Banco BPI 1st Half 2009 This page was intentionally left blank. Report This page was intentionally left blank. Index

REPORT Leading business indicators 4 Introduction 5 Governing bodies 7 Shareholders 8 Financial structure and business 9 Distribution channels 12 Human resources 13 Background to operations 14 Domestic commercial banking 22 Bancassurance 29 Asset Management 30 Investment banking 33 Private Equity 37 International banking activity 38 Financial review 41 Risk management 76 Rating 109 Banco BPI shares 110

FINANCIAL STATEMENTS AND NOTES Consolidated financial statements 113 Notes to the consolidated financial statements 119 Declaration 265 Audit Report issued by the Auditor registered with the CMVM 266 Leading business indicators

(Consolidated figures in millions of euro, except where indicated otherwise)

30 Jun. 08 30 Jun. 09 Δ%

Net total assets 39 745.2 43 531.8 9.5% Assets under management2 12 293.0 10 075.0 (18.0%) Business volume3 66 123.8 67 802.6 2.5% Loans to Customers (gross) and guarantees4 33 599.1 33 472.7 (0.4%) Total Customer resources 32 524.7 34 329.9 5.6% Business volume3 per Employee5 (thousands of euro) 6 999 7 200 2.9% Net operating revenue 529.4 565.7 6.9% Net operating revenue (1st half 2008 adjusted)1 602.4 565.7 (6.1%) Net operating revenue per Employee5 (thousands of euro) 56 60 6.6% Net operating revenue per Employee (1st half 2008 adjusted)1 64 60 (6.4%) Operating costs / Net operating revenue6 64.6% 61.4% Operating costs / Net operating revenue (1st half 2008 adjusted)1 56.7% 61.4% Net profit 9.1 89.0 880.2% Net profit (1st half 2008 adjusted)1 167.5 89.0 (46.9%) Adjusted data per share (euro)7 Net profit7 0.01 0.10 768.2% Net profit (1st half 2008 adjusted)1 0.21 0.10 (52.9%) Book value7 1.89 1.89 0.2% Weighted average no. of shares (in millions)7 791.4 893.5 12.9% Return on average total assets (ROA) 0.05% 0.6% ROA (1st half 2008 adjusted)1 0.9% 0.6% Return on Shareholders’ equity (ROE)8 1.1% 9.1% ROE (1st half 2008 adjusted)1 20.9% 9.1% Loans in arrears for more than 90 days / Customer loans 1.1% 1.7% Loan impairments (in the balance sheet) / Customer loans 1.4% 1.6% Loan impairments, deducted from recovery of loans written off (income statement) / Customer loans 0.18% 0.37% Cover of pension obligation 104.7% 99.4% Shareholders’ Equity9 1 680.5 1 687.8 0.4% Ratio of own funds requirements10 11.2% 11.4% Tier I10 7.6% 8.9% Core Tier I10, 11 6.7% 8.1% Closing price (euro) 2.64 1.82 (30.9%) Stock market capitalisation at period end 2 371.5 1 638.0 (30.9%) Retail branches12 (number) 828 876 5.8% Corporate and institutional centres network13 (number) 58 64 10.3% BPI Group staff complement14 (number) 9 448 9 417 (0.3%) 1) Banco BPI’s 1st half 2008 consolidated net profit includes two negative non-recurrent impacts (after taxes): (i) loss on the sale of the shares in Table 1 Banco Comercial Português (BCP) and impairment charges set aside on the BCP investment of 157.4 M.€; and (ii) costs with early retirements of 1.1 M.€. Excluding these non-recurrent impacts, the net profit from the domestic activity in the 1st half 2008 was 109.1 M.€ (vs. -49.4 M.€, as reported) and the consolidated net profit was 167.5 M.€ (vs. 9.1 M.€ as reported). The above table presents the indicators relating to efficiency, profitability, earnings and earnings per share after eliminating the abovementioned impacts. 2) Unit trust (mutual) funds, Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff pension funds). 3) Loans, guarantees and total Customer resources. 4) To ensure comparability, securitised mortgage loans written off from the balance sheet were added back (gross balance of 1 081 M.€ in June 2008, 989 M.€ at the end of 2008 and 943 M.€ in June 2009). 5) Number of Employees of the companies which are consolidated in full. 6) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue. 7) Corresponds to net profit and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-semester number in the case of the indicator “book value per share”), with the number of shares adjusted by the capital increase which took place in June 2008. 8) In the ROE calculation, the average Shareholders' equity (excluding minority interests) was taken into account and the revaluation reserves were excluded. 9) Excludes minority interests. 10) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements. 11) Core capital corresponds to basis own funds, before deductions relating to equity interests in credit institutions and insurance undertakings, and excludes preference shares. 12) Includes traditional branches, housing shops, investment centres and automatic shops in Portugal, branches in Angola, investment centres in Angola and branches in Paris. 13) Distribution network specialising in serving companies, 1 Project Finance centre, Institutionals, the branch in Madrid and corporate centres in Angola. 14) Group staff complement in the domestic activity and in the international activity. Includes term Employees and temporary workers, and excludes bursaries.

4 Banco BPI | 1st half 2009 report Introduction

BPI’s activity in the 1st half of 2009 was conducted In the 12 months ended 30 June 2009, BPI was able, in against one of the most gruelling international backdrops a particularly adverse economic context, to ensure high in living memory for the banking business. capitalisation levels, to maintain a comfortable level of resources and liquidity, to reduce and control risk levels The effects of the international global financial crisis and to strengthen Customer relations. which erupted in the 2nd half of 2007 and intensified during the course of 2008, remained present in the 1st Capital. As concerns capital, at the end of June 2009 six months of 2009, having experienced a critical period BPI had a total ratio of 11.4%, which corresponds to between September 2008 and March 2009 with the ratios for Tier I capital of 8.9% and core Tier I capital of significant deterioration in credit market conditions (fruit 8.1%. of a widespread loss of confidence) and the steep plunge in the equity markets. Liquidity. On the liquidity front, the Bank presents a comfortable situation: The drop in global economic activity since the outbreak of the crisis was extraordinarily swift and far-reaching, ᭿ Customer resources continued to represent the principal leading to the biggest drop in the world economy’s gross source of funding. The strong expansion in on-balance domestic product since World War II. As a very open sheet Customer resources has fully funded the increase economy to trade flows with its community partners, the in lending, not only in domestic operations but also in Portuguese economy strongly reverberated the European international activity; economy’s slowdown. The Bank of Portugal’s most recent forecasts point to a 3.5% fall in Portuguese GDP in ᭿ In banking activity in Angola, BFA boasts an extremely 2009, the biggest of the last 35 years, and a contraction liquid balance sheet: the Customer loans / on-balance of 0.6% in 2010. Private consumption and investment sheet resources ratio stood at 34%; recorded a sharp drop – which translated into a significant contraction in demand for credit –, ᭿ Total potentially-available financial resources at the end unemployment in the economy rose and interest rates of June totalled 5.9 Bi.€, corresponding to the sum of: sank to historically-low levels, all of which resulted in a challenging economic landscape for the banking industry. ᭿ assets eligible for funding at the European Central Bank available for immediate use of 4.2 Bi.€; The economic scenario in Angola was also less favourable in the first six months of 2009. Angola’s economy, which ᭿ potential issue guaranteed by the Portuguese State of had managed to remain virtually immune to the 1.7 Bi.€; international financial turmoil, ended up being affected by the current global economic situation via the fall in the oil ᭿ this sum exceeds the volume of medium and long-term price and the cutback in OPEC production quotas. The fall debt repayments to be made by the end of 2013 of 5.3 in exports gave rise to increased pressure on the balance of Bi.€; payments current account and to an expressive decline in foreign exchange reserves, thus forcing the Angolan ᭿ BPI did not resort to the issue of the State-backed government to act with a view to cooling domestic demand. debt. The lower exports and the deceleration in the robustness of domestic activity were responsible for the Angolan Finance Ministry revising downwards the economic growth projection for 2009, while international organisations’ forecasts point to a real drop GDP in 2009, with a probable upswing in growth expected to occur in 2010.

Report | Leading business indicators and Introduction 5 Risks. The Bank’s non-performing loan ratios present a For their part, the positive effects of the measures good relative level despite the increase in risk levels in adopted by the Bank reflected themselves in a slower the economy, at the same time as cover for overdue loans and/or incomplete manner: the adjustment of credit is adequate. spreads to reflect the rise in funding costs, the adjustment made to the fees charged for services with a The consolidated ratio of loans in arrears for more than view to reducing the cross-subsidisation between 90 days was situated at 1.7% at the end of June 2009. products and segments, the tightening of cost control and the early-retirement programme. Impairment charges recognised in the period, net of recoveries, represented an annual-equivalent 0.37% of For its part, international activity maintained expressive the average performing loan portfolio in the 1st half of business expansion levels, robust revenue growth and a 2009. high return on invested shareholders’ equity.

The pension funds’ net assets covered the funding of Consolidated net profit was 89.0 M.€ in the 1st half of 99% of pension liabilities at the end of June 2009. 2009 (9.1 M.€ in the 1st half of 2008), which corresponded to a return on average shareholders’ equity Customers. In the past 12 months, the Group has of 9.1%. attracted 143 thousand new Customers in Portugal and 148 thousand in Angola, while the expansion in Domestic activity’s contribution to consolidated net profit commercial activity is borne out by the following amounted to 42.1 M.€ (-49.4 M.€ in the same period of year-on-year rates of growth for lending and resources: 2008). The return on allocated average shareholders’ equity (88% of the group’s capital) was 4.9% in the 1st ᭿ consolidated Customer loans grew by 1.2%, on-balance six months of 2009. sheet Customer resources by 13.7% and total Customer resources by 5.6%; For its part, the contribution made by international operations to consolidated net profit was 46.9 M.€, 20% ᭿ in domestic activity, Customer loans increased by 0.2% lower than the 58.5 M.€ contribution in the same period and on-balance sheet Customer resources rose by 9.2%. of 2008, bearing in mind that with the sale of a minority In international operations, BFA recorded increases in shareholding in December 2008, the appropriation of loans and resources of 29% and 57%, respectively. BFA’s profit by BPI decreased from 100% to 50.1%. Minority interests of 47.4 M.€ in BFA’s individual profit Profitability. The impacts of the prevailing economic were recognised in the 1st half of 2009. climate manifested themselves in a rapid and expressive manner in the results and profitability of the Bank’s The ROE generated by international operations, to which domestic operations in a number of areas: contraction in 12% of the Group’s average capital was allocated, was net interest income, lower asset-management and 40.5% in the first six months of 2009. investment-banking commissions, more subdued growth in commercial-banking commission and an increase in the amount of loan impairments despite the maintenance of relatively good credit-risk indicators.

6 Banco BPI | 1st half 2009 report Governing bodies

Shareholders’ General Meeting Remunerations Committee Supervisory Board Chairman Chairman João Vieira de Castro Chairman 1 IPI – Itaúsa Portugal Investimentos, SGPS, Lda. Deputy-Chairman Abel António Pinto dos Reis Members Manuel Cavaleiro Brandão Members 2 Jorge de Figueiredo Dias Arsopi – Holding, SGPS, S.A. Secretaries HVF, SGPS, S.A.3 Alexandra Magalhães José Neves Adelino Luís Manuel Amorim

Portuguese Statutory Auditor

Board of Directors Member in office Deloitte & Associados, SROC, S.A.4 Chairman Artur Santos Silva Alternate member Carlos Luís Oliveira de Melo Loureiro Deputy-Chairmen Carlos da Câmara Pestana Fernando Ulrich Nomination, Evaluation and Remuneration Ruy Octávio Matos de Carvalho Audit and Internal Control Committee Committee Members Chairman Chairman Alfredo Rezende de Almeida Artur Santos Silva Artur Santos Silva António Domingues Deputy-Chairman Members António Farinha Morais Ruy Octávio Matos de Carvalho Armando Leite de Pinho António Lobo Xavier Armando Leite de Pinho Carlos da Câmara Pestana Members Carlos Moreira da Silva Herbert Walter Alfredo Rezende de Almeida Edgar Alves Ferreira Henri Penchas Marcelino Armenter Vidal Henri Penchas Marcelino Armenter Vidal Herbert Walter5 Ignacio Alvarez-Rendueles Corporate Governance Committee Isidro Fainé Casas Company Secretary José Pena do Amaral Chairman Member in office Juan Nin Génova Artur Santos Silva João Avides Moreira Klaus Dührkop Members Manuel Ferreira da Silva Alternate member António Lobo Xavier Marcelino Armenter Vidal Fernando Leite da Silva Edgar Alves Ferreira Maria Celeste Hagatong Carlos Moreira da Silva Mário Leite da Silva Tomaz Jervell Pedro Barreto Roberto Egydio Setúbal Tomaz Jervell

Executive Committee of the Board of Directors

Chairman Fernando Ulrich

Deputy-Chairman António Domingues

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

1) IPI – Itaúsa Portugal Investimentos, SGPS, Lda. nominated Carlos da Câmara Pestana to represent it in the exercise of this office. 2) Arsopi – Holding, SGPS, S.A. nominated Armando Leite de Pinho to represent it in the exercise of this office. 3) HVF, SGPS, S.A. nominated Edgar Alves Ferreira to represent it in the exercise of this office. 4) Deloitte & Associados, SROC, S.A. nominated Augusta Francisco to represent it in the exercise of this office. 5) Allianz Europe, Ltd. nominated, in terms of article 15(2) of Banco BPI, S.A.’s Statutes, Herbert Walter to exercise the office in his own name.

Report | Governing bodies 7 Shareholders

At 30 June 2009 Banco BPI’s capital was held by institutional and corporate investors holding 88.3% of 20 335 Shareholders, of whom 19 853 were individuals the share capital. owning 11.7% of the capital, while 482 were

Shareholders owning more than 2% of Banco BPI’s capital at 30 June 2009 (Qualified shareholdings according to article 20 of the Portuguese Securities Code) No. of % of % of voting rights (according Shareholders shares held capital held to the Securities Code)1

La Caixa Group2 270 900 000 30.1% 30.1% Itaú Group3 169 855 146 18.9% 18.9% Santoro4 87 214 836 9.7% 9.7% Allianz Group5 79 437 630 8.8% 8.8% Arsopi6 27 050 652 3.0% 3.0% JP Morgan Chase Bank7 26 261 335 2.9% 2.9% HVF, SGPS, S.A. 25 774 355 2.9% 2.9% Note: shareholder positions recorded at 30 June 2009 at the Securities Clearing House, based on the information received from the clearing House. At 30 June 2009 Table 2 the BPI Group held 6 257 638 own shares corresponding to 0.70% of Banco BPI share capital.

1) In terms of statutory provisions, the exercise of voting rights is limited to 20%. 2) Through Criteria CaixaCorp, S.A., which is 79.5% owned by the La Caixa Group’s parent entity, Caixa d'Estalvis i Pensions de Barcelona (“La Caixa”) 3) Through IPI – Itaúsa Portugal Investimentos – SGPS, Lda., 100% held. 4) Directly held by Santoro Finance – Prestação de Serviços, S.A. (“Santoro Finance”), and imputable to Santoro Financial Holdings, SGPS (“Santoro”), by owning the entire capital of Santoro Finance, and to Eng. Isabel José dos Santos, as shareholder of Santoro Financial Holdings, SGPS. 5) Through the subsidiaries controlled by Allianz SE: direct shareholding of 8.66% held by Allianz Europe (100% held by Allianz Group) and direct shareholding of 0.17% held by Companhia de Seguros Allianz Portugal (65% held by Allianz Group). 6) Shares held by companies of the Arsopi Group and by its Shareholders. 7) Custodian bank. The information received from the Securities Clearing House does not permit identifying the third party entities to which the investments deposited at custodian banks are imputable.

8 Banco BPI | 1st half 2009 report Financial structure and business

The BPI Group – headed by Banco BPI – is a financial At the end of June 2009, 89% of the Group’s and multi-specialist group, focusing on the banking shareholders’ equity was allocated to domestic operations, business, with a comprehensive spectrum of financial and the remaining 11% to international operations. services and products for corporate, institutional and individual Customers. Leading indicators by business segment1 At 30 June 2009 Amounts in M.€ The Group’s operations are mainly conducted in Portugal, Domestic International operations operations a developed and competitive market where BPI has a Net total assets 39 440.5 4 415.4 strong competitive position, and in Angola, an emerging Shareholders' equity2 1 500.2 187.7 economy which has recorded robust and sustained growth Loans to Customers (net) 27 693.7 1 329.7 in recent years, where BPI, through its subsidiary BFA, Total Customers resources 30 521.9 3 808.0 holds market leadership positions. No. of Customers (thousand) 1 543 618 No. of Employees 7 662 1 755 Distribution network (no.) 824 116 1) BPI Group adopted the geographical segmentation as the main Table 3 basis for the segmentation of its activities, having defined two segments: domestic operations and international operations. 2) Excludes minority interests. Main units of the BPI Group

Banco BPI

1.2% 1.7% 86.0% 11.1% Capital allocated Capital allocated Capital allocated Capital allocated

Investment Banking Financial investments Domestic Commercial Asset Management Insurance International and Private Equity Banking Commercial Banking

Banco Português Inter-risco ᭿ Individuals and BPI Gestão Allianz Portugal Banco de Fomento de Investimento Small Businesses de Activos Angola 100% 100% 100% 35%1,2 50.1% Banking ᭿ ᭿ ᭿ ᭿ ᭿ Equities Private Equity ᭿ Corporate Banking, Unit trust funds Non-life and life-risk Individuals Banking management insurance ᭿ Corporate Banking ᭿ Corporate Finance Institutional Banking ᭿ Investment Banking ᭿ Private Banking and Project Finance Participating BPI Pensões Cosec Banco Comercial e de interests Investimentos BPI Suisse (100%) 100% 50%1,3 Mozambique 30%1,4

᭿ Pension funds ᭿ Export credit insurance management

BPI Vida

100%

᭿ Insurance capitalisation

Portugal Portugal Portugal Portugal Portugal Angola Spain Portuguese emigrant Mozambique communities5 Madrid branch Note: The percentages indicated refer to the participations (direct and indirect) of Banco BPI in each company. 1) Equity-accounted subsidiaries. 2) In association with Allianz, which holds 65% of the capital. 3) In association with Euler Hermes, a company of Allianz Group. 4) In partnership with Caixa Geral de Depósitos and a group of Mozambican investors that, together, hold 70% of the share capital. 5) The BPI Group has overseas branches, representative offices and distribution agreements in overseas cities with large communities of Portuguese emigrants.

Report | Shareholders and Financial structure and business 9 Domestic operations Domestic operations correspond to commercial banking Corporate, Project Finance and Institutional Banking business in Portugal, the provision of overseas banking serves companies with a turnover of more than 2 M.€, services to non residents – notably to communities of operating in competition with Individuals and Small Portuguese emigrants and the services provided at the Businesses Banking in the segment up to 5 M.€. Also Madrid branch–, and to investment banking services, includes the provision of project finance services and the private equity, asset management and insurance. relationship with Public Sector, State-owned Companies, Municipalities and the State Business Sector, Domestic commercial banking operations – predominantly Foundations and Associations. Corporate Banking, Project focused on the attraction of resources from Customers Finance and Institutional Banking had at 30 June 2009 and on the granting of loans to individuals, companies a specialised network composed of 47 corporate centres and institutionals –, is carried on by Banco BPI, backed (including the Madrid branch), 6 institutional centres and by a multi-channel distribution network which includes one Project Finance centre. specialised physical networks whose ample geographical coverage thereby ensures a high degree of Customer Investment banking business is conducted by Banco proximity. The Bank is the fifth biggest financial Português de Investimento, the BPI Group’s original institution operating in Portugal, serving more than 1.5 parent company, and is structured into four main areas: million Customers and has market shares of close to 11% Equities, Corporate Finance, Private Equity and Private in loans and deposits. Banking.

Commercial banking activity is organised into two major The equities business which encompasses research business areas: Individuals and Small Businesses services, sales of national and international shares and Banking and Corporate, Institutional and Project Finance stock exchange dealing, and the corporate finance Banking. business are conducted within the geographical ambit of the Iberian Peninsula through its structure in Portugal Individuals and Small Businesses Banking serves and a branch in Madrid. BPI also has a team dedicated individual Customers – including high net-worth or to Angola and Mozambique. earning individuals, catered for by the investment centres –, and small businesses with turnovers of up 5 M.€, via a Private Banking activity, centred on the provision of distribution network composed of 701 retail branches 38 specialist discretionary management and financial investment centres, branches specialising in home loans advisory services, is undertaken by Banco Português de (20), network of external promoters (12 748), and virtual Investimento. channels, namely, telephone banking (BPI Directo), homebanking service (BPI Net) and online brokerage (BPI BPI’s asset management – unit trust funds, Net Bolsa). life-capitalisation insurance and pension funds – is carried on by 100% controlled dedicated subsidiaries, BPI also makes available a broad range of life and non- with the products being placed with Customers through life insurance by means of a insurance distribution Banco BPI’s distribution network and Banco Português de agreement with Allianz Portugal, which is 35% held by Investimento. the BPI Group within the scope of the strategic partnership with the Allianz Group.

10 Banco BPI | 1st half 2009 report At the end of June 2009, BPI Gestão de Activos was the International operations fourth biggest fund manager in Portugal, with a market International operations encompass the business share of 13.1%1, BPI Pensões was the second largest conducted by Banco de Fomento in Angola (BFA) – pension fund manager with a 17.7%2 market share. 50.1% held by BPI in partnership with Unitel, owner of the remaining 49.9% of the capital –, as well as the Private equity activity is founded on the management of appropriation of the results attributable to the 30% venture-capital funds promoted by the BPI Group interest held in Banco Comercial e de Investimentos (through its shareholding in Inter-Risco), which are (BCI), in Mozambique. directed to investments in equity interests in non- financial companies with a view to sectorial consolidation BFA is a retail bank and has an ample base of deposits and internationalisation drives. and reduced transformation of deposits in loans. BFA is market leader in Angola, with market shares of close to At the end of June 3009, the Private Equity area 19% in terms of loans and deposits and 35% in cards managed a group of assets totalling circa 54 M.€ at and payment terminals. market values, forming part of the own portfolio of participating interests and venture-capital funds BFA has a structured and differentiated spectrum of managed. products and services for individuals, which includes loans, deposits and investment, cards and transfers, and for companies, namely, treasury management, financing and support for imports. The offer to companies is also complemented by the availability of project finance, corporate finance and private equity services.

At the end of June 2009, BFA served 618 thousand Customers, through a distribution network with a strong presence in Luanda and wide coverage throughout of the whole territory, comprising 101 branches, 5 investment centres and 10 corporate centres. The physical network is complemented by homebanking services – BFA Net Particulares and BFA Net Empresas.

1) Source: CMVM. 2) In March 2009 (latest information available); source: Instituto de Seguros de Portugal. The amounts allocated to PPR and PPA and the amounts under the management of the Bank of Portugal’s Pension Fund Management Company and Previsão, whose sole object covers the management of the respective shareholders’ pension funds, were not taken into consideration.

Report | Financial structure and business 11 Distribution channels

BPI distribution channels in mainland Portugal Individuals and Small Businesses Banking Corporate Banking, Institutional Banking and Project Finance

Clients Individuals Small Businesses Companies Large companies Project Finance Turnover below Private companies Biggest private EUR 5 million business groups Institutional1 Physical network Traditional branches 693 Investment centres 38 Corporate 46 Project 1 Institutional 6 Of which, Housing shops 20 centres finance centre centres2 with housing areas 65 Automatic Bank (ATM) 1 587 Madrid 1 External promoters 12 748 branch Remote channels BPI Directo (telephone banking) BPI Expresso Imobiliário BPI Net empresas 808 200 500 www.bpiexpressoimobiliario.pt www.bpinetempresas.pt 472 thousand regular users 892 th. real estate properties announced 79 thousand regular users BPI Net (homebanking) BPI Online (brokerage) www.bpinet.pt www.bpionline.pt 574 thousand regular users 12 largest world-wide markets

Overseas distribution network Commercial Banking Investment Banking

Banks Overseas branches Banco de Fomento Angola Paris (11 branches) BPI Suisse (Private Banking) (116 branches) Madrid Madrid Banco Comercial e de Investimentos3 S.ta Maria – Azores (SFE4) Mozambique Funchal – Madeira (SFE4) Banco BPI Cayman Cayman (SFE4) Macau (SFE4)

Representative offices Distribution agreements5 Caracas Belgium* Geneva Geneva* Hamburg Hamburg (Hamburger Bank) Johannesburg Netherlands Antilles Newark Canada (Montreal Bank)* London United Kingdom* Luxembourg Luxembourg (DEXIA/BILL Bank)* Lyon Australia Rhode Island Brazil Toronto

1) Local authorities, autonomous regions, social security system, universities, public utility associations, State Business Sector and other non-profit entities. 2) Includes the corporate centre of State Business Sector. 3) 30% shareholding. 4) SFE – Sucursal Financeira Exterior (off-shore financial branch). 5) Distribution agreements with banks or post offices (marked with a *) and agent networks.

12 Banco BPI | 1st half 2009 report Human resources

At 30 June 2009, the BPI Group’s headcount stood at In International operations (Angola), the workforce 9 417 Employees, representing a 0.3% decline when increased by 13.9% (+214 Employees) year-on-year to compared with the number recorded at 30 June 2008. 1 755 Employees at the end of June 2009. At the end of June 2009, this figure represented roughly 19% of the In domestic activity, BPI ‘s staff complement at the end Group’s Employees. of June 2009 stood at 7 662 Employees, which corresponds to a year-on-year decrease of 3.1%. This trend is chiefly explained by the execution in the 1st half of 2009 of a programme involving 200 early retirements.

Employees of the BPI Group End-of period figures Period-average figures Jun. 08 Dec. 08 Jun. 09 Δ% Jun. 08 / 1st half 08 1st half 09 Δ% 1st half 08 / Jun. 09 1st half 09 Domestic activity Banco BPI 7 430 7 410 7 171 (3.5%) 7 387 7 305 (1.1%) Banco Português de Investimento 153 163 170 11.1% 148 166 12.2% Other subsidiary companies 99 108 106 7.1% 100 106 6.0% Subtotal – activity in Portugal 7 682 7 681 7 447 (3.1%) 7 635 7 577 (0.8%) Overseas branches and representative offices 225 219 215 (4.4%) 234 215 (8.1%) Subtotal – domestic activity1 7 907 7 900 7 662 (3.1%) 7 869 7 792 (1.0%) International activity Banco de Fomento Angola 1 541 1 598 1 755 13.9% 1 538 1 639 6.6% Subtotal – international activity 1 541 1 598 1 755 13.9% 1 538 1 639 6.6% Total1 9 448 9 498 9 417 (0.3%) 9 406 9 431 0.3% Of which: Activity in Portugal Fixed-term contracts 719 724 645 (10.3%) 776 684 (11.9%) Temporary employment2 177 132 150 (15.3%) 184 169 (8.2%) Overseas branches and representative offices Fixed-term contracts 27 15 17 (37.0%) 38 16 (57.9%) 1) Includes fixed-terms contracts and temporary workers with no employment contract with BPI and excludes student workers and trainees. Table 4 2) Costs associated with temporary employment are recorded in the books under the caption GENERAL AND ADMINISTRATIVE OVERHEADS.

Report | Distribution channels and Human resources 13 Background to operations

MACROECONOMIC BACKGROUND

Since the beginning of 2007, global economic activity The volatility of the economic conditions and pervasive has revealed signs of a slowdown which were pessimism can be gauged by the successive revisions of compounded with the eruption of the financial crisis the global gross domestic product (GDP) evolution midway through that year. However, by freezing up the forecasts during the aforesaid months. Hence the global financial markets, the bankruptcy of the North International Monetary Fund (IMF), in its half-yearly American investment bank Lehman Brothers in publication World Economic Outlook with reference to September 2008 induced the first contraction in world October 2008, projected an increase in the world’s GDP trade of the last decade through, amongst others, the in 2009 of 2.2%, whilst the US and EMU were expected lack of financing for import-export business, so pushing to shrink 0.7% and 0.5%, respectively. In the following the world economy to the biggest slump in gross revision published in January 2009, the rise in global domestic product since World War II. In the final quarter GDP for 2009 had shrunk to 0.5% and the contraction in of 2008 and the first three months of 2009, industrial the US and euro area had worsened to -1.6% and -2%, output, namely in economies such as that of China, respectively. In the disclosure of the World Economic South Korea, Japan or Germany, presented year-on-year Outlook relating to April 2009, this organisation declines in the order of 20%, fuelling strong published an estimated fall in world GDP in 2009 of unemployment and contraction in international demand. 1.3%, with declines of 2.8% and 4.2% in the US and Consumers and investors sought refuge by adopting EMU, thus constituting the steepest plunge in global conservative postures, forcing governments in the GDP of the last eighty years. majority of cases to take their place as the catalyst for demand. Indeed, from the USA to China and embracing Despite the fact that at first glance it was widely believed Europe and the emerging economies, governments that Europe – unscathed by the North American housing adopted expansionist budgetary policies anchored to two crisis and far away from the epicentre of the financial distinct pillars. Priority was given to activating automatic turbulence – would be less affected by the economic stabilizers, fostering social protection. On the other hand, crisis, it was not long before it became apparent that the public investment plans were extended envisaging the main European economies’ strong dependence on creation of infrastructures capable of improving external stimulus, which in the meantime disappeared as productivity in the future. The period elapsing between a consequence of the steep fall in the demand for capital October 2008 and June 2009 (with particular incidence goods from the emerging markets and by the contraction up until March this year), was characterised by in credit, and the correction of specific national extraordinary uncertainty due to the swift and dramatic imbalances (e.g. bursting of real-estate bubbles in certain collapse of global activity, and by doubts regarding the countries such as Spain and Ireland; unexpected debility ability of the authorities to withstand the turbulence of banking systems and their exposure to heavily-indebted engendered by the crisis which, in turn, was undermining eastern European economies) left the European economy institutions as fundamental as the banking systems and exposed to the global turmoil. With the aggravating factor the capital markets in the developed world. This led to that, contrary to other countries, the margin to manoeuvre the stifling of the natural flow of credit to companies and in the field of public stimuli of the economic activity individuals in the northern hemisphere and of capital and/or their potential impact were limited. Thus, in May movements to the emerging economies. These meanwhile this year, the European Commission revised its GDP presented greater resilience to the external shocks than in growth forecasts in the euro zone from -1.9% (data previous crises in that their external imbalances and published in January) to -4.0% in 2009 and to -0.1% in dependence on international funds were minimal relative 2010. to 1997 or 1998.

14 Banco BPI | 1st half 2009 report According to Eurostat, in the first quarter of 2009, EMU Summing up, the first half of 2009 could have seen the GDP contracted by an year-on-year 4.9%, highlighting the worst of the current economic crisis, since there are signs falls registered in investment (-10.2%) and exports on the horizon which herald an improvement in global (-16.3%). Generically, domestic demand’s contribution activity. However, it is acknowledged that instead of was negative, posting a retraction relative to the same talking about recovery, one should rather consider the period last year of 3.1%. In the same period, the North stabilisation of economic conditions. Indeed, namely in American economy’s performance was less dramatic, to Europe and as the European Central Bank underlines, the the extent that the real decline in GDP stood at 3.3%, degree of uncertainty concerning the recovery is although in the following three months (according to remarkable and the global adjustments in progress (in preliminary data) the rate of retreat had accelerated to particular, reduction in the level of households’ and 3.9%. financial institutions’ leverage) being of slow resolution, will tend to keep the pace of growth at lower levels than The marked cooling down of global economic activity had those observed in the preceding decade. as a benign consequence inducing a downward movement on interest rates and on the prices of energy Turning to Portugal, considering that since 2006 the sources and food products, culminating in negative principal stimuli for domestic activity had come from inflation figures in the majority of the developed abroad, the strong deceleration in demand, notably in countries in the second quarter of 2009. In the euro Europe – partner which accounts for approximately 80% area, after having risen to a maximum of 4% in July of Portugal’s exports – had a decisive impact on the 2008, the year-on-year inflation in June of the current behaviour of gross domestic product. In the first quarter year posted a fall of 0.1%. However, underlying inflation of 2009, exports and investment contracted 20.8% and has presented relatively stable levels neighbouring 1.5% 19.8%, respectively, in year-on-year terms. As a since the end of 2008, dispelling the spectre of consequence of the deterioration of the labour market, deflation. Furthermore, inflation forecasts for Europe for (one should recall that the unemployment rate in the first the end of 2009 issued by the majority of international three months of 2009 was situated at 8.9%, the highest organisations were situated in positive territory. figure since 1986) coupled with the impact of the high interest rates (these only began to fall in October and the It should be noted that as from around March 2009 majority of home-loan contracts are indexed to the onwards, the negative clouds overhanging the global six-month Euribor rate) induced the contraction in private economy began to slowly dissipate with the publication of consumption (-1.7%). As a consequence of the downturn international trade, industrial output and consumer in demand and the drop in the international crude-oil sentiment indicators, first in Asia and later in the US and price, in spite of the decline in exports, external demand Europe. These evidenced a deceleration in the rate of posted a positive trend (+2.0%). For 2009, the Bank of economic contraction and in certain cases a reversal in Portugal’s forecasts point to a contraction in GDP of the trend. In this regard, mention is made of the 3.5%, decelerating to -0.6% in 2010. That is, the disclosure of the leading indicators produced by the Portuguese economy will contract in two consecutive OECD which in July reinforced the trend reversal, years. One awaits for the improvement in economic although their levels are situated at levels commensurate conditions in Europe to propel the national economy, with the global recession for 2009. More specifically, the bearing in mind that the main drivers of domestic growth leading indicator for the OECD area has been climbing are presently exhausted. These prospects on the consistently since March of this year, although in expansion of the Portuguese economy place the current absolute terms in June, the latest figure available (95.7) crisis, in absolute terms, at the same level of the one is 5 points below that of the same period last year. experienced in the 70’s, making it the hardest in more than thirty years.

Report | Background to operations 15 As has been recognised by various international conditions (larger spreads, more stringency vis-à-vis organisations, the Portuguese banking system presents guarantees, lower loan-to-value ratio, amongst others), but itself as robust, having revealed a low level of exposure to also as a result of the slowdown in economic activity and toxic products and not being at the mercy of an explosion the postponement of investment and consumption of a speculative property bubble, bearing in mind that decisions. In the coming months, the granting of loans this segment has been relatively stable since the will remain modest, influenced by the weak level of beginning of 2000. It should be added that Portuguese economic activity and by the deteriorating labour market. banks were able to overcome their funding needs through As concerns deposits, the strong trend observed in 2008 the expansion of deposits and recourse to the remained intact. Indeed, in year-on-year terms and with international wholesale markets, albeit at higher costs reference to May, residents’ deposits grew 17.7% (13.3% than those observed in the recent past. in May 2008). However, considering the period between January and May, this aggregate’s expansion was more The unfavourable factors influencing domestic demand modest: 3.4% (non-annualised rate), revealing signs of had an adverse impact on the behaviour of credit and exaustion of the upward trend. Even more so considering deposits in the early months of 2009, while we observed that the flow of funds into deposit accounts as a result of a significant contraction in lending activity, notably in the the migration from the capital markets must be close to individuals’ segment, for which the high level of interest its conclusion. One of the main highlights of lending rates up till October was a contributing factor for the activity in the first half of 2009 is linked to the reasons referred to earlier. With information relating to deterioration in default levels. Total non-performing loans May, it can be seen that whilst total credit (excluding climbed to 2.3% in April, which compares with 1.6% in Public Administration) posted an year-on-year increase of the same period a year earlier. The loan portfolio’s poorest 5.9% (12.9% in May 2008), loans to individuals grew by performance was seen in the corporate segment where the only 2.3% (8.4%). The home-loan segment recorded an rate of default surged from 1.8% in April 2008 to 3.2% increase relative to the same period of the previous year twelve months later. In the housing segment, portfolio of 2.5%. Considering the period between January and deterioration was more modest, with defaulting loans May, total credit registered a non-annualised increase of advancing from 1.3% in April 2008 to 1.7% in May of 3.9%, with loans to companies rising by 2.2% and to the current year. It will be recalled that home loans individuals by 0.4%, constituting stagnation in this correspond to 36% of total loans (including non residents activity not only via the increased restrictiveness of access and Public Administration).

Detailed forecasts for Portugal and the Euro zone Growth rates in % 2009 2010 Portugal Euro zone Portugal Euro zone BoP1 EC2 EC2 BoP1 EC2 EC2 Private consumption (1.8) (1.3) (0.9) (0.6) (0.4) (0.3) Public consumption 1.0 0.6 2.0 0.7 0.2 1.7 Fixed investment (14.3) (14.4) (10.4) (3.8) (8.0) (2.7) Exports of goods and services (17.7) (11.7) - (0.9) (0.1) - Imports of goods and services (17.1) (10.0) - (1.2) (2.3) - GDP (3.5) (3.7) (4.0) (0.6) (0.8) (0.1) Inflation3 (0.5) (0.3) 0.4 1.3 1.7 1.2 Current balance account4 (8.3) (9.8) (1.2) (6.6) (9.5) (1.3) 1) Bank of Portugal forecasts, Economic Bulletin, Summer 2009. Table 5 2) European Commission, Spring forecasts, April 2009. 3) Harmonised Index of Consumer Prices. 4) As percentage of GDP.

16 Banco BPI | 1st half 2009 report MARKETS

Currency market The first half of 2009 was dominated by a globally further, injecting liquidity without restrictions with favourable sentiment for the euro to the detriment of the one-year maturity at an interest rate of 1%. North American currency, most visible from March onwards. The confirmation of the containment of the The monetary authorities’ efforts to re-establish normality economic crisis and of the effects of the official stimuli in the money market of the respective currencies, in caused the resurgence of investors’ propensity for risk, tandem with the publication of positive results in the now willing to abandon or reduce positions in early quarters of the year by the main international refuge-associated assets and/or currencies. This banks, were responsible for alleviating tensions in the movement affected particularly the North American interbank market, very gradually restoring transactions dollar, whose exchange rate against the euro climbed with maturities of more than one month and reducing the from 1.26 in February to above 1.44 in August. The premium on implicit risk. The approximation to normality unequivocal improvement in global economic sentiment was conducive to the fall in benchmark rates. It will be and the prospects that the worst of the crisis has passed recalled that the six-month dollar Libor rate between tends to continue penalising the American currency. March (month in which it recorded the highest value for However the approximation to 1.45 (an important the six months) and August, dropped from 1.96% to resistance level), the possibility of the US recovery 0.90%. In Europe, a similar phenomenon was observed preceding that of Europe and of the Federal Reserve with the Euribor for the same maturity sliding from preceding the European Central Bank (ECB) in discarding 2.95% in January to 1.13% in August. Euribor rates for the expansionist nature of monetary policy, constitute maturities of less than six months pierced below the 1% factors underpinning the dollar, which could gain barrier in June and July, inducing a significant increase significance to the extent that the confirmation of the in the slope of the yield curve for up to one year (the improvement in global economic conditions is reflected in differential between 12-month and 3-month Euribor market prices and the element of surprise dissipates. swung from around 12 basis points in January to 45 b.p. in August). Money market In the early months of 2009, we witnessed the In view of the decline in short-term interest rates and the acknowledgement by the monetary authorities of the crushing of the risk premium, the room for additional exhaustion of traditional monetary policies. That is, the falls is limited, although an alteration in the trend of low principal central banks of the developed economies noted interest rates in the interbank market is not yet that falling key interest rates did not translate easily into anticipated to the extent that the monetary authorities an increase in liquidity in the economy and, in particular, maintain their expansionist stance over a prolonged into the unblocking of the credit markets. Hence, the period of time. Federal Reserve and the Bank of England, after having fixed their key interest rates at close to 0% at the end of 2008, adopted unconventional policies, including the adoption of emblematic public debt acquisition measures. Maintaining a more conservative posture, the ECB continued to cut its benchmark rate. It reduced its refi rate four times, trimming it from 2.5% in December to 1% in May. Joining the group of central banks which adopted unorthodox policies, the ECB announced the purchase of covered bonds (mortgage bonds), initiated in July, and pursued its drive aimed at the granting of unlimited funds to the Eurosystem. In June it went even

Report | Background to operations 17 Bond market Long-term yields on the US and German public-debt During the first half of 2009, the widening of the spreads markets registered an upward trend as a result of the between German debt and that of peripheral European perceived improvement in economic conditions, which countries continued to dominate the attentions. Indeed, withdrew part of the appeal of these instruments as in the case of Portugal, 10-year TB’s recorded a refuge assets, but also by the increased supply and by maximum differential of about 180 b.p. vis-à-vis their the loss of attractiveness in terms of yield relative to German counterparts in March, narrowing progressively alternative investments. Given that the phenomenon of thereafter. At the present time, this differential is higher yields was more pronounced in the US than in situated at 60 b.p., having returned to the levels seen in Germany, the differential in ten-year rates between September last year. It is possible that this contraction American and German securities inverted from -71 basis movement will continue, stabilising at a level close to the points to 14 b.p., with North American debt currently spreads noted prior to the collapse of the American bank presenting a positive spread vis-à-vis its German Lehman Brothers (40 b.p.). counterpart. The short-term zones of the yield curves were the least penalised, having even posted gains As was the case with the majority of markets for riskier induced by the declines in interest rates in the money assets, the miscellaneous / corporate debt market posted market. Accordingly, the slope of the yield curves for major gains from March onwards of the current year. As treasuries and bunds became steeper. In spite of previously mentioned, the change in the pessimistic expectations of the continuing upward movement of mood and the emergence of more auspicious signals yields in the coming months remaining intact, this trend relating to the behaviour of economic activity, pointing to will be progressive to the extent that the uncertainty the surmounting of the most crippling period of the regarding the buoyancy of the economic recovery, which crisis, led investors to return to the corporate-debt should be slow and modest, tends to lend support to the market. In spite of the very significant volume of issues public-debt market. As evidence of this market’s registered in the early months of the year, major falls in resilience, we can cite the revealed capacity to absorb risk premiums were witnessed throughout the spectrum of the unprecedented volume of issues in the early months credit-risk profiles, in particular for issuers with A and of the year. In the US and United Kingdom, the monetary BBB credit ratings. Notwithstanding the expectations of authorities’ announcement of the plan to purchase public rising defaults in the coming months, such events will debt gave a positive, albeit essentially one-off, impetus to not impinge on current market gains, with the present the market to the extent that yields rapidly returned to favourable trend expected to continue. their previous dynamics.

18 Banco BPI | 1st half 2009 report Equity market After having witnessed some stabilisation of the equity In addition, halfway during the period under review, markets in the final two months of 2008, the stock macroeconomic indicators as well as certain statements markets retreated sharply in the first couple of months of of central bank officials began to reveal some signs of 2009, posting declines at the beginning of March of recovery. The term “green shoots” started to form part of approximately 30%. investor’s normal lexicon. Similarly from the Far East, indicators relating to China depicted a strong recovery The principal factor explaining this marked stockmarket that was of vital importance for the economy’s overall drop was once again related to the financial sector’s growth. precarious situation on both sides of the Atlantic. Even after President Obama’s election in the US the situation This more optimistic macroeconomic landscape and some did not improve due to certain advances and retreats in stability in the financial sector were responsible for the programmes directed at stimulating the economy in investors reducing their risk aversion. This fact explains general and the financial sector in particular. The why in the US alone more than 40 thousand M.US$ was markets clearly reacted badly to all this uncertainty, to raised rapidly in new stock issues in the financial system. the point of registering abrupt falls in the stock prices of Similarly, in Europe we witnessed a strong drive to major financial institutions (Citigroup, Bank of America recapitalise financial and industrial companies. In spite and certain British banks), even resulting in state of all this supply of new issues, equity market indices intervention that substantially altered the shareholder recovered sharply, closing the half-year at levels in line structure of those banks. with those prevailing at the end of the preceding year, translating into a recovery of some 40% since the lows Moreover, the state of the real economy deteriorated. reached at the beginning of March. Major industrial firms issued numerous profit warnings at the same time as there were several negative surprises on Insofar as the Iberian equity markets are concerned, if on the macroeconomic indicators’ front, these having sunk one hand the IBEX35 replicated the movements on the to decade lows. Clearly the crisis which was initially international markets, on the other hand the Portuguese financial in nature had spread to all corners of the market (PSI20) demonstrated its peripheral nature, economy, with investors’ aversion to risk rising to new closing the semester in a better position than the other heights, thereby penalising the values of all risk-related European markets, and above all demonstrating much assets. For icons of the North American economy, as in less volatility to the panic-induced gyrations noted at the the case of GM, insolvency were an inevitable outcome. start of the year.

At the beginning of March and after some initial hesitation, American rescue plans for the financial system were put into practice. The announcement of the realisation of stress tests for all American banks and the ensuing recapitalisation (if necessary with public funds) broke the vicious cycle of plunging prices of financial institutions’ stocks. Patently, investors began to perceive that the end of the uncertainty was drawing to a close given that the State would take care of those institutions which did not have an adequate capital base.

Report | Background to operations 19 MACROECONOMIC BACKGROUND IN ANGOLA

Angolan economy In the past five years, the Angolan economy has been At the start of the year, the decline in export revenues posting annual average growth rates of 17%, propelled by was very significant whilst the dynamism of domestic the increased capacity for oil exploration and by the rise demand remained buoyant, which explains the strong in the international prices of this fossil fuel. The strong pressure on the balance of payments current account, flow of oil revenues has supported the realisation of an entailing a considerable decrease in foreign exchange ambitious public-investment plan, directed at promoting reserves. In order to promote a cooling down in domestic the normalisation of economic activity and the resurgence demand, better aligned with revenue inflows, the of non-extractive sectors at the hands of private initiative. authorities announced a rescheduling of their investment The economic forecasts for 2009 point to a slowdown in plan, postponing certain projects and proposing a smaller economic growth as a consequence of the approximation increase in the state’s current expenditure, with a major to maximum capacity of crude-oil production and the implication in an economy where the public bodies stabilisation of the oil price at lower levels than in 2008. assume the role of the chief buyers and paymasters. However, the drop in the oil price and the imposition of Coincidentally, the Central Bank adopted a more lower output quotas by the Organisation of Petroleum- restrictive monetary policy through increasing the Exporting Countries (OPEC) explain a steep fall in compulsory reserves coefficient, which was raised from nominal GDP, with inescapable repercussions for the 20% to 30%, so curbing the system’s capacity to extend realisation of investment and consumption decisions. credit, and reinforced the scrutiny of compliance with certain pre-existing exchange controls, compliance with GDP growth forecasts which had been relaxed in recent times. These measures were put into practice after some speculation about the Total Non-oil Oil possibility of devaluation of the local currency, which 2004 11% 9% 14% slipped from 75 to 78 kwanzas per dollar in April, at 2005 21% 14% 25% which value it has stabilised. 2006 19% 26% 10% 2007 24% 26% 28% These measures achieved the objective of abating 2008E 15% 19% 11% domestic demand. Since April, the conjugation of the Angolan Ministry of Finance forecasts for 2009: cooling down of domestic dynamism with the increase in In November 2008 11.8% 16.3% 5.9% crude-oil revenues was favourable to the economy’s In June 2009 6.1% 14.6% (6.1%) stabilisation, as borne out by the interruption of the IMF forecasts for 2009: abrupt drop in official foreign exchange reserves. It will In April (3.6%) 9.0% n.d. be recalled that these reached some 17.5 thousand BPI forecasts for 20091: M.US$ in December, having fallen to approximately 12.1 In April 2009 (6%) 4% (14%) thousand M.US$ in June. In June 2009 (2%) 5% (6%) 1) BPI forecasts’ hypothesis: Table 6 April 09: oil production of 1.55 million barrels/day at 40 US$/barrel Inflation has shown itself to be indifferent to the June 09: oil production of 1.75 million barrels/day at 48 US$/barrel economic slowdown. Despite the slight improvement Source: Ministry of Finance (Angola), IMF, BPI. noted in the second quarter of the year, more recently the The Angolan authorities, who in November 2008 rhythm of price rises has accelerated, to be fixed at projected economic growth for 2009 of 11.8%, revised in 13.95% in June, distancing itself from the official target June of this year their GDP expansion estimates to 6.1%. of 12.5%. Meanwhile, the projections advanced by international agencies point to a contraction in real and nominal activity in Angola.

20 Banco BPI | 1st half 2009 report The effects of the slowdown in domestic demand, the Bills’ placing rates at the end of the second quarter of postponement of investment decisions and the decline of the year. One should recall that the dollar-indexed around 20% in nominal GDP triggered by the fall in the Treasury Bonds are not substitutes for Treasury Bills, international price of oil (it is important to note that in given that they do not serve the same functions in terms recent months Angola has been producing roughly 1.75 of assets’ and liabilities’ management as regards million barrels/day, which is above the quota of 1.6 maturities and currencies. Given this state of affairs, the million barrels/day fixed by OPEC and close to its present authorities decided to increase the premium on the capacity), had a major impact on the behaviour of loan dollar-indexed Treasury Bond’s by 100 b.p. (in the four and deposit aggregates. Although loans and deposits still years maturity issues they began to pay a spread over the present robust year-on-year growth rates, these were down dollar Libor of 6%) to boost their yield and to promote significantly when compared with 2008, registering the placing of inflation-indexed Treasury Bonds (with a modest monthly advances. Indeed, the deceleration in 3% premium over the inflation rate), which are securities the loan and deposit aggregates is quite astounding. In in local currency, with the result that in the shorter-dated the first six months of 2009, the year-on-year growth securities they comply with the objectives of rates for total loans were in the vicinity of 60% which balance-sheet management much in the same way as compares with the 150% noted in the previous year, Treasury Bills. The limited substitutability between while deposits expanded by 40% against the previous Treasury Bills and Treasury Bonds and the decrease in the year’s 70%. It is to be noted that between January and placing of the first-mentioned resulted in pressure on May total loans contracted by 2.9% (but with a 15% demand, fuelling a steep drop in interest rates for increase in credit to the private sector), whilst deposits maturities of less than one year. expanded 9% (non-annualised rates of change).

In the first half of 2009, the Angolan Treasury altered its financing policy. Previously, the authorities had preferred the procurement of funding through the placing Treasury Bills (short-term securities in local currency). These debt instruments were mostly subscribed for by the banking system, which has a surplus of local currency and which needs to invest funds with short maturities given the predominance of deposits maturing in less than twelve months. However the authorities have recently reduced significantly Treasury Bills placings, preferring to issue securities indexed to the American dollar or to inflation, with maturities varying between one and four years. The change in the Treasury’s financing structure with respect to maturities and currencies, in conjunction with the higher cash reserve requirements, entailed changes in the management of Angolan banks’ balance sheets. The surplus liquidity in kwanzas was reduced due to the higher compulsory reserves, limiting at least sporadically the demand by banks for Treasury paper in Angolan currency; Its curtailed supply, however, replaced by US dollar-indexed Treasury Bonds, was even more pronounced, which explains the sudden drop in Treasury

Report | Background to operations 21 Domestic commercial banking

INDIVIDUALS AND SMALL BUSINESS BANKING

OVERVIEW OF ACTIVITY Individuals and Small Businesses Banking was In the first half of 2009, 4 new investment centres were responsible at the end of June 2009 for a portfolio of opened. At the close of June 2009, Individuals and resources totalling 22 699.9 M.€ and a loan and Small Businesses Banking comprised a total of 701 guarantees portfolio amounting to 15 555.8 M.€. These traditional branches and 38 investment centres, catering figures correspond to annual growth rates obtained since to the needs of high net-worth or high-income Clients. June 2008 of 1.7% for resources and 1.4% for loans and guarantees.

Special mention is made of the trend in on-balance sheet resources, the annual growth rate of which relative to June 2008 was 8.6%. Off-balance sheet resources decreased by 42.2%, reflecting the transfers to resources carried on the balance sheet, the decline in portfolio values and redemptions.

Selected indicators Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Total Customer resources1 22 328.3 22 511.4 22 699.9 1.7% On-balance sheet resources 19 275.5 20 576.3 20 934.7 8.6% Off-balance sheet resources 3 052.9 1 935.0 1 765.2 (42.2%) Loan and guarantees portfolio 15 347.0 15 555.8 15 555.8 1.4% Accounts opened (in thousands) 85.1 164.7 63.5 (25.3%) Total business per account opened (th.€) 15.7 15.9 11.8 (24.9%) 1) Securities not included. Table 7

22 Banco BPI | 1st half 2009 report CUSTOMER RESOURCES The resources of Individuals and Small Businesses Bonds and deposits (sight and term) registered higher Banking Customers increased by 371.5 M.€ relative to growth rates than the other categories of resources. June 2008, which corresponds to a 1.7% growth rate.

Customer Resources of Individuals and Small Business Banking1 Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Sight deposits 3 101.6 3 186.5 3 352.7 8.1% Time deposits 11 785.5 12 850.6 12 210.2 3.6% Bonds and structured products2 placed with Customers 1 529.2 1 883.9 3 074.5 101.0% Unit trust funds3 1 724.3 959.7 924.9 -46.4% PPR4 1 875.6 1 661.2 1 541.9 -17.8% Insurance capitalisation3 2 260.1 1 920.2 1 556.5 -31.1% Preference shares 52.0 49.2 39.1 -24.8% Total Customer resources 22 328.3 22 511.4 22 699.9 1.7% 1) Does not include securities portfolio. Table 8 2) Guaranteed-capital and limited-risk bonds. 3) Excludes PPR. 4) Includes PPR in the form of capitalisation insurance recorded on the balance sheet (547.0 M.€ in 30 Jun. 08 and 701.6 M.€ in 30 Jun. 09).

The term-deposits portfolio grew by 3.6% relative to June The portfolio of retirement-savings plans of Individuals 2008, reflecting a sharp deceleration when compared to and Small Businesses Banking Customers registered at the figures noted during 2008, and which is linked to the 30 June 2009 a 17.8% year-on-year decline. decline in interest rates which in turn made this product less attractive. In June 2009, some 278 thousand Customers had a retirement savings plan, which corresponds to an increase The portfolio of bonds and structured products registered of almost 10 thousand Customers with this product over at 30 June 2009 a 101.0% year-on-year increase to the past 12 months. The placing of regular-subscription 3 074.5 M.€. Of note was the 1 593.9 M.€ increase in plans amongst Customers with retirement-savings plans the bond portfolio reflecting Customers’ greater appetite continued to be a Bank priority, with the percentage of for this type of product, as well as the competitiveness of Customers with the product who possessed this service BPI’s product range and its greater diversity. climbing to 57%, up on the 53% recorded in June 2008.

The portfolio of unit trust funds (excluding PPR) decreased by 46.4% when compared to June 2008, with the decline being recorded in the vast majority of funds.

Report | Domestic commercial banking 23 CUSTOMER LOANS In June 2009 the Customer loan and guarantees portfolio relating to individuals and small businesses amounted to 15 555.8 M.€, corresponding to an annual growth rate of 1.4%.

Individuals and Small Business Banking Customer loans and guarantees Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Mortgage loans1,2 11 318.3 11 549.9 11 631.7 2.8% Personal loans3 695.2 704.5 702.8 1.1% Credit cards4 176.3 186.6 173.1 (1.8%) Car finance5 353.9 368.6 352.1 (0.5%) Commercial loans6 1 868.8 1 806.2 1 820.3 (2.6%) Guarantees and sureties 219.8 228.3 213.7 (2.8%) Equipment and property leasing5 688.3 686.7 649.7 (5.6%) Factoring with recourse 26.4 24.9 12.4 (52.9%) Total 15 347.0 15 555.8 15 555.8 1.4% 1) Loans secured by fixed property. Corresponds primarily to home loans and loans for home alterations. Table 9 2) At Jun. 2008, Dec. 2008 and Jun. 2009 includes 1 078.0 M.€, 986.3 M.€ and 939.4 M.€ of securitization operations derecognised, respectively. 3) Includes consumer loans and credit lines made available for privatisations. 4) Includes outstanding credit of non-Bank Customers. 5) Includes car financing and leasing originated by Individuals and Small Businesses Banking. 6) Includes overdrafts, current account loans, discounted bills receivable and other loans which form part of the loans products tailored mainly for entrepreneurs and small businesses.

Mortgage loans Personal loans and motor vehicle finance In June 2009, the mortgage-loan portfolio amounted to The personal loans portfolio grew marginally by 1.1% 11 631.7 M.€, corresponding to a 2.8% increase relative relative to June 2008, to total 702.8 M.€ at the end of to June last year. June 2009. If we exclude loans for the purchase of securities, the portfolio’s growth was 3.1%. In the first The increased uncertainty observed since September half of 2009, new loans contracted amounted to 2008 originated a contraction in economic activity and a 129.2 M.€, which corresponded to a 32.7% decrease greater restriction in the granting of new loan operations. when compared to the same period a year ago. As a result of this, the contracting of mortgage loans in the first six months of 2009 for the market overall fell by The portfolio of motor-vehicle finance advanced to 42% when compared to the same period of the previous Individual and Small Businesses Banking Customers year. This decline was greater (54%) at Banco BPI, and totalled 352.1 M.€ at the close of June 2009, down by is attributable to the implementation at the beginning of 0.5%, year-on-year. This portfolio constitutes 71% of the the second half of 2008 of more stringent risk-analysis value of the total motor-vehicle finance portfolio at BPI. and loan-decision criteria. Accordingly, Banco BPI’s market share shrank by 2.7 p.p., to stand at 10.3% in The contracting of new motor-car finance in the first half the first half of 2009. of 2009 amounted to 55.5 M.€, presenting a decline of 37.0% relative to the same period last year, in line with The specialised sales channels – housing shops and the 36.6% decrease registered in the sales of new estate agents – represented 50% of total new passenger vehicles in the market. mortgage-loan business contracted in the first half of 2009 compared with the 41% noted in the same period In the aggregate figure for 2009 (up till April), BPI last year. Noteworthy in this growth was the performance occupied 1st place in the ranking of the number of of the “Estate Agents” channel, whose share climbed by vehicles financed under LTR and Leasing contracts with a 7 p.p. in this same period. 15.2% market share.

24 Banco BPI | 1st half 2009 report Commercial loans, guarantees and sureties, leasing and with-recourse factoring The portfolio of loans, guarantees and sureties essentially We also refer to Banco BPI’s very proactive involvement channelled to sole traders and small businesses posted a in various credit lines launched by the government to 3.8% decrease relative to June 2008, standing at lend support to companies (Linha PME Investe II, III and 2 696.2 M.€. IV). These credit lines have as their main objective giving support to SME’s in the reinforcement of their permanent During the first half of 2009, Banco BPI excelled as the capital and in the development of their investment partner of choice of Small and Medium-size Enterprises projects. (SME), supporting their activities and striving to respond to their needs with a superior-quality service. In Individuals and Small Business Banking 3 792 operations were contracted during the first half of 2009 This period was also important for the consolidation of involving 141.6 M.€ under the PME Investe II, III and IV Banco BPI’s position as the chief support Bank in the credit lines. attribution of the PME Líder status performed by the Instituto de Apoio às Pequenas e Médias Empresas e à Credit and debit cards Inovação (IAPMEI – small and medium-size companies At the end of June 2009 there were almost 539 support institute). This status rewards companies which thousand BPI credit cards, a figure that is very close to pursue strategies fostering growth and the strengthening that registered in June 2008, which corresponds to an of their competitive base and better risk profiles. It outstanding amount of 173.1 M.€. Accumulated billing should be noted that 36% of PME Líder firms adhered to in the first half of 2009 was 498.0 M.€, which reflects a the programme via Banco BPI. 3% fall relative to the same period a year earlier.

In addition, it is worth highlighting the Bank’s role in the In the first half of 2009, the debit card business posted support given to PME Excelência1 companies: 12% growth in billing relative to the same period last year, having totalled 2 490.4 M.€. On that date, there ᭿ 47% of the PME Excelência companies obtained this were some 981 thousand cards placed with BPI status following BPI’s proposal; Customers, which corresponds to a 1% growth when compared with June 2008. ᭿ 76% of PME Excelência companies are BPI Customers.

Credit and debit cards Selected indicators 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Credit cards No. of cards at the end of the year (th.) 540.9 544.9 538.9 (0.4%) Billing (M.€) 514.5 1 073.0 498.0 (3.2%) Loan portfolio (M.€)1 176.3 186.6 173.1 (1.8%) Debit cards No. of cards at the end of the year (th.) 968.8 996.6 981.4 1.3% Billing (M.€) 2 231.7 4 840.6 2 490.4 11.6%

1) Outstanding of Individuals and Small Businesses Banking Customers and non-Clients. Table 10

1) The PME Excelência status is a distinction bestowed by IAPMEI to national SME’s which stand out as a result of the quality of their economic and financial performances. The PME Excelência are financially sound firms which have managed to maintain high competitive standards, committed to innovation and internationalisation, and which have made active contributions to boosting the development and employment of the various regions.

Report | Domestic commercial banking 25 Automatic payment terminals Banco BPI continued to focus on the placing of APT, with At the end of June 2009 the Investment Centres’ the APT network standing at 35.4 thousand units in June business volume amounted to 4 442 M.€, which 2009 and recording 30.5% year-on-year growth. This represents a 7% growth relative to the same period of growth resulted in a 1.6 p.p. increase in the last year. Of the remaining business volume, we refer to corresponding market share, which was situated at the increased volume of resources (excluding securities) 14.6% at the end of June 2009. Billing through to 3 595 M.€ (+9% when compared to the end of June terminals where BPI is the support bank was 2008). 1 076.7 M.€, representing 21.5% growth relative to the first half of 2008. With respect to the volumes allocated to value-added investment solutions, it is worth highlighting the positive Automatic payment terminals performance of BPI bonds with a 237% year-on-year Selected indicators growth. 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 08 08 09 / Jun. 09 In a still adverse market backdrop, namely during the No. of APT at the end of the year (th.) 27.2 31.9 35.4 30.5% first quarter of 2009, commercial activity was centred on Market share1 13.0% 14.1% 14.6% 1.6 p.p. communication with Customers and on the proactive Billing (M.€) 886.1 2 063.2 1 076.7 21.5% evaluation of the composition of their portfolios. From the 1) Source: SIBS. Table 11 standpoint of protecting Customers’ financial assets, BPI continued to be concerned with keeping Customers Insurance informed about the current situation and future Within the ambit of the strategic partnership with prospects, at the same time as paying special attention to Allianz Portugal, Banco BPI offers a full range of the placing of guaranteed-capital assets. autonomous-sale insurance products, both for the individual Customer segment and for the segment In the plan to attract new clients and despite the comprising small businesses, sole traders and self- unfavourable climate, it was possible to meet employed professionals. In the first six months of 2009, satisfactorily the goals laid down for the period, more than 23 thousand insurance policies were compensating to a large extent the impact of the falling subscribed to by Individuals and Small Business Banking markets on the year-on-year change in the resources Customers. portfolio.

INVESTMENT CENTRES Investment centres In the first half of 2009, BPI gave continuity to its Selected indicators Amounts in M.€ Δ expansion plan for the Investment Centre network, 30 Jun. 08 30 Jun. 09 % opening four new centres located in Almada, Benfica, Customer resources 3 662 3 931 +7% Estoril and Vila Nova de Famalicão. Hence, at 30 June Resources excluding securities 3 292 3 595 +9% Securities 370 336 (9%) 2009 BPI boasted a network of 38 Centres, with Loans granted 503 511 +2% specially-groomed and trained teams for providing a Business volume 4 165 4 442 +7% personalised service to high net-worth or high-income Table 12 Customers.

26 Banco BPI | 1st half 2009 report CORPORATE AND INSTITUTIONAL BANKING AND PROJECT FINANCE

At the end of June 2009, the loan and guarantees Large corporations and companies portfolio of Corporate Banking, Institutional Banking and The loan portfolio of Large Corporations expanded 5.1% Project Finance area totalled 14 981 M.€ which relative to the same period last year, while the corporate represents a 6.3 % decrease relative to June 2008. loans portfolio posted a year-on-year decline of 11.4%. This performance is primarily influenced by the decrease Corporate Banking, Institutional Banking in the Madrid branch’s portfolio. and Project Finance Amounts in M.€ 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 BPI maintained its strong focus on the SME segment 08 08 09 / Jun. 09 through a major drive aimed at the distribution of the Loans and guarantees1 PME Invest credit lines, which enabled companies to Large corporations 4 463.4 5 194.7 4 691.6 5.1% obtain credit with longer repayment periods and at Companies 4 376.2 3 595.5 3 878.6 (11.4%) Project Finance 2 172.5 2 208.0 2 136.3 (1.7%) interest rates subsidised by the State. Institutional Banking and State usiness Sector 1 936.2 1 890.6 1 820.3 (6.0%) BPI was involved in more than 8 800 Linha PME Invest Loans to Customers 12 948.3 12 888.8 12 526.8 (3.3%) operations and by June 2009 some 5 300 operations had Guarantees 3 033.1 2 755.2 2 453.9 (19.1%) been concluded. Loans and guarantees 15 981.4 15 839.3 14 980.7 (6.3%) Resources2 1 718.7 1 744.5 1 805.9 5.1% Furthermore, within the ambit of the PME Líder and PME 1) The concept of loan includes loans to Customers (certificated and Table 13 uncertificated), loans to credit institutions and guarantees. Excelência programmes, BPI has been playing a key role, 2) Includes sight deposits and time deposits. as borne out by the fact that roughly 47% of the PME Excelência companies adhered to this status through BPI, The first six months of 2009 continued to be strongly and that 78% of the total PME Excelência companies influenced by the international crisis, which was were BPI Customers. characterised by a plunge in economic activity, notably the export sector, and by the halt to investment. This This segment’s guarantees portfolio suffered a contraction generalised scenario translated itself into a decline in the of 15.7% due to the downturn in activity, notably in the demand for new credit and an increasing deterioration in public works sector. the economic and financial health of companies. Project Finance BPI continued to pursue its criteria of rigour in the The Project Finance segment presented in June 2009 a evaluation of credit risk and the synchronisation of its loan and guarantees portfolio amounting to 2 471 M.€, pricing to market conditions. down 8.1% on the figure for the same period last year.

The trend in this segment’s loan portfolio thus suffered a BPI remains strongly participative in the structuring, 3.3% contraction, down from 12 948 M.€ at 30 June set-up and participation in projects which involve 2008 to 12 527 M.€ at the end of June 2009. strategic sectors, with special reference to motorway infrastructures and renewable energies. The guarantees portfolio posted an even larger decrease of 19.1%, stemming in particular from the weak level of In this domain, in the period under review, the Bank investment, above all in the public works sectors, as well participated in a broad spectrum of operations, which as the downswing in export activity. permitted maintaining the portfolio of outstanding loans at roughly 500 M.€ (around 25% higher than that noted in June 2008). Owing to their importance, we highlight the leader mandates for the funding of the Transmontana,

Report | Domestic commercial banking 27 Baixo Alentejo, Litoral Oeste and Algarve Litoral motorway Institutional banking / business sector sub-concessions. The Institutional Banking and State Business Sector Division caters for institutional Clients, state-controlled In terms of advising in Project Finance and Public-Private companies and other companies held by public-sector Partnership (PPP) operations, BPI continues to evidence entities. a prominent position in the national market. The Institutional Banking and State Business Sector One still highlights the advisory services rendered to the Division’s loan and guarantees portfolio totalled 1 958 Health Ministry within the scope of the preparation and M.€ at the end of June 2009, which represents a 6.9% launching of the tender for new hospitals under the PPP decrease when compared to the figure a year earlier. regime and to the Highway Consortium XXI (Soares da Costa / FCC groups) as part of its participation in This behaviour is due in particular to the loan and international public tenders for a number of motorway guarantees portfolio relating to the State Business Sector, concessions in Portugal. Also worthy of mention was the in which there were some repayments arising from the financial consultancy mandate in conjunction with BES utilisation of financing from the European Investment Investimento and Banco Invest, to the ALTAVIA Bank, as well as the recourse to other sources of Consortium integrating the groups MotaEngil, Vinci, international funding tapped by State Business Sector Somague, Teixeira Duarte, MSF, Opway, Alves Ribeiro, entities. BPI and BES, and bidder for the high-speed rail transport projects launched in Portugal.

BPI still continues working as the financial advisor for various infrastructure, water, environmental and energy projects.

28 Banco BPI | 1st half 2009 report Bancassurance

In the insurance area, BPI has a strategic partnership ᭿ insurance premiums amounted to 55.2 M.€, which with the sector’s world leader – the German group Allianz. corresponds to an increase of 1.2%. Life-risk and This association has been cemented through BPI’s 35% non-life-risk insurance premiums totalled 30.3 M.€ and stake in the capital of Allianz Portugal, and in a 24.9 M.€, respectively, which corresponds to 9.4% distribution agreement in terms of which insurance growth in life risk and a decrease of 7.2% in non-life policies are marketed via the Bank’s commercial network. risk: this performance is due to the drop in sales of Personal Loans (against the market’s decline of 5.8%, BPI Customers thus have at their disposal an extensive with 4.7% growth in life risk and 5.1% drop in non-life range of insurance products which cover both life risk); assurance – death and disability insurance – and the other branches – motor insurance and all-risks cover: ᭿ the trend in the number of insurance policies has housing, fire, building alterations and installations, public likewise been positive; this is evidenced by the fact that liability, theft, personal accident, unemployment and there were more than 420 thousand active sickness. life-assurance and more than 325 thousand active non-life insurance policies; The positive performance presented by bancassurance is

1 borne out by activity and income indicators, as well as by ᭿ life assurance – 96.57% of Satisfied or Very Satisfied the number of policies sold in 2009. Here are the data: Customers;

᭿ € commission income was up 1.2% to 16.4 M. ; ᭿ non-life insurance – 89.2% of Satisfied or Very Satisfied Customers.

1) Survey conducted by Qmetrics.

Report | Bancassurance 29 Asset Management

The volume of Customers’ financial assets under the BPI UNIT TRUST FUNDS Group’s management at the end of June 2009 amounted Unit trust funds under management totalled 2 012 M.€, to 10.1 th. M.€, which represents an 18% drop relative at the end of the 1st half of 2009, down 42% on the to June last year. same period of 2008 in line with the market’s direction. The funds domiciled in Portugal totalled 1 861 M.€, In order of importance, the pension funds represent 27% while there were six UCITS III funds domiciled in of total assets under management, posting a year-on-year Luxembourg amounting to 152 M.€. decrease of 4.7%. In terms of portfolio representativeness, capitalisation insurance accounts for 26%, private Unit trust funds under management Amounts in M.€ banking 22%, the unit trust funds 18%, institutional Jun. 08 Jun. 09 Δ% Clients 4%, absolute-return products 2% and, finally, the Bonds and money market 907 469 (48.3%) real-estate unit trust funds 1%. Worth special mention Capital growth (equities) 533 332 (37.7%) was the growth recorded by the Real Estate Unit Trust Tax efficiency (PPR/E and PPA) 1 418 901 (36.5%) Funds (+10%) relative to the same period of 2008. Diversification 613 310 (49.4%) Total 3 471 2 012 (42.0%) Table 15 Assets under management Amounts in M.€ Jun. 08 Jun. 09 Δ% Unit trust (mutual) funds 3 471 2 012 (42.0%) Turning to the performance of the various categories of Real estate unit trust funds 144 159 10.4% BPI’s funds, the trend observed in previous periods Pension funds 3 097 2 951 (4.7%) whereby the volume under management fell in all Capitalisation insurance 3 679 2 852 (22.5%) categories became more pronounced. During the period Private Banking 2 491 2 359 (5.3%) under review, there was some increase in the equity Institutional Customers 450 419 (6.9%) funds, in respect of which we are beginning to detect a Hedge funds 479 174 (63.7%) growing interest on the part of investors, as gauged from Total1 12 293 10 075 (18.0%) the movement that is becoming generalised throughout 1) Adjusted for duplication of balances. Table 14 the market.

The portfolios of BPI’s Funds continue to evidence strong diversification in terms of the class of funds, with the Tax Efficiency component (which includes the PPR) representing a significant percentage of 45%. BPI continues to assume the leadership in the market of PPR’s constituted in the form of Unit Trust Funds.

30 Banco BPI | 1st half 2009 report Returns and public recognition of BPI’s Asset REAL-ESTATE UNIT TRUST FUNDS Management in 2009 At the end of June 2009, there were two real-estate unit In 2009 BPI Gestão de Activos was once again trust funds under management – the open-end distinguished with the Morningstar awards, receiving Imofomento fund (134.5 M.€), responsible for the recognition again for its expertise in managing its abovementioned increase in Real-Estate Unit Trust Funds Customers’ financial assets, with the attribution of the when compared to the same period of 2008, and the prize for the Best National Equities Manager. closed-end Josiba Florestal fund (24.7 M.€).

Individually, the following funds were honoured: Imofomento generated a return in the last 12 months of 5.1%, being the best amongst the category of open-end ᭿ BPI Reestruturações – the Best Overall National real-estate funds (source: APFIPP, Medidas de Equities Fund; Rendibilidade dos FII – June 2009).

᭿ BPI Euro Taxa Fixa – the Best National Fixed-Income Fund;

᭿ BPI Europa Crescimento – the Best National European Equities Fund.

Returns In 2009, the unit trust funds managed by BPI Gestão de Activos obtained returns in line with prevailing market conditions.

Below are highlighted the returns achieved by some of the funds over the last 12 months.

᭿ BPI Liquidez with 1.2% was the third best fund in its class.

᭿ BPI Euro Taxa Fixa fixed-income fund once again turned in a good performance, 9.8%.

᭿ BPI Reforma Acções PPR (-0.9%) was the best in the class of PPR with more than 35% Equities.

Report | Asset Management 31 PENSION FUNDS CAPITALISATION INSURANCE At the end of the first half of 2009, BPI Pensões The first half of 2009 was still very much marked by the managed 35 pension funds which represented a total grave global financial crisis. As a result of the plunge in volume of financial assets of 2 951 M.€. When asset prices and the migration of Clients’ portfolios to compared with the end of the first six months of last term deposits, the volume of assets under management year, there was a decrease of 4.73% in the total amount at the end of June 2009 was 2 852 M.€, which under management. This decline was mainly the result of corresponded to a 7% decrease relative to the start of the the drop in the value of assets due to the impact of the year. crisis sweeping across the financial markets. In the meantime, the pace of early redemptions In commercial terms, BPI Pensões continued to maintain decelerated when compared to the same period last year its active posture in the acquisition of new Clients, (-27.5%). having secured in this 1st half of 2009 six new mandates, of which two are jointly managed: In the case of BPI Reforma Garantida, the retirement-savings plan with a guaranteed rate of return ᭿ New pension plans created by BPI Pensões: for a predetermined period, new contracts almost doubled when compared to the same period of 2008 (+78%). It is ᭿ MFS International UK Limited – Representative worth pointing out that this product now offers different office; guaranteed-rate periods of 1, 3, 5 and 8 years, which allowed its adaptation to different Customer profiles ᭿ MATUTANO – Sociedade de Produtos Alimentares seeking security combined with flexibility. Unipessoal, Lda.;

᭿ Bristol Myers Squibb – Farmacêutica Portuguesa, S.A.

᭿ Existing plans transferred to BPI Pensões in their entirety or under co-management:

᭿ Merck Sharp & Dohme, Lda. (Group);

᭿ Vodafone Portugal – Comunicações Pessoais, S.A.;

᭿ Pernod Ricard Portugal – Distribuição, S.A.

At 30 June 2009, the company managed 114 company pension plans, of which 61 are of the defined-benefit type, 46 are of the defined-contribution type and 7 are mixed plans.

32 Banco BPI | 1st half 2009 report Investment banking

CORPORATE FINANCE

The crisis that swept across the international financial Moreover, in the twelve months ended 30 June 2009, markets at the beginning of summer 2007 and which BPI acted as intermediary in M&A deals with an overall intensified in September 2008, as well as its growing value of some 1 117.4 M.€, corresponding, according to interaction with the deceleration in global economic Bloomberg, to a market share in Portugal for this type of activity, had a major impact on the environment in which transaction of 20.1%. corporate finance business was conducted in the first half of 2009. BPI thus maintained its customary strong competitive position in the national corporate finance market, a fact In fact, according to data from Thomson Financial, in the that bears testimony to its expertise and the first six months of 2009, the global mergers and distinguishing qualities of its range of products and acquisitions market registered a negative year-on-year services. change of roughly 49%, while the European market suffered an even greater contraction of 59.5%. We list below some of the assignments of a public nature undertaken by BPI during the first half of 2009. In this context of a particularly adverse market, BPI was involved during the course of the first half of 2009 in more than 20 financial advisory and M&A operations.

᭿ ANA – Advising in the provision of information to INAC. ᭿ Porto Editora – Advising in the taking of investment decisions. ᭿ CIN – Advising in the valuation of the group’s assets. ᭿ Ricon – Advising in the Group’s restructuring. ᭿ Cires – Advising in the company’s valuation. ᭿ SAG – Advising in economic-financial analyses. ᭿ Galp Energia – Advising in the valuation of a subsidiary. ᭿ Sogrape – Advising in the taking of investment decisions. ᭿ Inter Risco – Advising in the disinvestment process. ᭿ Sonae Capital – Advising in the disposal of assets. ᭿ Jerónimo Martins – Advising in the financial analysis process. ᭿ Sonae Distribuição – Advising in the disposal of assets.

᭿ NAER – Advising in the preparation process for ANA’s privatisation and the contracting of the conception, construction, financing and operation of Lisbon’s new airport.

᭿ Partex – Advising in the calculation of the fair value of its crude-oil interests and in economic-financial analyses.

Report | Investment banking 33 EQUITIES

Secondary market The equity markets experienced two contrasting phases in Accordingly, the results achieved by BPI were positive in the first half of 2009. In the first phase, the markets relative terms, given that the drop in brokerage income suffered a sharp correction as a consequence of rising was about half of the decrease in trading volumes. doubts about the stability of the banking system and Contributing to this result were the opening of new growing concerns about the deepening of the financial institutional client accounts and market share gains crisis. In this first phase, the Spanish and Portuguese secured by the Group’s online channels. markets recorded falls of 26% and 10% respectively. In this period, volatility indices soared to historical highs, Primary market mirroring the uncertainty and fears felt by investors. The In this inclement market climate, the Iberian primary second phase was characterised by the market’s strong (new issues) market was lacklustre, with operations being revival. The banking sector stress tests restored some limited to capital increases in the banking community. confidence in the sector at a time when economic indicators began to evidence some abatement in the Research and sales world economies’ deceleration. The conjugation of these BPI continues to reinforce its market positioning, factors induced a greater appetitive for risk amongst asserting itself as an Iberian research house recognised some investors. The IBEX 35 closed the semester with a for the quality and consistency of the service rendered. gain of 6.5% while the PSI-20 advanced 12.1%. This point is of special importance at a time when many local and global brokers have demonstrated a lower level The flight of investors from the equity market led to a of commitment in this area, in certain cases marked by a substantial drop in trading volumes. In Spain, the daily clear disinvestment. average volume of trading in IBEX 35 companies in the first half of 2008 was 2 394 M.€, down 53% when In June 2009, BPI Equity Research covered a universe of compared with the same period of 2008. In Portugal, the 98 companies (67 in Spain and 31 in Portugal), being daily average trading volume in stock of PSI-20 one of the houses with the largest coverage at the iberian companies in the first half of 2009 was 108 M.€. This level. During the first half of the year 239 research figure is 55% lower than that relating to the first half of reports were compiled dealing with iberian companies 2008. (excluding daily newsletters). Besides the Iberian Small & Mid Caps Guide, BPI continued to extend the coverage of In the first half of 2009, BPI brokered a volume of share larger capitalisation firms with the publication of Iberian deals of 3 290 M.€ and generated net brokerage Large Caps, as well as the 3rd edition of the Renewables commissions of 5.0 M.€. This figure for net commissions report. compares with 7.0 M.€ in the first half of 2008 (down 28.5%).

34 Banco BPI | 1st half 2009 report BPI Research also continued to boost its high profile Trading through good classifications in the industry’s leading Trading activity, which encompasses the portfolios rankings. During the first half of 2009 a number of BPI managed at BPI as well as the portfolios managed at analysts were honoured with awards in different areas: Banco BPI, contributed positively – with 4 M.€ – to the analyst in charge of the Large Caps team was voted profits from financial operations in the first 6 months of the best stock picker in the European utilities sector by 2009. If we exclude the financial costs incurred in this Starmine; the analyst responsible for the Small Caps activity, the contribution to the BPI Group’s net operating team was rated the stock picker in Healthcare in the revenue in the first half of 2009 was 3.6 M.€. Iberian Peninsula. In addition, BPI was placed 3rd in the Telecommunications rankings. Trading activity has as its objective the procurement of positive absolute returns, irrespective of the market The institutional sales team continued to bolster its environment. Accordingly, the techniques developed in franchising amongst the leading institutional investors the hedge funds industry are resorted to. The risk / return operating in the Iberian market. Once again, BPI was well relationship of these results illustrates the scrupulous placed in the ranking compiled by Thomson Extel, manner in which these portfolios are managed, primarily occupying 3rd place in the category “Leading Brokerage in a climate of uncertainty and volatility, as was the case Firm” in Portugal and Spain. For the first time, the in the first half of 2009. Institutional sales team secured first place as “Top Brokerage Firm – Small & Mid Caps”, with three of its members being placed at the top of the ranking, individually occupying the top three slots. This ranking is compiled based on the responses given by the principal fund managers operating in the Iberian market.

Particularly noteworthy is the high degree of recognition BPI has achieved amongst the institutional investor community, thus enabling it to strengthen its position as an Iberian broker.

Report | Investment banking 35 PRIVATE BANKING

At the end of June 2009, BPI Private Banking’s turnover Private Banking totalled 2 916 M.€, or 5% lower than the figure recorded Selected indicators Amounts in M.€ Δ at the end of June 2008, a fact which is essentially due Jun. 08 Jun. 09 % on the one hand to the direction of the financial markets Assets under management 2 491 2 378 (5%) and the concomitant drop in the prices of risk-related Stable investments under custody 419 404 (4%) assets, and on the other to the lower volume of credit, Loans advanced 173 134 (23%) Business volume 3 083 2 916 (5%) which today is 23% less than the figure for the same Table 16 period last year. Besides these effects, we also witnessed a transfer of assets under discretionary management to financial advisory mandates, which in turn posted a 14% increase relative to the end of June 2008.

Although still characterised in the early months of the year by an adverse market backdrop shrouded by uncertainty, the first six months of 2009 were marked by the appearance of the first signals of an appetitive for risk-related assets. In this scenario, commercial activity, although still adhering to the guideline of preserving and protecting clients’ wealth and fostering greater Customer proximity, began to be guided by a greater pace of portfolio diversification. In the domain of low-risk investment solutions, BPI bonds performed positively (recording year-on-year growth of 274%), as did other bonds, mainly corporate debt, with year-on-year growth of 37%.

It is also worth noting the good results obtained in canvassing for new Customers and new assets, a factor which permitted cushioning the impact of the financial market setbacks on the volume of Private Banking business when compared with the same period last year, The favourable performance observed in recent years was maintained, as is reflected in the distinction bestowed on BPI’s Private Banking in 2008 and 2009, such as the award for “Best Private Banking” in Portugal given by “Euromoney Private Banking Survey”.

36 Banco BPI | 1st half 2009 report Private Equity

In the first six months of the year, BPI’s private equity’s investment in two companies forming part of the activity was centred on monitoring the investment portfolio, Serlima and NewCoffee Co., to 250 thousand portfolio and managing the venture-capital funds. euro and 500 thousand euro, respectively.

At the end of June 2009, Inter-Risco managed a group of During the period under review, the Visabeira Group’s assets worth more than 54 M.€ at market values, public takeover bid for Vista Alegre was formalised, comprising its own investment portfolio and managed constituting the only disinvestment made in the period. funds. The current investment portfolio is as follows. The Caravela Fund – the venture-capital fund promoted by the BPI Group –, with a capital of 30 M.€, raised its

Private Equity Investments At 30 June 2009 Company % held Activity

Managed fund Serlima 23.0% Facility Management Services (cleaning, maintenance and industrial laundries) NewCoffee Co. 33.3% Coffee processing and sales Mastertest 30.0% Motor vehicle inspection centres Moneris 45.6% Business Process Outsourcing services (accounting, consultancy) ASFC 33.3% Packing in solid urban-waste containers Own portfolio Arco Bodegas Unidas 2.1% Wine production and sales Caravela Gest 20.0% Food retailer (Haagen Dazs) Conduril 9.2% Construction ColdLand 80.0% Services specialising in cold-storage logistics Table 17

Report | Private Equity 37 International banking activity

COMMERCIAL BANKING IN ANGOLA

BANCO DE FOMENTO ANGOLA BFA’s contribution to the BPI Group’s consolidated net Banco de Fomento Angola profit for the first half of 209 was 44.5 M.€. Banco de Selected indicators Amounts in M.€ Δ Fomento Angola’s (BFA) shareholders’ equity (including Jun. 08 Jun. 09 % minority interests) at the end of June 2009 amounted to Total net assets 2 905.1 4 398.3 51.4% 350 M.€, while assets totalled in the same period Loans to Customers (net) 1 031.7 1 329.7 28.9% 4 398 M.€, or 16% and 10% respectively of the Group’s Loans in arrears for more than 90 days 1.4% 1.5% +0.16 p.p. Customer resources 2 427.5 3 808.0 56.9% corresponding indicators. Shareholders’ equity 296.9 350.1 17.9% Net operating revenue 108.5 158.3 45.9% At the end of the six months ended 30 June 2009 the Net interest income 71.8 93.6 30.4% commercial network comprised 116 branches, which is Commissions and other 17% more than the number a year earlier, while the total operating income 20.6 23.3 13.2% number of Customers was 618 thousand (+148 thousand Profits from financial operations 16.1 41.4 156.2% Customers relative to June 2008). Administrative overheads 34.5 49.8 44.5% Administrative overheads, depreciation and amortisation / net operating revenue 31.8% 31.5% (0.3 p.p.) Also worth noting is the growing use of electronic Personnel costs / net operating revenue 13.5% 13.5% 0.0 p.p. banking, with approximately 68 thousand subscribers, BFA’s contribution to the BPI Group’s which represents an increase of 73%. net profit 56.6 44.5 (21.4%) No. of Employees 1 541 1 755 13.9% Traditional branches 99 116 17.2% Resources No. of Customers 470 476 618 181 31.4% Customer resources registered 57% year-on-year growth, Customers using BFA Net 39 060 67 741 73.4% totalling 3 808 M.€. In the period under review, BFA had Of which, individuals 36 152 64 060 77.2% a market share in deposits of 19%, giving it second place companies 2 908 3 681 26.6% in the market. ATM machines (no.) 139 187 34.5% Multicaixa cards (valid cards) 452 636 528 740 16.8% Loans Points of Sale terminals (POS) 444 943 112.4% The loan portfolio, measured in euro, posted 29% growth, Table 18 year-on-year, to be situated at 1 330 M.€, with loans in dollars being this item’s most expressive component. According to Central Bank statistics, BFA’s market share in June 2009 was 18% (for this purpose, credit includes loans, Treasury Bills and Treasury Bonds, as well as financial investments), which percentage corresponds to second position in the market.

At the end of June 2009, 70% of the loan and guarantees portfolio corresponded to the companies’ segment, with the remaining 30% attributed to the individuals’ segment.

38 Banco BPI | 1st half 2009 report Securities portfolio Savings solutions BFA’s securities portfolio at 30 June 2009 amounted to Towards the end of June 2009 BFA launched a new 1 280 M.€, that is, 29% of assets. The dealing campaign to attract resources with the theme Soluções securities portfolio comprising Treasury Bills totalled de Poupança BFA. The campaign was based on the 251 M.€, with the average maturity being 3.8 months, diversity of the range of savings products, now while the portfolio of securities available for sale, made complemented with the launching of a new product, up of Treasury Bonds, amounted to 1 029 M.€. Plano de Poupança BFA (savings plan). This product is designed to foster a savings-oriented attitude amongst the Cards middle-tier segment. BFA continued during the first half of 2009 to consolidate the position of the chief operator of ATM cards, securing a market share in the order of 34%. Of the total 731 active ATM’s in the Angolan banking system, 187 are made available by BFA.

At the end of June 2009, BFA already had 7 840 credit cards in circulation, a position reinforced at the end of 2008 with the launch of cards in kwanzas, VISA BFA Mwangolé Gold and VISA BFA Mwangolé Classic. As regards the VISA acquiring operation, at 30 June 2009, BFA was ranked first in the number of active point-of-sale (POS) terminals installed with a 33% market share and a total of 943 units.

Report | International banking activity 39 COMMERCIAL BANKING IN MOZAMBIQUE

BCI – BANCO COMERCIAL E DE INVESTIMENTOS BCI’s contribution to Banco BPI’s consolidated net profit, Banco Comercial e de Investimentos corresponding to the 30% shareholding, increased from Selected indicators Amounts in M.€ 1.9 M.€, in the first half of 2008 to 2.5 M.€ in the 1st 30 Jun. 30 Jun. Δ% 08 09 half of 2009. Total net assets 509.6 694.2 36.2% Loans to Customers (net) 247.7 440.5 77.9% The investment in BCI is equity accounted. At the end of Customer deposits 410.2 549.8 34.0% June 2009, the investment was valued in Banco BPI’s Shareholders’ equity 44.5 56.7 27.2% consolidated balance sheet at 17 M.€. At that date, BCI Fomento contribution to BCI’s shareholders’ equity stood at 56.7 M.€. the BPI Group’s net profit 1.9 2.5 30.2% No. of Employees 786 951 21.0% Traditional branches 41 57 39.0% Total assets were 694.2 M.€, which measured in Euro, Table 19 represents a 36% increase relative to June 2008.

Deposits Customer deposits when measured in Euro registered a 34% year-on-year growth, totalling 549.8 M.€ in June 2009. In May 2009, BCI’s market share in deposits was situated at 25%.

Loans The net loan portfolio stated in Euro posted year-on-year growth of 78%, totalling 440.5 M.€.

BCI’s market share in the loan segment was situated at 32% in May 2009.

Distribution network, Employees and Customers BCI continued to expand its physical network of branches, opening 16 new branches in the last 12 months (of which 7 were opened in the 1st half of 2009).

At the end of June 2009, the bank had a total of 57 branches and a headcount of 951 Employees who served some 105 thousand Customers.

40 Banco BPI | 1st half 2009 report Financial review

OVERVIEW The 1st half of 2009 turned out to be one of the most international organisations point to a decrease in real difficult periods in living memory for the global banking GDP for 2009, with a revival in growth expected to occur industry. The international financial crisis experienced a in 2010. The deceleration in economic activity and critical period between September 2008 and March certain measures adopted, such as raising the mandatory 2009, while the collapse in worldwide economic activity reserves requirement from 15% to 30%, the increased over the past 12 months was extraordinarily rapid and supply of medium and long-term public-debt securities, far-reaching, culminating in the biggest drop in global coupled with the reduction in issues of short-term paper gross domestic product since World War II. and stepped-up foreign-exchange control, were responsible for a slowdown in the expansion of lending As an economy extremely open to trade flows with its and deposit aggregates in the banking system. community partners, the Portuguese economy succumbed appreciably to the European economy’s slowdown. The BPI was able in the 12 months ended 30 June 2009 and Bank of Portugal’s latest forecasts point to a fall in GDP in a particularly inclement environment to ensure high of 3.5% in 2009, the biggest of the last 35 years, with a capitalisation levels, to maintain a comfortable funding further drop of 0.6% predicted in 2010. Private and liquidity position, to reduce and control risk levels consumption and investment recorded a marked and to strengthen the relationship with Customers. contraction, at the same time as unemployment in the economy rose and interest rates sank to historically low Capital. As regards Capital, BPI’s ratio at the end of June levels, all of which resulted in a difficult economic 2009 stood at 11.4%, which corresponds to a Tier I background for the banking industry. Demand for credit capital ratio of 8.9% and core Tier I capital ratio of contracted due to the escalating uncertainty in the 8.1%. economy and the postponement of consumption and investment decisions, the pressure on unit financial Liquidity. As concerns Liquidity, the Bank presents a margins increased as a result of the higher funding costs, comfortable position: income directly related to the capital markets – income from asset management and investment banking – ᭿ Customer resources continue to be the main source of receded and the level of credit defaults rose, although funding. The strong growth in on-balance sheet they remain at relatively low levels when compared with Customer resources since the second half of 2007 has previous recessions. fully funded the expansion in lending, both in domestic and international operations; The economic landscape in Angola became less favourable in the 1st half of 2009. Angola’s economy, ᭿ in activity in Angola, BFA has an extremely liquid which had managed to remain virtually immune to the balance sheet: the ratio of Customer loans / resources international financial crisis, ended up being affected by on the balance sheet is situated at 34%; the prevailing gloomy global economic situation via the lower oil price and OPEC’s cut in production quotas. ᭿ total financial resources potentially available at the end Falling exports gave rise to increased pressure on the of June totalled 5.9 Bi.€, corresponding to the sum of: balance of payments’ current account and a steep drop in foreign-exchange reserves, forcing the Angolan government to act with the object of dampening domestic demand. Lower exports and the abatement of domestic buoyancy explain why the Angolan Finance Ministry revised its economic growth projections for 2009 downwards, at the same time as the forecasts of

Report | Financial review 41 Consolidated

᭿ assets eligible for funding at the European Central Customers. In the last 12 months, the Group attracted Bank available for immediate use of 4.2 Bi.€; 143 thousand new Customers in Portugal and 148 thousand in Angola, while commercial activity expanded, ᭿ potential issue guaranteed by the Portuguese State of as borne out by the year-on-year growth in loans and 1.7 Bi.€; resources:

᭿ this sum exceeds the volume of medium and long-term ᭿ consolidated Customer loans grew by 1.2%, on-balance debt repayments to be made by the end of 2013 of sheet Customer resources by 13.7% and total Customer 5.3 Bi.€; resources by 5.6%;

᭿ BPI did not resort to the State-backed debt issue. ᭿ in domestic activity, Customer loans expanded 0.2% and on-balance sheet Customer resources were up Risks. The Bank’s overdue credit ratios remain at a 9.2%. In international operations, BFA recorded growth relatively good level despite the higher risk levels in the in loans and resources of 29% and 57%, respectively. economy. Cover for non performing loans is adequate. Profitability. The impact on results and earnings of the The consolidated ratio of loans in arrears for more than prevailing economic climate manifested itself in a rapid 90 days was situated at 1.7% at the end of June 2009. and far-reaching manner insofar as domestic activity is concerned in several domains: lower net interest income, On that date, loan impairment allowances in the balance decrease in commissions from asset management and sheet relating to loans with defaulting instalments investment banking, reduced growth in commercial guaranteed 96% cover for the Bank’s exposure to these banking commissions and increased loan impairment operations (overdue loans and associated loans not yet charges. due), net of existing tangible guarantees. For their part, the positive effects of the measures Impairment charges recognised in the period, net of adopted reflected themselves in a much slower and/or recoveries, represented 0.37% of the average performing incomplete manner: the adjustment of lending spreads to portfolio in the 1st half of 2009 in annualised terms. reflect the rise in funding costs, the adjustment made to fees charged for services so as to reduce the cross- Pension fund net assets at the end of June 2009 covered subsidisation between products and segments, the 99% of the funding of pension liabilities. tightened control over costs, early retirements and the control of credit risk.

International activity maintained expressive business expansion rates, income growth and a high return on invested shareholders’ equity.

42 Banco BPI | 1st half 2009 report Consolidated

Consolidated net profit was 89.0 M.€ in the first half of For its part, international activity contributed 46.9 M.€ 2009, which corresponded to a return on average to consolidated net profit, down 20% on the contribution shareholders’ equity of 9.1%. of 58.5 M.€ in the first half of 2008, bearing in mind that, with the sale of a minority stake in December 2008, Consolidated net profit of 9.1 M.€ in the same period of the appropriation of BFA’s profit by BPI fell from 100% 2008 was severely affected by the negative impact of to 50.1%. Minority interests of 47.4 M.€ in BFA’s 157.4 M.€ arising from the loss realised on the sale of individual profit for the first six months of 2009 were Banco Comercial Português shares and from the recognised. impairment charges recognised on the shareholding in that bank. The ROE on international operations, to which the remaining 12% of the Group’s average capital were The contribution from domestic activity to consolidated allocated, was 40.5% in the first half of 2009. net profit was 42.1 M.€ (-49.4 M.€ in the corresponding period of 2008). The return on allocated average shareholders’ equity (88% of the Group’s capital) was 4.9% in the 1st half of 2009.

ROE by business areas Amounts in M.€ Domestic activity2 International activity of BPI Group Commercial Banking3 (consolidated)

30 Jun. 08 30 Jun. 09 30 Jun. 08 30 Jun. 09 30 Jun. 08 30 Jun. 09

Average risk weighted assets 23 804.6 23 950.3 1 642.9 2 151.3 25 447.5 26 101.6 Average shareholders' equity (excluding revaluation reserves) 1 284.1 1 723.9 315.6 231.6 1 599.7 1 955.6 Net profit (49.4) 42.1 58.5 46.9 9.1 89.0 ROE neg. 4.9% 37.1% 40.5% 1.1% 9.1% Net profit, excluding impacts with BCP stake and early retirements1 109.1 42.1 58.5 46.9 167.5 89.0 ROE excluding impacts with BCP stake and early retirements1 17.0% 4.9% 37.1% 40.5% 20.9% 9.1%

1) Excluding from the contribution from domestic operations, the 157.4 M.€ negative impact from the sale of the Banco Comercial Português shares and Table 20 from impairment charges recognised on the BCP investment in the first half 2008, and 1.1 M.€ in early-retirement costs, all after tax. Geographical segmentation of the BPI Group’s activity 2) Domestic operations comprise the commercial banking activity conducted in Portugal, including the provision of banking services to non-residents abroad (namely, amongst Portuguese emigrant communities) and those of the Madrid branch, as well as the activities relating to investment banking, private equity and other investments. 3) International operations comprise the activity conducted by Banco Fomento Angola, as well as the appropriation of the 30% equity interest held in BCI in Mozambique and the activity of BPI Dealer in Mozambique (92.7% held). International operations’ contribution to net profit in the 1st half 2009 from Banco Fomento Angola amounted to 44.5 M.€, from BCI was 2.5 M.€ and from BPI Dealer Mozambique was -0.006 M.€. Calculation of ROE by business areas 4) The return generated by each area results from the quotient between the contribution to the consolidated net profit and the capital allocated to the area. In determining the capital allocated the accounting capital (shareholders' equity), excluding revaluation reserves, was taken into consideration.

Report | Financial review 43 Consolidated

Selected indicators (Figures in millions of euro, except where indicated otherwise) 30 Jun. 08, 30 Jun. 08, 30 Jun. 09, Δ% as reported adjusted1 as reported Consolidated

Consoli- Consoli- Domestic International Consolidated Jun. 08 as dated dated activity activity reported / Jun. 09 Net total assets2 39 745.2 39 440.5 4 415.4 43 531.8 9.5% Assets under management3 12 293.0 10 075.0 10 075.0 (18.0%) Business volume4 66 123.8 62 374.5 5 428.1 67 802.6 2.5% Loans to Customers (gross) and guarantees5 33 599.1 31 852.6 1 620.2 33 472.7 (0.4%) Total Customer resources 32 524.7 30 521.9 3 808.0 34 329.9 5.6% Business volume4 per Employee6 (thousands of euro) 6 999 8 141 3 093 7 200 2.9% Net operating revenue1 529.4 602.4 407.4 158.3 565.7 6.9% Net operating revenue per Employee1, 6 (thousands of euro) 56 64 52 97 60 6.6% Operating costs / net operating revenue1, 7 64.6% 56.7% 73.1% 31.5% 61.4% Personnel costs / net operating revenue1 59.9% 52.6% 68.1% 27.0% 56.6% Personnel costs and outside supplies and services / net operating revenue and equity accounted results1, 8 37.1% 32.9% 44.0% 13.2% 35.3% Operating costs / net operating revenue and equity accounted results1, 8 63.3% 56.0% 72.5% 31.0% 60.8% Net profit1 9.1 167.5 42.1 46.9 89.0 880.2% Adjusted data per share (euros)9 Net profit1, 9 0.01 0.21 0.05 0.05 0.10 768.2% Book value9 1.89 1.68 0.21 1.89 0.2% Weighted average no. of shares (in millions)9 791.4 893.5 893.5 893.5 12.9% Net operating revenue and equity accounted results / ATA1, 8 2.7% 3.1% 2.2% 6.9% 2.7% Profit before taxation and minority interests / ATA1, 8 0.1% 1.1% 0.3% 4.2% 0.7% Return on average total assets (ROA)1 0.05% 0.9% 0.2% 4.2% 0.6% Profit before taxation and minority interests / average Shareholders equity and minority interests1, 8 3.4% 25.0% 6.6% 69.6% 14.7% Return on Shareholders’ equity (ROE)1, 10 1.1% 20.9% 4.9% 40.5% 9.1% Loans in arrears for more than 90 days / Customer loans 1.1% 1.8% 1.5% 1.7% Loan impairments (in the balance sheet) / Customer loans 1.4% 1.5% 4.9% 1.6% Loan impairments in the period, deducted of recoveries of loans in arrears written-off (in the income statement) / Customer loans 0.18% 0.33% 1.21% 0.37% BPI Group Employees’ pension funds assets 2 408.6 2 315.5 2 315.5 (3.9%) Pension obligation cover 104.7% 99.4% 99.4% Shareholders’ equity11 1 680.5 1 500.2 187.7 1 687.8 0.4% Own funds12 2 837.7 2 916.8 2.8% Risk weighted assets12 25 224.2 25 675.9 1.8% Ratio of own funds requirements8, 12 11.2% 11.4% Tier I8, 12 7.6% 8.9% Core Tier I12, 13 6.7% 8.1% 1) Banco BPI’s 2008 consolidated net profit was specially affected by two negative impacts (after taxes): (i) loss on the sale of the shares in Banco Comercial Português Table 21 (BCP) and by the impairment charges set aside on the BCP investment of 157.4 M.€ in the first semester and 27.1 M.€ in the second semester; (ii) costs with early retirements of 1.1 M.€ in the first semester and 26.7 M.€ in the second semester; and positively affected by the gain realised on the sale of 49.9% of BFA’s capital to Unitel, with a positive impact on after-tax net profit of 130.6 M.€ in the second semester. Excluding these non-recurrent impacts, the net profit from the domestic activity in the 1st half 2008 was 109.1 M.€ (vs. -49.4 M.€, as reported) and the consolidated net profit was 167.5 M.€ (vs. 9.1 M.€ as reported). The above table presents the indicators relating to efficiency, profitability, earnings and earnings per share after eliminating the abovementioned impacts. 2) The amount of net total assets presented for each geographical segment has not been corrected for the balances resulting from operations between these segments. For consolidation purposes, these balances have been eliminated. 3) Unit trust (mutual) funds, Retirement Savings Plans (PPR) and Equities Savings Plans (PPA), capitalisation insurance, guaranteed-capital and limited-risk bonds, assets under discretionary management and advisory mandates of Private Banking Clients and institutional Clients and assets of pension funds under management (including the Group’s staff pension funds). 4) Loans, guarantees and total Customer resources. 5) To ensure comparability, securitised mortgage loans written off from the balance sheet were added back (gross balance of 1 081 M.€ in June 2008, 989 M.€ at the end of 2008 and 943 M.€ in June 2009). 6) Number of Employees of the companies which are consolidated in full. 7) Personnel costs (excluding costs with early-retirements), outside supplies and services, depreciation and amortisation as percentage of net operating revenue. 8) Calculated in accordance with the Bank of Portugal's Instruction 16 / 2004. ATA – Average total assets. 9) Corresponds to net profit and shareholders’ equity (excluding minority interests) divided by the weighted average number of shares (end-of-period number in the case of the indicator “book value per share”), with the number of shares adjusted by the capital increase which took place in June 2008. 10) In the ROE calculation, the average Shareholders' equity (excluding minority interests) was taken into account and the revaluation reserves were excluded. 11) Excludes minority interests. 12) Calculated in accordance with Bank of Portugal rules governing minimum own funds requirements. 13) Core capital corresponds to basis own funds, before deductions relating to equity interests in credit institutions and insurance undertakings, and excludes preference shares.

44 Banco BPI | 1st half 2009 report Consolidated

Consolidated income statement Amounts in M.€ 1st half 2nd half 2008 1st half Δ% 1st half 08 / 08 08 09 1st half 09

Net interest income (narrow sense) 1 304.8 338.1 642.9 311.7 2.2% Unit linked gross margin 2 4.2 2.4 6.5 1.5 (63.8%) Income from securities (variable yield) 3 3.2 2.4 5.6 4.7 45.0% Commissions related to deferred cost (net) 4 10.3 10.9 21.2 11.4 11.4% Net interest income 5 = Σ 1 a 4 322.5 353.7 676.2 329.3 2.1% Technical result from insurance contracts 6 5.4 (17.6) (12.2) 5.0 (8.1%) Commissions and other similar income (net) 7 150.5 155.1 305.5 145.1 (3.6%) Profits from financial operations 8 36.0 (15.4) 20.7 70.9 96.8% Operating income and charges 9 15.0 176.6 191.6 15.4 2.6% Net operating revenue 10 = Σ 5 a 9 529.4 652.4 1 181.8 565.7 6.9% Personnel costs 11 (201.9) (217.5) (419.4) (200.9) (0.5%) Of which: early retirements costs 12 (1.5) (36.2) (37.7) 1.2 (179.7%) Other administrative expenses 13 (116.5) (109.3) (225.9) (118.2) 1.4% Depreciation of fixed assets 14 (24.9) (27.5) (52.4) (27.3) 9.9% Operating costs 15 = 11+13+14 (343.3) (354.4) (697.7) (346.4) 0.9% Operating profit 16 = 10+15 186.1 298.0 484.1 219.3 17.8% Recovery of loans written-off 17 14.8 11.1 25.9 9.0 (38.9%) Loan provisions and impairments 18 (62.2) (81.5) (143.7) (63.0) 1.3% Other impairments and provisions 19 (120.7) (25.9) (146.6) (20.3) (83.2%) Profits before taxes 20 = Σ 16 a 19 18.0 201.7 219.7 145.0 706.6% Corporate income tax 21 (10.3) (41.1) (51.4) (9.4) (8.7%) Equity-accounted results of subsidiaries 22 10.4 (0.7) 9.7 6.2 (40.3%) Income attributable to minority interest 23 (9.0) (18.8) (27.7) (52.8) 488.1% Net profit 24 = Σ 20 a 23 9.1 141.2 150.3 89.0 880.2% Cash flow after taxation 25 = 24-14-18-19 216.8 276.2 493.0 199.6 (8.0%) Table 22

Non-recurrent impacts related to the sale of the shares in BCP, to early-retirements and to the sale of 49.9% of BFA’s capital in 2008 (included in the income statement presented above) Amounts in M.€ Caption 1st half 08 2nd half 08 2008

Commissions and other similar income (net) (0.1) (0.1) (0.2) Realised capital losses in BCP Profits from financial operations (73.0) (21.3) (94.3) Operating income and charges Gains in BFA 176.6 176.6 Net operating revenue (73.1) 155.2 82.1 Personnel costs Early-retirements (1.5) (36.2) (37.7) Operating costs (1.5) (36.2) (37.7) Operating profit (74.6) 118.9 44.4 Other impairments and provisions Impairments related to BCP (111.5) (9.1) (120.6) Profits before taxes (186.1) 109.8 (76.3) Corporate income tax 27.6 (33.0) (5.3) Net profit (158.4) 76.9 (81.6) Table 23

Report | Financial review 45 Consolidated

Consolidated balance sheet Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Assets Cash and deposits at central banks 848.4 1 088.3 1 549.5 82.6% Amounts owed by credit institutions repayable on demand 258.7 227.1 622.1 140.5% Loans and advances to credit institutions 1 052.7 3 504.2 2 315.6 120.0% Loans and advances to Customers1 28 524.6 29 275.2 29 023.4 1.7% Financial assets held for dealing 4 201.9 2 853.6 1 669.6 (60.3%) Financial assets available for sale 2 985.6 3 262.6 5 779.9 93.6% Investments held to maturity 407.7 698.7 Hedging derivatives 506.8 484.4 287.6 (43.3%) Investments in associated companies and jointly controlled entities 134.9 137.9 141.7 5.1% Other tangible assets 310.0 331.7 262.4 (15.3%) Intangible assets 16.3 15.4 12.4 (23.9%) Tax assets 146.1 250.4 218.1 49.3% Other assets 759.1 1 165.1 950.8 25.3% Total assets 39 745.2 43 003.4 43 531.8 9.5% Liabilities and shareholders' equity Central banks’ resources 1 505.3 Financial liabilities held for dealing 218.2 258.5 383.4 75.8% Other credit institutions' resources 2 390.7 2 007.4 2 107.8 (11.8%) Clients' resources and other loans 22 268.7 25 633.6 24 642.8 10.7% Debts evidenced by certificates 5 563.8 6 417.8 7 093.3 27.5% Technical provisions 2 406.0 2 246.4 1 911.4 (20.6%) Financial liabilities associated to transferred assets 2 570.3 2 070.8 1 887.5 (26.6%) Hedging derivatives 590.2 596.5 327.6 (44.5%) Provisions 73.9 77.6 85.8 16.1% Tax liabilities 48.0 62.8 34.9 (27.3%) Instruments representing capital 28.9 28.7 29.4 2.0% Subordinated loans 932.0 767.6 702.0 (24.7%) Other liabilities 706.6 874.1 687.0 (2.8%) Share capital, share premium account, reserves and other equity instruments 1 704.0 1 370.5 1 620.5 (4.9%) Treasury stock (32.5) (22.7) (21.7) (33.2%) Net profit 9.1 150.3 89.0 880.2% Minority interests 267.3 463.4 445.7 66.7% Total Shareholders’ equity and minority interests 1 947.9 1 961.5 2 133.6 9.5% Total liabilities and shareholders' equity 39 745.2 43 003.4 43 531.8 9.5% Note: Bank guarantees 3 610.4 3 355.5 3 040.2 (15.8%) Off-balance sheet Customer resources2 6 677.1 5 104.0 4 951.6 (25.8%) 1) In December 2007, BPI sold 35% of the bonds relating to the capital tranche of the mortgage-loan securitisation operations which resulted in the derecognition Table 24 of loan assets totalling 1 264 M.€. At 30 June 2009 the amount of Customer loans (net) derecognised from the balance sheet was 939 M.€. 2) The amount of unit trust funds included in these resources has been corrected for fund units held in the portfolios of the Group’s banks and pension funds under BPI management.

46 Banco BPI | 1st half 2009 report Consolidated

Capital ratios At 30 June 2009, core capital1 stood at 8.1% of impairment with the result that in relation to the risk-weighted assets. The Tier I capital ratio was 8.9%, securities in which such a situation remains, this will while the own funds requirements ratio was 11.4%. not result in any negative impact on earnings.

Own funds It should be noted that effective from October 2008, Shareholders’ equity as per the accounts, including according to Bank of Portugal Notice 6 / 2008, the minority interests, increased by 172 M.€ relative to unrealised gains and losses on bonds in the December 2008, that is 8.8% higher, to 2 133.6 M.€ at available-for-sale portfolio with no indications of the close of the 1st half of 2009. impairment – which are recorded directly in shareholders’ equity, in the fair-value reserve – ceased to be included The principal positive impacts on shareholders’ equity in Tier II and Tier I capital, respectively. and minority interests were: At the end of June 2009, basis own funds totalled ᭿ consolidated net profit generated in the first half of 2 291.5 M.€, which is quite close to the figure at the 89.0 M.€; end of December 2008. Total own funds were 2 916.8 M.€, 46.8 M.€ less (-1.6%) than in December 2008. ᭿ the 167.2 M.€ decrease in unrealised losses recorded in the fair value reserve (net of deferred tax), which Own funds requirements resulted chiefly from the valuation of corporate bonds Own funds requirements decreased by 41.3 M.€ (-2.0%) by virtue of the contraction in credit spreads in the relative to December to 2 054.1 M.€. securities market throughout the period under review. Bonds held in portfolio do not present signs of

Shareholders’ Equity Amounts in M.€ 1st half 08 2nd half 08 1st half 09

Shareholders' equity and minority interests at semester-beginning 1 905.5 1 947.9 1 961.5 Previous year dividend’s payment (140.6) (59.8) Net profit of the semester attributable to BPI shareholders 9.1 141.2 89.0 Minority interests: sale of 49.9% of BFA's capital 189.6 Proceeds from the share capital increase in June 2008 350.0 Revaluation reserve of financial assets available for sale (net of deferred taxes) (136.8) (369.6) 167.2 Other (39.3) 52.4 (24.5) Shareholders' equity and minority interests at year-end 1 947.9 1 961.5 2 133.6 Table 25

1) Core capital corresponds to basis own funds, before deductions relating to equity interests in credit institutions and insurance undertakings, and excludes preference shares.

Report | Financial review 47 Consolidated

Own funds requirements ratios Calculated according to the Bank of Portugal rules Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09

Shareholders' equity and minority interests 1 947.9 1 961.5 2 133.6 Dividend distribution in respect of the period (3.6) (60.1) (35.6) Exclusion of: Fair value reserve in bonds available-for-sale portfolio (net of deferred taxes) not considered in own funds1 - 448.7 280.9 Positive fair value reserve in equities available-for-sale portfolio (45% of this amount in included in the Tier II) (22.8) (21.9) (20.0) Revaluation reserves of fixed assets included in Tier II (8.5) (8.5) (8.5) Adjustments to preference shares 31.9 32.1 19.4 Other adjustments 2.0 1.8 2.4 Subtotal 1 946.8 2 353.5 2 372.1 Inclusion of: Contributions to the pension funds still not disclosed as a cost (0.7) (0.6) (0.5) Intangible fixed assets (16.3) (15.4) (12.4) Loan provisions calculated in accordance with Bank of Portugal rules2 (84.9) (79.3) (100.9) Deduction of participating interests in credit institutions and insurance companies (63.0) (80.7) (74.7) Deferred adjustments resulting from the transition to IAS / IFRS 131.5 119.9 108.0 Basis own funds3 1 913.3 2 297.5 2 291.5 of which, core capital 1 678.3 2 082.7 2 080.8 of which, preference shares 298.1 295.5 285.4 of which, deduction of participating interests in credit institutions and insurance companies (63.0) (80.7) (74.7) Complementary own funds3 924.4 666.1 625.3 of which, complementary own funds before deductions 991.5 751.3 705.1 of which, deduction of participating interests in credit institutions and insurance companies (63.0) (80.7) (74.7) of which, other deductions (4.1) (4.5) (5.1) Total own funds 2 837.7 2 963.6 2 916.8 Total own funds requirements 2 017.9 2 095.3 2 054.1 Risk-weighted assets4 25 224.2 26 191.7 25 675.9 Own funds requirements ratio 11.2% 11.3% 11.4% Tier I 7.6% 8.8% 8.9% Core Tier I (excluding preference shares) 6.7% 8.0% 8.1% Preference shares as percentage of Tier I, before deductions of interests in credit institutions and insurance companies 15.1% 12.4% 12.1% In the note to the financial statements “4.50 Capital management” information is presented giving details of own funds. Table 26 1) In accordance with Bank of Portugal Notice 6 / 2008 of 17 October 2008, unrealised gains and losses on the portfolio of available-for-sale bonds, without signs of impairment, which are recorded directly in shareholders’ equity, in the fair value reserve, ceased to be included in Tier II and Tier I capital respectively. 2) The amount of the loan provisions (specific and general), calculated according to the Bank of Portugal’s rules, which exceeds the value of the impairment allowances recognised in the consolidated accounts, is deducted from basis own funds. That part of this figure which corresponds to general provisions, is then added to complementary own funds. 3) Following the allocation to the basis own funds and the complementary own funds of 50% of the specific deductions relating to investments in credit institutions and insurance companies. 4) Own funds requirements x 12.5.

48 Banco BPI | 1st half 2009 report Consolidated

PRINCIPAL REGULATORY ALTERATIONS TO THE OWN FUNDS CALCULATION (IN 2008)

Bank of Portugal Notice 6 / 20081 Effective from October 2008 and by way of Notice 6 / According to the Bank of Portugal’s rules, the negative 2008, the Bank of Portugal adopted the identical rules to actuarial variances of the pension funds, as regards that those that had already been adopted by virtually all the part which cannot be accommodated within the accounting European countries’ central banks, with the result that “corridor”2, are deducted from basis own funds. unrealised gains and losses on the portfolio of available-for-sale bonds, without signs of impairment, Notice 11 / 2008 widened the corridor considered for which are recorded directly in shareholders’ equity, ceased purposes of determining the amount of the actuarial gains to be included in Tier II and Tier I capital respectively. and losses to be deducted from own funds, by allowing adding to the accounting corridor the amount of the Previously, the unrealised losses on bonds, net of deferred negative actuarial variances recorded in 2008, after taxes, recorded in the fair value reserve, were included deducting the pension funds’ expected income in that year. 100% in basis own funds (Tier I), while unrealised gains This addition will be gradually reduced over the next on bonds, recorded in the fair value reserve were included 4 years3. to the extent of 45% of their value in complementary own funds (Tier II), and the remaining 55% of those unrealised Taking into account that in 2008, BPI registered in a gains were not considered in own funds. This procedure negative actuarial variance of 544.3 M.€4, this figure, remained for the gains and losses on available-for-sale after deducting 161.2 M.€, which corresponds to the shares. expected income of the pension funds in 2008, is 383.1 M.€, which amount, pursuant to Notice 11 / 2008, will be Bank of Portugal Notice 7 / 20081 added to the accounting corridor at 30 June 2009 (235.7 Via Notice 7 / 2008, the period for the deferral of the M.€). Accordingly, at the end of June 2009, the relevant impacts of the transition to IAS relating to pension corridor for calculating the impact of the negative actuarial liabilities which at 30 June 2008 had not yet been variances in own funds amounts to 618.8 M.€, which recognised in retained earnings was extended by 3 years permits fully accommodating the negative actuarial (SAMS, mortality table and others). In this manner, the variances on that date. period for the recognition of this impact was extended to 2014, inclusive. Impact of actuarial deviations in own funds Amounts in M.€ At 30 June 2009, the negative impacts of transition to the 30 Jun. 09 IAS / IFRS still not recognised (108.0 M.€) corresponded 1 to 0.4% of risk-weighted assets. Accounting corridor at the end of June 2009 235.7 Actuarial deviations registered in 2008 544.3 Bank of Portugal Notice 11 / 20081 Expected income of the pension fund in 2008 -161.2 Bank of Portugal Notice 11 / 2008 laid down a transitional Addition to the accounting corridor 383.1 regime for recognising in a phased manner over 4 years, Corridor in terms of Notice 11 / 20082 618.8 part of the actuarial and financial negative variances of the Accumulated negative actuarial deviations pension funds which occurred in 2008. The transitional at the end of June 2009 433.7 regime envisaged in Notice 11 / 2008 already applies with Negative impact in Tier I 0.0 respect to the reporting of financial information at 31 1) Taking into consideration the pension liabilities with Employees Table 27 December 2008. and Directors. 2) Accounting corridor + addition to the corridor in terms of Notice 11 / 2008, Bank of Portugal.

1) Notice 6 / 2008: publication on 17 Oct. 2008; entered into force on 18 Oct. 2008; Notice 7 / 2008: publication on 17 Oct. 2008; entered into force on 18 Oct. 2008; Notice 11 / 2008: publication on 14 Jan. 2009; entered into force on 19 Jan. 2009. 2) The accounting corridor corresponds to 10% of the amount of pension liabilities or of the Pension funds’ net assets, whichever is the greater. 3) The addition to the accounting corridor will take in to consideration the following percentages: up till 30 December 2009, 100%; from 31 December 2009 to 30 December 2010, 75%; from 31 December 2010 to 30 December 2011, 50%; from 31 December 2011 to 30 December 2012, 25% and from 31 December to 2012, 0%. 4) Of the amount of the negative actuarial variances occurring in 2008, 42.1 M.€ was offset by existing positive variances at the end of 2007, so that at the end of 2008 there were negative actuarial variances of 502.2 M.€.

Report | Financial review 49 DOMESTIC ACTIVITY

OVERVIEW Domestic operations generated a net profit of 42.1 M.€ In the 1st half of 2008, the net loss of -49.4 M.€ was in the first six months of 2009. The average return on primarily affected by the negative impact (after taxation) shareholders’ equity allocated to domestic operations of 157.4 M.€ relating to the realised losses and (ROE) was situated at 4.9% in the first six months of impairment charges on the equity holding in BCP, which 2009. was completely disposed of in the second half of the year.

Domestic activity ROE by business area Amounts in M.€ Commercial Investment Participating Total Banking Banking interests and other

30 Jun. 08 30 Jun. 09 30 Jun. 08 30 Jun. 09 30 Jun. 08 30 Jun. 09 30 Jun. 08 30 Jun. 09

Average risk weighted assets 22 743.1 23 428.4 375.0 363.1 686.6 158.7 23 804.6 23 950.3 Shareholders' equity (average) 1 061.3 1 567.5 143.9 82.8 78.9 73.7 1 284.1 1 723.9 Adjustment for capital reallocation 165.5 118.9 (123.6) (56.7) (41.9) (62.2) - - Capital allocated (adjusted) 1 226.8 1 686.4 20.2 26.1 37.0 11.4 1 284.1 1 723.9 Net profit 77.7 43.9 9.8 1.6 (136.9) (3.5) -49.4 42.1 Adjustment to profit due to capital reallocation 2.8 1.1 (2.1) (0.5) (0.7) (0.6) - - Net profit (adjusted) 80.5 45.1 7.7 1.1 (137.6) (4.1) (49.4) 42.1 ROE 13.1% 5.3% 75.8% 8.6% neg. neg. neg. 4.9% Net profit (adjusted), excluding impacts with BCP stake and early retirements1 81.6 45.1 7.7 1.1 19.8 (4.1) 109.1 42.1 ROE excluding impacts with BCP stake and early retirements1 13.3% 5.3% 75.8% 8.6% 106.8% neg. 17.0% 4.9%

1) Excluding from the contribution from domestic operations, the 157.4 M.€ negative impact from the sale of the Banco Comercial Português shares and Table 28 from impairment charges recognised on the BCP investment in the first half 2008, and 1.1 M.€ in early-retirement costs, all after tax. Segmentation of the BPI Group’s domestic activity The domestic activity comprises the commercial banking activity conducted in Portugal, including the provision of banking services to non-residents abroad (namely, amongst Portuguese emigrant communities) and those of the Madrid branch, as well as the activities relating to investment banking, private equity and other investments. Calculation of ROE by business areas In determining the capital allocated to each business area integrating the domestic operations, it is assumed that the capital employed is identical to the average capital employed for this activity as a whole, except as regards the revaluation reserves which were excluded from the calculation of the capital allocated. The amount of capital allocated to each area is calculated by multiplying the assets weighted by the quotient between shareholders’ equity (excluding revaluation reserves) and the assets weighted for the whole of the aforesaid areas. Whenever the shareholders’ equity of a business area is more (or less) than the allocated capital, it is assumed that there has been a redistribution of capital, whereby that area’s contribution is adjusted by the costs (revenue) resulting from the increase (decrease) in outside resources by virtue of the capital reallocation. The return generated by each area results from the quotient between the adjusted contribution and the capital allocated to the area.

The Customer loans’ portfolio grew by 0.2% relative to The narrowing of intermediation margins sparked off by June 2008. The mortgage-loan portfolio grew 2.8%, the higher costs of funding and which was not year-on-year, while the portfolio of loans to companies, compensated for by the adjustment to credit spreads of project finance and institutional banking, and loans to the same magnitude, coupled with a moderate growth in sole traders and small businesses registered decreases of business and the decrease in the income more directly 2.6% and 4.6%, respectively. On the other hand related with the behaviour of the capital markets – from on-balance sheet Customer resources grew by a asset management and investment banking – exerted year-on-year 9.2%, whereas off-balance sheet Customer pressure on the behaviour of income associated with resources declined 26% as a result of the drop in the domestic activity. Net operating revenue from banking values of financial asset portfolios and the transfer of was down 3.2% relative to the 1st half of 2008. As funds to balance-sheet resources. regards the trend in year-on-year terms of the main components of net operating revenue: net interest income fell by 6.0% (-15.0 M.€), commissions were 6.2% lower

50 Banco BPI | 1st half 2009 report Domestic activity

(-8.1 M.€), while profits from financial operations In the 1st half of 2009, the contribution made by climbed from 19.9 M.€ in the 1st half of 2008 commercial banking operations to net profit was 43.9 (included losses realised on the shareholding in BCP) to M.€, while investment banking contributed with 1.6 M.€ 29.5 M.€ in the 1st half of 2009. and the investments and other area made a negative contribution of 3.5 M.€. For their part, operating costs decreased by 4.0% (-12.2 M.€) relative to the 1st half of 2008, in spite of Net total assets in domestic activity grew by a BPI being able to count upon a much larger physical year-on-year 6.5%, to 39 440.5 M.€, at the end of distribution network (4.7% larger than that existing in June 2009. June 2008). Customer loans represented 70% of total assets at the Loan impairments, net of recoveries, registered an end of the period. Customer resources constitute the increase from 20.6 M.€1 in the 1st half of 2008 to principal source of asset funding. Amounts owed to 45.6 M.€ in the 1st half of 2009, which mirrors the Customers and the technical insurance provision relating deterioration in risk levels in the economy. Loan-quality to BPI Vida’s capitalisation insurance, represented indicators nevertheless remain at a low level. The roughly 57% of total assets in domestic activity in June non-performing loans ratio was situated at 1.8% at the 2009. end of June 2009 (1.0% in June de 2008) while the net loan loss2 corresponded to 0.33% of the average The growth in on-balance sheet Customer resources since performing loan portfolio in the 1st half of 2009 the second half of 2007 has fully funded the expansion (0.15% in the 1st half of 2008). in lending.

1) Impairments for Structured Investment Vehicles (SIV) of 22.7 M.€ which were recorded in the caption LOAN PROVISIONS AND IMPAIRMENTS in the 1st half 2008 were not included. 2) The net credit loss corresponds to the value of impairments recognised in the year, after deducting recoveries of overdue loans and interest previously written off.

Report | Financial review 51 Domestic activity

Domestic activity income statement Amounts in M.€ 1st half 2nd half 2008 1st half Δ% 1st half 08 / 08 08 09 1st half 09

Net interest income (narrow sense) 1 233.1 237.3 470.4 218.1 (6.4%) Unit linked gross margin 2 4.2 2.4 6.5 1.5 (63.8%) Income from securities (variable yield) 3 3.2 2.4 5.6 4.7 45.0% Commissions related to deferred cost (net) 4 10.3 10.9 21.2 11.4 11.4% Net interest income 5 = Σ 1 a 4 250.8 252.9 503.7 235.7 (6.0%) Technical result from insurance contracts 6 5.4 (17.6) (12.2) 5.0 (8.1%) Commissions and other similar income (net) 7 129.5 126.3 255.8 121.4 (6.2%) Profits from financial operations 8 19.9 (40.0) (20.2) 29.5 48.5% Operating income and charges 9 15.3 176.1 191.5 15.7 2.7% Net operating revenue 10 = Σ 5 a 9 420.9 497.8 918.6 407.4 (3.2%) Personnel costs 11 (187.2) (199.8) (387.0) (179.5) (4.1%) Of which: early retirements costs 12 (1.5) (36.2) (37.7) 1.2 (179.7%) Other administrative expenses 13 (102.2) (93.8) (196.0) (96.8) (5.3%) Depreciation of fixed assets 14 (19.3) (21.1) (40.5) (20.2) 4.5% Operating costs 15 = 11+13+14 (308.8) (314.7) (623.5) (296.6) (4.0%) Operating profit 16 = 10+15 112.1 183.0 295.1 110.8 (1.1%) Recovery of loans written-off 17 14.7 11.0 25.7 7.5 (49.4%) Loan provisions and impairments 18 (58.0) (75.9) (133.9) (53.1) (8.5%) Other impairments and provisions 19 (119.0) (20.4) (139.4) (16.1) (86.5%) Profits before taxes 20 = Σ16 a 19 (50.3) 97.8 47.5 49.1 197.7% Corporate income tax 21 1.6 (26.1) (24.6) (5.1) 422.0% Equity-accounted results of subsidiaries 22 8.3 (3.1) 5.2 3.5 (57.8%) Income attributable to minority interest 23 (9.0) (9.4) (18.4) (5.5) (39.2%) Net profit 24 = Σ 20 a 23 (49.4) 59.1 9.7 42.1 185.2% Cash flow after taxation 25 = 24-14-18-19 147.0 176.5 323.5 131.5 (10.6%) Table 29

Non-recurrent impacts related to the sale of the shares in BCP, to early-retirements and to the sale of 49.9% of BFA’s capital in 2008 (included in the income statement presented above) Amounts in M.€ Caption 1st half 08 2nd half 08 2008

Commissions and other similar income (net) (0.1) (0.1) (0.2) Realised capital losses in BCP Profits from financial operations (73.0) (21.3) (94.3) Operating income and charges Gains in BFA 176.6 176.6 Net operating revenue (73.1) 155.2 82.1 Personnel costs Early-retirements (1.5) (36.2) (37.7) Operating costs (1.5) (36.2) (37.7) Operating profit (74.6) 118.9 44.4 Other impairments and provisions Impairments related to BCP (111.5) (9.1) (120.6) Profits before taxes (186.1) 109.8 (76.3) Corporate income tax 27.6 (33.0) (5.3) Net profit (158.4) 76.9 (81.6) Table 30

52 Banco BPI | 1st half 2009 report Domestic activity

Domestic activity balance sheet Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Assets Cash and deposits at central banks 525.0 649.0 596.4 13.6% Amounts owed by credit institutions repayable on demand 247.8 217.8 257.9 4.1% Loans and advances to credit institutions 1 033.1 3 447.7 2 311.2 123.7% Loans and advances to Customers1 27 492.9 28 040.5 27 693.7 0.7% Financial assets held for dealing 3 382.8 1 379.1 1 418.4 (58.1%) Financial assets available for sale 2 556.7 2 735.2 4 751.3 85.8% Investments held to maturity - 407.7 698.7 - Hedging derivatives 506.8 484.4 287.6 (43.3%) Investments in associated companies and jointly controlled entities 120.7 121.9 124.7 3.3% Other tangible assets 235.8 237.1 163.5 (30.7%) Intangible assets 15.6 14.1 11.4 (27.3%) Tax assets 146.1 250.4 218.1 49.3% Other assets 756.1 1 160.0 907.6 20.0% Total assets 37 019.5 39 144.8 39 440.5 6.5% Liabilities and shareholders' equity Central Banks’ resources - - 1 505.3 - Financial liabilities held for dealing 218.2 258.5 383.4 75.8% Credit institutions' resources 2 479.6 2 514.9 2 391.1 (3.6%) Clients' resources and other loans 19 811.5 21 738.6 20 757.7 4.8% Debts evidenced by certificates 5 563.8 6 417.8 7 093.3 27.5% Technical provisions 2 406.0 2 246.4 1 911.4 (20.6%) Financial liabilities associated to transferred assets 2 570.3 2 070.8 1 887.5 (26.6%) Hedging derivatives 590.2 596.5 327.6 (44.5%) Provisions 56.7 58.8 64.1 13.0% Tax liabilities 36.0 37.4 30.1 (16.2%) Instruments representing capital 28.9 28.7 29.4 2.0% Other subordinated loans 932.0 767.6 702.0 (24.7%) Other liabilities 688.9 852.1 591.0 (14.2%) Share capital, share premium account, reserves and other equity instruments 1 452.0 1 305.2 1 479.8 1.9% Treasury stock (32.5) (22.7) (21.7) (33.2%) Net profit (49.4) 9.7 42.1 185.2% Minority interests 267.3 264.5 266.3 (0.4%) Total shareholders’ equity and minority interests 1 637.4 1 556.7 1 766.4 7.9% Total liabilities and shareholders' equity 37 019.5 39 144.8 39 440.5 6.5% Note: Bank guarantees 3 383.0 3 118.4 2 810.5 (16.9%) Off-balance sheet Customer resources2 6 677.1 5 104.0 4 951.6 (25.8%) Note: The balance sheet relating to domestic operations presented above has not been corrected for the balances resulting from operations with the “international operations” Table 31 geographical segment. For consolidation purposes, these balances have been eliminated. 1) In December 2007, BPI sold 35% of the bonds relating to the capital tranche of the mortgage-loan securitisation operations which resulted in the derecognition of loan assets totalling 1 264 M.€. At 30 June 2009, the amount of Customer loans (net) derecognised from the balance sheet was 939 M.€. 2) The amount of unit trust funds included in these resources has been corrected for fund units held in the portfolios of the Group’s banks and pension funds under BPI management.

Report | Financial review 53 Domestic activity

FUNDING AND LIQUIDITY Short-term funding BPI maintained comfortable liquidity levels throughout The money, repo and Euro Commercial Paper markets the 1st half of 2009. registered an increase in activity as from March 2009, in tandem with a certain stabilisation of market conditions. The growth in Customer resources in the 1st half of 2009 BPI resumed its normal activity in these markets, keeping of 2.0% (+456.4 M.€) relative to December 2008 can the focus on the diversification of short-term funding be attributed to the placing through the retail network of sources. debt with 2 and 3-year maturities. For its part, the Customer loans portfolio decreased 1.4% At the end of June, the ECP portfolio totalled 401 M.€ (-393.7 M.€) in non-annualised terms. with an average maturity of 89 days. Security repos surpassed 40 M.€ at the end of 2008 to 365 M.€ at 30 The liquidity position remained in surplus during virtually June 2009. the entire period under review. BPI started the half-year with a positive short-term GAP of 1.5 Bi.€. Part of this Short term GAP Amounts in M.€ liquidity was used in the repayment of ML-term debt Dec. 08 Jun. 09 which matured in the period (1.0 Bi.€). Cash and short term loans and advances Deposits at Bank of Portugal1 - 18 In June 2009, the European Central Bank launched a Short term loans and advances 2 635 1 531 funds-accommodation operation (interest rate of 1%) and Short-term financing for the first time with a maturity of one year. Short-term financing 1 182 1 448 Money market 908 682 Repos 40 365 Taking advantage of the opportunity, BPI obtained Euro Commercial Paper (ECP) 234 401 resources of 1.5 Bi.€ from the ECB within the ambit of Funding from the ECB - 1 505 this operation. Short term gap with BCE1 1 453 (1 404) 1) Excludes cash reserve. Table 32 Also in June, BPI reinforced its bond portfolio1, primarily with the public-debt securities of euro-zone countries Medium and long-term funding with positive spreads vis-à-vis money market and swap During the first part of 2009, the market was rates. The increase in the bond portfolio gave rise to a characterised by certain State-guaranteed bank issues decrease in the liquidity GAP from a positive figure to a being wholly placed. The higher-rated issuers negative amount of 1.4 Bi.€ at the end of June. progressively resorted to issues without guarantee with the credit spreads lowering, while there was more It is worth noting that on that date BPI had a portfolio of demand from investors for assets with 2 and 3 year assets eligible for funding at the ECB of 4.2 M.€2, maturities and later extending to 5 and 10 years. available for immediate use. BPI also had a potential issue guaranteed by the Portuguese State of 1.7 Bi.€, a The European Central Bank’s announcement of a facility to which the Bank did not resort. programme of mortgage-bond purchases was instrumental at the end of the period in that it stimulated the issue of this type of asset.

1) Available-for-sale financial assets portfolio. 2) Portfolio net of haircuts and utilisation.

54 Banco BPI | 1st half 2009 report Domestic activity

In the first six months of 2009, BPI’s recourse to the Assets eligible for funding at the ECB capital market was minimal, being limited to the carrying At the end of June 2009, BPI had a portfolio of assets out of two operations: a private placement of a small eligible for funding at the ECB, net of all drawings, of amount and a mortgage-bond issue fully placed with the 4.2 Bi.€, which represented roughly 10.7% of total European Investment Bank. assets deployed in domestic activity.

The amount of medium-term debt repaid was 1 045 M.€. Assets eligible for financing at the ECB The amount of medium and long-term debt repayments At 30 June 2009 Amounts in M.€ to be made by the end of the year is 233 M.€. 30 Jun. 09 Assets eligible for ECB 1 Already in July, BPI has floated an issue of mortgage Bonds 5 928 Interbank loans1 129 bonds amounting to 1 000 M.€ under the EMTN Total assets eligible for ECB 6 057 programme. [-] Used amount 1 858 [=] Available amount 4 199 Medium and long term 1) Net of haircuts. Table 34 debt redemption Amounts in M.€ 1st half 3rd quarter 4th quarter 2009 2009 2009 2009 Senior debt 1 045 - 59 1 104 Subordinated debt - 30 - 30 MLT loans - 2 142 144 1 045 32 201 1 278 Table 33

Report | Financial review 55 Domestic activity

LOANS AND RESOURCES Customer loans The loan portfolio in domestic operations expanded 0.2% Customer loans portfolio Amounts in M.€ relative to June 2008. The pronounced contraction in 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 economic activity and the process of adjusting spreads on 08 08 09 / Jun. 09 new loans advanced to Customers naturally affected the Corporate banking, institutional banking expansion of credit. and project finance Corporate Banking 8 648.9 8 790.2 8 464.1 (2.1%) Nonetheless, the loan portfolios of the different segments Project finance 2 172.5 2 208.0 2 136.3 (1.7%) evidenced contrasting trends. The loan portfolios relating Institutional and State Business to the corporate and institutional banking and Project Sector Banking 1 936.2 1 890.6 1 820.3 (6.0%) Finance areas, as well as those relating to small Corporate banking, institutional banking businesses, posted year-on-year decreases of 2.6% and and project finance 12 757.6 12 888.8 12 420.7 (2.6%) 4.6%, respectively. Loans to Individuals and Small Businesses Mortgage loans1 11 314.2 11 545.0 11 628.4 2.8% On the other hand, in the loans advanced to individuals, Loans to individuals – the mortgage-loan portfolio expanded 2.8% while the other purposes 1 227.4 1 261.5 1 228.7 0.1% portfolio of loans granted for other purposes recorded a Loans to small marginal increase of 0.1%. businesses 2 625.0 2 556.6 2 504.5 (4.6%) Loans to Individuals and Small Businesses 15 166.6 15 363.0 15 361.6 1.3% Other 543.8 556.4 611.2 12.4% Total loans in arrears 319.3 450.7 532.6 66.8% Loan impairments 337.8 401.3 408.9 21.1% Interests 121.5 169.0 115.9 (4.6%) Net loan portfolio 28 570.9 29 026.8 28 633.1 0.2% Bank guarantees 3 383.0 3 118.4 2 810.5 (16.9%) 1) To ensure comparability, securitised mortgage loans written off from Table 35 the balance sheet following the sale, in December 2007, of 35% of the bonds relating to the capital tranche of the securitisation operations, were added back (1 078.0 M.€ at 30 June 2008, 986.3 M.€ at 31 December 2008 and 939.4 M.€ at 30 June 2009).

56 Banco BPI | 1st half 2009 report Domestic activity

Customer resources Total Customer resources grew 1.4% year-on-year as a Total Customer resources1 Amounts in M.€ result of the expansion in on-balance sheet resources. 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 08 08 09 / Jun. 09 The growth in on-balance sheet Customer resources was On-balance sheet resources 9.2% year-on-year. Contributing to this increase was the Sight deposits 4 426.4 4 668.2 4 919.7 11.1% € Term and savings expansion in deposits of 6.8% (+ 1 222.8 M. ) and the deposits 13 472.0 15 057.1 14 201.4 5.4% placing of bonds with Customers, with the portfolio Total deposits 17 898.3 19 725.3 19 121.1 6.8% growing more than twofold, which corresponded to an Capitalisation insurance 2 increase in absolute terms of 1 792.4 M.€. (BPI Vida) 3 519.5 3 060.4 2 698.0 (23.3%) Structured products – guaranteed capital / limited The environment of low interest rates has made term risk and fixed-rate bonds 1 664.0 2 102.0 3 456.3 107.7% deposits less attractive, thereby explaining the transfer of Subordinated bonds placed with Customers 286.2 279.1 255.6 (10.7%) funds in term deposits to bonds. Preference shares placed with Customers 52.0 49.4 39.3 (24.4%) Off-balance sheet resources – unit trust funds, PPR, PPA On-balance sheet resources 23 420.0 25 216.3 25 570.4 9.2% and pension funds – decreased 25.8% relative to June Off-balance sheet 2008 as a result of the lower valuation of investments resources and the transfer to balance-sheet resources (deposits and Unit trust (mutual) funds 1 865.6 1 099.0 1 057.6 (43.3%) bonds). However, it should be noted that since December Equity (PPA) and retirement (PPR) 2008, off-balance sheet resources evidence a more savings plans 1 417.9 1 036.5 900.6 (36.5%) moderate decline of 3% (non annualised) in the amounts Hedge funds 259.1 88.5 35.7 (86.2%) under management. This trend is explained by the Pension funds3 3 134.5 2 880.0 2 957.6 (5.6%) deceleration in the volume of redemptions and by the Off-balance sheet resources 6 677.1 5 104.0 4 951.6 (25.8%) appreciation in the value of portfolios, shadowing the Total 30 097.1 30 320.2 30 521.9 1.4% recovery verified in the capital markets. 1) Corrected for double counting: placements of unit trust funds and Table 36 pension funds managed by BPI in the Group's deposits, structured products and unit trust funds. 2) BPI Vida savings products with discretionary participation in results are recorded in the balance sheet under the caption AMOUNTS OWED TO CUSTOMERS (786.6 M.€, at 30 June 2009) and those with discretionary profit sharing are recorded under the caption TECHNICAL PROVISIONS (1 911.4 M.€, at 30 June 2009). 3) Includes BPI Group Employees pension funds.

Report | Financial review 57 Domestic activity

SECURITIES AND FINANCIAL INVESTMENTS PORTFOLIO At 30 June 2009, the total portfolio of assets held for In the wake of the changes made to the accounting dealing and available for sale, investments held to standards IAS 39 and IFRS 7, BPI undertook the maturity and investments in associates and jointly reclassification of bonds held by BPI Vida from the controlled entities, amounted to 6 993.1 M.€, which portfolio of financial assets held for dealing to the corresponded to 17.7% of the total assets deployed in portfolio of held-to-maturity investments (460.4 M.€1) domestic activity. and to the Customer loans’ portfolio (57.8 M.€)1, and the reclassification of 37.1 M.€1 of bonds of the portfolio of Financial assets and investments in associated financial assets held for dealing to the portfolio of 1 companies and jointly controlled entities Amounts in M.€ available-for-sale financial assets. 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 08 08 09 / Jun. 09 The portfolio of available-for-sale financial assets increased Financial assets held for dealing from 2 556.7 M.€, in June 2008 to 4 751.3 M.€, which Bonds of public-sector mainly reflects the acquisition of public debt. issuers 371.1 180.9 174.7 (52.9%) Corporate bonds and bonds of other entities 1 868.5 509.6 327.9 (82.5%) BPI has maintained in recent years a bond portfolio with Shares 543.0 249.7 337.0 (37.9%) the object of diversifying the Bank’s sources of income. Participating units 294.0 121.0 87.1 (70.4%) In June 2009, about 60% of this portfolio was composed Derivatives with positive of public debt, 3/5 of which is Portuguese public debt. fair value 306.3 317.9 491.7 60.6% The corporate bonds which form part of the portfolio Financial assets held for dealing 3 382.8 1 379.1 1 418.4 (58.1%) correspond to those issued by large European companies Financial assets with ratings of BBB or better and those of companies in available for sale exporting emerging markets or with leading positions in Bonds of public-sector issuers 798.2 816.1 2 796.8 250.4% their domestic markets. Corporate bonds and bonds of other entities 1 513.8 1 747.5 1 835.8 21.3% At the close of June 2009, the portfolio of Shares 200.4 57.5 57.6 (71.3%) available-for-sale financial assets recorded unrealised Participating units 42.0 111.9 59.0 40.6% losses (net of gains) of 336.3 M.€, before deferred tax, Other 2.4 2.1 2.2 (9.2%) which are recognised in the fair-value reserve. Financial assets available for sale 2 556.7 2 735.2 4 751.3 85.8% Investments held The aforesaid amount is associated primarily with the to maturity - 407.7 698.7 - bond portfolio which did not however present signs of Investments in associated companies and jointly impairment, with the result that in relation to the controlled entities 120.7 121.9 124.7 3.3% securities in which such situation remains if held to Total 6 060.2 4 643.9 6 993.1 15.4% maturity, this will not have a negative impact on earnings. Table 37

The portfolio of assets held for dealing totalled Fair value reserve – financial assets portfolio 1 418.4 M.€ at the end of June 2009. Of this total, available for sale At 30 June 2009 Amounts in M.€ 43% (602.9 M.€) corresponded to BPI Vida’s investment Market Unrealised portfolio allocated to hedge capitalisation-insurance value gains (losses) (Fair value reserve) products. Equities portfolio 57.6 17.2 Bonds – public debt 2 796.8 (15.8) Corporate bonds 1 835.8 (335.1) Others 61.2 (2.6) Total 4 751.3 (336.3) Table 38 1) Book value at 30 June 2009.

58 Banco BPI | 1st half 2009 report Domestic activity

INCOME Net interest income Net interest income attributable to domestic operations On the other hand, the positive impacts on net interest was 235.7 M.€, which constitutes a decrease of 6.0% income were not enough to offset the narrowing of the (-15.0 M.€) relative to the 1st half of 2008. The margin on resources: negative behaviour of net interest income reflects the contraction recorded in unit net interest income, under ᭿ the adjustment of credit spreads so as to reflect banks’ pressure from the rise in the average cost of resources higher funding costs. This adjustment, which is against a background marked by a moderate growth in influenced by competition in the marketplace, has volume. revealed itself to be much slower and of less magnitude than the trend noted in the average costs of resources, Net interest income Amounts in M.€ with the result that it was not possible to avoid the 30 Jun. 08 30 Jun. 09 Δ% narrowing of the unit margin between loans and Net interest income (narrow sense) 233.1 218.1 (6.4%) resources; Gross margin on unit links products 4.2 1.5 (63.8%) Income from securities – dividends 3.2 4.7 45.0% ᭿ for its part, the volume effect on net interest income of Commissions relating to the the expansion in loans and resources is, in relative amortised cost (net) 10.3 11.4 11.4% terms, smaller as a consequence of the deceleration in Net interest income 250.8 235.7 (6.0%) these aggregates’ expansion. Table 39

The decline in net interest income is explained on the It is worth mentioning that the repricing cycle of the loan one hand by the negative impact stemming from: portfolio against a backdrop of the steep decline in market interest rates, gave rise to a widening of the ᭿ decrease in the average spread on sight deposits portfolio’s average spread relative to the respective attributable to the steep fall in market interest rates benchmarks which protected net interest income up till noted since the end of September 2008; the end of the 1st quarter of 2009. This positive effect abated in the 2nd quarter of 2009, mirroring the more ᭿ the higher cost of interest-bearing Customer resources. moderate descent in market interest rates in that quarter. The worsening of the financial crisis since September 2008 blocked the functioning of the capital market and Technical result of insurance contracts originated a significant increase in risk premiums which The net profit on capitalisation insurance with in turn engendered greater competition in the capture discretionary profit sharing1 was 5.0 M.€ in the 1st half of Customer resources. BPI maintained a competitive of 2009, down 8.1% relative to the same period of offer of time deposits and bonds targeted at the retail 2008. network which naturally translated itself into an increase in the costs of these resources.

1) Correspond to the gains and losses on the management of the resources taken and allocated to those capitalisation insurance products, and are deducted from amounts owed to Customers (mathematical provisions and profit sharing).

Report | Financial review 59 Domestic activity

Commissions Commissions and other net income declined by 6.2% Commissions and other similar income (net) Amounts in M.€ (-8.1 M.€) relative to the 1st half of 2008. Commissions 30 Jun. 08 30 Jun. 09 Δ% were penalised by the negative performance of Commercial Banking commissions commissions from asset management and investment Commissions associated with loans and guarantees 25.0 30.0 20.3% banking, while commercial banking commissions turned Income from cards 26.2 28.2 7.5% in a positive performance. Intermediation of insurance products 16.3 16.6 1.6% Asset-management commissions1 were down by some Deposits and related services 12.2 14.1 15.6% 45% (-15.6 M.€) relative to the 1st half of 2008. This Banking services 4.4 4.8 7.5% decrease, bearing in mind that these commissions are Other 1.1 2.0 92.7% indexed to the value of assets under management, Commercial Banking commissions 85.1 95.7 12.4% reflects on the one hand the drop in the values of Investment Banking commissions Brokerage and placing 7.7 5.7 (25.3%) securities under management and, on the other, Consultancy and valuations redemptions realised. (corporate finance) 1.4 0.9 (38.3%) Other 0.5 (0.0) (102.7%) At the same time, commissions earned from investment Investment Banking commissions 9.6 6.6 (31.4%) banking plunged by 31% (-3.0 M.€) relative to the 1st Asset Management commissions 34.8 19.2 (44.8%) half of 2008. Total 129.5 121.4 (6.2%) Table 40 The growth in commercial banking commissions was 12.4% (+10.5 M.€). Noteworthy was the growth in loan and guarantees’ commissions (+20.3%), commissions related to sight deposits (+15.6%) and to income from cards (+7.5%). Commissions derived from commercial banking benefited from the expansion in business volume, albeit moderate, and from the adjustment made to the fees charged for services in such a manner as to reduce the cross-subsidisation that exists between products and segments.

1) Asset-management commissions essentially correspond to commissions for the management and placing of unit trust (mutual) funds, the commissions earned from managing pension funds and Private Banking management and advisory commissions. The commissions from managing unit trust funds are apportioned to commercial banking and investment banking activities taking into consideration the relative weight of the commercial networks in the placing of products. Pension-fund management commissions are fully allocated to commercial banking activity, while Private Banking asset-management and advisory commissions are allocated to investment banking activity.

60 Banco BPI | 1st half 2009 report Domestic activity

Profits from financial operations Profits from financial operations were 29.5 M.€ in the Profits from financial operations Amounts in M.€ 1st half of 2009. 30 Jun. 08 30 Jun. 09 Δ M.€ Profit in fair value operations The contribution derived from dealing activity was up by Equities 8.0 3.1 (4.9) roughly 21%, from 21.7 M.€ in the 1st half of 2008 to Bonds 1.4 8.8 7.4 26.2 M.€ in the 1st half of 2009. Structures products 7.2 8.5 1.2 Hedge funds (0.6) 1.0 1.6 Gains realised with available-for-sale financial assets Currency 5.3 4.8 (0.5) Other 0.3 0.0 (0.3) amounted to 5.8 M.€, compared with the negative figure Profit in fair value operations 21.7 26.2 4.5 of 36.5 M.€ for the same period of 2008. In the 1st half Profit in available for sale assets of 2008, the net loss on available-for-sale assets resulted Equities (39.1) (0.9) 38.2 € chiefly from the pre-tax loss of 73.0 M. realised on the Bonds (0.4) 6.4 6.8 sale of the shareholding in BCP and the gains of Other 3.1 0.3 (2.8) 21.7 M.€ and 10.1 M.€ realised on Galp and TvTel, Profit in available for sale assets (36.5) 5.8 42.3 respectively. Net financial income from pensions Expected pension funds return 96.0 60.8 (35.2) The financial result with pensions1 in the 1st half of Interest cost (61.3) (63.3) (1.9) 2009 was a negative 2.5 M.€. Net financial income from pensions 34.7 (2.5) (37.1) Total 19.9 29.5 9.6 In the first half of 2008, the financial net income with Table 41 pensions was 34.7 M.€. This resulted from the existence of a positive differential between the pension fund’s Operating income and costs expected rate of return (7.0%) and the discount rate Other operating income totalled 15.7 M.€ in the 1st half (5.0%) ruling in the 1st half of 2008, and from the of 2009, marginally higher than the 15.3 M.€ registered pension fund’s surplus funding during the first half of the in the same period of 2008. year (353.1 M.€ in December 2007 and 108.6 M.€ in June 2008). With effect from June 2008 the same In the 1st half of 2009, other operating income includes assumed figure of 5.5% was adopted for the pension 11.8 M.€ relating to net gains on the contribution in fund’s expected rate of return and for the discount rate. kind (fixed properties) to Banco BPI’s pension fund. In the same period of 2008, other operating income includes 18.1 M.€ of gains realised on the sale of fixed properties to Banco BPI’s pension fund.

1) The net financial income from pensions corresponds to the expected pension fund return net of the interest-cost with pensions.

Report | Financial review 61 Domestic activity

OPERATING COSTS Operating costs – personnel costs, outside supplies and Personnel costs services and depreciation and amortisation – decreased Personnel costs were down 4.1% relative to the 1st half 4.0% relative to the 1st half of 2008, in spite of the fact of 2008. The remuneration component decreased by that BPI has a much larger distribution network when 4.8% (-7.9 M.€). compared with the corresponding period of 2008. BPI implemented a programme of 200 early retirements In the second half of 2008, BPI opened 24 new during the first quarter of 2009. The costs of this branches (+4% relative to the number in June), thereby programme (36 M.€1) had already been fully recognised completing its branch expansion programme in Portugal. in the 2008 income statement.

The indicator “Operating costs as a percentage of net The average Employee headcount decreased 0.8% operating revenue” was situated at 73.1%. year-on-year to 7 624 Employees in the 1st half of 2009. At the end of June 2009, the number of Employees in Operating costs Amounts in M.€ domestic activity stood at 7 512, 2.8% less than in June 30 Jun. 08 30 Jun. 09 Δ% 2008. Personnel costs 187.2 179.5 (4.1%) Of which: costs with It is worth mentioning the 13.8% increase in pension early retirements 1.5 (1.2) costs (+2.9 M.€). This increase is due to the fact that Outside supplies and services 102.2 96.8 (5.3%) these include in the 1st half of 2009, costs of 6.2 M.€ Operating costs, before depreciationand amortisation 289.4 276.3 (4.5%) related to the gradual recognition in the income Depreciation and amortisation 19.3 20.2 +4.5% statement of negative actuarial variances recorded Total 308.8 296.6 (4.0%) outside the corridor. Efficiency ratio1, 2 62.2% 73.1% 1) Operating costs, excluding costs with early-retirements, as % Table 42 On the other hand, the current service cost was down of net operating revenue. 2) In the calculation of the efficiency ratio in the 1st half 2008, net operating 16.3% (-3.4 M.€) to 17.3 M.€ in the 1st half of 2009. revenue excludes the loss incurred with the BCP shares.

Personnel costs Amounts in M.€ 30 Jun. 08 30 Jun. 09 Δ% Remunerations 164.9 157.1 (4.8%) Pension costs1 20.8 23.7 +13.8% Subtotal 185.7 180.7 (2.7%) Costs with early retirements 1.5 (1.2) - Total 187.2 179.5 (4.1%)

1) Includes current service cost (20.7 M.€ in the 1st half 2008 and Table 42 17.3 M.€ in the 1st half 2009), the amortisation of actuarial deviations, fund income recorded outside the corridor and the amortisation of the pension plan’s conditions.

1) In 2008 a total cost with early retirements of 37.7 M.€ was recognised.

62 Banco BPI | 1st half 2009 report Domestic activity

Outside supplies and services Costs relating to outside supplies and services fell by Outside supplies and services Amounts in M.€ 5.3% (-5.4 M.€) relative to the 1st half of 2008, 30 Jun. 08 30 Jun. 09 Δ% benefiting from the stringent management of expenses. Advertising, communication, public relations and studies Advertising campaigns 10.1 6.0 (40.4%) Advertising costs declined by 40%, that is, -4.1 M.€, Studies and advising 3.8 2.5 (34.1%) while costs relating to the size of the operating structure Subtotal: advertising, – costs incurred with premises, communications and IT communication, public systems, and others – were down 0.6% or -0.4 M.€ in relations and studies 13.9 8.5 (38.7%) Costs related to businesses absolute terms notwithstanding the higher costs Cards and automatic banking 6.4 7.6 18.1% associated with the functioning of a larger distribution Treasury, compensation and cheques 4.5 5.3 19.3% network. Home loans, consumer credit and motor car financing 4.0 2.8 (30.9%) Meanwhile, costs associated with business increased by Other 1.7 1.9 8.7% 5.6% (+0.9 M.€) relative to the first six months of Subtotal: costs related to business 16.6 17.6 5.6% 2008. Costs with premises, communications, IT and other Premises 24.1 26.0 8.0% Communications 13.4 12.1 (10.0%) IT 13.1 12.8 (2.1%) Other 17.1 16.4 (4.1%) Subtotal: costs with premises, communications, IT and other 67.7 67.3 (0.6%) Costs related with human resources 4.0 3.4 (15.0%) Total 102.2 96.8 (5.3%) Table 44

Depreciation and amortisation Depreciation and amortisation charges associated with domestic activity were 4.5% higher at 20.2 M.€ in the 1st half of 2009 (0.9 M.€ more than in the same period of 2008).

Report | Financial review 63 Domestic activity

IMPAIRMENT AND PROVISIONS Loan provisions and impairments The cost of credit risk in domestic activity rose when Recoveries of overdue loans and interest previously compared with the corresponding period of 2008, written off amounted to 7.5 M.€ in the 1st half of 2009 reflecting the deterioration in the economic climate over (against 14.7 M.€ in the same period of 2008). the past 12 months and the consequent increment in default levels in the economy. Even so, BPI maintained The net credit loss, which corresponds to the value of risk indicators which are considered to be low. impairment charges recognised in the year net of arrear loans and interest previously written-off, was situated at Loan impairment charges climbed from 35.4 M.€ in the 45.6 M.€ in the 1st half of 2009 and corresponded to 1st half of 2008 to 53.1 M.€ in the first half of 2009. 0.33% of the loan portfolio’s average balance in Credit-risk cost, measured by loan impairments as a annualised terms. This figure compares with the average percentage of the average balance on the performing of 0.20% for the past five years. loans’ portfolio, in annualised terms, rose from 0.26% in the 1st half of 2008 to 0.38% in the 1st half of 2009. Over the past five years, this indicator’s average value was 0.30%.

Loan provisions and impairments 30 Jun. 08 30 Jun. 09

(M.€) As % of the (M.€) As % of the loan portfolio1 loan portfolio1 Loan provisions and impairments Corporate banking, institutional banking and project finance 7.5 0.12% 24.6 0.39% Individuals and small businesses banking Mortgage loans 11.7 0.24% 5.4 0.10% Loans to individuals – other purposes 6.1 1.04% 8.3 1.34% Loans to small businesses 10.3 0.80% 14.2 1.12% Individuals and small businesses banking 28.2 0.41% 27.9 0.39% Other (0.3) (0.11%) 0.5 0.18% Loan provisions and impairments 35.4 0.26% 53.1 0.38% (-) Recovery of loans written-off 14.7 0.11% 7.5 0.05% Net credit loss2 20.6 0.15% 45.6 0.33%

Note: in the table above, impairments for Structured Investment Vehicles (SIV) (22.7 M.€ in the 1st half of 2008). Table 45 1) As a percentage of the average balance on the performing loan portfolio. In annualised terms. 2) Loan provisions and impairments deducted of recoveries of loans and interests in arrears previously written off.

Other impairments and provisions In the 1st half of 2009 16.1 M.€ was set aside for In the same period last year, impairments and provisions securities and other purposes. for securities and other totalled 119.0 M.€. Of this figure, 111.5 M.€ resulted from the recognition as an impairment of the unrealised loss on the shareholding in BCP.

64 Banco BPI | 1st half 2009 report Domestic activity

EQUITY-ACCOUNTED RESULTS OF SUBSIDIARIES MINORITY INTERESTS Equity-accounted subsidiaries contributed 3.5 M.€ to net Minority interests in net profit which, in domestic activity, profit generated by domestic operations in the 1st half of essentially correspond to the dividend on preference 2009, compared with a contribution of 8.3 M.€ in the shares issued by BPI Capital Finance, decreased by 39%, first six months of 2008. from 9.0 M.€ in the 1st half of 2008 to 5.5 M.€, in the 1st half of 2009. This situation reflects the fall observed The insurance area subsidiaries’ contribution decreased in market interest rates considering that the preference from 7.2 M.€ in the 1st half of 2008 to 3.4 M.€ in the share dividend (non-cumulative) is indexed to the three- 1st half of 2009. The appropriated results relating to the month Euribor. equity stakes in Allianz Portugal and Cosec amounted to 3.6 M.€ and -0.2 M.€, respectively. At the end of June 2009, the balance sheet value of the preference shares stood at 266.0 M.€.

Equity-accounted results of subsidiaries Amounts in M.€ 30 Jun. 08 30 Jun. 09 Δ% Subsidiaries in the insurance area Allianz Portugal 6.7 3.6 (47%) Cosec 0.5 (0.2) (139%) Subsidiaries in the insurance area 7.2 3.4 (53%) Viacer 0.5 0.3 (37%) Finangest 0.6 (0.3) (154%) Outras 0.03 0.09 214% Total 8.3 3.5 (58%) Table 46

Report | Financial review 65 Domestic activity

PENSION LIABILITIES At 30 June 2009, the pension funds’ net assets totalled It is important to refer that, solely for computing 2 315.5 M.€, which guaranteed the funding of 99.4% of regulatory capital, the Bank of Portugal (Notice 11 / the amount of pension liabilities to Employees. 2008) established a regime for recognising in a gradual manner over 4 years part of the pension funds’ actuarial Pension liabilities to Employees and financial variances which occurred in 2008. The Pension liabilities at the end of June 2009 amounted to application of this regime to BPI meant that at the end of 2 330.0 M.€, 31.8 M.€ more than at the end of 2008. 2008 and in June 2009, any negative impact related to the actuarial and financial variances was not recognised The execution in the 1st half 2009 of the programme of in capital, as further described in the section “Group 200 early retirements gave rise to additional pension Capital” of the present chapter. liabilities of 30 M.€1. Employees’ pension obligations cover Amounts in M.€ Income 30 Jun. 08 31 Dec. 08 30 Jun. 09 In the 1st half of 2009, the banks’ pension funds Total past service registered a non-annualised return of 5%, which was pension liabilities 2 300.0 2 298.2 2 330.0 Pension funds 2 408.6 2 269.41 2 315.5 therefore higher than the pension funds’ assumed Financing surplus (/ deficit) 108.6 (28.8) (14.5) income2. Financing of pension liabilities 104.7% 98.7% 99.4% Corridor 240.9 229.9 233.0 It should be noted that up till June 2009, the fund’s Negative deviations recorded actual income since its creation in 1992 was 9.2% per in the corridor (219.0) (229.4) (232.6) annum on average, and in the last ten, seven, five and Available margin to accommodate 21.9 0.4 0.4 three years, the effective annual return was on average Positive (/ negative) deviations 7.0%, 7.4%, 6.0% and 4.6%, respectively. outside the corridor (0.1) (272.4) (200.3) Pension funds return (11.9%)2 (20.5%) 5.0%2 Actuarial and financial variances 1) Including contributions made at 2009. Table 47 2) Non-annualised return in the semester. The actuarial and financial variances registered outside the corridor decreased by 72.1 M.€ relative to December 2008. This trend is mainly the result of the positive variance in the pension funds’ income in the half year of 46.9 M.€, and the revision of the ACTV’s pension scales, below that of the assumed growth thereof, which gave rise to a positive actuarial variance of 17.4 M.€.

At the end of June 2009, the 10% “accounting corridor” envisaged in the IAS (of 233.0 M.€) was wholly utilised to accommodate the fund’s actuarial and financial variances, while outside the corridor there was a negative variance of 200.3 M.€.

1) Includes 1 M.€ already accounted in the pension liabilities value at 31 December 2008. 2) The figure of 5.5% is currently used for the pension fund’s expected rate of return as well as for the discount rate.

66 Banco BPI | 1st half 2009 report Domestic activity

Liabilities under the Directors’ complementary pension plan The directors forming part of Banco BPI’s Executive Committee as well as the other directors of Banco Português de Investimento benefit from a complementary retirement and survivors’ pension plan. The liabilities associated with this plan are covered by a pension plan.

At 30 June 2009, the aforementioned liabilities amounted to 27.1 M.€ and were 93.1% covered by the pension fund.

Directors’ complementary pension plan cover Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Total past service pension liabilities 23.1 26.1 27.1 Pension funds 22.5 25.41 25.3 Financing of pension liabilities 97.2% 97.2% 93.1% 1) Including contributions made at 2009. Table 48

Report | Financial review 67 INTERNATIONAL ACTIVITY

OVERVIEW International operations’ contribution to the Group’s The distribution network grew by 17% year-on-year to consolidated net profit was 46.9 M.€ in the 1st half of 116 units at the end of June 2009. In the last 12 2009. months, 13 new retail branches, one investment centre and 3 corporate centres were opened. BFA’s contribution to the Group’s consolidated net profit was 44.5 M.€1 in the 1st half of 2009, 21% lower than At the end of June 2009, BFA boasted a distribution the 56.6 M.€ contribution in the same period of 2008 network comprising 101 retail branches, 5 investment given that, with the sale of a minority interest in centres and 10 corporate centres, manned by a December 2008, the appropriation of BFA’s net profit by headcount of 1 755 Employees, 14% more than in June BPI dropped from 100% to 50.1%. Minority interests of 2008. 47.4 M.€ in BFA’s individual profit were recognised in the 1st half of 2009. BFA has an extremely liquid and capitalised balance sheet, which made it immune to the turbulence on the The contribution of the 30% equity interest in Banco international financial markets. Customer resources Comercial e de Investimentos (BCI), in Mozambique constitute the principal component of liabilities and (which is equity accounted) improved 30% to 2.5 M.€. guarantee the financing of 87% of assets. Customer loans represented 34% of Customer resources in June The return on average shareholders’ equity (ROE) 2009. allocated to international operations – about 12% of the Group’s average shareholders’ equity – was 40.5% in the Shareholders’ equity, including minority interests, 1st half of 2009. represented 8.0% of total assets.

In Angola, BFA’s operation is characterised by the In Mozambique, BCI maintained significant rates of expressive growth in business, the distribution network’s business growth. Net total assets grew by 36%, Customer expansion, market leadership, high liquidity, solidity and deposits by 34%, the loan portfolio by 78%, all relative profitability. to June 2008.

Relative to June 2008, total assets grew 51%, Customer At the end of June 2009, BCI’s workforce was composed resources were up 57%, Customer resources expanded of 951 Employees (+21% more than in June 2008) and 29% and the number of Customers grew 31% to 618 a distribution network with 57 branches (16 more thousand, which represents an increase of some 150 branches than in June 2008). thousand new Customers in the year.

Business expansion has been underpinned by the continued reinforcement of the Bank’s commercial capability based on the enlargement of the distribution network, on the increase in the workforce and their respective competencies, on the development of a segmented approach and on the broader range of products and services.

1) BFA contribution net of taxes on dividends.

68 Banco BPI | 1st half 2009 report International activity

CONSOLIDATION OF INTERNATIONAL OPERATIONS

International operations comprise the activity conducted by regarded as a hyperinflationary economy, with the result Banco de Fomento in Angola (fully consolidated), as well that the conversion of the income statement and the as the appropriation of the results attributable to the 30% balance sheet is done in accordance with the principles set participating interest in BCI Fomento, in Mozambique, and out in IAS 21. the activity of the broker BPI Dealer (92.7% held), also in Mozambique. The income and costs generated each month are converted into euro at the exchange rate of the month in which they In December 2008, BPI sold to Unitel a 49.9% stake in are recognised. In the case of assets and liabilities, the BFA’s capital, after which it began to recognise minority exchange rate ruling at the end of the year is used. The interests relating to this shareholding already with effect gains or losses resulting from this conversion are from December. recognised directly in Shareholders’ equity, in the caption REVALUATION RESERVES. Banco de Fomento Angola’s contribution to the net profit from international operations in the first half of 2009 was The local currency is the Kwanza; however, the Angolan 44.5 M.€, while BCI Fomento contributed with 2.5 M.€ economy’s high utilisation of the dollar explains why the and BPI Dealer Moçambique with a loss of 6 thousand major share of business with Banco de Fomento Angola’s euro. Customers is expressed in American dollars. At the end of June 2009, more than 69% of deposits and more than The COSTS and INCOME captions, as well as the captions 95% of the loan portfolio were denominated in dollars. ASSETS and LIABILITIES, presented as being derived from A substantial portion of revenue and costs is expressed in international operations, refer almost exclusively to Banco the American currency or is indexed thereto, as is the case de Fomento Angola, given that BCI Fomento Mozambique’s with personnel costs. contribution is recognised in the BPI Group’s financial statements using the equity method, while the accounts of In June 2009, around 67% of assets and 62% of liabilities BFE Dealer Mozambique (also consolidated in full) are not and shareholders’ equity were expressed in American material. dollars, while the remainder was virtually all expressed in kwanza (AKZ). Consolidation of Banco de Fomento Angola The financial statements of Banco de Fomento Angola are Euro exchange rates recognised in the consolidated financial statements using Jun. 08 Jun. 09 Δ% the purchase (full consolidation) method. At semester end 1 EUR = AKZ 118.1 109.5 (7.3%) Their inclusion is preceded by the conversion of the 1 EUR = USD 1.57 1.41 (10.6%) income statement and balance sheet balances into euro, Semester average based on indicative exchange rates disclosed by the Banco 1 EUR = AKZ 115.7 102.5 (11.4%) Nacional de Angola (central bank). 1 EUR = USD 1.54 1.34 (13.3%) Effective from the second half of 2006 and for purposes of Table 49 BFA’s consolidation, the Angolan economy ceased to be

Report | Financial review 69 International activity

International activity income statement1 Amounts in M.€ 1st half 2nd half 2008 1st half Δ% 1st half 08 / 08 08 09 1st half 09

Net interest income (narrow sense) 1 71.8 100.8 172.5 93.6 30.4% Unit linked gross margin 2 Income from securities (variable yield) 3 Commissions related to deferred cost (net) 4 Net interest income 5 = Σ 1 a 4 71.8 100.8 172.5 93.6 30.4% Technical result from insurance contracts 6 Commissions and other similar income (net) 7 21.0 28.7 49.7 23.7 13.0% Profits from financial operations 8 16.1 24.7 40.8 41.4 156.2% Operating income and charges 9 (0.4) 0.5 0.1 (0.4) (4.4%) Net operating revenue 10 = Σ 5 a 9 108.5 154.7 263.2 158.3 45.9% Personnel costs 11 (14.6) (17.7) (32.3) (21.3) 45.6% Other administrative expenses 12 (14.3) (15.6) (29.9) (21.4) 49.6% Depreciation of fixed assets 13 (5.5) (6.4) (12.0) (7.1) 28.6% Operating costs 14 = Σ 11 a 13 (34.5) (39.7) (74.2) (49.8) 44.5% Operating profit 15 = 10+14 74.0 115.0 189.0 108.5 46.5% Recovery of loans written-off 16 0.0 0.1 0.1 1.6 - Loan provisions and impairments 17 (4.1) (5.6) (9.8) (9.9) 138.8% Other impairments and provisions 18 (1.7) (5.6) (7.2) (4.2) 154.0% Profits before taxes 19 = Σ 15 a 18 68.3 103.9 172.1 95.9 40.5% Corporate income tax 20 (11.9) (14.9) (26.8) (4.3) (63.6%) Equity-accounted results of subsidiaries 21 2.1 2.5 4.5 2.7 30.2% Income attributable to minority interest 22 (0.0) (9.3) (9.3) (47.4) - Net profit 23 = Σ 19 a 22 58.5 82.1 140.6 46.9 (19.8%) Cash flow after taxation 24 = 23-13-17-18 69.8 99.7 169.5 68.1 (2.4%)

1) The contribution from the international activity includes the net profit of Banco de Fomento Angola (56.6 M.€, in the 1st half of 2008, and 44.5 M.€, in the Table 50 1st half of 2009) and of BCI (1.9 M.€, in the 1st half of 2008, and 2.5 M.€, in the 1st half of 2009), which in the case of the latter was equity accounted deducted of taxes on dividends received from BCI.

70 Banco BPI | 1st half 2009 report International activity

International activity balance sheet Amounts in M.€ 30 Jun. 08 31 Dec. 08 30 Jun. 09 Δ% Jun. 08 / Jun. 09 Assets Cash and deposits at central banks 323.4 439.3 953.1 194.7% Amounts owed by credit institutions repayable on demand 53.7 51.0 376.8 602.2% Loans and advances to credit institutions 170.5 558.9 315.8 85.3% Loans and advances to Customers 1 031.7 1 234.7 1 329.7 28.9% Financial assets held for dealing 819.1 1 474.5 251.2 (69.3%) Financial assets available for sale 429.0 527.4 1 028.5 139.8% Investments held to maturity - - - - Hedging derivatives - - - - Investments in associated companies and jointly controlled entities 14.1 15.9 17.0 20.2% Other tangible assets 74.2 94.6 98.9 33.4% Intangible assets 0.7 1.3 1.1 50.0% Tax assets --- - Other assets 3.0 4.6 43.2 1 346.8% Total assets 2 919.4 4 402.2 4 415.4 51.2% Liabilities and shareholders' equity Central banks’ resources - - - - Financial liabilities held for dealing - - - - Other credit institutions' resources 104.7 36.6 40.6 (61.2%) Clients' resources and other loans 2 457.3 3 895.1 3 885.1 58.1% Debts evidenced by certificates - - - - Technical provisions - - - - Financial liabilities associated to transferred assets - - - - Hedging derivatives - - - - Provisions 17.2 18.7 21.7 26.2% Tax liabilities 12.1 25.4 4.8 (60.1%) Instruments representing capital - - - - Other subordinated loans - - - - Other liabilities 17.7 21.6 96.0 442.5% Share capital, share premium account, reserves and other equity instruments 252.0 65.3 140.7 (44.2%) Treasury stock - - - - Net profit 58.5 140.6 46.9 (19.8%) Minority interests - 199.0 179.5 - Total shareholders’ equity and minority interests 310.5 404.8 367.1 18.3% Total liabilities and shareholders' equity 2 919.4 4 402.2 4 415.4 51.2% Note: Bank guarantees 227.4 237.1 229.7 1.0% Note: The balance sheet relating to the international activity presented above has not been corrected for the balances resulting from operations with the Table 51 “Domestic Activity” geographical segment. For consolidation purposes, these balances have been eliminated.

Report | Financial review 71 International activity

LOANS AND RESOURCES Customer loans The Customer loans’ portfolio grew by a year-on-year 29% The aggregate of time deposits and security sales with to 1 329.7 M.€ at the close of June 2009. The loan repurchase agreements expanded by 67% to 1 798.5 portfolio’s growth expressed in dollars1 was 15%. M.€ at the end of June 2009.

The ratio of loans in arrears for more than 90 days was Customer resources Amounts in M.€ situated at 1.5% at the end of June 2009, and was 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 covered by loan impairment allowances to the extent of 08 08 09 / Jun. 09 322%. Sight deposits 1 350.8 1 972.3 2 009.4 48.8% Term deposits 466.9 147.9 1 019.8 118.4% Securities sold with At the end of June 2009, approximately 70% of the repurchase agreements 609.8 1 735.7 778.7 27.7% portfolio were loans to companies and 30% loans Total 2 427.5 3 856.0 3 808.0 56.9% advanced to individuals. The loan portfolio presents a Table 53 significant sectorial diversification taking into consideration the emerging-market characteristics of the SECURITIES PORTFOLIO Angolan market and the fact that the oil-exploration and The portfolio of assets held for dealing is composed of diamond-mining industries represent more than 50% of short-term securities with maturities of up to one year, GDP. denominated in kwanzas and issued by the Central Bank (TBC – Títulos do Banco Central) and by the government In loans to individuals, loans for consumption (BT – Bilhetes do Tesouro). At the end of June 2009, this represented 54% and home loans 26%. portfolio was composed exclusively of Treasury Bills (Bilhetes do Tesouro).

Customer loans portfolio Amounts in M.€ 30 Jun. 31 Dec. 30 Jun. Δ% Jun. 08 The portfolio of assets held for dealing decreased from 08 08 09 / Jun. 09 819.1 M.€ in June 2008 to 251.2 M.€ at 30 June Performing loans portfolio 1 057.4 1 267.1 1 348.8 27.6% 2009, which reflects a very substantial reduction in the Loans in arrears 18.7 12.8 34.0 81.5% TB issues by the Government. Loan impairments 48.3 50.4 60.8 25.8% Interests 3.9 5.2 7.7 95.5% In the 1st half of 2009, the Angolan Treasury began to Total 1 031.7 1 234.7 1 329.7 28.9% promote longer-dated issues, from one to four years, – Bank guarantees 227.4 237.1 229.7 1.0% Table 52 treasury bonds in kwanzas, indexed to the American dollar, and treasury bonds indexed to inflation (with a 3% Customers resources differential over inflation) –, at the expense of TB issues. Customer resources expressed in the currency used for consolidating the accounts – the Euro – expanded by Counterbalancing the decline in the dealing portfolio, 57% to 3 808.0 M.€ at the end of June 2009. BFA’s portfolio of available-for-sale assets (which is Measured in dollars, Customer resources registered 40% composed of Treasury Bonds), recorded an increase of year-on-year growth1. 140% year-on-year from 429 M.€ in June 2008 to 1 028.5 M.€ at the end of June 2009. Sight deposits grew 49% (+659 M.€) year-on-year to 2 009.4 M.€. These represented at the end of June 2009 roughly 53% of total Customer resources.

1) At the end of June 2009, US dollar-denominated loans represented around 95% of the loan portfolio. 2) Customer resources expressed in dollars represented at the end of June 2009 roughly 69% of the total balance of Customer resources.

72 Banco BPI | 1st half 2009 report International activity

INCOME Net interest income Net interest income in international operations grew by The average spread between remunerated assets and 30.4% (+21.8 M.€) relative to the 1st half of 2008 to liabilities was situated at 4.8% in the 1st half of 2009, 93.6 M.€. which represents a decrease relative to the average spread of 6.5% registered in the same period of 2008. This increase reflects the expansion in the volume of business with Customers. In terms of average balances, In the 1st half of 2009, the average interest rate on Customer loans grew by 35% and the portfolios of loans was 8.0%, the average remuneration earned on the dealing and available-for-sale securities grew by 70% dealing portfolio (Treasury Bills) was situated at 13.7% year-on-year. For their part, Customer resources, with and the average remuneration on the portfolio of 83% year-on-year growth in terms of average balances, available-for-sale securities (Treasury Bonds) was situated fully funded the asset expansion. at 7.0%.

Net interest income Amounts in M.€ On the other hand, the average remuneration on 30 Jun. 08 30 Jun. 09 Δ% interest-bearing liabilities was 3.2% in the 1st half Income of 2009. Interest on Customer loans 42.1 53.7 27.6% Interest on financial assets held With effect from March 2009, the mandatory reserves for dealing 43.5 72.7 67.3% coefficient was raised from 15% to 20%. Subsequently Interest on financial assets available for sale 16.6 27.4 65.3% in May this coefficient was raised to 30%, while in June, Interest on placements with credit a change was made permitting that 1/3 of mandatory institutions and other 2.7 5.0 87.3% reserves can be composed of Central Bank securities or Interest income from interest-earning assets 104.8 158.9 51.5% public-debt securities held in banks’ own portfolios, while Costs for the remaining 2/3 the requirement to keep Customers deposits 7.9 15.4 94.3% non-remunerated deposits at the Central Bank is still Securities sold with repurchase in force. agreements 22.8 41.7 82.5% Other interest costs 2.3 8.2 255.5% Interest cost on interest-bearing liabilities 33.1 65.3 97.4% Net interest income 71.8 93.6 30.4% Table 54

Report | Financial review 73 International activity

Commissions Commissions and other similar income were up 13% to The indicator “operating costs as a percentage of net 23.7 M.€ in the 1st half of 2009. operating revenue” was situated at 31.5% in the 1st half of 2009.

Commissions and other similar income (net) Amounts in M.€

30 Jun. 08 30 Jun. 09 Δ% Operating costs Amounts in M.€ Banking services 9.6 11.0 13.8% 30 Jun. 08 30 Jun. 09 Δ% Deposits and related services 7.4 8.5 14.1% Personnel costs 14.6 21.3 45.6% Associated with loans and guarantees 2.6 2.7 6.6% Outside supplies and services 14.3 21.4 49.6% Other 1.3 1.5 13.1% Operating costs, before depreciation Commissions 21.0 23.7 13.0% and amortisation 28.9 42.7 47.6% Table 55 Depreciation and amortisation 5.5 7.1 28.6% Total 34.5 49.8 44.5% Profits from financial operations Efficiency ratio1 31.8% 31.5% Profits from financial operations rose by 156% from 1) Operating costs as a % of net operating revenue. Table 56 16.1 M.€ in the 1st half of 2008 to 41.4 M.€ in the 1st half of 2009. These results are derived primarily from IMPAIRMENTS AND PROVISIONS commercial operations with Customers. Provisions and impairment charges amounted to 14.1 M.€ in the 1st half of 2009, corresponding to an OPERATING COSTS increase in absolute amount of 8.3 M.€ relative to the The distribution network’s strong expansion in Angola and same period of 2008. the associated increase in the workforce explain the 44.5% increase in operating costs to 49.8 M.€ in the Loan impairment charges increased from 4.1 M.€ in the 1st half of 2009. 1st half of 2008 to 9.9 M.€ in the 1st half of 2009. The indicator “loan impairments as a percentage of the Also contributing to the increase in costs expressed in average loan portfolio” in annualised terms rose from euro (accounting consolidation currency) was the dollar’s 0.80% in the 1st half of 2008 to 1.44% in the 1st half appreciation of 14.9% against the euro in terms of the of 2009. average exchange rate for the six months when compared with the same period of 2008. In fact, the Angolan It will be recalled that in February 2008 new rules for economy’s high “dollarization” means that a large portion the constitution of provisions came into effect in Angola. of income and costs is expressed in dollars or in kwanzas Within the ambit of this regulatory change, BFA (but indexed to the dollar, as is the case with payroll undertook a review of impairments, having arrived at a costs). surplus of 7.9 M.€ which was utilised between March and July 2008. Had this procedure not been adopted, Personnel costs rose by 45.6%. This increase is the amount of impairments in the first half of 2008 explained on the one hand by the 6.6% growth in the would have been 9.5 M.€, which corresponds to an average headcount relative to the 1st half of 2008, and annualised 1.85% of the loan book’s average balance, on the other by salary reviews, promotions and the effect instead of the 4.1 M.€ actually recorded (0.80% of the of the dollar’s appreciation vis-à-vis the euro. Costs loan book’s average balance in annualised terms). incurred with outside supplies and services climbed by 49.6%, while depreciation and amortisation rose by 28.6%.

74 Banco BPI | 1st half 2009 report International activity

CORPORATE INCOME TAX The average corporate income tax rate in Angola declined BCI maintained a high pace of business growth. Relative from 17.4% in the 1st half of 2008 to 4.5% in the first to June 2008, total assets grew by 36% to 694.2 M.€; six months of 2009. The reduction in that average rate is deposits by 34% to 549.8 M.€ and the Customer loans chiefly explained by the increase in the portfolios of portfolio by 78% to 440.5 M.€. securities issued by the Angolan government (Treasury Bills and Treasury Bonds) bearing in mind that the At the end of June 2009, BCI served some 105 thousand income earned on these securities is tax exempt. Customers. It had a workforce comprising 951 Employees, 21% more than the figure a year earlier, and a distribution EQUITY-ACCOUNTED RESULTS OF SUBSIDIARIES network made up of 57 branches (16 more than in June Equity-accounted results correspond to the appropriation 2008). of net income attributable to the 30% participating interest in BCI in Mozambique. In the first half of 2009, MINORITY INTERESTS equity-accounted results amounted to 2.7 M.€, 30.2% In December 2008, BPI sold a 49.9% stake in BFA’s more than the figure for the same period a year ago. capital to Unitel, as a result of which BPI’s shareholding fell from 100% to 50.1%. BCI’s contribution to consolidated net profit, besides the equity-accounted results, also includes the deferred tax In the 1st half of 2009, BPI recognised minority interests relating to BCI’s distributable earnings. In the first half of of 47.4 M.€ in BFA’s net profit. 2008, BCI’s contribution increased by 30.2%, from 1.9 M.€ in the 1st half of 2008 to 2.5 M.€ in the 1st half of 2009.

Report | Financial review 75 Risk management

At the BPI Group, risk management is founded on the converge). It is responsible for identifying exposure to the ongoing identification and analysis of the exposure to the different risks, including the calculation of capital at risk different risks (counterparty risk, country risk, market using VaR models and stress tests, the control of risks, liquidity risks, operational and legal risks); and on derivatives, the production of rating and scoring models, the execution of strategies aimed at maximising the the calculation of Default Probability (DP) and Loss Given results vis-à-vis risks, within predefined and duly Default (LGD), statistical provisions and the selection of supervised limits. Risk management is complemented by portfolios for securitisation. the analysis à posteriori of performance indicators In the specific realm of credit risks, the Corporate and ORGANISATION Small Businesses Credit Risk Division and the Individuals Risk management is coordinated by the Board of Credit Risk Division, are charged with ensuring an Directors’ Executive Committee within the ambit of the independent vision of the risk of the various proponents work delineated by the Board of Directors. At the higher or guarantors and of the characteristics of the operations level there are also two specialist executive committees: in the respective segments; as well as the management of the Market Risk Executive Committee, whose attention is debt-recovery processes in the event of default. In focused on the management of overall risks (market, specific segments such as Institutional Customers or liquidity, country and credit / securitisations), and the Derivatives, there are risk-analysis areas carrying out Credit Risk Executive Committee, whose work is similar functions. The attribution of ratings to Portuguese concentrated on the analysis of the larger loan and Spanish companies (having as a support a operations. quantitative model in the case of many companies), or to project finance operations is the function of the The Bank has a centralised and independent structure for Corporate and Small Businesses Credit Risk Division, as dealing with the analysis and control of risk in well as of the Rating Committee. accordance with the best organisational practices in this domain, and with the requirements of the Basle Accord. In the operational risks domain, a specific unit of the The Risk Analysis and Control Division is responsible for Organisation Division keeps abreast of the information of monitoring overall risks (market, credit, country, liquidity the processes and occurrences through the application of and operational risks) and for the management of the operational risk management. This information is then Risk Datamart for the whole Group (to where all the reported to the Operational Risk Committee. important information about the Bank’s systems

76 Banco BPI | 1st half 2009 report Selected indicators

Jun. 08 Jun. 09 Domestic International Consolidated Consolidated activity activity Loans in arrears for more than 90 days, as percentage of total loan portfolio 1.1% 1.8% 1.5% 1.7% Loan impairments (accumulated in the balance sheet), as percentage of total loan portfolio 1.4% 1.5% 4.9% 1.6% Loans in arrears for more than 90 days and doubtful loans1, as percentage of total loan portfolio2 1.1% 1.8% 1.5% 1.8% Loans in arrears for more than 90 days and doubtful loans, net of specific loan provisions, as percentage of total net loan portfolio2 0.2% 0.7% -3.0% 0.6% Increase in loans in arrears (for more than 90 days), adjusted by write-offs as percentage of the performing loan portfolio3 0.32% 0.97% 1.74% 1.00% Increase in loans in arrears (for more than 90 days), adjusted by write-offs and deducted of recoveries of loans and interests written-off, as percentage of the performing loan portfolio3 0.21% 0.91% 1.51% 0.94% Loan impairments in the period as percentage of the performing loan portfolio3 0.28% 0.38% 1.44% 0.43% Loan impairments in the period deducted of recoveries of loans and interests written-off, as percentage of the performing loan portfolio3 0.18% 0.33% 1.21% 0.37% Country-risk exposure, net of provisions (M.€)4 ---5 904.3 As percentage of total assets (net) - - - 14% Market risk (VaR) Maximum (M.€) 5.7 - - 2.5 Monthly average (M.€) 2.4 - - 1.4 Loans as percentage of total Customer resources 88.9% 92.1% 36.5% 85.9% Loans as percentage of stable resources5 72.0% - - 57.1% 1) Doubtful loans treated as being in arrears for purposes of provisioning. Table 57 2) Calculated according to the Bank of Portugal Instruction 16 / 2004. 3) As percentage of the performing loans portfolio (average balance). In annualised terms. 4) The exposure to Group I countries totals 4 797 M.€ (essentially corresponds to the exposure to European Union countries, Switzerland, USA and offshore banks which are 100% held or are the branches of counterparties whose registered head offices are in Group I countries). The exposure to Group II countries (including subsidiaries) totals 1 108 M.€ and essentially corresponds to the exposure to Brazil (431 M.€), Angola (375 M.€, including the subsidiary), Kazakhstan, Russia, Turkey and Mozambique. 5) Stable resources in accordance with the definition laid down in Bank of Portugal Instruction 1 / 2000: Customer deposits, participating securities, provisions for loans (specific and general), loans (certificated or not) with a residual maturity term of more than one year, minority shareholders’ interests and shareholders’ equity, after deducting the profits to be distributed by way of dividends.

Report | Risk management 77 CREDIT RISK Management process Credit risk associated with the possibility of actual In the small businesses segment, the medium / long- default by a counterparty (or with the change in the term operations must as a rule be fully secured by economic value of a given instrument or portfolio tangible guarantees. stemming from a deterioration in the risk quality of a counterparty) constitutes the primary risk factor inherent In order to mitigate credit risk on companies’ derivative in the BPI Group’s business spectrum. operations, in addition to the drafting of contracts with clauses which permit the set-off of obligations in the Specific approval for loans to companies and small event of default, BPI has as a rule signed businesses or to institutional Customers follows the collateralisation accords with its counterparties. principles and procedures laid down in the credit regulations, and in essence result from the following: The specific approval of loans to individuals follows the principles and procedures laid down in the credit ᭿ Rejection filters: the existence of incidents and defaults regulations. The approval or rejection of operations in or debts to the Tax Administration, the Social Security essence result from the following: Department, currency restrictions and others. ᭿ Rejection filters: the existence of incidents and defaults ᭿ Exposure limits: evaluation of the present capability to or debts to the Tax Administration and to the Social service debt and the establishment of corresponding Security Department, minimum and maximum age maximum exposure limits. restrictions and others.

᭿ Acceptance / rejection boundary according to the ᭿ Exposure limits: evaluation of the present capability to probability of the counterparty defaulting: a boundary is service debt through the calculation of the set in accordance with the internal rating (potential housing-to-income ratio or the estimated value of the Customers whose classification places them in a risk savings of the loan applicants, guarantors or sureties. As class which is deemed to be excessive are turned down, a general rule, applications where the housing-to-income that is, whose probability of defaulting is high); or in ratio is considered to be excessive or where savings accordance with an equivalent analysis by an expert become negative due to the costs of the new loan, are system (there is no internal scoring or rating for the turned down. small businesses or the institutional Customers segment, with the result that the subjective appraisal of ᭿ Acceptance / rejection boundary, according to the the risk analysts is fundamental). probability of the counterparty defaulting: boundaries are set in accordance with the internal scoring ᭿ Mitigation of risk attaching to operations: in the (potential Customers whose classification places them acceptance or rejection of Customers and operations, at risk which is deemed to be excessive are turned regard is had to any personal or tangible guarantees down, that is, whose probability of defaulting is high). which contribute to reducing risks. There are reactive scorings for each loan segment In the corporate segment, the object is to become (housing, personal loans, credit cards and motor car involved with long-term operations which are associated finance) designed to evaluate the probability of default by with tangible guarantees (financial and non-financial), the counterparty, guarantors or sureties. with collateral cover levels (net of haircuts and temporal adjustments in the case of financial assets) of 100%. In complex cases, the identification of the risk class (probability of default) requires the involvement of the Individuals Credit Risk Division.

78 Banco BPI | 1st half 2009 report ᭿ Mitigation of risk attaching to operations: in the An estimate is also made of the provisions for impairment acceptance or rejection of Customers and operations, losses, involving both a statistical calculation for regard is had to any personal or tangible guarantees performing loans, with incidents or in default, and an which contribute to reducing risks. evaluation of the same impairment by expert systems for all the larger loans. The impairment losses and provisions In the Home Loans segment, the relationship between are the object of a monthly assessment by the Board of loan and guarantee is now subject to a maximum Directors’ Executive Committee (Executive Committee for ceiling of 85% (or 95% if there is personal protection Credit Risk), and are scrutinised every six months by the insurance or insurance to protect the amount external auditors and reviewed regularly by the Audit repayable). In motor car finance, the relationship Committee. between the amount financed and the security can attain a maximum ceiling of 130%. Functioning as agents controlling this entire management process, in addition to the Board of Directors, the Audit In order to access BPI personal loans, an insurance and Internal Control Committee, the Supervisory Board policy must be taken out which protects the loan and the Executive Committee for Credit Risk, are the Risk against the eventuality of unemployment and Analysis and Control Division, the internal and external hospitalisation. Auditors and the Bank of Portugal.

On the commercial front, the overall evaluation of Evaluation of exposure to credit risk operations or Customers must take into consideration the Companies, institutional Customers, specialised finance objectives relating to the profitable employment of and small businesses shareholders’ equity relative to the risks assumed. BPI uses an internal rating system for companies with ten classes (E1 to E10) plus two classes in the case of For each one of the different divisions involved, the incidents (ED1 and ED2) and one in the case of default relevant hierarchical levels for the approval of credit (ED3, which corresponds to a 100% “probability of according to their risk or commercial characteristics have default”. Default probabilities are associated to each been defined with the object of decentralising decisions classification for the evaluation of loans, guarantees and and, therefore, ensuring processing speed and efficacy. securities of medium and large-sized companies.

Subsequently, the Bank maintains constant vigilance over the evolution of its exposure to the different counterparties, the evolution of its portfolio (diversification by geographical area, sector, segment, counterparty, currency and maturity), and the profitability results and indices achieved vis-à-vis the risks assumed.

Moreover, problematic credit situations, provisioning cover indices, write-offs and recoveries are analysed every month. The alert signalling non-performing loans is available on-line via the internal network for the information of the Bank’s managers.

Report | Risk management 79 Internal rating of companies Internal rating of project finance Breakdown of exposure by risk classes in June 2009 Breakdown of exposure by risk classes in June 2009 Value % of portfolio One-year default Value % of portfolio Risk classes Risk classes (M.€) amount probability (M.€) amount E1 1 345.1 12.2% 0.03% Strong 532.0 29.4% E2 1 176.7 10.7% 0.38% Good 1 190.7 65.7% E3 1 409.5 12.8% 0.79% Satisfactory 9.6 0.5% E4 1 197.1 10.8% 0.88% Weak 7.5 0.4% E5 1 356.4 12.3% 1.27% Default 0.0 0.0% E6 1 476.3 13.4% 1.89% Without rating 71.8 4.0% E7 981.3 8.9% 2.37% Total 1 811.7 100.0% E8 982.0 8.9% 3.35% Table 59 E9 273.3 2.5% 3.77% E10 139.2 1.3% 5.63% The small businesses segment is not evaluated by means Without rating 151.8 1.4% 5.63% of scoring. Notwithstanding this fact, it is possible to ED1 135.7 1.2% 21.01% estimate an average default probability over a one-year ED2 71.8 0.7% 25.57% period in the case of this portfolio of 2.1%, and a loss in ED3 (default) 340.0 3.1% - the event of default of 48.2% (the definition of default Total* 100.0% used in the calculations of impairment losses is that of Note: the portfolio includes bonds and commercial paper of the Table 58 Companies segment. In the calculation of default probabilities, loans in arrears for 180 days or more). all the operations in default of a single Customer were regarded as being a single negative case (and not various cases). The calculation of the portfolio’s average default probabilities naturally excludes the ED3 class (in default for more than These systems for evaluating counterparty risk are 90 days or in legal-recovery process) and does not take into account any bank guarantees. complemented by other methodologies, in particular, the calculation of the capital at risk, in accordance with the The average default probability (DP) of the Companies assessment enshrined in regulations governing solvency portfolio from a one-year perspective weighted by the ratios or a variation thereof. amount of liabilities stood at 2.0% at 30 June 2009. The loss in case of default (LGD) in this segment is on Indices relating to exposure concentration are also average 18.4%. analysed. In global terms, the portfolio reveals a sound degree of diversification by counterparty or groups In the project finance area, there is a classification (including conservative compliance with the regulations system based on five classes. The portfolio is composed governing “large exposures”), geographical areas, sectors in the majority of cases of projects with “good” or and maturity periods. “strong” ratings. Financial institutions In financing granted to other financial institutions, BPI bases its risk analysis on available external ratings. Financing relations are restricted to investment grade institutions.

80 Banco BPI | 1st half 2009 report Individuals Securities portfolio In the individuals domain, there is a reactive scoring Turning to the evaluation of risks stemming from its model for each segment, which is annually updated, securities portfolio, BPI resorts primarily to information designed to represent default probabilities (distribution of obtained from external rating reports. Notwithstanding the results of each scoring by ten classes, plus two in the the valuation of bonds at market prices containing case of incidents and one terminal class in the case of implicitly in this environment high risk premiums, the default). investment portfolio is predominantly composed of the securities of low credit-risk issuers. Over the life of the operations, the default probabilities are assessed and represented by behavioural scorings or Bonds and fixed-interest securities’ 1 by the study of default frequencies in each loan segment. investment portfolio Amounts in M.€ Rating Dec. 08 % Jun. 09 % Default probabilities of loans to individuals in June 2009 Aaa 137.3 2.8 128.3 1.8 Default probability within a Loss given Aa 764.2 15.8 2 625.3 36.1 Risk classes year, weighted by the default A 589.6 12.2 882.1 12.1 liabilities in the portfolio Baa 696.4 14.4 995.7 13.7 Mortgage loans 2.1% 27.07% Others / without rating (NR) 860.0 17.8 971.3 13.3 Personal loans 2.7% 27.46% Commercial paper with Motor car finance 3.2% 19.35% guarantees from Credit cards 2.7% 52.92% credit institutions 12.4 0.3 35.8 0.5 Note: The calculation of average DP includes situations of loans in arrears Table 60 Commercial paper without for less than 90 days. The LGD calculation for the Motor Car and Cards guarantees 1 763.2 36.6 1 639.9 22.5 loan (credit) segments conforms to a 180-day default definition and employs a Total 4 823.1 100.0 7 278.4 100.0 different calculation methodology (calculation referring to December 2008). 1) Includes preference shares which are recorded in the equities portfolio. Table 61

The estimated loss on each operation in default in these segments is also revised periodically over the lifespan of Equities / participating interests portfolio the operations. The lower expected loss in the event of As regards the structural position of the equities / default in the motor-car and housing finance is directly participating interests portfolio, the corresponding market related to the existence of tangible guarantees, risk is not easily measured by traditional methodologies facilitating the recoupment of loans. In home loans, the such as VaR, given the investment’s time horizon, the estimated ratio of portfolio finance / average guarantee at importance of the positions or the lack of quoted prices the end of June was around 46.4% (for value of in the equity market. According to the Basle Accord, this outstanding principal and revalued properties), providing risk is treated as credit risk (and eventually included in a comfortable safeguard margin against delinquencies. the treatment of large exposures).

The realisation of a stress test on this portfolio reveals a capital at risk of just 32.2 M.€ given above all the fall already registered and the disposal of equity positions in the meantime.

Report | Risk management 81 Derivative operations Default, provisioning and recovery levels Given the specific manner in which they are valued, At the end of June 2009, Customer loans in arrears for credit risk stemming from derivative operations is more than 90 days amounted to 514.6 M.€, which accorded special treatment. This has as its base the corresponded to 1.7% of the gross loan portfolio. concept of the substitution value, which is estimated daily. Default probabilities and the value of losses in case In domestic operations, loans in arrears for more than of default are analysed according to the rating agencies’ 90 days totalled 493.5 M.€, which corresponded to a data. loan-in-arrears ratio of 1.8%, while in international operations, loans in arrears for more than 90 days The set-off and collateralisation contracts naturally have amounted to 21.1 M.€ and were equivalent to 1.5% of an influence on the calculation of this type of exposure. the gross loan portfolio. These agreements, which entail the receipt (and payment) of collateral amounts for hedging risks between The non-performing loan ratio calculated in accordance counterparties, permitted a reduction in the substitution with the criteria prescribed in Bank of Portugal value of the derivatives portfolio from 409 M.€ (gross letter-circular no. 99 / 2003 was 1.8%. Besides loans in amount, after set-off) to 200 M.€ (net amount) at the arrears for more than 90 days, the aforesaid ratio end of June 2009. includes doubtful debts, which are treated as being in arrears for provisioning purposes. At 30 June 2009, Current credit risk doubtful loans totalled 10.3 M.€. Substitution value of derivatives by type of counterparty M.€ Jun. 08 Jun. 09 At 30 June 2009, impairment allowances (accumulated) Over-the-counter market 149.1 199.6 relating to the Customer loans portfolio recognised in the Financial institutions 52.9 60.7 consolidated balance sheet totalled 477.9 M.€, which Local and administrative public sector 0.1 0.2 corresponded to 1.6% of the gross loan portfolio. Loan Companies 89.5 134.0 impairments in domestic operations were 409.9 M.€ and Unit trust funds / pension funds 3.7 1.3 corresponded to 1.5% of the gross loan portfolio. In Individuals 2.8 3.4 international operations, loans impairments totalled Regulated markets (stock exchange) 0.0 0.0 € Total 149.1 199.6 68.0 M. , which corresponded to 4.9% of the gross loan Note: the total substitution value is the sum of the substitution values of the Table 62 portfolio. counterparties, when positive. It does not include options inserted into bonds issued or bought. The substitution value incorporates the effect of the risk reduction that results from the set-off of credit and debit balances between the same counterparties and agreements with counterparties, which serve as guarantee for compliance with obligations.

This form of evaluating exposure to counterparty risk is complemented by the traditional regulatory approach.

82 Banco BPI | 1st half 2009 report Loans to Customers in arrears, provisions and impairments Amounts in M.€ 2005 2006 2007 Jun. 08 2008 Jun. 09 Customer loan portfolio at the end of the period (gross) 21 270.4 24 941.4 27 603.2 28 908.2 29 723.8 29 489.8 Loans in arrears Loans in arrears for more than 90 days1 278.0 263.5 276.9 306.1 357.1 514.6 Loans in arrears for more than 30 days1 295.7 277.6 296.5 336.4 460.8 562.2 Doubtful loans2 5.4 3.3 6.7 7.8 6.6 10.3 Loan impairments 335.1 341.0 385.7 406.2 464.5 477.9 Ratio of loans in arrears and doubtful loans Loans in arrears for more than 90 days, as percentage of total loan portfolio 1.3% 1.1% 1.0% 1.1% 1.2% 1.7% Loans in arrears for more than 90 days and doubtful loans2, as percentage of total loan portfolio3 1.3% 1.1% 1.0% 1.1% 1.2% 1.8% Loans in arrears for more than 30 days, as percentage of total loan portfolio 1.4% 1.1% 1.1% 1.2% 1.6% 1.9% Loan impairments (accumulated in the balance sheet) Loan impairments, as percentage of total loan portfolio 1.6% 1.4% 1.4% 1.4% 1.6% 1.6% Loan impairments, as percentage of loans in arrears for more than 90 days 120.5% 129.4% 139.3% 132.7% 130.1% 92.9% Note Write-offs 48.3 30.5 37.4 15.14 41.0 24.24 Recovery of loans and interests in arrears written-off 17.6 21.0 20.9 14.84 25.9 9.04 1) Includes interests in arrears. Table 63 2) Doubtful loans treated as being in arrears for purposes of provisioning. 3) Calculated according to the Bank of Portugal Instruction 16 / 2004. 4) In the semester.

Loans in arrears for more than 90 days (adjusted for 0.70% of the average loan portfolio in annualised terms). write-offs) increased by 181.7 M.€ relative to December In domestic operations, this indicator was situated at 2008, of which 71.3 M.€ refers to a single default 162.3 M.€ in the 1st half of 2009, which corresponds to situation which in December 2008 was classified as an annualised 0.91% of the loan portfolio (91.0 M.€ and loans in arrears for more than 30 days. 0.66% respectively, excluding the abovementioned default situation), while in international operations it was Excluding this default situation, the appearance of new 10.4 M.€ (1.51% of the loan portfolio in annualised non-performing loans (for more than 90 days), net of terms). recoveries, in the 1st half of 2009 totalled 110.4 M.€, which corresponded to an annualised 0.76% of the The net credit loss in the half-year (measured by loan average loan portfolio. impairment losses recognised in the period and after deducting recoveries of arrear loans previously written off During the first six months of 2009, 9.0 M.€ in arrear from assets) amounted to 54.0 M.€, which corresponds loans and interest previously written off was recovered. to 0.37% of the performing loan portfolio in annualised terms. Deducting the overdue loans and interest recoveries from the variation in loans in arrears (for more than 90 days) It is worth noting that loan-impairment charges in the in the 1st half of 2009, adjusted for write-offs, we arrive period correspond to the increase in the estimated total at a figure of 172.6 M.€, or 0.94% of the average loan loss on both performing and non-performing loans, taking portfolio in annualised terms, (101.3 M.€ excluding the into consideration the total amount of the exposure, the aforementioned default situation, which corresponds to probability of entering into default, the existence of

Report | Risk management 83 tangible guarantees, the recoverable amount and the portfolio in annualised terms. In international operations, period of time to recovery. the net credit loss was situated at 8.3 M.€, which corresponds to 1.21% of the loan portfolio in annualised In domestic operations, the net credit loss was 45.6 terms. M.€, which corresponds to 0.33% of the performing loan

Credit loss and cost of risk Amounts in M.€ Domestic activity International activity BPI Group (consolidated) Jun. 08 Jun. 09 Jun. 08 Jun. 09 Jun. 08 Jun. 09 Performing loan portfolio (average balance) 26 741.4 27 740.1 1 029.0 1 372.3 27 770.4 29 112.4 Change in loans in arrears Increase in loans in arrears (for more than 90 days) adjusted by write-offs 39.4 169.7 5.0 11.9 44.4 181.7 as percentage of the performing loan portfolio (average balance)1 0.29% 0.97% 0.96% 1.74% 0.32% 1.00% - Recovery of loans and interests in arrears written-off 14.7 7.5 0.0 1.6 14.8 9.0 = Increase in loans in arrears (for more than 90 days), adjusted by write-offs and deducted of recoveries of loans and interests written-off 24.7 162.3 4.9 10.4 29.6 172.6 as percentage of the performing loan portfolio (average balance)1 0.18% 0.91% 0.96% 1.51% 0.21% 0.94% Net credit loss Loan impairments in the semester (in the income statement) 35.4 53.1 4.1 9.9 39.5 63.0 as percentage of the performing loan portfolio (average balance)1 0.26% 0.38% 0.80%2 1.44% 0.28%2 0.43% - Recovery of loans and interests in arrears written-off 14.7 7.5 0.0 1.6 14.8 9.0 = Net credit loss 20.6 45.6 4.1 8.3 24.7 54.0 as percentage of the performing loan portfolio (average balance)1 0.15% 0.33% 0.80%2 1.21% 0.18%2 0.37% 1) As a percentage of the average balance on the performing loan portfolio. In annualised terms. Table 64 2) Following the introduction in February 2008 of new rules for the constitution of provisions in Angola, BFA set about the review of impairments, having ascertained a surplus relative to the previous methodology, which was utilised between March and July 2008. Had this procedure not been adopted, the amount of impairment charges in international operations in the first half of 2008 would have been around 9.5 M.€. (instead of the 4.1 M.€ actually booked), while the amount of impairments as a % of the loan portfolio in annualised terms would have been 1.85% instead of 0.80%. From a consolidated perspective, the indicator impairment charges as a percentage of the average balance on loans would have been 0.32% (instead of 0.28%), and the consolidated impairment indicator, net of loan recoveries, as a percentage of the average balance on loans would have been 0.22% (instead of 0.18%).

BPI recognises as overdue loans the instalments on a At 30 June 2009, total loans in arrears were 562.2 M.€ loan which are in arrears for more than 30 days. In the which represented 1.9% of the gross loans portfolio. At case of loans handed over for legal recovery, all the that date, there were instalments not yet due with outstanding capital (instalments due and not yet due) is defaulting instalments amounting to 408.9 M.€. classified as loans in arrears. In mortgage loans, BPI normally initiates the recovery process 5 months after the Of the total exposure to overdue loans and associated date of the 1st default, at which moment the loan instalments not yet due (971.1 M.€), roughly 56% are becomes a litigation situation, and all the outstanding fully covered by tangible guarantees, and about 67% capital is in this manner recognised as loans in arrears. were secured by tangible guarantees of more than 75% of the total exposure to loans (instalments due and not yet due).

84 Banco BPI | 1st half 2009 report In average terms, total overdue loans and associated The remaining loan impairment allowances recorded in instalments were 96% covered by tangible guarantees the consolidated balance sheet and not allocated to (655.2 M.€) and individual impairment allowances set specific default situations, amounted to 196.7 M.€, aside for these loans (281.2 M.€). which corresponds to 0.7% of the performing loan portfolio.

Loans in arrears and performing loans associated with loans in arrears At 30 June 2009 Amounts in M.€ Loans with instalments in default Real guarantees2 Impairments4 (mortgages and Performing loans1 In arrears Total other3) Loans with collateral 361.3 314.7 675.9 655.2 140.8 Loans without collateral 47.6 247.5 295.2 140.4 408.9 562.2 971.1 655.2 281.2 1) Performing loans associated with loans in arrears. Table 65 2) It was considered the amount owed if lower than the fair value of the collateral received. 3) Other collateral includes pledged deposits and securities. 4) For purposes of determining impairments in loans under legal action, pledged property is valued at the amount in the event of execution, which is less than market value.

At the end of June 2009, accumulated impairment In international operations, the accumulated impairment allowances in the balance sheet relating to domestic allowances in the balance sheet represented 4.9% of the operations represented 1.5% of the gross loan portfolio. gross loan portfolio at the end of June 2009, which corresponded to 322% cover for loans in arrears for more It is important to point out that the expected loss on than 90 days. mortgage loans, which accounted for 39% of the domestic operations’ loan portfolio at the end of June The table below presents the ratios for loans in arrears for 2009, is lower – 1.0% of the loan book –, given the more than 90 days and the impairment allowances in the existence of real guarantees and a history of very minimal balance sheet by market segment, as well as the actual loss. contribution of each segment to the gross loan portfolio.

Loans in arrears and impairments accumulated in the balance sheet, by market segment Jun. 08 Jun. 09 Loan portfolio Ratio of loans Loan impairments Loan portfolio Ratio of loans Loan impairments (gross), as % of in arrears for (accumulated in the (gross), as % of in arrears for (accumulated in the the consolidated more than balance sheet) as % of the consolidated more than balance sheet) as % of loan portfolio 90 days the gross loan portfolio loan portfolio 90 days the gross loan portfolio Domestic activity Corporate banking, institutional banking and project finance 44% 0.5% 1.2% 43% 1.3% 1.4% Individuals and small businesses banking Mortgage loans 36% 1.5% 0.8% 37% 1.9% 1.0% Loans to individuals – other purposes 4% 1.7% 2.6% 4% 2.0% 2.8% Loans to small businesses 9% 1.8% 2.2% 9% 3.1% 3.1% Individuals and small businesses banking 50% 1.6% 1.2% 50% 2.2% 1.5% Others 2% 0.9% 1.4% 2% 0.8% 1.0% Domestic activity 96% 1.0% 1.2% 95% 1.8% 1.5% International activity 4% 1.4% 5.4% 5% 1.5% 4.9% Total 100% 1.1% 1.4% 100% 1.7% 1.6% Table 66

Report | Risk management 85 COUNTRY RISK Country risk is very similar in terms of its respective Country risk exposure effects to counterparty risk and is associated with the At 30 June 2009 M.€ Rating Gross Guaran- Exposure changes or specific turmoil of a political, economic or Country Exposure tees net of financial nature in those places where the counterparties guarantees operate (or, more rarely, in a third country where the Countries from Group I 5 103.9 307.1 4 796.8 business transaction takes place), which impede full Euro zone 3 182.1 255.4 2 926.7 compliance with the contract, irrespective of the Other UE countries 500.0 10.4 489.6 counterparties’ will or capacity. The “country-risk” Switzerland AAA 27.9 1.6 26.3 EUA AAA 159 30.9 128.0 designation is also used to classify the counterparty risk Other 9.1 8.8 0.3 involved in loans to state entities, given the similarity Off-shores 1 225.8 1 225.8 between the analysis methods for country risk and those Countries from Group II 926.8 16.2 910.6 for a state’s counterparty risk (sovereign risk). Brazil BBB- 432.2 1.5 430.7 Trade Finance 20.1 20.1 Individual evaluation of each country’s risk is performed Public debt 294.2 294.2 with recourse to external ratings, external studies (IIF and Other 118 1.5 116.5 others) and reports prepared by the Finance Division. The Kazakhstan BBB- 76.4 76.4 Board of Directors’ Executive Committee approves the list Trade Finance 17.0 17.0 of countries in respect of which country-risk exposure is Other 59.4 59.4 authorised. Eligible countries considered are large-sized Russia BBB+ 124.9 124.9 emerging markets which embrace market economy Trade Finance 29.7 29.7 Other 95.2 95.2 principles, are open to international trade and are of Turkey BB- 66.5 66.5 strategic importance within the framework of international Other 66.5 66.5 politics. Angola 204.9 10.3 194.6 Mozambique B 16.0 2.8 13.2 In addition, the operations defined as eligible are Other 5.8 1.5 4.3 short-term financing for external trade, the loans of Subsidiaries 196.9 196.9 certain multilateral banks, certain medium-term Angola (BFA) 180.2 180.2 operations with political risk hedging or which, due to Mozambique (BCI) B 16.7 16.7 their structuring, are not subject to transfer risk. Total 6 227.6 323.3 5 904.3 Note: Table 67 Group I – General authorisation. Includes operations with banks domiciled in offshore centres, provided that these banks are 100% owned or are the branches of authorised counterparties whose registered head offices are domiciled in Group I countries. Group II – Remaining Countries / Operations. Gross exposure includes on-balance sheet and off-balance sheet operations (current exposure of derivatives). Rating corresponding to 2nd best (S&P, Fitch IBCA, Moody’s), medium and long-term debt. The off-shores include the Cayman Islands, Andorra, British Virgin Islands, Mauritius, Jersey Island and Dutch Antilles.

The direct exposure to country / sovereign risk by way of trading activity is described in the section dealing with market risks.

86 Banco BPI | 1st half 2009 report MARKET RISKS Market or price risk (interest rates, foreign exchange Foreign exchange rate risk 1 rates, equity prices, commodity prices and others) is Structural position at 30 June 2009 Amounts in M.€ defined as the possibility of incurring losses due to Sight Term Global unexpected variations in the price of financial AON1 180.2 0.0 180.2 instruments or operations. USD (221.8) 252.1 30.2 GBP (44.2) 44.9 0.7 JPY (207.6) 209.9 2.3 The assessment of treasury positions (short term) and CAD (23.4) 23.2 (0.2) structural risk positions relating to interest or foreign CHF 5.0 (4.1) 1.0 exchange rates (long term) is based on gap schedules MZM 18.4 0.0 18.4 (currency gaps, repricing gaps, duration gaps). Other 23.7 (20.5) 3.2 Position 1 (269.8) 505.5 235.8 The Bank is structurally exposed to the risk of a fall in Position 2 770.0 602.3 236.4 interest rates, with an amount of capital at risk of Position 3 519.9 553.9 236.1 79 M.€ associated with the classical stress test of a 1) Corresponds to 50.1% of BFA's shareholders equity at 30 June 2009. Table 68 This exposure is partially covered at the Angolan subsidiary via the 200 b.p. fall in interest rates. provision for the maintenance of own funds. 2) Position 1 – algebraic sum of the positions in each currency; Position 2 – sum in module; Position 3 – highest absolute value between the sum of all the long positions At 30 June 2009, the repricing gap (of interest rates) vs. sum of all the short positions. accumulated up to 1 year was 292.1 M.€1. The trading positions are managed autonomously by The risk management of market positions of up to one traders and kept within the exposure limits by market or year has been delegated to the Finance Division within products, fixed and revised periodically. There are limits fixed by the Executive Committee for Market Risks. different exposure limits including overall VaR limits set Long-term structural positions are managed in by the Executive Committee for Market Risks and later accordance with the rules laid down by the Executive distributed autonomously amongst the various books, by Committee for Market Risks. the divisions involved in trading activities. In addition, stop-loss limits are defined. In the currency arena, the financial holdings are taken into account in the structural position, including the Market risk in trading books1 Amounts in M.€ currency position in kwanza associated with BFA’s 2008 2009 shareholders’ equity. The positions in the remaining 30 Average 30 Average currencies are of minor significance. A stress test to the June 1st half June 1st half exposure reveals a more significant capital at risk only in Interest rate risk 705 939 265 271 the case of a sharp depreciation of the kwanza (39 M.€). Currency risk 1 033 1 017 369 325 Equities risk 1 124 1 357 1 900 1 188 Commodities 96 93 064 Spread 0 187 00 1) Maximum potential loss with a 99% confidence level resulting from Table 69 an adverse movement in prices, indices and interest rates over a period of two weeks, taking into consideration in the calculation of the overall risk the effect of the correlation of returns. A normal distribution of returns is assumed. Maximum VaR based on daily calculations.

1) Includes 50 M.€ of non-remunerated sight deposits; the remaining amount of sight deposits was considered to be not sensitive to interest rates; the bank prepares however analyses in accordance with other probabilities.

Report | Risk management 87 In evaluating exposure under trading operations, this A primary indicator of liquidity risk – the degree of function is carried out on a daily basis which calculates transformation of stable resources into loans – was the VaR – Value at Risk – according to standardised situated at 57.1%. assumptions, which as a rule are consistent with the BIS’s set of recommendations. Exposure arising from Liquidity risk options is controlled by recourse to specific models. The Sundry indicators information generated by the risk evaluation and control Jun. 2009 system is available online to authorised users. Degree of transformation of deposits into loans 129.2% Degree of transformation of Customer resources in the balance sheet into loans 100.6% LIQUIDITY RISK Degree of transformation of stable resources into loans 57.1% Liquidity risk is monitored in terms of its two Font: Stable resources and liquidity ratio as defined in Bank of Portugal Table 70 components: i) in the tradability of the different assets; Instruction 1 / 2000. ii) in its overall context, whereby liquidity risk is defined at grassroots level as the (in)ability to monitor the asset’s The evaluation of global exposure to liquidity risk is also growth and to satisfy treasury requirements without favourably reflected in the gap schedules by maturities incurring abnormal losses. (which permits the timely identification of the larger lags and their dynamic cover). In terms of the different assets, the various managers keep a constant watch over the transaction levels of the At 30 June 2009, the repricing gap (for liquidity) up to various instruments in accordance with a variety of one year stood at – 1 479.3 M.€1. indicators (BPI’s market share, number of days to unwind positions, size and volatility of spreads, etc.), although The stress test tables (monitored by the Bank of Portugal) always observing the operating limits set for each market. also evidence favourable results.

At global level, responsibility for liquidity In 2009 the Bank maintained an expressive portfolio of risk-management strategy is vested in the Executive assets eligible for short-term funding from the ECB Committee for Market Risks and the Group’s Finance through the structuring of collateralised operations Division and is founded on the constant vigilance of the involving own assets or through the acquisition of exposure indicators. Given the rupture of the interbank securities, or even through the creation of conditions for market and the international debt market, the advantages the utilisation of bank loans. of a balanced exposure where there is a surplus in short-term liquidity were clearly evident; the weak At the end of June 2009 the portfolio of ECB eligible dependence in relative terms on interbank funding; the assets totalled 6 057 M.€2. Of this figure, 1 858 M.€ diversity of funding sources by counterparties, maturities had already been utilised, with the result that the amount and financial centres; the proportionality of long-term available was 4 199 M.€. assets relative to more stable resources; and the possibilities of the substantial transformation of assets into liquidity (at the ECB or through the securitisation of certain assets, despite this segment’s retreat since the end of 2007). In any case, certain last-resort measures in line with the best Basle practices are also provided for and which suggest the need for an emergency plan to deal with the liquidity risk (even if it is improbable that there will be actual recourse to it).

1) The Gap includes all currencies; does not include the activities of the Madeira Offshore Branch; the growth projected for Customer loans and Customer resources in the balance sheet was considered for the next 12 months; the shares and trading operations were considered without term. 2) Market value net of “haircuts”.

88 Banco BPI | 1st half 2009 report OPERATIONAL RISKS Operational risks are defined as those which could result The management of operational risk is primarily founded in unexpected losses arising from human failure, on the training / quality of the human resources and on shortcomings in internal control procedures, failures in their proper organisation: segregation of functions, the information systems or from external causes. The definition of responsibilities, procedures and supervision. definition of operational risks includes legal risk and All the internal and external audit work and the central excludes strategic errors or reputation risks. management of alerts also contribute to this supervision.

In June 2009, according to the basic method for There is also in place a business continuity plan analysing operational risks, the value / capital at anchored to the contingency programmes for the most operational risk at BPI was situated slightly above crucial central information systems. In the case of 157.3 M.€. necessity caused by equipment breakdown or by a major incident, it is possible to recoup these systems on site or The management of operational risk at the BPI Group is at an alternative location after a period of time that varies vested in two specific bodies, the Operational Risk with the type of risk. Also guaranteed – even under Committee and the Operational Risk Area, and also in extreme conditions – is minimum functioning under an members of each one of the Group’s bodies which exceptional situation. The same method is employed in undertake the identification and management of the case of the telecommunications equipment. The voice operational risk in their areas of activity. and data services at the BPI Group’s main buildings are guaranteed through the recourse to alternative In the quest to adopt the best practices stemming from equipment, in accordance with formal disaster-recovery the new regulations (Basle II), BPI has a system for processes. The BPI Group has also identified alternative gathering information concerning operational risks from procedures for each one of its most critical operations. the various divisions, identifying the frequency and A data base is on stand-by which identifies all these severity of the losses which are classified into seven risk procedures, thereby enabling these to be activated at any categories or factors (damages to physical assets, failures point in time. These disaster-recovery schemes are tested in IT systems, failure in the management and execution and subjected to periodic reviews. of processes, external fraud, internal fraud, violation of professional duties and contravention of labour norms). Finally, the BPI Group annually reviews its insurance The gathering of this information by the various divisions cover, adjusting cover to its operating requirements and is attainable by means of the proper training of the market conditions, with the object of obtaining an designated operational risk pivots. Identification of this appropriate level of outside protection against data will in future enable the Risk Analysis and Control operational risk. Division to test in future years the most advanced measures for controlling exposure to this risk, in parallel with the application of the basic method.

This information will also help formulate the management strategy for operational risk. In this domain and under the Executive Committee’s supervision, the Organisation Division and, of course, all the divisions where factors critical to operational risk have been identified, assume a crucial role.

Report | Risk management 89 LEGAL RISKS Legal risks imply the possibility of incurring unexpected losses stemming from shortcomings in the analysis of the legal framework applicable at a given moment to the contracts / positions to be established or from an alteration to the same legal framework.

Special attention is paid in the realm of legal risks to the analysis of the legal framework and to the identification of any regulatory shortcomings; to the analysis of the prospects of changes to the legal framework and their consequences; to the clarification of the nature of contractual relationships and the interpretation given to them by the counterparties, the analysis of products, their legal situation, centralisation of communications to the supervision authorities and the drawing up of the respective processes for submission to such authorities; and to the identification / proposals of measures capable of reducing eventual litigation risks.

90 Banco BPI | 1st half 2009 report ADOPTION OF THE RECOMMENDATIONS OF THE FINANCIAL STABILITY FORUM AND OF THE COMMITTEE OF EUROPEAN BANKING SUPERVISORS RELATING TO THE TRANSPARENCY OF INFORMATION AND VALUATION OF ASSETS The Financial Stability Forum (FSF), in the report “Report of the inherent in the Group’s operations, the processes of risk analysis Financial Stability Forum on Enhancing Market and Institutional and management and the division of responsibilities amongst the Resilience”, of 11 April 2008, and the Committee of European various bodies, makes a detailed analysis of the activity carried Banking Supervisors (CEBS), in the reports “CEBS report on out and the results obtained in the 1st half 2009, and the banks' transparency on activities and products affected by the impacts of the international financial crisis on business, results recent market turmoil” and “Report on issues regarding the and capital, and it describes the accounting policies and valuation of complex and illiquid financial instruments”, both of valuation methods of financial assets and presents a qualitative 18 June 2008, issued a series of recommendations relating to and quantitative information concerning the exposures to the transparency and disclosure of information. financial assets. The Group’s 2008 Corporate Governance Report which forms an integral part of the annual report describes in The Bank of Portugal, through the circular-letters 97 / 08 / more detail the Group’s governance model, except for the DSBDR of 3 December 2008 and 58 / 09 / DSBDR of 5 August alterations that have occurred in the meantime, namely these 2009 has recommended that in the accounting reporting a which were approved at the Shareholders’ General Meeting of 22 separate chapter or specific annex is prepared as part of the April 2009, and which are outlined on the Investor Relations Annual and Interim Reports, designed exclusively to respond to website’s page devoted to the AGM. the recommendations of the CEBS and of the FSF, taking into account the principle of proportionality and following the In order to give compliance to the Bank of Portugal’s questionnaire presented as an annex to the Bank of Portugal’s recommendation, in the present chapter a response is given to circular-letter 46 / 08 / DSBDR. the aforesaid questionnaire, using in large part cross-references to the more detailed information presented in the Report and Throughout the present Directors’ Report, the financial accounts for the 1st half 2009 and, in some cases, in the 2008 statements and respective notes, BPI describes in detail the Annual Report. Group’s business model and governance model, the major risks

I. BUSINESS MODEL 1. Description of the business model The BPI Group’s activity is centred on the commercial banking funding from the capital market – ended up being affected by the business, predominantly focused on the attraction of Customer present world economic panorama during the 1st half of 2009 as resources and on the granting of loans to individuals, companies a consequence of the drop in the price of crude oil and the lower and institutions in Portugal, through Banco BPI, and in Angola, production quotas fixed by OPEC. In tandem with the fall in through BFA. At the end of June 2009, 86.0% of the Group’s exports, the Angolan economy registered a slowdown in buoyant shareholders’ equity was allocated to domestic commercial domestic activity during this period. banking activity, and 11.1% to international activity (Angola and Mozambique). The Group also carries on investment banking The international financial crisis significantly affected the activities – Equities, Corporate Finance, Private Equity and Private functioning of the capital markets – provoking a substantial Banking –, asset management – unit trust fund management, reduction of liquidity in funding operations on the primary pension funds and capitalisation insurance, which are placed market, lower liquidity and an increase in the spreads on bonds with Customers through Banco BPI’s and Banco Português de on the secondary market and a widespread decline in stock Investimento’s distribution networks – and private equity. 2.9% of prices on the equities market – and ended up contaminating the the Group’s shareholders’ equity at the end of June 2009 was whole economy on a global scale, while also affecting domestic allocated to these activities. commercial banking activity with individuals and companies.

The international financial crisis exerted pressure on the Bank’s BPI’s recourse to the capital market has been recurring over the domestic operations. International activity in Angola – which was past, above all as a source of medium and long-term funding. virtually immune to the international financial crisis owing to the The BPI Group also uses the capital market for trading in local financial system’s minimal interaction with the global interest-rate instruments and equities activity and, in recent financial markets, the local banking system’s abundant liquidity years, has maintained a portfolio of investments in bonds and and the corporate and banking community’s reduced recourse to equity holdings as a form of diversifying the bank’s sources of

Report | Annex 91 returns. The capital market situation is also a determining factor ᭿ potentially available total funding resources at the end of for asset management business. June totalled 5.9 Bi.€ corresponding to the sum of:

The international financial crisis experienced a critical period ᭿ assets eligible for funding of 4.2 Bi.€ at the European between September 2008 and March 2009, at the same time as Central Bank available for immediate use; the decline in global economic activity in the last 12 months was extraordinarily swift and far-reaching, leading to the biggest drop in ᭿ a potential Portuguese State-backed issue of 1.7 Bi.€; the world economy’s gross domestic product since World War II. ᭿ this sum exceeds the volume of medium and long-term debt Since March 2009 we have witnessed an increasing number of repayments to be made by the end of 2013 of 5.3 Bi.€; unsecured issues by issuers with high ratings, a decrease in credit spreads in the capital markets, an increase in the demand ᭿ BPI did not resort to the State-backed debt issue. for long-dated corporate bonds and rising activity on the money market, both in terms of volume and the maturity period of BPI’s funding policy during the last few years was characterised transactions; however, trust amongst credit institutions has not by a deliberate intention to reduce the weight of short-term yet been fully re-established. funding, namely on the money market, in the total borrowing structure. This was achieved by means of a greater recourse to In the 1st half 2009 Report, in the chapter of the Directors’ the capital markets, including between 2005 and 2007, the Report dealing with financial and business structure, a detailed realisation of four asset securitisation operations, and by a greater description is presented of the Group’s financial structure and the emphasis on capturing Customer resources. main business areas. In the first half of 2009, BPI’s recourse to the capital market was 1st half 2009 DR – Financial and business structure, page 9. minimal, having concluded just two operations: a private placement of a small amount and a mortgage-backed bond issue 2. Description of strategies and objectives wholly placed with the European Investment Bank. With effect from the third quarter of 2007, BPI’s management concentrated its attention on four priorities, organised as a Meanwhile and already in July, BPI floated a mortgage-backed response programme to the immediate challenges posed by the bond issue (1 000 M.€), the first realised by a Portuguese issuer financial crisis: defence and reinforcement of capital, guarantee since August 2008. of comfortable liquidity levels, risk reduction and strengthening the relationship with Customers. Risks. The Bank’s overdue loan ratios present a relatively good situation notwithstanding the higher risk levels in the economy, As regards Capital, BPI’s ratio at the end of June 2009 stood at while (provisioning and impairment allowance) cover for overdue 11.4%, which corresponds to a Tier I capital ratio of 8.9% and loans is adequate. The consolidated ratio for loans in arrears for core Tier I capital ratio of 8.1%. more than 90 days was situated at 1.7% at the end of June 2009, while impairment charges recognised in the 1st half 2009, In the case of Liquidity, the Bank presents a particularly net of recoveries, represented an annualised 0.37% of the comfortable situation: average performing-loan portfolio.

᭿ customer resources continue to represent the principal The pension funds’ net assets at the end of June covered the source of funding. The strong growth in on-balance sheet funding of 99% of pension liabilities. Customer resources since the second half of 2007 has totally funded the expansion in lending, both in domestic Customers. Over the past 12 months, 143 thousand new and in international operations; Customers were signed up in Portugal and 148 thousand in Angola, while commercial activity expanded as borne out by the ᭿ in activity in Angola, BFA has an extremely liquid balance year-on-year growth rates recorded in loans and resources: sheet: the ratio Customer loans / resources carried in the balance sheet is situated at 34%.

92 Banco BPI | 1st half 2009 report ᭿ consolidated Customer loans grew by 1.2%, on-balance commercial banking, page 85; Financial review, page 90; 2008 sheet Customer resources by 13.7% and total Customer NFS – Note 3 Segment reporting, page 208. resources by 5.6%; 1st half 2009 DR – Domestic commercial banking, page 22; ᭿ in domestic activity, Customer loans were up by 0.2% and Bancassurance, page 29; Asset Management, page 30; on-balance sheet Customer resources rose by 9.2%. In Investment banking, page 33; Private Equity, page 37; international activity, BFA posted growth in loans and International commercial banking, page 38; Financial review, resources of 29% and 57%, respectively. page 41; 1st half 2009 NFS – Note 3 Segment reporting, page 139. In the 2008 Annual Report and in the 1st half 2009 Report, in the Financial Review chapter a detailed analysis of the Group’s 4. Description of the type of activities undertaken operations and earnings in 2008 and 1st half 2009 is presented. 5. Description of the objective and extent of the institution’s involvement relating to each activity undertaken 1st half 2009 DR – Presentation of the report, page 5; Financial BPI’s domestic commercial banking activity encompasses review, pages 41 and 54. Individuals and Small Businesses Banking, Corporate and Institutional Banking and the State Business Sector. 2008 DR – Financial review, pages 90 and 108. Individuals and Small Businesses Banking serves individual 3. Description of the importance of the operations carried out Customers and small businesses with a turnover of up to 5 M.€. and the respective contribution to business The Group has a complete and diversified product range, In the 1st half 2009, consolidated net profit was 89.0 M.€. amongst which home loans, consumer credit, credit and debit cards, motor car finance, commercial loans, deposits, In the 1st half 2009, net profit from commercial banking guaranteed-capital and limited-risk products, unit trust funds, (domestic and international) was 90.9 M.€, net profit from PPR and PPA, capitalisation products, stock exchange investment banking activity was 1.6 M.€ and the contribution to operations, life assurance and non-life insurance, amongst consolidated net profit from financial investments, including others. Private Equity was a negative 3.5 M.€. Corporate, Institutional and State Business Sector Banking Profit from asset management business is allocated to domestic manages in an integrated manner the Bank’s relationship with commercial banking activity and to investment banking activity the business and institutional Customer base, as well as the based on the relative importance of each one of the distribution respective spectrum of products and services. The Corporate networks in the placing of managed products with Customers. Banking range of products and services includes financing for operations, investment loans, treasury management and support In the 2008 Annual Report and in the 1st half 2009 Report, in for the export and internationalisation sector. The Project Finance the chapters “Domestic commercial banking”, “Bancassurance”, area centres activity on financing project finance operations and “Asset Management”, “Investment Banking”, “Private Equity” public-private partnerships, offering consultancy and the and “International commercial banking”, the activity carried out organisation, mounting, and participation in the financing of in 2008 and in the 1st half 2009 is described in detail for each major projects. business area. Institutional Banking serves, amongst others, local authorities, In the 2008 Annual Report and in the 1st half 2009 Report, in autonomous regions, the Social Security system, universities, the Financial Review chapter, and in the notes to the financial foundations, public utility associations and other non-profit statements, in Note 3 – Segment Reporting, an analysis is made entities. The range of products and services made available to its of each business area’s contribution to the BPI Group’s net profit, Customers is based on the granting of day-to-day financing, the balance sheet and investments. support for treasury management and the provision of services tailored to these Customers. 2008 DR – Domestic commercial banking, page 53; Bancassurance, page 72; Asset Management, page 73; Investment banking 79; Private Equity, page 84; International

Report | Annex 93 Commercial banking business in Angola is carried on directly by 3) Asset Management: BFA. BFA has a range of financial products and services tailored BPI’s asset management business is centred at BPI Asset for individuals, which encompass sight deposits, time deposits, Management, BPI Vida and BPI Pensões, which undertake the home loans, personal and motor car loans and cards, amongst management of the unit trust (mutual) and life-capitalisation others, and a structured range for companies, which includes funds distributed by the Bank’s commercial network, as well as solutions associated with treasury management, financing, bank managing pension funds and the asset portfolios of institutional guarantees and import finance. The corporate product range is Clients. These entities execute the management mandates in also complemented by the availability of project finance and accordance with the specifications of the Products / Customers, corporate finance solutions. as embodied in specific investment policies. Asset management entails investing in the financial products most suited to each In Capital Market operations, BPI essentially uses the following investment policy and controls the respective market risks, financial instruments: observing the regulatory and internal limits. Depending on the market trends and the objectives of each mandate, shares are 1) Sources of financing: bought and sold on any global stock market (from a sectorial or BPI has resorted to the Capital Market as a form of diversifying its geographical perspective), debt securities (of governments, funding sources. In this regard, it maintains permanently active a financial or corporate sectors, in both developed and emerging programme of Euro Medium Term Notes issues (EMTN) worth countries, as well as other structured debt instruments) and 10 000 M.€, a programme of Mortgage Bonds issues worth hedging instruments (of equities, interest-rate and currency 7 000 M.€ and a programme of public sector bonds worth markets) traded on a stock market. 2 000 M.€. As for short-term funding, the Bank also has a Euro Commercial Paper programme amounting to 5 000 M.€. In the 1st half 2009 Directors’ Report, in the chapters “Domestic commercial banking”, “Bancassurance”, “Asset Management”, 2) Bond portfolio: “Investment Banking”, “Private Equity” and “International The securities forming part of the bond portfolio correspond to banking activity”, the activity carried out by each business area is large European companies with a rating of BBB or higher, described in greater detail. companies from exporting emerging markets or with leading positions in their home markets and Asset Backed Securities 1st half 2009 DR – Domestic commercial banking, page 22; (ABS’s) with the intervention of credible institutions and whose Bancassurance, page 29; Asset Management, page 30; underlying assets were considered a good investment opportunity Investment banking, page 33; Private Equity, page 37; in the light of the market conditions on the date of acquisition. International commercial banking, page 38. The acquisition of any security for the portfolio presupposes a prior analysis of the issuer’s creditworthiness and a specific II. RISK AND RISK MANAGEMENT approval by the Executive Committee. If it refers to a structured 6. Description of the nature and extent of the risks incurred in issue (ABS), its structure is analysed from a legal and financial relation to the activities carried out and the instruments perspective. Issuers’ performances are permanently monitored. utilised 1st half 2009 DR – Risk management, page 76; Financial review, The Bank maintains permanently a very active posture in page 54; 1st half 2009 NFS – Note 4.48 Financial risks, page monitoring the events that affect the valuation of portfolio 209 and following. positions. As regards the ABS portfolio, besides recurring to the analysis of available information, frequent contacts are maintained with the various participating entities in the structures, namely managers, trustees, originators and even other investors. The balance sheet value of the ABS portfolio at 30 June 2009 was 149.7 M.€. Of this portfolio’s composition, mention is made of the 62% securitisation of “Diversified Payment Rights (DPR)” generated by first-class banks in emerging markets and will high levels of over-collateralisation and 16% of securitised home loans (RMBS) originated in various European markets.

94 Banco BPI | 1st half 2009 report 7. Description of major risk-management practices in III. IMPACT OF THE PERIOD OF FINANCIAL TURBULENCE operations ON EARNINGS At the BPI Group, risk management is founded on the ongoing 8. Qualitative and quantitative description of earnings identification and analysis of the exposure to the different risks – As already referred to in point 1, the international financial counterparty risk, country risk, market risk, liquidity risk, turmoil had a significant adverse impact on the results of the operational and legal risks – and on the execution of strategies Bank’s domestic operations. The Bank’s international activity in aimed at maximising the results vis-à-vis risks within predefined Angola – a country that remained virtually immune to the (and duly supervised) limits. Risk management is complemented international financial meltdown owing to the local financial by the analysis à posteriori of performance indicators. system’s minimal interaction with the global financial markets, the local banking system’s abundant liquidity and the corporate and Credit risk associated with the possibility of actual default by a banking community’s reduced recourse to funding from the counterparty (or with the change in the economic value of a capital market –, ended up being affected by the present world given instrument or portfolio stemming from a deterioration in the economic panorama during the 1st half of 2009 as a risk quality of a counterparty) constitutes the primary risk factor consequence of the drop in the price of crude oil and the lower inherent in the BPI Group’s business spectrum. production quotas fixed by OPEC. In tandem with the fall in exports, the Angolan economy registered a slowdown in buoyant In the 1st half 2009 Directors’ Report, in the “Risk Management” domestic activity during this period. chapter (page 76), a detailed description is given highlighting the major risks attaching to the Group’s operations, risk analysis and The international financial crisis influenced the results of management and the division of the responsibilities amongst the domestic operations in five main areas: various bodies. ᭿ profits from financial operations, with e steep drop in trading The analysis of liquidity risk presented in the Risk Management profits and the drop in the Pension Fund’s net financial chapter of the Directors’ Report, is complemented with a review income to a figure of close to zero as from June 2008; of the funding and liquidity trends in domestic operations, in the Financial Review chapter (page 54). ᭿ commissions, with the pronounced decline in asset management, as a consequence of the decline in managed In the notes to the financial statements, Note 4.48 – Financial assets; and with the lower growth in commercial banking risks – presents the fair value of the financial instruments and the commissions; valuation of the risk exposure resulting from financial instruments – credit risk, liquidity risk, market risk (interest-rate risk, equities ᭿ loan impairments, with an increase in the respective risk and currency risk). amount, due to the slowdown in economic activity;

᭿ net interest income, pressured by the higher average costs of resources and by the deceleration in lending, whilst the adjustment of the spreads (to reflect the rise in funding costs) occurred in a gradual and incomplete fashion;

᭿ the indispensable tighter control over costs, with immediate negative impacts in 2008, as in the case of early retirements.

Consolidated net profit was 89 M.€ in the 1st half of 2009, while the return on average shareholders’ equity (ROE) was situated at 9.1% in this period.

Report | Annex 95 In the 2008 Annual Report and in the 1st half 2009 Report, in issue of senior debt in the form of Commercial Paper and MTN the Financial Review chapter, a qualitative and quantitative (with triple A credit ratings by the three international agencies), review is presented dealing with the Group’s operations and besides a capital base (with a maximum leverage of 20 times) results and the impacts of the international financial crisis in with an investment-grade credit rating (subordinated debt). The 2008 and in the 1st half 2009. return on capital resulted from the arbitrage of the maturities between the assets and the liabilities. When the investors began 2008 DR – Financial review, page 90. to have doubts about the quality of their asset portfolios, the SIV’s found it impossible to fund themselves on the capital market at 1st half 2009 DR – Financial review, page 41. low cost, having to resort to bank finance for unprecedented amounts. Due to the difficulties of raising finance and within the 9. Breakdown of the write-downs / losses by types of products context of falling asset prices, they were obliged to start selling and instruments affected by the period of turbulence portfolios, incurring losses that compromised almost definitively The most direct impact of the international financial crisis on the the possibility of recouping the investments of the holders of their BPI Group’s earnings resulted from the recognition of 51.3 M.€ capital. of impairments (of which 25 M.€ in 2007 and 26.3 M.€ in 2008), corresponding to the acquisition value of a portfolio of The indirect impact on domestic operations was due essentially Structured Investment Vehicles (SIV), which is currently recorded to the rise in the funding costs of operations, in a context in at nil value. which the raising of resources was important and, on the other, due to the deceleration in economic activity. In the 2008 Annual Report and in the 1st half 2009 Report, the notes to the financial statements 4.5 Financial assets available for In the 2008 Annual Report and in the 1st half 2009 Report, in sale and 4.7 Loans and advances to Customers, present details the Financial review chapter, a qualitative and quantitative review of impairment and unrealised losses, security by security. is presented showing the Group’s operational and financial performance and the impacts of the international financial crisis. The notes to the financial statements 4.20 Provisions and impairment losses and 4.40 Net income on financial operations, In the 2008 Annual Report and in the 1st half 2009 Report, in present details of the losses recognised in consolidated net profit the Background to operations chapter, a description is given of for 2008 and 1st half 2009, resulting from the loans and the economic environment behind the domestic and international securities portfolios held by the BPI Group. operations (Angola and Mozambique), the behaviour of the financial markets and impacts of the international financial crisis 2008 NFS – Note 4.5 Financial assets available for sale, page on the economies and markets. 227; Note 4.7 Loans and advances to Customers, page 237; Note 4.19 Provisions and impairment losses, page 257; Note 2008 DR – Financial review, page 90; 2008 DR – Background to 4.39 Net income on financial operations, page 272. operations, page 41.

1st half 2009 NFS – Note 4.5 Financial assets available for sale, 1st half 2009 DR – Financial review, page 41; Background to page 154; 1st half 2009 NFS – Note 4.7 Loans and advances to operations, page 14. Customers, page 163; Note 4.20 Provisions and impairment losses, page 187; Note 4.40 Net income on financial operations, page 202.

10. Description of the reasons and factors responsible for the impact suffered The biggest individual impact of the write-downs resulted from events which affected the capital market and which affected more severely BPI’s investments in SIV. The SIV were created in the mid 90’s and has as their object the acquisition of medium / long-term investment-grade assets (generally with an average risk rating of between double A and A), financing them through the

96 Banco BPI | 1st half 2009 report 11. Comparison of the i) impacts between (relevant) periods 14. Disclosure of the maximum loss risk and ii) financial statements before and after the turbulent BPI resorted to calculating capital-at-risk using VaR and stress period test models in managing and controlling market risks or price to A description of the impacts of the international financial crisis which it is exposed (interest rate, currency rates, equity prices, and a comparative review of the 2008 and 1st half 2009 financial commodity prices and others). The exposures are constantly statements relative to the same periods of the previous year are measured and monitored. represented in the Financial review chapter of the 2008 Annual Report and the 1st half 2009 Report. In the 1st half 2009 Report, in the Risk management chapter and in the note to the financial statements 4.48 Financial risks 2008 DR – Financial review, page 90. information is presented regarding the maximum losses resulting from the unexpected changes in the price of instruments or 1st half 2009 DR – Financial review, page 41. operations based on the abovementioned methodologies.

12. Breakdown of the write-downs between realised and 1st half 2009 DR– Risk management, page 87; unrealised amounts 1st half 2009 NFS – Note 4.48 Financial risks, page 209. The impact on the Group’s results of the drop in the value of the equities and bond portfolios is described in the Financial review 15. Disclosure of the impact that the evolution of the spreads chapter of the 2008 Annual Report and the 1st half 2009 Report, associated with the institution’s own liabilities had on earnings (Profits from financial operations and Impairment losses for the The deterioration in the financial crisis throughout 2008 and in period). the first months of 2009 made the opportunities for banks to obtain medium and long-term funds on the capital markets In the 1st half 2009 Directors’ Report, in the Financial review scarce, and culminated in a significant increase in the cost of chapter and in the notes to the financial statements 4.5 Financial funding, of both these resources and Customer resources. assets available for sale and 4.7 Loans and advances to Customers, details are presented of the impairment losses and BPI focused on the capture of Customer resources, maintaining a unrealised losses, security by security, at 30 June 2009. competitive offer of time deposits and promoting the placement of bonds with Customers through the retail network, which 2008 DR – Financial review, pages 113, 114, 119, 124; translated into an increase in the costs of these resources, while 2008 NFS – Note 4.5 Financial assets available for sale, page access to the capital market was very moderate. 227 and Note 4.7 Loans and advances to Customers, page 237. Net interest income was also penalised by the steep fall in market 1st half 2009 DR – Financial review, pages 58, 61, 64; interest rates that has occurred since the end of September 1st half 2009 NFS – Note 4.5 Financial assets available for sale, 2008, originating a contraction in the average spread on sight page 154 and Note 4.7 Loans and advances to Customers, page deposits. 163. On the other side, the adjustment of credit spreads in such a way 13. Description of the influence of the financial turbulence on as to reflect the Bank’s higher funding costs, has been a slower the behaviour of Banco BPI shares and more gradual process, resulting in the narrowing of unit In the 2008 Group’s Corporate Governance Report, point 11. margins between loans and resources. Banco BPI Shares, and in the 1st half 2009 Report, in the chapter Banco BPI shares a description is presented of the stock The Bank did not revalue its liabilities. exchange behaviour of Banco BPI shares and of the influence that the adverse performance of the equity markets at global level 2008 DR – Financial review, page 115. had on the share’s behaviour. 1st half 2009 DR – Financial review, page 59. 2008 CGovR – 11; Banco BPI shares, page 416.

1st half 2009 DR – Banco BPI shares, page 110.

Report | Annex 97 IV. EXPOSURE TYPES AND LEVELS AFFECTED BY THE The exposure to country risk is described in a separate section of TURBULENT PERIOD the Risk Management chapter. 16. Nominal value (or amortised cost) and fair value of exposures In the notes to the financial statements 4.5 Financial assets In the 1st half Report, in the note to the financial statements 4.48 available for sale, details are presented of the exposures to Financial risks the book value is compared with the estimated fair available-for-sale securities, security by security. value for most of the BPI Group’s assets and liabilities at 30 June 2009. Annexed to this section are details of the ABS securities held by BPI at 30 June 2009. The notes to the financial statements 4.5 Financial assets available for sale presents details of the nominal value, book 1st half 2009 DR – Risk management, page 78 to 86 and value and unrealised gains and losses recorded in the fair value Adoption of Bank of Portugal recommendations on transparency reserve, security by security, at that date. of information and valuation of assets, page 100; 1st half 2009 NFS – Note 4.48 Financial risks, page 209 and 1st half 2009 NFS – Note 4.48 Financial risks, page 209 and Note 4.5 Financial assets available for sale, page 154. Note 4.5 Financial assets available for sale, page 154. 19. Movements which occurred in the exposures between the 17. Information about credit risk mitigation and respective relevant reporting periods and the underlying reasons for these effects on existing exposures variations (sales, write-downs, purchases, etc.) With the object of mitigating credit risk on operations with In the 1st half 2009 Directors’ Report, in the Financial Review Customers, the Bank considers when accepting or rejecting chapter the principal changes occurring in the financial assets Customers and operations, the existence of any personal or and investments portfolio are described. tangible guarantees, the existence of credit protection insurance, the drafting of contracts with clauses which permit setting-off 1st half 2009 DR – Financial review, pages 58 and 72. liabilities in the case of default and collateralisation agreements with their counterparties. 20. Explanations about exposures which have not been consolidated (or which have been recognised during the crisis) In derivative operations, BPI resorts to set-off contracts and and the associated reasons collateralisation established with counterparties, in order to The BPI Group consolidates all the exposures in which it has mitigate credit risk. significant control or influence, as envisaged in IAS 27, 28 and IFRS 3. No changes were made to the BPI Group’s consolidation In the 1st half 2009 Directors’ Report, in the Risk Management perimeter as a consequence of the period of turbulence in the chapter, a detailed description is made of the impact of credit financial markets. risk mitigation. In this regard, the estimated loss in the case of default is presented for the principal Customer loan segments 21. Exposure to “mono-line” insurers and quality of insured (loss-given-default, LGD). assets At 30 June 2009, BPI’s exposure to mono-line insurers was 1st half 2009 DR – Risk management, page 78 to 85. totally indirect and stemmed from the existence of portfolio positions whose interest and principal were unconditionally 18. Detailed disclosure of exposures guaranteed by this type of company. There were no losses worth In the 1st half 2009 Report, in the Risk Management chapter noting, given that none of these securities were in default. and in the notes to the financial statements 4.48 Financial risks – an analysis is presented of the quality of the loan and securities Annexed to this section is information about exposure to mono- portfolios based on rating systems and internal scoring and on line insurers. the recourse to external ratings. The information is complemented by the analysis of the default levels, the existence of tangible guarantees and cover by impairment allowances.

98 Banco BPI | 1st half 2009 report 1st half 2009 DR – Adoption of Bank of Portugal 25. Description of the modelling techniques utilised for valuing recommendations on transparency of information and valuation financial instruments of assets, page 108. In the 1st half 2009 report, the notes to the financial statements 2.2. Financial assets and liabilities and 4.48 Financial risks V. ACCOUNTING AND VALUATION POLICIES describe the techniques utilised in valuing financial instruments. 22. Classification of transactions and structured products for accounting purposes and the respective accounting treatment 1st half 2009 NFS – Note 2.2 Financial assets and liabilities, In the 1st half 2009 report, in the note to the financial statements page 126 and Note 4.48 Financial risks, page 209. 2.2 Financial assets and liabilities, the accounting criteria used in the recognition and valuation of financial assets and liabilities are VI. OTHER IMPORTANT DISCLOSURE ASPECTS described. 26. Description of disclosure policies and principles which are used in financial reporting BPI’s investments in structured products (namely SIVs and ABS) BPI attributes great importance to the maintenance of a frank were included in the debt securities portfolio and in available-for- and transparent relationship with shareholders, investors, sale assets (notes to the financial statements 2.2.3 and 2.2.4). financial analysts, authorities and other capital market players.

The debt securitisation operations originated by BPI are Consequently and well before it became a common practice recognised in financial liabilities associated with transferred amongst companies listed on the stock exchange, BPI created in assets (notes to the financial statements 2.2.4 and 4.19). 1993 a structure dedicated solely for this purpose – the Investor Relations Division, which reports directly to the Executive 1st half 2009 NFS – Note 2.2 Financial assets and liabilities, Committee of the Board of Directors and to the Chairman of the page 126; Note 2.2.3. Financial assets available for sale, page Board of Directors. 128; Note 2.2.4 Loans and other receivable, page 131; Note 4.19 Financial liabilities relating to transferred assets, page 185. The dissemination of accurate, timely, regular, clear and unbiased information which is important for evaluating their listed 23. Consolidation of Special Purpose Entities (SPE) and other shares constitutes a concern of paramount importance at BPI. vehicles and their reconciliation with the structured products affected by the turbulent period In the 2008 BPI Group’s Corporate Governance Report, in point The vehicles through which Banco BPI’s debt securitisation 10. Communication with the market, detailed information is operations are effected are recorded in the consolidated financial provided regarding the principles of financial information statements according to the BPI Group’s continued involvement disclosure and the communication channels used, the Investor in these operations, determined on the basis of the percentage of Relations Division’s terms of reference and the activity carried out the equity piece held of the respective vehicles. in the year.

24. Detailed disclosure of the fair value of financial 2008 CGovR – Communication with the market, page 413. instruments In the 1st half 2009 report, the note to the financial statements 4.48 Financial risks presents details of the estimated fair value for virtually all of the BPI Group’s financial assets and liabilities at 30 June 2009.

1st half 2009 NFS – Note 4.48 Financial risks, page 209.

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

Report | Annex 99 ANNEX TO POINT 18 OF THE BANK OF PORTUGAL’S RECOMMENDATIONS

The portfolio of ABS securities is divided into various sub-categories:

Residential Mortgage-Backed Securities (RMBS): The issue of Residential Mortgage Backed Securities is collateralised by mortgage loans. The funding of the collateral’s acquisition is done by means of the issue of various classes with different levels of seniority. The issues held by the Bank are solely collateralised by European mortgage loans, not including non-conforming loans, with the investment ᭟

At 30 June 2009, the details of the RMBS securities in BPI’s portfolio were as follows:

Class Level of Originator Country of risk of Type of RMBS issues seniority the assets included collateral in the collateral Loan portfolio Dali Capital Series 2006-1 A Senior Gazprombank Russia RMBS Dutch Mor.Port.Loans (15.9.34)-O.Hip B Mezzanine Hypoteekbank Holland RMBS Gazprombank Mortgage Series 2007-1 25.06.2047 A1 Senior Gazprombank Russia RMBS Kazakh Mortgage S.07-1 15.02.2029 A Senior Bank Turanalem Kazakhstan RMBS Red & Black Prime Russia Series 2007-1 01.19.35 A Senior Societe Generale Russia RMBS Ukraine Mortgage Loan Series 2007-1 15.12.2031 A Senior Privatbank Ukraine RMBS

Available-for-sale portfolio Atlantes Mortgage – Sr.1-Cl.A (17.1.2036) A Senior Banif Portugal RMBS Cajam 22/06/2049 Series 2006-1 A2 Mezzanine Caja Madrid Spain RMBS DMPL IV (Dutch Mortgage Portfolio Loan IV) A Senior Hypoteekbank Holland RMBS Granite M Issuer Plc 20/12/2054 Series 2006-1 A5 Senior Northen Rock United Kingdom RMBS Granite Mortg.-Tv 20.9.2044 Series 2004-3 2C Mezzanine Northen Rock United Kingdom RMBS Granite Mortgages Series 2004-1 20/03/2044 2C Mezzanine Northen Rock United Kingdom RMBS Granite Mortgages Series 2004-1 20/03/2044 2M Mezzanine Northen Rock United Kingdom RMBS Holland Euro-Den Mtge Bck Series Vii 18/11/37 B Mezzanine Sns Bank Holland RMBS Kion Mortgage Finance Plc 15/07/2051 A Senior Novabank Greece RMBS Lusitano Mortgages 1 15/12/2035 D Mezzanine Banco Espirito Santo Portugal RMBS Magritte Finance Nv Serie 2004 A Senior Krefima Belgium RMBS Mbs Bancaja (17.11.2035) A Senior Bancaja Spain RMBS Pelican Mortgages 15/09/2036 S2 B Mezzanine Montepio Geral Portugal RMBS Provide Plc 25/08/2048 Series 2005-1 B Mezzanine HVB / Unicredito Germany RMBS Provide Plc 27/11/2045 Series 2004-1 B Mezzanine HVB / Unicredito Germany RMBS Orion Finance No.3 Plc A Senior Banca Populare di Bergamo Italy RMBS Residential Mortg 13/05/2037 S 17x M1C Mezzanine Kensington Group United Kingdom RMBS Siena Mortgage S4 16/12/2038* B Mezzanine Monte Paschi Siena Italy RMBS Uci Series 8 Tx.Vr. (18.12.2033) A Senior Union de Creditos Imobiliarios Spain RMBS

1) Subordination and reserve fund.

100 Banco BPI | 1st half 2009 report being mostly in the senior classes. The protection of the issues is assured by maximum default ratios in the collateral which accelerate the redemption of the more senior classes. The differential between the remuneration of the collateral and of the classes issued also represents an additional safeguard for absorbing losses.

Vintage Credit Arrears Last Current Moody’s S&P Fitch Balance Enhancement1 >90d CPR LTV sheet value (M.€)

2006 28.36 1.4% 13.4% 61.2% Baa1 BBB nr 4.2 2000 21.0% 0.1% 10.5% 62.3% Aa1 AAA AAA 4.0 2007 0.4% 3.5% 16.7% 60.3% B3 B nr 2.1 2007 40.4% 0.0% 38.3% 62.6% Ba2 nr BB+ 0.9 2007 35.3% 0.2% 8.8% 56.7% Baa1 nr A- 2.1 2007 61.8% 0.0% 6.1% nd Ba1 nr BB 1.1 14.4

2003 19.1% 8.2% 2.1% nd Aaa AAA AAA 1.7 2006 13.7% 4.9% 13.2% nd Aa1 AA AA 0.2 2004 13.6% 0.2% 4.7% 70.3% Aaa AAA nr 1.2 n/a (Master Trust) 18.1% 4.6% 4.7% 78.3% Aaa AAA AAA 1.3 2004 10.5% 4.6% 4.7% 78.3% Baa2 A- BBB+ 0.0 2004 6.1% 4.6% 4.7% 78.3% Baa1 A- A- 0.1 2004 12.6% 4.6% 4.7% 78.3% A1 A+ AA 0.1 2003 5.1% 0.9% 7.2% 84.0% A1 AA AA- 0.3 2006 20.7% 20.5% 2.3% nd Aaa AAA AAA 0.2 2002 3.0% 2.6% 5.4% nd Baa2 BBB BBB+ 0.1 2004 25.9% 2.8% 6.2% nd Aaa nr AAA 1.2 2004 20.5% 1.1% 5.0% 42.3% Aaa nr AAA 0.6 2003 11.9% 2.3% 1.6% 59.7% A1 AA- AAA 0.2 2005 5.1% 0.8% 12.5% 68.2% Aa1 nr AA 0.5 2004 6.7% 1.0% 14.7% 59.5% Aa2 AA AA 0.6 2003 7.2% 0.5% 1.8% nd Aaa AAA nr 0.4 2004 63.7% 35.0% 13.8% 76.2% nr AAA AAA 0.0 2003 7.2% 3.4% 5.6% nd Aa3 AA+ AA 0.3 2002 11.2% 1.9% 7.3% 52.1% Aaa AAA nr 0.8 9.9

Report | Annex 101 Collateralized Debt Obligations (CDO): Issues of the so-called Collateralised Debt Obligations can have as collateral loans, bonds or other ABS. The funding of the collateral’s acquisition is effected with the issue of various classes of bonds with different seniority levels, while the losses realised on the collateral are allocated to the most subordinated classes until exhausted. The remuneration differential between the collateral and the various classes issued also provides additional protection. The existence of minimum ᭟

At 30 June 2009, details of the CDO portfolio were as follows:

Class Level of Manager Country of risk of Type of Collateralised Debt Obligation issues seniority the assets included collateral in the collateral Loan portfolio Stichting Eurostar II CDO A Senior Dws Mostly Europe HY Securities Saratoga CLO I Limited A2 Mezzanine Invesco USA HY Loans Saratoga CLO I Limited B Mezzanine Invesco USA HY Loans

Available-for-sale portfolio Claris Ltd / Millesime CDO 10/06/2024 s1c2 n/a Mezzanine Societe Generale Europe Aaa Abs's Cloverie 2004-72 17/11/2024 n/a Mezzanine Citi USA Aaa Us Rmbs Rhodium Bv 27/05/2084 S1x C Mezzanine Solent Capital Europe IG Mezzanine Abs's Madison Avenue Cdo Ii A Senior Metropolitan Life Mostly USA IG Securities Avoca Clo 18/02/2022 Series IV B Mezzanine Avoca Mostly Europe Leveraged Loans Avoca Clo 15/01/2020 Series II A1 Senior Avoca Mostly Europe Leveraged Loans Celf Loan Partners Bv 18/01/2021 Series 1 A Senior Celf Mostly Europe Leveraged Loans Duchess 25/05/2021 Series V B Mezzanine Babson Capital Mostly Europe Leveraged Loans Harbourmaster CLO 11/10/2019 S 4 A3 Mezzanine Harbourmaster Mostly Europe Leveraged Loans Harvest CLO SA 21/05/2020 Series II A2 Mezzanine Mizuho Mostly Europe Leveraged Loans Harvest CLO SA 29/03/2017 Series I B2 Mezzanine Mizuho Mostly Europe Leveraged Loans

1) Protection level by subordinated tranches to the class held.

102 Banco BPI | 1st half 2009 report over-collateralisation ratios (issue’s cover by the portfolio of assets net of defaults and realised losses) safeguards the more senior classes given that the respective default accelerates repayment, not only through the interruption of the reinvestment period should it still be in progress, but also by the re-directing of the remuneration of the more subordinated classes. The Bank has investments mostly in the more senior classes collateralised by loans.

Vintage Protection level1 Par Value Interest Moody’s S&P Fitch Balance by subordinated Coverage Coverage sheet value tranches Ratio Ratio (M.€)

2001 85.0% 185.4% 179.1% nr AAA AAA 0.4 2006 16.9% 120.4% 292.9% Aaa AAA nr 7.1 2006 8.2% 108.9% 258.1% Baa3 A nr 2.1 9.6

2004 n/a n/a n/a Baa2 nr nr 0.1 2004 0.9% n/a n/a A1 nr CCC 0.0 2004 15.5% 116.9% 273.2% Baa2 AA nr 0.2 2001 13.4% 115.5% 40.7% A3 AA nr 0.7 2005 16.9% 120.3% 240.9% Aa2 AA nr 0.2 2004 28.1% 128.6% 212.0% Aaa AAA nr 0.7 2005 29.7% 119.5% 248.5% Aaa AAA nr 0.6 2005 18.2% 122.5% 279.6% Aa2 AA nr 0.2 2004 11.9% 113.5% 235.3% nr nr AA 0.3 2005 30.1% 120.6% 173.5% Aaa AAA nr 0.4 2004 13.9% 116.2% 245.3% Aa2 AA nr 0.3 3.7

Report | Annex 103 Other ABS: the issues grouped under the designation of other ABS have different types of collateral; however, because individually they are of insignificant volume they were grouped under this more generic heading, Accordingly the following issues are included:

ABS of Auto Loans, whose collateral are loans granted for the acquisition of motor vehicles by individuals and/or companies guaranteed by the ownership of the vehicles;

ABS of Consumer Loans and Credit Cards, whose collateral are the personal loans, without tangible guarantees, for financing consumer credit granted and loans advanced through the use of credit cards, respectively;

Commercial Mortgage-Backed Securities (CMBS), whose collateral are the rentals corresponding to the long-term rental contracts involving properties whose ownership is attributed to the vehicle which issues the bonds; ᭟

Class Level of Manager Country of risk of the Type of Other ABS issues seniority assets included in collateral the collateral Loan portfolio Roof Russia-Tv-(25.07.2017) A Senior RZB Russia Auto Loans Russian Car Loans Sr.1 Tv – 16/10/2017 A Senior Russian Standard Bank Russia Auto Loans Russian Car Loans Sr.1 Tv – 16/10/2017 B Mezzanine Russian Standard Bank Russia Auto Loans

Available-for-sale portfolio Aleutian Investments Llc 25/10/2012 n/a MTN pari passu com totalidade Japan / USA / ABS de MTN emitidas por SPV Argentina collaterized Cibeles Ftypme Fta 26/11/2030 BSA Mezzanine Several Spanish Spain SME Promise Plc 05/10/2019 Caravela B Mezzanine BCP Portugal SME Nostrum Consumer Fin.-1/A (26.11.2015) A Senior CGD Portugal Consumer Loans Auto Abs Compartment 2004 A Senior Psa Finance Deutschland Germany Auto Loans Locat Sec Vehicle Serie 2004-2 A Senior Locat Spa Italy Auto Loans LTR Finance Ltd Serie 5 A Senior Finantia Portugal Auto Loans FTA Santander Emp-Sr.1 (04.11.38) A2 Senior Banco Santander Spain SME CM Bancaja Fta Serie 1 A Senior Bancaja Spain SME

Class Level of Manager Country of risk of the Type of Other ABS issues (CMBS) seniority assets included in collateral the collateral Available-for-sale portfolio La Defense Plc 09/042014 S Iii C1 Mezzanine Credit Suisse France CMBS Marlin (Emc-Ii) Bv 23/12/2012 S1 B Mezzanine Citi Europe CMBS Midgaard Finance Ltd 23/04/2029 A2 Mezzanine Nordea Sweden / Finland / CMBS Norway Opera 25/01/2022 S Ger3 B Mezzanine Eurohypo Germany CMBS

1) Subordination and reserve fund.

104 Banco BPI | 1st half 2009 report ABS of SME, whose collateral are loans advanced to small and medium-sized companies, which may or may not have tangible guarantees.

The financing of the acquisition of the collateral is effected by the issue of various classes with different levels of seniority. The issues held by the Bank are mostly of originators domiciled in Western Europe and in the most senior classes. The protection of the issues is assured by maximum default ratios in the collateral or by minimum ratios of over-collateralisation of the issue and respective interest (in the case of the CMBS) which accelerate the repayment of the most senior classes, in case they are not observed. The differential between the remuneration of the collateral and of the classes issued also represents an additional protection for absorbing losses.

At 30 June 2009, details of the portfolio of other ABS were as follows:

Vintage Credit Arrears Last Current Moody’s S&P Fitch Balance Enhancement1 >90d CPR LTV sheet value (M.€)

2007 17.5% 2.6% nd 70.9% Baa1 nr BBB- 2.3 2006 56.1% 6.7% nd nd Baa1 BBB nr 5.5 2006 40.2% 6.7% nd nd Baa1 BBB- nr 1.5 9.3

2002 Nominal value of the collateral nd nd nd Caa2 A nr 2.3 covers 1.13x the MTN issued 2003 29.4% 1.3% nd nd Aa2 AA nr 0.2 2004 8.4% 0.7% nd nd nr AAA AA 0.6 2003 53.5% 3.9% 14.3% nd Aaa 0 AAA 0.3 2004 19.7% 2.3% nd nd Aaa AAA nr 0.4 2004 15.2% 0.2% 5.8% nd Aaa AAA nr 0.8 2004 54.0% 8.3% 3.4% nd Aaa AAA AAA 1.5 2005 44.1% 1.4% 7.2% 64.5% nr AAA AAA 1.6 2005 28.7% 2.1% 12.0% nd nr AAA AAA 0.5 8.2

Vintage Credit Debt Service Interest Current Moody’s S&P Fitch Balance Enhancement1 Coverage Coverage LTV sheet value Ratio Ratio (M.€)

2004 8.0% >135% nd nd nr A A 0.1 2004 32.6% n/a 211.0% 41.1% nr AAA AA- 0.0 2004 Risco Nordea Aa1 A+ AA- 0.4 Bank 2007 0.0% 163.0% 123.0% 75.8% nr AA AAA 0.5 1.0

Report | Annex 105 The category “Other ABS” also includes the ABS of NPLs. The ABS of NPLs have as collateral overdue debts relating to taxes and social security contributions owed to the Directorate-General for Taxes (Direcção Geral de Impostos) and to the Financial Management Institute of the Portuguese State Social Security. In this type of ABS the issue is protected assured by the very high level of the collateral ᭟

Class Level of Manager Country of risk of Type of Issues of other ABS seniority the assets included collateral in the collateral Sagres Soc Titul. Cred. 25/09/2012 S1 Co* O Mezzanine Portugal Portugal NPL'S 1) Protection level provided by tranches subordinated to the class held.

DPR – Diversified Payment Rights: The collateralised Diversified Payment Rights have as originators banks domiciled in emerging countries with high volumes of overseas trade flows (historically with the greatest volume are Brazil and Turkey) which use these structures to obtain long-term financing with an investment-grade credit-risk rating. The collateral corresponds to the payment orders in USD and Euros, current and future, remitted by correspondent banks with high credit-risk ratings domiciled in investment-grade countries, through bank accounts opened at these banks in the name of the issuer under the administration of a Trustee, where the necessary funds are captured for payment of the issue’s debt servicing, with the remainder remitted to the originator bank. ᭟

Originator Originator’s Type of Diversified Payment Rights issues country collateral

Available-for-sale portfolio Brazilian Merchant Voucher Receivables Visanet Brazil DPR Brazil Foreign Diversified Payment Rights Santander / Banespa Brazil DPR International Diversified Payment Rights Series 2003 Bradesco Brazil DPR Dollar Diversified Payment Rights Fin. Co. Banco do Brasil Brazil DPR Yapi Kredi DPR Fin Series 2006-B Yaki Ve Kredi Bankasi Turkey DPR

Loan portfolio Alfa Diversified Payment Rights Alfa Bank Russia DPR Alfa Diversified Payment Rights Alfa Bank Russia DPR Alliance Dpr Co Alliance Bank Kazakhstan DPR Arts Series 2005-A Akbank Turkey DPR Bosphorous Fin. Services Ltd Finansbank Turkey DPR Garanti Diversified Series 2006-A Tukiye Garanti Bankasi Turkey DPR Garanti Diversified Series 2005-A Tukiye Garanti Bankasi Turkey DPR Hsbc Brazil Series 2006-A HSBC Brazil Brazil DPR Mdm Dpr Finance Company Series 2007-A MDM Bank Russia DPR Tib Diversified Payment Rights Series 2005-D Isbank Turkey DPR Vb Dpr Fin Co Series 2006-A Tukiye Vakiflar Bankasi Turkey DPR Vb Dpr Fin Co Series 2006-B Tukiye Vakiflar Bankasi Turkey DPR Vb Dpr Fin Co Series 2006-E Tukiye Vakiflar Bankasi Turkey DPR Yapi Kredi Dpr Fin Series 2006-B Yaki Ve Kredi Bankasi Turkey DPR Yapi Kredi Dpr Fin Series 2006-D Yaki Ve Kredi Bankasi Turkey DPR Yapi Kredi Dpr Fin Series 2007-B Yaki Ve Kredi Bankasi Turkey DPR

106 Banco BPI | 1st half 2009 report relative to the amount of bonds issued. The collections of overdue debts are used to redeem issues in the order of seniority and to pay the respective interest.

Vintage Protection level1 Par value Moody’s S&P Fitch Balance by subordinated coverage sheet value tranches ratio (M.€) 2004 na 26.6x nr BBB- A 0.3

These structures are protected against the risk of government intervention in the outflow of foreign exchange and guarantee the performance through the imposition of controls which ensure adequate cover for servicing the debt, as well as the frequency of the flows remitted. Despite the decline noted in export prices, the quality of the originator banks in the respective countries has permitted maintaining very high levels of payment orders.

Details of the Diversified Payments Rights issues were as follows:

Over-collateralisation Moody’s S&P Fitch Monoline Balance of debt servicing (wrapper) sheet value (M.€)

8.4 A2 A- A- 0.8 109.6 A2 A- A 1.9 76 A1 A- nr 1.0 150.4 A1 A- nr 2.5 64.7 Baa2 BBB nr MBIA 2.8 9.0

46.6 Ba1 BBB- nr 1.3 46.6 Ba1 BBB- nr 2.4 1.4 nr nr CC 1.1 76 Baa2 BBB+ nr MBIA 10.7 40.3 Baa2 nr nr 2.4 43.9 Baa2 BBB nr MBIA 8.3 43.9 Baa2 BBB nr MBIA 4.1 596.1 A1 A- nr FGIC 12.5 24.9 Ba1 nr BB+ 2.5 29.8 Baa2 BBB- nr 5.3 21.5 Baa2 BBB- nr FGIC 5.3 21.5 Baa2 BBB nr MBIA 6.1 21.5 Baa2 BBB- nr 3.5 64.7 Baa2 BBB nr MBIA 6.1 64.7 Baa2 BBB nr AMBAC 5.7 64.7 Baa2 BBB- nr XL CAPITAL 6.9 84.3

Report | Annex 107 ANNEX TO POINT 21 OF THE BANK OF PORTUGAL RECOMMENDATIONS

BPI does not have direct exposure to mono-line insurers. Indirect exposure stems from the guarantees given by these insurers to certain issues in portfolio, they themselves collateralised by assets with capacity for generating flows for covering the respective debt servicing. The unconditional and irrevocable guarantee of the mono-line insurers will only be activated where the flows generated are insufficient to service the debt on the respective payment date. These issues are a sub-group of the securities presented above.

BPI’s exposure to mono-line insurers at 30 June 2009:

Current rating Monoline Current rating of Book value at Write-downs Portfolio underlying (wrapper) the Monoline 30 Jun. 09 or Losses Issues the issue (M.€) (M / S&P / F) HSBC Brazil DPR Finance (No. 1) Ltd 2006-A A1 / A- / nr FGIC Ca / NR / nr 12.5 0.0 Loans Akbank Remittances Trust Sec (ARTS 10) 2005-A Baa2 / BBB- / nr MBIA Ba3 / BB / nr 10.7 0.0 Loans Garanti DPR Finance Co. 2005-A Baa2 / BBB / nr MBIA Ba3 / BB / nr 4.1 0.0 Loans Garanti DPR Finance Co. 2006-A Baa2 / BBB / nr MBIA Ba3 / BB / nr 8.3 0.0 Loans VB DPR Finance Co. 2006-A Baa2 / BBB- / nr FGIC Ca / NR / nr 5.3 0.0 Loans VB DPR Finance Co. 2006-B Baa2 / BBB / nr MBIA Ba3 / BB / nr 6.1 0.0 Loans Yapi Kredi DPR Finance Co. 2006-B Baa2 / BBB / nr MBIA Ba3 / BB / nr 6.1 0.0 Loans Yapi Kredi DPR Finance Co. 2006-B Baa2 / BBB / nr MBIA Ba3 / BB / nr 2.8 0.0 DV Yapi Kredi DPR Finance Co. 2006-D Baa2 / BBB / nr AMBAC Caa2 / CC / nr 5.7 0.0 Loans Yapi Kredi DPR Finance Co. 2007-B Baa2 / BBB- / nr XL Capital Baa2 / BBB+ / BBB 6.9 0.0 Loans Aleutian Investments LLC 2002 series B Ba3 / A / nr AMBAC Caa2 / CC / nr 2.3 0.0 DV Total 70.8 Credit protection provided by wrapper – Unconditional and irrevocable guarantee of payment of the total repayments of capital and interest on the respective maturity dates. M – Moody’s. S&P – Standard and Poor’s. F – Fitch Ratings.

108 Banco BPI | 1st half 2009 report Rating

The BPI Group’s strategy, competitive position, solid Banco BPI rating classifications financial base and asset quality continue to merit from Fitch Moody's Standard the independent and reputable firms – Fitch Ratings, Ratings & Poor's Moody’s and Standard & Poor’s – an evaluation that is Long term A+ A11 A 1 borne out by the high credit ratings. Short term F1 P-1 A-1 Outlook Negative Under revision1 Negative Rating attribution: Standard & Poor’s in its note of 3 February 2009, and Initial date 31 Oct. 962 1 Nov. 963 27 Apr. 99 Fitch Ratings in its note of 10 August, reaffirmed Banco Last report 10 Aug. 09 08 Apr. 09 31 Jul. 09 BPI’s ratings (long term / short term) of A / A-1 and A+ / 1) The rating notations attributed by Moody’s to the Portuguese banks Table 70 F1 respectively. On those dates, these agencies altered are currently under revision, according to the report of April 09. 2) Rating notation attributed to all banks that composed BPI Group at that date. their outlook from stable to negative, reflecting, according 3) Rating notation attributed to BFB. to their justifications, the pressure that the Portuguese Moody’s: A1 Bonds which are rated “A” possess very favourable attributes and are considered as economy’s deterioration during 2009 could have on BPI’s superior-medium grade investments. results and the quality of its assets, as well as the (the modifier 1 denotes a top position within category A). Fitch Ratings: challenge posed to improving profitability in domestic A+ High credit quality. A ratings denote a low expectation of credit risk. operations against this backdrop. (the modifier + denotes a higher position within category A). Standard & Poor’s: A An entity with an A rating possesses a strong capacity to meet its financial commitments. (lack of signal denotes a middle position within category A).

Fitch Ratings Moody's Standard & Poor's

Banco BPI Banco BPI Banco BPI Credit rating (LT / ST) A+ / F1 Bank deposits (LP / CP) A1 / P-11 Counterparty credit (LT / ST) A / A-1 Outlook Negative Outlook Under revision Outlook Negative Individual B / C Bank financial strength C1 Certificate of deposits (LT / ST) A / A-1 Support rating 2 Issuer rating A11 Support rating floor BBB- Senior unsecured (domestic currency) A11 Senior secured debt AAA Senior unsecured (LT) A+ Other short term Senior unsecured A Senior unsecured (ST) F1 (domestic currency) P-1 Short term debt (domestic currency) A-1 Subordinated (LT) A Junior subordinate Subordinated (domestic currency) A- (domestic currency) A21 Junior subordinated Subordinate (LT) (domestic currency) BBB (domestic currency) A21 Acções preferenciais Baa11

Preference stock (LT) A Preference stock Baa11 Preference stock BBB

Sovereign rating – Portuguese Republic Sovereign rating – Portuguese Republic Sovereign rating – Portuguese Republica Long term (foreign currency) AA Long term (foreign currency) Aa2 Long term / Short term A+ / A-1 Long term (domestic currency) AA Long term (domestic currency) Aa2 Outlook Stable Outlook Stable Outlook Stable

1) Under revision since the report of April 09.

Report | Rating 109 Banco BPI shares

Stock market performance Liquidity Following the major falls registered in 2008, the equity In the first half of 2009, Banco BPI shares originated a markets began in 2009 a period of stabilisation and later turnover of 254.6 M.€. The daily average trading volume recovery, as a reflection of the principal international was 2.0 M.€, down 79% when compared to the volume indices. Having sunk in many cases to historical lows in traded in the same period of last year of 9.4 M.€. The March, the markets rebounded subsequently, permitting decrease observed in the BPI share’s liquidity was much in the majority of cases the recoupment of the losses in line with the national stock market’s subdued trend. In suffered hitherto in 2009 and thus generate positive the period under review, the PSI20 index witnessed its market returns. business volume plunge 55%, while the banking sector suffered an even bigger retreat of more than 62%. The BPI closed the 1st half of 2009 with a gain of 4.0%, the number of BPI dealt in the period was equivalent to 17% share price being fixed at € 1.820 after having collapsed of its share capital. to a low of € 1.350 at the beginning of March. In the same period, comparable Iberian banks registered an Stockmarket capitalisation average appreciation of 0.7%, while the European sector The market value of the BPI Group, as gauged from its index – the DJ Europe Stoxx Banks – climbed 18.3% and stockmarket capitalisation at 30 June 2009 amounted to the national benchmark, – the PSI-20 – advanced 1 638 M.€. BPI was at the end of the first half of 2009 12.1%. the tenth largest in terms of stockmarket capitalisation, with a weight of 2.7% on the PSI-20 index.

110 Banco BPI | 1st half 2009 report Banco BPI shares principal indicators Amounts in euros and M.€

1st half 2008 2nd half 2008 1st half 2009

Stock exchange price of Banco BPI shares (€)1 Highest price 5.082 2.880 2.097 Average price 3.373 1.990 1.710 Lowest price 2.635 1.360 1.350 Closing price 2.635 1.750 1.820 Change in the stock price and in the reference indexes in the semesters Banco BPI (48.8%) (33.6%) 4.0% PSI-20 (31.6%) (28.8%) 12.1% Dow Jones STOXX 600 (20.6%) (31.5%) 3.8% Dow Jones Europe STOXX Bank (32.8%) (47.0%) 18.3% Market valuation Stock market capitalisation at the end of the semester (M.€) 2 372 1 575 1 638 Data per share in the semester (euros)1 Net profit1 0.011 0.158 0.100 Net profit adjusted1, 2 0.2122 0.0722 0.100 Cash-flow after taxation1 0.274 0.309 0.223 Cash-flow after taxation adjusted1, 2 0.3332 0.2132 0.223 Book value 1.885 1.677 1.889 Weighted average no. of shares (in millions)1 791.4 892.7 893.5 Liquidity Trading volume in the semester (M.€) 1 181.2 594.7 254.6 Daily average trading volume (M.€) 9.4 4.6 2.0 Daily average trading quantity (x thousand) 2 812 2 339 1 181 Share capital rotation 45% 34% 17%

1) Adjusted by the capital increase of 760 M.€ to 900 M.€, by cash contributions, which took place in June 2008. Table 71 2) Banco BPI’s 2008 consolidated net profit was specially affected by two negative impacts (after taxes): (i) loss on the sale of the shares in Banco Comercial Português (BCP) and by the impairment charges set aside on the BCP investment of 157.4 M.€ in the first semester and 27.1 M.€ in the second semester; (ii) costs with early retirements of 1.1 M.€ in the first semester and 26.7 M.€ in the second semester; and positively affected by the gain realised on the sale of 49.9% of BFA’s capital to Unitel, with a positive impact on after-tax net profit of 130.6 M.€ in the second semester. Excluding these non-recurrent impacts, the consolidated net profit in the first half 2008 was 167.5 M.€ (vs. 9.1 M.€ as reported). The above table presents the indicators earnings per share and cash flow per share after eliminating the abovementioned impacts.

BANCO BPI SHARES

Banco BPI’s share capital is composed of 900 million Codes and tickers nominative and dematerialised shares with a nominal value ᭿ ISIN and Euronext code: PTBPI0AM004 of one euro each. All the shares are entitled to the full ᭿ Reuters: BBPI.LS dividend relating to 2009 and following years. All the ᭿ Bloomberg: BPI PL shares are admitted to trading on the Euronext market.

Report | Banco BPI shares 111 Treasury stock In the first half of 2009, Banco BPI traded 1 181 192 the granting of shares and share options. For its part, own shares corresponding to 0.13% of share capital. Banco Português de Investimento, S.A., – 100% held by These transactions were earmarked for the execution of Banco BPI – traded 575 964 Banco BPI shares the variable remuneration in shares programme (share representing 0.06% of the latter’s share capital. incentive scheme) for Employees and Directors, through

Treasury shares transactions in the 1st half of 2009 Purchase Sell Total traded Quantity Amount Unitary avera- Quantity Amount Unitary avera- Quantity As % of (number) (€) ge price (€) (number) (€) ge price (€) (number) share capital Banco BPI Stock exchange market 1 037 100 2 053 856 1.98 236 436 1.85 1 037 336 0.12% Over-the-counter market 1 108 4 706 4.25 142 748 251 975 1.77 143 856 0.02% 1 038 208 2 058 561 1.98 142 984 252 411 1.77 1 181 192 0.13% Banco Português de Investimento Stock exchange market 26 732 47 117 1.76 549 232 950 996 1.73 575 964 0.06% Over-the-counter market 0.00 0.00 0.00% 26 732 47 117 1.76 549 232 950 996 1.73 575 964 0.06% Total Stock exchange market 1 063 832 2 100 973 1.97 549 468 951 431 1.73 1 613 300 0.18% Over-the-counter market 1 108 4 706 4.25 142 748 251 975 1.77 143 856 0.02% 1 064 940 2 105 679 1.98 692 216 1 203 407 1.74 1 757 156 0.20% Table 70

At 30 June 2009, Banco BPI held 6 157 2381 own The number of own shares referred to does not include shares, that is 0.68% of the capital. These shares are shares granted under condition subsequent within the earmarked for covering the options granted to Employees scope of the RVA scheme but still not freely disposable. under the share incentive scheme (Portuguese initials – The transfer of the ownership of the shares granted under RVA) in effect at the Group since 2001. the RVA scheme is effected in total on the grant date, but is dependent on Employees continuing to work at the For its part, Banco Português de Investimento held BPI Group. For accounting purposes, the shares remain 100 400 Banco BPI shares at 30 June 2009, that is, in Banco BPI’s treasury shares portfolio up until the date 0.01% of the capital, all of which were earmarked to they become freely disposable. cover positions in PSI-20 futures.

The other subsidiaries over which Banco BPI exercises effective management control did not acquire or sell any shares representing its share capital and, at the end of June 2009, did not hold any Banco BPI shares in their portfolios.

1) Includes an over-the-counter transaction of 1 505 shares effected on the 30 June, recording of which is performed in the following business day.

112 Banco BPI | 1st half 2009 report Banco BPI, S.A.

Consolidated financial statements as of June 30, 2009 and 2008

BANCO BPI, S.A. CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2009 AND DECEMBER 31, 2008 (Translation of balance sheets originally issued in Portuguese - Note 5)

(Amounts expressed in thousands of Euro) (Amounts expressed in thousands of Euro) Jun. 30, 09 Dec. 31, 08

Amounts Impairment before and impairment and Notes depreciation Net Net Notes Jun. 30, 09 Dec. 31, 08 depreciation and and amortisation amortisation

ASSETS LIABILITIES Cash and deposits at central banks 4.1 1 549 467 1 549 467 1 088 339 Resources of central banks 4.14 1 505 251 Loans and advances to other credit institutions 4.2 622 104 622 104 227 081 Financial liabilities held for trading 4.15/4.4 383 412 258 452 Financial assets held for trading and at fair Resources of other credit institutions 4.16 2 107 796 2 007 412 value through profit or loss 4.3/4.4 1 669 612 1 669 612 2 853 579 Resources of customers and other debts 4.17 24 642 794 25 633 620 Financial assets available for sale 4.5 5 834 528 54 670 5 779 858 3 262 603 Debt securities 4.18 7 093 325 6 417 808 Loans and advances to credit institutions 4.6 2 317 098 1 458 2 315 640 3 504 198 Financial liabilities relating to transferred assets 4.19 1 887 496 2 070 779 Loans and advances to customers 4.7 29 489 771 466 322 29 023 449 29 275 182 Hedging derivatives 4.4 327 591 596 537 Held to maturity investments 4.8 698 676 698 676 407 654 Provisions 4.20 85 766 77 565 Hedging derivatives 4.4 287 577 287 577 484 428 Technical provisions 4.21 1 911 392 2 246 427 Other tangible assets 4.9 712 482 450 065 262 417 331 654 Tax liabilities 4.22 34 948 62 812 Intangible assets 4.10 89 461 77 045 12 416 15 364 Participating bonds 4.23 29 447 28 682 Investments in associated companies and Subordinated debt 4.24 702 011 767 628 jointly controlled entities 4.11 141 696 141 696 137 875 Other liabilities 4.25/4.26 687 043 874 147 Tax assets 4.12 218 096 218 096 250 375 Total Liabilities 41 398 272 41 041 869 Other assets 4.13/4.26 976 171 25 349 950 822 1 165 067 SHAREHOLDERS' EQUITY Subscribed share capital 4.27 900 000 900 000 Share premium account 4.28 441 306 441 306 Other equity instruments 4.29 10 309 12 307 Revaluation reserves 4.30 ( 278 332) ( 435 638) Other reserves and retained earnings 4.31 547 246 452 509 (Treasury shares) 4.29 ( 21 715) ( 22 686) Consolidated net income of the BPI Group 4.46 89 009 150 305 Shareholders' equity attributable to the shareholders of BPI 1 687 823 1 498 103 Minority interest 4.32 445 735 463 427 Total Shareholders' Equity 2 133 558 1 961 530 Total Assets 44 606 739 1 074 909 43 531 830 43 003 399 Total Liabilities and Shareholders' Equity 43 531 830 43 003 399

OFF BALANCE SHEET ITEMS Guarantees given and other contingent liabilitie 4.7/4.33 3 040 204 3 355 546 Of which: [Guarantees and sureties] [2 798 471] [3 112 929] [Others] [241 733] [242 617] Commitments 4.33 4 314 196 4 560 511

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

CONSOLIDATED STATEMENTS OF INCOME FOR PERIODS ENDED JUNE 30, 2009 AND 2008

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

(Amounts expressed in thousands of Euro)

Notes Jun. 30, 09 Jun. 30, 08

Interest and similar income 1 278 147 1 418 934 Interest and similar expenses ( 966 458) (1 114 085) Financial margin (narrow sense) 4.34 311 689 304 849 Gross margin on unit links 4.35 1 514 4 176 Income from equity instruments 4.36 4 683 3 230 Net commission relating to amortised cost 4.37 11 438 10 271 Financial margin 329 324 322 526

Technical result of insurance contracts 4.38 4 960 5 394

Commissions received 137 989 147 345 Commissions paid ( 20 492) ( 20 198) Other income, net 27 613 23 304 Net commission income 4.39 145 110 150 451 Gain and loss on operations at fair value 67 573 37 822 Gain and loss on assets available for sale 5 812 ( 36 453) Interest and financial gain and loss with pensions 4.26 ( 2 482) 34 660 Net income on financial operations 4.40 70 903 36 029 Operating income 29 022 24 405 Operating expenses ( 10 991) ( 6 897) Other taxes ( 2 677) ( 2 544) Net operating income 4.41 15 354 14 964 Operating income from banking activity 565 651 529 364 Personnel costs 4.42 ( 200 870) ( 201 851) General administrative costs 4.43 ( 118 177) ( 116 530) Depreciation and amortisation 4.9/4.10 ( 27 329) ( 24 878) Overhead costs ( 346 376) ( 343 259) Recovery of loans, interest and expenses 9 014 14 753 Impairment losses and provisions for loans and guarantees, net 4.20 ( 62 970) ( 62 180) Impairment losses and other provisions, net 4.20 ( 20 283) ( 120 698) Net income before income tax 145 036 17 980 Income tax 4.44 ( 9 387) ( 10 281) Earnings of associated companies (equity method) 4.45 6 191 10 365 Global consolidated net income 141 840 18 064 Income attributable to minority interest 4.32 ( 52 831) ( 8 983) Consolidated net income of the BPI Group 4.46 89 009 9 081

Earnings per share (in Euro) Basic 0.100 0.011 Diluted 0.099 0.011

The accompanying notes form an integral part of these statements.

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR PERIODS ENDED JUNE 30, 2009 AND 2008

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

(Amounts expressed in thousands of Euro)

Jun. 30, 09 Jun. 30, 08

Attributable to Attributable to Attributable to minority Attributable to minority shareholders' of the BPI Total shareholders' of the BPI Total interests interests Group Group Consolidated net income 89 009 52 831 141 840 9 081 8 983 18 064 Foreign exchange translation differences ( 9 936) ( 9 288) ( 19 224) ( 19 275) ( 19 275) Revaluation reserves of financial assets available for sale: Revaluation of financial assets available for sale 196 688 196 688 ( 197 239) ( 197 239) Tax effect ( 37 154) ( 37 154) 18 096 18 096 Transfer to income resulting from sales 6 939 6 939 11 707 11 707 Tax effect ( 193) ( 193) 6 807 6 807 Transfer to income resulting from impairment recognized in the period 963 963 22 818 22 818 Tax effect ( 1) ( 1) 1 016 1 016 Valuation of assets of associated companies 5 672 5 672 ( 20 936) ( 20 936) Tax effect ( 1 413) ( 1 413) 5 235 5 235 Income not included in the consolidated statements of income 161 565 ( 9 288) 152 277 ( 171 771) ( 171 771) Consolidated comprehensive income 250 574 43 543 294 117 ( 162 690) 8 983 ( 153 707)

The accompanying notes form an integral part of these statements.

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

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE PERIODS ENDED JUNE 30, 2009 AND 2008

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

(Amounts expressed in thousands of Euro) Other Share Subscribed Other equity Revaluation reserves and Treasury Minority Shareholders' premium Net income share capital instruments reserves retained shares interest equity account earnings Balance at December 31, 2007 760 000 231 306 10 822 54 975 253 132 ( 30 213) 355 111 270 326 1 905 459 Dividends distributed in 2008 ( 140 558) ( 140 558) Appropriation of net income for 2007 to reserves 214 553 ( 214 553) Share capital increase: Nominal value 140 000 140 000 Share premium account 210 000 210 000 Dividends paid on preference shares ( 8 767) ( 8 767) Variable Remuneration Program (RVA) 632 ( 3 059) ( 2 427) Sale / purchase of treasury shares ( 2 719) 764 ( 1 955) Sale / purchase of preference shares ( 3 212) ( 3 212) Comprehensive income in 1st half 2008 ( 156 070) ( 15 701) 9 081 8 983 ( 153 707) Others 3 046 3 046 Balance at June 30, 2008 900 000 441 306 11 454 ( 101 095) 452 311 ( 32 508) 9 081 267 330 1 947 879 Dividends paid on preference shares ( 9 470) ( 9 470) Variable Remuneration Program (RVA) 853 ( 5 949) 10 046 4 950 Sale / purchase of treasury shares 1 896 ( 224) 1 672 Sale / purchase of preference shares ( 2 805) ( 2 805) Comprehensive income in 2nd half 2008 Foreign exchange translation differences 35 065 35 065 Revaluation reserves of financial assets available for sale ( 369 608) ( 369 608) Revaluation reserves of assets of associated companies 5 518 5 518 Comprehensive income in 2nd half 2008 141 224 18 763 159 987 Sale of 49.9% of the share capital of BFA 189 609 189 609 Others ( 1 267) ( 1 267) Balance at December 31, 2008 900 000 441 306 12 307 ( 435 638) 452 509 ( 22 686) 150 305 463 427 1 961 530 Dividends distributed in 2009 ( 59 752) ( 59 752) Appropriation of net income for 2008 to reserves 90 553 ( 90 553) Dividends paid on preference shares ( 6 488) ( 6 488) Dividends paid to minority interest ( 57 573) ( 57 573) Variable Remuneration Program (RVA) ( 1 998) ( 78) 60 ( 2 016) Sale / purchase of treasury shares ( 4) 911 907 Sale / purchase of preference shares 2 826 2 826 Comprehensive income in 1st half 2009 157 306 4 259 89 009 43 543 294 117 Others 7 7 Balance at June 30, 2009 900 000 441 306 10 309 ( 278 332) 547 246 ( 21 715) 89 009 445 735 2 133 558

The accompanying notes form an integral part of these statements.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR PERIODS ENDED JUNE 30, 2009 AND 2008

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

(Amounts expressed in thousands of Euro) Jun. 30, 09 Jun. 30, 08 Operating activities Interest, commissions and similar income received 1 848 800 2 048 528 Interest, commissions and similar expenses paid ( 1 248 242) ( 1 379 279) Recovery of loans and interest in arrears 9 014 14 753 Payments to personnel and suppliers ( 343 026) ( 332 480) Net cash flow from income and expenses 266 546 351 522 Decrease (increase) in: Financial assets held for trading, available for sale and held to maturity ( 1 349 319) 1 087 419 Loans and advances to credit institutions 1 154 692 487 857 Loans and advances to customers 235 074 ( 1 304 104) Other assets 314 186 ( 280 797) Net cash flow from operating assets 354 633 ( 9 625) Increase (decrease) in: Resources of central banks and other credit institutions 1 618 105 ( 1 336 384) Resources of customers ( 1 253 701) 1 232 890 Financial liabilities held for trading 124 960 ( 316 517) Other liabilities ( 341 351) 7 245 Net cash flow from operating liabilities 148 013 ( 412 766) Contributions to the Pension Funds ( 46 463) Income tax paid ( 42 321) ( 66 349) 680 408 ( 137 218) Investing activities Purchase of other tangible assets and intangible assets ( 22 229) ( 26 046) Sale of other tangible assets 739 1 752 Dividends received and other income 10 328 15 207 ( 11 162) ( 9 087) Financing activities Liability for assets not derecognised ( 179 502) ( 436 067) Issuance of debt securities and subordinated debt 2 676 965 1 217 799 Redemption of debt securities ( 1 466 009) ( 788 477) Purchase and sale of own debt securities and subordinated debt ( 632 878) ( 182 405) Purchase and sale of preference shares 2 826 ( 3 212) Interest on debt securities and subordinated debt ( 88 952) ( 155 103) Share capital increase Nominal value 140 000 Share premium account 210 000 Dividends paid on preference shares ( 6 488) ( 8 767) Dividends distributed ( 59 752) ( 140 558) Dividends distributed to minority interest ( 57 573) Purchase and sale of treasury shares ( 1 117) ( 7 862) 187 520 ( 154 652) Net increase (decrease) in cash and equivalents 856 766 ( 300 957) Cash and equivalents at the beginning of the period 1 314 362 1 407 100 Cash and equivalents at the end of the period 2 171 128 1 106 143 The accompanying notes form an integral part of these statements.

The Accountant The Executive Committee of the Board of Directors Alberto Pitôrra President Fernando Ulrich Banco BPI, S.A.

Notes to the consolidated financial statements as of June 30, 2009 and 2008

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

(These notes are a translation of notes originally issued in Portuguese – Note 5) 1. THE FINANCIAL GROUP

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

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

At June 30, 2009 the Group’s banking operations were carried out principally through Banco BPI in the commercial banking area and through BPI Investimentos in the investment banking area. The BPI Group is also the holder of a 50.1% participation in Banco de Fomento, S.A. which operates as a commercial bank in Angola.

During 2008 Sofinac, a company that was fully owned by Banco BPI, was merged into BPI Gestão de Activos. For accounting purposes, the merger became effective on January 1, 2008.

During 2008 Banco BPI dissolved and liquidated Eurolocação, a company that was fully owned by Banco BPI.

In December 2008 Banco BPI sold 49.9% of the share capital of Banco de Fomento Angola, thus the BPI Group became the holder of 50.1% of that Bank.

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 120

At June 30, 2009 the BPI Group was made up of the following companies:

Shareholders' Net income (loss) Direct Effective Consolidation / Head Office Total assets equity for the period participation participation Recognition method

Banks Banco BPI, S.A. Portugal 1 493 628 40 102 422 99 503 Banco Português de Investimento, S.A. Portugal 57 894 3 035 370 3 471 100,00% 100,00% Full Consolidation Banco Comercial e de Investimentos, S.A.R.L. Mozambique 56 657 694 168 8 539 29,55% 30,00% Equity Method Banco de Fomento, S.A. (Angola) Angola 359 653 4 445 057 89 411 50,08% 50,10% Full Consolidation Banco BPI Cayman, Ltd. Cayman Island 141 869 1 023 343 3 229 100,00% Full Consolidation

Specialised loan companies BPI Rent – Comércio e Aluguer de Bens, Lda. Portugal 15 436 15 809 1 189 100,00% 100,00% Full Consolidation BPI Locação de Equipamentos, Lda Portugal 3 061 4 887 536 100,00% 100,00% Full Consolidation

Asset management companies and dealers BPI Dealer – Sociedade Financeira de Corretagem (Moçambique), S.A.R.L. Mozambique 89 100 ( 7) 13,00% 92,70% Full Consolidation BPI Gestão de Activos – Gestão de Fundos de Investimento Mobiliários, S.A Portugal 13 961 22 576 3 637 100,00% 100,00% Full Consolidation BPI – Global Investment Fund Management Company, S.A. Luxembourg 832 1 049 367 100,00% 100,00% Full Consolidation BPI Pensões – Sociedade Gestora de Fundos de Pensões, S.A. Portugal 5 503 6 491 1 214 100,00% 100,00% Full Consolidation BPI (Suisse), S.A. Switzerland 85 2 250 ( 326) 99,90% Full Consolidation

Venture capital companies F.Turismo – Capital de Risco, S.A. Portugal 5 717 5 954 350 25,00% 25,00% Equity Method Inter-Risco – Sociedade de Capital de Risco, S.A. Portugal 27 102 28 989 ( 700) 100,00% 100,00% Full Consolidation

Insurance companies BPI Vida – Companhia de Seguros de Vida, S.A. Portugal 96 370 2 934 831 3 121 100,00% 100,00% Full Consolidation Cosec – Companhia de Seguros de Crédito, S.A.1 Portugal 40 014 98 926 ( 356) 50,00% 50,00% Equity Method Companhia de Seguros Allianz Portugal, S.A. Portugal 179 592 1 138 655 10 241 35,00% 35,00% Equity Method

Other BPI Capital Finance Ltd. 2 Cayman Island 550 333 550 343 8 465 100,00% 100,00% Full Consolidation BPI, Inc. 3 U.S.A. 1 051 1 052 ( 69) 100,00% 100,00% Full Consolidation BPI Madeira, SGPS, Unipessoal, S.A. Portugal 152 851 152 854 15 100,00% 100,00% Full Consolidation Douro – Sociedade Gestora de Participações Sociais, S.A. 4 Portugal 4 734 4 795 ( 23) 100,00% 100,00% Full Consolidation Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A. Portugal 67 617 74 453 ( 1 106) 32,80% 32,80% Equity Method Simofer – Sociedade de Empreendimentos Imobiliários e Construção Civil, Lda. Portugal ( 5 953) 1 069 ( 15) 100,00% 100,00% Full Consolidation Ulissipair ACE Portugal 8 178 8 50,00% Proportional Method Viacer – Sociedade Gestora de Participações Sociais, Lda Portugal 72 960 72 974 1 278 25,00% 25,00% Equity Method

Note: Unless otherwise indicated, all amounts are as of June 30, 2009 (accounting balances before consolidation adjustments). 1 Values as of May 31, 2009. 2 The share capital is made up of 5 000 ordinary shares with a nominal value of 1 Euro each, and 550 000 000 non-voting preference shares with a nominal value of 1 euro each. The BPI Group’s effective participation corresponds to 0.001% considering the preference shares. 3 Amounts as of December 31, 2008 translated using the US dollar exchange rate as of June 30, 2009. 4 The amounts refer to the consolidated financial statements with Sucessa – Sociedades de Investimentos e Construções Urbanas, S.A. and Douro Fundiários, S.A., which are fully owned by Douro – Sociedade Gestora de Participações Sociais, S.A.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 121

2. BASIS OF PRESENTATION AND PRINCIPAL ACCOUNTING POLICIES

A) BASES OF PRESENTATION

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

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

The standards (new or revised), reflected in the financial statements as of June 30, 2009, were as follows:

„ IAS 1 – Presentation of Financial Statements: changes were introduced in terms of the presentation requirements of certain transactions reflected in shareholders' equity and changes in terms of the captions used and presentation of the financial statements. These amendments are of mandatory application for annual periods beginning on or after January 1, 2009.

The impact of these changes was the introduction of a Statement of Comprehensive Income.

„ IAS 23 – Borrowing Costs: the revised Standard introduced changes requiring borrowing costs relating to assets which are not yet available for use or sale to be capitalized. The standard also provides a number of exceptions to the capitalization of these costs. The revised Standard is of mandatory application for annual periods beginning on or after January 1, 2009. Implementation of these changes had no impact on the financial statements presented.

„ IAS 32 – Financial Instruments: Presentation and IAS 1 - Presentation of Financial Statements: the amendments to this Standard changed the balance sheet classification of puttable financial instruments, in particular, financial instruments that previously met the definition of a financial liability are now classified as equity because they represent a residual interest in the net assets of the entity. These amendments are of mandatory application for annual periods beginning on or after January 1, 2009. Implementation of these changes had no impact on the financial statements presented.

„ IFRS 2 – Share-based Payments: the revised Standard clarifies that vesting conditions are service and performance conditions only, and that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. These amendments are of mandatory application for annual periods beginning on or after January 1, 2009. The implementation of these changes had no impact on the financial statements presented.

„ IFRS 8 – Operating Segments: This Standard sets the disclosure requirements for segments information, replacing Standard IAS 14 - "Segment Reporting". These amendments are of mandatory application for annual periods beginning on or after January 1, 2009.

The impact from these changes is described in Note 3. Segment Reporting.

„ IFRIC 16 – Hedging of a net investment in a foreign operation: This interpretation clarifies the rules for these hedging relationships and the amounts that must be reclassified to profit or loss when the hedged foreign operation terminates. These amendments are of mandatory application for annual periods beginning on or after October 1, 2008. Implementation of these changes had no impact on the financial statements presented.

At June 30, 2009 the following standards (revised) were available for early adoption:

„ IFRS 3 – Business Combinations and IAS 27 – Consolidated and Separate Financial Statements: the revised Standards make changes to the measurement and recording of “Goodwill”, the accounting treatment of step acquisitions and the recording of transactions with shares of subsidiaries, with or without maintaining control. These amendments are of mandatory application for annual periods beginning on or after July 1, 2009.

„ IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations: the revised Standard clarifies that if there is an intention to sell an investment in a subsidiary which implies loss of control after conclusion of the sale, the assets and liabilities

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 122

of the subsidiary should be classified as non-current assets held for sale, even when the entity holds a residual interest in the former subsidiary after the sale. This revision is of mandatory application for annual periods beginning on or after July 1, 2009.

„ IAS 27 – Consolidated and Separate Financial Statements: according to the revised Standard, investments in subsidiaries, associates or joint ventures which are recorded in accordance with IAS 39 in the parent’s separate financial statements should continue to be measured under this standard, even after their classification as non-current investments held for sale. This standard is of mandatory application as from the date of the first adoption of IFRS 5.

At June 30, 2009 the following standards (new and revised) and interpretations, not yet endorsed by the European Union, were available for early adoption:

„ IAS 39 – Financial Instruments: Recognition and Measurement: this standard was amended in July 2008 in order to clarify two aspects of hedge accounting, namely the identification of inflation as a hedged risk and hedging through options. This amendment is of mandatory application for annual periods beginning on or after July 1, 2009.

„ IFRIC 17 – Distribution of non-monetary assets: This interpretation clarifies that if a distribution of dividends in the form of non- monetary assets occurs, the entity should record this dividend as the fair value of the net assets distributed. These amendments are of mandatory application for annual periods beginning on or after July 1, 2009.

„ IFRS 2 – Share-based Payments: the revised Standard clarifies how a subsidiary must record certain share-based payment agreements in its financial statements. This Standard is of mandatory application for annual periods beginning on or after January 1, 2010.

At the date of approval of these financial statements, the following interpretations had not yet been endorsed by the European Union:

„ IFRS 7 – Financial Instruments: Additional disclosures: the revised Standard presents additional disclosure requirements regarding liquidity risk and determination of fair value. The Standard is of mandatory application for years beginning on or after January 1, 2009.

„ IFRIC 9 and IAS 39 – Reassessment of embedded derivatives: These amendments clarify the accounting treatment of embedded derivatives for entities that make use of the Reclassification Amendment to IAS 39 issued by the IASB in October 2008, namely that on reclassification of a financial asset out of the 'fair value through profit or loss' category, all embedded derivatives have to be valued and, if necessary, recorded separately in financial statements. The amendments apply retrospectively and must be applied for years ending on or after June 30, 2009.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 123

B) PRINCIPAL ACCOUNTING POLICIES:

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

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

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

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

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 124

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

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

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

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

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

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

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

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

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

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

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

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

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

A market is considered to be active, and therefore liquid, if it is traded on a regular basis. Generally, there are market prices for securities and derivatives (futures and options) that are traded on stock exchanges.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 125

In markets which lack liquidity and in the absence of regular transactions, alternative methods of valuing assets are used, namely: − assets valued based on the Net Asset Value updated and disclosed by their managers; − assets valued based on prices disclosed by the entities involved with the structuring of the transactions; − assets valued based on third party bid prices considered to be reliable; or, − assets for which impairment tests are made based on indicators of the performance of the underlying operations (degree of protection by subordination of the parts owned, rates of delinquency of the underlying assets, evolution of the ratings).

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

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

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

These captions include: „ fixed income securities and variable-yield securities traded on active markets, including long (purchased securities) or short (short selling of securities) positions, and derivatives purchased by the BPI Group for sale or repurchase in a very short period of time; „ securities related to capitalisation insurance portfolios; and, „ fixed income securities and variable-yield securities traded on active markets, which the Bank has opted, on the recognition date, to record and value at fair value through profit or loss.

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

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

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

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

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

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

Gains and losses resulting from changes in the fair value of financial assets available for sale are recognised directly in the shareholders’ equity caption fair value revaluation reserve, except for impairment losses and exchange gains and losses on monetary

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assets, until the asset is sold. At this time, the gain or loss previously recognised in shareholders’ equity is transferred to the statement of income.

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

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

IAS 39 identifies some events that are regarded as objective evidence of impairment of financial assets available for sale, namely: „ Significant financial difficulty of the issuer; „ A breach of contract by the issuer in terms of repayment of principal or payment of interest; „ Probability of bankruptcy of the issuer; „ The disappearance of an active market for the financial asset because of financial difficulties of the issuer;

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

With reference to the date of preparation of the financial statements, the Bank assesses the existence of objective evidence of impairment which indicates that the cost of investments may not be recovered in the medium term, considering the market situation and the available information about the issuers.

In the case of objective evidence of impairment the accumulated loss in the fair value revaluation reserve is removed from equity and recognized in the statement of income.

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

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

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

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

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

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

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

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

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The Bank classifies as overdue credit, instalments of principal and interest overdue for more than 30 days. Credits under legal collection procedures include the full amount of the principal (both overdue and not yet due). Mortgage loans are considered to be under legal collection procedures when the petition to execute is delivered to the court, which is usually 150 days after the first default.

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

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

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

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

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

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

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

Securitised credit not derecognised

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Individual assessment

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

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

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

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

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

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

Collective assessment

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

Collective assessment involves estimating the following risk factors:

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

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

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

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

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

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

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

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

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

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

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

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

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

2.2.7. Hedge accounting – derivatives and hedged instruments The BPI Group carries out derivative operations in the normal course of its business, managing its own positions based on the expected evolution of the markets (trading), to meet the specific needs of its customers, or to hedge its exposure (hedging).

All derivative instruments are recorded at fair value, the changes in fair value being recognised in the statement of income.

Financial derivative transactions in the form of foreign exchange contracts, interest rate contracts, contracts on shares or share indices, inflation contracts or a combination of these, are carried out in over-the-counter (OTC) markets and in organised markets (especially stock exchanges). The majority of over-the-counter derivatives, swaps, fras, caps, floors and options are traded on active markets, and are valued based on generally accepted methods (discounting cash flows, Black-Scholes method, etc.) and market prices for similar assets. The amount obtained is adjusted based on liquidity and credit risk.

Derivatives are also recorded in off balance sheet accounts at their theoretical value (notional amount), except for futures, which are recorded in off balance sheet accounts at their daily adjusted market value.

Hedge accounting The BPI Group carries out derivative operations to hedge interest rate and foreign exchange rate risk (fair value hedge operations) on financial assets and liabilities identified individually (bond portfolio, issuance of own debt securities and loans), and on groups of operations (term deposits and fixed rate loans).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Annually, the BPI Group determines the amount of its past service liability by actuarial calculation using the “Projected Unit Credit” method in the case of retirement due to age, and the “Single Successive Premiums” method in the case of retirement due to incapacity and survivor benefits. The actuarial assumptions used (financial and demographic) are based on the expectations, as of the balance sheet date, regarding salary and pension increases, using mortality tables adapted to the Bank’s population. The discount rate is determined based on market rates for high quality corporate bonds with similar terms to those of the related pension liability. The assumptions are mutually compatible. In 2008 the BPI Group updated the actuarial assumptions as of June 30 and December 31, this being reflected prospectively in pension costs and in determining and amortising the actuarial deviations that exceed the corridor. At June 30, 2009, the BPI Group did not change the actuarial assumptions because it was considered that the assumptions used at December 31, 2008 are still applicable considering the current market conditions and expectations at the balance sheet date. The amount of the liability includes, in addition to the retirement pension benefits, post-employment healthcare benefits (SAMS) and death subsidy during retirement.

The BPI Group recognises, under the caption “Other assets” or “Other liabilities – Actuarial deviations”, the net accumulated amount (after January 1, 2004) of actuarial gains and losses resulting from changes in the actuarial and financial assumptions, as well as differences between the actuarial and financial assumptions used and the actual amounts. A corridor has been established to absorb accumulated actuarial gains and losses of up to 10% of the higher of the present value of the past service liability or the amount of the pension fund. Amounts that exceed the corridor are amortised against the statement of income over the average period up to the expected retirement age of the employees covered by the plan, which at June 30, 2009 corresponded to 22 years.

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

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

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

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

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

„ the establishment of a transitory period to fund the increase in the liability resulting from application of IAS 19 at December 31, 2004.

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

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

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

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

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

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

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

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

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

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

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

2.9. Share-based payments (Remuneração variável em acções – RVA) (IFRS 2) The share-based payment program (Remuneração Variável em Acções - RVA) is a remuneration plan under which part of the variable remuneration of Executive Directors and Employees of the BPI Group with annual variable remuneration equal to or greater than 2 500 euro is paid in BPI shares and BPI share options. Remuneration under the RVA program varies from 10% to 50% of the total variable remuneration, the percentage increasing as the responsibility level of the Director or Employee increases.

The shares granted under the RVA program become available to the beneficiary on a gradual basis: 25% on the date they are granted and 25% in each of the three following years. As from 2002 ownership of the shares granted under the RVA program has been fully transferred on the date the shares are granted. Call options over the shares can be exercised between the first and the fifth year, as from the date they are granted. The shares become available (in the 3 years following the year in which they are granted) and the options become available (up to 2005, in the year following that in which they were granted, and as from 2005 in the 90 days following the grant date) subject to the beneficiaries remaining with the BPI Group.

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

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

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

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

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

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

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

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

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

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

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 135

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

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

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

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

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

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

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

Net income distributed to Banco BPI by subsidiary and associated companies in Portugal are not taxed in Banco BPI as a result of application of the regime established in article 46 of the Corporate Income Tax Code, which provides for the elimination of double taxation of net income distributed.

2.13. Preference shares (IAS 32 and IAS 39) Preference shares are classified as equity instruments when:

„ There is no contractual obligation for the BPI Group to redeem the preference shares acquired by a holder (in cash or in another financial asset); „ Remission or early redemption of the preference shares can only be made at the option of the BPI Group; „ Dividends distributed by the BPI Group to the preference shareholders are discretionary.

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

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

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 136

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 137

3. SEGMENT REPORTING

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

• Domestic activity: is the activity related to banking services provided to domestic customers, including members of emigrant communities and subsidiaries of Portuguese companies, and includes:

o Commercial Banking o Investment Banking o Equity investments and others

• International activity: is the activity developed in Angola by Banco de Fomento, S.A, and in Mozambique by Banco Comercial de Investimentos, S.A.R.L. and by BPI Dealer – Soceidade Financeira de Corretagem, S.A.R.L.

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

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

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

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

The Bank has not identified other business segments under IFRS 8, other than those identified under IAS 14. The reports used by the management consist essentially of accounting information based on IFRS.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 138

The BPI Group’s balance sheet as of June 30, 2009 and investments made in tangible and intangible assets during the period, by segment, are as follows:

Domestic operations International operations Equity Inter segment Commercial Investment Inter segment BPI Group investments Total Angola Mozambique Total operations banking banking operations and others Asset Cash and deposits at Central Banks 596 230 182 1 596 413 953 054 953 054 1 549 467 Loans and advances to other credit institutions repayable on demand 485 553 97 154 1 374 ( 326 158) 257 923 376 770 41 376 811 ( 12 630) 622 104 Financial assets held for trading and at fair value through profit or loss 1 630 211 393 418 ( 605 223) 1 418 406 251 164 42 251 206 1 669 612 Financial assets available for sale 4 675 622 45 544 38 021 ( 7 857) 4 751 330 1 028 528 1 028 528 5 779 858 Loans and advances to credit institutions 4 330 568 2 619 980 1 376 ( 4 640 755) 2 311 169 315 826 1 315 827 ( 311 356) 2 315 640 Loans and advances to customers 27 632 926 110 496 ( 49 680) 27 693 742 1 329 707 1 329 707 29 023 449 Held to maturity investments 634 851 114 560 ( 50 735) 698 676 698 676 Hedging derivatives 388 706 251 ( 101 380) 287 577 287 577 Other tangible assets 160 580 2 888 163 468 98 949 98 949 262 417 Intangible assets 11 333 32 11 365 1 051 1 051 12 416 Investment in associated companies and jointly controlled entities 64 288 60 413 124 701 16 995 16 995 141 696 Tax assets 213 170 4 878 41 218 089 7 7 218 096 Other assets 1 023 658 55 922 1 331 ( 173 318) 907 593 43 227 2 43 229 950 822 TOTAL ASSETS 41 847 696 3 445 305 102 557 ( 5 955 106) 39 440 452 4 398 276 17 088 4 415 364 ( 323 986) 43 531 830 LIABILITIES Resources of central banks 1 505 251 1 505 251 1 505 251 Financial liabilities held for trading 571 225 206 623 ( 394 436) 383 412 383 412 Resources of other credit institutions 5 640 150 29 351 10 746 ( 3 289 103) 2 391 144 40 638 40 638 ( 323 986) 2 107 796 Resources of customers and other debts 19 200 537 2 784 171 867 ( 1 227 871) 20 757 704 3 885 090 3 885 090 24 642 794 Debt securities 7 163 671 157 ( 70 503) 7 093 325 7 093 325 Financial liabilities relating to transferred assets 1 902 467 ( 14 971) 1 887 496 1 887 496 Hedging derivatives 350 963 700 ( 24 072) 327 591 327 591 Provisions 62 880 1 147 54 64 081 21 685 21 685 85 766 Technical provisions 1 619 204 292 188 1 911 392 1 911 392 Tax liabilities 29 694 1 759 ( 1 324) 30 129 4 817 2 4 819 34 948 Participating bonds 29 447 29 447 29 447 Subordinated debt 1 262 557 11 257 ( 571 803) 702 011 702 011 Other liabilities 902 166 50 260 965 ( 362 347) 591 044 95 991 8 95 999 687 043 TOTAL LIABILITIES 40 240 212 3 377 613 11 308 ( 5 955 106) 37 674 027 4 048 221 10 4 048 231 ( 323 986) 41 398 272 SHAREHOLDERS' EQUITY Shareholders' equity attributable to the shareholders of BPI 1 341 222 67 692 91 249 1 500 163 170 588 17 072 187 660 1 687 823 Minority interest 266 262 266 262 179 467 6 179 473 445 735 TOTAL SHAREHOLDERS' EQUITY 1 607 484 67 692 91 249 1 766 425 350 055 17 078 367 133 2 133 558 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 41 847 696 3 445 305 102 557 ( 5 955 106) 39 440 452 4 398 276 17 088 4 415 364 ( 323 986) 43 531 830

Investments made in: Property 25 25 6 190 6 190 6 215 Equipment and other tangible assets 6 202 109 6 311 8 524 8 524 14 835 Intangible assets 1 055 26 1 081 98 98 1 179

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 139

The BPI Group’s income statement for the period ended June 30, 2009, by segment, is as follows:

Domestic operations International operations Inter Commercial Investment Equity investment Inter segment segment BPI Group Total Angola Mozambique Total bankig banking and others operations operations Financial margin (narrow sense) 214 872 4 485 ( 1 264) 218 093 93 591 5 93 596 311 689 Gross margin on unit links 412 1 102 1 514 1 514 Income from equity instruments 3 915 138 630 4 683 4 683 Net commission relating to amortised cost 11 438 11 438 11 438 Financial margin 230 637 5 725 ( 634) 235 728 93 591 5 93 596 329 324 Technical result of insurance contracts 4 896 64 4 960 4 960 Commissions received 125 247 13 354 259 ( 12 986) 125 874 12 736 4 12 740 ( 625) 137 989 Commissions paid ( 27 879) ( 2 852) ( 2) 12 986 ( 17 747) ( 3 363) ( 7) ( 3 370) 625 ( 20 492) Other income, net 13 284 17 13 301 14 312 14 312 27 613 Net commission income 110 652 10 519 257 121 428 23 685 ( 3) 23 682 145 110 Gain and loss on operations at fair value 22 170 4 025 26 195 41 378 41 378 67 573 Gain and loss on assets available for sale 6 547 296 ( 1 031) 5 812 5 812 Interest and financial gain and loss with pensions ( 2 461) ( 20) ( 1) ( 2 482) ( 2 482) Net income on financial operations 26 256 4 301 ( 1 032) 29 525 41 378 41 378 70 903 Operating income 28 262 201 36 28 499 523 523 29 022 Operating expenses ( 10 342) ( 237) ( 4) ( 10 583) ( 404) ( 4) ( 408) ( 10 991) Other taxes ( 1 828) ( 347) ( 4) ( 2 179) ( 498) ( 498) ( 2 677) Net operating expenses 16 092 ( 383) 28 15 737 ( 379) ( 4) ( 383) 15 354 Operating income from banking activity 388 533 20 226 ( 1 381) 407 378 158 275 ( 2) 158 273 565 651 Personnel costs ( 167 283) ( 12 061) ( 202) ( 179 546) ( 21 319) ( 5) ( 21 324) ( 200 870) General administrative costs ( 91 070) ( 5 627) ( 100) ( 96 797) ( 21 380) ( 21 380) ( 118 177) Depreciation and amortisation ( 19 478) ( 732) ( 20 210) ( 7 119) ( 7 119) ( 27 329) Overhead costs ( 277 831) ( 18 420) ( 302) ( 296 553) ( 49 818) ( 5) ( 49 823) ( 346 376) Recovery of loans, interest and expenses 7 451 7 451 1 563 1 563 9 014 Impairment losses and provisions for loans and guarantees, net ( 53 113) 32 ( 53 081) ( 9 889) ( 9 889) ( 62 970) Impairment losses and other provisions, net ( 13 390) ( 293) ( 2 398) ( 16 081) ( 4 202) ( 4 202) ( 20 283) Net income before income tax 51 650 1 545 ( 4 081) 49 114 95 929 ( 7) 95 922 145 036 Income tax ( 5 919) 103 748 ( 5 068) ( 4 090) ( 229) ( 4 319) ( 9 387) Earnings of associated companies (equity method) 3 671 ( 167) 3 504 2 687 2 687 6 191 Global consolidated net income 49 402 1 648 ( 3 500) 47 550 91 839 2 451 94 290 141 840 Income attributable to minority interest ( 5 462) ( 5 462) ( 47 370) 1 ( 47 369) ( 52 831) Consolidated net income of the BPI Group 43 940 1 648 ( 3 500) 42 088 44 469 2 452 46 921 89 009 Cash flow after taxes 129 921 2 641 ( 1 102) 131 460 65 679 2 452 68 131 199 591 Overheads as a % of operating income from banking activity 72% 91% -22% 73% 31% -250% 31% 61%

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 140

The BPI Group’s balance sheet as of December 31, 2008 and investments made in tangible and intangible assets during the period, by segment, are as follows:

Domestic operations International operations Equity Inter segment Commercial Investment Inter segment BPI Group investments Total Angola Mozambique Total operations banking banking operations and others ASSETS Cash and deposits at Central Banks 648 689 312 649 001 439 338 439 338 1 088 339 Loans and advances to other credit institutions repayable on demand 503 243 85 336 1 087 ( 371 891) 217 775 50 912 38 50 950 ( 41 644) 227 081 Financial assets held for trading and at fair value through profit or loss 1 642 884 431 510 ( 695 302) 1 379 092 1 474 449 38 1 474 487 2 853 579 Financial assets available for sale 2 599 041 105 722 40 461 ( 10 048) 2 735 176 527 427 527 427 3 262 603 Loans and advances to credit institutions 5 781 948 3 527 786 1 620 ( 5 863 660) 3 447 694 558 924 558 924 ( 502 420) 3 504 198 Loans and advances to customers 27 958 047 96 734 ( 14 258) 28 040 523 1 234 659 1 234 659 29 275 182 Held to maturity investments 401 858 67 618 ( 61 822) 407 654 407 654 Hedging derivatives 569 846 346 ( 85 764) 484 428 484 428 Other tangible assets 233 917 3 151 237 068 94 586 94 586 331 654 Intangible assets 14 045 10 14 055 1 309 1 309 15 364 Investment in associated companies and jointly controlled entities 57 762 64 180 121 942 15 933 15 933 137 875 Tax assets 246 178 4 227 ( 37) 250 368 7 7 250 375 Other assets 1 142 897 55 370 1 080 ( 39 311) 1 160 036 4 561 13 4 574 457 1 165 067 TOTAL ASSETS 41 800 355 4 378 122 108 391 ( 7 142 056) 39 144 812 4 386 165 16 029 4 402 194 ( 543 607) 43 003 399 LIABILITIES Financial liabilities held for trading 422 844 221 038 ( 385 430) 258 452 258 452 Resources of other credit institutions 6 506 468 29 634 58 124 ( 4 079 328) 2 514 898 36 578 36 578 ( 544 064) 2 007 412 Resources of customers and other debts 19 698 553 3 650 975 867 ( 1 611 835) 21 738 560 3 895 060 3 895 060 25 633 620 Debt securities 6 528 235 226 ( 110 653) 6 417 808 6 417 808 Financial liabilities relating to transferred assets 2 087 577 ( 16 798) 2 070 779 2 070 779 Hedging derivatives 653 918 365 ( 57 746) 596 537 596 537 Provisions 57 938 2 149 54 ( 1 319) 58 822 18 743 18 743 77 565 Technical provisions 1 922 876 323 551 2 246 427 2 246 427 Tax liabilities 36 803 1 949 ( 1 346) 37 406 25 404 2 25 406 62 812 Participating bonds 28 682 28 682 28 682 Subordinated debt 1 320 573 10 814 ( 563 759) 767 628 767 628 Other liabilities 1 116 116 50 292 870 ( 315 188) 852 090 21 600 21 600 457 874 147 TOTAL LIABILITIES 40 380 583 4 290 993 58 569 ( 7 142 056) 37 588 089 3 997 385 2 3 997 387 ( 543 607) 41 041 869 SHAREHOLDERS' EQUITY Shareholders' equity attributable to the shareholders of BPI 1 155 309 87 129 49 822 1 292 260 189 823 16 020 205 843 1 498 103 Minority interest 264 463 264 463 198 957 7 198 964 463 427 TOTAL SHAREHOLDERS' EQUITY 1 419 772 87 129 49 822 1 556 723 388 780 16 027 404 807 1 961 530 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 41 800 355 4 378 122 108 391 ( 7 142 056) 39 144 812 4 386 165 16 029 4 402 194 ( 543 607) 43 003 399

Investments made in: Property 264 16 280 7 806 8 086 Equipment and other tangible assets 32 878 736 33 614 16 161 49 775 Intangible assets 7 025 2 7 027 938 7 965

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 141

The BPI Group’s income statement for the period ended June 30, 2008, by segment, is as follows:

Domestic operations International operations Inter Equity Commercial Investment Inter segment Mozambiqu segment BPI Group investments and Total Angola Total banking banking operations e operations others Financial margin (narrow sense) 243 657 3 356 ( 13 933) 233 080 71 765 4 71 769 304 849 Gross margin on unit links 2 946 1 230 4 176 4 176 Income from equity instruments 2 929 101 200 3 230 3 230 Net commission relating to amortised cost 10 271 10 271 10 271 Financial margin 259 803 4 687 ( 13 733) 250 757 71 765 4 71 769 322 526 Technical result of insurance contracts 3 806 1 588 5 394 5 394 Commissions received 134 836 21 607 163 ( 19 382) 137 224 10 746 10 746 ( 625) 147 345 Commissions paid ( 33 643) ( 5 127) ( 129) 19 383 ( 19 516) ( 1 307) ( 1 307) 625 ( 20 198) Other income, net 11 767 19 11 786 11 518 11 518 23 304 Net commission income 112 960 16 499 34 1 129 494 20 957 20 957 150 451 Gain and loss on operations at fair value 13 928 7 744 21 672 16 150 16 150 37 822 Gain and loss on assets available for sale ( 530) ( 7) ( 35 916) ( 36 453) ( 36 453) Interest and financial gain and loss with pensions 34 693 ( 32) ( 1) 34 660 34 660 Net income on financial operations 48 091 7 705 ( 35 917) 19 879 16 150 16 150 36 029 Operating income 24 090 79 38 24 207 198 198 24 405 Operating expenses ( 6 435) ( 92) ( 4) ( 6 531) ( 366) ( 366) ( 6 897) Other taxes ( 1 808) ( 511) ( 28) ( 2 347) ( 197) ( 197) ( 2 544) Net operating expenses 15 847 ( 524) 6 15 329 ( 365) ( 365) 14 964 Operating income from banking activity 440 507 29 955 ( 49 610) 1 420 853 108 507 4 108 511 529 364 Personnel costs ( 175 104) ( 11 616) ( 482) ( 187 202) ( 14 649) ( 14 649) ( 201 851) General administrative costs ( 96 683) ( 5 221) ( 336) ( 102 240) ( 14 290) ( 14 290) ( 116 530) Depreciation and amortisation ( 18 399) ( 889) ( 56) ( 19 344) ( 5 534) ( 5 534) ( 24 878) Overhead costs ( 290 186) ( 17 726) ( 874) ( 308 786) ( 34 473) ( 34 473) ( 343 259) Recovery of loans, interest and expenses 14 735 14 735 18 18 14 753 Impairment losses and provisions for loans and guarantees, net ( 58 093) 55 ( 58 038) ( 4 142) ( 4 142) ( 62 180) Impairment losses and other provisions, net ( 3 403) ( 41) ( 115 599) ( 119 043) ( 1 655) ( 1 655) ( 120 698) Net income before income tax 103 560 12 243 ( 166 083) 1 ( 50 279) 68 255 4 68 259 17 980 Income tax ( 23 879) ( 2 514) 27 967 1 574 ( 11 678) ( 177) ( 11 855) ( 10 281) Earnings of associated companies (equity method) 6 760 1 541 8 301 2 064 2 064 10 365 Global consolidated net income 86 441 9 729 ( 136 575) 1 ( 40 404) 56 577 1 891 58 468 18 064 Income attributable to minority interest ( 8 983) ( 8 983) ( 8 983) Consolidated net income of the BPI Group 77 458 9 729 ( 136 575) 1 ( 49 387) 56 577 1 891 58 468 9 081

Cash flow after taxes 157 353 10 604 ( 20 920) 1 147 038 67 908 1 891 69 799 216 837 Overheads as a % of operating income from banking activity 66% 59% -2% 73% 32% 32% 65%

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 142

4. NOTES

4.1. Cash and deposits at Central Banks

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Cash 247 833 310 648 Demand deposits at the Bank of Portugal 437 261 445 041 Demand deposits at foreign Central Banks 863 942 331 528 Accrued interest 431 1 122 1 549 467 1 088 339

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

4.2. Loans and advances to other Credit Institutions

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08 Domestic Credit Institutions Demand deposits 2 057 8 680 Cheques for collection 121 200 153 580 Other 2 278 2 801 Foreign Credit Institutions Demand deposits 490 475 57 098 Cheques for collection 6 082 4 904 Accrued interest 12 18 622 104 227 081

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 143

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

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Financial assets held for trading Debt Instruments Listed Securities Bonds issued by Portuguese government entities 3 136 3 613 Bonds issued by foreign government entities 167 133 175 871 Bonds issued by other Portuguese entities Non-subordinated debt 21 564 15 711 Bonds issued by foreign financial entities 6 154 6 366 Bonds issued by other foreign entities Non-subordinated debt 55 401 124 542 Subordinated debt 17 327 11 252 Unlisted securities Bonds issued by foreign government entities 255 681 1 475 865 Bonds issued by other Portuguese entities Non-subordinated debt 58 668 26 883 Subordinated debt 35 3 855 Bonds issued by foreign financial entities Bonds issued by other foreign entities Non-subordinated debt 149 521 306 571 Subordinated debt 19 239 14 470 753 859 2 164 999 Equity instruments Listed securities Shares issued by Portuguese entities 173 805 99 335 Shares issued by foreign entities 118 726 105 891 292 531 205 226 Other securities Listed securities Participating units 87 070 120 813 Unlisted securities Participating units 210 87 070 121 023 1 133 460 2 491 248 Financial assets at fair value through profit or loss Equity instruments Unlisted securities Shares issued by foreign entities 44 437 44 480 44 437 44 480

Derivative instruments with positive fair value (Note 4.4) 491 715 317 851 1 669 612 2 853 579

This caption includes the following assets hedging capitalisation insurance products issued by BPI Vida: Jun. 30, 09 Dec. 31, 08 Debt Instruments Of public entities 173 410 179 539 Other entities 310 299 494 458 Equity Instruments 32 041 25 668 Other securities 87 070 120 180 Derivative instruments with positive fair value 100 45 602 920 819 890

In the second half of 2008 and first half of 2009, the BPI Group reclassified bonds, at the prices as of the date of reclassification, from Financial assets held for trading to Financial assets available for sale (Note 4.5), Loans and advances to customers (Note 4.7) and Held to maturity investments (Note 4.8), following the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 144

4.4. Derivatives

The caption “Derivative instruments held for trading” (Notes 4.3 and 4.15) is made up as follows: Jun. 30, 09 Dec. 31, 08 Notional Book value Notional Book value 1 1 value Assets Liabilities value Assets Liabilities Exchange rate contracts Futures 239 510 243 425 20 116 Options 1 1 Exchange forwards and swaps 783 985 2 905 2 465 1 287 677 8 227 6 926 Interest rate contracts Futures 994 245 50 1 228 127 296 18 330 Options 1 019 601 10 357 9 155 1 098 287 5 933 5 718 Swaps 14 896 340 327 577 222 497 8 520 935 267 549 223 930 Contracts over shares Futures 99 865 345 3 107 87 885 260 1 124 Swaps 281 732 18 608 6 201 103 407 20 116 3 506 Options 286 480 2 020 2 034 8 240 230 239 Contracts over credit events Swaps 8 000 219 219 Contracts over other underlying items Futures 58 934 170 205 18 26 Others Options 2 3 556 419 129 633 127 623 486 461 15 479 16 337 Others3 4 619 894 8 172 26 845 005 491 715 382 701 12 133 818 317 851 258 252 1 In the case of swaps and forwards only the asset amounts were considered. 2 Parts of operations that are autonomous for accounting purposes, commonly referred as "embedded derivatives”. 3 At June 30, 2009 the book value of this caption corresponded to changes in the fair value of derivatives associated with financial liabilities for assets not derecognised. At December 31, 2008 these changes were recorded as Corrections of the amount in Liabilities for assets not derecognized, and amounted to 3 597 t. euro (Note 4.19).

The caption “Derivative instruments held for hedging” is made up as follows: Jun. 30, 09 Dec. 31, 08 Notional Book value Notional Book value 1 1 value Assets Liabilities value Assets Liabilities Exchange rate contracts Exchange forwards and swaps 85 092 181 187 240 495 2 370 1 700 Interest rate contracts Swaps 9 679 511 258 133 251 007 12 136 505 285 909 321 670 Contracts over shares Swaps 716 468 1 631 37 640 794 837 3 297 68 707 Options 333 458 5 268 5 485 Contracts over credit events Swaps 49 722 1 467 3 264 51 500 2 500 3 674 Contracts over other underlying items Swaps 341 341 3 575 12 746 397 900 3 484 26 959 Others Options2 738 096 22 590 22 747 4 027 874 181 600 168 342 11 610 230 287 577 327 591 17 982 569 484 428 596 537 1 In the case of swaps and forwards only the asset amounts were considered. 2 Parts of operations that are autonomous for accounting purposes, commonly referred as "embedded derivatives”.

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 145

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

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

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

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

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

Notional value is the reference value for purposes of calculating the flow of payments and receipts resulting from the operation and is recognised in off balance sheet accounts.

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

In contrast to traditional mutual operations, where the market value is related directly to the amount of the principal loaned, in derivative operations the market value can be: • Determined based on market price (ex. futures); • Calculated based on the present value of future flows (cash flows), considering the relevant interest rates at the computing date (mark to market: ex. swaps) or; • Determined using models that have the objective of calculating the price based on statistical models in accordance with generally accepted principles in the market (mark to model: ex. options).

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 146

At June 30, 2009 the notional value, by term remaining to maturity was as follows: > 3 months > 6 months > 1 year <= 3 months > 5 years Total <= 6 months <= 1 year <= 5 years Over-the-counter market Exchange rate contracts 739 310 92 198 37 569 869 077 Forwards 530 239 12 832 8 258 551 329 Swaps 209 071 79 366 29 311 317 748 Interest rate contracts 1 519 451 938 699 2 742 420 9 749 211 10 645 671 25 595 452 Swaps 1 513 731 863 406 2 724 881 8 918 842 10 554 991 24 575 851 Options 5 720 75 293 17 539 830 369 90 680 1 019 601 Contracts over indexes and shares 501 179 50 112 184 181 525 567 23 479 1 284 518 Swaps 321 179 30 112 103 523 519 907 23 479 998 200 Options 180 000 20 000 80 658 5 660 286 318 Contracts over credit events 57 722 57 722 Swaps 57 722 57 722 Contracts over other underlying items 13 832 68 644 71 027 171 463 16 375 341 341 Swaps 13 832 68 644 71 027 171 463 16 375 341 341 Others 214 919 259 852 657 779 2 595 670 5 186 189 8 914 409 Options 214 919 259 852 657 779 2 294 887 867 078 4 294 515 Others 300 783 4 319 111 4 619 894 2 988 691 1 409 505 3 692 976 13 099 633 15 871 714 37 062 519 Organized markets Exchange rate contracts 239 510 239 510 Futures 239 510 239 510 Interest rate contracts 48 245 18 000 36 000 892 000 994 245 Futures 48 245 18 000 36 000 892 000 994 245 Contracts over indexes and shares 99 865 162 100 027 Futures 99 865 99 865 Options 162 162 Contracts over other underlying items 58 934 58 934 Futures 58 934 58 934 446 554 18 000 36 000 892 000 162 1 392 716 3 435 245 1 427 505 3 728 976 13 991 633 15 871 876 38 455 235

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 147

At December 31, 2008 the notional value, by term remaining to maturity was as follows: > 3 month > 6 month > 1 year <= 3 month > 5 years Total <= 6 month <= 1 year <= 5 years Over-the-counter market Exchange rate contracts 1 416 528 67 965 43 679 1 528 172 Forwards 913 220 15 953 25 629 954 802 Swaps 503 308 52 012 18 050 573 370 Interest rate contracts 1 163 105 994 418 2 727 253 8 058 760 8 812 191 21 755 727 Swaps 1 053 055 990 793 2 641 209 7 258 402 8 713 981 20 657 440 Options 110 050 3 625 86 044 800 358 98 210 1 098 287 Contracts over indexes and shares 76 521 52 271 322 719 685 580 102 851 1 239 942 Swaps 74 752 52 271 122 719 599 173 49 329 898 244 Options 1 769 200 000 86 407 53 522 341 698 Contracts over credit events 51 500 51 500 Swaps 51 500 51 500 Contracts over other underlying items 19 367 14 334 90 274 257 040 16 885 397 900 Swaps 19 367 14 334 90 274 257 040 16 885 397 900 Others 45 700 144 500 563 315 2 880 857 879 963 4 514 335 Options 45 700 144 500 563 315 2 880 857 879 963 4 514 335 2 721 221 1 273 488 3 747 240 11 933 737 9 811 890 29 487 576 Organized markets Exchange rate contracts 243 425 243 425 Futures 243 425 243 425 Interest rate contracts 19 296 12 000 24 000 72 000 127 296 Futures 19 296 12 000 24 000 72 000 127 296 Contracts over indexes and shares 87 885 87 885 Futures 87 885 87 885 Contracts over other underlying items 169 974 231 170 205 Futures 169 974 231 170 205 520 580 12 231 24 000 72 000 628 811 3 241 801 1 285 719 3 771 240 12 005 737 9 811 890 30 116 387

At June 30, 2009 the distribution of derivative operations, by counterparty, was as follows: Jun. 30, 09 Notional % of Notional value1 Net exposure2 value Over-the-counter market 28 148 110 199 599 95,3% OTC with Financial Institutions 23 879 378 60 697 80,8% OTC with Local and Administrative Public Sector 7 475 236 0,0% OTC with Investment/Pension funds 208 699 1 318 0,7% OTC with Companies 3 959 895 133 963 13,4% OTC with Individuals 92 663 3 385 0,3% Regulated markets 1 392 716 4,7% Stock exchange 1 392 716 4,7% 29 540 826 199 599 100,0% 1 Does not include embedded derivates and other options in the amount of 8 914 409 t. euro. 2 Amount of exposure considering netting agreements and collaterals.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 148

At December 31, 2008 the distribution of derivative operations, by counterparty, was as follows: Dec. 31, 08 Notional Net % of Notional value1 exposure2 value Over-the-counter market 21 326 531 69 756 94,7% OTC with Financial Institutions 17 859 188 46 435 79,3% OTC with Local and Administrative Public Sector 5 709 16 0,0% OTC with Investment/Pension funds 197 288 150 0,9% OTC with Companies 3 190 872 22 816 14,2% OTC with Individuals 73 474 339 0,3% Regulated markets 1 185 143 2 298 5,3% Stock exchange 1 185 143 2 298 5,3% 22 511 674 72 054 100,0% 1 Does not include embedded derivates in the amount of 5 444 869 t. euro. 2 Amount of exposure considering netting agreements and collaterals.

At June 30, 2009 the distribution of derivative operations, by counterparty external rating, was as follows: Jun. 30, 09 Exposure Notional Gross considering Net Value1 exposure 2 netting3 exposure4 Over-the-counter market (OTC) AAA 5 250 AA+ 51 500 AA 1 554 193 12 932 1 423 1 423 AA- 8 381 040 214 788 79 478 28 329 A+ 9 220 800 297 116 154 965 10 413 A 455 980 16 715 14 118 6 058 A- 150 000 N.R. 8 329 346 161 303 159 386 153 376 28 148 110 702 854 409 370 199 599 Traded on the stock exchange Futures5 1 392 716 1 392 716 29 540 826 702 854 409 370 199 599 Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings. 1 Does not include embedded derivates in the amount of 8 914 409 t. euro. 2 Exposure without considering netting agreements and collateral. 3 Amount of exposure without considering collateral. 4 Exposure considering netting agreements and collateral. 5 The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 149

At December 31, 2008 the distribution of derivative operations, by counterparty external rating, is as follows: Dec. 31, 08 Exposure Notional Gross considering Net Value1 exposure 2 netting3 exposure4 Over-the-counter market (OTC) AAA 8 647 73 AA+ 4 582 750 47 260 20 573 9 783 AA 4 744 579 82 815 33 779 11 285 AA- 3 071 161 20 018 12 590 9 466 A+ 2 260 907 33 265 11 807 3 632 A 276 603 16 783 15 647 12 664 N.R. 6 381 884 43 773 22 926 22 926 21 326 531 243 987 117 322 69 756 Traded on the stock exchange Futures5 1 101 208 Options 83 935 2 298 2 298 2 298 1 185 143 2 298 2 298 2 298 22 511 674 246 285 119 620 72 054 Note: The amounts were accumulated by rating levels of the counterparties, considering the senior medium and long term debt ratings attributed by the Moody, Standard & Poor and Fitch agencies as of the reference date. The selection of a rating for a given counterparty follows the rules recommended by the Basel Committee in force on the reference date (where there are diverging ratings the second best was selected). The operations with entities without ratings (N.R.) correspond essentially to Customers subject to internal ratings. 1 Does not include embedded derivates in the amount of 5 444 869 t. euro. 2 Exposure without considering netting agreements and collateral. 3 Amount of exposure without considering collateral. 4 Exposure considering netting agreements and collateral. 5 The exposure of the futures is nil, because they are traded on organised stock exchanges and there is daily financial settlement.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 150

4.5. Financial assets available for sale

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Debt instruments Listed securi ti es Bo nd s issu ed by Portugue se governmen t ent it ies 1 67 1 888 541 036 Bo nd s issu ed by f oreign governme nt en tities 1 12 4 890 2 75 067 Bo nd s issu ed by oth er Port ug uese e ntities Non-subord in at ed de bt 25 9 579 353 429 Bonds issued by international financial organisations 516 Bo nd s issu ed by oth er foreign en tities Non-subord in at ed de bt 72 4 755 762 883 Subordinat ed debt 519 211 335 901 Impairment ( 487) Unlisted securities Bo nd s issu ed by f oreign governme nt en tities 1 02 8 292 5 27 193 Bo nd s issu ed by oth er Port ug uese e ntities Non-subord in at ed de bt 18 8 826 79 690 Subordinat ed debt 272 Bonds issued by international financial organisations 515 Bo nd s issu ed by oth er foreign en tities Non-subord in at ed de bt 11 5 773 214 674 Subordinat ed debt 29 136 2 213 Impairment ( 1 821) ( 1 809) 5 66 0 829 3 0 90 793 Equity instruments Listed securities Shares issued by Portuguese entities 25 565 40 851 Impairment ( 19 189) ( 34 040) Unl isted securities Issued by Portuguese entities Shares 42 148 41 828 Impairment ( 5 927) ( 5 434) Quotas 1 1 Shares issu ed by fore ig n ent it ies 3 1 103 29 392 Impairment ( 15 865) ( 14 843) 57 836 57 755 Other securities Listed securities Participating units 28 496 79 407 Unl isted securities Participating units 35 086 37 031 Impairment ( 4 548) ( 4 527) 59 034 111 911 Loans and other receivables 8 992 26 772 Impairment ( 6 833) ( 24 628) 2 159 2 144 5 77 9 858 3 2 62 603

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

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

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

The changes in impairment losses and provisions in the first half of 2009 and 2008 are shown in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 151

At June 30, 2009 this caption was made up as follows: Amou nts per unit

Natu re and t ype of security Quantity Book Value / Nominal Listing / Price Cost Gain2 Loss2 Impairment Fair Value1

SECURITIES Debt In stru ments Issued by Portuguese Entities Portuguese Public Debt Treasury Bonds OT 3.2% Abril 2011 200 000 0,01 198 207 7 OT-3.6%-15.10.2014 100 000 000 0,01 0,01 99 909 101 356 1 180 OT 3.95% Julho 1999/2009 520 632 0,01 0,01 528 541 OT - 4.375% - JUNHO - 2003 / 2014 50 000 000 0,01 0,01 52 655 52 844 188 OT-4.75%-14.06.2019 250 000 000 0,01 0,01 261 540 257 578 5 937 OT 5% Junho 2002/2012 850 000 000 0,01 0,01 884 316 916 092 1 170 OT 5.15% Junho 2001/2011 850 500 0,01 0,01 923 908 30 OT - 5,45% - Setembro - 1998/2013 300 000 000 0,01 0,01 328 746 342 362 1 639 1 628 815 1 671 888 4 214 5 937 Other residents Non - Subo rd inated Debt Bonds ADP-Aguas de Portugal,SGPS-TV-20.06.2022 Banco Comercial Português-TV-28.05.2010 82 500 000 50 000,00 49 660,22 82 500 82 092 561 Banco Espirito Santo-TV-14.05.2010 56 050 000 50 000,00 49 725,00 56 050 55 895 308 Banco Espirito Santo-3.75%-19.01.2012 35 000 000 50 000,00 35 896 36 371 106 Banco Itau Europa - TX.VAR. (22.06.2010) 18 030 000 1 000,00 938,26 21 907 20 678 1 280 BANCO ITAU EUROPA-TV. (27.07.2011) 30 000 000 50 000,00 29 595 26 192 3 589 BANIF-BCO INTL FUNCHAL-3.25%-08.05.2012 15 000 000 1 000,00 1 002,02 14 987 15 101 42 BCP - 5.625% - 23.04.2014 20 000 000 50 000,00 51 249,50 20 013 20 709 478 BES-5.625%-05.06.2014 10 000 000 50 000,00 51 198,50 9 953 10 278 284 BES-TV-29.03.2010 8 000 000 100 000,00 99 001,50 8 000 7 920 80 CGD-4.375%-13.05.2013 30 000 000 50 000,00 50 184,00 30 007 30 287 100 CGD-TV-21.05.2010 96 700 000 1 000,00 96 700 95 887 1 015 Mota Engil - Tx. Vr. (09.12.2010) 5 100 000 300,00 300,00 5 100 5 110 Parpublica - 3.5% - 08.07.2013 30 000 000 29 922 29 874 48 Portucel Tv 27.10.2012 11 500 000 1 000,00 996,00 11 509 11 509 55 Semapa/2006/2016 2ª 500 000 50 000,00 495 502 3 452 634 448 405 907 7 042 Su bordinated Debt Bonds Sagres STC S4-1 CL. 0 (25.09.12) 278 194 278 193,66 253 272 8 25 3 2 7 2 8 Issued by non - resident s By foreign public issuers Bonds Buoni Poliennali Del Tes-4%-15.04.2012 275 000 000 1 000,00 1 046,00 286 653 289 940 1 011 Irish Treasury-3.9%-05.03.2012 220 000 000 0,01 0,01 225 298 228 912 814 Irish Treasury-4%-15.01.2014 20 000 000 0,01 0,01 20 124 20 338 174 Obrigações do Tesouro (Angola) 863 042 913,11 1 012 759 1 028 292 Rep Grecia-4.3%-20.03.2012 200 000 000 1 040,35 206 645 211 204 1 393 Rep Grecia-5.5%-20.08.2014 65 000 000 1 082,10 69 259 71 835 1 195 Republic of Brasil - 7.375% (03.02.2015) 150 400 000 1 000,00 1 115,00 173 482 172 163 10 075 Republic of Brasil - 8.5% (24.09.2012) 30 000 000 1 000,00 1 124,00 33 964 35 669 750 Republic of Brasil - 11% (26/06/2017) 72 500 000 1,00 1,30 105 219 94 337 7 262 Repub l ic o f Ir aq - 5.8% (15.01.2028) 733 692 707,51 455,21 734 492 262 2 134 137 2 153 182 4 413 18 523 In tern ational Financial Organisations Bonds BEI/2004 -Tx.Vr. (08.06.2010) 515 000 1 000,00 505 515 3 50 5 5 1 5 3 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 152

Amou nts per unit Nature and type of securities Quantity Book Value / 2 2 Nominal Listing / Price Cost Gain Loss Impairment Fair value1

B y other no n resident s issuers Non - Subo rd inated Debt Bonds Aleutian Inv LLC-TV-25.10.2012 4 245 083 70 751,38 3 862 2 283 1 718 Allied Irish Banks-3.625%-16/09/2010 20 000 000 1 000,00 1 006,15 20 168 20 550 40 Alpha Credit Group-Tv-17.01.2012 1 450 000 1 000,00 942,15 1 437 1 371 76 Alpha Credit Group-TV. (02.06.2011) 3 800 000 50 000,00 3 800 3 671 133 Alpha Credit Group-TV. (21.06.2010) 3 800 000 1 000,00 989,40 3 800 3 761 40 Alrosa Finance SA - 8.875% - 17.11.2014 9 197 679 707,51 620,03 10 615 8 158 2 803 Altadis Emis. Finance - 4% (11.12.2015) 45 000 000 1 000,00 906,22 42 197 41 771 4 476 Atlantes Mortgage -SR.1-CL.A (17.1.2036) 1 997 656 39 953,11 1 743 1 690 177 AUTO ABS Compartment-C.A-T.V(25.05.2014) 352 188 88 047,03 348 349 2 Autostrade SPA - Tx.Vr. (09.06.2011) 7 000 000 100 000,00 98 591,00 6 930 6 916 43 75 Avoca Clo BV-Sr.-II.X-CL-A1 (15.01.2020) 800 000 1 000,00 780 708 92 BANIF FINANCE(CAY)-TV-03.11.2010 3 800 000 1 000,00 3 800 3 392 418 BAT HOLDINGS-TV. (15.05.2010) 5 000 000 1 000,00 991,46 5 002 4 967 44 Euro-Vip 1990 4 245 083 707,51 4 245 3 023 1 231 Banca Popolare Di Milano-Tv-31.01.2014 500 000 1 000,00 950,14 494 476 20 Banco Sabadell-TV-23.04.2010 6 650 630 70 751,38 69 417,72 6 318 6 540 8 Bank Of America Corp-Tv-28.06.2011 10 000 000 1 000,00 9 718 9 372 451 Bank Of Ireland-3.75%-03.09.2010 22 500 000 1 000,00 1 008,04 22 700 23 164 11 BES Finance LTD-TV 08.02.2011 4 000 000 100 000,00 96 606,00 4 000 3 873 136 BES Finance LTD-TV 13.11.2009 2 000 000 1 000,00 996,84 2 000 1 997 6 BES Finance LTD-TV 18.07.2011 5 000 000 1 000,00 958,60 5 000 4 808 207 BES Finance LTD-TV 21.04.2011 4 000 000 1 000,00 959,91 4 000 3 852 160 Bra.Mer Vouch R-5.911%(15.06.2011)S.144A 791 975 263,99 784 794 2 Brazil Foreign Div.P.R.F-5.5%(20.09.2011 2 071 337 414,27 2 040 1 937 140 Caixa Eco Montepio Geral-Tv-03.05.2012 300 000 1 000,00 841,27 294 253 44 Caixa Geral Depositos(PAR)-TV-07.11.2009 1 883 000 1 000,00 1 883 1 886 1 Caja Salamanca & Soria-6.625%-30.06.2010 11 000 000 50 000,00 51 305,00 11 000 11 287 287 Casino Guichard Perrachon-6% (27.02.2012) 17 500 000 1 000,00 1 043,86 18 606 18 621 544 Celf Loan Part.BV-Sr.2005-1x CL.A 2021 800 000 1 000,00 773 569 241 CEMG (Cay)-Tv- (30.09.2010) 5 306 000 1 000,00 943,74 5 305 5 008 298 CEMG (CAY)-TV-(04.11.2009) 150 000 1 000,00 991,23 150 149 1 CEMG (CAY)-TV-(19.09.2011) 1 500 000 50 000,00 1 500 1 398 103 CEMG (CAY)-TV-(31.01.2011) 16 250 000 50 000,00 16 250 15 290 1 004 CIMPOR FINANCIAL OPERTNS-4.5%(27.5.2011) 52 000 000 1 000,00 984,75 51 184 51 425 2 240 CM BANCAJA FTA-SR.1 CL.A TV.(22.12.2036) 582 918 1,00 0,89 500 516 15 Corsair Fin Ire-Tv-20.06.2012 6 500 000 50 000,00 6 500 5 068 1 437 Cosan Finance Ltd - 7% - 01.02.2017 14 150 276 707,51 620,14 13 827 12 813 3 972 Cosipa Commercial - 8.25% (14.06.2016) 7 428 895 707,51 753,86 8 332 7 943 945 COUNTRYWIDE FIN CORP-TV.(23.11.2010) 750 000 1 000,00 954,32 683 717 4 CREDIT AGRICOLE - TX VAR. (15.11.2010) 5 750 000 1 000,00 5 750 5 770 6 CREDITO EMILIANO - TV. (05.08.2010) 800 000 50 000,00 796 797 3 Csn Islands VIII Corp - 9.75% (16.12.2013) 14 150 276 707,51 795,07 16 016 15 959 1 599 Csn Islands IX Corp - 10% (15.01.2015) 9 197 679 707,51 820,48 10 896 11 109 595 DEUTSCHE TELEKOM INT F-TV-08.12.2009 5 000 000 1 000,00 998,60 5 010 4 998 8 DIAGEO FINANCE PLC-TV-22.05.2012 250 000 1 000,00 249 224 26 DOLLAR DIVERS RI.F-6.55%(16.12.2013)-REG 2 454 136 490,83 2 672 2 461 119 Dresdner Bank/1998-2013 - PTE - C. Zero 5 125 148 498,80 1 005,14 9 470 10 326 790 DUCHESS-SR.V-X CL.B-TV.25.05.2021 800 000 1 000,00 742 217 534 Dutch Mor.Port.Loans(20.11.52)O.HIP-CL.A 1 267 727 211 287,82 200 016,07 1 205 1 202 17 EDISON SPA - TX.VR. (19.07.2011) 5 000 000 1 000,00 990,00 5 079 4 970 82 EDP FINANCE BV-TV. (14.06.2010) 5 000 000 1 000,00 990,58 4 999 4 956 46 EFG HELLAS PLC - 4.25% - 26.05.2011 18 000 000 1 000,00 1 003,07 17 855 18 129 191 EIRLES TWO LIMITED-TV. PERP. 800 000 100 000,00 794 506 300 Eletrobras - C. E. Brasil - 7.75% (30.11.2015) 22 994 198 707,51 764,11 24 930 24 982 2 142 Etab Econ Casino - 4.875% - 10.04.2014 2 500 000 50 000,00 49 429,00 2 482 2 499 170 Evraz Securities - 10.875% - 03.08.2009 4 598 840 70 751,38 71 046,41 4 995 4 822 19 FRANCE TELECOM - TX.VR.(09.06.2010) 5 000 000 50 000,00 49 583,00 5 002 4 963 43 FTA SANTANDER EMP-SR.1-CL.A2(04.11.38) 1 631 314 40 782,86 1 557 1 558 3 Gaz Capital (Gazprom) - 6.212% (22.11.2016) 22 994 198 707,51 602,26 22 915 19 724 6 093 GLITNIR BANKI HF-TV-24.05.2011 500 000 1 000,00 487 487 HARVEST CLO-SR.II-X CL.A (21.05.2020) 528 628 9 974,11 511 358 165 HSBC FINANCE CORP-TV. (05.04.2013) 500 000 1 000,00 847,33 494 426 72 ING BANK NV-TX.VR (16.5.2012) 800 000 10 000,00 788 614 180 INTL LEASE FINANCE CORP-TX.VR. 15.8.2011 900 000 50 000,00 891 695 202 INTL LEASE FINANCE CORP-TX.VR.(6.7.2010) 200 000 50 000,00 200 167 34 Intergas finance BV - 6.875% - 04.11.2011 13 796 519 707,51 657,04 14 187 12 960 2 372 Intern.Divers.Pay.Rig.CO-6.75%(20.8.10) 998 282 1 070 1 027 7 KAUPTHING BANK HF-TX.VAR. (25.05.2010) 600 000 1 000,00 590 590 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 153

Valores unitários

Natu re and t ype of security Quantity Book Value / 2 2 Nominal Listing / Price Cost Gain Loss Impairment Fair Value1

Non - Subo rd inated Debt (con t.) Bonds (cont.) Kazakhstan Temir Zholy - 6.5% (11.05.2011) 18 041 602 707,51 640,30 18 290 16 488 3 139 KION MORTGAGE FIN SR.06-1 CL.A-15.07.51 265 075 4 141,80 263 233 30 KONINKLIJKE KPN NV-TX.VR.(21.7.2009) 5 000 000 1 000,00 998,84 5 002 5 012 6 Koninklijke KPN NV - Tx.Vr. (22.06.2015) 19 000 000 1 000,00 974,09 17 793 18 524 735 LAFARGE-4.25% (23.03.2016) 30 000 000 1 000,00 859,77 28 721 26 139 4 740 LAFARGE-6.5% (15.07.2016) 6 367 624 707,51 6 548 5 921 1 523 LOCAT SEC.VEHICLE(12.12.2024)C.A-S2004-2 890 553 14 842,56 13 826,07 845 830 17 LTR Finance Limited-SR.5-C.A(25.07.2015) 1 560 817 31 216,34 1 527 1 518 16 Madison Avenue C.LTD(24.3.14)-O.HIP-CL.A 1 674 522 167 452,25 1 533 697 894 MAGRITTE FINANCE NV-SR.2004-CL.A(1.6.32) 1 248 908 124 890,83 117 727,23 1 194 1 179 28 MBS BANCAJA FTA-SR.1-CL.A-TV(17.11.2035) 754 773 27 954,56 23 828,49 667 645 32 Megafon (OJSC) - 8% (10.12.2009) 9 197 679 707,51 716,36 9 566 9 354 101 METRO AG - TV - (07.10.2009) 5 000 000 1 000,00 997,50 5 029 5 009 15 MIDGAARD FINANCE- SR.1-CL.A2(23.4.2029) 500 000 500 000,00 493 394 102 Mobile Telesystems - 8.375% - (14.10.2010) 9 197 679 707,51 717,88 9 760 9 495 452 Norilsk Nickel Fin Lux - 7.125 (30.09.2009) 18 395 359 707,51 709,73 18 899 18 781 198 NOSTRUM CONSUMER FIN.-1/A (26.11.2015) 281 294 5 409,50 276 277 Orion Finance PLC- T.V. (15.08.2040) 450 355 15 011,84 14 542,03 427 437 8 OTE PLC - 4.625% (20.05.2016) 25 000 000 50 000,00 48 042,50 24 888 24 151 1 925 PEMEX PROJ.FDG MAST.TR - 6.375%- 2016 28 000 000 1 000,00 30 689 29 542 3 617 PORT.TELECOM INT.FIN.-3.75% (26.03.2012) 23 000 000 1 000,00 996,02 21 875 23 135 394 PORT.TELECOM INT.FIN.-4.375% (24.03.2017) 24 000 000 1 000,00 910,52 22 013 22 134 2 257 PORTUGAL TELECOM INT FIN-6%-30.04.2013 3 000 000 1 000,00 1 050,75 2 997 3 182 155 RCI BANQUE SA-TV-24.01.2012 100 000 50 000,00 98 78 21 SANPAOLO IMI BK IRELAND-TV-09.11.2009 4 900 000 50 000,00 49 952,00 4 900 4 905 5 SANTANDER INTL DEBT-TV 10.11.2010 3 000 000 1 000,00 993,24 3 000 2 986 20 SNS BANK NEDERLAND-TV (6.10.2011) 3 000 000 10 000,00 9 591,49 3 000 2 889 123 TELECOM ITALIA SPA -4.5% (28.1.2011) 3 700 000 100 000,00 102 201,00 3 700 3 851 81 TELECOM ITALIA SPA-TV-07.06.2010 6 400 000 50 000,00 49 458,50 6 400 6 336 69 TELECOM ITALIA SPA-TV.(06.12.2012) 5 000 000 50 000,00 46 176,00 4 999 4 623 382 TELECOM ITALIA SPA.-4.75% (19.05.2014) 62 500 000 50 000,00 49 494,50 62 005 62 210 3 742 Tengizchevroil Fin - 6.124 (15.11.2014) 19 461 453 556,04 501,42 19 290 17 699 3 569 TNK - BP Finance - 6.875% (18.07.2011) 22 994 198 707,51 688,04 23 658 23 073 2 596 UBS Luxem (Vimpelcom) - 8% (11.02.2010) 9 197 679 707,51 713,41 9 631 9 558 221 UCI- SR.8-CL.A - TX.VR. (18.12.2033) 924 806 18 496,11 849 833 26 Vale Overseas Lim (CAY)-6.25% (11.01.2016) 17 687 845 707,51 726,50 17 525 18 682 1 588 VIVENDI - TV. 3.10.2011 6 000 000 50 000,00 6 000 5 804 225 Yapi Kredi DPR Fin-Sr. 2006-1Cl.B-2014 3 537 569 707,51 3 357 2 830 571 862 907 838 220 1 586 70 269 2 308 Su bordinated Debt Bonds AGF - Assurances Gen Fr - 4.625% - Perp 20 000 000 1 000,00 498,33 19 371 10 017 10 898 Allianz Finance BV - 4.375% Perp 135 000 000 1 000,00 690,77 128 393 95 406 44 114 Avoca Clo BV-Sr.-IV.X-CL-B-TV (18.02.2022) 800 000 100 000,00 746 175 588 Axa SA - 5.777% Perp/Sub 100 000 000 1 000,00 619,14 104 579 67 596 46 687 Banco Sabadell-5.234%-Perpetua 50 000 50 000,00 23 833,50 49 26 25 Bayer AG - 5% (29.07.2105) 75 000 000 1 000,00 845,63 71 229 66 874 12 858 Caja Ahorros de Galicia-TV-PERPETUA 50 000 50 000,00 50 23 28 C8 Capital SPV - 6.64% - PERPETUA 45 988 397 707,51 45 795 23 914 26 440 Cibeles Ftypme-SR.III-CL.BSA(26.11.2030) 222 800 55 700,08 220 161 60 Claris Millesime CDO-SR.1-CL.2(10.06.24) 500 000 500 000,00 450 76 379 Cloverie 2004-72-TX.VR.(17.11.2024) 500 000 500 000,00 475 20 458 DONG A/S - 5.5% (29.06.3005) 65 000 000 1,00 0,87 65 121 56 768 15 579 ELM BV (Swiss Rein Co) - TV - Perpetua 48 000 000 50 000,00 26 996,50 48 364 26 165 25 229 Generali Finance BV - 5.479% - Perpétuas 75 000 000 50 000,00 36 338,00 76 049 56 106 25 736 Granite Master-Sr.2006-1A-ClA5-20.12.54 1 819 390 330,80 1 797 1 256 547 Granite Mortg.-TV(20.3.2044)-SR.04-1/2C 500 000 100 000,00 499 70 430 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 154

Amou nts per unit

Natu re and t ype of security Quantity Book Value / 2 2 Nominal Listing / Price Cost Gain Loss Impairment Fair Value1

Subordinated Debt (cont.) Bonds (cont.) Granite Mortg.-TV(20.3.2044)-SR.04-1/2M 500 000 100 000,00 499 95 405 Granite Mortg.-TV(20.9.2044)-SR.04-3/2C 153 488 383,72 152 18 134 Harbourmaster CLO-S.4X-CL.A3(11.10.2019) 500 000 1,00 491 245 249 Harvest CLO SA-SR.IX-CL.B2 (29.3.2017) 750 000 250 000,00 745 253 502 Henkel KGAA - T.V. (25.11.2104) 5 000 000 1 000,00 763,46 4 913 3 977 1 411 Holland Euro-Denom.MTG Backed-2037-CL.B7 500 000 500 000,00 493 319 180 La Defense PLC-SR.III-CL.C1(9.4.2014) 243 112 9 350,46 241 135 108 Lusitano MTGE-SR.1-CL.D-TV (15.12.2035) 200 000 100 000,00 198 52 148 Madrid RMBS FTA-SR.06-1 CL.A2-22.06.2049 375 516 93 879,03 47 335,75 369 190 180 Marlin BV-SR.1-CL.B (23.12.2012) 37 497 37 496,68 3 7 3 2 6 Old Mutual PLC-Ob. Perpetua 25 000 000 1 000,00 342,56 24 324 9 379 17 376 Opera Finance(DE)-SR.GER3 CL.B-25.1.2022 1 000 000 50 000,00 937 522 426 Pelican Mortgages-2/B (15.9.2036) 290 000 10 000,00 286 242 47 Promise PLC-TV.(05.10.2019)-SR.CARA-CL.B 600 000 100 000,00 597 602 2 Provide PLC-SR.A04-1/B (27.11.2045) 650 000 50 000,00 48 199,15 644 628 23 Provide PLC-SR.A05-1 CL.B TV. 25.08.2048 500 000 100 000,00 490 456 44 Residential Mortg.Sec-17X -M1C(13.05.37) 54 204 9 034,00 6 206,36 54 37 17 Rhodium BV - SR.1X- CL.C (27.5.2084) 800 000 100 000,00 785 162 631 Siemens Financieringsmat - 5.25% (14.09.2066) 50 000 000 1 000,00 877,47 50 966 45 952 9 343 Siena Mortgages-TX.VR.(16.12.2038)CL.B 360 000 10 000,00 353 309 47 Vattenfall Treasury AB-TV. PERP. 65 000 000 1 000,00 895,72 64 212 58 231 13 518 Vinci - 6.25% Perpetuas 25 000 000 50 000,00 41 755,50 25 096 21 858 5 419 740 069 548 347 2 260 270 Equity Instrumen ts Issued by residents Shares Agrogarante, SA 500 1,00 1,00 1 1 Alberto Gaspar, SA 60 000 5,00 141 141 Alar - Emp. Ibérica de Material Aeronautico, SA 2 200 4,99 20 20 Ambelis - Agência p/ Modernização Economica de Lisboa, 400 6,85 20 20 Apis -Soc. Ind. Parquetes Azarujense 65 000 4,99 Apor - Agência p/Modernização do Porto - Cl. B 2 877 5,00 12 12 Boavista Futebol Clube 21 900 5,00 110 110 Bombardier Transportation Portugal 31 5,00 Buciqueira - SGPS - Cap.Red.-Em. 2001 8 5,00 1 1 Caderno Verde - Comunicação (C) 134 230 1,00 967 967 Caravela Gest, SGPS, SA 272 775 5,00 1 895 205 1 691 Carmo & Braz 65 000 4,99 CIMPOR - CIM.DE PORTUGAL-SGPS 3 565 1,00 5,20 7 19 12 Coimbravita - Agência Desenvolvimento Regional 15 000 4,99 75 75 Cold Land SGPS SA 4 000 000 4 000 4 000 Companhia Águas da Fonte Santa de Monfortinho, SA 10 5,00 Companhia Aurifícia, SA (Valor Nominal 7 EUR) 1 186 7,00 1 111,30 25 1 318 1 294 Companhia de Diamantes de Angola 166 716 2,49 Companhia de Diamantes de Angola - P (II) 1 000 2,49 Companhia de Fiação e Tecidos de Fafe, SA 240 4,99 Companhia Prestamista Portugueza 10 1,00 Comundo - Consórcio Mundial de Import.e Export., SA 3 269 0,50 6 2 4 Conduril - Construtora Duriense, SA 184 262 5,00 806 10 036 9 231 Corticeira Amorim - SGPS 127 419 1,00 0,72 315 92 18 241 Digitmarket - Sistemas de Informação, S.A. 4 950 1,00 74 3 7 4 3 EIA - Ensino, Investigação e Administração, SA 10 000 4,99 50 34 16 Empresa Cinematográfica S. Pedro - Águeda 100 4,99 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 155

Amou nts per unit Natu re and t ype of security Quantity Book Value / 2 2 Nominal Listing / Price Cost Gain Loss Impairment Fair Value1

Eq uity in struments (con t.) Issued by residents (cont.) Shares (cont.) Empresa O Comércio do Porto, SA 50 2,49 1 1 Esence - Soc. Nac. Corticeira - Nom. 54 545 4,99 Estamparia Império - Emp.Industriais e Imobiliários, SA 170 4,99 1 1 Eurodel-Ind.Metalurgicas e Participações 23 5,00 Eurofil - Ind. de Petróleos, Plástico e Filamentos, SA 11 280 4,99 25 25 Fábricas Vasco da Gama - Ind. Transformadoras, SA 33 4,99 1 1 Fit - Fomento e Industria do Tomate, SA 148 4,99 3 3 Futebol Clube do Porto 105 000 5,00 1,34 539 141 399 Gap - Gestão Agro-Pecuária, SGPS, SA 548 4,99 3 3 Garval-Sociedade de Garantia Mutua 1 694 820 1,00 1,00 1 695 1 695 GEIE-Gestão de Espaços de Incub.Empres.S.A. 12 500 1,00 13 13 Gestinsua-Aq.Al.Patrimonio 430 5,00 2 2 Gregório & Ca. 1 510 4,99 4 4 Impresa - SGPS 6 200 000 0,50 0,98 22 791 6 076 1 736 18 451 Incal - Indústria e Comércio de Alimentação, SA 2 514 1,13 2 2 Inovcapital-Soc. de Capital de Risco SA 241 527 5,00 5,57 1 205 1 346 141 Intersis, SA 42 147 4,99 1 307 1 307 J. Soares Correia - Armazéns de Ferro, SA 84 5,00 2 2 Jotocar - João Tomás Cardoso, SA 3 020 4,99 7 7 Lisgarante-Soc.de Garantia Mutua 446 700 1,00 1,00 447 447 Lisnave - Est. Navais 180 5,00 1 1 Margueira - Sociedade Gestora de Fundos Investimento Im 3 511 5,00 17 17 Matur - Sociedade de Empreend. Tur. da Madeira, SA 13 439 5,00 146 146 Maxstor 8 190 4,99 41 41 Metalurgia Casal, SA 128 4,99 1 1 Mimalha, SA 40 557 5,00 336 336 NET - Novas Empresas e Tecnologias, SA 10 539 5,00 4,01 25 42 17 Norgarante - Soc. de garantia Mutua 1 679 950 1,00 1,00 1 680 1 680 Norgarante - Soc. de Garantia Mutua-(C) 2 000 000 1,00 2 000 2 000 Nutroton - Industrias da Avicultura 11 395 5,00 4,38 50 50 Oficina da Inovação 10 000 5,00 4,93 50 49 9 10 Plastrade-Comércio Intern.Plásticos - N 19 200 5,00 5,00 96 96 Porto de Cavaleiros, SGPS 2 4,99 Primus - Prom. e Desenvolvimento Regional, SA 8 000 4,99 39 15 24 Salvor - Soc. Investimentos Hoteleiros, SA 10 5,00 Sanjimo - Sociedade Imobiliária 1 620 4,99 8 8 Saphety Level - Trusted Services 5 069 1,00 98 98 SDEM-Soc. de Desenv.Empr.Madeira, SGPS - N 937 500 1,00 0,78 938 732 50 255 Secca - Construções Metálicas - Ac. Ord. Em.92 3 627 4,99 18 18 Secca - Pref. S/Voto - Em. 92 3 627 4,99 18 18 Senal - Soc. Nacional de Promoção de Empresas, SA 450 0,50 SIBS - Sociedade Interbancária de Serviços, S.A. 738 455 5,00 3 115 3 115 Soc. Port.Inovação, Consul. Empres.Fom.Inovação, S.A. 1 500 5,00 7 7 Sociedade de Construções ERG 50 4,99 Sociedade de Construções ERG (Em.93) - IR C 6 4,99 Sociedade Industrial Aliança, SA 1 2,49 Sociedade dos Vinhos Borges - P 50 5,00 1 1 Sodimul-Soc.de Comércio e Turismo 25 14,96 1 1 Sofid-Soc.P/Fin.Des.-Inst.Fin.Credito SA 1 000 000 1,00 1,23 1 250 1 230 20 Somotel - Soc. Portuguesa de Moteis, SA 1 420 2,50 Sonae SGPS 36 868 1,00 0,67 69 25 11 54 Sopeal - Soc. Promoção Educacional Alcacerense, SA 100 4,99 SPGM-Sociedade de Investimento - N 665 150 1,00 1,00 664 665 1 Spidouro - Sociedade Promoção e Investimento Douro e T 15 000 4,99 75 21 54 Sport Lisboa e Benfica ( Pub.Geral ) 13 692 5,00 1,80 68 25 44 Star - Turismo, SA 533 4,99 3 3 SVB, SGPS, SA 1 250 5,00 6 6 Tagusparque - Sociedade de Promoção e Desenvolviment 480 000 5,00 2 394 2 394 Telecine Moro, SA 170 4,99 1 1 Terologos - Tecnologias de Manutenção - P 7 960 4,99 40 40 Textil Lopes da Costa, SA 4 900 4,99 8 8 Turopa - Operadores Turisticos, SA 5 4,99 Unicer - Bebidas de Portugal 1 002 1,00 8,07 8 8 Unicre - Cartão Internacional de Crédito 352 076 5,00 1 057 1 057 ViaLitoral - Conc. Rodoviária da Madeira 4 750 161,25 766,95 792 3 643 2 851 Xelb Cork - Co. e Ind. Cortiça 87 4,99 52 363 42 597 15 371 20 25 116 Quotas Propaço - Soc.Imob. de Paço D' Arcos 1,00 1 1 1 1 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 156

Amou nts per unit Natu re and t ype of security Quantity Book Value / 2 2 Nominal Listing / Price Cost Gain Loss Impairment Fair Value1

Rights over equi t y operations Atlântis - Pref. S/ Voto-Dir. Inc./Em.97 1 1,00 Cimpor-Cim.Portugal-SGPS-Dir.Inc.-Em-99 1 1,00 Corticeira Amorim-SGPS-Dir.Inc.Em.00 1 1,00 Fabricas Triunfo-Dir.reduçao Em.2001 8 1,00 Oliva - Ind.Metalurgicas-Direitos de redução 100 1,00 Portugal Telecom, SGPS-D.Inc.-Em.2001 8 1,00 Sicel-Soc.Industr.Cereais-Di/EM.94 0 1,00 S oc . Co ns t ru ç õe s Er g/ 9 3 3 1 , 00 Sonae-SGPS-D.Cisão 2005 7 1,00 Sonae Industria-SGPS-D.I./Em.97-2ª 4 1,00 Sonae-SGPS-D.Cisão 2008 2 1,00

Others Participating Units BPI Selecção 200 000 5,00 3,91 1 000 782 218 BPI Taxa Variável 4 287 222 4,99 6,27 33 233 26 885 6 349 Citeve - Cent.Tec.Ind.Tex.Vest.Portugal 20 498,80 10 10 EGP-University Of Porto Bus.School ASS. 2 4,99 70 70 FCR-Turismo Capital (TC TUR.CAP.SCR) 164 24 939,89 19 669,89 3 568 3 226 171 513 Frie - PME Capital 115 24 939,89 13 726,33 2 868 1 578 32 1 322 Frie - PME Capital - Retex 40 24 939,89 20 623,28 998 825 1 173 Frie Inter-Risco 120 24 939,89 4 673,14 2 993 561 101 2 533 Fun.Cap.Risco AICEP Capital Global - FIEP 7 098 1 000,00 909,81 7 098 6 458 640 Fun.Cap.Risco AICEP Capital Global II 40 4 987,98 5 659,88 200 226 34 7 Fun.Cap.Risco F-Hitec (Es Ventures) 10 50 000,00 47 264,00 500 473 27 Fundo BPI - América 200 000 0,01 3,19 998 638 359 Fundo Caravela 3 108 5 000,00 12 374 16 966 4 592 Inegi Instituto de Engenharia Mecanica 5 000 1,00 25 25 65 935 58 723 4 931 7 593 4 548 Equity Instrumen ts Issued by non residents Shares Altitude Software 5 984 560 0,04 13 810 13 810 Amsco - African Management Services Com 1 807 707,51 708 708 Arco Bodegas Unidas 63 382 4 399 3 363 1 037 Club Financiero Vigo 1 15 626,31 18 12 6 European Investment Fund 9 1 000 000,00 9 410 10 341 932 Growela Cabo Verde 19 000 9,07 172 172 International Factors Group, S.C. 12 50,00 1 Nasdaq Europe SA/VN 100 49,96 25 4 21 Parque Industrial da Matola 1 920 000 0,03 51 51 Swift - Society for Worldwide Inf.Dev 63 125,00 91 91 Tharwa Finance 20 895 8,85 185 185 Unirisco Galicia 80 1 202,02 96 84 15 26 Visa Europe Limited 1 10,00 Visa Inc-Class C 32 134 0,71 918 918 CLD-Credit Logement Developpment 100 15,25 2 Emis-Empresa Interbancária de Serviços 263 229 34 IMC-Instituto de Mercado de Capitais 7 7 Sofaris 13 107,89 2 2 29 238 15 238 1 865 15 865 Others Participating Units Fundo BPI - Europa (Luxemburgo) 23 405 0,01 8,15 171 191 19 PORTUGAL VENTURE CAPITAL INITIATIVE-PVCI 120 000 1,00 120 120 291 311 19 Loans and oth er receivables Loans and Shareholder's loans GEIE 23 Intersis 50 Maxstor 973 Propaço - Imob. Paços d' Arcos 1 349 3 789 Saphety Level - Trusted Services, SA 153 SVB 456 1 845 Petrocer 200 Plastrade 154 2 159 6 833 5 967 148 5 779 858 33 319 369 654 54 670 1 Net of impairment. 2 Amount recorded in revaluation reserves after recognizing the effect of the hedging operations in the statement of income (Note 4.30).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 157

At June 30, 2009 this caption included the following securities reclassified from the caption “Financial assets held for trading”, during 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48).

Book Value / Fair Nature and type of security Quantity Value

Debt Instruments Other residents Non - Subordinated Debt Bonds BANCO ITAU EUROPA-TV. (27.07.2011) 30 000 000 26 192 BANCO ITAU EUROPA - TX.VAR. (22.06.2010) 4 000 000 3 754 By other non resident issuers Non - Subordinated Debt Bonds DRESDNER BANK / 1998-2013 - PTE - C.ZERO 124 699 251 MADISON AVENUE C.LTD(24.3.14)-O.HIP-CL.A 1 674 522 697 BRA.MER VOUCH R-5.911%(15.06.2011)S.144A 791 975 794 BRAZIL FOREIGN DIV.P.R.F-5.5%(20.09.2011 2 071 337 1 937 DOLLAR DIVERS RI.F-6.55%(16.12.2013)-REG 2 454 136 2 461 INTERN.DIVERS.PAY.RIG.CO-6.75%(20.8.10) 998 282 1 027 37 113

4.6. Loans and advances to credit institutions

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Loans and advances to the Bank of Portugal 830 000 140 300 Loans and advances to other Portuguese credit institutions Very short term loans and advances 200 000 Deposits 66 274 451 725 Loans 107 500 Other loans 125 190 132 215 Other advances 9 665 9 647 Accrued interest 1 214 7 349 309 843 800 936 Loans and advances to other foreign credit institutions Very short term loans and advances 40 314 105 662 Deposits 966 451 2 236 917 Other loans and advances 166 224 189 482 Accrued interest 762 30 657 1 173 751 2 562 718 Correction of the amount of hedged assets 8 381 Commission relating to amortised cost (net) ( 85) ( 123) ( 77) 258 2 313 517 3 504 212 Overdue loans and interest 3 581 Impairment ( 1 458) ( 14) 2 315 640 3 504 198

The changes in impairment losses and provisions during the first half of 2009 and 2008 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 158

4.7. Loans and advances to customers

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Loans Domestic loans Companies Discount 263 762 341 127 Loans 4 880 206 4 652 350 Commercial lines of credit 1 638 631 1 830 736 Demand deposits - overdrafts 476 145 474 903 Invoices received - factoring 695 038 740 260 Finance leasing 645 410 747 342 Real estate leasing 676 120 698 468 Other loans 25 170 38 170 Loans to individuals Housing 10 798 282 10 532 967 Consumer 961 571 1 117 073 Other loans 662 596 686 467 Foreign loans Companies Discount 10 867 7 655 Loans 3 490 023 3 768 741 Commercial lines of credit 219 245 241 085 Demand deposits - overdrafts 18 844 11 010 Invoices received - factoring 30 45 Other loans 450 294 490 962 Loans to individuals Housing 449 576 352 591 Consumer 13 401 14 239 Other loans 61 204 54 326 Accrued interest 95 197 142 384 26 531 612 26 942 901 Securities Issued by Portuguese entities Non subordinated debt securities Bonds 433 441 314 813 Commercial paper 1 675 712 1 775 571 Issued by foreign entities Non subordinated debt securities Bonds 241 149 181 839 Commercial paper 7 075 7 185 Subordinated debt securities 11 297 11 192 Accrued interest 6 449 16 347 2 375 123 2 306 947 Correction of the amount of hedged assets 21 875 20 022 Commission relating to amortised cost (net) ( 1 029) ( 6 930) 28 927 581 29 262 940 Overdue loans and interest 562 190 460 817 Loan impairment ( 466 322) ( 448 575) 29 023 449 29 275 182

The caption “Loans to customers” includes the following non-derecognised securitised assets: Jun. 30, 09 Dec. 31, 08

Non-derecognised securitised assets Loans Loans to SME's 281 047 355 862 Housing 4 171 821 4 309 783 Ceded risk / benefit ( 937 223) ( 984 245) Accrued interest 4 655 10 269 3 520 300 3 691 669

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 159

The loans subject to securitisation operations carried out by Banco BPI were not derecognised from the Bank’s balance sheet and are recorded under the caption “Loans”. The amounts received by Banco BPI from these operations are recorded under the caption “Liabilities relating to assets not derecognised in securitisation operations” (Notes 2.2.3 and 4.19). In December 2007 the Bank sold to the Banco BPI Pension Fund a portion of the risk / benefit relating to the housing loan securitisation operations. The assets and liabilities relating to these operations were derecognised in the percentage sold, and the difference to the product of the sale was recognised in the statement of income.

In December 2008, Banco BPI started a securitisation operation over housing loans totalling 1 500 million euro with settlement date in January 2009.

At June 30, 2009 and December 31, 2008 the caption “Loans to Customers” also included operations allocated to the Cover Pool given as collateral for the Covered Bonds issued by Banco BPI (Note 4.17), namely: • 3 381 182 t. euro and 2 634 949 t. euro, respectively, allocated as collateral to mortgage bonds, • 253 582 t. euro and 262 938 t. euro allocated as collateral to public sector bonds.

The changes in impairment losses and provisions in the first half of 2009 and 2008 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 160

The BPI Group’s portfolio of loans and advances to customers and guarantees given at June 30, 2009, by business sector, is made up as follows: Loans 1 Guarantees given2 Amount % Amount % Residents: Agriculture, animal production and hunting 203 887 0,7 7 013 0,2 Forestry and forest operations 11 221 1 946 0,1 Fishing 16 541 0,1 4 462 0,1 Mining 34 745 0,1 8 408 0,3 Manufacturing industries Beverage, tobacco and food 445 393 1,5 22 527 0,7 Textiles and clothing 158 263 0,5 17 614 0,6 Leather and related products 27 342 0,1 1 240 Wood and cork 142 052 0,5 12 632 0,4 Pulp, paper and cardboard and graphic arts 322 808 1,1 8 167 0,3 Coke, oil products and nuclear fuel 626 16 525 0,6 Chemical and synthetic or artificial fibres 85 306 0,3 8 244 0,3 Rubber and plastic materials 65 461 0,2 11 971 0,4 Other mineral non-metallic products 303 611 1,1 36 075 1,2 Metalworking industries 233 755 0,8 57 858 1,9 Manufacturing of machinery and equipment 100 620 0,3 30 661 1,0 Manufacturing of electrical and optical equipment 45 035 0,2 25 639 0,8 Manufacturing of transport material 58 184 0,2 40 475 1,3 Other manufacturing industries 99 627 0,3 15 346 0,5 Electricity, gas and water 584 927 2,0 279 091 9,2 Construction 861 531 3,0 841 597 27,7 Wholesale and retail trading 1 947 166 6,8 289 827 9,5 Restaurants and hotels 359 433 1,3 46 598 1,5 Transport, warehousing and communications 1 036 280 3,6 295 253 9,7 Banks 11 559 67 249 2,2 Other credit institutions 43 402 1,4 Other financial institutions and insurance companies 48 520 0,2 3 752 0,1 Investment holding companies 820 060 2,9 91 131 3,0 Real estate, rental and services provided to companies 1 581 894 5,5 159 851 5,3 Public administration, defence and mandatory social security 1 112 002 3,9 46 975 1,6 Education 47 181 0,2 2 184 0,1 Healthcare and welfare 287 959 1,0 39 029 1,3 Leisure, cultural and sports activities 244 949 0,9 20 696 0,7 Other service companies 35 318 0,1 8 583 0,3 Individuals Housing loans 10 798 282 37,5 Others 1 624 167 5,6 61 442 2,0 Multinational financial institutions 18 404 0,1 62 Other sectors 57 975 0,2 32 Non-residents: Central Banks Financial and credit institutions 113 975 0,4 48 187 1,6 Multinational Financial Institutions 10 781 405 Administrative public sector 4 Non-financial companies 4 324 064 15,0 362 570 11,9 Individuals 524 181 1,8 5 485 0,2 28 805 089 100,0 3 040 204 100,0 1 Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortised cost. 2 Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 161

The BPI Group’s portfolio of loans and advances to customers and guarantees given at December 31, 2008, by business sector, is made up as follows: Loans 1 Guarantees given2 Amount % Amount % Residents: A gric ulture, animal production and hunting 205 524 0.7 5 283 0.2 Fore stry an d f orest operat ions 10 97 5 1 798 0.1 Fishing 13 636 0.1 7 662 0.2 Mining 37 239 0.1 8 616 0.3 Manufacturing industries Beve rage, t obacco an d f oo d 454 88 4 1 .6 26 951 0.8 Textiles and clot hing 152 445 0.5 19 432 0.6 Leather and related products 23 758 0.1 1 309 Wood and cork 136 941 0.5 14 030 0.4 Pulp, paper and cardboard and graphic arts 281 948 1.0 9 191 0.3 Coke, oil products and nuclear fuel 475 16 753 0.5 Chemical and synthetic or artificial fibres 66 091 0.2 11 782 0.4 Rubber and plast ic materials 66 880 0.2 11 929 0.4 Other mineral non-metallic products 336 077 1.2 51 290 1.5 Metalworking industries 224 001 0.8 65 739 2.0 Manufact uring of machinery and equipment 89 009 0.3 31 987 1.0 Manufact uring of elect rical and opt ical equipment 45 366 0.2 28 878 0.9 Manufact uring of trans port material 41 311 0.1 37 723 1.1 Other manufacturing industries 96 372 0.3 15 311 0.5 Electricity, gas and water 586 858 2.0 299 699 8.9 Construct ion 862 381 3.0 933 264 27.8 Wholesale and retail trading 1 988 142 6.8 306 530 9.1 Rest aurants and hot els 350 438 1.2 45 205 1.3 Transport, warehousing and communications 1 088 024 3.7 328 120 9.8 B ank s 11 48 0 62 470 1.9 Other credit institutions 44 533 1.3 Ot her f inancial institut ions and insurance c ompanies 65 614 0.2 3 794 0.1 Invest ment holding companies 844 472 2.9 91 137 2.7 Real estate, rental and services provided to companies 1 495 968 5.1 185 967 5.5 P ublic a dminist ra tion, defe nce an d ma nd at ory socia l secu rit y 1 301 89 8 4 .5 33 130 1.0 E duc ation 47 098 0.2 807 Healthcare and welfare 294 599 1.0 39 793 1.2 Leisure, cult ural and sport s activit ies 254 783 0.9 57 072 1.7 Ot her s ervic e companies 43 698 0.2 8 299 0.2 Individuals Housing loans 10 532 967 36.2 Others 1 803 540 6.2 60 290 1.8 Multinational financial institutions 29 459 0.1 31 Other sectors 65 896 0.2 6 Non-residents: Financial and credit institutions 40 586 0.1 58 081 1.7 Mult inat ional Fina ncial I nstit utions 1 32 8 411 Administrative public sector 7 Non-fina ncia l comp anie s 4 677 79 3 16 .1 4 20 699 12.5 Individuals 421 156 1.5 10 544 0.3 29 091 117 100.00 3 355 546 100. 00 1 Excluding overdue loans, securities and interest, accrued interest, correction of the amount of hedged assets and commission relating to amortised cost. 2 Includes guarantees and sureties, stand-by letters of credit, open documentary credits and surety bonds and indemnities.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 162

The caption “Securities” at June 30, 2009 is made up as follows:

Nature and type of security Quantity Cost Gross book value Impairment3

Issued by Portuguese Entities N on - Subordinat ed Debt Bonds ADP-Aguas de Portugal,SGPS-TV-20.06.2022 35 000 000 35 000 35 000 ADP-AGUAS DE PORTUGAL,SGPS-TV-20.06.2022 15 000 000 15 000 15 000 Banif - Tax.Var. (30.12.2015)1 11 800 000 11 554 11 554 Celbi Celulose Beira Ind.-TV(08.02.2015) 75 000 000 75 000 75 000 EDIA SA-TV-30.01.2027 16 180 000 16 180 16 180 GALP-ENERGIA SGPS - TV - 20.05.2013 65 000 000 65 000 65 000 GDL / 19982 1 107 235 1 101 1 110 Grupo Visabeira SGPS-TV-13.07.2014 5 000 000 5 000 5 000 Jeronimo Martins-JM2011-TV-28.03.2011 17 500 000 17 500 17 500 Jeronimo Martins-JM2012-TV-28.03.2012 17 500 000 17 500 17 500 JMR-Gestão Empresas Retalho-2007/2012 35 000 000 35 000 35 000 JMR-GESTAO EMPRESAS RETALHO-2007/2012 15 000 000 15 000 15 000 Mota Engil - TX.VR. (09.12.2010) 150 000 150 150 Mota Engil - TX.VR. 2004-2011 7 000 000 7 000 7 000 MOTA ENGIL - TX.VR. 2004-2011 8 000 000 8 000 8 000 Polimaia / 1989 - SR.C (AC.CRED.) 7 Portucel-Emp.Celu.Papel-TV.(27.10.2012) 4 500 000 4 521 4 520 Portucel-Emp.Celu.Papel-TV.(27.10.2012)1 4 904 000 4 903 4 927 Semapa - 2006/2016 2ª 50 000 000 50 000 50 000 Sonae Capital SGPS-2007/2012-1ª EMISSAO 10 000 000 10 000 10 000 Sonae Distribuição Setembro - 2007/2015 40 000 000 40 000 40 000 433 409 433 441 Commercial paper 1 675 712 1 675 712 9 434 Issued by non resid ents N on - Subordinat ed Debt Bonds S tructured Investment Vehicl es (SIV' s) CENTAURI CORPORATION(CAY)-TV-09-09-2011 10 000 000 2 150 2 150 2 150 DORADA CORPORATION-TV-15.05.2017 10 000 000 4 729 4 729 4 729 FIVE FINANCE CORP-TV.(10.02.2014) 3 537 569 499 499 499 FIVE FINANCE CORP-G4-SR4-TR1(2015.11.10) 2 500 000 353 353 353 K2 CORPORATION - TX.VR. (28.02.2013) 1 768 784 439 439 439 Links Finance Corp-TV-15.06.2017 2 830 055 2 830 2 830 2 830 NIGHTINGALE FIN LTD-TV-06.06.2017 3 537 569 3 538 3 538 3 538 SEDNA FINANCE CORP-TV. (05.01.2011) 3 537 569 923 923 923 SEDNA FINANCE CORP-TX.VAR.(16.04.2012) 5 000 000 1 305 1 305 1 305 Zela Finance Corporation TV. (15.08.2016) 5 000 000 1 585 1 585 1 585 18 351 18 351 18 351 Asset Backed Securities (ABS's) Alfa Bank Sr. 1x Cl.A-TV (15.03.2011) 1 303 276 1 303 1 303 Alfa Div Pymt Rt Fin-TV-15.12.2011 2 375 000 2 375 2 375 Alliance DPR CO-TV 15.11.2013 1 053 176 1 053 1 053 407 ARTS-SR.2005-AA-CL.A-15.06.2012 10 984 152 10 554 10 691 Bosphorus Finantial Serv.TV(15.02.2012) 2 432 079 2 432 2 432 Dali Capital-Sr.2006-1Cl.A (25.12.2046) 4 167 795 4 168 4 168 Dali Capital-Sr.2006-1Cl.A (25.12.2046) 1 1 339 648 1 240 1 240 Dutch Mor. Port. Loans (15.9.34)-O.HIP-CL.B 4 000 000 4 000 4 000 Eddystone Fin. Sr. 2006-1 CLA 1B 19.04.20212 647 722 394 396 HSBC BRAZIL-SR.2006-A-15.04.2016 13 089 005 12 300 12 432 Garanti Diversified-Sr.06A-CL.1-04.2011 8 368 286 8 013 8 166 Garanti Diversified-Sr.2005-A-CL.1-2013 4 245 083 4 095 4 136 Gazprombank Mort-Sr07-1 CLA1-25.06.2047 2 048 243 2 048 2 048 Património Uno-Sr. 06-1 Cl. B 31.12.20212 4 000 000 2 472 2 472 Preps Limited Part. Sr. 06-1 Cl. 1A 2015 1 2 251 179 2 079 2 108 Preps Limited Partners. Sr. 2005-2 Cl. A1 8.12.14 1 1 771 544 1 634 1 636 Red & Black Prime Rus-S07-1 CA-01.19.35 2 022 364 2 022 2 022 Saratoga CLO I Ltd. - Sr.2006-1X-Cl-A2-2019 7 075 138 7 075 7 075 Saratoga CLO I Ltd. - Sr.2006-1X-Cl-B-2019 2 122 541 2 123 2 123 Stichting Eurostar CDO (10/03/2013) O.H-Cl-A1 390 069 389 390 MDM DPR FIN COMPANY-TV-15.12.2011 2 500 000 2 500 2 500 Russian Car Loans Sr.1 CL.A-TV-16.10.17 5 500 000 5 500 5 500 Russian Car Loans Sr.1 CL.B-TV 16.10.17 1 500 000 1 500 1 500 TIB Diversified-SR.05-DX CL.D-15.08.2012 5 306 353 5 309 5 308 Ukraine Mort-Sr.2007-1 CL.A-15.12.2031 1 104 167 1 104 1 104 1 Securities reclassified from the caption “Financial assets held for trading”, in 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 2 Securities reclassified from the caption “Financial assets held for trading”, during the first half of 2009, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48). 3 Additionally, the Bank recorded collective impairment of 490 t. euro on bonds issued by residents Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 163

Book value / Fair Nature and type of security Quantity Cost Impairment va l ue

Asset Backed Securities (ABS's) (cont.) VB DPR FIN CO-SR.2006-1A-CL.A-15.03.2013 6 367 624 5 253 5 355 VB DPR FIN CO-SR.2006-1A-CL.B-15.06.2014 927 727 6 044 6 113 Kazakh Mortgage-S.07-1-C.A-15.02.2029 3 537 569 928 928 Roof Russia-TV-(25.07.2017) 2 297 095 2 297 2 297 VB DPR FIN.COMP.- SR.2006-1X - CL.E-2013 3 537 569 3 537 3 537 Yapi Kredi DPR FIN-SR.06-1-CL.D-11.2014 6 000 000 5 648 5 718 Yapi Kredi DPR FIN-SR.2006-1-CL.B-2014 6 367 624 5 986 6 062 Yapi Kredi DPR FIN-SR.2007-1-CL.B-2015 7 782 652 6 716 6 892 124 091 125 080 407 Other bonds Banco Finantia Intl. Ltd. Cay.Tv. (04.05.2015) 1 3 500 000 3 505 3 520 Banco Finantia Intl. Ltd.Tv. (26.07.2017) 1 8 500 000 8 500 8 540 Banco Finantia Intl. Ltd.Tv. (28.07.2016) 1 4 000 000 3 998 4 017 Banif Finance (Cay)-Tv. 29.12.2014 1 4 220 000 4 213 4 213 Banif Finance (Cay)-Tv. Perp. 1 2 000 000 1 824 1 825 Espirito Santo Invest PLC-4.384%-26.04.2011 7 500 000 75 000 75 603 97 040 97 718 239 482 241 149 18 758 Commercial paper 7 075 7 075 Subordinated Debt Bonds Banif Finance Ltd - Tv. Perp.1 7 900 000 6 954 6 958 Espirito Santo Invst. PLC-TV (20.12.2015) 1 4 500 000 4 337 4 339 11 291 11 297 Accrued interest 6 449 2 366 969 2 375 123 28 192 1 Securities reclassified from the caption “Financial assets held for trading”, in 2008, under the amendments to IAS 39 and IFRS 7 (Notes 2 and 4.48).

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

Signs of impairment of the Asset Backed Securities (ABSs) portfolio are determined through regular monitoring of the performance indicators of the underlying transactions. At June 30, 2009 this analysis does not show the existence of impairment situations in other securities, apart from those already recorded. A significant part of the securities in this portfolio does not have reference market values. However, the losses identified for the securities for which indicative prices could be obtained do not show evidence of impairment.

4.8 Held to maturity investments

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Debt Instruments Unlisted securities Bonds issued by other Portuguese entities Non-subordinated debt 295 622 60 053 Subordinated debt 4 036 Bonds issued by other foreign entities Non-subordinated debt 365 771 331 497 Subordinated debt 33 247 16 104 698 676 407 654

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 164

At June 30, 2009 this caption was made up as follows: Amounts per unit Nature and type of security Quantity Listing / Price Cost Book Value

Securities Debt Instruments Other residents Non - Subordinated Debt Bonds Banco Comercial Português-TV-28.05.20101 18 500 000 99,53 18 481 18 515 Banco Comercial Português-TV-28.05.2010 7 800 000 99,53 7 695 7 710 Banco Espirito Santo-3.75%-19.01.2012 25 000 000 101,50 25 376 25 792 Banco Espirito Santo-TV-14.05.20101 12 500 000 99,91 12 489 12 523 Banco Intl Funchal-3.25%-08.05.2012 71 220 000 99,91 71 159 71 495 Banco Itau Europa - TX.VAR. (22.06.2010)1 1 000 000 98,88 989 989 BES-TV-29.03.20101 2 000 000 99,46 1 990 1 990 CGD-3.875%-12.12.2011 50 000 000 101,86 50 929 51 991 CGD-TV-21.05.20101 22 300 000 99,97 22 294 22 341 Modelo Continente, SGPS-TV. (02.08.2012)2 4 767 000 99,45 4 741 4 800 Parpublica - 3.5% - 08.07.2013 73 000 000 99,74 72 810 72 810 Portucel-Emp.Cel.Pap.-TV. (29.03.2010)1 3 500 000 100,09 3 503 3 528 Semapa - TV (20.04.2016)2 1 200 000 94,24 1 131 1 138 293 587 295 622 Subordinated Debt BANCO ITAU EUROPA - TX.VR. (22.12.2015)2 5 450 000 74,02 4 034 4 036 4 034 4 036 Issued by non residents Non - Subordinated Debt Bonds ABN AMRO Bank NV - TX.VAR. (08.06.2015)1 / 2 6 000 000 95,20 5 712 5 718 Alfa Div Pymt Rights Fin-TV.15.03.20121 1 787 500 95,96 1 715 1 718 Alfa Div Pymt RT Fin-TV-15.12.20111 800 000 96,06 769 769 Alpha Credit Group PLC-TV-07-09-20091 4 000 000 99,87 3 995 3 999 Alpha Credit Group-TV. (02.06.2011)1 300 000 98,27 295 295 Alpha Credit Group-TV. (21.06.2010)1 200 000 99,31 199 199 Anglo Irish Bank Corp-TV. (10.02.2010)1 2 000 000 98,48 1 970 1 974 Anglo Irish Bank Corp-TV. (21.06.2016)1 4 850 000 88,20 4 278 4 280 BAA Funding LTD - 3.975% - 15.02.20142 442 000 70,09 310 316 Banca Carige SPA-TV-07.06.20162 1 000 000 72,55 726 727 Banca Intesa SPA - TV. (11.05.2012)2 4 000 000 96,21 3 848 3 857 Banif Finance(CAY)-TV-05.08.20091 6 500 000 99,88 6 492 6 511 Banif Finance(CAY)-TV-05.08.2009 900 000 99,88 899 901 Banif Finance(CAY)-TV-05.22.20122 5 000 000 95,62 4 781 4 789 Bat Intl Finance PLC-3.625% (29.06.2012)2 4 688 000 99,10 4 646 4 646 BCP Finance Bank-TV-06.02.20122 12 300 000 92,80 11 414 11 442 BCP Finance Bank-TV-20.10.20091 45 900 000 99,81 45 815 45 952 BCP Finance Bank-Tx.Var. (03.02.2011)1 3 000 000 98,61 2 958 2 965 BCP FINANCE BANK-TX.VR. (28.01.2010) 2 700 000 98,97 2 672 2 680 BEAR STEARNS CO-TX.VAR. (27.07.2012)2 3 500 000 89,60 3 136 3 146 BES FINANCE LTD-TV 13.11.20091 31 950 000 99,78 31 879 31 938 BES FINANCE LTD-TV. (08.02.2011)1 1 000 000 98,85 989 991 BES FINANCE LTD-TX.VAR.(09.02.2010)1 35 000 000 99,24 34 733 34 805 CAIXA D'ESTALVIS CATALUNA-TV.06.07.20122 1 500 000 83,88 1 258 1 264 CAIXA ECO MONTEPIO GERAL-TV.(03.05.2012)1 11 900 000 96,08 11 433 11 464 CAIXANOVA - TV - 02-03-20121 10 000 000 96,87 9 687 9 698 CAJA AHORROS DE GALICIA-TV-10.01.20101 10 000 000 99,95 9 995 10 052 CAJA SALAMANCA & SORIA-6.625%-30.06.20101 3 000 000 99,95 2 998 2 998 CAJA VALENCIA CAST.-TX.VAR.(06.06.2012)2 2 000 000 71,57 1 431 1 433 CAM GLOBAL FINANCE - TX.VAR.(29.06.2012)2 2 500 000 75,28 1 882 1 882 CEMG (CAY)-TV-(19.09.2011)1 3 300 000 97,97 3 233 3 234 CIMPOR FINANCIAL OPERTNS-4.5%(27.05.2011)2 2 500 000 91,87 2 297 2 307 CIT GROUP INC-TV.(20.06.2013)1 6 000 000 79,48 4 769 4 771 COUNTRYWIDE FIN CORP-TV.(23.11.2010)2 5 200 000 91,44 4 755 4 763 CREDITO EMILIANO - TV. (04.05.2012)1 1 545 000 98,53 1 522 1 526 CX MONTEPIO GERAL(CAY)-TV.(31.01.2011)1 2 000 000 97,96 1 959 1 965 DAIMLERCHRYSLER NA HLDG-4.375%-16.3.20101 6 000 000 98,95 5 937 6 013 DEGUSSA AG-5.125% (10.12.2013)2 500 000 95,34 477 491 DRESDNER BANK AG - TV. (01.08.2012)2 200 000 94,68 189 190 GOLDMAN SACHS GROUP INC.-TV.(04.02.2013)1 1 600 000 96,11 1 538 1 542 HSBC FINANCE CORP-TV. (05.04.2013)1 3 400 000 95,28 3 240 3 253 IBERCAJA(CA.ZARAGOZA A.R.)TV-20.04.20181 6 000 000 93,30 5 598 5 619 IBERCAJA(CA.ZARAGOZA A.R.)TV-25.04.20191 8 400 000 90,22 7 579 7 605 ING GROEP NV-TV. (11.04.2016)1 3 900 000 93,63 3 651 3 665 1 ING VERZEKERINGEN NV - TV (18.09.2013) 4 000 000 96,29 3 852 3 854 1 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2008 (Notes 2 and 4.48) 2 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, during the first half of 2009 (Notes 2 and 4.48).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 165

Amounts per unit Nature and type of security Quantity Listing / Price Cost Book Value

Bonds (cont.) IRISH NATIONWIDE BLDG-TX.VR.(12.10.2009)1 10 767 000 92,72 4 912 4 930 KONINKLIJKE KPN NV-4,5% (21.07.2011)1 5 000 000 95,95 9 087 9 484 KRAFT FOODS INC-5.75%-20.03.20122 2 600 000 83,39 6 309 6 407 MACQUARIE BANK LTD-TV-06.12.20161 1 000 000 99,82 5 383 5 389 MERRILL LYNCH & CO,INC.-TV. (08.02.2010)2 1 715 000 95,50 1 638 1 641 MONTEPIO GERAL (CAY) - TV. (30.09.2010)1 1 194 000 98,83 1 180 1 180 MONTEPIO GERAL-CAY-TX.VR (4.11.2009)1 27 000 000 99,74 26 931 27 000 MORGAN STANLEY-TV-29.11.20131 2 500 000 90,91 2 273 2 276 NATIONAL GRID PLC-TV. 25.09.20091 3 850 000 99,71 3 839 3 840 PORT.TELECOM INT.FIN.-3.75%(26.03.20121 10 767 000 92,72 9 983 10 090 RAIFFEISEN ZENTRALB.OEST.-TV-(22.06.16)1 5 000 000 95,95 4 797 4 799 RCI BANQUE SA-TV-24.01.20122 2 600 000 83,39 2 168 2 176 SANPAOLO IMI BK IRELAND-TV-09.11.20091 1 000 000 99,82 998 1 000 SLM CORP. - TV (15.12.2010)2 550 000 71,04 391 391 TDC AS - 6.5% (19.04.2012)1 1 000 000 97,18 972 985 TELECOM ITALIA SPA -4.5% (28.1.2011)1 1 300 000 97,62 1 269 1 293 TELECOM ITALIA SPA-TV-07.06.20101 1 600 000 99,04 1 585 1 586 TELECOM ITALIA SPA-TV.(06.12.2012)1 / 2 2 700 000 96,32 2 601 2 604 TELEFONICA EMISIONES-TV. (25.01.2010)1 5 500 000 99,71 5 484 5 501 VIVENDI - TV. 3.10.20111 3 000 000 98,46 2 954 2 968 VOLKSWAGEN INTL FIN-3.75%-16.11.2010 6 000 000 99,93 5 996 6 024 364 261 365 771 Subordinated Debt Bonds Abbey National Plc-TV. (21.04.2015)2 2 250 000 78,89 1 775 1 782 Anglo Irish Bank Corp-TV-19.06.20171 10 417 000 83,70 8 719 8 724 Bank Of Ireland - Tx.Var. (03.07.2017)2 2 450 000 47,15 1 155 1 166 Bank Of Ireland-Tv-24.01.20172 300 000 43,24 130 131 BCP Finance Bank-Tx.Var. (15.06.2015)2 10 300 000 87,26 8 988 8 995 Caixa Geral Dep.Franca-Tv.(27.04.2015)2 3 000 000 79,24 2 377 2 387 CAM International-Tv-26.04.20172 1 900 000 46,29 880 885 Erste BK Oest Sparkssaen-TV.(29.06.2015)2 1 000 000 65,04 650 650 Fortis Bank Nederland NV-TV.(22.06.2015)2 1 000 000 80,31 803 803 Standard Chartered Bank-TV-28.03.20181 8 500 000 90,87 7 724 7 724 33 201 33 247 695 083 698 676 1 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, in 2008 (Notes 2 and 4.48) 2 Securities reclassified from the caption “Financial Assets held for trading” under the amendments to IAS 39 and IFRS 7, during the first half of 2009 (Notes 2 and 4.48).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 166

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 167

4.9. Other tangible assets

The changes in other tangible assets, during the first half of 2009 were as follows:

Gross Depreciation Net

Foreign Foreign Balance at Sales and Transfers Balance at Balance at Depreciation Sales and Transfers Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 07 write-offs and others Jun. 30, 08 Dec. 31, 07 for the period write-offs and others Jun. 30, 08 Jun. 30, 08 Dec. 31, 07 differences differences

Property Property for own use 235 126 926 ( 426) 733 ( 2 997) 233 362 76 948 2 170 ( 104) ( 180) 78 834 154 528 158 178 Other property 2 976 ( 1 920) ( 22) 1 034 848 8 ( 496) ( 2) 358 676 2 128 Leasehold improvements 106 178 1 103 ( 1 851) 658 ( 1 665) 104 423 80 591 4 611 ( 1 710) ( 8) ( 914) 82 570 21 853 25 587 344 280 2 029 ( 4 197) 1 391 ( 4 684) 338 819 158 387 6 789 ( 2 310) ( 8) ( 1 096) 161 762 177 057 185 893 Equipment Furniture and fixtures 45 207 1 189 ( 93) 300 ( 360) 46 243 35 869 1 194 ( 87) ( 13) ( 92) 36 871 9 372 9 338 Machinery and tools 13 365 360 ( 157) 19 ( 137) 13 450 11 091 403 ( 156) ( 93) 11 245 2 205 2 274 Computer hardware 154 937 5 579 ( 238) 3 401 ( 537) 163 142 134 188 6 920 ( 236) ( 298) 140 574 22 568 20 749 Interior installations 128 817 121 ( 230) 13 944 ( 224) 142 428 73 482 4 549 ( 194) ( 109) 77 728 64 700 55 335 Vehicles 6 563 157 ( 310) 81 ( 302) 6 189 4 804 481 ( 310) 16 ( 210) 4 781 1 408 1 759 Security equipment 22 875 481 ( 88) 160 ( 117) 23 311 17 736 732 ( 87) ( 18) 18 363 4 948 5 139 Other equipment 248 ( 3) 245 225 2 227 18 23 372 012 7 887 ( 1 116) 17 905 ( 1 680) 395 008 277 395 14 281 ( 1 070) 3 ( 820) 289 789 105 219 94 617 Tangible assets in progress 32 535 11 278 ( 19 522) ( 798) 23 493 23 493 32 535 Other tangible assets 13 567 ( 129) 491 ( 34) 13 895 9 687 142 ( 127) 9 702 4 193 3 880 46 102 11 278 ( 129) ( 19 031) ( 832) 37 388 9 687 142 ( 127) 9 702 27 686 36 415 762 394 21 194 ( 5 442) 265 ( 7 196) 771 215 445 469 21 212 ( 3 507) ( 5) ( 1 916) 461 253 309 962 316 925

The net amount of the caption Sales and write-offs of Property for own use includes 62 556 t. euro relating to the contribution in kind to the BPI Pension Fund. The contribution amounted to 74 347 t. euro (Notes 4.26 and 4.41).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 168

The changes in other tangible assets during the first half of 2008 were as follows:

Gross Depreciation Net

Foreign Foreign Balance at Sales and Transfers Balance at Balance at Depreciation Sales and Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 08 write-offs and others Jun. 30, 09 Dec. 31, 08 for the period write-offs Jun. 30, 09 Jun. 30, 09 Dec. 31, 08 differences differences

Property Property for own use 247 871 5 719 ( 110 772) 3 365 ( 2 355) 143 828 81 317 1 528 ( 47 393) ( 170) 35 282 108 546 166 554 Other property 1 070 ( 11) 1 059 369 7 ( 1) 375 684 701 Leasehold improvements 112 407 496 1 223 ( 1 101) 113 025 88 518 5 044 ( 785) 92 777 20 248 23 889 361 348 6 215 ( 110 772) 4 588 ( 3 467) 257 912 170 204 6 579 ( 47 393) ( 956) 128 434 129 478 191 144 Equipment Furniture and fixtures 47 433 967 ( 117) 384 ( 272) 48 395 37 680 1 104 ( 115) ( 88) 38 581 9 814 9 753 Machinery and tools 13 720 543 ( 289) 40 ( 76) 13 938 11 112 455 ( 288) ( 54) 11 225 2 713 2 608 Computer hardware 168 907 3 696 ( 2 773) 1 042 ( 469) 170 403 143 827 7 921 ( 2 756) ( 317) 148 675 21 728 25 080 Interior installations 157 899 214 ( 165) 508 ( 133) 158 323 82 707 5 727 ( 158) ( 78) 88 198 70 125 75 192 Vehicles 6 838 478 ( 385) 104 ( 156) 6 879 5 304 508 ( 381) ( 124) 5 307 1 572 1 534 Security equipment 25 437 438 ( 9) 233 ( 132) 25 967 18 907 649 ( 9) ( 25) 19 522 6 445 6 530 Other equipment 259 ( 1) 258 229 3 ( 1) 231 27 30 420 493 6 336 ( 3 738) 2 311 ( 1 239) 424 163 299 766 16 367 ( 3 707) ( 687) 311 739 112 424 120 727 Tangible assets in progress 15 193 8 499 ( 7 579) ( 473) 15 640 15 640 15 193 Other tangible assets 14 292 491 ( 16) 14 767 9 702 190 9 892 4 875 4 590 29 485 8 499 ( 7 088) ( 489) 30 407 9 702 190 9 892 20 515 19 783 811 326 21 050 ( 114 510) ( 189) ( 5 195) 712 482 479 672 23 136 ( 51 100) ( 1 643) 450 065 262 417 331 654

During the first half of 2008 properties with net book value of 1 424 t. euro were sold to the BPI Pension Fund. The selling price was 11 000 t. euro (Note 4.41).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 169

4.10. Intangible assets

The changes in intangible assets during the first half of 2009 were as follows:

Gross Amortisation Net

Foreign Foreign Balance at Sales and Transfers Balance at Balance at Amortisation Sales and Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 08 write-offs and others Jun. 30, 09 Dec. 31, 08 for the period write-offs Jun. 30, 09 Jun. 30, 09 Dec. 31, 08 differences differences

Software 55 462 1 107 ( 11) 129 ( 63) 56 624 51 380 1 355 ( 11) ( 42) 52 682 3 942 4 082 Other intangible assets 32 105 46 ( 6) ( 56) 32 089 21 580 2 838 ( 4) ( 51) 24 363 7 726 10 525 87 567 1 153 ( 17) 129 ( 119) 88 713 72 960 4 193 ( 15) ( 93) 77 045 11 668 14 607 Intangible assets in progress 757 26 ( 35) 748 748 757 88 324 1 179 ( 17) 94 ( 119) 89 461 72 960 4 193 ( 15) ( 93) 77 045 12 416 15 364

The caption “Other intangible assets” at June 30, 2009 includes 6 606 t. euro relating to the net amount of rights to lease property for the establishment of branches.

The changes in intangible assets during the first half of 2008 were as follows:

Gross Amortisation Net

Foreign Foreign Balance at Sales and Transfers Balance at Balance at Amortisation Sales and Balance at Balance at Balance at Purchases exchange exchange Dec. 31, 07 write-offs and others Jun. 30, 08 Dec. 31, 07 for the period write-offs Jun. 30, 08 Jun. 30, 08 Dec. 31, 07 differences differences

Software 52 251 637 956 ( 77) 53 767 48 852 1 176 ( 44) 49 984 3 783 3 399 Other intangible assets 26 604 3 879 ( 276) 311 ( 99) 30 419 16 528 2 490 ( 276) ( 73) 18 669 11 750 10 076 78 855 4 516 ( 276) 1 267 ( 176) 84 186 65 380 3 666 ( 276) ( 117) 68 653 15 533 13 475 Intangible assets in progress 1 978 336 ( 1 523) 791 791 1 978 80 833 4 852 ( 276) ( 256) ( 176) 84 977 65 380 3 666 ( 276) ( 117) 68 653 16 324 15 453

The caption “Other intangible assets” at June 30, 2008 includes 10 586 t. euro relating to the net amount of rights to lease property for the establishment of branches.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 170

4.11. Investments in associated companies and jointly controlled entities

Investments in associated companies and jointly controlled entities, recorded in accordance with the equity method, are as follows:

Effective participation Book value (%)

Jun. 30, 09 Dec. 31, 08 Jun 30, 09 Dec. 31, 08 Banco Comercial e de Investimentos, S.A.R.L. 30,0 30,0 16 996 15 933 Companhia de Seguros Allianz Portugal, S.A. 35,0 35,0 62 857 56 387 Cosec – Companhia de Seguros de Crédito, S.A. 50,0 50,0 20 007 20 366 F. Turismo – Capital de Risco, S.A. 25,0 25,0 1 429 1 374 Finangeste – Empresa Financeira de Gestão e Desenvolvimento, S.A. 32,8 32,8 22 167 23 786 Viacer - Sociedade Gestora de Participações Sociais, Lda 25,0 25,0 18 240 20 029 141 696 137 875

4.12. Tax assets

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08 Current tax assets Corporate income tax recoverable 7 781 3 693 Others 412 381 8 193 4 074 Deferred tax assets Due to temporary differences 202 641 238 245 Due to tax losses carried forward 7 262 8 056 209 903 246 301 218 096 250 375

Details of deferred tax assets are presented in Note 4.44.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 171

4.13. Other assets

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Debtors, other applications and other assets Debtors for future operations 29 901 42 365 Collateral accounts 6 278 3 321 Other aplications 1 619 1 223 VAT recoverable 96 21 Debtors for loan interest subsidy receivable 20 274 18 187 Other debtors 217 410 223 050 Overdue debtors and other applications 965 1 175 Impairment ( 1 173) ( 1 504) Other assets Gold 106 162 Other available funds and other assets 848 898 276 324 288 898 Tangible assets available for sale 82 831 72 233 Impairment ( 24 176) ( 21 034) 58 655 51 199 Accrued income For irrevocable commitments assumed in relation to third parties 132 117 For banking services rendered to third parties 3 314 5 058 Other accrued income 19 676 22 491 23 122 27 666 Deferred expenses Insurance 214 126 Rent 4 829 3 174 Other deferred expenses 12 064 3 983 17 107 7 283 Liability for pensions and other benefits (Note 4.26) Actuarial deviations Employees 432 918 501 846 Directors 796 430 Changes in the Pension Plan conditions to be amortised Employees 173 207 Directors 343 404 434 230 502 887 Other accounts Stock exchange transactions pending settlement 19 494 Non Stock exchange transactions pending settlement 607 Operations on assets pending settlement 121 890 286 527 141 384 287 134 950 822 1 165 067

At June 30, 2009 and December 31, 2008 the caption “Other debtors” included 194 566 t. euro and 197.600 t. euro, respectively, relating to the amount receivable in installments from the sale in 2008 of 49.9% of the share capital of Banco de Fomento (Angola). The selling price was 365 671 t. euro and part of the proceeds of the sale will be paid in eight annual instalments plus compensation due to monetary correction.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 172

The changes in tangible assets available for sale during the first half of 2009 were as follows:

Balance at Dec. 31, 08 Sales Increase / Balance at Jun. 30, 09 Aquisi- Reversals of tions impairment Gross Impair- Net Gross Impair- Gross Impair- Net ment ment ment Assets received in settlement of defaulting loans Real estate 65 013 ( 16 447) 48 566 16 591 ( 6 590) 1 035 ( 3 586) 75 014 ( 18 998) 56 016 Equipment 4 971 ( 3 705) 1 266 1 883 ( 1 254) 281 ( 871) 5 600 ( 4 295) 1 305 Others 61 ( 60) 1 ( 32) 29 ( 60) ( 31) Other tangible assets Real estate 408 ( 93) 315 408 ( 93) 315 Others 1 780 ( 729) 1 051 ( 1) 1 780 ( 730) 1 050 72 233 ( 21 034) 51 199 18 474 ( 7 876) 1 316 ( 4 458) 82 831 ( 24 176) 58 655

The changes in tangible assets available for sale during the first half of 2008 were as follows:

Balance at Dec. 31, 07 Sales Increase / Balance at Jun. 30, 08 Aquisi- Reversals of tions impairment Gross Impair- Net Gross Impair- Gross Impair- Net ment ment ment Assets received in settlement of defaulting loans Real estate 51 518 ( 11 373) 40 145 10 900 ( 14 371) 446 ( 2 455) 48 047 ( 13 382) 34 665 Equipment 5 009 ( 3 606) 1 403 1 843 ( 1 738) 122 5 114 ( 3 484) 1 630 Others 61 ( 60) 1 61 ( 60) 1 Other tangible assets Real estate 396 ( 143) 253 12 ( 2) 408 ( 145) 263 Others 1 791 ( 731) 1 060 ( 11) 1 780 ( 731) 1 049 58 775 ( 15 913) 42 862 12 755 ( 16 120) 446 ( 2 335) 55 410 ( 17 802) 37 608

During the first half of 2008 proprieties with a book value of 10 249 t. euro received as settlement of defaulting loans were sold to the BPI Pension Fund. The selling price was 18 750 t. euro (Note 4.41).

The caption “Other accrued income” at June 30, 2009 and December 31, 2008 includes 7 218 t. euro and 15 156 t. euro, respectively, relating to accrued variable commission on Allianz’ insurance contracts.

At December 31, 2008, the caption “Stock exchange transactions pending settlement” refers to the sale of securities only settled in the following month.

The caption “Operations on assets pending settlement” at June 30, 2009 and December 31, 2008 includes 16 761 t. euro relating to taxes to be settled, of which 12 529 t. euro relates to taxes in litigation which were paid under the provisions of Decree-Law 248-A / 02 of November 14.

This caption at June 30, 2009 and December 31, 2008 also includes 75 065 t. euro and 111 916 t. euro, respectively, relating to securitisation operations carried out by the BPI Group (Notes 4.7 and 4.19), resulting from timing differences between settlement of the securitised loans and settlement of the liability for assets not derecognised.

The caption “Operations on assets pending settlement” at June 30, 2009 and December 31, 2008 also included 5 476 t. euro and 4 936 t. euro, respectively, relating to housing loans pending settlement. At December 31, 2008 this caption also included 120 807 t. euro relating to the corresponding entry to the contributions payable to the Pension Fund that were paid during the first half of 2009 (Notes 4.25 and 4.26).

The changes in impairment losses and provisions during the first half of 2009 and 2008 are presented in Note 4.20.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 173

4.14. Resources of Central Banks

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Resources of Bank of Portugal Deposits 1 505 000 Accrued interest 251 1 505 251

During the first half of 2009 Banco BPI took funds from the EuroSystem, using part of its portfolio of assets eligible for this purpose (Note 4.33).

4.15. Financial liabilities held for trading

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Short selling of securities Equity Instruments 711 200

Derivative instruments with negative fair value (Note 4.4) 382 701 258 252 383 412 258 452

4.16. Resources of other credit institution

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Resources of Portuguese credit institutions Very short term resources 7 923 5 000 Deposits 95 756 266 011 Other resources 479 120 Accrued interest 518 3 669 104 676 274 800 Resources of foreign credit institutions Deposits of international financial organisations 377 936 345 197 Very short term resources 11 235 3 360 Deposits 1 109 248 1 236 255 Debt securities sold with repurchase agreements 365 481 39 848 Other resources 130 450 87 055 Accrued interest 8 153 16 646 2 002 503 1 728 361 Correction of the amount of hedged liabilities 1 817 4 374 Commission relating to amortised cost ( 1 200) ( 123) 2 107 796 2 007 412

The balance of the caption “Debt securities sold with repurchase agreements” is made up essentially of repurchase operations to hedge the bond portfolio.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 174

4.17. Resources of customers and other debts

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Demand deposits 7 408 634 7 372 260 Term deposits 14 793 137 14 712 000 Savings deposits 506 598 570 324 Compulsory deposits 11 881 12 108 Cheques and orders payable 57 415 66 727 Debt securities sold with repurchase agreements 778 749 1 735 732 Other resources of customers 94 414 63 634 Capitalisation insurance products - Unit links 468 847 521 384 Capitalisation insurance products - guaranteed rate 317 727 292 557 Accrued interest 169 950 242 276 24 607 352 25 589 002 Correction of the amount of hedged liabilities 35 442 44 785 Commission relating to amortised cost (net) ( 167) 24 642 794 25 633 620

The caption “Resources of customers” at June 30, 2009 includes 204 118 t. euro and 378 187 t. euro, respectively, relating to deposits of investment funds and pension funds managed by the BPI Group (314 979 t. euro and 519 493 t. euro, respectively, at December 31, 2008).

4.18. Debt securities

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Average Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate Deposit Certificates EUR 127 127 3,9% 185 185 3,9% 127 127 185 185 Commercial Paper EUR 401 492 401 492 1,4% 234 201 234 201 4,2% 401 492 401 492 234 201 234 201 Covered Bonds EUR 3 225 000 (1 920 000) 1 305 000 3,2% 2 550 000 (1 420 000) 1 130 000 5,0% 3 225 000 (1 920 000) 1 305 000 2 550 000 (1 420 000) 1 130 000 Fixed rate cash bonds EUR 2 128 511 ( 58 447) 2 070 064 3,4% 684 957 ( 42 048) 642 909 4,1% CZK 19 318 19 318 3,7% 18 605 18 605 3,7% USD 28 855 ( 723) 28 132 4,1% 36 026 ( 840) 35 186 4,2% GBP 46 943 46 943 5,5% 41 995 41 995 5,5% JPY 29 518 29 518 2,5% 31 711 31 711 2,5% 2 253 145 ( 59 170) 2 193 975 813 294 ( 42 888) 770 406 Variable rate cash bonds EUR 2 189 434 ( 266 415) 1 923 019 1,8% 3 239 383 ( 244 114) 2 995 269 4,8% CAD 9 413 9 413 2,7% 2 189 434 ( 266 415) 1 923 019 3 248 796 ( 244 114) 3 004 682 Variable income cash bonds EUR 1 852 925 ( 764 711) 1 088 214 1 853 409 ( 712 520) 1 140 889 USD 135 630 ( 95 292) 40 338 146 008 ( 95 092) 50 916 1 988 555 ( 860 003) 1 128 552 1 999 417 ( 807 612) 1 191 805 10 057 753 (3 105 588) 6 952 165 8 845 893 (2 514 614) 6 331 279 Accrued interest 88 961 69 436 Correction of the amount of hedged liabilities 106 537 89 342 Premiums and commissions (net) ( 54 338) ( 72 249) 141 160 86 529 7 093 325 6 417 808

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 175

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

As part of its medium and long term funding plan, the BPI Group issues cash bonds under the Euro Medium Term Notes (EMTN) program, the maximum of which is 10 000 000 000 euros.

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

Cash bonds can be issued in different currencies.

In 2008 the BPI Group started issuing commercial paper, diversifying its way of obtaining liquidity in the market. These issues were made under a Euro Commercial Paper program, the maximum amount of which is 5 000 000 000 euros.

In 2008, the BPI Group issued two bond programs with collateral (mortgage bonds and public sector bonds) under Decree-Law 59/2006.

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

The mortgage bonds program was constituted for up to a maximum of 7 000 000 000 euros.

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

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

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

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

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

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 176

At June 30, 2009 the amount of mortgage bonds issued by the BPI Group was 3 075 000 000 euros, split into 5 issues as follows:

OH- Serie 1 OH- Serie 2 OH- Serie 3 OH- Serie 4 OH- Serie 5 Issue Date 05/08/2008 19/08/2008 09/12/2008 07/05/2009 28/05/2009 Nominal Amount EUR 1,000,000,000 EUR 400,000,000 EUR 1,000,000,000 EUR 500,000,000 EUR 175,000,000 ISIN PTBBQO1E0024 PTBISN1E0001 PTBBR7OE0028 PTBB1OOE0007 PTBB1XOE0006 Maturity Date 05/08/2010 19/08/2016 09/12/2013 07/05/2024 28/05/2016 Rating (Moody's/S&P/Fich) Aaa/AAA/AAA Aaa/-/- Aaa/-/- Aaa/-/- Aaa/-/- Reimbursement At maturity At maturity At maturity At maturity At maturity Interest Payment frequency Annual Semi-annual Semi-annually Quarterly Quarterly Coupon 5,75% Euribor 6 m + 0.50% Euribor 6 m + 0.50% Euribor 3 m + 0.50% Euribor 3 m + 1.20% Repurchases EUR 20,000,000 EUR 400,000,000 EUR 1,000,000,000 EUR 500,000,000 -

At June 30, 2009 and December 31, 2008, the cover pool allocated to the mortgage bonds amounted to 3 470 757 t. euro and 2 710 376 t. euro, respectively, of which 3 381 182 t. euro and 2 634 949 t. euro was in loans (Note 4.7).

The Series 2, 3 and 4 of the mortgage bonds were issued for inclusion in the portfolio of assets eligible for financing from the European Central Bank. At June 30, 2009 mortgage bonds amounting to 1 505 000 t. euro are pledged to ECB.

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

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

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

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

At June 30, 2009 Banco BPI held one issue outstanding of bonds over the public sector amounting to 150 000 000 euros, as follows:

OSP - Serie 1 Issue Date 17/07/2008 Nominal Amount EUR 150,000,000 ISIN PTBP14OE0006 Maturity Date 15/06/2016 Rating (Moody's/S&P/Fich) AAA Reimbursement At maturity Interest Payment frequency Quarterly Coupon Euribor 3 m - 0.004%

At June 30, 2009 and December 31, 2008 the cover pool allocated to bonds over the public sector amounted to 312 464 t. euro and 311 492 t. euro, respectively, of which 253 582 t. euro and 262 938 t. euro was in loans (Note 4.7).

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 177

The changes in the bonds issued by the BPI Group during the first half of 2009 were as follows:

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

Balance at December 31, 2008 185 234 201 1 130 000 770 406 3 004 682 1 191 805 6 331 279 Bonds issued during the period 380 558 675 000 1 509 190 35 217 77 000 2 676 965 Bonds redeemed ( 58) ( 213 267) ( 72 359) (1 094 578) ( 85 747) (1 466 009) Repurchases (net of resales) ( 500 000) ( 16 289) ( 22 302) ( 53 790) ( 592 381) Exchange difference 3 027 ( 716) 2 311 Balance at June 30, 2009 127 401 492 1 305 000 2 193 975 1 923 019 1 128 552 6 952 165

The changes in the bonds issued by the BPI Group in 2008 were as follows:

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

Balance at December 31, 2007 257 507 699 3 205 989 1 699 964 5 413 909 Bonds issued during the period 234 201 2 550 000 447 496 455 036 701 540 4 388 273 Bonds redeemed ( 72) ( 167 982) ( 540 700) (1 031 012) (1 739 766) Repurchases (net of resales) (1 420 000) ( 12 613) ( 113 983) ( 176 467) (1 723 063) Reclassification (Note 4.24) ( 4 200) ( 4 200) Exchange difference ( 4 194) ( 1 660) 1 980 ( 3 874) Balance at December 31, 2008 185 234 201 1 130 000 770 406 3 004 682 1 191 805 6 331 279

Bonds issued by the BPI Group at June 30, 2009, by maturity date, are as follows: Maturity 2009 2010 2011 2012 2013-2016 > 2016 Total Deposit Certificates EUR 17 33 32 30 15 127 17 33 32 30 15 127 Commercial Paper EUR 399 538 1 954 401 492 399 538 1 954 401 492 Covered Bonds EUR 980 000 325 000 1 305 000 980 000 325 000 1 305 000 Fixed rate bonds EUR 55 956 42 013 1 006 814 844 305 77 667 43 309 2 070 064 CZK 19 318 19 318 USD 12 517 15 615 28 132 GBP 46 943 46 943 JPY 29 518 29 518 102 899 54 530 1 041 747 844 305 77 667 72 827 2 193 975 Variable rate bonds EUR 11 432 1 195 616 583 343 32 628 100 000 1 923 019 11 432 1 195 616 583 343 32 628 100 000 1 923 019

Variable income bonds EUR 162 856 384 666 344 280 76 245 104 597 15 570 1 088 214 USD 4 245 14 897 2 972 18 224 40 338 167 101 399 563 347 252 94 469 104 597 15 570 1 128 552 Total 680 987 2 631 696 1 972 374 971 432 607 279 88 397 6 952 165

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 178

Bonds issued by the BPI Group at December 31, 2008, by maturity date, are as follows: Maturity 2009 2010 2011 2012 2013-2016 > 2016 Total Deposit Certificates EUR 44 43 40 39 19 185 44 43 40 39 19 185 Commercial Paper EUR 234 201 234 201 234 201 234 201 Covered Bonds EUR 980 000 150 000 1 130 000 980 000 150 000 1 130 000 Fixed rate bonds EUR 118 491 42 905 420 532 9 048 9 631 42 302 642 909 CZK 18 605 18 605 USD 6 436 12 820 15 930 35 186 GBP 41 995 41 995 JPY 31 711 31 711 166 922 55 725 455 067 9 048 9 631 74 013 770 406 Variable rate bonds EUR 990 912 1 238 427 615 930 150 000 2 995 269 CAD 9 413 9 413 1 000 325 1 238 427 615 930 150 000 3 004 682 Variable income bonds EUR 222 536 404 994 369 900 60 628 67 261 15 570 1 140 889 USD 11 484 17 310 3 233 18 889 50 916 234 020 422 304 373 133 79 517 67 261 15 570 1 191 805 Total 1 635 512 2 696 499 1 444 170 88 604 376 911 89 583 6 331 279

4.19. Financial liabilities relating to transferred assets

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Liabilities relating to assets not derecognised in securitisation operations (Note 4.7) Loans Housing loans 4 262 775 4 396 261 Loans to SME's 300 784 377 579 Liabilities held by the BPI Group (1 740 796) (1 712 385) Risk / benefit on housing loans ceded ( 950 906) (1 013 691) Accrued costs 8 050 12 930 Correction of the amount of hedged liabilities 1 3 597 Premiums /discounts relating to liabilities held by the BPI Group 9 819 8 658 Commission relating to amortised cost (net) ( 2 230) ( 2 170) 1 887 496 2 070 779 1 At June 30, 2009 the amount relating to corrections of the amount of hedged liabilities was included in “Derivatives held for trading” (8 173 t. euro) (Note 4.4).

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

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

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 179

On April 6, 2005 Banco BPI launched its first small and medium companies securitisation operation, in the amount of 500 000 t. euro, under the name Douro SME Series 1. The operation was issued in 4 lots, their main characteristics being as follows: Estimated Rating residual Description Amount (Moody's, S&P, Guarantee Spread average life Fitch) (years) ƒ Class A Notes 245 774 1,28 AAA Without 0,10%

European ƒ Class B Notes 26 000 4,11 AAA 0,08% Investment Fund

Credit ƒ Class C Notes 24 000 4,11 Securitisation 1,00% Guarantee Fund

Without ƒ Class D Notes 5 010 4,11 2,00% Guarantee Total of the issues 300 784 Liabilities held by BPI Group ( 77 436) Total 223 348

On November 24, 2005 Banco BPI launched its first housing loan securitisation operation, in the amount of 1 500 000 t. euro, under the name DOURO Mortgages No. 1. The operation was issued in 5 lots, their main characteristics being as follows: Estimated Rating residual Description Amount (Moody's, S&P, Spread 1 average life Fitch) (years) ƒ Class A Notes 625 524 3,22 Aaa / AAA / AAA 0,14% ƒ Class B Notes 13 236 3,22 Aa2 / AA / AA 0,17% ƒ Class C Notes 12 033 3,22 A1 / BBB / A+ 0,27% ƒ Class D Notes 10 027 3,22 Baa1 / BBB / A- 0,47% ƒ Class E Notes 9 000 3,22 Residual Interest Total of the issues 669 820 Reserve Fund ( 4 200) Other funds 3 Liabilities held by BPI Group ( 14 176) Risk / benefit ceded ( 230 238) Total 421 209 1 Until the date of the call option (September 2014); after this date, if the option is not exercised, the spread doubles.

On September 28, 2006 Banco BPI launched its second housing loan securitisation operation in the amount of 1 500 000 t. euro under the name DOURO Mortgages No. 2. The operation was issued in 6 lots, their main characteristics being as follows: Estimated Rating residual Description Amount (Moody's, S&P, Spread 1 average life Fitch) (years) ƒ Class A1 Notes 7 978 5,11 Aaa / AAA / AAA 0,05% ƒ Class A2 Notes 806 373 5,11 Aaa / AAA / AAA 0,14% ƒ Class B Notes 19 891 5,11 Aa3 / AA / AA 0,17% ƒ Class C Notes 12 902 5,11 A2 / A- / A+ 0,23% ƒ Class D Notes 10 214 5,11 Baa2 / BBB / BBB+ 0,48% ƒ Class E Notes 9 000 5,11 Residual Interest Total of the issues 866 358 Reserve Fund ( 4 200) Liabilities held by BPI Group ( 69 357) Risk / benefit ceded ( 299 025) Total 493 776 1 Until the date of the call option (April 2015); after this date, if the option is not exercised, the spread doubles.

On July 31, 2007 Banco BPI launched its third housing loan securitisation operation in the amount of 1 500 000 t. euro under the name DOURO Mortgages No. 3.The operation was issued in 6 lots, their main characteristics being as follows:

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 180

Estimated Rating residual Description Amount (Moody's, S&P, Spread 1 average life Fitch) (years) ƒ Class A Not es 1 147 964 6,02 Aaa / AA A / AA A 0,16% ƒ Class B Notes 27 750 7,67 nr / AA / AA 0,17% ƒ Class C Notes 16 500 8,00 nr / A / A 0,23% ƒ Class D Notes 14 250 8,41 nr / BBB/ BBB 0,48% ƒ Class E Notes 9 033 N.A. nr / BBB- / BBB- 0,50% ƒ Class F Notes 1 251 N.A. Residual Interest Total of the issues 1 216 748 Reserve Fund ( 4 200) O ther funds ( 54) Liabilities held by BP I G roup ( 57 327) Risk / benefit c eded ( 421 643) Total 733 524 1 Until the date of the call option (August 2016); after this date, if the option is not exercised, the spread is multiplied by 1.5.

In December 2008 Banco BPI launched a new series of housing loan securitisation operations in the amount of 1 500 000 t. euro under the name DOURO Mortgages No. 4, which was settled financially in January, 2009. The operation was issued in 4 lots, their main characteristics being as follows: Estimated Rating residual Description Amount (Moody's, S&P, Spread average life Fitch) (years) ƒ Class A Notes 1 275 000 7,95 AAA 0,15% ƒ Class B Notes 180 000 19,52 nr 0,20% ƒ Class C Notes 45 000 20,17 nr 0,25% ƒ Class D Notes 22 500 N.A. nr Residual Interest Total of the issues 1 522 500 Liabilities held by BPI Group (1 522 500) Total

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 181

4.20. Provisions and impairment losses

The changes in provisions and impairment losses of the Group during the first half of 2009 were as follows: Exchange Balance at Decreases Balance at Increases Utilisation differences Dec. 31, 07 and reversals Jun. 30, 08 and others Impairment losses on loans and advances to 9 1 10 credit institutions (Note 4.6) Impairment losses on loans and advances to 383 551 customers (Note 4.7) 372 712 64 727 ( 2 580) ( 48 195) ( 3 113) Impairment losses on financial assets available for sale (Note 4.5) Debt instruments 530 137 ( 20) 647 Equity instruments 46 887 115 601 ( 1 374) ( 46) 161 068 Other securitites 4 544 4 544 Loans and other receivables 25 703 142 25 845 Impairment losses on other assets Tangible assets held for sale 15 913 3 878 ( 1 543) ( 446) 17 802 Debtors, other applications and other assets 1 553 6 ( 27) ( 13) 1 519 Impairment losses and provisions for guarantees 37 939 1 554 ( 1 521) ( 685) 37 287 and commitments Other provisions 34 914 3 139 ( 616) ( 467) ( 365) 36 605 540 704 189 185 ( 6 307) ( 50 495) ( 4 209) 668 878

In the first half of 2009 the utilisation of impairment losses includes 56 573 t. euro relating to the sale of Vista Alegre, of which 25 266 t. euro relates to loans to customers. In addition, the utilisation of Impairment losses on loans and advances to customers also includes write-offs recorded during the first half of 2009.

In the first half of 2009, decreases and reversals of impairment losses includes 6 891 t. euro relating to the sale of Vista Alegre.

The caption “Other provisions” at June 30, 2009 includes provisions for tax contingencies and litigation in progress.

The changes in provisions and impairment losses of the Group during the first half of 2008 were as follows: Exchange Balance at Decreases Balance at Increases Utilisation differences Dec. 31, 07 and reversals Jun. 30, 08 and others Impairment losses on loans and advances to 9 1 10 credit institutions Impairment losses on loans and advances to 383 551 customers 372 712 64 727 ( 2 580) ( 48 195) ( 3 113) Impairment losses on financial assets available for sale Debt instruments 530 137 ( 20) 647 Equity instruments 46 887 115 601 ( 1 374) ( 46) 161 068 Other securitites 4 544 4 544 Loans and other receivables 25 703 142 25 845 Impairment losses on other assets Tangible assets held for sale 15 913 3 878 ( 1 543) ( 446) 17 802 Debtors, other applications and other assets 1 553 6 ( 27) ( 13) 1 519 Impairment losses and provisions for guarantees 37 939 1 554 ( 1 521) ( 685) 37 287 and commitments Other provisions 34 914 3 139 ( 616) ( 467) ( 365) 36 605 540 704 189 185 ( 6 307) ( 50 495) ( 4 209) 668 878

Utilisation of impairment losses on loans to customers corresponds essentially to write-offs recorded during the first half of 2008.

In the first half of 2008 the increases in impairment losses on equity instruments available for sale includes 111 522 t. euro relating to impairment recorded on shares of Banco Comercial Português.

The caption “Other provisions” at June 30, 2008 includes provisions for tax contingencies and litigation in progress.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 182

4.21. Technical provisions

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Immediate Life Annuity / Individual 6 6 Immediate Life Annuity / Group 48 49 Family Savings 489 483 BPI New Family Savings 1 293 374 1 599 999 BPI Retirement Guaranteed 7 954 7 286 BPI Retirement Savings 492 475 507 046 BPI Non Resident Savings 104 333 118 341 Planor 5 698 5 687 PPR BBI Life 5 374 5 871 Savings Investment Plan / Youths 1 512 1 529 South PPR 129 130 1 911 392 2 246 427

The technical provisions were computed on a prospective actuarial basis, contract by contract, in accordance with the technical bases of the products:

Immediate income

Individual Interest Rate 6% Mortality Table PF 60/64

Group Interest Rate 6% Mortality Table PF 60/64

Deferred capital with Counterinsurance with Participation in Results

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

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

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

4.22. Tax liabilities

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Current Tax Liability Corporate income tax payable 11 880 38 064 Other 1 2 11 881 38 066 Deferred Tax Liability On temporary differences 23 067 24 746 23 067 24 746 34 948 62 812

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

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 183

4.23. Participating bonds

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Average Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate

Participating bonds EUR 28 081 ( 45) 28 036 5,8% 28 081 ( 3) 28 078 5,7% 28 081 ( 45) 28 036 28 081 ( 3) 28 078 Accrued interest 1 411 604 29 447 28 682

The changes in debt issued by the BPI Group during the first half of 2009 were as follows: Participating bonds

Balance at Dec. 31, 08 28 078 Repurchases (net of resales) ( 42) Balance at Jun. 30, 09 28 036

The changes in debt issued by the BPI Group in 2008 were as follows: Participating bonds

Balance at December 31, 2007 26 787 Repurchases (net of resales) 1 291 Balance at December 31, 2008 28 078

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

4.24. Subordinated debt

This caption is made up as follows: Jun. 30, 09 Dec. 31, 08

Average Average interest interest Issued Repurchased Balance rate Issued Repurchased Balance rate Perpetual bonds EUR 720 000 ( 660 000) 60 000 2,0% 720 000 ( 660 000) 60 000 4,4% JPY 55 346 55 346 4,0% 59 458 59 458 4,0% 775 346 ( 660 000) 115 346 779 458 ( 660 000) 119 458 Other Bonds EUR 494 200 ( 63 531) 430 669 3,0% 494 200 ( 23 076) 471 124 5,0% JPY 129 142 129 142 2,8% 138 735 138 735 2,8% 623 342 ( 63 531) 559 811 632 935 ( 23 076) 609 859 1 398 688 ( 723 531) 675 157 1 412 393 ( 683 076) 729 317 Accrued costs 6 992 5 778 Correction of the amount of hedged liabilities 20 752 33 693 Premiums (net) ( 890) ( 1 160) 26 854 38 311 702 011 767 628

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 184

The changes in debt issued by the BPI Group during the first half of 2009 were as follows:

Perpetual Other Total bonds bonds

Balance at Dec. 31, 08 119 458 609 859 729 317 Repurchases (net of resales) ( 40 455) ( 40 455) Exchange difference ( 4 112) ( 9 593) ( 13 705) Balance at Jun 30, 09 115 346 559 811 675 157

The changes in debt issued by the BPI Group in 2008 were as follows:

Perpetual Other Total bonds bonds

Balance at Dec. 31, 07 105 474 810 601 916 075 Reclassification (Note 4.18) 4 200 4 200 Bonds redeemed ( 280 000) ( 280 000) Repurchases (net of resales) 42 428 42 428 Exchange difference 13 984 32 630 46 614 Balance at Dec. 31, 08 119 458 609 859 729 317

Debt issued by the BPI Group at June 30, 2009 is made up as follows, by residual term to maturity: Maturity 2011 2012 2013-2016 > 2016 Total Perpetual Bonds EUR 1 60 000 60 000 JPY 2 55 346 55 346 55 346 60 000 115 346 Other Bonds EUR 84 982 2 531 343 156 430 669 JPY 129 142 129 142 84 982 2 531 472 298 559 811 Total 140 328 60 000 2 531 472 298 675 157 1 Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up. 2 Date of the call option (November 2011); after that date, if the option is not exercised, the remuneration is stepped up.

Debt issued by the BPI Group at December 31, 2008 is made up as follows, by residual term to maturity: Maturity 2011 2012 2013-2016 > 2016 Total Perpetual Bonds EUR 1 60 000 60 000 JPY 2 59 458 59 458 59 458 60 000 119 458 Other Bonds EUR 89 310 2 736 379 078 471 124 JPY 138 735 138 735 89 310 2 736 517 813 609 859 Total 148 768 60 000 2 736 517 813 729 317 1 Date of the call option (September 2012); after that date, if the option is not exercised, the remuneration is stepped up. 2 Date of the call option (November 2011); after that date, if the option is not exercised, the remuneration is stepped up.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 185

4.25. Other liabilities

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Creditors and other resources Creditors for futures operations 23 792 31 967 Consigned resources 18 684 19 089 Captive account resources 5 720 6 201 Subscription account resources 3 931 Guarantee account resources 17 766 18 197 State administrative sector Value Added Tax (VAT) payable 10 270 6 459 Tax withheld at source 31 316 23 076 Social Security contributions 2 671 2 585 Other 154 177 Contributions to other health systems 1 493 1 355 Credores por contratos de factoring 9 037 8 636 Creditors for the supply of assets 5 182 9 117 Contributions to the Pension Fund (Note 4.26) Pensioners and employees 119 296 Directors 1 511 Other creditors 68 026 77 634 Deferred costs ( 243) ( 91) 197 799 325 209 Liability for pensions and other benefits (Note 4.26) Net assets of the pension fund Pensioners and employees (2 315 511) (2 150 110) Directors ( 25 266) ( 23 871) Past service liabilities Pensioners and employees 2 330 018 2 298 177 Directors 27 144 26 120 Other 471 421 16 856 150 737 Accrued costs Creditors and other resources 248 202 Personnel costs 90 775 127 016 General administrative costs 31 081 18 826 Others 570 788 122 674 146 832 Deferred income Creditors and other resources 144 On guarantees given and other contingent liabilities 5 732 6 421 Others 4 469 3 949 10 201 10 514 Other accounts Foreign exchange transactions pending settlement 25 195 Securities operations pending settlement - stock exchange operations 64 742 Securities operations pending settlement - non stock exchange operations 72 122 930 Liabilities pending settlement 176 265 179 833 Other operations pending settlement 26 384 34 897 339 513 240 855 687 043 874 147

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

At December 31, 2008 the caption “Accrued costs - Personnel costs” includes 28 972 t. euro relating to the increased liability resulting from the program of 200 early retirements approved in December 2008 (Note 4.26).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 186

The caption “Security operations pending settlement – Stock Exchange Operations” at June 30, 2009 corresponds to purchases and sales of shares which were only settled in the following month.

The amounts recorded under “Security operations pending settlement - Non Stock Exchange Operations” at June 30, 2009 corresponds to securities purchased which were only settled in the following month.

The caption “Liabilities pending settlement” at June 30, 2009 and December 31, 2008 includes: • 83 267 t. euro and 63 481 t. euro, respectively, relating to electronic interbank transfer transactions; • 39 393 t. euro and 58 825 t. euro, respectively, relating to loan securitisation fund transactions; • 12 216 t. euro and 9 765 t. euro, respectively, relating to ATM/POS transactions to be settled with SIBS; • 2 587 t euro and 1 652 t. euro, respectively, relating to transfers made through the “SPGT”.

The caption “Other operations pending settlement”, at June 30, 2009 and December 31, 2008 includes: • 6 222 t. euro and 5 563 t. euro, respectively, relating to the revaluation of options not yet exercised, under the RVA programs (these amounts are recorded by corresponding entry to “Other assets”). • 6 195 t. euro and 10 581 t. euro, respectively, relating to the settlement of payments and receipts of Leasing/ALD/Factoring operations.

4.26. Liability for pensions and other benefits

The past service liability relating to pensioners and personnel that are, or have been, employees of BPI Group companies1, and are covered by pension Funds, is calculated in accordance with IAS 19.

BPI Pensões is the entity responsible for the actuarial calculations used to determine the amounts of the retirement and survivor pension liabilities, as well as for managing the respective Pension Funds.

The “Projected Unit Credit” method was used to calculate the normal cost and past service liability due to age, and the “Single Successive Premiums” method was used to calculate the cost of the incapacity and survivor benefits.

1 Companies consolidated by the full consolidation method (Banco BPI, BPI Investimentos, BPI Gestão de Activos, Inter-Risco and BPI Vida).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 187

The main actuarial and financial assumptions used to calculate the pension liability are as follows: Assumptions Actual

Jun. 30, 09 Dec. 31, 08 Jun. 30, 09 Dec. 31, 08

Demographic assumptions: Mortality table 1 TV 73/77-M - 1 year TV 73/77-M - 1 year -- TV 88/90-W -1 year TV 88/90-W -1 year Incapacity table EKV 80 EKV 80 - - Personnel turnover 0% 0% - - Decreases By mortality By mortality - - Financial assumptions: Discount rate 5,50% 5,50% - - Pensionable salary increase rate 3,50% 3,50% ……….. 2 6.03% 3 Pension increase rate 2,25% 2,25% 1.50% 4 2.60% 4 Pension fund income rate 7.00%/annual 1st half Banco BPI 5.50% 5.01% 5 -20.60% 5.50%/annual 2nd half Other companies 5.50% 5.00%/annual 1st half 1.04% 5 -8.35%

1 The life expectancy considered was one year greater than the mortality table used. 2 Rate established annually. 3 Calculated based on the changes in the pensionable wages of the employees working for the Group companies in the beginning and end of the year (includes changes in remuneration levels and does not reflect new arrivals and departures). 4 Corresponds to the ACTV table update rate 5 Rate for the first half of 2009, not annualized.

The amount of the retirement and survivor pension liabilities of the BPI Group at June 30, 2009 was determined based on projections of the actuarial calculations realised on December 31, 2008.

At December 31, 2008 the number of pensioners and employees covered by the pension plans funded by the pension funds was as follows:

Dec. 31, 08

Retirement pensioners 6 112 Survivor pensioners 1 032 Current employees 7 662 Former employees (clauses 137º A and 140 of the ACTV) 2 668 17 474

The past service liability for pensioners and employees of the BPI Group and respective coverage by the Pension Fund at June 30, 2009 and December 31, 2008 are as follows:

Jun. 30, 09 Dec. 31, 08

Total past service liability Liability for pensions under payment 1 718 394 1 695 377 Of which: [increase in the liability resulting from early retirements during the year] [ 29 395] [ 1 880] Past service liability of current and former employees 611 624 602 800 2 330 018 2 298 177 Net assets of the pension funds 2 315 511 2 150 110 Contributions to be transferred to the Pension Fund 119 296 Excess/(Insufficient) cover ( 14 507) ( 28 771) Degree of coverage 99% 99%

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 188

At December 31, 2008 the Bank recorded, under the caption “Other liabilities - Contributions due to the Pension Fund” (Note 4.25), the amount of 119 296 t. euro relating to the contribution for 2008, paid in the first half of 2009, after which the degree of coverage is 99%.

The changes in the present value of the past service liability during the first half of 2009 and in 2008 were as follows:

Jun. 30, 09 Dec. 31, 08

Liability at the beginning of the year 2 298 177 2 445 429 Current cost: Of the BPI Group 16 656 36 783 Of the employees 1 764 3 390 Interest cost 62 534 123 344 Actuarial (gain) and loss in the liability ( 17 385) ( 192 781) Early retirements (1) 29 395 1 880 Pensions payable (estimate) ( 61 126) ( 119 868) Other 3 Liability at the end of the year 2 330 018 2 298 177 1 At June 30, 2009 and December 31, 2008, Includes 28 972 t. euro and 1 028 t. euro, respectively, relating to the program of 200 early retirements approved in December 2008 (Note 4.25).

The changes in the pension funds during the first half of 2009 and in 2008 were as follows:

Jun. 30, 09 Dec. 31, 08

Net assets of the Pension Fund at the beginning of the year 2 150 110 2 798 494 Contributions made: By the BPI Group 119 299 42 105 By the employees 1 764 3 390 Pension Fund income (net) 106 986 ( 573 821) Pensions paid by the Pension Funds ( 62 648) ( 120 058) Net assets of the Pension Fund at the end of the year 2 315 511 2 150 110

At June 30, 2009 and December 31, 2008 the net assets of the Banco BPI Employees’ Pension Fund were as follows:

Jun. 30, 09 Dec. 31, 08

Liquidity 14,6% 21,3% Fixed rate bonds 39,7% 34,5% Indexed rate bonds 13,7% 13,1% Shares issued by portuguese entities 10,0% 10,3% Shares issued by foreign entities 4,5% 5,1% Real estate 15,2% 13,2% Others 2,3% 2,5% 100,0% 100,0%

During the first half of 2009 the contributions to the Pension Funds were made in properties and cash in the amounts of 74 347 t. euro (Note 4.9 and 4.41) and 44 952 t. euro, respectively. Contributions to the Pension Funds in 2008 were paid in cash.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 189

The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities in the first half of 2009, were as follows:

Changes in Dec. 31, 08 Purchases Sales Jun. 30, 09 fair value Fair value of the plan assets: Financial instruments issued by the BPI Group Shares 8 993 359 9 352 Bonds 155 821 6 603 ( 334) 162 090 164 814 6 603 25 0 171 442 Premises used by the BPI Group 125 518 76 944 ( 2 758) 199 704 290 332 83 547 ( 2 733) 0 371 146

The changes in the fair value of the pension fund assets used by entities of the BPI Group or representing securities issued by these entities in 2008 were as follows: Changes in Dec. 31, 07 Purchases Sales Dec. 31, 08 fair value Fair value of the plan assets: Financial instruments issued by the BPI Group Shares 9 760 14 610 ( 5 993) 9 384 8 993 Bonds 68 908 111 567 235 24 889 155 821 78 668 126 177 ( 5 758) 34 273 164 814 Premises used by the BPI Group 114 933 7 191 3 394 125 518 193 601 133 368 ( 2 364) 34 273 290 332

The pension liabilities not yet recognised as income and (cost) at June 30, 2009 and December 31, 2008 were as follows:

Jun. 30, 09 Dec. 31, 08

Actuarial deviations Within the corridor ( 232 574) ( 229 446) Outside the corridor ( 200 344) ( 272 400) ( 432 918) ( 501 846) Changes in the conditions of the pension plan ( 173) ( 207) ( 433 091) ( 502 053)

The changes in actuarial deviations1 in 2008 and the first half of 2009 were as follows:

Amount at December 31, 2007 39 361 Amortisation of deviations outside the corridor 35 Adjustment in excess of that established in the ACTV Table ( 2 468) Change in the actuarial and financial assumptions 203 809 Deviation in pension fund income ( 733 832) Deviation in pensions paid ( 191) Mortality deviations ( 8 000) Others ( 560) Amount at December 31, 2008 ( 501 846) Amortisation of deviations outside the corridor 6 191 Adjustment in deficit of that established in the ACTV Table 17 385 Deviation in pension fund income 46 875 Deviation in pensions paid ( 1 523) Amount at June 30, 2009 ( 432 918) 1 Actuarial gains and losses due to differences between the actuarial and financial assumptions and the amounts effectively realised and changes in the actuarial and financial assumptions.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 190

The consolidated financial statements as of June 30, 2009 and 2008 include, in the captions “Interest, financial gain and loss with pensions” (Note 4.40) and “Personnel costs” (Note 4.42), the following amounts relating to coverage of the pension liability:

Jun. 30, 09 Jun. 30, 08

Interest and financial gain and loss with pensions Interest cost 62 534 60 714 Expected Fund income ( 60 111) ( 95 422) 2 423 ( 34 708) Personnel costs Current service cost 16 656 19 873 Amortisation of deviations outside the corridor 6 191 31 Increase in liabilities for early retirements 423 839 Compensation due to early retirement ( 1 580) 628 Change in the conditions of the pension plan 35 35 21 725 21 406

The Members of the Executive Board of Banco BPI, S.A. and the remaining Board Members of BPI Investmentos benefit from a supplementary retirement and survivor pension plan. At December 31, 2006 a pension fund was constituted to cover these liabilities.

The main actuarial and financial assumptions used to calculate the pension liability are as follows: Assumptions Actual

Jun. 30, 09 Dec. 31, 08 Jun. 30, 09 Dec. 31, 08

Demographic assumptions: Mortality table 1 TV 73/77-M - 1 year TV 73/77-M - 1 year TV 88/90-W - 1 year TV 88/90-W - 1 year

Incapacity table EKV 80 EKV 80 Personnel turnover 0% 0% Decreases By mortality By mortality Financial assumptions: Discount rate 5,50% 5,50% Pensionable salary increase rate 2,50% 2,50% ……….2 3.10% 3 Pension increase rate 2,25% 2,25% 2.60% . Pension fund income rate 5.0%/annual 1st half 1.21% 4 -8.37% 5.5% 5.5%/annual 2nd half

1 The life expectancy considered was one year greater than the mortality table used. 2 Rate established annually. 3 Calculated based on the changes in the pensionable wages of directors serving in the Group companies in the beginning and end of the year (includes changes in remuneration levels and does not reflect changes in directors). 4 Rate for the first half of 2009, not annualized.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 191

At June 30, 2009 and December 31, 2008 the past service liability of this plan and respective coverage by the Pension Fund were as follows:

Jun. 30, 09 Dec. 31, 08

Present value of the past service liability Liability f or pensions under payment 11 688 11 247 Of which: [increase in the liability resulting from early retirements during the year] [ 236] Past service liabilty relating to the current and former directors 15 456 14 873 27 144 26 120 Net ass ets of the pens ion fund 25 266 23 871 Contributions to be transferred to the Pension Fund 1 511 E xc ess/(Insuf ficient ) cover ( 1 878) ( 738) Degree of coverage 93% 97%

On December 31, 2008 the Bank recorded in the caption “Other Liabilities - Contributions due to the Pension Fund” (Note 4.25) the amount of 1 511 t. euro relating to contributions for 2008 made in the first half of 2009, after which the degree of coverage is 97%.

The changes in the present value of the past service liability of the plan in the first half of 2009 and in 2008 were as follows:

Jun. 30, 09 Dec. 31, 08

Liability at the beginning of the year 26 120 23 388 Current service cost 714 1 765 Interest cost 745 1 303 Actuarial (gain)/loss in the liability ( 177) Early retirements during the year 236 Pensions payable (estimate) ( 435) ( 395) Liability at the end of the year 27 144 26 120

The changes in the pension fund during the first half of 2009 and in 2008 were as follows:

Jun. 30, 09 Dec. 31, 08

Net assets of the Pension Fund at the beginning of the year 23 871 23 372 Contributions made 1 511 2 890 Pension Fund income (net) 289 ( 1 956) Pensions paid by the Pension Fund ( 405) ( 435) Net assets of the Pension Fund at the end of the year 25 266 23 871

At June 30, 2009 and December 31, 2008 the net assets of the Banco BPI Directors’ Pension Fund were as follows:

Jun. 30, 09 Dec. 31, 08

Liquidity 14,9% 18,3% Fixed rate bonds 41,5% 36,0% Indexed rate bonds 7,0% 9,4% Shares 28,5% 29,0% Real Estate 2,7% 2,7% Others 5,4% 4,6% 100,0% 100,0%

Contributions to the Pension Funds in the first half of 2009 and in 2008 were paid up in cash.

The pension liability for the Directors at June 30, 2009 and December 31, 2008 not recognised as income and (cost) was as follows:

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 192

Jun. 30, 09 Dec. 31, 08

Actuarial deviations - Executive Directors Within the corridor ( 796) ( 430) ( 796) ( 430) Changes in the conditions of the Executive Directors' pension plan ( 343) ( 404) ( 1 139) ( 834)

The changes in actuarial deviations in 2008 and in the first half of 2009 were as follows:

Amount at December 31, 2007 2 631 Amortisation of deviations outside the corridor ( 51) Deviation in pension fund income ( 3 148) Change in actuarial and financial assumptions 1 315 Deviation in pensions paid ( 39) Others ( 1 138) Amount at December 31, 2008 ( 430) Deviation in pension fund income ( 397) Deviation in pensions paid 31 Amount at June 30, 2009 ( 796)

The consolidated financial statements as of June 30, 2009 and 2008 include, in the captions “Interest and financial gain and loss with pensions” (Note 4.40) and “Personnel costs” (Note 4.42), the following amounts relating to coverage of the pension liability for Directors:

Jun. 30, 09 Jun. 30, 08

Interest and financial gain and loss with pensions Interest cost 745 627 Expected Fund income ( 686) ( 579) 59 48 Personnel costs Current service cost 714 919 Amortisation of deviations outside the corridor ( 16) Change in the pension plan conditions 60 60 774 963

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 193

4.27. Capital

On June 18, 2008 the subscribed share capital of Banco BPI was increased from 760 000 t. euro to 900 000 t. euro through the issuance of 140 000 000 ordinary shares with a nominal value of 1 euro each by public subscription reserved to the shareholders. The shares were paid up at the subscription price of 2.5 euro each, which based on their nominal value, corresponds to a share premium of 1.5 euro per share (Note 4.28).

The Shareholders’ General Meeting held on April 22, 2009 empowered Banco BPI’s Board of Directors to do the following during a period of eighteen months: a) to purchase treasury shares of up to 10% of Banco BPI’s share capital, provided that: i) the treasury shares are purchased on a market registered by the Securities Market Commission (Comissão do Mercado de Valores Mobiliários - CMVM), at a price not exceeding 110% of the weighted average of the weighted daily average prices of Banco BPI shares on the 10 official price market sessions managed by Euronext Lisboa - Sociedade Gestora de Mercados Regulamentados, S.A. (Euronext) preceding the date of purchase, and a minimum of 1 Euro; or ii) the purchases result from agreements to settle obligations arising from loan agreements entered into by Banco BPI, provided that the value attributed, for that purpose, to the shares does not exceed the value determined by application of the criteria defined in (i) above, with reference to the settlement agreement date; b) to sell Banco BPI shares provided that: i) the shares and options to purchase shares of Banco BPI are sold to employees and Directors of Banco BPI and subsidiaries, as share-based payments under the terms and conditions established in the Variable Remuneration Program (RVA) regulations; or ii) the shares are sold to third parties under the following conditions: − the shares are sold in a market registered at the Securities Market Commission (CMVM); and − the shares are sold at a price not less than 90% of the weighted average of the daily weighted average prices of Banco BPI shares on the 10 official price market sessions managed by Euronext preceding the date of sale; or, c) Carry out repurchase or resale agreements or the loan of shares of Banco BPI, provided that such operations are conducted with qualified investors that meet the requirements to be eligible counterparties of Banco BPI, in accordance with articles 30 and 317-D of the Securities Code (Código dos Valores Mobiliários).

4.28. Share Premium account

During the first half of 2009 there were no changes in the caption “Share Premium account”.

The changes in the share premium account in 2008 were as follows:

Balance at December 31, 2007 231 306 Capital increase at June, 2008 - Share Premium account subscribed (note 4.27) 210 000 Balance at December 31, 2008 441 306

In accordance with Ministerial Order 408/99 of June 4, published in Diário da República – 1st B Series, nº 129, the share premium account may not be used to pay dividends or to acquire treasury shares.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 194 4.29. Other equity instruments and treasury shares

These captions are made up as follows:

Jun. 30, 09 Dec. 31, 08

Other equity instruments Cost of shares to be made available to Group employees RVA 2005 940 RVA 2007 908 1 312 RVA 2008 69 503 RVA 2009 54 Costs of options not exercised (premiums) RVA 2003 288 RVA 2004 462 463 RVA 2005 1 257 1 258 RVA 2007 5 868 5 878 RVA 2008 1 244 1 665 RVA 2009 447 10 309 12 307 Treasury shares Shares to to be made available to Group employees RVA 2005 968 RVA 2007 1 264 1 954 RVA 2008 136 Shares hedging RVA options RVA 2003 1 008 RVA 2004 3 365 3 365 RVA 2005 1 806 1 804 RVA 2007 12 811 12 501 RVA 2008 2 157 Other treasury shares 176 1 086 21 715 22 686

The caption “Other equity instruments” includes accrued share-based payment program (RVA) costs relating to shares to be made available and options not yet exercised.

Details of the share-based Variable Remuneration Program (RVA) are included in Note 4.49.

The financial statements of the BPI Group as of June 30, 2009 and December 31, 2008 reflect, respectively, 6 734 960 and 6 689 807 treasury shares, including 475 817 and 804 893 treasury shares to be made available under the RVA program for which the respective ownership was transferred to the employees on the grant date.

In the first half of 2009 the Bank recorded directly in shareholders’ equity, a loss of 102 t. euro on the sale of treasury shares hedging the variable remuneration (RVA) program and a loss of 11 t. euro on the sale of other treasury shares. During the first half of 2008 the Bank recognised directly in shareholders’ equity a loss of 2 970 t. euro on the sale of treasury shares hedging the variable remuneration (RVA) program and a loss of 656 t. euro on the sale of other treasury shares.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 195

4.30. Revaluation reserves

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Revaluation reserves Reserves resulting from valuation to fair value of financial assets available for sale (Note 4.5): Debt Instruments ( 350 908) ( 557 033) Equity Instruments 17 216 13 778 Other ( 2 643) 2 329

Reserve for foreign exchange difference on investments in foreign entities

Subsidiary or associated companies ( 12 618) ( 2 686) Equity instruments available for sale ( 107) ( 103) Legal revaluation reserve 703 703 ( 348 357) ( 543 012) Deferred tax reserve Resulting from valuation to fair value of financial assets available for sale: Tax assets 75 301 110 616 Tax liabilities ( 5 276) ( 3 242) 70 025 107 374 ( 278 332) ( 435 638)

Deferred taxes have been calculated in accordance with current legislation and correspond to the best estimate of the impact of recognising the unrealized gains and losses included in the caption “Revaluation Reserves”.

4.31. Other reserves and retained earnings

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Legal reserve 138 843 102 822 Merger reserve ( 2 463) ( 2 463) Other reserves 488 879 224 507 625 259 324 866 Consolidation reserves and retained earnings ( 73 241) 132 332 Gain on treasury shares ( 6 474) ( 6 361) Taxes relating to gain on treasury shares 1 702 1 672 547 246 452 509

In accordance with Article 97 of the General Regime for Credit Institutions and Financial Companies, approved by Decree-Law 298/91 of December 31 and amended by Decree-Law 201/2002 of September 25, Banco BPI must appropriate at least 10% of its net income each year to a legal reserve until the amount of the reserve equals the greater of the amount of share capital or the sum of the free reserves plus retained earnings.

At June 30, 2009 and December 31, 2008 the share premium account and legal reserve of the companies included in the consolidation of the BPI Group which, under the applicable regulations, may not be distributed, amounted to 195 445 t. euro and 161 335 t. euro, respectively, which, adjusted by Banco BPI’s effective participation percentage in these companies, amounted to 90 219 t. euro and 78 389 t. euro, respectively. These reserves are included in the captions “Consolidation reserves” and “Retained earnings and revaluation reserves”.

The caption “Consolidation reserves” at June 30, 2009 and December 31, 2008 includes (6 480) t euro and (11 844) t. euro, respectively, relating to the amount of the revaluation reserves of the companies recorded in accordance with the equity method, weighted by Banco BPI’s (effective) participation in them.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 196 4.32. Minority interest

This caption is made up as follows:

Balance sheet Statement of income

Jun. 30, 09 Dec. 31, 08 Jun. 30, 09 Dec. 31, 08

Minority shareholders in: Banco Fomento, S.A. (Angola) 179 467 198 957 47 370 BPI Capital Finance Ltd 266 262 264 463 5 462 8 983 BPI Dealer - Sociedade financeira de Corretagem (Moçambique), S.A.R.L. 6 7 ( 1) BPI (Suisse), S.A. 445 735 463 427 52 831 8 983

Minority interest in BPI Capital Finance at June 30, 2009 and December 31, 2008 includes 266 027 t euro and 263 427 t. euro, respectively, relating to preference shares:

Jun. 30, 09 Dec. 31, 08 Issued Repurchased Balance Issued Repurchased Balance "C" Series Shares 250 000 ( 23 301) 226 699 250 000 ( 36 014) 213 986 "D" Series Shares 200 000 ( 174 147) 25 853 200 000 ( 165 779) 34 221 "E" Series Shares 100 000 ( 86 525) 13 475 100 000 ( 84 780) 15 220 550 000 ( 283 973) 266 027 550 000 ( 286 573) 263 427

The C, D and E series correspond to preference shares with a nominal value of 1 000 euros each, issued, respectively, in August 2003 (C series) and June 2005 (D and E series). The payment of dividends and redemption of the preference shares are guaranteed by Banco BPI.

The C Series preference shares entitle the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate plus a spread of 1.55 percentage points up to August 12, 2013 and thereafter to a non-cumulative preference dividend at a rate equal to the three month Euribor rate plus a spread of 2.55 percentage points. The dividends are payable quarterly on February 12, May 12, August 12 and November 12 of each year.

The D Series preference shares entitle the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate plus a spread of 0.075 percentage points over their nominal value. The dividends are payable quarterly on March 30, June 30, September 30 and December 30 of each year.

The E Series preference shares entitle the holders to a non-cumulative preference dividend, if and when declared by the Directors of BPI Capital Finance, Ltd., at an annual rate equal to the three month Euribor rate over their nominal value. The dividends are payable quarterly on March 30, June 30, September 30 and December 30 of each year.

BPI Capital Finance, Ltd. will not pay any dividend on the preference shares if, during the year or quarter in progress, such dividend plus amounts already paid exceed Banco BPI’s distributable funds.

The C Series preference shares are redeemable in whole or in part at their nominal value, at the option of BPI Capital Finance, Ltd. on any dividend payment date as from August 2013, subject to prior consent of the Bank of Portugal and Banco BPI. The C series preference shares are also redeemable in whole, but not in part, at the option of BPI Capital Finance, Ltd, with prior approval of the Bank of Portugal and Banco BPI, if a disqualifying capital event or tax event occurs.

The D and E Series preference shares are redeemable in whole, but not in part, at their nominal value, at the option of BPI Capital Finance, Ltd., on any dividend payment date as from June 30, 2010, subject to prior consent of the Bank of Portugal and Banco BPI. The D and E series preference shares are redeemable in whole, but not in part, at their nominal value, at any time prior to June 30, 2010 at the option of BPI Capital Finance, Ltd, subject to prior consent of the Bank of Portugal and Banco BPI, if a disqualifying capital event or tax event occurs.

These shares are subordinated to all liabilities of Banco BPI and "pari passu" with any other preference shares that might be issued by the Group in the future.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 197

4.33. Off balance sheet items

This caption is made up as follows:

Jun. 30, 09 Dec. 31, 08

Guarantees given and other contingent liabilities Guarantees and sureties 2 798 471 3 112 929 Stand-by letters of credit 28 399 27 875 Documentary credits 213 282 214 683 Sureties and indemnities 52 59 3 040 204 3 355 546 Assets given as collateral 3 700 770 1 794 271 Commitments to third parties Irrevocable commitments Options on assets 69 378 66 772 Forward operations - Sale of securities Irrevocable credit lines 45 128 58 833 Securities subscription 348 817 258 279 Term commitment to make annual contributions to the Deposit Guarantee Fund 37 917 37 472 Commitment to the Investor Indemnity System 8 763 10 513 Other irrevocable commitments 573 150 573 Revocable commitments 3 803 620 3 978 069 4 314 196 4 560 511 Responsability for services provided Custody and safekeeping 23 156 164 23 270 056 Amounts for collection 214 790 249 285 Assets managed by the institution 6 981 040 7 114 535 30 351 994 30 633 876

The caption “Assets given as collateral” at June 30, 2009 includes:

• 248 834 t. euro relating to captive credit and 3 406 435 t. euro relating to securities eligible for funding from the European Central Bank (ECB). • 4 691 t. euro relating to securities given in guarantee to the Securities Market Commission (Comissão do Mercado de Valores Mobiliários - CMVM) under the Investor Indemnity System (Sistema de Indemnização aos Investidores); • 40 467 t. euro relating to securities given in guarantee to the Deposit Guarantee Fund; and • 289 t. euro relating to securities given in guarantee to Foreign Stock Exchanges to set up the margin to carry out futures operations for its own portfolio.

The “Options on assets” caption at June 30, 2009 and December 31, 2008 corresponds to share options issued by the BPI Group under the share-based payments program (RVA).

The “Commitments to third parties - Securities subscription” caption at June 30, 2009 and December 31, 2008 corresponds to Banco BPI’s commitment to subscribe for commercial paper if the securities issued are not totally or partially subscribed for by the market.

The “Term commitment to make annual contribution to the Deposit Guarantee Fund” caption at June 30, 2009 and December 31, 2008 corresponds to BPI’s legally required irrevocable commitment, to pay to the Fund, upon request by it, the amount of the annual contributions not yet paid.

The “Commitment to the Investor Indemnity System” caption at June 30, 2009 and December 31, 2008 corresponds to BPI’s irrevocable commitment, legally required under the applicable legislation, to pay the System, if required to do so, its share of the amounts necessary to indemnify investors.

The “Other irrevocable commitments” caption at December, 31, 2008 includes a commitment to purchase shares amounting to 150 000 t. euro, as part of a corporate finance operation, for which the risk is fully covered.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 198

At June 30, 2009, there is a legal action against Banco BPI where it is requested that the Bank pays an amount regarding bonds which repayment the plaintiff believes that the Bank was responsible. Although it concerned a court case, whose decision by its nature cannot be predicted, it is the Bank's conviction, based on requested legal advice, that it will be acquitted of the application mentioned above.

At June 30, 2009 the BPI Group managed the following third party assets: Investment Funds and PPRs 1 993 919 Pension Funds 1 2 957 637 1 Includes the Group companies’ Pension Funds.

4.34. Financial margin (narrow sense)

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Interest and similar income Interest on deposits with banks 1 609 7 433 Interest on placements with credit institutions 18 563 21 691 Interest on loans to customers 530 552 712 778 Interest on credit in arrears 3 822 4 264 Interest on securities held for trading and available for sale 174 056 127 246 Interest on securitised assets not derecognised 72 706 72 415 Interest on derivatives 469 096 470 642 Interest on debtors and others aplications 4 838 360 Other interest and similar income 2 905 2 105 1 278 147 1 418 934 Interest and similar expense Interest on resources Of central banks 2 268 91 Of other credit institutions 28 086 69 811 Deposits and other resources from customers 335 566 340 082 Other resources Debt securities 114 597 132 902 Interest from short selling 5 1 740 Interest on derivatives 416 338 476 385 Interest on liabilities relating to assets not derecognised on securitised operations 54 631 65 180 Interest on subordinated debt 13 943 27 132 Other interest and similar expenses 1 024 762 966 458 1 114 085

4.35. Gross margin on unit links

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Income from financial instruments Interest 6 913 8 978 Gains and losses on financial instruments 11 079 ( 72 401) Interest on capitalisation insurance - unit links ( 18 010) 63 415 Management and redemption comission 1 532 4 184 1 514 4 176

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 199

4.36. Income from equity instruments

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Conduril 369 74 SIBS 920 732 Unicre 2 800 1 848 Others 594 576 4 683 3 230

4.37. Net commission relating to amortised cost

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Commission received relating to amortised cost Loans to customers 14 644 12 523 Others 1 030 1 075 Commission paid relating to amortised cost Loans to customers ( 3 846) ( 3 027) Others ( 390) ( 300) 11 438 10 271

4.38. Technical result of insurance contracts

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Premiums 154 375 170 121 Income from financial instruments 21 345 25 263 Cost of claims, net of reinsurance ( 505 660) ( 512 036) Changes in technical provisions, net of reinsurance 350 241 338 723 Participation in results ( 15 341) ( 16 677) 4 960 5 394

This caption includes the result of capitalisation insurance with a discretionary participation feature (IFRS 4). Participation in the results of capitalisation insurance is attributed at the end of each year and is calculated in accordance with the technical bases of each product, duly approved by the Portuguese Insurance Institute (Note 2.10).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 200

4.39. Net commission income

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Commissions received On guarantees provided 19 474 19 205 On commitments to third parties 1 217 454 On banking services rendered 105 791 113 394 On operations realised on behalf of third parties 7 276 10 491 Other 4 231 3 801 137 989 147 345 Commissions paid On guarantees received 58 59 On commitments to third parties 5 On financial instrument operations 113 203 On banking services rendered by third parties 18 447 16 779 On operations realised by third parties 1 693 1 984 Other 176 1 173 20 492 20 198 Other income, net Refund of expenses 16 237 14 263 Income from banking services 15 730 13 858 Charges similar to fees ( 4 354) ( 4 817) 27 613 23 304

4.40. Net income on financial operations

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Gain and loss on operations at fair value Foreign exchange gain, net 46 201 20 715 Gain and loss on financial assets held for trading Debt instruments 2 045 3 545 Equity instruments 59 659 ( 181 236) Other securities ( 8) ( 67) Gains and losses on trading derivative instruments ( 54 222) 191 861 Gain and loss on other financial assets valued at fair value through profit or loss 635 ( 398) Gain and loss on financial liabilities held for trading ( 1 537) ( 3 597) Gain and loss on revaluation of assets and liabilities hedged by derivatives 24 195 ( 42 218) Gain and loss on hedging derivative instruments ( 9 513) 49 191 Other gain and loss on financial operations 118 26 67 573 37 822 Gain and loss on assets available for sale Gain and loss on the sale of loans and advances to customers ( 1) ( 668) Gain on amortisation of liabilities 3 232 Gain and loss on financial assets available for sale Debt instruments 6 449 6 Equity instruments ( 939) ( 39 148) Others 303 125 5 812 ( 36 453) Interest and financial gain and loss with pensions (Note 4.26) Interest cost ( 63 279) ( 61 341) Expected fund income 60 797 96 001 ( 2 482) 34 660

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 201

The caption “Gain and loss on trading derivative instruments” during the first half of 2009 and 2008 includes (48 376) t. euro and 151 420 t. euro, respectively, relating to equity swaps contracted with Customers, which are hedged with shares classified in the caption “Financial assets held for trading” .

The “Gain on amortisation of liabilities” caption at June 30, 2008 refers to the settlement of a loan, remuneration of which was linked to the results of a private equity investment portfolio.

The “Gain and loss on equity instruments available for sale” caption at June 30, 2008 includes losses of 72 958 t. euro regarding the sale of Banco Comercial Português shares.

4.41. Net operating expenses

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Operating income Gain on the sale of investments in subsidiaries and associated companies 1 860 Gain on tangible assets held for sale 477 9 613 Gain on other tangible assets 17 561 9 618 Other operating income 10 984 3 314 29 022 24 405 Operating expenses Subscriptions and donations 1 650 1 288 Contributions to the Deposit Guarantee Fund 2 080 1 896 Loss on tangible assets held for sale 86 1 031 Loss on other tangible and intangible assets 5 862 663 Other operating expenses 1 313 2 019 10 991 6 897 Other taxes Indirect taxes 2 228 1 990 Direct taxes 449 554 2 677 2 544

The captions “Gain on other tangible assets” and “Loss on other tangible and intangible assets” at June 30, 2009 include 16 720 t. euro and 4 929 t. euro, respectively, related to contributions in kind (properties) to Banco BPI’s Pension Fund (Note 4.9).

The “Gain on the sale of investments in subsidiaries and associated companies” caption at June 30, 2008 includes amounts pending settlement with BCI Moçambique regarding settled loans that were fully or partly provided for in the merger process of the former Banco de Fomento Moçambique.

At June 30, 2008, the “Gain on tangible assets held for sale” and “Gain on other tangible assets” captions include 8 501 t. euro and 9 576 t. euro, respectively, realised on the sale of property to Banco BPI’s Pension Fund (Notes 4.9 and 4.13).

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 202

4.42. Personnel costs

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Remuneration 147 465 149 867 Long service premium (Note 2.7) 1 686 551 Pension costs (Note 4.26) 24 980 21 863 Early retirements (Note 4.26) ( 1 157) 1 467 Other mandatory social charges 22 992 23 587 Other personnel costs 4 904 4 516 200 870 201 851

The caption “Remuneration” at June 30, 2009 and 2008 includes the following costs relating to remuneration attributed to the members of Banco BPI’s Board of Directors: • 2 637 t. euro and 1 599 t. euro, respectively, relating to remuneration paid in cash; and • 79 t. euro and 54 t. euro, respectively, relating to the accrued cost of the share-based remuneration program (RVA) in accordance with IFRS 2.

At June 30, 2008, the caption “Long service premium” reflects the change in the actuarial assumptions made in that period (Note 4.26).

The caption “Pension Fund” at June 30, 2009 and 2008 includes 1 324 t. euro and 961 t. euro, respectively, relating to costs of the Defined Contribution Pension Plan for employees of Banco de Fomento Angola.

4.43. Administrative Costs

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

Administrative costs Supplies Water, energy and fuel 5 093 4 256 Consumable material 3 815 3 787 Other 954 883 Services Rent and leasing 24 050 21 052 Communications and computer costs 20 393 21 884 Travel, lodging and representation 5 008 4 956 Publicity 11 437 13 731 Maintenance and repair 8 913 8 873 Insurance 2 632 1 932 Fees 1 657 3 030 Legal expenses 890 1 073 Security and cleaning 4 529 3 944 Information services 1 919 1 829 Temporary labour 1 903 1 670 Studies, consultancy and auditing 4 598 4 330 SIBS 8 617 8 156 Other services 11 769 11 144 118 177 116 530

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 203

4.44. Income tax

Income tax recognised in the statements of income for the six months ended June 30, 2009 and 2008, as well as the tax burden, measured by the relationship between the tax charge and profit before tax, are as follows:

Jun. 30, 09 Jun. 30, 08

Current income tax For the year 12 542 22 523 Correction of prior years ( 957) ( 3 108) 11 585 19 415 Deferred tax Recognition and reversal of temporary differences ( 3 079) ( 7 362) Change in tax rate 86 11 On tax losses carried forward 795 ( 1 783) ( 2 198) ( 9 134) Total tax charged to the statement of income 9 387 10 281 Net income before income tax 1 145 036 17 980 Tax burden 6,5% 57,2% 1 Considering net income of the BPI Group plus income tax and minority interest less the earnings of associated companies (equity method).

In addition, in the first half of 2009 and 2008, Banco BPI recorded, directly in shareholders’ equity, income tax of (30) t. euro and (976) t. euro, respectively, on net loss on treasury shares recognised in equity (Note 4.31).

The reconciliation between the nominal rate of income tax and the tax burden for the first half of 2009 and 2008, as well as between the tax cost/income and the product of the accounting profit times the nominal tax rate are as follows: Jun. 30, 09 Jun. 30, 08 Tax rate A mount Tax rat e Amount

Net income before inc ome tax 145 036 17 980 Impact of BCP on the 1 st half 081 ( 184 608) Income before tax wit hout B CP 145 036 202 588

Income tax comp uted based on th e nomina l tax ra te 32,1% 46 553 29,3% 59 380

Effect of tax rates applicable to foreign branches 1,9% 2 811 2,2% 4 367 Income exempt from income tax (SFE's) 0,0% ( 66) 0,0% ( 47) Capital gains and impairment of inves tments (net) 0,2% 335 -2,7% ( 5 416) Capital gain of tangible asset s (net ) -3,7% ( 5 330) -2,0% ( 3 975) Interest on Angolan public debt -22,5% ( 32 576) -6,0% ( 12 211) Non taxable dividends -1,7% ( 2 503) -1,2% ( 2 386) Tax on dividends of subsidiary and as sociat ed companies 2,3% 3 332 0,3% 534 B anc o B PI Cayman net inc ome 0,0% ( 3) 0,7% 1 412 Conversion of ass ociat ed companies shareholders' equit y -0,1% ( 99) 0,1% 136 Tax benef it s -0,5% ( 783) -0,2% ( 499) Impairment of and provision for loans -0,5% ( 779) Non tax deductible pension costs 0,0% 17 0,1% 114 Interest recognised in minorit y interest -1,0% ( 1 452) -1,2% ( 2 388) Correction on tax losses from prior years -0,5% ( 701) -1,0% ( 2 107) Tax losses used -0,2% ( 302) -0 ,1% ( 214) Effect of change in the rate of deferred taxes 0,1% 86 0,0% 11 A uto no mous taxation 0,4% 591 0 ,2% 314 Other non taxable income and expenses 0,2% 256 0,2% 495 6,5% 9 38 7 18 ,5% 37 521 Impact of BCP on the 1 st half 081 ( 27 240) 6,5% 9 38 7 57 ,2% 10 281 1 Corresponds to losses regarding the sale of BCP shares during the first half of 2008 and to impairment recorded on shares held at June 30, 2008.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 204

Current taxes are calculated based on the nominal tax rates legally in force in the countries in which the Bank operates: Jun. 30, 09 Jun. 30, 08 Net income Net income Cu rr en t t ax Current tax be fore before rate ra te income tax income tax

Companies with income tax rate of 25% and Municipal 22 329 26,5% 44 774 26,5% Surcharge of 1.5% (except BCP)

Companies with income tax rate of 25% and Municipal 26 778 26,4% 89 558 26,4% Surcharge of 1.4% (except BCP) Companies with income tax rate of 35% (Angola) 95 929 35,0% 68 256 35,0% 145 036 32,1% 202 588 29,3% Impact of BCP on the 1 st half 08 ( 184 608) 145 036 17 980

Deferred tax assets and liabilities correspond to the amount of tax recoverable and payable in future periods resulting from temporary differences between the amount of assets and liabilities on the balance sheet and their tax base. Deferred tax assets are also recognised on tax losses carried forward and tax credits.

Profits distributed to Banco BPI by subsidiary and associated companies in Portugal are not taxed in Banco BPI as a result of applying the regime established in article 46 of the Corporate Income Tax Code, which eliminates double taxation of profits distributed.

Deferred tax assets and liabilities are calculated using the tax rates decreed for the periods in which they are expected to reverse.

Deferred tax assets and liabilities at June 30, 2009 and December 31, 2008 are as follows:

Jun. 30, 09 Dec. 31, 08

Deferred tax Assets (Note 4.12) 209 903 246 301 Liabilities (Note 4.22) ( 23 067) ( 24 746) 186 836 221 555 Recorded by corresponding entry to: Retained earnings 114 613 91 747 Fair value reserve (Note 4.30) 70 025 107 374 Financial instruments available for sale 70 025 107 374 Net income 2 198 22 434 186 836 221 555

Deferred tax assets are recognised up to the amount expected to be realised through future taxable profits.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 205

The changes in deferred taxes during the fisrt half of 2009 are as follows:

Corresponding entry to net Corresponding entry to reserves Balance at income and retained earnings Balance at Dec. 31, 08 Jun. 30, 09 Costs Income Increases Decreases

Defer red tax asse ts P ensio n liabilit y 38 792 ( 2 898) 78 35 97 2 E arly retiremen ts 33 521 ( 3 844) 42 29 71 9 A dvertising campaigns 2 960 ( 386) 2 574 "Taxa garantida" operations 338 ( 42) 296 Revaluation of assets and liabilities hedged by derivatives 207 ( 53) 154 B anco BPI Cayman net income 206 206 Taxed provisions and impairments 44 851 6 400 51 25 1 Long service premium 6 450 191 6 641 Tax losses 8 056 ( 1 076) 282 7 262 Financial instruments available for sale 109 958 515 662 ( 36 030) 75 105 Tax def erral of th e impa ct of t ransition t o NCA 935 ( 235) 70 0 Others 27 ( 6) 2 23 246 301 ( 8 540) 7 508 664 ( 36 030) 209 903 Defer red tax liabilities Reva luat ion of tangible fixed ass ets ( 4 006) 2 152 ( 1 85 4) "Taxa garant ida" operations ( 337) 42 ( 29 5) Revaluation of assets and liabilities hedged by derivatives Transition of subsidiaries and associated shareholders' equity ( 1 203) 98 ( 1 105) Dividends to be distributed by subsidiary and associated companies ( 6 681) ( 3 320) 5 876 8 394 ( 3 723) RVA's ( 6) ( 28) 2 28 ( 4) Loan impairment ( 5 089) ( 4 847) ( 9 93 6) Financial instruments available f or sale ( 6 908) ( 2 297) 5 686 182 ( 2 163) ( 5 50 0) Tax def erral of th e impa ct of t ransition t o NCA ( 226) 57 ( 16 9) Others ( 290) ( 191 ) ( 48 1) ( 24 746) ( 10 394) 13 624 218 ( 1 769) ( 23 06 7) 221 555 ( 18 934) 21 132 882 ( 37 799) 186 836

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 206

The changes in deferred taxes during the first half of 2008 are as follows:

Corresponding entry to net Corresponding entry to reserves Balance at income and retained earnings Balance at Dec. 31, 07 Jun. 30, 08 Costs Income I ncreases Decreases

Defer red tax assets P ension liabilit y 48 360 ( 6 742) 26 41 644 Early retirements 32 428 ( 3 322) 29 106 A dvertising campaigns 3 534 ( 122) 3 412 "Taxa garantida" operations 422 ( 42) 380 B anco BPI Cayman net income 206 206 Taxed provisions and impairments 21 370 6 073 27 443 Long service premium 6 555 ( 107) 2 6 450 Tax losses 1 783 1 783 Financial instruments available f or sale 21 525 ( 123) 8 165 163 ( 811) 28 919 Tax def erral of the impact of t ransition t o NCA 1 403 ( 234) 1 169 Others 24 ( 3) 5 26 135 827 ( 10 695) 16 049 168 ( 811) 140 538 Deferred tax liabilities Revaluat ion of tangible fixed ass ets ( 4 108) 154 ( 3 954) "Taxa garantida" operations ( 421) 42 ( 379) Revaluat ion of assets and liabilities hedged by derivatives ( 2 323) 130 ( 2 193) Transit ion of subsidiaries and ass ociat ed shareholders' equity ( 1 113) ( 31) ( 1 144) Dividends to be distributed by subsidiary and associated companies ( 482) ( 175) 1 ( 656) RVA's ( 8) ( 785) 4 784 ( 5) Loan impairment ( 10 280) 7 219 ( 3 061) Financial instruments available f or sale ( 35 058) ( 2 665) 1 26 612 ( 44) ( 11 154) Tax def erral of the impact of t ransition t o NCA ( 339) 57 ( 282) Others ( 119) ( 198) 27 191 ( 256) ( 355) ( 54 251) ( 3 854) 7 634 27 588 ( 300) ( 23 183) 81 576 ( 14 549) 23 683 27 756 ( 1 111) 117 355

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 207

The BPI Group does not recognise deferred tax assets and liabilities on temporary taxable differences relating to investments in subsidiary and associated companies as it is improbable that such differences will revert in the foreseeable future, except as follows: • deferred tax liabilities relating to estimated dividends that Banco de Fomento Angola is expected to pay to the BPI Group companies next year out of profit for the year, are recognized; • deferred tax liabilities relating to all the distributable net income (including the undistributed part) of Banco Comercial e de Investimentos are recognized.

4.45. Earnings of associated companies (equity method)

This caption is made up as follows:

Jun. 30, 09 Jun. 30, 08

B anc o Comercial e de Investimentos, S. A.R.L. 2 686 2 065 Companhia de Seguros Allianz Portugal, S.A. 3 585 6 732 Cosec – Companhia de Seguros de Crédito, S.A. ( 178) 458 F. Turis mo – Capit al de Risco, S. A. 86 27 Finangeste – Empresa Financeira de G estão e Desenvolvimento, S .A . ( 308) 573 V iacer - S ociedade G estora de P articipações Sociais, Lda 320 510 6 191 10 365

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 208

4.46. Consolidated net income of the BPI Group

The contribution of Banco BPI and subsidiary and associated companies to consolidated net income for the first half of 2009 and 2008 is as follows:

Jun. 30, 09 Jun. 30, 08

Banks Banco BPI, S.A.1 24 676 ( 745) Banco Português de Investimento, S.A.1 2 527 8 735 Banco de Fomento S.A. (Angola)1 44 469 56 577 Banco Comercial e de Investimentos, S.A.R.L.1 2 458 1 889 Banco BPI Cayman, Ltd 3 229 ( 5 354) Specialised credit BPI Locação de Equipamentos, Lda 354 238 BPI Rent - Comércio e Aluguer de Bens, Lda.1 936 512 Eurolocação - Comércio e Aluguer de Veículos e Equipamentos, S.A. 0 5 Asset management and brokerage BPI Dealer - Sociedade Financeira de Corretagem (Moçambique), S.A.R.L. ( 6) 2 BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliários, 3 637 8 780 S.A. BPI - Global Investment Fund Management Company, S.A. 367 744 BPI Pensões - Sociedade Gestora de Fundos de Pensões, S.A. 1 214 1 291 BPI (Suisse), S.A.1 ( 331) 163 Venture capital / development F. Turismo - Capital de Risco, S.A. 86 27 Inter-Risco - Sociedade de Capital de Risco, S.A.1 ( 1 048) ( 160) Insurance BPI Vida - Companhia de Seguros de Vida, S.A. 3 124 ( 72 248) Cosec - Companhia de Seguros de Crédito, S.A. ( 178) 458 Companhia de Seguros Allianz Portugal, S.A. 3 585 6 732 Others BPI, Inc1 ( 67) 13 BPI Madeira, SGPS, Unipessoal, S.A.1 15 53 BPI Capital Finance 0 0 Douro SGPS, S.A.1 ( 39) 122 Finangeste - Empresa Financeira de Gestão e Desenvolvimento, S.A.1 ( 308) 573 Simofer - Sociedade de Empreendimentos Imobiliários e Construção Civil, Lda ( 15) ( 18) Ulissipair ACE 4 182 Viacer - Sociedade Gestora de Participações Sociais, Lda 320 510

89 009 9 081 1Adjusted net income.

4.47. Personnel

The number of employees (1) in the first half of 2009 and 2008, on average and at the end of the period were as follows:

Jun. 30, 09 Jun. 30, 08

Average End of Average End of for the period period for the period period Executive directors2 12 12 13 12 Management staff 584 581 580 584 Other staff 4 540 4 508 4 402 4 564 Other employees 4 295 4 316 4 411 4 288 9 431 9 417 9 406 9 448 1 Personnel of Group’s entities that were consolidated by Full Consolidation. This includes the personnel of branches of Banco BPI abroad. 2 This includes the executive directors of Banco BPI and BPI Investments.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 209

4.48. Financial risks

Fair value

The fair value of financial instruments at June 30, 2009 is made up as follows:

Assets and liabilities valued at fair value Assets valued at historical Method used to determine fair value cost1 Valuation techniques Total book value Net book Active market Total Book value Type of financial instrument Market data3 Models Difference value listings2 fair value

Assets Cash and deposits at Central Banks4 1 549 467 1 549 467 1 549 467 1 549 467 Deposits in other credit institutions4 622 104 622 104 622 104 622 104 Financial assets held for trading and at fair value through profit or loss5 1 669 612 650 316 316 376 702 920 1 669 612 1 669 612 Financial assets available for sale5 4 737 075 4 334 708 402 367 4 737 075 1 042 783 5 779 858 Loans and advances to credit institutions 2 315 640 2 316 482 2 316 482 842 2 315 640 Loans and advances to customers 29 023 449 28 923 568 28 923 568 ( 99 881) 29 023 449 Held to maturity investments 698 676 679 039 679 039 ( 19 637) 698 676 Hedging derivatives 287 577 227 112 60 465 287 577 287 577 40 903 600 4 985 024 543 488 35 256 412 40 784 924 ( 118 676) 1 042 783 41 946 383 Liabilities Resources at central banks 1 505 251 1 505 207 1 505 207 44 1 505 251 Financial liabilities held for trading 383 412 711 216 181 166 520 383 412 383 412 Resources of other credit institutions 2 107 796 2 112 020 2 112 020 ( 4 224) 2 107 796 Resources of customers and other debts 24 642 794 24 510 953 24 666 379 ( 23 585) 24 642 794 Debt securities 7 093 325 6 933 059 6 934 974 158 351 7 093 325 Financial liabilities relating to transferred assets 1 887 496 1 899 119 1 899 119 ( 11 623) 1 887 496 Hedging derivatives 327 591 248 105 79 486 327 591 327 591 Technical provisions 1 911 392 1 911 392 1 911 392 1 911 392 Subordinated debt 702 011 677 134 675 306 26 705 702 011 Participating bonds 29 447 27 664 27 664 1 783 29 447 40 590 515 711 464 286 39 822 554 40 443 064 147 451 40 590 515 313 085 341 860 28 775 1 042 783 1 355 868

Valuation differences in financial assets recognised in revaluation reserves ( 336 442)

Total ( 307 667) 1 Unlisted securities for which it was not possible to determine fair value on a reliable basis. 2 This category includes, in addition to financial instruments listed on stock exchanges, securities valued based on prices in active markets disclosed through negotiation platforms. 3 Valuation based on market rates (swap curves). 4 Fair value corresponds to the book value. 5 The securities included in the category "Valuation techniques - models" correspond to securities valued based on indicative Bids and models developed in-house.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 210

The fair value of financial instruments at December 31, 2008 is made up as follows:

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 211

Assets and liabilities valued at fair value Assets valued at historical Method used to determine fair value cost1 Valuation techniques

Net book Active market Total Book value Type of financial instrument Market data3 Models Difference value listings2 fair value Assets Cash and deposits at Central Banks4 1 088 339 1 088 339 1 088 339 Deposits in other credit institutions4 227 081 227 081 227 081 Financial assets held for trading and at fair value through profit or loss5 2 853 579 663 711 260 207 1 929 661 2 853 579 Financial assets available for sale5 2 720 631 2 355 050 365 581 2 720 631 541 972 Loans and advances to credit institutions 3 504 198 3 516 195 3 516 195 11 997 Loans and advances to customers 29 275 182 29 213 276 29 213 276 ( 61 906) Held to maturity investments 407 654 376 627 376 627 ( 31 027) Hedging derivatives 484 428 279 028 205 400 484 428 40 561 092 3 018 761 539 235 36 922 160 40 480 156 ( 80 936) 541 972 Liabilities Financial liabilities held for trading 258 452 1 796 219 892 36 764 258 452 Resources of other credit institutions 2 007 412 2 026 170 2 026 170 ( 18 758) Resources of customers and other debts 25 633 620 25 673 004 25 673 004 ( 39 384) Debt securities 6 417 808 6 337 030 6 337 030 80 778 Financial liabilities relating to transferred assets 2 070 779 2 088 263 2 088 263 ( 17 484) Hedging derivatives 596 537 344 318 252 219 596 537 Technical provisions 2 246 427 2 246 427 2 246 427 Subordinated debt 767 628 717 080 717 080 50 548 Participating bonds 28 682 27 956 27 956 726 40 027 345 1 796 564 210 39 404 913 39 970 919 56 426 533 747 509 237 ( 24 510) 541 972

Valuation differences in financial assets recognised in revaluation reserves ( 541 029)

Total ( 565 539) 1 Unlisted securities for which it was not possible to determine fair value on a reliable basis. 2 This category includes, in addition to financial instruments listed on stock exchanges, securities valued based on prices inactive markets disclosed through negotiation platforms. 3 Valuation based on market rates (swap curves). 4 Fair value corresponds to the book value. 5 The securities included in the category "Valuation techniques - models" correspond to securities valued based on indicative Bids and models developed in-house.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 212

Whenever possible, the BPI Group has estimated fair value using prices on active markets (a market is active and therefore liquid when it is accessed by equally informed counterparties and regular transactions are made) or valuation techniques based on market data for instruments with similar characteristics to the financial instruments held by the Group. However, in certain situations, including loans to customers, resources of customers and debt securities, there is no active market in Portugal, with transactions between equally knowledgeable and willing parties. For these cases, the Group has developed internal valuation techniques to estimate the possible fair value of the financial instruments. The valuation techniques used involve certain assumptions that may not necessarily be the same for different institutions.

For captions which are not recorded at fair value, value was determined based on market conditions applicable to similar operations, at the reference date of the financial statements namely:

• in interbank operations, market interest and swap rates were used; • in operations with Customers, interest rates on the date of the financial statements for operations of the same term were used. Book value was used when this was considered to be the most reasonable estimate of fair value.

The unrealised gain/loss on financial instruments recognised based on valuation techniques at June 30, 2009, was as follows:

Type of financial instrument Net income on Shareholder's financial operations equity1

Assets Financial assets held for trading and at fair value through profit or loss2 ( 6 760) Financial assets available for sale 10 869 5 820 Loans and advances to credit institutions ( 381) Loans and advances to customers 1 706 Hedging derivatives ( 9 513) ( 4 079) 5 820 Liabilities Resources of other credit institutions 2 578 Resources of customers and other debts 9 500 Debt securities ( 3 894) Financial liabilities relating to transferred assets 3 597 Participating bonds 1 Subordinated debt 219 12 001 7 922 5 820 1 Change in relation to December 31, 2008. 2 Includes the net value of assets and liabilities relating to derivatives. During the first half of 2009, unrealised losses of 3 919 t. euro on equity swaps hedged through shares negotiated in organised markets were recognised, and therefore the corresponding unrealised gain is not included on this table.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 213

The unrealised gain/loss on financial instruments recognised based on valuation techniques at June 30, 2008, was as follows:

Type of financial instrument Net income on Shareholder's financial operations equity1

Assets Financial assets held for trading and at fair value through profit or loss2 43 540 Financial assets available for sale ( 39 846) ( 5 374) Loans and advances to credit institutions 27 Loans and advances to customers ( 6 850) Hedging derivatives 49 192 46 063 ( 5 374) Liabilities Resources of other credit institutions 449 Resources of customers and other debts 7 773 Debt securities ( 3 403) Financial liabilities relating to transferred assets ( 407) Participating bonds 6 Subordinated debt 33 4 451 50 514 ( 5 374) 1 Change in relation to December 31, 2007 2 Includes the net value of assets and liabilities relating to derivatives. During the first half of 2008, unrealised gain of 75 292 t. euro on equity swaps hedged by shares negotiated in organised markets was recognised, and therefore the corresponding unrealised loss is not included on this table.

The unrealized gains and losses recognized in net income on financial operations from financial assets available for sale and from financial instruments recorded at amortized cost (loans to customers, resources of customers, debt securities and subordinated debt) refer to changes in fair value attributable to the hedged risk under hedge accounting (Note 2.2.7).

Derecognition of financial instruments

During the first half of 2009 and in 2008 no financial instruments for which it was not possible to reliably determine fair value were derecognised, and so the impact on net income is nil.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 214

Reclassification of financial assets

As a result of the amendments to IAS 39 in October 2008 (Note 2.2), the BPI Group reclassified bonds, from Financial assets held for trading to Financial assets available for sale (Note 4.5), Loans and advances to customers (Note 4.7) and Held to maturity investments (Note 4.8), as follows: Jun. 30, 09 Dec. 31, 08 Effective Book value on Book value on interest rate on Book value at Fair value at Book value at Fair value at reclassification reclassification reclassification Jun. 30, 09 Jun. 30, 09 Dec. 31, 08 Dec. 31, 08 date date date

Reclassification of bonds in 2008

Financial assets held for trading ( 474 768) ( 502 877)

Financial assets available for sale 43 571 37 113 37 113 43 571 40 657 40 657 5,81%

Loans represented by securities 54 512 54 877 39 499 54 737 55 011 41 637 6,37%

Held to maturity investments 376 685 379 998 359 538 404 569 407 654 380 347 6,29%

Reclassification of bonds in 1st half 2009

Financial assets held for trading ( 82 172) n.a. n.a. n.a.

Loans represented by securities 3 881 3 978 3 782 n.a. n.a. n.a. 5,3%

Held to maturity investments 78 291 79 275 79 594 n.a. n.a. n.a. 6,0%

555 241 519 525 503 322 462 641

In the context of lack of liquidity in the bond market, the valuation prices that can be obtained for these securities do not reflect the prices of an active market with transactions on a regular basis. Therefore, BPI Group decided to reclassify these bonds to financial assets available for sale, loans and advances to customers and held to maturity investments. To determine the fair value of the financial assets available for sale, alternative valuation methods were used as described on Note 2.2 – Financial assets and liabilities.

The gains / (losses) relating to fair value changes of these securities recognized in the statements of income during the first half of 2009 and in 2008 were as follows:

Gains/ (losses) associated with fair value changes up to the reclassification date Jun. 30, 09 Dec. 31, 08

Reclassification of bonds in 2008

Financial assets available for sale n.a. 47

Loans represented by securities n.a. ( 1 935)

Held to maturity investments n.a. ( 7 001)

Reclassification of bonds in 1st half 2009

Loans represented by securities ( 345) ( 1 316)

Held to maturity investments ( 804) ( 7 406)

( 1 149) ( 8 889)

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 215

After the reclassification date, gains / (losses) relating to fair value changes of these securities not recognized in the statements of income and the other gains / (losses) recognized in reserves and in the statements of income, were as follows: Jun. 30, 09 31 Dez. 081

Gains/ (losses) Other gains / (losses) Gains/ (losses) Other gains / (losses) associated with recognized in: associated with recognized in: fair value fair value changes not changes not recognized in recognized in Statements of Statements the statements Reserves the statements Reserves of income income of income of income

Financial assets available for sale ( 1 886) ( 1 886) 821 ( 2 983) ( 2 983) 833

Loans represented by securities ( 2 324) 1 428 ( 13 374) 350

Held to maturity investments 6 995 10 020 ( 27 307) 4 757

2 785 ( 1 886) 12 269 ( 43 664) ( 2 983) 5 941

1 Corresponds to the 2nd half of 2008 as the reclassification of securities was made from July 1, 2008.

The amounts of Gains / (losses) relating to fair value changes not recognized in the statements of income correspond to gains / (losses) that would affect net income if the bonds remained in the “Financial assets held for trading” portfolio.

The amounts presented in other gains / (losses) recognized in net income include interest, premiums / discounts and other expenses. The amounts presented in other gains / (losses) recognized in reserves correspond to the fair value changes of financial assets available for sale after the reclassification date.

For purposes of determining the effective interest rate of the reclassified assets, at the reclassification date the BPI Group estimated that it would recover all future cash flows relating to the reclassified securities.

Financial instrument risks

The BPI Group assesses and controls risk in accordance with best practices and in compliance with the prudential rules and regulations, following the precepts, definitions and valuation methods recommended by the Basel Banking Supervision Committee in its three pillars.

The Directors’ Report, presented together with the notes to Banco BPI’s financial statements, includes also a section relating to “Risk management”, which contains additional information about the nature and extent of the BPI Group’s financial risks.

Credit risk

Maximum exposure to credit risk

Credit risk is one of the most significant risks of the BPI Group’s operations. More information about this risk, particularly about the management process for the various segments of credit, can be found in the section “Risk Management” in the Directors’ Report.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 216

Maximum exposure to credit risk at June 30, 2009, by type of financial instrument, is as follows: Type Gross Net of financial book Impairment book instrument value value Balance sheet items Loans and advances to credit institutions 622 104 622 104 Financial assets held for trading and at fair value through profit or loss 1 177 897 1 177 897 Financial assets available for sale 5 834 528 ( 54 670) 5 779 858 Loans and advances to credit institutions 2 317 098 ( 1 458) 2 315 640 Loans and advances to customers 29 489 771 ( 466 322) 29 023 449 Held to maturity investments 698 676 698 676 Derivatives Hedging derivatives 287 577 287 577 Trading derivatives 491 715 491 715 40 919 366 ( 522 450) 40 396 916 Off balance sheet items Guarantees given 2 798 471 ( 29 845) 2 768 626 Irrevocable credit lines 45 128 ( 481) 44 647 2 843 599 ( 30 326) 2 813 273 43 762 965 ( 552 776) 43 210 189

Maximum exposure to credit risk at December 31, 2008, by type of financial instrument, is as follows: Type Gross Net of financial book Impairment book instrument value value Balance sheet items Loans and advances to credit institutions 227 081 227 081 Financial assets held for trading and at fair value through profit or loss 2 535 728 2 535 728 Financial assets available for sale 3 347 884 ( 85 281) 3 262 603 Loans and advances to credit institutions 3 504 212 ( 14) 3 504 198 Loans and advances to customers 29 723 757 ( 448 575) 29 275 182 Held to maturity investments 407 654 407 654 Derivatives Hedging derivatives 484 428 484 428 Trading derivatives 317 851 317 851 40 548 595 ( 533 870) 40 014 725 Off balance sheet items Guarantees given 3 112 929 ( 33 811) 3 079 118 Irrevocable credit lines 58 833 ( 639) 58 194 3 171 762 ( 34 450) 3 137 312 43 720 357 ( 568 320) 43 152 037

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 217

Breakdown of overdue loans

Overdue loans and interest at June 30, 2009, by non performing classes, are as follows: Non performing classes from 3 up to 1 from 1 to 3 from 1 to 5 more than 5 months to 1 Total month months years years year Aplications in Credit Institutions Subject to individual assessment Overdue loans and interest 3 581 3 581 Impairment ( 972) ( 972) 2 609 2 609 Loans and advances to customers Subject to individual assessment Overdue loans and interest 587 26 811 142 283 40 035 9 247 218 963 Impairment ( 59) ( 5 014) ( 63 285) ( 27 893) ( 6 595) ( 102 846) 528 21 797 78 998 12 142 2 652 116 117 Subject to collective assessment Overdue loans and interest 958 19 223 91 085 204 903 27 058 343 227 Impairment ( 102) ( 3 261) ( 28 623) ( 77 222) ( 9 616) ( 118 824) 856 15 962 62 462 127 681 17 442 224 403

In addition, at June 30, 2009 collective impairment of 245 138 t. euro was recognised on performing loans.

Overdue loans and interest at December 31, 2008, by non performing classes, are as follows: Non performing classes from 3 up to 1 from 1 to 3 from 1 to 5 more than 5 months to 1 Total month months years years year Loans and advances to customers Subject to individual assessment Overdue loans and interest 71 713 7 055 42 638 35 659 8 744 165 809 Impairment ( 21 433) ( 2 057) ( 25 558) ( 24 034) ( 6 304) ( 79 386) 50 280 4 998 17 080 11 625 2 440 86 423 Subject to collective assessment Overdue loans and interest 413 23 906 64 338 181 435 24 916 295 008 Impairment ( 48) ( 3 814) ( 21 655) ( 72 426) ( 9 210) ( 107 153) 365 20 092 42 683 109 009 15 706 187 855

In addition, at December 31, 2008 collective impairment of 262 036 t. euro was recognised on performing loans.

Collateral

Banco BPI receives, among others, the following collateral in its loan granting business: • Housing mortgages; • Mortgage of buildings and land; • Deposit of assets; • Pledge of securities; • Guarantees provided by other credit institutions.

The fair value of collateral received is determined based on market value considering its nature. For example, property received in guarantee is valued by external appraisers or by Banco BPI’s units using methods considered appropriate.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 218

The coverage of overdue loans by collateral received at June 30, 2009 is as follows:

Coverage Loans with default Collateral 1 Impairment 3 Performing amount Overdue Total Mortgages Other collateral associated with defaulting 2 loans >=100% 282 040 261 835 543 875 520 561 23 174 109 456 >=75% and <100% 72 563 35 852 108 415 92 391 10 918 23 036 >=50% and <75% 2 550 4 289 6 839 2 864 1 582 2 370 >=25% and <50% 3 188 2 251 5 439 1 229 794 1 273 >=0 and <25% 933 10 427 11 360 50 1 645 4 638 Without collateral 47 631 247 536 295 167 140 386

Total 408 905 562 190 971 095 617 095 38 113 281 159 1 The value of collateral presented is the lower of the fair value of the collateral received and the amount owed at June 30, 2009. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. The amount of impairment shown includes 59 490 t. euro relating to performing loans associated with overdue loans.

The coverage of performing loans on which impairment was determined on an individual basis at June 30, 2009 is as follows:

Loans with impairment Collateral1 Impairment 3

Performing Mortgages Other collateral2 Coverage loans

Loans not represented by securities >=100% 104 664 89 465 15 199 15 057 >=75% and <100% 1 831 657 852 730 >=50% and <75% >=25% and <50% 225 56 23 >=0 and <25% 5 500 161 221 209 Without collateral 84 647 23 649 196 867 90 339 16 272 39 668 Loans represented by securities Without collateral 26 302 23 406

Guarantees provided >=100% 4 242 563 3 679 1 293 >=75% and <100% >=50% and <75% 2 482 150 1 098 576 >=25% and <50% Without collateral 47 965 11 721 54 689 713 4 777 13 590

277 858 91 052 21 049 76 664 1 The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at June 30, 2009. 2 Other collateral includes pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 219

The coverage of overdue loans by collateral received at December 31, 2008 is as follows:

Coverage Loans wit h default Collateral1 Impairment3 Performing O verdue Total Mort gages Ot he r c ollate ra l 2 amount associated with defaulting loans

>=100% 259 957 226 670 486 627 469 764 16 863 103 974 >=75% and <100% 67 501 25 427 92 928 81 924 7 171 20 415 >=50% and <75% 2 224 2 767 4 991 2 105 1 134 1 493 >=25% and <50% 1 491 1 465 2 956 764 327 1 002 >=0 and <25% 1 127 706 1 833 74 128 751 Without collateral 28 117 203 782 231 899 113 016

Total 360 417 460 817 821 234 554 631 25 623 240 651 1 The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at December 31, 2008. 2 Other collateral include pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value. Impaiment presented includes 54 112 t. euro relating to performing loans associated with overdue loans.

The coverage of performing loans on which impairment was determined on an individual basis at December 31, 2008 is as follows:

Loans with impairment Collateral1 Impairment 3

Performing Mortgages Other collateral2 Coverage loans

Loans not represented by securities >=100% 56 355 47 514 8 841 23 062 >=75% and <100% 1 539 1 301 1 261 >=50% and <75% 2 761 482 1 416 746 >=25% and <50% 15 363 5 673 15 822 >=0 and <25% 11 458 161 1 729 3 191 Without collateral 73 108 24 736 160 584 55 131 11 986 68 818 Loans represented by securities Without collateral 22 877 22 877

Guarantees provided >=100% 3 082 387 2 695 1 207 >=75% and <100% 4 3 2 >=50% and <75% 1 614 415 651 603 >=25% and <50% 2 633 985 3 174 Without collateral 40 370 12 245 47 703 1 787 3 349 17 231

231 164 56 918 15 335 108 926 1 The value of collateral shown is the lower of the fair value of the collateral received and the amount owed at December 31, 2008. 2 Other collateral include pledged deposits and securities. 3 For purposes of determining impairment, pledged property is valued at the amount in the event of execution, which is less than market value.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 220

Credit risk quality (rating)

This section presents information concerning the quality of the credit risk of the BPI Group’s main financial assets, excluding derivatives which are analysed in detail in Note 4.4. In the case of financial assets with ratings assigned by the international rating agencies (Moody, Standard & Poor and Fitch) the rules set in the prudential regulations issued by the Bank of Portugal were followed, selecting the second best in the case of different external ratings for the same instrument. When no specific external ratings were found, Banco BPI used external ratings assigned by the issuer of instruments with the same degree of subordination. In the case of local authorities, banks and some other similar institutions, the ratings used are based on the external ratings assigned to the State where the entity has its headquarters. In the specific case of the central banks in the Euro zone the rating is AAA. External rating is an important element to consider in the management of positions, especially in security portfolios, and is also used for calculating weights used to determine prudential capital by the standard method, in accordance with the regulations issued by the Bank of Portugal.

Loan exposures without external ratings were distributed by rating classes (for company exposure), by quality levels (for project finance) or by scorings (for private customer exposure). External and internal ratings, where they exist, are an indicator of increasing importance to the BPI Group’s internal management of loans, being used by the teams responsible for monitoring customers in order to inform the decisions regarding new loans or the situation of existing exposure. This internal classification does not include all the Group’s exposure. It excludes sovereign exposures or exposure to other banks, in which case external ratings are used, loans granted locally by Banco de Fomento de Angola which uses its own methodologies, as well as loans granted to entrepreneurs and the business segment.

Actual internal ratings and scorings include ten classes for regular operations, from E 01/01 (less probability of default) to E 10/10 (more probability of default); two classes (ED 1/D 01 and ED 2/D 02) for “incidents” (delays in payment of less than 60 and 90 days, respectively) and finally one class for default (ED 3/D 03), when delay in payment of a given amount by a counterparty exceeds 90 days.

Project finance operations have a separate internal classification from other loan operations due to their specific nature, so that at any moment the quality of the credit risk can be determined.

Deposits and loans and advances to credit institutions, by ratings, at June 30, 2009 are as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure Deposits, loans and advances to credit AAA to AA- 2 439 684 2 439 684 institutions A+ to A- 216 241 216 241 External BBB+ to BBB- 129 318 1 456 127 862 rating BB+ to BB- 2 147 2 147 B+ to B- 2 644 2 644 N/D N/D 19 983 2 19 981 2 810 017 1 458 2 808 559 Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 221

Loans to costumers, by ratings, at June 30, 2009 are as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure Loans to costumers AAA to AA- 1 109 868 36 1 109 832 A+ to A- 243 320 2 508 240 812 External BBB+ to BBB- 272 581 1 205 271 376 rating BB+ to BB- 13 578 13 578 B+ to B- 2 048 2 048 < B- 2 358 1 711 647 Strong 377 542 377 542 Project Good 1 051 123 1 051 123 Finance rating Satisfactory 9 639 9 639 Weak 7 546 7 546 E01 to E03 2 204 371 3 381 2 200 990 Internal E04 to E06 2 470 967 4 920 2 466 047 rating E07 to E10 1 914 414 11 635 1 902 779 ED1 to ED3 444 518 123 553 320 965 01 to 03 6 985 845 10 877 6 974 968 04 to 06 3 049 628 8 420 3 041 208 Scoring 07 to 10 1 095 523 7 508 1 088 015 D01 to D03 780 483 92 742 687 741 N/D 7 353 802 197 826 7 155 976

29 389 154 466 322 28 922 832 Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.

The Securities portfolio, by ratings, at June 30, 2009 is as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure AAA to AA- 2 742 780 2 742 780 Securities A+ to A- 1 746 177 1 746 177 External BBB+ to BBB- 1 278 592 1 278 592 rating BB+ to BB- 111 291 111 291 B+ to B- 9 550 9 550 < B- 35 483 1 077 34 406 N/D N/D 1 787 228 53 593 1 733 635

7 711 101 54 670 7 656 431

Deposits and loans and advances to credit institutions, by ratings, at December 31, 2008 are as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure Deposits, loans and advances to credit AAA to AA- 3 288 401 3 288 401 institutions A+ to A- 75 017 75 017 External BBB+ to BBB- 90 216 90 216 rating BB+ to BB- 8 324 8 324 B+ to B- 2 685 2 685 N/D N/D 70 265 14 70 251 3 534 908 14 3 534 894 Note: Gross exposure corresponds to the nominal value adjusted for corrections of value and does not include cheques for collection.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 222

Loans to customers, by ratings, at December 31, 2008 are as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure Loans to costumers AAA to AA- 1 325 430 58 1 325 372 A+ to A- 103 425 2 522 100 903 External BBB+ to BBB- 108 718 27 108 691 rating BB+ to BB- 15 526 15 526 B+ to B- 2 271 2 271 < B- 1 305 1 305 Strong 392 266 392 266 Project Good 1 075 716 1 075 716 Finance rating Satisfactory 9 659 9 659 Weak 7 546 7 546 E01 to E03 4 482 930 8 879 4 474 051 Internal E04 to E06 2 162 208 5 411 2 156 797 rating E07 to E10 1 595 236 38 396 1 556 840 ED1 to ED3 639 627 106 825 532 802 01 to 03 6 816 823 10 412 6 806 411 04 to 06 2 933 737 7 773 2 925 964 Scoring 07 to 10 1 118 274 6 250 1 112 024 D01 to D03 761 243 89 350 671 893 N/D N/D 6 020 016 171 367 5 848 649 29 571 956 448 575 29 123 381

Note: Gross exposure corresponds to the nominal value adjusted for corrections of value.

The Securities portfolio, by ratings, at December 31, 2008 is as follows:

Type of financial instrument Origin Rating Grade Class Gross exposure Impairment Net exposure AAA to AA- 1 324 142 1 324 142 Securities A+ to A- 1 085 003 1 085 003 External BBB+ to BBB- 1 191 619 1 191 619 rating BB+ to BB- 110 949 110 949 B+ to B- 2 999 2 999 < B- 2 929 1 077 1 852 N/D N/D 2 573 626 84 205 2 489 421 6 291 267 85 282 6 205 985

Restructured loans

Operations for which the conditions were renegotiated due to credit risk deterioration (being or not in default), after increase in the guarantees or full payment of overdue interest and other expenses, for which impairment has not been recognised by individual assessment, have been considered as restructured credit operations in the consolidated financial statements of Banco BPI. Renegotiated loan operations with impairment by individual assessment are not presented in this section.

The following restructured loan operations, without impairment by individual assessment, at June 30, 2009 and December 31, 2008 have been identified:

Jun. 30, 09 Dec. 31, 08 Loans Collective Loans Collective Performing Overdue Total Impairment Performing Overdue Total Impairment Companies 77 130 2 486 79 616 1 944 84 767 1 994 86 761 1 823 Loans to ind ivid uals Housing 3 1 589 12 6 06 44 195 6 377 21 4 76 9 262 3 0 738 5 62 6 Ot her loans 1 1 555 1 9 09 13 464 2 040 10 9 89 1 378 1 2 367 1 74 1 12 0 274 17 0 01 137 275 10 361 117 2 32 12 634 12 9 866 9 19 0

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 223

Liquidity risk

The schedules presented below were prepared based on the requirements of IFRS 7 relating to Liquidity Risk, considering the total contractual undiscounted cash-flows expected to be paid or received in the periods relating to outstanding transactions on the reference dates.

The main assumptions used in preparing the tables below were: • in the case of interest depending on market indices or other references which are only identifiable in a future date (eg. interest based on the Euribor) assumptions were made regarding the future value of such references, based on the last known value; • defaults and early repayment are not considered (except for perpetual debt instruments); • shares and overdue loans are included (by their book value) as "undetermined"; • demand deposits (including interest) and the bills and coins on hand are considered as "on demand"; • trading portfolio operations and all derivatives are considered in these schedules by their projected or estimated cash flows, on the contractual dates, and not by the market values that would be obtained by their possible sale in the short term.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 224

The contractual undiscounted cash flows of financial assets and liabilities at June 30, 2009 were as follows:

from 3 months to more than 5 on demand up to 3 months from 1 to 5 years undetermined Total 1 year years Assets Cash and deposits at Central Banks 1 549 036 1 549 036 Loans and advances to other credit institutions 494 811 127 281 622 092 Financial assets held for trading and at fair value through profit or loss 1 680 071 2 520 765 7 710 175 5 028 920 424 038 16 363 969 Financial assets available for sale 45 388 424 927 3 381 185 1 820 629 162 398 5 834 528 Held to maturity investments 18527 251 045 398 774 30 330 698 676 Loans and advances to credit institutions 1 929 572 191 402 181 600 9 043 3 581 2 315 199 Loans and advances to customers 5 330 351 2 556 945 8 154 117 12 763 675 562 191 29 367 279 Hedging derivatives1 546 416 1 516 154 3 901 577 4 822 896 10 787 043

Contractual interest cash flows 443 528 928 1 094 574 3 814 377 4 710 509 10 148 831 2 044 290 9 206 533 8 555 813 27 541 806 29 186 003 1 152 209 77 686 653 Liabilities Resources of central banks 5 000 1 500 000 1 505 000 Financial liabilities held for trading 1 367 788 2 386 837 7 525 800 4 906 701 711 15 187 838 Resources of other credit institutions 991 356 253 476 619 691 233 985 2 098 508 Resources of customers and other debts 7 408 634 10 076 668 5 841 520 549 137 561 443 24 437 402 Debt securities 421 060 1 621 460 4 366 621 543 023 6 952 165 Financial liabilities relating to transferred assets 5 871 5 186 297 557 1 563 243 1 871 857 Hedging derivatives 1 546 811 1 517 252 3 904 401 4 826 388 10 794 851 Technical provisions 6 153 117 075 1 387 105 401 059 1 911 392 Subordinated debt 29 090 167 657 478 411 675 157 Participating bonds 28 036 28 036

Contractual interest cash flows 417 342 2 175 409 2 135 592 1 171 139 5 899 482 7 408 634 12 862 139 13 918 215 20 953 560 14 713 428 711 69 856 688 1 Includes the notional amount of swap operations.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 225

The contractual undiscounted cash flows of financial assets and liabilities at December 31, 2008 were as follows:

from 3 months to more than 5 on demand up to 3 months from 1 to 5 years undetermined Total 1 year years Assets Cash and deposits at Central Banks 1 087 217 1 087 217 Loans and advances to other credit institutions 68 579 158 484 227 063 Financial assets held for trading and at fair value through profit or loss 1 1 085 125 2 347 480 5 111 320 2 578 292 370 729 11 492 946 Financial assets available for sale 39 818 120 865 1 607 029 1 415 060 165 112 3 347 884 Held to maturity investments 20 718 136 381 225 173 25 382 407 654 Loans and advances to credit institutions 2 589 868 632 846 235 700 7 533 3 465 947 Loans and advances to customers 5 505 903 2 740 680 7 454 844 13 389 594 460 912 29 551 934 Hedging derivatives1 638 152 2 573 198 4 316 858 5 852 533 13 380 742

Contractual interest cash flows 1 140 764 108 1 847 494 6 201 797 10 238 732 4 459 19 057 730 1 156 936 10 802 176 10 398 945 25 152 721 33 507 126 1 001 212 82 019 117 Liabilities Resources of central banks Financial liabilities held for trading 1 279 196 1 493 659 4 822 982 2 378 689 200 8 974 726 Resources of other credit institutions 725 048 333 065 692 178 232 555 1 982 846 Resources of customers and other debts 7 371 752 10 726 660 6 751 661 453 417 43 236 25 346 726 Debt securities 816 775 821 120 4 333 045 360 339 6 331 279 Financial liabilities relating to transferred assets 47 11 425 374 505 1 661 785 2 047 763 Hedging derivatives 1 638 617 2 575 071 4 320 000 5 856 793 13 390 480 Technical provisions 5 766 67 228 1 711 503 461 931 2 246 427 Subordinated debt 29 185 174 244 525 887 729 316 Participating bonds 28 078 28 078 Contractual interest cash flows 598 838 1 120 027 2 895 694 1 812 777 6 427 336 7 371 752 13 790 947 13 202 441 19 777 567 13 362 070 200 67 504 977 1 Includes the notional amount of swap operations. .

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 226

The Bank continuously tracks the evolution of its liquidity, monitoring incoming and outgoing funds in real time, whether or not they are known in advance. Projections of short and medium term liquidity are executed in order to plan the funding strategy in the monetary and capital markets. In addition, the Bank has a portfolio of assets that can be used at any time to obtain funding from the ECB. During the first half of 2009, the surplus position of BPI Treasury was reduced due to the redemption of medium and long-term loans and business growth, but the total liquidity position has been strengthened as the portfolio of eligible assets for ESCB, which amounted to 4 200 000 t. euro, net of haircuts, was increased. In the section on Liquidity Risk in the Directors’ Report, additional elements used by the Group in its daily management of liquidity risk are presented.

Market Risk

Market risk (interest rate, exchange rate, share price, commodity price and spread) is defined as the potential to incur losses due to unexpected changes in the price of instruments or operations (“price” includes index value, interest rate or exchange rate). Spread risk is the risk resulting from the variability of interest rates of some counterparties in relation to the interest rate used as a reference.

The Executive Board for Market Risk (EBMR) is responsible for managing the BPI Group’s market risk and differentiates between the trading portfolio (trading) and the remaining businesses. In the specific case of exchange risk, the assessment is made for the activity as a whole (trading and non-trading).

More information about market risks in BPI Group is contained in the “Risk Management” section of the Directors’ Report.

Trading portfolio (trading)

Trading positions are managed autonomously by the traders, within the limits established by the Trading Department Manual for the entire BPI Group, approved by the Executive Committee of the Board of Directors. The trading portfolio is defined for financial and risk management purposes, independently of the accounting classification (although the concepts largely match) and includes all types of financial instruments traded by the Trading Rooms (derivatives, repurchases, shares and bonds) that cause various types of market risk, namely interest rate, shares, exchange, commodities and spread risks.

Market risk in trading operations is assessed and controlled daily through the calculation of VaR - Value at Risk – using a standard model (of the “variance co-variance” type), based on the activity of the Banks of BPI Group as a whole.

Calculated VaR corresponds to the maximum potential loss, with a confidence level of 99%, resulting from an adverse evolution of risk factors within a timeframe of two weeks (risk factors are increase rates of prices, indexes and interest rates that affect the value of the portfolio, or that are taken as representative of those prices, indexes and rates). The model uses, as risk factor volatility, the standard deviation of historical samples of their amounts on an annual basis and uniform weight. In calculating the overall risk, the effect of the diversification of investments is included in the model through the statistical effect of the correlation between risk factors (the correlation is calculated from annual historical samples and uniform weight of relevant pairs of risk factors). A normal distribution of risk factors is assumed, with mean zero and standard deviation leading to the above mentioned confidence level.

In the first half of 2009 and 2008 the average VaR value in the Bank’s trading books was as follows:

Jun. 30, 09 Dec. 31, 08

VaR (average) VaR (maximum) VaR (average) VaR (maximum) Interest rate risk 271 411 717 3 354 Currency risk 325 1 772 1 137 1 819 Share risk 1 188 2 369 1 160 4 814 Commodities 64 176 75 152 Spread 102 382

In compliance with its legal obligations, the Group also produces prudential information for purposes of control by the supervisor and calculates regulatory capital relating to market risks in accordance with the standard methodology established by the Bank of Portugal.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 227

Banking portfolio (non-trading)

The Financial Committee, chaired by the Executive Board’s member responsible for the financial portfolio, monitors and manages the positions that are part of the banking portfolio, from reports produced for the purpose and within the guidelines of EBRM. When necessary an extraordinary meeting of EBRM is requested to make the more important decisions.

Interest rate risk

Following is a sensitivity analysis of the BPI Group’s financial margin and shareholders’ equity to a 2% increase in the reference interest rate, considering all the instruments of the banking portfolio sensitive to interest rate variations (including the securities portfolio of the international activity classified in the accounting records as of trading):

Jun. 30, 09 Dez. 31, 08 Financial margin Weighting Weighted Weighting Weighted Position Position Time band factor position factor position on demand 2 302 317 2,00% 46 046 1 046 574 2,00% 20 931 on demand - 1 month (1 111 827) 1,92% ( 21 347) (2 345 283) 1,92% ( 45 029) 1 - 2 months ( 626 075) 1,75% ( 10 956) 372 330 1,75% 6 516 2 - 3 months 1 672 578 1,58% 26 427 1 764 322 1,58% 27 876 3 - 4 months ( 23 649) 1,42% ( 336) 157 457 1,42% 2 236 4 - 5 months 237 076 1,25% 2 963 847 405 1,25% 10 593 5 - 6 months 1 352 144 1,08% 14 603 1 088 303 1,08% 11 754 6 - 7 months ( 185 748) 0,92% ( 1 709) ( 60 797) 0,92% ( 559) 7 - 8 months ( 165 167) 0,75% ( 1 239) 7 564 0,75% 57 8 - 9 months ( 107 718) 0,58% ( 625) ( 27 560) 0,58% ( 160) 9 - 10 months ( 223 215) 0,42% ( 938) ( 108 601) 0,42% ( 456) 10 - 11 months ( 115 700) 0,25% ( 289) ( 69 444) 0,25% ( 174) 11 - 12 months (2 042 132) 0,08% ( 1 634) ( 109 434) 0,08% ( 88) Total 50 968 33 497 Note: The positions were distributed by the assets, liabilities and respective maturity class columns.

The weighted position indicates an estimate of the impact on financial margin obtained at the end of 12 months starting on January 1 of each year resulting from a single and instantaneous change of 2% in the overall market interest rates affecting the respective positions. Thus, the impact on each date depends on the existence and time distribution of the repricing gaps.

In medium and long-term fixed rate operations, the BPI Group hedges the interest rate risk at the inception of operations, through derivatives transactions (interest rate swaps), thus transforming the fixed rate operations into floating rate operations. At June 30, 2009 and at December 31, 2008, the BPI Group did not have significant medium and long-term exposure to fixed interest rates during the life of the operation.

Share risk

In accordance with the prudential requirements, the BPI Group calculates the impact of a 20% decrease in share prices and participating units classified as financial assets available for sale and financial assets at fair value through profit or loss. This stress test was based on the following exposures in shares and participation units:

Jun. 30, 09 Dec. 31, 08

Financial assets held for trading and at fair value through profit or loss 44 437 44 480 Financial assets available for sale - at fair value and without impairment 32 691 62 017 Financial assets available for sale - at fair value and with impairment 10 879 14 991 Financial assets available for sale at historical cost 14 491 14 778 Participation units in liquidity, bonds and real estate funds 58 809 77 880 161 307 214 146 Note: Does not include the trading portfolio which is considered in market risk.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 228

A 20% decrease in the price of the above securities (except for securities at historical cost and participating units in liquidity, bonds and real estate funds and assuming that the Group does not identify impairment situations in addition to those that already existed on the reference date of the financial statements) at June 30, 2009 and December 31, 2008 would result in a decrease of 17 601 t. euro and 24 297 t. euro, respectively, in their fair value, implying the recognition of a loss of 11 063 t. euro and 11 984 t. euro, the remaining devaluation being reflected in the fair value reserve.

Currency risk

Financial assets and liabilities at June 30, 2009, by currency, were as follows:

Assets and liabilities by currency

Other Type of financial instrument EUR USD AON Total currencies

Assets Cash and deposits at Central Banks 594 356 49 657 903 726 1 728 1 549 467 Loans and advances to other credit institutions 225 678 382 091 2 831 11 504 622 104 Financial assets held for trading and at fair value through profit or loss 1 287 151 119 975 251 164 11 322 1 669 612 Financial assets available for sale1 4 726 455 1 352 566 36 593 579 6 116 193 Loans and advances to credit institutions 2 029 475 236 348 49 817 2 315 640 Loans and advances to customers 27 219 199 1 498 434 39 663 266 153 29 023 449 Held to maturity investments 698 676 698 676 Hedging derivatives 244 662 2 277 40 638 287 577 Debtors and other applications 64 705 207 871 2 665 129 275 370 37 090 357 3 849 219 1 236 642 381 870 42 558 088 Liabilities Resources of central banks 1 505 251 1 505 251 Financial liabilities held for trading 350 824 31 111 1 477 383 412 Resources of other credit institutions 1 954 831 139 751 13 214 2 107 796 Resources of customers and other debts 19 798 708 3 599 580 1 084 163 160 343 24 642 794 Debt securities 6 787 997 73 950 231 378 7 093 325 Financial liabilities relating to transferred assets 1 887 496 1 887 496 Hedging derivatives 285 572 32 115 9 904 327 591 Provisions 65 845 19 686 89 146 85 766 Technical provisions 1 911 392 1 911 392 Subordinated debt 492 648 209 363 702 011 Participating bonds 29 447 29 447 35 070 011 3 896 193 1 084 252 625 825 40 676 281 Forward currency operations ( 541 139) 318 502 ( 41 166) 244 905 ( 18 898) 271 528 111 224 950 1 862 909

Stress Test 54 306 44 490 190 1 Excludes the amount recorded in the Fair Value Reserve.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 229

Financial assets and liabilities at December 31, 2008, by currency, were as follows:

Assets and liabilities by currency Other Type of financial instrument EUR USD AON Total currencies Assets Cash and deposit s at Central B ank s 645 266 52 727 386 754 3 592 1 088 339 Loans and advances to other credit inst it utions 196 160 21 250 2 158 7 513 227 081 Financial assets held for trading and at fair value through profit or loss 1 282 204 82 175 1 474 448 14 751 2 853 579 Financial assets available for sale1 2 883 621 919 550 358 3 803 529 Loans and advances to credit institutions 3 019 989 336 898 147 311 3 504 198 Loans and advances to customers 27 571 568 1 432 630 31 651 239 334 29 275 182 Held to maturit y investments 407 654 407 654 Hedging derivatives 396 176 27 522 60 729 484 428 Debtors and other applications 72 811 213 279 1 922 156 288 167 36 475 449 3 086 031 1 896 933 473 744 41 932 157 Liabilities Financial liabilities held for trading 252 974 2 831 2 647 258 452 Resources of ot her credit institut ions 1 796 987 182 199 28 227 2 007 412 Resources of cust omers and other debts 20 691 050 3 246 487 1 523 494 172 589 25 633 620 Debt securities 6 223 994 85 458 108 356 6 417 808 Financial liabilities relating to transferred assets 2 070 779 2 070 779 Hedging derivatives 505 070 73 461 18 006 596 537 Provisions 60 484 16 501 429 150 77 565 Technical provisions 2 246 427 2 246 427 S ubordinated debt 531 628 236 000 767 628 P articipat ing bonds 28 682 28 682 34 408 074 3 606 937 1 523 923 565 976 40 104 910 Forward currency operations ( 678 766) 612 925 ( 59 809) 100 152 ( 25 498) 92 019 313 202 7 919 1 801 749

Stress Test 18 404 125 281 1 584 1 Excludes the amount recorded in the Fair Value Reserve.

The stress test consists of assessing the impact of a 20% variation in the exchange rate of each currency against the euro, with the exception of Kwanza (AON) in which the impact of a 40% variation against the euro was assessed. The amounts presented above are absolute amounts, and correspond to the potential impact (before taxes) on total equity including minority interest.

Hedge accounting

The BPI Group applies fair value hedge accounting for several business lines, including hedging for:

• fixed rate deposits; • fixed rate debt issues; • structured debt issues; • fixed rate securities.

The BPI Group uses “back-to-back” hedging relationships and macro-hedging.

The BPI Group hedges interest rate risk and exchange risk relating to the above items.

Interest rate swaps and forward currency operations are the main hedging instruments used. The optional component of structured debt issues is hedged by options and swaps.

Application of Hedge Accounting eliminates the "accounting mismatch" that would result from the recognition of the hedged items at amortised cost, while the hedging instruments (derivative financial instruments) would have to be recorded at fair value through profit or loss.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 230

The fair value of hedging instruments at June 30, 2009 is made up as follows:

Hedged items Hedge instruments

Interest Nominal Interest, Value Notional Fair value types of hedge Impairment Total and Revaluation Fair value amount premiums and corrections amount premiums potential gains/losses Assets Loans and advances to other credit institutions 45 888 257 8 46 153 30 172 20 20 Loans to customers 577 212 2 225 ( 726) 21 875 600 586 633 286 ( 4 606) ( 20 786) ( 25 392) Fixed rate securities portfolio 2 785 548 ( 205 284) 142 169 2 722 433 2 666 893 ( 22 524) ( 140 638) ( 163 162) 3 408 648 ( 202 802) ( 726) 164 052 3 369 172 3 330 351 ( 27 130) ( 161 404) ( 188 534) Liabilities Resources of credit institutions 104 902 480 1 817 107 199 105 092 162 1 774 1 936 Customer deposits 3 276 114 107 317 35 442 3 418 873 3 562 000 94 503 27 127 121 630 Debt issues 4 495 663 12 592 127 289 4 635 544 3 874 691 ( 62 007) 86 961 24 954 7 876 679 120 389 164 548 8 161 616 7 541 783 32 658 115 862 148 520 Embedded options were not included. The notional amount of hedging instruments is the sum of the notional purchase amounts, so the compensation of positions arising from contracting derivative instruments with symmetrical conditions is not visible.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 231

The fair value of hedging instruments at December, 30, 2008 is made up as follows:

Hedged items Hedge instruments Interest, Interest Nominal premiums and Value Notional Fair value types of hedge Impairment Total and Revaluation Fair value amount potential corrections amount premiums gains/losses Assets Loans and advances to other credit institutions 107 744 949 381 109 074 102 412 666 ( 24) 642 Loans to customers 582 167 1 594 ( 6 361) 20 022 597 422 645 834 ( 1 078) ( 17 466) ( 18 544) Fixed rate securities portfolio 2 079 783 ( 423 706) 130 670 1 786 747 2 102 585 ( 40 299) ( 127 962) ( 168 261) 2 769 694 ( 421 163) ( 6 361) 151 073 2 493 243 2 850 831 ( 40 711) ( 145 452) ( 186 163) Liabilities Resources of credit institutions 157 601 1 025 4 374 163 000 138 082 ( 134) 163 29 Customer deposits 3 106 899 105 037 44 785 3 256 721 3 280 000 57 869 28 331 86 200 Liability for assets not derecognised 2 047 763 19 419 3 597 2 070 779 4 685 442 1 887 5 210 7 097 Debt issues 3 175 165 ( 51 567) 123 035 3 246 633 3 000 340 ( 109 134) 89 862 ( 19 272)

8 487 428 73 914 175 791 8 737 133 11 103 864 ( 49 512) 123 566 74 054 Embedded options were not included. The notional amount of hedging instruments is the sum of the notional purchase amounts, so the compensation of positions arising from contracting derivative instruments with symmetrical conditions is not visible.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 232

Net income on financial operations recognised in hedge derivative financial instruments and in hedged items during the first half of 2009 and 2008 was the following:

Fair value types of hedge Jun. 30, 09 Jun. 30, 08

Hedging derivatives ( 9 513) ( 25 899)

Hedged items Loans and advances to other credit institutions ( 373) Loans to customers 1 853 ( 6 849) Fixed rate securities portfolio 10 868 ( 39 845) Resources of credit institutions 2 557 455 Customer deposits 9 366 7 773 Liability for assets not derecognised 3 597 ( 407) Debt issues ( 3 673) 71 746 24 195 32 872 14 682 6 973 Note: At June 30, 2008, “Debt issues – hedged item” includes the results relating to the embedded options in those issues.

4.49. Share-based variable remuneration program

The Share-based Variable Remuneration Program (Programa de Remuneração Variável em Acções - RVA) is a remuneration scheme under which part of the variable remuneration of Executive Directors and Employees of the BPI Group, whose annual variable remuneration is equal to or greater than 2 500 euro, is paid in Banco BPI shares (BPI shares) and options to purchase BPI shares. In RVA 2007 and 2008, the employees whose variable remuneration was equal to or greater than 2 500 euro and less than or equal to 10 000 euro could choose to receive this amount in full in “Cash”. The portion of the individual variable remuneration that corresponds to the RVA program varies between 10% and 50%, the percentage increasing with the level of responsibility of the Director or Employee.

In 2006, there was no RVA because Banco BPI was under a public share purchase. All others RVA programs remain in the regular conditions mentioned in this note.

The shares attributed under the RVA program are made available to the beneficiary on a gradual basis: 25% when they are attributed and 25% in each of the three following years.

The price of the shares attributed corresponds to the weighted average list price of the BPI shares traded in the last ten stock exchange sessions prior to the date the shares are attributed. The price of the shares attributed also corresponds to the strike price of the options.

The shares are made available (in the three years following the date they are attributed) subject to the beneficiaries remaining with the BPI Group. The price of the shares attributed, as well as the period in which they are made available, are summarised in the following table: Shares Program Date of Strike Date of availability of tranches assignment price 2nd 3rd 4th RVA 2004 28-02-2005 3,10 28-02-2006 28-02-2007 28-02-2008 RVA 2005 23-02-2006 4,44 23-02-2007 23-02-2008 23-02-2009 RVA 2007 21-03-2008 3,33 21-03-2009 21-03-2010 21-03-2011 RVA 2008 16-03-2009 1,41 16-03-2010 16-03-2011 16-03-2012

The share options of the RVA 2004 program are exercisable between the first and the end of the fifth year following the date they were attributed. The share options of the RVA 2005, RVA 2007 and RVA 2008 programs can be exercised between the 90th day and the end of the 5th year following the date they were attributed. The share options are made available subject to the beneficiaries remaining with the BPI Group.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 233

The strike price of the options, as well as the period the options can be exercised, are summarised in the following table: Options Program Date of Strike Strike period assignment price1 From To RVA 2002 22-02-2003 2,14 22-02-2004 22-02-2008 RVA 2003 23-02-2004 3,01 23-02-2005 23-02-2009 RVA 2004 28-02-2005 2,98 28-02-2006 28-02-2010 RVA 2005 23-02-2006 4,27 24-05-2006 23-02-2011 RVA 2007 21-03-2008 3,20 23-06-2008 21-03-2013 RVA 2008 16-03-2009 1,41 17-06-2009 16-03-2014 1 Strike price after considering the effect of the share capital increase made in June 2008.

The number of employees and directors covered by the RVA 2008 and RVA 2007 programs was as follows:

RVA 2008 RVA 2007

Directors 12 12 Employees 304 1 546 316 1 558

In RVA 2007, the employees whose variable remuneration was equal to or greater than 2 500 euro and less than or equal to 10 000 euro could choose to receive this amount in full in “Cash”. In RVA 2008, the employees whose variable remuneration was equal to or greater than 2 500 euro could choose to receive this amount in full in “Cash”.

The total cost of the RVA programs is as follows: Total cost Program Shares Options Total RVA 2001 2 478 2 478 4 956 RVA 2002 2 507 2 507 5 014 RVA 2003 3 202 2 272 5 474 RVA 2004 3 834 2 169 6 003 RVA 2005 4 006 3 075 7 081 RVA 2007 2 649 5 938 8 587 RVA 2008 115 634 749 18 791 19 073 37 864

MODEL FOR VALUING THE EQUITY INSTRUMENTS GRANTED TO THE EMPLOYEES AND DIRECTORS OF THE BPI GROUP

Shares

The Bank, for purposes of the share-based payment program, acquires a portfolio of BPI shares and transfers ownership of the shares to the employees and directors on the date the RVA remuneration is granted.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 234

The changes in the number of shares not yet made available to the employees and directors of the BPI Group in the first half of 2009 and in 2008, as well as the fair value of the respective instruments, are as follows:

RVA 2004 RVA 2005 RVA 2007 RVA 2008 Fair value Fair value Fair value Fair value Number of Number of Number of Number of sh ar e s On the date On the shares On the date On the sh ar e s On the date On the sh ar e s On the date On the attributed ref erence date attributed reference date attributed reference date attributed reference date Shares attributed up to 2007 1 237 831 3 837 6 635 904 340 4 015 4 847 Shares made available up to 2007 921 555 2 857 4 940 451 348 2 004 2 419 Shares made available early up to 2007 4 936 15 26 4 083 18 22 Shares refused up to 2007 10 117 31 54 7 939 35 43 Shares not made available at December 31, 2007 301 223 934 1 615 440 970 1 958 2 364 Shares attributed in 2008 796 235 2 651 1 393 Shares made available in 2008 301 025 933 527 220 342 978 386 200 123 666 350 Shares made available early in 2008 Shares refused in 2008 198 1 2 466 11 4 9 381 31 16 Shares not made available at December 31, 2008 218 162 968 382 586 731 1 954 1 027 Shares attributed in 2009 128 252 181 233 Shares made available in 2009 210 940 937 384 191 422 637 348 32 135 45 58 Shares made available early in 2009 6 807 30 12 14 916 50 27 Shares refused in 2009 415 2 1 729 2 1 Shares not made available at June 30, 2009 379 664 1 264 691 96 117 136 175

In the case of death, incapacity or retirement of the employee or director, the shares not yet made available are made available early, becoming freely available to the person or to the respective heirs.

The shares refused include shares granted but not made available, to which the employee or director has lost his/her right because he/she has left the BPI Group.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 235

Options

The changes in the number of share options in circulation, held by employees and directors of the BPI Group (options that can be exercised) in the first half of 2009 and in 2008, as well as their respective fair values are as follows:

RVA 2003 RVA 2004 RVA 2005 RVA 2007 RVA 2008 Fair value Fair value Fair value Fair value Fair value Number of Number of Number of Number of Number of On the On the On the On the On the options options options options options On the date reference On the date reference On the date reference On the date reference On the date reference attributed date attributed date attributed date attributed date attributed date Options attributed up to 2007 5 050 419 2 273 10 858 6 998 811 2 170 14 907 6 836 764 3 077 8 204 Options made available up to 2007 5 012 429 2 256 10 777 6 972 511 2 161 14 851 6 836 764 3 077 8 204 Options cancelled up to 2007 48 441 22 104 43 821 14 93 6 659 3 8 Options exercised up to 2007 4 177 084 1 880 8 981 5 220 835 1 618 11 120 4 008 812 1 804 4 811 Options in circulation and exercisable at December 31, 2007 824 894 371 1 774 1 734 155 538 3 694 2 821 293 1 270 3 386 Options in circulation at December 31, 2007 824 894 356 26 1 734 155 517 55 2 821 293 1 219 62 Options attributed in 2008 26 029 11 1 60 527 18 2 113 672 49 3 15 013 916 5 915 2 222 Options made available in 2008 26 029 11 1 60 527 18 2 113 672 49 3 15 013 916 5 915 2 222 Options cancelled in 2008 504 18 280 8 94 903 37 14 Options exercised in 2008 185 030 80 6 241 633 72 8 8 108 4 1 630 1 Options in circulation and exercisable at December 31, 2008 665 893 288 21 1 552 545 463 50 2 908 577 1 257 64 14 917 383 5 878 2 208 Options in circulation at December 31, 2008 665 893 288 5 1 552 545 463 12 2 908 577 1 257 23 14 917 383 5 877 2 014 Options attributed in 2009 3 457 018 1 293 467 Options made available in 2009 3 457 018 1 293 467 Options cancelled in 2009 665 893 288 5 588 754 25 656 10 3 Options exercised in 2009 248 14 248 5 2 Options in circulation and exercisable at June 30, 2009 1 551 957 462 12 2 907 823 1 256 23 14 891 479 5 867 2 010 3 442 770 1 288 465

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 236

When an employee or director of the BPI Group leaves the Group he/she loses the right to the options attributed and not yet made available. In the case of options made available but not yet exercised, the director or employee has a maximum period of 30 days from the date the labour relationship terminates to exercise the option, after which the option expires (options cancelled).

In the case of death, incapacity or retirement of directors or employees, the options attributed become immediately exercisable, having to be exercised within a period of 2 years from the date of the event, otherwise they expire. Cancelled options include options not exercised within this period.

In the first half of 2009 and in 2008 the weighted average price of the shares on the date the options were exercised was as follows: Options exercised up to June. 30, 2009 Options exercised in 2008 Program Number of Average price Number of Average price options of the shares options of the shares RVA 2002 327 867 3,32 RVA 2003 185 030 3,36 RVA 2004 241 633 4,05 RVA 2005 8 108 4,30 RVA 2007 248 1,85 1 630 2,35 RVA 2008 14 248 1,90

In determining the number of options to be granted to the employees and directors, the BPI Group determines the financial value of the options as of the date they are granted.

The premium of the options over Banco BPI shares was determined in accordance with the following models: ƒ Black-Scholes model for the RVA 2002 program; and ƒ An internally developed model, based on the Black-Scholes model, for the RVA 2003 to RVA 2008 programs.

The critical factors of the model used to manage the RVA programs are as follows:

• Volatility of Banco BPI shares, determined as follows:

ƒ 60% of the historical volatility of Banco BPI shares in the last 3.33 years;

ƒ 10% of the VIX volatility index;

ƒ 10% of the VDAX volatility index;

ƒ 20% of the implicit volatility of the listed options traded in Spain over Spanish banks which are similar to Banco BPI.

• Average expected life of the option, which depends, among others, on the following factors:

ƒ Responsibility level of the beneficiaries: Directors and other employees;

ƒ Ratio between the market price and the strike price; and

ƒ Volatility of the share price.

The model also enables the number of shares of Banco BPI necessary to ensure adequate coverage of the inherent risk of issuing options under the RVA program to be determined.

The parameters used to determine the financial value of the options under each RVA program, as of the date the options are attributed, are as follows:

RVA 2001 RVA 2002 RVA 2003 RVA 2004 RVA 2005 RVA 2007 RVA 2008

BPI listing 2,55 2,16 3,20 3,13 4,47 3,33 1,41 Stike price 2,542,143,133,104,443,331,41 Implicit volatility 29,70% 22,30% 21,50% 17,70% 17,10% 29,34% 44,27% Interest rate 5,00% 3,15% 3,00% 2,72% 3,08% 3,73% 3,10% Expected dividends 0,09 0,08 0,09 0,10 0,12 0,19 0,07 Value of the option 0,62 0,33 0,45 0,31 0,45 0,41 0,37

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 237

The number of outstanding options under each RVA Program, as well as their respective fair values at June 30, 2009 is as follows:

RVA 2004 RVA 2005 RVA 2007 RVA 2008

Number of outstanding options 1 551 957 2 907 823 14 891 479 3 442 770 Strike price 2,98 4,27 3,20 1,41 Value of option 0,01 0,01 0,14 0,58

The number of outstanding options under each RVA Program, as well as their respective fair values at December 31, 2008 is as follows:

RV A 2003 RVA 2004 RV A 2005 RV A 2 00 7

Number of outst anding options 665 893 1 552 545 2 908 577 14 917 383 Strike price 3.01 2.98 4.27 3.20 V alue of option 0.03 0. 02 0.15

ACCOUNTING IMPACT OF THE RVA PROGRAM

Shares In order to cover the share-based payments, the Bank acquires a portfolio of treasury shares at the time the RVA remuneration is attributed. The shares remain in Banco BPI’s portfolio until they are made available to the beneficiaries. At that time they are derecognised by corresponding charge to accumulated costs in the caption “Other equity instruments”.

The book value and fair value of the share component of the RVA program not yet made available to the Employees/Directors at June 30, 2009 and December 31, 2008 are as follows: Jun. 30, 09 Dec. 31, 08 Shares Program Book Number Fair Book Number Fair value of shares Value value of shares Value RVA 2005 940 Cost of the shares to be made available to the Group's RVA 2007 908 1 312 employees/directors, recognized in RVA 2008 69 503 shareholder's equity RVA 2009 54 1 031 2 755 RVA 2005 47 Cost of the shares to be made available to the Group's employees/ RVA 2007 406 642 directors, not recognized RVA 2008 67 571 shareholder's equity RVA 2009 61 534 1 260

Total 1 565 475 781 866 4 015 804 893 1 409

Treasury shares made available RVA 2004 15 early to the Group's employees/ RVA 2005 18 18 directors RVA 2007 50

Total 68 33

Treasury shares to be made RVA 2005 968 218 162 382 available to the Group's employees/ RVA 2007 1 264 379 664 691 1 954 586 731 1 027 directors RVA 2008 136 96 117 175 Total 1 400 475 781 866 2 922 804 893 1 409

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 238

Options The BPI Group has created a portfolio of BPI shares to cover its share-based payment program responsibilities resulting from the issuance of options to purchase BPI shares in accordance with a delta strategy (determined in accordance with BPI’s options evaluation model developed in-house based on the Black-Scholes model). The strategy corresponds to the creation of a portfolio with delta shares for each option issued, the delta number corresponding to the relationship between the variation in the price of an option and variation in the price of the underlying share. The treasury shares held to hedge the risk of variation in the amount of the options sold are recorded in the caption “Treasury shares hedging the RVA”, where they remain while they are held for that purpose.

When the options are exercised, the treasury shares are derecognised together with transfer of share ownership to the Employees/Directors. At that time a gain or loss is recognised, in the amount corresponding to the difference between the strike price and the average cost of acquiring the treasury share portfolio covering each of the programs, less the cost of the option premiums accumulated in the caption “Other equity instruments”.

The book value and fair value of the outstanding option component of the RVA program attributed to the Employees/Directors at June 30, 2009 and December 31, 2008 are as follows: Jun. 30, 09 Dec. 31, 08 Options Program Book Fair Unrealized Book Fair Unrealized value Value gain/(loss) value value gain/(loss) RVA 2003 288 RVA 2004 462 463 Cost of outstanding options RVA 2005 1 257 1 258 (premiums) recognized in shareholder's equity RVA 2007 5 868 5 878 RVA 2008 1 244 1 665 RVA 2009 447 9 278 9 552

Cost of outstanding options RVA 2008 694 (premiums) not recognized in RVA 2009 187 shareholder's equity 187 694 Total 9 465 2 055 7 410 10 246 4 303 5 943 RVA 2003 1 008 525 ( 483) RVA 2004 3 365 1 822 ( 1 543) 3 365 1 752 ( 1 613) Treasury shares hedging the RVA options RVA 2005 1 806 729 ( 1 077) 1 804 700 ( 1 104) RVA 2007 12 811 6 664 ( 6 147) 12 501 6 231 ( 6 270) RVA 2008 2 157 1 994 ( 163) Total 20 139 11 209 ( 8 930) 18 678 9 208 ( 9 470)

Unrealized gain /(loss) ( 1 520) ( 3 527)

The gain and loss realised on treasury shares hedging the exercise of RVA options, as well as the respective taxes, are recorded directly in shareholders’ equity, not affecting net income.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 239

The gross gain and loss realised in making the shares available and in exercising the options, as well as the corresponding hedge, reflected in shareholders’ equity at June 30, 2009 and December 31, 2008, are as follows:

Gain-loss Program Jun. 30, 09 Dec. 31, 08

RVA 2007 ( 13) Shares In making the shares available RVA 2008 ( 50) ( 50) ( 13) RVA 2002 ( 253) RVA 2003 272 33 RVA 2004 12 In the exercise of options RVA 2005 1 RVA 2008 ( 2) Options 270 ( 207) RVA 2004 ( 213) RVA 2005 ( 7 602) On the sale of hedging shares RVA 2007 ( 340) ( 340) ( 7 815) Transaction costs 13 ( 33) ( 107) ( 8 068)

The cost of the share-based remuneration program is accrued in personnel costs, by corresponding entry to the “Other equity instruments” caption, as required by IFRS 2 for share-based payment programs. The cost of the shares and option premiums when they are granted, are accrued on a straight-line basis from the beginning of the program (January 1) to the date they are made available to the Employees/Directors.

The total cost of the share-based payment program recognised in first half of 2009 and in 2008 was as follows: Jun. 30, 09 Jun. 30, 08 Program Shares Options Total Shares Options Total RVA 2002 ( 1) ( 1) RVA 2003 RVA 2004 7 7 RVA 2005 26 26 167 ( 8) 159 RVA 2007 282 ( 10) 272 ( 1 126) 2 740 1 614 RVA 2008 ( 389) ( 403) ( 792) 367 1 332 1 699 RVA 2009 54 447 501 Total ( 27) 34 7 ( 585) 4 063 3 478

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 240

4.50. Capital Management

Banco BPI’s policy regarding the distribution of results is to distribute an annual dividend, by proposal of the Board of Directors to the Shareholders’ General Meeting, usually of not less than 40% of net profit reflected in the consolidated accounts for the year to which they relate, unless exceptional circumstances justify the distribution of a smaller dividend.

Banco BPI’s dividend policy also includes the maintenance of a sound financial position through maintaining:

• A ratio of basic Own Funds to assets weighted by risk - Tier I – tending to exceed 7%; • The level of preference shares not above 20% of basic Own Funds, meaning a Core Tier I indicator tending to exceed 5.5%.

The potential components of Tier I (including Core Tier I) and Tier II (including upper Tier II and lower Tier II) Own Funds are in accordance the regulations established in Bank of Portugal Notice 5/2007. The regulatory proportions to be observed indicate that the amount of Tier II cannot exceed Tier I and the amount of the lower Tier II level (long-term subordinated debt and redeemable preference shares) cannot exceed 50% of Tier I.

According to the new regulations of the Bank of Portugal, issued in 2008, the following changes to the calculation of Own Funds were made: • unrealized gains and losses in the portfolio of bonds available for sale are no longer included in Tier II and Tier I, respectively, • the limit for inclusion of deferred tax assets in Own Funds was removed (the limit was 10% of Tier I), • the period for recognition of the deferral of the IAS impact on pensions that at June 30, 2008 had not been recognized in retained earnings was extended by 3 years, • the limit of the proportion of preference shares included in the composition of Tier I was increased from 20% to 35%, and • under the terms of Notice 11/2008 of December 23, negative actuarial deviations determined in 2008, less the expected return on assets of the pension fund for that year, are deferred gradually up to December 30, 2012.

For the first half of 2009, the Own Funds of Banco BPI assume a dividend distribution of 35 604 t. euro, which corresponds to 0.0396 euro per share.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 241

According to Bank of Portugal rules the BPI Group’s Own Funds are made up as follows:

Jun. 30, 09 Dec. 31, 08 Base own funds Subscribed share capital, share premium, reserves (excluding positive fair value reserves) and retained 1 917 957 1 868 876 earnings Contributions to the pension fund not yet recognised as cost ( 516) ( 611) P reference shares 285 439 295 519 Ot her minority int erests 180 092 199 496 Intangible asset s ( 12 416) ( 15 364) Treasury shares ( 11 406) ( 10 379) Difference between impairment and provisions ( 100 898) ( 79 262) Deferred transition adjustments to IAS / IFRS 108 004 119 900 Base own funds 2 366 256 2 378 175 Complementary own funds Revaluation reserves of fixed assets 8 548 8 548 Perpetual subordinated debt 55 346 59 458 Positive fair value reserve 9 016 9 868 S ubordinated debt and participating securities 552 729 594 161 Difference between impairment and provisions 79 490 79 262 Complementary own funds 705 129 751 297 Deductions

( 149 430) ( 161 405) Deduct ion of interests in part ic ipat ions in insurance companies and other financial institutions Ot hers deduct ions ( 5 149) ( 4 476) Deductions ( 154 579) ( 165 881) Total own funds 2 916 806 2 963 591 Total requirements 2 054 070 2 095 333 Assets w eighted by risk1 25 675 878 26 191 665 Own Funds requirements ratio 11,4% 11,3% Tier I 2 8,9% 8,8% Core Tie r I (exclu ding preference share s)2, 3 8,1% 8,0% P ercentage of preference shares to Tier I 12,1% 12,4% 1 Total requirements x 12.5. 2 Calculated in accordance with Bank of Portugal Instruction 16 / 2004. 3 In a ccordance wit h B an k of Po rt ug al, Co re Tier I sho uld not refle ct 50% of de duc tion s in f in ancial ins titut io ns an d in suran ce companies.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 242

4.51. Related parties The BPI Group’s related parties at June 30, 2009 were as follows:

Effective Direct Name of related entity Head Office participation participation Associated and jointly controlled entities of Banco BPI Banco Comercial e de Investimentos, S.A.R.L. Mozambique 30,0% 29,4% Companhia de Seguros Allianz Portugal, SA Portugal 35,0% 35,0% Cosec - Companhia de Seguros de Crédito, SA Portugal 50,0% 50,0% F. Turismo - Capital de Risco, SA Portugal 25,0% 25,0% Finangeste – Empresa Financeira de Gestão e Desenvolvimento, SA Portugal 32,8% 32,8% Unicer - Bebidas de Portugal, SGPS, SA Portugal 14,0% Viacer – Sociedade Gestora de Participações Sociais, Lda Portugal 25,0% 25,0% Ulissipair ACE Portugal 50,0% Pension fund of Employees and Directors of the BPI Group Fundo de Pensões Banco BPI Portugal 100,0% Fundo de Pensões Aberto BPI Acções Portugal 36,5% Fundo de Pensões Aberto BPI Valorização Portugal 49,6% Fundo de Pensões Aberto BPI Segurança Portugal 42,6% Fundo de Pensões Aberto BPI Garantia Portugal 33,7% Shareolders of Banco BPI Grupo Itaú Brazil 18,9% Grupo La Caixa Spain 30,1% Members of the Board of Directors of Banco BPI Artur Santos Silva Carlos da Câmara Pestana Fernando Ulrich Ruy Octávio Matos de Carvalho Alfredo Rezende de Almeida Antonio Domingues António Farinha Morais Armando Leite de Pinho Marcelino Armenter Vidal Carlos Moreira da Silva Edgar Alves Ferreira Ignacio Alvarez-Rendueles Isidro Fainé Casas António Lobo Xavier Henri Penchas Juan Nin Génova José Pena do Amaral Klaus Duhrkop Manuel Ferreira da Silva Maria Celeste Hagatong Mário Leite da Silva Pedro Bissaia Barreto Allianz Europe Ltd. - Representada por Herbert Walter Roberto Egydio Setúbal Tomaz Jervell

In accordance with IAS 24, related parties are those in which the Bank has significant influence (direct or indirect) in decisions relating to their financial and operating policies – associated and jointly controlled companies and pension funds – and entities which have significant influence in management policy of the Bank – shareholders and members of Banco BPI’s Board of Directors.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 243

The total assets, liabilities and off balance sheet responsibilities relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at June 30, 2009 are as follows:

Pensions funds of Associated and Employees and jointly controlled Directors of the companies BPI Group Total Assets Financial assets available for sale 8 8 Loans 77 963 77 963 77 971 77 971 Liabilities Deposits and technical provisions 27 355 354 866 382 221 Other financial resources 2 500 60 077 62 577 Other amounts payable 1 271 1 271 31 126 414 943 446 069 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 29 084 29 084 Responsabilities for services rendered Deposit and safeguard of assets 927 076 1 749 687 2 676 763 956 160 1 749 687 2 705 847

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 244

The total assets, liabilities and off balance sheet responsibilities relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2009 are as follows:

Companies where Members of the Board of Directors Members of the of Banco BPI have Shareolders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Assets Financial applications 86 820 86 820 Financial assets held for trading 385 385 Financial assets available for sale 46 870 46 870 Loans 4 249 10 595 147 613 162 457 Held to maturity investments 5 025 5 025 Other amounts receivable 58 58 143 407 10 595 147 613 301 615 Liabilities Deposits and technical provisions 96 106 14 835 7 322 118 263 Other amounts payable 41 25 66 96 147 14 860 7 322 118 329 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 94 117 9 312 9 523 Responsabilities for services rendered Deposit and safeguard of assets 802 174 33 760 87 356 923 290

Foreign exchange operations and derivatives instruments Purchases 667 667 Sales ( 673) ( 673) 802 268 33 877 96 662 932 807 1 With a significant influence in BPI Group management policy. Significant influence usually exists when the percentage participation exceeds 20%. It is assumed that there is significant influence when the capital share is above 20% 2 With an individual role.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 245

The total assets, liabilities, and off balance sheet responsibilities relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at December 31, 2008 are as follows:

Pensions funds of Associated and Em ployees and joi ntl y controll ed Directors of the companies BPI Group Total Assets Financial ass ets available for sale 8 8 Loans 78 481 78 481 78 489 78 489 Liabilities Financial liabilities held for trading and derivatives 34 34 Deposit s and tec hnical provisions 49 885 474 360 524 245 O ther financial resources 3 826 60 180 64 006 O ther amount s payable 130 130 53 875 534 540 588 415 Off balance sheet items Guarantees given and other contingent liabilities Guarant ees and sureties 30 093 30 093 Open documentary credits 96 96 Responsabilit ies f or services rendered Deposit and saf eguard of ass ets 850 268 1 526 419 2 376 687 Foreign exchange operations and derivatives instrument s Purchases 10 034 10 034 890 491 1 526 419 2 416 910

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 246

The total assets, liabilities and off balance sheet responsibilities relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at December 31, 2008 are as follows:

Companies where Members of the Board of Directors Members of the of Banco BPI have Shareolders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Assets Financial applications 93 396 93 396 Financial assets held for trading 4 191 4 191 Financial assets available for sale 48 112 48 112 Loans 211 11 195 160 250 171 656 Held to maturity investments 984 984 Other amounts receivable 364 364 147 258 11 195 160 250 318 703 Liabilities Deposits and technical provisions 171 934 10 480 5 249 187 663 Other amounts payable 27 27 171 961 10 480 5 249 187 690 Off balance sheet items Guarantees given and other contingent liabilities Guarantees and sureties 17 518 117 8 070 25 705 Responsabilities for services rendered Deposit and safeguard of assets 692 423 33 653 83 665 809 741

Foreign exchange operations and derivatives instruments Purchases 5 5 709 941 33 770 91 740 835 451 1 With significant influence in BPI Group management policy. Significant influence usually exists when the percentage participation exceeds 20%. 2 With an individual role.

The total income and cost relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at June 30, 2009 are as follows: Pensions funds of Associated and Employees and jointly controlled Directors of the companies BPI Group Total Income Interest and similar income 894 894 Commissions received 23 59 82 Operating income 11 791 11 791 917 11 850 12 767 Expenses Interest and similar expenses 543 3 546 4 089 543 3 546 4 089

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 247

The total income and cost relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2009 are as follows:

Companies where Membe rs of the Board of Directors Members of the of Banco BPI have Shareolders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Income Interest and similar income 692 12 108 812 Commissions received 14 5 7 26 706 17 115 838 Expenses Interest and similar expenses 77 33 4 114 77 33 4 114 1 With significant influence in BPI Group management policy. Significant influence usually exists when the percentage participation exceeds 20%. 2 With an individual role.

The total income and cost relating to operations with associated and jointly controlled companies and pension funds of employees and directors of the BPI Group at June 30, 2008 are as follows:

Associated and Associated and jointly controlled jointly controlled companies companies Total Income Interest and similar income 1 560 25 1 585 Commissions received 357 1 087 1 444 Operating income 1 861 18 078 19 939 3 778 19 190 22 968 Expenses Interest and similar expenses 1 142 7 544 8 686 1 142 7 544 8 686

The total income and cost sheet responsibilities relating to operations with shareholders, members of the Board of Directors and companies in which members of the Board of Directors have significant influence at June 30, 2008 are as follows:

Companies where Membe rs of the Board of Directors Members of the of Banco BPI have Shareolders of Board of Directors significant Banco BPI 1 of Banco BPI 2 influence Total Income Interest and similar income 275 1 173 449 Commissions received 152 31 122 305 427 32 295 754 Expenses Interest and similar expenses 65 33 26 124 65 33 26 124 1 With significant influence in BPI Group management policy. Significant influence usually exists when the percentage participation exceeds 20%. 2 With an individual role.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 248

Remuneration attributed to the members of the Board of Directors of the BPI Group in the first half of 2009 and 2008 was as follows:

Jun. 30, 09 Jun. 30, 08

Remuneration in c ash 1 2 637 1 599 E quit y-based remuneration 1 618 87 P ens ions paid 518 223 3 773 1 909 1 Includes accrued variable remuneration to be attributed at year end. As a result of the resolution of the Shareholders’ General Meeting held in April, 2008, the amount of variable remuneration of members of Banco BPI’s Executive Committee of the Board of Directors became limited to 1.5% of consolidated net income.

In accordance with the Bank’s policy, the members of the Executive Committee of Banco BPI are entitled to participate in the Subsidised Housing Loan Scheme available to all the Banks’ employees. At June 30, 2009 the outstanding mortgage own housing loans granted to the members of the Executive Committee, by the Group’s banks, amounted to 2 319 t. euro.

Under the share-based payment program (RVA) the members of the Executive Committee of Banco BPI benefited from the loan scheme to purchase BPI shares through exercise of the options granted under the share-based payment program (RVA), available to all the Banks’ employees. At June 30, 2009 the total loans granted to members of the Executive Committee amounted to 5 359 t. euro.

A line of credit in force for all Banks’ employees to purchase BPI shares under the capital increase was also made available. At June 30, 2009 the balance of credit granted to the members of Executive Committee amounted to 942 t. euro.

Therefore, at June 30, 2009 the total balance of loans to members of Executive Committee, made by the Group’s Banks, amounted to 6 301 t. euro.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 249

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholdings of the members of the Board of Directors at June 30, 2009 were as follows:

Shares Unavailable Held at Held at Jun. Value at shares Pledged shares Pledged shares Pledged shares Loans Loans Dec. 31, 08 Purchases Sales 30, 09 Jun. 30, 091 A B C D E F

Artur Santos Silva Artur Santos Silva 805 399 805 399 1 466 Carlos da Camara Pestana Carlos da Camara Pestana 360 658 360 658 656 Fernando Ulrich (*) Fernando Ulrich 2 1 848 597 1 848 597 3 364 71 320 1 440 951 290 409 4 033 695 Ruy Octávio Matos de Carvalho Ruy Octávio Matos de Carvalho 142 474 142 474 259 Alfredo Rezende de Almeida Alfredo Rezende de Almeida 1 910 000 1 910 000 3 476 Antonio Domingues (*) Antonio Domingues 2 24 606 53 079 77 685 141 39 807 António Farinha Morais (*) António Farinha Morais 2 240 869 10 000 230 869 420 133 334 356 António Lobo Xavier Armando Leite de Pinho Armando Leite de Pinho Carlos Moreira da Silva Carlos Moreira da Silva 42 862 42 862 78 Edgar Alves Ferreira Edgar Alves Ferreira Henri Penchas Herbert Walter Herbert Walter Ignacio Alvarez-Rendueles Isidro Fainé Casas Isidro Fainé Casas José Pena do Amaral (*) José Pena do Amaral 2 34 935 31 140 66 075 120 23 355 Juan Nin Génova Klaus Duhrkop Klaus Dührkop Manuel Ferreira da Silva (*) Manuel Ferreira da Silva 2 445 798 445 798 811 123 457 Marcelino Armenter Vidal Marcelino Armenter Vidal Maria Celeste Hagatong (*) Maria Celeste Hagatong 2 609 896 175 500 434 396 791 37 838 155 556 40 671 370 97 Mário Leite da Silva Pedro Barreto (*) Pedro Barreto 2 430 908 430 908 784 344 000 86 000 600 150 Roberto Egydio Setúbal Roberto Egydio Setúbal Tomaz Jervell Tomaz Jervell 10 132 10 132 18 Henri Penchas A - Shares attributed under the RVA program, the availability of which at June 30, 2009 is subject to a resolutive condition. B - Shares which at June 30, 2009 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program. C - Shares which at June 30, 2009 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions under the capital increase. D - Shares which at June 30, 2009 were pledged in guarantee for the purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais). E - Amount owed at June 30, 2009, on the loan referred to in B. F - Amount owed at June 30, 2009, on the loan referred to in C 1 Fair value of the shares. 2 Member of the Executive Committee.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 250

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the members of the Board of Directors in terms of the options held at June 30, 2009 was as follows:

Options

Held at Held at Jun. Dec. 31, 08 Purchases Exercised2 30, 09

Artur Santos Silva Carlos da Camara Pestana Fernando Ulrich (1) Ruy Octávio Matos de Carvalho Alfredo Rezende de Almeida Antonio Domingues (1) 951 702 200 535 1 152 237 António Farinha Morais (1) 639 262 235 295 874 557 António Lobo Xavier Armando Leite de Pinho Carlos Moreira da Silva Edgar Alves Ferreira Henri Penchas Herbert Walter Ignacio Alvarez-Rendueles Isidro Fainé Casas José Pena do Amaral (1) 743 315 117 648 860 963 Juan Nin Génova Klaus Dührkop Manuel Ferreira da Silva (1) 1 031 774 117 648 73 638 1 075 784 Marcelino Armenter Vidal Maria Celeste Hagatong (1) 242 790 242 790 Mário Leite da Silva Pedro Barreto (1) 558 332 235 295 793 627 Roberto Egydio Setúbal Tomaz Jervell

1 Member of the Executive Committee 2Includes extinguished by expiry.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 251

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 252

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the others directors of Banco BPI, members of the Board of Directors of BPI Investments, in terms of the shares held at June 30, 2009 was as follows:

Shares Unavailable Held at Held at Jun. Value at shares Pledged shares Pledged shares Pledged shares Loans Dec. 31, 08 Purchases Sales 30, 09 Jun. 30, 091 A B C D E

Alexandre Lucena e Vale 99 064 99 064 180 3 752 43 699 15 562 97 Carlos Jaime Amoedo Casqueiro 12 893 12 893 23 Henrique Cabral Meneses 12 678 12 678 23 José Miguel Morais Alves 25 382 14 031 11 351 21 João Pedro Oliveira e Costa 4 167 4 167

A - Shares attributed under the RVA program, the availability of which at June 30, 2009 is subject to a resolutive condition. B - Shares which at June 30, 2009 were pledged in guarantee of loans to finance their acquisition resulting from the exercise of options granted under the RVA program. C - Shares which at June 30, 2009 were pledged in guarantee of loans to finance their acquisition resulting from exercise of BPI share subscriptions under the capital increase. D - Shares which at June 30, 2009 were pledged in guarantee for the purposes of article 396 of the Commercial Company Code (Código das Sociedades Comerciais). E - Amount owed at June 30, 2009, on the loan referred to in B. F - Amount owed at June 30, 2009, on the loan referred to in C 1 Fair value of the shares.

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the others directors of Banco BPI, members of the Board of Directors of BPI Investimentos, in terms of the options held at June 30, 2009 was as follows:

Options

Held at Held at Jun. Dec. 31, 08 Purchases Exercised1 30, 09

Alexandre Lucena e Vale 357 674 124 709 34 685 447 698 Carlos Jaime Amoedo Casqueiro 221 404 63 637 285 041 Henrique Cabral Meneses 366 977 366 977 José Miguel Morais Alves 213 182 107 761 320 943 João Pedro Oliveira e Costa 237 546 237 546

1Includes extinguished by expiry.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 253

In accordance with the terms of article 477 of the Commercial Company Code (Código das Sociedades Comerciais), the shareholding position of the others directors of Banco BPI, in terms of shares and options held at June 30, 2009 was as follows:

Shares Options Held at Held at Jun. Value at Held at Dec. 31, Held at Jun. 30, Dec. 31, 08 Purchases Sales 30, 09 Jun. 30, 091 08 Purchases Exercised2 09

Susana Trigo Cabral 19 127 19 127 35 157 011 13 875 143 136 Luis Ricardo Araújo 52 000 52 000 95 67 074 29 412 96 486 Graça Graça Moura 8 598 8 598 16 80 517 11 563 68 954 Ana Rosas Oliveira 4 226 4 226 8 58 980 2 515 56 465 João Avides Moreira 13 500 13 500 25 8 414 13 369 21 783

1Fair value of shares. 2Includes extinguished by expiry.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 254

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 255

Artur Santos Silva

Did not purchase or sell any securities.

Carlos da Câmara Pestana

Did not purchase or sell any securities.

At June 30, 2009, IPI - Itaúsa Portugal Investimentos, SGPS, Lda, where he is a member of the Management Board, held 169 855 148 shares.

Fernando Ulrich

Did not purchase or sell any securities.

At June 30, 2009, his spouse held 53 386 shares.

Ruy Octávio Matos de Carvalho

Did not purchase or sell any securities.

At June 30, 2009, his spouse held 12 100 shares.

Alfredo Rezende de Almeida

Did not purchase or sell any securities.

António Domingues

Under RVA 2008, 53 079 shares and 200 535 shares purchase options were granted at the price of 1.413 euro and 0,374 euro, respectively, at April 28, 2009. At June 30, 2009, he held 77 685 Banco BPI shares and 1 152 237 bonds over Banco BPI‘s shares.

Acquired out of the stock exchange market on May 4, 2009, 400 000 bonds of Banco BPI at the price of 0.612 euro.

António Farinha Morais

Sold on the stock exchange, at May 20, 2009, 10 000 Banco BPI shares, at price of 2 097 euro.

Under RVA 2008, 235 295 Banco BPI’s shares purchase options were granted at the price of 0.374 euro. At June 30, 2009 he held 874 557 options over Banco BPI’s shares.

António Lobo Xavier

He does not hold or made any transactions with Banco BPI shares.

Armando Leite de Pinho

Did not purchase or sell any securities.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 256

The company Arsopi – Holding, SGPS, S.A., of which he is the President of the Board of Directors, owns at June 30, 2009, 2 674 789 Banco BPI shares.

The company ROE, SGPS, S.A., of which he is the President of the Board of Directors, owns at June 30, 2009, 4 038 447 Banco BPI shares.

The company Security, SGPS, S.A., of which he is the President of the Board of Directors, owns at June 30, 2009, 3 104 004 Banco BPI shares.

Carlos Moreira da Silva

Did not purchase or sell any securities.

Edgar Alves Ferreira

Did not purchase or sell any securities.

The company HVF - SGPS, S.A., of which he is member of the Board of Directors, owns at June 30, 2009, 25 774 355 Banco BPI shares.

Henri Penchas

He does not hold or made any transactions with Banco BPI shares.

Herbert Walter

Did not purchase or sell any securities.

The person named by Allianz Europe, Ltd. to represent it as a member of the Board of Directors for which the company was elected.

The company Allianz Europe Ltd held, at June 30, 2009, 77 896 561 shares. The subject to the imputation of the above mentioned qualified participation is the company Allianz SE that already fully owned Allianz Europe BV, which in turn holds the entire share capital of Allianz Europe Ltd.

Ignacio Alvarez Rendueles

Appointed on April 22, 2009, he does not hold or made any transactions with Banco BPI shares.

Isidro Fainé Casas

Did not purchase or sell any securities.

Is President of Caja de Ahorros y Pensiones de Barcelona “la Caixa” which has full control over Criteria CaixaCorp, S.A.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 257

The company Criteria CaixaCorp acquired on the stock exchange: on January 2, 2009:

• 78 000 shares at the price of 1.759 euro on January 5, 2009:

• 160 000 shares at the price of 1.750 euro on January 6, 2009:

• 165 000 shares at the price of 1.780 euro on January 7, 2009:

• 160 000 shares at the price of 1.780 euro on January 8, 2009:

• 50 000 shares at the price of 1.800 euro on January 9, 2009:

• 90 000 shares at the price of 1.790 euro on January 12, 2009:

• 65 000 shares at the price of 1.760 euro on January 13, 2009:

• 92 000 shares at the price of 1.730 euro on January 14, 2009:

• 105 472 shares at the price of 1.700 euro on January 15, 2009:

• 73 000 shares at the price of 1.660 euro on January 16, 2009:

• 63 000 shares at the price of 1.680 euro on January 19, 2009:

• 250 000 shares at the price of 1.620 euro

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 258

on January 20, 2009:

• 285 000 shares at the price of 1.600 euro on January 21, 2009:

• 525 000 shares at the price of 1.560 euro on January 22, 2009:

• 285 000 shares at the price of 1.560 euro on January 23, 2009:

• 492 000 shares at the price of 1.510 euro on January 26, 2009:

• 316 000 shares at the price of 1.520 euro on January 27, 2009:

• 508 000 shares at the price of 1.490 euro on January 28, 2009:

• 520 000 shares at the price of 1.490 euro on January 29, 2009:

• 185 000 shares at the price of 1.500 euro on January 30, 2009:

• 415 000 shares at the price of 1.490 euro on 2 February, 2009:

• 185 000 shares at the price of 1.480 euro on 3 February, 2009:

• 122 000 shares at the price of 1.490 euro on 4 February, 2009:

• 76 000 shares at the price of 1.490 euro on 5 February, 2009:

• 300 000 shares at the price of 1.470 euro

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 259

on 6 February, 2009

• 310 000 shares at the price of 1.500 euro on 9 February, 2009:

• 167 672 shares at the price of 1.560 euro on 10 February, 2009:

• 218 000 shares at the price of 1.560 euro on 11 February, 2009:

• 102 000 shares at the price of 1.560 euro on 12 February, 2009:

• 125 000 shares at the price of 1.570 euro holding at June 30, 2009 a total of 270 900 000 shares.

José Pena do Amaral

Did not purchase or sell any securities.

Under the RVA of 2008, 31 140 shares and 117 648 purchase options of Banco BPI shares at the price of 1.41 euro and 0,374, respectively, were attributed to him, holding at June 30, 2009 a total of 66 075 shares and 860 963 purchase options of Banco BPI share.

Juan Nin Génova

He does not hold or made any transactions with Banco BPI shares.

Klaus Dührkop

Did not purchase or sell any securities.

He is the CSR Director of Allianz SE and Executive Director of Allianz Turkey.

Manuel Ferreira da Silva

Did not purchase or sell any securities.

On February 23, 2009, 73 638 purchase options of Banco BPI shares were extinguished by expiry. Under the RVA of 2008, at April 27, 2009, 117 648 purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, he held at June 30, 2009, a total of 1 075 784 purchase options of Banco BPI shares.

At June 30, 2009, his spouse held 212 320 shares. At February 23, 2009, 70 815 purchase options of Banco BPI shares were extinguished by expiry. Therefore, at June 30, 2009, his spouse hold 436 986 purchase options of Banco BPI shares.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 260

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 261

Marcelino Armenter Vidal

Did not purchase or sell any securities.

Is Executive Director of Caja de Ahorros y Pensiones de Barcelona “la Caixa”, which has full control over Criteria CaixaCorp, S.A.

For further information about these companies’ transactions and participation in Banco BPI’s capital, see the above information concerning the member Isidro Fainé Casas.

Maria Celeste Hagatong

Sold on the stock exchange: on February 5, 2009:

• 105 655 shares at the price of 1.480 euro on February 6, 2009:

• 69 845 shares at the price of 1.489 euro

At June 30, 2009, her husband held 380 288 shares.

Mário Leite da Silva

Appointed on April 22, 2009, he does not hold or made any transactions with Banco BPI shares.

Pedro Barreto

Did not purchase or sell any securities.

Under the RVA for 2008, 235 295 purchase options of Banco BPI shares at the price of 0.374 euro were attributed to him. Therefore, at June 30, 2009, he held a total of 793 627 purchase options of Banco BPI shares.

Roberto Egydio Setúbal

Did not purchase or sell any securities.

Is Vice-President of the Board of Directors, President-Director and member of the International Consultative Committee of Banco Itaú Holding Financeira, S.A..

Tomaz Jervell

Did not purchase or sell any securities.

The companies Norsócia, SGPS, S.A. and Auto Maquinaria Tea Aloya, SL, of which he is a member of the Boards of Directors held, at June 30, 2009 a total of 7 140 081 and 7 162 457 shares, respectively.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 262

Alexandre Lucena e Vale

Did not purchase or sell any securities.

At February 23, 2009, 34 685 purchase options of Banco BPI shares were extinguished by expiry.

Under the RVA for 2008, 124 709 purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, at June 30, 2009, he held 447 698 purchase options of Banco BPI shares.

Carlos Jaime Casqueiro

Did not purchase or sell any securities.

Under the RVA for 2008, 63 637purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, at June 30, 2009, he held 285 041 purchase options of Banco BPI shares.

Henrique Cabral Meneses

Did not purchase or sell any securities.

José Miguel Morais Alves

Sold on the stock exchange: on February 10, 2009:

• 1 048 shares at the price of 1.580 euro; on February 12, 2009:

• 12 983 shares at the price of 1.580 euro.

Under the RVA for 2008, 107 761 purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, at June 30, 2009, he held 320 943 purchase options of Banco BPI shares.

João Pedro Oliveira Costa

Sold on the stock exchange, at April 30, 2009:

• 3 023 shares at the price of 1.841 euro; • 1 144 shares at the price of 1.840 euro.

At June 30, 2009, he held 237 546 purchase options of Banco BPI shares.

Susana Trigo Cabral

Did not purchase or sell any securities.

On February 23, 2009, 13 875 purchase options of Banco BPI shares were extinguished by expiry. Therefore, she held at June 30, 2009, a total of 143 136 purchase options of Banco BPI shares.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 263

Ana Rosas Oliveira

Did not purchase or sell any securities.

On February 23, 2009, 2 515 purchase options of Banco BPI shares were extinguished by expiry, under the RVA 2003. Therefore, she held at June 30, 2009, a total of 56 465 purchase options of Banco BPI shares.

At June 30, 2009, her husband held 1 672 shares. On February 23, 2009, 3 036 options related to RVA 2003 were extinguished by expiry. Therefore, at June 30, 2009, he held 27 371 purchase options of Banco BPI shares.

Graça Graça Moura

Did not purchase or sell any securities.

On February 23, 2009 11 563 purchase options of Banco BPI shares were extinguished by expiry, under the RVA 2003. Therefore, she held at June 30, 2009, a total of 68 954 purchase options of Banco BPI shares.

At June 30, 2009, her husband held 25 162 shares and 100 821 purchase options of Banco BPI shares.

Luís Ricardo Araújo

Did not purchase or sell any securities.

Under the RVA for 2008, 29 412 purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, at June 30, 2009, he held 96 486 purchase options of Banco BPI shares.

João Avides Moreira

Did not purchase or sell any securities.

Under the RVA for 2008, 13 369 purchase options of Banco BPI shares were attributed to him, at the price of 0,374 euro. Therefore, at June 30, 2009, he held 21 783 purchase options of Banco BPI shares.

4.52. Subsequent events

During the month of July 2009, a draft of a purchase and sale contract was initialed by representatives of Banco BPI and of the Portuguese State with the aim of selling the participation of 50% in the share capital of COSEC - Companhia de Seguros de Crédito, SA, to the Portuguese State, stake held by Banco BPI.

The draft provides that the sale price will be 27 500 t. euro, which will enable Banco BPI to record a gain before taxes of 7 500 t. euro, based on the equity value of COSEC as of May 31, 2009.

The completion of this purchase depends, in addition to the signature of a purchase contract, which terms conform to the draft, by the legal representatives of Banco BPI and the Portuguese State: a) a favourable decision from the Competition Authority regarding the acquisition of this participation by the Portuguese Sate; b) the conclusion by the Portuguese State and Euler Hermes SFAC, SA, which holds the remaining 50% of the share capital of COSEC, of an agreement to the sell the participation in the same terms as the draft referred above.

5. NOTE ADDED FOR TRANSLATION

These consolidated financial statements are a translation of financial statements originally issued in Portuguese in conformity with the International Financial Reporting Standards as adopted by the European Union, some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

Notes to the consolidated financial statements as of June 30, 2009 | Banco BPI | 264

Declaration

DECLARATION REFERRED TO IN ARTICLE 246(1)(C) OF THE PORTUGUESE SECURITIES CODE

Article 246(1)(c) of the Portuguese Securities Code provides that each one of the persons responsible for the company issues a statement, the contents of which are defined therein.

The members of the Executive Committee of Banco BPI’s Board of Directors identified here by name, subscribe individually to the statement which is transcribed as follows:

“I declare in the terms and for the purposes envisaged in article 246(1)(c) of the Securities Code that to the best of my knowledge the financial statements and directors’ report of Banco BPI, S.A., relating to the 1st half of 2009, were prepared in accordance with applicable accounting standards, giving a true and fair image of the assets and liabilities, the financial position and of the results of that company and of the companies included in the consolidation perimeter and that the directors’ report contains an indication of the important events which occurred in the 1st half of 2009 and their impact on the respective financial statements, as well as a description of the principal risks and uncertainties for the six following months.”

Fernando Ulrich (Chairman) António Domingues (Vice-Chairman)

António Farinha Morais (Member) José Pena do Amaral (Member) Manuel Ferreira da Silva (Member) Maria Celeste Hagatong (Member) Pedro Barreto (Member)

20 August 2008

265 Banco BPI | 1st half 2009 report Audit report

Deloitte & Associados, SROC S.A. Inscrição na OROC nº 43 Registo na CMVM nº 231

Edifício Atrium Saldanha Praça Duque de Saldanha, 1 - 6º 1050-094 Lisboa Portugal

Tel: +(351) 210 427 500 Fax: +(351) 210 427 950 www.deloitte.pt

AUDIT REPORT PREPARED BY AN AUDITOR REGISTERED AT THE PORTUGUESE SECURITIES MARKET COMMISSION (CMVM) ON THE HALF YEAR CONSOLIDATED INFORMATION (Amounts expressed in thousands of euro – th. euro)

Introduction 1. In compliance with the Portuguese Securities Code (Código dos Valores Mobiliários) we hereby present our Audit Report on the consolidated financial information included in the Directors’ Report and the accompanying consolidated financial statements for the half year ended 30 June 2009 of Banco BPI, S.A. and subsidiaries (the Bank), that comprise the consolidated balance sheet (which reflects total assets of 43 531 830 th. euro and shareholders’ equity of 2 133 558 th. euro, including consolidated net profit of 89 009 th. euro), the consolidated statements of comprehensive income, income, changes in shareholders’ equity and cash flows for the half year then ended and in the corresponding Notes.

Responsibilities 2. The Bank’s Board of Directors is responsible for: (i) the preparation of consolidated financial statements that present a true and fair view of the financial position of the companies included in the consolidation, the consolidated comprehensive income of their operations, the changes in the consolidated shareholders’ equity and consolidated cash flows; (ii) the preparation of historical financial information in accordance with the International Financial Reporting Standards as adopted in the European Union, that is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Code; (iii) the adoption of adequate accounting policies and criteria and maintenance of appropriate systems of internal control; and (iv) the disclosure of any significant facts that have influenced the operations of the Bank and of the companies included in the consolidation, their financial position or their comprehensive income.

3. Our responsibility is to examine the financial information contained in the documents of account referred to above, including verifying that, in all material respects, the financial information is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Code, and to issue an independent professional report based on our examination.

A expressão Deloitte refere-se à Deloitte Touche Tohmatsu, uma Swiss Verein, ou a uma ou mais entidades da sua rede de firmas membro, sendo cada uma delas uma entidade legal separada e independente. Para aceder à descrição detalhada da estrutura legal da Deloitte Touche Tohmatsu e suas firmas membro consulte www.deloitte.com/about.

Tipo: Sociedade civil sob a forma comercial | Capital Social: 500.000,00 Euros | Matricula C.R.C. de Lisboa e NIPC 501 776 311 Sede: Edifício Atrium Saldanha, Praça Duque de Saldanha, 1 - 6º, 1050-094 Lisboa | Porto: Bom Sucesso Trade Center, Praça do Bom Sucesso, 61 - 13º, 4150-146 Porto

Member of Deloitte Touche Tohmatsu

Declaration e Audit report 266 Deloitte & Associados, SROC S.A. Inscrição na OROC nº 43 Registo na CMVM nº 231

Page 2 of 2

Scope 4. Our examination was performed in accordance with the Auditing Standards (“Normas Técnicas e Directrizes de Revisão / Auditoria”) issued by the Portuguese Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement. Our examination included verifying, on a sample basis, evidence supporting the amounts and disclosures in the consolidated financial statements and assessing the significant estimates, based on judgments and criteria defined by the Board of Directors, used in their preparation. Our examination also included verifying the consolidation procedures, application of the equity method and that the financial statements of the companies included in the consolidation have been appropriately examined, assessing the adequacy of the accounting policies used, their uniform application and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept, verifying the adequacy of the overall presentation of the consolidated financial statements and assessing if, in all material respects, the consolidated financial information is complete, true, timely, clear, objective and licit. Our examination also included verifying that the consolidated financial information included in the Directors’ Report is consistent with the other documents of consolidated accounts. We believe that our examination provides a reasonable basis for expressing our opinion.

Opinion 5. In our opinion, the consolidated financial statements referred to in paragraph 1 above present fairly, in all material respects, the consolidated financial position of Banco BPI, S.A. and its subsidiaries as of 30 June 2009, the respective consolidated comprehensive income of operations, changes in consolidated shareholders’ equity and consolidated cash flows for the half year then ended, in conformity with the International Financial Reporting Standards as adopted in the European Union, and the financial information contained therein is, in terms of the definitions included in the auditing standards referred to in paragraph 4 above, complete, true, timely, clear, objective and licit.

Oporto, 21 August 2009

DELOITTE & ASSOCIADOS, SROC S.A. Represented by Maria Augusta Cardador Francisco

EXPLANATION ADDED FOR TRANSLATION (This report is a translation of a report originally issued in Portuguese. Therefore according to Deloitte & Associados, SROC, S.A. internal procedures, the report should not be signed. In the event of discrepancies, the Portuguese language version prevails.)

267 Banco BPI | 1st half 2009 report