CTT - Correios De Portugal, S.A. (CTT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the CTT full year 2020 results. [Operator Instructions] I must advise you the conference is being recorded today on Wednesday, the 17th of March 2020. I will now hand the conference over to your speaker today, João Bento, CEO. Please go ahead.

Thank you. Good morning, everyone. Welcome to our webcast of financial results 2020. I'll start with the highlights of the quarter and the year. It was a year obviously marked by the pandemic impact on people and companies, but that ended with an excellent quarter for CTT, the strongest EBITDA exhibited by the company in more than 5 years and delivering on guidance at all levels. Actually, the year was a year where we've been able to establish ourselves as the enabler, and actually the shaper of e-commerce and digital transformation of the Portuguese companies with very strong volume growth in parcels, leading to significant improvement in profitability. And also a special year for our bank because on its fifth year, a year that was particularly difficult for the financial sector, we've been able to reach the profitability milestone that was promised. So it's not only good news because we did it, but also because we did in such a special year for the financial sector. We have, of course, to accelerate strong accounting measures for restoring Mail sustainability given the pandemic impact and the strong decline. And it was a year that was also marked by the leadership position that we are taking in sustainability, not only in Portugal but also amongst our international peers. Moving to the next slide. It's quite obvious that the recovery from the midyear lows that was provided by the pandemic accelerated in the last quarter, which was also a consequence of being usually a very good quarter and a very good quarter for parcels because of the Christmas and the peak season but in fact, on revenues, EBITDA and EBIT, an excellent quarter as the chart exhibits. Moving to the next slide. I would now, in these 2 slides, give you an overview of how much new things we have done and how the year was marked as an innovation and modernization year. Indeed, a year where the company became with the new positioning, and mainly in terms of giving the theme in e-commerce. Well, it started with the brand positioning. The new brand is simpler and fresher branding. That was also accompanied by the launch of a new store concept with messages on 24 hours availability and self-service, a movement that is now to stay and to progress. It's also a year where we've installed our main investment in Mail, new mixed mail sorting machines acquired as part of our modernization mail operations, part of the transformation plan for Mail. A year also marked by a number of new partnerships. One of the most significant that we have chosen is the partnership with the Portuguese Institute of Records and Notary (sic) [ Portuguese Institute of Registries and Notary ] for home delivery of citizen cards. This was an urgent measure that enable us to take advantage of our positioning and digital and physical capabilities to address an urgency because of the backlog on delivering ID cards for the public in general, given the pandemic. And in fact, it became and it's now -- we are now discussing the final terms -- the new way for this type of delivery. I would also call your attention to the leading world Banco bank took with new initiatives, for example, the factoring solution with BNP Paribas for SMEs that works without additional capital requirements for the bank. So a typical partnership that the bank is doing, but also the distinction that the Banco CTT received during the year. It became #1 in customer satisfaction awarded by ECSI. ECSI is a very well-reputed brand in Portugal and also with exhibiting a very strong Net Promoter Score of almost 47. And moving to the Payments area, also a year with significant progress. For example, with the partnership that we made with Edubox to facilitate top-up of student meal cards. We have actually developed a new product, so-called digital wallet for school. And although the pandemic and the school closing prevented this to grow, it's already now a full steam and growing very fastly. Moving to the next slide. I would call the attention to what we started and accelerated in terms of PUDO and indeed lockers development and deployment. We have called the attention to a partnership with Lidl to install co-hosted parcel lockers. We are, in fact, now with 1,800 PUDO points in our Portuguese network, a little bit more than that in Spain, and we are improving this very substantially. We'll bring news on this along this year. We have also partnered with the National Association of Pharmacies to deliver medicines, again, an urgent measures that we have deployed in less than 10 days by the beginning of the pandemic that became a stable new delivery scheme for the Portuguese population. We have been on the e-commerce shaping in Portugal, a huge number of initiatives with very strong impact. The most visible one or one of the most visible ones is, for sure, the launch that we did the first day after the state of emergency was declared in Portugal, 18th of March last year. Almost 1 year from today, tomorrow. The service to deploy online shops devoted for SMEs. We started this 1 year ago, as I said, and we are now reaching 1,900 registered stores with almost 700 already operating. We've also seen an accelerated usage of Dott, our marketplace in Sonae, reaching 200,000 registered users and more than 1,400 vendors already. And the last of the main initiatives that we launched here was aimed at covering the lower sophisticated end of retail and small businesses, an app that we call CTT Comércio Local, that stands for CTT local retail, developed to foster e-commerce amongst small business. Because of the fragmentation of these businesses and the low sophistication, we are deploying this not directly to businesses but to municipalities. And it's a very fastly growing movement. We have now closed with 23 municipalities and growing. And in fact, it's one of the most relevant initiatives for the future of e-commerce in the country. Moving to Spain and CTT Express. We have relaunched the company in Spain, rebranded it, positioning it as a participant in the Iberian process and aiming at leading actually the cross-border return -- sorry, parcels business in Iberia. And in particular, we have a number of facilities, especially in Barcelona and Valencia, the most relevant ones, but also new sorters in Madrid and Barcelona with the higher throughput, actually the largest parcel sorters in our own facilities. And in parcels, we have also tried to set ourselves as a full-fledged operator for all types of parcels and therefore, we have launched premium international next-day delivery and also two-man delivery and overnight delivery during the year as well as more relevant alternatives such as green delivery and here, we call the attention to the partnership that we have set up with Nespresso for delivering orders of Nespresso coffee using an electric fleet. And moving to numbers, I will call Guy, our CFO, to guide us through the presentation.

Thank you, João, and good morning. So on Page 8, we can see the excellent year that we have in Express & Parcels with a very strong fourth quarter. And parcels are now turning into a true growth engine for CTT. In Portugal, in the context of COVID-19, we have been seeing the population finally embracing the online shopping and we see the country is starting to convert to what is the other countries as enablers of penetration of e-commerce. A very strong year with -- in volumes, with growth of 35.7% for the full year and 38.4% on the fourth quarter. And what is the available market data indicates that we are gaining share with Sonae. In Spain, we also saw even higher rate of growth with 57.7% of growth in 2020, 95% in the fourth quarter. We are leveraging in the capture of new large e-tailers that we announced in the end of the third quarter that are supporting our growth in that region. In the next slide, we have Banco operational activity. Banco has, as João already mentioned, reached a very important milestone, reaching profitability after 5 years of existence in what was a very challenging year, which shows the resilience of our business model. In auto loans, we remain with a very robust demand, with loans growing 19.3% in the year. Our emphasis shift from mortgage to auto loans to maximize the risk-adjusted return on capital of these kind of loans. Nevertheless, mortgage loans grew 29.5% in the year. The moratorium requests now stand at 3.6% of our book, declining from the previous 7% after the end of the moratoriums and quick-line credit to -- related with auto loans. Customers continue to grow with 56,000 new accounts and customer deposits is also grew in the context of pandemic with increased savings of the Portuguese population to 31.6% growth of deposits that now stands EUR 1.7 billion. In terms of Mail, we had a weaker-than-expected Mail evolution in the second half of '20, led -- that led to a double-digit ticket decline in the Mail revenues of the year. Mail continued to be very pressured by the reduced activity of large corporate customers such as utilities and banks and telcos. Business Solutions continue to grow rapidly, although from a small base, growing 54.8% in the year. Our Financial Services were very resilient given the heavy restrictions on people movement in the second quarter and in the end of last year, with public debt placements remaining very resilient, declining only 2% in the year. Money orders benefited from the current context and the increase of subsidies from the Portuguese government and grew 7.6% in the period. We are now giving a focus on sustainability, and we think we are leading on this regard amongst our peers. We were named the second best in our industry among 19 postal operators by the IPC, that is this cooperative of posts. We are also being distinguished with the highest score of carbon disclosure project in our category. And we are very in line to achieve our commitment of reducing 30% of carbon emissions since our IPO, and we are in line to achieve that target. Turning now to the financial section, and starting on Slide 14. We can see that our revenues grew on the full year, 0.7%, on the back of very significant growth of Banco and Express & Parcels. That offsets the Mail revenue decline. And this is -- this growth is especially strong on the fourth quarter, where we reached 5.1% of growth in revenues. Our EBITDA in the fourth quarter reached EUR 32.8 billion and growing 16.4%, which is the highest number since 2016. Unfortunately, it was not enough to offset the effects of lockdown driven by the COVID-19 in the second quarter of 2020. In the full year, our EBITDA reached EUR 90.5 million, declining 10.8% versus '19. EBIT growing 32.1% in the quarter, with a strong contribution of Express & Parcels and Banco CTT. In the full year, still declining EUR 34 million -- to EUR 34 million, a 27% decline. Our net income in the full year is of EUR 16.7 million and our cash flow, EUR 21.8 million in the same period. Starting with the overview of our revenues. Revenues growing the full year 0.7%. We're focusing on parcels in the fourth quarter. We accelerated growth to 45.2% driven by significant increase in volumes both in Portugal and Spain that are growing 32.8% and 95%, respectively, in the quarter. The COVID-19 accelerated e-commerce adoption in Iberia, where the penetration levels still lag the European average. In Portugal, we are seeing very significant growth in SME market so there wasn't that -- where we are building an extensive and distinctive offering that covers all value -- all the value chain of e-commerce to help these companies in their journey to sell online. In Spain, we continue to leverage growth in the acquisition of big accounts and capturing cross-border volumes with Portugal. In the full year, Express & Parcels business grew, improving 26.6% or EUR 40.6 million. Banco CTT also growing significantly, 33.3% in the fourth quarter or 32.3% in the full year driven by 321 Crédito growth in auto loans and by the introduction of commissioning in the debit cards. That more than compensated the declines in the Payment business, also affected by the restrictions on people movements. Mail volumes with a lower-than-expected recovery after the second quarter lockdown declined 16.5% in the full year within existence of a market of the right price mechanism to partially offset this impact of volumes in the current regulatory framework. It led to a 10.8% decline in revenues. We continue to see financial sector and still aggressively digitizing processes, and advertising mail is suffering from the slowdown in the economy. Business Solutions continued to grow with some meaning to 54.8%, but from a small base. Financial retail -- Financial Services & Retail with a resilient performance despite restrictions on people movements. Public debt placements declined 2% and retail products revenue declined 2.5%. The Financial Services performance reflects mainly the effect of saving insurance revenue that declined EUR 3.7 million, a factual of the decline in placements and the new pricing conditions with the Portuguese state. On the next slide, we can see our OpEx. OpEx is growing 2.5% in the quarter and in the full year, reflecting the strong growth in revenues of Express & Parcels and Banco. Express & Parcels OpEx is up 30% in the fourth quarter and 20.5% in the full year driven by significant growth in volumes of 45.2% and 41%, respectively. In Portugal, we continue to see EBITDA margins improving sequentially, reaching 16.2% in the fourth quarter due to higher volumes and efficiency initiatives and the investments that we are being -- that are being implemented. In Spain, following a difficult third quarter, we improved significantly, the EBITDA margin. That now stands to a negative 0.6%, but with a significant improvement versus the performance of the recent quarters. Mail OpEx declined 6.1% in the quarter and 4.4% in the full year. We saw a reduction of EUR 10.3 million in the staff cost of the business unit, and EUR 7.2 million in direct costs and G&A. Following the reduction in Mail volumes, we have been implementing ways to optimize our distribution model, given the constraints of quality standards that we need to address to help us act on what is a fairly rigid structure. And going forward, we will aim to implement a new distribution model that is detailed ahead in Page 23, and we'll go through that. Banco CTT OpEx growing 6.3% in the full year, reflecting essentially the additional 4 months of consolidation of 321 Crédito. In 2020, we saw a stabilization of the growth of the bank structure and with the reduction of marketing spend given the current economic context. Financial Services OpEx declining 7.8%, reflecting the revenue decline and higher efficiency. On Page 17, we can see our EBIT evolution that grew 32.1% in the quarter, showing a sustained recovery throughout the year and less dependence of Mail profitability. Nevertheless, our full year numbers still -- was still significantly affected by the operational performance of the Mail division, especially on the second quarter. The Mail volume evolution impacted EBITDA of the Mail division. That declined 13.4% in the quarter and 43.6% in the full year. The current universal service obligation without an effective pricing lever that -- it's very difficult to reduce OpEx in line with the revenue decline that we are seeing. Express & Parcels EBITDA growing EUR 8.9 million. EUR 6.2 million in the fourth quarter, showing a good momentum of division in Portugal and Spain. Portugal with EBITDA margins well above the 10% for the third quarter in a row. And Spanish division reducing losses to EUR 200,000 in this quarter. Banco CTT growing EUR 15.5 million, reflecting the sustained growth of the franchise with EUR 8.2 million of that growth coming from 321 Crédito. Financial Services with a small decline of EUR 1.4 million, reflecting the public debt performance. Our restructuring costs in the year declined EUR 11.2 million, essentially value reduction of the negotiated exits that this year were considerably lower. Impairment provisions -- impairment and provisions increasing EUR 6.7 million, mainly the effect of Banco CTT, that reflect the growth of its credit book and a small increase on the cost of risk given the current quarter. Our full year EBIT reached EUR 34.5 million. On Page 18, we can see our cash flow. Our operating cash flow reached EUR 42.9 million in the full year, EUR 1.6 million lower than 2019 with lower CapEx and specific items offsetting the lower EBITDA for the year. Free cash flow reached EUR 21.8 million. Our net cash position now stands at EUR 43.8 million and if we include IFRS 16 lease liabilities, we have a net financial debt of EUR 71.4 million. I now turn you over to João that will guide you through the strategy and guidance update.

Thank you, Guy. Well, on Slide 20, we see that the overall framing for the years that we are expecting an obviously improving trend has declined from a very unique situation given the pandemic, obviously assuming that no further lockdowns. And the good news here is that, as you might be aware, as of the beginning of this week, the easing of lockdown in Portugal started. Moving to Page 21. We have a slide regarding the concession situation. Well, the clear statement is that we need a new and improved concession contract that is critical to resolve sustainability of universal postal service. And this has been now, well, widely accepted amongst the actors in this setting. We have 2 main levers of action. One, regards to the new mode -- universal service obligation. And other one regards the compensation that we see it's due given the -- what happened during the year. It is, in fact, critical to redefine a new sustainable concession contract in '21 to restore the pricing lever and improve operational flexibility, which is a way to say that we need also better quality indicators and more acceptable and more in line with European peers. For CTT to remain universal postal service provider, the contract terms need to improve substantially. This has been stated repeatedly, widely, loudly, publicly and privately, and this is a very strong position. A governmental working group has been set up as a consequence of our actions to establish the basis of the new terms for the future concession contract in line with the aforementioned concerns. So this is the future and the way we see the future needs to be different. Regarding what happened. Given the unilateral decision by development to extend the existing concession contract until the end of this year without amendments in the same exact conditions and protected by the state of emergency, extraordinary measures that allow the government to do that. This is a very extreme situation. The contract and financial terms require revision. This is not disputable by anyone. That the unilateral nature of the extension allows us for that. And in fact, we are now working on that. In addition, given the extraordinary impacts of the pandemic during the year, CTT is also seeking for special compensation regarding what happened in 2020. As Guy repeatedly said, we did not activate a pricing lever because that's -- that is an option which is not available and therefore, we are now seeking compensation for that. Both this compensation for the extraordinary decline in '20 and the rebalancing need associated or as a result of the unilateral extension for this year, for '21, formal procedures have already been launched. The most likely outcome is that it's going to be resolved through an arbitration. We are now, well, in discussion with the -- we have launched this formally, and we are discussing how it's going to proceed. Slide 22 is a bit of a prudent slide. This is to give you an idea on how the pricing lever has not been active in Portugal because if you compare with these 6 peers, 3 very pretty common products, registered mail, standard occasional and international mail for Europe, we are well behind, including the price of the purchase concerns, we are clearly behind our European peers. And for some of them, on top of the better pricing, there's also direct subsidies. So this is, in a way, well, an illustration on how efficiency we've been able to be without this pricing aid, but also, but there is some space if we happen to evolve to a more common situation in comparison with our European peers. Page 23 is a very important one because it describes very broadly, what I would call the most relevant operational restructuring initiative that we have going on already. This new Shamrock model for distribution. We are moving from a two-leaved current model where we distribute part of the nonpriority mail in the slow part and a fast part for priority mail and parcel to a three-leaved, what we call the Shamrock model, where the slow part is going to be slightly longer, but we have 2 fast parts, and we see, on this, we have already tested this with very several pilots, and we are now deploying this to roughly 40% of our distribution centers. We see here an opportunity that we are grabbing for increased productivity and also to free capacity for our fastest-growing delivery demand, which is, of course, parcel. So this is a way of turning our traditional distribution network to a distribution network that is both efficiently -- efficient in distributing mail but even more so in parcels. Moving to Slide 24. It provides a very good idea with specific product transactions and solutions that we have now put in place to cover the whole value chain of e-commerce. And that's why we believe we are shaping e-commerce in Portugal, and this is widely recognized. In fact, we are not well positioned. I think we are in a uniquely -- unique position to provide service across the whole e-commerce value chain. From marketing and advertising to online sales, payments, logistics, including fulfillment, dispatch, reception, returns. And we have solutions, some of them -- several of them with partnerships and this agility and this capacity to leverage on partners and our commercial presence and physical presence is, in fact, now starting to deliver on results. We are working to induce more e-commerce-driven deliveries and demand. And this is -- yes, we are just about to start. So we are very optimistic on this, I would say, new positioning of the company. Moving to Slide 25, a bit of detail of what we are doing strategically speaking, on the parcels business. We are -- it has been already mentioned by Guy, we are -- although growing fastly in Portugal and Spain, we are still lagging on the left-hand extreme of our European peers and in fact, both in Portland and in Spain. So there's a huge room to grab. And we have 3 sets of priorities for that. One is to improve profitability, building what we believe will be starting to be a leading Iberian CEP platform and leading cross-border parcels in Iberia by deploying 20 new sorting centers and automated sorters in Madrid and Barcelona, Valencia and Murcia and reinforcing the investment, not only on hardware but also on software. Mainly, and this is why we have highlighted this one on dynamic routing software because this is what's providing us already, and we are already taking advantage of that and feeling that result on efficiency in last-mile distribution for parcel. Then a second group of actions is related to Spain itself. It is a very critical project for us. And we have, as you know, a very strong commitment to deliver in Spain. Unit cost improvements in September due to onboarding -- to the onboarding of new large e-tailers and our continuous investment in automation are, in fact, promising. We have a hiccup in the third quarter for reasons with a very fast movement from B2B to B2C in Spain, but we are converging -- really converging and therefore, optimistic on completing the turnaround in Spain. And the third group is with regards to us covering the space with a full-fledged offer for parcels, not only expanding to fulfillment, but also expanding to two-man deliveries, same-day delivery, overnight delivery and cargo. In Portugal, this is fully available right now, and we are doing the same for our Spanish geography. Moving to Page 26. A couple of words on the bank. Well, I would start with the bottom page highlight. We are positioning the bank as a mostly digital consumer credit and retail bank. The bank aims to continue its strong growth trend, consolidating profitability and leveraging on digital capabilities on consumer credit, auto loans, mortgage loans, payments, deposits and savings. On consumer credit, a particular word because we are reinforcing the digital player nature, leveraging on digital channels, with simplified underwriting, including preapproved credit. But we are also accelerating growth on auto loans. We are not even covering fully the geography of the country, especially in the South, so there's plenty of room to grow here as well. Our mortgage loans, we want to sustain growth, although, as I said before, in terms of risk-adjusted returns, it's now -- we are shifting more to consumer credit. And then Payshop. Payshop, we are refunding that business model. It's, in fact, again, a unique position. It comes from an extreme cash-only position to a position of digital and cash. We would probably be the only player in the country to have a full-fledged, both -- well, from cash to digital available, and we are now building on that. And finally on deposit and savings, we want to convert into value a very rich client base, where there's still plenty of value to grab, including off-balance sheet proposals and offers for savings, which don't consume capital. So -- and that's what we want. And I would now move to the final page on our outlook. We believe that CTT with the pandemic, it was, in fact, a turning year for us. It could have been a terrible year and it came to be an excellent year in the sense that it speeded up a repositioning of the company, and we are emerging as the agent that best combines physical and digital dimensions in supporting companies' digitalization. With particular emphasis on e-commerce, but we are, in fact, the leading company on helping, especially SMEs, to digitize themselves. And for people, we are the easiest place to communicate and to have simple financial services, credit, savings and insurance. So on the outlook, we believe that there's going to be a high single-digit revenue growth. e-commerce Parcels, Banco CTT, new postal Financial Services that we are deploying and Business Solutions are growing all of them and offsetting the mid- to high single-digit Mail revenue decline. Mail decline is also a function of how the pandemic and the lockdown will ease but in any case, our prediction is that this will produce high single-digit revenue growth. On EBIT, again, we think that we are growing to above EUR 50 million. Again, on the account of Express & Parcels, Banco CTT and Business Solutions growing more than compensating the erosion of profitability. We are expecting, although we are now providing guidance on EBIT, we are expecting to have also double-digit growth on EBITDA, with the year where CapEx should not exceed EUR 35 million, EUR 15 million of those being for expansion to allow for reinforcing Express & Parcels capacity and digital capacities. And finally, we are resuming dividend payments. The Board of Directors yesterday approved and will propose a dividend payment of EUR 0.085 per share for 2020 financial year, payable on May, subject, of course, to approval in general meeting. This accounts for roughly 75% of payout ratio. And the company will continue to invest to be the shape of e-commerce in Portugal, therefore, some room on the use of results is also interesting. We should be disclosing more information along the year. It's a special year when we are able to -- the new concession contracts in terms -- it's very likely that we would like to be close to investors and analysts disclosing more of what we have in the pipeline. So for the moment, thank you.

[Operator Instructions] Your first question comes from the line of Filipe Leite of CaixaBank.

This is Filipe Leite from CaixaBank. I have 4 questions, if I may. First one related with real estate. And if you can give us an update on the potential deals that you're mentioning in previous quarters. Second question, regarding the new definition of EBITDA, which will include IFRS 16 and impairments and provisions. And if you can give us the amount of full year '20 EBITDA under this new definition and. Also, what is the amount of provisions and specific items expected for this year, which are included in your EBIT target? Third question on market share in Parcels, and if you can give us an idea of your current market share in both Portugal and Spain. And last one is related with the new the Mail contract because you state in the presentation that, and I'm quoting, "for CTT to remain the universal postal service provider, the contract terms need to improve substantially." So my question is if the government decides to keep the terms of the new concession basically roughly in line with previous one, if you will give up on contract and consequently, will lose a substantial part of your business. I'm wondering if CTT not been the universal mail provider in Portugal from next year onward is a real possibility.

Your next question comes from Marco Limite of Barclays.

Thanks. I think probably it's better if management give answers to the first questions, yes.

We would prefer to answer the questions. Thank you, Filipe. I will start with the last one, and then I will hand over to Guy. Given the new Mail contract, yes, in fact, the segment is to be taken seriously but your conclusion is probably not the same that we would have in the sense that it's not a matter of choice. It makes no sense for us to reverse on a contract that, in fact, seems to be sustainable and actually profitable. And that needs to be handled in several ways. One of them is that probably the scope of universal service today is no longer reasonable in the sense that the role of mail in -- 20 years ago when the contract was set up was totally different than that from today. But then there are all the issues of quality requirements and of scope and pricing and the role of the regulator in establishing prices. So those are all things that we need to see change. And what happens if we don't have it? Well, in fact, our own modeling of the liquid cost of universal service is that it is clearly negative. So we could provide a so-called universal service in our own terms. And that's, in fact, one of the possibilities, if in an extreme situation, which I don't foresee, the terms for the new concession won't be there. We also foresee that the process will be not a tender as it was supposed to be when there was time for that because, as you know, the extension is only up to this year. And the excuse for the extension, hopefully, won't be here again because the pandemic shall be gone by the end of this year. And so this is just to say that it's going to be a negotiation process as it is in, for example, in Portugal for -- on infrastructure concessions or hospital concessions. And therefore, the result of that negotiation needs to be acceptable for us. So we are very committed to remain the provider of USO with or without the concession contract. Moving to Guy.

On your other questions, real estate, on the project. We progressed a lot in the last few months because we are in the final stages of submitting the transaction to the relevant regulators. And we also have to submit the transaction to the concession grantor, just to make sure that the transaction doesn't jeopardize other bigger things for us. In terms of EBITDA, if you see in Page 34, we provide a detailed view of our numbers. And there, we can see basically the way to see our rebased EBITDA is to add to the line that say, EBITDA, including IFRS 16, that is EUR 118.9 million and then deduct impairments and provision that last year was EUR 15.3 million, that should account to EUR 103.6 million for 2020. Then on market share, because it's highly B2B business still, it's very difficult to estimate numbers. The numbers for the full year are still not closed. The numbers available, that are those that we show in the presentation, of ANACOM show estimates of the market growing 20% in Portugal, and we are well above that. So it's -- we should be growing market share at this point. It's very difficult to give you an exact number of market share.

Your next question comes from the line of António Seladas of AS Independent.

I think that there's one question from one of my colleagues first that was not answered. Well, I can do my questions, but there's one person before me. Well, my questions are 2 questions. One is related with the bank and the provisioning that was -- well, the second question was more relevant, but on the second half of the year, 2020 was small. So if you can share with us what are your ideas for 2021, take into consideration that unemployment should increase and taking into consideration that everyone is very worried about nonperforming loans and all that kind of stuff. So if you can share with us, how do you see your loan book evolving over 2021 and the provision levels? And the second question is related with your slide on Page 23. So as far as I understood, you still need -- just to understand if you -- to implement this change in your distribution model regarding Parcels, if you need your Mail operations right now, you're logistic on Mail or if your operation on Parcels is enough to do the change. So my question is, you can work on Parcels without your current infrastructure on Mail or not? And congratulations for the figures that were very strong and the guidance, of course.

Thank you, António. We were not getting you in the beginning, but it was clear. I will start again with the second question on if we need Mail. Of course, we could not have -- we could have distributed all our Parcels without our mailmen but probably not with the same results. That is not the question, since that we have the operator from Mail, and we have it. And so what we are doing is exactly try to find the optimum between using our existing distribution efforts for Mail and the existing distribution network, partly outsourced, as you know, for Parcels. But I will take the opportunity to ask our COO, which is here with us. We are all here together to take the opportunity to give you some more highlight on how the Shamrock model is advantaged for that purpose. Joao?

So the aim of this model, which applies to our Mail network, is to free up more capacity for the network to deliver the product flows that are growing, which are Parcels, both express parcels and postal parcels. So while applying this model, we are expanding the cargo capacity in the last mile and increasing the speeds on the less dense segments of the distribution routes. So we end up with more capacity to deliver parcels with a more efficient model that also reduces the effort for the mailman agreement on the walking routes.

Okay. Moving to the questions on the bank. I will ask Guy.

So regarding the way we are seeing risk and the level of provisioning on the bank. So last year, the cost of risk of the bank stood at 1% and that is an increase versus '19, also because of the higher weight of 321 Crédito that has more consumption credit than the rest. The way we are seeing and assuming no major changes on economy, we are seeing an improvement on the cost of risk for this year, and so improving on the levels of provisioning that we saw during 2020.

And your next question comes from Marco Limite of Barclays.

I think there were a couple of, yes, technical issues before. So really, I've got some few follow-up questions on some of the comments you were giving before. So number one is really when you mentioned that this is still a B2B market, can you really give us a sort of split of B2B and -- between B2B and B2C in your parcel volumes? It's the first question. The second question is on your negotiation with the regulator and why you're negotiating for 2020 and 2021, the compensation and the rebalancing. I mean what sort of compensation do you expect? Is that going to be sort of a cash payment? Or do you expect, for example, higher price increase for the following years? And my third point is a follow-up question on the real estate strategy. I think that in the past, you mentioned that the value of the real estate portfolio is around EUR 200 million. If you can provide actually the book value of that real estate portfolio, number one. And number two, what's the strategy for that cash you will get? How do you plan to use that cash? Is it just going to reduce your net debt position, which is quite low already? Or will be used for more CapEx or bolt-on acquisitions, for example, in Spain or in Portugal? Yes, those are my questions.

Thank you, Marco. I will start with the negotiations with the regulator, the second of your 3 questions. In fact, we don't know if it's going to be a cash payment or price increase because it also is a function of when things will be resolved in the sense that this contract is going to end and the new contract is, in fact, an independent contract. There could be no compensation for this in the next contract. So the answer should be, depending on how fast we progress on discussing that, it could be either a price increase that will still be usable during the current term that could be also part of the compensation and the remainder in cash or a full payment in cash. So there are only -- there's only one way to compensate, which is allow us to basically grab more, through pricing, to recover part of what we didn't have in the past or to be directly compensated. There is an option also of cost replacement, but we don't see that as very, we believe, very acceptable. So it will depend on how fast we move. In any case, well, the value should be the same. There's also a question on B2B and B2C market, that I will ask Guy to take. And on real estate, we need to be very careful because we -- as we said, we went very far in preparing ourselves to deploy what we are about to deploy. But as soon as we have news, we'll come back to that. And the usage of the proceeds and all that is, of course, part of what we will disclose at a later stage. Guy, please.

On the B2B and B2C in the market in our numbers, so the below 60%. In 2019, it was below 50%, the share of B2C, and that increased slightly to 57% this year, but is almost half in B2B still. And bear in mind, that B2B was very depressed during the 2020 year due to the general economy lockdown and -- that we witnessed during the year. So it's roughly still 50-50. We think that B2C is now slightly above 50% on 2020.

There are no further questions on the line. Please continue.

Okay. Thank you for coming and for joining and for the questions and comments, and we'll remain available, as I said, and so I hope to meet you all soon when we disclose results for the first quarter. Thank you very much, again. Good morning.

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.