CGD REPORTS ANNUAL REPORT 2012 www.cgd.pt CaixaCaixa Geral Geral de de Depósitos, Depósitos, S.A. S.A. x •Sede Registered Social: Office:Av. João Av. XXI, João 63 XXI, – 1000-300 63 – 1000-300 Lisboa Lisbon Share capital EUR 5 900 000 000 • CRCL and tax no.500 960 046 Capital Social EUR 5 150 000 000 x CRCL e Contribuinte sob o n.º 500 960 046 2 ANNUAL REPORT 2012 CGD [THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ] CGD REPORTS CGD ANNUAL REPORT 2012 3 INDEX 1. BOARD OF DIRECTORS' REPORT ................................................................................ 9 1.1. MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHAIRMAN OF THE EXECUTIVE COMMITTEE ......................................................... 9 1.2. MAIN INDICATORS ...................................................................................................... 11 1.3. EXECUTIVE SUMMARY .............................................................................................. 12 1.4. GROUP PRESENTATION............................................................................................ 14 1.4.1. Equity Structure ............................................................................................ 14 1.4.2. Milestones ..................................................................................................... 14 1.4.3. Dimension and ranking of Group .................................................................. 16 1.4.4. CGD Group structure - recent developments ............................................... 18 1.4.5. Branch office network ................................................................................... 21 1.4.6. Caixa brand .................................................................................................. 23 1.4.7. Human Capital .............................................................................................. 38 1.5. MACROECONOMIC FRAMEWORK ............................................................................ 42 1.5.1. Overview ....................................................................................................... 42 1.5.2. Portuguese economy .................................................................................... 45 1.5.2.1. Overview ............................................................................................... 45 1.5.2.2. Deposit and credit aggregates .............................................................. 46 1.5.2.3. Interest rates ......................................................................................... 47 1.5.2.4. Exchange rates ..................................................................................... 48 1.5.2.5. Capital market ....................................................................................... 49 1.6. BUSINESS STRATEGY AND MODEL ......................................................................... 52 1.6.1. Strategic objectives....................................................................................... 52 1.6.2. Business areas ............................................................................................. 55 1.6.2.1. Retail banking in Portugal ..................................................................... 55 1.6.2.2. Specialised credit .................................................................................. 77 1.6.2.3. International activity .............................................................................. 78 1.6.2.4. Investment banking ............................................................................... 90 1.6.2.5. Asset management ............................................................................... 94 1.6.2.6. Insurance and healthcare activity ......................................................... 96 1.7. FINANCIAL ANALYSIS .............................................................................................. 108 1.7.1. Consolidated activity ................................................................................... 108 1.7.1.1. Results and profitability....................................................................... 108 1.7.1.2. Balance sheet ..................................................................................... 114 1.7.1.3. Equity management ............................................................................ 126 1.7.1.4. CGD staff's pension fund and healthcare plan ................................... 128 1.7.1.5. Group rating ........................................................................................ 129 1.7.2. Separate activity ......................................................................................... 130 1.7.2.1. Balance sheet ..................................................................................... 130 1.7.2.2. Equity management ............................................................................ 131 1.7.2.3. Net income .......................................................................................... 131 1.7.3. Main risks and uncertainties in 2013 .......................................................... 132 1.8. RISK MANAGEMENT ................................................................................................. 133 1.8.1. Credit risk .................................................................................................... 134 1.8.2. Market risk .................................................................................................. 140 1.8.3. Interest rate risk in the balance sheet......................................................... 142 1.8.4. Liquidity risk ................................................................................................ 143 1.8.5. Operational risk ........................................................................................... 145 CGD REPORTS 4 ANNUAL REPORT 2012 CGD 1.9. SUBSEQUENT EVENTS ........................................................................................... 147 1.10. CONCLUDING REMARKS ...................................................................................... 148 1.11. PROPOSAL FOR THE APPROPRIATION OF NET INCOME ................................ 148 1.12. DECLARATION ON THE CONFORMITY OF THE PRESENTATION OF THE FINANCIAL INFORMATION ..................................................................................... 149 1.12.1. Board of Directors .................................................................................... 149 1.12.2. Bonds held by members of the Board of Directors .................................. 150 1.12.3. Information on CGD’s shareholders ........................................................ 150 1.13. SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS .......................... 151 Balance Sheet (Separate) ................................................................................... 151 Income Statement (Separate) .............................................................................. 152 Statement of Comprehensive Income (Separate) ............................................... 153 Cash Flow Statements (Separate) ....................................................................... 154 Statements of Changes in Shareholders’ Equity (Separate) ............................... 155 Consolidated Balance Sheet ............................................................................... 156 Consolidated Income Statement .......................................................................... 157 Consolidated Statement of Comprehensive Income ........................................... 158 Consolidated Cash Flows Statements ................................................................. 159 Consolidated Statements of Changes in Shareholders’ Equity ........................... 160 2. NOTES, REPORTS AND OPINIONS ........................................................................... 161 2.1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................. 161 1. Introductory note .............................................................................................. 161 2. Accounting policies .......................................................................................... 162 3. Group companies and transactions during the period ..................................... 192 4. Cash and cash equivalents at central banks ................................................... 198 5. Cash balances at other credit institutions ........................................................ 199 6. Loans and advances to credit institutions ........................................................ 200 7. Financial assets held for trading and other assets at fair value through profit or loss ...................................................................................................... 202 8. Available-for-sale financial assets ................................................................... 204 9. Financial assets with repurchase agreement .................................................. 212 10. Unit-linked products ....................................................................................... 213 11. Derivatives ..................................................................................................... 214 12. Held to maturity investments ......................................................................... 219 13. Loans and advances to customers ................................................................ 221 14. Non-current assets held for sale