Banco BPI 1st half 2011

Publicly-held Company Headquarters: Rua Tenente Valadim, n.º 284, Oporto, PORTUGAL Share Capital: 990 000 000 euro Registered at Oporto C.R.C. and tax identification under the sole number 501 214 534

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Banco BPI | 1st half 2011 Report 2 Index

REPORT Leading business indicators 4 Introduction 5 Governing bodies 7 Shareholders 8 Financial structure and business 9 Distribution channels 11 Human resources 12 Background to operations 13 Domestic commercial banking 22 Bancassurance 29 Asset Management 30 Investment banking 33 Private Equity 36 International banking operations 37 Financial review 40 Risk management 69 Rating 91 Banco BPI shares 92

FINANCIAL STATEMENTS AND NOTES Consolidated financial statements 95 Notes to the consolidated financial statements 101 Declaration 249 Audit Report issued by the Auditor registered with the CMVM 250

Banco BPI | 1st half 2011 Report 3 Leading business indicators

(Consolidated figures in millions of euro, except where indicated otherwise) 30 Jun. 10 30 Jun. 11 Δ% Net total assets 49 351 43 225 (12.4%) Assets under management1 17 689 16 952 (4.2%) Business turnover2 69 848 67 855 (2.9%) Loans to Customers (gross) and guarantees3 35 111 33 355 (5.0%) Total Customer resources 34 737 34 499 (0.7%) Business turnover2 per Employee4 (thousands of euro) 7 323 7 295 (0.4%) Net operating revenue 549.5 603.9 9.9% Net operating revenue per Employee4 (thousands of euro) 58 64 11.1% Operating costs / net operating revenue (last 12 months) 5 58.1% 61.6% Net profit 99.5 79.1 (20.4%) Cash flow after taxation 197.4 212.8 7.8% Return on average total assets (ROA) 0.6% 0.6% Return on Shareholders’ equity (ROE)6 9.6% 7.2% Loans in arrears for more than 90 days (in the balance sheet) / Customer loans 1.8% 2.3% Loan impairments (in the balance sheet) / Customer loans 1.9% 2.1% Net credit loss7 0.33% 0.48% Adjusted net credit loss8 0.45% 0.48% Cover of pension obligations 105.3% 104.7% Shareholders’ equity 1 433.6 1 115.3 (22.2%) Ratio of own funds requirements9 10.8% 10.4% Tier I9 8.6% 9.6% Core Tier I9 8.1% 9.1% Adjusted data per share (euro)10 Cash flow after taxation 10 0.20 0.22 7.8% Net profit 10 0.10 0.08 (20.5%) Book value10 1.46 1.14 (22.3%) Weighted average no. of shares (in millions) 10 981.8 982.2 0.0% Closing price (euro) 1.392 11) 1.015 (27.1%) Stock market capitalisation at the end of the period 1 377.9 1 004.9 (27.1%) Retail branches12 (number) 886 845 (4.6%) Corporate and institutionals centres network13 (number) 65 68 4.6% BPI Group staff complement14 (number) 9 538 9 301 (2.5%) 1) Amounts not corrected for double counting (investments of financial products in other financial products). Includes unit trust (mutual) funds, Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff pension funds). 2) Loans, guarantees and total Customer resources. 3) Mortgage loans written off from the balance sheet were added back (gross balance of 863 M.€ in June 2010 and 797 M.€ in June 2011). 4) Number of Employees of the companies which are consolidated in full. 5) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue. In calculating the efficiency ratio in June 2011, a gain of 74.2 M.€ realised on the repurchase of own bonds in the 1st half of 2011 was excluded from net operating revenue. If one considers the net operating revenue as reported (which includes that gain), then the aforesaid indicator would be 57.7% in the 12-month period till June 2011. 6) For the purpose of the calculation of the ROE, the revaluation reserves were excluded from the allocated capital. 7) Loan impairments in the period, deducted of recoveries of loans in arrears written-off (in the income statement) as percentage of Customer loans portfolio. 8) For purposes of calculating the indicator for the 1st half 2010, 18.2 M.€ corresponding to the utilisation of the extraordinary charge recorded in December 2009 were added to impairments for the period. 9) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements. 10) Corresponds to cash flow after taxation, net profit and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-period number in the case of the indicator “book value per share”). The weighted average number of shares was adjusted by the bonus issue that took place in May 2011. 11) Share price at 30 June 2010 adjusted adjusted by the bonus issue that took place in May 2011. 12) Includes traditional branches, housing shops, investment centres and automatic shops in Portugal, branches in Angola, investment centres in Angola and branches in Paris. In the 2nd half of 2010 one housing shop was closed while in the 1st half of this year, 48 branches and one housing shop were closed. In addition, on the last day of June 2011, 9 housing shops which had been functioning on that day were closed, with one of them becoming a branch. 13) Distribution network specialising in serving large and medium-sized companies, 1 Project Finance centre, Institutional centres, the branch in Madrid and corporate centres in Angola. 14) Group staff complement in the domestic activity and in the international activity. Includes term Employees and temporary workers, and excludes bursaries.

Banco BPI | 1st half 2011 Report 4 Introduction

BPI conducted its activity during the 1st half of 2011 According to the results released in July, including the against an extremely adverse backdrop insofar as impact of all the measures executed up till April 2011, domestic operations are concerned. BPI presents in the adverse scenario a Core Tier I capital ratio of 6.9% in 2012, which compares with 8.2% at the The sovereign debt crisis in Europe, in view of the growing end of 2010. If within the ambit of the Bank’s objective difficulties experienced by the countries already the of reducing the loan portfolio by around 1 000 million object of international support programmes – Greece and euro in 2011, an additional reduction in the loan portfolio Ireland – spread to Portugal from April 2010 onwards and between April and December was considered, the Core has intensified since then. The rise in the cost of Tier 1 ratio in the adverse scenario would stand at 7% in servicing Portuguese public debt - reflecting the mounting 2012. concerns about the sustainability of the Portuguese public accounts and external debt, and the republic’s rating Liquidity. In the liquidity domain, the Bank presents a downgrades at the end of the first quarter of 2011 – comfortable position: made the recourse to external assistance (formalised in April) inevitable. ƒ Deposits and bonds placed with customers grew in domestic activity by 2.4% (+541 M.€) relative to The contraction in economic activity in Portugal since the December 2010, while the gross loan portfolio end of 2010, already reflected in the adoption that year decreased 2.4% (-716 M.€) . The transformation ratio of budgetary correction measures, was compounded from of customer resources into loans fell from 131% in April onwards by the uncertainty surrounding the December to 125% at the end of June (in consolidated negotiation of the terms of the international bailout terms, the same indicator was situated at 110% in package and by the early general election held in June. June); ƒ In Angola, BFA has an extremely liquid balance sheet: On the other hand, the Portuguese banking system, which the customers loans / on-balance sheet customer has not been able to access the international medium and resources ratio is situated at 24%; long-term debt markets since April 2010, also saw its ƒ BPI presented at the end of June 2011 a net creditor access to the short-term markets severely restricted from April 2011 bearing in mind that the cut in public-debt position in the Interbank Money Market of 0.4 Bi.€ and ratings limited the use of the portfolio of such securities reduced net funding obtained from the ECB from 3.5 in repo operations. Bi.€ in June 2010 to 1 Bi.€. in December, at which figure it remained at the end of the first half of 2011. In this testing environment, BPI maintained high capitalisation levels, a comfortable resources and liquidity Risks. Impairments after deducting loan recoveries situation, and relatively good risk levels. represented 0.48% of the average loan portfolio in the

first half of 2011 in annualised terms, which compares Capital. As concerns capital, BPI had at the end of June with 0.45% in the same period of 2010 (0.33% 2011 a core Tier I capital ratio of 9.1% and a Tier I ratio recognised in the income statement plus the use of the of 9.6%, which correspond respectively to increases of st extraordinary charge made at the end of 2009). In the 1 0.4 p.p. and 0.5 p.p. relative to the figures at the end of half of 2011 that indicator in domestic operations stood 2010. at 0.46% and in international operations it stood at

0.88%. The Bank’s sound financial base was once again recognised this year in the stress test carried out by the The consolidated ratio of loans in arrears for more than 90 European Banking Authority in cooperation with the days was situated at the end of June 2011 at 2.3%, while national supervisory authorities, the European Systemic the ratio of loans in arrears for more than 90 days plus Risk Board (ESRB), the European Central Bank (ECB) and loans not yet due - indicator which takes into the European Commission, with the object of evaluating consideration all the exposure to operations with the European banking system’s resistance to a plausible instalments of capital or interest in default, stood at 3.1% adverse scenario over the time span of 2 years. at that date.

Banco BPI | 1st half 2011 Report 5

reflects the impacts of the deleveraging movement in the The pension funds’ net assets at the end of June 2011 balance sheet (the loan portfolio contracted 3.8% year- guaranteed the funding of 105% of pension liabilities. on-year), the smaller demand for banking services and the higher cost of bank funding. Profitability. Consolidated net profit for the 1st half of 2011 was 79.1 M.€, which corresponded to a 20.4% BPI continued the process of adjusting the pricing of decrease relative to the same period last year. This trend loans to the more onerous conditions faced by banks in was attributable to the 38.4% decline in the contribution their funding operations and the revision of the charges from domestic operations to 31.8 M.€, while international for its services, as well as further tightening of cost activity, to which some 14% of average shareholders’ control. Costs, excluding early-retirement costs, fell by a equity is allocated, contributed with 47.4 M.€ to year-on-year 4.4%. consolidated earnings (-1.1% vis-à-vis 1st half of 2010). Up till the end of June 2011, BPI executed a The return on consolidated average shareholders’ equity rationalisation programme directed at the distribution was situated at 7.2% in the 1st half of 2011. In domestic network which entailed the closure of 57 branches and operations, this indicator was 3.4% and 30.1% in housing shops, and recorded already in June the cost of a international operations. programme of some 260 early retirements to be realised by the end of the current year. The lower contribution from domestic activity is essentially explained by the decline in income, namely net interest income and commissions. This decrease

Banco BPI | 1st half 2011 Report 6 Governing bodies

Shareholders’ General Meeting

Chairman Miguel Luís Kolback da Veiga

Remunerations Committee Deputy-Chairman Supervisory Board Manuel Cavaleiro Brandão 3 Chairman Criteria CaixaCorp, S.A. Secretaries 4 Arsopi-Holding, SGPS, S.A. Alexandra Magalhães Abel António Pinto dos Reis HVF - SGPS, S.A..5 Luís Manuel Amorim Members Jorge de Figueiredo Dias José Neves Adelino Board of Directors Nominations, Evaluation and Alternate members Chairman Francisco Javier Olazabal Rebelo Valente Remunerations Committee Artur Santos Silva Rui Guimarães Chairman Deputy-Chairmen Artur Santos Silva Carlos da Camara Pestana Portuguese Statutory Auditor Members Fernando Ulrich Armando Leite de Pinho Members Member in office 2 Edgar Alves Ferreira Deloitte & Associados, SROC, S.A. Alfredo Rezende de Almeida Herbert Walter 1 Allianz Europe, Ltd. Alternate member Marcelino Armenter Vidal António Domingues Carlos Luís Oliveira de Melo Loureiro António Farinha Morais António Lobo Xavier Corporate Governance Committee Armando Leite de Pinho Audit and Internal Control Committee Chairman Carlos Moreira da Silva Chairman Artur Santos Silva Edgar Alves Ferreira Henri Penchas Ruy Octávio Matos de Carvalho Members Ignacio Alvarez-Rendueles Members António Lobo Xavier Klaus Dührkop Isidro Fainé Casas Alfredo Rezende de Almeida

Carlos Moreira da Silva José Pena do Amaral Ignacio Alvarez-Rendueles Tomaz Jervell Juan Nin Génova Mário Leite da Silva Klaus Dührkop Manuel Ferreira da Silva Financial Risks Committee Marcelino Armenter Vidal Company Secretary

Maria Celeste Hagatong Chairman Member in office Artur Santos Silva Mário Leite da Silva Pedro Barreto João Avides Moreira Members Ricardo Villela Marino Alternate member Carlos da Camara Pestana Tomaz Jervell Fernando Leite da Silva Marcelino Armenter Vidal

Executive Committee of the Board of Directors

Chairman Fernando Ulrich

Deputy-Chairman António Domingues

Members António Farinha Morais José Pena do Amaral Manuel Ferreira da Silva Maria Celeste Hagatong

Pedro Barreto

1) Allianz Europe, Ltd. nominated, in terms of article 15(2) of Banco BPI, S.A.’s Statutes, Herbert Walter to exercise the office in his own name. 2) Deloitte & Associados, SROC, S.A. nominated António Marques Dias to represent it in the exercise of this office. 3) Criteria CaixaCorp, S.A. nominated Isidro Fainé Casas to represent it in the exercise of this office. On the 1st July 2011, following the reorganisation of "La Caixa" Group, Criteria CaixaCorp – that began to carry out the Group banking business – changed its name to CaixaBank. This entity is 81.52% owned by "La Caixa". 4) Arsopi – Holding, SGPS, S.A. nominated Armando Leite de Pinho to represent it in the exercise of this office. 5) HVF, SGPS, S.A. nominated Edgar Alves Ferreira to represent it in the exercise of this office.

Banco BPI | 1st half 2011 Report 7 Shareholders

At 30 June 2011 Banco BPI’s capital was held by and corporate investors holding 85.2% of the share 21 659 Shareholders, of whom 21 146 were individuals capital. owning 14.8% of the capital, while 513 were institutional

1, 2 Shareholders owning more than 2% of Banco BPI’s capital At 30 June 2011 1 Shareholders No. of shares Capital held Voting rights La Caixa Group 3 297 990 000 30.10% 30.10% Itaú Group4 186 840 660 18.87% 18.87% Santoro 5 98 944 995 9.99% 9.99% Allianz Group 6 87 243 078 8.81% 8.81% HVF SGPS, S.A. 28 351 791 2.86% 2.86% Note: shareholder positions recorded at 30 June 2011 at the Securities Clearing House, based on the information received from the House.

1) According to a statutory provision, the voting rights for purposes of their exercise are limited to 20%. 2) At 30 June 2011, companies controlled by the director Armando Leite de Pinho held 7 856 695 shares representing 0.79% of BPI’s capital. Persons related by family ties and companies linked to them owned holdings which, added to the abovementioned, totalled 30 049 406 shares representing 3.04% of BPI’s capital. According to the information which the Bank has, this does not mean that the aforesaid aggregate constitutes a qualified shareholding in BPI in terms of article 16 and following the Securities Code. 3) Through Caixabank, S.A., which is 81.52% held by the parent company of the La Caixa Group, Caixa d'Estalvis i Pensions de Barcelona ("La Caixa"). 4) Through IPI – Itaúsa Portugal Investimentos – SGPS, Lda., 100% held. 5) Directly held by Santoro Finance – Prestação de Serviços, SA (“Santoro Finance”), and imputable to Santoro Financial Holdings, SGPS ("Santoro"), as owner of the entire capital of Santoro Finance, and to Eng. Isabel José dos Santos, in her capacity as shareholder of Santoro Financial Holdings, SGPS. 6) Through the subsidiaries controlled by Allianz SE: direct shareholding of 8.66% held by Allianz Europe Ltd. (100% held by the Allianz Group) and a direct shareholding of 0.16% held by Companhia de Seguros Allianz Portugal (65% held by the Allianz Group).

Banco BPI | 1st half 2011 Report 8 Financial structure and business

The BPI Group – headed by Banco BPI – is a financial and At the end of June 2011, 79% of the Group’s shareholders’ multi-specialist group, focusing on the banking business, equity was allocated to domestic operations1, and the with a comprehensive spectrum of financial services and remaining 21% to international operations. products for corporate, institutional and individual Customers. Leading indicators by business segment At 30 June 2011 Amounts in M.€ Domestic International Consolidated The Group’s operations are mainly conducted in Portugal, a operations operations 2 developed and competitive market in which BPI holds a Net total assets 38 513 4 711 43 225 strong competitive position – third by business volume Shareholders' equity 878 237 1 115 amongst privately-held banks –, and in Angola, an emerging Loans to Customers3 and economy which has recorded robust and sustained growth in guarantees 32 111 1 244 33 355 recent years, where BPI, through its subsidiary BFA, holds Total Customer resources 30 486 4 013 34 499 4 market leadership positions. Business volume 62 597 5 257 67 855 No. of Customers (thousand) 1 614 841 2 455 No. of Employees 7 205 2 096 9 301

Distribution network (no.) 767 146 913

Note: The percentages indicated refer to the participations (direct and indirect) of Banco BPI in each company. 1)BPI Group adopted the geographical segmentation as the main basis for the segmentation of its activities, having defined two segments: domestic activity and international activity. 2)The total assets figure presented for each geographic segment is corrected for the balances resulting from operations between these segments. 3)Gross loans. Includes securitised mortgage loans derecognised from assets (gross balance of 797 M.€ at 30 June 2011). 4)Loans, guarantees and total Customer resources. 5)Equity-accounted subsidiaries. 6)In association with Allianz, which holds 65% of the capital. 7)In association with Euler Hermes, a company of Allianz Group. 8)In partnership with Caixa Geral de Depósitos and a group of Mozambican investors, which together, hold 70% of the share capital. 9)The BPI Group has overseas branches, representative offices and distribution agreements in overseas cities with large communities of Portuguese emigrants.

Banco BPI | 1st half 2011 Report 9

Domestic operations Domestic operations correspond to commercial banking At the end of June 2011, BPI Gestão de Activos was the business in Portugal, the provision of overseas banking third biggest fund manager in Portugal, with a market services to non-residents – notably to communities of share of 17.4%, and BPI Vida e Pensões was the second Portuguese emigrants and the services provided at the largest pension fund manager with a 17% market share, Madrid branch–, and to investment banking services, and had an 9% market share in the segment of private equity, asset management and insurance. capitalisation and PPR products in the form of insurance.

Domestic commercial banking operations is carried on by Private equity invests directly, as well through the venture Banco BPI, the fourth biggest financial institution capital funds, of which we highlight the venture capital operating in Portugal (3rd among private banks), in terms funds promoted by the BPI Group and currently managed of business volume, serving more than 1.6 million by a 49%-held associated company – Inter-Risco. Customers holding market shares of close to 11% in loans and resources. International operations International operations encompass the business Individuals and Small Businesses Banking serves conducted by Banco de Fomento in Angola (BFA) – individual Customers and small businesses with turnovers 50.1% held by BPI in partnership with Unitel, owner of of up 5 M.€. the remaining 49.9% of the capital –, as well as the appropriation of the results attributable to the 30% Corporate, Project Finance and Institutional Banking interest held in Banco Comercial e de Investimentos serves companies with a turnover of more than 2 M.€, (BCI), in Mozambique. operating in competition with Individuals and Small Businesses Banking in the segment up to 5 M.€. Also BFA is a retail bank and has an ample base of deposits includes the provision of project finance services and the and reduced transformation of deposits in loans. BFA relationship with Public Sector, State-owned Companies, holds leadership positions in Angola, with market shares Municipalities and the State Business Sector, of 19% and 12% in terms of deposits and loans, Foundations and Associations. respectively, and close to 30% in cards and payment terminals. BPI also makes available a broad range of life and non-life insurance by means of a insurance distribution agreement BFA has a structured and differentiated spectrum of with Allianz Portugal, which is 35% held by the BPI products and services for individuals and companies, Group within the scope of the strategic partnership with complemented in this case by the availability of project the Allianz Group. finance, corporate finance and private equity services.

Investment banking business is conducted by Banco At the end of June 2011, BFA served 841 thousand Português de Investimento and is structured into four Customers, through a distribution network with a strong main areas: Equities, Corporate Finance – these within presence in Luanda and wide coverage throughout of the the geographic confines of the Iberian Peninsula –, whole territory, comprising 126 branches, 6 investment Private Equity and Private Banking. BPI also has a team centres and 14 corporate centres. The physical network is dedicated to Angola and Mozambique. complemented by homebanking services - BFA Net Particulares and BFA Net Empresas. BPI’s asset management – unit trust funds, life- capitalisation insurance and pension funds – is carried on BCI is a retail bank predominantly focused in collecting by dedicated subsidiaries controlled 100%, with the resources and granting loans, in which activities the bank products being placed with Customers through Banco has market shares of 27% and 32%, respectively. BCI BPI’s distribution network and Banco Português de serves 335 thousand Clients via a branch network of 105 Investimento. units, 245 ATM and 1 812 POS.

Banco BPI | 1st half 2011 Report 10 Distribution channels

Distribution network selected indicators BCI – Banco Comercial e de Banco BPI Banco de Fomento Angola 2) Investimentos

Traditional branches 648 126 99 Paris branch (branches) 12 – – Investment centres 39 6 – Corporate centres1 54 14 6 Housing shops 14 – – Automatic bank (ATM) 1 644 267 245 Active points of sale (POS) 47 236 2 238 1 812 Commercial partners 30 580 – – BPI Net: 608 615 BFA Net Particulares: 157 952 E-banking Particulares: 16 928 Internet Banking (active users) BPI Net Empresas: 68 668 BFA Net Empresas: 5 568 E-banking Empresas: 3 377 Telephone banking (active users) BPI Directo: 337 267 – – BPI Imobiliário (properties available) 687 994 – – 1) The corporate banking distribution network in Portugal includes 1 Project Finance centre, 6 institutional centres and a Madrid branch. 2) 30% shareholding.

Banco BPI | 1st half 2011 Report 11 Human resources

At 30 June 2011, the BPI Group’s workforce numbered In International operations (Angola), the workforce 9 301, which corresponds to a year-on-year decrease of increased by 11.5% (+217 Employees) year-on-year. At 2.5%. the end of June 2011, Banco de Fomento Angola’s headcount stood at 2 096 Employees, which represented In domestic operations, the staff headcount decreased roughly 23% of the Group’s Employees. 5.9%, totalling 7 205 Employees at the end of June 2011.

BPI Group Employees End of period figures Period-average figures

st st Δ% Δ% Jun.10 1 half 1 half st Jun.10 Dec.10 Jun.11 1 half 10 / Jun. 11 st 2010 2011 / 1 half 11 Domestic activity Activity in Portugal1 Banco BPI 1 7 199 7 000 6 763 (6.1%) 7 184 6 905 (3.9%) Banco Português de Investimento 2 160 165 167 4.4% 161 167 3.6% Other subsidiary companies 3 85 79 72 (15.3%) 85 74 (12.8%) [= Σ1 to 3] 4 7 444 7 244 7 002 (5.9%) 7 430 7 146 (3.8%) Overseas branches and representative offices 5 215 212 203 (5.6%) 210 208 (0.8%) Domestic activity [=4+5] 6 7 659 7 456 7 205 (5.9%) 7 640 7 354 (3.7%) International activity Banco de Fomento Angola 7 1 879 2 038 2 096 11.5% 1 858 2 042 9.9% International activity [=7] 8 1 879 2 038 2 096 11.5% 1 858 2 042 9.9% Total1 [=6+8] 9 9 538 9 494 9 301 (2.5%) 9 498 9 396 (1.1%)

1) Includes fixed-term contracts and temporary employment of persons with no binding work contracts with BPI. At 30 June 2011, the number of Employees with fixed-term contracts in Portugal stood at 215 and in the overseas operations was 19. In turn, the number of Employees working on a temporary basis in Portugal was 158 in June 2011, while in overseas operations there was only one employee working under this regime. In average terms, in the 1st half 2011, the number of Employees with fixed-term contracts in Portugal was situated at 288, while the corresponding figure for overseas operations was 21. In turn, the number of Employees working on a temporary basis in Portugal was 158 in the 1st half 2011. Temporary employment costs are recorded in the books under the caption “Other administrative expenses”.

Banco BPI | 1st half 2011 Report 12 Background to operations

MACROECONOMIC BACKGROUND

The global economic growth scenario has suffered 2011, accelerating slightly to 4.5% in 2012. The successive downward revisions, albeit modest, since the principal risk factors remain but the uncertainty start of the year. The occurrence of unexpected negative surrounding the evolution of the sovereign date crisis in shocks and the materialisation of certain negative risks Europe, as well as the signs of hesitation and weakness in from the standpoint of economic expansion explain the the US economy, underscore the possibility that growth is intensification of the signs of a slowdown which could disappointing. It should be pointed out however that there extend into the third quarter. The first group of factors are important structurally positive factors underpinning refer to the earthquake and tsunami in Japan and the growth in the future. Namely, the fact that the economic larger constraints on the oil market triggered by the policies of the developed countries remain very interruption of supplies from Libya; the second group accommodative, stimulating activity; the suppressed includes the rise in commodity prices (even excluding demand for durable goods given the postponement of energy) in the early months of the year, the weakness of purchase and investment decisions in the world’s largest private demand in the United States, the impact of the economies, in line with the desired readjustment of policies aimed at curbing inflation in the more dynamic households’ and corporate balance sheets towards lower emerging markets, as well as the intensification of the borrowings and a higher savings rate; the advance, albeit sovereign debt crisis in Europe. sluggish, of the correction process in the major property markets undergoing adjustment, although it is still quite In the first quarter, according to the International uncertain when they will regain their mantle as drivers of Monetary Fund (IMF), world economic growth attained an activity; finally, the strong impetus of the major emerging annualised rate of 4.3%, still expressive but below economies notwithstanding the economic policies aimed expectations. The North American economy’s performance at curbing inflation. China and India should continue to disappointed with the growth rate having abated grow at rates of around 9.5% and 8%, respectively, while significantly to an annualised 1.9%, the reflection of the the Brazilian economy, although decelerating, should private sector’s lack of dynamism dictated by the need to expand by roughly 4% according to the IMF. readjust households’ balance sheets – i.e. deleveraging– as well as due to the persistence of a historically high The inflation rate rose slightly in the early months of the unemployment rate. On the other hand, the euro-zone year, reflecting above all the behaviour of commodity countries registered a very favourable behaviour, with prices, a tendency that was more evident in the emerging Gross Domestic Product expanding 3.2%, annualised economies confronted by burgeoning domestic demand. quarterly change. The performance of exports, notably to Meanwhile it is worth noting that the underlying inflation the most dynamic emerging economies, investment and rates – excluding the most volatile components of energy also private consumption were factors contributing to this and foodstuffs – have also been climbing marginally, even good performance. Meanwhile the regional asymmetries in the developed economies, signalling the gradual became more acute: on the positive side, one can point to narrowing of surplus capacity in manufacturing activity. the countries of central Europe, where Germany was the Despite this trend, the tendencies remain benign. In other principal catalyst; on the negative side, the peripheral words, inflation rates should continue to rise this year due countries, in particular Greece, Ireland and Portugal, primarily to the spike in commodity prices, but are countries which were especially affected by the expected to descend to more contained levels in 2012, in intensification of the sovereign debt crisis. line with the persistence of growth rates below the historical standard average and given the continued The trend in the leading economic indicators point to the correction of structural imbalances in certain economies, maintenance of the tendency towards the moderate the progress of which is naturally slow. The IMF expects cooling down of global economic activity, which could that the advanced economies will register an inflation rate change direction towards the end of the year. The of 2.6% this year, falling to 1.7% in 2012. International Monetary Fund’s most recent forecasts suggest that the rate of global economic expansion will decelerate from the 5.1% observed in 2010 to 4.3% in

Banco BPI | 1st half 2011 Report 13

The first six months of 2011 can be regarded as a crucial predictable increase in unemployment and restrictive period for the Portuguese economy’s future. The outbreak salary policies also in the private sector; more expensive of the sovereign debt crisis in Europe since the end of access to banking credit and with more stringent criteria 2010 and international investors’ rising doubts as regards given the need to give continuity to the Portuguese the sustainability of certain dominant tendencies in the economy’s deleveraging process. Investment will also not Portuguese macroeconomic panorama – namely as be the engine of growth owing to the weak prospects concerns the evolution of public debt and external debt in relative to the trend in demand and given the adjustment a context of lacklustre potential growth – were mirrored in process which is still taking place in the construction the deterioration in conditions for tapping the sector. Exports should constitute the only element international financial markets. The national economy’s spurring economic activity, also benefiting from the recent substantial financing needs and the State’s demanding drive to diversify into and search for more dynamic calendar of commitments in terms of its liabilities to third markets, but even so will not be sufficient to compensate parties made the recourse to international financial help for the downturn in domestic demand. Overall, it is unavoidable.- formalised at the beginning of April and expected that the contraction in economic activity will be materialised in early May through the European in the vicinity of 2% this and next year, after which period Commission/International Monetary Fund and the more auspicious signs should be evident above all in European Central Bank. This bailout entailed a loan of structural terms. During this period, satisfying the EUR 78 billion, with a corresponding commitment to measures and reforms agreed to with the EC/IMF/ECB will implement a series of measures and reforms with the be fundamental, which should contribute to reinforcing object of consolidating the public accounts, reducing the competitiveness of the Portuguese economy, paving indebtedness and the external financing requirements, the way for healthier expansion and instilling and bestowing sustainability on the medium-term sustainability into economic development. macroeconomic scenario. Meanwhile, despite the favourable progress made by the In macroeconomic terms, Gross Domestic Product budgetary execution figures disclosed on a cash basis, the recorded a 0.6% contraction in chain and in year-on-year budget balance from the national accounts standpoint terms in the first quarter of 2011.Domestic demand (more relevant for the EC/IMF) present only minor (private and public) was responsible for the contraction progress in 1Q11 (7.8% against the 5.9% annual target). registered not only relative to the previous quarter but also However, the trends observed do not rule out attaining the on a year-on-year basis, being partially offset by the very targets agreed to with the EC/IMF/ECB, a scenario which substantial contribution from net external demand. This is reinforced by the recent announcement of additional component has always added to growth since 2009, being budgetary consolidation measures, both on the public the only motor fuelling economic activity between January expenditure and revenue sides. and March. Households’ consumer spending fell by 2.1% year-on-year, mainly due to durable goods – which was In the first five months of the year, total domestic credit already expected due to the VAT hike in January and the recorded a sharp deceleration, growing 1.2%, in average bringing forward of purchases to 2010 – and non-food terms compared with 3.2% in 2010. However, the current goods and services. The behaviour of this sub- tendency was more noticeable in the private sector given component constitutes a sign of private consumption that if one excludes credit extended to the public sector, containment and of the foreseeable greater caution of the aggregate decline in lending was 1%. households’ behaviour in the future. The latest indicators confirm the negative direction of During the first half of 2011, the progressively more economic activity. In fact, all the uncertainty relating to unfavourable assessment of Portuguese sovereign debt the request for external assistance could possibly have had far-reaching repercussions for the banking system’s induced greater caution on the part of families and funding conditions, which saw access to the international companies, negatively affecting activity. It is worth adding wholesale debt market barred. In this manner, the slight that a number of factors should adversely affect families’ expansion in the banking sector’s assets was primarily disposable incomes, thereby influencing the pattern of funded by recourse to financing from the ECB which, medium-term private consumption. More specifically, the since the second half of , attained amounts of slightly higher tax burden, which should increase in 2002 given more than 40 billion euro, contrasting with the typical the obligation to comply with budget targets; the

Banco BPI | 1st half 2011 Report 14

figures observed prior to this phase of the crisis of around the highest level since 1998 – and in the individuals’ 10 billion. segment in consumer loans – 8.5% in May against 7.3% in the same period a year ago. In the home loans segment The increase in deposits also constituted an important which accounts for about 44% of the banking sector’s source of the banking system’s funding. In the first five total assets, the default ratio has stabilised at 1.7% since months of 2011, deposits at non-monetary financial the closing months of 2009. institutions rose by 3.8% in the period, thanks in particular to the reinforced deposits of the public The deterioration in the national banking sector’s funding administration entities (related to the receipt of the first conditions in the wake of the closure of the international tranches of the external loans), the deposits of individuals wholesale debt markets and of the spreading of the and the deposits of other financial institutions. On the sovereign debt crisis in Europe, was inevitably reflected in other hand, the deposits of non residents and of non- the higher spreads demanded by national banks. In the financial companies contributed negatively. individuals segment, the biggest deterioration was noted in consumer loans, where the average spread demanded The early months of the year saw the return of the in relation to the Euribor rates rose by some 120 basis tendency towards the deterioration of credit risk in the points (b.p.) when compared with a year ago, being banking system, as evidenced by a new acceleration in situated in May at 605 b.p. As regards financing for home the volume of non-performing loans. More concretely, the purchases, the average spread climbed to 170 b.p. ratio of total doubtful debts, which reflects loans in relative to the 125 required a year ago. In the companies arrears for more than 30 days, relative to the amount of segment, there was also a considerable increase in the loans granted, is situated at 3.9%, higher than the 3.6% risk premiums demanded, namely for financing operations registered in the same period last year. Of special note of more than 1 million euro, having reached 376 b.p. was the considerable increase in delinquent loans in the against 267 b.p a year ago. companies segment –where the ratio is situated at 5%,

Portugal – Macroeconomic outlook – Forecasts comparison (July 2011) European Ministry of Finance Bank of Portugal IMF 2010 Commission 2011F 2012F 2011F 2012F 2011F 2012F 2011F 2012F Real GDP change (%) 1.3 (2.3) (1.7) (2.0) (1.8) (2.2) (1.8) (2.2) (1.8) Private consumption 2.3 (4.5) (3.3) (3.8) (2.9) (4.4) (3.8) (4.3) (4.4) Public consumption 1.2 (6.1) (5.3) (6.3) (4.4) (6.1) (4.6) (6.8) (4.8) Investment (4.9) (10.3) (5.1) (10.8) (10.0) (9.9) (7.4) (9.9) (7.4) Exports 8.8 6.7 5.6 7.7 6.6 6.2 5.9 6.2 6.0 Imports 5.1 (4.8) (1.3) (4.0) (1.2) (5.3) (2.8) (5.3) (3.0) Contribution to real GDP change (%) Domestic demand 0.7 (6.2) (4.1) (6.0) (4.6) (6.1) (4.8) (6.3) (5.0) Foreign demand 0.6 3.9 2.5 4.0 2.8 4.0 3.1 4.1 3.2 Average inflation rate 1.4 3.5 2.3 3.4 2.2 3.4 2.0 3.5 2.1 Unemployment 10.8 12.5 13.2 - - 12.3 13.0 12.1 13.4 Current and capital balance (8.8) (6.5) (4.0) (6.4) (4.4) (6.0) (3.7) (8.1) (5.8) Source: Ministry of Finance

Banco BPI | 1st half 2011 Report 15 MARKETS

Currency market During the first six months of the year, the changes in the The euro/dollar exchange rate registered a steep posture of central banks, signalling the return of a more appreciation in the early months of 2011, motivated normal environment, were mirrored in the slow climb in above all by the successive improved expectations market interest rates. This movement was more regarding the macroeconomic landscape in the EMU and pronounced in the US due the fears of deflation and the the consequent prospect of a hike in the benchmark Federal Reserve’s greater pro-activeness explains the very interest rate - a measure which materialised in April. In low levels attained: the dollar’s Libor rate for 6-month this context, the EUR/USD rate reached 1.49 in May, the operations sank to the minimum of 0.38% in February. highest figure since the end of 2009. Since then, the The upward movement in dollar short-term interest rates worsening of the European sovereign debt crisis – with the continued until May, when it levelled out thanks to the taking place of yet another request for assistance to changes in perception regarding the Federal Reserve’s supranational institutions, this time by Portugal and the monetary policy. In fact, the interruption in the persistence of instability in Greece, which recently saw improvement in the US labour market and the evidence the support achieved in 2010 boosted even further – and that the manufacturing excess capacity was not the accumulation of signs of a global economic slowdown diminishing, as well as a more cautious stance by the were responsible for the increased volatility in the anchor Federal Reserve, reaffirming that the benchmark rates currency, which has been oscillating between 1.47 and would remain at close to zero for a prolonged period, 1.40 in the last few months. justified the re-assessment of tendencies on the part of market players. Consequently, dollar interest rates have Over the medium term, the European currency continues been declining marginally, indicating the expectation that to benefit from the perspective of the more favourable the current situation of interest rates close to zero will not trend in the interest rate differential. However, in the near change in the near future. term it will be difficult to predict the formation of new firm trends, with the safe-haven currencies continuing to On the other hand, in the EMU, short-term interest rates post gains, i.e. the Swiss franc and the yen. have been rising gradually , in line with the posture of the monetary authority, which has raised the principal Money market refinancing rate (refi-rate) by 50 basis points since April During the first six months of 2011, the main dominant to be situated at 1.5% in July. trends in the money market changed appreciably. In the early months of the year, fears about deflation diminished The signs of a greater-than-expected slowdown in global and exit strategies were pursued for the unconventional economic activity as well as the intensification of the monetary policy measures: The Federal Reserve European sovereign debt crisis and which presently poses announced that the second programme involving the a threat to larger states in the region , could reflect purchase of public debt in the amount of USD 600 billion themselves in the postponement of less expansionist would end at the close of the 1st half of 2011; at the policies. In the US, speculation surrounding a further beginning of 2011, the ECB discontinued the liquidity- programme of public-debt securities buying – the so- provision operations for longer maturities in light of the called quantitative easing – could intensify. In Europe, return of some measure of calm to the interbank markets the ECB could delay the next hike in interest rates, (except in the countries subjected to intervention) and the endeavouring to become more assured as regards the improvement in liquidity conditions. However, already in sustainability of the European recovery. What is certain is the second half of the year, the monetary authority that central banks will continue to try to normalise reintroduced 6-month liquidity injection operations monetary policy and to recoup margin for action, a following the fresh outbreak of the uncertainty triggered trajectory that will be inevitably be slow given the need for by the apparent spreading of the sovereign debt crisis to the private and public sectors in certain economies to Spain and Italy. In addition, the regular liquidity- deleverage. provision operations will remain with unlimited amounts until January 2012.

Banco BPI | 1st half 2011 Report 16

The public debt market was above all affected by flight- The decisions adopted at the July European summit to-quality movements and the increase in risk aversion, contributed to a significant correction to the risk which movements gained momentum at the start of the premiums of the three periphery countries bailed out, second half of the year. The greater pessimism about the which even so are still situated at very punitive levels. behaviour of economic activity and the intensification of Gradually, evidence that the measures and reforms the debt crisis in Europe were behind this trend, which imposed as the quid pro quo for the aid packages have drove the yields on 10-year USD and EUR securities to had the desired effect, the expected return to sustained around 2.6% and 2.4%, respectively. growth levels and the demonstration of visible fiscal consolidation progress, should contribute to alleviating During the period under review, it is worth highlighting pressures which still prevail and so permit once again the the request made by Portugal for financial assistance, access by these states to the international markets. which was granted at the start of May, totalling EUR 78 billion, and which is earmarked to meet the public In the miscellaneous debt secondary market, the risk sector’s financing requirements up till the middle of premiums remain higher than in the years prior to the 2014. In the meantime, at the meeting of the heads of 2008 financial crisis. At the end of June, the eruption of State of the European Union at the end of July, there were the risk aversion and flight-to-quality movements induced significant developments which should contribute to the a slight deterioration in the spreads prevailing in the dissipation of tensions in the European sovereign debt secondary market. The primary market continues to be markets: a new financial aid package was granted to dominated by the activity of financial institutions, Greece amounting to EUR 109 billion with much more concentrated in the shorter-dated operations (in the order favourable terms, also applicable to the loans to Portugal of 5 years), even though marked by the absence of the and Ireland; the private sector’s voluntary involvement in periphery countries’ banks, whose main form of funding the restructuring costs of Greek debt was encouraged; in continues to be the recourse to the ECB. Indeed, in the addition, the potential action of the European Financial European periphery countries, access to the primary Stabilisation Fund EFSF (future EFSM- European market by companies and financial institutions was Financial Stabilisation Mechanism), which from now on virtually a non-viable proposition. In the case of banks, in will become active in the public debt primary and which they have managed to obtain funding from the secondary market, can lend money to states not subject to ECB, the deterioration in the risk perception (successive intervention, which can use the funds for recapitalising downgrades by the international ratings agencies) obliges banks; finally, it is worth mentioning that roughly 1/3 of the pledging of additional guarantees, thus making the the EFSF’s potential action is being utilised by the costs of funding more expensive. The same applies in assistance granted to Greece, Portugal and Ireland, relation to non-financial companies, from which a higher leaving ample leeway to deal with any future financial risk premium is required. difficulties.

Banco BPI | 1st half 2011 Report 17

Equities market the IBEX-35 standing out with one of the best gains in Global overview the European context (+5.1%), which compares with the During the course of the first half of 2011, the credit PSI-20 posting a 3.5% decline in the same period. The crisis in the euro-zone’s peripheral countries deepened, daily average trading volumes fell on the leading European with the spreads on these countries’ sovereign bonds and American markets, while the main Portuguese relative to German yields climbing to new highs in all national index posted a year-on-year drop of 28% in the maturities. Greece, Ireland and Portugal were the main number of transactions concluded daily, while the retreat targets of pressure, with the risk premiums demanded by in Spain was situated at 6%. investors in 10-year bonds soaring to 1503, 920 and 879 basis points, respectively. We continued to witness an intensification of competition in the stock broking business, chiefly amongst local/multi- Notwithstanding the global economic recovery under way, local brokers, with the global players maintaining a the stock markets turned in a subdued performance as a smaller presence, largely due to the reduction in their result of this adverse trend in sovereign risk levels, universe of coverage, a trend already observed in recent coupled with the expectations of a deceleration in growth years. in the second half of the year. Meanwhile at the end of April, the Portuguese government submitted a request for Iberia – primary market external help to the IMF and the EU, following which a The Iberian primary market was relatively stagnant in the bailout package amounting to 78 billion euro was granted first half of the year, a reflection of the high levels of and a change in government took place after a snap uncertainty and pressure on the capital markets, as well general election. as of the difficulties in accessing finance. The only noteworthy events were the issues of bonds convertible In geographical terms, the best performances in the into shares realised by Pescanova (180 M.€) and Sacyr equities markets were recorded in the North American (200 M.€), besides BCP’s share capital increase (rights continent, which the leading market index, the S&P 500, issue amounting to 260 M.€ and debt conversion of 990 advancing 5.0%, whilst in Europe, the DJ Stoxx 600 M.€). The Spanish alternative market (MAD) did not closed the half year with a fall of 1.1%. record the entry of new companies in this period, which compares with 4 offers realised in the first six months of Iberia – secondary market 2010. During the first half of the year, Spain distanced itself from Portugal in terms of stock market performance with

Banco BPI | 1st half 2011 Report 18 ANGOLA

In 2011, the Angolan economy should grow in real terms The price of oil on the international market has displayed by 7.75% according to the IMF, based on assumptions of great volatility. oscillating in tandem with how the news an increase in oil production (average of 1.85 million from the various economic blocs affects the prospects for barrels / day) and acceleration in the non-oil sector, global demand for this commodity. This price effect benefiting from the private sector’s improved translated into a positive contribution in terms of Angola’s performance. export receipts, contributing to a greater availability of foreign reserves and permitting greater budgetary leeway. However, the first half of the year was marked by instability factors which added confusion regarding the Fiscal policy and public accounts expectations for the global economy. In first place, the Taking into account that in 2010, there was a recovery in succession of events in the countries of North Africa, the non-oil budget balance and measures were taken that especially in Libya, an oil-producing country, where the permitted stabilising the external and public accounts, conflict has reached more serious proportions and has the challenge in 2011 will be to secure a fiscal policy become protracted; in second place, the crisis in Japan, that allows promoting equilibrium in the non-oil budget an oil-consuming country and the world’s third largest balance without ignoring the commitment to investing in economy, where various industrial plants were forced to infrastructures and industrial units which permit boosting suspend operations; thirdly, the sovereign debt crisis in the non-oil sector; but simultaneously ensuring the certain euro-zone member States, with implications for continued accumulation of foreign reserves. Meantime, the growth scenario in the European bloc; finally, the the structural reforms launched within the scope of the difficulties manifested by the US in approving the raising accord with the IMF should be pursued. of the national debt ceiling also reveal weaknesses in the world’s largest economy. This sequence of events has External accounts introduced new uncertainties as concerns the world In 2011, with the expected consolidation of the recovery economy’s recovery, particularly in the US and the EMU, in oil production and with the policy of protecting with implications for the economies of the African region industries from import substitutes through the and in particular Angola, via the impact on the crude-oil introduction of higher tax and customs barriers, the market; but also through the propensity to risk on the part current account balance should gradually improve. of international investors. Despite the uncertainties which According to data released by the Customs Department, prevail as regards the recovery of the developed the current account in 2010 may even have presented a economies, Angola benefits from the favourable positive balance, recovering from a negative performance economic outlook for the emerging economies in Asia and in 2009. The IMF forecasts that the current account Latin America (Brazil), which account for a major slice of balance will be 1.4% in 2011 (and projects a surplus of Angola’s oil exports. 1.6% in 2010). The tranches to be received throughout 2011 under the IMF agreement should also make an The oil sector important contribution to rebalancing the current account. The level of daily average oil production declined in the first half of 2011 as a consequence of interruptions to The oil price’s strong advance enabled the foreign output motivated by the need for improvement and reserves to recover at a brisk pace relative to the lows maintenance works. In this period, the daily average registered at the beginning of 2010 (in the order of USD production was 1.59 million barrels/day, that is, below 12 billion), to stand at USD 21 billion in June. the levels projected by various international bodies and even by the Angolan government. However, this situation appears to be normalising in the second half of the year.

Banco BPI | 1st half 2011 Report 19

Currency policy loans advanced against 43% in the same period of last In terms of currency policy, the early months of 2011 year. Lending to the private sector maintains a positive were marked by the kwanza’s greater stability against the trajectory, but also in deceleration. However, in the dollar, which was made possible by the accumulation of coming months, the measures that have been foreign reserves. However, the dollar’s depreciation implemented by BNA should create conditions so that against the other currencies on the international markets credit to the private sector continues to expand. translates into a deterioration of the kwanza’s effective exchange rate. The USD/AKZ exchange rate in the early By sectors of activity, we refer to the increase in the months of 2011 has remained in the neighbourhood of weight of lending to individuals, accounting for 25% in 93, after having registered strong volatility in this variable May against 20% in December last year. As for the rest, in 2010 (oscillated between 89 and 94). loans to the retail trade and for real estate activities are those which continue to account for a greater share of Inflation and monetary policy lending operations, although there has been a greater During the period under review, we observed successive dispersion amongst the vast majority of sectors of activity. declines in the inflation rate (indicator which at the end of 2010 was situated at 15.3%), but nevertheless it Total deposits in the banking system have remained remained at high levels relative to the objectives set by relatively stabilised in recent months. However, it is worth the Angolan authorities and the estimates of international noting the sharp drop from the last quarter of 2010, after organisations such as the IMF. This downward tendency which deposits have grown at annual rates of less than results in part from the recomposition of the associated 10%. Looking at the composition of deposits, one can basket of goods. This occurs simultaneously with a new confirm that the proportion of deposits in national posture in terms of monetary policy. In recent months, currency has been falling, to be situated systematically Banco Nacional de Angola has been implementing a below the 50% level since November. number of expansionist measures: cutting the discount rate, reducing the rate of the permanent liquidity facility, Interest rates and public debt the introduction of repos and the return of the compulsory Recently Moody’s gave Angola a sovereign debt rating of reserves coefficient to re-crisis levels. These measures are Ba3 while Standard & Poor’s upgraded the respective intended to promote fiscal equilibrium and the classification in foreign currency to BB-. These initiatives recomposition of foreign reserves and simultaneously reward the effort directed at rebalancing the public and stimulate economic activity, incentivising private external accounts, and the progress made in terms of the investment. structural reforms implemented within the ambit of the stand-by agreement entered into with the IMF. This The latest available information relating to loan and positive perception on the part of the ratings agencies deposit aggregates refers to May. Total loans have facilitates Angola’s access to the international markets. maintained a decelerating trend during the course of this year, in line with that observed last year. Total loans In the first six months of the year, the authorities resorted closed 2010 with a year-on-year growth rate in the order to financing by means of Treasury Bill issues, with special of 16%. The first few months of 2011 were marked by emphasis on 364-day maturities, while the placing of acceleration in this trend, but in the second quarter the CB Bonds has been diminishing. The trend in the gradual loss of rhythm became evident once again, with the year- decline in average placing interest rates since the second on-year growth of around 15% being registered in May. quarter of 2010 continues, with rates falling to around This pattern reflects the decrease in lending to the public 5% for 364-day maturities, which means that the real sector which currently represents roughly 33% of total return on these assets has become negative.

Banco BPI | 1st half 2011 Report 20 MOZAMBIQUE

The prospects for Mozambique’s economic growth for during the global crisis and the metical’s depreciation 2011 continue favourable after having expanded 6.8% in during the greater part of 2010. 2010, in real terms. According to the International Monetary Fund real GDP growth should accelerate to The future success of the authorities’ efforts to meet the 7.2% this year and to almost 8% over the medium term, objectives of poverty eradication depends crucially on engendered by the reinforcement of activity related to attracting DFI, fostering the economy’s diversification, certain mega-investment projects and by an increase in strengthening the export sector and broadening the tax public investment. It should be pointed out that the base. In recent times, the capacity to attract and retain official forecast for 2011, included in the Rectified FDI has been quite significant, and should continue in the Budget, is situated at 7.4%. future, underpinning the reinforcement of the growth rate and outpacing its regional peers, at the same time The agricultural sector has been an important catalytic distancing Mozambique from an economic model very factor spurring economic activity and constitutes the susceptible to natural catastrophes, rainfall vs. droughts, principal strategic instrument for the eradication of encouraging the constitution of long-term savings and absolute poverty in the country (roughly 80% of capital for the sustainable funding of the development Mozambique’s population live solely from agriculture). process. The introduction of new agricultural production technologies, the distribution of better quality seeds and Over the medium term, the sectors associated with mining the dedication of the operators from the family sector are operations, with special mention of coal but also the factors which have contributed to the sector’s exploration of gold, continue to afford ample potential for improvement. However, this sector continues to present expansion since the reserves are vast, while a number of low productivity levels and to practice subsistence projects are in the expansion phase. But besides the farming on a large scale (more than 90% of the country’s mining sector, the other sectors of activity also continue livestock operations are classified as small undertakings to offer expansion potential, namely those relating to the and around 90% of the production obtained is destined construction of basic infrastructures and various transport for own consumption). networks, health care, etc. The decrease in the dependence on international donations, the need to The approval of the Action Plan for Reducing Poverty in stimulate the emergence of a robust private sector, the May 2011 places great emphasis on the creation of new eradication of poverty and the promotion of more inclusive employment opportunities and on the continued human growth and development, remain as the main challenges and social development. This strategy will complement of the Mozambique economy over the medium term. the efforts directed at fostering economic growth through public investment, as a result of which it is hoped that the sectors of "Public Administration", "Education", "Agriculture" and "Transport and Communications” continue to contribute meaningfully to GDP growth in 2011 and following years.

Average inflation in 2010, at 12,45%, was in line with projections., but well above the Mozambiquan government’s initial goals (8%). The behaviour of consumer prices has been affected by exogenous factors, such as the increase in worldwide commodity prices. Particularly important for Mozambique is the rise in food prices given that the country is strongly dependent on its imports. The decrease in fuel price subsidies also contributed to the increase in petrol and diesel prices in 2010 and at the start of 2011. The rise in underlying inflation (excluding foodstuffs and fuel is a reflection of the lasting effects of the accommodative monetary policy

Banco BPI | 1st half 2011 Report 21 Domestic commercial banking

INDIVIDUALS AND SMALL BUSINESS BANKING

OVERVIEW OF ACTIVITY At the end of the first six months of 2011, Individuals and guarantees portfolio of 15 906.2 M.€. These figures and Small Business Banking was responsible for a correspond to annual rates of change since June 2010 of resources portfolio totalling 22 385.8 M.€ and for a loan -0.1% for resources and -1.5% for loans and guarantees.

Main business indicators Amounts in M.€ ∆% Jun.10/ 30 Jun.10 31 Dec. 10 30 Jun.11 Jun.11

Total Customer resources 1) 22 411.4 22 380.7 22 385.8 (0.1%) On-balance sheet resources 20 180.5 20 171.8 20 369.8 0.9% Off-balance sheet resources 2 230.9 2 208.9 2 016.0 (9.6%) Loan and guarantees portfolio 16 155.0 16 192.6 15 906.2 (1.5%) Accounts opened (in thousands) 69.5 145.8 68.8 (0.9%) Total business per account opened (th.€) 10.8 11.3 8.8 (19.2%) 1) Securities not included.

On-balance sheet resources increased by 189 M. € year- In the first six months of 2011, 69 thousand accounts on-year (+0.9%) as a result of the expansion of the term were opened, much in line with the same period last year. deposit portfolios, while off-balance sheet resources The sale of basic offer products and services at the decreased by 215 M.€ relative to June 2010 (-9.6%). moment of opening an account was situated at 2.2 in the first half of 2011, with the increases registered in credit At the end of June 2011, Individuals and Small Business and debit cards meriting special mention. At the end of Banking comprised a total of 648 traditional branches June 2011, Individuals and Small Business Banking had and 39 investment centres catering for high net worth more than 1.5 million accounts. customers or those with potential to accumulate financial assets. It is worth mentioning the rationalisation of the CUSTOMER RESOURCES network of traditional branches and housing shops via the Individuals and Small Business Banking customer closure of 57 units1. resources fell relative to June 2010 by 25.6 M.€ which corresponded to a rate of change of -0.1%. 1) Reduction in the number of functioning branches of 48 units and 1 housing shop during the six months. In addition, 9 housing shops which had been functioning were closed at the end of 30 June 2011, one of which became a branch.

Customer resources2 Individuals and small businesses banking Amounts in M.€ ∆% Jun.10/ 30 Jun.10 31 Dec. 10 30 Jun.11 Jun.11 Sight deposits 1 3 808.9 3 634.7 3 663.0 -3.8% Time deposits 2 9 457.5 9 673.7 10 289.9 8.8% Bonds and structured products 3 placed with Customers 3 3 749.8 3 591.1 3 377.3 -9.9% Unit trust funds 4 4 1 349.9 1 330.1 1 199.2 -11.2% PPR5 5 2 015.1 2 085.3 2 008.9 -0.3% Insurance capitalisation 4 6 2 030.2 2 065.9 1 847.5 -9.0% Total Customer resources [=Σ 1 to 6] 7 22 411.4 22 380.7 22 385.8 -0.1%

2) Does not include the securities portfolios. 3) Guaranteed-capital and limited-risk bonds. 4) Excludes PPR. 5) Includes PPR in the form of capitalisation insurance recorded on the balance sheet (1 134.1 M.€ in 30 Jun.10 and 1 192.1 M.€ in 30 Jun.11).

Banco BPI | 1st half 2011 Report 22

Term deposits increased by 832.4 M.€ since June 2010, A new PPR was launched - BPI Reforma Objectivo PPR which corresponded to an 8.8% growth rate. The change (structured savings instrument), in the format of in the portfolio in the first half of 2011 was 616 M.€. capitalisation insurance in a monthly unit of account. This This trend is explained by the higher demand for risk-free product differs from other PPR’s by virtue of the fact that products and by the launch since June 2010 of new term its adapts to the life cycle, that is, the investment deposits which enabled customers to earn higher rates as portfolio is adjusted at the expected retirement date, a result of the strengthened relationship with the Bank. there being two time horizons: 2025 or 2035. Choosing the appropriate objective date, 2025 or 2035, the The portfolio of bonds and structured products placed customer remains invested in the selected product with customers decreased 9.9%. In the case of bonds, through to its maturity. With the march of time and by there were a large number of maturities which were not way of a management mechanism, these products will offset by the placing of new issues of fixed-rate bonds in invest in bonds maturing on the target date with a Euro and USD. In structured products, besides the corresponding reduction in equity holdings. maturities, sales on the secondary market also contributed to reducing the portfolio. In these products, the placing of In capitalisation insurance, the portfolio decreased by issues has been associated with the following themes: 218.4 M.€ since December 2010, which in turn is crude oil, sugar, gold and Germany. explained by the climb in interest rates on alternative savings products which are more attractive to customers. The portfolio of unit trust (mutual) funds, excluding PPR, registered a 150.7 M.€ decline, essentially explained by As concerns campaigns and resource products, we portfolio reductions in the money market and variable rate highlight the following initiatives: funds and in the real estate funds. ƒ The savings solution campaign, which was aimed at In the first half of the year, BPI launched a Special raising awareness amongst customers of the simplicity Investment Fund – BPI Metais Preciosos FEI (BPI of gradual savings by means of the BPI savings plans Precious Metals) – directed at Investment Centre and associated with retirement-savings plans, unit trust Private Banking customers. BPI Precious Metals is a funds, capitalisation insurance and savings accounts; closed-end SIF set up for a period of 8 years with the object of providing capital gains through investment in a ƒ The BPI Africa campaign, the aim of which was to diversified portfolio of precious metal assets (gold, silver, announce the national fund with a higher return in platinum and palladium). 2010, presenting at the same time the African market as an alternative for a diversified portfolio; The portfolio of retirement-savings plans (Planos de Poupança Reforma - PPR) registered in the past 12 ƒ the campaign "There are 20 years to plan for months a 0.3% decline, in part explained by changes to retirement", initiated already in June, which has as its the product’s tax regime. BPI continues to promote objective making customers aware of the importance of retirement savings amongst its customers, namely through saving as early as possible for retirement. the promotion of campaigns encouraging regular savings through the placing of periodic contribution plans. At the close of June 2011, there were almost 8 thousand more customers with these plans relative to June 2010.

Banco BPI | 1st half 2011 Report 23

CUSTOMER LOANS In June 2011 the individuals and small business loans corresponding to a negative annual rate of change of - and guarantees portfolio amounted to 15 906.2 M.€, 1.5%.

Customer loans and guarantees Individuals and small businesses banking Amounts in M.€ Δ% Jun.10/ 30 Jun.10 31 Dec. 10 30 Jun.11 Jun.11 Loans to Individuals Mortgage loans 1,2 1 12 305.5 12 394.3 12 305.5 0.0% Personal loans 3 2 767.9 774.6 759.6 (1.1%) Credit cards 4 3 174.5 187.6 173.0 (0.8%) Car finance 5 4 338.0 332.0 304.7 (9.8%) [=Σ 1 to 4] 5 13 585.9 13 688.5 13 542.9 (0.3%) Loans to Small Businesses 6 Commercial loans6 7 1 764.3 1 738.3 1 639.8 (7.1%) Equipment leasing5 8 133.4 115.4 101.7 (23.7%) Property leasing5 9 453.2 440.6 425.2 (6.2%) Factoring5 10 25.4 16.8 9.6 (62.3%) [=Σ 6 to 9] 11 2 376.3 2 311.1 2 176.3 (8.4%) Total loan portfolio [= 5 + 10] 12 15 962.1 15 999.6 15 719.1 (1.5%) Guarantees and sureties 13 192.8 192.9 187.0 (3.0%) Total [= 11 + 12] 14 16 155.0 16 192.6 15 906.2 (1.5%)

Mortgage loans The average term of new loans and the average value per In June 2011, BPI’s mortgage loans portfolio totalled contract were situated at 34.3 years and 82.6 thousand 12 305.5 M.€, which corresponds to a 0.7% decrease euro, respectively. The average indicator for the relative to December 2010 and a zero change when loan/security ratio was 61.7% for the contracts entered compared with the same month last year. into during the first half of 2011, 5.3 p.p. below the figure in the same period a year earlier. BPI’s new business contracted in the first half of 2011 fell by 68.7% relative to the first 6 months of 2010, Personal loans and motor car finance against a market contraction of 51.3%. BPI’s market The personal loans portfolio was 1.1% lower relative to share in new loans contracted was situated at 8.5% in June 2010, totalling 759.6 M.€. The decreased demand, this period, reflecting the reinforced stringency in risk as well as the more restrictive lending policy, contributed evaluation and the various spread/rate adjustments for to a 24.2% drop in new loans contracted in the first half new loans introduced by BPI in the wake of the higher of 2011 and which amounted to 124 M.€. funding costs borne by banks on the Portuguese market.

1) Loans secured by fixed property. Corresponds primarily to home loans and loans for home alterations. 2) At June and December 2010 and June 2011, includes performing loan balances of 857 M.€, 821 M.€ and 789 M.€, respectively, of derecognised securitization operations. 3) Includes consumer loans and credit lines made available for privatisations. 4) Includes outstanding credit of non-Bank Customers. 5) Includes car financing, leasing, factoring with and without recourse and confirming originated by Individuals and Small Businesses Banking. 6) Includes overdrafts, current account loans, discounted bills receivable and other loans which form part of the loan products tailored mainly for entrepreneurs and small businesses.

Banco BPI | 1st half 2011 Report 24

At the end of June 2011, the portfolio of motor car and in the Support Line for companies in the agricultural finance advanced to Individuals and Small Business and livestock sector. In this period, the Individuals and Banking customers totalled 304.7 M.€, down 9.8% when Small Business Banking division contracted 891 compared with June 2010. This portfolio represents 75% operations in the amount of 45.3 M.€ within the scope of of the value of BPI’s total portfolio of motor car financing these credit lines. loans. New loans advanced in the first six months of 2011 posted a 40.1% decrease as a result of the lower Credit and debit cards and automatic payment terminals demand and the revision of spreads and rates at BPI. In June 2011, Banco BPI registered 561.1 thousand credit cards, corresponding to a 3.9% increase in the last As part of BPI’s association with Volvo, a new campaign 12 months. The accumulated billing in the first half of was launched in May which offers special selling prices 2011 totalled 507 M.€, which represents a 0.4% and rates for the entire Volvo range, in addition to offering increase when compared with the same period last year. 1 year’s comprehensive motor vehicle insurance. The amount of credit outstanding was down 0.8%, standing at 173 M.€ at the end of June 2011. Commercial loans, leasing and factoring The commercial loans, leasing and factoring portfolio, The placing of debit cards with BPI customers totalled essentially geared to sole proprietors and small 1 072.2 thousand cards at the end of June 2011, which businesses, recorded an 8.4 % decline vis-à-vis June corresponds to 5.4% year-on-year growth. Accumulated 2010, totalling 2 176.3 M.€. billing in the first six months of 2011 totalled 2 760 M.€, which represents 3.1% growth relative to the same period During the first half of 2011, Banco BPI maintained an a year earlier. active role in the PME Investe II, III, and VI credit lines

Credit cards, debit cards and automatic payment terminals (APT) Selected indicators 30 Jun.10 31 Dec. 10 30 Jun.11 ∆% Jun.10 / Jun.11 Credit cards No. of cards (x th.) 540.1 548.2 561.1 3.9% Billing (M.€) 505.4 1 057.2 507.3 0.4% Loan portfolio (M.€)1 174.5 187.6 173.0 -0.8% Debit cards No. of cards (x th.) 1 017.6 1 045.7 1 072.2 5.4% Billing (M.€) 2 676.4 5 697.7 2 760.1 3.1% APT No. of APT (x th.) 45.0 51.4 47.2 4.9% Billing (M.€) 1 238.3 2 711.4 1 284.1 3.7%

The number of Banco BPI’s automatic payment terminals Salary accounts (APT) grew by 4.9% to number 47.2 thousand terminals The number of salary accounts with automatic salary at the end of June 2011. Accumulated billing in the half domiciliation grew by 13% relative to June 2010, to year increased 3.7% when compared with the same stand at 293 thousand at the end of June 2011. period last year to 1 284.1 M.€.

1) Customers of Individuals and Small Businesses Banking and non-Customers outstanding.

Banco BPI | 1st half 2011 Report 25

The strategy of promoting customer loyalty was pursued in segment and for small businesses, sole proprietors and 2011, having focused once again on staging a Salary self-employed professionals. Account campaign at the start of the year with the goal of During the first half of 2011, special emphasis was capturing new automatic salary-domiciliation accounts. In placed on the sale of business-related insurance cover by order to encourage salary domiciliation accounts, BPI way of the implementation of different commercial offered a PPR plan amounting to 10% of the salary initiatives, namely the realisation of a campaign targeting domiciled, having also taken the opportunity to stimulate unincorporated business customers and self-employed a savings culture amongst its customers through the professionals, which was held from April to June 2011. placing of regular-contribution PPR plans. As a result of these commercial drives, the policies portfolio expanded 180% relative to June 2010. Insurance As part of the strategic partnership with Allianz Portugal, In overall terms and taking into consideration all the Banco BPI offers a diversified range of autonomous-sale autonomous-sale insurance policies, the portfolio grew by insurance products, both for the individual customers 35% when compared with the same period last year.

Autonomous-sale insurance products Selected indicators ∆% Jun.10/ 30 Jun.10 31 Dec. 10 30 Jun.11 Jun.11 No. of policies for Individuals (thousands) 136.6 156.3 180.5 32.1% No. of policies for small businesses (thousands) 2.9 4.8 8.3 180.1% Total 139.5 161.1 188.7 35.3%

Banco BPI | 1st half 2011 Report 26 COMPORATE BANKING, INSTITUTIONAL BANKING AND PROJECT FINANCE

In June 2011, the loan and guarantees portfolio of Finance totalled 14 594 M.€ , down 6.7% on the figure Corporate Banking, Institutional Banking and Project in June 2010.

Corporate Banking, Institutional Banking and Project Finance Amounts in M.€ Jun.10/Jun.11 Jun. 10 Dec. 10 Jun. 11 Δ M.€ Δ % Loan to Customers Companies and Large corporations1 2 8 373.7 7 939.4 7 727.7 (646.0) (7.7%) Institutional Banking / State Business Sector 2 2 248.0 2 284.4 2 198.9 (49.1) (2.2%) Project Finance 3 2 331.2 2 328.1 2 250.1 (81.1) (3.5%)

[= Σ 1 to 3] 4 12 953.0 12 552.0 12 176.7 (776.2) (6.0%)

Guarantees 5 2 501.4 2 482.1 2 355.6 (145.8) (5.8%)

2 Loans and guarantees 6 15 640.3 15 152.3 14 593.8 (1 046.5) (6.7%)

3 Resources 7 1 857.0 2 105.3 1 839.9 (17.0) (0.9%)

The macroeconomic and financial background remained The bank continued to pay special attention to monitoring challenging in the first half of 2011, with negative customers closely with a view to ensuring a proper consequences for companies’ activity, although there was management of credit risk. a positive trend in the export companies’ segment. BPI continued and reinforced its support for the export As a result of the sovereign debt crisis, the restrictions on segment through specialised structures, notably for the Portuguese companies’ access to international financing Angolan market, the Office for Africa and, for the Iberian intensified, leading to the higher cost of credit which market, the Spanish Companies Office, as well as actively aggravated even further the conditions under which promoting the selling of export credit insurance and companies function. making available specific products and services for other markets, such as the Mozambique market. The loan portfolio registered a decrease in all segments of Corporate Banking. The total loan portfolio evidenced a In the Companies segment, BPI continued to maintain its 6% decrease, having fallen from 12 953 M.€ (in June strong support for the SME’s sub-segment through the 2010) to 12 177 M.€ (in June 2011). PME Investe lines, which have enabled companies to access financing under special conditions. Bank guarantees posted a 5.8% decline, due mainly to the retraction in the construction market and the cutback BPI is leader in the PME Investe lines with 15 300 in public works. operations entitled to the program, corresponding to 1 600 M.€. Companies and large corporations The Companies and Large Corporations loan portfolio Similarly under the PME Líder and PME Excelência totalled 7 728 M.€, down 7.7%. This decrease can be programmes, BPI has played a prominent role, with some essentially attributed to the repayment of certain large- 42% of SME’s having adhered to this status through BPI, scale operations, as well as a series of voluntary early while of the total of PME Líder firms, 69% are BPI repayments, namely operations domiciled at the Madrid customers. branch.

1) Companies and Large corporations aggregate includes figures from branch in Madrid. 2) The concept of loans and guarantees includes loans to Customers (certificated and uncertificated), loans to credit institutions and other certified assets, attributed to the Corporate Banking, Institutional Banking and Project Finance business. 3) Includes sight deposits and time deposits.

Banco BPI | 1st half 2011 Report 27

Project Finance In light of the conditions imposed by the current realised both on the local market – giving continuity to its macroeconomic environment, the project finance market role of permanent financial advisor in several projects, in in Portugal continues to record a significant slowdown due particular in the health, infrastructures and transport to the brake applied to the launch of new public sectors – and on the international market where the Bank investment projects under the public-private partnerships continued to step up its involvement in the Portuguese- regime, as well as to the bank’s decision not to participate speaking African markets, notably Angola, Mozambique in new operations on the international market. and Cape Verde.

In this context, the project finance segment’s loan Institutional banking / State business sector portfolio totalled 2 250 M.€ in June 2011, translating The Institutional Banking and State Business Sector into a 3.5% decrease relative to the same month last Division serves institutional clients, public-sector year. Also contributing to this decrease was the early companies and other companies owned by public sector repayment of operations primarily concentrated on the entities. international market which exceeded in value the disbursement of operations already contracted – these Loans to Institutional Banking and State Business Sector essentially on the domestic market. Division clients totalled 2 199 M.€ at the close of June 2011, which represents a 2.2% decrease relative to the During this period, BPI’s involvement was also marked by same period a year ago. a greater focus on consultancy activities. These were

Banco BPI | 1st half 2011 Report 28 Bancassurance

In the insurance area, BPI has a strategic partnership with Bancassurance’s performance in the 1st half of 2011 is the sector’s world leader – the German group Allianz. This reflected in the following income indicators: association has been cemented through BPI’s 35% stake in the capital of Allianz Portugal, and in a distribution ƒ the amount of commissions was 18.3 M.€; agreement in terms of which insurance policies are ƒ life assurance and non-life insurance premiums totalled marketed via the Bank’s commercial network. respectively 36.4 M.€ and 29 M.€, which correspond to

an increase of 15% in life assurance and a 2% BPI Customers thus have at their disposal an extensive reduction in non-life business – the last-mentioned range of insurance products which cover both life being explained by the behaviour of credit-protection assurance – death and disability insurance – and the insurance associated with personal loans which other branches – motor insurance and all-risks cover: recorded a decrease in the period. housing, fire, building alterations and installations, public liability, theft, personal accident, unemployment and ƒ The number of insurance policies at the end of June sickness. 2011 exceeded 490 thousand active insurance policies in life risk and 370 thousand active policies in non-life business;

Banco BPI | 1st half 2011 Report 29 Asset management

The volume of financial assets managed by the BPI 2011 has been particularly difficult for the savings Group’s asset management companies totalled 10 industry in Portugal, with large-scale disinvestments on thousand M.€ at the end of the 1st half of 2011, which the part of national savers in unit trust funds, represents a 3.6% decrease relative to the end of the first capitalisation insurance and other. six months of 2010.

Assets under management Amounts in M.€ ∆% Jun.10/ 30 Jun. 10 31 Dec. 10 30 Jun. 11 Jun.11 Unit trust (mutual) funds 1 2 581 2 584 2 374 (8.0%) Real estate unit trust funds 2 284 273 206 (27.5%) Pension funds 3 3 274 3 349 3 260 (0.4%) Capitalisation insurance 4 3 829 4 032 3 744 (2.2%) Institutional Customers 5 438 473 448 2.3% Total [= Σ 1 to 5] 6 10 406 10 713 10 033 (3.6%)

Notwithstanding the 8% decline in 2011 in the volume of BPI’s real-estate unit trust funds is attributable to an BPI unit trust funds, this drop was not as large as that initiative of BPI Gestão de Activos, which decided to alter recorded in the national market (9.5%), with BPI Gestão the redemption conditions of its open-end fund, making it de Activos recording a slight gain in market share (from more protected against future withdrawals. Before 17.1% to 17.4%). As regards Capitalisation Insurance, implementing this change, all participants were given the the 7% contraction in the volume of managed assets was opportunity to exit the fund, with the large majority of the identical to the 7% decrease in the mathematical capital (75%) having opted to remain in the fund. provisions of capitalisation insurance on the Portuguese market. Meanwhile the significant drop which occurred in

Banco BPI | 1st half 2011 Report 30

UNIT TRUST FUNDS Unit trust funds under management totalled 2 374 M.€ at domiciled in Portugal totalled 2 241 M.€ in June while the end of the 1st half of 2011, which corresponds to an the six UCITS III funds domiciled in Luxembourg 8% fall vis-à-vis the first half of 2010. The funds amounted to 133 M.€.

BPI unit trust funds Amounts in M.€ ∆% Jun.10/ 30 Jun. 10 31 Dec. 10 30 Jun. 11 Jun.11 Bonds and money market 1 620 559 489 (21.2%) Capital growth (equities) 2 524 575 551 5.2% Tax efficiency (PPR and PPA) 3 940 935 871 (7.3%) Diversification 4 498 516 464 (6.8%) Total [= Σ 1 to 4] 5 2 581 2 584 2 374 (8.0%)

The decreases recorded in the volumes of the money Advertising campaigns market and PPR funds were a feature of the national A few advertising campaigns were realised, of which we market in this 1st half of 2011. The decrease registered highlight two with greater commercial visibility and in the volume of the money market funds in Portugal was external communication: 40%, as a result of a strong movement involving the reallocation of short-term investments to other types of ƒ The “BPI Africa No. 1 in 2010” campaign– this instruments which offer higher guaranteed rates, such as campaign sought to disclose the good results obtained term deposits. by the BPI Africa fund, the best fund in 2010 (29.5%)

and simultaneously reinforce the importance of a proper Marketing activity diversification of the portfolio from the geographic, Products sectorial, asset class, currency and maturity During the course of the 1st half of the year. BPI Gestão perspectives. de Activos launched a Special Investment Fund – BPI Precious Metals – targeted at customers of BPI’s ƒ The “You have 20 years to plan retirement” campaign – Investment Centres and Private Banking. initiated in June 2011, this initiative had as its goal reinforcing BPI’s image and reputation in the field of BPI Precious Metals is a closed-end SIF set up for a retirement savings and fostering awareness among period of 8 years with the object of generating capital customers of the importance of saving for retirement as gains through investment in a diversified portfolio of early as possible. precious metal assets (gold, silver, platinum and palladium). Recognition of BPI Gestão de Activos in 2011 BPI Gestão de Activos received 2 important accolades in the 2011 edition of the Morningstar – Diário Económico Awards for the best Unit Trust Funds in the following categories:

ƒ Best National Equities Fund Manager – BPI Gestão de Activos (accolade received for the 3rd consecutive year)

ƒ Best National Global Equities Fund – BPI Restructurings (accolade received for the 5th year)

Banco BPI | 1st half 2011 Report 31

business written in 2011 was a transversal reality BPI Gestão de Activos returns in 2011 throughout the entire Portuguese market for capitalisation At 30 June 2011, special mention is made of the products and PPR in the form of insurance, which fell following unit trust funds managed by BPI Gestão de 40.6% relative to the same period of the preceding year. Activos based on the returns earned during the past 12 The availability of term deposits with extremely attractive months. rates had a major impact on the demand for capitalisation

(unit linked) insurance. ƒ BPI Europa with 14.5% and BPI Euro Grandes

Capitalizações with 12.4% were the 4th and 8th best funds in the class EU, Switzerland and Norway Equity The volume of assets under management totalled Funds 3 744 M.€ at the end of June 2011, which corresponds ƒ BPI Restructurings with 10.8% was the 5th best to a 2% decrease relative to June last year. fund in the category International Equities Funds ƒ BPI América with 9.6%, was the 3rd best fund in In the 1st half of 2011, BPI Vida e Pensões launched the the class North American Equities Funds product BPI Reforma Objectivo PPR (2025 and 2035), a ƒ BPI High-Risk High-Yield Bonds was prominent with retirement plan which adapts to the life cycle of investors. a return of 8.8%, being the best in its class of These products’ investment policy keeps pace with the International Bonds Funds age of their investors: as the maturity date approaches, ƒ BPI Reforma Acções PPR (retirement equities) with the exposure to equities tends to diminish, while the 5.5% was the best fund in its class of Retirement investment in bonds tends to increase so as to add greater Savings Funds with more than 35% in equities stability to the portfolio of those who are approaching Source: APFIPP, Return and Risk Measurements of 30 retirement date. June 2011. This product has bolstered the spectrum of BPI Vida e Pensões’s retirement savings plans, which presented a CAPITALISATION INSURANCE positive performance during the first half of 2011, with In April 2011, the BPI Group decided to merge BPI Vida the mathematical provisions growing by 5% when with BPI Pensões, which was the BPI Group unit compared with the corresponding period of 2010. specialising in pension funds and plans. This merger gave birth to BPI Vida e Pensões Companhia de Seguros S.A., PENSION FUNDS the entity which aggregates the entire production of the BPI Vida e Pensões managed 36 pension funds at the end BPI Group’s insurance and pensions. This operation was of the first half of 2011, involving total financial asset essentially motivated by the quest for operational and holdings of 3 090 M.€, virtually unchanged figure when functioning gains, although the business model at each compared to the end of the same period last year (down one of the activities in which the two companies 0.5%), but 2.9% lower than the amount at the end of last conducted their operations remained unchanged. year. This decline is explained by the conjugation of the financial markets’ lacklustre performance with the day-to- Turning to insurance activity, after BPI Vida having day routine activity of paying pensions and benefits. attained 835 M.€ of new capitalisation insurance business written in the 1st half of 2010 (atypically high At 30 June 2011, BPI Vida e Pensões managed 123 value), new business written in the first half of 2011 fell business pension plans, of which 70 were defined to 212 M.€ (year-on-year change of -75%), a figure that is contribution, 44 defined benefit and 9 mixed plans. close to those noted in the same period of 2008 and Relative to the end of last year, there was the passage of 2009. It is worth mentioning that this decrease in new one defined-benefit plan to a defined-contribution plan.

Banco BPI | 1st half 2011 Report 32 Investment banking

CORPORATE FINANCE

Contrary to that observed on the European market, advising an international financial investor on the mergers & acquisitions business in Portugal has still not acquisition of Galp’s natural-gas distribution assets, as reversed the downward trend witnessed since 2008. well as transactions involving assets in the retail and transport sectors, both in Portugal and in the international In particular in the Portuguese case, the intensification of markets. the sovereign debt crisis and the political uncertainty noted in the 1st half of 2011 against a backdrop of weak Even so, BPI maintained a prominent position on the economic growth, constituted an environment that is corporate finance market in Portugal and advised a wide hardly conducive to the execution of mergers & group of entities in the taking of investment, restructuring acquisition deals involving national economic agents. and financing decisions.

In fact, based on data extracted from Bloomberg, it is Amongst the processes in which BPI was involved, the estimated that in the first half of 2011 mergers & following merit special mention (i) advising ExpressGlass acquisitions transactions involving Portuguese entities, on in the analysis of an investment opportunity; (ii) advising the buyer’s or seller’s side, in which financial advisers the Soares da Costa group on the valuation and analysis of participated, have remained at extremely lower levels than strategic options for a subsidiary; and (iii) advising those observed prior to the onset of the financial crisis FCPorto SAD on the issue of a bond loan. (plunges of 90% in value and 73% in the number of transactions relative to the first half of 2010; when Also noteworthy was the advice given by BPI to Partex on compared to the first half of 2007, the accumulated drop the valuation of its crude-oil assets. was 86% and 83%, respectively). Listed next are some of the consultancy assignments of a The macroeconomic and political landscape exacerbated public nature in which BPI was involved in the 1st half of in particular some operations in which BPI was involved 2011. and which end up not being realised, amongst which

ƒ ExpressGlass – Advising in the study into the taking of a ƒ Desfo Group– Advising on the analysis of strategic options. strategic investment decision. ƒ Soares da Costa – Advising on the valuation and analysis of ƒ Sonae – Advising on the possible acquisition in the retail strategic options for a subsidiary. area. ƒ Martifer Renewables – Advising in the analysis of strategic ƒ Fundo de Infra-estruturas – Advising on the taking of a options for wind-farm projects. decision on the acquisition of Galp’s natural-gas assets. ƒ FCPorto SAD – Support in the mounting and flotation of a ƒ Partex – Advising on the determination of the fair value of bond issue. crude-oil interests.

Banco BPI | 1st half 2011 Report 33 EQUITIES

Secondary market In the first half of 2011, BPI brokered a trading volume in Once again, BPI occupied top positions in the most equities of 4.1 th.M.€ and generated net brokerage important sector rankings, having been voted the best commissions of 5.2 M.€. In online broking, Banco BPI is research house in Portugal by IRG Awards, while from an market leader with its 18.7% share (aggregated market Iberian perspective, BPI was rated the best research share of 20.3%), having brokered 1.4 th.M.€. house by Thomson Reuters Starmine and the second best by the Institutional Investor. BPI was also regarded as Primary market being the second best Iberian broker by Thompson Extel In the first half of the year, BPI was involved for the first (15th in Europe in Small & Mid Caps). time in a primary (first issues) market operation in Brazil, where it participated as co-manager of the syndicate The institutional sales team continued to strengthen its which placed the international institutional tranche of franchise amongst the major institutional investors Sonae Sierra Brasil on the Brazilian stock exchange. Also operating in the Iberian market and presently has clients noteworthy was BPI’s participation as co-manager in the in 18 countries. For the third consecutive year, BPI was placing of the Spanish company Pescanova’s convertible ranked in first place in the category Iberian Small & Mid bonds for an amount of 180 M.€. Caps-Sales compiled by Thomson Extel, whilst two of its team members occupied the top places in the ranking. Research and sales This year BPI’s equities sales team was also voted to best During the first half of 2011, BPI continued to stand out team in terms of the overall Iberian market. A member of thanks to its leading position in the Equity Research the trading team occupied the top place for the first time arena, founded on the quality of its service and in the Best Trading – Iberia classification. During the first consistency in keeping abreast of a extensive universe of half of 2011, BPI staged 62 road shows with companies coverage. and analysts and 11 reverse road shows (visits by institutional investors to Portugal and Spain). In this period, the number of companies tracked increased to 109 (30 in Portugal, 75 in Spain, 3 in Trading France and 1 in Denmark), with the start of coverage of The Equities Department’s trading activity has been CAF, Eiffage and Vinci. A total of 279 research reports concentrated since 2010 chiefly at BPI Alternative Fund – were issued (excluding the Iberian Daily), with the Iberian Equities Long/Short of which BPI is the holder of "Iberian Small & Mid Caps Guide" and the "Iberian roughly 75% of the participating units issued. Profits Strategy" increasingly asserting themselves as key from financial operations in the first six months of 2011 publications in the industry. On the occasion of amounted to 2.8 M.€ as a result of this fund’s Portuguese Day at the NYSE, a report was issued primarily consolidation in BPI’s accounts, coupled with the focusing on the best prospects amongst national arbitrage activity in equities carried out directly in the companies. bank’s balance sheet. BPI’s initial investment in the fund in January 2010 was 60 M.€.

Banco BPI | 1st half 2011 Report 34 PRIVATE BANKING

At the close of June 2011, BPI Private Banking’s It is also worth highlighting that new client influx has business volume was situated at 3 463 M.€, made an important contribution to the positive change in corresponding to a 3% increase relative to the end of June business volume. 2010. Assets under discretionary management and advisory mandates at BPI Private Banking registered 4% BPI’s Private Banking service was recognised for the 4th growth to total 2 891 M.€. Stable investments under consecutive year with the award “Best Domestic Private custody decreased 4% when compared with the same Banking” by “Euromoney Private Banking Survey 2011”. period a year ago, while the loan portfolio amounted to 164 M.€ in June 2011, representing a 19% rise relative In the past 4 years, BPI was ranked in 1st place in the to the end of June 2010. categories "Relationship Management" and "Privacy and Security". The 1st half of 2011 was characterised by a market climate that was adverse and with high uncertainty as a Private Banking consequence of the sovereign debt crisis which affected Selected indicators Amounts in M.€ certain European states and which worsened in 2011. Jun. 10 Jun. 11 Δ% Besides a significant aversion to risk, we have witnessed a Advisory and discretionary management growing need for risk diversification, thereby making the Advisory 1 2 295 2 555 11% task of counselling and selection of investments even Discretionary management 2 492 335 (32%) more complex. In this scenario, and despite the [ = 1 + 2] 3 2 787 2 891 4% permanent concern with preserving clients’ wealth, Stable investments under custody 4 427 409 (4%) commercial activity remained focused on the gradual Loan portfolio 5 138 164 19% diversification of investments, taking advantage of good Business volume [ = Σ 3 to 5] 6 3 352 3 463 3% economic growth in other corners of the world. This movement ended up translating into increases of 26% in the volumes invested in bonds and 23% in unit trust funds.

Banco BPI | 1st half 2011 Report 35 Private Equity

In the first half of 2011, BPI Private Equity’s activity was SGPS, S.A. (a company which has 100% control of centred on monitoring the portfolio of direct investments, Frissul Entrepostos Frigoríficos, S.A. and Frissul which include the shareholdings of 9.2% in Conduril, Transportes Lda.), the vehicle destined for the execution 20% in Caravela Gest and around 2% in Arco Bodegas of a buy-and- build project in the provision of the logistics Unidas. For its part and in the wake of the changes which and controlled temperature services sector. took place in this area of the Group in 2010, the management of venture capital funds was carried out by During the first half of 2011 Inter-Risco’s management Inter-Risco – Sociedade de Capital de Risco, S.A. (Inter- focused on promoting the Inter-Risco II Fund with a view Risco), a company in which BPI Private Equity has a 49% to attracting new investors, with particular emphasis equity interest. placed on canvassing international institutional investors. In tandem with this prospecting activity, priority was given Besides the Fundo Caravela – Fundo de Capital de Risco to the dental clinics project with the constitution of the promoted by BPI with a capital of 30 M.€. – Inter-Risco 32 Senses Group. This Group, which will operate in the also manages the Inter-Risco II Fund launched in 2010, premium (with the 32 Senses brand), shopping centres which has BPI as sponsor with an investment of 37.5 (with the Smile Up brand) and traditional segments, is M.€. This fund commenced its activity in November with striving to build up a distinctive project, both due to its a capital allocation of 75 M.€ and a target of 150 M.€. size and its innovative character in the oral health market Amongst the Inter-Risco II Fund’s investors are, in in Portugal and to reach a leading position in coming addition to BPI, the PVCi Fund, a fund with 111 M.€ years. managed by the European Investment Fund, geared to investments in private equity and venture capital funds in In global terms, the Group’s Private Equity area closed the Portugal and in which BPI also has a stake. The PVCi year with an exposure to this class of assets of some 73 fund invested 15 M.€ in the Inter-Risco II Fund. M.€., in terms of balance sheet values, comprising its own portfolio of investments and the investments in venture With its more generalist mission geared to expansion and capital funds. buy-and-build operations, the Inter-Risco II Fund made its first investment still in 2010, with the acquisition of a The current portfolio of managed investments in BPI’s financial holding of 80% in the capital of Cold-Land Private Equity is as follows:

PRIVATE EQUITY INVESTMENTS 30 June 2011

Banco BPI | 1st half 2011 Report 36 International banking activity

BANCO DE FOMENTO ANGOLA Selected indicators Amounts in M.€ In June 2011, Banco de Fomento Angola’s (BFA) Jun. 10 Jun. 11 ∆% shareholders’ equity (including minority interests) Net total assets 4 648.3 4 683.5 0.8% amounted to 424 M.€, while assets in the same period Loans to Customers (net) 1 371.2 1 006.0 (26.6%) totalled 4 683 M.€. Customer resources 3 962.1 4 013.4 1.3% At the end of the first six months of 2011, the Shareholders’ equity 418.3 424.3 1.4% Commercial Network comprised 146 branches, up 9% on Net operating revenue 151.8 157.4 3.7% the same period last year, serving total customers of 841 Net interest income 90.2 104.5 15.8% thousand (+115 thousand customers relative to June Commissions and other operating income 22.0 21.6 (1.8%) 2010). Profits from financial operations 39.5 31.3 (21.0%)

It is also worth mentioning the growing adherence by Operating costs 51.1 55.4 8.4% customers to the homebanking services, which permits a Operating costs / net operating revenue 34% 35% progressive transfer of branch transactional activity to Personnel costs / net operating revenue 16% 17% these channels, thus freeing the commercial network to BFA’s contribution to the BPI Group’s net 45.1 44.6 (1.0%) focus on more value-added functions, namely commercial profit relationship with customers, translating into an Return on average total assets (ROA) 4.3% 4.3% improvement in service quality. At the end of the first half Return on Shareholders’ equity (ROE) 49.5% 47.4% of 2011, approximately 163.5 thousand customers were users of the homebanking services, which corresponds to No. of Employees 1 879 2 096 11.5% 52% year-on-year growth (56 thousand more users). Distribution network 134 146 9.0% No. of Customers 726 180 841 060 15.8% Resources Customers using BFA Net 107 299 163 520 52.4% In June 2011, customer resources posted 20% growth Of which, individuals 102 882 157 920 53.5% relative to the same period last year to total 5 783 M.US$ (4 013 M.€, corresponding to a 1.3% change in resources companies 4 417 5 600 26.8% expressed in euro). ATM machines (no.) 246 267 8.5% Multicaixa cards 600 233 622 178 3.7% BFA had in the period under review a 19.3% market Points of sale terminals (POS) 1 500 2 238 49.2% share in deposits, placing it in second place in the market.

Loans The customer loans portfolio measured in American dollars recorded a decrease in the order of 13%, year-on- year, to 1 449 M.US$ (1 006 M.€, corresponding to a -27% change in loans expressed in euro). According to BNA statistics, BFA’s market share in June 2011 was 12.3%.

At the end of June 2011, 72% of the loan and guarantees portfolio corresponded to the corporate segment and the remaining 28% to the individuals’ segment.

Banco BPI | 1st half 2011 Report 37

Securities portfolio As regards the VISA acquiring operation, in June 2011 At 30 June 2011, BFA’s securities portfolio stood at BFA held first position in terms of the number of active 1 743 M.€, which represented 37% of the Bank’s assets. points of sale machines (POS) with a share of 30.7%. The portfolio of short-term securities, composed of Treasury Bills and Central Bank Bonds, totalled 764 M.€, Loans for investment while the portfolio of medium-term securities made up of In May 2011, BFA launched a campaign Crédito ao Treasury Bonds amounted to 978 M.€. Investimento (loans for investment) in kwanzas, - a campaign which is aligned with the Angolan authorities’ Cards objectives of stimulating investment in the country BFA continued during the first half of 2011 to through the promotion of financing in kwanzas for consolidate its position as the principal operator of companies. BFA offered the lowest interest rate on the multicaixa cards, achieving about 28% market share, market for investment loans in kwanzas. which places in first place in the Angolan market for debit cards.

Banco BPI | 1st half 2011 Report 38

BCI – BANCO COMERCIAL E DE INVESTIMENTOS Selected indicators Amounts in M.€ At 30 June 2011, total assets were 1 104.2 M.€, which 30 Jun.10 30 Jun. 11 ∆% measured in euro, represents a year-on-year growth of Net total assets 983.7 1 104.2 12.2% 12.2%. Loans to Customers (net) 680.7 738.8 8.5% Deposits Customer deposits 680.4 814.9 19.8% Deposits taken from customers registered in June 2011, Shareholders’ equity 63.6 89.9 41.4% when measured in euro, 19.8% year-on-year growth, Number of Employees 1 244 1 531 23.1% totalling 814.9 M.€. In May 2011, BCI’s market share in deposits was situated at 27%, which represents a share Traditional branches 76 105 38.2% gain (+0.9 p.p.) relative to that registered in the same Conversion exchange rate 42.93 41.31 period last year. EUR/MZN

Loans The net loans portfolio stated in euro posted 8.5% growth, to total 738.8 M.€ in June 2011.

BCI’s market share in the loans segment was situated at 32% in May 2011, which represents a drop in market share (-2.8 p.p.) relative to the same period last year.

Distribution network BCI continued the boost its physical network of branches, opening 26 new branches, 2 business centres and 1 Exclusive Centre in the last 12 months (of which 10 were opened in the first half of 2011).

At the end of June 2011, the bank had a total of 98 branches, 6 business centres and 1 Exclusive Centre, while its workforce numbered 1 531 employees.

Banco BPI | 1st half 2011 Report 39 Financial review

Selected indicators (Amounts in M.€, except when indicated otherwise) 30 Jun. 2010 30 Jun. 2011 Δ% Domestic International Consolidated Consolidated Consolidated activity activity Net total assets1 49 351 38 513 4 711 43 225 (12.4%) Assets under management2 17 689 16 952 - 16 952 (4.2%) Business turnover 3 69 848 62 597 5 257 67 855 (2.9%) Loans to Customers (gross) and guarantees4 35 111 32 111 1 244 33 355 (5.0%) Total Customer resources 34 737 30 486 4 013 34 499 (0.7%) Business (turnover) volume3 per Employee5 (thousands of euro) 7 323 8 688 2 508 7 295 (0.4%) Net operating revenue 549.5 446.5 157.4 603.9 9.9% Net operating revenue per Employee5 (thousands of euro) 58 61 77 64 11.1% Operating costs (excluding costs with early retirements) / net operating revenue6 61.8% 74.1% 35.4% 62.6% Operating costs (excluding costs with early retirements) / net operating revenue 58.1% 73.7% 33.9% 61.6% (last 12 months)6 Personnel costs and outside supplies and services / net operating revenue 57.5% 70.4% 31.8% 58.9% Personnel costs / net operating revenue and equity accounted results7 34.6% 36.2% 16.7% 31.1% Operating costs / net operating revenue and equity accounted results7 60.2% 60.2% 34.7% 53.6% Net profit 99.5 31.8 47.4 79.1 (20.4%) Adjusted data per share (euro) 8 Net profit8 0.101 0.032 0.048 0.081 (20.5%) Book value8 1.461 0.894 0.241 1.136 (22.3%) Weighted average number of shares (in millions) 8 981.8 982.2 982.2 982.2 0.0% Net operating revenue and equity accounted results / ATA7 2.3% 2.3% 6.7% 2.8% Profit before taxation and minority interests / ATA7 0.6% 0.2% 4.1% 0.6% Return on average total assets (ROA) 0.6% 0.2% 4.0% 0.6% Profit before taxation and minority interests / average Shareholders’ equity and 13.0% 6.6% 38.1% 15.3% minority interests 7 Return on Shareholders’ equity (ROE)9 9.6% 3.4% 30.1% 7.2% Loans in arrears for more than 90 days / Customer loans 1.8% 2.2% 5.4% 2.3% Loan impairments (in the balance sheet) / Customer loans 1.9% 1.9% 7.7% 2.1% Net credit loss 10 0.33% 0.46% 0.88% 0.48% Adjusted net credit loss 11 0.45% 0.46% 0.88% 0.48% BPI Group Employees’ pension funds assets 2 389.2 2 329.4 2 329.4 (2.5%) Pension obligation cover 105.3% 104.7% 104.7% Shareholders’ equity12 1 433.6 878.1 237.2 1 115.3 (22.2%) Own funds13 2 911.5 2 718.8 (6.6%) Risk weighted assets13 26 845.5 26 240.7 (2.3%) Ratio of own funds requirements7, 13 10.8% 10.4% Tier I7, 13 8.6% 9.6% Core Tier I13, 14 8.1% 9.1% 1) The amount of net total assets presented for each geographical segment has been corrected for the balances resulting from operations between these segments. 2) Amounts not correct for double counting (investments of financial products in other financial products). Includes unit trust (mutual) funds, Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff pension funds). 3) Loans, guarantees and total Customer resources. 4) Mortgage loans written off from the balance sheet were added back (gross balance of 863 M.€ in June 2010 and 797 M.€ in June 2011). 5) Number of Employees of the companies which are consolidated in full. 6) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue. In calculating the efficiency ratio in June 2011, a gain of 74.2 M.€ realised on the repurchase of own bonds in the 1st half of 2011 was excluded from net operating revenue. If one considers the net operating revenue as reported (which includes that gain), then the aforesaid indicator in the 1st half of 2011 would be 61.8% in domestic operations and 54.9% in consolidated terms, and for the 12-month period till June 2011 it would be 67.1% in domestic operations and 57.7% in consolidated terms. 7) Calculated in accordance with the Bank of Portugal's Instruction 16 / 2004. ATA – Average total assets. 8) Corresponds to net profit and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-period number in the case of the indicator “book value per share”). The weighted average number of shares was adjusted by the bonus issue that took place in May 2011. 9) In the ROE calculation, the average Shareholders' equity for the period (excluding minority interests) was taken into account and the revaluation reserves were excluded. 10) Loan impairments in the period, deducted of recoveries of loans in arrears written-off (in the income statement) / Customer loans. 11) For purposes of calculating the indicator for the 1st half 2010, 18.2 M.€ corresponding to the utilisation of the extraordinary charge recorded in December 2009 were added to impairments for the period. 12) Excludes minority interests. 13) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements. 14) Core capital corresponds to basis own funds, before deductions relating to equity interests in credit institutions and insurance undertakings, and excludes preference shares.

Banco BPI | 1st half 2011 Report 40 Consolidated OVERVIEW

BPI’s consolidated net profit for the 1st half of 2011 was Domestic operations contributed with 31.8 M.€ to 79.1 M.€, which corresponds to a 20.4% decrease consolidated profit, down 38.4% relative to the 1st half of relative to the profit of 99.5 M.€ reported in the same last year. The ROE relating to domestic operations - to period of 2010. The return on consolidated average which 85.7% of the Group’s average capital was allocated shareholders’ equity (ROE) in the 1st six months of 2011 - was situated at 3.4% in the 1st half of 2011. was 7.2%. For its part, the contribution from international activity to Domestic activity was conducted in a very tough economic consolidated profit was 47.4 M.€, 1.1% lower than the and market environment , reflecting the deterioration of figure earned in the 1st half of 2010. The ROE relating to the sovereign debt crisis in Europe, which made it international activity, which was allocated 14.3% of the inevitable for Portugal to seek international financial aid, Group’s average capital, was 30.1%. formalised at the beginning of April.

ROE by business area in the 1st half 2011 Amounts in M.€ Domestic activity Participating International BPI Group Commercial Investment Total of domestic interests and activity (consolidated) banking banking activity other Net profit Net profit 1 25.3 3.2 3.3 31.8 47.4 79.1 Adjustment to profit due to capital reallocation 2 1.1 - 0.3 - 0.7 [= 1+2] 3 26.4 2.8 2.5 31.8 47.4 79.1 Average risk weighted assets 4 22 653.7 187.3 151.2 22 992.3 2 581.0 25 573.2 Capital allocated Shareholders' equity (average) 5 1 713.0 58.2 111.1 1 882.4 315.1 2 197.5 Capital reallocation 6 141.6 - 42.9 - 98.8 [= 5+6 ] 7 1 854.6 15.3 12.4 1 882.4 315.1 2 197.5 ROE [= 3/7] 8 2.8% 36.9% 41.2% 3.4% 30.1% 7.2% Segmentation of the BPI Group’s domestic activity 1) The domestic activity comprises the commercial banking activity conducted in Portugal, including the provision of banking services to non-residents abroad (namely, amongst Portuguese emigrant communities) and those of the Madrid branch, as well as the activities relating to investment banking, private equity and other investments. 2) International operations comprise the activity conducted by Banco Fomento Angola (50.1% held), as well as the appropriation of the 30% equity interest held in BCI in Mozambique, the activity of BPI Dealer in Mozambique (92.7% held) and the activity of BPI Capital África in South Africa (100% held). International operations’ contribution to net profit in the 1st half 2011 from Banco Fomento Angola amounted to 44.6 M.€, from BCI was 3.1 M.€, from BPI Dealer Mozambique was –0.001 M.€ and from BPI Capital África was –0.4 M.€.. Calculation of ROE by business areas The return generated by each area results from the quotient between the contribution to the consolidated net profit and the capital allocated to the area. In determining the capital allocated to the domestic activity and to the international activity business areas, the accounting capital (shareholders' equity), excluding revaluation reserves, was taken into consideration. As regard each business area integrating the domestic operations, it is assumed that the capital employed is identical to the average capital employed for this activity as a whole, except as regards the revaluation reserves which were excluded from the capital allocated. The amount of capital allocated to each area is calculated by multiplying the assets weighted by the quotient between shareholders’ equity (excluding revaluation reserves) and the assets weighted for the whole of the aforesaid areas. Whenever the shareholders’ equity of a business area is more (or less) than the allocated capital, it is assumed that there has been a redistribution of capital, whereby that area’s contribution is adjusted by the costs (revenue) resulting from the increase (decrease) in outside resources by virtue of the capital reallocation.

Banco BPI | 1st half 2011 Report 41 Consolidated

BPI maintains a sound financial base, with comfortable ƒ Short-term funding procured from the ECB totalled liquidity levels and relatively good risk indicators. 1 000 M.€ in June 2011, the identical figure to that registered at the end of 2010. Capital. BPI concluded the 1st half of 2011 with a Core ƒ The portfolio of assets eligible for funding from the Tier I capital ratio – essentially shareholders’ equity and ECB was some 7 000 M.€, net of haircuts; minority interests excluding preference shares– of 9.1% ƒ The medium and long-term refinancing needs to occur and a Tier I capital ratio of 9.6%, up in both cases 1.0 in the 2nd half of 2011 are not material (327 M.€). p.p. relative to June last year. The total capital ratio stood at 10.4% at the end of June 2011. In international activity in Angola, BPI (through Banco

de Fomento Angola) has an extremely liquid balance Liquidity. In domestic operations, BPI maintains a sheet in which at the end of June 2011, customer comfortable liquidity situation: resources covered the funding of 88% of assets while

loans corresponded to only 24% of customer resources. ƒ On-balance sheet resources increased by 541 M.€

relative to December, while the gross loan portfolio Credit risk. The bank maintained good risk indicators: decreased by 716 M.€ in the period, which translated impairment charges in the period, net of loan recoveries, into a decrease in the transformation ratio of resources represented 0.48% of the average loan portfolio in the into loans (customer loans / customer resources on the 1st half of 2011, in annualised terms. In domestic balance sheet) from 131% in December to 125% at operations, that indicator stood at 0.46% and in the end of June (in consolidated terms, the same international operations it was 0.88%. indicator fell from 115% in December to 110% in

June); The ratio of loans in arrears for more than 90 days was ƒ The behaviour of the abovementioned customer loans 2.3% in June 2011. The total exposure to operations and resources aggregates permitted a reduction in the with instalments in arrears for more than 90 days, that recourse to short-term funding, with the result that the is, including loans not yet due associated with these liquidity gap records a 1 257 M.€ drop when operations, represented 3.1% of the total gross loan compared with December; portfolio at the end of the 1st half of 2011.

ƒ In the interbank market, BPI maintained throughout

the period a net debtor position of minor significance (385 M.€ at the end of June);

Banco BPI | 1st half 2011 Report 42 Consolidated ANALYSIS OF THE CONSOLIDATED INCOME STATEMENT

Consolidated net operating revenue increased 9.9% 9.2%, reflecting the ongoing expansion of the (+54.4 M.€) relative to the same period of 2010. distribution network in Angola.

The improvement in net operating revenue was greatly The increase in loan and other impairments, net of influenced by a gain of 74.2 M.€ realised on the recoveries, of 39.7 M.€ (influenced by the extraordinary repurchase of Tier II own bonds in the 1st half of 2011. charge of 24 M.€ mentioned above), is explained by the In parallel, BPI decided to recognise in the income higher charges in domestic operations. Impairments statement a cost of 40 M.€ (before tax) relating to a absorbed 45% of consolidated operating profit. programme of early retirements to be executed in the second half of 2011 and an extraordinary additional The 20.4% decline in consolidated net profit, when profit charge for loan and other impairments of some 24 M.€. before taxation is up 0.3% (down 14.8% in domestic operations and 6.8% higher in international activity), is Excluding the above gain on the repurchase of bonds, chiefly explained by the unfavourable trend in the caption consolidated net operating revenue decreased by 3.6% corporate income tax. (-19.8 M.€). In domestic operations, which contributed 70% to net operating revenue, net operating revenue Domestic operations contributed 40% to consolidated net excluding that gain was down 6.4% (-25.4 M.€), while profit, while international operations – which correspond in international activity (contributing the remaining 30% to the appropriation by BPI of 50.1% of BFA’s individual to net operating revenue) it increased 3.7% (+5.6 M.€). net profit and, with a smaller impact, the appropriation of 30% of BCI’s net profit in Mozambique - contributed the Consolidated costs, excluding early retirement costs, other 60%. Profit from domestic operations fell by 38.4% decreased by 2.3%. In domestic operations, costs were and from international activity by 1.1%. 4.4% lower, while in international activity costs rose by

Banco BPI | 1st half 2011 Report 43 Consolidated

Consolidated income statement Amounts in M.€ Δ% 1st half 10 2nd half 10 2010 1st half 11 1st half10 /1st half 11 Net interest income (narrow sense) 1 298.6 327.8 626.4 286.5 (4.0%) Unit linked gross margin 2 2.1 2.1 4.1 2.1 (0.5%) Income from securities (variable yield) 3 3.6 0.1 3.7 1.5 (57.2%) Commissions related to deferred cost (net) 4 15.7 14.6 30.3 14.9 (4.8%) Net interest income [=Σ 1 to 4] 5 320.0 344.5 664.5 305.1 (4.7%) Technical result from insurance contracts 6 6.1 9.9 16.1 7.4 20.4% Commissions and other similar income (net) 7 158.3 155.5 313.9 148.1 (6.5%) Profits from financial operations 8 75.2 44.0 119.2 133.8 78.0% Operating income and charges 9 (10.2) (4.7) (14.9) 9.5 193.7% Net operating revenue [=Σ 5 to 9] 10 549.5 549.3 1 098.8 603.9 9.9% Personnel costs, excluding early-retirements costs 11 (194.8) (200.6) (395.4) (192.9) (1.0%) Outside supplies and services 12 (121.4) (110.8) (232.1) (119.3) (1.7%) Depreciation of fixed assets 13 (23.5) (21.7) (45.2) (19.6) (16.3%) Operating costs, excluding (339.6) (333.1) (672.8) (331.8) (2.3%) early-retirements costs [=Σ 11 to 13] 14 Early-retirements costs 15 (17.7) (18.4) (36.1) (39.9) 125.4% Operating costs [= 14+15] 16 (357.4) (351.5) (708.8) (371.7) 4.0% Operating profit [= 10+16] 17 192.1 197.8 389.9 232.2 20.9% Recovery of loans written-off 18 9.6 6.2 15.9 9.5 (1.1%) Loan provisions and impairments 19 (58.8) (62.3) (121.1) (79.8) 35.6% Other impairments and provisions 20 (15.6) (13.5) (29.1) (34.2) 119.6% Profits before taxes [= Σ 17 to 20] 21 127.3 128.2 255.5 127.7 0.3% Corporate income tax 22 9.4 (3.6) 5.9 (12.0) 226.9% Equity-accounted results of subsidiaries 23 14.3 14.8 29.1 15.4 7.2% Income attributable to minority interest 24 (51.6) (54.1) (105.7) (51.9) 0.6% Net profit [= Σ 21 to 24] 25 99.5 85.3 184.8 79.1 (20.4%) Cash flow after taxation [= 25-13-19-20] 26 197.4 182.8 380.2 212.8 7.8%

Banco BPI | 1st half 2011 Report 44 Consolidated ANÁLYSIS OF CONSOLIDATED BALANCE SHEET

ASSETS Consolidated net total assets amounted to 43 224.8 M.€ which in turn represents around 90% of the consolidated at 30 June 2011. The 12.4% year-on-year decrease in total, while assets relating to international activity consolidated net total assets reflects the 12.7% decrease presented a slight increase (+0.9%). in the balance sheet relating to domestic operations,

Consolidated balance sheet Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Assets Cash and deposits at central banks 1 1 456.2 1 328.2 1 351.3 (7.2%) Amounts owed by credit institutions repayable on demand 2 286.2 338.6 348.7 21.8% Loans and advances to credit institutions 3 3 736.9 1 439.1 1 482.0 (60.3%) Loans and advances to Customers1 4 30 546.2 30 055.0 29 121.1 (4.7%) Financial assets held for dealing 5 1 594.4 1 241.7 1 035.1 (35.1%) Financial assets available for sale 6 8 282.9 8 156.3 6 555.1 (20.9%) Investments held to maturity 7 1 123.9 1 043.6 1 085.8 (3.4%) Hedging derivatives 8 420.2 250.3 270.7 (35.6%) Investments in associated companies and jointly controlled entities 9 186.4 194.2 182.9 (1.9%) Other tangible assets 10 260.9 252.1 211.5 (18.9%) Intangible assets 11 6.7 6.4 6.3 (6.2%) Tax assets 12 423.5 430.6 600.1 41.7% Other assets 13 1 026.4 923.8 974.2 (5.1%) Total assets [= Σ1 to 13] 14 49 350.7 45 659.8 43 224.8 (12.4%) Liabilities and shareholders' equity Resources of central banks 15 3 716.9 1 245.5 1 270.5 (65.8%) Financial liabilities held for dealing 16 422.6 261.5 131.9 (68.8%) Credit institutions' resources 17 4 862.3 4 726.1 2 895.1 (40.5%) Clients' resources and other loans 18 22 650.6 23 240.9 23 898.5 5.5% Debts evidenced by certificates 19 9 174.3 7 782.3 7 465.3 (18.6%) Technical provisions 20 2 832.1 2 991.9 2 777.1 (1.9%) Financial liabilities associated to transferred assets 21 1 663.0 1 570.4 1 497.8 (9.9%) Hedging derivatives 22 674.6 499.4 415.2 (38.4%) Provisions 23 104.7 110.6 119.7 14.4% Tax liabilities 24 51.0 37.7 42.6 (16.4%) Participating bonds 25 20.2 7.2 6.5 (67.9%) Other subordinated loans 26 699.7 640.4 342.3 (51.1%) Other liabilities 27 563.0 582.0 774.7 37.6% Share capital, share premium account, reserves and other equity instruments 28 1 357.7 1 283.5 1 058.0 (22.1%) Treasury stock 29 (23.6) (21.7) ( 21.9) 7.4% Net profit 30 99.5 184.8 79.1 (20.4%) Minority interests 31 482.3 517.4 472.2 (2.1%) Total Shareholders’ equity and 1 915.9 1 963.9 1 587.5 (17.1%) minority interests [= Σ28 to 31] 32 Total liabilities and 49 350.7 45 659.8 43 224.8 (12.4%) shareholders' equity [= Σ15 to 31] 33 Note: Bank guarantees 34 3 139.8 3 012.0 2 847.7 (9.3%) Off-balance sheet Customer resources2 35 5 692.3 5 783.4 5 467.3 (4.0%)

1) In December 2007, BPI sold 35% of the bonds relating to the capital tranche of the mortgage-loan securitisation operations which resulted in the derecognition of loan assets totalling 1 264 M.€. At 30 June 2011 the amount of Customer loans (net) derecognised from the balance sheet was 793 M.€. 2) The amount of unit trust funds included in these resources has been corrected for fund units held in the portfolios of the Group’s banks and pension funds under BPI management.

Banco BPI | 1st half 2011 Report 45 Consolidated

GROUP CAPITAL Accounting shareholders’ equity Accounting shareholders’ equity, including minority With negative impact, interests, totalled 1 587.5 M.€ in June 2011, which corresponds to a 19.2% decrease (-376.4 M.€) when ƒ The negative change in the fair value reserve of compared with December 2010. 387.5 M.€1 as a result of the unrealised losses on public-debt bonds held in the portfolio of available-for- The following are the principal factors explaining the sale financial assets, reflecting the widening of the above trend: risk premiums on the sovereign debt of the EU periphery countries; With positive impact, ƒ The payment of dividends by BFA to Unitel of 57.3

M.€ relating to 2010; ƒ Consolidated net profit generated in the half year of 131.0 M.€, of which 79.1 M.€ is attributable to ƒ The currency revaluation of participating interests, shareholders and 51.9 M.€ is attributable to minority with a negative impact of 44.3 M.€ in the six months, interests in BFA. stemming primarily from the revaluation of BFA’s shareholders’ equity by virtue of the kwanza’s

depreciation against the euro.

1) According to Bank of Portugal Notice 6 / 2008, unrealised losses on bonds available for sale recorded in the fair value reserve, and therefore deducted directly from accounting Shareholders’ equity, are not subtracted from regulatory capital in the calculation of the own funds requirements ratio. Accordingly, the increase in unrealised losses on bonds is not reflected in the trend in own funds.

Shareholders´ equity and minority interests trend Amounts in M.€ Shareholders’ Minority interests Total equity Shareholders’ equity and minority interests at 30 Jun. 10 1 1 433.6 482.3 1 915.9 2nd half 2010 net profit 2 85.3 54.1 139.4 2 Change in the fair value reserve, net of taxes 3 ( 51.2) ( 51.2) Foreign exchange translation of subsidiaries 4 ( 17.5) ( 17.6) ( 35.0) Other 5 ( 3.7) ( 1.5) ( 5.2) Shareholders’ equity and 6 1 446.6 517.4 1 963.9 minority interests at 31 Dec. 10 [= Σ1 to 5] 2010 dividend payment 7 (57.3) (57.3) 1st half 2011 net profit 8 79.1 51.9 131.0 Change in the fair value reserve, net of taxes2 9 (387.5) (387.5) Foreign exchange translation of subsidiaries 10 (21.1) (23.1) (44.3) Other 11 (1.8) (16.6) (18.4) Shareholders’ equity and 12 1 115.3 472.2 1 587.5 minority interests at 30 Jun. 11 [= Σ6 to 11]

2) Change in the fair value reserve (net of deferred taxes) stemming from the revaluation of available-for-sale financial assets.

Banco BPI | 1st half 2011 Report 46 Consolidated

Capital ratios in Bank of Portugal Notice 12/92, that is, including At the end of June 2011, the core capital ratio1 stood at general provisions) and the amount of impairments 9.1% and the Tier I capital ratio (basis own funds / risk- recognised in the consolidated accounts, is now taken weighted assets) at 9.6%, which correspond into account in the deduction from core capital. In June respectively to increases of 0.4 p.p. and 0.5 p.p. 2011 there was no deduction (in December 2010, relative to the end of the previous year. 111 M.€ was written off from core capital).

The increase in the above ratios reflects the increase of Risk-weighted assets increased 0.8% (+205 M.€) 121.2 M.€ in core capital, while risk-weighted assets relative to December 2010, given that the impact of the grew 0.8%. decreases in the customer loans portfolio and, to a lesser extent, the decrease in the bond portfolio, was The increase in core capital was chiefly the result of the cancelled out by the increase in risk-weighted assets application by the bank of Bank of Portugal Notice which resulted from now attributing a 100% weighting 6/2010, in terms of which the difference between the to the exposures to other Portuguese financial amount of regulatory specific loan provisions resulting institutions as a consequence of the lower ratings given from the application of Bank of Portugal Notice 3/95 to the Portuguese Republic. (and not the total provisions as previously contemplated

1) Core capital corresponds to basis own funds, before the deductions relating to The decline in the own funds requirement ratio from interests in credit institutions and insurance undertakings, and excluding the amount 11.1% in December 2010 to 10.4%, in June 2011 is of preference shares. Mainly includes share capital and share-issue premiums, reserves, retained earnings and minority interests, excluding preference shares. mainly explained by the repurchase of own Tier II bonds effected in the period under review.

Banco BPI | 1st half 2011 Report 47 Consolidated

Own funds requirements ratios Calculated according to the Bank of Portugal rules Amounts in M.€ Jun.10 Dec.10 Jun.11 Accounting shareholders’ equity attributable to BPI shareholders 1 1 433.6 1 446.6 1 115.3 Minority interests, excluding preference shares 2 246.8 249.2 216.3 Dividends attributable to BPI shareholders 3 (39.8) - ( 31.7) BFA dividends attributable to minority interests 4 (33.7) (63.6) ( 30.4) [= Σ1 to 4] 5 1 606.9 1 632.2 1 269.6 Exclusion of: 1 Fair value reserve in bonds in the available-for-sale portfolio (net of deferred taxes) 6 660.3 711.9 1 093.6 2 Positive fair value reserve in equities in the available-for-sale portfolio 7 (23.3) (23.7) ( 23.8) Revaluation reserves of fixed assets included in Tier II 8 (8.5) (8.5) ( 8.5) Other adjustments 9 3.6 0.5 3.4 [= Σ6 to 9] 10 632.0 680.2 1 064.7 Inclusion of: 3 Contributions to the pension funds still not disclosed as a cost 11 (0.3) (0.2) ( 0.1) Intangible fixed assets 12 (6.7) (6.4) ( 6.2) Loan provisions calculated in accordance with Bank of Portugal rules deducted of loan impairments recognised in the income statement 4 13 (136.4) (111.0) - 5 Deferred adjustments resulting from the transition to IAS / IFRS 14 84.2 72.3 60.4 [= Σ11 to 14] 15 (59.2) (45.2) 54.0 Core capital [= 5+10+15] 16 2 179.8 2 267.1 2 388.3 Preference shares 17 246.1 246.7 236.7 Deduction of participating interests in credit institutions and insurance companies 18 (121.3) (134.5) ( 97.6) Basis own funds [= Σ16 to 18] 19 2 304.6 2 379.3 2 527.4 Complementary own funds 20 606.9 523.0 191.4 of which, complementary own funds before deductions 21 731.6 663.1 294.7 of which, deduction of participating interests in credit institutions and insurance companies 22 (121.3) (134.5) ( 97.6) of which, other deductions 23 (3.4) (5.6) ( 5.8) Total own funds [= 19+20] 24 2 911.5 2 902.2 2 718.8 Risk-weighted assets 25 26 845.5 26 035.8 26 240.7 Total own funds requirements (risk-weighted assets x 8%) [= 25 x 8%] 26 2 147.6 2 082.9 2 099.3 Core Tier I ratio [= 16/25] 27 8.1% 8.7% 9.1%

Tier I ratio [= 19/25] 28 8.6% 9.1% 9.6% Own funds requirements ratio [= 24/25] 29 10.8% 11.1% 10.4%

1) Effective from October 2008, through Bank of Portugal Notice 6/2008, unrealised losses on the portfolio of available-for-sale bonds, without signs of impairment, which are recorded directly in shareholders’ equity, in the fair value reserve, are not deducted to the regulatory own funds. Similarly, the unrealised gains on bonds available for sale (recorded in the fair value reserve) are excluded from the regulatory own funds. 2) The unrealised gains on shares available for sale which are recorded directly in shareholders’ equity (in the fair value reserve), are excluded from core capital. Subsequently, 45% of the unrealised gains is added to complementary own funds (at 30 June 2011 the amount added to complementary own funds was 10.7 M.€, corresponding to 45% of 23.8 M €). 3) At the end of June 2011, BPI had 44 M.€ of negative actuarial variances recorded outside the accounting corridor. However, the facility of the transitional widening of the corridor provided for in Bank of Portugal Notice 11/2008 permitted the accommodation in full of the above mentioned negative actuarial deviation without giving rise to any impact in capital, while still holding, at 30 June 2011, a 146 M.€ margin available for use. Bank of Portugal Notice 11/2008 laid down a transitional regime which consisted of a temporary widening of the relevant corridor in order to accommodate part of the 2008 actuarial and financial variances of the pension funds that were situated outside the accounting corridor provided for by IAS / IFRS and thus, avoiding its deduction from regulatory own funds. The transitional regime envisaged in Notice 11/2008 was already applied with respect to the reporting of financial information at 31 December 2008, being in force for four years (until 31 Dec. 2012). Notice 11/2008 widened the corridor considered for purposes of determining the amount of the actuarial losses to be deducted from own funds in 2008 by 383.1 M.€ in the case of BPI, by allowing adding to the accounting corridor the amount of the negative actuarial variances recorded in 2008 (544.3 M.€), after deducting the pension funds’ expected income in that year (161.2 M.€). This addition will be gradually reduced over the next 4 years until its extinction at 31 Dec. 2012: 100% (383.1 M.€) until 30 Dec. 2009; 75% (287.3 M.€) from 31 Dec. 2009 until 30 Dec. 2010; 50% (191.5 M.€) from 31 Dec. 2010 until 30 Dec. 2011; 25% (95.8 M.€) from 31 Dec. 2011 until 30 Dec. 2012; and 0% after 31 Dec. 2012. 4) In accordance with Notice 6/2010, and as from June 2011, the bank now deducts from core capital the difference (when positive) between the amount of the specific loan provisions calculated according to the Bank of Portugal’s rules (whereas previously, pursuant to Bank of Portugal Notice 12/92 , total provisions were taken into account, that is, including also general provisions) and the amount of impairments recognised in the consolidated accounts. In the procedure followed previously, the difference written off from basis own funds, as regards that part which corresponded to general provisions, was added afterwards to complementary own funds. 5) The impacts of the transition to IAS/IFRS are being recognised in own funds until 2014, including.

Banco BPI | 1st half 2011 Report 48 RESULTS OF DOMESTIC ACTIVITY

Net profit from domestic operations was 31.8 M.€ in the Net operating revenue, excluding the gain on the 1st half of 2011, which corresponded to a 38.4% repurchase of own bonds, was down 6.4% (-25.4 M.€). decrease (-19.8 M.€) when compared with the same This decrease was partially offset by the 4.4% drop (-12.6 period last year. M.€) in costs, excluding early-retirement costs.

Impairments, net of recoveries (including the Net operating revenue improved by 12.3% (+48.8 M.€) abovementioned additional charge), rose by 44.9 M.€ relative to the same period last year and includes, in the relative to the same period of 2010. 1st half of 2011, a gain of 74.2 M.€ realised on the repurchase of own bonds, accounted for in profits from Profit before taxation was down 14.8%. The caption financial operations. Only a portion of that gain is corporate income tax, which included in the 1st half of reflected in net profit for the period given that BPI 2010 a non-recurring gain of 10 M.€ and in the 1st six decided to recognise in profit for the period a cost of months of 2011 a charge of 7.6 M.€ relating to the € 40 M. relating to an early-retirement programme to be 1 nd extraordinary contribution levied on the banking sector , executed in the 2 half of the year and an additional explain the steeper decline in net profit (-38.4%). extraordinary charge for loan and other impairments of some 24 M.€. 1) The extraordinary contribution levied on the banking sector in Portugal, in force since 1 January 2011, is applied to liabilities, after deducting basis and complementary own funds included therein, and to the national value of unhedged derivative financial instruments. Domestic activity income statement Amounts in M.€ Δ% 1st half 10 2nd half 10 2010 1st half 11 1st half10 /1st half 11 Net interest income (narrow sense) 1 208.4 208.8 417.2 182.0 (12.7%) Unit linked gross margin 2 2.1 2.1 4.1 2.1 (0.5%) Income from securities (variable yield) 3 3.6 0.1 3.7 1.5 (57.2%) Commissions related to deferred cost (net) 4 15.7 14.6 30.3 14.9 (4.8%) Net interest income [=Σ 1 to 4] 5 229.8 225.6 455.4 200.6 (12.7%) Technical result from insurance contracts 6 6.1 9.9 16.1 7.4 20.4% Commissions and other similar income (net) 7 135.7 131.7 267.4 126.9 (6.5%) Profits from financial operations 8 35.6 15.3 50.9 102.6 187.9% Operating income and charges 9 (9.5) (4.2) (13.8) 9.1 195.4% Net operating revenue [=Σ 5 to 9] 10 397.7 378.2 776.0 446.5 12.3% Personnel costs, excluding early-retirements costs 11 (170.4) (175.3) (345.8) (166.1) (2.6%) Outside supplies and services 12 (100.2) (86.1) (186.3) (96.0) (4.2%) Depreciation of fixed assets 13 (17.9) (16.0) (34.0) (13.9) (22.4%) Operating costs, excluding early-retirements costs [=Σ 11 to 13] 14 (288.6) (277.5) (566.1) (276.0) (4.4%) Early-retirements costs 15 (17.7) (18.4) (36.1) (39.9) 125.4% Operating costs [= 14+15] 16 (306.3) (295.9) (602.2) (315.9) 3.1% Operating profit [= 10+16] 17 91.4 82.4 173.8 130.6 42.9% Recovery of loans written-off 18 8.2 5.5 13.8 7.7 (6.0%) Loan provisions and impairments 19 (47.2) (52.8) (99.9) (73.2) 55.3% Other impairments and provisions 20 (14.1) (8.3) (22.4) (32.4) 130.1% Profits before taxes [= Σ 17 to 20] 21 38.5 26.8 65.2 32.8 (14.8%) Corporate income tax 22 5.5 (0.1) 5.3 (8.6) 257.8% Equity-accounted results of subsidiaries 23 11.2 11.8 23.0 11.9 6.2% Income attributable to minority interest 24 (3.6) (3.4) (7.0) (4.3) 21.3% Net profit [= Σ 21 to 24] 25 51.6 35.0 86.5 31.8 (38.4%) Cash flow after taxation [= 25-13-19-20] 26 130.7 112.1 242.8 151.3 15.7%

Banco BPI | 1st half 2011 Report 49 Domestic activity

DOMESTIC ACTIVITY BALANCE SHEET Net total assets relating to domestic operations Against this background, the trend in medium and long- amounted to 39 209.4 M.€ at the end of June 2011, term resources tapped from the capital market was subject corresponding to a 12.7% year-on-year decrease. to the calendar of redemptions. At the end of June 2011, those resources amounted to 6 198 M.€, representing 16% The process of balance sheet deleveraging currently of total assets. Debt repayments to be made in the 2nd half under way in domestic operations translated into a of 2011 total 327 M.€, at the same time that in the shrinking of the customer loans portfolio of 1 060 M.€ portfolio of available-for-sale bonds maturities will amount since June 2010 and into a decrease in the bond to 94 M.€, resulting in a resources requirement net of the portfolio (in the portfolio of available–for-sale financial above maturities of 233 M.€. assets) of some 600 M.€ in the same period.

In terms of funding, customer resources – deposits, Short-term maturities totalled 3 311 M.€ at the end of the bonds placed with customers and capitalisation 1st half of 2011. Securities repos amounted to 1 798 M.€ insurance –, propelled by the 7.3% expansion in in June 2011 (down 1 227 M.€ relative to June last year). deposits grew by a year-on-year 2.4%, reinforcing their The Bank had a marginally negative net borrowing position importance in balance sheet funding. At the close of in the money market (385 M.€), while funding obtained June 2011, on-balance sheet customer resources from the ECB totalled 1 000 M.€, unchanged from the totalled 26 411.6 M.€, which corresponded to 67% of figure at the end of 2010, but 2 500 M.€ less when total assets relating to domestic activity, up 10 p.p. on compared with the June 2010 figure. June last year. The customer loans / on-balance sheet customer resources ratio (excluding capitalisation At the end of the 1st half of 2011, BPI had a portfolio of insurance) decreased from 134% in June 2010 to assets eligible for ECB funding of 7 047 M.€, net of 125% in June 2011. haircuts, which represented 18% of total assets employed in domestic activity. With the worsening of the sovereign debt crisis since the start of 2010, the medium and long-term debt markets were closed to Portuguese banks from April last year and already in 2011, the Portuguese Republic’s credit ratings downgrades in March / April had an impact on the utilisation of national public debt in repo operations.

Banco BPI | 1st half 2011 Report 50 Domestic activity

1 Domestic activity balance sheet Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Assets Cash and deposits at central banks 1 597.2 475.8 547.1 (8.4%) Amounts owed by credit institutions repayable on demand 2 237.8 260.8 333.6 40.2% Loans and advances to credit institutions 3 3 674.4 1 437.1 1 188.6 (67.7%) Loans and advances to Customers2 4 29 175.0 28 865.8 28 115.2 (3.6%) Financial assets held for dealing 5 1 585.4 1 168.7 949.4 (40.1%) Financial assets available for sale 6 6 338.2 6 114.0 4 898.0 (22.7%) Investments held to maturity 7 1 123.9 1 043.6 1 085.8 (3.4%) Hedging derivatives 8 420.2 250.3 270.7 (35.6%) Investments in associated companies and jointly controlled entities 9 166.1 171.7 155.9 (6.1%) Other tangible assets 10 141.7 136.1 102.8 (27.5%) Intangible assets 11 6.3 5.8 5.5 (11.8%) Tax assets 12 423.5 430.6 600.1 41.7% Other assets 13 1 026.2 908.5 956.8 (6.8%) Total assets [= Σ1 to 13] 14 44 915.9 41 268.5 39 209.4 (12.7%) Liabilities and shareholders' equity Resources of central banks 15 3 716.9 1 245.5 1 270.5 (65.8%) Financial liabilities held for dealing 16 422.6 261.5 131.9 (68.8%) Credit institutions' resources 17 5 021.0 5 142.5 3 525.5 (29.8%) Clients' resources and other loans 18 18 579.3 19 026.1 19 781.6 6.5% Debts evidenced by certificates 19 9 174.3 7 782.3 7 465.3 (18.6%) Technical provisions 20 2 832.1 2 991.9 2 777.1 (1.9%) Financial liabilities associated to transferred assets 21 1 663.0 1 570.4 1 497.8 (9.9%) Hedging derivatives 22 674.6 499.4 415.2 (38.4%) Provisions 23 75.0 79.1 91.1 21.5% Tax liabilities 24 46.3 29.7 37.8 (18.4%) Participating bonds 25 20.2 7.2 6.5 (67.9%) Other subordinated loans 26 699.7 640.4 342.3 (51.1%) Other liabilities 27 513.8 532.9 730.6 42.2% Share capital, share premium account, reserves and other equity instruments 28 1 180.8 1 124.4 868.2 (26.5%) Treasury stock 29 (23.6) (21.7) ( 21.9) 7.4% Net profit 30 51.6 86.5 31.8 (38.4%) Minority interests 31 268.5 270.4 258.1 (3.9%) Total Shareholders’ equity and 1 477.2 1 459.6 1 136.2 (23.1%) minority interests [= Σ28 to 31] 32 Total liabilities and 44 915.9 41 268.5 39 209.4 (12.7%) shareholders' equity [= Σ15 to 31] 33 Note: Bank guarantees 34 2 900.9 2 818.9 2 689.7 (7.3%) Off-balance sheet Customer resources3 35 5 692.3 5 783.4 5 467.3 (4.0%)

1) The balance sheet relating to the domestic activity presented above has not been corrected for the balances resulting from operations with the “International activity” geographical segment. For consolidation purposes, these balances have been eliminated 2) In December 2007, BPI sold 35% of the bonds relating to the capital tranche of the mortgage-loan securitisation operations which resulted in the derecognition of loan assets totalling 1 264 M.€. At 30 June 2011 the amount of Customer loans (net) derecognised from the balance sheet was 793 M.€. 3) The amount of unit trust funds included in these resources has been corrected for fund units held in the portfolios of the Group’s banks and pension funds under BPI management.

Banco BPI | 1st half 2011 Report 51 Domestic activity

CUSTOMER LOANS The loan portfolio in domestic operations decreased by a institutional banking decreased 6.0%, year-on-year, which year-on-year 3.8%, which corresponds to an absolute represented roughly 2/3 of the overall contraction in the change of -1 127 M.€, with decreases in both the loan portfolio, while the individuals’ loans portfolio segments loans to companies and to individuals. The decreased 1.9%, representing about 1/3 of the total portfolio loans to companies, project finance and portfolio’s contraction.

Customer loans portfolio Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Corporate banking, institutional banking and project finance Large corporations 1 4 630.2 4 371.3 4 253.9 (8.1%) Companies 2 3 743.5 3 568.1 3 473.8 (7.2%) Project finance 3 2 331.2 2 328.1 2 250.1 (3.5%) Institutional banking and state business sector 4 2 248.2 2 284.4 2 198.9 (2.2%) [= Σ1 to 4] 5 12 953.1 12 552.0 12 176.7 (6.0%) Loans to individuals and small businesses Mortgage loans 1 6 12 302.5 12 392.3 12 304.5 0.0% Loans to individuals – other purposes 7 1 345.9 1 357.2 1 292.9 (3.9%) Loans to small businesses 8 2 433.7 2 350.4 2 181.0 (10.4%) [= Σ6 to 8] 9 16 082.1 16 099.9 15 778.5 (1.9%) Other loans 10 806.7 852.1 726.7 (9.9%) Loans in arrears 11 566.8 576.2 647.2 14.2% Loan impairments 12 (468.7) (478.7) (513.2) 9.5% Interests 13 94.8 88.5 92.4 (2.5%) Total1, 2 [= 5+Σ9 to 13] 14 30 034.8 29 689.9 28 908.3 (3.8%) Securitised loans written off from the balance sheet 15 (859.9) (824.1) (793.2) (7.8%) Balance sheet value [= 14+15] 16 29 175.0 28 865.8 28 115.2 (3.6%) Guarantees 17 2 900.9 2 818.9 2 689.7 (7.3%)

The loans to companies, project finance and companies’ and project finance segments) was some 360 institutional banking portfolio posted a year-on-year M.€ relative to June 2010 (-13.5%), representing 46% of decrease of 6%, with all segments being lower. The the decrease recorded in the companies, project finance portfolio’s behaviour essentially reflects the retraction in and institutional banking segment. the demand for credit against a difficult economic and financial backdrop for companies, the early repayment The contraction in the portfolio of loans to individuals and of a series of operations, namely loans domiciled at the small businesses resulted mainly from the 10.4% year-on- Madrid branch, the significant slowdown noted in the year decrease in the small business loans portfolio, whereas project finance market in Portugal, and the bank’s the mortgage loans portfolio registers no change when decision not to participate in new project finance compared with the June 2010 figure. It is worth noting that operations in the international market. the mortgage loans portfolio was 88 M.€ less (-0.7%) than in December 2010. The contraction in the loan portfolio headquartered at the Madrid branch (essentially loans in the large

1) Includes securitised mortgage loans written off from the balance sheet following the sale, in December 2007, of 35% of the bonds relating to the capital tranche of the securitisation operations. 2) Net loan portfolio.

Banco BPI | 1st half 2011 Report 52 Domestic activity

CUSTOMER RESOURCES The increase in the aggregate deposits and bonds, with a Balance sheet resources – deposits, bonds and year-on-year change of +3.6%, in tandem with the capitalisation insurance – increased 2.4% in year-on- contraction in the loan portfolio, resulted from a drop in the year terms, which is primarily explained by the 9.8% transformation ratio of customer resources (excluding expansion in term deposits. capitalisation insurance) into loans from 134% in June 2010 to 125% in June 2011.

On-balance sheet Customer resources Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Deposits Sight deposits 1 6 054.1 5 680.6 6 210.8 2.6% Term and savings deposits 2 11 538.8 12 352.0 12 664.7 9.8% [= 1+2] 3 17 592.9 18 032.6 18 875.5 7.3% Structured products 1 and fixed-rate bonds 4 4 292.1 4 131.2 3 859.2 (10.1%) Subordinated bonds2 5 236.0 207.7 177.9 (24.6%) Deposits and bonds placed with Customers [= Σ3 to 5] 6 22 120.9 22 371.5 22 912.6 3.6% Capitalisation insurance3 7 3 673.2 3 802.6 3 499.0 (4.7%) Total [= 6 + 7] 8 25 794.2 26 174.1 26 411.6 2.4% Note: Gross loan portfolio 9 29 640.4 29 341.1 28 624.7 (3.4%) Loans to Customer resources ratio [= 6 / 9] 10 134.0% 131.2% 124.9%

1) Bonds whose remuneration is indexed to the equity, commodities and other markets, with total or partial guarantee of the capital invested at the end of the term. 2) Subordinated bonds placed with Clients. 3) BPI Vida savings products with discretionary participation in results are recorded under the caption “Amounts owned to Customers” (721.8 M.€ at 30 June 2011) and those with discretionary profit sharing are recorded under the caption “Technical provisions” (2 777.1 M.€ at 30 June 2011).

Off-balance sheet resources fell by 4.0% year-on-year equity and retirement savings plans, reflecting above all (-225.1 M.€). This behaviour is explained by the 9.1% a movement towards the re-intermediation to balance decrease in the unit trust funds, primarily the bond and sheet resources, which intensified in the 1st half of money market funds, and in the 7.3% decline in the 2011.

Off-balance sheet Customer resources Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Unit trust (mutual) funds 1 1 597.7 1 628.3 1 452.4 (9.1%) Equity (PPA) and retirement (PPR) savings plans 2 939.8 934.9 870.8 (7.3%) Hedge funds 3 42.1 50.4 49.4 17.3% Pension funds4 4 3 112.7 3 169.8 3 094.7 (0.6%) Total [= Σ1 to 4] 5 5 692.3 5 783.4 5 467.3 (4.0%)

4) Includes BPI Group Employees pension funds.

Banco BPI | 1st half 2011 Report 53 Domestic activity

SECURITIES AND FINANCIAL INVESTMENTS PORTFOLIO At the end of June 2011, the securities and financial investments portfolio totalled 7 089.2 M.€.

Securities and financial investments portfolio Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Financial assets available for sale Bonds – public debt 1 4 674.1 4 452.4 3 512.5 (24.9%) Bonds – corporate 2 1 513.1 1 481.4 1 165.5 (23.0%) Equities 3 62.8 55.9 49.4 (21.4%) Other 4 88.3 124.3 170.6 93.3% [= Σ1 to 4] 5 6 338.2 6 114.0 4 898.0 (22.7%) Financial assets held for dealing Banco BPI and Banco Português de Investimento trading portfolio Equities portfolio 6 329.9 292.1 260.2 (21.1%) 1 Derivative instruments at fair value 7 478.9 313.6 145.1 (69.7%) Bonds and other 8 53.8 47.0 60.1 11.7% [= Σ6 to 8] 9 862.6 652.7 465.4 (46.0%) 2 BPI Vida e Pensões trading portfolio 10 722.8 516.0 484.0 (33.0%) [= 9+10] 11 1 585.4 1 168.7 949.4 (40.1%) Investments held to maturity 12 1 123.9 1 043.6 1 085.8 (3.4%) 3 Financial investments 13 166.1 171.7 155.9 (6.1%) Total [= 5+11+12+13] 14 9 213.5 8 497.9 7 089.2 (23.1%)

The most important components correspond to public value of the securities and financial investments portfolio. debt securities and corporate bonds in the available-for- sale assets portfolio, the balance sheet values (fair The following table presents the exposure to public debt value) of which were 3 512.5 M.€ and 1 165.5 M.€ and companies in the portfolio of available-for-sale respectively, representing 50% and 16% of the overall financial assets.

Bonds in the available-for-sale portfolio Amounts in M.€ Jun.10 Dec.10 Jun.11 Acquisition Book value / Acquisition Book value / Acquisition Book value / cost Fair value cost Fair value cost Fair value Public debt Portugal 1 2 884.8 2 677.9 2 884.9 2 614.1 2 885.2 2 037.6 Italy 2 1 003.5 1 013.1 1 003.5 971.7 1 003.5 973.2 Greece 3 530.4 382.1 530.4 324.6 530.4 265.4 Ireland 4 357.3 347.4 357.3 282.8 357.3 236.3 [= Σ1 to 4] 5 4 776.0 4 420.4 4 776.2 4 193.2 4 776.5 3 512.5 Brazil 6 249.1 253.6 248.9 259.2 [= 5 + 6] 7 5 025.1 4 674.1 5 025.1 4 452.4 4 776.5 3 512.5 Corporate bonds 8 1 580.0 1 513.1 1 510.9 1 481.4 1 203.9 1 165.5 Total [= 7 + 8] 9 6 605.1 6 187.2 6 535.9 5 933.8 5 980.3 4 678.0

1) Recorded on the liabilities side are positions in dealing derivatives of 422.6 M.€ in Jun. 2010, 261.5 M.€ in Dec.10 and 131.9 M.€ in Jun.11. 2) Assets allocated to cover capitalisation insurance policies issued by BPI Vida e Pensões. 3) Investments in associated companies and jointly controlled entities.

Banco BPI | 1st half 2011 Report 54 Domestic activity

During the 1st half of the year, BPI sold the portfolio of Brazilian public debt securities (which had a balance sheet value of 259 M.€ at the end of 2010), while the portfolio of corporate bonds registered a decrease of some 300 M.€ reflecting the redemptions which took place in the period and some selective sales of securities. The decline in the market value of the euro-zone public- debt portfolio1 is explained by the significant widening of the risk premium of the so-called periphery countries as consequence of the worsening of the sovereign debt crisis in Europe.

The balance sheet caption “Financial assets held for trading and at fair value through the income statement” includes the following securities:

ƒ equities (260.2 M.€) associated with trading activity through the management of an arbitrage portfolio carried out at Banco Português de Investimento and in the participation and management of the BPI Alternative Fund: Iberian Equities Long Short2; ƒ securities portfolio of BPI Vida e Pensões (484.0 M.€) associated with the portfolio of capitalisation insurance sold by that subsidiary; ƒ derivative instruments at fair value (145.1 M.€). These essentially correspond to interest rate swaps and options incorporated into structured issues, classified as “embedded derivatives” and which for accounting purposes are separated from the respective base contract.

1) In 2009, the bank created an arbitrage portfolio composed of European public debt (denominated in euro). This portfolio was financed by recourse to short-term funding so as to take advantage of the positively-sloping yield curve. The investment made, bearing in mind that it constituted an increase in the assets eligible for funding from the ECB, guarantees its own financing. The interest rate risk attaching to this portfolio is being hedged. 2) As from January 2010, trading activity in equities began to be carried out through a fund of long-short equities created on that date, to which BPI’s portfolio of trading shares was transferred. At the end of June 2011, that fund had an allocated capital of 77 M.€, of which 81% was held by BPI, with the result that it was consolidated using the purchase method.

Banco BPI | 1st half 2011 Report 55 Domestic activity

PENSION FUND Actuarial and financial variances At 30 June 2011, the net assets of the employee pension At the end of June 2011, BPI had negative actuarial funds amounted to 2 329.4 M.€, which covered the funding variances of 230.1 M.€ which were recorded within the of 104.7% of the value of pension liabilities. 10% accounting corridor envisaged in the IAS and of 44.3 M.€ recorded outside the corridor. Pension funds Selected indicators Amounts in M.€ It should be noted that the facility of the transitional Jun. 10 Dec. 10 Jun.11 widening of the corridor envisaged in Bank of Portugal Total past service pension liabilities 1 2 268.9 2 306.1 2 225.7 Notice 11/2008 would permit fully accommodating the Pension funds 2 2 389.2 2 409.4 2 329.4 negative actuarial variance of 44.3 M.€ outside the Financing surplus [= 2 – 1] 3 120.3 103.3 103.7 abovementioned accounting corridor without giving rise to Financing of pension liabilities [= 2 / 1] 4 105.3% 104.5% 104.7% an impact on own funds, while BPI has an unutilised Accounting corridor 5 238.9 240.9 232.9 margin of 146 M.€. Actuarial and financial deviations (accumulated) The accumulated negative variances were 19.7 M.€ more Negative deviations recorded in the relative to December 2010. The main factors contributing corridor 6 (238.2) (238.7) (230.1) to this situation were: Positive (/negative) deviations outside the corridor 7 (29.4) (16.0) (44.3) ƒ negative variances recorded in the half year of Pension funds return 8 (0.5%) 2.9% (1.9%) 109.7 M.€ resulting from the differential between the fund’s effective return and the corresponding financial Liabilities for employees’ pensions assumption; Pension liabilities totalled 2 225.7 M.€ at the end of the 1st half of 2011. ƒ positive variance of 73.8 M.€ resulting from the change in the aforementioned discount rate which only partly At the end of June 2011, BPI altered the discount rate offset the negative variances occurring in the period from 5.25% to 5.50%, bringing it into line with the under review. pension funds’ expected return assumption. The other actuarial and financial assumptions used in the Liabilities for the Directors’ complementary pension plan calculation of liabilities remained unchanged. At 30 June 2011, the liabilities for the complementary pension plan for Directors totalled 29.6 M.€ and were Return 99% covered by the pension fund. In the 1st half of 2011, the pension funds earned an effective, non-annualised return of -1.9%.

It should be noted that, up until the end of June 2011, the fund’s effective return since its creation in 1992, was on average 9.0% per annum, and that in the last ten and five years, the effective annual returns were, on average, 6.5% and 4.9%, respectively.

Banco BPI | 1st half 2011 Report 56 Domestic activity

INCOME Net operating revenue from domestic operations was up ƒ the contribution of the arbitrage portfolio comprising 12.3% (+48.8 M.€) when compared with the same period European government debt bonds declined by 18.0 M.€, of 2010, benefiting from a non-recurring gain of 74.2 from 40 M.€ in the 1st half of 2010 to 22 M.€ in the M.€ realised in the 1st half of 2011 on the repurchase of 1st half of 2011, which essentially resulted from the Tier II debt issued by the bank. higher cost of the portfolio’s short-term funding;

ƒ the average unit margin on deposits declined 0.28 p.p., Net interest income given that the widening of the net interest margin on Net interest income decreased by 12.7% (-29.2 M.€) sight deposits, reflecting the rise in market interest relative to the same period of 2010. 1 rates , was not sufficient to compensate for the higher costs of term deposits. The net margin on term deposits Net interest income Amounts in M.€ shrank by 0.61 p.p., reflecting the intensification of the Jun.10 Jun.11 Δ% competition for attracting customer resources, in Net interest income (narrow particular from the end of 2010 with the deepening of sense) 1 208.4 182.0 (12.7%) Gross margin on unit link the sovereign debt crisis in Europe. products 2 2.1 2.1 (0.5%) ƒ The loan portfolio’s average contractual spread (spread Income from securities – relative to the benchmarks, on the respective repricing dividends 3 3.6 1.5 (57.2%) dates), climbed by 0.28 p.p., to 1.54%, by virtue of the Commissions related to deferred ongoing spread adjustment process. The increase in the cost (net) 4 15.7 14.9 (4.8%) Net interest income [= Σ 1 to 4] 5 229.8 200.6 (12.7%) company loans segment was 0.47 p.p., to 1.80%, and in home loans, it was 0.11 p.p. to 0.79%. The trend in net interest income is explained by the lower The abovementioned positive effect offset the negative contribution from the securities arbitrage portfolio and by impact on net interest income of the contraction in the the higher cost of customer resources, at the same time loan portfolio. as the loan portfolio increased its contribution to net interest income as a result of the wider loan spreads which offset the negative impact resulting from the 1) The fall in market interest rates is almost fully reflected in a contraction in the average reduction in the loan portfolio. In more detail: margin on sight deposits, given that these are remunerated at rates close to zero, with the result that the possibility of adjusting their remuneration is negligible. The average Euribor 3-month increased 0.58 p.p. year-on-year, from 0.67% in the first half of 2010 to 1.25% in the 1st half of 2011.

Banco BPI | 1st half 2011 Report 57 Domestic activity

Commissions Profits from financial operations Commissions and other net income decreased 6.5% when Profits from financial operations in the 1st half of 2011 compared with the 1st half of 2010. Commercial banking were 102.6 M.€, benefiting from a gain of 74.2 M.€ on commissions were down 4.8% (-4.8 M.€), investment the repurchases made of own Tier II bonds in the period. banking commissions down 28% (-3.1 M.€) and asset management commissions 3.8% lower (-1.0 M.€). In the first half of 2010, profits from financial operations of 35.6 M.€ included a non-recurring gain of 21.8 M.€ The behaviour of commercial banking commissions was related to the revaluation of the shareholding in Unicre1. primarily penalised by the decline in credit-associated commissions of 11.8% (-3.3 M.€), reflecting to a large Profits from financial operations Amounts in M.€ extent the contraction in the demand for credit, and in Jun.10 Jun.11 Δ M.€ banking services fees, essentially due to the 2.9 M.€ Operations at fair value reduction in fees earned from the provision of consultancy Equities 1 2.2 4.1 +1.8 services. On the positive side, card commissions posted Interest rate 2 4.6 6.9 +2.2 2.8% growth (+0.9 M.€). Structured products 3 2.5 1.7 -0.8 Hedge funds 4 1.1 (0.1) -1.1 Currency 5 Commissions and other fees (net) Amounts in M.€ 4.2 3.2 -1.0 Repurchase of own bonds 6 Jun.10 Jun.11 Δ% (0.3) 80.6 +80.9 [=Σ 1 to 6] 7 Commercial banking 14.3 96.4 +82.0 Available for sale assets Cards 1 30.4 31.3 2.8% Bonds 8 Loans and guarantees 2 28.2 24.9 (11.8%) (4.8) 0.2 +4.9 Intermediation of insurance 3 Equities 9 0.2 0.1 -0.1 products 18.9 18.6 (1.6%) Other 10 18.8 (0.0) -18.8 [=Σ 8 to 10] Deposits and related services 4 13.7 12.6 (8.0%) 11 14.2 0.2 -14.0 Banking services 5 6.3 3.0 (51.8%) Subtotal [=7+11] 12 28.6 96.6 +68.0 Other 6 1.5 3.9 153.8% Financial income from pensions [= Σ1 to 6] 7 99.1 94.3 (4.8%) Expected pension funds return 13 66.7 65.9 -0.9 Asset management 8 25.7 24.7 (3.8%) Interest cost 14 (59.6) (59.9) -0.2 Investment Banking [=13+14] 15 7.1 6.0 -1.1 Brokerage and other securities 9 Total [=12+15] 16 35.6 102.6 +67.0 operations 9.2 6.9 (25.5%) Corporate finance 10 1.4 0.8 (39.1%) 1) This investment's revaluation is due to the fact that Unicre is now treated as being an Other 11 0.3 0.1 (54.2%) associated company and, therefore, accounted for on the equity basis following BPI's [= Σ9 to 11] 12 10.9 7.9 (28.0%) increased equity stake in the company. According to IAS / IFRS, when an equity investment acquired in phases becomes an associated company, the investment Total [= 7+8+12] 13 135.7 126.9 (6.5%) previously held must be revalued in accordance with the fair value of the additional holding. The resulting gain / loss is recognised in the period, with BPI having adopted the procedure of recognising the gains in net profit for the year, compared with the alternative procedure of recognising the gains directly in shareholders’ equity (reserves).

Banco BPI | 1st half 2011 Report 58 Domestic activity

As concerns the principal components of profits from OPERATING COSTS financial operations: Operating costs – personnel costs, outside supplies and services and depreciation and amortisation –, excluding ƒ The profits from operations at fair value amounted to early-retirement costs, decreased 4.4% relative to the 1st 96.4 M.€, and resulted chiefly from: half of 2010. ƒ Gain of 74.2 M.€ on the repurchase of own Tier II bonds , which includes the result of the early Operating costs as reported, which include early settlement of hedging derivatives; retirement costs, were 3.1% higher relative to the same period of 2010. ƒ 6.9 M.€ in gains on interest-rate products;

ƒ Gains of 4.1 M.€, from equity trading associated Operating costs Amounts in M.€ with a long-short equities portfolio and an arbitrage Jun.10 Jun.11 Δ% portfolio with PSI-20 futures; Operating costs, before depreciation

and amortisation ƒ Currency gains of 3.2 M.€ resulting from the Personnel costs, excluding early- 1 foreign currency margin on operations carried out retirements costs 170.4 166.1 (2.6%) by the commercial network with customers. Outside supplies and services 2 100.2 96.0 (4.2%) [= 1+2] 3 270.6 262.1 (3.2%) ƒ Gains on available-for-sale assets were 0.2 M.€; Depreciation and amortisation 4 17.9 13.9 (22.4%) ƒ The net financial result with pensions1 was situated at Subtotal [= 3+4] 5 288.6 276.0 (4.4%) 6.0 M.€ and resulted from the existence of the pension Costs with early retirements 6 17.7 39.9 - funds’ funding surplus and a positive differential Total [= 5+6] 7 306.3 315.9 3.1% between the pension fund’s expected rate of return (5.5%) and the discount rate (5.25%) up till the end of Efficiency ratio the half year2. The indicator “operating costs as a percentage of net

operating revenue” stood at 74.2% in the 12 months Other operating gains and losses ended June 2011. Other operating gains (net of losses) amounted to a positive figure of 9.1 M.€ in the 1st half of 2011, Excluding from net operating revenue in June 2011 the influenced by gains of 9.6 M.€ in the contribution in kind 74.2 M.€ gain realised on the repurchase of own bonds, (fixed properties) made to the Banco BPI Pension Fund. the indicator “operating costs, excluding early retirement costs, as a percentage of net operating revenue” was In the same period of last year, the caption “Other situated at 73.7% in the 12 months to June 2011. operating gains/(losses)” presented a negative balance of 9.5 M.€. Efficiency ratio Jun.10 Jun.11 Accordingly, this caption registered a positive change of Last 12 months 18.6 M.€. Operating costs as % of operating revenue 71.6% 74.2% Operating costs, excluding early retirement costs,

1) The financial net income with pensions corresponds the difference between the as % of operating revenue, excluding in Jun.2011 pension funds’ expected income and the interest cost of the liabilities. the 74.2 M.€ gain from own bonds repurchase 69.3% 73.7% 2) At the end of June, BPI changed the discount rate to 5.5%.

Banco BPI | 1st half 2011 Report 59 Domestic activity

Personnel costs Outside supplies and services Personnel costs, excluding early retirement costs, were Outside supplies and services were down 4.2% year-on- 2.6% down relative to the 1st half of 2010. This trend year. can be attributed above all to the reduction in the headcount deployed in domestic activity, the average Costs relating to the size of the operating structure – costs number1 of which fell by 3.5% in the period under review with premises, communications and IT and others – when compared with the same period of 2010. registered a 2.4% decline relative to the 1st half of 2010.

Personnel costs Amounts in M.€ Since the end of 2010 and up till the start of July 2011, Jun.10 Jun.11 Δ% BPI closed 47 branches and 10 housing shops in Remunerations Portugal4, which represents a reduction of close to 7% in Fixed remunerations 1 116.0 113.8 (1.9%) the domestic operations’ distribution network. Outside Variable remunerations 2 10.8 9.1 (16.1%) supplies and services in the 1st half of 2011, which 2 Other 3 5.7 4.4 (23.1%) include a cost of 0.5 M.€ with branch closures, still do [=Σ 1 to 3] 4 132.5 127.3 (4.0%) not fully reflect the positive impact on the costs of the 3 Pension costs and social charges 5 37.9 38.8 2.4% branch network rationalisation. Remunerations, pension costs and social charges [= 4+5] 6 170.4 166.1 (2.6%) Costs with early retirements 7 17.7 39.9 125.4% Outside supplies and services Amounts in M.€ Total [= 6+7] 8 188.1 206.0 9.5% Jun.10 Jun.11 Δ% Advertising, communication, public BPI recognised in the income statement to 30 June 2011 relations and studies 1 9.8 8.3 (15.3%) a charge of 40 M.€ relating to a programme of early Costs related to businesses 2 17.5 16.9 (3.6%) retirements to be executed in the 2nd half of the year. Costs with premises, communications, IT and other 3 69.5 67.9 (2.4%)

Costs related with human resources 4 3.4 3.0 (11.2%) This programme covers 260 employees and will permit an Total [=Σ 1 to 4] 5 100.2 96.0 (4.2%) estimated annual saving in personnel costs of some 12

M.€. Depreciation and amortisation

Depreciation and amortisation in domestic activity The recognition of this early retirement charge explains recorded a decrease of 4.0 M.€ (-22.4%) relative to June why the total of the “personnel costs” caption (which 2010, explained chiefly by the lower depreciation and includes the early retirement costs) increased by 9.5% amortisation of intangible assets (-1.5 M.€), IT equipment relative to the 1st half of 2010. (-1.1 M.€) and leasehold improvements (-0.7 M.€).

4) Reduction of 48 units in the number of branches and 1 housing shop functioning 1) Excluding temporary labour which is recorded in the caption “Outside supplies and during the six months. In addition, on the last day of 30 June 2011 9 housing shops services”. which had been functioning on that day, were closed, with one of them becoming a 2) Includes bonuses and motivation incentives for the commercial network, long service branch. awards, cost of loans to employees and others. 3) Includes social charges (22.3 M.€ in Jun.2010 and 34.5 M.€ in Jun.2011), current service cost (15.5 M.€ in Jun.2010 and 3.6 M.€ in Jun.2011), the amortisation of actuarial and fund income variances recorded outside the corridor and the amortisation of changes to pension plan conditions.

Banco BPI | 1st half 2011 Report 60 Domestic activity

IMPAIRMENTS AND PROVISIONS Impairments for loans and other impairments and It should be noted that in the corresponding period of last provisions, net of recoveries of loans previously written year, loan impairments of 47.2 M.€ were recognised in the off, amounted to 97.9 M.€ in the 1st half of 2011, income statement, while in addition 18.2 M.€ was utilised including an extraordinary charge of some 24 M.€1 made of the extraordinary charge made in December 2009, at the end of June. resulting in a total of 65.4 M.€, which corresponded to 0.45% of the loan portfolio in annualised terms. Impairments of customer loans Loan impairments recognised in the income statement for The net loan loss in the 1st half of 2011, which the 1st half of 2011 totalled 73.2 M.€ (including an corresponds to the amount of the impairments after extraordinary charge of 20 M.€ booked in June) which deducting loan recoveries, amounted to 65.5 M.€, corresponded to 0.52% of the average loan portfolio in representing 0.46% of the loan portfolio’s average annualised terms. balance in annualised terms.

1) In the 1st half of 2011, a total extraordinary charge was made of 28 M.€, of which 20 M.€ refers to loan impairments recorded in June, and 8 M.€ refers to other impairments and provisions.

Loan impairments Amounts in M.€ Jun. 10 Jun. 11 As % of Impairments As % of As % of Impairments As % of Impairments the loan net of the loan Impairments the loan net of the loan portfolio2 recoveries portfolio2 portfolio2 recoveries portfolio2 Corporate banking, institutional banking and project finance 1 50.5 0.78% 47.7 0.73% 34.5 0.56% 32.8 0.53% Individuals and small businesses banking Mortgage loans 2 7.2 0.13% 6.9 0.12% 12.9 0.22% 12.1 0.21% Loans to individuals – other purposes 3 5.8 0.87% 4.2 0.63% 7.1 1.07% 4.7 0.72% Loans to small businesses 4 2.4 0.20% (0.9) (0.07%) 12.6 1.11% 9.7 0.86% [= Σ2 to 4] 5 15.4 0.20% 10.2 0.14% 32.6 0.43% 26.6 0.35% Other 6 (0.5) (0.13%) (0.7) (0.19%) 6.1 1.54% 6.1 1.54% 3 Subtotal [= 1+5+6] 7 65.4 0.45% 57.1 0.40% 73.2 0.52% 65.5 0.46% Utilisation of the extraordinary charge 8 (18.2) (18.2) 4 Total [= 7+8] 9 47.2 0.33% 38.9 0.27% 73.2 0.52% 65.5 0.46%

2) Average performing loan portfolio. 3) Does not correspond to the impairment charges recorded in the income statement in the 1st half 2010, given that, for purposes of calculating the above indicators, the utilisation in the 1st half 2010 of the extraordinary charge recorded in 2009 was added to the impairments for the period. 4) Total recognised in the income statement for the period.

Banco BPI | 1st half 2011 Report 61 Domestic activity

EQUITY-ACCOUNTED RESULTS OF SUBSIDIARIES MINORITY INTERESTS The contribution of the equity-accounted results of Minority interests in net profit generated by domestic subsidiaries to net profit from domestic activity was 11.9 activity essentially correspond to the non-cumulative M.€ in the 1st half of 2011 (+6.2% vis-à-vis the same dividend on the preference shares issued by BPI Capital period of 2010). Finance.

The contribution from the subsidiaries in the insurance Minority interests in net profit rose from 3.6 M.€ in the area – Allianz Portugal and Cosec – increased 15.2% in 1st half of 2010 to 4.3 M.€ in the 1st half of 2011. This year-on-year terms to 9.0 M.€. This figure represented increase mainly reflects the behaviour of market interest 76% of the total contribution from the equity-accounted rates bearing in mind that the dividend on preference subsidiaries. share is indexed to the three-month Euribor rate.

Equity-accounted results of subsidiaries Amounts in M.€ At the end of June 2011, the balance sheet value of the Jun.10 Jun.11 Δ% preference shares was 227.5 M.€. Allianz Portugal 1 7.3 7.4 1.5% Cosec 2 0.6 1.6 194.3% [= 1+2] 3 7.8 9.0 15.2% Viacer 4 1.6 1.3 (20.5%) Finangest 5 1.8 0.5 (73.0%) 1 Unicre 6 - 1.1 - Other 7 - 0.08 - Total [= Σ3 to 7] 8 11.2 11.9 6.2%

1) In 2010, Unicre began to be treated as an associated company and hence equity accounted by virtue of BPI having increased its interest in Unicre’s capital from 17.6% to 21% (previously, this investment was recorded in the portfolio of available-for-sale financial assets).

Banco BPI | 1st half 2011 Report 62 RESULTS OF INTERNATIONAL ACTIVITY

NET PROFIT International activity contributed to consolidated net ƒ to the contribution from Banco Comercial e de profit for the 1st half of 2011 with 47.4 M.€, which Investimentos (BCI) of 3.1 M.€ (+11.2% year-on-year), corresponds to a 1.1% decrease relative to the same relating to the appropriation of 30% of its individual period of 2010. The principal contributions to profit from profit (recognised using the equity method1). international operations corresponded:

The return on average capital allocated to international ƒ to the contribution from Banco de Fomento Angola operations in the 1st half of 2011 was situated at 30.1%. (BFA) of 44.6 M.€ (-1% relative to the same period last year), relating to the appropriation of 50.1% of its 1) BCI’s contribution to consolidated profit, besides the equity accounted earnings, also includes the deferred tax relating to BCI’s distributable profits. individual profit;

International activity income statement Amounts in M.€ Δ% 1st half 10 2nd half 10 2010 1st half 11 1st half10 /1st half 11 Net interest income (narrow sense) 1 90.2 118.9 209.2 104.5 15.8% Unit linked gross margin 2 Income from securities (variable yield) 3 Commissions related to deferred cost (net) 4 Net interest income [=Σ 1 to 4] 5 90.2 118.9 209.2 104.5 15.8% Technical result from insurance contracts 6 Commissions and other similar income (net) 7 22.6 23.9 46.5 21.2 (6.4%) Profits from financial operations 8 39.5 28.7 68.3 31.2 (21.0%) Operating income and charges 9 (0.6) (0.5) (1.1) 0.4 167.4% Net operating revenue [=Σ 5 to 9] 10 151.8 171.0 322.8 157.4 3.7% Personnel costs, excluding early-retirements costs 11 (24.4) (25.3) (49.7) (26.8) 9.9% Outside supplies and services 12 (21.2) (24.7) (45.8) (23.3) 9.9% Depreciation of fixed assets 13 (5.5) (5.7) (11.2) (5.7) 3.6% Operating costs [=Σ 11 to 13] 14 (51.1) (55.6) (106.7) (55.8) 9.2% Operating profit [= 10+14] 15 100.7 115.4 216.1 101.6 0.9% Recovery of loans written-off 16 1.4 0.7 2.1 1.8 27.3% Loan provisions and impairments 17 (11.7) (9.5) (21.2) (6.6) (43.7%) Other impairments and provisions 18 (1.5) (5.2) (6.7) (1.9) 22.5% Profits before taxes [= Σ 15 to 18] 19 88.9 101.5 190.3 94.9 6.8% Corporate income tax 20 4.0 (3.5) 0.5 (3.4) 184.9% Equity-accounted results of subsidiaries 21 3.1 3.0 6.1 3.4 11.2% Income attributable to minority interest 22 (48.0) (50.7) (98.7) (47.6) (1.0%) Net profit [= Σ 19 to 22] 23 47.9 50.3 98.3 47.4 (1.1%) Cash flow after taxation [=23-13-17-19] 24 66.6 70.7 137.4 61.6 (7.6%)

Banco BPI | 1st half 2011 Report 63 International activity

Net operating revenue from international activity was up absolute terms of income outpaced the rise in costs, with 3.7% (+5.6 M.€) in relation to the 1st half of 2010, due the result that operating profit was 0.9% higher. mainly to the 15.8% expansion in net interest income The 5.1 M.€ decline in loan and other impairments, net (+14.3 M.€), which compensated for the drop recorded in of recoveries, when compared with the corresponding profits from financial operations (-8.3 M.€) and in period of 2010, was responsible for the improvement in commissions (-1.4 M.€). profit before taxation of 6.8% (+6.0 M.€).

Operating costs increased 9.2% (+4.7 M.€) year-on-year , The 1.1% drop in profit (when profit before taxation grew reflecting the impact of the ongoing expansion of the 6.8%) is mainly explained by the caption corporate commercial network in Angola. income tax, bearing in mind that in the same period a

year earlier this caption included a gain of 7.4 M.€ Given that the costs relating to international activity relating to a correction (decrease) in the estimated tax to account for only 1/3 of the income base, the expansion in be borne by BFA with respect to the 2009 financial year.

CONSOLIDATION OF INTERNATIONAL ACTIVITY

International activity encompasses the business carried balances into euro in accordance with the principles embodied on by the following companies: in IAS 211, based on indicative exchange rates disclosed by the

Banco Nacional de Angola (central bank). % of Contribution Consolidation Country capital to Jun.11 Entity method held profit (M.€) The Angolan currency is the kwanza; however, the Angolan BFA Angola 50.1% Full consolid. 44.6 economy’s high utilisation of the dollar explains why the major BCI Mozambique 30.0% Eq. accounted 3.1 share of business with Banco de Fomento Angola’s customers BPI Dealer Mozambique 92.7% Full consolid. (0.001) is expressed in American dollars. At the end of June 2011, BPI Capital more than 65% of customer resources and more than 60% of South Africa 100% Full consolid. (0.4) África the loan portfolio were denominated in dollars. A substantial portion of revenue and costs is expressed in the American The costs and income captions, as well as the captions currency or is indexed thereto, as is the case with personnel assets and liabilities, presented as being derived from costs. international operations, refer almost exclusively to Banco de Fomento Angola, given that BCI's (Mozambique) At 30 June 2011, the net exposure of BFA’s balance sheet to contribution is recognised in the BPI Group’s financial foreign currencies was not material. statements using the equity method, while the accounts of BFE Dealer Mozambique and BPI Capital Africa (also Euro exchange interest rates consolidated in full) are not material. End of period Half-year average 1st half 1st half Jun.10 Jun.11 Δ% Δ% Full consolidation of BFA 10 11 The inclusion of Banco de Fomento Angola’s financial 1 EUR = AKZ 112.8 134.4 19.2% 120.7 129.7 7.5% statements in the consolidated financial statements is 1 EUR = USD 1.219 1.441 18.2% 1.312 1.394 6.3% preceded by the conversion of the income statement and 1) The income and costs generated each month are converted into euro at the exchange rate of the month in which they are recognised. In the case of assets and liabilities, the exchange rate ruling at the end of the year is used. The gains or losses resulting from this conversion are recognised directly in Shareholders’ equity, in the caption “Revaluation reserves”.

Banco BPI | 1st half 2011 Report 64

INTERNATIONAL ACTIVITY BALANCE SHEET Net total assets employed in international activity maturities up to 1 year (19% of customer resources), amounted to 4 711.5 M.€ at the end of the 1st half of and in Angolan Treasury bonds (24% of customer 2011. resources).

International activity has a very liquid balance sheet At the end of June 2011, customer resources amounting € founded on the taking of customer resources and the to 4 013 M. , funded some 85% of assets, and together application of this liquidity in loans (roughly 24% of with own resources, assured the almost whole funding of customer resources), in securities issued by the Angolan assets. central bank and by the Angolan Treasury with

1 International activity balance sheet Amounts in M.€ Δ% Jun. 10 Dec. 10 Jun.11 Jun.10/Jun.11 Assets Cash and deposits at central banks 1 859.0 852.4 804.3 (6.4%) Amounts owed by credit institutions repayable on demand 2 90.2 98.8 69.2 (23.2%) Loans and advances to credit institutions 3 254.6 470.9 935.4 267.4% Loans and advances to Customers 4 1 371.2 1 189.2 1 006.0 (26.6%) Financial assets held for dealing 5 9.0 73.0 85.6 848.8% Financial assets available for sale 6 1 944.7 2 042.4 1 657.1 (14.8%) Investments held to maturity 7 Hedging derivatives 8 Investments in associated companies and jointly controlled entities 9 20.3 22.6 27.0 32.6% Other tangible assets 10 119.2 116.0 108.8 (8.7%) Intangible assets 11 0.4 0.6 0.7 78.4% Tax assets 12 Other assets 13 0.2 15.3 17.4 9714.3% Total assets [= Σ1 to 13] 14 4 668.8 4 881.2 4 711.5 0.9% Liabilities and shareholders' equity Resources of central banks 15 Financial liabilities held for dealing 16 Credit institutions' resources 17 75.2 73.5 65.7 (12.6%) Clients' resources and other loans 18 4 071.3 4 214.8 4 116.9 1.1% Debts evidenced by certificates 19 Technical provisions 20 Financial liabilities associated to transferred assets 21 Hedging derivatives 22 Provisions 23 29.6 31.5 28.6 (3.5%) Tax liabilities 24 4.7 8.0 4.8 3.1% Participating bonds 25 Other subordinated loans 26 Other liabilities 27 49.2 49.1 44.1 (10.5%) Share capital, share premium account, reserves and other equity instruments 28 176.9 159.1 189.8 7.3% Treasury stock 29 Net profit 30 47.9 98.3 47.4 (1.1%) Minority interests 31 213.9 247.0 214.1 0.1% Total Shareholders’ equity and minority interests [= Σ28 to 31] 32 438.7 504.4 451.3 2.9% Total liabilities and shareholders' equity [= Σ15 to 31] 33 4 668.8 4 881.2 4 711.5 0.9% Note: Bank guarantees 34 239.0 193.1 158.0 (33.9%)

1) The balance sheet relating to the international activity presented above has not been corrected for the balances resulting from operations with the “Domestic activity” geographical segment. For consolidation purposes, these balances have been eliminated.

Banco BPI | 1st half 2011 Report 65 International activity

CUSTOMER LOANS SECURITIES AND FINANCIAL INVESTMENTS BFA’s customer loans portfolio expressed in the PORTFOLIO consolidation currency (the euro) decreased 27% year-on- The financial assets portfolio is composed of short-term year, with BFA continuing to adhere to stringent risk securities, with maturities up to one year, expressed in evaluation criteria. Loans to companies recorded a 30% kwanzas and issued by Banco Nacional de Angola (Central decline year-on-year, while loans to individuals were down Bank Securities) and by the State (Treasury Bills) and 23%. Angolan Treasury Bonds. This portfolio is used for the application of BFA’s surplus liquidity and balance sheet The abovementioned changes incorporate the effect of the management. dollar’s and kwanza’s depreciation against the euro. When expressed in American dollars1, BFA’s loan portfolio The 10.3% year-on-year decrease in the securities and shrank 13.3% relative to June 2010. investments portfolio is attributable to the reduction in the Treasury Bonds portfolio of 381 M.€ (-28%), while Customer loans portfolio Amounts in M.€ the short-term securities portfolio increased by 170 M.€ Δ% (+29%) with the reinforcement of the T-Bills portfolio. It Jun.10 Dec.10 Jun.11 Jun.10 / Jun.11 should be mentioned that the Angolan authorities began Loans to companies 1 948.7 817.6 666.6 (29.7%) to give preference to the issue of T-Bills from the end of Loans to individuals 2010 (primarily with 365-day maturities) for raising Housing loans 2 137.8 127.6 116.7 (15.3%) finance, while the placing of Central Bank Securities Consumer loans 3 234.9 195.3 178.1 (24.2%) became less important. Other 4 84.4 66.5 56.4 (33.1%) [= 5 457.1 389.4 351.2 (23.2%) The relative weight of short-term securities on the total Loans in arrears 6 52.7 50.1 62.3 18.2% portfolio increased from 30% in June 2010 to 43% in (96.4) (78.7) (80.0) (17.0%) Loan impairments 7 June 2011. 8 9.1 10.7 5.9 (35.4%) Interests and other Total [=1+Σ5 to 8] 9 1 371.2 1 189.2 1 006.0 (26.6%) (net loan portfolio) Securities and financial investments portfolio Amounts in M.€ Δ% 239.0 193.1 158.0 (33.9%) Guarantees 10 Jun.10 Dec.10 Jun.11 Jun.10/

Jun.11 Central Bank securities CUSTOMER RESOURCES (TBC) 1 585.8 728.5 249.9 (57.3%) Customer resources, expressed in euro, were 1.3% higher Angolan Treasury Bills (BT) 2 8.8 206.4 514.6 n.m. year-on-year. Angolan Treasury Bonds 3 1 358.3 1 179.7 977.7 (28.0%) When measured in dollars2, total customer resources Other 4 0.8 0.6 0.6 (28.2%) present 20% year-on-year growth. [= Σ1 to 4] 5 1 953.7 2 115.3 1 742.8 (10.8%) Financial investments 3, 4 6 20.3 22.6 27.0 32.6% Total Customer resources Amounts in M.€ Δ% Total [= 5 + 6] 7 1 974.0 2 137.9 1 769.7 (10.3%) Jun.10 Dec.10 Jun.11 Jun.10/ Jun.11

Sight deposits 1 1 887.8 2 008.0 1 847.4 (2.1%) 3) Investments in associated companies and jointly controlled entities. Term and savings deposits 2 2 074.3 2 168.3 2 165.9 4.4% 4) Corresponds to the 30% participating interest in BCI (in Mozambique) which is recognised using the equity method. Total [= 1 + 2] 3 3 962.1 4 176.2 4 013.4 1.3%

1) Loans expressed in American dollars represented at the end of June 2011 roughly 60% of the balance of BFA’s loans. 2) Customer resources expressed in dollars represented at the end of June 2011, roughly 65% of the total balance on BFA’s Customer resources.

Banco BPI | 1st half 2011 Report 66 International activity

INCOME1 Commissions Net operating revenue from international activity (BFA’s Commissions and other similar income totalled 21.2 M.€, operations) advanced 3.7% (+5.6 M.€) relative to the 1st which correspond to a 6.4% year-on-year decrease. half of 2010. This improvement is explained by the 15.8% expansion in net interest income, which offset the Profits from financial operations lower profits from financial operations and the fall in Profits from financial operations correspond chiefly to commissions. foreign currency gains arising from commercial operations with customers. Net operating revenue Amounts in M.€ Profits from financial operations fell by 21% to 31.2 M.€. Jun. 10 Jun. 11 Δ% The relative importance of profits from financial Net interest income 1 90.2 104.5 15.8% operations in net operating revenue dropped from 26% in Technical result from insurance the 1st half of 2010 to 20% in the 1st half of 2011. 2 22.6 21.2 (6.4%) contracts Commissions and other similar OPERATING COSTS 3 39.5 31.2 (21.0%) income (net) Operating costs rose by 9.2% relative to the 1st half of Profits from financial operations 4 (0.6) 0.4 167.4% 2010. The continuation of the distribution network’s Total [=Σ 1 to 4] 5 151.8 157.4 3.7% expansion in Angola, which grew 9% when compared with June 2010, and the larger workforce associated with it,

(9.9% increase in the average number of employees Net interest income relative to the same period of 2010), constitute the main Net interest income grew 15.8% (+14.3 M.€) when reasons behind the higher costs. compared with the 1st half of 2010.

The indicator “operating costs as a percentage of net The principal factors behind this improvement were: operating revenue” was situated at 33.9%, in the 12

months to June 2011. ƒ the positive volume effect of 17.1 M.€ resulting from

the increase in the average balance on the securities Operating costs Amounts in M.€ portfolio (+19%, year-on-year), which offset the negative Jun.10 Jun.11 Δ% impact of the decrease in the customer loans portfolio Operating costs, before depreciation and (negative volume effect of 11.6 M.€); amortisation ƒ the positive price effect of 10.6 M.€ resulting from the Personnel costs 1 24.4 26.8 9.9% higher average rates on loans (+0.4 p.p. to 10.1% in Outside supplies and services 2 21.2 23.3 9.9% the 1st half of 2011) and of the securities portfolio2 [= 1+2] 3 45.6 50.1 9.9% (+0.5p.p. to 10.8%) and from the decline in the Depreciation and amortisation 4 5.5 5.7 3.6% average cost borne on interest-bearing liabilities (-0.2 Total [= 3+4] 5 51.1 55.8 9.2% p.p to 3.1%). 3 Efficiency ratio (last 12 months) 6 30.1% 33.9% 1) Income and costs from international operations refer to BFA’s business in Angola (full consolidation method) given that the 30% shareholding in BCI in Mozambique is equity accounted. 2) The increase in the average interest rate earned on the securities portfolio resulted from 3) Operating costs as percentage of net operating revenue. the higher weight of T-Bills and Central Bank Securities relative to the total portfolio (from 25% in the 1st half of 2010 to 45% in the 1st half of 2011, in terms of average balances) to the detriment of the Treasury Bonds portfolio given that since the T-Bills and Central Bank Securities are denominated in kwanzas, they benefit from higher remuneration rates than the treasury bonds, which are predominantly expressed in USD or in kwanzas indexed to the USD. It should be noted, however, that the average interest rates on T-Bill and Central Bank Securities placings have registered a continuous decline since the end of the 1st quarter of 2010, having fallen from rates of close to 25% in March 2010 to around 8% at the end of June 2011.

Banco BPI | 1st half 2011 Report 67 International activity

LOAN IMPAIRMENTS AND PROVISIONS EQUITY-ACCOUNTED RESULTS OF SUBSIDIARIES Loan impairments in the period, net of recoveries of loans Equity-accounted results – which correspond to the previously written off, totalled 4.8 M.€, which corresponds appropriation of the net income of the 30% shareholding to a 53% decline (-5.5 M.€) relative to the same period a in BCI in Mozambique – grew 11.2%, year-on-year to year ago. The indicator impairments (after deducting 3.4 M.€3. recoveries) as a percentage of the average loan portfolio in annualised terms dropped from 1.54% in the 1st half of BCI maintains significant levels of banking business 2010 to 0.88% in the 1st half of 2011. expansion, expressed in the year-on-year growth rates of 12% in total assets, 20% in deposits and 8.5% in loans. At the end of June 2011, BFA had a ratio of customer loans in arrears for more than 90 days of 5.4%, while MINORITY INTERESTS loans in arrears for more than 90 days were covered by Minority interests in the results of international activity total loan provisions to the extent of 143%. correspond to the 49.9% interest in BFA’s capital held by Unitel. Loan impairments Amounts in M.€ As % of As % of Jun. Jun. BPI recognised minority interests of 48.0 M.€ and loan loan 2010 1 2011 1 47.6 M.€ in BFA’s net profit in the first six months of portfolio portfolio 2010 and 2011, respectively. Loan impairments 1 11.7 1.75% 6.6 1.21% (-)Recoveries of loans in 2 1.4 0.21% 1.8 0.33% arrears written off 2 Net credit loss [= 1-2] 3 10.3 1.54% 4.8 0.88% 3) BCI’s contribution to BPI consolidated net profit, besides the equity-accounted results also includes the deferred tax relating to BCI’s distributable results. In the 1st half of 2011, BCI’s contribution was 3.1 M.€, up 11.2% on the semester of the previous year’s contribution.

1) Average performing loan portfolio. 2) Loan provisions and impairments deducted of recoveries of loans and interests in arrears previously written off.

Banco BPI | 1st half 2011 Report 68 Risk management

At the BPI Group, risk management is founded on the and operations, backed by the various risk indicators and ongoing identification and analysis of the exposure to the scoring models produced by the Risk Analysis and Control different risks (counterparty risk, country risk, market Division. The management of recovery processes also risks, liquidity risks, operational and other risks) and on forms part of the functions of the Individuals’ Credit Risk the execution of strategies aimed at maximising the Division. results vis-à-vis risks, within predefined and duly supervised limits. Risk management is complemented by In specific segments such as those of loans to financial the analysis à posteriori of performance indicators. institutions or derivatives, there are credit risk analysis areas which carry out similar functions to those described ORGANISATION for companies or individuals. The BPI Group’s global risk management is entrusted to the Executive Committee. At the Executive Committee The management of operational risk at the BPI Group is level, a Director without direct responsibility for the undertaken by two specific bodies, the Operational Risks commercial divisions is placed in charge of the risk Committee and the Operational Risk Area, which ensure divisions. the implementation of the good management practices laid down by the Basle Committee, and transposed into At senior level, there are also two specialised executive the European and national legislative and supervision committees: the Global Risks Executive Committee standards. (global Market, Liquidity, Credit, Country, Operational risks) and the Credit Risks Executive Committee, which The Operational Risk Committee is the specialised concentrates its activity on the analysis of large-scale coordinating body emanating from the Board of Directors operations. of Executive Committee, whose mission is to ensure the proper execution, monitoring and reporting of operational- The Bank has a centralised and independent structure for risk management policy at the BPI Group. dealing with the analysis and control of risk in accordance with the best organisational practices in this domain and The Operational Risk Area, in liaison with the staff with the requirements of the Basle Accord. The Risk members who are allocated to operational risk at each Analysis and Control Division is responsible for monitoring Group division, promotes the formalisation of the global risks and for the management of the risk datamart processes which permit the identification, monitoring, for the whole Group (to where all the important management and mitigation of operational risk which information about the Bank’s systems converge). exists in the various business areas.

In the specific domain of corporates, small businesses, The BPI Group’s Compliance Division has as its mission institutional clients and project finance credit risks, the contributing to the prevention and mitigation of the Credit Risk Division undertakes an independent appraisal “Compliance Risks”, which translate into the risk of legal by the commercial structures of the risk of the various or regulatory sanctions, financial or reputational loss as a proponents or sureties and of the characteristics of the consequence of the failure to comply with the law, operations. The granting of ratings falls within this regulations, code of conduct and good banking practices, Division’s terms of references, and – in high profile cases fostering the observance by the BPI Group and its – those of the Rating Committee. Quantitative models Employees of all the applicable rules by way of an produced by the Risk Analysis and Control Division are independent involvement, in conjunction with all the available to support the attribution of ratings. The Bank’s organic units. It is worth pointing out that the Corporate Loans Recovery Division undertakes the ambit of the Compliance Division’s terms of reference management of recovery proceedings in the event of covers all the areas, processes and activities which default. constitute the BPI Group, including the affiliates, branches, subsidiaries and overseas representative In the specific sphere of Individuals’ credit risk, it is the offices. task of the Individuals’ Credit Risk Division to perform the functions of independently analysing proponents, sureties

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Matrix of responsibilities for risk management and control Performance Identification and analysis of exposure Strategy Limits and control Recovery Evaluation

Credit / DACR: rating and scoring models (probabilities of default), and CECA, CERG: CA, CECA, CERC, Credit DRCE: counterparty loss given default for all loan segments overall strategy Board, DRC, DRCP, DACR, Companies risk DF: limits DACR and DF: external rating identification for debt securities CECA, CERC: DRCP: and for credit to financial institutions approval of CECA, CACI, CERC, CERG, Individuals substantial Credit Board, DACR, DO, and Small DRC: Rating for Corporates, Small Businesses, Project Finance operations Internal and external Businesses and Institutionals Auditors1, Supervisory Board, Credit Board, Bank of Portugal: control Rating Committee: Rating for large Corporates and Institutionals DRC, DBI, DRCP, DF: approval of DRCP: Expert System for loans to Individuals operations

DACR: exposure to derivatives

CECA DACR: analysis of overall exposure to credit risk CERG, CERC, Country risk DF: analysis of individual country risk with recourse to external CECA, CERG: CECA, CACI, CERG, DACR, DCPE, DACR ratings and analyses overall strategy DC, Internal and external All other Auditors1, Supervisory Board, Divisions DACR: analysis of overall exposure DF, DA, DIAPE: Bank of Portugal: control operations

Market risk DACR: analysis of risk by books / instruments and global risks – CECA, CERG: CECA, CERG, DACR, DF, DA: interest rates, currencies, shares, commodities, other. overall strategy limits

DF, DA, DIAPE: CECA, CACI, CERG, DACR, operations DC, Internal and external Auditors1, Supervisory Board, Bank of Portugal: control

Liquidity risk DF, DA, DIAPE: individual risk analysis of liquidity, by CECA, CERG: CECA, CACI, CERG, DACR, instrument overall strategy DC, Internal and external Auditors1, Supervisory Board, DACR: analysis of overall liquidity risk Bank of Portugal: control

Operating risks DACR: analysis of overall exposure CECA: overall CECA, CERG, DORG, DACR: DJ, DAI, CECA, DORG organisation regulation and limits DO, DORG and all the Divisions: identification of critical points Commercial Operating Risk CECA, CACI, DORG, DACR, Divisions Committee DC, Internal and external Auditors1, Supervisory Board, DORG: regulations Bank of Portugal: control

Legal and DJ, DC CECA, CACI, DJ, DC, Internal compliance and external Auditors1, risks Supervisory Board, Bank of Portugal: control

1) As part of the execution of the audit and statutory audit of the BPI Group’s accounts, the external auditors also contribute to the process of controlling the various risks to which the Group is exposed. CA - Conselho de Administração (Board of Directors); CACI – Comissão de Auditoria e de Controlo Interno (Audit and Internal Control Committee); CECA – Comissão Executiva do Conselho de Administração (Board of Directors Executive Committee); CERC – Comissão Executiva de Riscos de Crédito (Credit Risks Executive Committee); CERG – Comissão Executiva de Riscos Globais (Global Risks Executive Committee); DA – Departamento de Acções (Equity Department); DACR – Direcção de Análise e Controlo de Riscos (Risk Analysis and Control Division); DAI – Direcção de Auditoria Interna (Internal Audit Division); DC – Direcção de Compliance (Compliance Division); DF – Direcção Financeira (Financial Division); DIAPE – Direcção de Investimentos Alternativos e Produtos Estruturados (Alternative Investments and Structured Products Division); DJ – Direcção Jurídica (Legal Division); DO – Direcção de Operações (Operations Division); DORG – Direcção da Organização (Organisation Division); DP – Direcção de Planeamento (Planning Division); DRC – Direcção de Riscos de Crédito (Credit Risk Division); DRCE – Direcção de Recuperação de Crédito a Empresas (Corporate Credit Recovery Division); DRCP – Direcção de Riscos de Crédito a Particulares (Individuals Credit Risk Division).

Banco BPI | 1st half 2011 Report 70

CREDIT RISK In order to mitigate credit risk on companies’ derivative Management process operations, in addition to the drafting of contracts with Credit risk associated with the possibility of actual default clauses which permit the set-off of obligations in the by a counterparty (or with the change in the economic event of default, BPI has as a rule signed collateralisation value of a given instrument or portfolio stemming from a accords with its counterparties. deterioration in the risk quality of a counterparty) constitutes the primary risk factor inherent in the BPI The specific approval of loans to individuals follows the Group’s business spectrum. principles and procedures laid down in the credit regulations and in essence result from the following: Specific approval for loans to companies and small businesses or to institutional Customers follows the ƒ Rejection filters: the existence of incidents and principles and procedures laid down in the credit defaults, liens or debts to the Tax Administration and to regulations, and in essence result from the following: the Social Security Department, minimum and maximum age restrictions and others. ƒ Rejection filters: the existence of incidents and ƒ Exposure limits: evaluation of the present capability to defaults, liens or debts to the Tax Administration and to service debt through the calculation of the housing-to- the Social Security Department; others. income ratio or the estimated value of the savings of the ƒ Exposure limits to credit risk: evaluation of the present loan applicants, guarantors or sureties. As a general capability to service debt and the establishment of rule, applications where the housing-to-income ratio is corresponding maximum exposure limits, also paying considered to be excessive or where savings become attention to the Bank’s involvement capacity. negative due to the costs of the new loan, are turned ƒ Acceptance/ rejection boundary according to the down. probability of the counterparty defaulting: a boundary is ƒ Acceptance/ rejection boundary, according to the set in accordance with the internal rating (potential probability of the counterparty defaulting: there are Customers whose classification places them in a risk reactive scorings for each loan segment (housing, class which is deemed to be excessive are turned down, personal loans, credit cards and motor car finance) that is, whose probability of defaulting is high) or in designed to evaluate the probability of default by the accordance with an equivalent analysis by an expert counterparty, guarantors or sureties. In complex cases, the identification of the risk class (probability of default) system. requires the involvement of the Individuals Credit Risk ƒ Mitigation of risk attaching to operations: regard is had Division. Potential Customers whose classification to any personal or tangible guarantees which contribute places them at risk which is deemed to be excessive are to reducing risks. turned down, that is, whose probability of defaulting is high. In the corporate segment, the object is to become ƒ Mitigation of risk attaching to operations: in the involved with long-term operations which are associated acceptance or rejection of Customers and operations, with tangible guarantees (financial and non-financial), regard is had to any personal or tangible guarantees with collateral cover levels (net of haircuts and temporal which contribute to reducing risks. adjustments in the case of financial assets) of 100%. In the home loans segment, the relationship between loan In the small businesses segment, the medium / long- and guarantee bears a maximum figure of 80%. term operations must as a rule be fully secured by tangible guarantees. In motor vehicle finance, the amount financed can not exceed the vehicle’s selling price. Moreover, the

relationship between the net borrowing (equal to the selling price of the vehicle minus the down payment) and the commercial value of the vehicle must be less than or equal to 130%. The vehicle’s commercial value

Banco BPI | 1st half 2011 Report 71

corresponds, in the case of new vehicles, to the average Analysis and Control Division, the internal and external market selling price to the public without extras and, in auditors1 and the Bank of Portugal. the case of used vehicles, to an independent valuation by recourse to the Eurotax selling price catalogue. Evaluation of exposure to credit risk Companies, institutional Customers, specialised finance In order to access BPI personal loans, an insurance policy and small businesses must be taken out which protects the loan against the BPI uses an internal rating system for companies eventuality of unemployment and hospitalisation. (excluding small businesses) with ten classes (E1 to E10)

plus two classes in the case of incidents (ED1 and ED2) On the commercial front, the overall evaluation of and one in the case of default (ED3, which corresponds to operations or Customers – Companies, Individuals and other - must take into consideration the objectives relating a 100% “probability of default”). Default probabilities are to the profitable employment of shareholders’ equity associated to each classification for the evaluation of relative to the risks assumed. loans, guarantees and securities of medium and large- sized companies. For each one of the different divisions involved, the Internal rating of companies relevant hierarchical levels for the approval of credit Breakdown of exposure by risk classes in the 1st half 2011 according to their risk or commercial characteristics have % of Value One-year default 2 Risk classes portfolio 3 been defined with the object of decentralising decisions (M.€) probability amount and, therefore, ensuring processing speed and efficacy. E1 1 226.2 2.5% 0.03%

E2 2 1 134.5 12.5% 0.15% Subsequently, the Bank maintains constant vigilance over E3 3 1 072.7 11.8% 0.19% the evolution of its exposure to the different counterparties, E4 4 808.7 8.9% 0.43% the evolution of its portfolio (diversification by geographical E5 5 1 957.3 21.6% 0.54% area, sector, segment, counterparty, currency and E6 6 942.6 10.4% 0.81% maturity), and the profitability results and indices achieved E7 7 937.9 10.3% 1.46% vis-à-vis the risks assumed. E8 8 736.0 8.1% 2.64%

E9 9 290.3 3.2% 4.34% Moreover, problematic credit situations, provisioning cover E10 10 138.2 1.5% 8.08% indices, write-offs and recoveries are analysed every Without rating 11 204.2 2.3% 8.08% month. The alert signalling non-performing loans is ED1 12 109.9 1.2% 35.39% available on-line via the internal network for the ED2 13 25.3 0.3% 49.34% information of the Bank’s managers. ED3 (default) 14 482.1 5.3% 10%

Total [=Σ 1 to 14] 15 9 065.9 100% 1.66% An estimate is also made of the provisions for impairment losses, involving both a statistical calculation for performing loans with incidents or loans in default, and 1) As part of the execution of the audit and statutory audit of the BPI Group’s accounts, an evaluation of the same impairment by expert systems the external auditors also contribute to the process of controlling the various risks to which the Group is exposed. for all the larger loans. The impairment losses and 2) The portfolio includes bonds, bank guarantees and commercial paper of the provisions are the object of a monthly assessment by the Companies segment and excludes factoring without recourse. 3) In the calculation of default probabilities, all the operations in default of a single Board of Directors’ Executive Committee (Executive customer were regarded as being a single negative case (and not various cases). The Committee for Credit Risk), and are reviewed every six calculation of the portfolio’s average default probabilities naturally excludes the ED3 class. months by the external auditors and reviewed regularly by the Audit and Internal Control Committee. Functioning as agents controlling this entire management process, in addition to the Board of Directors, the Audit and Internal Control Committee, the Supervisory Board and the Executive Committee for Credit Risk, are the Risk

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The average default probability of the companies portfolio The concentration at geographic level is inherent to the from a one-year perspective weighted by the amount of location of the Group’s operations. liabilities stood at 1.66% at 30 June 2011. The loss on each operation in default in this segment is on average Financial institutions 18.43%, a figure that is higher than that of the past, In financing granted to other financial institutions, BPI indicating greater difficulties in recovering operations in bases its risk analysis on available external ratings. default owing to the economic crisis. The expected loss is Financing relations are restricted to investment grade on average 0.31% for the entire portfolio. institutions, at the time of the investment decision.

In the project finance and structured finance areas, there This system for evaluating counterparty risk is is a classification system based on five classes. The complemented by the calculation of the capital at risk, in portfolio is composed in the majority of cases of projects accordance with the assessment enshrined in regulations with “good” or “strong” ratings. governing solvency ratios or a variation thereof.

Internal rating of project finance Individuals st Breakdown of exposure by risk classes in the 1 half 2011 In the individuals domain, there is a reactive scoring Value % of portfolio Risk classes (M.€) amount model for each segment, designed to represent default Strong 1 452.8 15.6% probabilities (distribution of the results of each scoring by Good 2 2 113.2 72.7% ten classes, plus two in the case of incidents and one Satisfactory 3 229.0 7.9% class in the case of default). Weak 4 105.1 3.6% Default 5 8.0 0.3% Over the life of the operations, the default probabilities Total [=Σ 1 to 5] 6 2 908.1 100.0% are assessed by behavioural scorings. It should be noted that in the home loan segment, notwithstanding the The segment of small businesses is still at an initial stage difficult economic environment, there is a decline in the of a rating evaluation process. Notwithstanding this fact, portfolio’s average probability of default (1.75% in 2009, it is possible to estimate an average default probability 1.59% in 2010 and 1.69% in the 1st half 2011). This over a one-year period in the case of this portfolio, and a favourable trend is due not only to tighter decision loss in the event of default of 3.26% and 54.44%, criteria, but also to the natural decline in default respectively (the definition of default used in the probabilities on older loans (the portfolio’s average age is calculations of impairment losses is that of loans in 5 years while the peak of default probabilities in their arrears for 180 days or more). lifespan is situated between 3 and 4 years).

These systems for evaluating counterparty risk are Default probabilities of loans to individuals complemented by other methodologies, in particular, the At 30 Jun. 2011 Probability of calculation of the capital at risk, in accordance with the Loss given Expected Risk classes default within a , default (LGD) loss assessment enshrined in regulations governing solvency year1 2 ratios or a variation thereof. Mortgage loans 1.69% 27.28% 0.46% Personal loans 1.45% 27.11% 0.39% Indices relating to exposure concentration are also Motor car finance 1.76% 11.74% 0.21% analysed. In global terms, the portfolio reveals an average Credit cards 1.17% 40.64% 0.48% / high degree of concentration by counterparty or group (including conservative compliance with the regulations 1) Probability of default weighted by the liabilities in portfolio or potential (credit cards). governing “large exposures”) and a low degree of 2) The calculation of the average default probability includes situations of loans in arrears concentration by sectors. According to the Bank of for less than 90 days. Portugal’s calculation methodology, the individual concentration index stands at 44.7% and the sector concentration index at 10.7%.

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The estimated loss on each operation in default in these This system for evaluating counterparty risk is segments is also revised periodically over the lifespan of complemented by the calculation of the capital at risk, in the operations. The lowest expected loss in the event of accordance with the assessment enshrined in regulations default in the motor-car and housing finance is directly governing solvency ratios or a variation thereof. related to the existence of tangible guarantees, facilitating the recoupment of loans. The existence of promissory Securities portfolio notes and, at times, financial collateral, also facilitates In what regards the evaluation of risks stemming from its the recovery of amounts (relatively low) advanced in the securities portfolio, BPI resorts primarily to information form of personal loans. obtained from external rating reports. Notwithstanding

recent downgrades and the fact that bond valuations at Loan-to-value ratio in housing loans market prices implicitly contain, in this environment, high At 30 June 2011 risk premiums, the investment portfolio is predominantly June 2011 composed of the securities of low credit-risk issuers. New loans contracted 1 54.96% Housing loan portfolio 49.22% Loans in default (more than 90 days) 67.45%

1) Loans granted in June 2011.

Bonds and fixed-interest securities’ investment portfolio Amounts in M.€ Rating Jun. 10 % Dec. 10 % Jun. 11 % AAA 1 174.7 2.0% 128.5 1.5% 104.7 1.5% AA 2 1 658.2 19.0% 181.9 2.2% 976.6 14.0% A 3 2 855.2 32.8% 4 122.1 48.9% 253.6 3.6% BBB 4 1 162.2 13.4% 1 171.6 13.9% 3 041.8 43.6% BB 5 474.5 5.5% 432.2 5.1% 96.9 1.4% B 6 45.2 0.5% 33.9 0.4% 33.0 0.5% CCC 7 266.7 3.8% CC 8 4.5 0.1% 3.8 0.0% Other / without rating (NR) 9 509.9 5.9% 600.2 7.1% 610.8 8.8% Commercial paper with guarantees from credit 10 447.2 5.1% 419.2 5.0% 327.5 4.7% institutions Commercial paper without guarantees 11 1 373.5 15.8% 1 335.2 15.8% 1 259.4 18.1% Total [=Σ 1 to 11] 12 8 705.1 100% 8 428.6 100.0% 6 970.9 100.0%

Equities and participating interests portfolio Derivative operations As regards the structural position of the equities and Credit risk analysis relating to operations in derivates is participating interests portfolio, the corresponding market founded on the replacement value (exposure equivalent to risk is not easily measured by traditional methodologies credit), and on default probabilities and loss values in the such as VaR, given the investment’s time horizon, the case of default attaching to the counterparty and to the importance of the positions or the lack of quoted prices in operations, respectively. the equity market. According to the Basle Accord, this risk is treated as credit risk (and eventually included in The set-off and collateralisation contracts naturally have the treatment of large exposures). an influence on the calculation of this type of exposure. These agreements, which entail the receipt (and payment) The realisation of a stress test on this portfolio (30% fall of collateral amounts for hedging risks between in quoted prices) reveals a capital at risk of 73.7 M.€. counterparties, permitted a reduction in the substitution value of the derivatives portfolio from 338 M.€ (gross amount) to 157.6 M.€ (net amount, after set off and collateralisation) at the end of the 1st half 2011.

Banco BPI | 1st half 2011 Report 74

Current credit risk Substitution value of derivatives by type of counterparty1 Amounts in M.€ Jun. 10 % Dec. 10 % Jun. 11 % Over-the-counter market Financial institutions 1 52.9 18.3% 25.0 14.2% 41.9 26.6% Other financial intermediaries 2 0.0 0.0% 0.1 0.1% 0.1 0.1% Local and administrative public 3 0.3 0.1% 0.3 0.2% 0.2 0.2% sector Companies 4 212.7 73.6% 145.7 82.9% 112.0 71.0% Unit trust funds and pension funds 5 18.3 6.3% 1.0 0.6% Individuals 6 4.9 1.7% 3.7 2.1% 3.4 2.2% Total [=Σ 1 to 6] 7 289.1 100.0% 175.9 100.0% 157.6 100.0%

1) The total substitution value is the sum of the substitution values of the counterparties, when positive. It does not include options inserted into bonds issued or bought. The substitution value incorporates the effect of the risk reduction that results from the set-off of credit and debit balances between the same counterparties and agreements with counterparties, which serve as guarantee for compliance with obligations.

This form of evaluating exposure to counterparty risk is complemented by the traditional regulatory approach (own Total exposure in operations with instalments or interests funds requirements by capital at risk). overdue, that is, loans in arrears for more than 90 days added with falling due loans associated with loans in Default levels, provisioning and recovery default, represented 3.1% of the total gross loan portfolio At the end of June 2011 loans in arrears for more than 90 at the end of June 2011, which compares with 2.6% at days amounted to 677.4 M.€, which corresponded to the end of 2010. The corresponding ratio for the domestic 2.3% of the consolidated gross loan portfolio (1.9% in activity was 2.8% in June 2011 (2.4% in December December 2010). 2010).

In the domestic activity which represents about 96% of At the end of June 2011, the consolidated balance sheet the consolidated loan portfolio, the ratio of loans in recognised estimated losses relating to the Customer loan arrears (over 90 days) was 2.2% at the end of June 2011 portfolio, that is, Customer loan impairments2 (1.8% in December 2010), while in international activity (accumulated) of 617.0 M.€, which corresponded to which accounts for the remaining 4% of the loan 2.1% of the gross loan portfolio. Loan impairments in portfolio, the indicator stood at 5.4% (3.6% in December domestic operations totalled 533.2 M.€ and corresponded 2010). to 1.9% of the gross loan portfolio. In international operations, loan impairments totalled 83.9 M.€, which Loans in arrears for more than 90 days corresponds to corresponded to 7.7% of the gross loan portfolio and instalments of principal and interests overdue for more 143% of loans in arrears for more than 90 days. than 90 days, with the exception of loans handed over for legal recovery, in which case all the outstanding capital

(instalments due and not yet due) is classified as loans in 2) Loan impairments correspond to the estimated total loss, in relation to both performing arrears. In mortgage loans, BPI normally initiates the loans and non-performing loans, taking into consideration the total amount of the exposure, the probability of entry into default, the amount recoverable and the time recovery process 5 months after the date of the 1st period to recovery. default, at which moment the loan becomes a litigation situation, and all the outstanding capital is in this manner recognised as loans in arrears.

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Loans to Customers in arrears, provisions and impairments Amounts in M.€ 30 Jun. 2011 2007 2008 2009 2010 Domestic International Consolidated activity activity Customer loan portfolio (gross) 1 27 603.2 29 723.8 30 485.9 30 608.9 28 624.7 1 086.0 29 710.7 Loans in arrears Loans in arrears for more than 90 days1 2 276.9 357.1 559.9 577.0 618.8 58.6 677.4 1 Loans in arrears for more than 30 days 3 296.5 460.8 591.4 620.3 640.5 62.3 702.8 Doubtful loans 4 6.7 6.6 8.3 10.0 22.9 22.9 Loan impairments 5 385.7 464.5 552.7 582.2 533.2 83.9 617.0 Ratio of loans in arrears and doubtful loans Loans in arrears for more than 90 days, as % of total loans [= 2/1] 6 1.0% 1.2% 1.8% 1.9% 2.2% 5.4% 2.3% Loans in arrears for more than 90 days and 2 3 doubtful loans , as % of total loans [= (2+4)/1] 7 1.0% 1.2% 1.9% 1.9% 2.2% 5.4% 2.4% Loans in arrears (+ 90 days) and doubtful loans2, net of specific 3 loan provisions, as % of total net loans 8 0.2% 0.3% 0.4% 0.4% 0.8% (2.1%) 0.7% Loans in arrears for more than 30 days, as % of total loans [= 3/1] 9 1.1% 1.6% 1.9% 2.0% 2.2% 5.7% 2.4% Loan impairments (accumulated in the balance sheet) Loan impairments, as % of total loans [= 5/1] 10 1.4% 1.6% 1.8% 1.9% 1.9% 7.7% 2.1% Loan impairments, as % of loans in arrears for more than 90 days [= 5/2] 11 139.3% 130.1% 98.7% 100.9% 86.2% 143.2% 91.1% Write-offs 12 37.4 41.0 53.1 93.6 38.2 38.2 Recovery of loans and interests in arrears written-off 13 20.9 25.9 21.2 15.9 7.7 1.8 9.5

1) Includes interests in arrears. 2) Loans in arrears for more than 90 days and doubtful loans treated as being in arrears for purposes of provisioning. 3) Calculated according to the Bank of Portugal Instruction 16 / 2004. Loan impairment charges booked in the 1st half 2011 New entries of loans in default (for more than 90 days) in amounted to 79.8 M.€ (0.54% of the loan portfolio, in the 1st half 2011, calculated as the change in the balance annualised terms), which included an extraordinary charge of loans in arrears between the beginning and the end of of 20 M.€. the semester added with write-offs made in the period, amounted to 138.6 M.€, corresponding to 0.94% of the Net credit loss in the period, measured by the loan average loan portfolio, in annualised terms. impairment losses and after deducting recoveries of overdue loans written off, was 70.3 M.€ in the 1st half New entries in the 1st half 2011 of loans in default (for 2011, which corresponded to 0.48% of the performing more than 90 days), after deducting recoveries of loans loan portfolio, in annualised terms. previously written-off, amounted to 129.1 M.€, corresponding to 0.88% of the average loan portfolio, in In the 1st half of 2010, 49.2 M.€ of loan impairment annualised terms. charges were booked and additionally, it was used 18.2 M.€ of the extraordinary impairment charge recorded in 2009, thus making a total of 67.4 M.€, which corresponded to 0.45% of the performing loan portfolio, in annualised terms.

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Credit loss and cost of risk Amounts in M.€ BPI Group Domestic activity International activity (consolidated) Jun.10 Jun.11 Jun.10 Jun.11 Jun.10 Jun.11

Performing loan portfolio (average balance) 1 28 809.4 28 253.3 1 334.2 1 088.3 30 143.7 29 341.5 Change in loans in arrears Increase in loans in arrears (for more than 90 days) adjusted by write-offs 2 20.4 125.4 22.5 13.3 42.9 138.6 as percentage of the performing loan portfolio (average balance)1 [= 2/1] 3 0.14% 0.89% 3.37% 2.44% 0.28% 0.94% – Recovery of loans and interests in arrears written-off 4 8.2 7.7 1.4 1.8 9.6 9.5 = Increase in loans in arrears (for more than 90 days), adjusted by write-offs and deducted of recoveries of loans and interests written-off [= 2-4] 5 12.1 117.6 21.1 11.5 33.2 129.1 as percentage of the performing loan portfolio (average balance)1 [= 5/1] 6 0.08% 0.83% 3.16% 2.11% 0.22% 0.88% Net credit loss Loan impairment charges in the period added with the utilisation of the extraordinary charge booked in 2009 7 65.4 73.2 11.7 6.6 77.1 79.8 as percentage of the performing loan portfolio (average balance)1 [= 7/1] 8 0.45% 0.52% 1.75% 1.21% 0.51% 0.54% – Recovery of loans and interests in arrears written-off 9 8.2 7.7 1.4 1.8 9.6 9.5 = Net credit loss [= 7-9] 10 57.1 65.5 10.3 4.8 67.4 70.3 as percentage of the performing loan portfolio (average balance)1 [= 10/1] 11 0.40% 0.46% 1.54% 0.88% 0.45% 0.48% - Utilisation of the extraordinary charge booked in 2009 12 (18.2) (18.2) = Loan impairment charges in the period, net of recoveries (in the income statement) [= 10+12] 13 38.9 65.5 10.3 4.8 49.2 70.3 as percentage of the performing loan portfolio (average balance)1 [= 13/1] 14 0.27% 0.46% 1.54% 0.88% 0.33% 0.48%

1) In annualised terms. In average terms, total arrear loans and associated falling At the end of June 2011, total loans in arrears stood at due instalments were 84.8% covered by real guarantees 702.8 M.€, while the portion not yet due on these (524.2 M.€) and individual impairment allowances set operations totalled 375.0 M.€. aside for these loans (389.4 M.€).

Loans in arrears and falling due loans At 30 June 2011 Amounts in M.€

Full exposure to credit operations with 4 2 Impairments capital or interests in arrears Real guarantees

Falling due (mortgages and other3) In arrears 5 Total loans Loans with collateral 1 255.8 282.9 538.7 524.2 119.8 Loans without collateral 2 447.0 92.1 539.1 - 269.6 [= 1+2] 3 702.8 375.0 1 077.8 524.2 389.4

2) It was considered the amount owed if lower than the fair value of the collateral received. 3) Other collateral includes pledged deposits and securities. 4) For purposes of determining impairments in housing loans under legal action, pledged property is valued at the amount in the event of execution, which is less than market value. 5) Falling due loans associated with loans in arrears.

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Loans in arrears for more than 90 days amounted to portfolio at the end of June 2011, is lower – 0.9% of the 677.4 M.€ at 30 June 2011, which represented 2.3% of loan portfolio –, given the existence of real (tangible) the gross loan portfolio, while the portion of falling due guarantee and a history of minimal actual loss. loans on these operations amounted to 241.2 M.€. Total loans in arrears for more than 90 days and associated In international operations, accumulated impairments in falling due instalments (918.6 M.€) represented 3.1% of the balance sheet represented 7.7% of the gross loan the gross loan portfolio. The corresponding ratio for the portfolio at the end of June 2011, which corresponded to domestic activity was 2.8%. 143% cover for loans in arrears for more than 90 days.

At the end of June 2011, accumulated impairment The table below presents the ratios for loans in arrears (for allowances in the balance sheet represented 2.1% of the more than 90 days) and for loans in arrears added by gross loan portfolio. falling due loans associated and the impairment allowances in the balance sheet by market segment, as In the domestic activity, accumulated impairments in the well as the contribution of each segment to the gross loan balance sheet represented 1.9% of the gross loan portfolio portfolio. It is important to note that the expected loss on mortgage loans, which accounted for 39% of the consolidated loan

Loans in arrears and impairments accumulated in the balance sheet, by market segment Jun. 10 Jun.11 Ratios by segment Ratios by segment Loan (as % of the gross loan portfolio) (as % of the gross loan portfolio) Loan portfolio Impairments Loans in arrears Impairments Loans in Loans in arrears portfolio Loans in (gross), (accumulated for more than (accumulated arrears for for more than 90 (gross), as arrears for as % of in the 90 days + in the more than days + falling % of total more than total balance falling due balance 90 days due loans 90 days sheet) loans sheet) Domestic activity Corporate banking, institutional 1 banking and project finance 42% 1.3% 1.7% 1.7% 42% 2.2% 2.6% 2.0% Individuals and small businesses banking 2 Mortgage loans 38% 1.9% 2.4% 0.8% 39% 1.8% 2.5% 0.9% 3 Other loans to individuals 4% 2.3% 2.8% 2.9% 4% 2.3% 3.0% 3.0% 4 Loans to small businesses 8% 3.9% 4.6% 4.0% 8% 4.4% 5.5% 4.8% 5 [=Σ 2 to 4] 50% 2.2% 2.8% 1.5% 52% 2.2% 3.0% 1.7% 6 Other 3% 0.2% 0.2% 2.0% 3% 0.5% 0.5% 3.5% 7 [=1+5+6] 95% 1.7% 2.3% 1.6% 96% 2.2% 2.8% 1.9% 8 International activity 5% 3.3% 6.2% 7.0% 4% 5.4% 11.4% 7.7% 9 Total [=7+8] 100% 1.8% 2.4% 1.9% 100% 2.3% 3.1% 2.1%

At the end of the 1st half 2011, BPI held in its portfolio At 30 June 2011, the accumulated amount of impairment loan-foreclosure properties with a gross balance sheet allowances for loan-foreclosure properties stood at 46.7 M.€, value of 122.6 M.€. Of this figure, 51.2 M.€ refers to which corresponded to 38% of their gross balance sheet repossessed properties relating to home loans, and carrying value. Accordingly, the net balance sheet carrying 71.4 M.€ refers to repossessed properties relating to the value of these properties was 75.8 M.€, which compares with recovery of other loans. a market value of the same properties of 140.3 M.€.

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Property repossessed from loans recoverage Amounts in M.€ COUNTRY RISK Dec.07 Dec.08 Dec.09 Dec.10 Jun.11 Management process Housing Country risk is very similar in terms of its respective Gross value 1 13.2 22.5 34.5 43.6 51.2 effects to counterparty risk and is associated with the Impairments 2 5.3 8.5 9.7 14.6 18.0 changes or specific turmoil of a political, economic or Net value 3 7.9 14.1 24.7 29.1 33.2 financial nature in those places where the counterparties Market value 4 15.8 27.9 42.3 55.3 64.7 operate (or, more rarely, in a third country where the Other business transaction takes place), which impede full Gross value 5 38.3 42.5 60.1 70.8 71.4 compliance with the contract, irrespective of the Impairments 6 6.1 8.0 21.7 25.4 28.7 counterparties’ will or capacity. The “country-risk” designation is also used to classify the counterparty risk Net value 7 32.2 34.5 38.4 45.4 42.7 involved in loans to state entities, given the similarity Market value 8 37.8 40.1 59.3 72.8 75.6 between the analysis methods for country risk and those TOTAL for a state’s counterparty risk (sovereign risk). Gross value 9 51.5 65.0 94.6 114.4 122.6 Impairments 10 11.4 16.4 31.5 40.0 46.7 The Board of Directors’ Executive Committee approves the Net value 11 40.1 48.6 63.1 74.4 75.8 list of countries in respect of which country-risk exposure Market value 12 53.6 68.0 101.7 128.1 140.3 is authorised. Eligible countries considered are large-sized emerging markets which embrace market economy In calculating the impairment losses on properties principles, are open to international trade and are of repossessed under foreclosures, Banco BPI uses strategic importance within the framework of international especially prudent criteria, listed as follows. politics.

In properties repossessed under home-loan foreclosures, In addition, the operations defined as eligible are short- the amount of the impairment corresponds to the term financing for external trade, the loans of certain difference, if positive, between the gross amount and the multilateral banks, certain medium-term operations with valuation after taking into account certain discount factors. political risk hedging or which, due to their structuring, are not subject to transfer risk. Discount factor Impairment if Property acquisition date applied to the valuation equals (AD) in years assessment value the gross value AD ≤ 1 year 25% 25% 1 year < AD ≤ 2 years 50% 50% 2 years < AD ≤ 3 years 75% 75% AD > 3 years, rented or no 100% 100% sale possible

In the case of the other properties, the following minimum values are considered for the impairment losses, if the valuations do not lead to the booking of higher impairments.

Age of property (AD) in years Minimum impairment

2 years < AD ≤ 5 years 30% GV AD > 5 years 50% GV No sale possible 100% GV GV = Gross Value.

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Country risk exposure assessment Country risk exposure At 30 June 2011 Amounts in M.€ Personal Tangible Exposure net of Country Rating Gross exposure guarantees guarantees guarantees Countries from Group I Euro zone 1 AAA 1 443.9 3.0 (29.6) 1 417.2 2 AA 1 848.0 4.7 (48.2) 1 804.5 3 A 0.3 0.3 4 BBB 250.0 (0.0) 250.0 5 CCC 281.7 281.7 [Σ 1 to 5] 6 3 823.8 7.7 (77.8) 3 753.6 Other EU countries 7 AAA 419.1 4.6 (11.9) 411.8 8 A 1.0 1.0 9 BBB 0.1 0.1 10 BB 0.6 0.6 [Σ 7 to 10] 11 420.8 4.6 (11.9) 413.5 Switzerland 12 AAA 164.8 13.1 (2.5) 175.4 USA 13 AAA 67.8 (15.1) 52.7 Other 14 12.3 0.1 (0.9) 11.5 Offshores 15 67.5 (0.2) 67.3 Total Countries from Group I [6 + Σ 11 to 15] 16 4 557.0 25.5 (108.4) 4 474.1 Countries from Group II Brazil Trade Finance 17 13.4 13.4 Public debt 18 Other 19 44.9 (1.2) 43.7 [Σ 17 to 19] 20 BBB 58.3 (1.2) 57.1 Angola Trade Finance 21 31.4 31.4 Public debt 22 Other 23 296.8 (49.9) (12.7) 234.3 [Σ 21 to 23] 24 BB 328.2 (49.9) (12.7) 265.7 Russia 25 BBB 38.9 38.9 Kazakhstan Trade Finance 26 2.4 2.4 Other 27 7.7 7.7 [26 + 27) 28 BBB 10.1 10.1 Turkey 29 BB 20.8 20.8 Mexico 30 BBB 57.6 (0.2) 57.4 Mozambique 31 B 23.6 (0.4) 23.2 Venezuela 32 B 20.6 (6.2) 14.4 Cape Verde 33 B 49.3 (44.8) 4.5 South Africa 34 BBB 13.3 (5.7) 7.6 Other 35 7.9 (1.5) 6.4 Total Countries from Group II [20+24+25+ Σ 28 to 35) 36 628.7 (94.7) (27.9) 506.1 Subsidiaries Angola (BFA) 37 215.0 215.0 Mozambique (BCI) 38 26.6 26.6 Total subsidiaries [37+38) 39 241.6 241.6 Total [16+36+39] 40 5 427.2 (69.2) (136.3) 5 221.7 Note: Group I – General authorisation. Includes operations with banks domiciled in offshore centres, provided that these banks are 100% owned or are the branches of authorised counterparties whose registered head offices are domiciled in Group I countries. Group II – Remaining Countries / Operations. Gross exposure includes on-balance sheet and off-balance sheet operations (current exposure of derivatives). Total value of personal guarantees is not equal to zero, since this table is not including the figures for Portugal.

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1 Individual evaluation of each country’s risk is performed Market risk in trading books Amounts in M.€ with recourse to external ratings, external studies (IIF and Jun. 10 Jun. 11 Average Maximu Average Maximu others) and internal reports prepared by the Finance VaR m VaR VaR m VaR Division. Only warranting mention are the exposures to Interest rate risk 0.3 0.8 0.3 0.9 Greek public debt (265 M.€), and to Irish public debt Currency risk 0.4 0.9 0.3 1.4 (236 M.€). Equities risk 0.4 1.5 0.3 1.5

The exposure to country / sovereign risk via trading MARKET RISKS – STRUCTURAL INTEREST RATE RISK activity is included in the section dealing with market risks – trading. POSITION Management process MARKET RISKS – TRADING POSITIONS The risk management of structural interest rate positions Management process (excluding trading activity) of up to one year has been delegated to the Finance Division within limits fixed by Market or price risk (interest rates, foreign exchange rates, the Global Risks Executive Committee. equity prices, commodity prices and other) is defined as the possibility of incurring losses due to unexpected Long-term structural positions are managed in accordance variations in the price of financial instruments or with the rules laid down by the Global Risks Executive operations. Committee.

The trading positions are managed autonomously by Structural interest rate risk exposure assessment traders and kept within the exposure limits by market or The assessment of treasury positions (short term) and products, fixed and revised periodically. There are structural risk positions relating to interest rates (long different exposure limits including overall VaR limits set term) is based on gap schedules (currency gaps, repricing by the Global Risks Executive Committee and later gaps, duration gaps). In addition, several stress tests are distributed autonomously amongst the various books, by conducted (parallel shift of the yield curves, slope of the the divisions involved in trading activities. In addition, curves, spread / basis risk). stop-loss limits are defined.

At 30 June 2011, the repricing gap (of interest rates) As a general rule, the Bank abstains from any open accumulated up to 1 year was 5.5 thousand M.€. positions in options sales.

Interest rate risk Market risk exposure assessment – trading Structural position, at 30 June of 20112 Amounts in M.€ In evaluating exposure under trading operations, this 1 to 2 2 to 5 5 to 7 7 to 15 > 15 1 year function is carried out on a daily basis which calculates years years years years years the VaR – Value at Risk – according to standardised Accumulated 5 549 5 716 6 052 6 184 6 282 6 264 assumptions, which as a rule are consistent with the BIS’s Gap set of recommendations. Exposure arising from options is controlled by recourse to specific models. The information The Bank has positioned itself for an eventual rise in generated by the risk evaluation and control system is interest rates in the domestic activity and, therefore, is available online to authorised users. structurally exposed to the risk of a fall in interest rates, with a loss in net interest income of 29.1 M.€ associated The VaR figures found show that the trading exposure with a stress test change in interest rates of 100 basis levels are not material. points.

1) Maximum potential loss with a 99% confidence level resulting from an adverse movement in prices, indices and interest rates over a period of two weeks, taking into consideration in the calculation of the overall risk the effect of the correlation of returns. A normal distribution of returns is assumed. Maximum VaR based on daily calculations. 2 ) Customers sight deposits were considered to be not sensitive to interest rates.

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MARKET RISKS – STRUCTURAL POSITION OF Risks Executive Committee. “Hedging” or “non hedging” EXCHANGE RATE RISK are options to be decided upon depending on the Management process prospects surrounding the direction of foreign exchange The management of currency risk on structural positions rates and the risk level involved. resulting from business dealings with the Bank’s Customers is delegated to the Finance Division, within the Evaluation of the exposure to structural foreign exchange operating bands set at senior level. As a general rule, the rate risk Bank seeks substantial hedging of these currency In the currency arena, the position in kwanza reaches a positions. significant value due to the participating interest in BFA’s capital. The positions in the remaining currencies are of The structural currency positions resulting from minor significance. A stress test to this structural position investments or participating interests are managed in (depreciation of between 20% and 30%) reveals a capital accordance with the directives laid down by the Global at risk of 66 M.€.

Foreign exchange rate risk Structural position, at 30 June of 2011 Amounts in M.€ Assets and liabilities by currency Type of financial instrument EUR USD AKZ Other Total Assets Cash and deposits at central banks 545 444 360 2 1 351 Amounts owed by credit institutions repayable on demand 264 44 14 28 349 Financial assets held for dealing and at fair value through profit and loss1 804 141 85 4 1 035

Financial assets available for sale2 6 263 1 039 755 - 8 058 Loans and advances to credit institutions 867 354 247 14 1 482 Loans and advances to Customers 27 761 929 266 165 29 121 Investments held to maturity 1 086 - - - 1 086 Hedging derivatives 258 6 - 6 271 Other assets 53 158 3 - 214 37 901 3 115 1 731 220 42 966 Liabilities Resources of central banks 1 197 73 - - 1 270 1 Financial liabilities held for dealing 89 42 - 1 132 Credit institutions' resources 2 616 275 - 3 2 895 Clients' resources and other loans 18 796 3 545 1 395 163 23 899 Debts evidenced by certificates 7 133 272 - 61 7 465 Financial liabilities associated to transferred assets 1 498 - - - 1 498 Hedging derivatives 397 18 - - 415 Provisions 92 27 1 - 120 Technical provisions 2 777 - - - 2 777 Other subordinated loans 342 - - - 342 Participating bonds 6 - - - 6 34 944 4 253 1 396 228 40 820 Forward currency operations1 (1 228) 1 214 (14) 10 (18) Structural position1 (22) 235 (2) Stress test3 (4) 71 (0) 66 1) Positions excluded from the calculus of the structural position. 2) Excludes revaluation reserves. 3) Stress test on the currency structural position (excluding assets and liabilities held for dealing and at fair value through profit and loss). The stress test considers the impact of a 20% positive change in foreign exchange rates, except with regard to the Kwanza, in which case a 30% change was taken into account.

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LIQUIDITY RISK ƒ Increase in the portfolio of assets eligible for Management process Eurosystem funding. Liquidity risk is monitored in terms of its two components: i) in the tradability of the different assets; ii) in its overall Short-term gap context, whereby liquidity risk is defined at grassroots During the first six months of 2011, BPI’s short-term level as the (in)ability to monitor the asset’s growth and to borrowing gap (domestic operations) fell by 1 257 M.€. satisfy treasury requirements without incurring abnormal losses. This decline was a reflection of the balance sheet deleveraging movement that the Bank has been In terms of the different assets, the various managers implementing since the end of 2010 and which translated keep a constant watch over the transaction levels of the itself into a decrease in the loan portfolio and the various instruments in accordance with a variety of selective sale of part of the bond portfolio. Also worth indicators (BPI’s market share, number of days to unwind mentioning the increase in customer resources. positions, size and volatility of spreads, etc.), although always observing the operating limits set for each market. Short term liquidity position Amounts in M.€ Dec. 10 Jun. 11 At global level, responsibility for liquidity risk- Cash and short term lending Cash and deposits at the Bank of management strategy is vested in the Executive 1 80 144 Committee for Market Risks and the Group’s Finance Portugal 1 Division and is founded on the constant vigilance of the Short term lending 2 677 562 [= 1 + 2] 3 757 706 exposure indicators. There are no predefined limits but Short term borrowing merely guidelines relating to these indicators. Money market 4 (875) (947)

Repos 5 (3 306) (1 798) Liquidity and funding Euro Commercial Paper (ECP) 6 (1) (128) During the first half of 2011, liquidity management at [= Σ 4 to 6] 7 (4 181) (2 873) BPI remained affected by the Republic’s deteriorating risk Funding from the ECB 8 (1 000) (1 000) perception amongst international investors, which had as [= 7 + 8] 9 (5 181) (3 873) a consequence the greater difficulty in accessing Short term gap [= 3 + 9] 10 (4 424) (3 167) financing, namely, at the shorter end of the spectrum.

The funding gap has been carried out with recourse to Indeed, the cut in the Republic’s rating from A3/A- to repos and the ECB. As regards repos, the fact that Baa1/BBB between March and April had as an immediate Portuguese public debt is no longer accepted as collateral consequence the forfeiting of acceptance of Portuguese referred to earlier explains the drop observed between public debt as collateral for short-term funding. December and June. LCH.Clearnet, the main European clearing house, progressively increased the haircuts for repo operations on As concerns funding from the Eurosystem (ECB), the Portuguese State bonds (they were 80% at the beginning figures at 30 June 2011 remain at the same level as of July). those at 31 December 2010. BPI has only resorted to this funding source after having exhausted all the other In this context, BPI continued to maintain liquidity alternatives. management as one of its prime priorities, which was reflected in the following aspects: Already at the end of June, BPI carried out an operation for the repurchase of medium and long-term debt issued ƒ Permanent and detailed monitoring of the short-term by it; this operation’s objective was to benefit from the borrowing gap; enormous discount at which the Bank’s debt is traded on ƒ Stringent utilisation of ECB funding; the secondary market. ƒ Focus on customer resources, recognised as being the

most important source of funding; 1) Excludes cash reserves.

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Customer resources In terms of the composition of short-term borrowing, the Customer resources have in recent years been the decrease in assets permitted accommodating the loss of strategic source of funding. Besides deposits, BPI has funding via repos without there being any changes in the regularly used bond issues as a form of offering its recourse to the ECB. customers a long-term savings instrument. The bonds which the Bank issues to the network are in the majority of cases at fixed rate, although structured bonds are also offered based on stock market or other indices.

On-balance sheet Customers resources Amounts in M.€ Domestic activity Consolidated Dec.10 Jun.11 Δ% Dec.10 Jun.11 Δ% Customer deposits 1 18 033 18 876 4.7% 22 209 22 889 3.1% Bonds and other products placed with 2 4 339 4 037 (7.0%) 4 339 4 037 (7.0%) Customers [= 1+2] 3 22 371 22 913 2.4% 26 548 26 926 1.4% Insurance capitalisation 4 3 803 3 499 (8.0%) 3 803 3 499 (8.0%) Total [= 3+4] 5 26 174 26 412 0.9% 30 350 30 425 0.2% Gross loan portfolio 6 29 341 28 625 (2.4%) 30 609 29 711 (2.9%) Loan to Customer 7 131% 125% 115% 110% resources ratio [= 6 / 3]

During 2011, the contribution of deposits and bonds transformation ratio was situated at 110% at the end of placed with customers to the funding of BPI’s domestic the half year. activity increased by some 541 M.€. The degree of transformation of customer resources (deposits and bonds Total customer resources on the balance sheet, which also issues placed with customers) into loans was situated at include capitalisation insurance, totalled 26 412 M.€ in 125% at the end of June 2011. domestic activity and 30 425 M.€ in consolidated terms.

In consolidated terms, the increase in deposits and bonds placed with customers was 378 M.€ while the

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Portfolio of assets eligible for Eurosystem operations OPERATIONAL RISK At 30 June 2011, BPI had available a portfolio of assets Management process eligible for the Eurosystem of 4 840 M.€. (figures net of Operational risk is defined as being the risk of financial value gains and haircuts). losses resulting from human failures, the inadequate or negligent application of internal procedures, failures in the technological infrastructure or incidents stemming Assets eligible for funding at the ECB Amounts in M.€ from external causes. This definition excludes strategic 31 errors or reputational risks. Dec.10 30.Jun.11 Assets eligible for funding at the ECB Bonds (1) 7 058 6 900 Operational risk is an integral and inevitable part of the Banking loans (1) 428 147 business given that it is inherent in the processes themselves. Accordingly, the objective of operational risk Assets eligible for funding at the ECB 7 486 7 047 (2) management where removing it is completely impossible (-) Amount used 3 187 2 207 is to keep it within acceptable levels, ensuring a high (=) Amount still available for refinancing 4 299 4 840 1) Net of haircuts. degree of effectiveness of the processes and the 2) Repos and ECB funding. maximum security for customers.

During the first quarter, a new loan securitisation To this end, the BPI Group’s management model provides operation was carried out – PME – Douro SME 2, with a for the identification and evaluation of operational risk in face value of 3 500 M.€. Already in June, preparatory all areas of activity, classifying them according to the type work commenced for a new issue of mortgage bonds of risk defined by the Basle Committee. In addition to this which should increase the eligible portfolio by around function, each Division is responsible for the 400 M.€. identification and reporting of operational risk occurrences with a real or potential impact on the Group’s The change in the value of the eligible portfolio during the results. Based on the information gathered, mitigation first half of the year reflects, on the positive side, the measures are prescribed with the objective of reducing aforementioned securitisation and the Portuguese public the exposure to operational risk. debt which, in spite of not being accepted in the repo market, is eligible as collateral at the ECB, and on the There is also in place a business continuity plan anchored negative side, the value losses and eligibility losses to the contingency programmes for the most crucial resulting from the successive Republic and banks’ ratings central information systems. In the case of necessity downgrades. caused by equipment breakdown or by a major incident, it is possible to recoup these systems on site or at an Trend in assets eligible alternative location after a period of time that varies with for ECB refinancing Amounts in M.€ the type of risk. Also guaranteed - even under extreme Portfolio of eligible assets at 31 Dec.10 7 486 conditions - is minimum functioning under an exceptional Securitisation operations (+) 1 098 situation. The same method is employed in the case of Debt redemption (-) 63 the main telecommunications equipment. The voice and Purchase and sale (-) 58 data services at the BPI Group’s main buildings are Change in market value and haircuts (-) 1 058 guaranteed through the recourse to alternative equipment, Loss in eligibility (-) 356 in accordance with formal disaster-recovery processes. Subtotal (-) 438 The BPI Group has also identified alternative procedures Portfolio of eligible assets at 30 Jun.11 7 047 for each one of its most critical operations. A data base is on stand-by which identifies all these procedures, thereby enabling these to be activated at any point in time. These disaster-recovery schemes are tested and subjected to periodic reviews.

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Finally, the BPI Group annually reviews the extent of its LEGAL RISKS insurance policies cover adjusting these to the reality of In a specific sphere of operational risks – legal risks – its functioning and the Bank’s situation in the market, there exists the possibility of incurring unexpected losses endeavouring to offload in an appropriate manner a part arising from shortcomings in the analysis of the legal of operational risk. context applicable to the Bank’s and the Group’s operations, namely that which is applicable at any Evaluation of exposure to operational risk moment to the legal positions which fall within or which Operational risk occurrences are classified into seven are or could be expected to fall within the legal sphere of types of risk: internal fraud, external fraud, practices in the Bank and the companies making up its Group. the domain of employment and security at the workplace, customers, products and commercial practices, damages In the legal risks arena, special attention is paid to: to physical assets, disruption of commercial activities and system failures and Execution, Delivery and Management ƒ The analysis of the applicable legal and regulatory of Processes. context and of the respective evolution. Its compliance

and the adjustment of the Bank’s and the Group’s In terms of frequency, the number of operational risk position thereto; occurrences up till 30 June 2011 (1 270 occurrences) ƒ Analysis of the prospects of changing the legal context was slightly lower than in the period to 30 June 2010 (1 343 occurrences) and presented the following and of its consequences for the Bank and the Group; distribution: ƒ the drafting of the contracts to be entered into by the Bank and the Group companies with a view to ensuring Losses associated with the occurrence of operational risk their legal conformity and to identify and allocate the in the 1st half 2011 relevant risks in accordance with the business options Breakdown by frequency and by loss amount and safeguarding the defined interests of the Bank and Risk type % loss amount % frequency of the Group companies; Execution, delivery and ƒ interpretation of the contractual provisions and their 1 58.9% 59.4% management of processes undertaking on the part of counterparties; External fraud 2 35.0% 27.1% ƒ analysis of products, their legal context; Internal fraud 3 1.2% 0.5% ƒ centralisation of communications to the supervisory Other 4 4.9% 13.0% authorities and the drawing up of the respective Total [= Σ 1 to 4] 5 100.0% 100.0% processes to be submitted to the aforesaid entities; ƒ the identification / proposed measures capable of The losses associated with these events amounted to minimising any eventual litigation risks; 1.2 M.€. ƒ tracking and monitoring of legal, administrative or

disciplinary proceedings in which the Bank and the In 2011, according to the basic method for the analysis Group companies are involved; of operational risks, the capital at risk at BPI was situated at 170.3 M.€. ƒ analysis and monitoring of the legal, regulatory and recommendatory discipline governing the business affairs of the Group companies.

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ADOPTION OF THE RECOMMENDATIONS OF THE FINANCIAL STABILITY FORUM AND OF THE COMMITTEE OF EUROPEAN BANKING SUPERVISORS RELATING TO THE TRANSPARENCY OF INFORMATION AND VALUATION OF ASSETS

The Financial Stability Forum (FSF), in the report “Report of the unbiased information which is important for evaluating their Financial Stability Forum on Enhancing Market and Institutional listed shares constitutes a concern of paramount importance at Resilience”, of 11 April 2008, and the Committee of European BPI. Banking Supervisors (CEBS), in the reports “CEBS report on banks' transparency on activities and products affected by the Throughout the Directors’ Report and the financial statements recent market turmoil” and “Report on issues regarding the and respective notes, BPI describes in detail the Group’s valuation of complex and illiquid financial instruments”, both of business and governance models, the major risks inherent in the 18 June 2008, issued a series of recommendations relating to Group’s operations, the processes of risk analysis and the transparency and disclosure of information. management and the division of responsibilities amongst the various bodies, makes a detailed analysis of the activity carried st The Bank of Portugal, through the circular-letters 97 / 08 / out and the results obtained in the 1 half 2011, and the DSBDR of 3 December 2008 and 58 / 09 / DSBDR of 5 August impacts of the international financial crisis on business, results 2009, has recommended that, in the accounting reporting, a and capital, and it describes the accounting policies and separate chapter or a specific annex is prepared as part of the valuation methods of financial assets and presents qualitative Annual and Interim Reports, designed to respond to the and quantitative information concerning the exposures to recommendations of the CEBS and of the FSF, taking into financial assets. account the principle of proportionality and following the questionnaire presented as an annex to the Bank of Portugal’s In order to comply with the Bank of Portugal’s recommendation, circular-letter 46 / 08 / DSBDR. the present chapter provides a response to the aforesaid questionnaire, using cross-references to the more detailed st BPI attributes great importance to the maintenance of a frank information presented in the Report and Accounts for the 1 half and transparent relationship with shareholders, investors, 2011. financial analysts, authorities and other capital market players. The dissemination of accurate, timely, regular, clear and

I. BUSINESS MODEL (iii) reducing and controlling risks; and (iv) strengthening the 1. Description of the business model relationship with Customers. In 2009 it added to this set of In the chapter of the Directors’ Report dealing with the financial priorities (v) improvement in profitability, inevitably affected and business structure, a detailed description is presented of the by the impact of the international crisis. Group’s financial structure and the main business areas. The disciplined execution of this programme permitted the The BPI Group’s activity is centred on the commercial banking Bank to weather this whole period with tranquillity and business, predominantly focused on the attraction of Customer security, with a sound financial base, stable risk levels and a resources and on the granting of loans to individuals, companies comfortable liquidity situation. and institutions, in Portugal through Banco BPI, and in Angola through BFA. The Group also carries on investment banking DR – Presentation of the report, page. 5; Financial review, activities - Equities, Corporate Finance and Private Banking -, pages 40 and Risk management, page 69. asset management – unit trust fund management, pension funds and capitalisation insurance – and private equity. 3. Description of the importance of the operations carried out and the respective contribution to business DR – Financial and business structure, page 9. In the chapters “Domestic commercial banking”, “Bancassurance”, “Asset Management”, “Investment 2. Description of strategies and objectives Banking”, “Private Equity” and “International commercial st Management’s strategic priorities and an evaluation of the banking “, the activity carried out in the 1 half 2011 is Group’s performance and results in 1st half 2011 are presented described in detail for each business area. In the “Financial in the “Introduction to the Report” and in the chapters entitled review” chapter, and in the notes to the financial statements, “Financial review” and “Risk management”. in Note “3 – Segment Reporting”, an analysis is made of each business area’s contribution to the BPI Group’s net With effect from the third quarter of 2007, BPI implemented a profit, the balance sheet and investments, as well as of the programme designed to respond to the immediate challenges capital allocation to each one of these areas. posed by the international financial crisis: (i) defence and reinforcement of capital; (ii) ensuring comfortable liquidity levels,

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DR – Domestic commercial banking, page 22; Bancassurance, 7. Description of major risk-management practices in page 29; Asset Management, page 30; Investment banking 33; operations Private Equity, page 36; International commercial banking, page In the “Risk management” chapter, a detailed description is 37; Financial review, page 40; given highlighting the major risks attaching to the Group’s NFS – 3 Segment reporting, page 119. operations, risk analysis and management and the division of the responsibilities amongst the various bodies. 4. Description of the type of activities undertaken 5. Description of the objective and extent of the institution’s The note to the financial statements, “4.48 – Financial risks”, involvement relating to each activity undertaken. presents the fair value of the financial instruments and the In the chapter dealing with financial and business structure, a valuation of the risk exposure resulting from financial instruments detailed description is presented of the Group’s financial – credit risk, liquidity risk , market risk (interest-rate risk, equities structure and the main business areas. In the chapters “Domestic risk and currency risk). commercial banking”, “Bancassurance”, “Asset Management”, “Investment Banking”, “Private Equity” and “International DR – Risk management, page 69; st commercial banking “, the activity carried out in the 1 half NFS – 4.48 Financial risks, page 194 and following 2011 is described for each business area. III. IMPACT OF THE PERIOD OF FINANCIAL The importance to BPI of the capital markets stems primarily TURBULENCE ON EARNINGS from the recourse to it for raising medium and long-term funding. 8. Qualitative and quantitative description of earnings The BPI Group also resorts to the capital market for trading in In the “Financial review” chapter, a qualitative and quantitative interest-rate instruments and equities and, over the past few review is presented dealing with the Group’s operations and years, has maintained a portfolio of investments in bonds and results and the impacts of the economic and markets background participating interests as a form of diversifying the bank’s sources to operations in the 1st half 2011. of income. The state of the capital market is also crucial for asset management and investment banking business. DR – Financial review, page 40.

The chapter “Background to operations” reviews impacts of the 9. Breakdown of the write-downs/losses by types of products international financial crisis in the functioning of capital markets and instruments affected by the period of turbulence and the “Risk management” and “Financial review” chapters The notes to the financial statements “4.5 Financial assets describe BPI’s activities in the interbank and medium and long- available for sale” and “4.7 Loans and advances to Customers”, term capital markets in the 1st half 2011, as well as the present details of impairment and unrealised losses, security by behaviour of the financial assets and investments portfolios. security, and in note “4.48 – Financial risks” additional information on sovereign debt exposure is given. DR – Domestic commercial banking, page 22; Bancassurance, page 29; Asset Management, page 30; Investment banking 33; The notes to the financial statements “4.20 Provisions and Private Equity, page 36; International commercial banking, page impairment losses” and “4.40 Net income on financial 37; Background to operations, page 13; Financial review, page operations”, present details of the losses recognised in 40; Risk management, page 69. consolidated net profit, resulting from the loans and securities portfolios held by the BPI Group. II. RISK AND RISK MANAGEMENT 6. Description of the nature and extent of the risks NFS – 4.5 Financial assets available for sale, page 132; 4.7 Loans incurred in relation to the activities carried out and the and advances to Customers, page 139; 4.20 Provisions and instruments utilised impairment losses, page 163; 4.40 Net income on financial In the “Risk Management” chapter and in the notes to the operations, page 185 and 4.48 Financial risks, page 194. financial statements, in Note “4.48 – Financial risks”, a description is given of the major risks attaching to the 10. Description of the reasons and factors responsible for the Group’s operations and the financial instruments used by it. impact suffered In the “Financial review” chapter, a qualitative and quantitative DR – Risk management, page 69; review is presented showing the Group’s operational and financial NFS – 4.48 Financial risks, page 194 and following. performance and the impacts of the international financial crisis.

Banco BPI | 1st half 2011 Report 88

In the “Background to operations” chapter, a description is given unexpected changes in the price of instruments or operations and of the economic environment behind the domestic and risk indicators based on VaR and stress test models. international operations (Angola and Mozambique), the behaviour of the financial markets and the impact of the international DR– Risk management, page 69; financial crisis on the economies and markets. NFS – 4.48 Financial risks, page 194 and following.

DR – Financial review, page 40; Background to operations, 15. Disclosure of the impact that the trend in spreads page 13. associated with the institution’s own liabilities had on earnings 11. Comparison of the i) impacts between (relevant) periods An analysis is presented in the “Financial review” chapter of and ii) financial statements before and after the turbulent the trend in remunerated asset and liability spreads and their period impact on the Group’s earnings. A description of the effects of the international financial crisis st and a comparative review of the 1 half 2011 financial The Bank did not revalue its liabilities. statements relative to the same period of the previous year are

presented in the “Financial review” chapter. DR – Financial review, page 57 and 67. DR – Financial review, page 40. IV. EXPOSURE TYPES AND LEVELS AFFECTED BY 12. Breakdown of the write-downs between realised and THE TURBULENT PERIOD unrealised amounts 16. Nominal value (or amortised cost) and fair value of The impact on the Group’s results of the drop in the value of exposures the equities and bond portfolios is described in the In the note to the financial statements “4.48 Financial risks”, “Financial review” chapter, in “Profits from financial the book value is compared with the estimated fair value for most operations”, in “Impairments in the year” and in the notes to of the BPI Group’s assets and liabilities at 30 June 2011. the financial statements “4.40 Net income on financial operations” and “4.20 Provisions and impairment losses”. The note to the financial statements “4.5 Financial assets available for sale”, presents details of the nominal value, book In the notes to the financial statements “4.5 Financial value and unrealised gains and losses recorded in the fair value assets available for sale” and “4.7 Loans and advances to reserve, security by security, at that date and in note “4.48 – Customers”, details are presented of the impairment losses Financial risks” additional information on sovereign debt and unrealised losses, security by security, at 30 June 2011, exposure is given. and in note “4.48 – Financial risks” additional information

on sovereign debt exposure is given. NFS – 4.48 Financial risks, page 194 and following; 4.5 Financial

assets available for sale, page 132. DR – Financial review, pages 40;

NFS – 4.5 Financial assets available for sale, page 132; 4.7 17. Information about credit risk mitigation and respective Loans and advances to Customers, page 139; 4.40 Net income effects on existing exposures on financial operations, page 185; 4.20 Provisions and In the “Risk management” chapter, a description is presented of impairment losses, page 163 and 4.48 Financial risks, page the impact of credit risk mitigation on credit operations with 194. Customers and on derivative operations.

13. Description of the influence of the financial turbulence on the behaviour of Banco BPI shares DR – Risk management, page 71. In the chapter “11. Banco BPI Shares”, a description is presented of the stock exchange behaviour of Banco BPI 18. Detailed disclosure of exposures In the Risk Management chapter and in the note to the financial shares and of the influence that the performance of the statements – “4.48 Financial risks” - an analysis is presented of equity markets at global level had on the share’s behaviour. the quality of the loan and securities portfolios based on rating DR –Banco BPI shares, page 92. systems and internal scoring and on the recourse to external ratings. The information is complemented by the analysis of the 14. Disclosure of the maximum loss risk default levels, the existence of tangible guarantees and cover by In the “Risk management” chapter and in the note to the impairment allowances. financial statements “4.48 Financial risks”, information is presented regarding the maximum losses resulting from the

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The exposure to country risk is described in a separate section of BPI’s investments in structured products (namely SIVs and ABS) the “Risk management” chapter. were included in the debt securities portfolio and in available-for- sale assets (notes to the financial statements 2.2.3 and 2.2.4). In the notes to the financial statements “4.5 Financial assets available for sale” and Note “4.7 Loans and advances to The debt securitisation operations originated by BPI are Customers”, details are presented of the exposures to available- recognised in financial liabilities associated with transferred for-sale securities and securitised loans, security by security assets (notes to the financial statements 2.2.4 and 4.19). (including structured products, namely SIV and ABS) and in note “4.48 – Financial risks” additional information on sovereign debt NFS – 2.2 Financial assets and liabilities, page 106; 2.2.3. Financial exposure is given. assets available for sale, page 107; 2.2.4 Loans and other receivables, page 108; 4.19 Financial liabilities relating to DR – Risk management, page 69; transferred assets, page 160. NFS – 4.48 Financial risks, page 194; 4.5 Financial assets available for sale, page 132; and 4.7 Loans and advances to 23. Consolidation of Special Purpose Entities (SPE) and Customers, page 139. other vehicles and their reconciliation with the structured products affected by the turbulent period 19. Movements which occurred in the exposures between the The vehicles through which Banco BPI’s debt securitisation relevant reporting periods and the underlying reasons for operations are effected are recorded in the consolidated financial these variations (sales, write-downs, purchases, etc.) statements according to the BPI Group’s continued involvement in these operations, determined on the basis of the percentage of In the “Financial review” chapter the principal changes occurring the equity interest held of the respective vehicles. in the financial assets and investments portfolio are described.

24. Detailed disclosure of the fair value of financial DR – Financial review, page 54 and 66. instruments

The note to the financial statements “4.48 Financial risks” 20. Explanations about exposures which have not been presents details of the estimated fair value for virtually all of the consolidated (or which have been recognised during the BPI Group’s financial assets and liabilities at 30 June 2011. crisis) and the associated reasons

The BPI Group consolidates all the exposures in which it has NFS – 4.48 Financial risks, page 194. significant control or influence, as envisaged in IAS 27, 28 and

IFRS 3. No changes were made to the BPI Group’s consolidation 25. Description of the modelling techniques utilised for scope as a consequence of the turbulent period in the financial valuing financial instruments markets. The notes to the financial statements “2.2. Financial assets and liabilities” and “4.48 Financial risks” describe the techniques 21. Exposure to “mono-line” insurers and quality of insured utilised in valuing financial instruments. assets At 30 June 2011, BPI’s exposure to mono-line insurers was NFS – 2.2 Financial assets and liabilities, page 106 and 4.48 totally indirect and stemmed from the existence of portfolio Financial risks, page 194. positions, the interest and principal of which were unconditionally guaranteed by this type of company. There were VI. OTHER IMPORTANT DISCLOSURE ASPECTS no losses worth noting, given that none of these securities were in default. At the end of June 2011, BPI exposure to mono-line 26. Description of disclosure policies and principles which are used in financial reporting insurers amounted to 19.7 M.€ (book value). In the BPI Group’s 2010 Corporate Governance Report, in point

“10. Communication with the market”, detailed information is V. ACCOUNTING AND VALUATION POLICIES provided regarding the principles of financial information 22. Classification of transactions and structured products for disclosure and the communication channels used, the Investor accounting purposes and the respective accounting treatment Relations Division’s terms of reference and the activity carried The note to the financial statements “2.2 Financial assets and out in the year. liabilities”, describes the accounting criteria used in the recognition and valuation of financial assets and liabilities are CGovR 2010 – 10. Communication with the market, page 333. described.

DR - Directors’ Report; NFS – Notes to the financial statements; CGovR 2010 - BPI Group’s 2010 Corporate Governance Report.

Banco BPI | 1st half 2011 Report 90 Rating

During the 1st half of 2011, the rating agencies S&P, March and July 2011, Moody’s cut Portuguese banks’ Moody’s and Fitch made successive downward revisions of ratings. BPI’s long-term rating dropped from A2 to Baa3, the Republic’s rating, with a concomitant impact on banks’ while the short-term rating declined from P-1 to P-3. The ratings which were also downgraded in the period. financial strength indicator (Bank Financial Strength Rating) was altered from C- to D+. Banks’ ratings (including BPI) are After announcing the downgrading of the Portuguese under revision for possible downgrade. Republic’s long-term rating from A- to BBB-, Standard & Poor’s cut the ratings of Portuguese financial institutions, Fitch Ratings also cut the rating classifications of the with BPI’s long-term rating being reduced from A- to BBB- Republic and Portuguese banks during the course of the 1st and the short-term rating from A-2 to A-3, with negative half of 2011. The Republic’s rating was reduced from A+ to outlook. BBB- and consequently BPI’s long and short-term ratings descended from A- to BBB- and from F-2 to F-3, Also in the wake of the downward revision of the Republic’s respectively. The Republic’s and Portuguese banks’ ratings ratings from A1 to Ba2 in 3 consecutive revisions, between are under revision for possible downgrade.

Fitch Ratings Moody's Standard & Poor's

Banco BPI1 Banco BPI3 Banco BPI

Credit rating (LT / ST) BBB- / F3 Bank deposits (LT / ST) Baa3 / P3 Credit rating (LT / ST) BBB- / A3 Outlook Under revision Outlook Under revision Outlook Negative Individual C/D (bb-) Bank financial strength (BFSR) D+ Individual bbb-

Certificate of deposit (LT / ST) BBB- / A-3 Senior collateralised debt Senior collateralised debt 2 ƒ Mortgage A+ ƒ Mortgage A- Senior collateralised debt 4 ƒ Public sector BBB Senior non-collateralised debt (LT / ST)BBB- / F3 ƒ Mortgage A3 Senior non-collateralised debt BBB- Subordinated debt BB+ ƒ Public sector A3 Subordinated debt BB+ Commercial paper F3 Senior non-collateralised debt Baa3 Junior subordinated BB- Preference stock BB- Subordinated debt Ba1 Commercial paper A-3 Junior subordinated Ba2 Short term debt A-3 Other short term debt P-3 Preference stock BB- Preference stock Ba3 Sovereign rating – Portuguese Republic Long term / Short term BBB- / F3 Sovereign rating – Portuguese Republic Sovereign rating – Portuguese Republic Outlook Under revision Long term / Short term Ba2 / NP Long term / Short term BBB- / A3 Outlook Negative Outlook Negative

1) Placed under revision for possible downgrade on the 5th April 2011. 2) Placed under revision for possible downgrade on the 6th April 2011 3) Placed under revision for possible downgrade on the 15th July 2011. 4) Placed under revision for possible downgrade on the 15th July 2011.

Banco BPI | 1st half 2011 Report 91 Banco BPI shares

STOCK MARKET PERFORMANCE In April Portugal formalised the request for international Banco BPI shares principal indicators financial assistance, a move which unavoidably led to a 1st half 2nd half 1st half substantial increase in its cost of securing financing on 2010 2010 2011 the capital markets. This can be attributed to the Stock exchange price of Banco 1 escalating concerns about the sustainability of the BPI shares (€) public accounts and Portugal’s external debt in a Highest price 2.124 1.627 1.340 backdrop of low economic growth -, it being the third Average price 1.623 1.429 1.161 Lowest price 1.302 1.255 0.921 peripheral European country (after Greece and Ireland) Closing price 1.392 1.259 1.015 to do so. Change in the stock price and in

the reference indexes Accordingly, worries about the negative effects on the Banco BPI (27.8%) (9.5%) (19.4%) profitability of Portuguese banks of the application of Comparable Iberian Banks2 (21.0%) (10.6%) (8.1%) budgetary-adjustment measures and the uncertainty Dow Jones Europe STOXX Banks (12.8%) 1.4% (5.5%) surrounding the measures directed at the banking sector PSI-20 (16.5%) 7.4% (3.5%) as part of the international bailout package intensified, Dow Jones STOXX 600 (4.2%) 13.4% (1.1%) coupled with the impact on banks’ balance sheets of the Data per share (€)1 involvement of private investors in the new aid package Net profit 0.10 0.09 0.08 to Greece. Cash-flow after taxation 0.20 0.19 0.22 Book value 1.46 1.47 1.14 Against this background, Banco BPI shares closed the Weighted average no. of shares (in 981.8 982.5 982.2 half year at 1.015 euro, which corresponds to a 19% millions)1 decline over the six-month period. Market capitalisation Market capitalisation (M.€) 1 378 1 247 1 005 1 In the same period, comparable Iberian banks present Liquidity an average depreciation of 8%, while the European Trading volume in the 279 173 171 banking sector, represented by the DJ Europe Stoxx semester(M.€) Daily average trading volume Banks index, posted a negative change of 5.5%. 2.2 1.3 1.3 (M.€) Daily average trading quantity (x 1 365 919 1 157 thousand) BANCO BPI SHARES 1) Adjusted by the bonus issue that took place in May 2011. In the first half of 2011, BPI raised its share capital from 2) Comparable Iberian banks: Millennium BCP, Banco Espírito Santo, Banco Popular, 900 M.€ to 990 M.€ through the incorporation of Banco Sabadell, Bankinter, Banesto and Banco Pastor. reserves amounting to 90 M.€. The new shares issued were admitted to trading on the Euronext market on 7 June 2011.

After the above operation, the share capital is now represented by 990 million nominative and dematerialised shares with a nominal value of one euro each. Trading on the Euronext market.

Index weighting (30 Jun. 11) PSI-20: 1.68%; #14 Next 150: 0.47%; #70

Codes and tickers ISIN and Euronext code: PTBPI0AM004 Reuters: BBPI.LS Bloomberg: BPI PL

1) Index the value of which results from the simple average of a sample composed of the shares of Millennium BCP, Banco Espírito Santo, Banco Popular, Banco Sabadell, Bankinter, Banesto and Banco Pastor.

TREASURY STOCK Banco BPI manages a portfolio of treasury shares set up Banco Português de Investimento, S. A., the entity with a view to the execution of the share incentive 100%-owned by Banco BPI did not own any Banco BPI scheme for employees and executive directors shares at 30 June 2011. (Portuguese initials – RVA). With this objective in mind, the following transactions were realised in the first 6 months of 2011.

Treasury shares transactions in the 1st half of 2011 No. shares Acquisition Disposal Shares No. shares Total traded attributed in held (31 held (30 Jun. Quantity Amount Price Quantity Amount Price (Quantity) the capital 3 Dec. 10) 1 1 2 11) (number) (€) (€) (number) (€) (€) increase Banco BPI4 6 392 284 446 677 1.52 6 928 9 145 1.32 7 374 638 580 7 024 382 Banco Português de 15 001 19 791 1.32 15 001 19 467 1.30 30 002 Investimento5 Total 6 392 284 15 447 20 468 1.33 21 929 28 612 1.30 37 376 638 580 7 024 382

% of share capital 0.710% 0.002% 0.002% 0.004% 0.710% Note: at 30 June 2011, Banco BPI Employees’ pension fund held 5 652 472 Banco BPI shares, representing 0.57% of the Bank’s share capital. 1) Average price. 2) Capital increase by way of the incorporation of reserves of 90 M.€ approved at the Shareholders’ General Meeting of 27 April de 2011. 3) The balance of treasury shares at 30 June 2011 does not include 46 737 shares awarded under the condition subsequent as part of the RVA scheme but not yet freely disposable. The transfer of the ownership of the shares awarded under the RVA programme, is wholly effected on the award date, but their availability is dependent on Employees continuing to work for the BPI Group, with the result that for accounting purposes, the shares remain in Banco BPI’s treasury shares portfolio up until the date they become freely disposable, but whose reporting of transactions to the CMVM and to the market occurs at the time of the award. 4) Operations realised solely off the market. 5) Operations realised solely on the stock exchange.

Banco BPI | 1st half 2011 Report 93

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Banco BPI, S.A.

Consolidated financial statements as of June 30, 2011 and 2010

BANCO BPI, S.A. CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2011 AND DECEMBER 31, 2010 (Translation of balance sheets originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro) (Amounts expressed in thousands of Euro) Jun. 30, 11 Dec. 31, 10 Amounts before Impairment, impairment, depreciation Notes Net Net Notes Jun. 30, 11 Dec. 31, 10 depreciation and and amortisation amortisation ASSETS LIABILITIES Cash and deposits at central banks 4.1 1 351 335 1 351 335 1 328 222 Resources of central banks 4.14 1 270 495 1 245 537 Deposits at other credit institutions 4.2 348 684 348 684 338 551 Financial liabilities held for trading 4.15/4.4 131 896 261 493 Financial assets held for trading and at fair value Resources of other credit institutions 4.16 2 895 074 4 726 084 through profit or loss 4.3/4.4 1 035 059 1 035 059 1 241 651 Resources of customers and other debts 4.17 23 898 530 23 240 863 Financial assets available for sale 4.5 6 619 748 64 621 6 555 127 8 156 321 Debt securities 4.18 7 465 275 7 782 274 Loans and advances to credit institutions 4.6 1 481 960 2 1 481 958 1 439 145 Financial liabilities relating to transferred assets 4.19 1 497 796 1 570 418 Loans and advances to customers 4.7 29 710 675 589 536 29 121 139 30 055 006 Hedging derivatives 4.4 415 240 499 444 Held to maturity investments 4.8 1 085 820 1 085 820 1 043 584 Provisions 4.20 119 748 110 573 Hedging derivatives 4.4 270 685 270 685 250 263 Technical provisions 4.21 2 777 117 2 991 907 Other tangible assets 4.9 697 913 486 398 211 515 252 077 Tax liabilities 4.22 42 647 37 728 Intangible assets 4.10 90 437 84 183 6 254 6 378 Participating bonds 4.23 6 464 7 167 Investments in associated companies and jointly Subordinated debt 4.24 342 305 640 389 controlled entities 4.11 182 914 182 914 194 221 Other liabilities 4.25/4.26 774 659 581 988 Tax assets 4.12 600 083 600 083 430 610 Total Liabilities 41 637 246 43 695 865 Other assets 4.13/4.26 1 023 036 48 835 974 201 923 784 SHAREHOLDERS' EQUITY Subscribed share capital 4.27 990 000 900 000 Share premium account 4.28 128 432 441 306 Other equity instruments 4.29 7 948 9 894 Revaluation reserves 4.30 ( 1 125 505) ( 716 874) Other reserves and retained earnings 4.31 1 057 134 649 153 (Treasury shares) 4.29 ( 21 858) ( 21 699) Consolidated net income of the BPI Group 4.46 79 141 184 796 Shareholders' equity attributable to the shareholders of BPI 1 115 292 1 446 576 Minority interests 4.32 472 236 517 372 Total Shareholders' Equity 1 587 528 1 963 948 Total Assets 44 498 349 1 273 575 43 224 774 45 659 813 Total Liabilities and Shareholders' Equity 43 224 774 45 659 813

OFF BALANCE SHEET ITEMS Guarantees given and other contingent liabilities 4.7/4.33 2 847 673 3 012 038 Of which: [Guarantees and sureties] [2 689 884] [2 820 405] [Others] [157 789] [191 633] Commitments 4.33 3 150 255 3 856 696

The accompanying notes form an integral part of these balance sheets. The Accountant The Executive Committee of the Board of Directors BANCO BPI, S.A.

CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(Translation of statements originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro)

Notes Jun. 30, 11 Jun 30, 10

Interest and similar income 969 910 938 261 Interest and similar expenses ( 683 363) ( 639 639) Financial margin (narrow sense) 4.34 286 547 298 622 Gross margin on unit links 4.35 2 051 2 062 Income from equity instruments 4.36 1 547 3 614 Net commission relating to amortised cost 4.37 14 931 15 685 Financial margin 305 076 319 983

Technical result of insurance contracts 4.38 7 389 6 136

Commissions received 147 679 154 653 Commissions paid ( 23 454) ( 22 027) Other income, net 23 863 25 719 Net commission income 4.39 148 088 158 345 Gain and loss on operations at fair value 127 616 53 877 Gain and loss on assets available for sale 233 14 247 Interest and financial gain and loss with pensions 4.26 5 988 7 056 Net income on financial operations 4.40 133 837 75 180 Operating income 24 847 3 522 Operating expenses ( 12 331) ( 10 284) Other taxes ( 3 004) ( 3 393) Net operating income 4.41 9 512 ( 10 155) Operating income from banking activity 603 902 549 489 Personnel costs 4.42 ( 232 779) ( 212 546) General administrative costs 4.43 ( 119 272) ( 121 355) Depreciation and amortisation 4.9/4.10 ( 19 631) ( 23 455) Overhead costs ( 371 682) ( 357 356) Recovery of loans, interest and expenses 9 527 9 638 Impairment losses and provisions for loans and guarantees, net 4.20 ( 79 822) ( 58 849) Impairment losses and other provisions, net 4.20 ( 34 245) ( 15 597) Net income before income tax 127 680 127 325 Income tax 4.44 ( 11 994) 9 448 Earnings of associated companies (equity method) 4.45 15 359 14 321 Global consolidated net income 131 045 151 094 Income attributable to minority interests 4.32 ( 51 904) ( 51 618) Consolidated net income of the BPI Group 4.46 79 141 99 476

Earnings per share (in Euro) Basic 0.081 0.111 Diluted 0.080 0.111

The accompanying notes form an integral part of these statements.

The Accountant The Executive Committee of the Board of Directors BANCO BPI, S.A.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(Translation of statements originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro)

Jun. 30, 11 Jun. 30, 10

Attributable to Attributable to Attributable to minority Attributable to minority shareholders' of the BPI Total shareholders' of the BPI Total interests interests Group Group

Consolidated net income 79 141 51 904 131 045 99 476 51 618 151 094 Foreign exchange translation differences ( 21 144) ( 23 136) ( 44 280) 28 312 29 286 57 598 Revaluation reserves of financial assets available for sale: Revaluation of financial assets available for sale ( 546 684) ( 546 684) ( 664 159) ( 664 159) Tax effect 159 136 159 136 194 196 194 196 Transfer to income resulting from sales 63 63 4 575 4 575 Tax effect ( 73) ( 73) ( 1 556) ( 1 556) Transfer to income resulting from impairment recognized in the period 100 100 1 083 1 083 Tax effect ( 29) ( 29) ( 272) ( 272) Valuation of assets of associated companies ( 8 200) ( 8 200) ( 5 540) ( 5 540) Tax effect 3 693 3 693 1 362 1 362 Income not included in the consolidated statements of income ( 413 138) ( 23 136) ( 436 274) ( 441 999) 29 286 ( 412 713) Consolidated comprehensive income ( 333 997) 28 768 ( 305 229) ( 342 523) 80 904 ( 261 619)

The accompanying notes form an integral part of these statements.

The Accountant The Executive Committee of the Board of Directors BANCO BPI, S.A.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(Translation of statements originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro) Other Share Subscribed Other equity Revaluation reserves and Treasury Minority Shareholders' premium Net income share capital instruments reserves retained shares interests equity account earnings Balance at December 31, 2009 900 000 441 306 10 484 ( 210 628) 553 872 ( 23 036) 175 034 455 658 2 302 690 Dividends distributed in 2010 ( 69 700) ( 69 700) Appropriation of net income for 2009 to reserves 105 334 ( 105 334) Dividends paid on preference shares ( 2 870) ( 2 870) Dividends paid to minority interests ( 56 455) ( 56 455) Variable Remuneration Program (RVA) ( 921) 251 1 132 462 Sale / purchase of treasury shares ( 26) ( 1 706) ( 1 732) Sale / purchase of preference shares ( 9 138) ( 9 138) Redemption of preference shares ( 17 233) ( 17 233) Consolidation of BPI Alternative Fund 13 600 13 600 Consolidation of BPI Taxa Variável Fund 17 884 17 884 Comprehensive income in the first half of 2010 ( 437 821) ( 4 178) 99 476 80 904 ( 261 619) Other 18 18 Balance at June 30, 2010 900 000 441 306 9 563 ( 648 449) 655 271 ( 23 610) 99 476 482 350 1 915 907 Dividends paid on preference shares ( 2 966) ( 2 966) Variable Remuneration Program (RVA) 331 ( 251) 28 108 Sale / purchase of treasury shares 26 1 883 1 909 Sale / purchase of preference shares 432 432 Consolidation of BPI Alternative Fund 3 580 3 580 Consolidation of BPI Taxa Variável Fund ( 2 566) ( 2 566) Comprehensive income in the second half of 2010 ( 68 425) ( 6 097) 85 320 36 542 47 340 Other 204 204 Balance at December 31, 2010 900 000 441 306 9 894 ( 716 874) 649 153 ( 21 699) 184 796 517 372 1 963 948 Appropriation of net income for 2010 to reserves 184 796 ( 184 796) Share capital increase by incorporation of reserves 90 000 ( 90 000) Use of share premium account to cover negative retained earnings ( 312 874) 312 874 Dividends paid on preference shares ( 3 292) ( 3 292) Dividends paid to minority interests ( 57 287) ( 57 287) Variable Remuneration Program (RVA) ( 1 946) 679 ( 1 267) Sale / purchase of treasury shares 865 ( 838) 27 Sale / purchase of preference shares 4 014 ( 8 231) ( 4 217) Consolidation of BPI Alternative Fund ( 3 228) ( 3 228) Consolidation of BPI Taxa Variável Fund ( 1 866) ( 1 866) Comprehensive income in the first half of 2011 ( 408 631) ( 4 507) 79 141 28 768 ( 305 229) Other ( 61) ( 61) Balance at June 30, 2011 990 000 128 432 7 948 (1 125 505) 1 057 134 ( 21 858) 79 141 472 236 1 587 528

The accompanying notes form an integral part of these statements.

The Accountant The Executive Committee of the Board of Directors BANCO BPI, S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED JUNE 30, 2011 AND 2010

(Translation of statements originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro) Jun. 30, 11 Jun. 30, 10 Operating activities Interest, commissions and similar income received 1 475 510 2 014 019 Interest, commissions and similar expenses paid ( 835 454) ( 1 406 377) Recovery of loans and interest in arrears 9 527 9 638 Payments to personnel and suppliers ( 323 250) ( 295 738) Net cash flow from income and expenses 326 333 321 542 Decrease (increase) in: Financial assets held for trading, available for sale and held to maturity 1 346 278 ( 40 224) Loans and advances to credit institutions ( 42 910) ( 1 397 146) Loans and advances to customers 941 656 ( 614 424) Other assets ( 75 641) ( 157 842) Net cash flow from operating assets 2 169 383 ( 2 209 636) Increase (decrease) in: Resources of central banks and other credit institutions ( 1 806 231) 1 092 597 Resources of customers 394 330 719 697 Financial liabilities held for trading ( 129 598) 103 770 Other liabilities ( 122 158) 385 720 Net cash flow from operating liabilities ( 1 663 657) 2 301 784 Contributions to the Pension Funds ( 28 875) ( 1 326) Income tax paid ( 24 492) ( 18 611) 778 692 393 753 Investing activities Acquisition of participation in subsidiary and associated companies Unicre - Instituição Financeira de Crédito, S.A. ( 4 428) Purchase of other tangible assets and intangible assets ( 7 735) ( 14 524) Sale of other tangible assets 17 918 31 Dividends received and other income 25 060 13 175 35 243 ( 5 746) Financing activities Liability for assets not derecognised ( 72 480) ( 100 136) Issuance of debt securities and subordinated debt 1 229 801 3 057 462 Redemption of debt securities ( 1 791 971) ( 3 743 656) Purchase and sale of own debt securities and subordinated debt 38 515 642 978 Redemption of preference shares ( 17 233) Purchase and sale of preference shares ( 8 231) ( 9 138) Interest on debt securities and subordinated debt ( 114 482) ( 85 512) Dividends paid on preference shares ( 3 292) ( 2 870) Dividends distributed ( 69 700) Dividends distributed to minority interests ( 57 287) ( 56 455) Purchase and sale of treasury shares ( 1 239) ( 1 270) ( 780 666) ( 385 530) Net increase (decrease) in cash and equivalents 33 269 2 477 Cash and equivalents at the beginning of the period 1 666 269 1 739 722 Cash and equivalents at the end of the period 1 699 538 1 742 199

The accompanying notes form an integral part of these statements.

The Accountant The Executive Committee of the Board of Directors Alberto Pitôrra President Fernando Ulrich Vice-President Antonio Domingues Members António Farinha Morais José Pena do Amaral Manuel Ferreira da Silva Maria Celeste Hagatong Pedro Barreto Banco BPI, S.A.

Notes to the consolidated financial statements as of June 30, 2011 and 2010

(Unless otherwise indicated, all amounts are expressed in thousands of Euro – t. euro)

(These notes are a translation of notes originally issued in Portuguese – Note 5)

1. THE FINANCIAL GROUP

Banco BPI is the central entity of a multi-specialised financial group dedicated to banking, which provides a broad range of banking services and products to companies, institutional investors and private individuals. Banco BPI has been listed on the Stock Exchange since 1986.

The BPI Group started operating in 1981 with the foundation of SPI – Sociedade Portuguesa de Investimentos, S.A.R.L.. By public deed dated December 1984, SPI – Sociedade Portuguesa de Investimentos, S.A.R.L. changed its corporate name to BPI – Banco Português de Investimento, S.A., which was the first private investment bank created after the re-opening, in 1984, of the Portuguese banking sector to private investment. On November 30, 1995 BPI – Banco Português de Investimento, S.A. (BPI Investimentos) was transformed into BPI - SGPS, S.A., which operated exclusively as the BPI Group’s holding company, and BPI Investimentos was founded to act as the BPI Group’s investment banking company. On December 20, 2002, BPI SGPS, S.A. incorporated, by merger, the net assets and operations of Banco BPI and changed its corporate name to Banco BPI, S.A..

At June 30, 2011 the Group’s banking operations were carried out principally through Banco BPI in the commercial banking area and through BPI Investimentos in the investment banking area. The BPI Group is also the holder of a 50.1% participation in Banco de Fomento, S.A. which operates as a commercial bank in Angola.

In January 2010, the BPI Alternative Fund was established. On June 30, 2011 the BPI Group held 81.1% of the fund’s participating units through BPI Investimentos, the financial statements of the fund being fully consolidated in the financial statements of the BPI Group.

At June 30, 2011 the BPI Group held 66.4% of the participating units of BPI Taxa Variável Fundo de Investimento Aberto de Obrigações de Taxa Variável (BPI Taxa Variável Fund), which is managed by BPI Gestão de Activos. As from June 30, 2010 the BPI Group has fully consolidated the financial statements of BPI Taxa Variável Fund.

In June 2010 the BPI Group acquired 3.4% of the share capital of Unicre – Instituição Financeira de Crédito, SA, and now holds a 21.01% participation in that company. The participation of the BPI Group in Unicre is now recorded in accordance with the equity method of accounting.

In 2010 the BPI Group dissolved and liquidated Simofer, a fully owned subsidiary of Banco BPI.

In 2010 the corporate name of Inter-Risco - Sociedade de Capital de Risco, S.A., was changed to BPI Private Equity - Sociedade de Capital de Risco, S.A.. Subsequently, a new company called Inter-Risco – Sociedade de Capital de Risco, S.A. was founded, 49% of its capital being held by BPI Private Equity, and is recorded in accordance with the equity method of accounting.

As from December 2010, a company incorporated in South Africa, named BPI Capital Africa (Proprietary), Limited, became part of the BPI Group. Having already been admitted as a member of the Johannesburg Stock Exchange (JSE), this company will start operating in the areas of brokerage and investment consultancy (research) of, among others, companies listed on the JSE. This company, which is wholly owned by the BPI Group, is consolidated by the full consolidation method.

In the first half of 2011 BPI Pensões – Sociedade Gestora de Fundos de Pensões, S.A. was merged into BPI Vida – Companhia de Seguros de Vida, S.A, both fully owned by Banco BPI, and BPI Vida change its name to BPI Vida e Pensões – Companhia de Seguros, S.A.

The vehicles through which the Bank’s loan securitisation is carried out are recorded in the consolidated financial statements in accordance with the BPI Group’s continuing involvement in these operations, based on the percentage held of the equity piece of the corresponding vehicles.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 102

At June 30, 2011 the BPI Group was made up of the following companies:

Shareholders' Net in come (loss) Direct Effective Consolidat ion / Head Office Total assets equit y for th e period participation participation Recognition method

Banks Banco BPI, S.A. Portugal 749 026 44 017 955 98 445 Banco Português de Investimento, S.A. Portugal 65 624 4 080 773 920 100.00% 100.00% Full Consolidation Banco Comercial e de Investimentos, S.A.R.L. Mozambique 89 904 1 104 156 11 939 29.70% 30.00% Equity Method Banco de Fomento Angola, S.A. Angola 429 125 4 705 235 93 733 50.08% 50.10% Full Consolidation Banco BPI Cayman, Ltd. Cayman Islands 152 935 402 620 1 584 100.00% Full Consolidation

Specialised loan companies BPI Locação de Equipamentos, Lda Portugal 3 922 4 200 499 100.00% 100.00% Full Consolidation

Asset management com panies and dealers BPI Dealer – Sociedade Financeira de Corretagem (Moçambique), S.A.R.L. Mozambique 65 83 1 13.50% 92.65% Full Consolidation BPI Gestão de Activos – Gestão de Fundos de Investimento Mobiliários, S.A Portugal 18 857 31 320 6 116 100.00% 100.00% Full Consolidation BPI – Global Investment Fund Management Company, S.A. Luxembourg 685 1 049 220 100.00% 100.00% Full Consolidation BPI (Suisse), S.A. Switzerland 2 580 5 486 1 047 99.90% Full Consolidation BPI Alternative Fund: Iberian Equities Long/Short Fund Portugal 76 695 95 105 2 084 81.05% Full Consolidation Fundo BPI Taxa Variável Portugal 43 868 56 915 1 715 66.38% Full Consolidation

Venture capital companies BPI Private Equity - Sociedade de Capital de Risco, S.A. Portugal 29 077 33 242 ( 13) 100.00% 100.00% Full Consolidation Inter-Risco – Sociedade de Capital de Risco, S.A. Portugal 376 1 560 124 49.00% Equity Method TC Turismo Capital - SCR, S.A. Portugal 5 788 5 952 225 25.00% 25.00% Equity Method

Insurance companies BPI Vida e Pensões – Companhia de Seguros, S.A. Portugal 197 503 3 764 731 6 295 100.00% 100.00% Full Consolidation Cosec – Companhia de Seguros de Crédito, S.A. Portugal 42 803 108 914 3 283 50.00% 50.00% Equity Method Companhia de Seguros Allianz Portugal, S.A. Portugal 170 399 1 130 295 21 076 35.00% 35.00% Equity Method

Ot her BPI Capital Finance Ltd. 1 Cayman Islands 250 704 250 714 3 507 100.00% 100.00% Full Consolidation BPI Capital Africa (Proprietary) Limited South Africa ( 28) 935 ( 376) 100.00% Full Consolidation 2 BPI, Inc. U.S.A. 1 062 2 103 34 100.00% 100.00% Full Consolidation BPI Madeira, SGPS, Unipessoal, S.A. Portugal 152 842 152 852 4 100.00% 100.00% Full Consolidation Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A. Portugal 81 057 88 926 1 428 32.80% 32.80% Equity Method Ul is si pa i r A CE P o rt u ga l 1 6 16 ( 1 ) 50.00% Proportional Method Unicre - Instituição Financeira de Crédito, S.A. Portugal 71 687 272 632 5 139 20.65% 21.01% Equity Method Viacer – Sociedade Gestora de Participações Sociais, Lda Portugal 81 712 104 541 5 032 25.00% 25.00% Equity Method

Note: Unless otherwise indicated, all amounts are as of June 30, 2011 (accounting balances before consolidation adjustments). The financial statements of subsidiaries, associates and jointly controlled entities are pending approval by the respective governing bodies. However, the Board of Directors of Banco BPI believes that there will be no changes with significant impact on the consolidated income of the Bank. 1 Share capital is made up of 5 000 ordinary shares of 1 Euro each, and 250 000 000 non-voting preference shares of 1 euro each. The BPI Group’s effective participation corresponds to 0.002% considering the preference shares. 2 Amounts as of December 31, 2010 translated using the US dollar exchange rate as of June 30, 2011.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 103

2. BASIS OF PRESENTATION AND MAIN ACCOUNTING POLICIES

A) BASES OF PRESENTATION

The consolidated financial statements were prepared from the accounting records of Banco BPI and its subsidiary and associated companies in conformity with International Accounting Standards/International Financial Reporting Standards (IAS/IFRS), as endorsed by the European Union in accordance with Regulation (EC) 1606/2002 of July 19 of the European Parliament and Council, incorporated into Portuguese legislation through Bank of Portugal Notice 1/2005 of February 21.

Adoption of standards (new or revised) issued by the “International Accounting Standards Board” (IASB) and interpretations issued by the “International Financial Reporting Interpretation Committee” (IFRIC), as endorsed by the European Union.

The standards (new or revised) and interpretations applicable to the operations of the BPI Group and reflected in the financial statements as of June 30, 2011, were as follows:

„ IAS 32 – Financial Instruments: Presentation: this standard was amended to clarify under what conditions the rights issues are classified as equity instruments. These amendments are of mandatory application for years beginning on or after February 1, 2010. Implementation of these changes did not have a significant impact on the financial statements presented. „ IFRIC 19 – Extinguishing Financial Liabilities through Equity Instruments: this standard established the accounting treatment to be given by an entity that issues equity instruments for the purpose of settling a financial liability in full or in part. It is of mandatory application for years beginning on or after July 1, 2010. Implementation of these changes did not have a significant impact on the financial statements presented. „ Improvements to international financial reporting standards - 2010: this process involved a review of 6 accounting standards and 1 interpretation, 2 of which with mandatory application for years beginning on or after July 1, 2010. Implementation of these changes did not have a significant impact on the financial statements presented.

At June 30, 2011 the following standards (new and revised) and interpretations, already endorsed by the European Union, were available for early adoption:

„ IAS 24 – Related entities: the changes made in November 2009 are intended to clarify the definition of related entity and introduce simplifications to the disclosure requirements for government entities. The revised standard is mandatory for years beginning on or after January 1, 2011. „ IFRIC 14 – Early payments under minimum funding requirements: the changes to this interpretation made in November 2009 permit an entity to recognize early payments under minimum funding requirements, as an asset. This change is of mandatory application in years beginning on or after January 1, 2011. „ Improvements to international financial reporting standards - 2010: this process involved a review of 6 accounting standards and 1 interpretation, 5 of which with mandatory application for years beginning on or after January 1, 2011.

These standards, although endorsed by the European Union, have not been adopted by the BPI Group at June 30, 2011, because their application is not yet mandatory. Significant impacts are not expected in the financial statements as a result of adopting these standards.

B) MAIN ACCOUNTING POLICIES:

The following accounting policies are applicable to the consolidated financial statements of the BPI Group.

2.1. Consolidation of subsidiaries and jointly controlled entities and recognition of associated companies (IAS 27, IAS 28, IAS 31 and IFRS 3)

Banco BPI has direct and indirect participations in subsidiary and associated companies. Subsidiary companies are entities over which the Bank has control or power to manage their financial and operating policies. Associated companies are entities over which Banco BPI has direct or indirect significant influence over their management and financial policies but over which it does not have control. As a general rule, it is presumed that significant influence exists when the participation exceeds 20%.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 104

The financial statements of subsidiary companies are consolidated using the full consolidation method. Significant inter-group transactions and account balances were eliminated in the consolidation process. The amount of share capital, reserves and net results corresponding to third party participation in these subsidiaries is reflected in the caption minority interest. When necessary, adjustments are made to the subsidiary companies’ financial statements to ensure their consistency with the BPI Group’s accounting policies.

Goodwill arising from the difference between the cost of acquisitions (including expenses) and the fair value of the identifiable assets, liabilities and contingent liabilities of subsidiary companies as of the date of the first consolidation are recorded as assets and are subject to impairment tests. When a subsidiary company is sold, net goodwill is included in determining the gain or loss on the sale.

The financial statements of companies under joint control of the BPI Group and other entities are consolidated using the proportional method, under which the assets, liabilities, costs and income of the entities are included in the consolidated financial statements in proportion to the BPI Group’s participation in their share capital.

Associated companies are recorded in accordance with the equity method of accounting. In accordance with this method, the amount of the investment, which is initially recognised at cost, is adjusted by post-acquisition changes in the net asset value of the associated companies, in proportion to the BPI Group’s participation.

Goodwill relating to associated companies is included in the book value of the investment. The book value of associated companies (including goodwill) is subject to impairment tests in accordance with IAS 36 and IAS 39.

In the case of associated companies acquired in stages, goodwill is calculated at the time that the acquired company becomes an associate, being determined by the difference between the total acquisition cost of the investment and the proportion held of the fair value of the identifiable assets and liabilities of the associate as of that date. As provided for in IAS 28, total acquisition cost corresponds to the fair value of the original investment on the date that significant influence is achieved, plus the amount paid for the additional participation. In accordance with the policy established by the BPI Group, gains or losses on the revaluation to fair value of the original investment are recognized in the statement of income on the date the acquired company becomes an associate.

In accordance with IFRS 1 and the BPI Group’s accounting policies up to the date of transition to IAS/IFRS, goodwill on investments acquired up to January 1, 2004 was deducted in full from shareholders’ equity.

Negative goodwill arising from the difference between the cost of acquisitions (including expenses) and the fair value of the identifiable assets, liabilities and contingent liabilities of subsidiary and associated companies as of the date of the first consolidation or the date the equity method is first applied is immediately recognised in the statement of income.

The financial statements of subsidiary or associated companies which are inactive or in liquidation were excluded from the consolidation and from application of the equity method. These participations are classified as financial assets available for sale.

Consolidated net income is the sum of the individual net result of Banco BPI and the percentage of the net results of subsidiary and associated companies, equivalent to Banco BPI’s effective participation in them, considering the period the participations are held for, after elimination of income and expenses resulting from inter-group transactions.

Foreign currency subsidiary and associated companies (IAS 21 and IAS 29)

The foreign currency financial statements of subsidiary and associated companies were included in the consolidation after being translated to Euro at the exchange rates published by the Bank of Portugal:

− Assets and liabilities expressed in foreign currencies are translated to Euro using the exchange rates in force at the balance sheet date; − Income and expenses expressed in foreign currencies are translated to Euro using the exchange rates in force in the months in which they are recognized; and, − Exchange differences resulting from the translation to Euro are recognised directly in the shareholders’ equity caption revaluation reserves, since the Bank does not have participations in subsidiaries and associated companies whose functional currency is that of a hyperinflationary economy.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 105

2.2. Financial assets and liabilities (IAS 32 and IAS 39)

Financial assets and liabilities are recognised in the BPI Group’s balance sheet on the trade or contracting date, unless there is an express contractual stipulation or applicable legal or regulation regime under which the transactions’ inherent rights and obligations are transferred at a different date, in which case the latter date is applicable.

Financial assets and liabilities are initially recorded at fair value plus direct transaction costs, except for assets and liabilities that have been recognised at fair value through profit or loss, in which case the transaction costs are immediately recorded in the statement of income.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between equally knowledgeable, willing parties. On the date of contracting or starting an operation, fair value is generally the amount of the transaction.

Fair value is determined based on: „ the price in an active market, or „ valuation methods and techniques (when there is not an active market) supported by: − mathematical calculations based on recognised financial theories; or, − prices calculated based on similar assets or liabilities traded on active markets or based on statistical estimates or other quantitative methods.

Financial assets are initially recognized, at the time of their acquisition or inception, under one of the four categories defined in IAS 39: − financial assets held for trading and at fair value through profit or loss; − held-to-maturity financial assets; − available-for-sale financial assets; − loans and other receivables.

Following the amendment to IAS 39 in October 2008 entitled “Reclassification of financial assets”, it became possible to reclassify financial assets between financial asset categories, as follows: (i) in specific circumstances, non-derivative financial assets (other than those initially designated as financial assets at fair value through profit or loss under the “fair value option”) can be reclassified out of the fair value through profit and loss category, and (ii) financial assets which meet the definition of loans and receivables can be reclassified from the available-for-sale financial assets category to the loans and receivables category, provided that the entity has the intention and ability to hold the asset for the foreseeable future or until maturity. For reclassifications made up to November 1, 2008, the reference date of the changes made by the BPI Group was July 1, 2008. The reclassifications made on or after November 1, 2008 are effective only as from the reclassification date.

In Note 4.48 the valuation methods of assets and liabilities recorded at fair value (Financial assets held for trading and at fair value through profit or loss, Financial liabilities held for trading and Financial assets available for sale) are presented in detail.

2.2.1. Financial assets held for trading and at fair value through profit or loss and financial liabilities held for trading

These captions include: „ fixed income securities and variable-yield securities traded on active markets, which the Bank has opted, on the recognition date, to record and value at fair value through profit or loss, can be classified as held for trading or at fair value through profit or loss; „ securities related to capitalisation insurance portfolios; and, „ derivatives (including embedded derivatives on financial assets and liabilities), except for those designated as hedging instruments under hedge accounting (Note 2.2.7).

Such assets and liabilities are valued daily at fair value. The book value of bonds and other fixed income securities includes accrued interest.

Gains and losses resulting from changes in fair value are recognised in the statement of income.

In the case of default, derivatives are settled in advance and recorded at their replacement value. Derivative operations are subject to credit risk analysis, their value being adjusted with a corresponding entry to loss on financial operations.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 106

2.2.2. Held to maturity investments This caption includes non-derivative financial assets with fixed or determinable payments and defined maturities that the BPI Group has the intention and ability to hold until maturity.

These investments are measured at amortized cost, using the effective interest rate method and subject to impairment tests. The impairment losses on financial investments held to maturity are recorded in the income statement. If, in a subsequent period, the amount of an impairment loss decreases and that decrease can be related objectively to an event occurring after the date on which the impairment loss was recognized, the previously recognized impairment loss is reversed through the statement of income for the year.

2.2.3. Financial assets available for sale This caption includes: „ fixed income securities which have not been classified in the trading, held to maturity or loan portfolios; „ variable yield securities available for sale; and „ shareholders’ loans and supplementary capital contributions in financial assets available for sale.

Assets classified as available for sale are valued at fair value, except for equity instruments that are not traded on active markets and for which their fair value cannot be reliably measured or estimated. In this case they remain recorded at cost.

Gains and losses resulting from changes in the fair value of financial assets available for sale are recognised directly in the shareholders’ equity caption fair value revaluation reserve, except for impairment losses and exchange gains and losses on monetary assets, until the asset is sold. At this time, the gain or loss previously recognized in shareholders’ equity is transferred to the statement of income.

Interest accrued on bonds and other fixed income securities and differences between their cost and nominal value (premium or discount) are recorded in the statement of income using the effective interest rate method.

Income from variable-yield securities (dividends in the case of shares) is recorded as income when it is attributed or received. In accordance with this procedure, interim dividends are recorded as income in the period in which they are declared.

With reference to the date of preparation of the financial statements, the Bank assesses the existence of objective evidence that financial assets available for sale are impaired, considering the market situation and the available information about the issuers.

In accordance with IAS 39, a financial asset available for sale is impaired and impairment losses are incurred if, and only if: (i) there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a “loss event”) and (ii) that (those) loss event (s) has (have) an impact on the estimated future cash flows of the financial asset, that can be reliably estimated.

In accordance with IAS 39, objective evidence that a financial asset available for sale is impaired includes observable data regarding the following loss events: „ Significant financial difficulty of the issuer; „ A breach of contract by the issuer in terms of the repayment of principal or payment of interest; „ Probability of bankruptcy of the issuer; „ The disappearance of an active market for the financial asset because of financial difficulties of the issuer.

In addition to the events relating to debt instruments referred to above, the existence of objective evidence of impairment on equity instruments also takes into consideration information about the following loss events: „ Significant changes with adverse impact on the technological, market, economic or legal environment in which the issuer operates indicating that the cost of the investment may not be fully recovered; „ A significant or prolonged decrease in the market value of the financial asset below its cost.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 107

When there is objective evidence that a financial asset available for sale is impaired, the accumulated loss in the fair value revaluation reserve is removed from equity and recognized in the statement of income.

Impairment losses recorded on fixed income securities are reversed through the statement of income if there is a positive change in the fair value of the security resulting from an event which has occurred after determination of the impairment. Impairment losses on variable-yield securities cannot be reversed. In the case of securities for which impairment losses have been recognised, subsequent negative changes in fair value are always recognised in the statement of income.

Exchange differences on non monetary assets (equity instruments) classified in the available-for-sale portfolio are recognised in the exchange difference revaluation reserve. Exchange differences on other securities are recorded in the statement of income.

Financial assets available for sale, designated as hedged assets, are valued as explained in Note 2.2.7. Hedge Accounting – derivatives and hedged instruments.

2.2.4. Loans and other receivables Loans and other receivables include loans and advances made by the Bank to customers and to credit institutions, including finance lease operations, factoring operations, participation in syndicated loans and securitised loans (commercial paper and bonds issued by companies) that are not traded on an active market and which are not intended to be sold.

Loans and securitised loans traded on active markets are included in the caption “Financial assets available for sale”.

At the inception date, loans and other receivables are recognised at fair value. In general, fair value at the inception date corresponds to the amount of the transaction and includes commission, taxes and other costs and income relating to credit operations.

Loans and other receivables are subsequently valued at amortised cost, using the effective interest rate method and are subject to impairment tests.

Interest income, commission, fees and other costs and income on credit operations are recognised on an accruals basis over the period of the operations, regardless of when they are received or paid. Commission received relating to credit commitments is deferred and recognised on a straight-line basis over the period of the commitment.

The Bank classifies as overdue credit, instalments of principal and interest overdue for more than 30 days. Credits under legal collection procedures include the full amount of the principal (both overdue and not yet due). Mortgage loans are considered to be under legal collection procedures when the petition to execute is delivered to the court, which is usually 180 days after the first default.

The BPI Group writes off loans on operations considered to be unrecoverable, for which provisions (in accordance with the Adjusted Accounting Standards (Normas de Contabilidade Ajustadas - NCA) established by Bank of Portugal Notice 1/2005) and impairment losses have been recorded for their full amount in the month preceding the write-off.

Loans designated as hedged assets are valued as explained in Note 2.2.7. Hedge Accounting - derivatives and hedged instruments.

Finance leasing (IAS 17) Lease operations in which the Bank transfers substantially all the risks and rewards of ownership of an asset to a customer or to a third party, are reflected on the balance sheet, at the inception date, as loans granted, at the net amount paid to acquire the leased asset. Lease instalments are composed of an interest income component and a principal repayment component. The interest income component for each period reflects an effective interest rate of return on the outstanding amount of principal.

Factoring Assets resulting from factoring operations with recourse are recorded on the balance sheet as loans granted, by the amount advanced on account under the terms of the corresponding contracts.

Assets resulting from factoring operations without recourse are recorded on the balance sheet as loans granted, by the amount of the credit taken, with a corresponding entry to the liability caption “Creditors for factoring operations”. Amounts advanced under the contracts are debited to the caption “Creditors for factoring operations”.

Invoices received under factoring contracts with recourse, in which amounts are not advanced, are recorded in the off-balance sheet caption, “Contracts with recourse – invoices not financed”, by the amount of the invoices received. The balance of this caption is reduced as the invoices are settled.

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Commitments resulting from unused credit lines negotiated with customers are recorded as off-balance sheet items.

Securitized credit not derecognized

The Bank does not derecognize credits sold in securitisation operations when: „ it retains control over the operations; „ it continues to receive a substantial part of the remuneration; and, „ it retains a substantial part of the risk on the credits transferred.

Credits sold that have not been derecognized are recorded in the caption “Loans and advances to customers” and are subject to the accounting principles used for other credit operations. Interest, commission and fees relating to the securitized loan portfolio are accrued over the period of the credit operation.

Amounts received relating to securitization operations are recorded under the caption “Financial liabilities relating to transferred assets”. The respective interest, commission and fees are accrued based on the remuneration ceded by the Bank, in accordance with the expected average life of the securitisation operation at the launching date.

The risks and/or benefits maintained are represented by the bonds with the highest degree of risk, issued by the securitization vehicle. The amount recorded in assets and liabilities represents the proportion of risk/benefit held by the Bank (continuing involvement).

Bonds issued by securitisation vehicles and held by the BPI Group entities are eliminated in the consolidation process.

Securities under repurchase and resale agreements Securities purchased with resale agreements are not recorded in the securities portfolio. Funds paid are recorded as loans at the settlement date, while interest is accrued.

Securities sold with repurchase agreements are maintained in their original securities portfolio. Funds received are recorded in the corresponding liability caption at the settlement date, while interest is accrued.

Guarantees given and irrevocable commitments Guarantees given and irrevocable commitments are recorded in off-balance sheet accounts by the amount at risk, while interest, commission, fees and other income are recorded in the statement of income over the period of the operations. These operations are subject to impairment tests.

Impairment Loans, other receivables and guarantees given are subject to monthly impairment tests. Impairment losses identified are recorded by corresponding charge to the statement of income for the year. If, in subsequent periods, there is a decrease in the estimated impairment loss, the impairment loss initially recorded is reversed by credit to the statement of income.

In accordance with IAS 39 a financial asset is considered to be impaired when there is evidence that one or more loss events have occurred after initial recognition of an asset, and such events have an impact on the estimated recoverable value of the future cash flows of the financial asset considered.

IAS 39 defines some events that may be considered as objective evidence of impairment (breach of contract, such as delay in the payment of principal or interest; probability that the borrower will become bankrupt, etc.). However, in certain circumstances determination of impairment loss requires professional judgement.

Objective evidence of impairment situations is assessed as of the date of the financial statements.

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Impairment assessment is made based on individual credits where they are significant in amount and on an individual or collective basis where the credits are not significant in amount.

BPI’s loan portfolio is segmented as follows for purposes of determining impairment: „ Corporate Banking; „ Private individuals and small businesses; „ Specialised credit: housing loans, equipment leasing, real estate leasing, vehicle financing, consumer credit and credit cards; „ Commercial portfolio: discounts, credit with a plan, credit without a plan and overdrafts; „ Project Finance; „ Institutional Banking and the State Business Sector; „ Others.

Impairment losses relating to the Corporate Banking, Project Finance, Institutional Banking and the State Business Sector segments are determined on an individual basis whenever the credits show signs of impairment or are in default. Credit operations in these segments that do not show signs of impairment, as well as operations of the other segments are subject to collective assessment to determine the amount of the related impairment.

Individual assessment

In the case of assets for which there is objective evidence of impairment on an individual basis, impairment is calculated operation by operation, based on the information included in the Bank’s credit risk analysis models which consider, among others, the following factors: − Overall exposure of the customer and nature of the liabilities contracted with the Bank: financial or non financial operations (namely, liabilities of a commercial nature or performance guarantees); − Notation of client risk determined based on a calculation system implemented by the BPI Group. Risk notation includes, among others, the following characteristics: ƒ Financial situation of the customer; ƒ Risk of the business sector in which the customer operates; ƒ Quality of management of the customer, measured by the experience in the relationship with the BPI Group and the existence of incidents; ƒ Quality of the accounting information presented; ƒ Nature and amount of the guarantees relating to the liabilities contracted with the Bank; ƒ Non-performing loans for a period exceeding 30 days.

In such situations the amount of the loss is calculated based on the estimated recoverable amount of the credit, after recovery costs, discounted at the effective rate of interest during the period from the date the impairment to the expected date of recovery.

The expected recoverable amount of the credit reflects the cash flows that can result from execution of the guarantees or collateral relating to the credit granted, less costs of the recovery process.

Assets evaluated individually, for which there are no objective signs of impairment, are included in a group of assets with similar credit risks, and impairment losses are assessed collectively.

Impairment for these groups of assets is assessed as explained in the following section – Collective assessment.

Assets assessed individually, for which an impairment loss is recognised, are excluded from the collective assessment.

Collective assessment

Future cash flows of groups of credit subject to collective impairment assessment are estimated based on the past experience of losses on assets with similar credit risk characteristics.

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Collective assessment involves estimating the following risk factors: − The possibility of a performing operation or customer coming to show signs of impairment through delays arising during the emergence period (period between the occurrence of a loss event and identification of that event by the Bank). In accordance with IAS 39 these situations correspond to losses incurred but not reported, that is cases in which, for part of the credit portfolio, the loss event has already occurred, but the Bank has not yet identified it; − The possibility of an operation or customer that has already had delays, going into default (situations of legal collection) during the remaining period of the operation; − Financial loss on operations in default.

For purposes of determining the percentage of estimated loss on operations or customers in default, the Bank considers payments by customers after default, less direct costs of the recovery process. The flows considered are discounted at the interest rate of the operations and compared to the exposure at the time of default.

The inputs used for calculating collective impairment are determined based on statistical models for credit groups and revised regularly to approximate the estimated amounts to the actual amounts.

For exposures with objective evidence of impairment, the amount of the loss results from a comparison of the book value with the present value of the estimated future cash flows. The interest rate of the operations at the date of each assessment is used to calculate the present value of the future cash flows.

2.2.5. Deposits and other resources After initial recognition, deposits and other financial resources of customers and credit institutions are valued at amortised cost, using the effective interest rate.

This category includes life capitalisation insurance without a discretionary participation feature.

Deposits designated as hedged liabilities are valued as explained in Note 2.2.7 Hedge Accounting – derivatives and hedged instruments.

2.2.6. Debt securities issued by the Bank Debt securities issued by the Bank are recorded under the captions “Subordinated Debt” and “Debt Securities”.

At the date of issue, debt securities are recorded at fair value (issue value), including transaction expenses, commission and fees, and subsequently valued at amortised cost using the effective interest rate method.

Derivatives embedded in bonds are recorded separately and revalued at fair value through the statement of income.

Bonds designated as hedged liabilities are valued as explained in Note 2.2.7. Hedge Accounting – derivatives and hedged instruments.

Bonds issued by the Bank can be listed, or not, on the Stock Exchange.

Secondary market transactions The Bank repurchases bonds issued in secondary market. Purchases and sales of own debt securities are included proportionately in the respective captions of debt issued (principal, interest, commission, fees and derivatives), and the differences between the amount liquidated and the decrease or increase in the amount of the liability are immediately recognised in the statement of income.

2.2.7. Hedge accounting – derivatives and hedged instruments The BPI Group designates as hedging instruments, derivatives contracted to hedge interest rate and foreign exchange rate risk (fair value hedge operations) on financial assets and liabilities identified individually (bond portfolio, issuance of own debt securities and loans), and on groups of operations (term deposits and fixed rate loans).

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The BPI Group has formal documentation of the hedge relationship identifying, at the inception of the transaction, the instrument (or part of the instrument, or part of the risk) that is being hedged, the strategy and type of risk being hedged and the methods used to demonstrate the effectiveness of the hedge.

Monthly, the Bank tests the effectiveness of the hedge by comparing changes in the fair value of the hedged instrument, attributable to the hedged risk, with changes in the fair value of the hedging derivative, the relationship between them being within the range of 80% to 125%.

Hedging derivative instruments are recorded at fair value and the gains and losses resulting from their revaluation are recognised in the statement of income. Gains and losses resulting from changes in the fair value of hedged financial assets or liabilities, attributable to the hedged risk, are also recognised in the statement of income, by corresponding entry to the book value of the hedged asset or liability in the case of operations at amortised cost (loans, deposits and debt issued) or to the fair value revaluation reserve in case of financial assets available for sale (bonds portfolio).

A hedged asset or liability may have only one part or one component of its fair value hedged (interest rate risk, foreign exchange rate risk or credit risk), provided that the effectiveness of the hedge can be measured separately.

When using hedge accounting, the Bank does not value the commercial spreads of the hedged assets or liabilities.

If the hedging relationship ceases to exist as a result of the relationship between the fair value changes of the derivatives and the hedged instruments being outside the 80% to 125% range, the derivatives are reclassified to trading instruments and the amount of the revaluation of the hedged instrument is recognised in the statement of income for the remaining period of the operation.

Hedging effectiveness tests are duly documented on a monthly basis, thus ensuring the existence of evidence during the period of the operation.

2.2.8. Foreign currency financial assets and liabilities Foreign currency financial assets and liabilities are recorded in conformity with the multi-currency system that is in their original currencies.

Foreign currency assets and liabilities are translated to Euro at the official market rates published by the Bank of Portugal.

Foreign currency income and expenses are translated to Euro at the exchange rates in force on the dates they are recognised.

2.3. Tangible assets (IAS 16) Tangible assets used by the Bank in its operations are stated at cost (including directly attributable costs) less accumulated depreciation and impairment losses.

Depreciation of tangible assets is recorded on a straight-line basis over their estimated useful lives, which corresponds to the period the assets are expected to be available for use:

Useful life (years) Property 20 to 50 Improvements in owned property 10 to 50 Non-recoverable expenditure capitalized on leasehold buildings 3 to 10 Equipment 3 to 12 Other tangible assets 3 to 10

Non-recoverable expenditure on improvements in leasehold buildings is depreciated in accordance with its estimated useful life or the remaining period of the lease contract.

As established in IFRS 1, tangible assets acquired by the BPI Group up to January 1, 2004 have been recorded at their book value at the date of transition to IAS/IFRS, which corresponds to cost adjusted for revaluations recorded in accordance with legislation, based on price level indices. In accordance with current tax legislation, 40% of the additional depreciation charge resulting from such revaluations is not deductible for income tax purposes, the resulting deferred tax liability being recognised.

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Tangible assets acquired under finance lease Tangible assets acquired under finance lease operations, in which the Bank has all the risks and rewards of ownership, are depreciated in accordance with the procedures explained in the preceding section.

Lease instalments comprise an interest charge and a principal repayment component. The liability is reduced by the amount corresponding to the principal repayment component of each of the instalments and the interest is reflected in the statement of income over the term of the lease.

2.4. Tangible assets available for sale Assets (property, equipment and other assets) received as settlement of loan operations are recorded in the caption “Other assets” as they are not always in condition to be sold immediately and may be held for periods in excess of one year. Such assets are recorded at the amount stated in the settlement agreement, which is the lower of the amount of the outstanding debt or the appraised value as of the date of the agreement. Such property is subject to periodic appraisals, with impairment losses being recorded whenever the appraised value (net of costs to sell) is lower than its book value.

The caption “Other assets” also includes the Bank’s tangible assets retired from use (unused property and equipment) which are in the process of sale. Such assets are transferred from tangible assets at their book value in accordance with IAS 16 (cost less accumulated depreciation and impairment losses) when they become available for sale, and are subject to periodic appraisals with impairment losses being recorded whenever the appraised value (net of selling costs) is lower than their book value.

Unrealised gains on other assets are not recognised on the balance sheet.

2.5. Intangible assets (IAS 38) The Bank recognises, in this caption, expenses relating to the development stage of projects implemented and to be implemented, as well as the cost of acquiring software, in both cases where the impact extends beyond the financial year in which the cost is incurred.

Intangible assets are amortised on a straight-line monthly basis over the estimated period of useful life of the assets which, in general, corresponds to a period of three years.

To date the Bank has not recognised any intangible assets generated internally.

2.6. Retirement and survivor pensions (IAS 19) The BPI Group companies that have adhered to the Collective Vertical Labour Agreement for the Portuguese Banking Sector (Acordo Colectivo de Trabalho Vertical para o Sector Bancário Português) for the Portuguese Banking Sector have assumed the commitment to pay their employees or their families, pensions for retirement due to age or incapacity, pensions for early retirement or survivor pensions (defined benefit plan). The pensions consist of a percentage, which increases with the number of years of service of the employees, applied to their salaries. Up to December 31, 2010 the majority of employees of the BPI Group was not covered by the Portuguese Social Security system.

With the publication of Decree-Law 1-A/2011 of January 3, all the bank employees that benefit from CAFEB – Caixa de Abono de Família dos Empregados Bancários were incorporated into the General Social Security Regime, as from January 1, 2011, becoming covered by this regime as regards old age pensions and possible maternity, paternity and adoption, the cost of which the Bank no longer covers. Given the complementary nature of the rules of the Collective Labour Agreement for the Portuguese Banking Sector, the Bank will continue to cover the difference between the amount of the benefits paid under the General Social Security Regime for the items covered and the benefits established in the Collective Labour Agreement.

Annually, the BPI Group determines the amount of its past service liability by actuarial calculation using the “Projected Unit Credit” method in the case of retirement due to age, and the “Single Successive Premiums” method in the case of retirement due to incapacity and survivor benefits. The actuarial assumptions used (financial and demographic) are based on the expectations, as of the balance sheet date, regarding salary and pension increases, using mortality tables adapted to the Bank’s population. The discount rate is determined based on market rates for high quality corporate bonds with similar terms to those of the related pension liability. An analysis of actuarial assumptions and, if applicable, their corresponding change, is carried out by the BPI Group as of June 30 and December 31 of each year. On June 30, 2011, the BPI Group has changed the discount rate used to calculate pension liabilities from 5.25% to 5.50%. The remaining actuarial assumptions have not changed as it was considered that the assumptions as of December 31, 2010 were still applicable considering the current market conditions and expectations at the balance sheet date. The updating of these assumptions is reflected prospectively in pension costs and in the determination and amortization of actuarial deviations that exceed the corridor. The amount of the liability includes, in addition to the retirement pension benefits, post-employment healthcare benefits (SAMS) and death subsidy during retirement.

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The BPI Group recognises, under the caption “Other assets” or “Other liabilities – Actuarial deviations”, the net accumulated amount (after January 1, 2004) of actuarial gains and losses resulting from changes in the actuarial and financial assumptions, as well as differences between the actuarial and financial assumptions used and the actual amounts. A corridor has been established to absorb accumulated actuarial gains and losses of up to 10% of the higher of the present value of the past service liability or the amount of the pension fund. Amounts that exceed the corridor are amortised to the statement of income over the average period up to the expected retirement age of the employees covered by the plan, which at June 30, 2011 corresponded to 21 years.

The increase in the past service liability resulting from early retirements is fully recognised as cost in the statement of income for the year.

Increases in the past service liability resulting from changes in the conditions of the Pension Plans are recognised in full as costs in the case of vested benefits, or amortised over the period up to the time the benefits become vested. The amount of the liabilities not yet recognised as cost is reflected in the caption “Other assets”.

The past service liability (post employment benefits) is covered by Pension Funds. The value of the Pension Funds corresponds to the fair value of their assets at the balance sheet date.

The funding requirements of the Pension Fund are defined in Bank of Portugal Notice 4/2005, which establishes:

„ the requirement to fully fund pensions under payment and a minimum of 95% of the past service liability for current personnel;

„ the establishment of a transitory period to fund the increase in the liability resulting from application of IAS 19 at December 31, 2004. This increase in the liability can be financed through the application of an amortization plan of uniform installments up to December 31, 2009, except for the part concerning the liability for post-employment medical care and changes in actuarial assumptions relating to the mortality table for which the funding plan can go up to December 31, 2011;

„ at December 31, 2005 the Bank opted to fund the full amount of the liability for retirement pensions of its employees and so is not applying the uniform amortisation plan allowed by the Bank of Portugal.

The past service liability for retirement pensions net of the amount of the pension fund is recorded in the BPI Group’s financial statements under the caption “Other liabilities” (insufficient coverage) or “Other assets” (excess coverage).

The following costs relating to retirement and survivor pensions are included in the consolidated statement of income of the BPI Group:

„ current service cost (cost for the year); „ interest cost on the total liability; „ expected income of the Pension Funds; „ cost relating to the increase in the past service liability due to early retirements; „ amortisation of the actuarial deviations or changes in assumptions outside the corridor; „ cost (or amortisation) resulting from changes in the conditions of the Pension Plan.

At the transition date, the BPI Group adopted the option, allowed under IFRS 1, of not recalculating actuarial gains and losses deferred since the inception of the pension plans (reset option). Consequently, deferred actuarial gains and losses reflected in the BPI Group’s financial statements as of December 31, 2003 were reversed by corresponding entry to retained earnings at the transition date (January 1, 2004).

2.7. Long service premiums (IAS 19) The BPI Group companies that have adhered to the Collective Vertical Labour Agreement (Acordo Colectivo de Trabalho Vertical) for the Portuguese Banking Sector have assumed the commitment to pay current employees that have fifteen, twenty five or thirty years of good service to the Group companies, a long service premium corresponding, respectively, to one, two or three months of their effective monthly remuneration (in the year the premium is attributed).

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Annually, the BPI Group determines the present value of the liability for long service premiums by actuarial calculation using the “Projected Unit Credit” method. The actuarial assumptions used (financial and demographic) are based on the expectations, as of the balance sheet date, regarding salary increases, using mortality tables adapted to the Bank’s population. The discount rate used is determined based on market rates for high quality corporate bonds with similar terms to those of payment of the liability. The assumptions are mutually compatible.

The liability for long service premiums is reflected under the caption “Other liabilities”.

The following costs relating to the liability for long service premiums are included in the consolidated statement of income of the BPI Group:

„ current service cost (cost for the year); „ interest cost; „ gain and loss resulting from actuarial deviations, changes in assumptions or changes in the conditions of the benefits.

2.8. Treasury shares (IAS 32) Treasury shares are recorded at cost in equity captions and are not subject to revaluation. Realised gains and losses, as well as the resulting taxes, are recorded directly in shareholders’ equity, not affecting net income for the year.

2.9. Share-based payments (Remuneração variável em acções – RVA) (IFRS 2)

The share-based payment program (Remuneração Variável em Acções - RVA) is a remuneration plan under which, whenever it is decided to grant variable remuneration to Executive Directors and employees of the BPI Group (in the latter case provided that it exceeds 2500 euro), it is partly made up of BPI shares and BPI share options. The individual remuneration under the RVA program varies between 10% and 50%, the percentage increasing with the responsibility level of the beneficiary.

The shares granted to Employees under the RVA program are transferred in full at the grant date, but 75% of the transfer is subject to a resolutive condition (relating to termination of the employment relationship, unless made by just cause of the Employee), which terminates on a gradual basis over the three years following the grant date (25% each year). The share purchase options may be exercised between the 90th day and the fifth year as from the grant date. Termination of the employment relationship between the Employee and BPI Group also affects the options granted, in accordance with RVA Regulations.

The conditions for granting shares and share options to the Executive Directors up to RVA 2009 were similar to those previously referred for Employees. As from RVA 2010, the shares and share options granted to Executive Directors under the RVA program are subject to the following suspensive condition: Banco BPI’s consolidated shareholders’ equity, based on the consolidated accounts for the third year following that to which the variable remuneration relates, must be greater than Banco BPI’s consolidated shareholders’ equity for the year to which the variable remuneration relates, taking into account the assumptions established in the RVA Regulations. The granting of shares is also subject to the suspensive condition of non termination of the management or employment relationship established in the RVA Regulations. In addition to these conditions, the granting of the shares is also subject to a suspensive term of three years as from the grant date and the strike period for the share options begins after that period.

Costs relating to the share-based payment program (RVA program) are accrued under the caption “Personnel costs” with a corresponding entry to “Other equity instruments”, as established by IFRS 2 for share-based payments. The cost of the shares and option premiums, as of the date they are granted, is accrued on a straight-line basis from the beginning of the year of the program (January 1) to the moment they become available to the employees.

For the purpose of share-based payments, the Bank has created a portfolio of BPI shares transferring ownership of the shares to employees on the grant date (in the case of Executive Directors, after verifying the suspensive terms and conditions). However, for accounting purposes, the shares remain in the Bank’s treasury share portfolio until the date they are made available. The shares are then derecognised by corresponding entry to the amounts accumulated under the caption “Other equity instruments”.

For purposes of the share-based payment in options, the BPI Group has created a portfolio of BPI shares in order to hedge the liability resulting from issuing call options over the BPI shares, following a delta hedging strategy (determined using a model to evaluate the BPI share options, developed in-house based on Black-Scholes methodology).

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This strategy corresponds to the creation of a portfolio with delta shares for each option granted, delta corresponding to the relationship between evolution of the price of an option and evolution of the price of the underlying shares. The treasury shares held to hedge the risk of variation in the value of the options sold are recorded under the caption “Treasury shares hedging the share-based payment program”, where they remain while they are held for that purpose.

When the options are exercised, the treasury shares are derecognised together with transfer of their ownership to the employees. At that time the Bank recognises a gain or loss resulting from the difference between the exercise price and the average cost of the treasury share portfolio hedging each program, less the cost of the option premiums accumulated in the caption “Other equity instruments”.

Realised gains and losses on treasury shares in the coverage and exercise of the options of the share-based payment program, as well as the related taxes, are recorded directly in shareholders’ equity, not affecting net income for the year.

2.10. Technical provisions (IFRS 4) The BPI Group sells capitalisation life insurance products through its subsidiary BPI Vida. Capitalisation insurance products without discretionary participation features are recorded in accordance with IAS 39 and included in the caption “Resources of customers and other debts”. Capitalisation insurance products with discretionary participation features are recorded in accordance with IFRS 4, in the caption “Technical provisions”.

The technical provisions recorded for life insurance contracts represent, collectively, the liability to the insured customers and include:

„ Mathematical provisions determined using prospective actuarial methods in accordance with the technical bases of each product. They also include a provision for rate commitments, which is recorded when the effective profitability rate of the assets which represent the mathematical provisions of a certain product is lower than the technical interest rate used to calculate the mathematical provisions. „ Provision for participation in profits to be attributed to the contracts in force at the end of each year. The amount is calculated in accordance with the technical bases of each contract, duly approved by the Portuguese Insurance Institute (Instituto de Seguros de Portugal), using the profitability rates for investments covering the respective mathematical provisions. „ Provision for claims to cover indemnities payable relating to claims incurred but not yet settled. Since the BPI Group does not commercialise risk insurance, no provision has been recorded for claims incurred but not yet reported (IBNR).

2.11. Provisions for other risks and charges (IAS 37) This caption includes provisions to cover other specific risks, namely tax contingencies, legal processes and other losses arising from the operations of the BPI Group.

2.12. Income taxes (IAS 12) All the Group companies are taxed individually.

Banco BPI and its subsidiary and associated companies with head offices in Portugal are subject to the tax regimes established in the Corporate Income Tax Code (Portuguese initials - CIRC) and in the Statute of Tax Benefits.

The Madeira and Santa Maria Off-shore Financial Branches of Banco BPI are exempt from corporate income tax up to December 31, 2011, in accordance with article 31 of the Statute of Tax Benefits. Under the provisions of Ministerial Order 555/2002 of June 4, for the purpose of applying this exemption, at least 80% of the taxable income from Banco BPI’s global operations is considered to result from activities outside the institutional scope of the Madeira and Santa Maria Free Trade Zones. This regime came into force on January 1, 2003.

Current taxes are calculated based on the legal tax rates in force in the countries in which the Bank operates during the reporting period.

Deferred tax assets and liabilities correspond to the tax recoverable and payable in future periods resulting from temporary differences between the carrying value of assets and liabilities and their respective tax bases. Tax losses carried forward and tax credits also give rise to the recognition of deferred tax assets.

Deferred tax assets are recognised only to the extent of the probable existence of sufficient expected future taxable income to absorb the deductible temporary differences.

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Deferred tax assets and liabilities have been calculated using the tax rates decreed for the period in which the respective assets or liabilities are expected to be realised.

Current and deferred taxes are recognised in the statement of income, except for those relating to amounts recorded directly in shareholders’ equity (namely gains and losses on treasury shares and securities available for sale).

The BPI Group does not record deferred tax assets and liabilities on temporary deductible or taxable differences relating to investments in subsidiary and associated companies, as these differences are not expected to revert in the foreseeable future, except for the following:

„ deferred tax liabilities relating to the estimated dividends that Banco de Fomento Angola is expected to pay to the BPI Group companies in the next year out of net income for the year, are recognized; „ deferred tax liabilities relating to all distributable net income (including the undistributed part) of Banco Comercial e de Investimentos are recognized.

Net income distributed to Banco BPI by subsidiary and associated companies in Portugal are not taxed in Banco BPI as a result of application of the regime established in article 51 of the Corporate Income Tax Code, which provides for the elimination of double taxation of net income distributed.

2.13. Preference shares (IAS 32 and IAS 39) Preference shares are classified as equity instruments when: „ There is no contractual obligation for the BPI Group to redeem the preference shares acquired by a holder (in cash or in another financial asset); „ Remission or early redemption of the preference shares can only be made at the option of the BPI Group; „ Dividends distributed by the BPI Group to the preference shareholders are discretionary.

The BPI Group classified the preference shares issued by BPI Capital Finance Ltd. as equity instruments. The payment of dividends and redemption of the shares are guaranteed by Banco BPI.

The preference shares classified as equity instruments, held by third parties, are presented in the consolidated financial statements in the caption “Minority interests”.

2.14. Insurance and reinsurance brokerage services Banco BPI is duly authorized by the Portuguese Insurance Institute (Instituto de Seguros de Portugal) to provide insurance brokerage services, in the Insurance Brokerage Services area, in accordance with the article 8, paragraph a), subparagraph i) of Decree-Law 144/2006 of July 31, and operates in the life and non life insurance brokerage areas.

In the insurance brokerage services area, Banco BPI sells insurance contracts. As remuneration for the insurance brokerage services rendered, Banco BPI receives commission for brokering insurance contracts, which is defined in agreements/protocols established between Banco BPI and the Insurance Companies.

Commission received for insurance brokerage services refer to: „ Commission that includes a fixed and a variable component. The fixed component is calculated by applying a predetermined rate over the amounts of subscriptions made through Banco BPI and a variable component calculated based on predetermined criteria, total annual fees being the sum of the fees calculated monthly; „ Commission for participation in the results of insurance, which is calculated annually and paid by the Insurance Company in the beginning of the year following that to which it refers (up to January 31).

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Commission received for insurance brokerage services is recognized on an accruals basis. Fees paid in a different period from that to which they relate are recorded as receivables in the caption “Other assets” by corresponding entry to “Commissions received - for insurance brokerage services”.

Banco BPI does not collect insurance premiums on behalf of Insurance Companies, or receive or pay funds relating to insurance contracts. Thus, there are no other assets, liabilities, income or expenses to be recognized relating to the insurance brokerage services rendered by Banco BPI, from those already disclosed.

2.15. Main estimates and uncertainties regarding the application of the accounting standards The BPI Group’s financial statements have been prepared using estimates and expected future amounts in the following areas:

Retirement and survivor pensions Retirement and survivor pension liabilities and Pension Fund income have been estimated based on actuarial tables and assumptions of the increase in pensions and salaries and future income of the Pension Funds. These assumptions are based on the BPI Group’s expectations for the period during which the liabilities will be settled.

Loan impairment Loan impairment has been determined based on expected future cash flows and estimated recoverable amounts. The estimates are made using assumptions based on the available historical information and assessment of the situation of the customers. Possible differences between the assumptions used and the actual future behaviour of the loans and changes in the assumptions used by the BPI Group have an impact on the estimates.

Fair value of derivatives and unlisted financial assets The fair value of derivatives and unlisted financial assets was estimated based on valuation methods and financial theories, the results of which depend on the assumptions used.

The environment of the financial markets, particularly in terms of liquidity, can influence the realisable value of these financial instruments in some specific situations, including their sale prior to maturity.

Income taxes Current and deferred taxes have been recognised based on the tax legislation currently in force for the BPI Group companies or on legislation already published for future application. Different interpretations of tax legislation can influence the amount of income taxes. Additionally, deferred tax assets are recognised based on the assumption of the existence of future taxable income.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 118

3. SEGMENT REPORTING

The BPI Group’s segment reporting is made up as follows:

• Domestic operations: consist of banking services provided to domestic customers, including members of emigrant communities and subsidiaries of Portuguese companies, and include:

o Commercial Banking o Investment Banking o Equity investments and others

• International operations: Consist of the operations in Angola carried out by Banco de Fomento Angola, S.A, in Mozambique by Banco Comercial de Investimentos, S.A.R.L. and BPI Dealer – Sociedade Financeira de Corretagem, S.A.R.L. and in South Africa by BPI Capital Africa (Proprietary) Limited.

Commercial banking The BPI Group’s operations are focused mainly on commercial banking. Commercial banking includes: • Retail banking – Retail banking includes commercial operations with private clients, businesses and sole traders with turnover of up to 2.5 million euro through a multi-channel distribution network made up of commercial branches, investment centres, home banking services (BPI Net), telephone banking (BPI Directo), specialised branches and a network of external promoters. • Corporate banking – Corporate banking includes commercial operations with private, public and municipal companies and public sector organisations (including the Central and Local Administration), as well as Foundations and Associations. Corporate banking also includes Project Finance and Public-Private Partnership operations in the commercial promotion area, structuring and organising financial operations and consultancy services relating to this area.

Investment banking Investment banking covers the following business areas: • Brokerage – includes brokerage (purchase and sale of securities) on account of customers; • Private Banking – Private Banking is responsible for implementing strategies and investment proposals presented to customers and managing all or part of their financial assets under management mandates given to the Bank. In addition, Private Banking provides asset management, tax information and business consulting services. • Corporate finance – This includes rendering consultancy services relating to the analysis of investment projects and decisions, market privatisation operations and the structuring of merger and acquisition processes.

Equity investments and others This segment includes essentially Financial Investments and Private Equity activities. The BPI Group Private Equity area invests essentially in unlisted companies with the following objectives: the development of new products and technologies, financing of investments in working capital, acquisitions and the strengthening of financial autonomy.

This segment also includes the Bank’s residual activity, such segments representing individually less than 10% of total income, net profit and the Group’s assets.

Inter-segment operations are presented based on the effective conditions of the operations and application of the accounting policies used to prepare the BPI Group’s consolidated financial statements.

The reports used by Management consist essentially of accounting information based on IFRS.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 119 The BPI Group’s balance sheet as of June 30, 2011 and investments made in tangible and intangible assets during the period, by segment, are as follows:

Domestic operations International operations Inter segment Commercial Investment Equity investments Inter segment BPI Group Total Angola Others Tot al operations banking banking and others operations ASSETS Cash and deposits at Central Banks 546 919 165 547 084 804 251 804 251 1 351 335 Loans and advances to other credit institutions repayable on demand 611 216 68 027 4 529 ( 350 214) 333 558 69 199 26 69 225 ( 54 099) 348 684 Financial assets held for trading and at fair value through profit or loss 815 545 220 683 ( 86 793) 949 435 85 566 58 85 624 1 035 059 Financial assets available for sale 4 826 118 30 581 42 415 ( 1 129) 4 897 985 1 657 142 1 657 142 6 555 127 Loans and advances to credit institutions 2 961 723 3 766 142 2 887 ( 5 542 142) 1 188 610 934 850 504 935 354 ( 642 006) 1 481 958 Loans and advances to customers 28 006 270 132 047 ( 23 160) 28 115 157 1 005 982 1 005 982 29 121 139 Held to maturity investments 1 135 223 79 049 ( 128 452) 1 085 820 1 085 820 Hedging derivatives 301 425 67 ( 30 807) 270 685 270 685 Other tangible assets 100 588 2 170 1 102 759 108 382 374 108 756 211 515 Intangible assets 5 486 38 5 524 722 8 730 6 254 Investment in associated companies and jointly controlled entities 61 087 94 858 155 945 26 969 26 969 182 914 Tax assets 598 884 1 412 ( 221) 600 075 8 8 600 083 Other assets 1 073 769 41 234 826 ( 159 041) 956 788 17 378 35 17 413 974 201 TOTAL ASSETS 41 044 253 4 341 615 145 295 ( 6 321 738) 39 209 425 4 683 472 27 982 4 711 454 ( 696 105) 43 224 774 LIABILITIES Resources of central banks 1 270 495 1 270 495 1 270 495 Financial liabilities held for trading 175 603 47 105 ( 90 812) 131 896 131 896 Resources of other credit institutions 7 406 319 99 440 14 645 ( 3 994 934) 3 525 470 65 709 65 709 ( 696 105) 2 895 074 Resources of customers and other debts 17 681 343 3 830 024 ( 1 729 777) 19 781 590 4 116 940 4 116 940 23 898 530 Debt securities 7 617 657 81 ( 152 463) 7 465 275 7 465 275 Financial liabilities relating to transferred assets 1 504 627 ( 6 831) 1 497 796 1 497 796 Hedging derivatives 418 997 164 ( 3 921) 415 240 415 240 Provisions 90 675 473 91 148 28 600 28 600 119 748 Technical provisions 2 596 327 180 790 2 777 117 2 777 117 Tax liabilities 35 564 3 996 ( 1 753) 37 807 4 840 4 840 42 647 Participating bonds 6 464 6 464 6 464 Subordinated debt 603 568 6 543 ( 267 806) 342 305 342 305 Other liabilities 736 466 65 135 4 177 ( 75 194) 730 584 43 099 976 44 075 774 659 TOTAL LIABILITIES 40 144 105 4 233 751 17 069 ( 6 321 738) 38 073 187 4 259 188 976 4 260 164 ( 696 105) 41 637 246 SHAREHOLDERS' EQUITY Shareholders' equity attributable to the shareholders of BPI 672 003 77 911 128 226 878 140 210 151 27 001 237 152 1 115 292 Minority interest 228 145 29 953 258 098 214 133 5 214 138 472 236 TOTAL SHAREHOLDERS' EQUITY 900 148 107 864 128 226 1 136 238 424 284 27 006 451 290 1 587 528 TOTAL LIABILITIES AND SHAREHOLDERS' EQU ITY 41 044 253 4 341 615 145 295 ( 6 321 738) 39 209 425 4 683 472 27 982 4 711 454 ( 696 105) 43 224 774

Investments made in: Property 46 46 539 539 585 Equipment and other tangible assets 1 692 179 1 871 3 329 399 3 728 5 599 Intangible assets 1 217 1 217 325 9 334 1 551

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 120

The BPI Group’s income statement for the period ended June 30, 2011, by segment, is as follows:

Domestic operations International op eration s Inter Commercial Investment Equity Inter segment segment BPI Group Total Angola Others Total banking banking investment and operations operations others Financial margin (narrow sense) 181 711 1 474 ( 1 155) 182 030 104 508 9 104 517 286 547 Gross margin on unit links 602 1 449 2 051 2 051 Income from equity instruments 1 156 100 291 1 547 1 547 Net commission relating to amortised cost 14 931 14 931 14 931 Financial margin 198 400 3 023 ( 864) 200 559 104 508 9 104 517 305 076 Technical result of insurance contracts 7 301 88 7 389 7 389 Commission received 132 818 21 159 ( 16 290) 137 687 10 617 10 617 ( 625) 147 679 Commission paid ( 31 215) ( 6 781) ( 1) 16 290 ( 21 707) ( 2 372) ( 2 372) 625 ( 23 454) Other income, net 10 897 41 10 938 12 925 12 925 23 863 Net commission income 112 500 14 419 ( 1) 126 918 21 170 21 170 148 088 Gain and loss on operations at fair value 90 497 5 869 96 366 31 250 31 250 127 616 Gain and loss on assets available for sale 234 ( 1) 233 233 Interest and financial gain and loss with pensions 5 954 33 1 5 988 5 988 Net income on financial operations 96 685 5 901 1 102 587 31 250 31 250 133 837 Operating income 23 671 267 ( 51) 23 887 960 960 24 847 Operating expenses ( 11 755) ( 148) ( 11 903) ( 428) ( 428) ( 12 331) Other taxes ( 2 267) ( 630) ( 2 897) ( 105) ( 2) ( 107) ( 3 004) Net operating expenses 9 649 ( 511) ( 51) 9 087 427 ( 2) 425 9 512 Oper a ti ng income from banking ac t iv i ty 424 535 22 920 ( 915) 446 540 157 355 7 157 362 603 902 Personnel costs ( 195 047) ( 10 834) ( 85) ( 205 966) ( 26 607) ( 206) ( 26 813) ( 232 779) General administrative costs ( 90 463) ( 5 495) ( 59) ( 96 017) ( 23 082) ( 173) ( 23 255) ( 119 272) Depreciation and amortisation ( 13 241) ( 676) ( 13 917) ( 5 688) ( 26) ( 5 714) ( 19 631) Overhead costs ( 298 751) ( 17 005) ( 144) ( 315 900) ( 55 377) ( 405) ( 55 782) ( 371 682) Recovery of loans, interest and expenses 7 744 7 744 1 783 1 783 9 527 Impairment losses and provisions for loans and guarantees ( 73 124) ( 114) ( 73 238) ( 6 584) ( 6 584) ( 79 822) Impairment losses and other provisions, net ( 32 094) ( 25) ( 254) ( 32 373) ( 1 872) ( 1 872) ( 34 245) Net income before income tax 28 310 5 776 ( 1 313) 32 773 95 305 ( 398) 94 907 127 680 Income tax ( 7 028) ( 1 644) 73 ( 8 599) ( 3 104) ( 291) ( 3 395) ( 11 994) Earnings of associated companies (equity method) 7 398 4 532 11 930 3 429 3 429 15 359 Global consolidated net income 28 680 4 132 3 292 36 104 92 201 2 740 94 941 131 045 Income attributable to minority interest ( 3 368) ( 979) ( 4 347) ( 47 557) ( 47 557) ( 51 904) Consolidated net income of the BPI Group 25 312 3 153 3 292 31 757 44 644 2 740 47 384 79 141 Cash flow after taxes 143 771 3 968 3 546 151 285 58 788 2 766 61 554 212 839 Overheads as a % of operating income from banking activit 70% 74% -16% 71% 35% 35% 62%

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 121 The BPI Group’s balance sheet as of December 31, 2010 and investments made in tangible and intangible assets during the year, by segment, are as follows:

Do mestic operations International operations Equity Inter segment Commercial Investment Inter segment BPI Group investments Total Angola Others To tal operations banking banking operations and others ASSETS Cash and deposits at Central Banks 475 516 268 475 784 852 028 410 852 438 1 328 222 Loans and advances to other credit institutions repayable on demand 539 341 94 821 4 534 ( 377 927) 260 769 98 788 9 98 797 ( 21 015) 338 551 Financial assets held for trading and at fair value through profit or loss 1 041 226 246 306 ( 118 832) 1 168 700 72 896 55 72 951 1 241 651 Financial assets available for sale 6 039 361 36 539 38 062 6 113 962 2 042 359 2 042 359 8 156 321 Loans and advances to credit institutions 3 167 783 3 522 812 2 883 ( 5 256 403) 1 437 075 470 922 2 470 924 ( 468 854) 1 439 145 Loans and advances to customers 28 741 641 146 374 ( 22 234) 28 865 781 1 189 225 1 189 225 30 055 006 Held to maturity investments 1 022 077 146 918 ( 125 411) 1 043 584 1 043 584 Hedging derivatives 305 089 161 ( 54 987) 250 263 250 263 Other tangible assets 133 837 2 243 1 136 081 115 996 115 996 252 077 Intangible assets 5 711 45 5 756 622 622 6 378 Investment in associated companies and jointly controlled entities 76 195 95 457 171 652 22 569 22 569 194 221 Tax assets 427 470 3 327 ( 194) 430 603 7 7 430 610 Other assets 987 023 57 151 1 151 ( 136 807) 908 518 15 263 3 15 266 923 784 TOTAL ASSETS 42 962 270 4 256 965 141 894 ( 6 092 601) 41 268 528 4 858 099 23 055 4 881 154 ( 489 869) 45 659 813 LIABILITIES Resources of central banks 1 245 537 1 245 537 1 245 537 Financial liabilities held for trading 332 195 73 498 ( 144 200) 261 493 261 493 Resources of other credit institutions 8 616 782 23 274 6 682 ( 3 504 254) 5 142 484 73 469 73 469 ( 489 869) 4 726 084 Resources of customers and other debts 17 364 900 3 630 833 ( 1 969 622) 19 026 111 4 214 752 4 214 752 23 240 863 Debt securities 7 934 078 100 ( 151 904) 7 782 274 7 782 274 Financial liabilities relating to transferred assets 1 570 774 ( 356) 1 570 418 1 570 418 Hedging derivatives 503 423 245 ( 4 224) 499 444 499 444 Provisions 78 608 446 79 054 31 519 31 519 110 573 Technical provisions 2 615 888 376 019 2 991 907 2 991 907 Tax liabilities 27 835 4 181 ( 2 271) 29 745 7 983 7 983 37 728 Participating bonds 7 167 7 167 7 167 Subordinated debt 898 314 10 089 ( 268 014) 640 389 640 389 Other liabilities 513 512 64 849 4 603 ( 50 027) 532 937 49 038 13 49 051 581 988 TOTAL LIABILITIES 41 709 013 4 183 534 9 014 ( 6 092 601) 39 808 960 4 376 761 13 4 376 774 ( 489 869) 43 695 865 SHAREHOLDERS' EQUITY Shareholders' equity attributable to the shareholders of BPI 1 000 255 56 066 132 880 1 189 201 234 338 23 037 257 375 1 446 576 Minority interest 253 002 17 365 270 367 247 000 5 247 005 517 372 TOTAL SHAREHOLDERS' EQUITY 1 253 257 73 431 132 880 1 459 568 481 338 23 042 504 380 1 963 948 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 42 962 270 4 256 965 141 894 ( 6 092 601) 41 268 528 4 858 099 23 055 4 881 154 ( 489 869) 45 659 813

Investments made in: Property 65 65 3 632 3 632 3 697 Equipment and other tangible assets 11 792 159 11 951 19 794 19 794 31 745 Intangible assets 1 768 18 1 786 177 177 1 963

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 122

The BPI Group’s income statement for the period ended June 30, 2010, by segment, is as follows:

Domestic operations Int ernat ional operations Inter Commercial Investment Equity Inter segment segment BPI Group Total A n go l a O t he r s To tal banking banking investment and operations operations others Financial margin (narrow sense) 205 859 2 871 ( 330) 208 400 90 220 2 90 222 298 622 Gross margin on unit links 592 1 470 2 062 2 062 Income from equity instruments 3 110 135 369 3 614 3 614 Net commission relating to amortised cost 15 685 15 685 15 685 Financial margin 225 246 4 476 39 229 761 90 220 2 90 222 319 983 Technical result of insurance contracts 6 067 69 6 136 6 136 Commission received 139 806 21 275 258 ( 17 656) 143 683 11 844 11 844 ( 874) 154 653 Commission paid ( 32 730) ( 5 406) ( 2) 17 656 ( 20 482) ( 2 419) ( 2 419) 874 ( 22 027) Other income, net 12 498 27 12 525 13 194 13 194 25 719 Net commission income 119 574 15 896 256 135 726 22 619 22 619 158 345 Gain and loss on operations at fair value 10 665 3 663 14 328 39 549 39 549 53 877 Gain and loss on assets available for sale ( 5 673) ( 1 908) 21 828 14 247 14 247 Interest and financial gain and loss with pensions 7 042 15 ( 1) 7 056 7 056 Net income on financial operations 12 034 1 770 21 827 35 631 39 549 39 549 75 180 Operating income 2 976 275 3 251 271 271 3 522 Operating expenses ( 8 955) ( 642) ( 3) ( 9 600) ( 684) ( 684) ( 10 284) Other taxes ( 2 494) ( 678) ( 4) ( 3 176) ( 217) ( 217) ( 3 393) Net operating expenses ( 8 473) ( 1 045) ( 7) ( 9 525) ( 630) ( 630) ( 10 155) Oper a ti ng income from banking ac t iv i ty 354 448 21 166 22 115 397 729 151 758 2 151 760 549 489 Personnel costs ( 178 218) ( 9 716) ( 205) ( 188 139) ( 24 401) ( 6) ( 24 407) ( 212 546) General administrative costs ( 94 352) ( 5 735) ( 112) ( 100 199) ( 21 156) ( 21 156) ( 121 355) Depreciation and amortisation ( 17 247) ( 696) ( 17 943) ( 5 512) ( 5 512) ( 23 455) Overhead costs ( 289 817) ( 16 147) ( 317) ( 306 281) ( 51 069) ( 6) ( 51 075) ( 357 356) Recovery of loans, interest and expenses 8 237 8 237 1 401 1 401 9 638 Impairment losses and provisions for loans and guarantees ( 47 594) 439 ( 47 155) ( 11 694) ( 11 694) ( 58 849) Impairment losses and other provisions, net ( 13 940) ( 30) ( 99) ( 14 069) ( 1 528) ( 1 528) ( 15 597) Net income before income tax 11 334 5 428 21 699 38 461 88 868 ( 4) 88 864 127 325 Income tax 6 190 ( 853) 113 5 450 4 260 ( 262) 3 998 9 448 Earnings of associated companies (equity method) 7 269 3 969 11 238 3 083 3 083 14 321 Global consolidated net income 24 793 4 575 25 781 55 149 93 128 2 817 95 945 151 094 Income attributable to minority interest ( 3 111) ( 472) ( 3 583) ( 48 035) ( 48 035) ( 51 618) Consolidated net income of the BPI Group 21 682 4 103 25 781 51 566 45 093 2 817 47 910 99 476 Cash flow after taxes 100 463 4 390 25 880 130 733 63 827 2 817 66 644 197 377 Overheads as a % of operating income from banking activit 82% 76% 1% 77% 34% 34% 65%

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 123

4. NOTES

4.1. Cash and deposits at Central Banks

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10

Cash 263 935 264 655 Demand deposits at the Bank of Portugal 357 304 290 803 Demand deposits at foreign Central Banks 729 857 772 494 Accrued interest 239 270 1 351 335 1 328 222

The caption “Demand deposits at the Bank of Portugal” includes deposits made to comply with the minimum cash reserve requirements of the European Central Bank System (ECBS). These deposits bear interest and correspond to 2% of the amount of customers’ deposits and debt securities maturing in up to 2 years, excluding deposits and debt securities of entities subject to the ECBS minimum cash reserves regime.

4.2. Deposits at other Credit Institutions

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10 Domestic Credit Institutions Demand deposits 2 524 11 453 Cheques for collection 98 835 100 513 Other 1 396 888 Foreign Credit Institutions Demand deposits 237 313 209 190 Cheques for collection 8 374 16 273 Accrued interest 242 234 348 684 338 551

Cheques for collection from domestic Credit Institutions correspond to cheques drawn by third parties against domestic credit institutions, which in general do not remain in this account for more than one business day.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 124

4.3. Financial assets held for trading and at fair value through profit or loss

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10

Financial assets held for trading Debt Instruments Bonds issued by Portuguese government ent it ies 9 874 89 989 Bonds issued by f oreign government entities 111 405 140 388 Bonds issued by other Port ugues e entit ies Non-subordinat ed debt 3 526 51 069 Subordinat ed debt 1 962 Bonds issued by foreign financial entities 77 Bonds issued by other foreign entities Non-subordinat ed debt 14 621 100 336 Subordinat ed debt 6 080 20 155 145 506 403 976 Equity instruments Shares issued by Portuguese ent it ies 140 711 118 728 Shares issued by foreign entities 100 168 195 545 240 879 314 273 Other securities Part ic ipating units issued by Portuguese ent it ies 26 897 Partic ipating units issued by foreign entities 82 131 511 82 158 408 386 467 876 657 Financial assets at fair value through profit or loss Debt Instruments Bonds issued by Portuguese government ent it ies 112 820 Bonds issued by f oreign government entities 56 744 Bonds issued by other Port ugues e entit ies Non-subordinat ed debt 21 757 Bonds issued by f oreign financial entities 744 Bonds issued by other foreign entities Non-subordinat ed debt 67 144 Subordinat ed debt 8 561 267 770 Equity instruments Shares issued by Portuguese entities 1 764 Shares issued by foreign entities 31 709 51 421 33 473 51 421 Other securities Part ic ipating units issued by Portuguese ent it ies 17 254 Partic ipating units issued by foreign entities 184 310 201 564 502 807 51 421 Derivative instruments with positive fair value (Note 4.4) 145 785 313 573 1 035 059 1 241 651

This caption includes the following assets hedging capitalisation insurance products issued by BPI Vida: Jun. 30, 11 Dec. 31, 10 Debt Instruments Of public entities 169 565 136 291 Other entities 98 221 147 912 Equity Instruments 13 918 73 384 Other securities 201 646 158 408 Derivative instruments with positive fair value 655 484 004 515 995

In the first half of 2011, in compliance with indications received from the Portuguese Insurance Institute (Instituto de Seguros de Portugal), BPI Vida reclassified the securities included in the capitalization insurance portfolios from the caption “Financial assets held for trading” to the caption “Financial assets at fair value through profit or loss”.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 125

In 2008 and 2009 the BPI Group reclassified bonds from Financial assets held for trading to Financial assets available for sale (Note 4.5), Loans and advances to customers (Note 4.7) and Held to maturity investments (Note 4.8), under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). The reclassifications made up to October 31, 2008 were based on prices at July 1, 2008 and the reclassifications made after that date were made based on prices at the reclassification date.

4.4. Derivatives The caption “Derivative instruments held for trading” (Notes 4.3 and 4.15) is made up as follows: Jun. 30, 11 Dec. 31, 10

Not iona l Book value Notional Book value value 1 Assets Liabilities val ue1 Assets Liabilities Exchange rate contracts Fut ures 23 9 4 48 23 9 82 4 1 1 Exchange forwards and swaps 1 501 377 1 026 950 966 898 506 253 Interest rate contracts Futures 82 308 1 9 Options 1 154 578 7 614 7 457 1 012 999 13 784 12 843 Swap s 9 52 3 7 09 21 45 5 16 180 11 17 0 35 2 1 71 57 3 12 2 948 Contracts over shares Fut ures 61 739 2 1 134 101 382 690 16 Swaps 380 633 11 737 5 101 260 880 5 277 4 758 Options 218 822 3 571 543 156 659 2 349 1 009 Contracts over other underlying items Futures 97 908 11 269 Others Options2 1 922 677 99 611 100 531 2 622 795 118 940 119 626 Others3 2 455 976 397 4 106 984 66 30 Overdue derivatives 372 386 17 556 867 145 785 131 896 20 732 350 313 573 261 493 1 In the case of swaps and forwards only the asset amounts were considered. 2 Parts of operations that are autonomous for accounting purposes, commonly referred to as "embedded derivatives”. 3 Corresponds to derivatives associated to Financial liabilities relating to transferred assets (Note 4.19).

The caption “Derivative instruments held for hedging” is made up as follows: Jun. 30, 11 Dec. 31, 10 Notional Book value Notional Book value 1 1 value Assets Liabilities value Assets Liabilities Exchange rate contracts Exchange forwards and swaps 47 069 2 5 23 659 9 Interest rate contracts Futures 5 989 097 332 14 251 9 916 926 245 35 844 Swaps 17 021 588 249 028 363 372 16 060 867 212 021 406 054 Contracts over shares Swaps 482 825 1 619 19 080 632 038 425 19 808 Contracts over credit events Swaps 49 163 548 1 330 49 163 556 1 292 Contracts over other underlying items Swaps 78 707 3 942 1 988 204 202 4 033 3 457 Others Options2 847 905 15 214 15 214 903 516 32 983 32 980 24 516 354 270 685 415 240 27 790 371 250 263 499 444 1 In the case of swaps and forwards only the asset amounts were considered. 2 Parts of operations that are autonomous for accounting purposes, commonly referred to as "embedded derivatives”.

The BPI Group’s operations include carrying out derivative transactions to manage its own positions based on expectations regarding market evolution (trading), meet the needs of its customers or hedge positions of a structural nature (hedging).

The BPI Group carries out financial derivative transactions in the form of contracts over exchange rates, interest rates, goods and metals futures price, shares or share indices (relating to inflation, shares, among others) or a combination of these. These transactions are realised in over-the-counter (OTC) markets and in organised markets (especially stock exchanges).

Derivatives traded on organised markets follow the standards and rules of these markets.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 126

Derivatives traded on the over-the-counter (OTC) markets are normally based on a standard bilateral contract that covers the group of operations over derivatives between the parties. In the case of inter-professional relationships, there is an ISDA – International Swaps and Derivatives Association Master Agreement. In the case of relations with customers there is a BPI contract.

These types of contract include offsetting responsibilities in the event of non compliance (the scope of the offsetting is established in the contract itself and is regulated by Portuguese legislation and, in the case of contracts with foreign counterparties or subject to foreign legislation, by the appropriate legislation).

Derivative contracts can also include an agreement to collateralise the credit risk generated by the transactions covered by them. Derivative contracts between two parties normally include all the derivative OTC transactions carried out between the two parties, irrespective of whether they are for hedging purposes or not.

In accordance with IAS 39, the parts of operations normally known as “embedded derivatives” are also considered separately and recorded as derivatives, in order to recognise, in net income, the fair value of these operations.

All derivatives (embedded or autonomous) are recorded at market value.

Derivatives are also recorded as off balance sheet items by their theoretical value (notional value). Notional value is the reference value for purposes of calculating the flow of payments and receipts resulting from the operation.

Market value (fair value) corresponds to the value of the derivatives if they were traded on the market on the reference date. Changes in the market value of derivatives are recognised in the appropriate balance sheet accounts and have an immediate effect on net income.

Note 4.48 includes detailed valuation methods to determine the fair value of derivative financial instruments.

The amount of the exposure corresponds to the present value of the estimated loss, in the case of counterparty default. In the case of a derivative contract that establishes the compensation of responsibilities in the event of non-compliance, the amount of the exposure is the sum of the market values of the operations covered by the contract, when positive. In the case of operations for which the contract does not establish the compensation of responsibilities, the amount of the exposure is equal to the sum of the market values of each individual transaction, if positive. The scope of the compensation clauses, in the case of default, is considered by the BPI Group on a conservative perspective, considering that, in the case of doubt, compensation does not exist.

The potential loss in a group of derivative operations on a given date corresponds to the amount of the exposure on that date. In futures contracts, the stock markets being the counterparties for the BPI Group’s operations, the credit risk is eliminated daily through financial settlement. For medium and long term derivatives, contracts usually provide for the netting of outstanding balances with the same counterparty, which eliminates or reduces credit risk. Additionally, in order to control credit risk in OTC derivatives, some agreements have also been signed under which the Bank receives from, or transfers to, the counterparty, assets (in cash or in securities) to guarantee fulfilment of the obligations.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 127

At June 30, 2011 the notional value, by term remaining to maturity, was as follows: > 3 months > 6 months > 1 year <= 3 months > 5 ye ars Total <= 6 months <= 1 year <= 5 years Over-the-counter market E xchange r ate contracts 1 297 908 170 191 80 347 1 548 446 Forwards 188 697 100 680 28 106 317 483 Swaps 1 109 211 69 511 52 241 1 230 963 Inter est r ate contracts 2 790 717 1 524 891 3 782 676 11 039 096 8 467 900 27 605 280 Swaps 2 677 734 1 474 955 3 720 753 10 241 762 8 430 093 26 545 297 Opt ions 112 983 49 936 61 923 797 334 37 807 1 059 983 Contr acts ove r inde xes a nd shares 42 9 4 62 67 67 6 56 695 52 2 46 7 5 98 0 1 08 2 280 Swaps 427 712 67 676 50 160 312 680 5 230 863 458 Opt ions 1 750 6 535 209 787 750 218 822 Contracts over credit events 49 163 49 163 Swaps 49 163 49 163 Contracts over other underlying items 68 632 10 075 78 707 Swaps 68 632 10 075 78 707 Other s 439 529 181 070 153 502 2 969 675 1 482 782 5 226 558 Opt ions 316 834 181 070 153 502 1 671 765 447 411 2 770 582 Oth ers 12 2 6 95 1 29 7 91 0 1 0 35 37 1 2 45 5 976 4 957 616 1 943 828 4 073 220 14 649 033 9 966 737 35 590 434 Organized markets E xcha nge r ate c ontra cts 23 9 4 48 23 9 448 Futures 239 448 239 448 Inter est rate contracts 1 991 768 2 022 319 1 927 639 141 966 6 083 692 Futures 1 989 097 2 020 000 1 840 000 140 000 5 989 097 Opt ions 2 671 2 319 87 639 1 966 94 595 Contracts over indexes and shares 61 739 61 739 Futures 61 739 61 739 Contracts over other underlying items 14 288 11 088 21 295 5 1 23 7 9 7 908 Futures 14 288 11 088 21 295 51 237 97 908 2 307 243 2 033 407 1 948 934 193 203 6 482 787 7 264 859 3 977 235 6 022 154 14 842 236 9 966 737 42 073 221

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 128

At December 31, 2010 the notional value, by term remaining to maturity was as follows: > 3 months > 6 months > 1 year > 5 years Total <= 3 months <= 6 months <= 1 year <= 5 years Over-the-counter market E xchange r ate contracts 841 371 80 373 68 813 990 557 Forwards 174 842 12 564 58 872 246 278 Swaps 666 529 67 809 9 941 744 279 Interest rate contracts 1 222 055 1 333 873 4 536 484 12 114 111 9 037 695 28 244 218 Swaps 1 142 969 1 309 282 4 431 950 11 337 636 9 009 382 27 231 219 Options 79 086 24 591 104 534 776 475 28 313 1 012 999 Contracts over indexes and shares 325 298 39 107 149 419 520 123 15 630 1 049 577 Swaps 325 298 39 107 147 669 365 964 14 880 892 918 Options 1 750 154 159 750 156 659 Contracts over credit events 49 163 49 163 Swaps 49 163 49 163 Contracts over other underlying items 44 258 74 318 75 551 10 075 204 202 Swaps 44 258 74 318 75 551 10 075 204 202 Others 299 560 316 791 602 547 3 109 647 3 304 750 7 633 295 Options 299 560 316 791 448 257 1 756 531 705 172 3 526 311 Others 154 290 1 353 116 2 599 578 4 106 984 2 732 542 1 844 462 5 357 263 15 868 595 12 368 150 38 171 012 Or ganized markets E xchange r ate contracts 239 824 239 824 Futures 239 824 239 824 Interest rate contracts 2 098 036 1 944 198 4 030 000 1 927 000 9 999 234 Futures 2 098 036 1 944 198 4 030 000 1 927 000 9 999 234 Contracts over indexes and shares 101 382 101 382 Futures 101 382 101 382 Contracts over other underlying items 1 712 1 506 2 498 5 553 11 269 Futures 1 712 1 506 2 498 5 553 11 269 2 440 954 1 945 704 4 032 498 1 932 553 10 351 709 5 173 496 3 790 166 9 389 761 17 801 148 12 368 150 48 522 721

At June 30, 2011 the distribution of derivative operations, by counterparty, was as follows: Jun. 30, 11 Notional % of Notional va lue 1 Net exposure 2 val ue Over-the-counter market 30 363 876 157 633 82.4% O TC with Financial I nst it utions 24 971 498 41 886 67.8% OTC with other Financial Intermediaries 1 887 702 88 5.1% O TC with Local and Administrat ive Public S ect or 6 854 241 0.0% OTC with Investment/Pension funds 164 373 36 0.4% O TC with Companies 3 271 196 111 953 8.9% OTC with Individuals 62 253 3 429 0.2% Regul ated markets 6 482 787 17.6% S toc k exchange 6 482 787 17.6% 36 846 663 157 633 100.0% 1 Does not include embedded derivates and other options in the amount of 5 226 558 t. euro. 2 Amount of exposure considering netting agreements and collaterals.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 129

At December 31, 2010 the distribution of derivative operations, by counterparty, was as follows: Dec. 31, 10 Notional Net % of Notional value1 exposure2 val ue Over-the-counter market 30 537 717 175 870 74.7% OTC with Financial Institutions 24 868 294 24 961 60.8% OTC with other Financial Intermediaries 1 935 739 125 4.7% OTC with Local and Administrative Public Sector 6 784 344 0.0% OTC with Investment/Pension funds 130 549 1 034 0.3% OTC with Companies 3 535 702 145 732 8.6% OTC with Individuals 60 649 3 674 0.1% Regulated markets 10 351 709 25.3% Stock exchange 10 351 709 25.3% 40 889 426 175 870 100.0% 1 Does not include embedded derivates and other options in the amount of 7 633 295 t. euro. 2 Amount of exposure considering netting agreements and collaterals.

At June 30, 2011 the distribution of derivative operations, by counterparty external rating, was as follows: Jun. 30, 11 Exposure Notional Gross considering Net Value1 exposure 2 netting3 exposure4 Over-the-counter market (OTC) AA+ 5 250 AA 1 319 191 13 336 AA- 4 991 775 43 335 12 057 902 A+ 10 719 683 68 869 14 776 14 776 A 3 284 858 75 599 35 286 24 171 A- 153 790 6 283 5 634 1 399 BBB+ 4 136 951 5 358 3 798 638 N.R. 5 752 378 126 141 119 904 115 747 30 363 876 338 921 191 455 157 633 Traded on the stock exchange Futures5 6 388 191 Options 94 596 6 482 787 36 846 663 338 921 191 455 157 633 Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings. 1 Does not include embedded derivates in the amount of 5 226 558 t. euro. 2 Amount of exposure without considering netting agreements and collateral. 3 Amount of exposure without considering collateral. 4 Amount of exposure considering netting agreements and collateral. 5 The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 130

At December 31, 2010 the distribution of derivative operations, by counterparty external rating, was as follows: Dec. 31, 10

Exposure Not iona l G ross consi dering Net Val ue1 exposure 2 ne t ting 3 exposure4 Over-the-counter market (OTC) AA+ 5 250 AA 1 380 293 16 088 389 389 AA- 5 469 688 125 322 79 125 4 832 A+ 10 895 674 78 420 15 101 3 872 A 6 593 047 98 969 26 879 9 892 A- 201 723 4 032 2 345 225 BB B+ 15 146 891 891 891 N. R. 5 976 896 164 187 162 356 155 769 30 537 717 487 909 287 086 175 870 Traded on the stock exchange Futures 5 10 351 709 10 351 709 40 889 426 487 909 287 086 175 870 Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings. 1 Does not include embedded derivates in the amount of 7 633 295 t. euro. 2 Amount of exposure without considering netting agreements and collateral. 3 Amount of exposure without considering collateral. 4 Amount of exposure considering netting agreements and collateral. 5 The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 131

4.5. Financial assets available for sale

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Debt instruments Bonds issued by Portuguese government ent it ies 2 037 574 2 614 116 Bonds issued by f oreign government entities 3 131 719 3 880 253 Bo nds issued by other Port ug ues e entit ie s Non-subordinat ed debt 151 503 151 411 Bo nds issued by other fo reign en tities Non-subordinat ed debt 320 010 643 306 Subordinat ed debt 695 845 688 653 Impairment ( 1 857) ( 1 968) 6 334 794 7 975 771 Equity instruments Shares issued by Portuguese entities 60 903 66 949 Impairment ( 25 373) ( 25 294) Quotas 1 1 Shares issued by foreign ent ities 31 130 31 424 Impairment ( 17 014) ( 16 864) 49 647 56 216 Other securities Part icipating units is sued by Port uguese ent it ies 169 490 123 385 Impairment ( 3 361) ( 3 221) Part icipating units is sued by foreign entities 1 105 1 166 167 234 121 330 Loans and other receivables 19 878 8 287 Impairment ( 16 426) ( 5 283) 3 452 3 004 Overdue bonds 590 590 Impairment on overdue bonds ( 590) ( 590) 6 555 127 8 156 321

Banco BPI holds a portfolio of fixed rate bonds, issued by national and international entities, in which the interest rate risk is hedged by derivative instruments.

The caption “Loans and other receivables” corresponds to shareholders’ loans to, and supplementary capital contributions in, companies classified as financial assets available for sale.

In the review made by the Bank, no impaired securities were identified, other than the amounts already recognised.

The changes in impairment losses and provisions in the first half of 2011 and 2010 are shown in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 132

At June 30, 2011 this caption was made up as follows: Amou nts per unit Net gain / Hedge Nature and type of security Quantity Book Value / Nominal Listing / Price Cost (loss) on accounting Impairment Fair Value1 securities2 effect2

Debt Instruments Issued by Portuguese Entities Portuguese Public Debt Treasury Bonds OT - 5% - JUNHO - 2002/2012 1 030 185 000 0.01 94.43 1 078 994 977 747 ( 69 714) ( 15 928) OT - 5.45% - SETEMBRO - 1998/2013 150 000 85.84 150 135 ( 22) OT-3.6%-15.10.2014 1 141 000 0.01 0.01 1 147 887 ( 285) OT-4.75%-14.06.2019 1 700 000 000 0.01 0.01 1 804 908 1 058 805 ( 732 319) ( 54 048) 2 885 199 2 037 574 ( 802 340) ( 69 976) Other residents Non - Subordin ated Debt Bonds ANA - AEROP.PORTUGAL-TV-28.08.2013 50 000 000 50 000.00 50 483.17 50 000 52 193 483 ( 342) BANCO ESPIRITO SANTO-3.75%-19.01.2012 35 000 000 50 000.00 48 360.50 35 896 34 435 ( 1 442) ( 116) BANCO ITAU EUROPA-TV. (27.07.2011) 30 000 000 50 000.00 49 829.00 29 595 29 987 ( 92) GALP-ENERGIA SGPS - TV - 20.05.2013 3 000 000 50 000.00 49 270.00 2 956 2 974 JMR-GESTAO EMPRESAS RETALHO-2007/2012 4 800 000 50 000.00 50 000.00 4 800 4 826 MOTA ENGIL - TX.VR. 2004-2011 1 000 000 1.25 1.25 1 000 1 000 PARPUBLICA - 3.5% - 08.07.2013 20 000 000 50 000.00 38 385.00 19 948 16 039 ( 4 678) ( 387) PORTUCEL-EMP.CELU.PAPEL-TV.(27.10.2012) 4 700 000 1 000.00 997.9 4 700 4 718 ( 5) SEMAPA - 2006/2016 500 000 50 000.00 49 785.00 495 501 1 SONAE DISTRIBUIÇAO SETEMBRO - 2007/2015 4 800 000 10.00 10.00 4 800 4 830 154 190 151 503 ( 5 733) ( 845) Issued by non - residents By Foreign Government Entities Bonds Bilhetes do Tesouro (Angola) 61 705 475 7.44 414 250 429 244 BUONI POLIENNALI DEL T-4.25%-01.09.2019 800 000 000 1 000.00 980.80 818 068 795 878 ( 31 088) ( 28 842) BUONI POLIENNALI DEL T-4.5%-01.03.2019 175 000 000 1 000.00 998.45 185 458 177 332 ( 9 197) ( 7 478) IRISH TREASURY-4%-15.01.2014 20 000 000 0.01 0.01 20 124 16 033 ( 4 437) ( 417) IRISH TREASURY-4.4%-18.06.2019 235 000 000 0.01 0.01 229 115 149 658 ( 80 866) ( 2 949) IRISH TREASURY-5.9%-18.10.2019 100 000 000 0.01 0.01 108 108 70 642 ( 40 105) ( 1 173) Obrigações do Tesouro (Angola) 771 444 872 325 901 350 Outros títulos de dívida IPC (Angola) 76 280 7.44 75 138 76 343 REP GRECIA-6%-19.07.2019 480 000 000 1 000.00 496.00 530 378 265 381 ( 284 169) ( 21 309) Títulos do Banco Central (Angola) 34 500 119 7.44 218 232 249 858 3 471 196 3 131 719 ( 449 862) ( 62 168) By ot her n on resident issu ers Non - Subordin ated Debt Bonds ALEUTIAN INV LLC-TV-25.10.2012 4 151 387 100 000.00 63 412.44 3 777 3 814 ( 243) ALPHA CREDIT GROUP-TV-17.01.2012 1 450 000 1 000.00 911.47 1 437 1 326 ( 127) ALROSA FINANCE SA-8.875%-17.11.2014 8 994 672 1 000.00 791.36 10 381 10 383 708 ( 1 096) ALTADIS EMIS.FINANCE - 4% (11.12.2015) 35 000 000 1 000.00 1 025.53 33 026 36 664 1 852 ( 1 950) ATLANTES MORTGAGE -SR.1-CL.A (17.1.2036) 1 529 542 30 590.83 26 554.32 1 334 1 333 ( 202) AVOCA CLO BV-SR-II.X-C L-A1-15.01.2020 682 690 853.36 834.33 666 672 ( 7) BANCA POPOLARE DI MILANO-TV-31.01.2014 500 000 1 000.00 955.85 494 479 ( 20) BES FINANCE LTD-TV 18.07.2011 5 000 000 1 000.00 997.73 5 000 5 004 ( 11) BRAZIL FOREIGN DIV.P.R.F-5.5%(20.09.2011 427 397 123.54 87.19 421 442 9 CAIXA ECO MONTEPIO GERAL-TV-03.05.2012 300 000 1 000.00 908.36 294 273 ( 26) CELF LOAN PART.BV-SR.2005-1X CL.A 2021 745 196 931.50 871.51 720 702 ( 48) CEMG (CAY)-TV-(19.09.2011) 1 500 000 50 000.00 49 249.00 1 500 1 478 ( 23) CM BANCAJA FTA-SR.1 CL.A TV.(22.12.2036) 200 832 10 041.59 9 304.91 172 186 12 CORSAIR FIN IRE-TV-20.06.2012 6 500 000 50 000.00 35 555.00 6 500 4 627 ( 1 878) COSAN FINANC E LTD-7%-01.02.2017 13 837 958 1 000.00 744.08 13 521 15 283 1 228 ( 3 070) COSIPA COMMERCIAL - 8.25% (14.06.2016) 7 264 928 1 000.00 803.00 8 148 8 458 706 ( 1 053) 1 Net of impairment. 2 Amount recorded in revaluation reserves (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 133

Amou nts per unit Net gain / Hedge Nature and type of security Quantity Book Value / Nominal Listing / Price Cost (loss) on accounting Impairment Fair Value1 securities2 effect2 Bonds ( cont) DOLLAR DIVERS RI.F-6.55%(16.12.2013)-REG 1 419 321 410.27 283.86 1 545 1 423 ( 37) DUCHESS-SR.V-X CL.B-TV.25.05.2021 800 000 1 000.00 720.00 742 577 ( 182) EDISON SPA - TX.VR. (19.07.2011) 5 000 000 1 000.00 999.89 5 079 5 019 ( 1) EIRLES TWO LIMITED-TV. PERP. 800 000 100 000.00 80 000.00 794 646 ( 160) EURO-VIP / 1990 4 151 387 1 000.00 477.41 4 151 2 870 83 1 370 FTA SANTANDER EMP-SR.1-CL.A2(04.11.38) 472 457 11811.42 11 575.19 451 464 10 GAZ CAPITAL(GAZPROM)-6.212% (22.11.2016) 22 486 681 1 000.00 745.52 22 409 24 377 1 786 ( 3 605) GLITNIR BANKI HF-TV-24.05.2011 500 000 1 000.00 181.30 487 91 91 487 HARVEST CLO-SR.II-X CL.A (21.05.2020) 515 474 9 725.93 9 161.83 499 487 ( 30) HSBC FINANCE CORP-TV. (05.04.2013) 500 000 1 000.00 987.61 494 496 ( 4) ING BANK NV-TX.VR (16.5.2012) 800 000 10 000.00 9 579.3 788 769 ( 31) INTERGAS FINANCE BV-6.875%-04.11.2011 4 497 336 1 000.00 703.92 4 598 4 624 70 ( 96) INTL LEASE FINANCE CORP-TX.VR. 15.8.2011 900 000 50 000.00 49 675.50 891 896 ( 6) KION MORTGAGE FIN SR.06-1 CL.A-15.07.51 179 728 2 808.25 1 945.55 178 125 ( 54) LAFARGE-4.25% (23.03.2016) 30 000 000 1 000.00 997.13 28 721 30 259 536 ( 2 511) LAFARGE-6.5%-15.07.2016 6 227 081 1 000.00 750.11 6 403 6 937 435 ( 985) MADISON AVENUE C.LTD(24.3.14)-O.HIP-CL.A 401 581 58 040.50 39 194.30 368 393 4 MAGRITTE FINANCE NV-SR.2004-CL.A(1.6.32) 676 272 67 627.21 65 170.27 646 653 ( 24) ORION FINANCE PLC- T.V. (15.08.2040) 199 395 6 646.50 6 518.89 189 196 6 OTE PLC-4.625%-20.05.2016 25 000 000 50 000.00 41 749.50 24 905 21 004 ( 4 068) ( 1 276) PEMEX PROJ.FDG MAST.TR - 6.375%- 2016 28 000 000 1 000.00 1 083.68 30 528 31 951 845 ( 1 767) PORTUGAL TELCM INT FIN-4.375%(24.3.2017) 24 000 000 1 000.00 830.84 22 013 20 221 ( 2 834) ( 2 189) SNS BANK NEDERLAND-TV (6.10.2011) 3 000 000 10 000.00 9 991.00 3 000 3 008 ( 3) TELECOM ITALIA SPA -4.75% (19.05.2014) 62 500 000 50 000.00 51 382.00 62 005 64 568 1 908 ( 2 914) TELECOM ITALIA SPA-TV.(06.12.2012) 5 000 000 50 000.00 49755.5 4 999 4 975 ( 32) 314 274 318 153 238 ( 22 512) 1 857 Subordinated Debt Bonds ALLIANZ FINANCE BV-4.375% PERP. 135 000 000 1 000.00 876.25 128 393 120 446 ( 12 926) ( 8 873) ALLIANZ FRANCE-4.625%-PERP 20 000 000 1 000.00 898.50 19 489 18 021 ( 1 731) ( 1 261) AVOCA CLO SR.IV-X CL.B-TV.(18.02.2022) 800 000 100 000.00 68 440.00 746 553 ( 221) AXA SA - 5.777% PERP/SUB 100 000 000 1 000.00 882.93 104 579 93 975 ( 14 142) ( 6 176) BANCO SABADELL-5.234%-PERPETUA 50 000 50 000.00 34 375.00 49 36 ( 15) BAYER AG - 5% (29.07.2105) 75 000 000 1 000.00 999.70 71 249 78 429 1 899 ( 4 369) C8 CAPITAL SPV - 6.64% - PERPETUA 44 973 362 1 000.00 501.63 44 784 32 606 ( 12 282) ( 5 639) CAJA AHORROS DE GALICIA-TV-PERPETUA 50 000 50 000.00 29 000.00 50 29 ( 21) CIBELES FTYPME-SR.III-CL.BSA(26.11.2030) 83 870 20 967.45 20 443.26 83 82 ( 1) CLARIS MILLESIME CDO-SR.1-CL.2(10.06.24) 500 000 500 000.00 352 500.00 450 353 ( 108) CLOVERIE 2004-72-TX.VR.(17.11.2024) 500 000 500 000.00 28 250.00 475 29 ( 452) DONG A/S - 5.5% (29.06.3005) 65 000 000 1.00 100 349.00 65 111 65 237 157 ( 5 833) ELM BV (SWISS REIN CO) - TV - PERPETUA 48 000 000 50 000.00 44 091.50 48 364 42 576 ( 5 858) ( 3 223) GENERALI FINANCE BV - 5.479% - PERPETUAS 75 000 000 50 000.00 42 969.00 76 049 66 052 ( 11 138) ( 5 094) GRANITE MASTER-SR.2006-1A-CL.A5-20.12.54 1 138 681 299.22 199.48 1 124 1 097 ( 41) GRANITE MORTG.-TV(20.3.2044)-SR.04-1/2C 500 000 100 000.00 72 000.00 499 360 ( 140) GRANITE MORTG.-TV(20.3.2044)-SR.04-1/2M 500 000 100 000.00 82 000.00 499 410 ( 90) GRANITE MORTG.-TV(20.9.2044)-SR.04-3/2C 153 488 383.72 288.91 152 116 ( 38) HARBOURMASTER CLO-S.4X-CL.A3(11.10.2019) 500 000 1.00 0.82 491 412 ( 84) HARVEST CLO SA-SR.IX-CL.B2 (29.3.2017) 750 000 250 000.00 208 400.00 745 630 ( 125) HENKEL KGAA - T.V. (25.11.2104) 5 000 000 1 000.00 1 021.24 4 913 5 266 150 ( 305) LUSITANO MTGE-SR.1-CL.D-TV (15.12.2035) 200 000 100 000.00 35 800.00 198 72 ( 128) MADRID RMBS FTA-SR.06-1 CL.A2-22.06.2049 275 251 68812.77 45 106.77 270 181 ( 90) MARLIN BV-SR.1-CL.B (23.12.2012) 37 219 37 218.78 35 916.12 37 36 ( 1) OLD MUTUAL PLC-OB.PERPETUA 25 000 000 1 000.00 869.23 24 324 22 546 ( 2 955) ( 1 415) OPERA FINANCE(DE)-SR.GER3 CL.B-25.1.2022 1 000 000 50 000.00 41 000.00 937 823 ( 133) PELICAN MORTGAGES-2/B (15.9.2036) 290 000 10 000.00 4 511.00 286 131 ( 159) RESIDENTIAL MORTG.SEC-17X -M1C(13.05.37) 54 204 9 034.00 7 725.88 54 46 ( 8) RHODIUM BV - SR.1X- CL.C (27.5.2084) 800 000 100 000.00 30 000.00 785 242 ( 557) SIEMENS FINANCIERINGSMAT-5.25% 14.9.2066 50 000 000 1 000.00 1 019.99 50 901 53 078 473 ( 3 280) VATTENFALL AB-TV. PERP. 65 000 000 1 000.00 1 006.88 64 217 65 457 850 ( 5 809) VINCI - 6.25% PERPETUAS 25 000 000 50 000.00 51 075.00 25 100 26 518 472 ( 1 473) 735 403 695 845 ( 59 443) ( 52 750) 1 Net of impairment. 2 Amount recorded in revaluation reserves (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 134

Amou nts per unit Net gain / Hedge Nature and type of securities Quantity Book Value / Nominal Listing / Price Cost (loss) on accounting Impairment Fair value1 securities2 effect2 Equity Instruments Issued by residents Shares AGROGARANTE SA 353 520 1.00 1.00 354 354 ALAR - EMP.IBERICA MATERIAL AERONAUTICO 2 200 4.99 20 20 Alberto Gaspar, SA 60 000 141 141 APIS-SOC.IND.PARQUETES AZARUJENSE (C) 65 000 4.99 APOR-AG.P/MODERNIZAÇAO PORTO - CL.B 5 665 5.00 26 26 BOAVISTA FUTEBOL CLUBE, FUTEBOL,SAD 21 900 5.00 110 110 BOMBARDIER TRANSPORTATION PORTUGAL SA 31 5.00 BUCIQUEIRA SGPS 8 5.00 1 1 Cª AG.FONTE SANTA MONFORTINHO-D.SUB/E.98 10 5.00 CADERNO VERDE - COMUNICAÇAO (C) 134 230 1.00 967 967 Caravela Gest, SGPS, SA 272 775 1 895 223 18 1 691 CARMO & BRAZ (C) 65 000 4.99 CIMPOR - CIM.DE PORTUGAL-SGPS 3 565 1.00 5.27 7 19 12 COIMBRAVITA - AGENCIA DESENV.REGIONAL 15 000 4.99 75 75 COMPª AURIFICIA - N 1 186 7.00 1 111.30 24 1 318 1 294 COMPª PRESTAMISTA PORTUGUEZA 10 1.00 COMPª.FIAÇAO E TECIDOS DE FAFE - P 240 4.99 COMPANHIA DIAMANTES ANGOLA - P (I)-510 166 716 2.49 COMPANHIA DIAMANTES ANGOLA - P (II) 1 000 2.49 COMUNDO-CONSORCIO MUNDIAL IMP.EXP. 3 269 0.5 6 2 4 Conduril, SA 184 262 806 10 036 9 231 CORTICEIRA AMORIM - SGPS 127 419 1.00 0.99 315 126 52 241 DIGITMARKET-SIST.INF.-N 4 950 1.00 743 743 EIA-ENSINO INVESTIGAÇAO E ADMINIST. 10 000 4.99 50 34 16 EMP.CINEMATOGRAFICA S.PEDRO 100 4.99 EMPRESA O COMERCIO DO PORTO 50 2.49 1 1 ESENCE - SOC.NAC.CORTICEIRA - N 54 545 4.99 ESTAMPARIA IMPERIO-EMP.IND.IMOBILIARIOS 170 4.99 1 1 EURODEL-IND.METALURGICAS E PARTICIPAÇOES 23 5.00 EUROFIL - IND.PLAST.E FILAM. 11 280 4.99 25 25 F.I.T.-FOM.IND.TOMATE - P 148 4.99 3 3 FAB. VASCO DA GAMA - IND.TRANSF. 33 4.99 1 1 FUTEBOL CLUBE DO PORTO 105 000 5.00 0.74 539 78 461 GAP - SGPS 548 4.99 3 3 GARVAL - SOCIEDADE DE GARANTIA MUTUA 3 646 490 1.00 1.00 3 646 3 646 GEIE - GESTÃO ESPAÇOS INC.EMPRESARIAL(C) 12 500 1.00 13 13 GESTINSUA - AQ.AL.PATRIMONIOS IMOB.MOB. 430 5.00 2 2 GREGORIO & CA. 1 510 4.99 4 4 IMPRESA SGPS 6 200 000 0.5 0.69 22 791 4 278 18 513 INCAL-IND.E COM.DE ALIMENTAÇÃO 2 514 1.13 2 2 INOVCAPITAL-SOC.DE CAPITAL DE RISCO,SA 241 527 5.00 5.45 1 205 1 317 112 INTERSIS AUTOMAÇAO, ENG.DE SISTEMAS 42 147 4.99 1 307 1 307 J.SOARES CORREIA-ARMAZENS DE FERRO 84 5.00 2 2 JOTOCAR - JOÃO TOMAS CARDOSO - P 3 020 4.99 8 8 LISGARANTE - SOC.DE GARANTIA MUTUA 1 152 290 1.00 1.00 1 152 1 152 LISNAVE - EST.NAVAIS 180 5.00 1 1 MARGUEIRA-SOC.GEST.DE FUNDOS INV.IMOB.-N 3 511 5.00 18 18 MATUR-SOC.EMPREEND.TURISTICOS DA MADEIRA 13 435 5.00 146 146 MATUR-SOC.EMPREEND .TURISTICOS MADEIRA-N 4 5.00 MAXSTOR - SUP.E MATRIZES INFORMATICOS-C 8 190 4.99 41 41 METALURGIA CASAL - P 128 4.99 1 1 Mimalha, SA 40 557 336 336 MORETEXTILE,SGPS,SA 711 1.00 1 1 NET - NOVAS EMPRESAS E TECNOLOGIAS - N 10 539 5.00 3.73 25 39 14 NEWPLASTICS 1 445 1.00 1 1 NORGARANTE - SOC.DE GARANTIA MUTUA 119 480 1.00 1.00 119 119 NORGARANTE - SOC.DE GARANTIA MUTUA-(C) 750 000 1.00 1.00 750 750 NUTROTON SGPS - C 11 395 5.00 4.38 50 50 OFICINA DA INOVACAO 10 000 5.00 6.88 50 69 29 10 PORTO DE CAVALEIROS , SGPS 2 4.99 PRIMUS - PROM.DESENVOLVIMENTO REGIONAL 8 000 4.99 40 16 24 S.P.G.M.- SOCIEDADE DE INVESTIMENTO - N 665 150 1.00 1.00 664 665 1 SALVOR - SOC.INV.HOTELEIRO - P 10 5.00 SANJIMO - SOCIEDADE IMOBILIARIA 1 620 4.99 8 8 SAPHETY LEVEL - TRUSTED SERVICES 5 069 1.00 98 98 SDEM -SOC.DE DESENV.EMPR.MADEIRA,SGPS-N 937 500 1.00 0.94 938 882 200 255 1 Net of impairment. 2 Amount recorded in revaluation reserves (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 135

Amou nts per unit Net gain / Hedge Nature and type of securities Quantity Book Value / Nominal Listing / Price Cost (loss) on accounting Impairment Fair value1 securities2 effect2 SENAL-SOC.NAC.DE PROMOÇÃO DE EMPRESAS-P 450 0.50 SIBS-FORWARD PAYMENT SOLUTIONS,SA 738 455 5.00 3 115 3 115 SOC.CONSTRUÇÕES ERG 50 4.99 SOC.CONSTRUÇÕES ERG (EM.93) - IR (C) 6 4.99 SOC.INDUSTRIAL ALIANÇA (VN 500.$00) 1 2.49 SODIMUL-SOC.DE COMERCIO E TURISMO 25 14.96 2 2 SOFID-SOC.P/FIN.DES.-INST.FIN.CREDITO SA 1 000 000 1.00 1.12 1 250 1 121 129 SOMOTEL-SOC.PORTUGUESA DE MOTEIS 1 420 2.50 SONAE - SGPS 36 868 1.00 0.72 69 26 12 54 SOPEAL-SOC.PROM.EDUC.ALCACERENSE 100 4.99 SPIDOURO-SOC.PROM.EMP.INV.DOURO E T.M. 15 000 4.99 75 21 54 SPI-SOC PORTUGUESA DE INOVACAO 1 500 5.00 7 7 STAR - SOC. TURISMO E AGENCIAS RIBAMAR 533 4.99 3 3 TAEM - PROCESSAMENTO ALIMENTAR,SGPS, SA 125 1.00 TAGUSPARQUE - N 436 407 5.00 2 177 2 177 TELECINE MORO - SOC.PRODUTORA DE FILMES 170 4.99 1 1 TEROLOGOS-TECNOLOGIAS DE MANUTENÇÃO - P 7 960 4.99 40 40 TEXTIL LOPES DA COSTA 4 900 4.99 8 8 TUROPA-OPERADORES TURISTICOS 5 4.99 UNICER - BEBIDAS DE PORTUGAL 1 002 1.00 8.07 8 8 VIALITORAL - CONC. RODOVIARIA MADEIRA 4 750 161.25 766.95 791 3 643 2 852 VNCORK SGPS 151 1.00 XELB-CORK - COM.E INDUSTRIA DE CORTIÇA 87 4.99 47 078 35 530 13 827 25 373 Quotas PROPAÇO - SOC.IMOB.DE PAÇO D'ARCOS 1.00 1 1 1 1 Issued by non residents Shares Altitude Software B.V. 6 386 243 0.04 13 810 13 810 AMSCO -USD 1 807 1 000.00 692 692 ARCO Bodegas Unidas 63 382 4 399 2 202 2 197 Bolsa de Valores e Derivados de Angola 3 000 69.19 208 208 CLUB FINANCIERO VIGO 1 15 626.31 18 12 6 CREDIT LOGEMEN DEVELOPMENT 100 15.25 15.25 2 2 Emis-Empresa Interbancária de Serviços (capital) 3 360 7.44 124 81 43 EUROPEAN INVESTMENT FUND 9 1 000 000.00 1 137 864.26 9 410 10 241 831 GROWELA CABO VERDE 19 000 1 000.00 172 172 IMC-Instituto do Mercado de Capitais 400 691.90 3 3 Interbancos NASDAQ EUROPE SA/VN 100 499 565.00 25 4 21 OSEO - SOFARIS 13 107.89 107.89 2 2 PARQUE INDUSTRIAL DA MATOLA - MZN 1 920 000 1.00 46 46 S.W.I.F.T. 63 125.00 91 91 SOFHA - Sociedade de Fomento Habitacional (Angola) 3 3 THARWA FINANCE - MAD 20 895 100.00 184 184 UNIRISCO GALICIA 80 1 202.02 980.15 96 78 9 27 VISA EUROPE LIMITED 1 10.00 VISA INC-CLASS C 32 134 1.00 55.00 1 005 1 005 29 285 14 116 1 845 17 014 1 Net of impairment. 2 Amount recorded in revaluation reserves (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 136

Amou nts per unit Net gain / Hedge Nature and type of securities Quantity Book Value / Nominal Listing / Price Cost (loss) on accounting Impairment Fair value1 securities2 effect2 Others Issued by residents Participating Units CITEVE - CENT.TEC.IND.TEX.VEST.PORTUGAL 20 498.80 10 10 EGP-UNIVERSITY OF PORTO BUS.SCHOOL ASS. 2 4.99 70 70 FCR - FUNDO RECUPERACAO 95 000 1 000.00 990.67 95 000 94 114 ( 886) FCR - INOVCAPITAL ACTEC 50 8 904.88 500 445 ( 55) FCR F-HITEC (ES VENTURES) 10 50 000.00 46 195.40 500 462 ( 38) FCR INOVCAPITAL 115 24939.89 10 923.20 2 868 1 256 1 612 FCR INOVCAPITAL VALOR 40 24939.89 10 719.00 998 429 569 FCR-TURISMO CAPITAL (TC TUR.CAP.SCR) 164 24939.89 14 728.53 3 568 2 416 21 1 173 FUN.CAP.RISCO AICEP CAPITAL GLOBAL II 40 4987.98 5 936.65 200 237 45 7 FUN.CAP.RISCO AICEP CAPITAL GLOBAL-FIEP 4 134 1 000.00 1 025.09 4 134 4 238 104 FUNDO CAP. RISCO TURISMO INOVAÇÃO-FCR 40 50 000.00 2 000 2 000 FUNDO CARAVELA 3 122 5 000.00 6 375.53 11 742 19 904 8 162 FUNDO INTER-RISCO II - F.C.R.- CL.A 6 750 5 000.00 33 750 33 750 Fundo Inter-Risco II (*c) 3 750 3 750 INEGI INSTITUTO DE ENGENHARIA MECANICA 5 000 25 25 UNICAMPUS-FEIIF 3 000 1 000.00 1 007.66 3 000 3 023 23 162 115 166 129 7 376 3 361 Issued by non residents Participating Units FUNDO BPI-EUROPA 23 405 0.01 10.66 171 249 78 PORTUGAL VENTURE CAPITAL INITIATIVE-PVCI 1 199 115 1.00 0.71 1 199 856 ( 343) 1 370 1 105 ( 265) Loans and other receivables Loans and Shareholder's loans Emis - Empresa Interbancária de Serviços (suprimentos) 53 28 GEIE 23 INTERSIS 50 MAXSTOR 973 MORETEXTILE SGPS, SA 1 040 9 363 Newplastic 738 738 Petrocer SGPS, Lda 200 PROPACO-IMOBILIARIA DE PACO D'ARCOS 1 393 3 788 SAPHETY Level - Trusted Services SA 154 TAEM-PROCESSAMENTO ALIMENTAR 1 196 VnCork-SGPS,SA 28 113 3 452 16 426 Overdue bonds KAUPTHING BANK HF-TX.VAR. (25.05.2010) 600 000 1 000.00 590 590 590 590 7 800 701 6 555 127 ( 1 294 357) ( 208 251) 64 621 1 Net of impairment. 2 Amount recorded in revaluation reserves (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 137

At June 30, 2011 this caption included the following securities reclassified from the caption “Financial assets held for trading”, in 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48).

Book Value / Nature and type of security Quantity Fair Value

Debt Instruments Other residents Non - Subordinated Debt Bonds BANCO ITAU EUROPA-TV. (27.07.2011) 30 000 000 29 987 By other non resident issuers Non - Subordinated Debt Bonds MADISON AVENUE C.LTD(24.3.14)-O.HIP-CL.A 580 405 393 BRAZIL FOREIGN DIV.P.R.F-5.5%(20.09.2011 617 718 442 DOLLAR DIVERS RI.F-6.55%(16.12.2013)-REG 2 051 345 1 423 32 245

4.6. Loans and advances to credit institutions

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10

Loans and advances to other Portuguese credit institutions Very short term loans and advances 140 100 169 743 Deposits 3 000 74 604 Securities 107 688 108 850 Ot her loans 32 983 23 497 Ot her advances 6 905 13 573 Accrued interest 1 046 2 994 291 722 393 261 Loans and advances to other foreign Central Banks 254 595 Loans and advances to other foreign financial entities 139 250 Loans and advances to other foreign credit institutions Very short term loans and advances 369 531 442 932 Deposits 72 060 42 017 Loans 6 050 7 053 Ot her loans and advances 346 180 552 562 Accrued interest 2 123 275 1 189 789 1 044 839 Correction of t he amount of hedged assets 468 1 448 Commission relat ing to amortised cost (net) ( 19) ( 21) 449 1 427 1 481 960 1 439 527 Impairment ( 2) ( 382) 1 481 958 1 439 145

The changes in impairment losses and provisions in the first half of 2011 and 2010 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 138

4.7. Loans and advances to customers

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10

Loans Domestic loans Companies Discount 166 045 188 131 Loans 5 694 116 5 873 366 Commercial lines of credit 1 424 187 1 357 218 Demand deposits - overdrafts 414 390 331 444 Invoices received - factoring 772 287 832 218 Finance leasing 405 954 457 164 Real estate leasing 562 741 599 470 Other loans 25 981 25 680 Loans to individuals Housing 11 623 179 11 682 269 Consumer 958 031 1 025 935 Other loans 623 229 630 916 Foreign loans Companies Discount 2 021 7 026 Loans 2 851 959 3 171 491 Commercial lines of credit 340 934 392 823 Demand deposits - overdrafts 27 054 33 180 Invoices received - factoring 2 518 2 277 Other loans 295 855 301 996 Loans to individuals Housing 151 672 242 903 Consumer 226 527 242 009 Other loans 71 282 48 893 Accrued interest 76 682 72 878 26 716 644 27 519 287 Securities Issued by Portuguese government entities 99 841 99 807 Issued by other Portuguese entities Non subordinated debt securities Bonds 670 237 668 814 Commercial paper 1 262 734 1 333 289 Issued by foreign entities Non subordinated debt securities Bonds 232 962 337 205 Subordinated debt securities 4 500 4 500 Accrued interest 8 648 9 338 Deferred interest ( 4 828) ( 2 251) 2 274 094 2 450 702 Correction of the amount of hedged assets 18 323 25 524 Commission relating to amortised cost (net) ( 1 204) ( 6 917) 29 007 857 29 988 596 Overdue loans and interest 702 818 620 342 Loan impairment ( 589 536) ( 553 932) 29 121 139 30 055 006

The caption “Loans to customers” includes the following non-derecognised securitised assets: Jun. 30, 1 1 Dec. 31, 10 Non-d erec ognised sec urit ised assets 1 Loans Hou sing 5 134 240 5 222 092 Loans to SME's 3 428 346 140 837 Ced ed risk / benefit ( 789 402) ( 820 949) A ccrued int erest 17 068 4 054 7 790 252 4 546 034 1 Excludes overdue loans and interest.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 139

The loans subject to securitisation operations carried out by Banco BPI were not derecognised from the Bank’s balance sheet and are recorded under the caption “Loans”. The amounts received by Banco BPI from these operations are recorded under the caption “Liabilities relating to assets not derecognised in securitisation operations” (Notes 2.2.4 and 4.19). In December 2007 the Bank sold to the Banco BPI Pension Fund a portion of the risk / benefit relating to the housing loan securitisation operations. The assets and liabilities relating to these operations were derecognised in the percentage sold, and the difference to the product of the sale was recognised in the statement of income.

In February 2011 Banco BPI started a securitisation of loans to SME’s in a total amount of 3 742 500 t. euro.

At June 30, 2011 and December 31, 2010 the caption “Loans to Customers” also included operations allocated to the Cover Pool given as collateral for Covered Bonds issued by Banco BPI (Note 4.18), namely: • 4 381 499 t. euro and 4 080 757 t. euro, respectively, allocated as collateral to mortgage bonds, • 400 353 t. euro and 392 870 t. euro, respectively, allocated as collateral to public sector bonds.

The securities portfolio includes the following assets to cover capitalization insurance contracts issued by BPI Vida: Jun. 30, 1 1 Dec. 31, 10 Debt instruments Issued by Port uguese government entities 99 841 99 807 Issued by other Portuguese entities 55 696 51 227 Issued by other foreign entities 186 181 261 509 341 718 412 543

The changes in impairment losses and provisions in the first half of 2011 and 2010 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 140

The BPI Group’s portfolio of loans and advances to customers and guarantees given at June 30, 2011, by business sector, is made up as follows: Loans 1 Guarantees given2 Amount % Amount % Residents: A gric ulture, animal produ ction and hu nt ing 243 114 0. 8 8 857 0.3 Forestry an d f orest operat io ns 12 722 1 220 Fishing 36 080 0.1 1 897 0.1 Mining 39 596 0.1 12 813 0.4 Manufacturing indust ries Beverage , tobacco and foo d 478 177 1. 7 29 351 1.0 Textiles and clot hing 112 259 0. 4 12 975 0.5 Le ath er an d re lated products 22 715 0. 1 628 Wood and cork 76 216 0. 3 8 294 0.3 Pulp , pap er an d cardboard and graphic art s 267 680 0. 9 15 898 0.6 Coke, oil products and nuclear fuel 594 4 777 0.2 Chemical and syn the tic or artificial f ib res 138 739 0. 5 8 273 0.3 Rubb er and plast ic mat eria ls 58 171 0. 2 11 768 0.4 Other mineral no n-me ta llic products 167 950 0. 6 28 969 1.0 Metalworking ind ustries 226 896 0. 8 52 099 1.8 Manu fact uring of mach inery and eq uipme nt 81 756 0. 3 43 922 1.5 Manu fact uring of elec trical and opt ic al equipment 36 821 0. 1 9 902 0.3 Manu fact uring of transpo rt material 36 331 0. 1 30 107 1.1 Other man ufa ctu ring in dus tries 199 467 0. 7 36 393 1.3 E le ctricity, g as and wat er 561 307 1. 9 2 00 283 7.0 Con struct io n 811 181 2. 8 7 46 643 2 6.3 Wholesale a nd reta il tradin g 1 614 200 5. 6 2 40 512 8.4 Rest au ra nts an d h ot els 382 417 1. 3 62 989 2.2 Transpo rt , warehou sing an d co mmu nica tions 1 303 495 4. 5 3 69 879 1 3.0 B ank s 11 800 78 431 2.8 Other credit institutions 13 491 0.5 Ot her financial institut ions and insuran ce companies 144 860 0. 5 4 510 0.2 Invest ment holding compan ies 1 027 061 3. 6 1 81 900 6.4 Rea l est ate , rental an d se rvices provided to co mpanies 1 183 279 4. 1 1 35 052 4.7 P ublic administ ration, defence and mandat ory soc ial sec urit y 1 659 948 5. 7 38 429 1.3 E duc ation 42 757 0.1 6 417 0.2 Hea lthcare and welfare 215 519 0. 7 8 627 0.3 Leisure, cult ural and spo rts activities 230 056 0. 8 11 445 0.4 Other service companies 28 124 0.1 2 267 0.1 Individuals Housing lo ans 11 623 179 40. 2 Others 1 581 260 5. 5 58 359 2.0 Multin ational f inancial institut ions 24 840 0. 1 25 Other sectors 22 385 0.1 308 Non-residents: Finan cial and credit in stitu tions 188 456 0. 7 48 213 1.7 Mult inat ional Fina ncial I nst it utions 46 806 0. 2 50 Administrative public sec tor 94 063 0.3 Non-fina ncia l companies 3 428 478 11. 9 320 993 1 1.4 Individuals 449 481 1.6 707 28 910 236 100. 0 2 8 47 673 100.0 1 Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortized cost. 2 Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 141

The BPI Group’s portfolio of loans and advances to customers and guarantees given at December 31, 2010, by business sector, is made up as follows:

Loans 1 G uara ntees given2

Amount % Amount % Residents: A gric ulture, animal produ ction and hu nt ing 224 504 0. 8 10 440 0.3 Forestry an d f orest operat io ns 13 010 1 634 0.1 Fishing 22 909 0.1 1 266 Mining 30 428 0.1 14 309 0.5 Manufacturing indust ries Beverage , tobacco and foo d 425 937 1. 4 20 519 0.7 Textiles and clot hing 130 059 0. 4 15 539 0.5 Le ath er an d re lated products 23 821 0. 1 590 Wood and cork 129 262 0. 4 8 455 0.3 Pulp , pap er an d cardboard and graphic art s 261 785 0. 9 6 279 0.2 Coke, oil products and nuclear fuel 454 6 367 0.2 Chemical and syn the tic or artificial f ib res 132 830 0. 4 8 306 0.3 Rubb er and plast ic mat eria ls 55 775 0. 2 11 720 0.4 Other mineral no n-me ta llic products 234 199 0. 8 32 036 1.1 Metalworking ind ustries 232 452 0. 8 69 206 2.3 Manu fact uring of mach inery and eq uipme nt 71 317 0. 2 30 408 1.0 Manu fact uring of elec trical and opt ic al equipment 36 986 0. 1 23 490 0.8 Manu fact uring of transpo rt material 55 226 0. 2 31 984 1.1 Other man ufa ctu ring in dus tries 190 137 0. 6 25 882 0.9 E le ctricity, g as and wat er 563 888 1. 9 2 69 372 8.9 Construction 796 184 2. 7 7 50 533 2 5.0 Wholesale a nd reta il tradin g 1 802 866 6. 0 2 72 564 9.0 Rest au ra nts an d h ot els 396 929 1. 3 50 197 1.7 Transpo rt , warehou sing an d co mmu nica tions 1 235 127 4. 1 3 77 812 1 2.6 B ank s 12 923 55 377 1.8 Other credit institutions 18 366 0.6 Ot her financial institut ions and insuran ce companies 596 679 2. 0 4 695 0.2 Invest ment holding compan ies 402 860 1. 3 1 60 244 5.3 Rea l est ate , rental an d se rvices provided to co mpanies 1 339 685 4. 5 1 39 857 4.6 P ublic administ ration, defence and mandat ory soc ial sec urit y 1 753 646 5. 9 37 298 1.2 E duc ation 42 571 0.1 6 543 0.2 Hea lthcare and welfare 234 334 0. 8 13 265 0.4 Leisure, cult ural and spo rts activities 229 029 0. 8 37 627 1.2 Other service companies 32 226 0.1 6 674 0.2 Individuals Housing lo ans 11 682 269 39. 1 Others 1 656 851 5. 6 59 779 2.0 Multin ational f inancial institut ions 56 340 0. 2 633 Other sectors 223 Non-residents: Finan cial and credit in stitu tions 265 152 0. 9 68 953 2.3 Mult inat ional Fina ncial I nst it utions 142 545 0. 5 24 613 0.8 Admin ist ra tive public sec tor 81 358 0. 3 6 941 0.2 Non-fina ncia l companies 3 761 443 12. 6 331 578 1 1.1 Individuals 533 805 1.8 687 29 890 024 100. 0 3 0 12 038 100.0 1 Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortized cost. 2 Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 142

The caption “Securities” at June 30, 2011 is made up as follows: Gross boo k Nature and type of security Quantity Cost Impaiment3 value Debt Instruments Issued by Portuguese Entities Portuguese Public Debt OT-TV-05.01.2021 50 000 000 49 928 49 928 REPUBLICA PORTUGUESA - TV - 03.11.2015 50 000 000 49 913 49 913 99 841 99 841 Ot her residents Non - S ubor di n at ed De bt Bonds Asset Backed Securities (ABS's) TAGUS-SOC.TIT.CREDITO-CL.A-12.02.2025 102 171 408 102 171 102 171 TAGUS-SOC.TIT.CREDITO-CL.B-12.02.2025 50 000 50 50 102 221 102 221 Other bonds ADP-AGUAS DE PORTUGAL,SGPS-TV-20.06.2022 50 000 000 50 000 50 000 BANIF - TAX.VAR. (30.12.2015)1 11 800 000 11 800 11 800 CELBI CELULOSE BEIRA IND.-TV(08.02.2015) 75 000 000 75 000 75 000 EDIA SA-TV-30.01.2027 16 180 000 16 180 16 180 EDIA-EMP.DES.DO ALQUEVA - TV-11.08.2030 19 250 000 19 250 19 250 GALP-ENERGIA SGPS - TV - 20.05.2013 62 000 000 61 845 61 899 GRUPO VISABEIRA SGPS-TV-13.07.2014 5 000 000 5 000 5 000 JERONIMO MARTINS-JM2011-TV-28.03.2011 17 500 000 17 500 17 500 JERONIMO MARTINS-JM2012-TV-28.09.2012 17 500 000 17 500 17 500 JMR-GESTAO EMPRESAS RETALHO-2007/2012 45 200 000 45 200 45 200 MOTA ENGIL - TX.VR. 2004-2011 2 750 000 2 750 2 750 POLIMAIA / 1989 - SR.C (AC.CRED.) 7 PORTUCEL-EMP.CELU.PAPEL-TV.(27.10.2012) 13 300 000 13 315 13 305 PORTUCEL-EMP.CELU.PAPEL-TV.(27.10.2012)1 4 904 000 4 902 4 902 SEMAPA - 2006/2016 2ª 50 000 000 50 000 50 000 SONAE CAPITAL SGPS - TV - 17.01.2016 10 000 000 10 000 10 000 SONAE DISTRIBUIÇAO SETEMBRO - 2007/2015 35 200 000 35 200 35 200 ZON MULTIMEDIA 2009-2012 32 530 000 32 530 32 530 ZON MULTIMEDIA 2010-2014 100 000 000 100 000 100 000 567 972 568 016 Commercial paper 1 262 734 1 262 734 3 917 2 032 768 2 032 812 3 917 Issued by non residents Non - Subordinated Debt Bonds Structured Investment Vehicles (SIV's) LINKS FINANCE CORP-TV-15.06.2017 2 767 592 2 768 2 768 2 768 NIGHTINGALE FIN LTD-TV-06.06.2017 3 459 489 3 459 3 459 3 459 6 227 6227 6 227 Asset Backed Securities (ABS's) ALFA DIV PYMT RT FIN-TV-15.12.2011 475 000 475 475 ARTS-SR.2005-AA-CL.A-15.06.2012 3 580 572 3 440 3 549 BOSPHORUS FINANCIAL SERV-TV.(15.02.2012) 648 654 649 649 DALI CAPITAL-SR.2006-1-CL.A-25.12.20461 809 735 798 798 DALI CAPITAL-SR.2006-1-CL.A-25.12.2046 2 519 176 2 519 2 519 EDDYSTONE FIN.SR2006-1 CLA1B 19.04.20212 530 307 351 351 GARANTI DIVERSIFIED-SR.2005-A-CL.1-2013 2 075 694 2 002 2 050 HSBC BRAZIL-SR.2006-A-15.04.2016 10 666 758 10 024 10 286 KAZAKH MORTGAGE-S.07-1-C.A-15.02.2029 454 300 454 454 RED & BLACK PRIME RUS-S07-1 CA-01.19.35 1 259 666 1 260 1 260 SARATOGA CLO I LTD-SR.2006-1X-CL-A2-2019 6 918 979 6 919 6 919 SARATOGA CLO I LTD-SR.2006-1X-CL-B-2019 2 075 694 2 076 2 076 STICHTING EUROSTAR CDO(10.3.13)O.H-CL-A1 2 TIB DIVERSIFIED-SR.05-DX CL.D-15.08.2012 1 729 745 1 731 1 730 UKRAINE MORT-SR.2007-1 CL.A-15.12.2031 395 017 395 395 VB DPR FIN CO-SR.2010-1A-CL.A-15.06.2014 2 959 340 2 849 2 871 VB DPR FIN CO-SR.2010-1A-CL.B-15.06.2014 3 991 913 3 871 3 896 VB DPR FIN.COMP.- SR.2006-1X - CL.E-2013 1 849 587 1 850 1 850 YAPI KREDIT FIN-SR.2010-CL.C-21.11.2014 4 200 000 4 045 4 075 45 708 46 203 1 Securities reclassified from the caption “Financial assets held for trading”, in 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 2 Securities reclassified from the caption “Financial assets held for trading”, in 2009, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 3 Additionally, the Bank recorded collective impairment of 896 t. euro on bonds issued by residents

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 143

Gross book Nature and type of security Quantity Cost Impaiment3 value Other bonds B.FINANTIA INTL LTD-CAY-TV.(04.05.2015) 1 3 500 000 3 500 3 500 BANCO FINANTIA INTL LTD-TV-26.07.20171 8 500 000 8 500 8 500 BANCO FINANTIA INTL-TV. (28.07.2016)1 4 000 000 4 000 4 000 BANIF FINANCE(CAY)-TV-29.12.20141 4 220 000 4 220 4 220 BIE BANK & TRUST LTD-4.20%-13.02.2013 75 000 000 75 000 75 000 BIE BANK & TRUST LTD-TV-13.02.2013 10 000 000 10 000 10 000 CA VALENCIA & ALICANTE-TV-18.03.2012 15 000 000 15 052 15 052 CAIXA D'ESTALVIS CATALUNA-TV.05.06.2012 15 000 000 15 074 15 074 CAJA DE AHORROS DE AVILA TV 30.04.2012 15 000 000 15 059 15 059 CAJA GENERAL CANARIAS TV 16.03.2012 30 000 000 30 127 30 127 180 532 180 532 Subordinated Debt Bonds ESPIRITO SANTO INVST PLC-TV.(20.12.2015)1 4 500 000 4 500 4 500 236 967 237 462 6 227 Accrued interest 8 648 Deferred interest ( 4 828) 2 269 735 2 274 094 10 144 1 Securities reclassified from the caption “Financial assets held for trading”, in 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 2 Securities reclassified from the caption “Financial assets held for trading”, in 2009, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 3 Additionally, the Bank recorded collective impairment of 896 t. euro on bonds issued by residents

The impairment losses recorded in the Structured Investment Vehicles (SIVs) portfolio mentioned above were calculated based on a nil Net Asset Value.

Evidence of impairment of the Asset Backed Securities (ABSs) portfolio is determined through regular monitoring of the performance indicators of the underlying transactions. At June 30, 2011 this analysis did not show impairment situations in other securities, other than those already recorded. A significant part of the securities in this portfolio does not have reference market values. However, the losses identified for the securities for which indicative prices could be obtained do not show evidence of impairment.

4.8 Held to maturity investments

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10 Debt Instruments Bonds issued by Portuguese government entities 99 905 Bonds issued by other Portuguese entities Non-subordinated debt 351 107 363 343 Subordinated debt 5 450 5 450 Bonds issued by foreign government entities 212 670 212 170 Bonds issued by other foreign entities Non-subordinated debt 395 242 442 332 Subordinated debt 10 648 10 353 Accrued interest 10 798 9 936 1 085 820 1 043 584 The portfolio of held to maturity investments includes assets to cover capitalization insurance contracts issued by BPI Vida.

In the first half of 2011 and in 2010, a sale of securities prior to their maturity was made, following a significant deterioration in the credit risk of the issuer of the bonds. These transactions fall within the situations provided for in IAS 39 that do not put in doubt the BPI Group’s intention to hold the remaining investments to maturity.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 144

At June 30, 2011 this caption was made up as follows:

Nature and type of security Quantity Cost Book Value Impairment

Debt Instruments Issued by Portuguese Entities Portuguese Public Debt Bonds Republic Of Portugal Tv-23.02.19 50 000 000 50 000 50 000 Republic Of Portugal-Tv-14.01.2021 50 000 000 49 905 49 905 99 905 99 905 Other residents Non - Subordinated Debt Bonds Banco Comercial Portugues-Tv-09.05.2014 13 500 000 11 693 11 693 Banco Espirito Santo-3.75%-19.01.2012 25 000 000 25 081 25 081 Banco Intl Funchal-3.25%-08.05.2012 71 220 000 71 202 71 202 Bankinter Sa-Tx.Vr.-15-01-2013 22 500 000 22 491 22 491 Bcp-Tv-28.02.2013 27 300 000 26 694 26 694 Bes-Floating Rate Notes Due 2012 1 700 000 1 691 1 691 Bes-Tv-08.05.2013 3 500 000 3 442 3 442 Bes-Tv-25.02.2013 6 000 000 5 953 5 953 Caixa Eco Montepio Geral-3.25%-27.7.2012 16 750 000 16 749 16 749 Caixa Eco Montepio Geral-Tv-29.05.2013 8 150 000 7 963 7 963 Cgd-3.875%-12.12.2011 50 000 000 50 169 50 169 Cgd-5.125%-19.02.2014 10 000 000 10 329 10 329 Modelo Continente, Sgps-Tv. (02.08.2012) 2 4 767 000 4 767 4 767 Parpublica - 3.5% - 08.07.2013 91 950 000 91 732 91 732 Semapa - Tv (20.04.2016)2 1 200 000 1 151 1 151 351 107 351 107 Subordinated Debt Banco Itau Europa - Tx.Vr. (22.12.2015) 2 5 450 000 5 450 5 450 5 450 5 450 Issued by non residents Issued by foreign government entities Bonds Bonos Y Oblig Del Estado-Tv-17.03.2015 60 000 000 59 891 59 891 Rep Grecia-4.3%-20.03.2012 45 000 000 44 683 44 683 Rep Grecia-Tv-20.02.2013 109 000 000 108 096 108 096 212 670 212 670 Issued b y other no n resident entities Non - Subordinated Debt Bonds Alfa Div Pymt Rights Fin-Tv.15.03.20121 487 500 482 482 Alfa Div Pymt Rt Fin-Tv-15.12.20111 160 000 159 159 Allied Irish Banks-Tv-15.09.2011 3 000 000 2 964 2 964 Anglo Irish Bank Corp-Tv-23.12.2011 3 053 400 3 053 3 053 Ayt Cedulas Cajas Global-Tv-14.12.2012 1 900 000 1 872 1 872 Baa Funding Ltd - 3.975% - 15.02.20142 442 000 406 406 Banca Carige Spa-Tv-07.06.20162 1 000 000 993 993 Banca Intesa Spa - Tv. (11.05.2012)2 4 000 000 3 954 3 954 Banco Sabadell Sa-Tv-20.02.2012 27 500 000 27 477 27 477 Banesto Financial Plc-Tv-11.01.2013 27 000 000 26 776 26 776 Banif Finance(Cay)-Tv-05.22.20122 5 000 000 4 931 4 931 Banif Finance(Cay)-Tv-05.22.2012 1 100 000 1 088 1 088 Bankinter-Tv-21.06.2012 4 000 000 3 965 3 965 Bat Intl Finance Plc-3.625% (29.06.2012) 2 4 688 000 4 674 4 674 Bcp Finance Bank-Tv-06.02.20122 12 300 000 12 057 12 057 Bcp Finance Bank-Tv-06.02.2012 14 615 000 14 379 14 379 Bcp Finance Bank-Tv-17.06.2013 2 000 000 1 937 1 937 Bear Stearns Co-Tx.Var. (27.07.2012)2 3 500 000 3 368 3 368 Bes Finance - Tv. (18.07.2011) 20 000 000 19 983 19 983 Bpe Financiaciones-Tx.Vr.-08.02.2012 11 600 000 11 543 11 543 Caixa D'estalvis Cataluna-Tv.06.07.20122 1 500 000 1 414 1 414 Caixa Eco Montepio Geral-Tv.(03.05.2012)1 11 900 000 11 760 11 760 Caixa Eco Montepio Geral-Tv.(03.05.2012) 7 404 000 7 327 7 327 Caixanova - Tv - 02-03-20121 10 000 000 9 920 9 920 Caja Valencia Cast.-Tx.Var.(06.06.2012)2 2 000 000 1 798 1 798 Cam Global Finance - Tx.Var.(29.06.2012)2 2 500 000 2 275 2 275 Cemg (Cay)-Tv-(19.09.2011)1 3 300 000 3 291 3 291 Cemg (Cay)-Tv-(19.09.2011) 3 000 000 2 991 2 991 Credito Emiliano - Tv. (04.05.2012)1 1 545 000 1 538 1 538 Criteria Caixa Corp.-4.125%-20.11.2014 14 800 000 14 752 14 752 Degussa Ag-5.125% (10.12.2013)2 500 000 487 487 Dexia Credit Local - Tv - 06.02.2012 5 000 000 4 999 4 999 Dresdner Bank Ag - Tv. (01.08.2012) 2 200 000 196 196 1 Goldman Sachs Group Inc.-Tv.(04.02.2013) 1 600 000 1 572 1 572 1 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2008 (Notes 2 and 4.48)

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 145

2 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2009 (Notes 2 and 4.48).

Nature and type of security Quantity Cost Book Value Impairment

Bonds (cont.) Hbos Treasury Srvcs Plc-Tv. (14.06.2012) 1 750 000 1 723 1 723 Hsbc Finance Corp-Tv. (05.04.2013)1 3 400 000 3 324 3 324 Ibercaja(Ca.Zaragoza A.R.)Tv-20.04.20181 6 000 000 5 806 5 806 Ibercaja(Ca.Zaragoza A.R.)Tv-25.04.20191 8 400 000 8 400 8 400 Iberdrola Finanzas Sau-Tv-08.02.2013 31 000 000 31 000 31 000 Ing Bank Nv-Tv.(22.08.2011) 2 200 000 2 201 2 201 Ing Groep Nv-Tv. (11.04.2016)1 3 900 000 3 723 3 723 Ing Verzekeringen Nv - Tv (18.09.2013)1 4 000 000 3 921 3 921 Koninklijke Kpn Nv-4,5% (21.07.2011)1 9 375 000 9 367 9 367 Kraft Foods Inc-5.75%-20.03.20122 6 100 000 6 155 6 155 Macquarie Bank Ltd-Tv-06.12.20161 6 000 000 5 885 5 885 Morgan Stanley-Tv-29.11.20131 2 500 000 2 373 2 373 Port.Telecom Int.Fin.-3.75%(26.03.2012)1 10 767 000 10 550 10 550 Rci Banque Sa-Tv-24.01.20122 2 600 000 2 498 2 498 Repsol Intl Finance-Tv-16.02.2012 2 500 000 2 493 2 493 Royal Bank Of Scotland-Tv-08.06.20151 5 500 000 5 500 5 500 Royal Bank Of Scotland-Tv-08.06.20152 500 000 500 500 Santander Intl Debt Sa-Tv-18.01.2013 35 000 000 34 911 34 911 Santander Intl Debt-Tv. (05.04.2013) 2 500 000 2 484 2 484 Santander Intl Debt-Tx.Vr.-25.04.2012 5 100 000 5 078 5 078 Santander Intl Debt-Tx.Vr.-30.01.2012 700 000 698 698 Tdc As - 6.5% (19.04.2012)1 1 000 000 992 992 Telecom Italia Spa - Tv - 19.07.2013 2 500 000 2 458 2 458 Telecom Italia Spa-Tv.(06.12.2012)2 300 000 300 300 Telecom Italia Spa-Tv.(06.12.2012)1 2 400 000 2 400 2 400 Vivendi - Tv. 3.10.20111 3 000 000 2 995 2 995 Vodafone Group Plc-Tv-06.06.2014 10 000 000 9 850 9 850 Vodafone Group Pl c- Tv. (05 . 0 9 . 2 0 13 ) 17 383 000 17 276 17 276 395 242 395 242 Subordinated Debt Bonds Cam International-Tv-26.04.2017 2 1 900 000 1 518 1 518 Fortis Bank Nederland Nv-Tv.(22.06.2015) 2 1 000 000 1 000 1 000 Standard Chartered Bank-Tv-28.03.2018 1 8 500 000 8 129 8 130 10 647 10 648 Accrued interest 10 798 1 075 021 1 085 820 1 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2008 (Notes 2 and 4.48) 2 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2009 (Notes 2 and 4.48).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 146

4.9. Other tangible assets

The changes in other tangible assets in the first half of 2011 were as follows:

Gross Depreciation Net

Foreign Foreign Balance at Sales and write- Transfers and Balance at Balance at Depreciation for Sales and Transfers and Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 10 offs others Jun. 30, 11 Dec. 31, 10 the period write-offs others Jun. 30, 11 Jun. 30, 11 Dec. 31, 10 differences differences

Property Property for own use 155 281 397 ( 31 293) ( 3 877) ( 6 650) 113 858 39 032 1 086 ( 14 764) ( 2 175) ( 553) 22 626 91 232 116 24 9 Other property 455 455 200 3 203 252 255 Leasehold improvements 118 612 188 ( 1 511) 358 ( 3 427) 114 220 99 971 2 494 ( 1 498) ( 1) ( 2 188) 98 778 15 442 18 641 274 348 585 ( 32 804) ( 3 519) ( 10 077) 228 533 139 203 3 583 ( 16 262) ( 2 176) ( 2 741) 121 607 106 926 135 145 Equipment Furniture and fixtures 50 674 643 ( 23) 294 ( 783) 50 805 41 039 1 072 ( 23) 2 ( 281) 41 809 8 996 9 635 Machinery and tools 14 011 119 ( 82) 17 ( 242) 13 823 11 782 402 ( 80) ( 1) ( 158) 11 945 1 878 2 229 Computer hardware 181 569 2 415 ( 1 041) 939 ( 1 544) 182 338 164 424 5 997 ( 1 006) ( 3) ( 1 028) 168 384 13 954 17 145 Interior installations 162 572 698 ( 5 741) 508 ( 417) 157 620 103 174 5 458 ( 3 553) ( 79) ( 202) 104 798 52 822 59 398 Vehicles 8 567 871 ( 415) 85 ( 628) 8 480 6 037 672 ( 156) ( 77) ( 424) 6 052 2 428 2 530 Security equipment 26 769 146 ( 85) 76 ( 408) 26 498 21 015 651 ( 81) ( 26) ( 103) 21 456 5 042 5 754 Other equipment 748 ( 47) 701 238 4 ( 1) ( 3) 238 463 510 444 910 4 892 ( 7 387) 1 919 ( 4 069) 440 265 347 709 14 256 ( 4 899) ( 185) ( 2 199) 354 682 85 583 97 201 Tangible assets in progress 16 250 698 ( 274) ( 955) 15 719 15 719 16 250 Other tangible assets 13 800 9 ( 416) 3 13 396 10 319 154 ( 360) ( 4) 10 109 3 287 3 481 30 050 707 ( 416) ( 271) ( 955) 29 115 10 319 154 ( 360) ( 4) 10 109 19 006 19 731 749 308 6 184 ( 40 607) ( 1 871) ( 15 101) 697 913 497 231 17 993 ( 21 521) ( 2 365) ( 4 940) 486 398 211 515 252 077

The net amounts of the captions “Sales and write-offs of Property for own use” and “Sales and write-offs of Interior installations” include 16 486 t. euro and 1 365 t. euro, respectively, relating to the contribution in kind to the BPI Pension Fund. The contribution amounted to 27 500 t. euro (Notes 4.26 and 4.41).

The net amount of the caption “Transfers and others” includes 3 904 t. euro relating to property for own use transferred to the caption “Other Assets – Tangible assets available for sale” (Note 4.13) due to the Bank's intention to sell these assets.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 147

The changes in other tangible assets in the first half of 2010 were as follows:

Gross Depreciation Net

Foreign Foreign Balance at Sales and write- Transfers and Balance at Balance at Depreciation for Sales and Transfers and Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 09 offs others Jun. 30, 10 Dec. 31, 09 the period write-offs others Jun. 30, 10 Jun. 30, 10 Dec. 31, 09 differences differences

Property Property for own use 143 655 1 170 1 343 8 971 155 139 35 996 1 339 35 664 38 034 117 105 107 659 Other property 944 ( 293) 6 657 330 4 ( 36) 1 299 358 614 Leasehold improvements 113 703 1 043 ( 12) 489 4 790 120 013 92 972 3 697 ( 12) 87 2 952 99 696 20 317 20 731 258 302 2 213 ( 12) 1 539 13 767 275 809 129 298 5 040 ( 12) 86 3 617 138 029 137 780 129 004 Equipment Furniture and fixtures 49 076 469 ( 12) 130 1 076 50 739 39 125 1 005 ( 10) 3 362 40 485 10 254 9 951 Machinery and tools 13 769 252 ( 160) 19 321 14 201 11 225 434 ( 145) 203 11 717 2 484 2 544 Computer hardware 173 424 2 683 ( 1 054) 1 112 1 904 178 069 153 564 6 722 ( 1 023) 1 259 160 522 17 547 19 860 Interior installations 161 382 514 ( 139) 295 552 162 604 93 357 5 658 ( 140) 301 99 176 63 428 68 025 Vehicles 6 655 1 389 ( 187) 16 799 8 672 5 101 544 ( 162) ( 1) 543 6 025 2 647 1 554 Security equipment 26 042 349 ( 8) 15 533 26 931 19 978 667 ( 7) 108 20 746 6 185 6 064 Other equipment 263 23 438 67 791 230 2 2 2 236 555 33 430 611 5 679 ( 1 560) 2 025 5 252 442 007 322 580 15 032 ( 1 487) 4 2 778 338 907 103 100 108 031 Tangible assets in progress 11 970 6 432 ( 3 339) 1 358 16 421 16 421 11 970 Other tangible assets 14 695 ( 924) 13 771 10 097 161 ( 87) 10 171 3 600 4 598 26 665 6 432 ( 4 263) 1 358 30 192 10 097 161 ( 87) 10 171 20 021 16 568 715 578 14 324 ( 1 572) ( 699) 20 377 748 008 461 975 20 233 ( 1 499) 3 6 395 487 107 260 901 253 603

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 148

4.10. Intangible assets

The changes in intangible assets in the first half of 2011 were as follows:

Gross Amortisation Net

Foreign Foreign Balance at Sales and write- Transfers and Balance at Balance at Depreciation for Sales and Balance at Jun. Balance at Balance at Purchases exchange exchange Dec. 31, 10 offs others Jun. 30, 11 Dec. 31, 10 the period write-offs 30, 11 Jun. 30, 11 Dec. 31, 10 differences differences

Software 57 659 371 661 ( 156) 58 535 54 671 1 037 ( 114) 55 594 2 941 2 988 Other intangible assets 31 152 ( 1 325) ( 139) 29 688 29 446 601 ( 1 325) ( 133) 28 589 1 099 1 706 88 811 371 ( 1 325) 661 ( 295) 88 223 84 117 1 638 ( 1 325) ( 247) 84 183 4 040 4 694 Intangible assets in progress 1 684 1 180 ( 650) 2 214 2 214 1 684 90 495 1 551 ( 1 325) 11 ( 295) 90 437 84 117 1 638 ( 1 325) ( 247) 84 183 6 254 6 378

The caption “Other intangible assets” at June 30, 2011 includes 234 t. euro relating to the net amount of lease rights to areas for the establishment of branches.

The changes in intangible assets in the first half of 2010 were as follows:

Gross Amortisation Net

Foreign Foreign Balance at Sales and write- Transfers and Balance at Balance at Depreciation for Sales and Balance at Jun. Balance at Balance at Purchases exchange exchange Dec. 31, 09 offs others Jun. 30, 10 Dec. 31, 09 the period write-offs 30, 10 Jun. 30, 10 Dec. 31, 09 differences differences

Software 56 617 91 ( 1 018) 308 185 56 183 53 596 1 034 ( 1 018) 145 53 757 2 426 3 021 Other intangible assets 31 501 3 ( 269) 216 31 451 26 373 2 188 ( 269) 194 28 486 2 965 5 128 88 118 94 ( 1 287) 308 401 87 634 79 969 3 222 ( 1 287) 339 82 243 5 391 8 149 Intangible assets in progress 1 565 105 ( 392) 1 278 1 278 1 565 89 683 199 ( 1 287) ( 84) 401 88 912 79 969 3 222 ( 1 287) 339 82 243 6 669 9 714

The caption “Other intangible assets” at June 30, 2010 includes 1 994 t. euro relating to the net amount of lease rights to areas for the establishment of branches.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 149

4.11. Investments in associated companies and jointly controlled entities

Investments in associated companies and jointly controlled entities, recorded in accordance with the equity method, are as follows: Effective participation (%) Book value

Jun. 30, 11 Dec. 31, 10 Jun. 30, 11 Dec. 31, 10 Banc o Comerc ial e de Investimentos, S.A.R.L. 30.0 30.0 26 970 22 569 Companhia de Seguros Allianz Portugal, S.A. 35.0 35.0 59 640 74 749 Cosec – Companhia de Seguros de Crédito, S.A. 50.0 50.0 21 402 22 383 F. Turismo – Capital de Risco, S.A. 25.0 25.0 1 447 1 446 Finangeste – Empresa Financeira de G est ão e Desenvolviment o, S.A . 32.8 32.8 26 572 24 323 InterRisco - Sociedade de Capital de Risco, S.A. 49.0 49.0 356 296 Unicre - Inst it uição Financeira de Crédit o, S.A . 21.0 21.0 28 255 28 552 V iacer - S ociedade G estora de P articipações S ociais, Lda 25.0 25.0 18 272 19 903 182 914 194 221

In June 2010 the BPI Group acquired 3.4% of the share capital of Unicre – Instituição Financeira de Crédito, SA, and now holds a 21.01% participation in that company. The participation of the BPI Group in Unicre is now recorded in accordance with the equity method of accounting (Note 4.40)

In 2010 a new company, Inter-Risco – Sociedade de Capital de Risco, S.A., was founded, in which BPI Private Equity – Sociedade de Capital de Risco, S.A. has a 49% participation (Note 1).

4.12. Tax assets

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10 Current tax assets Corporate income tax recoverable 1 186 1 231 Others 2 521 2 433 3 707 3 664 Deferred tax assets Due to temporary differences 588 856 416 719 Due to tax losses carried forward 7 520 10 227 596 376 426 946 600 083 430 610

Details of deferred tax assets are presented in Note 4.44.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 150

4.13. Other assets

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10

Debtors, other applications and other assets Debtors for future operat ions 18 943 28 662 Collat eral account s 4 019 3 318 Ot her aplications 15 857 16 328 VAT recoverable 17 9 Debtors for loan interest subsidy receivable 10 128 12 216 Other debtors 164 905 172 435 Overdue debt ors and other applications 1 072 966 Impairment ( 970) ( 970) Other assets Gold 38 51 Other available funds and other assets 810 823 214 819 233 838 Tangible assets available for sale 129 556 117 288 Impairment ( 47 865) ( 40 958) 81 691 76 330 Accrued income For irrevocable commitments assumed in relation to third part ies 216 315 For banking services rendered to third part ies 3 733 4 384 Ot her accrue d income 19 949 25 112 23 898 29 811 Defer red expenses Insurance 98 19 Rent 2 341 2 457 Contributions to the Deposit Guarantee Fund 1 746 Ot her def erred expenses 18 470 7 234 22 655 9 710 Liability for pensions and other benefits (Note 4.26) P ens ion Fund As set Value P ensioners and employees 2 329 446 2 409 393 Directors 29 176 29 477 Past Service Liabilities P ensioners and employees (2 225 698) (2 306 127) Directors ( 29 618) ( 29 402) Others ( 755) ( 712) Actuarial deviations E mployees 274 430 254 766 Directors ( 784) ( 515) Changes in the Pension Plan conditions to be amortised E mployees 35 69 Directors 115 162 376 347 357 111 Other accounts Foreign exchange transactions pending settlement 48 511 Stock exchange transactions pending settlement 22 731 31 564 Operat ions on ass ets pending settlement 232 060 136 909 254 791 216 984 974 201 923 784

The caption “Other applications” at June 30, 2011 and December 31, 2010 includes 15 138 t. euro and 15 904 t. euro, respectively, relating to collateral pledged in guarantee under derivative transactions relating to bonds issued through Sagres – Sociedade de Titularização de Créditos, S.A.

The caption “Other debtors” at June 30, 2011 and December 31, 2010 includes 141 860 t. euro and 153 420 t. euro, respectively, relating to instalments receivable from the sale in 2008 of 49.9% of the share capital of Banco de Fomento (Angola). The selling price was 365 671 t. euro, part of the proceeds from the sale being paid in eight annual instalments, from 2009 to 2016, plus compensation due to monetary correction.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 151

The changes in tangible assets available for sale in the first half of 2011 were as follows:

Balance at Dec. 31, 10 Aquisi- Sales and write-offs Increase / Balance at Jun. 30 , 11 tions and Reversals of tra nsfers im pairm ent Gross Impair- Ne t Gross Impair- Gross Impair- Net ment ment ment Assets received in settlement of defaulting loans Real est ate 114 396 ( 39 985) 74 411 19 499 ( 11 334) 1 851 ( 8 591) 122 561 ( 46 725) 75 836 Equipment 2 423 ( 818) 1 605 2 712 ( 2 516) 215 ( 277) 2 619 ( 880) 1 739 Others 61 ( 61) 61 ( 61) Other tangible assets Real estate 408 ( 94) 314 3 907 ( 105) 4 315 ( 199) 4 116 Others 117 288 ( 40 958) 76 330 26 118 ( 13 850) 2 066 ( 8 973) 129 556 ( 47 865) 81 691

The net amount of the caption “Aquisitions and Transfers” includes 3 904 t. euro relating to tangible assets transferred from the caption “Property for own use” (Note 4.9).

The changes in tangible assets available for sale in the first half of 2010 were as follows:

Balance at Dec. 31, 09 Aquisi- Sales and write-offs Increase / Balance at Jun. 30 , 10 tions and Reversals of tra nsfers im pairm ent Gross Impair- Ne t Gross Impair- Gross Impair- Net ment ment ment Assets received in settlement of defaulting loans Real est ate 94 583 ( 31 474) 63 109 17 327 ( 11 844) 2 462 ( 4 551) 100 066 ( 33 563) 66 503 Equipment 5 695 ( 4 249) 1 446 3 117 ( 3 238) 954 ( 476) 5 574 ( 3 771) 1 803 Others 61 ( 61) 61 ( 61) Other tangible assets Real estate 408 ( 94) 314 408 ( 94) 314 Others 1 780 ( 729) 1 051 ( 1 780) 729 102 527 ( 36 607) 65 920 20 444 ( 16 862) 4 145 ( 5 027) 106 109 ( 37 489) 68 620

The caption “Other accrued income” at June 30, 2011 and December 31, 2010 includes 8 932 t. euro and 16 609 t. euro, respectively, relating to the accrued commission from participation on the results of insurance products (Notes 2.14 and 4.39).

The caption “Other deferred expenses” at June 30, 2011 includes 6 977 t. euro relating to the accrual of the Extraordinary Contribution over the Banking Sector paid in advance in June 2011.

The caption “Past service liabilities – Others” corresponds to the liability of Banco de Fomento Angola in accordance with Law 18/90 of Angola, regarding the Angola Social Security system, which defines that retirement pensions must be granted to all Angolan employees enrolled in the Social Security.

The caption “Stock exchange transactions pending settlement” at June 30, 2011 and December 31, 2010 refers to the sale of securities only settled in the following month.

The caption “Operations on assets pending settlement” at June 30, 2011 and December 31, 2010 includes 15 960 t. euro and 16 209 t. euro, respectively, relating to taxes to be settled, of which 11 977 t. euro, relates to taxes under litigation which were paid under the provisions of Decree-Law 248-A / 02 of November 14.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 152

In addition, at June 30, 2011 and December 31, 2010 this caption also includes: • 173 739 t. euro and 81 144 t. euro, respectively, relating to securitisation operations carried out by the BPI Group (Notes 4.7 and 4.19), resulting from temporary differences between settlement of the securitised loans and settlement of the liability for assets not derecognized; • 12 371 t. euro and 11 090 t. euro, respectively, relating to mortgage loans pending settlement.

The changes in impairment losses and provisions in the first half of 2011 and 2010 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 153

4.14. Resources of Central Banks

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Resources of the Bank of Portugal Deposits 1 073 341 1 051 639 Accrued interest 1 737 251 Resources of other Central Banks Deposits 194 398 193 034 Accrued interest 1 019 613 1 270 495 1 245 537

During the first half of 2011 and in 2010, Banco BPI took funds from the EuroSystem, using part of its portfolio of eligible assets for this purpose (Note 4.33).

4.15. Financial liabilities held for trading

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Derivative instruments with negative fair value (Note 4.4) 131 896 261 493 131 896 261 493

4.16. Resources of other credit institutions

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Resources of Portuguese credit institutions Very short term resources 2 500 Deposits 86 456 238 980 Loans 121 Other resources 3 163 1 330 Accrued interest 269 180 90 009 242 990 Resources of foreign credit institutions Deposits of international financial organisations 491 627 327 281 Very short term resources 86 013 928 Deposits 487 703 696 525 Debt securities sold with repurchase agreements 1 645 470 3 321 747 Other resources 95 851 134 516 Accrued interest 3 462 3 798 2 810 126 4 484 795 Correction of the amount of hedged liabilities 2 394 4 289 Commission relating to amortised cost ( 7 455) ( 5 990) 2 895 074 4 726 084

The balance of the caption “Debt securities sold with repurchase agreements” is made up essentially of money market repurchase operations, used for liquidity management purposes.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 154 4.17. Resources of customers and other debts

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Demand deposits 8 042 250 7 673 321 Term deposits 14 479 257 14 138 443 Savings deposits 341 022 377 629 Compulsory deposits 14 546 13 818 Cheques and orders payable 66 268 42 763 Other resources of customers 64 354 48 959 Capitalisation insurance products - Unit links 490 840 560 346 Capitalisation insurance products - guaranteed rate 230 993 250 369 Accrued interest 163 280 114 733 23 892 810 23 220 381 Correction of the amount of hedged liabilities 5 720 20 482 23 898 530 23 240 863

The caption “Resources of customers” at June 30, 2011 included 292 337 t. euro and 1 082 048 t. euro, respectively, relating to deposits of investment funds and pension funds managed by the BPI Group (462 726 t. euro and 424 516 t. euro, respectively, at December 31, 2010).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 155

4.18. Debt securities

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10 Av era ge Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate Deposit Certificates EUR 60 60 3.5% 76 76 3.5% 60 60 76 76 Commercial Paper EUR 24 717 24 717 4. 2% 990 990 1.1% USD 103 450 103 450 1.4% 128 167 128 167 990 990 Covered Bonds EUR 3 925 000 (1 289 650) 2 635 350 2.8% 3 725 000 (1 259 750) 2 465 250 2.5% 3 925 000 (1 289 650) 2 635 350 3 725 000 (1 259 750) 2 465 250 Fixed rate cash bonds EUR 3 366 447 ( 386 014) 2 980 433 3.5% 3 284 233 ( 285 721) 2 998 512 3.3% CZK 19 951 19 951 3.7% CHF 825 ( 54) 771 1. 3% 796 796 1.3% US D 150 062 ( 11 081) 138 981 2. 7% 150 617 ( 4 648) 145 969 2.1% CA D 21 701 ( 2 097) 19 604 3. 0% 22 726 ( 435) 22 291 2.2% JPY 34 409 34 409 2. 5% 36 815 36 815 2.5% 3 573 444 ( 399 246) 3 174 198 3 515 138 ( 290 804) 3 224 334 Variable rate cash bonds EUR 1 332 024 ( 544 143) 787 881 2.3% 1 716 572 ( 590 523) 1 126 049 1.7% USD 6 919 6 919 3.0% 1 338 943 ( 544 143) 794 800 1 716 572 ( 590 523) 1 126 049 Variable income cash bonds EUR 1 001 759 ( 372 293) 629 466 1 350 829 ( 550 566) 800 263 US D 76 594 ( 57 111) 19 483 88 460 ( 57 141) 31 319 1 078 353 ( 429 404) 648 949 1 439 289 ( 607 707) 831 582 10 043 967 (2 662 443) 7 381 524 10 397 065 (2 748 784) 7 648 281 A ccrued int erest 77 392 82 133 Correction of the amount of hedged liabilities 34 516 88 546 P remiums and commission (net ) ( 28 157) ( 36 686) 83 751 133 993 7 465 275 7 782 274

The average interest rates mentioned in the preceding table were calculated based on the interest rate of each issue in relation to the nominal value of the bonds. It is not possible to calculate the rate for the Variable Income Bonds as the income is only known when it is due.

As part of its medium and long term funding plan, the BPI Group issues cash bonds. Some of the bonds are issued under the Euro Medium Term Notes (EMTN) program.

The maximum amount for emissions under the EMTN program is 10 000 000 000 euro.

Cash bonds can only be issued by institutions under the Bank of Portugal’s supervision. They are an instrument currently used by the BPI Group to provide investment solutions for its customers, as an alternative to term deposits.

Bonds issued, being cash bonds or bonds issued under the EMTN program, can be issued in different currencies.

In 2008 the BPI Group set up two collaterized bond issue programs (mortgage bonds and bonds over the public sector), under Decree- Law 59/2006. Under these programs the BPI Group made three issues of mortgage bonds in 2009, four issues of mortgage bonds and one issue of bonds over the public sector in 2010 and one issue of mortgage bonds in 2011.

In accordance with this law, the holders of the mortgage bonds benefit from a special credit privilege over the autonomous assets, which consists of a guarantee of the debt to which the bondholders have access in the event of the issuer’s insolvency.

The mortgage bonds program was set up for up to a maximum of 7 000 000 000 euro.

The mortgage bonds are secured by a portfolio of mortgage loans and other assets that together constitute an autonomous cover pool.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 156 Assets allocated to the cover pool include mortgage loans for housing or commercial purposes located in a EU Member State and other eligible assets, such as deposits at the Bank of Portugal, deposits with financial institutions with ratings equal to or greater than " A - " and other low risk and highly liquid assets. The total value of the other assets cannot exceed 20% of the cover pool. The amount of the allocated mortgage loans cannot exceed 80% of the value of the mortgaged property in the case of residential property, or 60% of the value of the mortgaged property, in the case of commercial property.

The legislation applicable to mortgage bonds imposes prudential limits, which must be met during the period of the bonds:

• The total nominal amount of the outstanding mortgage bonds cannot exceed 95% of the total amount of mortgage loans and other assets assigned to the bonds;

• The average maturity of the outstanding mortgage bonds cannot exceed, at any time, the average maturity of the mortgage loans and other assets assigned to the bonds;

• The total amount of interest payable to the holders of mortgage bonds cannot exceed, at any time, the amount of interest receivable related to the mortgage loans and other assets assigned to the bonds;

• The net present value of the liabilities arising from the outstanding mortgage bonds cannot exceed, at any time, the net present value of the cover pool given as collateral of these bonds, after consideration of any financial derivative instruments. This ratio must be maintained when considering a 200 basis points parallel up or down shift of the yield curve;

• The credit institutions’ risk exposure, except for positions with residual maturity less than or equal to 100 days, cannot exceed 15% of the total nominal amount of the outstanding mortgage bonds.

At June 30, 2011 the amount of mortgage bonds issued by the BPI Group was 3 525 000 000 euro, split into 7 issues as follows: OH - Serie 5 O H - Ser ie 6 OH - Seri e 7 OH - Seri e 8 Issue Date 28/05/2009 17/ 07/2009 15/ 01/ 2010 12/02/ 2010 Nominal Amount E UR 175 000 000 EUR 1 000 000 000 EUR 1 000 000 000 EUR 200 000 000 ISIN PTBB1XOE0006 PTBB24OE0000 PTBB5JOE0000 PTBB5WOE0003 Ma turi ty Da te 28/05/2016 17/ 07/2012 15/ 01/ 2015 12/02/ 2017 Rating ( Moody's/S&P/Fitch ) Aaa/-/- Aaa/AAA/ AAA Aaa/AAA/ AAA Aaa/-/- Reimbursement At maturity At maturity At maturity At maturity I nterest Payment frequency Quarterly Annual Annual Q uart erly Coupon E uribor 3 m + 1.20% 3. 00% 3.25% Euribor 3 m + 0. 84% Repurchases - EUR 63 350 000 EUR 26 300 000 -

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 157

OH - Serie 9 OH - S eri e 10 OH - S eri e 11 Issue Date 21/05/2010 05/ 08/2010 25/ 01/ 2011 Nominal Amount E UR 350 000 000 E UR 600 000 000 E UR 200 000 000 ISIN PTBBP6OE0023 PTBBQQOE0024 PTBBPMOE0029 Ma turi ty Da te 21/05/2025 05/ 08/2020 25/ 01/ 2018 Rating ( Moody's/S&P/Fitch ) Aaa/-/- -/-/AAA Aa1/AA/AA+ Reimbursement At maturity At maturity At maturity I nterest Payment frequency Quarterly Quarterly Quart erly Coupon E uribor 3 m + 0.65% E uribor 3 m + 0.65% E uribor 3 m + 4.60% Repurchases EUR 350 000 000 E UR 600 000 000 -

At June 30, 2011 and December 31, 2010, the cover pool allocated to the mortgage bonds amounted to 4 534 475 t. euro and 4 292 188 t. euro, respectively, of which 4 381 499 t. euro and 4 080 757 t. euro corresponded to mortgage loans (Note 4.7).

The bond program over the public sector was constituted for up to a maximum of 2 000 000 000 euro.

The bonds over the public sector are secured by a portfolio of public sector loans and other assets that together constitute the cover pool.

Loans granted to central public administrations, regional or local authorities of any EU Member State as well as loans with a specific guarantee from these entities may be allocated to the cover pool.

The prudential limits applicable to public sector bonds are similar to those applicable to the mortgage bonds, except for the limit on the maximum nominal amount of outstanding bonds in relation to the loans and other assets allocated to the cover pool, which in the case of bonds over the public sector is 100%.

At June 30, 2011 Banco BPI held two issues of outstanding bonds over the public sector amounting to 400 000 000 euro, as follows: OSP - Seri e 1 OSP - Serie 2 Issue Date 17/07/20 08 3 0/ 09/20 10 Nominal Amount EUR 150 000 000 EUR 250 000 000 ISIN PTBP14OE0006 PTBBRHOE0024 Maturity Date 15/06/20 16 3 0/ 09/20 17 Rating ( Moody's/S&P/Fitch ) -/AAA/- -/A/- Reimbursement At maturity At maturity Interest Payment frequency Quarterly Quarterly Coupon E uribor 3 m - 0.004% Euribor 3 m + 0.4% Repurchases - E UR 250 000 000

At June 30, 2011 and December 31, 2010 the cover pool allocated to bonds over the public sector amounted to 507 123 t. euro and 503 245 t. euro, respectively, of which 400 353 t. euro and 392 870 t. euro corresponded to loans (Note 4.7).

The BPI Group issues bonds on a regular basis, with different remuneration conditions:

• Fixed rate – bonds issued on which the BPI Group is committed to pay a previously defined rate of income, calculated based on a fixed interest rate from the time of issue to maturity; • Variable rate - bonds issued on which the BPI Group is committed to pay income calculated based on a specified interest rate index published by an outside source (market); • Variable income – bonds issued for which the remuneration is not known, or certain, at the issue date, and can be subject to changes depending on the evolution of certain underlying assets (indices or indexing rates) announced at the date of issue. Such bonds have embedded derivatives which are recorded in specific accounts as required by IAS 39 (Note 4.4.). In addition, the BPI Group has options to hedge the risks of change in the cost incurred with these bonds.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 158 The changes in the bonds issued by the BPI Group during the first half of 2011 were as follows:

Variable Deposit Commercial Fixed rate Variable rate Covered Bonds income Total Certificates Paper bonds bonds bonds

Balance at December 31, 2010 76 990 2 465 250 3 224 334 1 126 049 831 582 7 648 281 Bonds issued during the period 128 167 200 000 793 715 26 919 81 000 1 229 801 Bonds redeemed ( 16) ( 990) ( 720 638) ( 404 548) ( 435 683) (1 561 875) Repurchases (net of resales) ( 29 900) ( 108 811) 46 380 174 262 81 931 Exchange difference ( 14 402) ( 2 212) ( 16 614) Balance at June 30, 2011 60 128 167 2 635 350 3 174 198 794 800 648 949 7 381 524

The changes in the bonds issued by the BPI Group in 2010 were as follows:

Deposit Commercial Fixed rate Variable rate Variable Covered Bonds Total Certificates Paper bonds bonds income bonds

Balance at December 31, 2009 110 848 915 2 255 900 2 686 000 2 123 725 1 060 254 8 974 904 Bonds issued during the period 990 2 400 000 783 668 590 001 262 556 4 037 215 Bonds redeemed ( 34) ( 848 915) (1 900 000) ( 62 107) (1 325 418) ( 605 325) (4 741 799) Repurchases (net of resales) ( 290 650) ( 192 253) ( 262 259) 112 526 ( 632 636) Exchange difference 9 026 1 571 10 597 Balance at December 31, 2010 76 990 2 465 250 3 224 334 1 126 049 831 582 7 648 281

Bonds issued by the BPI Group at June 30, 2011, by maturity date, are as follows: Maturity 2011 2012 2013 2014-2017 > 2017 Total Deposit Certificates EUR 16 29 15 60 16 29 15 60 Commercial Paper EUR 24 717 24 717 USD 103 450 103 450 128 167 128 167 Covered Bonds EUR 936 650 1 498 700 200 000 2 635 350 936 650 1 498 700 200 000 2 635 350 Fixed rate bonds EUR 511 946 1 192 097 707 493 523 434 45 463 2 980 433 CHF 771 771 USD 14 647 113 610 10 724 138 981 CAD 19 604 19 604 JPY 34 409 34 409 526 593 1 192 097 841 478 534 158 79 872 3 174 198 Variable rate bonds EUR 181 901 493 264 12 716 100 000 787 881 USD 6 919 6 919 181 901 493 264 19 635 100 000 794 800

Variable income bonds EUR 96 136 103 847 282 176 147 307 629 466 USD 15 304 4 179 19 483 96 136 119 151 286 355 147 307 648 949 Total 932 813 2 741 191 1 147 483 2 280 165 279 872 7 381 524

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 159

Bonds issued by the BPI Group at December 31, 2010, by maturity date, are as follows: Maturity 2011 2012 2013 2014-2017 > 2017 Total Deposit Certificates EUR 31 30 15 76 31 30 15 76 Commercial Paper EUR 990 990 990 990 Covered Bonds EUR 951 000 1 514 250 2 465 250 951 000 1 514 250 2 465 250 Fixed rate bonds EUR 1 172 613 1 274 547 222 673 270 568 58 111 2 998 512 CZK 19 951 19 951 CHF 796 796 USD 16 206 129 763 145 969 CAD 22 291 22 291 JPY 36 815 36 815 1 208 770 1 274 547 375 523 270 568 94 926 3 224 334 Variable rate bonds EUR 524 515 501 534 100 000 1 126 049 524 515 501 534 100 000 1 126 049 Variable income bonds EUR 296 320 113 663 264 565 125 715 800 263 USD 2 021 17 851 11 447 31 319 298 341 131 514 276 012 125 715 831 582 Total 2 032 647 2 858 625 651 550 2 010 533 94 926 7 648 281

4.19. Financial liabilities relating to transferred assets

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Liabili ti es rel ating to assets not derecognised i n securi tisation oper ations (Note 4.7) Loans Housing loans 5 254 134 5 350 568 Loans to S ME 's 3 595 095 154 290 Liabilities held by the BPI Group (6 550 339) (3 099 873) Risk / benefit on housing loans ceded ( 802 035) ( 835 615) Accrued costs 3 713 2 877 Commission relat ing to amortised cost (net) ( 2 772) ( 1 829) 1 497 796 1 570 418

Banco BPI launched securitisation operations, the main features of which are summarised in the tables below. These were issued through Sagres – Sociedade de Titularização de Créditos S.A..

The bonds issued by securitisation vehicles and held by BPI Group entities were eliminated in the consolidation process.

In December 2007 the Bank sold part of the highest risk bonds issued under the housing loan securitisation operations, usually referred to as equity pieces, having thus ceded part of the benefits and risks of these transactions. The impact of this operation on liabilities is shown in the table above. The assets and liabilities relating to these operations were derecognised by the percentage ceded, and the difference to the product of the sale was recognised in the statement of income.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 160

On April 6, 2005 Banco BPI launched its first small and medium companies securitisation operation, in the amount of 500 000 t. euro, under the name of Douro SME Series 1. The operation was issued in 4 lots, their main characteristics being as follows: Esti mated Rating residual Description Am ount (Moody's, S&P, Guarantee Spread aver age life Fitch) (years) Without ƒ Class A Not es 67 695 0.76 Aa2/AA-/A+ 0. 10% guarantee

European ƒ Class B Notes 26 000 2.08 Aaa/AAA/AAA 0. 08% Investment Fund

Credit ƒ Class C Notes 24 000 2.15 nr Securitisation 1. 00% Guarantee Fund Without ƒ Class D Notes 5 000 2.15 nr 2. 00% guarantee Total of the issues 122 695 Liabilities held by BPI Group ( 29 010) Total 93 685

On February 11, 2011 Banco BPI launched its second small and medium companies securitisation operation, in the amount of 3 472 400 t. euro, under the name of Douro SME Series 2. The operation was issued through Sagres – Sociedade de Titularização de Créditos S.A..The operation was issued in 4 lots, their main characteristics being as follows: Esti mated residual Rating Spread / Description Amount Guarantee a ver age life (Fitc h/ DBRS) Fixed rate (years) Without ƒ Class A Notes 1 819 400 3.13 A+/AA 0.15% guarant ee Without ƒ Class B Notes 1 317 500 4.87 nr 0.10% guarant ee

Without ƒ Class C Notes 52 500 1.41 nr 0.10% guarant ee

Without Residual ƒ Class D Notes 283 000 4.87 nr guarant ee in te re st Total of the issues 3 472 400 L iab ilities held b y BP I G roup (3 47 2 400 ) Total

On November 24, 2005 Banco BPI launched its first housing loan securitisation operation, in the amount of 1 500 000 t. euro, under the name of DOURO Mortgages No. 1. The operation was issued in 5 lots, their main characteristics being as follows: Esti mated Rating residual Description Am ount (Moody's, S&P, Spread 1 aver age life Fitch) (years) ƒ Class A Notes 514 378 3.26 A1/AA-/A+ 0.14% ƒ Class B Notes 10 884 3.26 A1/AA-/A+ 0.17% ƒ Class C Notes 9 895 3.26 A1/A/A+ 0.27% ƒ Class D Notes 8 246 3.26 Baa1/BBB/A- 0.47% ƒ Class E Notes 8 694 3.26 nr/nr/nr Residual interest Total of the issues 552 097 Reserve Fund ( 3 041) O ther funds 3 Liabilities held by BP I G roup ( 8 143) Risk / benefit c eded ( 190 192) Total 350 724 1 Until the date of the call option (September 2014); after this date, if the option is not exercised, the spread doubles.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 161

On September 28, 2006 Banco BPI launched its second housing loan securitisation operation in the amount of 1 500 000 t. euro under the name of DOURO Mortgages No. 2. The operation was issued in 6 lots, their main characteristics being as follows: Esti mated Rating residual Description Am ount (Moody's, S&P, Spread 1 aver age life Fitch) (years) ƒ Class A1 Notes 6 744 6.31 A1/AA-/A+ 0.05% ƒ Class A2 Notes 681 653 6.31 A1/AA-/A+ 0.14% ƒ Class B Notes 16 814 6.31 A1/AA-/A+ 0.17% ƒ Class C Notes 10 906 6.31 A2/A+/A 0.23% ƒ Class D Notes 8 634 6.31 Baa2/BBB/BBB+ 0.48% ƒ Class E Notes 8 697 6.31 nr/nr/nr Residual interest Total of the issues 733 448 Reserve Fund ( 3 043) Liabilities held by BPI Group ( 56 463) Risk / benefit c eded ( 253 663) Total 420 279 1 Until the date of the call option (April 2015); after this date, if the option is not exercised, the spread doubles.

On July 31, 2007 Banco BPI launched its third housing loan securitisation operation in the amount of 1 500 000 t. euro under the name of DOURO Mortgages No. 3.The operation was issued in 6 lots, their main characteristics being as follows: Esti mated Rating residual Description Am ount (Moody's, S&P, Spread 1 aver age life Fitch) (years) ƒ Class A Notes 978 646 5.25 A1/AA-/A+ 0.16% ƒ Class B Notes 25 091 5.25 nr/AA-/A+ 0.17% ƒ Class C Notes 14 919 5.25 nr/AA-/A+ 0.23% ƒ Class D Notes 12 885 5.25 nr/BB B/ BBB 0.48% ƒ Class E Notes 2 632 1.12 nr/BBB-/BBB- 0.50% ƒ Class F Notes 1 251 5.25 nr/nr/nr Residual interest Total of the issues 1 035 424 Reserve Fund ( 4 200) O ther funds ( 54) Liabilities held by BPI Group ( 40 823) Risk / benefit c eded ( 358 180) Total 632 167 1 Until the date of the call option (August 2016); after this date, if the option is not exercised, the spread is multiplied by 1.5.

In December 2008 Banco BPI launched a new series of housing loan securitisation operations in the amount of 1 522 500 t. euro under the name of DOURO Mortgages No. 4, which were settled financially in January, 2009. The operation was issued in 4 lots, their main characteristics being as follows: Esti mated residual Rating Description Am ount Spread aver age life (S&P, DBRS) (years) ƒ Class A Notes 1 275 000 8.23 AA-/AA 0.15% ƒ Class B Not es 180 000 21.49 nr/nr 0.20% ƒ Class C Notes 45 000 22.49 nr/nr 0.25% ƒ Class D Notes 22 500 22.49 nr/nr Residual interest Total of the issues 1 522 500 Liabilities held by BP I G roup (1 522 500) Total

This issue was made in order to be eligible for possible funding from the European Central Bank.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 162

On August 6, 2010 Banco BPI launched its fifth housing loan securitisation operation in the amount of 1 421 000 t. euro under the name of DOURO Mortgages No. 5.The operation was issued in 3 lots, their main characteristics being as follows: Esti mated residual Rating Description Am ount Spread aver age life (S&P, DBRS) (years) ƒ Class A Notes 1 099 000 8.75 AA-/AA 0.20% ƒ Class B Not es 301 000 21.73 nr/nr ƒ Class C Notes 21 000 21.73 nr/nr Residual interest Total of the issues 1 421 000 Liabilities held by BP I G roup (1 421 000) Total

This issue was made in order to be eligible for possible funding from the European Central Bank.

4.20. Provisions and impairment losses

The changes in provisions and impairment losses of the Group during the first half of 2011 were as follows: E xchange Balance at Decreases Balance at Incr eases Utilisation differences Dec. 31, 10 and reversals Jun. 30, 11 and others Im pairm ent losses on l oans and advances to 382 ( 372) ( 8) 2 credit institutions (Note 4.6) Im pairm ent losses on l oans and advances to customers (Note 4. 7) 553 932 115 949 ( 35 012) ( 38 181) ( 7 152) 589 536 Im pairm ent losses on financial assets available for sale (Note 4.5) Debt instruments 2 558 ( 111) 2 447 E quit y inst rument s 42 158 290 ( 61) 42 387 O ther securitit es 3 221 140 3 361 Loans and other receivables 5 283 11 146 ( 3) 16 426 Im pairm ent losses on other assets (Note 4.13) Tangible asset s held for sale 40 958 12 281 ( 3 308) ( 2 066) 47 865 Debtors, ot her applic ations and ot her assets 970 17 ( 17) 970 Im pairm ent losses and provisions for guarantees 35 018 296 ( 1 411) ( 168) 33 735 and comm itm ents Other provisions 75 555 14 266 ( 459) ( 1 268) ( 2 081) 86 013 760 035 154 385 ( 40 318) ( 41 887) ( 9 473) 822 742

Utilisation of impairment losses on loans and advances to customers recorded in the first half of 2011 corresponds to write-offs and loans sold, in the amounts of 36 907 t. euro and 1 274 t. euro, respectively.

The caption “Other provisions” at June 30, 2011 includes provisions for tax contingencies and litigation in progress.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 163

The changes in provisions and impairment losses of the Group during the first half of 2010 were as follows: Exchange Balance at Decreases Balance at Increases Utilisation differences Dec. 31, 09 and reversals Jun. 30, 10 and others Impairment losses on loans and advances to 1 779 310 2 089 credit institutions Impairment losses on loans and advances to 561 787 customers 530 365 63 648 ( 7 442) ( 39 345) 14 561 Impairment losses on financial assets available for sale Debt instruments 2 284 406 2 690 Equity instruments 41 729 82 138 41 949 Other securitites 4 627 595 5 222 Loans and other receivables 6 833 264 65 7 162 Impairment losses on financial assets held to maturity Debt instruments 4 830 4 830 Impairment losses on other assets Tangible assets held for sale 36 607 8 310 ( 3 283) ( 4 145) 37 489 Debtors, other applications and other assets 1 196 55 ( 6) ( 199) ( 74) 972 Impairment losses and provisions for guarantees 28 556 3 936 ( 1 293) 450 31 649 and commitments Other provisions 61 120 9 542 ( 368) ( 536) 3 267 73 025 719 926 86 838 ( 12 392) ( 44 225) 18 717 768 864

The utilisation of impairment losses on loans and advances to customers includes essentially write-offs recorded during the first half of 2010.

The caption “Other provisions” at June 30, 2010 includes provisions for tax contingencies and litigation in progress.

4.21. Technical provisions

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Immediate Life Annuity / Individual 5 6 Immediate Life Annuity / Group 43 45 Family Savings 222 218 BPI New Family Savings 1 613 567 1 813 154 BPI Retirement Guaranteed 102 947 103 595 BPI Retirement Savings 926 278 929 348 BPI Non Resident Savings 123 256 134 445 Planor 5 588 5 579 PPR BBI Life 3 866 4 148 Savings Investment Plan / Youths 1 251 1 279 South PPR 94 90 2 777 117 2 991 907

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 164 The technical provisions were computed on a prospective actuarial basis, contract by contract, in accordance with the technical bases of the products.

Immediate income

Individual Interest Rate 6% Mortality Table PF 60/64

Group Interest Rate 6% Mortality Table PF 60/64

Deferred capital with Counterinsurance with Participation in Results

Group Interest Rate 4% and 0% Mortality Table PF 60/64, TV 73-77 and GRF 80

The technical provisions also include a provision for rate commitments, which is recorded when the effective profitability of the assets that represent the mathematical provisions of a determined product is lower than the technical interest rate used to calculate the mathematical provisions.

The BPI New Family Savings, BPI Retirement Savings PPR and BPI Non Resident Savings are capitalisation products with guaranteed capital and participation in the results.

4.22. Tax liabilities

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Current Tax Liability Corporate income t ax payable 17 300 6 273 Ot her 1 008 341 18 308 6 614 Defer red Tax Li abili ty On temporary differences 24 339 31 114 24 339 31 114 42 647 37 728

Details of the deferred tax liability are presented in Note 4. 44.

4.23. Participating bonds

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10 Average Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate

Participating bonds EUR 28 081 ( 21 710) 6 371 1. 6% 28 081 ( 20 959) 7 122 1.6% 28 081 ( 21 710) 6 371 28 081 ( 20 959) 7 122 Accrued interest 93 45 6 464 7 167

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 165

The changes in debt issued by the BPI Group during the first half of 2011 were as follows: Participating bonds

Balance at December 31, 10 7 122 Repurchases (net of resales) ( 751) Balance at June 30, 11 6 371

The changes in debt issued by the BPI Group during 2010 were as follows:

Participating bonds

Balance at December 31, 09 11 719 Repurchases (net of resales) ( 4 597) Balance at December 31, 10 7 122

The participating bonds can be redeemed at par at the request of the participants with the approval of the Bank or at the initiative of the Bank with six months notice.

4.24. Subordinated debt

This caption is made up as follows: Jun. 30, 11 Dec. 31, 10 Average Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate Perpetual bonds EUR 420 000 ( 360 000) 60 000 2.8% 420 000 ( 360 000) 60 000 2.4% JPY 69 029 69 029 4.0% 420 000 ( 360 000) 60 000 489 029 ( 360 000) 129 029 Other Bonds EUR 434 200 ( 154 534) 279 666 2.8% 434 200 ( 111 869) 322 331 2.4% JPY 161 068 161 068 2.8% 434 200 ( 154 534) 279 666 595 268 ( 111 869) 483 399 854 200 ( 514 534) 339 666 1 084 297 ( 471 869) 612 428 Accrued interest 2 495 3 031 Correction of the amount of hedged liabilities 175 25 175 Premiums (net) ( 31) ( 245) 2 639 27 961 342 305 640 389

At the end of the first half of 2011, Banco BPI repurchased all the BPI CAYMAN 13/03/2036 2.76% JPY and BPI OBRIGAÇÕES PERPÉTUAS SUBORDINADA / 96 - JPY – CAYMAN subordinated issuances (Note 4.40).

The changes in debt issued by the BPI Group during the first half of 2011 were as follows:

Perpetual Other Total bonds bonds

B alance at December 31, 10 129 029 483 399 612 428 Repurchases (net of resales) ( 69 029) ( 203 733) ( 272 762) B alance at June 30, 11 60 000 279 666 339 666

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 166 The changes in debt issued by the BPI Group during 2010 were as follows:

Perpetual Other Total bonds bonds

Balance at December 31, 09 116 323 518 318 634 641 Repurchases (net of resales) ( 34 566) ( 34 566) Exchange difference 12 706 ( 353) 12 353 Balance at December 31, 10 129 029 483 399 612 428

Debt issued by the BPI Group at June 30, 2011 is made up as follows, by residual term to maturity: Maturity 2011 2012 2013 2014-2017 > 2017 Total Perpetual Bonds EUR 1 60 000 60 000 60 000 60 000 Other Bonds E UR 28 443 2 369 248 854 279 666 28 443 2 369 248 854 279 666 Total 28 443 60 000 2 369 248 854 339 666 1 Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up.

Debt issued by the BPI Group at December 31, 2010 is made up as follows, by residual term to maturity: Maturity 2011 2012 2013 2014-2017 > 2017 Total Perpetual Bonds EUR 1 60 000 60 000 JPY 2 69 029 69 029 69 029 60 000 129 029 Other Bonds E UR 28 499 2 369 291 463 322 331 JPY 161 068 161 068 28 499 2 369 291 463 161 068 483 399 Total 97 528 60 000 2 369 291 463 161 068 612 428 1 Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up. 2 Date of the call option (November 2011); after that date, if the option is not exercised, the remuneration is stepped up.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 167

4.25. Other liabilities

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Creditors and other resources Creditors for futures operations 5 795 8 789 Consigned resources 14 808 15 630 Captive account resources 5 167 5 036 Subscription account resources 88 1 Guarantee account resources 15 885 16 200 State administrative sector Value Added Tax (VAT) payable 7 199 6 672 Tax withheld at source 20 099 24 181 Social Security contributions 4 348 2 644 Other 234 480 Contributions to other health systems 1 402 1 450 Creditors for factoring contracts 14 902 10 682 Creditors for the supply of assets 6 821 8 404 Other creditors 151 728 125 553 Deferred costs ( 207) ( 69) 248 269 225 653 Accrued costs Creditors and other resources 384 295 Personnel costs 140 483 120 864 General administrative costs 41 046 31 864 Others 1 494 1 308 183 407 154 331 Deferred income On guarantees given and other contingent liabilities 5 873 5 636 Others 4 890 4 064 10 763 9 700 Other accounts Foreign exchange transactions pending settlement 17 104 Securities operations pending settlement - non stock exchange operations 130 029 46 992 Liabilities pending settlement 179 894 104 472 Other operations pending settlement 5 193 40 840 332 220 192 304 774 659 581 988

At June 30, 2011 the caption “Accrued costs - Personnel costs” includes 40 000 t. euro relating to the increased liability resulting from an early retirements program approved in June 2011 that is expected to include 260 employees of the Group (Note 4.26). At December 31, 2010 this caption included 13 000 t. euro relating to the increased liability resulting from an early retirements program that was expected to include 65 employees of the Group (Note 4.26). The amounts recorded under the caption “Security operations pending - Non Stock Exchange Operations” at June 30, 2011 and December 31, 2010 corresponds to securities purchased which were only settled in the following month.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 168 The caption “Liabilities pending settlement” at June 30, 2011 and December 31, 2010 includes: • 89 550 t. euro and 49 425 t. euro, respectively, relating to electronic interbank transfer transactions; • 38 520 t. euro and 10 860 t. euro, respectively, relating to loan securitisation fund transactions; • 12 905 t. euro and 10 178 t. euro, respectively, relating to ATM/POS transactions to be settled with SIBS; • 993 t euro and 1 213 t. euro, respectively, relating to transfers made through the “SPGT”.

The caption “Other operations pending settlement”, at June 30, 2011 and December 31, 2010 includes: • 16 104 t. euro and 14 405 t. euro, respectively, relating to transfers under SEPA (Single Euro Payment Area); • 5 451 t. euro and 5 662 t. euro, respectively, relating to the settlement of payments and receipts of Leasing/ALD/Factoring operations.

4.26. Liability for pensions and other benefits

The past service liability relating to pensioners and personnel that are, or have been, employees of BPI Group companies1, and are covered by pension Funds, is calculated in accordance with IAS 19.

With the publication of Decree-Law 1-A/2011 of January 3, all the bank employees that benefit from CAFEB – Caixa de Abono de Família dos Empregados Bancários were incorporated into the General Social Security Regime, as from January 1, 2011, being covered by this regime as regards old age pensions and in the case of maternity, paternity and adoption leave, the cost of which the Bank will no longer cover. Given the complementary nature of the rules under the Collective Labour Agreement for the Portuguese Banking Sector (Acordo Colectivo de Trabalho do Sector Bancário), the Bank will continue to guarantee the difference between the amount of the benefits that will be paid under the General Social Security Regime for the eventualities covered and the benefits established in the Collective Labour Agreement.

Following the instructions of the National Council of Financial Supervisors (Conselho Nacional dos Supervisores Financeiros) , the amount of the past service liability remained unchanged at December 31, 2010. Current service cost decreased as from 2011 and the Bank became subject to the Single Social Tax (Taxa Social Única) of 23.6%.

Incapacity and survivor pensions and sickness subsidy of these employees will continue to be the Bank’s responsibility.

BPI Vida e Pensões is the entity responsible for the actuarial calculations used to determine the amounts of the retirement and survivor pension liability, as well as for managing the respective Pension Funds.

The “Projected Unit Credit” method was used to calculate the normal cost and past service liability due to age, and the “Single Successive Premiums” method was used to calculate the cost of the incapacity and survivor benefits.

1 Companies consolidated by the full consolidation method (Banco BPI, BPI Investimentos, BPI Gestão de Activos, BPI Private Equity and BPI Vida e Pensões)

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 169

The main actuarial and financial assumptions used to calculate the pension liability are as follows: Assumptions Actual

Jun. 30, 11 Dec. 31, 10 Jun. 30, 11 Dec. 31, 10

Demographic assumptions: Mortality table 1 TV 73/77-M - 1 year TV 73/77-M - 1 year - - TV 88/90-W -1 year TV 88/90-W -1 year Incapacity table EKV 80 EKV 80 - - P erson ne l turnover 0% 0 % - - Decreases By mortality By mortality - - Financial assumptions: Discount rate 5.50% 5. 25% - - P ens ionable salary increase rate 3.00% 3. 00% …….. 2 3.13% 3 P ens ion increase rat e 1.75% 1. 75% …….. 4 1. 00% 5 P ens ion fund income rate

Banco BPI 5.50% 5. 50% -1.87% 6 2. 85%.. Other companies 5.50% 5. 50 % 0. 27% 6 2. 26%..

1 The life expectancy considered was one year greater than the mortality table used. 2 Rate only calculated annually. 3 Calculated based on the changes in the pensionable wages of the employees working for the Group companies in the beginning and end of the year (includes changes in remuneration levels and does not reflect new entrants and exits). 4 Up to this date, the agreement to review the wages and prices tables was not closed. 5 Corresponds to the ACTV table update rate. 6 Rate for the first half of 2011, not annualized.

At December 31, 2010 the number of pensioners and employees covered by the pension plans funded by the pension funds was as follows:

Dec. 31, 10

Retired pensioners 6 458 Survivor pensioners 1 126 Current employees 6 847 Former employees (clauses 137º A and 140 of the ACTV) 3 000 17 431

The past service liability for pensioners and employees of the BPI Group and respective coverage by the Pension Fund at June 30, 2011 and December 31, 2010 are as follows:

Jun. 30, 11 Dec. 31, 10

Total past service liability Liability for pensions under payment 1 696 522 1 746 955 Of which: [increase in the liability resulting from early retirements during the period] [ 11 472] [ 19 809]

Past service liability of current and former employees 529 176 559 172 2 225 698 2 306 127 Net ass ets of the pens ion funds 2 329 446 2 409 393 Contribut ions to be transferred to the Pension Fund 1 375 Excess/(Insufficient) cover 103 748 104 641 Degree of coverage 105% 105%

Contributions in cash amounting to 1 375 t. euro were made to the Pension Fund in January and February 2011.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 170

Evolution of the degree of coverage of the liabilities in the last five years was as follows: Jun. 30, 11 2010 2009 2008 2007 Total past service liability 2 225 698 2 306 127 2 274 641 2 298 177 2 445 429 Net assets of the Pension Fund 2 329 446 2 409 393 2 463 809 2 150 110 2 798 494 Contributions to be transferred to the Pension Fund 1 375 18 119 296 Excess/ (insufficient) cover 103 748 104 641 189 186 ( 28 771) 353 065 Degree of coverage 105% 105% 108% 99% 114%

The changes in the present value of the past service liability during the first half of 2011 and in 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Liability at the beginning of the period 2 306 127 2 274 641 Current cost: Of t he BP I Group 2 870 29 736 Of t he employees 1 775 3 536 Interest cost 59 062 117 636 Actuarial (gain) and loss in the liability ( 90 176) ( 10 533) Early re tiremen ts (1 ) 11 472 19 809 P ens ions payable (estimat e) ( 65 432) ( 128 698) Liabili ty at the end of the peri od 2 225 698 2 306 127 1 Includes 11 250 t. euro at June 30, 2011, relating to the 65 early retirements program approved in December 2010.

The decrease in current service cost in June 2011 results from the transfer of responsibilities to the General Social Security Regime.

The changes in the pension funds during the first half of 2011 and 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Net ass ets of the P ension Fund at the beginning of t he period 2 409 393 2 463 809 Contribut ions made: By the BPI Group 28 875 18 By the employees 1 775 3 536 P ens ion Fund income (net) ( 44 626) 70 015 P ens ions paid by the P ens ion Funds ( 65 971) ( 127 985) Net assets of the Pension Fund at the end of the period 2 329 446 2 409 393

At June 30, 2011 and December 31, 2010 the net assets of the Banco BPI Employees’ Pension Fund were as follows:

Jun. 30, 11 Dec. 31, 10

Liquidity 43.8% 13.8% Fixed rate bonds 12.4% 34.6% Indexed rate bonds 5.7% 8.5% S hares issued by portuguese ent ities 16.2% 19.9% S hares issued by foreign entities 4.1% 6.5% Real est ate 15.8% 14.2% Others 2.0% 2.6% 100.0% 100.0%

During the first half of 2011 the contributions made by the Group to the Pension Funds were made in premises and cash in the amounts of 27 500 t. euro (Notes 4.9 and 4.41) and 1.375 t. euro, respectively. In 2010, the contributions to the Pension Funds were paid in cash.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 171

The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities during the first half of 2011 were as follows: Cha nges in Dec. 31, 10 Purchases Sal es Jun. 30, 11 fair value Fair value of the plan assets: Financial instruments iss ued by the B PI Group Shares 7 117 ( 1 380) 5 737 Bonds 79 242 ( 85) 79 157 86 359 ( 1 465) 84 894 Premises us ed by t he BP I G roup 202 364 27 500 1 408 231 272 288 723 27 500 ( 57) 316 166

The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities in 2010 were as follows: Changes in Dec. 31, 09 Purchases Sales Dec. 31, 10 fair value Fair value of the plan assets: Financial instruments issued by the BPI Group Shares 10 894 ( 3 777) 7 117 Bonds 164 411 ( 5 169) 80 000 79 242 175 305 ( 8 946) 80 000 86 359 Premises used by the BPI Group 199 243 1 605 1 516 202 364 374 548 1 605 ( 7 430) 80 000 288 723

The pension liabilities not yet recognized as income and (cost) at June 30, 2011 and December 31, 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Actuarial deviations Within the corridor ( 230 121) ( 238 734) Outside the corridor ( 44 309) ( 16 032) ( 274 430) ( 254 766) Changes in the conditions of the pension plan ( 35) ( 69) ( 274 465) ( 254 835)

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 172

The changes in actuarial deviations1 from 2007 to 2010 and in the first half of 2011 were as follows: Amount at December 31, 2006 ( 42 561) A mortisation of deviat ions outside the corridor 43 Adjustment in the ACTV Table above the estimate ( 16 805) Change in the actuarial and financial assumptions ( 166 341) Deviation in pension fund income 266 018 Deviation in pensions paid ( 993) Amount at December 31, 2007 39 361 A mortisation of deviat ions outside the corridor 35 A djust ment in t he ACTV Table above the estimat e ( 2 468) Change in the actuarial and financial assumptions 203 809 Deviation in pension fund income ( 733 832) Deviation in pensions paid ( 191) Deviation in mortality ( 8 000) Ot hers ( 560) Amount at December 31, 2008 ( 501 846) Amortisation of deviations outside the corridor 10 744 A djust ment in t he ACTV Table below the estimat e 17 385 Change in the actuarial and financial assumptions 84 083 Deviation in pension fund income 194 897 Deviation in pensions paid ( 1 601) Deviation in mortality ( 5 545) Ot hers ( 4 794 ) Amount at December 31, 2009 ( 206 677) Amortisation of deviations outside the corridor 568 A djust ment in t he ACTV Table below the estimat e 17 144 Deviation in pension fund income ( 59 904) Deviation in pensions paid 714 Deviation in mortality ( 6 621) Ot hers 10 Amount at December 31, 2010 ( 254 766) Amortisation of deviations outside the corridor 380 Change in the actuarial and financial assumptions 73 806 Deviation in pension CGA2 16 370 Deviation in pension fund income ( 109 680) Deviation in pensions paid ( 540)

Amount at June 30, 2011 ( 274 430) 1 Actuarial gains and losses due to differences between the actuarial and financial assumptions and the amounts effectively realised and changes in the actuarial and financial assumptions. 2 Change in the calculation and payment rules of CGA – Caixa Geral de Aposentações pensions, which had the effect of reducing the amount of pensions payable by the Bank relating to the employees for which years of service in the Public Sector were recognized.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 173

The consolidated financial statements as of June 30, 2011 and 2010 include the following amounts relating to coverage of the pension liability, in the captions “Interest, financial gain and loss with pensions” (Note 4.40) and “Personnel costs” (Note 4.42):

Jun. 30, 11 Jun. 30, 10

Interest and financial gain and loss with pensions Interest cost 59 062 58 895 Expected Fund income ( 65 054) ( 65 986) ( 5 992) ( 7 091) Personnel costs Current service cost 2 870 14 865 Amortisation of deviations outside the corridor 380 ( 6) Increase in liability for early retirements1 34 922 14 676 Compensation due to early retirement2 4 986 3 032 Change in the conditions of the pension plan 35 35 43 193 32 602 1 Includes 34 700 t. euro at June 30, 2011 relating to the 260 early retirements program approved in June 2011 (Note 4.25). 2 Includes 5 300 t. euro at June 30, 2011 relating to the program referred to in the preceeding footnote (Note 4.25).

The Members of the Executive Board of Banco BPI, S.A. and the remaining Board Members of BPI Investments benefit from a supplementary retirement and survivor pension plan. At December 31, 2006 a pension fund was started to cover these liabilities.

The main actuarial and financial assumptions used to calculate the pension liability were as follows: Assumptions Actual

Jun. 30, 11 Dec. 31, 10 Jun. 30, 11 Dec. 31, 10

Dem ogr aphic assumptions: Mortality table 1 TV 73/77-M - 1 year TV 73/ 77-M - 1 year TV 88/90-W - 1 year TV 88/90-W - 1 year Incapacity table EKV 80 EKV 80 P ersonnel turnover 0% 0% Decreases By mortality By mortality Financial assumptions: Discount rate 5.50% 5.25% P ens ionable salary increase rate 2.00% 2.00% ……... 2 1. 00% 3 P ens ion increas e rat e 1.75% 1.75% ……... 2 0.00%.. 4 Pens ion fund income rate 5.50% 5.50% 0.26% 2.45%.. 1

The life expectancy considered was one year greater than the mortality table used. 2 Rate only calculated annually. 3 Calculated based on the changes in the pensionable wages of directors serving in the Group companies in the beginning and end of the year (includes changes in remuneration levels and does not reflect changes in directors). 4 Rate for the first half of 2011, not annualized.

At June 30, 2011 and December 31, 2010 the past service liability of this plan and respective coverage by the Pension Fund were as follows:

Jun. 30, 11 Dec. 31, 10

P resent value of the past service liabilit y Liability for pensions under payment 10 327 10 709 Past service liabilty relating to the current and former directors 19 291 18 693 29 618 29 402 Net ass ets of the pens ion fund 29 176 29 477 Excess/(Insufficient) cover ( 442) 75 Degree of coverage 99% 100%

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 174

The changes in the degree of coverage of the liabilities in the last five years were as follows: Jun. 30, 11 2010 2009 2008 2007 Total past service liability 29 618 29 402 27 664 26 120 23 388 Net assets of the Pension Fund 29 176 29 477 26 564 23 871 23 372 Contributions to be transferred to the Pension Fund 1 308 1 511 Excess/ (insufficient) cover ( 442) 75 208 ( 738) ( 16) Degree of coverage 99% 100% 101% 97% 100%

The changes in the present value of the past service liability of the plan in the first half of 2011 and in 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Liability at the beginning of the period 29 402 27 664 Current service cost 806 1 504 Interest cost 803 1 538 Actuarial (gain)/loss in the liability ( 956) ( 424) P ens ions payable (estimat e) ( 437) ( 880) Liabili ty at the end of the peri od 29 618 29 402

The changes in the pension fund during the first half of 2011 and in 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Net ass ets of the P ension Fund at the beginning of t he period 29 477 26 564 Contribut ions made 3 008 P ens ion Fund income (net) 76 651 P ens ions paid by the P ens ion Fund ( 377) ( 746) Net assets of the Pension Fund at the end of the period 29 176 29 477

At June 30, 2011 and December 31, 2010 the net assets of the Banco BPI Directors’ Pension Fund were as follows:

Jun. 30, 11 Dec. 31, 10

Liquidity 13.8% 15.7% Fixed rate bonds 42.0% 37.6% Indexed rate bonds 8.4% 6.5% S hares 30.0% 33.7% Real Estate 2.2% 2.2% Others 3.6% 4.3% 100.0% 100.0%

Contributions to the Pension Funds in 2010 were paid in cash.

The pension liability for the Directors at June 30, 2011 and December 31, 2010 not recognised as income and (cost) was as follows:

Jun. 30, 11 Dec. 31, 10

Actuarial deviations - Executive Directors Within the corridor 368 129 Outside the corridor 416 386 784 515 Changes in the conditions of the Executive Directors' pension plan ( 115) ( 162) 669 353

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 175

The changes in actuarial deviations from 2007 to 2010 and in the first half of 2011 were as follows:

Amount at December 31, 2006 1 126 Amortisation of deviations outside the corridor ( 9) Deviation in pension fund income ( 390) Change in actuarial and financial assumptions 1 373 Deviation in pensions paid 2 Others 529 Amount at December 31, 2007 2 631 Amortisation of deviations outside the corridor ( 51) Deviation in pension fund income ( 3 148) Change in actuarial and financial assumptions 1 315 Deviation in pensions paid ( 39) Others ( 1 138) Amount at December 31, 2008 ( 430) Deviation in pension fund income 588 Change in actuarial and financial assumptions 1 020 Deviation in pensions paid 97 Others ( 488) Amount at December 31, 2009 787 Amortisation of deviations outside the corridor ( 29) Actuarial gains and (losses) 424 Deviation in pension fund income ( 801) Deviation in pensions paid 134 Amount at December 31, 2010 515 Amortisation of deviations outside the corridor ( 24) Deviation in pension fund income ( 723) Change in actuarial and financial assumptions 956 Deviation in pensions paid 60 Amount at June 30, 2011 784

The consolidated financial statements as of June 30, 2011 and December 31, 2010 include the following amounts relating to coverage of the pension liability for Directors, in the captions “Interest and financial gain and loss with pensions” (Note 4.40) and “Personnel costs” (Note 4.42):

Jun. 30, 11 Jun. 30, 10

Interest and financial gain and loss with pensions Interest cost 803 754 Expected Fund income ( 799) ( 719) 4 35 Personnel costs Current service cost 806 752 Amortisation of deviations outside the corridor ( 24) ( 18) Change in the pension plan conditions 47 60 829 794

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 176 4.27. Capital

On April 27, 2011, the Shareholders’ General Meeting approved a subscribed share capital increase of Banco BPI from 900 000 t. euro to 990 000 t. euro through the issuance of 90 000 000 ordinary shares of 1 euro by incorporation of reserves.

The Shareholders’ General Meeting held on April 27, 2011 empowered Banco BPI’s Board of Directors to do the following during a period of eighteen months: a) to purchase treasury shares of up to 10% of Banco BPI’s share capital, provided that: i) the treasury shares are purchased on a market registered by the Securities Market Commission (Comissão do Mercado de Valores Mobiliários - CMVM), at a price not exceeding 110% of the weighted average of the weighted daily average prices of Banco BPI shares on the 10 official price market sessions managed by Euronext Lisboa - Sociedade Gestora de Mercados Regulamentados, S.A. (Euronext) preceding the date of purchase, and a minimum of 1 Euro; or ii) the purchases result from assets received in payment agreements, to settle obligations emerging from contracts entered into by Banco BPI, provided that the value attributed, for that purpose, to the shares does not exceed the value determined by application of the criteria defined in (i) above, with reference to the settlement agreement date; b) to sell Banco BPI shares provided that: i) the shares and options to purchase shares of Banco BPI are sold to employees and Directors of Banco BPI and subsidiaries, as share-based payments under the terms and conditions established in the Variable Remuneration Program (RVA) regulations; or ii) the shares are sold to third parties under the following conditions: 1. the shares are sold in a market registered at the Securities Market Commission (CMVM); and 2. the shares are sold at a price not less than 90% of the weighted average of the daily weighted average prices of Banco BPI shares on the 10 official price market sessions managed by Euronext preceding the date of sale; c) Carry out repurchase or resale agreements or the loan of shares of Banco BPI, provided that such operations are conducted with qualified investors that meet the requirements to be eligible counterparties of Banco BPI, in accordance with articles 30 and 317-D of the Securities Code (Código dos Valores Mobiliários).

4.28. Share Premium account

The changes in the share premium account in the first half of 2011 were as follows:

Bal ance at December 31, 2010 441 306 Use of share premiums to cover negative retained earnings ( 312 874) Balance at June 30, 2011 128 432

The Shareholders’ General Meeting held on April 27, 2011, approved the use of 312 874 t. euro of share premiums to cover negative retained earnings.

In 2010 there were no changes on this caption.

In accordance with Ministerial Order 408/99 of June 4, published in Diário da República – 1st B Series, nº 129, the share premium account may not be used to pay dividends or to acquire treasury shares.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 177

4.29. Other equity instruments and treasury shares

These captions are made up as follows:

Jun. 30, 11 Dec. 31, 10

Other equity instruments Cost of shares to be made available to Group employees RVA 2007 664 RVA 2008 43 78 RVA 2009 10 15 RVA 2010 48 13 RVA 2011 17 Costs of options not exercised (premiums) RVA 2005 1 230 RVA 2007 5 729 5 729 RVA 2008 830 830 RVA 2009 814 814 RVA 2010 343 521 RVA 2011 114 7 948 9 894 Treasury shares Shares to to be made available to Group employees RVA 2007 613 RVA 2008 43 85 RVA 2009 14 22 RVA 2010 6 Shares hedging RVA options RVA 2005 1 806 RVA 2007 14 619 12 813 RVA 2008 3 045 3 045 RVA 2009 3 147 3 315 RVA 2010 146 Other treasury shares 838 21 858 21 699

The caption “Other equity instruments” includes accrued share-based payment program (RVA) costs relating to shares to be made available and options not yet exercised.

Details of the share-based Variable Remuneration Program (RVA) are included in Note 4.49.

The financial statements of the BPI Group as of June 30, 2011 and December 31, 2010 reflect 7 891 762 and 6 647 837 treasury shares, respectively, including 46 737 and 255 553 treasury shares to be made available under the RVA program for which ownership was transferred to the employees on the grant date.

During the first half of 2011, the Bank recorded directly in shareholders’ equity, a gain of 1 216 t. euro on the sale of treasury shares hedging the variable remuneration (RVA) program. In 2010 the Bank recorded directly in shareholders’ equity, a gain of 348 t. euro on the sale of treasury shares hedging the variable remuneration (RVA) program and a gain of 110 t. euro on the sale of other treasury shares.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 178

4.30. Revaluation reserves

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Revaluation reserves Reserves resulting from valuation to fair value of financial assets available for sale (Note 4.5): Debt Instruments Securities (1 317 140) ( 686 770) Hedging derivatives ( 208 251) ( 296 424) Equity Instruments 15 672 20 249 Other 7 111 6 858 Reserve for foreign exchange difference on investments in foreign entities Subsidiary or associated companies ( 53 315) ( 32 171) Equity instruments available for sale ( 112) ( 112) Legal revaluation reserve 703 703 (1 555 332) ( 987 667) Deferred tax reserve Resulting from valuation to fair value of financial assets available for sale: Tax assets 432 795 275 105 Tax liabilities ( 2 968) ( 4 312) 429 827 270 793 (1 125 505) ( 716 874)

Deferred taxes have been calculated in accordance with current legislation and correspond to the best estimate of the impact of recognising the unrealized gains and losses included in the caption “Revaluation Reserves”.

4.31. Other reserves and retained earnings

This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Legal reserve 68 377 149 463 Merger reserve ( 2 463) ( 2 463) Other reserves 595 043 514 818 660 957 661 818 Consolidation reserves and retained earnings 399 964 ( 7 951) Gain on treasury shares ( 5 106) ( 6 384) Taxes relating to gain on treasury shares 1 319 1 670 1 057 134 649 153

In accordance with Article 97 of the General Regime for Credit Institutions and Financial Companies, approved by Decree-Law 298/91 of December 31 and amended by Decree-Law 201/2002 of September 25, Banco BPI must appropriate at least 10% of its net income each year to a legal reserve until the amount of the reserve equals the greater of the amount of share capital or the sum of the free reserves plus retained earnings.

The Shareholders’ General Meeting held on April 27, 2011 approved the incorporation of 90 000 t.euro of the legal reserve into share capital (Note 4.27).

On June 30, 2011 and December 31, 2010 the share premium account and legal reserve of the companies included in the consolidation of the BPI Group which, under the applicable regulations, may not be distributed, amounted to 218 174 t. euro and 206 567 t. euro, respectively, which, adjusted by Banco BPI’s effective participation percentage in these companies, amounted to 95 770 t. euro and 93 578 t. euro, respectively. These reserves are included in the captions “Consolidation reserves” and “Retained earnings and revaluation reserves”.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 179

During the first half of 2011, share premiums were used to cover negative retained earnings in the amount of 312 874 t. euro (Note 4.28). The caption “Consolidation reserves” at June 30, 2011 and December 31, 2010 includes (12 579) t. euro and (8 187) t. euro, respectively, relating to the amount of the revaluation reserves of the companies recorded in accordance with the equity method, weighted by the BPI Group’s (effective) participation in them.

4.32. Minority interests

This caption is made up as follows:

Balance sheet Statem ent of incom e

Jun. 30, 11 Dec. 31, 10 Jun. 3 0, 11 Jun. 30 , 1 0

Minority s hare hold ers in: Banco Foment o A ngola, S. A. 214 133 247 000 47 557 48 035 BP I Ca pita l Fin an ce Ltd 228 14 5 236 9 63 3 368 2 93 2 BPI Alternative Fund 14 530 17 364 395 146 Fundo BPI Taxa Variável 15 420 16 039 583 505 BP I De aler - S ocied ad e f inan ceira de Corre tagem (Moça mbiqu e), S .A. R.L. 5 5 BPI (Suisse), S.A. 3 1 1 472 23 6 517 372 51 904 51 618

Minority interests in BPI Capital Finance at June 30, 2011 and December 31, 2010 includes 227 537 t. euro and 236 527 t. euro, respectively, relating to preference shares: Jun. 30, 11 Dec. 31, 10 Issued Repurchased Bal ance I ssued Repurchased Balance "C" Series S hares 250 000 ( 22 463) 227 537 250 000 ( 13 473) 236 527

The C, D and E series correspond to preference shares with a nominal value of 1 000 euro each, issued in August 2003 (C series) and June 2005 (D and E series), respectively. The payment of dividends and redemption of the preference shares are guaranteed by Banco BPI.

The C Series preference shares entitle the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate plus a spread of 1.55 percentage points up to August 12, 2013 and thereafter to a non-cumulative preference dividend at a rate equal to the three month Euribor rate plus a spread of 2.55 percentage points. The dividends are payable quarterly on February 12, May 12, August 12 and November 12 of each year.

The D Series preference shares entitled the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate plus a spread of 0.075 percentage points over their nominal value. The dividends were payable quarterly on March 30, June 30, September 30 and December 30 of each year.

The E Series preference shares entitled the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate over their nominal value. The dividends were payable quarterly on March 30, June 30, September 30 and December 30 of each year.

BPI Capital Finance, Ltd. will not pay any dividend on the preference shares if, during the year or quarter in progress, such dividend plus amounts already paid exceed Banco BPI’s distributable funds.

The C Series preference shares are redeemable in whole or in part at their nominal value, at the option of BPI Capital Finance, Ltd. on any dividend payment date as from August 2013, subject to prior consent of the Bank of Portugal and Banco BPI. The C series preference shares are also redeemable in whole, but not in part, at the option of BPI Capital Finance, Ltd, with prior approval of the Bank of Portugal and Banco BPI, if a disqualifying capital event or tax event occurs.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 180 The D and E Series preference shares were redeemed on June 30, 2010 at the option of BPI Capital Finance, Ltd, with prior approval of the Bank of Portugal and Banco BPI.

These shares are subordinated to all liabilities of Banco BPI and "pari passu" with any other preference shares that might be issued by the Group in the future.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 181

4.33. Off balance sheet items This caption is made up as follows:

Jun. 30, 11 Dec. 31, 10

Guarantees given and other contingent liabilit ies G uarantees and sureties 2 689 884 2 820 405 Transac tions wit h rec ourse 17 500 17 500 S tand-by letters of credit 21 945 27 216 Documentary credits 118 264 146 836 S uret ies and indemnities 80 81 2 847 673 3 012 038 A ssets given as collateral 7 120 775 5 710 853 Commitments to third parties Irrevoc able commitments Options on assets 54 818 66 087 Irrevocable credit lines 37 646 39 296 Securities subscription 327 469 419 191 Term commitment to make annual contributions to the deposit Guarantee Fund 38 714 38 326 Commitment to the Investor Indemnity System 12 088 11 622 O ther irrevocable commit ment s 707 1 591 Revocable commitments 2 678 813 3 280 583 3 150 255 3 856 696 Responsibility for services provided Deposit and safeguard of asset s 26 065 898 28 772 225 Amounts for collection 166 632 198 662 As sets managed by t he institution 7 302 763 7 709 454 33 535 293 36 680 341

The caption “Assets given as collateral” at June 30, 2011 and December 31, 2010 includes: • 574 524 t. euro and 786 544 t. Euro, respectively, relating to captive credit and 6 500 711 t. euro and 4 878 875 t. euro relating to securities eligible for funding from the European Central Bank (ECB). • 4 590 t. euro and 5 613 t. euro relating to securities given in guarantee to the Securities Market Commission (Comissão do Mercado de Valores Mobiliários - CMVM) under the Investor Indemnity System (Sistema de Indemnização aos Investidores); • 40 950 t. euro and 39 820 t. euro relating to securities given in guarantee to the Deposit Guarantee Fund.

The “Options on assets” caption at June 30, 2011 and December 31, 2010 corresponds to share options issued by the BPI Group under the share-based payments program (RVA).

The “Commitments to third parties - Securities subscription” caption at June 30, 2011 and December 31, 2010 corresponds to Banco BPI’s commitment to subscribe for commercial paper if the securities issued are not totally or partially subscribed for by the market.

The “Term commitment to make annual contributions to the Deposit Guarantee Fund” caption at June 30, 2011 and December 31, 2010 corresponds to BPI’s legally required irrevocable commitment, to pay to the Fund, upon request by it, the amount of the annual contributions not yet paid.

The “Commitment to the Investor Indemnity System” caption at June 30, 2011 and December 31, 2010 corresponds to BPI’s irrevocable commitment, legally required under the applicable legislation, to pay the System, if required to do so, its share of the amounts necessary to indemnify investors.

At June 30, 2011 the BPI Group managed the following third party assets: Investment Funds and PPRs 2 372 564 Pension Funds 1 3 094 717 1 Includes the Group companies’ Pension Funds.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 182

4.34. Financial margin (narrow sense) This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Interest and similar income Interest on deposits with banks 2 504 2 112 Interest on placements with credit institutions 8 044 6 833 Interest on loans to customers 352 205 352 918 Interest on credit in arrears 4 188 6 408 Interest on securities held for trading and available for sale 222 618 227 380 Interest on securitised assets not derecognised 96 032 28 657 Interest on derivatives 271 786 305 707 Interest on securities held to maturity 682 650 Interest on assets with repurchase agreements 2 861 Interest on debtors and other aplications 1 983 2 643 Other interest and similar income 7 007 4 953 969 910 938 261 Interest and similar expense Interest on resources Of central banks 7 429 14 579 Of other credit institutions 28 629 17 772 Deposits and other resources of customers 233 172 167 175 Debt securities 109 136 135 573 Interest from short selling 83 124 Interest on derivatives 283 168 281 094 Interest on liabilities relating to assets not derecognised on securitised operations 13 296 14 587 Interest on subordinated debt 8 171 8 728 Other interest and similar expenses 279 7 683 363 639 639

4.35. Gross margin on unit links This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Income from financial instruments Interest 2 348 6 291 Gains and losses on financial instruments ( 4 105) ( 28 580) Gains and losses on capitalisation insurance - unit links 1 766 22 271 Management and redemption comission 2 042 2 080 2 051 2 062

4.36. Income from equity instruments This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Conduril 276 369 SIBS 1 068 981 Unicre 1 991 Others 203 273 1 547 3 614

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 183

4.37. Net commission relating to amortised cost This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Commission received relating to amortised cost Loans to customers 18 484 19 554 Others 1 038 1 088 Commission paid relating to amortised cost Loans to customers ( 3 671) ( 3 902) Others ( 920) ( 1 055) 14 931 15 685

4.38. Technical result of insurance contracts This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Premiums 186 005 765 656 Income from financial instruments 43 518 34 734 Cost of claims, net of reinsurance ( 450 185) ( 149 527) Changes in technical provisions, net of reinsurance 263 270 ( 616 417) Participation in results ( 35 219) ( 28 310) 7 389 6 136

This caption includes the result of capitalisation insurance with a discretionary participation feature (IFRS 4). Participation in the results of capitalisation insurance is attributed at the end of each year and is calculated in accordance with the technical bases of each product, duly approved by the Portuguese Insurance Institute (Note 2.10).

4.39. Net commission income This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Commissions received On guarantees provided 12 542 13 557 On commitments to third parties 612 1 156 On insurance brokerage services 18 626 18 937 On banking services rendered 104 172 104 141 On operations realised on behalf of third parties 7 870 9 263 Other 3 857 7 599 147 679 154 653 Commissions paid On guarantees received 89 54 On commitments to third parties 6 On financial instrument operations 524 519 On banking services rendered by third parties 20 593 18 478 On operations realised by third parties 1 964 2 069 Other 278 907 23 454 22 027 Other income, net Refund of expenses 14 368 15 073 Income from banking services 14 057 14 805 Charges similar to fees ( 4 562) ( 4 159) 23 863 25 719

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 184

At June 30, 2011 and 2010, commissions received on insurance brokerage services or reinsurance is made up as follows:

Jun. 30, 11 Jun. 30, 10

Life insurance Housing 8 930 8 905 Consumer 1 538 1 357 Others 2 618 2 267 13 086 12 529 Non-life insurance Housing 2 076 2 260 Consumer 1 476 2 569 Others 1 988 1 579 5 540 6 408 18 626 18 937

Commission received on insurance brokerage services was paid in full in cash and more than 90% thereof relates to brokerage services in insurance of Allianz.

4.40. Net income on financial operations This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Gain and loss on operations at fair value Foreign exchange gain, net 34 387 43 778 Gain and loss on financial assets held for trading Debt instruments 2 018 816 Equity instruments 17 816 ( 38 623) Other securities 2 ( 1) Gain and loss on trading derivative instruments 8 468 46 185 Gain and loss on other financial assets valued at fair value through profit or loss ( 109) 1 075 Gain and loss on financial liabilities held for trading 2 268 ( 1 057) Gain and loss on the revaluation of assets and liabilities hedged by derivatives 106 824 246 453 Gain and loss on hedging derivative instruments ( 45 170) ( 245 683) Other gain and loss on financial operations 1 112 934 127 616 53 877 Gain and loss on assets available for sale Gain and loss on the sale of loans and advances to customers 255 Gain and loss on financial assets available for sale Debt instruments ( 314) ( 4 771) Equity instruments 79 22 019 Others 213 ( 3 001) 233 14 247 Interest and financial gain and loss with pensions (Note 4.26) Interest cost ( 59 865) ( 59 649) Expected fund income 65 853 66 705 5 988 7 056

At June 30, 2011 and 2010, the caption “Gain and loss on trading derivative instruments” includes (6 717) t. euro and 20 002 t. euro, respectively, relating to equity swaps contracted with Customers, which are hedged with shares classified in the caption “Financial assets held for trading” .

At June 30, 2011, the captions “Gain and loss on the revaluation of assets and liabilities hedged by derivatives” and “Gain and loss on hedging derivative instruments” include 74 238 t. euro relating to a gain on the repurchase of two own bonds issues (Note 4.24).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 185

The “Gain and loss on equity instruments available for sale” caption at June 30, 2010 includes 21 828 t. euro resulting from the revaluation of the participation in Unicre, resulting from the acquisition of 3.4% of its share capital (Notes 1 and 4.11). The gain recorded corresponds to the revaluation to fair value of the original investment (recorded at historical cost in the caption Financial assets available for sale) in accordance with the fair value of Unicre underlying the increase in the participation made in June 2010 (Note 2.1).

4.41. Net operating expenses This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Operating income Gain on tangible assets held for sale 423 650 Gain on other tangible assets 15 304 792 Other operating income 9 120 2 080 24 847 3 522 Operating expenses Subscriptions and donations 2 187 2 540 Contributions to the Deposit Guarantee Fund 1 745 1 840 Loss on tangible assets held for sale 5 294 380 Loss on other tangible and intangible assets 2 084 3 120 Other operating expenses 1 021 2 404 12 331 10 284 Other taxes Indirect taxes 2 053 2 356 Direct taxes 951 1 037 3 004 3 393

The caption “Gain on other tangible assets” at June 30, 2011 includes 9 649 t. euro relating to contributions in kind (properties) to Banco BPI’s Pension Fund (Note 4.9 and Note 4.26).

4.42. Personnel costs This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Remuneration 146 064 147 489 Long service premium (Note 2.7) 1 624 1 665 P ens ion costs (Note 4.26) 4 864 17 343 E arly retirements (Not e 4.26) 39 908 17 708 Ot her mandatory social charges 35 304 23 325 Ohter personnel costs 5 015 5 016 232 779 212 546

The caption “Remuneration” at June 30, 2011 and 2010 includes the following costs relating to remuneration granted to the members of Banco BPI’s Board of Directors: • 2 477 t. euro and 2 605 t. euro, respectively, relating to remuneration paid in cash; and • 131 t. euro and 47 t. euro, respectively, relating to the accrued cost of the share-based remuneration program (RVA) in accordance with IFRS 2.

The caption “Pension Fund” at June 30, 2011 and 2010 includes 739 t. euro and 1 650 t. euro, respectively, relating to costs of the Defined Contribution Pension Plan for employees of Banco de Fomento Angola.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 186

4.43. Administrative Costs This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Administrative costs Supplies Water, energy and fuel 5 403 4 874 Consumable material 3 530 3 445 Other 722 734 Services Rent and leasing 25 361 26 022 Communications and computer costs 22 189 20 445 Travel, lodging and representation 4 179 4 741 Publicity 10 906 10 477 Maintenance and repairs 9 686 10 886 Insurance 2 412 2 423 Fees 1 886 2 172 Legal expenses 1 283 946 Security and cleaning 5 397 5 658 Information services 1 935 2 034 Temporary labour 1 504 1 518 Studies, consultancy and auditing 2 430 3 550 SIBS 9 835 9 572 Other services 10 614 11 858 119 272 121 355

4.44. Income tax

At June 30, 2011 and 2010, the income tax recognised in the statements of income, as well as the tax burden, measured by the relationship between the tax charge and profit before tax, are as follows:

Jun. 30, 11 Jun. 30, 10

Current income tax For the year 22 816 16 530 Correct ion of prior years ( 113) ( 7 393) 22 703 9 137 Deferred tax Recognition and reversal of temporary diff erences ( 21 045) ( 1 962) Change in t ax rate ( 10 143) On tax losses carried forward 2 707 ( 6 480) ( 18 338) ( 18 585) Contribut ion over t he banking sector 7 629 Total tax charged to the statement of income 11 994 ( 9 448) Net income before income tax 1 127 680 127 325 Tax burden 9.4% -7. 4% 1 Considering net income of the BPI Group plus income tax and income attributable to minority interests less the earnings of associated companies(equity method).

The caption “Current income tax - Correction of prior years” for the period ended June 30, 2011, includes (7 427) t. euro relating to corrections of estimated taxes to be paid by BFA with respect to the year 2009.

As a result of the coming into force of Law No. 12 - A/2010 of June 30, a State surcharge of 2.5% on taxable income in excess of 2 000 t. euro was introduced. The impact of this change on the BPI Group’s deferred tax at December 31, 2009 is presented in the caption “Deferred tax - Change in tax rate”.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 187

The State Budget Law, law No. 55-A/2010 of December 31, in the article 141º approved a contribution over the banking sector. On March 30, 2011, the application conditions of the new contribution were published in Decree No. 121/2011. Due to this legislative change, in the first half of 2011 the BPI Group recorded 7 629 t. euro relating to this contribution.

In the first half of 2011 and 2010, Banco BPI recorded, directly in shareholders’ equity, income tax of 351 t. euro and 101 t. euro, respectively, on net gain/loss on treasury shares recognised in equity (Note 4.31).

Reconciliation between the nominal rate of income tax and the tax burden on the first half of 2011 and 2010, as well as between the tax cost/income and the product of the accounting profit times the nominal tax rate are as follows: Jun. 30, 11 Jun. 30, 10 Tax rate Amount Tax rate Amount

Net income before income tax 127 680 127 325 In come ta x comp uted bas ed on th e nomina l ta x ra te 3 2.6 % 41 59 5 3 2. 8% 4 1 7 79

Effect of tax rates applicable to foreign branc hes -2.0% ( 304) 4.4% 5 633 Income exempt from income t ax (SFE 's) -0.1% ( 72) Capital gain and impairment of investments (net) -0.5% ( 629) -4.7% ( 5 959 ) Capital gain of tangible asset s (net ) -1.9% ( 2 465) 0. 3% 358 Income on A ngolan public debt1 -16.5% ( 21 045) -31. 3% ( 39 823) Non taxable dividends 0.1% 81 -2.0% ( 2 542) Tax on dividends of subsidiary and associat ed companies 2.7% 3 481 1. 5% 1 863 Conversion of shareholders' equit y of associat ed companies -0.1% ( 157) 0. 0% 40 Tax benef its -0.8% ( 1 036) -0.8% ( 956) Impairment and provision for loans -0.5% ( 606) -0. 2% ( 250) Non tax deductible pension costs 0.0% 9 0.0% ( 38) Interest rec ognised on minority interests -0.8%( 977)-0.7%( 852) Correction of prior year taxes -1.8% ( 2 302) -0.7% ( 873) Tax losses -9.8% ( 12 556) 1. 0% 1 246 Effect of change in the rate of deferred tax -8.0% ( 10 143) Contribut ion over t he financial sect or 6.0% 7 629 A utonomous taxation 0.5% 604 0. 4% 572 Other non taxable income and expenses 0.5% 672 0.4% 569 9.4% 11 994 -7. 4% ( 9 448) 1 At June 30, 2010, includes corrections of prior year taxes of 7 427 t. euro.

Deferred tax assets related to tax losses and not recognized in the financial statements at June 30, 2011 and 2010 amount to 6 529 t. euro and 29 957 t. euro, respectively.

Current taxes are calculated based on the nominal tax rates legally in force in the countries in which the Bank operates: Jun. 30, 11 Jun. 30, 10 Net income Net income Current tax Current tax before bef ore ra te rate income tax income tax

Companies with income tax rate of 25% and Surcharge of 4% 22 534 29.0% 44 309 29.0% Companies with income tax rate of 25% and Surcharge of 3.8% 6 044 28.8% ( 7 518) 28.8% Companies with income tax rate of 35% (Angola) 95 304 35.0% 88 867 35. 0% Investment funds1 3 798 1 667 127 680 32.6% 127 325 32.8% 1 Regime applicable under the provisions of article 22 of the EBF.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 188

Deferred tax assets and liabilities correspond to the amount of tax recoverable and payable in future periods resulting from temporary differences between the amount of assets and liabilities on the balance sheet and their tax base. Deferred tax assets are also recognised on tax losses carried forward and tax credits.

Profits distributed to Banco BPI by subsidiary and associated companies in Portugal are not taxed in Banco BPI as a result of applying the regime established in article 46 of the Corporate Income Tax Code, which eliminates double taxation of profits distributed.

Deferred tax assets and liabilities are calculated using the tax rates decreed for the periods in which they are expected to reverse.

Deferred tax assets and liabilities at June 30, 2011 and December 31, 2010 are as follows:

Jun. 30, 11 Dec. 31, 10

Deferred tax Assets (Note 4.12) 596 376 426 946 Liabilities (Note 4.22) ( 24 339) ( 31 114) 572 037 395 832 Recorded by corresponding entry to: Retained earnings 123 872 105 625 Fair value reserve (Note 4.30) 429 827 270 793 Financial instruments available for sale 429 827 270 793 Net income 18 338 19 414 572 037 395 832

Deferred tax assets are recognised up to the amount expected to be realised through future taxable profits.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 189

The changes in deferred taxes during the first half of 2011 are as follows:

Corresponding entry to net Corresponding entry to r eserves Balance at income and retained earnings Balance at Dec. 31, 10 Jun. 30, 11 Costs I ncome Increases Decr eases

Deferred tax assets P ens ion liabilit y 29 974 ( 3 171) 4 26 807 Early retirements 30 349 ( 11) 5 979 36 317 Advertising campaigns 909 ( 323) 586 "Taxa garant ida" operations 186 ( 46) 140 B anc o B PI Cayman net income 225 225 Taxed provisions and impairment 71 551 12 531 84 082 Long service premium 7 316 ( 126) 7 7 197 Tax losses 10 227 ( 2 707) 7 520 Financial instruments available for sale 275 658 ( 324) 195 157 997 ( 447) 433 079 Others 551 ( 152) 28 ( 4) 423 426 946 ( 6 860) 18 744 157 997 ( 451) 596 376 Defer red tax liabilities Revaluat ion of tangible fixed asset s ( 1 896) 1 105 ( 791) "Taxa garant ida" operations ( 185) 46 ( 139) Revaluat ion of assets and liabilities hedged by derivat ives ( 1 464) 992 ( 472) S ubs idiary's equity conversion ( 1 598) 157 ( 1 441) Dividends to be distributed by subsidiary and associat ed companie ( 7 869) ( 3 395) 5 906 687 ( 14) ( 4 685) RVA's ( 1) 351 ( 351) ( 1) Loan impairment ( 13 424) 2 573 ( 10 851) Financial instruments available for sale ( 4 549) ( 1 488) 2 1 515 ( 31) ( 4 551) P reference treasury shares 175 ( 1 491) ( 1 316) Ot hers ( 128) 30 4 2 ( 92) ( 31 114) ( 4 726) 11 180 2 206 ( 1 885) ( 24 339) 395 832 ( 11 586) 29 924 160 203 ( 2 336) 572 037

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 190

The changes in deferred taxes during the first half of 2010 are as follows:

Corresponding entry to net Corresponding entry to r eserves Balance at income and retained earnings Balance at Dec. 31, 09 Jun. 30, 10 Costs I ncome Increases Decr eases

Deferred tax assets Pension liability 33 146 ( 3 130) 3 089 33 105 Early retirements 26 144 ( 5) 3 097 29 236 Advertising campaigns 2 089 ( 494) 1 595 "Taxa garant ida" operations 254 ( 46) 24 232 B anc o B PI Cayman net income 206 19 225 Taxed provisions and impairment 58 930 ( 18) 9 766 68 678 Long service premium 6 779 814 7 593 Tax losses 7 144 ( 1 120) 7 600 13 624 Financial instruments available for sale 57 133 ( 40) 681 190 170 ( 785) 247 159 Tax deferral of the impact of transition to NCA 467 ( 211) 256 Ot hers 25 ( 4) 173 ( 13) 181 192 317 ( 5 068) 25 263 190 170 ( 798) 401 884 Defer red tax liabilities Revaluat ion of tangible fixed asset s ( 1 815) ( 128) ( 1) ( 1 944) "Taxa garant ida" operations ( 253) ( 24) 46 ( 231) Revaluat ion of assets and liabilities hedged by derivat ives ( 547) ( 568) ( 1 115) S ubs idiary's equity conversion ( 1 614) ( 40) ( 1 654) Dividends to be distributed by subsidiary and associat ed companie ( 6 111) ( 3 397) 5 668 3 ( 857) ( 4 694) RVA 's ( 3) 103 ( 102) ( 2) Loan impairment ( 17 540) ( 3 580) ( 21 120) Financial instruments available for sale ( 7 288) ( 52) 3 155 ( 172) ( 4 357) Tax deferral of the impact of transition to NCA ( 113) 51 ( 62) Ot hers ( 460) ( 16) 328 ( 148) ( 35 744) ( 7 805) 6 195 3 158 ( 1 131) ( 35 327) 156 573 ( 12 873) 31 458 193 328 ( 1 929) 366 557

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 191

The BPI Group does not recognise deferred tax assets and liabilities on temporary taxable differences relating to investments in subsidiary and associated companies as it is improbable that such differences will revert in the foreseeable future, except as follows: • deferred tax liabilities relating to estimated dividends that Banco de Fomento Angola is expected to pay to the BPI Group companies in the following year out of profit for the year, are recognized; • deferred tax liabilities relating to all the distributable net income (including the undistributed part) of Banco Comercial e de Investimentos are recognized.

4.45. Earnings of associated companies (equity method)

This caption is made up as follows:

Jun. 30, 11 Jun. 30, 10

Banco Comercial e de Investimentos, S.A.R.L. 3 429 3 082 Companhia de Seguros Allianz Portugal, S.A. 7 377 7 269 Cosec – Companhia de Seguros de Crédito, S.A. 1 641 558 TC Turismo Capital - SCR, S.A. 21 1 Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A. 493 1 828 InterRisco - Sociedade de Capital de Risco, S.A. 60 Unicre - Instituição Financeira de Crédito, S.A. 1 080 Viacer - Sociedade Gestora de Participações Sociais, Lda 1 258 1 583 15 359 14 321

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 192

4.46. Consolidated net income of the BPI Group

The contribution of Banco BPI and subsidiary and associated companies to consolidated net income on the first half of 2011 and 2010 is as follows:

Jun. 30, 11 Jun. 30, 10

Banks Banco BPI, S.A.1 2 632 2 171 Banco P ortuguês de Invest iment o, S.A .1 ( 561) 4 251 Banco de Fomento S.A. (Angola)1 44 644 45 092 Banco Comercial e de Investimentos, S. A.R.L.1 3 137 2 821 Banco B PI Cayman, Lt d 1 584 1 827 Specialised credit BPI Locação de Equipamentos, Lda 63 60 Asset management and brokerage BP I Dealer - S ociedade Financ eira de Corret agem (Moçambique), S. A.R.L. ( 1) ( 4) BP I G estão de Act ivos - S ociedade Gest ora de Fundos de Investimento Mobiliários, S. A. 1 6 116 5 652 BPI - Global Investment Fund Management Company, S.A. 220 483 BPI Pensões - Sociedade Gestora de Fundos de Pensões, S.A.2 1 580 BPI (Suisse), S.A.1 978 133 BPI Alternative Fund: Iberian Equities Long/Short Fund 1 1 689 535 Fundo BPI Taxa Variável 1 828 ( 1 672) Venture capital / development TC Turismo Capital - SCR, S.A. 1 21 1 BP I P rivate Equity - S ociedade de Capital de Risco, S. A. ( 51) 267 Inter-Risco - S ociedade de Capital de Risco, S.A . 60 Insurance BP I V ida e P ensões - Companhia de Seguros , S. A.2 6 295 3 163 Cosec - Companhia de Seguros de Crédito, S.A. 1 1 641 558 Companhia de Seguros Allianz Portugal, S.A. 1 7 377 7 269 Other s BPI, Inc1 30 ( 30) BPI Madeira, SGPS, Unipessoal, S.A. 4 6 BPI Capital Finance BPI Capital Africa ( 396) Finangeste - Empresa Financeira de Gest ão e Desenvolviment o, S.A .1 493 1 828 Unicre - Instituição Financeira de Crédito, S.A. 3 1 080 21 828 Simofer - Sociedade de Empreendimentos I mobiliários e Construção Civil, Lda ( 171) Ulissipair ACE 245 Viacer - Sociedade G estora de P articipações Sociais, Lda 1 1 258 1 583 79 141 99 476 1Adjusted net income. 2 In the first half of 2011 BPI Pensões – Sociedade Gestora de Fundos de Pensões, S.A. was merged into BPI Vida e Pensões – Companhia de Seguros, S.A. 3 At June 30, 2010, includes 21 828 t euro relating to the gain resulting from the revaluation of the participation in Unicre (Note 4.40).

4.47. Personnel The average and period-end number of employees (1) in the first half of 2011 and 2010 were as follows:

Jun. 30, 11 Dec. 31, 10

Average End of Average End of for the period period for the period period Executive directors2 10 10 11 11 Management staff 624 622 614 622 Other staff 5 698 5 701 4 486 4 582 Other employees 3 064 2 968 4 387 4 323 9 396 9 301 9 498 9 538 1 Personnel of the Group’s entities that were consolidated by the full consolidation method. This includes the personnel of the foreign branches of Banco BPI.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 193

2 This includes the executive directors of Banco BPI and BPI Investimentos.

4.48. Financial risks

Fair value

Fair value is determined whenever possible based on the price in an active market. A market is considered to be active, and therefore liquid, when it is accessed by equally knowledgeable counterparties and is traded on a regular basis.

The valuation for financial instruments for which there are no prices in an active market is described in the following sections.

Financial instruments recorded in the balance sheet at fair value

Debt instruments and equity instruments

In the case of debt instruments with no prices in active markets, due to the lack of liquidity and absence of regular transactions, alternative methods of valuing assets are used, namely: - assets valued based on third party bid prices considered to be reliable; or, - assets valued based on Net Asset Value updated and disclosed by their managers; - assets valued based on prices disclosed by the entities involved with the structuring of the transactions; or - assets for which impairment tests are made based on indicators of the performance of the underlying operations (degree of protection by subordination of the parts owned, rates of delinquency of the underlying assets, evolution of the ratings).

For unquoted shares, fair value is estimated based on an analysis of the issuer’s financial position and results, risk profile and market valuations or transactions for companies with similar characteristics.

If a market value is not available and it is not possible to determine fair value reliably, equity instruments are recognized at historical cost and are subject to impairment tests.

Financial derivative instruments

Financial derivative transactions in the form of foreign exchange contracts, interest rate contracts, contracts on shares or share indices, inflation contracts or a combination of these, are carried out in over-the-counter (OTC) markets and in organised markets (especially stock exchanges).

The majority of over-the-counter derivatives (swaps, fras, caps, floors and standard options) are valued based on generally accepted methods: - based on the present value of future flows (cash flows), considering the relevant interest rate curve, at the time of the calculation (mark-to-market: such as swaps); or - through models to determine the price from statistical models (such as Black & Scholes), based on generally accepted assumptions (mark to model: such as options).

Valuation techniques use as input representative variables of market conditions at the date of the financial statements.

Market interest rates are determined based on information published in electronic trading platforms (such as Bloomberg, Reuters), and adjusted for liquidity and credit risk.

Interest rates for specific terms of cash flows are determined by suitable interpolation methods. The same interest rate curves are also used in the projection of nondeterministic cash flows such as the indexers.

For derivatives in which there has been counterparty default in the payment of contractual flows, fair value corresponds to its replacement value at the moment of early settlement, adjusted for expected of collectability.

In determining the fair value of derivatives, specific valuations provided by counterparties or by external parties are also used, ensuring in the latter case the reliability of the information provided through regular monitoring and validation of the valuations obtained, and through regular backtesting in relation to observable market transactions.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 194

For presentation purposes in this note, the financial instruments recorded in the balance sheet at fair value are classified in accordance with the following hierarchy established in IFRS 7:

• Level 1 – Price in an active market

This category includes, in addition to financial instruments listed on Stock Exchanges, financial instruments valued based on prices in active markets (executable bids) published in electronic trading platforms.

• Level 2 – Valuation techniques based on market inputs

This level includes financial instruments valued by reference to valuation techniques based on market prices for instruments with similar characteristics or similar financial instruments held by the Group, including observable market prices for financial assets for which significant decreases in trading volumes have occurred, or internal models using inputs which are mainly observable in the market (such as interest rate curves or exchange rates). This level also includes financial instruments valued based on third party purchase prices (indicative bids), considering observable market data.

• Level 3 – Valuation techniques using mainly inputs not based on observable market data

Financial assets and liabilities are classified as Level 3 if a significant proportion of their book value is the result of inputs not based on observable market data, namely:

• unlisted shares, bonds and derivative financial instruments that are valued based on in-house developed models for which there is no generally accepted market consensus as to the inputs to be used; and

• bonds valued based on third party indicative bids, based on theoretical models.

Financial instruments recorded in the balance sheet at amortized cost

The fair value of financial instruments recorded at amortized cost is determined by the BPI Group through valuation techniques. In this note, the fair value of these instruments is presented in level 3, as it is considered that its fair value depends on relevant data not observable in the market.

Fair value may not correspond to the realizable value of these financial instruments in a sale or liquidation scenario, having not been determined for that purpose.

The valuation techniques used are based on market conditions applicable to similar operations as of the date of the financial statements, such as the value of their discounted cash flows based on interest rates considered as most appropriate, namely:

• in interbank operations (Loans and advances to credit institutions and Resources of credit institutions) yield curves for interbank operations at the reference date of the financial statements are used;

• in operations with customers (Loans to costumers and Resources of customers) the weighted average of spreads over the reference rates used by the Bank in the previous month for similar operations is considered, taking into account the need to obtain a significant sample of operations for each class of product considered;

• in bond issuances (Debt securities and Subordinated debt) reference interest rates and spreads available in the market are applied, taking into account the residual maturity and degree of subordination.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 195

The reference rates used to calculate the discount factors at June 30, 2011 are listed in the table below. For each set of operations the above explained spreads applicable are added. 1 month 3 months 6 mon ths 1 ye ar 2 years 3 years 5 yea rs 7 years 10 years 30 years EUR 1.33% 1.55% 1.79% 2.16% 2.18% 2.40% 2.83% 3.13% 3.44% 3.84% GBP 0.63% 0.83% 1.10% 1.58% 1.44% 1.82% 2.50% 3.03% 3.54% 4.07% USD 0.19% 0.25% 0.40% 0.73% 0.71% 1.15% 2.03% 2.68% 3.28% 4.09% JPY 0.14% 0.20% 0.34% 0.56% 0.39% 0.43% 0.57% 0.79% 1.17% 2.02%

The fair value of “Held to maturity investments” is based on market prices or third party purchase prices, when available. If these do not exist, fair value is estimated based on the discounted value of the expected cash flows of principal and interest.

The fair value of spot operations (including Cash and deposits at central banks, Deposits at other credit institutions repayable on demand and Demand deposits included in Resources of customers and other debts) corresponds to their book value.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 196

The fair value of financial instruments at June 30, 2011 is made up as follows: Assets and liabilities valued at fair value Assets valued at historical Method used to determine fair value cost1 Valuation techniques Total book value Net book Active market Ma rke t d at a Mo de ls Total Book value Type of financial instrument Diff erence value listings (Level 1) (Level 2) (Level 3) fair value

Assets Cash and deposits at Central Banks 1 351 335 1 351 335 1 351 335 1 351 335 Deposit s at other credit institutions 348 684 348 684 348 684 348 684 Financial ass ets held for trading and at fair value through profit or loss 889 274 692 529 68 429 128 316 889 274 889 274 Financial ass ets available for sale 6 542 959 4 150 261 441 290 1 951 408 6 542 959 12 168 6 555 127 Loans and advances to credit instit utions 1 481 958 1 479 816 1 479 816 ( 2 142) 1 481 958 Loans and advances to cust omers 29 121 139 27 275 867 27 275 867 (1 845 272) 29 121 139 Held to mat urity investments 1 085 820 984 327 984 327 ( 101 493) 1 085 820 Trading derivatives 2 145 785 17 30 997 114 771 145 785 145 785 Hedging derivat ives 270 685 332 234 067 36 286 270 685 270 685 41 237 639 4 843 139 774 783 33 670 810 39 288 732 (1 948 907) 12 168 41 249 807 Liabilities Resources of central banks 1 270 495 1 270 464 1 270 464 31 1 270 495 Resources of other credit institutions 2 895 074 2 885 133 2 885 133 9 941 2 895 074 Resources of customers and other debt s 23 898 530 23 838 590 23 838 590 59 940 23 898 530 Debt securities 7 465 275 6 438 972 6 438 972 1 026 303 7 465 275 Financial liabilities relating t o t ransf erred asset s 1 497 796 1 372 243 1 372 243 125 553 1 497 796 Trading derivatives 131 896 1 142 19 640 111 114 131 896 131 896 Hedging derivat ives 415 240 14 251 362 476 38 513 415 240 415 240 Technical provisions 2 777 117 2 777 117 2 777 117 2 777 117 S ubordinated debt 342 305 278 677 278 677 63 628 342 305 P articipating bonds 6 464 4 778 4 778 1 686 6 464 40 700 192 15 393 382 116 39 015 601 39 413 110 1 287 082 40 700 192 537 447 ( 124 378) ( 661 825) 12 168 549 615

Valuation differences in financial assets recognised in revaluation reserves (1 502 720)

Total (2 164 545) 1 Unlisted securities for which it was not possible to determine fair value on a reliable basis. 2 This caption is presented in the balance sheet as Financial assets held for trading and at fair value through profit or loss.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 197

The fair value of financial instruments at December 31, 2010 is made up as follows: Assets and liabilities valued at fair value Assets valued at historical Method used to determine fair value 1 cost V aluation t echniques Total book value Net book Active market Ma rke t d at a Mo de ls Total Book value Type of financial instrument Diff erence value listings (Level 1) (Level 2) (Level 3) fair value

Assets Cash and deposits at Central Banks 1 328 222 1 328 222 1 328 222 1 328 222 Deposits at other credit institutions 338 551 338 551 338 551 338 551 Financial ass ets held for trading and at fair value through profit or loss 928 078 656 161 115 997 155 920 928 078 928 078 Financial ass ets available for sale 8 142 290 5 615 684 222 249 2 304 357 8 142 290 14 031 8 156 321 Loans and advances to credit instit utions 1 439 145 1 435 503 1 435 503 ( 3 642) 1 439 145 Loans and advances to cust omers 30 055 006 28 509 650 28 509 650 (1 545 356) 30 055 006 Held to maturity investments 1 043 584 970 827 970 827 ( 72 757) 1 043 584 Trading derivatives 2 313 573 693 171 846 141 034 313 573 313 573 Hedging derivat ives 250 263 245 164 677 85 341 250 263 250 263 43 838 712 6 272 783 674 769 35 269 405 42 216 957 (1 621 755) 14 031 43 852 743 Liabilities Resources of central banks 1 245 537 1 245 561 1 245 561 ( 24) 1 245 537 Resources of other credit institutions 4 726 084 4 738 749 4 738 749 ( 12 665) 4 726 084 Resources of customers and other debt s 23 240 863 23 186 347 23 186 347 54 516 23 240 863 Debt securities 7 782 274 7 353 659 7 353 659 428 615 7 782 274 Financial liabilities relating t o t ransf erred asset s 1 570 418 1 569 742 1 569 742 676 1 570 418 Trading Derivatives 261 493 26 124 086 137 381 261 493 261 493 Hedging derivat ives 499 444 35 844 404 449 59 151 499 444 499 444 Technical provisions 2 991 907 2 991 907 2 991 907 2 991 907 S ubordinated debt 640 389 602 861 602 861 37 528 640 389 P articipating bonds 7 167 6 759 6 759 408 7 167 42 965 576 35 870 528 535 41 892 117 42 456 522 509 054 42 965 576 873 136 ( 239 565) (1 112 701) 14 031 887 167

Valuation differences in financial assets recognised in revaluation reserves ( 956 199)

Total (2 068 900) 1 Unlisted securities for which it was not possible to determine fair value on a reliable basis. 2 This caption is presented in the balance sheet as Financial assets held for trading and at fair value through profit or loss.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 198

At June 30, 2011 and December 31, 2010 financial assets held for trading and at fair value through profit or loss included in Level 3 correspond essentially to bonds valued through indicative Bids based on theoretical models or in-house developed models.

At June 30, 2011 and December 31, 2010 financial assets available for sale included in Level 3 correspond essentially to Angolan public debt securities. They also include bonds collateralized by assets (ABS’s) and private equity investments.

At June 30, 2011 and December 31, 2010 trading and hedging derivatives included in Level 3 refer mainly to:

• options or swaps negotiated with Customers with an optional component and the related hedging with the market;

• embedded options in structured bonds issued by Banco BPI, with remuneration indexed to baskets of shares / share indexes, commodities and exchange rates, and operations negotiated with the market to hedge the optional risk of these bonds.

For financial instruments recorded at fair value in the balance sheet, the changes between December 31, 2010 and June 30, 2011 on assets and liabilities classified in Level 3, is made up as follows:

He dg ing Held for trading and Trading Available f or sale derivatives Total at fair value through derivatives (net) (net) profit or loss Financial assets and liabilities

Net book value at December 31, 2010 155 920 2 304 357 3 653 26 190 2 490 120 Accrued interest (amount at December 31, 2010) ( 135) ( 1 725) ( 1 413) 25 901 22 628 Gain / (loss) recognized in net income In net income on financial operations 823 294 1 989 ( 37 083) ( 33 977) Potential gain / (loss) ( 1 757) ( 5) 1 989 ( 37 083) ( 36 856) Ef fect ive gain / (loss) 2 580 299 2 879 In impairment loss ( 11 999) ( 11 999) Gain / (loss) recognized in revaluation reserves 153 153 Purchases 13 170 66 580 ( 548) ( 1 154) 78 048 Sales / settlements ( 42 035) ( 408 898) ( 848) 3 313 ( 448 468) Transfers out 357 205 562 Transfers in 134 134 Ac crued interest (amount at June 30, 2011) 216 2 307 824 ( 19 394) ( 16 047)

Net book value at June 30, 2011 128 316 1 951 408 3 657 ( 2 227) 2 081 154

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 199

For financial instruments recorded at fair value in the balance sheet, the changes between December 31, 2009 and December 31, 2010 on assets and liabilities classified in Level 3, is made up as follows:

Hedging Trading Held for trading and Available for sale derivatives Total derivatives (net) at fair value through (net) profit or loss Financial assets and liabilities

Net book value at December 31, 2009 596 138 1 508 229 333 ( 15 938) 2 088 762 Accrued interest (amount at December 31, 2009) ( 287) ( 2 161) ( 1 383) 49 324 45 493 Gain / (loss) recognized in net income In net income on financial operations 4 408 259 3 093 15 435 23 195 Potential gain / (loss) 2 070 3 094 17 636 22 800 Effective gain / (loss) 2 338 259 ( 1) ( 2 201) 395 In impairment loss ( 38) ( 38)

Gain / (loss) recognized in revaluation reserves ( 1 702) ( 1 702) Purchases 43 090 907 739 667 ( 3 350) 948 146 Sales / settlements ( 392 247) ( 163 587) ( 470) 6 620 ( 549 684) Transfers out ( 96 252) ( 33 414) ( 129 666) Transfers in 935 87 307 88 242 Accrued interest (amount at December 31, 2010) 135 1 725 1 413 ( 25 901) ( 22 628)

Net book value at December 31, 2010 155 920 2 304 357 3 653 26 190 2 490 120

Sales / settlements on assets held for trading and at fair value through profit or loss correspond mainly to bonds held by Banco de Fomento Angola that have matured. The acquisitions of assets available for sale relate mostly to bonds acquired by Banco de Fomento Angola.

Sales / settlements on assets available for sale correspond mainly to securities that have matured.

The continuous improvement in the databases related to fair value calculation methodologies in accordance with the hierarchy established in IFRS7, resulted in reclassifications between various levels that explain the transfers made in 2010.

Derecognition of financial instruments

During the first half of 2011 and in 2010 no financial instruments for which it was not possible to reliably determine their fair value were derecognised, therefore, there was no impact on net income of the period arising from this.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 200

Reclassification of financial assets

As a result of the amendments to IAS 39 in October 2008 (Note 2.2), the BPI Group reclassified bonds, from Financial assets held for trading to Financial assets available for sale (Note 4.5), Loans and advances to customers (Note 4.7) and Held to maturity investments (Note 4.8), as follows: Jun. 30, 11 Dec. 31, 10 Ef fect ive Book value on Book value on interest rate on Book value at Fair value at Book value at Fair value at reclassification reclassification reclassification J un. 30, 11 Jun. 30, 11 Dec. 31, 10 Dec. 31, 10 date date dat e

Reclassification of bonds in 2008

Financial assets held for trading ( 175 791) ( 189 787) Financial assets available for sale 36 821 32 245 32 245 38 076 33 057 33 057 5.81%

Loans represented by securities 41 690 42 327 29 774 41 807 42 429 33 124 6.37%

Held to maturit y investments 97 281 102 767 96 155 109 904 115 076 108 473 6. 29%

Reclassification of bonds in 2009

Financial assets held for trading ( 54 997) ( 57 370)

Loans represented by securities 320 352 505 339 365 537 5. 34%

Held to maturity investments 54 677 60 143 57 432 57 031 61 994 60 631 5.98%

237 834 216 112 252 921 235 822

In the case of the lack of liquidity in the bond market, the valuation prices that can be obtained for these securities do not reflect the prices on an active market with transactions on a regular basis. Therefore, the BPI Group decided to reclassify these bonds to financial assets available for sale, loans and advances to customers and held to maturity investments. To determine the fair value of the financial assets available for sale, alternative valuation methods were used as described previously in this note.

After the reclassification date, gain / (loss) relating to fair value changes of these securities not recognized in the statements of income and other gain / (loss) recognized in reserves and in the statements of income, were as follows: Jun. 30, 11 Dec. 31, 10

Gain/ (los s) Ot her gain / (los s) Gain/ (loss) O the r ga in / (los s) associated with reco gnized in: associated with recognized in: fair value fair value changes not changes not recognized in recognized in Statements S tat ements the statement of Reserves the st atement of Reserves in com e of inco me income of income

Financial assets available for sale 884 884 941 ( 1) ( 1) 1 397

Loans repre sented by securities ( 3 270) 564 ( 3 806) 1 593

Held-t o-maturity invest ment s ( 4 577) 3 882 ( 7 928) 11 177

( 6 963) 884 5 386 ( 11 735) ( 1) 14 167

The amounts of gain / (loss) relating to fair value changes not recognized in the statement of income correspond to gain / (loss) that would affect net income if the bonds had remained in the “Financial assets held for trading” portfolio. A portion of these amounts would be offset by opposite results under the caption “Technical Provisions”, namely in the case of gain / (loss) on securities allocated to insurance portfolios with profit participation.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 201

The amounts presented in other gain / (loss) recognized in the statement of income include interest, premiums / discounts and other expenses. The amounts presented in other gain / (loss) recognized in reserves correspond to the fair value changes of financial assets available for sale after the reclassification date.

For purposes of determining the effective interest rate of the reclassified assets at the reclassification date, the BPI Group estimated that it would recover all future cash flows relating to the reclassified securities.

Financial instrument risks

The BPI Group assesses and controls risk in accordance with best practices and in compliance with the prudential rules and regulations, following the precepts, definitions and valuation methods recommended by the Basel Banking Supervision Committee in its three pillars.

The Directors’ Report, presented together with the notes to Banco BPI’s financial statements, also includes a section relating to “Risk management”, which contains additional information about the nature and extent of the BPI Group’s financial risks.

Exposure to sovereign debt

The BPI Group's exposure to the debt of countries that have requested financial support from the European Union, the European Central Bank and the International Monetary Fund at June 30, 2011 was as follows:

Book Net Hedge BPI Group excluding BPI Vida e Pensões Acquisition value/ fair gain/(loss) accounting value on secutities effect

Held for trading and at fair value through profit or l oss 9 851 9 874 ( 62) Port ugal 9 851 9 874 ( 62)

Available for sale 3 772 924 2 539 288 (1 211 917) ( 95 824) Portugal 2 885 199 2 037 574 ( 802 340) ( 69 976) Gree ce 530 378 265 381 ( 28 4 169) ( 21 309) Ireland 357 347 236 333 ( 125 408) ( 4 539)

Total exposure 3 782 775 2 549 162 (1 211 979) ( 95 824)

The fair value of this exposure was determined based on prices in international markets, the unrealized gains / (losses) and hedge accounting effect being reflected in specific reserve captions or in the statement of income, depending on whether the securities are classified in the available for sale securities portfolio or in the held for trading securities portfolio, respectively.

In accordance with the valuation hierarchy established in IFRS 7, given the significant decline in trading volumes of Greek sovereign debt in the first half of 2011, the Bank reclassified these securities from Level 1 to Level 2, despite continuing to use observable market prices.

Breakdown by residual maturity, at June 30, 2011, was as follows: Maturity 2011 2012 2013 to 2018 2019 Total Port ugal 4 442 980 064 4 138 1 058 804 2 047 448 Greece 265 381 265 381 Ireland 16 033 220 300 236 333 4 442 980 064 20 171 1 544 485 2 549 162

The ratings of Portugal, Greece and Ireland are the following: Jun. 30, 11 1 Dec. 31, 10 S&P Moody's Fitch S&P Moody's Fitch Portugal BBB- Ba2 BBB- A- A1 A+ Greece CC Ca CCC BB+ Ba1 BBB- Ireland BBB+ Ba1 BBB+ A Baa1 BBB+

1 Includes t he rating reviews made in July 2011.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 202

On July 21, 2011 the Council of the European Union and the Institute of International Finance, Inc. (IIF) announced a restructuring plan of the Greek public debt, which includes a voluntary exchange operation of Greek Government Bonds with maturity up to and including 2020. This restructuring plan presumes a 90% acceptance level from the investors.

At June 30, 2011 Banco BPI held Greek Government Bonds with a nominal value of 480,000 t. euro, which the Bank acquired with the intention of holding them until maturity in July 2019 and the interest rate risk of which is hedged up to that date. These securities were classified in the available for sale assets portfolio. The book value of these securities, based on their market value (49.6%), amounted to 265,381 t. euro and the Bank had recorded, under the Fair Value Reserve caption, 284,169 t. euro relating to unrealized losses on the bonds and 21,309 t. euro relating to unrealized losses on the interest rate risk hedging derivative.

Based on the information available up to this date, Banco BPI decided not to participate in the Greek Government Bonds exchange program and intends to keep these securities until maturity. This decision takes into consideration the additional requirements that the Portuguese banking sector is currently facing, under the international aid program to Portugal, as well as the need to concentrate efforts on recovery of the Portuguese economy.

Considering the information currently available, and the importance of the restructuring plan not only for the Greek economy but also for the European financial system, Banco BPI believes that the restructuring plan of the Greek debt will be successful, creating, together with the official aid program, conditions to enable Greece to fulfill its financial responsibilities.

In this respect, Banco BPI does not expect to incur a loss on the Greek Government Bonds portfolio, so it has not recognized impairment on these exposures in the financial statements of June 30, 2011.

As regards exposure to the remaining countries in a situation of international financial assistance (Portugal and Ireland), Banco BPI believes that as of this date there is no objective evidence of impairment.

In addition, at June 30, 2011 some insurance capitalization portfolios of BPI Vida e Pensões, fully consolidated in the financial statements of the BPI Group, held Portuguese and Greek sovereign debt bonds.

Acquisition Book value Mar ket value

Held for trading and at fair value through profit or l oss 113 647 111 684 111 684 Port ugal 113 523 111 625 111 625 Greece 124 59 59

Loans and other recei vables 99 841 101 019 89 554 Port ugal 99 841 101 019 89 554

Hel d to maturity 252 684 255 624 210 188 Port ugal 99 905 100 996 96 967 Greece 152 779 154 628 113 221

Total exposure 466 172 468 327 411 426

Breakdown, by residual maturity, at June 30, 2011, was as follows: Maturity 2011 2012 2013 to 2018 2019 > 2019 Total Portugal 47 128 63 718 50 924 50 181 101 690 313 641 Gree ce 4 5 2 22 109 405 59 154 6 86 47 128 108 940 160 329 50 181 101 749 468 327

The Greek Government Bonds recorded at amortized cost in the held to maturity portfolio of the above mentioned insurance capitalization products have a nominal value of 154,000 t. euro and a maturity date of March 2012 and February 2013. The difference between book value and market value of the Greek Government Bonds at June 30, 2011 was 41,406 t. euro. The insurance capitalization products to which these bonds are assigned have specific and differentiated rules for participation in the results, so the portion of the unrealized loss that would be attributable to Banco BPI if it were realized, depends on the profitability of the respective portfolios.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 203

Credit risk

Maximum exposure to credit risk

Credit risk is one of the most significant risks of the BPI Group’s operations. More information about this risk, particularly about the management process for the various segments of credit, can be found in the section “Risk Management” in the Directors’ Report.

Maximum exposure to credit risk at June 30, 2011, by type of financial instrument, is as follows: Type Gross Net of financial book Impairment book instrument value value Balance sheet items Deposits at other credit institutions 348 684 348 684 Financial assets held for trading and at fair value through profit or loss 889 274 889 274 Financial assets available for sale 6 619 748 ( 64 621) 6 555 127 Loans and advances to credit institutions 1 481 960 ( 2) 1 481 958 Loans and advances to customers 29 710 675 ( 589 536) 29 121 139 Held to maturity investments 1 085 820 1 085 820 Derivatives Hedging derivatives 270 685 270 685 Trading derivatives 1 145 785 145 785 40 552 631 ( 654 159) 39 898 472 Off balance sheet items Guarantees given 2 689 884 ( 33 724) 2 656 160 Irrevocable credit lines 37 646 ( 11) 37 635 2 727 530 ( 33 735) 2 693 795 43 280 161 ( 687 894) 42 592 267 1 This caption is presented in the balance sheet as Financial assets held for trading and at fair value through profit or loss.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 204

Maximum exposure to credit risk at December 31, 2010, by type of financial instrument, is as follows: Type Gross Net of financial book Impairment book instrument value value Balance sheet items Deposits at other credit institutions 338 551 338 551 Financial assets held for trading and at fair value through profit or loss 928 078 928 078 Financial assets available for sale 8 209 541 ( 53 220) 8 156 321 Loans and advances to credit institutions 1 439 527 ( 382) 1 439 145 Loans and advances to customers 30 608 938 ( 553 932) 30 055 006 Held to maturity investments 1 043 584 1 043 584 Derivatives Hedging derivatives 250 263 250 263 Trading derivatives 1 313 573 313 573 43 132 055 ( 607 534) 42 524 521 Off balance sheet items Guarantees given 2 820 405 ( 34 997) 2 785 408 Irrevocable credit lines 39 296 ( 21) 39 275 2 859 701 ( 35 018) 2 824 683 45 991 756 ( 642 552) 45 349 204 1 This caption is presented in the balance sheet as Financial assets held for trading and at fair value through profit or loss.

Breakdown of overdue loans

Overdue loans and interest at June 30, 2011, by non performing classes, are as follows: Non performing classes from 3 up to 1 from 1 to 3 from 1 to 5 more than 5 months to 1 Total month months years years year Loans and advances to customers Subject to individual assessment Overdue loans and interest 2 495 10 144 153 819 165 017 13 629 345 104 Impairment ( 1 708) ( 3 387) ( 56 499) ( 86 065) ( 9 602) ( 157 261) 787 6 757 97 320 78 952 4 027 187 843 Subject to collective assessment Overdue loans and interest 771 11 744 64 094 245 657 35 448 357 714 Impairment ( 201) ( 2 640) ( 24 438) ( 113 517) ( 12 695) ( 153 491) 570 9 104 39 656 132 140 22 753 204 223

In addition, at June 30, 2011 collective impairment of 278 786 t. euro was recognised on performing loans.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 205

Overdue loans and interest at December 31, 2010, by non performing classes, are as follows: Non performing classes from 3 up to 1 from 1 to 3 from 1 to 5 more than 5 months to 1 Total month months years years year Loans and advances to customers Subject to individual assessment Overdue loans and interest 566 26 221 87 146 130 914 12 090 256 937 Impairment ( 511) ( 7 062) ( 42 224) ( 68 831) ( 8 290) ( 126 918) 55 19 159 44 922 62 083 3 800 130 019 Subject to collective assessment Overdue loans and interest 3 712 12 420 59 692 251 448 36 133 363 405 Impairment ( 91) ( 2 561) ( 21 507) ( 112 324) ( 15 006) ( 151 489) 3 621 9 859 38 185 139 124 21 127 211 916

In addition, at December 31, 2010, collective impairment of 275 907 t. euro was recognised on performing loans.

Collateral

Banco BPI receives, among others, the following collateral in its loan granting business: • Housing mortgages; • Mortgage of buildings and land; • Deposit of assets; • Pledge of securities; • Guarantees provided by other credit institutions.

The fair value of collateral received is determined based on market value considering its nature. For example, property received in guarantee is valued by external appraisers or by Banco BPI’s units using methods considered appropriate.

The coverage of overdue loans by collateral received at June 30, 2011 was as follows: Loans wit h def ault Collateral 1 Perf orming amount Co ver ag e Other Impairment 3 associated with Overdue Total Mortgages 2 defaulting loans collateral >=100% 207 023 199 093 406 116 391 755 14 622 88 326 >=75% and <100% 71 665 46 363 118 028 103 152 7 447 25 141 >=50% and <75% 3 073 5 908 8 981 4 650 945 3 693 >=25% and <50% 445 3 035 3 480 933 444 1 570 >=0 and <25% 678 1 393 2 071 121 107 1 031 Without collateral 176 238 447 026 623 263 287 565 Total 459 122 702 818 1 161 939 500 611 23 565 407 326 1 The value of collateral presented is the lower of the fair value of the collateral received and the amount owed at June 30, 2011. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. The amount of impairment shown includes 78 614 t. euro relating to performing loans associated with overdue loans.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 206

The coverage of performing loans on which impairment was determined on an individual basis at June 30, 2011 is as follows: Lo an s wit h imp airment Collateral 1 Performing Other Impairment 3 Coverage Mortgages loans collateral 2

Loans not represented by securities >=100% 56 196 44 947 11 249 12 747 >=75% and <100% 334 286 67 >=50% and <75% 323 190 81 >=25% and <50% 4 372 245 1 704 1 622 >=0 and <25% 5 840 972 3 494 Without collateral 59 272 19 867 126 337 45 478 14 115 37 878 Loans represented by securities Without collateral 8 727 7 477

Guarantees provided >=100% 8 423 2 855 5 567 1 416 >=75% and <100% 2 399 150 1 081 451 >=50% and <75% 105 34 15 >=0 and <25% 193 1 15 1 Without collateral 95 742 18 334 106 862 3 006 6 697 20 217

241 926 48 484 20 812 65 572 1 The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at June 30, 2011. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.

The coverage of overdue loans by collateral received at December 31, 2010 is as follows: Loans with default Collateral 1 Performing O verdue Total Mortgages Other Co ver ag e amount Collat eral 2 Impairment 3 associated with defaulting loans

>=100% 153 883 200 558 354 441 351 057 3 383 79 500 >=75% and <100% 55 408 43 518 98 926 84 555 8 734 22 333 >=50% and <75% 2 953 6 651 9 604 4 924 1 191 3 119 >=25% and <50% 635 3 065 3 700 786 662 1 486 >=0 and <25% 874 2 081 2 955 36 302 1 694 Without collateral 114 499 364 469 478 968 237 784

Total 328 252 620 342 948 594 441 358 14 272 345 916 1 The value of collateral presented is the lower of the fair value of the collateral received and the amount owed at December 31, 2010. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. The amount of impairment shown includes 67 509 t. euro relating to performing loans associated with overdue loans.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 207

The coverage of performing loans on which impairment was determined on an individual basis at December 31, 2010 is as follows: Loans with impairment Collateral1 Performing Other Impairment 3 Coverage Mortgages lo an s Collat eral 2

Loans not represented by securities >=100% 39 213 32 502 6 711 8 306 >=75% and <100% 74 743 3 746 60 166 1 040 >=50% and <75% >=25% and <50% 4 438 245 1 704 1 554 >=0 and <25% 6 222 40 886 2 464 Without collateral 120 505 33 367 245 121 36 533 69 467 46 731 Loans represented by securities Without collateral 13 886 11 636

Guarantees provided >=100% 8 397 2 561 5 836 1 437 >=75% and <100% 2 399 150 1 087 451 >=50% and <75% 75 19 8 >=0 and <25% 180 15 Without collateral 95 588 18 244 106 639 2 711 6 957 20 140

365 646 39 244 76 424 78 507 1 The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at December 31, 2010. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.

Credit risk quality (rating)

This section presents information concerning the quality of the credit risk of the BPI Group’s main financial assets, excluding derivatives which are analysed in detail in Note 4.4. In the case of financial assets with ratings assigned by the international rating agencies (Moody, Standard & Poor and Fitch) the rules set in the prudential regulations issued by the Bank of Portugal were followed, selecting the second best in the case of different external ratings for the same instrument. When no specific external ratings were found, Banco BPI used external ratings assigned by the issuer of instruments with the same degree of subordination. In the case of local authorities, banks and other similar institutions, the ratings used are based on the external ratings assigned to the State where the entity has its headquarters. In the specific case of the central banks in the Euro zone the rating is AAA. External rating is an important element to consider in the management of positions, especially in security portfolios, and is also used for calculating weights used to determine prudential capital by the standard method, in accordance with the regulations issued by the Bank of Portugal.

Loan exposures without external ratings were distributed by rating classes (for company exposure), by quality levels (for project finance) or by scorings (for private customer exposure). External and internal ratings, where they exist, are an indicator of increasing importance to the BPI Group’s internal management of loans, being used by the teams responsible for monitoring customers in order to inform the decisions regarding new loans or the situation of existing exposure. This internal classification does not include all the Group’s exposure. It excludes sovereign exposures or exposure to other banks, in which case external ratings are used, loans granted locally by Banco de Fomento de Angola which uses its own methodologies, as well as loans granted to entrepreneurs and the business segment.

Actual internal ratings and scorings include ten classes for regular operations, from E 01/01 (less probability of default) to E 10/10 (more probability of default); two classes (ED 1/D 01 and ED 2/D 02) for “incidents” (delays in payment of less than 60 and 90 days, respectively) and finally one class for default (ED 3/D 03), when delay in payment of a given amount by a counterparty exceeds 90 days.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 208

Project finance operations have a separate internal classification from other loan operations due to their specific nature, so that at any moment the quality of the credit risk can be determined (from Weak to Strong).

Deposits and loans and advances to credit institutions, by ratings, at June 30, 2011 are as follows: Type of f inancial ins trument Origin Rating G rade Class Gross expos ure Impairment Net expos ure Deposits , loans and advances to credit AA A t o A A- 1 059 205 1 059 205 institutions A+ to A- 2 939 2 939 External rating BB B+ to BB B- 404 964 404 964 BB + to BB- 245 904 245 904 B+ to B- 2 583 2 583 N/D N/D 4 448 2 4 446 1 720 043 2 1 720 041 Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.

Loans to costumers, by ratings, at June 30, 2011 are as follows: Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure Loans t o costumers AA A t o A A- 138 205 208 137 997 A+ to A - 49 328 49 328 External rating BB B+ to BB B- 1 789 597 83 1 789 514 BB + to BB- 118 759 83 118 676 B+ to B - 244 821 244 821 St rong 294 458 294 458 Project Good 1 346 066 365 1 345 701 Finance rating Satisfactory 128 533 54 128 479 Weak 92 288 4 194 88 094 E01 t o E 03 1 999 986 4 683 1 995 303 Internal E04 t o E 06 3 113 151 8 950 3 104 201 rating E07 t o E 10 1 873 810 30 098 1 843 712 ED1 to ED3 369 876 147 261 222 615 01 to 03 7 177 503 9 662 7 167 841 04 to 06 2 505 220 9 869 2 495 351 Scoring 07 to 10 919 942 18 440 901 502 D01 to D03 442 183 93 845 348 338 N/D 7 027 651 261 741 6 765 910 29 631 377 589 536 29 041 841

Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.

The Securities portfolio, by ratings, at June 30, 2011 is as follows: Type of f inancial ins trument Origin Rating G rade Class Gross expos ure Impairment Net expos ure AA A t o A A- 1 281 545 1 281 545 Securities A+ to A - 519 626 519 626 External BB B+ to BB B- 3 467 764 618 3 467 146 rating BB + to BB- 2 089 801 71 2 089 730 B+ to B - 188 668 188 668 < B- 273 660 590 273 070 N/DN/D 762 980 63 342 699 638

8 584 044 64 621 8 519 423

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 209

Deposits and loans and advances to credit institutions, by ratings, at December 31, 2010 are as follows: Type of f inancial ins trument Origin Rating G rade Class Gross expos ure Impairment Net expos ure Deposits , loans and advances to credit AA A t o A A- 1 203 493 1 203 493 institutions A+ to A - 425 474 425 474 External BBB+ to BBB- 20 056 379 19 677 rating BB + to BB- 1 054 1 054 B+ to B- 2 801 2 801 N/D N/D 4 932 3 4 929 1 657 810 382 1 657 428 Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.

Loans to customers, by ratings, at December 31, 2010 are as follows: Type of f inancial ins trument Origin Rating G rade Class Gross expos ure Impairment Net expos ure Loans t o costumers AA A t o A A- 135 801 203 135 598 A+ to A - 1 935 443 209 1 935 234 External BB B+ to BB B- 264 773 38 264 735 rating BB + to BB- 5 909 5 909 B+ to B - 109 144 109 144 < B- 3 742 3 742 St rong 303 995 303 995 Project Good 1 438 664 676 1 437 988 Finance rating Satisfastory 171 599 133 171 466 Weak 80 928 4 008 76 920 E01 t o E 03 2 191 465 4 436 2 187 029 Internal E04 t o E 06 3 180 283 8 004 3 172 279 rating E07 t o E 10 1 997 146 23 928 1 973 218 ED1 to ED3 421 394 161 375 260 019 01 to 03 8 340 697 10 680 8 330 017 04 to 06 3 015 029 7 622 3 007 407 Scoring 07 to 10 1 095 384 10 965 1 084 419 D01 to D03 510 302 114 263 396 039 N/D 5 334 192 203 650 5 130 542 30 535 890 553 932 29 981 958

Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.

The Securities portfolio, by ratings, at December 31, 2010 is as follows: Type of f inancial ins trument Origin Rating G rade Class Gross expos ure Impairment Net expos ure AA A t o A A- 607 709 607 709 Securities A+ to A - 4 641 743 131 4 641 612 External BB B+ to BB B- 1 396 572 487 1 396 085 rating BB + to BB- 577 700 577 700 B+ to B - 2 153 867 78 2 153 789 < B- 1 343 590 753 N/DN/D 792 333 51 934 740 399

10 171 267 53 220 10 118 047

Restructured loans

Operations for which the conditions were renegotiated due to credit risk deterioration (being or not in default), after increase in the guarantees or full payment of overdue interest and other expenses, for which impairment has not been recognised by individual assessment, have been considered as restructured credit operations in the consolidated financial statements of Banco BPI. Renegotiated loan operations with impairment by individual assessment are not presented in this section.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 210

Banco BPI continues over time to endeavour to improve the information available regarding the many changes to the loan operations, particularly regarding restructuring situations.

The following restructured loan operations, without impairment by individual assessment, at June 30, 2011 and December 31, 2010 have been identified: Jun. 30, 11 Dec. 31, 10 Loans Collective Loans Collective Performing Overdue Total Impairment Performing Overdue Total Impairment Without impairment by individual assessment Companies 60 067 1 515 61 582 1 960 63 617 955 64 572 1 983 Loans to individuals Housing 56 965 23 366 80 331 12 605 60 031 22 094 82 125 12 015 Other loans 16 954 2 664 19 618 3 258 14 762 2 248 17 010 2 781 133 986 27 545 161 531 17 823 138 410 25 297 163 707 16 779

Liquidity risk

The schedules presented below were prepared based on the requirements of IFRS 7 relating to Liquidity Risk, considering the total contractual undiscounted cash flows expected to be paid or received in the periods relating to outstanding transactions on the reference dates.

The main assumptions used in preparing the tables below were: • in the case of interest depending on market indices or other references which are only identifiable on a future date (such as. interest based on the Euribor) assumptions were made regarding the future value of such references, based on the last known value; • defaults and early repayment are not considered (except for perpetual debt instruments); • shares and overdue loans are included (by their book value) as "undetermined"; • demand deposits (including interest) and the bills and coins on hand are considered as "on demand"; • trading portfolio operations and all derivatives are considered in these schedules by their projected or estimated cash flows, on the contractual dates, and not by the market values that would be obtained by their possible sale in the short term.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 211

The contractual undiscounted cash flows of financial assets and liabilities at June 30, 2011 were as follows: from 3 months to more than 5 on demand up to 3 months from 1 to 5 years undetermined Total 1 year years Assets Cash and deposits at Central Banks 1 351 096 1 351 096 Deposits at other credit institutions 241 233 107 209 348 442 Financial assets held for trading and at fair value through profit or loss 79 008 28 703 211 795 112 790 456 978 889 274 Financial assets available for sale 395 774 1 823 127 1 214 744 2 922 884 263 219 6 619 748 Held-to-maturity investments 25 035 15 568 970 908 63 511 1 075 022 Loans and advances to credit institutions 1 182 972 148 125 135 978 11 267 1 478 342 Loans and advances to customers 4 732 867 2 914 506 7 826 988 13 435 875 702 818 29 613 054 Hedging derivatives1 859 905 4 212 653 7 478 461 5 081 265 17 632 284 Trading derivatives 1 34 362 1 964 979 3 608 017 4 296 984 9 904 342

Contractual interest cash flows of derivatives 142 848 347 247 1 001 445 694 411 2 185 951 Contractual interest cash flows of other assets 481 299 965 871 599 3 016 202 4 244 245 8 432 492 1 592 810 7 859 945 12 326 507 25 464 538 30 863 232 1 423 015 79 530 047 Liabilities Resources of central banks 1 267 739 1 267 739 Resources of other credit institutions 1 891 543 716 842 108 297 179 722 2 896 404 Resources of customers and other debts 8 042 250 8 300 218 6 439 531 885 955 61 576 23 729 530 Debt securities 550 427 1 861 996 4 464 312 504 789 7 381 524 Financial liabilities relating to transferred assets 30 439 995 950 470 466 1 496 855 Hedging derivatives 1 867 772 4 231 503 7 499 113 5 057 799 17 656 187 Trading derivatives 1 28 909 1 971 043 3 587 052 4 342 680 9 929 684 Technical provisions 151 855 587 955 1 168 806 868 501 2 777 117 Subordinated debt 26 734 54 958 257 974 339 666 Participating bonds 6 371 6 371

Contractual interest cash flows of derivatives 139 588 370 123 1 470 050 954 272 2 934 033 Contractual interest cash flows of other liabilities 209 126 409 199 585 351 509 213 1 712 889 8 042 250 13 464 350 16 588 192 20 826 215 13 206 992 72 127 999 1 Includes the notional amount of swap operations.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 212

The contractual undiscounted cash flows of financial assets and liabilities at December 31, 2010 were as follows: from 3 months to more than 5 on demand up to 3 months from 1 to 5 years undetermined Total 1 year years Assets Cash and deposits at Central Banks 1 327 952 1 327 952 Deposits at other credit institutions 221 531 116 786 338 317 Financial assets held for trading and at fair value through profit or loss 168 867 57 413 88 326 89 371 524 101 928 078 Financial assets available for sale 214 211 2 490 239 2 500 704 2 780 873 223 514 8 209 541 Held-to-maturity investments 42 311 123 451 853 221 14 665 1 033 648 Loans and advances to credit institutions 1 253 411 37 938 133 164 10 318 1 434 831 Loans and advances to customers 4 296 496 3 353 733 8 616 115 13 623 680 620 342 30 510 366 Hedging derivatives1 826 449 4 048 753 7 187 499 4 883 570 16 946 270 Trading derivatives 1 39 675 2 268 795 4 165 871 4 961 363 11 435 705

Contractual interest cash flows of derivatives 119 474 325 442 931 418 669 502 2 045 836 Contractual interest cash flows of other assets 504 313 644 910 521 2 913 113 3 754 619 7 892 401 1 549 987 7 391 324 13 616 285 27 389 432 30 787 961 1 367 957 82 102 946 Liabilities Resources of central banks 1 244 673 1 244 673 Passivos financeiros detidos para negociação Resources of other credit institutions 2 762 819 1 424 397 358 844 177 747 4 723 807 Resources of customers and other debts 7 673 321 7 963 985 6 383 563 1 011 150 73 629 23 105 648 Debt securities 668 511 1 353 303 4 974 547 651 920 7 648 281 Financial liabilities relating to transferred assets 103 336 54 188 898 013 513 798 1 569 335 Hedging derivatives 1 834 099 4 067 307 7 208 122 4 861 540 16 971 069 Trading derivatives 1 33 303 2 270 613 4 132 232 5 002 705 11 438 852 Technical provisions 58 584 415 928 1 539 022 978 373 2 991 907 Subordinated debt 97 496 62 348 452 584 612 428 Participating bonds 7 122 7 122 Contractual interest cash flows of derivatives 108 745 377 703 1 443 358 1 035 714 2 965 519 Contractual interest cash flows of other liabilities 183 858 338 348 619 538 361 018 1 502 763 7 673 321 13 961 913 16 782 846 22 247 174 14 116 150 74 781 404 1 Includes the notional amount of swap operations. .

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 213

The Bank continuously tracks the evolution of its liquidity, monitoring incoming and outgoing funds in real time. Projections of short and medium term liquidity are carried out in order to help plan the funding strategy in the monetary and capital markets. In the first half of 2011, the BPI Group redeemed a total of 631 864 t. euro (net of repurchases) in medium and long-term debt and issued new debt totalling of 200 000 t. euro. The funding obtained from the ECB was maintained at 1 000 000 t. euro from the end of December 2010 to the end of June 2011. At June 30, 2011 the Bank had a portfolio of assets eligible for obtaining funding from the ECB at any time, totalling 7 047 145 t. euro, net of ECB valuation margins. This amount includes 4 840 343 t. euro available for immediate use. The section on Liquidity Risk in the Directors’ Report includes additional procedures used by the Group in its daily management of liquidity risk.

Market Risk

Market risk (interest rate, exchange rate, share price, commodity price and spread) is defined as the potential to incur losses due to unexpected changes in the price of instruments or operations (“price” includes index value, interest rate or exchange rate). Spread risk is the risk resulting from the variability of interest rates of some counterparties in relation to the interest rate used as a reference.

The Executive Board for Global Risks (EBGR) is responsible for managing the BPI Group’s market risk and differentiates between the trading portfolio (trading) and the remaining businesses. In the specific case of exchange risk, the assessment is made for the activity as a whole (trading and non-trading).

More information about market risks in the BPI Group is contained in the “Risk Management” section of the Directors’ Report.

Trading portfolio (trading)

Trading positions are managed autonomously by the traders, within the limits established by the Trading Department Manual for the entire BPI Group, approved by the Executive Committee of the Board of Directors. The trading portfolio is defined for financial and risk management purposes, independently of the accounting classification (although the concepts largely match) and includes all types of financial instruments traded by the Trading Rooms (derivatives, repurchases, shares and bonds) that cause various types of market risk, namely interest rate, shares, exchange, commodities and spread risks.

Market risk in trading operations is assessed and controlled daily through the calculation of VaR - Value at Risk – using a standard model (of the “variance co-variance” type), based on the activity of the Banks of the BPI Group as a whole.

Calculated VaR corresponds to the maximum potential loss, with a confidence level of 99%, resulting from an adverse evolution of risk factors within a timeframe of two weeks (risk factors are price increase rates, indexes and interest rates that affect the value of the portfolio, or that are taken as representative of those prices, indexes and rates). The model uses, as risk factor volatility, the standard deviation of historical samples of their amounts on an annual basis and uniform weight. In calculating the overall risk, the effect of the diversification of investments is included in the model through the statistical effect of the correlation between risk factors (the correlation is calculated from annual historical samples and uniform weight of relevant pairs of risk factors). A normal distribution of risk factors is assumed, with a mean of zero and standard deviation leading to the above mentioned confidence level.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 214

In 2011 and 2010 the average VaR in the Bank’s trading books was as follows:

Jun. 30, 11 Dec. 31, 10

VaR (average) VaR (maximum) VaR (average) VaR (maximum) Interest rate risk 296 855 205 780 Currency risk 310 1 418 729 2 277 Equity risk 315 1 527 475 2 993 Commodities 14

In compliance with its legal obligations, the Group also produces prudential information for purposes of control by the supervisor and calculates regulatory capital relating to market risks in accordance with the standard methodology established by the Bank of Portugal.

Banking portfolio (non-trading)

The Financial Committee, chaired by the Executive Board’s member responsible for the financial portfolio, monitors and manages the positions that are part of the banking portfolio, from reports produced for the purpose and within the guidelines of EBGR. When necessary an extraordinary meeting of EBGR is requested to make the more important decisions.

Interest rate risk

Following is a sensitivity analysis of the BPI Group’s financial margin and shareholders’ equity to a 2% increase in the reference interest rate, considering all the instruments of the banking portfolio sensitive to interest rate variations (including the securities portfolio of the international activity classified in the accounting records as of trading):

Jun. 30, 11 Jun. 30, 10 Financial margin Weighting Weighted Weighting Weighted Position Position Time band factor position factor position on demand 1 509 949 2,00% 30 199 1 816 697 2,00% 36 334 on demand - 1 month ( 685 238) 1,92% ( 13 157) 157 776 1,92% 3 029 1 - 2 months ( 13 075) 1,75% ( 229) ( 657 210) 1,75% ( 11 501) 2 - 3 months 3 339 325 1,58% 52 761 3 606 348 1,58% 56 980 3 - 4 months 598 324 1,42% 8 496 209 412 1,42% 2 974 4 - 5 months ( 386 794) 1,25% ( 4 835) (1 209 597) 1,25% ( 15 120) 5 - 6 months 2 488 151 1,08% 26 872 1 692 278 1,08% 18 277 6 - 7 months 106 481 0,92% 980 219 873 0,92% 2 023 7 - 8 months ( 127 831) 0,75% ( 959) 24 464 0,75% 183 8 - 9 months ( 174 723) 0,58% ( 1 013) ( 52 514) 0,58% ( 305) 9 - 10 months ( 215 145) 0,42% ( 904) ( 825 480) 0,42% ( 3 467) 10 - 11 months ( 26 376) 0,25% ( 66) ( 64 283) 0,25% ( 161) 11 - 12 months 374 599 0,08% 300 64 581 0,08% 52 Total 98 446 89 298 Note: The positions were distributed by the asset, liability and respective maturity class columns.

The weighted position indicates an estimate of the impact on the financial margin obtained at the end of 12 months starting on July 1 of each year resulting from a single and instantaneous change of 2% in the overall market interest rates affecting the respective positions. Thus, the impact on each date depends on the existence and time distribution of the re-pricing gaps.

In medium and long-term fixed rate operations, the BPI Group has the policy of hedging interest rate risk through derivatives. The hedging is usually carried out for the entire exposure, but certain future cash flows can also be hedged (forward start). At June 30, 2011 and December 31, 2010 the BPI Group did not have significant medium and long-term exposure to fixed interest rates during the life of the operations.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 215

Equity risk

In accordance with the prudential requirements, the BPI Group calculates the impact of a 20% decrease in share prices and participating units classified as financial assets available for sale and financial assets at fair value through profit or loss1. This stress test was based on the following exposures in shares and participating units:

Jun. 30, 11 Dec. 31, 10

Financial assets held for trading and at fair value through profit or loss 19 555 51 421 Financial assets available for sale - at fair value and without impairment 28 333 28 537 Financial assets available for sale - at fair value and with impairment 9 252 13 920 Financial assets available for sale at historical cost 51 666 13 864 Participating units in liquidity, bond and real estate funds 127 630 121 225 236 436 228 967 Note: Does not include the trading portfolio which is considered in market risk.

At June 30, 2011 and December 31, 2010 a 20% decrease in the price of the above securities (except for securities recorded at cost and participating units in liquidity, bond and real estate funds and assuming that the Group does not identify impairment situations in addition to those that already existed on the date of the financial statements), would result in a decrease of 11 428 t. euro and 18 776 t. euro, respectively, in their fair value, implying the recognition of a loss of 5 671 t. euro and 13 068 t. euro, the remaining devaluation being reflected in the fair value reserve.

1 Excluding securities held by BPI Vida e Pensões.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 216

Currency risk

Financial assets and liabilities at June 30, 2011, by currency, were as follows:

Assets and liabilities by currency Other Type of financial instrument EUR USD AKZ Total currencies Assets Cash and deposits at Central Banks 545 244 444 408 359 751 1 932 1 351 335 Deposits at other credit institutions 263 601 43 549 13 648 27 886 348 684 Financial assets held for trading and at fair value through profit or loss 804 494 141 122 85 363 4 080 1 035 059 Financial assets available for sale1 6 263 040 1 038 959 755 379 357 8 057 735 Loans and advances to credit institutions 866 594 353 576 247 418 14 370 1 481 958 Loans and advances to customers 27 761 249 929 018 266 248 164 624 29 121 139 Held-to-maturity investments 1 085 820 1 085 820 Hedging derivatives 258 271 6 356 6 058 270 685 Debtors and other applications 52 889 158 085 2 702 295 213 971 37 901 202 3 115 073 1 730 509 219 602 42 966 386 Liabilities Resources of central banks 1 197 153 73 342 1 270 495 Financial liabilities held for trading 89 106 42 220 570 131 896 Resources of other credit institutions 2 616 442 275 209 121 3 302 2 895 074 Resources of customers and other debts 18 795 553 3 545 323 1 394 914 162 740 23 898 530 Debt securities 7 132 766 271 826 60 683 7 465 275 Financial liabilities relating to transferred assets 1 497 796 1 497 796 Hedging derivatives 397 121 17 659 460 415 240 Provisions 91 996 26 999 728 25 119 748 Technical provisions 2 777 117 2 777 117 Subordinated debt 342 305 342 305 Participating bonds 6 464 6 464 34 943 819 4 252 578 1 395 763 227 780 40 819 940 Forward currency operations (1 228 176) 1 214 346 ( 13 886) 9 855 ( 17 861) 76 841 320 860 1 677

Stress Test 15 368 96 258 335 1 Excludes the amount recorded in the Fair Value Reserve.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 217

Financial assets and liabilities at December 31, 2010, by currency, were as follows: Assets and liabilities by currency Other Type of financial instrument EUR USD AKZ Total currencies Assets Cash and deposits at Central Banks 471 489 420 908 432 114 3 711 1 328 222 Deposits at other credit institutions 230 525 72 487 14 471 21 068 338 551 Financial assets held for trading and at fair value through profit or loss 984 700 152 069 72 711 32 171 1 241 651 Financial assets available for sale1 6 767 726 1 314 297 1 019 518 10 867 9 112 408 Loans and advances to credit institutions 1 005 424 423 547 10 174 1 439 145 Loans and advances to customers 28 417 015 1 184 928 273 463 179 600 30 055 006 Held-to-maturity investments 1 043 584 1 043 584 Hedging derivatives 192 493 5 630 52 140 250 263 Debtors and other applications 68 110 160 795 3 768 291 232 964 39 181 066 3 734 661 1 816 045 310 022 45 041 794 Liabilities Resources of central banks 1 193 897 51 640 1 245 537 Financial liabilities held for trading 218 649 42 030 814 261 493 Resources of other credit institutions 4 235 048 465 306 25 730 4 726 084 Resources of customers and other debts 18 010 142 3 633 248 1 440 150 157 323 23 240 863 Debt securities 7 517 195 178 834 86 245 7 782 274 Financial liabilities relating to transferred assets 1 570 418 1 570 418 Hedging derivatives 453 193 33 092 13 159 499 444 Provisions 78 604 30 666 282 1 021 110 573 Technical provisions 2 991 907 2 991 907 Subordinated debt 377 111 263 278 640 389 Participating bonds 7 167 7 167 36 653 331 4 434 816 1 440 432 547 570 43 076 149 Forward currency operations ( 987 884) 788 293 93 247 633 48 135 88 138 375 706 10 085

Stress Test 17 628 112 712 2 017 1 Excludes the amount recorded in the Fair Value Reserve.

The stress test consists of assessing the impact of a 20% variation in the exchange rate of each currency against the euro, with the exception of the Kwanza (AON) in which the impact of a 30% variation against the euro was assessed. The amounts presented above are absolute amounts, and correspond to the potential impact (before taxes) on total equity including minority interests.

Hedge accounting

The BPI Group applies fair value hedge accounting for several business lines, including hedging for:

• fixed rate deposits; • fixed rate debt issues; • structured debt issues; • fixed rate securities.

The BPI Group uses “back-to-back” hedging relationships and macro-hedging.

The BPI Group hedges interest rate risk and exchange risk relating to the above items.

Interest rate swaps and forward currency operations are the main hedging instruments used.

Application of Hedge Accounting eliminates the "accounting mismatch" that would result from the recognition of the hedged items at amortised cost, while the hedging instruments (derivative financial instruments) would have to be recorded at fair value through profit or loss. The value of hedged financial instruments is its exposure (nominal value contracted).

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 218

The book value of hedged instruments and the fair value of hedging instruments at June 30, 2011 is made up as follows:

Hedged items Hedging instruments Interest, premiums Interest Nominal Value Notional Fair value types of hedge and potential Impairment Total and Revaluation Fair value amount corrections amount gain/loss premiums Assets Loans and advances to credit ins titut ions 100 000 748 468 101 216 195 562 ( 332) ( 2 620) ( 2 952) Loans to cus tomers 563 465 3 550 ( 2 698) 18 323 582 640 622 085 ( 6 177) ( 18 582) ( 24 759) Fixed rate securities portfolio 5 694 000 (1 323 346) 208 251 4 578 905 10 604 018 ( 31 480) ( 209 446) ( 240 926) 6 357 465 (1 319 048) ( 2 698) 227 042 5 262 761 11 421 665 ( 37 989) ( 230 648) ( 268 637) Liabilities Resources of credit institutions 67 049 319 2 394 69 762 67 069 ( 119) 2 392 2 273 Customer deposits 5 002 016 80 412 5 720 5 088 148 4 944 986 64 848 1 072 65 920 Debt issues 5 970 895 ( 123 291) 34 691 5 882 295 7 234 729 11 362 44 527 55 889 11 039 960 ( 42 560) 42 805 11 040 205 12 246 784 76 091 47 991 124 082 Embedded options were not included.

The book value of hedged instruments and the fair value of hedging instruments at December 31, 2010 is made up as follows:

Hedged items Hedging instruments

Interest Nominal Interest, premiums Value Notional Fair value types of hedge Impairment Total and Revaluation Fair value amount and potential corrections amount premiums gain/loss Assets Loans and advances to credit institutions 100 000 2 512 1 448 103 960 100 567 ( 363) ( 4 511) ( 4 874) Loans to customers 573 098 3 326 ( 1 721) 25 524 600 227 622 984 ( 5 484) ( 25 415) ( 30 899) Fixed rate securities portfolio 6 083 637 ( 614 904) 296 421 5 765 154 14 739 572 ( 76 839) ( 295 540) ( 372 379) 6 756 735 ( 609 066) ( 1 721) 323 393 6 469 341 15 463 123 ( 82 686) ( 325 466) ( 408 152) Liabilities Resources of credit institutions 43 548 815 4 289 48 652 43 659 654 4 180 4 834 Customer deposits 4 569 803 61 326 20 482 4 651 611 4 636 366 49 260 22 212 71 472 Debt issues 6 294 362 24 539 113 721 6 432 622 6 743 707 ( 11 807) 94 471 82 664

10 907 713 86 680 138 492 11 132 885 11 423 732 38 107 120 863 158 970 Embedded options were not included.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 219

The tables above include the nominal amounts of hedged items for which hedge accounting is being applied. The notional amount of hedging instruments corresponds to the sum of the notional amounts of the hedging derivatives contracts, including forward start operations (swaps and futures), and therefore the notional amount may be higher than the nominal amounts of the hedged items. For a given asset or liability (namely fixed rate securities) the Bank may have entered into several derivatives to hedge the corresponding future flows.

Net income on financial operations recognised in hedging derivative financial instruments and in hedged items in the first half of 2011 and 2010 was the following:

Fair value types of hedge Jun. 30, 11 Jun. 30, 10

Hedging derivatives ( 45 170) ( 245 683)

Hedged items Lo an s an d adva nces to credit inst itut ions ( 97 9) 1 389 Lo an s to cus tomers ( 7 20 1) 14 280 Fixed rate securities portfolio ( 51 411) 315 066 Resources of credit institutions 1 896 ( 3 241) Customer deposits 15 570 ( 11 071) Debt issues 148 949 ( 69 970) 106 824 246 453 61 654 770

The caption gain on debt issues at June 30, 2011 includes 74 238 t.euro relating to a gain on the repurchase of two bonds issues.

4.49. Share-based variable remuneration program

The share-based variable remuneration program (Remuneração Variável em Acções - RVA) is a remuneration plan under which, whenever it is decided to grant variable remuneration to Executive Directors and employees of the BPI Group (in the latter case provided that it exceeds 2500 euro) it is made up of BPI shares and BPI share options. The individual remuneration under the RVA program varies between 10% and 50%, the percentage increasing with the responsibility level of the beneficiary.

The shares granted to employees under the RVA program are transferred in full at the grant date, but 75% of the transfer is, subject to a resolutive condition (relating to termination of the employment relationship, unless made by just cause of the Employee), which expires in a gradual basis over the three years following the grant date (25% each year). The options to purchase shares may be exercised between the 90th day to the fifth year as from the grant date. In accordance with RVA Regulation, termination of the employment relationship between the Employee and the BPI Group also affects the options granted.

The conditions for granting shares and share options to the Executive Directors up to RVA 2009 were similar to those referred above for Employees. As from RVA 2010, the shares and share options granted to the Executive Directors under the RVA program are subject to the following suspensive condition: Banco BPI’s consolidated shareholders’ equity, based on the consolidated accounts for the third year following that to which the variable remuneration relates, must be greater than Banco BPI’s consolidated shareholders’ equity for the year to which the variable remuneration relates, observing the assumptions established in the RVA Regulations. The granting of shares is also subject to the suspensive condition of non termination of the management or employment relationship established in the RVA Regulations. In addition to these conditions, the granting of the shares is also subject to a suspensive term of three years as from the grant date and the strike period for the share options only begins after that period.

In the case of RVA 2007, the employees whose variable remuneration was equal to or greater than 2 500 euro and less than or equal to 10 000 euro could choose to receive this amount fully in “cash”. In the case of RVA 2008, 2009 and 2010, Executive Directors and employees, whose variable remuneration was equal to or greater than 2 500 euro could choose to receive the variable remuneration entirely in “cash” without affecting the deferral of the availability and Conditions of Access referred to above to up to 50% of the variable remuneration paid to the Executive Directors.

In 2006, there was no RVA because Banco BPI was under a public share purchase offering. All the other RVA programs remain in force under the conditions mentioned in this note.

The price of the shares granted corresponds to the weighted average list price of the BPI shares traded in the last ten stock exchange sessions prior to the date the shares are granted. The price of the shares granted also corresponds to the strike price of the options.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 220

The shares are made available (in the three years following the date they are attributed) subject to the beneficiaries remaining with the BPI Group. The price of the shares attributed, as well as the period in which they are made available, are summarised in the following table:

Shar es Program Da t e of St rik e Date of availability of tranches assi gnm ent pri ce 2nd 3rd 4th RV A 2007 21-03-2008 2.91 21-03-2009 21-03-2010 21-03-2011 RV A 2008 16-03-2009 1.41 16-03-2010 16-03-2011 16-03-2012 RV A 2009 11-03-2010 1.94 11-03-2011 11-03-2012 11-03-2013 RV A 2010 29-04-2011 1.25 29-04-2012 29-04-2013 29-04-2014

The share options can be exercised between the 90th day and the end of the 5th year following the date they were attributed. The share options are made available subject to the beneficiaries remaining with the BPI Group.

The strike price of the options, as well as the period the options can be exercised, are summarised in the following table: Options Program Da t e of St rik e Strike period assi gnm ent pri ce1 From To RV A 2004 28-02-2005 2.98 28-02-2006 28-02-2010 RV A 2005 23-02-2006 4.27 24-05-2006 23-02-2011 RV A 2007 21-03-2008 2.91 23-06-2008 21-03-2013 RV A 2008 16-03-2009 1.29 17-06-2009 16-03-2014 RV A 2009 11-03-2010 1.76 12-06-2010 11-03-2015 RV A 2010 29-04-2011 1.13 30-07-2011 29-04-2016 1 Strike price after considering the effect of the share capital increase made in May 2011.

By decision of the Shareholders’ General Meeting of the Bank, the members of Executive Commission of the Board of Directors implemented an RVA plan (with a suspensive condition) the availability and strike periods of which are shown in the following tables: Shares Program Date of Strike Date of assignm ent price availability

RV A 2010 29-04-2011 1.25 29-04-2014

Options Program Da t e of St rik e Strike period assi gnm ent pri ce1 From To RV A 2010 29-04-2011 1.76 29-04-2014 29-04-2017 1 Strike price after considering the effect of the share capital increase made in May 2011.

The number of employees and directors covered by the RVA 2010 and RVA 2009 programs was as follows:

RVA 2010 RVA 2009

Directors 6 3 Employees 94 201

100 204

The total cost of the RVA programs is as follows:

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 221

Total cost Program Shar es O pti ons Total RVA 2001 2 478 2 478 4 956 RVA 2002 2 507 2 507 5 014 RVA 2003 3 202 2 272 5 474 RVA 2004 3 834 2 169 6 003 RVA 2005 4 006 3 075 7 081 RVA 2007 2 649 5 938 8 587 RVA 2008 115 634 749 RVA 2009 29 814 843 RVA 2010 29 738 767 RVA 2011 140 624 764 18 989 21 249 40 238 The RVA 2011 amounts are estimated for the whole year.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 222

MODEL FOR VALUING THE EQUITY INSTRUMENTS GRANTED TO THE EMPLOYEES AND DIRECTORS OF THE BPI GROUP

Shares

The Bank, for purposes of the share-based payment program, acquires a portfolio of BPI shares and transfers ownership of the shares to the employees and directors on the date the RVA remuneration is granted.

The changes in the number of shares not yet made available to the employees and directors of the BPI Group in the first half of 2011 and in 2010, as well as the fair value of the respective instruments, are as follows: RVA 2007 RVA 2008 RVA 2009 RVA 2010 Fair value Fair value Fair value Fair value Number of Number of Number of Number of sh ar e s On t he date On the shares On the date On the shares On the date On the shares On the date On th e attributed reference date attributed reference date attributed reference date at tr i bute d reference date Shares attributed in 2009 796 235 2 651 1 688 128 252 181 272 Shares made available in 2009 391 545 1 304 830 32 135 45 68 Shares made available early in 2009 17 060 57 36 Shares refused in 2009 10 532 35 22 Shares not made available at December 31, 2009 377 098 1 256 799 96 117 136 204 Shares attributed in 2010 14 937 29 21 Shares made available in 2010 186 041 620 258 30 168 43 42 3 774 7 5 Shares made available early in 2010 6 745 22 9 5 659 8 8 Shares refused in 2010 212 1 Shares not made available at December 31, 2010 184 100 613 255 60 290 85 84 11 163 22 15 Shares attributed in 2011 3 053 4 3 769 1 1 7 059 8 7 Shares made available in 2011 184 100 536 187 30 145 39 31 3 681 6 4 1 651 2 2 Shares made available early in 2011 120 Shares refused in 2011 Shares not made available at June 30, 2011 33 198 43 34 8 131 14 8 5 408 6 5

In the case of death, incapacity or retirement of the employee or director, the shares not yet made available are made available early, becoming freely available to the person or to the respective heirs.

The shares refused include shares granted but not made available, to which the employee or director has lost his/her right because he/she has left the BPI Group.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 223

Options

The changes in the number of share options in circulation, held by employees and directors of the BPI Group (options that can be exercised) in the first half of 2011 and in 2010, as well as their respective fair values are as follows:

RVA 2005 RVA 2007 RVA 2008 RVA 2009 RVA 2010 Fa ir va l ue Fa ir va l ue Fair value Fair value Fair value Number of Number of Number of Number of Number of On t he On th e On th e On th e On th e option s option s option s option s option s On the date reference On the date reference On the date reference On the date reference On the date reference at tr i bute d date at tr i bute d date at tr i bute d date attributed date at tr i bute d date Options attributed in 2009 6 950 436 3 128 49 15 013 916 6 156 2 898 3 339 370 1 249 2 615 Options made available in 2009 6 950 436 3 128 49 15 013 916 6 156 2 898 3 339 370 1 249 2 615 Options cancelled in 2009 88 125 40 1 443 517 182 86 Options exercised in 2009 4 016 920 1 808 28 1 878 1 926 109 346 725

Options in circulation and exercisable at December 31, 2009 2 845 391 1 280 20 14 568 521 5 973 2 812 2 413 261 903 1 890 Options in circulation at December 31, 2009 2 845 391 1 229 14 568 521 5 740 219 2 413 261 903 603 Options attributed in 2010 2 079 992 763 295 Options made available in 2010 2 079 992 763 295 Options cancelled in 2010 1 000 28 172 11 Options exercised in 2010 193 826 72 48

Options in circulation and exercisable at December 31, 2010 2 844 391 1 229 14 540 349 5 729 218 2 219 435 830 555 2 079 992 763 295 Options in circulation at December 31, 2010 2 844 391 1 229 14 540 349 5 205 29 2 219 435 755 257 2 079 992 695 119 Options attributed in 2011 3 705 2 1 287 177 461 3 209 456 71 24 207 893 69 12 837 481 210 156 Options made available in 2011 3 705 2 1 287 177 461 3 209 456 71 24 207 893 69 12 837 481 210 156 Options cancelled in 2011 2 848 096 1 230 765 Options exercised in 2011 Options in circulation and exercisable at June 30, 2011 15 826 761 5 666 32 2 428 891 826 282 2 287 885 764 130 837 481 210 156

The availability and granting of Shares and Options under the RVA 2005, 2007, 2008 and 2009 programs in 2011 result from the capital increase by incorporation of reserves in May 2011.

The quantities granted under the RVA 2010 program resulting from the capital increase were 533 shares and 76,099 options.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 224

When an employee or director of the BPI Group leaves the Group he/she loses the right to the options attributed and not yet made available. In the case of options made available but not yet exercised, the director or employee has a maximum period of 30 days from the date the labour relationship terminates to exercise the option, after which the option expires (options cancelled).

In the case of death, incapacity or retirement of directors or employees, the options attributed become immediately exercisable, having to be exercised within a period of 2 years from the date of the event, otherwise they expire. Cancelled options include options not exercised within this period.

In the first half of 2011 and in 2010 the weighted average price of the shares on the date the options were exercised was as follows: Options exercised until June 30, 2011 O ptions exer cised i n 2010 Program Num be r of Average price Number of Average price options of the shares options of the sha res RVA 2008 193 826 1.95

In determining the number of options to be granted to employees and directors, the BPI Group determines the financial value of the options as of the date they are granted.

The premium of the options over Banco BPI shares was determined in accordance with an internally developed model, based on the Black-Scholes model, for the RVA 2003 to RVA 2010 programs.

The critical factors of the model used to manage the RVA programs are as follows:

• Volatility of Banco BPI shares, which was determined as follows:

ƒ 60% of the historical volatility of Banco BPI shares in the last 3.33 years;

ƒ 10% of the VIX volatility index;

ƒ 10% of the VDAX volatility index;

ƒ 20% of the implicit volatility of the listed options traded in Spain over Spanish banks which are similar to Banco BPI.

• Average expected life of the option, which depends, among others, on the following factors:

ƒ Responsibility level of the beneficiaries: Directors and other employees;

ƒ Ratio between the market price and the strike price; and

ƒ Volatility of the share price.

The model also enables the number of shares of Banco BPI necessary to ensure adequate coverage of the inherent risk of issuing options under the RVA program to be determined.

The parameters used to determine the financial value of the options under each RVA program, as of the date the options are attributed, are as follows:

RVA 2005 RVA 2007 RVA 2008 RVA 2009 RV A 2010

BPI listing 4.47 3.33 1.41 1.94 1.25 S tike price 4.44 3. 33 1.41 1.94 1. 25 Implicit volat ility 17.10% 29. 34% 44.27% 32. 25% 35.97% Interest rat e 3.08% 3. 73% 3.10% 2. 68% 5.15% E xpect ed dividends 0.12 0. 19 0.07 0.08 0. 00 V alue of the opt ion 0.45 0. 41 0.37 0.37 0. 28

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 225

The number of outstanding options under each RVA Program, as well as their respective fair values at June 30, 2011 was as follows:

RVA 2007 RVA 2008 RVA 2009 RVA 2010

Number of outst anding options 15 826 761 2 428 891 2 287 885 837 481 Strike price 2.91 1.29 1.76 1.13 V alue of option 0.00 0.12 0. 06 0.19

The number of outstanding options under each RVA Program, as well as their respective fair values at December 31, 2010 was as follows:

RVA 2005 RVA 2007 RVA 2008 RVA 2009

Number of outst anding options 2 844 391 14 540 349 2 219 435 2 079 992 Strike price 4.273.201.411.94 Value of option 0.00 0.02 0.25 0.14

ACCOUNTING IMPACT OF THE RVA PROGRAM

Shares In order to cover the share-based payments, the Bank acquires a portfolio of treasury shares at the time the RVA remuneration is attributed. The shares remain in Banco BPI’s portfolio until they are made available to the beneficiaries. At that time they are derecognised by corresponding charge to the accumulated costs caption “Other equity instruments”.

The book value and fair value of the share component of the RVA program not yet made available to the Employees/Directors at June 30, 2011 and December 31, 2010 are as follows: Ju n. 30 , 1 1 Dec. 31, 10 Shares Program Book Nu mber Fair Bo ok Nu mber F air va l ue of sh ar e s V a l ue v a l ue of sh ar e s Va l ue Cost of the shares to be made RVA 2007 664 available to the Group's employees/directors, recognized in RV A 20 0 8 43 7 8 shareholders' equity RV A 20 0 9 10 1 5 RV A 20 1 0 48 1 3 RV A 20 1 1 17 118 770 Cost of the shares to be made RVA 2007 28 available to the Group's employees/ di rec tor s, not recogniz ed i n RVA 2008 8 15 shareholders' equity RVA 2009 4 94 RV A 20 1 0 ( 42 ) 1 6 RVA 2011 123 93 153

Total 211 46 737 47 923 255 553 354 Treasury shares made available RVA 2007 0 79 early to the Group's employees/ directors RVA 2008 8 8 Tot al 8 87 Treasury shares to be made RVA 2007 0 613 184 100 255 available to the Group's employees/ directors RVA 2008 43 33 198 34 85 60 290 84 RVA 2009 14 8 131 8 22 11 163 15 RVA 2010 6 5 408 5 Total 63 46 737 47 720 255 553 354

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 226

Options The BPI Group has created a portfolio of BPI shares to cover its share-based payment program responsibilities resulting from the issuance of options to purchase BPI shares in accordance with a delta strategy (determined in accordance with BPI’s options evaluation model developed in-house based on the Black-Scholes model). The strategy corresponds to the creation of a portfolio with delta shares for each option issued, the delta number corresponding to the relationship between the variation in the price of an option and variation in the price of the underlying share. The treasury shares held to hedge the risk of variation in the amount of the options sold are recorded in the caption “Treasury shares hedging the RVA”, where they remain while they are held for that purpose.

When the options are exercised, the treasury shares are derecognised together with transfer of share ownership to the Employees/Directors. At that time a gain or loss is recognised, in the amount corresponding to the difference between the strike price and the average cost of acquiring the treasury share portfolio covering each of the programs, less the cost of the option premiums accumulated in the caption “Other equity instruments”.

The book value and fair value of the outstanding option component of the RVA program attributed to the Employees/Directors at June 30, 2011 and December 31, 2010 are as follows: Jun. 30, 11 Dec. 31, 10 Shares Program Book Fair Unrealized Book Fair Unrealized value Value gain/(loss) value Value gain/(loss) RVA 2005 1 230 Cost of outstanding options RVA 2007 5 729 5 729 (premiums) recognized in shareholders' equity RVA 2008 830 830 RVA 2009 814 814 RVA 2010 343 521 RVA 2011 114 7 830 9 124

Cost of outstanding options RVA 2010 217 (premiums) not recognized in RVA 2011 510 shareholders' equity 510 217 Total 8 340 708 7 632 9 341 1 970 7 371 RVA 2005 1 806 554 ( 1 252) Treasury shares hedging the RVA options RVA 2007 14 619 4 536 ( 10 083) 12 813 5 072 ( 7 741) RVA 2008 3 045 1 500 ( 1 545) 3 045 1 861 ( 1 184) RVA 2009 3 147 1 045 ( 2 102) 3 315 1 366 ( 1 949) RVA 2010 146 49 ( 97) Total 20 957 7 130 ( 13 827) 20 979 8 853 ( 12 126)

Unrealiz ed gain /(loss) ( 6 195) ( 4 755)

The gain and loss realised on treasury shares hedging the exercise of RVA options, as well as the respective taxes, are recorded directly in shareholders’ equity, not affecting net income.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 227

The gain and loss recorded in making the shares available and in the exercise of the options, as well as in the corresponding hedge, recorded in shareholders’ equity at June 30, 2011 and December 31, 2010, are as follows:

Gain-loss P rogram Jun. 30, 11 Dec. 31, 10

RVA 2009 ( 21) Shar es I n making the shares available RVA 2010 ( 14) ( 14) ( 21) RVA 2004 461 RVA 2005 ( 7) I n the exercise of options RVA 2008 ( 93) Options ( 7) 368 RVA 2005 1 166 On the sale of hedging shares 1 166 Transaction costs 71 1

1 216 348

The cost of the share-based remuneration program is accrued in personnel costs, by corresponding entry to the “Other equity instruments” caption, as required by IFRS 2 for share-based payment programs. The cost of the shares and option premiums, when they are granted, is accrued on a straight-line basis from the beginning of the program (January 1) to the date they are made available to the Employees/Directors.

The total cost of the share-based payment program recognised in the first half of 2011 and 2010 was as follows: Jun. 30, 11 Jun. 30, 10 Program Shares Options Total Shares Options Total RVA 2007 ( 51) ( 51) 130 ( 10) 120 RVA 2008 8 8 24 24 RVA 2009 3 3 ( 67) ( 66) ( 133) RVA 2010 37 ( 178) ( 141) 7 287 294 RVA 2011 17 114 131 Total 14 ( 64) ( 50) 94 211 305

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 228

4.50. Capital Management

Banco BPI’s policy regarding the distribution of results is to distribute an annual dividend, by proposal of the Board of Directors to the Shareholders’ General Meeting, usually of not less than 40% of net profit reflected in the consolidated accounts for the year to which it relates, unless exceptional circumstances justify the distribution of a smaller dividend.

The potential components of Tier I (including Core Tier I) and Tier II (including upper Tier II and lower Tier II) Own Funds are in accordance the regulations established in Bank of Portugal Notice 6/2010.

As established in Notice 6/2010 of the Bank of Portugal, in June 30, 2011 the Bank started considering in core capital, the amount of loan impairment losses recognized in consolidated net equity and not the full amount of the regulatory provisions on an individual basis.

In the first half of 2011, the Own Funds of Banco BPI assume the distribution of dividends of 31 656 t. euro, which corresponds to a dividend of 0.032 euro per share and a payout of 40% of consolidated profit for the half year.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 229

In accordance with the Bank of Portugal’s rules the BPI Group’s Own Funds are made up as follows:

Jun. 30, 11 Dec. 31, 10

Base own funds S ubs cribed share capital, share premium, reserves (excluding positive fair value res erves) and retained 2 161 420 2 138 555 earnings Contribut ions to the pension fund not yet recognised as cost ( 150) ( 232) P reference shares 236 681 246 698 Ot her minority int erests 185 946 185 597 Intangible asset s ( 6 246) ( 6 378) Treasury shares ( 13 072) ( 11 805) Difference between impairment and provisions ( 110 955) Deferred transition adjustments to IAS / IFRS 60 421 72 317 Base own funds 2 625 000 2 513 797 Complementary own funds Revaluation reserves of fixed assets 8 548 8 548 Perpetual subordinated debt 69 02 9 Positive fair value reserve 10 707 10 643 S ubordinated debt and participating securities 275 442 480 019 Difference between impairment and provisions 94 86 2 Complementary own funds 294 697 663 101 Deductions Deduction of participations in insurance companies and other financial institutions ( 195 122) ( 269 067) Ot hers deduct ions ( 5 767) ( 5 589) Deductions ( 200 889) ( 274 656) Total own funds 2 718 808 2 902 242 Total requirements 2 099 256 2 082 865 Assets w eighted by risk1 26 240 702 26 035 817 Own Funds requirements ratio 10.4% 11.1% 2 Tier I 9. 6% 9.1% Core Tie r I (exclu ding p reference share s)2, 3 9. 1% 8.7% P ercentage of preference shares to Tier I 9. 0% 9.8% 1 Total requirements x 12.5. 2 Calculated in accordance with Bank of Portugal Instruction 16 / 2004. 3 In accordance with Bank of Portugal, Core Tier I should not reflect 50% of deductions in financial institutions and insurance companies.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 230

4.51. Related parties

The BPI Group’s related parties at June 30, 2011 were as follows: Effective Direct Name of related entity Head Office participation participation Associated and j ointl y controll ed enti ties of Banco BPI Banco Comercial e de Investimentos, S.A.R.L. Mozambique 30.0% 29. 7% Companhia de Seguros A llianz P ortugal, SA Port ugal 35.0% 35. 0% Cosec - Companhia de Seguros de Crédit o, SA Port ugal 50.0% 50. 0% I nter-Risco – S ociedade de Capit al de Risco, S. A. Port ugal 49.0% TC Turismo Capital - SCR, S .A . Port ugal 25.0% 25. 0% Finangest e – Empresa Financeira de Ges tão e Desenvolvimento, SA Port ugal 32.8% 32. 8% Unic er - Bebidas de P ortugal, SG PS, SA Port ugal 14.0% V iace r – Socied ad e Gest ora de Participaçõe s Sociais, Lda Po rt ugal 25.0% 25. 0% Ulissipair ACE Port ugal 50.0% Unicre - Instituição Financeira de Crédito, SA Port ugal 21.0% 20. 7% Pension fund of Employees and Directors of the BPI Group Fundo de P ens ões Banco BP I Port ugal 100.0% Fundo de P ens ões Aberto BP I A cções Port ugal 18.2% Fundo de Pensões Aberto BPI Valorização Portugal 45.9% Fundo de P ens ões Aberto BP I S egu rança Po rt ugal 33.2% Fundo de P ens ões Aberto BP I Garant ia Port ugal 17.8% Shareholders of Banco BPI Grupo Itaú Brazil 18.9% Grupo La Caixa Spain 30.1% Members of the Board of Directors of Banco BPI Artur Santos Silva Carlos da Câmara Pestana Fernando Ulrich Alfredo Rezende de Almeida António Domingues António Farinha Morais Armando Leite de Pinho Marcelino Armenter Vidal Carlos Moreira da Silva Edgar Alves Ferreira Ig na cio A lvarez-Rendueles Isidro Fainé Casas António Lobo Xavier Henri Penchas Juan Nin Génova José Pena do Amaral Klaus Duhrkop Manuel Ferreira da Silva Maria Celeste Hagatong Mário Leite da Silva Pedro Bissaia Barreto Allianz Euro pe Ltd. - Re pres ent ed by Herb ert Wa lter Ricardo Villela Marino Tomaz Jervell

In accordance with IAS 24, related parties are those in which the Bank has significant influence (direct or indirect) in decisions relating to their financial and operating policies – associated and jointly controlled companies and pension funds – and entities which have significant influence on the management policy of the Bank – shareholders and members of Banco BPI’s Board of Directors.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 231

The total assets, liabilities, income and off-balance sheet responsibilities relating to operations with associated and jointly controlled companies and pension funds of employees of the BPI Group at June 30, 2011 are as follows:

Associated and Pension funds of jointly controlled Employees of the companies BPI Group Total Assets Financial assets available for sale 8 8 Loans 128 446 128 446 128 454 128 454 Liabilities Deposits and technical provisions 49 301 1 036 306 1 085 607 Other financial resources 60 083 60 083 Other liabilities 52 52 49 353 1 096 389 1 145 742 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 24 011 24 011 Responsabilities for services rendered Deposit and safeguard of assets 913 774 1 116 322 2 030 096

Foreign exchange operations and derivatives instruments Purchases 12 257 12 257 Sales ( 11 988) ( 11 988) 938 054 1 116 322 2 054 376

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 232

The total assets, liabilities, income and off balance sheet responsibilities relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2011 are as follows:

Com panies i n which Members of the Board of Directors of Banco Member s of the BP I ha ve Shareholders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Assets Financial applicat ions 89 599 89 599 Financial ass ets available for sale 29 987 29 987 Loans 379 11 045 130 069 141 493 Held-to-maturity investments 5 453 5 453 Derivatives 23 605 23 605 O ther amount s receivable 28 28 149 051 11 045 130 069 290 165 Liabilities Financial liabilities held for trading and derivatives 15 961 15 961 De po sit s a nd tec hnica l provision s 97 3 67 6 66 1 2 8 315 132 343 Other liabilities 310 25 125 460 113 638 6 686 28 440 148 764 Off balance sheet items G uarantees given and other contingent liabilities Guarant ees and sureties 94 93 42 017 42 204 Responsabilit ies f or services rendered Deposit and safeguard of assets 492 103 30 867 195 104 718 074

Fore ign exch an ge operatio ns and deriva tives instrume nts Purchases 400 000 75 400 075 Sales ( 400 000) ( 75) ( 400 075) 492 197 30 960 237 121 760 278 1 With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20% 2 In individual name.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 233

The total assets, liabilities, income and off balance sheet responsibilities relating to operations with associated and jointly controlled companies and pension funds of employees of the BPI Group at December 31, 2010 are as follows:

Associated and Pension funds of jointly controlled Employees of the companies BPI Group Total Assets Financial assets available for sale 8 8 Loans 110 126 110 126 110 134 110 134 Liabilities Deposits and technical provisions 20 420 371 275 391 695 Other financial resources 60 070 60 070 Other liabilities 93 93 20 513 431 345 451 858 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 24 817 24 817 Responsabilities for services rendered Deposit and safeguard of assets 1 024 523 1 887 842 2 912 365 1 049 340 1 887 842 2 937 182

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 234

The total assets, liabilities, income and off balance sheet responsibilities relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at December 31, 2010 are as follows:

Companies in which Members of the Board of Directors of Banco Members of the BPI have Shareholders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Assets Financial applications 98 572 98 572 Financial assets held for trading 2 035 2 035 Financial assets available for sale 28 975 28 975 Loans 204 11 122 143 135 154 461 Held-to-maturity investments 5 453 5 453 Derivatives 14 697 14 697 Other amounts receivable 24 24 149 960 11 122 143 135 304 217 Liabilities Deposits and technical provisions 130 289 7 270 109 619 247 178 Derivatives 9 788 9 788 Other liabilities 713 25 196 934 140 790 7 295 109 815 257 900 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 94 93 41 918 42 105 Responsabilities for services rendered Deposit and safeguard of assets 610 446 37 669 171 570 819 685

Foreign exchange operations and derivatives instruments Purchases 400 000 149 956 549 956 Sales ( 400 000) ( 149 994) ( 549 994) 610 540 37 762 213 450 861 752 1 With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20% 2 In individual name.

Total income and costs relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at June 30, 2011 are as follows:

Associated and Pension funds of jointly controlled Employees of the companies BPI Group Total Net income Financial margin (narrow sense) 230 ( 2 829) ( 2 599) Net commission income 12 148 160 Net operating income 9 649 9 649 General administrative costs ( 588) ( 7 631) ( 8 219) ( 346) ( 663) ( 1 009)

Total income and costs relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2011 are as follows:

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 235

Companies in which Members of the Board of Directors of Banco Members of the BPI have Shareholders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Net income Financial margin (narrow sense) 1 898 ( 11) ( 1 197) 690 Net commission income 24 6 7 37 Net income on financial operations ( 3 221) ( 3 221) ( 1 299) ( 5) ( 1 190) ( 2 494) 1 With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20% 2 In individual name.

Total income and costs relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at June 30, 2010 are as follows:

Associated and Pension funds of jointly controlled Employees of the companies BPI Group Total Net income Financial margin (narrow sense) 181 ( 472) ( 291) Net commission income 12 1 13 General administrative costs ( 716) ( 7 565) ( 8 281) ( 523) ( 8 036) ( 8 559)

Total income and costs relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2010 are as follows:

Companies in which Members of the Board of Directors of Banco Members of the BPI have Shareholders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Net income Financial margin (narrow sense) 258 ( 4) 129 383 Net income on financial operations 179 179 Net commission income 60 3 9 72 497 ( 1) 138 634 1 With significant influence on the BPI Group’s management policy. It is assumed that there is significant influence when the participation in capital exceeds 20% 2 In individual name.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 236

Remuneration attributed to the members of the Board of Directors of the BPI Group in first half of 2011 and 2010 was as follows: Jun. 30, 11 Jun. 30, 10

Remuneration in cash1 2 477 2 605 Equity-based remuneration1 497 250 Pensions paid 480 551 3 454 3 406 1 Includes accrued variable remuneration to be attributed at the end of the year. As a result of the resolution of the Shareholders’ General Meeting held in April 2011, the amount of variable remuneration of members of Banco BPI’s Executive Committee of the Board of Directors became limited to 1% of consolidated net income.

In accordance with the Bank’s policy, the members of the Executive Committee of Banco BPI are entitled to participate in the Subsidised Housing Loan Scheme available to all the Banks’ employees. At June 30, 2011 the outstanding mortgage own housing loans granted to the members of the Executive Committee, by the Group’s banks, amounted to 1 935 t. euro.

Under the share-based payment program (RVA) the members of the Executive Committee of Banco BPI benefit from a loan scheme to purchase BPI shares through exercise of the options granted under the share-based payment program (RVA), available to all the Banks’ employees. At June 30, 2011 the total loans granted to members of the Executive Committee amounted to 5 619 t. euro.

A line of credit in force in the Banks was also made available to employees for the purchase of BPI shares under the capital increase. At June 30, 2011 the balance of credit granted to the members of Executive Committee amounted to 942 t. euro.

Therefore, at June 30, 2011 the total balance of loans made by the Group’s Banks to members of the Executive Committee amounted to 6 561 t. euro.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 237

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholdings of the members of the Board of Directors at June 30, 2011 were as follows:

Shares1 Unavai labl e Shares pledged in Shares pledged in Shares pledged in Held at Held at Jun. Value at Jun. shares guarantee guarantee guarantee Loans Loans Dec. 31, 10 Purchases2 Sal es 30, 11 30, 113 A B C D E F Artur Santos Silva 805 399 80 539 885 938 899 Carlos da Camara Pestana 360 658 30 065 390 723 397 Fernando Ulrich 4 1 901 983 190 197 2 092 180 2 124 1 585 040 348 503 4 033 695 Alfredo Rezende de Almeida 1 910 000 191 000 2 101 000 2 133 A ntónio Domingues 4 278 220 27 822 306 042 311 14 595 220 591 283 A ntónio Farinha Morais 4 354 418 35 441 389 859 396 258 823 332 A ntónio Lobo Xavier Armando Leite de Pinho Carlos Moreira da S ilva 42 862 4 286 47 148 48 Edgar Alves Ferreira 1 449 653 69 966 750 000 769 619 781 Henri Penchas Herbert Walter Ignacio A lvarez-Rendueles Is id ro Fa in é Ca sas José Pena do Amaral 4 66 075 6 607 72 682 74 8 565 Juan Nin Génova Klaus Dührkop Manuel Ferreira da Silva 4 658 118 65 811 723 929 735 123 457 Marcelino Armenter Vidal Maria Celeste Hagatong 4 804 684 80 467 885 151 898 171 110 48 815 370 97 Mário Leite da Silva P edro Barret o 4 430 908 43 091 473 999 481 378 399 94 600 600 150 Ricardo Villela Marino 5 Tomaz Jervell 10 132 1 013 11 145 11

A - Shares attributed under the RVA program, the availability of which at June 30, 2011 is subject to a resolutive condition. B - Shares which at June 30, 2011 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program. C - Shares which at June 30, 2011 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions under the capital increase. D - Shares which at June 30, 2011 were pledged in guarantee for purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais). E - Amount owed at June 30, 2011 on the loan referred to in B. F - Amount owed at June 30, 2011 on the loan referred to in C 1 Includes securities held by their spouses. 2 Includes securities attributed under the capital increase in May 2011. 3 Fair value of the shares. 4 Member of the Executive Committee. 5 Appointed on April 27, 2011.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 238

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholder position of the members of the Board of Directors in terms of options held at June 30, 2011 was as follows:

Options 1 Held at Held at Jun. Dec. 31, 10 Purchases2 Exerci sed3 30, 11

Artur Santos Silva Carlos da Camara Pestana Fern an do Ulrich 4 Alfredo Rezende de Almeida A ntó nio Domingu es 4 951 702 95 170 1 046 872 A ntó nio Farinha Morais 4 913 922 83 299 80 930 916 291 A ntónio Lobo Xavier Armando Leite de Pinho Carlos Moreira da S ilva Edgar Alves Ferreira Henri Penchas Herbert Walter Ignacio Alvarez-Rendueles Is idro Fainé Casas José Pena do Amaral 4 860 963 67 597 184 983 743 577 Juan Nin Génova Klaus Dührkop Manuel Ferreira da Silva 4 1 311 927 113 281 282 101 1 143 107 Marcelino Armenter Vidal Maria Celeste Hagatong 4 242 790 242 790 Mário Leite da Silva P edro Barret o 4 992 992 99 299 1 092 291 Ricardo Villela Marino 5 Tomaz Jervell

1 Includes securities held by their spouses 2 Includes securities attributed under the capital increase in May 2011. 3Includes shares extinguished through expiry. 4 Member of the Executive Committee. 5 Appointed on April 27, 2011

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 239

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the other directors of Banco BPI, members of the Board of Directors of Banco Português de Investmentos, in terms of the shares held at June 30, 2011 was as follows:

Shares Unavai labl e Shares pledged in Shares pledged in Shares pledged in Held at Held at Jun. Value at Jun. shares guarantee guarantee guarantee Loans Loans Dec. 31, 10 Purchases1 Sal es 30, 11 30, 112 A B C D E F

Alexandre Lucena e Vale 99 064 9 906 108 970 111 1 876 43 699 15 562 97 37 José Migu el Morais Alves 11 351 1 135 12 486 13 João Pedro Oliveira e Costa

A - Shares attributed under the RVA program, the availability of which at June 30, 2011 is subject to a resolutive condition. B - Shares which at June 30, 2011 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program. C - Shares which at June 30, 2011 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions rights under the capital increase. D - Shares which at June 30, 2011 were pledged in guarantee for purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais). E - Amount owed at June 30, 2011, on the loan referred to in B. F - Amount owed at June 30, 2011, on the loan referred to in C 1 Includes securities attributed under the capital increase in May 2011. 2 Fair value of the shares.

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the other directors of Banco BPI, members of the Board of Directors of Banco Português de Investimentos, in terms of the options held at June 30, 2011 was as follows:

Options Held at Held at Dec. 31, 10 Purchases1 Exercised2 Jun. 30, 11 Alexandre Lucena e Vale 372 175 31 493 57 229 346 439 José Miguel Morais Alves 320 943 32 094 353 037 João Pedro Oliveira e Costa 206 330 17 511 31 216 192 625

1 Includes securities attributed under the capital increase in May 2011. 2Includes shares extinguished due to expiry.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 240

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the other directors of Banco BPI, in terms of shares and options held at June 30, 2011 was as follows:

1 Shares 1 Options Held at Held at Jun. Value at Jun. Held at Dec. 31, Held at Jun. Dec. 31, 10 Purchases2 Sal es 30, 11 30, 113 10 Purchases4 E xerci sed5 30, 11

Manuel Maria Meneses 94 277 9 427 103 704 105 331 398 23 427 97 117 257 708 Is abel Cast elo Branc o 17 725 1 771 19 496 20 104 964 6 681 38 153 73 492 S usana Trigo Cabral 19 127 1 911 21 038 21 111 668 8 565 26 014 94 219 Luis Ricardo A raújo 52 000 5 200 57 200 58 126 459 56 679 183 138 Graç a G raça Moura 33 760 3 374 37 134 38 97 607 4 060 57 000 44 667 A na Rosas Oliveira 5 898 589 6 487 7 76 281 6 471 11 563 71 189 João Avides Moreira 13 500 1 350 14 850 15 35 407 25 239 60 646

1 Includes securities held by their spouses 2 Includes securities attributed under the capital increase in May 2011. 3 Fair value of shares. 4 Includes securities attributed under the capital increase in May 2011. 5Includes shares and options extinguished through expiry.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 241

Artur Santos Silva

On 7 June, 2011 under the capital increase by incorporation of reserves 80 539 shares were attributed to him.

Carlos da Câmara Pestana

On June 7, 2011 under the capital increase by incorporation of reserves 30 065 shares were attributed to him.

On June 7, 2011 under the capital increase by incorporation of reserves 16 985 514 shares were attributed to IPI - Itaúsa Portugal Investimentos, SGPS, Lda, of which he is a member of the Management Board. At June 30, 2011 IPI – Itaúsa Portugal Investimentos, SGPS, Lda. held 186 840 662 shares.

Fernando Ulrich

On June 7, 2011 under the capital increase by incorporation of reserves 184 859 shares were attributed to him.

On June 7, 2011 under the capital increase by incorporation of reserves 5 338 shares were attributed to his spouse. At June 30, 2011 his spouse held 58 724 shares.

Alfredo Rezende de Almeida

On June 7, 2011 under the capital increase by incorporation of reserves 191 000 shares were attributed to him.

António Domingues

On June 7, 2011 under the capital increase by incorporation of reserves 27 822 shares were attributed to him.

As a result of the adjustment to the RVA 2007 program due to the capital increase by incorporation of reserves, on June 7, 2011 95 170 options were attributed to him. At June 30, 2011 he owned 1 046 872 Banco BPI share options, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros.

António Farinha Morais

On February 23, 2011, 80 930 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On 7 June, 2011 under the capital increase by incorporation of reserves 35 441 shares were attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7: - 55 833 options relating the RVA 2007 program, for which the adjusted attributable value as a result of the capital increase is 0.358 Euros and the strike price is 2.909 Euros; - 27 466 options relating the RVA 2009 program, for which the adjusted attributable value as a result of the capital increase is 0.334 Euros and the strike price is 1.759 Euros; owned 916 291 Banco BPI share options at June 30, 2011.

António Lobo Xavier Does not hold and has not made any transactions with Banco BPI shares.

Armando Leite de Pinho Does not hold and has not made any transactions with Banco BPI shares.

On June 7, 2011 under the capital increase by incorporation of reserves 267 478 shares were attributed to the company Arsopi – Holding, SGPS, S.A., of which he is the President of the Board of Directors. At June 30, 2011 Arsopi – Holding, SGPS, S.A. owned 2 942 267 Banco BPI shares.

On June 7, 2011 under the capital increase by incorporation of reserves 403 844 shares were attributed to the company ROE, SGPS, S.A., of which he is President of the Board of Directors. At June 30, 2011 ROE, SGPS, S.A. owned 4 442 291 Banco BPI shares.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 242

On June 7, 2011 under the capital increase by incorporation of reserves 310 400 shares were attributed to the company Security, SGPS, S.A., of which he is President of the Board of Directors. At June 30, 2011 Security, SGPS, S.A. owned 3 414 404 Banco BPI shares.

Carlos Moreira da Silva On 7 June, 2011 under the capital increase by incorporation of reserves 4 286 shares were attributed to him.

Edgar Alves Ferreira On February 7, 2011 he acquired 750 000 Banco BPI shares, at the price of 1.43 euro, on the stock exchange.

On June 7, 2011 under the capital increase by incorporation of reserves 47 966 shares were attributed to him.

On June 7, 2011 under the capital increase by incorporation of reserves 22 000 shares were attributed to his spouse. At June 30, 2011 his spouse held 242 000 shares.

On 7 June, 2011 under the capital increase by incorporation of reserves 2 577 436 shares were attributed to the company HVF - SGPS, S.A., of which he is a member of the Board of Directors. At June 30, 2011 HVF - SGPS, S.A. owned 28 351 791 Banco BPI shares.

Henri Penchas Does not hold and has not made any transactions with Banco BPI shares.

Herbert Walter Does not hold and has not made any transactions with Banco BPI shares.

Is the person named by Allianz Europe, Ltd. to represent it as a member of the Board of Directors for which the company was elected.

On June 7, 2011 under the capital increase by incorporation of reserves 7 789 656 shares were attributed to the company Allianz Europe Ltd, which owned 85 686 217 shares at June 30, 2011.

The entity to which the above qualified shares are allocated is the company Allianz SE, which in turn is the sole shareholder of Allianz Europe Ltd.

Ignacio Alvarez Rendueles Does not hold and has not made any transactions with Banco BPI shares.

Isidro Fainé Casas Did not purchase or sell any securities. Is President of Caja de Ahorros y Pensiones de Barcelona “la Caixa”, which has full control over Criteria CaixaCorp, S.A.1

On June 7, 2011 under the capital increase by incorporation of reserves 27 090 000 shares were attributed to the company Criteria CaixaCorp, S.A., which owned 297 990 000 Banco BPI shares at June 30, 2011.

José Pena do Amaral On February 23, 2011, 184 983 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 6 607 shares were been attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7: - 55 833 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros; - 11 764 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros; owned 743 577 Banco BPI share options at June 30, 2011.

1 On July 1, 2011, under the reorganization of the Group "La Caixa", Criteria CaixaCorp - that would develop the Group's banking business - has changed its name to CaixaBank. "La Caixa" helds 81.1% of this entity.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 243

Juan María Nin Génova Does not hold and has not made any transactions with Banco BPI shares.

Klaus Dührkop Does not hold and has not made any transactions with Banco BPI shares.

Manuel Ferreira da Silva On February 23, 2011, 184 984 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 44 579 shares were attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 55 833 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 11 764 options relating the RVA 2008 program, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros;

- 24 033 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.334 Euros and the strike price ois 1.759 Euros; owned 904 942 Banco BPI share options at June 30, 2011.

On February 23, 2011, 97 117 purchase options of Banco BPI shares held by his spouse were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 21 232 shares were attributed to his spouse. At June 30, 2011 his spouse held 233 552 shares.

As a result of the adjustment to the RVA 2007 program due to the capital increase by incorporation of reserves, on June 7, 2011 21 651 options were attributed to his spouse, which at June 30, 2011 owned 238 165 Banco BPI share options, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros.

Marcelino Armenter Vidal Did not purchase or sell any securities.

Is Executive Director of Caja de Ahorros y Pensiones de Barcelona “la Caixa”, which has full control over Criteria CaixaCorp, S.A. For further information about these companies’ transactions and participation in Banco BPI’s capital, see the above information concerning the member Isidro Fainé Casas.

Maria Celeste Hagatong On February 23, 2011, 242 790 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 43 439 shares were attributed to her.

On June 7, 2011 under the capital increase by incorporation of reserves, 37 028 shares were attributed to her spouse. At June 30, 2011 her spouse held 407 316 shares.

Mário Leite da Silva

Does not hold and has not made any transactions with Banco BPI shares.

Is President of the Board of Directors of Santoro Financial Holdings, SGPS, S.A. and its subsidiary Santoro Finance – Prestação de Serviços, S.A., which he controls.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 244

On June 7, 2011 under the capital increase by incorporation of reserves 8 994 999 shares were attributed to the company Santoro Finance – Prestação de Serviços, S.A.. At June 30, 2011 Santoro Finance – Prestação de Serviços, S.A. owned 98 944 955 Banco BPI shares.

Pedro Barreto On June 7, 2011 under the capital increase by incorporation of reserves 43 091 shares were attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 55 833 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 16 000 options relating the RVA 2008 program, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros;

- 27 466 options relating the RVA 2009 program, for which the adjusted assignment value due to the capital increase is 0.334 Euros and the strike price is 1.759 Euros; owned 1 092 291 Banco BPI share options at June 30, 2011.

Ricardo Villela Marino

Does not hold and has not made any transactions with Banco BPI shares.

He is Vice-President responsible for the operations in Latin America (Argentina, Chile, Uruguay and Paraguay) of Itaú Unibanco S.A. and director of Banco Itau Unibanco S.A..

Tomaz Jervell On June 7, 2011 under the capital increase by incorporation of reserves 1 013 shares were attributed to him.

On June 7, 2011 under the capital increase by incorporation of reserves 714 008 and 716 245 shares were attributed to the companies Norsócia, SGPS, S.A. and Auto Maquinaria Tea Aloya, SL, respectively, of which he is a member of the Boards of Directors, these companies having 7 854 089 and 7 878 702 shares, respectively at June 30, 2011.

Alexandre Lucena e Vale On February 23, 2011, 57 229 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 9 906 shares were attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 19 023 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 12 470 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros; owned 346 439 Banco BPI share options at June 30, 2011.

José Miguel Morais Alves On June 7, 2011 under the capital increase by incorporation of reserves 1 135 shares were been attributed to him.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 245

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 21 318 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 10 776 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros; owned 353 037 Banco BPI share options at June 30, 2011.

João Pedro Oliveira Costa Did not purchase or sell any securities.

On February 23, 2011, 31 216 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 17 511 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to him. At June 30, 2011, he owned 192 625 Banco BPI share options.

Manuel Maria Meneses

On February 23, 2011, 91 117 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 9 427 shares were been attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 12 657 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 5 334 options relating the RVA 2008, for which the adjusted assignment due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros;

- 5 436 options relating the RVA 2009, for which the adjusted assignment value due to the capital increase is 0.334 Euros and the strike price is 1.759 Euros; owned 257 708 Banco BPI share options at June 30, 2011.

Isabel Castelo Branco

On February 23, 2011, 38 153 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 1 771 shares were attributed to her.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 6 681 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to her. At June 30, 2011, she owned 73 492 Banco BPI share options.

Susana Trigo Cabral

On February 23, 2011, 26 014 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 1 911 shares were attributed to her.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 246

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 8 565 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to her. At June 30, 2011, she owned 94 219 Banco BPI share options.

Luís Ricardo Araújo

On June 7, 2011 under the capital increase by incorporation of reserves 5 200 shares were attributed to him.

On April 29, 2011, under the RVA 2010 program, 39 784 purchase options of Banco BPI shares were attributed to him at the price of 0.251 Euros (after adjustment resulting from the capital increase).

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 6 979 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 2 941 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros;

- 2 997 options relating the RVA 2009, for which the adjusted assignment value due to the capital increase is 0.334 Euros and the strike price is 1.759 Euros;

- 3 978 options relating the RVA 2010, for which the adjusted assignment value due to the capital increase is 0.251 Euros and the strike price is 1.132 Euros; owned 183 138 Banco BPI share options at June 30, 2011.

Graça Graça Moura

On February 23, 2011, 11 563 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 859 shares were attributed to her.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 4 060 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to her. At June 30, 2011, she owned 44 667 Banco BPI share options.

On February 23, 2011, a total of 45 437 purchase options of Banco BPI shares under the RVA 2005 program held by her husband were extinguished through expiry. Therefore, at June 30, 2011 her husband did not have any purchase options of Banco BPI shares.

On June 7, 2011 under the capital increase by incorporation of reserves 2 515 shares were attributed to her husband.

Ana Rosas Oliveira On February 23, 2011, 6 360 purchase options of Banco BPI shares under RVA 2005 were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 422 shares were attributed to her. At June 30, 2011, she held 4 648 shares.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 4 758 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to her. At June 30, 2011, she owned 52 344 Banco BPI share options.

On February 23, 2011, 5 203 purchase options of Banco BPI shares held by her husband under the RVA 2005 program were extinguished through expiry.

On June 7, 2011 under the capital increase by incorporation of reserves 167 shares were attributed to her husband. At June 30, 2011 her husband held 1 839 shares.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 247

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves, on June 7, 1 713 options relating the RVA 2007 program, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros, were assigned to her husband. At June 30, 2011, her husband owned 18 845 Banco BPI share options.

João Avides Moreira On April 29, 2011 19 892 purchase options of Banco BPI shares under RVA 2010 were attributed to him, at the price of 0,251 euro (after adjustment resulting from the capital increase).

On June 7, 2011 under the capital increase by incorporation of reserves 1 350 shares were been attributed to him.

As a result of the adjustment to the RVA programs due to the capital increase by incorporation of reserves the following additional shares were attributed to him on June 7:

- 841 options relating the RVA 2007, for which the adjusted assignment value due to the capital increase is 0.358 Euros and the strike price is 2.909 Euros;

- 1 336 options relating the RVA 2008, for which the adjusted assignment value due to the capital increase is 0.340 Euros and the strike price is 1.285 Euros;

- 1 362 options relating the RVA 2009, for which the adjusted assignment value due to the capital increase is 0.334 Euros and the strike price is 1.759 Euros;

- 1 808 options relating the RVA 2010, for which the adjusted assignment value due to the capital increase is 0.251 Euros and the strike price is 1.132 Euros; owned 60 646 Banco BPI share options at June 30, 2011.

5. NOTE ADDED FOR TRANSLATION

These consolidated financial statements are a translation of financial statements originally issued in Portuguese in conformity with the International Financial Reporting Standards as endorsed by the European Union, some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

Notes to the consolidated financial statements as of June 30, 2011 | Banco BPI | 248

Declaration

DECLARATION REFERRED TO IN ARTICLE 246 (1) C) OF THE SECURITIES CODE

Article 246 (1) (c) of the Securities Code prescribes that each one of the persons responsible for the company issues a declaration, the content of which is defined therein.

The Members of the Executive Committee of Banco BPI’s Board of Directors, identified here by name, individually subscribe to the declaration transcribed as follows:

“I declare in the terms and for the purposes for article 246 (1) (c) of the Securities Code that, to the best of my knowledge, the financial statements and the directors’ report of Banco BPI, S.A., relating to the 1st half of 2011, were prepared in conformity with the applicable accounting standards, giving a true and fair view of the assets and liabilities, the financial situation and the results of that company and of the companies included in the consolidation perimeter, and that the directors’ report contains an indication of the important events which occurred in the 1st half of 2011 and their impact on the respective financial statements, as well as a description of the principal risks and uncertainties for the six following months.”

Fernando Ulrich (Chairman) António Domingues (Deputy-Chairman)

António Farinha Morais (Member) José Pena do Amaral (Member) Manuel Ferreira da Silva (Member) Maria Celeste Hagatong (Member) Pedro Barreto (Member)

25 August 2011

Banco BPI | 1st half 2011 Report

AUDIT REPORT PREPARED BY AN AUDITOR REGISTERED AT THE PORTUGUESE SECURITIES MARKET COMMISSION (CMVM) ON THE HALF YEAR CONSOLIDATED INFORMATION

(Amounts expressed in thousands of Euros – t. euro)

(Translation of a report originally issued in Portuguese – Note 5)

Introduction

1. In compliance with the Portuguese Securities Market Code (Código dos Valores Mobiliários) we hereby present our Audit Report on the consolidated financial information contained in the Directors’ Report and on the accompanying consolidated financial statements of Banco BPI, S.A. and subsidiaries (“the Bank”) for the half year ended June 30, 2011, which comprise the Consolidated Balance Sheet as of June 30, 2011 (that reflects total assets of 43,224,774 t. euro and total shareholders’ equity of 1,587,528 t. euro, including consolidated net income of 79,141 t. euro), the Consolidated Statements of Income, Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows for the half year then ended and the corresponding Notes.

Responsibilities

2. The Board of Directors of the Bank is responsible for: (i) the preparation of consolidated financial statements that present a true and fair view of the financial position of the companies included in the consolidation, the consolidated income and comprehensive income from their operations, the changes in their consolidated shareholders’ equity and their consolidated cash flows; (ii) the preparation of historical financial information in accordance with International Financial Reporting Standards as endorsed by the European Union, that is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Market Code; (iii) the adoption of adequate accounting policies and criteria and maintenance of appropriate systems of internal control; and (iv) the disclosure of any significant facts that have influenced the operations of the companies included in the consolidation, their financial position or their results and comprehensive income.

3. Our responsibility is to examine the financial information contained in the documents of account referred to above, including verifying that, in all material respects, the information is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Market Code, and to issue a professional and independent report based on our examination.

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Scope

4. Our examination was performed in accordance with the auditing standards (“Normas Técnicas e Directrizes de Revisão/Auditoria”) issued by the Portuguese Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement. Our examination included verifying, on a sample basis, evidence supporting the amounts and disclosures in the financial statements and assessing the estimates, based on judgements and criteria defined by the Bank’s Board of Directors, used in their preparation. Our examination also included verifying the consolidation procedures used, application of the equity method and verifying that the financial statements of the companies included in the consolidation have been adequately examined, assessing the adequacy of the accounting principles used, their uniform application and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept, assessing the adequacy of the overall presentation of the consolidated financial statements, and assessing if, in all material respects, the financial information is complete, true, timely, clear, objective and licit. Our examination also included verifying that the consolidated financial information included in the Directors’ Report is consistent with the other consolidated documents of account. We believe that our examination provides a reasonable basis for expressing our opinion.

Opinion

5. In our opinion, the consolidated financial statements referred to in paragraph 1 above present fairly, in all material respects, the consolidated financial position of Banco BPI, S.A. and subsidiaries as of June 30, 2011, the consolidated income and comprehensive income from their operations, the changes in their consolidated shareholders’ equity and their consolidated cash flows for the half year then ended in conformity with the International Financial Reporting Standards as endorsed by the European Union and the financial information included therein is, in terms of the definitions included in the standards referred to in paragraph 4 above, complete, true, timely, clear, objective and licit. Página 3 de 3

Emphasis

6. At June 30, 2011 the book value of the consolidated exposure of Banco BPI to Greek Government Bonds (“bonds”) includes 265,381 t. euro of bonds held by Banco BPI classified in the Available For Sale portfolio and recorded at fair value, for which the potential loss recognized in the Fair Value Reserve caption amounts to 305,478 t. euro, including 284,169 t. euro of losses on bonds and 21,309 t. euro due to the effect of applying the rules of hedge accounting. In addition, as mentioned in Note 4.48 – Exposure to sovereign debt, some insurance capitalization portfolios of BPI Vida e Pensões include Greek Government Bonds, classified in the Held to Maturity portfolio and recorded at amortized cost, the book value of which at June 30, 2011 amounts to 154,628 t. euro. Communications from the Council of the European Union and from the Institute of International Finance of July 21, 2011 announced a restructuring plan of the Greek public debt, which includes a voluntary exchange operation of bonds with maturities up to and including 2020 and presumes a 90% acceptance level from the investors. All the bonds held by Banco BPI and BPI Vida e Pensões mature before 2020. Considering that based on the information available as of this date: (i) the Bank decided not to participate in the restructuring plan; and (ii) it believes that the restructuring will succeed and will create, together with the official aid program, conditions for Greece to comply with its financial responsabilities, the Bank assessment is that there is no objective evidence that the Greek Government Bonds recorded in the consolidated balance sheet are impaired and therefore it did not record any impairment losses in the June 30, 2011 accounts for the potential losses on these bonds (Note 4.48).

Report on other legal requirements

7. It is also our opinion that the financial information included in the consolidated Directors’ Report is consistent with the consolidated financial statements for the half year ended June 30, 2011.

Oporto, August 31, 2011

______DELOITTE & ASSOCIADOS, SROC S.A. Represented by António Marques Dias

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