Annual Report 2018

Contents

1. GOVERNING BODIES ...... 4 2. DEPARTMENTS AND BRANCH OFFICE NETWORK ...... 5 3. SHARE CAPITAL ...... 8 4. KEY INDICATORS ...... 9 5. CHAIRMAN´S MESSAGE ...... 10 6. INTERNATIONAL AND NATIONAL ENVIRONMENT 13 6.1. INTERNATIONAL ...... 13 6.2. NATIONAL ...... 16 6.2.1. General Information ...... 16 6.2.2. Financial System ...... 20 6.2.3. BCA in the System...... 21 7. STRATEGIC VISION ...... 24 8. COMMERCIAL ACTIVITY ...... 26 8.1. FUNDS ...... 26 8.2. LOAN...... 28 8.2.1. Analysis of Granted Loans ...... 28 8.2.2. Analysis of Loan Portfolio ...... 28 9. OTHER ACTIVITIES ...... 31 9.1. HUMAN RESOURCES ...... 31 9.2. RISK MANAGEMENT, INTERNAL AUDIT AND CONTROL ...... 34 9.3. MARKETING AND PUBLIC RELATIONS ...... 40 9.4 INTERNATIONAL AND LIQUIDITY MANAGEMENT ...... 42 9.5. OTHER SUPPORTING ACTIVITIES ...... 44 10. ANALYSIS OF ECONOMIC-FINANCIAL SITUATION ...... 46 10.1. BALANCE SHEET DEVELOPMENT ...... 46 10.2. INCOME STATEMENT ...... 49 10.3. ANALYSIS OF THE RATIOS ...... 51 10.4. PRUDENTIAL RATIOS ...... 52 11. APPROPRIATION OF NET INCOME ...... 54 12. CORRESPONDENT BANKS ...... 55 13. NOTES ...... 57

ANNUAL REPORT 2018

1. GOVERNING BODIES

The Ordinary General Meeting of the Banco Comercial do Atlântico (BCA), held on April 25th 2015, elected, in accordance with article 13 of its Articles of Association, the majority of the members of the Governing Bodies that were completed with the election held at the Extraordinary General Meeting of October 29th, 2015. The Governing Bodies are thus composed:

General Meeting Audit Board

Chairman Mr. Miguel António Ramos Chairman: Eng. António José do Nascimento Ribeiro

Vice-Chairman Mr. Salomão Jorge Barbosa Ribeiro Member: Ms. Maria de Fátima Oliveira de Melo Fernandes Sanchas Secretary: Mr. Dulce Patricia Dias Lopes Chantre Member: Mr. José Ricardo Vaz Fernandes Benoliel

Deputy Member Mr. Francisco Sebastião Correia Board of Directors

Teixeira The Board of Directors is appointed by the General Meeting and consists of a Chairman and six Board Members, four of Deputy Member: Mr. Adelino Vital Fonseca whom are non-executive members:

The Executive Board is appointed by the Board of Directors and Chairman Professor António José de Castro Guerra, it includes three members: PhD (until July 4th 2018) Professor António José de Castro Chairman Mr. Francisco Pinto Machado Costa Guerra, PhD (from July 5th 2018) Chairman until July 4th 2018

Board Member Mr. Francisco Pinto Machado Mr. Francisco Pinto Machado Costa Costa (until July 4th 2018) Chairman from July 5th 2018

Board Member Mr. Filipe Lamego Mr. Francisco Pinto Machado Costa (From February 26th 2018) Member until July 4th 2018

Mr. Filipe Lamego Board Member Mr. David Hopffer Cordeiro Almada

Member from February 26th 2018 Board Member Ms. Carla Maria Moniz Brigham Gomes

Board Member Mr. José Rui Cruz Lopes Gomes

Board Member Mr. Manuel José Dias Esteves

2. DEPARTMENTS AND BRANCH OFFICE NETWORK

Northern Commercial Southern Commercial Department – DCN Department - DCS Gilda Monteiro Herminalda Rodrigues Diretor Director Risk Management Department - Financial and International Department – DFI DGR Amélia Figueiredo Filomena Figueiredo Director Director

Means and Channels Department Organization and Innovation Department - DOI – DMC Águeda Monteiro Américo Andrade Director Director IT Systems Department – DSI Security and Logistics Department – DSL Luís Barbosa Adalberto Melo Director Director

Operational Support Department - DSO Credit Recovery Office - GRE Anibal Moreira Nuno CabraL Director Coordinator

Human Resources Department – DRH Legal and Pre-Legal Office - GJC Niva Barbosa – Head of Dulce Lopes Division Coordinator

Jacqueline Cruz – Head of Compliance Supporting Office – GFC Division Monica Sanches Coordinator Internal Audit Department – DAI Emanuel Miranda Director Research and Studies Office Marketing and Public Relations Office – GMR Evaldo Lima Paula Martins Coordinator Coordinator

NORTHERN CORPORATE OFFICES SOUTHERN CORPORATE OFFICES

Northern Corporate Offices – Southern Corporate Office I – GEN Virgínia Correia GES I Coordinator Zara Vicente Coordinator Corporate Office Sal – GESA Southern Corporate Office II – Vera Zego GES II Nelson Moreira Coordinator Coordinator

2018 ANNUAL REPORT

NORTHEN AREA BRANCHES SOUTHERN AREA BRANCHES

Elisa Santos Luis Ramos Celmira Mendes Coordinator Coordinator Coordinator

Type I Branches Type I Branches São Vicente Branch – ASV Praia Branch – APA Maísa Sancha Crisóstomo Sofia Barbosa Manager Manager

Santa Catarina Branch – ASC Miguel Ângelo Tavares Landim Manager

Type II Branches Type II Branches Boa Vista Branch – ABV Achada Santo António I Branch – ASTI Valdina Monteiro Romina Tavares Manager Manager

Praça Nova Branch - PNA Avenida Branch – AVE Lídia Pereira Admar Frederico Manager Manager

Porto Novo Branch – APN Elder Rodrigues São Filipe Branch - FOGO - AFG Manager Luis dos Reis Manager

Tarrafal Branch – ATA Ribeira Grande Branch – ARG Isabel Costa Osvaldina Espírito Santo G. Brito Manager Manager

Sal Branch - ASA Aeroporto Internacional Amílcar Cabral Counter Carla Santos Manager

São Nicolau Branch – ASN Extension Tarrafal de São Nicolau Branch – ATS Augusta Benilde Cruz Manager Type III Branches Type III Branches Fonte Filipe Branch – AFF Achada Santo António II Branch – ASTII António Évora Dulce Santos Manager Manager

Monte Sossêgo Branch – AMS Brava Branch – ABR Nelson Gomes Ângela Rosa Manager Manager

Ponta do Sol Branch – APS Maio Branch – AMA Paúl Branch – APL (Ext. ARG) Alexandrino Anes Osvaldina Espirito Santo G. Brito Manager Manager

Santa Maria Branch – ASM Mosteiros Branch – AMO Elizabeth Alexandre Luis dos Reis Manager Manager

Achada S. Filipe Branch - ASF Palmarejo Grande Branch – APG Extension São Domingos Branch - Joaquina Lopes Tavares PSD Manager Maria Borges Manager Assomada Branch – ADA Santa Cruz Branch – STC Claudio Filipe Barros Mendonça José Moniz Manager Manager Chã de Areia Branch – ACA Neusa Melo Manager

2018 ANNUAL REPORT

3. SHARE CAPITAL

BCAs share capital amounts to 1,324,765,000$00 (one billion, three hundred and twenty-four million, seven hundred and sixty-five thousand CVE) and, on December 31st 2018, was held by the shareholders listed on the following table, in which it can be seen that the equity stakes of Caixa Geral de Depósitos, SA/Banco Interatlântico, SA group, the INPS - Instituto Nacional de Previdencial Social, the Caixa Geral de Depósitos, the Garantia - Companhia de Seguros de Cabo Verde, SA and ASA - Aeroporto e Segurança Aérea, SA, correspond to more than two percent (2%).

Table 1 - Share Capital of BCA

CVE

Shareholder Amount Percentage CGD/INTERATLÂNTICO 697,446,000 52.65% INPS 166,078,000 12.54% CAIXA GERAL DE DEPOSITOS 89,504,000 6.76% GARANTIA 76,322,000 5.76% ASA - AEROPORTO E SEGURANÇA AÉREA, SA 28,780,000 2.17% EMPLOYEES 27,418,000 2.07% OTHER SHAREHOLDERS 239,217,000 18.05% TOTAL 1,324,765,000 100.00%

4. KEY INDICATORS

Table 2 - Key Values and Indicators from Activity and Income

Variables Units 2017 2018 Change BALANCE SHEET Total Asset Million CVE 89,106 91,167 2.3% Total net asset Million CVE 46,181 49,262 6.7% Total Liabilities Million CVE 83,663 85,987 2.8% Customer’s Loan Million CVE 75,862 77,953 2.8% Net Worth Million CVE 5,442 5,180 -4.8% OPERATING ACCOUNT Net Interest Income Million CVE 2,027 2,511 23.9% Non-Interest Income Million CVE 742 671 -9.6% Operating Income Million CVE 2,769 3,182 14.9% Administrative Costs Million CVE 1,926 3,215 66.9% =Cash-Flow Exposure Million CVE 843 (33) -103.9% Income from Subsidiaries exc. Assoc. Million CVE 47 56 21.1% Depreciation for period Million CVE 208 190 -8.5% -Impairment/Net Provisions for period Million CVE 390 (44) -111.4% Tax exc./Profits Million CVE 57 (11) -118.5% =Net Income for Period Million CVE 235 (112) -147.8% RATIOS Overdue Credit/Customers Loans % 14.6% 11.7% Overdue Credit up to + 90 days/Customers Loan % 13.4% 11.2% Credit Impairment/Overdue Credit % 75.2% 75.2% Credit Impairment and Liabilities/Overdue Credit % 74.5% 74.4% Customers Loan/Customers Deposits % 50.3% 47.2% Net Income/Own Capital (ROE) % 4.4% -2.1% Net Income/Asset (ROA) % 0.3% -0.1% Solvency Ratio % 16.17% 15.18% OPERATING (Cost-to-Income) inc. Pension Funds % 77.1% 107.0% (Cost-to-Income) exc. Pension Funds % 67.3% 57.4% Total Asset/Total Asset Invested Million CVE 194 201 3.7% Total Credit and Deposit/No of Asset Employees Million CVE 246 252 2.5% Total Credit and Deposit/No of branches Million CVE 3,323 3,359 1.1% Number of Total Active Employees Unit 460 453 -1.5% Number of Fixed Active Employees Unit 379 370 -2.4% Number of Branches Unit 34 34 0.0%

2018 ANNUAL REPORT

5. CHAIRMAN'S MESSAGE

Dear Shareholders, Customers and Employees

The 2018 Annual Report, more than in any of the recent years, requires an explanatory note from the Chairman of the Board of Directors to all stakeholders of Banco Comercial do Atlântico. In fact, the 2018 accounts reflect an extraordinary event that, in itself, implied the presentation of Net Losses due to its magnitude and the obligation to register it as a cost for period. The extraordinary event refers to the Judgment of the Court of Appeal of Sotavento which dismissed BCA's appeal in regards to the Employees' complaint, following the change in retirement conditions for the beneficiaries of the Private Social Security System, which was approved by BCA in 2013.

Although the Court's decision occurred in January 2019 condemning the Bank to the materialization of that liability, resulting in an increase of liabilities for the Pension Fund, against the Bank's results in the amount of 1,142,309 million CVE, with reference to December 31st, 2018.

The Net Profit of the Bank, in the amount of -112,025 million CVE shows an increase in Personnel Costs in 1,287,513 million CVE compared to 2017, resulting from the decision of the Court of Appeal, and which, having a one-off and non-repeatable nature, forecasts a very positive year of 2019, for Operating Account and Net Profit. In fact, if it were not for this "event", 2018 Net Profit would reflect the improvements in terms of Operating Income which reached 3,181,652 million CVE, registering a growth of 412,569 million CVE (+14.9%) compared to 2017, and would also reflect the lack of need to reinforce impairments due to the improvement in Overdue Credit that during 2018 registered a decrease in the amount of -1,131,541 million CVE (-20.9%). The Board of Directors expected, prior to the Court's decision that the year 2018 would end with a Net Profit of around 750,000 million CVE.

Effectively, the year 2018 in terms of Current Operation (excluding the incident described) was very positive, due to the Bank's commercial proactivity, together with strict cost control, but also supported by a favorable macroeconomic environment, of which we highlight the following:

In accordance to the Monetary Policy Report of April 2019, the domestic economy registered a volume growth of 5.5%, higher than the 4.0% registered in 2017. According to the same Report, economic growth was mainly determined by the dynamics of the public sector (net taxes of subsidies and public administration) and by the positive performances of trade, manufacturing, real estate and other services and electricity and water. The Report also highlights that there was a remarkable recovery in construction and a reduction in the positive contribution of housing and restoration.

BCA's business expectations for 2019 are positive, with growth in Credit to the Economy expected to increase from 2.2% in 2018 to 5.1%, after the dissipation of the effects of the liquidation of a large loan at the beginning of the year, also benefiting from the implementation of the

public mechanisms for risk-sharing and reducing funding cost, planned in 2019 State Budget. However, BCV's expectation is to maintain the context of low pressures on prices and on the balance of payments, without substantial effects on the level of provision, considered necessary to provide stability to unilateral peg exchange rate regime from the Cabo Verdean escudo to the euro. In this context, Central Bank foresees the maintenance of the current accommodative monetary policy stance, which may favor banking activity. In the international context, IMF's prospects for 2019 and 2020 point to global growth of 3.5% and 3.6% respectively, while still very much conditioned by the outcome of the trade tensions between the USA and China, the uncertainties about the effects of Brexit, as well as the process of normalization of the Monetary Policy of the world´s major Central Banks, which should gain greater momentum in 2020. Thus, in short, Banco Comercial do Atlântico's prospects for 2019 are optimistic, both because of the positive domestic economic environment and the growing trend of the operating income boosted in 2018 and which should continue in 2019, thus creating the conditions for 2019 to be a favorable year for BCA. With regard to 2018, it should be noted that in the Bank's current operation, customer funds continued to register positive growth, despite the lower rates, with BCA's total asset growing 3.1%, compared to the 4.5% registered in 2017. Demand deposits were, as in 2017, the main contributors to global fund growth, with companies’ demand deposits registering growth rates higher than 14%. BCA's deposit base continues to be sustained by private customers, who are responsible for 80% of total bank deposits, with Cabo Verdeans in the diaspora contributing more than 48% of total deposits. With regard to loan, it should be noted that 2018 normal portfolio final value reflects the continuation of the strategy of support to families and the SMEs present in the 9 inhabited islands of the Country, with loans to families growing 4.9% compared to 2017, to which contributed the new products launched for this segment, in particular BCA Nôs Kasa and BCA Crédito Automóvel. Loans to companies decreased, as despite the strong support to SMEs with the reinforcement of the SME line by a further 2.5 billion CVE, reaching 7.5 billion in total, it was not possible to offset the settlement of a high-value operation at the beginning of January 2018. The focus on improving loan quality showed results, with overdue loan portfolio decreasing more than 1,100,000 thousand CVE, from 5,398,431 thousand CVE in 2017 to 4,266,800 thousand in 2018, with the default ratio standing at 11.7% of the portfolio against 14.3% in 2017. The Non-Performing Loans (NPL) reduction strategy defined for the 2018/2021 quadrennial and a consistent and rigorous policy of write-off of assets contributed to this. With regard to operating costs, which containment and reduction has also been of major concern for the bank in recent years, registered in 2018 a growth of 59.6% compared to 2017, as a result of the impact of the Judgment of the Court of Appeal, thus excluding this effect its growth would have been null compared to 2017.

2018 ANNUAL REPORT

Reaffirming the importance of the impact of the decision of the Sotavento Court of Appeal, given the magnitude of the amounts involved, in the BCA accounts that implied the recognition of negative net income, it is important to note that the Bank was able to absorb a cost exceeding 1,577,608 thousand CVE in 2018, not jeopardizing its solidity, maintaining a solvency ratio of 15.18% well above the legal minimum required for 12%. The ability to absorb this impact was only possible because the current operation (excluding this factor) was very positive in 2018, thanks to the quality, commitment, dedication and professionalism of all Bank's employees, for that they truly deserve, in this headquarters, the recognition and gratitude on my own behalf and on behalf of the entire Board of Directors. The Board of Directors also expresses its gratitude and appreciation to all Shareholders, the General Meeting, the Audit Board, the External Auditor, the Banco de Cabo Verde, the General Audit of the Securities Market and the Cabo Verde Stock Exchange for all the cooperation over the years. To our clients, our special thanks for the privilege of their trust and preference, reiterating our commitment to seek to ensure the satisfaction of their expectations through an increasingly better quality of service and tightening of bonds that enable the longevity of our relationships, as customers are the reason for our existence.

6. INTERNATIONAL AND NATIONAL ENVIRONMENT 6.1. INTERNATIONAL

The IMF in its update of the World Economic Outlook (WEO) published January 2019 revised estimates of the economic growth of the global economy.

The average growth of the global economy for 2018 remained unchanged at 3.7%, despite some signs of deceleration in the second semester, which led to downward revisions in some European and Asian economies.

The average growth of the global economy was projected at 3.5% for 2019 and 3.6% for 2020 (0,2 P.p and 0,1 below WEO projections in October) reflecting lower-than-expected growth in some economies in the second semester of 2018, including Germany and Italy, as well as a more significant contraction than expected in Turkey.

Growth in advanced economies is expected to decelerate, from an estimated 2.3% in 2018 to 2% in 2019 and 1.7% in 2020. The projected growth rate for 2018 and the projection for 2019 were 0.1 p.p. below the WEO projections of October 2018, mainly due to downward revisions for the Eurozone.

The growth outlook for the United States remains unchanged. The projected growth for 2018 remains at 2.9%, subsequently falling to 2.5% in 2019 and 1.8% in 2020, reflecting the reversal of the effect of the policy of reducing the tax burden on Investment and Consumption. It is expected that the commercial tension, mainly aimed at China, also weighs on economic activity.

In the Eurozone the outlook for 2018 was revised at -0.2 p.p. GDP growth is projected at 1.8% (- 0.6 p.p. compared to 2017). For 2019, growth is projected at 1.6% (-0.3 p.p. Compared to the initial projections).

The downward revision of initial estimates is justified by a slowdown in the growth pace of the largest European economies. In Germany the deceleration is explained by low private consumption, poor manufacture after the introduction of new fuel emission standards for vehicles and moderate external demand. In Italy it is due to poor domestic demand and higher loan costs, as sovereign debt interest rates remain high and in France due to the negative impact of street protests (yellow vests) and industrial action.

2018 ANNUAL REPORT

In Portugal, one of our greatest economic partners, the estimates remained unchanged. GDP grew 2.7% in 2017, and is projected to grow 2.3% in 2018. For 2019 a growth of 1.8% is expected, revealing a slowdown in the growth pace, justified by the knock-on effect, resulting from the less favorable performance of the economic block in which it is inserted.

There is substantial uncertainty surrounding the baseline projection of around 1.5% growth in the United Kingdom for 2019 and 2020. The unchanged projection regarding WEO of October 2018 reflects the negative effect of prolonged uncertainty on the Brexit outcome and the positive impact of the fiscal stimulus announced in the 2019 budget. This projection assumes that the Brexit agreement will be reached in 2019 and that the United Kingdom will gradually move to the new regime. However, with rejection of the proposal submitted by British Prime Minister Theresa May, the form Brexit will take is increasingly uncertain.

Data published in the WEO of Oct. 18 point to a reduction of the unemployment rate in the Eurozone of 8.3% in 2018 (-0.8 p.p. compared to 2017) and 8% in 2019.

In the United Kingdom the rate is expected to fall to 4.1% in 2018 (-0.3 p.p. compared to 2017) and to a slight increase to 4.2% in 2019.

In the U.S. also, the unemployment rate is expected to fall to 3.8% in 2018 (-0.6 p.p. compared to 2017) and 3.5% in 2019, reflecting the increase in production resulting from the fiscal stimuli initiated in 2017.

With regard to consumer price behavior in the Eurozone, a slight acceleration from 1.5% in 2017 to 1.7% in 2018 and same rate in 2019.

In the United Kingdom, forecasts point to 2.7% in 2017 and a reduction to 2.5% in 2018 and 2.2% in 2019, as a result of the dilution of the effects of the depreciation of the Pound still present in 2017.

In the U.S. it is projected 2.1% for 2017 and an increase to 2.4% in 2018, falling again to 2.1% in 2019.

For the emerging market and the developing economy groups, growth should fall to 4.5% in 2019 (4.6% in 2018), before rising to 4.9% in 2020. The projection for 2018 and 2019 are 0.1 p.p. and 0.2 p.p. below the projected in the WEO of October 2018, respectively.

The Asian emergent economies make the largest contribution to this projection. Estimates remained unchanged regarding WEO of October 2018 projection, with estimated growth of 6.5% in 2018 and 6.3% in 2019, most notably China (6.6% in 2018 and 6.2% in 2019) and India (7.3% in 2018 and 7.5% in 2019).

Despite the fiscal stimulus that offsets part of the impact of rate increase in the US, China's economic growth is expected to decelerate due to the combined influence of tighter regulation in the financial system and trade tensions with the U.S. The Indian economy is expected to recover in 2019, benefiting from lower oil prices and a slower-than-expected pace of monetary tightening as inflationary pressures decrease.

In Sub-Saharan Africa, growth is expected to be of 2.9% in 2018, 3.5% in 2019 and 3.6% in 2020 (0.2 p.p., 0.3 p.p. and 0.2 p.p. below the initial projections, respectively), as the fall in oil prices caused downward revisions for Angola and Nigeria. Key figures for the region disguise an asymmetric performance, where more than a third of sub-Saharan economies will grow above 5% in 2019 and 2020.

Table 1 summarizes the key international macroeconomic indicators.

Table 3 - Development in key international macroeconomic indicators

GDP Inflation Unemployment Estimated Projection Estimated Projection 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018p 2019p Global Economy 3,8% 3,7% 3,5% 3,6% n.d n.d n.d n.d n.d. n.d. n.d. Advanced Economies 2,4% 2,3% 2,0% 1,7% 1,7% 2,0% 1,7% 2,0% n.d. n.d. n.d. USA 2,2% 2,9% 2,5% 1,8% 2,1% 2,4% 2,1% n.d 4,4% 3,8% 3,5% Eurozone 2,4% 1,8% 1,6% 1,7% 1,5% 1,7% 1,7% n.d. 9,1% 8,3% 8,0% Germany 2,5% 1,5% 1,3% 1,6% 1,7% 1,8% 1,8% n.d 3,8% 3,5% 3,4% Italy 1,6% 1,0% 0,6% 0,9% 1,3% 1,3% 1,4% n.d. 11,3% 10,8% 10,5% France 2,3% 1,5% 1,5% 1,6% 1,2% 1,9% 1,8% n.d 9,4% 8,8% 8,5% Japan 1,9% 0,9% 1,1% 0,5% 0,5% 1,2% 1,3% n.d. 2,9% 2,9% 2,9% United Kingdom 1,8% 1,4% 1,5% 1,6% 2,7% 2,5% 2,2% n.d 4,4% 4,1% 4,2% Emerging economies 4,7% 4,6% 4,5% 4,9% 4,3% 4,9% 5,1% 4,6% n.d. n.d. n.d. Brazil 1,1% 1,3% 2,5% 2,2% 3,4% 3,7% 4,2% n.d 12,8% 11,8% 10,7% Russia 1,5% 1,7% 1,6% 1,7% 3,7% 2,8% 5,1% n.d. 5,2% 5,5% 5,3% Emerging Asia 6,5% 6,5% 6,3% 6,4% 2,4% 3,0% 3,2% n.d n.d. n.d. n.d. China 6,9% 6,6% 6,2% 6,2% 1,6% 2,2% 2,4% n.d. 3,9% 4,0% 4,0% India 6,7% 7,3% 7,5% 7,7% 3,6% 4,7% 4,9% n.d n.d. n.d. n.d. Sub-Saharan Africa 2,9% 2,9% 3,5% 3,6% 11,0% 8,6% 8,5% n.d. n.d. n.d. n.d. Source: WEO - Word Economic Outlook - updated January 2019

2018 ANNUAL REPORT

The balance of risks to growth remains tilted to the downside, as in the WEO of October, which is why the IMF has revised downwards the initial average growth projections for the global economy for 2019 and 2020.

The main sources of risk to the global outlook are the outcome of trade negotiations and the direction financial conditions will take in the upcoming months. If countries resolve their differences without further increasing trade barriers, and financial market expectations improve, they could raise growth above the forecast.

However, the final results of the United States' negotiations with China and the ratification of the UMSCA agreement between the United States and Mexico (replacing NAFTA) remain unknown. The U.S government's shutdown in late 2018 also contributes to a more negative outlook.

In Europe, Italian spreads have slowed the growth pace for October and November, but are still high. A prolonged period of high interest rates could put further pressure on Italian banks, weighing on economic activity and worsening debt dynamics. Other factors specific to Europe that may lead to increased risk aversion include the growing possibility of a disorderly Brexit, with negative cross-border repercussions.

A second source of risk of systemic financial stability is a deeper-than-expected deceleration in China, with negative implications for trade partners and commodities global prices. China's economy decelerated in 2018, mainly due to tighter regulation in the financial system to contain parallel banking and local government investment off-budget, and as a result of the growing trade dispute with the U.S, which intensified the deceleration at the end of the year. Further deceleration is expected in 2019. Authorities reacted to the slowdown limiting financial regulatory tightening, injecting liquidity through cuts in bank reserve requirements, applying fiscal stimuli and resuming public investment.

6.2. NATIONAL 6.2.1. General Information

The latest Monetary Policy Report published in October 2018 by Banco de Cabo Verde states that the external environment favored a remarkable dynamic of the national economy in the first semester of 2018.

It should be noted that between 2012 and 2015 the GDP grew on average 1.46% per year, witnessing a period of very weak growth of the Cabo Verdean economy. However, in 2016 there was a growth of 4.7% (INE's final accounts) and in 2017 estimates point to a 4% growth.

The latest INE estimates published in January 2019 point to equivalent quarterly GDP growth of 5% in the third trimester of 2018. The evolution of Gross Value Added was mainly driven by very positive performances in Fisheries (+53%), Electricity and Water (+20.8%), Manufacturing (+19.6%), Financial Services (+16%) and Construction (+10.3%).

The shortage of rainfall in 2017, which continued in 2018, although with less intensity, continued to negatively condition the performance of Agriculture (-24%). The contraction of mobile and fixed telephony businesses negatively impacted the Telecommunications and Post Office sector (-6%), highlighting the negative contributions to GDP growth in the third trimester of 2018.

On the demand side, the positive contributions of Final Consumption and Investment are particularly noteworthy. This evolution resulted from the higher contribution of Final Consumption Expenses (YoY growth of 4.2% in 2ndT18, increasing to 4.7% in 3rdT18). The acceleration of Final Consumption results mainly from Private Consumption Expenditure (YoY growth of 0.3% in 2ndT18 increased to 5.8% in 3rdT18) since Public Consumption registered a YoY growth of 21.2% in 2ndT18, falling to 0.4% in 3rdT18. Investments registered a YoY growth of 5% in 2ndT18, increasing to 8.1% in 3rdT18.

It should be noted that the qualitative indicator of economic environment reversed the downward profile in 2ndT18 and continued to improve in 3rdT18, reflecting the improved confidence of businessmen in tourism, transport and ancillary services and sales sectors. However, in aggregate terms, the confidence index in trade decreased for the first time since 2015, due to the reduction in confidence of trade fair entrepreneurs. Expectations of construction and manufacturing businessmen also worsened in 3rdT18.

With regard to inflation, the tendency towards a recovery in consumer prices started in January 2017 maintained, with the annual average value standing at 1.2% in November 2018, against -1.4% in 2016 and 0.8% in 2017, reflecting the rise in the prices of energy commodities in the international market, as well as some influence from the weak agricultural season of 2017.

Regarding the external accounts, there was an unfavorable situation in the third trimester of 2018 (according to BCV Economic and Financial Indicators, November 2018), as a result of the

2018 ANNUAL REPORT

increase in the checking account deficit by 85% year-on-year (from -2.6 billion CVE in 2ndT to -4.8 billion CVE in 3rdT18), due to the growth in goods imports (+18.2%), the reduction in official transfers (-67.7%), and the increase in dividends distributed to external investors (+95.5%).

The Capital Account registered a decrease in surplus (from 317.4 million CVE in 3rdT17 it decreased to 89.7 million CVE in 3rdT18), justified by the reduction in capital donations resulting from the end of the execution of the second Millennium Challenge Account compact.

The Financial Account registered a surplus of 1.81 billion CVE in 3rdT18, which compares with the deficit of CVE -599.7 thousand CVE in the same period of the previous year, explained by the decrease in the external public debt stock and FDI inflows - Foreign Direct Investment in the country.

The increase in the checking account deficit combined with the decrease in net financing inflows resulted in the fall in International Reserves from 57.1 billion CVE in December 2017 to 56.18 billion CVE in September 2018. The stock of Net International Reserves started to guarantee 5.4 months of Imports, still remaining within the parameters considered adequate for the Cabo Verdean economy and for the stability of CVE Peg against Euro.

In October 2018, the Monetary Mass grew 6.1% year-on-year (0.5 p.p. less than December 2017). The more contained growth in money supply was determined by the significant slowdown in credit to the private sector and the reduction in banks' net foreign assets.

Compared to December 2017, until October 2018, Credit to the Economy and the Private Sector grew respectively 1.2% and 0.2% (7.5% and 6.8% in December 2017, YoY). Net Credit to the Public Sector grew 3% in the same period, driven by the 11% increase in credit to the Central Government.

In October 2018, Credit to the Economy grew at a faster pace than Credit to the Private Sector due to a higher contribution of Credit to Non-Financial Public Companies.

In terms of components, the performance of the Monetary Mass reflected the contraction of quasi- monetary liabilities, in particular deposits in the resident currencies (-24.5%) and emigrants time and savings deposits (-1.8%). Reference should also be made to the fall in currencies in circulation (belonging to the monetary aggregate M1) by -8.9% from December 2017 to October 2018, as a result of increased use of electronic means of payment.

For 2019, a budget deficit of 3.0% of GDP is expected, financed essentially from budgetary aid resources. The Debt Stock Ratio should reach 126.3% of GDP, with budgetary consolidation and debt sustainability continuing to be a major concern and challenge.

The BCV projects GDP growth at around 4.5% in 2018, in line with the IMF projections of October 2018 and the range designed in the 2019 State Budget [4.0%; 5.0%].

For 2019, growth is expected to accelerate to 4.7% of GDP, based on "the expected benign evolution of the external environment and the absence of infrastructural and commercial constraints to domestic production and external financing of investments in the country", also in line with the IMF projections of October 2018 and the range designed in the 2019 State Budget [4.5% -5.5%].

Table 2 summarizes the main information disclosed in the October 2018 Monetary Policy Report and the 2019 State Budget.

Table 4 - National Macroeconomic Indicators

Outlook

Units 2017 2018 2019 Real GDP % 4.0 4.5 4.7 Inflation Average floating Rate 0.8 1.3 1.4 Monetary Mass Annual Floating Rate in 6.6 5.6 5.5 % Exchange Rate Reserves Import months 5.9 5.8 5.8 Credit to the Economy Change (%) 7.5 5.0 5.1 Global Debt Stock In % of GDP 131.9 127.9 126.3 Budget Balance In % of GDP 3.2 3.1 3.0 Source: 2019 State Budget and BCV´s Monetary Policy Report Oct18

In January 2019, the African Development Bank (ADB) published the Africa Economic Outlook, where it analyses the macroeconomic performance of African countries.

The ADB estimates real GDP growth of 3.9% in 2018, 4.1% in 2019 and 4.8% in 2020, and projects growth to be driven by incoming remittances, manufacturing, continuous growth in tourism and increased expenditure on public infrastructure, not forgetting private investment, driven by favorable domestic credit conditions. These outlooks are less optimistic than those presented by the Cabo Verdean institutions, but they

2018 ANNUAL REPORT

are also more recent and posterior to the confirmation of less positive views on the performance of the world economy.

Given the strong economic connection between Cabo Verde and the Eurozone, the downward revision of economic growth in this block may have negative effects on the growth outlooks presented by BCV in October 2018 and the State Budget for 2019. In addition, the increased uncertainties about BREXIT outcome and its impact in the British economy pose an increased risk to Cabo Verde's economy, given the growing weight of the United Kingdom in Foreign Direct Investment flows and tourist flows.

6.2.2. Financial System

The Banco de Cabo Verde - BCV, with the objective of stabilizing money market interest rates, and providing for greater regulation of the existent liquidity levels in the system, in January 2018, through Notice No 01/2018, determined a new regime for the constitution of Minimum Cash Reserves.

Under Law no. 07/IX/2017, of January 27th establishing the Deposit Guarantee Fund (DGF), and to minimizing the impact of contributions to the said fund and considering the prevailing macro-financial environment in the country, BCV decided to reduce the Minimum Cash Reserves Ratio by 2 pp from 15% to 13%. This measure aims, in particular, to enable banks to release a certain amount of funds in the form of mandatory reserves in order to offset the funding costs associated with the establishment of the DGF, as well as to reduce the cost implicit in mandatory reserves.

In 2018, among the legal and regulatory diplomas that were published, the following stand out:

 Notice No 1/2018 Minimum Cash Reserves Ratio Notice comes to determine the minimum reserve system, as well as the requirements to be followed, the reserve base of the minimum cash resources, their calculation, the minimum cash resources ratio and minimum cash reserves and the duties the institutions subject have. As of Dec-17, BCV had announced a reduction in the minimum cash reserves ratio from 15% to 13%.  Law 22/IX/2018 that makes the first amendment to Law 61/VIII/2014, of April 23rd, which defines the bases, the guiding principles and the financial system’s reference for legal framework;

 Notice no. 2/2018 on Pricing Rules and Information Duties, which amends and republishes Notice no. 1/2013;  Law-Decree no. 3/2018 regulating the legal regime for economic and financial operations with abroad and exchange transactions within the national territory;  Ordinance no. 19/2018, of July 13th 2018 - document that approves the model declaration of information on financial information, included in Ordinance annex;  BCV Notice no. 5/2018 of July 27th 2018 - Deposit Guarantee Fund Chart of Accounts;  Notice 6/2018, of August 27th that establishes the duty of Information on Foreign Operations and Exchange Operations (duty of information of a statistical nature and the duty of conservation of their respective elements, taking into perspective, the performance of the Banco de Cabo Verde as monetary authority in the country);  Notice 7/2018, of August 27th, listing economic and financial operations with foreign countries, previously published under Annexes I (capital operations), of Decree-Law no. 26/98, of 29 June;  Decree-Law 7/2018 of November 28th establishing the legal framework applicable to the regulation, management and operation of the Cabo Verde Payment System, aiming at the fulfillment of public policy objectives, including the efficiency and security of systems, and the stability of the general financial system;  Decree-Law 8/2018 of November 28th that establishes the legal framework governing the provision of payment services and the issuance, distribution and reimbursement of electronic money in Cabo Verde by legally authorized entities;  Law-Decree 9/2018, which establishes the legal framework governing access to the activity of payment and electronic money institutions.

6.2.3. BCA in the System

The Cabo Verdean financial system remains competitive with 7 commercial banks operating in the country.

BCA's loan market share decreased from 33.7% in 2017 to 32.3% in 2018 (November data) and in Deposits, by 38.1% in 2018 (September data).

BCA maintained its commercial network unchanged in 2018 with 34 branches, including 4 Business Offices.

2018 ANNUAL REPORT

The production of Vinti4 cards (debit cards) accounted for 39% of all network production in 2018 with an increase of 1.085 cards (+ 2%) compared to the 2017 issuance. In relation to active cards in circulation, with reference to December 31st 2018, BCA had 80,120 units, totaling 32% of the total network (34% in 2017).

In 2018, the strategy of consolidating the services associated with remote channels (BCA Directo Telephone (Contact Center) and BCADirecto Mobile) continued, with special attention to the matter of security in these channels, and the strategy of implementing services that promote the "electronization" of BCA products and services was also continued, through the identification of new electronic distribution channels.

In 2018, BCA registered around 7,511 users/adherents to the service BCADirecto Multicanal (Internet, Mobile and Telephone), representing a growth of 4% over the previous year. The BCADirecto service ended the year with 52,057 users, representing a growth of around 9% compared to the previous year.

Regarding the transactions carried out in the BCADirecto Channel, the year 2018 was also positive, with about 660,246 transactions requiring the movement of funds in the channel

BCADirecto Internet and Mobile, representing a growth of 22% compared to the previous year and the values traded in the channel exceeded 16.3 billion CVE, also showing a growth of 22% compared to the previous year.

In 2018 BCA's ATM machine grew at a rate of 5% compared to the previous year, ending the year with 64 machines installed and active in the vinti4 network. In terms of market shares, it remained the same as in 2017, i.e. 34%.

The Point of Sale (POS) supported by BCA maintained the growing trend, reaching 2,046 installed and active equipment, which represented a growth of 9% over the previous year. In the meantime, the market share remained at 31%, both with respect to the equipment installed in the Vinti4 network, as well as with regard to the number of transactions carried out in the POS channel, yet, the share in terms of amounts traded decreased by 2 p.p.

The deposit machines increased to 12 machines placed in branches (+6 than the year 2017) located in the islands of Santiago, São Vicente and Sal.

This channel continued to have a very positive acceptance among customers, as evidenced by the growth in the number of deposits (+ 71%) and the amount of deposits (+ 80%), with approximately 145 thousand deposits totaling 3,1 billion CVE.

BCA continued to be the only Bank in the country to offer its customers this complementary channel to make their deposits with speed, security and convenience.

2018 ANNUAL REPORT

7. STRATEGIC VISION

The prospects of relative stability of the international environment and improvement of the domestic environment, along with the acceleration of the rhythm of approach of BCV national supervision to international standards, shape the framework in which BCA is adjusting its strategy.

In this context, the strategic performance of BCA continues through the following vectors:

1. Final Strategic Objectives:

a. Increase of Business Profitability through:

I. The improvement of Net Interest Income of loan operations II. The increase of the Loan-to Deposit Ration III. A greater contribution of Non-Interest Income

b. Reduction of Cost-to-Income, through:

I. The Increase of the Operating Income

II. The improvement in Technical and Operational Efficiency

c. Strengthening of Solvency based on

I. A Commercial Policy sensitive to the capital risk and consumption of the operations

II. A prudent Dividend Policy

2. Instrumental Strategic Objectives

a. Growth of the Regular Portfolio, through:

I. A greater Commercial Proactivity without prejudice to risk weighting and capital consumption of operations

II. Improving the Quality of Service at the counters

III. Better Communication between the commercial network (branches) and central services

IV. Reducing Response Time to internal and external customers

b. Reduction of the Non-Performing Loans Portfolio through:

I. Particular attention to First Signs of Default

II. More Sustainable Restructuring

III. Better Functional Articulation between GRE and GJC c. More Proactivity (internal and external) in the management and disposal of the assets in the portfolio (donations and judicial executions) d. Improvement of Technical and Operational Efficiency

I. Organizational Improvements

II. Control and reduction of Operating Costs

III. Reduction of Operational Risk

IV. Improvement of Internal Control

V. New Investments, on a business-case basis

VI. Qualification of Human Resources

2018 ANNUAL REPORT

8. COMMERCIAL ACTIVITY 8.1. FUNDS

The focus on the quality of service provided to customers, product innovation, recognition by Cabo Verdeans in the country and in the diaspora, and the election of BCA as a Marca de Confiança (Trusted Brand), continue to make the Bank a reference in the national banking market.

The balance of Customer Deposits reached 77.5 billion CVE, an increase of 3.1% compared to 2017, and continues to demonstrate the trust in the BCA brand. This evolution was supported by the increase in Demand Deposits in 10,7% and the Savings Deposits in 4,6%. Term deposits decreased 3.8%.

The table below illustrates the evolution of Customer Funds from 2017 to 2018.

Table 5 – Customers’ Funds (Million CVE) Change Type 2017 2018 Absolute Relative

Deposits 75,178 77,503 2,325 3.1% Demand Deposits 33,383 36,944 3,562 10.7% Term Deposits 37,520 36,088 -1,432 -3.8% Savings Deposits 4,275 4,471 196 4.6%

In terms of customer segment, the BCA Deposits belong mostly to Individual Customers with a weight of 79.9% (81.4% in December 2017), an increase of 1.2%. Business deposits increased at rates around 11.2% compared to 2017. Total Emigrants Deposits represent 48.3% (49.2% in 2017) of BCA's total Deposit Portfolio and grew 1.1% compared to December 2017.

Table 6 - Customer Deposits by Type (Million CVE) Change Type 2017 2018 Absolute Relative Demand Deposit Residents 21,319 23,482 2,163 10.1% Emigrants 9,136 10,416 1,280 14.0% Non-residents 2,927 3,046 119 4.1% Total 33,383 36,944 3,561 10.7%

Term Deposit

Residents 12,434 12,193 -241 -1.9% Emigrants 27,857 26,988 -869 -3.1% Non-residents 1,504 1,378 -126 -8.4% Total 41,795 40,559 -1,236 -3.0% Total Deposits 75,178 77,503 2,325 3.1%

Table 7- Customer Deposits by Segment (Million CVE) Variation Segments 2017 2018 Absolute Relative

Companies

Demand Deposits 10,983 12,543 1,560 14.2% Time Deposits 2,989 2,997 8 0.3% Total 13,972 15,539 1,567 11.2% Private Demand Deposits 22,399 24,401 2,002 8.9% Time Deposits 34,531 33,091 -1,440 -4.2% Savings Deposits 4,275 4,471 196 4.6% Total 61,206 61,964 758 1.2% Total Deposits 75,178 77,503 2,325 3.1%

2018 ANNUAL REPORT

8.2. LOAN 8.2.1. Analysis of Granted Loan

BCA's activity in 2018 continues being influenced by the economic dynamics resumption, with some business opportunities sustained by good market prospects, with an impact on credit demand and competition among banks for good operations that are emerging.

Total new loan granted in 2018, including restructured loans, reached approximately 8.7 billion CVE, higher than 2017 by 4.1% (348,000 million CVE) with loans granted to households during the year increasing 20.1%, compared to 2017. It is noteworthy the increase of 65.8% and 15.3% in the new production of home loans for Permanent Private Residence and Income and loans for Other Purposes.

It is worth mentioning, still, the decrease in the business segment, despite the strong commitment on loans granted to SMEs under the credit line launched in 2014, which has been strengthened every year since then, given the good acceptance by the market.

The following table shows the evolution of new loan granted by customer segments.

Table 8 - Loans, including restructured loans by Customers Segment

(Million CVE)

Change Structure Segments 2017 2018 Absolute Relative 2016 2017

Companies 4,694 4,288 -406 -8.6% 55.6% 48.8%

Short Term 2,764 1,771 -993 -35.9% 32.7% 20.1%

M/L Term 1,930 2,517 587 30.4% 22.9% 28.6%

Private 3,752 4,505 754 20.1% 44.4% 51.2%

Mortgage 1,248 2,068 820 65.8% 14.8% 23.5%

Expenditure Credit 2,504 2,437 384 15.3% 29.6% 27.7%

Total Granted Loan 8,446 8,794 348 4.1% 100.0% 100.0%

8.2 2. Loan portfolio Analysis

The balance of the Performing Loan portfolio, without business loans, amounted to 32.3 million CVE, maintaining practically the same value as in 2017. The favorable evolution in the stock of

loan to households in 4.9% is a reflection of the increase in new operations, both in home loans for permanent own housing and in loans for other purposes. In the business segment, the portfolio changed by -6.4%, due to the decrease in new operations and also in the normal and early amortization of certain loans with significant amount.

Table 9-Performing Loan Portfolio by Segments

(Million CVE) Change Structure Segments 2017 2018 Absolute Relative 2017 2018

Companies 13,754 12,876 -878 -6.4% 42.6% 39.8%

Short Term 1,586 1,652 65 4.1% 4.9% 5.1%

M/L Term 12,168 11,224 -944 -7.8% 37.7% 34.7%

Private 18,541 19,441 900 4.9% 57.4% 60.2%

Mortgage 11,906 12,550 644 5.4% 36.9% 38.8%

Credit Lease 1,618 1,463 -156 -9.6% 5.0% 4.5%

Expenditure Credit 5,016 5,428 412 8.2% 15.5% 16.8%

Total Performing Loan 32,295 32,317 22 0.1% 100.0% 100.0%

Including Loan and Overdue Interest, Income Receivable and Public and Private Bonds, the Total Loan portfolio to Customers increased by 4.4% over the same period of the previous year. Government bonds grew 37.1% and 3.3 billion CVE. The balance of public and private bonds decreased 33 million CVE, justified by the liquidation of the installments of some bonds, higher than the entry of new subscriptions.

Table 10 - Customer Loan Portfolio

(Million CVE) Variation Loan 2017 2018

Absolute Relative

Performing Loan 32,295 32,317 22 0.1%

Short Term 2,213 2,164 -49 -2.2%

Medium and Long Term 30,082 30,153 71 0.2%

Overdue Loan and Interest 5,525 4,393 -1,131 -20.5%

Public/Private Bonds 3,460 3,426 -33 -1.0%

Public Debt Securities 9,004 12,343 3,339 37.1%

Income Receivables 256 275 19 7.5%

Revenue incl. Deferred Income -242 -227 15 -6.2%

Total Loan Portfolio 50,297 52,528 2,231 4.4%

2018 ANNUAL REPORT

The increased effort in prudent risk management, the adoption of preventive measures and the permanent monitoring of customers with higher exposures, in order to optimize the quality of the loan portfolio, reflected in non-performing loans, which decreases by 1.1 billion CVE and -20.5%, reaching a cumulative balance in December 2018 of 4.3 billion CVE.

The decrease in Overdue Credit occurred in both the Companies and Private Segment by - 20.7% and - 21.6%, respectively. The representativeness of each segment in 2018 is shown in the following graph.

Chart 1 - Credit in Default in 2018

2.9%

28.4%

68.7%

Company Credit Individual Credit Company Bonds

The accumulated balance of the Loan Impairment, which includes the impairment for the obligations of private companies, reached 3.3 billion CVE, translating a variation of -19.3% and 798 thousand CVE and a coverage of Overdue Credit for Impairment of 75.5%.

9. OTHER ACTIVITIES 9.1. HUMAN RESOURCES

As of December 31st, 2018, the total number of active staff was 453 employees, 370 of whom had permanent contract and 83 had term contract. It still had 11 inactive employees. Nine new employees were admitted and 12 disconnections occurred (3 on the initiative of the Bank and 9 on the initiative of the employee). It should be noted that a total of 7 employees retired, 1 due to disability.

Table 11 - Distribution of Employees

ACTIVE INACTIVE 2017 2018 2017 2018 Permanent Employees 379 370 Retirees 173 181 Fixed-Term Contracts 81 83 Rescissions/Indemnified 6 12 On Secondment 1 On leave 9 9 Sick leave 1 1 Absence Other Reasons 1 0 TOTAL 460 453 TOTAL 190 204

With regard to Gender, 287 Women corresponded to 63.7% and 166 Men to 36.3% of total active employees. Regarding the distribution by Functional Groups, 107 (23.6%) employees held Leadership positions. It is noteworthy an increase in the number of employees holding a Bachelor's Degree, to 51.7% of the total workforce in 2018.

Table 12 - Educational Qualifications

2017 2018 Quantity % Quantity %

Primary 68 14.8% 64 14.1% Secondary 127 27.6% 121 26.7% Vocational 27 5.9% 24 5.3% Polytechnic 10 2.2% 10 2.2% University 228 49.6% 234 51.7% TOTAL 460 100% 453 100%

2018 ANNUAL REPORT

Training and Professional Qualification

In 2018 BCA invested in 61 training sessions reaching a total of 984 participants, with a total workload of 7,338 hours.

Training was carried out in several areas and with great impact on the Bank's activity, of which the following stand out: IFRS9 accounting standard; Basel III and CRR/CRG; Financing and bank credit; Operational Risk Seminar; Coaching Project COSO Model in Cabo Verde; Money Laundering and Terrorist Financing; Code of Conduct and Compliance; New requirements of the internal control system; Bancassurance; Computer audit training; On The Job Training – CGD; KEY USER's BANKA 3G Training; Seminar on Financial System Reform in Cabo Verde; Talent Development and Human Capital; New Internal Control System Requirements; Internships at Caixa Geral de Depósitos; Financial evaluation of projects and Bank Accounting.

Of the training sessions carried out, 22 were in the country (out of company) covering 108 employees, with 1,456 hours of workload, while in the country (in the company) 36 sessions were carried out covering 869 participants, with 5,513 hours of workload.

In terms of training abroad, 7 employees attending 3 training courses on the job and Workshop on Compliance officer at Caixa Geral de Depósitos and also work visits. Compared to 2017, there was an increase in the number of training courses and workload.

During 2018, a total of 18 professional internships were carried out, with the role of BCA prevailing as a partner in the country's development in job creation, especially among the youth.

BCA winner of the "Global Management Challenge - International CGD 2017/2018

In 2018, BCA’s team was the winner of the 2nd edition of the "Global Management Challenge - International CGD 2017/2018,”. The competition was organized by Caixa Geral de Depósitos (CGD).

The Global Management Challenge (GMC) is a management simulation game that operates in a competitive environment between virtual companies, being especially a training tool that allows participants to have the opportunity to develop managerial skills, as well as behavioral, such as teamwork and interactive learning. It is necessary to plan and decide on the most different variables that affect the day-to-day life of a company, such as prices, investments, salaries, advertising, among others, without neglecting the balancing of interests, often conflicting, of managers and owners thereof. To do this, the team spirit, the different skills and coordination among its members are key aspects.

This same BCA team represented Cabo Verde in Dubai, in the International Finale of the Global Management Challenge (GMC). This is the second time that BCA represents Cabo Verde in the GMC Challenge. The first was in 2017 in Qatar, when a team of employees won the 1st edition of the Global Management Challenge, aimed at companies and universities, held in Cabo Verde.

Social Benefit for Employees

The employees of the Bank's Private Social Security System, retired employees, and their families have benefited, in the country, from clinical diagnosis, general and specialist clinic visits, ocular and stomatal prostheses, ward treatments, surgeries and hospitalizations.

They have still benefited from treatment abroad under the existing protocol between BCA and SAMS - Medical and Social Support Services for Unions of Southern and Island Banks, Portugal.

2018 ANNUAL REPORT

The Bank continued to support its employees and pensioners through the credit policy, namely for the acquisition or construction of permanent own housing.

9.2. RISK MANAGEMENT, INTERNAL AUDIT AND CONTROL

Risk Management

The role of the Risk Management Function (FGR) is to ensure that the bank system is adequate and effective, ensuring that all material risks of the activity are identified, assessed, monitored and controlled, as well as to advise and provide complete and relevant information to the management bodies and supervision of the relevant risks associated with the activities carried out on an individual and consolidated basis.

In this context, in order to ensure the effectiveness of FGR, BCA, among other things, carried out in 2018 a set of actions, including:

 Appointment of Chief Risk Officer (CRO), in addition to the responsible local FGR at BCA;

 Review of BCA Structure, with the separation of the role of credit risk analysis to risk taking, risk control function;

 Implementation of the Risk Appetite Statement and determination of metrics to be monitored;

 Implementation of all corporate policies and adaptation of corporate standards, covering the various risks;

 Monthly meeting with the Central CRO, covering all areas of risk, following the evolution of RAS metrics (Risk Appetite Statement);

 Review of some RAS metrics, in particular, Non-Performing Exposure (NPE) and Non- Performing Loan (NPL) in July 2018;

 Promote the training of risk area technicians, either with internal training, whether directed by IFB and / or on-the-job training in the CGD / DGR.

Credit Risk, Credit Recovery and Operational Risk

It can be defined as the possibility of losses associated with the non-compliance by the applicant or counterparty of their respective financial obligations under the agreed terms, the devaluation of a credit agreement due to the deterioration of the applicant's risk classification, reduction of earnings or remuneration, the advantages granted in renegotiation and recovery costs.

From an organizational point of view, it should be noted that as of September 01st, 2018, BCA established the Credit Risk Office, which is a staff body of the structure of the Bank, with functions to analyze and issue an opinion on the credit risk, in accordance with the rules of credit and the delegation of powers in force.

With the creation of this office, the independent analysis proponents, sureties and operations with a view to issuing of credit opinions, ceased to be under the authority of the Risk Management Department (DGR), which focused its organic, among others, in the development of the risk management function and the design, implementation and monitoring of various risk indicators and support models to that analysis.

It is also important to praise the process of implementation of IFRS 9 standard at BCA, which culminated in the transition to the production in July 2018, software support tool for calculating impairment losses in the loan portfolio of the Bank, called LIVE (Loan Impairment Valuation Engine), and since that date the entire calculation process is reassured by DGR technicians. During the implementation, the recalculation of the risk factors was carried out (PD -Probability of Default, LGD - Loss Given Default) and appropriate back testing. In addition, and as expected, all the impairment process was documented and published in Administrative Order.

The implementation of new default concepts was also carried out, with a marking in the core Banka system, namely RDF - Restructuring by Financial Difficulties, ICDF - Indicator of Clients with Financial Difficulties, NPE's - Non-Performing Exposure and Default. Subsequently, in February 2018, the corporate project was created, called Integrated Information Repository Group (RIIG) in terms of CGD's central system that roughly adds detailed data per transaction and customer, allowing the classification of the portfolio credit risk in accordance with the risk concepts expressed above. In this regard, it is worth highlighting the role of the Risk Management Office (GGR) in RIIG validation.

In 2018 BCA decided to give to the Credit Recovery Office (GRE) the responsibility for monitoring the recovery process through the courts, following an increasingly evident

2018 ANNUAL REPORT

and successful intervention in the same (always in synchronization with the other corporate bodies to participate in proceedings).

This approach allowed the identification of intervention opportunities which resulted in strategic decision-making, particularly in cases in litigation and long history of failure, with very positive impact on the BCA portfolio of overdue loans.

Note that the Credit Recovery Office has been able to recover the operations in which intervenes with restructuring, with virtually no relapses and complemented by proposals for dations in payment that generally allow the recovery the capital. Indeed overdue loans recorded a significant reduction in 2018, the result of measures and / or strategies outlined previously, which represents the best performance of BCA in this matter.

In the 1st quarter of 2018 the process of implementation of the Monitoring and Debt Collection Policy (PARC) was initiated, which led, once again, with the final adoption of the regulations, by BCA Board of Administration, in the last quarter of 2018. This document aims to define and harmonize, in one document, monitoring practices, restructuring and credit recovery, where we establish the delegation of skills for each Structural Body participating in credit life cycle, most notably targeting colors in the core system as set out in PARC.

Another worthy aspect of registration, from an organizational point of view, is the transition, in the 3rd quarter of 2018, of the Operational Risk if the Organization and Innovation Directorate (DOI) for the DGR, specifically for the GGR, aiming the perfect corporate alignment with CGD in this field, namely to concentrate risk areas in the DGR.

Market Risk

The management of market risk is driven by the objective of focusing the activity on products and services that are in line with the business strategy of the bank and limit the complexity of products and positions, ensuring that they are in line with the existing capacities for risk monitoring.

In addition, limits are defined in the statement of risk appetite, either in market risk perspective or from the perspective of the exchange rate risk of the balance sheet, which in turn are broken down into limits applied to BCA of the portfolio through market and exchange position risk guidelines.

At market level, the portfolio of BCA's financial instruments are summarized obligations and actions. BCA has a portfolio of financial assets with some representation, but that was not made for trading and mostly unlisted and reduced expression compared to total assets. To point out that it can be considered that the portfolio is almost static, with little variability in the extent to which applications virtually retain their value until maturity.

BCA’s market risk is immaterial so in risk monitoring, there is the monitoring of the portfolio, ensuring the standardization of prices used for valuation of securities classified at fair value or prices are available in active official markets.

The level of risk of foreign exchange position, as with any materiality, it is the monitoring and daily monitoring of the limits of established and applicable currency positions, in order to identify, in a preventive manner, the significant conditions and emerging risk they can do incur the bank in financial losses, always with the concern of defending the financial health of the BCA.

The monitoring metrics and reporting of the foreign exchange position continue to ensure the reliability of estimates of potential losses and the positions and indicators remain within the tolerance levels set out in the foreign exchange risk management strategy. The currency positions rarely exceeded the limits for the various currencies in the portfolio, and when they exceed, they are readily justified, corrected and reported to Management, ensuring a foreign exchange risk management process smoothly.

With the liberalization of foreign exchange transactions, there are more frequent currency purchases and sales opportunities, where the management and control of foreign exchange position must remain prudent.

Liquidity Risk

BCA has been in a situation of excess liquidity, a consequence of the decrease in the loan portfolio versus increased deposit portfolio. Excess liquidity has led to greater competitiveness through rates, making these suffer decreases.

The exposure of the BCA Liquidity risk is monitored through monthly monitoring of liquidity indicators at national level and at the level of European supervision, as part of the CGD group. The frequency of monitoring the development of deposits and their characterization was increased, proceeding to the daily reporting of the liquidity position.

2018 ANNUAL REPORT

Given the poor variety of options for the medium-term investments, the Bank followed the strategy of applications in National and Foreign Financial Institutions and Public Debt Securities, keeping a buffer of very comfortable liquid assets above the limit and outside the tolerance zone to deal with any more serious liquidity events.

Interest Rate Risk

The financing of medium-long term assets and short-term liabilities poses great challenges to the financial sector. The purpose of monitoring its exposure to interest rate has been to minimize exposure to shocks and movements in interest rates with changes in the impact of calculations in interest rates on net interest income and the economic value of capital.

Significant changes in market conditions, the analysis of the evolution of internal and external benchmarks as well as the Repricing Gap have helped mitigate the most pronounced effects on net interest income, making the risk of interest rate, in net terms, as not material.

Compliance Risk

The banking laws as well as international recommendations on this subject point to the need for banks to have formally established a Compliance function that is characterized by being an independent, permanent and effective role in monitoring compliance with the obligations arising from laws, regulations, rules of conduct, ethical principles and other duties to which banks are subject to.

In this sense, BCA has a function Compliance fulfilling these requirements and that fosters mitigating compliance risks and the implementation of appropriate measures to address deficiencies or detected non-compliance, in close collaboration with other BCA Structural Bodies and CGD.

Management of Risk Compliance is the responsibility of all the Structural Bodies, under the coordination of Support Compliance Office (GFC). This unit is also responsible for safeguarding the proper execution of procedures for prevention of money laundering and terrorist financing, and preventing market abuse crimes and prevention of corruption and related offenses.

The guarantee of compliance with laws and regulations is also a concern of Compliance, as it was parallel to the internal disclosure of diplomas, to identify the necessary measures taken for implementation, aimed at preventing the default risks of the legal and regulatory duties enshrined therein.

With regard to safeguarding the proper implementation of procedures for prevention of money laundering and terrorist financing, in 2018 progress was made towards greater implementation of the software control tool as well as the review and strengthening of prevention procedures.

Audit and Internal Control

The activities of the Internal Audit Department (IAD) during the year 2018, in addition to the implementation of audit actions and routine inspection of agencies, offices companies, corporate bodies of the central services and processes, focused mainly on three axes:

 Consolidation of actions aimed at the full implementation of the audit function;  Strengthening of the organizational chapter;  Audit follow-up actions / at a distance.

Due to the new requirements resulting from the implementation of the audit function, the Directorate made a major commitment to training and improving skills of all its employees through courses in the country through an initiative from BCA and the Bank of Cabo Verde in coordination with its external partners, but also courses offered by the Institute of Internal Auditors (IIA) - USA through online platforms.

A fact to highlight in 2018 is the registration of BCA and eight employees of the Internal Audit Department as a collective and effective members, respectively, in the Portuguese Institute of Internal Audit (IPAI) and therefore, as members of the IIA.

However, the emphasis goes into the creation of the Audit and Compliance Committee, the implementation of which will take place in 2019. With the commencement of work of this committee, BCA will fulfill an important requirement for ensuring the full independence of the audit function. With respect to internal control, there was in 2018, an attention and an increasingly growing commitment on the part of the bank's corporate bodies in implementing the remediation plans of the shortcomings and the continuous improvement of internal control mechanisms.

2018 ANNUAL REPORT

9.3. MARKETING & PUBLIC RELATIONS

Line SMEs

The strategic focus and brand positioning in 2018 embody the guidelines set for the corporate segment, particularly for SMEs and micro-credit. Thus, continuing the strategy defined for this segment, the line for SMEs was reinforced in over 2.5 billion CVE, amounting to a total line amount of 7.5 billion CVE made available to small and medium-sized enterprises and microcredit associations, giving priority short / medium-term credit, for different sectors. In this context, approximately four hundred and fifty credits (450) were given, with an average amount of 3 million CVE, thus contributing to the development of this key sector for the country

Ecosystem for Economy Financing

BCA strengthened its support for the development of the national economy, by signing, along with other commercial banks in the market, the Economy Funding Ecosystem Protocol, with the government of Cabo Verde, the Chambers of Commerce, Industry and Services and the Chamber of Tourism, aimed, among other objectives, to create the conditions for facilitating financing through a set of financial support mechanisms to Cabo Verdean companies.

Mortgage, Car Loan, Credit Consumption and Bank Insurance

In 2018 new financing solutions for individuals were launched, especially the Credit solutions Consumption with Life Insurance, for certain professional categories, as well as the Car Loan, adapted to new customer requirements.

The Mortgage by Credit Line Nôs kasa also continued to be encouraged, one of the strategic products of the Bank - which offers special and differential price conditions, an offer addressed to own house purchase needs.

In bank insurance, BCA, in partnership with the Insurance Company Garantia, deepened the relational strategy, allowing to make available to BCA customers, in their own balconies, all insurance options provided by Garantia.

Grants

BCA has been present in various events associated with the business sector, supporting and promoting the debate among stakeholders, with special emphasis on the following:

 Ecosystem for Economy Financing Public Statement  Meeting with Businessmen organized by the Municipality of São Miguel  XXII Edition of the Cabo Verde International Fair - FIC  Chamber of Commerce Gala, Industry and Services of Sotavento

Campaigns

In the context of the strengthening of sales of assets and products in order to assist the commercial network to achieve the defined objectives, promotion initiatives were developed, including the Car Loan/Credit and Line SMEs.

In this sense, with regard to SMEs Line a communication campaign was developed which was present in different media in the 2nd half of 2018 - television and newspapers, as well as social networks and Agencies. A campaign was also launched to publicize the new conditions of the Car Loan/Credit.

Financial Literacy Program

The Financial Literacy Program - which aims to share knowledge in management of personal and family budget - began in São Vicente, with an internal discussion with the theme Financial Education in Banking sector - "The Best Practices in Management the Family Budget.

Sponsorships

Throughout 2018, a number of projects and initiatives supported by BCA, as follows:

 Gala We Are Cabo Verde;  In the field of literature, the edition of the Work "Itineraries of Amilcar Cabral," was sponsored by BCA;

2018 ANNUAL REPORT

 AME - in this area BCA supported the participation of Escala Maior - organization formed by a group of young people from one under-performing neighborhood of Praia - in the AME stage, seeking thereby enhancing initiatives aimed at promoting social inclusion through of culture.

Social Responsibility

In this area the support was directed to schools and to combat Alcoholism.

 Campaign "Less Alcohol More Life"  School Support

Volunteering

The joint component is also expressed through BCA employees, particularly in supporting nursing homes based on the collection of financial donations made internally at Christmas time.

Complaints management

In 2018, a 6% decrease in the total number of claim processes was recorded compared to the number determined in 2017, which contributed to the improvements claimed in some processes.

Given the quality, transparency and rigor that BCA prints in the commercialization of its products and services, throughout the year, awareness raising actions and proposals to improve processes, aimed at eliminating, from the root, the causes of the complaints presented.

9.4 INTERNATIONAL AND LIQUIDITY MANAGEMENT

Relationship with Correspondent Banks

Correspondent banks continue to play a very important role in order to meet the business needs of companies and individuals, with regard to the feasibility of foreign trade operations, relevant factor in the context of reinforcing the country's economy internationalization.

Accordingly, management has enabled maintenance and in some cases improving the conditions offered for the implementation of the international business, while ensuring the coverage of the main markets in the shortest time and at the most reasonable costs.

BCA ended the year 2018 with 17 correspondents and 184 RMA's - Relationship Management Agreement, which allows to cover the customers' claims at the international business level.

Here are the most important aspects that marked 2018:

 Legal Entity Identifier (LEI) Renewal - an alphanumeric code that lists important reference information that enables a clear and unique identification of legal entities participating in global financial markets;  Self-attestation Submission in December, which makes the self-assessment of infrastructure and its submission to the SWIFT under the CSP (Customer Security Programme);  Transfer of the management of the SWIFT platform in Cabo Verde from BCV- Banco de Cabo Verde to SISP - Sociedade Interbancária e Sistemas de Pagamentos.

Liquidity Management

In 2018 BCA continued to maintain excess liquidity and few alternative of investing in higher yielding assets. The management has been done by adopting a drying policy of liquidity, with preference for short-term investments, including treasury bills the rate of 1% and money market operations such as the monetary intervention securities - TIM's and Titles Monetary Regularization -TRM's whose rates remained at 1.5%. In this chapter we highlight the treasury bonds in which there was a downward trend, while the weighted average rate increased from 4.49% in 2017 to 4.2% in 2018.

It should be noted that investments in Financial National and Foreign Institutions and the Public Debt Securities are a "buffer "Quite comfortable liquid assets above the limit set by RAS "Risk Appetite Statement ", Allowing cope with any more serious liquidity events.

BCA has increased the frequency of monitoring the evolution of deposits, their characterization and concentration, transmitting, whenever necessary, alerts and recommendations to the Executive Committee. Because of integrating the CGD group annually under the liquidity crisis simulation practices conducted by the European Central Bank, is carried out over a period of 05 days, the designated SSM Crisis Management Liquidity Exercise, whose report is then integrated into the

2018 ANNUAL REPORT

CGD Group, aiming to ensure rapid access to granular information Bank's liquidity.

The exposure of the BCA Liquidity risk is monitored through daily and monthly reports of the position and its indicators. To this end, a liquidity contingency plan was drawn up with a view to absorbing possible liquidity incidents.

9.5. OTHER SUPPORTING ACTIVITIES

The Directorate of Organization and Innovation (DOI), with the scope of focused action on initiatives with significant impact on the organization and processes as well as in monitoring the management of business continuity and Helpdesk, promoted improvement of the Bank's maturity stage before personal customer data protection, employees and suppliers with the publication of internal regulations on the protection policy and data privacy; In this context it was created the Data Protection Officer to ensure the awareness of those responsible for the Bank on data protection issues, among others.

The Security and Logistics Department (DSL) maintained its prudent management policy of investment in support infrastructure to normal functioning of the Bank, highlighting the works and renovations as well as investments in electronic security systems and the management of assets received as because of execution of guarantees and dations in compliance, focusing on identifying cost saving opportunities.

However, in the year 2018 it is worth mentioning the consolidation of one of the most important BCA projects related to centralization and Scan Archive and improving the responsiveness of the DSL resulting fruits of the adequacy of the organizational and functional structure implemented in 2017, above all, in terms of the Negotiations and Purchases Section.

In line with the mission of BCA to provide financial products and services using advanced and safe technologies, in line with the Compliance and Security requirements, the Information System Department closely monitored the activities inherent to the implementation of a whole set of new procedures in the areas of Risk Management and Compliance, sometimes supported by specific IT platforms.

Stand out from the realization of a series of actions related to the development and implementation of own tools to respond to several requests for reporting, this demand, from both the institutions as National Supervisor's own Caixa Geral de Depósitos, culminating in the

installation of an IT platform to feed a centralized repository at Group headquarters.

Important steps have also been undertaken in the shed technological security as a result of an action Audit started in December 2017, aimed, initially, at implementing a global process Audit framed with risk analysis to IT and then to establish the best practices of ISO / IEC 27001/27002 level of corporate policies, aiming to obtain certification at its completion.

In this sense, major investments were made in the acquisition of hardware in order to improve our backups, consulting actions to improve the parameterization of communication and security equipment, new platforms acquired for automating updates, and monitoring software, among others.

It is also pertinent, in increasing security chapter, highlight the completion of our shed NCP Disaster Recovery, set of procedures that have been put into practice successfully.

However, the most important project of the year was the migration of Core Banking. We moved from Banka version 2.03 To 3G version. This process despite having high risk was properly monitored and conducted smoothly.

Finally, we highlight a number of measures, some still ongoing, which are aligned with the policy implemented cost containment

 Partial implementation of VOIP telephony.

 Maximizing shareable infrastructure.

 Boosting of the digital archive project, aimed at reducing paper and hence printing.

 Implementation of the concept of virtual servers.

2018 ANNUAL REPORT

10. ECONOMIC AND FINANCIAL ANALYSIS 10.1. BALANCE SHEET

In December 2018, Net Assets of BCA reached 91.1 billion CVE, which corresponds to an increase of 2.3% (+ 2 billion CVE) in relation to the value recorded in December 2017. This was due primarily contributed to increases in Net Loans and advances to customers by 6.7% (+3 billion CVE) in deposits at other banks at 410.3% (2.4 billion CVE) and Cash and Deposits in Central Banks 36.6% (2.3 billion CVE).

Table 13. Consolidated Balance Sheet (CVE Million) Variation

2017 2018

Absolute Relative

Active Cash and deposits with the Central Bank 6,325 8,637 2,312 36.6% Balances with other credit institutions 603 3,078 2,475 410.5% Financial assets available for sale 6,535 0 -6,535 -100.0% assets at fair value through other comprehensive income 0 6,573 6,573 100.0% Loans and Advances to Credit Institutions 23,586 17,592 -5,994 -25.4% Customer loans (net) 46,181 49,262 3,081 6.7% Other Net Tangible Assets 2,050 1,932 -118 -5.8% Intangible Assets 62 72 10 16.7% Investment Property 1 1 0 42.5% Investments in subsidiaries, associates and joint ventures 321 359 38 11.7% Current Tax Assets 14 34 20 144.2% Deferred tax assets 3 80 77 100.0% Other Assets 3,425 3,546 121 3.5% Total 89,106 91,167 2,062 2.3%

Liabilities Funds from other credit institutions 1,553 372 -1,181 -76.0% RESOUCE FUNDING FROM CUSTOMERS AND OTHER LOANS 75,862 77,953 2,091 2.8% Liabilities provisions 5,309 7,042 1,733 32.6% Current tax liabilities 67 26 -41 -61.9%

Deferred tax liabilities 206 188 -18 -8.5% OTHER LIABILITIES 0 Other Liabilities 666 406 -260 -39.0% Total Liabilities 83,663 85,987 2,324 2.8% EQUITY 5,442 5,180 -262 -4.8% of which: Net income 235 -112 -347 -147.7% TOTAL 89,106 91,167 2,062 2.3%

Loans and advances to Customers

The Global Customer Loans Portfolio net of impairment reached 49.2 billion CVE, higher than the balance recorded in December 2017 by 6.7% and around 3 billion CVE, partly reflecting the recovery initiated in the last quarter of 2017 with the increase in new operations financed in the year. This growth contributes to Government Securities Portfolio Cabo Verde which grew 37.1% in 2018 and recorded a trade surplus of 12.3 billion CVE, corresponding to 13.5% of the net assets of BCA.

The accumulated balance of the Loan impairments, including impairment for bonds of private companies reached 3.2 billion CVE (4.1 billion CVE in 2017) and representing a 75.2% coverage rate.

Securities Portfolio

The balance of the investments portfolio in securities, which includes the Financial Assets at Fair Value through Other Comprehensive Income, including TCMF's - Financial Mobilization Consolidated Securities and holdings in Promotora and companies not supervised by BCV - Cabo Verde Tobacco Society, Sita, Gari Fund and Visa, was around 6.5 billion CVE.

Customer’s Funds

The portfolio of customer funds including interest payable presented an annual growth of 2.8% and 2 billion CVE, reflecting the preference of its broad and stable customer base, reaching a cumulative surplus of 77.9 billion CVE. The weight of customer resources in the net assets of the bank in December 2018 increased to 85.5%, against 85.9% in 2017.

Emigrants deposits increased 410 000 CVE (+ 1.1%) compared to 2017, rising from 36.9 billion CVE to 37.4 billion CVE. This growth reflects the loyalty of our diaspora to the BCA brand and reinforces the existing level of trust. The increase in the emigrant Deposits by 14% and 1.2 billion CVE was decisive for the growth. It should be noted that the weight of the Emigrant Demand Deposits in the Bank's Total Deposits decreases slightly from 49.2% in 2017 to 48.3%.

2018 ANNUAL REPORT

Table 14. Deposits from Emigrants

(CVE Millions) Variation Rubrics 2017 2018

Absolute Relative

Demand Deposits 9,136 10,416 1,280 14.0%

Savings Deposit 3,131 3,316 186 5.9%

Term Deposits 24,726 23,671 -1,055 -4.3%

Total Emigrants 36,993 37,403 410 1.1%

TOTAL DEPOSITS 75,178 77,503 2,325 3.1%

Emigrant Weight / Total 49.2% 48.3%

Provision for Risks and Costs

The Provision for Costs with the Retirement and Survival Pension Fund reached a total of 6.7 billion CVE (5 billion CVE in 2017), an increase of + 1.7 billion CVE. In January 2019 the Sotavento Court of Appeal dismissed the appeal brought by BCA regarding the complaint of workers following the amendment of the conditions of the retirement situation of the beneficiaries of the Private Social Security System. This court decision and appropriate compliance has forced the Bank to have to register an additional contribution to this system, in the amount of 1.1 billion CVE impacting directly the net profit for the 2018 financial year. On the other hand, in 2018, there were changes in presuppositions (decrease discount rate from 5% in 2017 to 4% in 2018 and growth rate of 2.5% in 2017 salaries and 2% in 2018) contributing for said increase. With this increase the pension fund is fully covered with a balance of 6.7 billion CVE.

The normal contribution of the workers and BCA to the Costs for Retirement and Survival Pensions amounts to 43.6 million CVE, of which 16.2 million CVE are from the employees and 27.4 million from the bank. The uses for payment to the retired and pre-retired totaled 230.6 million CVE.

In the table below are movements in the Provision for Retirement Pensions Fund and Survival Pension from December 2017 to December 2018.

Table 15 - Book value Provision for the Pension Fund for Retirement and Survival

Movement in Period (CVE Millions) Value of Contribution Value of Bank Costs Use of Actuarial Exercise the From the Provisions Deviations Fund Employees Fund Dec18 Dec18

2017 5,017 1,605 231 16 326 6,734

Equity

The Equity Bank decreased by 4.8% and 262,2 million CVE in 2018, despite the incorporation of 75% reserves Net Result from 2017 and the positive impact transition to IFRS9 128.8 million CVE The decrease in net profit 347.2 million CVE and actuarial deviation pension and health resulting from the assumptions of changes in a total of 326.3 million CVE negatively impacted the equity of the bank.

10.2. INCOME STATEMENTS

Table 16 - Income Statements (CVE Millions) 2017 2018 Variation Absolute Relative

Interests and Similar Income 3,469 3,563 94 2.7%

Interest & Similar Costs 1,442 1,053 (389) -27.0%

Net Interest Income 2,027 2,511 483 23.8%

Revenue from Capital Instruments 12 37 25 221.2%

Services and Commissions Income 464 462 (2) -0.5%

Charges for Services and Commissions 55 61 6 11.0%

Foreign Exchange Re-evaluation Results 110 162 53 48.1%

Results of the Sale of other Assets (8) 18 26 331.3%

Other Operating Income 219 53 (166) -75.8%

Non-Interest Income 742 671 (71) -9.6%

Banking Product 2,769 3,182 413 14.9%

Personnel Costs 1,288 2,575 1,288 100.0%

General Administrative Expenses 638 640 2 0.2%

Depreciation 208 190 (18) -8.5%

Operating Costs 2,134 3,405 1,271 59.6%

Net Provisions of Reversals and Cancellations (64) (27) 38 100.0%

Impairment of Other Financial Assets 454 (18) (437) -96.1%

Result of Branches Excluded from Consolidation 47 56 10 21.1%

Earnings Before Taxes 292 (123) (450) -30.1%

Current Tax 57 (11) (67) -118.5%

Net income 235 (112) (347) -147.6%

2018 ANNUAL REPORT

Net income

BCA introduced in 2018 a Net Income of -112 million CVE and a negative variation of 147.6% and about 347.2 million CVE due to the impact of the strengthening of the Pension Fund for workers in the private social security system. It was recorded in 2018 an additional amount of 1.5 billion CVE so that the fund could continue to be fully covered.

Net Interest Income

The Net Interest Income increased by 483 million CVE and 23.8% over the same period last year, totaling 2.511 million CVE, justified by the more significant decrease in Interest and Similar Charges than Interest and Similar Income. It is important to note decreases in the received credits interest at 4.4% and (-115.2 million CVE) in credits titrated at 3.7% and (- 6.1 million CVE) and accrued interest on credit 12.9% (-2 million CVE). The positive highlights are the interest overnight applications and credit institutions and +34.2% and (16.1 million CVE) in treasury bonds interest at 9.1% (40,2 million CVE) and the commissions associated credit by 15.4% (18 million CVE). To even mention the state received interest on the debt recognized in 78,9 million CVE also contributed to the improvement in this margin.

Non-interest Income

Non-interest Income reached 671 million CVE, a decrease of -9.6% and 70 million CVE in respect of December 2017. This evolution is the result of the recognition of the debt by the State relative to the tax whose impact was of 171 million CVE in 2017, and also of a slight decrease in net commissions of 2,1% and 8,4% million CVE. Especially the increase in the results of currency management at 48.1% and 52.7 million CVE.

Banking Product

Despite the negative trend in complementary margin positive developments in the financial margin, resulted in a net operating income of 3,181 million CVE in 2018, higher than the previous year by 14.9% and around 412.5 million CVE, reflecting the good business performance of BCA during the previous year.

Operating Costs

Operating costs increased by 59.6% and 1.2 billion CVE, totaling 3,405 million CVE. The increase in Staff costs was due mainly to additional reinforcement made to the fund for pension benefits following the decision of the ratio court considered unfounded the appeal brought by BCA concerning the complaint of workers following the amendment of passage conditions the reform. In passed to the situation of retired seven employees.

The general administrative costs remained controlled and reached 640 million CVE, despite the new costs associated with the projects bank protection areas (Compliance, Risk and Audit). The additional costs incurred with projects related to these areas were about 28.8 million CVE.

Depreciation for the Year amounted to 190 million CVE, 18 million less than the amount recorded in December 2017.

The table below shows the composition of Operating Costs, as well as their evolution:

Table 17 - Operating Costs Evolutions (CVE Millions) Variation RUBRICS 2017 2018 Relative Absolute

Staff Costs 1,288 2,575 1,287 99.9% Salaries 861 838 -23 -2.7% Social Security Charges 403 1,713 1,309 324.5%

Retirement and Survivors Pensions 269 1,578 1,309 486.7% Social Charges - Others 23 24 1 5.5% General Administrative Expenses 638 640 2 0.2%

Amortizations 208 190 -18 -8.5% Total Operating Costs 2,134 3,405 1,271 59.6%

10.3. ANALYSIS OF THE RATIOS

Return on Assets (ROA) and Shareholders' Equity (ROE) reached -0.12% and -2.11%, respectively, against 0.27% and 4.39% in 2017, a direct consequence of the decrease in Net Income for the Year, as explained above.

The Cost-to-Income efficiency ratio, which relates Operating Costs to Total Operating Income, increased favorably to 107% in 20178 (77% in 2017), reflecting the increase in Total Operating Income.

2018 ANNUAL REPORT

Structures Costs Excluding the Pension Fund effect, Cost-to-Income would be 57.4% in 2018 (67,3% in 2017).

The ratio Personnel Expenses/ Total Operating Income improved from 46.5% to 80.9%.

In the Risk indicators, it should be noted the behavior of the ratio of Non-performing loans /Total Loan reached 11.7% in 2018, against 14.6% in 2017, as a consequence of the decrease in the non-performing portfolio, and the coverage ratio by Impairments on Overdue Loans that reached a comfortable level of 75.2% in 2018.

The loan-to-deposit ratio measured by Customer Loans in reference to Customer Funds remains very low and decreased to 47.2% (50.3% in 2017) due to the decrease in the loan portfolio and the increase in deposits.

10.4. PRUDENTIAL RATIOS

In terms of prudential ratios, BCA has a good performance and solidity, with shareholders’ equity of 4.4 billion CVE. Note that the Capital was adversely affected by the reinforcements needed to cover the liabilities with the Private Social Security System. Nevertheless Coverage for Fixed Asset ratio remains high, reaching 202.39% in 2018 (215.12% in 2017).

The Solvency Ratio, according to the Bank of Cabo Verde regulations, reached 15.18%, well above the minimum of 12% legally required of the Cabo Verdean commercial banks.

The ratio between Public Debt Securities and Deposits reached 15.93%, which is higher than that required by BCV, which determines that investments in Public Debt Securities of Financial Institutions may not be less than 5% of the total liabilities by Deposits.

In terms of the total amount of loans, the risks of which are subject to Concentration Limits, BCA holds, in absolute terms, 2.8 billion CVE, a value also lower than that stipulated by BCV, whose aggregate limit cannot exceed eight times its own funds, in essence 35.7 billion CVE. The maximum concentration limit for an entity in December is 723,6 million CVE, less than the 25% (1,109 million CVE) of Shareholders’ equity required by the Central Bank.

The following table shows the evolution of Prudential Ratios in the last three years:

Table 18 - Prudential Ratio Evolutions CVE Ratios Unit 2016 2017 2018 Equity CVE 4,942,827 4,959,499 4,482,375

Coverage of Fixed Assets % 204.80% 215.12% 202.39%

Solvency Ratio % 15.78% 16.17% 15.18%

Chart 1 - Prudential Ratio Evolutions

6,000 18.00% 16.17% 15.78% 15.18% 16.00% 5,000

14.00%

4,000 12.00% 4,959

10.00% 3,000 4,943 8.00% 4,482 2,000 6.00%

4.00% 1,000 2.00%

0 0.00%

Own Funds Solvency Ratio

2018 ANNUAL REPORT

11. APPROPRIATION OF NET INCOME

For the net result of the fiscal year in the amount of -112.025.284 CVE (negative one hundred and twelve million, twenty-five thousand, two hundred and eighty-four CVE), the Board of Directors decided to propose to the shareholders the following distribution of results:

Net Income -112,025,284

Other Reserves and Retained Earnings -112 025 284

12. CORRESPONDENT BANKS

Portugal United States of America Caixa Geral de Depósitos SA – Bank of America – New York

Lisbon-Novo Banco – Lisbon

Banco Português de Investimento SA – France Porto Caixa Geral de Depósitos SA – Paris

Banco Santander Totta SA – Lisbon

Italy

The Netherlands Intesa Sanpaolo SPI – Milan - ING Bank NV – Amesterdam UniCrédito Italiano SPA – Milan

Luxembourg Belgium Bank Internacional à Luxembourg SA – IngBelgium SA/NV – Brussels

Luxembourg

Bank et Caisse d'Epargne d'Etat – China Luxembourg BNU-Banco National Ultramarino – Macau United Kingdom Lloyds Bank PLC – London Switzerland UBS Swiss Bank Corporation AG – Zurik Austria

Bank of Austria Creditanstald – Vienna Spain Banco Sabadell SA TSB – Sabadell Sweden Nordea Bank AB (publ) – Stockholm Denmark

JyskeBank A/S – Copenhagen Norway DnB NOR Bank ASA – Oslo Japan Bank of Tokyo Mitsubishi UFJ Ltd – Tokyo

Attachments

13. ATTACHMENTS

2018 ANNUAL REPORT

BANCO COMERCIAL DO ATLÂNTICO, S.A.

Cost to Income - Operating Costs / Banking Income

Banking Product CVE

Variation Items 2017 2018 Relative Absolute

Net Interest Income 2,027,063,099 2,510,513,178 23.8% 483,450,079

+ Non-Interest Income 742,020,057 671,138,593 -9.6% -70,881,464

= Banking Product 2,769,083,156 3,181,651,771 14.9% 412,568,615

Operating Cost CVE Variation Items 2017 2018 Relative Absolute

Administrative Cost 1,925,645,233 3,214,693,578 66.9% 1,289,048,345

Depreciations 207,884,457 190,249,653 -8.5% -17,634,804

= Operating Cost 2,133,529,690 3,404,943,231 59.6% 1,271,413,541

Cost-to- Income

Items 2017 2018

Cost to Income - inc. Pension Funds 77.0% 107.0%

Cost to Income - exc. Pension Funds 67.3% 57.4%

2018 ANNUAL REPORT

BANCO COMERCIAL DO ATLÂNTICO, S.A.

Structure Ratios CVE

2017 2018 Rubrics Amount % Amount %

1-Short Term Loans to Customers 2,669,813,364 7.1% 2,336,648,726 6.4% 37,819,432,130 36,709,942,911

2-Medium/Long Term Loans to Customers Term/Customer 35,023,362,433 92.6% 34,247,037,852 93.3% Loans 37,819,432,130 36,709,942,911

3-Non-performing Loans & Obligations / Client Loans 5,524,597,303 14.6% 4,393,056,794 12.0% 37,819,432,130 36,709,942,911

4-Impairment on Non-Performing Loan/Non-Performing 4,059,166,562 75.2% 3,209,193,015 75.2% Loan 5,398,340,970 4,266,800,461

Customer Loan/Deposits 37,819,432,130 50.3% 36,709,942,911 47.4% 75,177,903,745 77,502,972,995

6-Customer Loans/Term Deposits 37,819,432,130 90.5% 36,709,942,911 90.5% 41,795,355,305 40,558,820,108

7-Performing Loans/Term Deposits 32,294,834,827 77.3% 32,316,886,117 79.7% 41,795,355,305 40,558,820,108

8-Short Term Loan/Term Deposit 2,669,813,364 6.4% 2,336,648,726 5.8% 41,795,355,305 40,558,820,108

9-Medium/Long Term Loans to Customers Term/Term 35,023,362,433 83.8% 34,247,037,852 84.4% Deposit 41,795,355,305 40,558,820,108

10-Demand Deposits/Total Deposits 33,382,548,440 44.4% 36,944,152,887 47.7% 75,177,903,745 77,502,972,995

11-Demand Deposits/Total Deposits 41,795,355,305 55.6% 40,558,820,108 52.3% 75,177,903,745 77,502,972,995

Performance Ratios CVE

2017 2018 Rubrics

Amount % Amount %

1-R0E=Net Invome/ Shareholder Equity 235,224,495 4.3% -112,025,284 -2.2%

5,442,326,163 5,180,046,620

2-ROA=Net Invome/ Average Assets 235,224,495 0.3% -112,025,284 -0.12% 86,812,694,494 90,136,424,699

3-ML = Net Income/Income 235,224,495 3.9% -112,025,284 -1.6% 5,955,627,357 7,038,054,678

4-RA = Net Income/Assets 5,955,627,357 6.7% 7,038,054,678 7.7% 89,105,770,184 91,167,079,212

6-MF=(Interest-Income Interest Costs)/Assets 2,027,063,099 2.3% 2,510,513,178 2.8% 89,105,770,184 91,167,079,212

ROE = Return on Equity ROA = Return on Assets ML = Profit Margin RA = Assets Turnover MF = Net Interest Income

BANCO COMERCIAL DO ATLÂNTICO, S.A.

Liquidity Ratios CVE

2017 2018 Rubrics

Amount % Amount %

1-Total Deposits/Assets 75,177,903,745 84.4% 77,502,972,995 85.0% 89,105,770,184 91,167,079,212

Customer Loan/Assets 37,819,432,130 42.4% 36,709,942,911 40.3% 89,105,770,184 91,167,079,212

3-Short Term Loan/Assets 2,669,813,364 3.0% 2,336,648,726 2.6% 89,105,770,184 91,167,079,212

4-Medium-Long Term Loan/Assets 35,023,362,433 39.3% 34,247,037,852 37.6% 89,105,770,184 91,167,079,212

5-Customer Loans / Total Deposits 37,819,432,130 50.3% 36,709,942,911 47.4% 75,177,903,745 77,502,972,995

Productivity Indicators

2017 2018 Rubrics

Amount CVE Amount CVE

1-Loan and Deposits / No. of Active Employees 112,997,336 245,646 114,212,916 252,126 460 453

2-Total Operating Income / No. of Active Employees 2,769,083 6,020 3,181,652 7,024 460 453

3-Loan and Deposits / No. of Branches 112,997,336 3,323,451 114,212,916 3,359,203 34 34

2018 ANNUAL REPORT

BANCO COMERCIAL DO ATLÂNTICO, S.A.

Key Indicators

Key Indicators Unity 2017 2018

1. ROE % 4.4% -2.2%

2. ROA % 0.3% -0.1%

3. Cost/income without Pension Funds % 67.3% 57.4%

4. Volume on Non-Performing Loan CVE 5,524,597 4,393,057

5. Solvency Ratio % 16.17% 15.18%

6. TIER 1 (Base Shareholder Equity / Weighed Asset ) % 17.50% 17.20%

7. Loan-to-Deposit Ratio % 50.31% 47.37%

8. Productivity per Employee (Net Income/No. Of Employees) CVE 511 -247

8.1. Business Revenue (Loans + Deposits) No. Employees CVE 245,646 252,126

8.2. Total Operating Income / No. of Employees CVE 6,020 7,024

9. Fixed Asset Coverage % 215.12% 202.39%

10. Shareholder’s Equity CVE 4,959,499 4,482,375

Ernst & Young Tel: +351 217 912 000 Audit & Associados - SROC, S.A. Fax: +351 217 957 586 Avenida da República, 90-6º www.ey.com 1600-206 Lisboa Portugal

(Translation from the original document in the Portuguese language. In case of any doubt or misinterpretation the Portuguese version prevails) Statutory and Auditor’s Report

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the accompanying financial statements of Banco Comercial do Atlântico, S.A. (“the Bank”), which comprise the Balance Sheet as at 31 December 2018 (showing a total of 91.167.079 thousand Cape Verdean escudos and a total equity of 5.180.047 thousand Cape Verdean escudos including a net loss for the year of 112.025 thousand Cape Verdean escudos), and, the Statement of Profit and Loss by nature, Statement of Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements give a true and fair view, in all material respects, of the financial position of Banco Comercial do Atlântico, S.A. as at 31 December 2018, and of its financial performance and its cash flows for the year then ended in accordance with accounting principles generally accepted in Cape Verde by the banking sector by the Bank of Cape Verde (Banco de Cabo Verde). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical standards and guidelines as issued by the Institute of Statutory Auditors. Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section below. We are independent of the Bank in accordance with the law and we have fulfilled other ethical requirements in accordance with the Institute of Statutory Auditors´ code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis Without modifying our opinion, we draw attention to the following circumstances: As disclosed in note 5 and note 38 of the notes to the financial statements, a three-party agreement was signed on December 31, 2018 between the Bank, the Cape Verdean State and the National Institute of Social Security (INPS), under which the obligations defined by the Employee Pension Plan would be transferred to the Cape Verdean State from January 1st, 2019 onwards. This transfer is part of the repayment mechanism of the Consolidated Financial Mobilization Securities (TCMF) held by the Bank. In order to determine the charges resulting from the obligations defined in the employees' pension plan, an actuarial study was performed as of December 31, 2018, using an agreed discount rate of 4%. As of December 31, 2018, these charges amount to 5,591,345 thousand Cape Verdean escudos and the bank recognized in its income statement the amount of 162 thousand Cape Verde escudos on application of the discount rate agreed with the Cape Verdean State and the INPS. As disclosed in notes 29 and note 38 of the notes to the financial statements, two lawsuits were filed by a Bank’s former employee and by the Cape Verdean Financial Institutions Workers' Union to declare the Bank's amendments to the Staff Regulations on retirement benefits as null and void. On 17 January 2019 a final decision was rendered, ordering the Bank to recognize an increase in the Pension Fund liability at 31 December 2018 with a charge against results of 1,142,309 of Cape Verdean escudos. Our opinion has not been modified as a result of this judgment.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Sociedade Anónima - Capital Social 1.335.000 euros - Inscrição n.º 178 na Ordem dos Revisores Oficiais de Contas - Inscrição N.º 20161480 na Comissão do Mercado de Valores Mobiliários Contribuinte N.º 505 988 283 - C. R. Comercial de Lisboa sob o mesmo número A member firm of Ernst & Young Global Limited Banco Comercial do Atlântico, S.A. Relatório de Auditoria 31 de dezembro de 2018

The key audit matters in the current year audit are the following:

1. Impairment of assets – Loans to Clients

Description of the most significant assessed risks of Summary of our response to the most significant material misstatement assessed risks of material misstatement

► The balance of loans to clients includes We have identified and assessed the audit risk accumulated impairment of 3,266,674 thousand underlying the determination of the audit approach to Cape Verdean escudos (“KCVE”), with an impact respond to the risk of material misstatement. This of 48,497 KCVE on the year's results recorded in approach included (i) an overall response regarding the the net loan impairment caption (net of reversals way the audit was performed and (ii) a specific and recoveries). The gross amount of loans is response in terms of the design, and subsequent 52,528,225 KCVE, consequently the implementation, of additional procedures including accumulated impairment represents 6.2% of testing of controls and substantive procedures, namely: loans. The details of the impairment and the ► We conducted analytical review tests on the accounting policies, methodologies, concepts evolution of the impairment for loans to client’s, and assumptions used are disclosed in the notes comparing balances with the prior year and to the financial statements (note 2.2, note 16 expectations, including gaining an understanding and note 35). of variations in the loan portfolio and changes in ► Impairment on loans to clients represents assumptions and in impairment methodologies; management's best estimate of the expected loss ► With the support of internal risk specialists, we on the client’s loan portfolio as at December 31, assessed the reasonableness of the parameters 2018. To calculate this estimate, the Bank's used in the impairment calculation and notably management has made assumptions, applied performed the following procedures: i) mathematical models to calculate parameters, understanding of the methodology formalized and interpreted concepts and developed a a model to approved by management compared to the calculate expected losses. For significant approach practically applied; ii) evaluation of exposures, it applied the judgment of specialists model changes to determine parameters to reflect to assess the Bank's credit risk. expected loss; iii) analysis of the changes made ► In addition, from January 1, 2018, the date of during 2018 to the risk parameters (PD, LGD and the initial application of International Reporting EAD); (iv) on a sampling basis, comparison of data Standard 9 - Financial Instruments impairment used in the determination of risk parameters with reflects the expected loss (loss incurred in the source information; v) inquiries to Bank 2017). This standard introduces two new experts responsible for modeling, and review of concepts: “significant increase in credit risk” and the internal audit and regulators reports. “forecasts of future economic conditions”. The ► We obtained an understanding and evaluated the impacts of the transition are disclosed in the design of the expected loss calculation model, notes to the financial statements (note 16). tested the calculation, compared the information ► Adding to the complexity of the models used in the model, through reconciliations described, their use requires the processing of a prepared by the Bank, with the source significant amount of data that is not always information, evaluated the assumptions used to fill available in the Bank's central systems, such as data gaps, we compared the parameters used with credit risk information at the time credit the results of the estimation models and compared inception, the date and the amount of the first the results with the amounts in the financial default, the amount of past recoveries of statements; defaulted claims. To overcome limitations that ► We assessed the disclosures included in the notes may exist in some data, management may use to the financial statements, based on the practical expedients that add to the extent of requirements of international financial reporting judgment applied. standards and accounting records. ► The use of alternative approaches, models or assumptions may have a material impact on the amount of estimated impairment.

2 Banco Comercial do Atlântico, S.A. Relatório de Auditoria 31 de dezembro de 2018

Description of the most significant assessed risks of Summary of our response to the most significant material misstatement assessed risks of material misstatement

► Due to the degree of subjectivity and complexity involved in the estimate of impairment and its materiality, we consider this to be a t key audit matter.

2. Valuation of property received to recover loans.

Description of the most significant assessed risks of Summary of our response to the most significant material misstatement assessed risks of material misstatement

► Other assets caption, as described in the notes to Our audit approach to this risk of material misstatement the Financial Statements, as at December 31, included the following procedures: 2018 and December 31, 2017, amounted to ► Performance of specific detailed procedures to 1,387,999 KCVE and 979,494 KCVE, respectively, identify properties with impairment indicators and corresponding to the net impairment value of verification of related amounts. assets obtained for credit recovery. ► Detailed testing of asset ownership regarding ► Periodically the Bank requests independent properties received to cover loans; experts registered with the Central Bank of Cape Verde to evaluate properties received for loan ► Analysis of the assumptions and judgements recovery. When the evaluation, net of costs applied in the evaluation process applied by the required to sell the property, is less than the independent valuation experts for properties carrying-value an impairment charge is recorded. received to cover loans;

► We consider the recognition of impairment of ► Analysis of the amounts recorded in the financial property received to recover loans to be a key statements of the Bank, to ensure that they were audit matter because the methodologies used to consistent with accounting records and estimate the amount of impairment are based on disclosures and complete with regards to assumptions and judgments which may not reflect accounting regulations. future events and the actual loss incurred may be different from that estimated.

Responsibilities of management and the supervisory board for the financial statements Management is responsible for:

► the preparation of financial statements that presents a true and fair view of the Bank´s financial position, financial performance and cash flows in accordance with Financial Reporting Standards generally accepted for the banking sector in Cape Verde;

► the preparation of the Management Report, in accordance with the laws and regulations;

► designing and maintaining an appropriate internal control system to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;

► the adoption of accounting policies and principles appropriate in the circumstances; and

► assessing the Bank’s ability to continue as a going concern, and disclosing, if applicable, matters that may cast significant doubt on the Bank´s ability to continue as a going concern. The supervisory body is responsible for overseeing the process of preparation of the Bank’s financial reporting and related financial disclosure.

3 Banco Comercial do Atlântico, S.A. Relatório de Auditoria 31 de dezembro de 2018

Auditor’s responsibilities for the audit of the financial statements Our responsibility consists in obtaining reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and in issuing an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

► identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

► obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control;

► evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

► conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern;

► evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

► communicate with those charged with governance, including the supervisory body, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit;

► from the matters communicated with those charged with governance, including the supervisory body, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes its public disclosure.

Lisbon, 24 May 2019

Ernst & Young Audit & Associados – SROC, S.A. Sociedade de Revisores Oficiais de Contas Represented by:

(Signed)

António Filipe Dias da Fonseca Brás – ROC nº 1661 Registered with the Portuguese Securities Market Commission under license nr.º 20161271