Banco Popular Portugal, S.A.

Interim Report and Accounts (Amended)

Half Year 2016

This is a mere translation of the original Portuguese documents prepared by Banco Popular Portugal, S.A., which was made with the single purpose of simplifying their consultation to English speaking stakeholders. In case of any doubt or contradiction between these and the original documents, their Portuguese version prevails.

Interim Report republished with supplementary information and revised comparative data to fully comply with IAS 34.

General Information3
Board and Management 4
Banco Popular Portugal Financial Highlights 5
Interim Management Report 6
Macroeconomic scenario7
Commercial strategy 8
Income and profitability10
Net interest income 10
Banking income 13
Operating income14
Net Income15
Investments and assets16
Total assets16
Customer funds16
Lending operations18
Main risks and uncertainties 19
Attachment 1 - Shareholding position of the members of the governing and supervisory
bodies 22
Attachment 2 - Qualifying holdings 22
Declaration on the financial information reported23
Declaration of compliance of the financial information 24
Half-Year Accounts25
Balance Sheet25
Income Statement 27
Individual Statement of Changes in Equity 30
Cash Flow Statement 31
Notes to the Financial Statements32

General Information

Banco Popular Portugal, S.A., was founded on 2 July 1991. The head office is located at 51 Ramalho Ortigão in Lisbon. It is registered at the Lisbon Commercial Registry under the taxpayer No. 502.607.084. The Bank adopted its current corporate name in September 2005 to the detriment of its former name 'BNC-Banco Nacional de Crédito, S.A.'. Banco Popular Portugal is a member of the Deposit Guarantee Fund and its current share capital is 513 million euros.

The financial and statistical data provided herein were prepared according to analytical criteria based on the utmost objectivity, detail, reporting transparency and consistency over time, from the financial information periodically sent to the Bank of Portugal. The financial statements are presented in accordance with the legislation in force in 2016, particularly those issued by the Bank of Portugal regarding the presentation of accounting information. The current interim financial information was not audited or officially reviewed.

The interim management report, the half-year accounts, and accompanying documents are available at Banco Popular Portugal's Internet website: www.bancopopular.pt.

Board and Management

Board of the General Meeting

Augusto Fernando Correia Aguiar-Branco - Chairman João Carlos de Albuquerque de Moura Navega - Secretary

Board of Directors

Carlos Manuel Sobral Cid da Costa Álvares - Chairman Pedro Miguel da Gama Cunha - Member Tomás Pereira Pena - Member Susana de Medrano Boix - Member

Supervisory Board

Rui Manuel Ferreira de Oliveira - Chairman António Luis Castanheira da Silva Lopes António Manuel Mendes Barreira

Rui Manuel Medina da Silva Duarte - Alternate

Statutory Auditor

PricewaterhouseCoopers & Associados, Sociedade de Revisores Oficiais de Contas, Lda., represented by António Alberto Henriques Assis or José Manuel Henriques Bernardo

Alternate Statutory Auditor

Jorge Manuel Santos Costa, Statutory Auditor (No. 847)

Banco Popular Portugal Financial Highlights

(million euros, unless otherwise stated)

	--------	-
individual basis

		Change Jun-16 (% and p.p.)	Jun-15
Turnover
Total assets under management	10 503	14.6%	9 167
Total on-balance sheet assets	9569	16.9%	8 1 8 5
Own funds (a)	772	6.1%	728
Customer funds	5 7 5 7	11.6%	5 1 5 9
on-balance sheet funds	4 823	15.5%	4 177
other intermediated customer funds	934	-4.9%	982
Loans and advances to customers	6311	6.7%	5918
Contingent risks	430	8.2%	398
Solvency (CRD IV/CRR phasing in)
Total capital ratio	13.8%	1.1	12.7%
Tier 1 capital ratio	13.8%	1.8	12.0%
Common Equity Tier 1	13.8%	1.8	12.0%
Risk Management
Total risks	6742	6.7%	6316
Past-due loans	397	$9.0\%$	364
Past-due loans for over 90 days	387	9.7%	353
Past-due loan ratio (%)	6.3%	0.1	6.1%
Past-due loan coverage ratio	88.9%	$-15.1$	103.9%
Earnings
Net interest income	66.5	$-1.6%$	67.6
Banking income	90.5	$-32.1%$	133.3
Operating income	38.8	-50.0%	77.5
Income before tax	11.8	$-74.3%$	46.1
Net income	9.8	-68.8%	31.6
Profitability and efficiency
Average net assets	8725	7.3%	8 1 2 9
Average own assets	754	4.5%	721
ROA (%)	0.23%	$-0.56$	0.78%
ROE (%)	2.62%	$-6.20$	8.83%
Cost to income (%)	55.7%	14.9	40.8%
Per share data
Final number of shares (millions)	513	7.8%	476
Average number of shares (millions)	495	3.9%	476
Share book value $(6)$	1.505	$-1.5%$	1.529
Earnings per share $(E)$	0.019	-498.0%	0.066
Other data
Number of employees	1 1 5 9	$-10.7%$	1 298
Number of branches	165	$-2.4%$	169
Employees per branch	7.0	$-8.5%$	7.7

Interim Management Report

As at 30 June 2016, Banco Popular Portugal, S.A., reported shareholders' equity of 772,189 thousand euros on an individual basis (773,307 thousand euros on a consolidated basis after the integration of Popular Factoring, S.A.) - including the capital increase of 37 million euros to 513 million euros - managed over 10.5 billion euros of total assets, including customer funds in the amount of 5.7 billion euros. At the end of the first half of 2016, Banco Popular's net assets exceeded 9.5 billion euros both on an individual and on a consolidated basis. In this period, net profit on an individual basis amounted to 9.8 million euros and on a consolidated basis it exceeded 10.9 million euros.

The bank's activity was supported by a network of 165 branches and a team of 1,159 staff.

Banco Popular Portugal (Bank) offers a full range of products and services, together with the following companies that are also related with Banco Popular Español (BPE), the group to which it belongs:

Popular Gestão de Activos, S.A., wholly owned by BPE, is a Fund Management Company that manages, among others, the securities and real estate investment funds commercialised by Banco Popular Portugal;
Eurovida - Companhia de Seguros de Vida, S.A., is an insurance company that provides life and capitalisation insurance, and is 84.1% held by BPE and 15.9% held by Banco Popular Portugal;
Popular Seguros - Companhia de Seguros, S.A., is wholly owned by Eurovida, and trades in non-life insurance products.
Popular Factoring S.A. – On 31 December 2015, Popular Factoring, S.A., handed the Bank of Portugal a merger project with Banco Popular Portugal, S.A. The planned acquisition of the Qualifying Holding, owned by Banco Popular Español, S.A. (sole shareholder of Banco Popular Portugal, S.A.), took place in April 2016, following the approval of the Bank of Portugal, by means of a share capital increase of Banco Popular Portugal, S.A., fully subscribed by its sole shareholder, Banco Popular Español, S.A., through contributions in kind substantiated by the Qualifying Holding.

As at 30 June 2016, the Bank fully owned Popular Factoring, S.A., after acquiring the qualifying holding from Banco Popular Español, S.A., (which amounted to 99.83%) and compulsorily purchasing the remaining shares.

Popular Factoring, S.A. (henceforth 'consolidated company') is presented in the Bank's consolidated accounts under the full consolidation method.

Macroeconomic scenario

According to Statistics Portugal, gross domestic product (GDP) grew by 0.9% between January and March 2016, when compared with the same period last year. This year-on-year growth was lower than in the previous quarter (1.3% growth) due to a slowdown in exports of goods and services and a lower contribution of domestic demand via the slowdown in investment. Net external demand contributed negatively to the year-on-year GDP change, which was coupled with a deceleration of imports of goods and services that together contributed to reduce the openness of the economy.

The several components of domestic demand behaved differently. Private consumption increased by 2.9% year on year mostly due to the purchase of durable goods. It was also boosted by the increase of disposable income and the demand of consumer loans, thus favourably contributing to the total amount. Conversely, regarding the investment component (-0.6% year on year) there was a decrease in gross fixed capital formation (GFCF) by -2.2% mostly associated with the construction sector but also extended to machinery, equipment, and transports.

The year-on-year growth trend of exports slowed down in the first quarter of 2016 (2.2% after 2.8% in the previous quarter), reflecting the deceleration of both exports of goods and services. Tourism was the exception since it increased substantially in the first quarter.

In the first quarter of 2016, the year-on-year growth trend of imports, mostly of goods, decelerated (4.6% compared with 5.3% in the same period last year).

Regarding the unemployment rate, according to Statistics Portugal it eased off to 12.4% in March 2016, with a downward trend both when compared with the same period last year and on a monthly basis. Inflation levels remained low with a year-on-year change in the harmonized index of consumer prices by 0.4% at the end of the first quarter of 2016.

Portuguese GDP growth in the first quarter was lower than that of the Euro Zone, whose economy grew by 1.7% when compared with the same period last year. However, in the previous quarters and over the year, the recovery rhythm of the economic activity has been similar to the Euro Zone average.

The projections of the Bank of Portugal point to a continuous gradual economic recovery process throughout the year. After a 1.5% GDP growth in 2015, a slight deceleration to 1.3% is expected in 2016, followed by 1.6% and 1.5% increases (revised downwards) for 2017 and

2018 respectively. Exports and investment are expected to post more robust growth in the years after 2016, given that both domestic demand and private and public consumption will have a slower rhythm when compared with 2016, which is compatible with the deleveraging of both private economic agents and the State. The prevalence of historically low interest rates and the monetary policy in terms of the Euro Zone, together with the existence of positive domestic primary balances, the need to achieve the goals defined for public finances, and lastly the growth of international trade and of the main economies whose demand is targeted at the Portuguese economy will be important factors for the confirmation of these projections and the recovery.

The projected growth for the Portuguese economy is, however, compatible with a progressive reduction in the unemployment rate and the inflation rate is expected to have an upward trend until 2018.

Commercial strategy

In the first half of 2016, Banco Popular strengthened its strategic positioning in the corporate segment, which resulted in an increased market share. This growth in the corporate market was coupled with the strengthening of the Bank's positioning regarding private customers, with the development of several initiatives and solutions that have contributed to approximate the Bank and its customers.

Regarding the private customer segment, there was an increase of around 12.8 thousand new customers in the first half of 2016. This growth, in line with 2015, has mostly resulted from the excellent response of the market to the Bank's offer in terms of residential mortgage loans, as well as the member-get-member strategy or via corporate customers.

In the scope of partnerships, we would like to highlight the launch of a new car loan together with Cofidis, the agreement signed with Remax/Melon named 'Casa de Sonho' (Dream House), and the agreement signed with DECO that offers an exclusive residential mortgage loan to DECO members (Banco Popular's home loan was considered the right choice for consumers by DECO). By promoting several initiatives, we have also strengthened our relationship with Médis and TAP, namely through the Victoria loyalty programme.

In the Corporate segment, the market further recognized Banco Popular has a SME-targeted bank, which allowed the Bank to raise 4.1 thousand new customers. In spite of the fierce competition and the still slight recovery of the national economy, Banco Popular has managed to increase the volume of loans granted, with a corresponding increase in terms of market share and customer loyalty.

Customer care, operational swiftness, and diversified offer are still key factors for the high satisfaction levels that Corporate customers feel towards Banco Popular. Banco Popular's strategy will maintain the transversal support to every sector in the economy and thus will

keep on providing almost every financing arrangement that a company or a sole trader may need in their activity. Accordingly, credit growth exceeded 336.5 million euros in the first half of 2016.

Aware of the need to provide our customers with the best solutions and the best possible experience, we have implemented several improvements in the digital channels, which guarantee better usability, greater offer, and more information, always with added security. Also concerning digital channels, we would like to highlight Banco Popular's App, which is increasingly being downloaded (both iOS and Android versions), and on which Banco Popular has been focusing its attention, not only by including more and more useful information, but also continuously improving its functionalities.

In terms of Brand and Communication, Banco Popular has maintained the strategy initiated in 2015 based on an always on approach and an integrated 360º campaign, trying to be present in the main media and conveying values that characterize its relationship with its customers: Proximity, Flexibility, and Swiftness.

However, a vital aspect continues to be carrying out several sectoral communication initiatives, focusing on important topics in the areas of Tourism, Agriculture, and Industry, trying to obtain from some of the main business people that operate in these sectors answers or solutions to the many challenges that our economy faces.

The proximity to the corporate world and its customers has led Banco Popular to maintain its marketing strategy, participating in important national trade fairs and conferences, and to sponsor various programmes, sharing its market experience as an Iberian Bank that already counts on 90 years in the market.

Income and profitability

The income statement is summarised in Table 1 with reference to the first half of 2016 and the same period in 2015, pursuant to regulations issued by the Bank of Portugal, namely as regards the international accounting standards, including the restatement of 2015 individual accounts. Table 1a also shows the consolidated income statement for the first half of 2016 resulting from the full acquisition of Popular Factoring, S.A., after having handed the merger project to the Bank of Portugal at the end of 2015 with a view to integrate the factoring activity in the Bank.

	Table 1. Individual and Consolidated Income Statement (2015 restated)
	( $\epsilon$ thousand)
		$Jun-16$ consolidated	$Jun-16$ individual	$Jun-15$ individual	Individual change Amount	%
1	Interest and similar income	97 404	94 662	106 630	$-11968$	$-11.2$
2	Interest and similar charges	35 989	35 989	46 213	$-10224$	$-22.1$
з	Net interest income (1-2)	61 415	58 673	60 417	$-1744$	$-2.9$
4	Loan-related fees and commissions	8019	7853	7 1 5 8	695	9.7
5	Net interest income (3+4)	69 434	66 526	67 575	$-1049$	$-1.6$
6	Return on equity instruments	94	94	62	32	51.6
7	Net fees and commissions	17 995	18518	17987	531	3.0
8	Net income from financial transactions	18735	18733	805	17929	2228.5
9	Net gains from the sale of other assets	$-6023$	$-6023$	42	$-6065$	$-14415.9$
10	Other operating income	$-7525$	$-7396$	46 804	$-54200$	$-115.8$
11	Banking income (5+6+7+8+9+10)	92710	90 452	133 275	$-42822$	$-32.1$
12	Personnel expenses	25 4 15	24 835	29 965	$-5130$	$-17.1$
13	Administrative overheads	25 709	25 535	24 403	1 1 3 2	4.6
14	Depreciation	1 3 3 5	1 3 2 2	1456	$-134$	$-9.2$
15	Operating income (11-12-13-14)	40 251	38760	77 451	$-38691$	$-50.0$
16	Provisions net of recoveries and write-offs	737	737	$-838$	1575	187.9
17	Net adjustments associated with customer loans	18 489	18 499	27993	$-9494$	$-33.9$
18	Net impairment of other assets	7686	7686	4 1 6 8	3518	84.4
19	Profit before tax (15-16-17-18)	13 339	11838	46 128	$-34290$	$-74.3$
20	Income tax	2 3 8 5	2002	14 553	$-12551$	$-86.2$
21	Net income for the period (19-20)	10 954	9836	31 575	$-21739$	$-68.8$

Net interest income

In the first half of 2016, net interest income without loan fees and commissions stood at 58.7 million euros, 1,744 thousand euros less, or -2.9%, when compared with the same period in 2015. This result was derived mostly from a drop by over 11% in interest and similar income and the decrease by over 22% in interest and similar charges. The Bank maintained its policy of reducing the cost of its liabilities initiated in prior years, which resulted in savings of 10.2 million euros in interest and similar charges. This decrease was divided into around 10.4 million euros due to the favourable price effect and around 0.2 million euros due to unfavourable volume and maturity effects.

As far as total investment is concerned, there was a decrease by almost 12 million euros in terms of interest and similar income, more than 10.2 million of which due to loans granted and 2.6 million due to the decrease in the financial asset portfolio.

The volume and maturity effects of investments contributed positively with around 5.4 million euros to net interest income, which was however insufficient to offset the strong unfavourable price effect in the amount of 17.4 million euros, of which 16.7 million euros are due to loans granted (see Table 2).

The necessary combination of the two components of net interest income confirms however the careful management of interest rates in a historically unfavourable scenario.

Table 2. Annual changes to net interest income - Causal analysis Jun/2016 - Jun/2015 (not restated)
$(\epsilon$ thousand)
Changes in:	Due to changes in Turnover	Due to changes in interest rates	Due to changes in period	Total change
Loans and advances to customers	6053	$-16711$	435	$-10223$
Deposits with banks	736	170		907
Financial assets	$-1936$	$-842$	133	$-2645$
Other assets	- 17	10	0	- 7
Total Investments	4836	$-17373$	569	$-11968$
Deposits from customers	2834	$-11899$	152	$-8913$
Deposits from banks	83	$-132$	11	- 38
Own assets	0	0	0	0
Other liabilities	$-2961$	1615	73	$-1273$
Total assets	- 44	$-10416$	236	$-10224$
Net interest income	4880	- 6957	333	$-1744$

Regarding average balances and rates, and according to Table 3, average assets at the end of the first half of 2016 were supported by customer funds (around 55%) and deposits from banks (around 34%). Loans and advances to customers is still the main component of assets, representing around 71% of total average assets. In the first half of 2016, compared with the same period last year, there was an important and balanced increase, on average, both of loans granted and of customer funds by around 445 million euros.

Table 3 . Evolution of equity and average annual rates. Net interest income.
( $\epsilon$ thousand & %)
			Jun-16				Jun-15 (not restated)
	Average Balance	Dist. (%)	Income or expense	Average Rate (%)	Average Balance	Dist. (%)	Income or expense	Average Rate (%)
Loans and advances to customers (a)	6 209 119	71.2%	72760	2.36	5763549	70.5%	82 984	2.90
Deposits with banks	559 448	6.4%	1036	0.37	229 386	2.8%	130	0.11
Financial assets	1754698	20.1%	20 804	2.39	1915960	23.5%	23 448	2.47
Other assets	201 676	2.3%	61	0.06	261 026	3.2%	68	0.05
Total Assets (b)	8724941	100%	94 662	2.19	8 169 922	100%	106 630	2.63
Deposits from customers (c)	4 756 485	54.5%	21 0 21	0.89	4 311 287	52.8%	29 933	1.40
Deposits from banks	2950608	33.8%	2050	0.14	2 834 548	34.7%	2088	0.15
Equity accounts	754 234	8.6%	0	0.00	714 818	8.7%	0	0.00
Other liabilities	263 613	3.0%	12918	9.88	309 269	3.8%	14 192	9.25
Total Liabilities and Shreholders' Equity (d)	8724941	100%	35 988	0.83	8 169 922	100%	46 213	1.14
Customer spread (a - c)				1.47				1.50
Net Interest Income (b - d)				1.36				1.49

Taking into consideration the evolution of the average interest rates of loans and deposits, we would like to stress that average assets stood at 8.7 Billion euros, with an overall profitability of 2.19%, which, when compared with the average cost of total resources allocated to the financing of assets (0.83%), has enabled an annual net interest income of 1.36%. However, we have to highlight the decrease by 13 basis points in net interest income when compared with the same period last year.

The policy of reducing the cost of liabilities, already implemented since mid-2014, has led this past year to a 51 basis points reduction in the annual average rate of customer funds, which stood at 0.89% at the end of the first half of the year, which compares with 1.40% in the same period last year (Table 3a). On the other hand, the average annual rate of loans granted dropped by 54 basis points, from 2.90% to 2.36%. Due to this combined effect, customer spread decreased by 3 basis points to 1.47%.

Table 3a . Evolution of annual average rates. Net interest income.
	Average annual rate	Average annual rate	Change
	Jun-16	Jun-15 (not restated)	Jun-16 / Jun-15
	(%)	(%)	(p.p.)
Loans and advances to customers (a)	2.36	2.90	$-0.54$
Deposits with banks	0.37	0.11	0.26
Financial assets	2.39	2.47	$-0.08$
Other assets	0.06	0.05	0.01
Total Assets (b)	2.19	2.63	$-0.44$
Deposits from customers (c)	0.89	1.40	$-0.51$
Deposits from banks	0.14	0.15	$-0.01$
Equity accounts	0.00	0.00	0.00
Other liabilities	9.88	9.25	0.64
Total Liabilities and Shareholders' Equity (d)	0.83	1.14	$-0.31$
Customer spread (a - c)	1.47	1.50	$-0.03$
Net Interest Income (b - d)	1.36	1.49	$-0.13$

Individual net interest income stood at 66.5 million euros at the end of the first half of 2016, which represents a -1.6% change when compared with the same period last year, i.e., around 1 million euros less. This rate of change was less negative due to the year-on-year increase by around 695 thousand euros in fees and commissions associated with the loans granted. On a consolidated basis, we would like to highlight the positive effect the merger with Popular Factoring had on net interest income by around 2,908 thousand euros, which allowed the consolidated net interest income to stand at 69.4 million euros at the end of the first half of 2016.

Banking income

In 2016, net fees and commissions charged to customers for the sale of products and services totalled 18.5 million euros, which corresponds to an increase by 3% when compared with the same period last year, i.e. around 531 thousand euros.

Complementing that information, Table 4 shows the main items that have contributed to the change in net fees and commissions in the past year. We would like to highlight the positive contribution of fees and commissions related with insurance brokerage (+53.3%), structuring financial operations (+34.5%), account management (+13.6%), and other net fees and commissions (+39.1%). The negative performance of some items, namely the decrease by 4.3% in fees related with collection and payment handling, -7.9% in terms of asset management fees, and -33.4% in fees related with guarantees and sureties, has contributed to weaken overall growth.

Table 4. Net Fees and Commissions
(€ thousand)
	Jun-16 consolidated	$Jun-16$ individual	$Jun-15$ individual	Individual change Amount	%
Commissions from guarantees and sureties	2020	2020	3034	$-1014$	$-33.4$
Commissions from collection and payment handling (net)	6 152	6 152	6430	$-278$	$-4.3$
Commissions from asset management (net)	1 160	1 160	1 260	- 100	$-7.9$
Commissions from insurance brokerage	1 199	1 199	782	417	53.3
Commissions from account management	3 158	3 1 5 8	2 7 7 9	379	13.6
Commissions from processing services	796	796	774	22	2.8
Commissions from structuring financial operations	1092	1092	812	280	34.5
Other fees and commissions (net)	2418	2941	2 1 1 5	826	39.1
Total	17995	18 518	17987	531	3.0

Regarding the remaining items of the banking product, we would like to highlight the significant increase by almost 18 million euros in terms of financial transactions, due to the timely sale of some financial assets in the portfolio with a view to realize gains in a market context of relevant losses in the profitability levels of certain asset segments.

Half Year 2016

The item Other operating results had a negative performance of over 54 million euros, which is explained by the sale in the first half of 2015 of the business unit in charge of managing real estate assets, which allowed the Bank to realize capital gains of over 48.6 million euros at the time. This fact explains the decrease in banking product by over 42.8 million euros (- 32.1%), which stood at around 90.4 million euros at the end of the first half of 2016 on an individual basis. On a consolidated basis, however, we would like to highlight the increase by 2.2 million euros when compared with individual figures due to the aforementioned merger with the factoring activity.

Operating income

In the first half of 2016, the Bank maintained the measures that have been implemented in previous years regarding its cost policy. As at 30 June 2016, operating expenses totalled 52.5 million euros on a consolidated basis and 51.7 million euros on an individual basis, which represents a decrease by over 4 million euros, i.e., -7,4% when compared with the same period last year.

From Table 5, we can see that personnel expenses on an individual basis amounted to 24.8 million euros, which corresponds to a decrease by 17.1%, when compared with the same period last year. This decrease is due to the aforementioned sale of the business unit in charge of managing real estate assets and credit exposures of customers associated with the real estate sector.

Administrative overheads totalled around 25.7 million euros on a consolidated basis and 25.5 million euros on an individual basis, which corresponds to a 4.6% increase, or around 1.1 million euros, when compared with the same period last year. Since cost control is visible in every item, this increase is due only to the costs associated with the management of real estate assets and credit exposures of costumers associated with the real estate sector that were not entirely offset by the remaining savings.

In terms of allocations for depreciation of fixed assets we have witnessed a positive performance (-134 thousand euros, or -9.2%) to around 1.3 million euros.

Table 5 . Operating Expenses
(€ thousand)
					Change
	Jun-16	Jun-16	Jun-15	Amount	%
	consolidated	individual	individual
Personnel expenses (a)	25 4 15	24 835	29 965	$-5130$	$-17.1$
Wages and salaries	17577	17 180	21 687	$-4507$	$-20.8$
Social security charges	5 3 2 0	5 1 9 7	5955	- 758	$-12.7$
Pension fund	2 2 2 5	2 2 2 5	2011	214	10.7
Other expenses	293	233	312	$-79$	$-25.3$
Administrative overheads (b)	25709	25 5 35	24 403	1 1 3 2	4.6
External supplies	1 2 4 9	1 2 4 6	1 2 8 6	$-40$	$-3.1$
Rents and leasing	2 182	2 1 3 9	2 2 1 9	$-80$	$-3.6$
Communications	1900	1928	2040	$-112$	$-5.5$
Travel, hotel and representation	598	584	641	- 57	$-8.9$
Advertising and publications	1031	1010	1995	- 985	$-49.4$
Maintenance of premises and equipment	1622	1621	1527	94	6.1
Transports	528	528	625	- 97	$-15.6$
Fees and regular payment agreements	1319	1 3 2 0	2032	$-712$	$-35.0$
Legal expenses	1011	971	1 0 0 9	$-38$	$-3.8$
IT Services	4 9 0 9	4887	4894	- 7	$-0.1$
Security, surveillance and cleaning	205	205	217	$-12$	$-5.5$
Temporary work	1976	1976	2010	- 34	$-1.7$
External consultants and auditors	461	432	268	164	61.0
SIBS	1 603	1568	1 600	$-32$	$-2.0$
Services rendered by Banco Popular Group	5 1 1 5	5 1 2 0	2040	3 0 8 0	151.0
Other services
Other operating expenses (c=a+b)	51 124	50 370	54 368	$-3998$	-7.4
Amortization for the period (d)	1 3 3 5	1 3 2 2	1456	- 134	$-9.2$
Total (c+d)	52 459	51 692	55 824	$-4132$	-7.4

The weight of personnel expenses in operating costs stood at 48%, which compares with 55% at the end of the first half of 2015. In the first half of 2016, operating income amounted to 38.8 million euros, i.e. around 49.9% less than in the same period last year. This was mostly due to the negative performance of other operating results, where, in the first half of 2015, there were capital gains from the sale of the aforementioned business unit (around 48.6 million euros).

Net Income

Net income for the first half of 2016 stood at around 9.8 million euros, which compares with 32 million euros in the same period last year. This unfavourable performance was mostly due to the item Other operating results, because of the aforementioned capital gains in the first half of 2015, and occurred in spite of the positive performance of other items, namely fees and commissions, financial transaction results, personnel costs, and provisions.

Investments and assets

Total assets

As at 30 June 2016, Banco Popular's net assets amounted to around 9,569 million euros, 1,384 million euros more than in the same period last year, which corresponds to an increase by 16.9%.

Adjustments made to the size of the financial asset portfolio, the increase of customer loans and the decrease of funding from central banks as a counterpart of the funding from the parent company, and the inherent management of resources have contributed to this evolution.

Banco Popular also manages other customer funds applied in investment, savings and retirement instruments, which amounted to 934 million euros at the end of the first half of 2016, representing a 4.9% decrease when compared with the same period last year, mostly due to investment funds.

Therefore, total assets managed by the Bank amounted to 10,503 million euros at the end of the first half of 2016, which represents a 14.6% increase when compared with the same period last year.

Customer funds

As at 30 June 2016, the total amount of on- and off-balance sheet customer funds amounted to 5,757 million euros, 11.6% more when compared with the previous year. Table 6 shows the performance of total customer funds in the first halves of 2016 and 2015.

On-balance sheet funds, mostly via deposits from customers, totalled approximately 4,823 million euros, which corresponds to an increase by 15.5% when compared with the same period last year, i.e. an overall growth that exceeded 646 million euros both in terms of demand accounts and time deposits.

Demand accounts posted significant growth of over 406 million euros, or almost 40%, rising from 1,028 million euros to 1,434 million euros, while time deposits grew by 8%, i.e., around 250 million euros.

Table 6. Customer funds
(€ thousand)
	Jun-16	Jun-16	Jun-15	Change
	consolidated	individual	individual	Amount	$\frac{9}{6}$
CUSTOMER FUNDS:
Deposits	4799939	4802090	4 147 027	655 063	15.8
Demand accounts	1 432 274	1 434 425	1 028 381	406 044	39.5
Time deposits	3 361 866	3 361 866	3 112 459	249 407	8.0
Savings accounts	5799	5799	6 187	$-388$	$-6.3$
Cheques, payment orders and other funds	7568	7568	9578	$-2010$	$-21.0$
Interest payable	13 161	13 161	19 950	$-6789$	$-34.0$
ON-BALANCE SHEET FUNDS (a)	4820668	4822819	4 176 555	646 264	15.5
Disintermediation funds
Investment funds	197 014	197 014	254 148	$-57134$	$-22.5$
Investment and capitalisation insurance	496 834	496 834	502 716	$-5882$	$-1.2$
Retirement insurance plans	102 427	102 427	100 075	2 3 5 2	2.3
Portfolio management	137 991	137 991	125 082	12 909	10.3
OFF-BALANCE SHEET FUNDS (b)	934 265	934 265	982 021	$-47755$	$-4.9$
TOTAL CUSTOMER FUNDS (a + b)	5754933	5757084	5 158 576	598 508	11.6

Off-balance sheet funds - which include investment fund applications, retirement plans, funds raised through investment insurance products, and assets managed through private banking - decreased by 4.9%, dropping from around 982 million euros at the end of the first half of 2015 to around 934 million euros as at 30 June 2016. The performance of this component was due to a decrease in investment and capitalization insurance and investment funds by over 63 million euros since portfolio management grew by 10.3%.

As at 30 June 2016, Banco Popular Portugal was the depositary of 12 investment funds managed by Popular Gestão de Activos, whose total portfolio amounted then to over 197 million euros. Table 7 shows the assets contained in each of the investment funds managed with reference to the end of the first halves of 2016 and 2015.

Table 7 . Investment Fund Portfolio (asset value)
(€ thousand)
	Jun-16	Jun-15	Change
Funds			Amount	%
Popular Acções	7485	8 1 3 5	- 650	-8.0
Popular Euro Obrigações	5492	10 457	-4965	$-47.5$
Popular Global 25	43 658	52 298	$-8640$	$-16.5$
Popular Global 50	40 440	48 407	- 7967	$-16.5$
Popular Global 75	20 606	22 406	$-1800$	$-8.0$
Popular Tesouraria	20 044	15751	4 2 9 3	27.3
Popular Objectivo Rendimento 2015	0	2 1 6 7	$-2167$	$-100.0$
Popular Objectivo Rendimento 2021	968	1 270	- 302	$-23.8$
Popular Predifundo	O	10 4 23	$-10423$	$-100.0$
ImoPopular	5418	20 726	$-15.308$	$-73.9$
Imourbe	12 246	10 353	1893	18.3
Popular Arrendamento	40 656	51 754	$-11099$	$-21.4$
Total	197 014	254 148	$-57134$	$-22.5$

Banco Popular Portugal also sells Eurovida's retirement plans and investment insurance, holding an equity stake of 15.9% in that company.

Lending operations

Loans and advances to customers amounted to around 6,311 million euros at the end of the first half of 2016, representing 66% of total assets, or 62.3% if we consider total net loans. Loans and advances to corporate customers and the public sector totalled around 3,490 million euros (excluding other securitized loans and overdue loans), which corresponds to around 63% of total lending operations. Loans and advances to private customers represented 37% of total lending, having increased by 5.9%, which corresponds to 113.8 million euros more, totalling over 2,045 million euros.

The following table shows the distribution of loans and advances to customers in the first halves of 2016 and 2015.

Table 8 . Loans and advances to customers
(€ thousand)
	Jun-16	Jun-16	Jun-15	Change
	consolidated	individual	individual	Amount	%
Loans and advances to customers ( a )
Private Companies and Public sector	3 539 925	3 489 904	3 280 854	209 050	6,4
Private individuals	2 045 137	2 045 137	1 931 276	113 861	5,9
Residential mortgage loans	1 660 017	1 660 017	1 537 934	122 083	7,9
Personal and consumer loans	30 758	30 758	36 880	- 6 122	-16,6
Other personal lending	354 361	354 361	356 462	- 2 101	-0,6
Total	5 585 062	5 535 041	5 212 130	322 911	6,2
Other loans (represented by securities) ( b )	380 251	380 251	336 937	43 314	12,9
Interest and commissions receivable ( c )	- 861	- 496	4 898	- 5 394	-110,1
Past-due loans and interest ( d )
Due within 90 days	16 376	9 707	11 236	- 1 529	-13,6
Over 90 days	390 409	386 978	352 710	34 268	9,7
Total	406 785	396 685	363 946	32 739	9,0
Total Gross Lending ( a + b + c + d )	6 371 237	6 311 481	5 917 911	393 570	6,7
Impairment on loans and advances to customers	357 316	352 567	378 302	- 25 735	-6,8
Total Net Lending	6 013 921	5 958 914	5 539 609	419 305	7,6

The increase by almost 323 million euros in terms of loans granted, which represents 6.2% more when compared with the same period last year, was mostly due to the increase by around 209 million euros, or 6.4%, in loans granted to corporate customers and by 122 million euros, or 7.9%, in terms of mortgage loans, since the remaining types of consumer loans have decreased.

The amount of past-due loans totalled around 32.7 million euros, i.e. 9%.

The 419 million euro change in terms of total net loans profited from the decrease in loan impairment by around 25.7 million euros, thus representing a 7.9% increase when compared wit the same period last year and exceeding the 6.7% change in terms of gross loans.

On an individual basis, the amount of past-due loans and interest totalled approximately 396.7 million euros at the end of the first half of 2016, 9% or 396.7 million euros more, when compared with the same period last year. This category of loans represented 6.29% of total loans. Taking into consideration only loans that have been non-performing for more than 90 days this indicator stood at 6.13%.

Total non-performing loans on an individual basis amounted to over 912 million euros at the end of the first half of 2016, which represents around 14.45% of total loans and has showed an improving trend of 9% since the end of the first half of 2015. On a consolidated basis its weight on total loans decreased to 14.37%.

Table 9. Past-due Loans and Non-performing Loans
$(E$ thousand)
	Jun-16	Jun-16	Jun-15	Change
	consolidated	individual	individual	Amount	% / p.p.
Past-due loans and interest	406 785	396 685	363 946	32739	9.0
Past-due loans by more than 90 days	390 409	386978	352 710	34 268	9.7
Non-performing loans	915 519	912 088	1 002 772	$-90684$	$-9.0$
Past-due loans / total loans (%)	6.38	6.29	6.15		0.14
Past-due loans over 90 days / total lending (%)	6.13	6.13	5.96		0.17
Non-performing loans / total lending (%)	14.37	14.45	16.94		$-2.49$
Net non-performing loans / total net lending (%)	10.46	10.56	12.65		$-2.10$
Impairment on loans and advances to customers	357 316	352 567	378 302	$-25735$	$-6.8$
Hedging ratio (%)	87.8	88.9	103.9		$-15.1$
memorandum item:
Total lending	6 371 237	6 311 481	5917911	393 570	6.7

At the end of the first half of 2016, customer loan impairment on an individual basis stood at 352.5 million euros, i.e. 6.8% below figures at the end of June 2015.

Main risks and uncertainties

In the second half of 2016, and in spite of a slight recovery trend of the economic situation of the country, there are still many challenges ahead and therefore we need to take into consideration a series of situations that may originate certain risks to the development of Banco Popular's activity, namely those that may restrain the fulfilment of the goals defined in the Budget and in the Financing and Capital Plan.

At this point, we would like to identify the main risks that may have an impact on the activity of the Bank during the second half of 2016 and that may lead future results to be materially different from those expected, namely:

Half Year 2016

• In Portugal, and despite some positive signs, there are still some risks and uncertainties tied with the still frail socio-economical conditions and the uncertain political scenario that is dependant upon the discussion of the General Government Budget for 2017.

• In Europe, we would like to highlight that the European Central Bank has maintained an accommodative monetary policy by keeping the reference interest rate at low levels for a long period of time, and enforced a policy on refinancing lines to support the economy, while strengthening the construction of the Banking Union in the sense of maintaining financial stability and trust in the euro and the economies that comprise it.

• Future regulatory developments that may introduce additional challenges for the banking sector on the short term.

Risks associated with the Bank's activity:

Despite the several control mechanisms and the measures implemented to mitigate them, the Bank is exposed to specific risks in its activity, namely:

• Credit and Concentration Risk – This is the main risk that the Bank is exposed to; we cannot exclude the possibility of a decline in the quality of its assets.

• Market Risk – The Bank's trading portfolio is not very significant, thus we do not expect any relevant impact via this type of risk during the second half of 2016.

• Liquidity Risk – In the past few years, the Bank has significantly reduced its liquidity dependence on the parent company. However, in a possible crisis scenario, it might be more difficult to obtain funding via the financial markets; the impossibility of resorting to this financing source would imply an almost exclusive funding by the parent company.

• Interest Rate Risk – Although not expected, a significant change in interest rates might have a positive impact on net interest income.

• Exchange Rate Risk - The global currency position tends to be null and therefore any impact on the Bank's earnings as a result of fluctuations in exchange rates is immaterial.

• Operational Risk - According to the latest self-assessment exercise regarding operational risks inherent to each area in the Bank, residual risk is concentrated mostly in a low-risk category. Quantitatively, losses due to operational risk in the first half of the year compare very favourably with the same period last year and we expect a similar behaviour in the second half of the year.

• Reputational and Compliance Risk – These are risks to which the Bank is also exposed, although the internal governance system has reduced the probability of occurrence of events with impact on the results.

• Other Risks – The Bank is also exposed to other risks (for example, technological risk, real estate risk or the risk inherent to the application of its strategy). However, we do not

anticipate that these risks shall have a significant influence on the Bank's activity and its results during the second half of the year.

Lisbon, 29 July 2016

The Board of Directors

Annex 1 - Shareholding position of the members of the governing and supervisory bodies

(Article 447 of the Commercial Companies Code - 'Código das Sociedades Comerciais') Nothing to report.

Annex 2 - Qualifying holdings

(Article 448 of the Commercial Companies Code and Article 20 of the Securities Code 'Código dos Valores Mobiliários')

Shareholders	No. of Shares Shareholding Position		Voting Rights
Banco Popular Español, SA	513 000 000	100%	100%

Declaration on the financial information reported

STATEMENT REFERRED TO IN ARTICLE 8(4) OF THE PORTUGUESE SECURITIES CODE

Pursuant to paragraph 4 of article 8 of the Portuguese Securities Code, Banco Popular Portugal states that the current interim financial information was not audited or officially reviewed.

Lisbon, 29 July 2016

BANCO POPULAR PORTUGAL, S.A.

Declaration of compliance of the financial information

STATEMENT REFERRED TO IN ARTICLE 246(1)(c)

OF THE PORTUGUESE SECURITIES CODE

Paragraph (c) of article 246(1) of the Portuguese Securities Code states that each of the responsible persons shall issue a statement as explained therein.

STATEMENT OF THE BOARD OF DIRECTORS

The members of the Board of Directors of Banco Popular Portugal, S.A., identified below by name, have individually signed the following statement:

'Pursuant to paragraph (c) of article 246(1) of the Portuguese Securities Code, I declare that, to the best of my knowledge, the condensed financial statements of Banco Popular Portugal, S.A. referred to the first half of 2016, were drawn up in accordance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and the results of that entity and that the interim management report faithfully states the information required in accordance with article 246(2) of the Portuguese Securities Code.'

Lisbon, 29 July 2016

Board of Directors

Carlos Manuel Sobral Cid da Costa Álvares - Chairman

Pedro Miguel da Gama Cunha - Member

Tomás Pereira Pena - Member

Susana de Medrano Boix - Member

Half-Year Accounts

Balance Sheet

Individual Balance Sheet as at 30 June 2016 and 2015

					(€ thousand)
			3 0 - 0 6 - 2 0 16
		A mo unt befo re
	N o tes/	pro visio ns,	P ro visio ns,		31-12-2015
	T A	nnexes depreciatio n	ablesimpairment andimpairment and N depreciatio n	et amo unt
		1	2	3 = 1 - 2
Assets
Cash and balances w ith central banks	17	82 867		82 867	55.505
Deposits w ith banks	18	89 820		89 820	76.428
Financial assets held for trading	19	44 975		44 975	49.893
Available-for-sale financial assets	21	1 435 988		1 435 988	1.914.430
Loans and advances to banks	22	1 405 171		1 405 171	606.616
Loans and advances to customers	23	6 311 481	352 567	5 958 914	5.702.487
Hedging derivatives					1.055
Non-current assets held for sale	25	0	0	0	0
Other tangible assets	26	156 791	90 452	66 339	68.498
Intangible assets	27	21 573	20 924	649	146
Investments in subsidiaries, associates and joint ventures	20 and 25	22 579	2 336	20 243	20.243
Deferred income tax assets	28	54 076	0	54 076	59.153
Other assets	29	446 063	35 940	410 123	442.035

Total Assets		10 071 384	502 219	9 569 165	8 996 489
Liabilities
Deposits from central banks	30	0		0	0
Financial liabilities held for trading	19	47 835		47 835	41.452
Deposits from banks	31	3 694 312		3 694 312	2.924.272
Deposits from customers	32	4 822 819		4 822 819	5.034.537
Debt securities issued	33	27 525		27 525	38.092
Hedging derivatives	34	75 761		75 761	121.337
Provisions	35	3 297		3 297	2.860
Current income tax liabilities	15	521		521	6.391
Deferred income tax liabilities	28	14 575		14 575	21.131
Other liabilities	36	110 331		110 331	53.779
Total Liabilities		8 796 976	0	8 796 976	8 243 851
Shareholders' Equity
Shareholders' Equity	39	513 000		513 000	476.000
Share premium	39	10 109		10 109	10.109
Revaluation reserves	40	- 15 030		- 15 030	1.722
Other reserves and retained earnings	41	254 274		254 274	220.787
Income for the period		9 836		9 836	44.020
Total Shareholders' Equity		772 189	0	772 189	752 638
Total Liabilities + Shareholders' Equity		9 569 165	0	9 569 165	8 996 489

THE CERTIFIED PUBLIC ACCOUNTANT THE BOARD OF DIRECTORS

			30/06/16
		Amount before
	Notes/	provisions,	Provisions,
	Tables	impairment and	impairment and	Net amount
	Annexes	depreciation	depreciation
		1	$\overline{2}$	$3 = 1 - 2$
Assets
Cash and balances with central banks	17	82 867		82 867
Deposits with banks	18	89821		89821
Financial assets held for trading	19	44 975		44 975
Available-for-sale financial assets	21	1 398 899		1 398 899
Loans and advances to banks	22	1 405 171		1 405 171
Loans and advances to customers	23	6 371 237	357 316	6 013 921
Non-current assets held for sale	25	0	0	0
Other tangible assets	26	157 713	91 170	66 543
Intangible assets	27	22 505	21 756	749
Investments in subsidiaries, associates and joint ventures	20 and 25	22 579	2 3 3 6	20 243
Current income tax assets	15	49		49
Deferred income tax assets	28	54 318	0	54 318
Other assets	29	444 810	35 940	408 870
Total Assets		10 094 944	508 518	9 586 426
Liabilities
Deposits from central banks	30	0		0
Financial liabilities held for trading	19	47835		47835
Deposits from banks	31	3 694 312		3 694 312
Deposits from customers	32	4820668		4820668
Debt securities issued	33	27 525		27 525
Hedging derivatives	34	75 761		75 761
Provisions	35	3 2 9 7		3 2 9 7
Current income tax liabilities	15	903		903
Deferred income tax liabilities	28	14 575		14 575
Other liabilities	36	128 243		128 243
Total Liabilities		8813119	0 ¹	8813119
Shareholders' Equity
Shareholders' Equity	39	513 000		513 000
Share premium	39	10 109		10 109
Revaluation reserves	40	$-15030$		$-15030$
Other reserves and retained earnings	41	254 274		254 274
Income for the period		10 954		10 954

Total Shareholders' Equity		773 307	0	773 307
Total Liabilities + Shareholders' Equity		9 586 426	Οi	9 586 426

Income Statement

Individual Income Statement as at 30 June 2016 and 2015

			(€ thousand)
	N o tes/ T ables A nnexes	3 0 - 0 6 - 2 0 16	3 0 - 0 6 - 2 0 15
Interest and similar income Interest and similar charges	6 6	102 515 35 989	113 788 46 213
Net interest income		66 526	67 575
Revenue from equity instruments Fees and Commissions received Fees and Commissions paid Net gains from assets and liabilities at fair value through profit or loss Net gains from available-for-sale financial assets Net gains from foreign exchange differences Income from the sale of other assets Other operating income	7 8 8 9 9 10 11 12	94 21 212 2 694 0 - 23 832 41 788 777 - 6 023 - 7 396	63 21 554 3 568 0 - 81 - 1 887 42 46 804
Banking income		90 452	133 275
Personnel expenses Administrative overheads Depreciation and amortization Provisions net of recoveries and w rite-offs Adjustments to loans and advances to customers (net of reversals and w rite-offs) Impairment of other assets net of reversals and recoveries	13 14 26 and 27 35 23 29	24 835 25 535 1 322 737 0 18 499 7 686	29 965 24 403 1 456 - 838 0 27 993 4 168
Net income before tax		11 838	46 128
Income tax Current tax Deferred tax	15 15	2 002 - 1 383 3 385	14 553 9 811 4 742
Net income after tax		9 836	31 575
Of w hich: Net income from discontinued operations		0	0
Net income for the period		9 836	31 575
Earnings per share (euro)		0,02	0,07

THE CERTIFIED PUBLIC ACCOUNTANT THE BOARD OF DIRECTORS

Consolidated Income Statement as at 30 June 2016

		(€ thousand)
	N o tes/ T ables A nnexes	3 0 - 0 6 - 2 0 16
Interest and similar income Interest and similar charges Net interest income	6 6	105 423 35 989 69 434
Revenue from equity instruments Fees and Commissions received Fees and Commissions paid Net gains from assets and liabilities at fair value through profit or loss Net gains from available-for-sale financial assets Net gains from foreign exchange differences Income from the sale of other assets Other operating income	7 8 8 9 9 10 11 12	94 20 836 2 841 - 23 831 41 788 778 - 6 023 - 7 525
Banking income		92 710
Personnel expenses Administrative overheads Depreciation and amortization Provisions net of recoveries and w rite-offs Adjustments to loans and advances to customers (net of reversals and w rite-offs) Impairment of other assets net of reversals and recoveries	13 14 26 e 27 35 23 29	25 415 25 709 1 335 737 0 18 489 7 686
Net income before tax		13 339
Income tax Current tax Deferred tax Net income after tax	15 15	2 385 - 1 000 3 385 10 954
Of w hich: Net income from discontinued operations		0
Net income for the period		10 954
Earnings per share (euro)		0,02

THE CERTIFIED PUBLIC ACCOUNTANT

THE BOARD OF DIRECTORS

Statement of Comprehensive Income

Individual Statement of Comprehensive Income

		(€ thousand)
	30-06-2016	30-06-2015
Net income	9 836	31 575
Other comprehensive income:
Items not reclassified as income
Retirement pensions
Recognition of actuarial gains and losses	( 10 534)	( 11 051)
	( 10 534)	( 11 051)
Items reclassified as income
Available-for-sale financial assets
Revaluation of available-for-sale financial assets	( 21 615)	( 4 722)
Tax burden	4 863	1 051
	( 16 752)	( 3 671)
Income not recognised in the income statement	( 27 286)	( 14 722)
Individual comprehensive income	( 17 450)	16 853
Consolidated Statement of Comprehensive Income		(€ thousand)
		30-06-2016
Net income		10 954
Other comprehensive income:
Items not reclassified as income
Retirement pensions
Recognition of actuarial gains and losses		( 10 534)
Items reclassified as income		( 10 534)

Available-for-sale financial assets Revaluation of available-for-sale financial assets		( 21 615)

Tax burden		4 863 ( 16 752)
Income not recognised in the income statement		( 27 286)
Individual comprehensive income		( 16 332)

THE CERTIFIED PUBLIC ACCOUNTANT THE BOARD OF DIRECTORS

Individual Statement of Changes in Equity

						(€ thousand)
	Share Capital	Share premium	Fair value reserves	Other reserves and retained earnings	Net income	Total Equity
Balance as at 31 December 2014	476 000	10 109	( 2 285)	217 098	2 283	703 205
Impact of the notice 5/2015 of Bank of Portugal			( 672)	8 326		7 654
Balance as at 01 January 2015	476 000	10 109	( 2 957)	225 424	2 283	710 859
Transferred to reserves				2 283	( 2 283)	0
Actuarial gains and losses						0
Other			( 24)	24		0
Comprehensive income for the period			( 3 671)	( 11 052)	31 575	16 852
Balance as at 30 de Junho de 2015	476 000	10 109	( 6 652)	216 679	31 575	727 711
Resultado integral do 2º semestre			8 374	4 108	12 445	24 927
Balance as at 31 December 2015 Share capital increase	476 000 37 000	10 109	1 722	220 787	44 020	752 638 37 000
Transferred to reserves				44 020	( 44 020)	0
Actuarial gains and losses						0
Other						0
Comprehensive income for the period			( 16 752)	( 10 533)	9 836	( 17 449)
Balance as at 30 June 2016	513 000	10 109	( 15 030)	254 274	9 836	772 189

Consolidated Statement of Changes in Equity

						(€ thousand)
	Share Capital	Share premium	Fair value reserves	Other reserves and retained earnings	Net income	Total Equity
Balance as at 31 December 2015 Share capital increase	476 000 37 000	10 109	1 722	220 787	44 020	752 638 37 000
Transferred to reserves				44 020	( 44 020)	0
Actuarial gains and losses Other						0 0
Comprehensive income for the period			( 16 752)	( 10 533)	10 954	( 16 331)
Balance as at 30 June 2016	513 000	10 109	( 15 030)	254 274	10 954	773 307

THE CERTIFIED PUBLIC ACCOUNTANT THE BOARD OF DIRECTORS

Cash Flow Statement

		Consolidated	Individual
	Notes	30/06/2016	30/06/2016	30/06/2015
Cash flow from operating activities
Interest, fees and other income received		110 264	107 367	112 539
Interest, fees and other expenses paid		(31860)	(31650)	(41529)
Recovery of outstanding loans and interest		545	545	1789
Cash paid to suppliers and employees		(35739)	(35645)	(51231)
Contributions to the pension fund	37	(424)	(424)	(1019)
Sub-total		42786	40 193	20 549
Changes in operating assets and liabilities
Deposits from central banks		(27414)	(27414)	52 576
Financial assets held for trading and at fair value through profit and loss		12 197	12 197	647
Loans and advances to banks		126 221	126 221	(4982)
Deposits from banks		769 918	769 918	23 993
Loans and advances to customers		(385388)	(329784)	(176005)
Deposits from customers		(210528)	(208377)	69 258
Risk management derivatives		(81125)	(81125)	(48536)
Other operating assets and liabilities		63 573	44 955	38 553
Net cash flow from operating activities before
income taxes		310 240	346 784	(23947)
Income tax		(4537)	(4487)	2 3 5 7
Net cash flow from operating activities		305 703	342 297	(21590)
Cash flow from investment activities
Dividends received		94	94	63
Purchase of available for sale financial assets		(426797)	(463886)	(6212)
Sale of available for sale financial assets		983 130	983 306	117 173
Sale of non-current tangible assets held for sale		53 593	53 593	9493
Purchase and sale of assets		(1271)	(952)	(841)
Net cash flow from investing activities		608 749	572 155	119 676
Cash flow from financing activities
Issue of bonds and other securitized liabilities	33	1072	1072	225 000
Issue of own equity instruments		37 000	37 000	0
Redemption of bonds and other securitized liabilities		(12616)	(12616)	(488960)
Net cash flow from financing activities		25 456	25 456	(263960)
Net changes in cash and cash equivalents
Cash and cash equivalents at the beginning of the period	46	595 477	595 477	325 415
Effect of exchange rate fluctuations on cash and cash equivalents		(1776)	(1776)	(1080)
Net changes in cash and cash equivalents		939 908	939 908	(165874)
Cash and cash equivalents at the end of the period	46	1 533 609	1 533 609	158 461

Notes to the Financial Statements

NOTES TO THE INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS AS AT 30 June 2016 AND 2015

(€ thousand)

1. INTRODUCTION

1.1 Activity

The Bank - then named BNC-Banco Nacional de Crédito Imobiliário - was founded on 2 July 1991, following the authorization given by Decree order No. 155/91, of 26 April, issued by the Ministry for Finances. On 12 September 2005, the name of the Bank was changed to Banco Popular Portugal, S.A.

The Bank is authorized to operate pursuant to the rules and regulations currently applicable to banks in Portugal and its corporate purpose is raising funds from third parties in the form of deposits or other, which it applies, together with its own funds, in granting loans or in other assets, also providing additional banking services in the country and abroad.

The accounts of the Bank are consolidated at the parent company, Banco Popular Español, S.A., ('BPE') whose Head Office is located in Madrid, Spain, at 34 Calle Velázquez.

BPE accounts are available at its respective Head Office as well on its webpage (www.bancopopular.es).

The Bank is not a listed company.

1.2 Bank structure

As a result of the restructuring process initiated in previous years, during 2011, the Bank ceased to hold any equity stake in any subsidiary and ceased to reclassify 'Class D Notes' issued by Navigator Mortgage Finance Nº 1 Plc ('Navigator') into the available-for-sale asset portfolio.

Based on the assumption that the investment in Navigator and its potential impact on the financial statements were considered immaterial, and pursuant to IAS 1 revised, the Bank decided not to prepare consolidated financial statements from 2011 onwards, since that information is not materially relevant for effects of the presentation of the Bank's financial information nor does it influence the decision of the readers of those statements.

As at 30 June 2016 and 2015, the Bank detained only one equity stake in the associated company Eurovida – Companhia de Seguros de Vida, S.A. (see Notes 20 and 25).

On 31 December 2015, Popular Factoring, S.A., handed the Bank of Portugal a merger project with Banco Popular Portugal, S.A. The planned acquisition of the Qualifying Holding, owned by Banco Popular Español, S.A. (sole shareholder of Banco Popular Portugal, S.A.), took place in April 2016, following the approval of the Bank of Portugal, by means of a share capital increase of Banco Popular

Portugal, S.A., fully subscribed by its sole shareholder, Banco Popular Español, S.A., through contributions in kind substantiated by the Qualifying Holding.

Popular Factoring, S.A. (henceforth 'consolidated company') is presented in the Bank's consolidated accounts under the full consolidation method.

In the first half of 2016, Banco Popular Portugal, S.A., sold its card business, but this operation shall only come into force on 30 September.

2. Summary of the Main Accounting Principles

The main accounting principles and valuation criteria adopted in the preparation of these financial statements are stated below. These principles were consistently applied to every year presented, except when otherwise stated.

2.1 Bases of preparation

Individual financial statements

Pursuant to article 2 of Notice No. 5/2015 issued by the Bank of Portugal on 7 December, starting on 1 January 2016, the entities that are under the supervision of the Bank of Portugal shall prepare their individual financial statements according to the International Accounting Standards (IAS) as adopted at each moment by the Regulation of the European Union and respecting the conceptual framework for the preparation and presentation of financial statements on which those standards are based, as was formerly required for consolidated financial statements when applicable.

The impact on the individual financial statements of the Bank on 1 January 2016 arising from the application of the IAS mostly resulted in a decrease in the provisions for customer loans and guarantees, arising from the recognition of impairment losses according to IAS 39 that replaced the former framework provided by Notice No. 3/95 issued by the Bank of Portugal and now revoked. This originated, excluding the associated tax effect, an increase of the share capital by 46 847 thousand euros.

As a consequence of the same Notice and from the correction of the deferred taxes estimates, the amounts set out in the 2015 restatement differ from those published in the previous year.

Furthermore, the amount of taxes that result from positive equity changes in consequence of the revocation of the 3/95 Notice and transition to imparity (according to the 5/95 Notice) were accounted as current year earnings in the first half of 2016. During this fiscal year these taxes will be reflected as retained earnings. This impact, materially non-relevant, would have led to a decrease of €1.993 thousands in retained earnings (considering a tax rate – IRC – of 22.5%) and an improvement in current year earnings of €665 should they had been accounted until June 2016.

Consolidated financial statements

The consolidated financial statements were prepared based on the accounting records of Banco Popular Portugal, SA and Popular Factoring, SA and were processed according to the Reporting Standards Financial and International Accounting Standards / International Financial Reporting Standards (IAS / IFRS) adopted by the European Union as established by Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July, transposed into national law through the Notice of Banco de Portugal No 1/2005 of 21 February.

2.2 Segmental reporting

As of 1 January 2009, the Bank adopted IFRS 8 – Operating Segments for effects of disclosing financial information analysed by operating segments (see Note 5).

An operational segment in a business is a group of assets and operations used to provide products or services, subject to risks and benefits that are different from those seen in other segments.

The Bank determines and presents operational segments based on in-house produced management information.

2.3 Equity stakes in associated companies

Associated companies are those in which the Bank has, directly or indirectly, a significant influence over its management and financial policy but does not hold control over the company. It is assumed that the Bank has a significant influence when it holds the power to control over 20% of the voting rights of the associate. Even when voting rights are lower than 20%, the Bank may have significant influence through the participation in management bodies or the composition of the Executive Boards of Directors.

In the Bank's individual financial statements, associated companies are booked at historical cost. The dividends from associated companies are booked in the Bank's individual income on the date they are attributed or received.

In case of objective evidence of impairment, the loss by impairment is recognised in the income statement.

2.4 Foreign currency transactions

a) Functional currency and presentation currency

The financial statements are presented in euros, which is both the functional and presentation currency of the Bank.

b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using indicative exchange rates prevailing on the dates of transactions. Gains and losses resulting from the conversion of foreign currency transactions, deriving from their extinction and conversion into monetary assets and liabilities in foreign currencies at the exchange rate at the end of each period, are recognised in the income statement, except when they are part of cash flow hedges or net investment in foreign currency, which are deferred in equity.

Conversion differences in non-monetary items, such as equity instruments measured at fair value with changes recognised in net income, are booked as gains and losses at fair value. For non-monetary items, such as equity instruments, classified as available for sale, conversion differences are booked in equity, in the fair value reserve.

2.5 Derivative financial instruments

Derivative financial instruments are initially recognised at fair value on trade date and subsequently remeasured at fair value. Fair values are based on quoted market prices, including recent market transactions and evaluation models, namely: discounted cash flow models and option valuation models Derivatives are considered assets when their fair value is positive and liabilities when their fair value is negative.

Certain derivatives embedded in other financial instruments – such as debt instruments whose profitability is indexed to share or share index price – are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value and subsequent changes are recognised in the income statement.

The Bank holds: (i) trading derivatives, measured at fair value – gains and losses arising from changes in their fair value are immediately included in the income statement, and (ii) fair value derivatives accounted for in conformity with Note 3.1 a).

2.6 Recognition of interest and similar income and interest and similar charges

Interest income and charges are recognised in the income statement for all instruments measured at amortized cost in accordance with the pro rata temporis accrual method.

Once a financial asset or group of financial assets has been written down as a result of an impairment loss, interest income should be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

2.7 Fees and commissions

Fees and commissions are generally recognised using the accrual method when the service has been provided. Revenue from credit line fees, which are expected to originate a loan, is differed (together with any cost directly related) and recognised as an adjustment at the effective interest rate. Fees and commissions on trades, or participation in third party trades - such as purchasing stock or purchasing or selling a business - are recognised as earned when the service has been provided. Portfolio and other management advisory fees are recognised based on the applicable service contracts – usually recognised proportionally to the time elapsed. Asset management fees related to investment funds are recognised rateably over the period the service is provided.

2.8 Financial assets

Financial assets are recognised in the Balance Sheet on trade date - the date on which the Bank commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus direct transaction costs, except for financial assets carried at fair value through profit or loss for which transaction cost are directly recognised in the income statement. Financial assets are derecognised when (i) the rights to receive cash flows from these assets have expired, (ii) the Bank has substantially transferred all risks and rewards of ownership, or (iii) notwithstanding the fact that the Bank may have

retained part, but not substantially all, of the risks and benefits associated with holding them, control over the assets was transferred.

Financial assets and liabilities are offset and the net amount booked in the income statement when, and only when, the Bank has a currently enforceable legal right to offset the recognised amounts and intends to settle them on a net basis.

The Bank classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. Management determines the classification of the financial instruments at initial recognition.

a) Financial assets at fair value through profit or loss

This category has two sub-categories: Financial assets held for trading, and those designated at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by Management. Derivative financial assets are also categorised as held for trading unless they qualify for hedge accounting.

The fair value option is only used for financial assets and liabilities in one of the following circumstances:

There is a significant reduction in the measurement inconsistencies that would arise if the related derivatives were treated as held for trading and the underlying financial instruments were carried at amortised cost, such as loans and advances to customers or banks and debt securities;
Certain investments, such as equity investments, that are managed and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to management on that basis; and
Financial instruments, such as holdings of debt securities, with one or more embedded derivatives that significantly modify cash flows, are carried at fair value through profit and loss.

These assets are assessed daily or at each reporting date based on fair value. In the case of bonds and other fixed-income securities the balance sheet contains the amount of unpaid accrued interest.

Gains and losses arising from changes in fair value are included directly in the income statement, which also includes interest revenue and dividends on traded assets and liabilities at fair value. Revenue from interest on financial assets at fair value through profit or loss is carried in net interest income.

Gains and losses arising from changes in the fair value of the derivatives that are managed together with designated financial assets and liabilities are included in item 'Income from assets and liabilities at fair value through profit and loss'.

b) Loans and receivables

Loans and receivables includes loans to customers and banks, leasing operations, factoring operations, participation in syndicated loans and securitised loans (commercial paper and corporate bonds) that are not traded in an active market and for which there is no selling intention.

Loans and securitised loans traded in an active market are classified as available-for-sale financial assets.

Loans and receivables are initially recognised at fair value. In general, fair value at inception corresponds to transaction value and includes fees, commissions or other credit-related costs and revenues.

Subsequently, loans and receivables are valued at amortised cost based on the effective interest rate method and subject to impairment tests.

Interest, fees, commissions and other credit-related costs and revenues are recognised on an accrual basis over the period of the transactions regardless of the moment when they are charged or actually paid. Fees on loan commitments are recognised on a deferred and linear basis during the lifetime of the commitment.

The Bank classifies as non-performing loans instalments of principal or interest after, at most, thirty days of their due date. In case of litigation, all principal instalments are considered non-performing (current and past due).

Factoring

Credit to customers includes advances within factoring operations with recourse and the amount of the invoices granted without recourse, whose intention is not a short run sale, and is recorded on the date the accounts receivable are assigned by the seller of the product or service that issues the invoice.

Accounts receivables assigned by the issuer of the invoices or other commercial credits for recourse or non-recourse factoring are registered on assets under the item Loans and advances to customers. As a counterpart it changes the item other liabilities.

When invoices are taken with recourse but cash advances on those respective contracts have not been made yet, they are registered in off-balance sheet accounts on the amount of the invoices that have been received. The off-balance sheet account is rectified as the cash advances are made.

Commitments arising from credit lines to factoring customers that have not been utilized yet are registered in off-balance sheet accounts.

Guarantees granted and irrevocable commitments

Liabilities for guarantees granted and irrevocable commitments are registered in off-balance sheet accounts by the value at risk and interest flows, commissions or other revenues recorded in the income statement during the lifetime of the operations. These operations are subject to impairment tests.

c) Held-to-maturity investments

This item includes non-derivative financial assets with fixed or determinable payments and defined maturities that the Bank has the intention and ability to hold to maturity.

These assets are initially recognised at fair value, minus possible commissions included in the effective rate, plus all direct incremental costs. They are subsequently valued at amortised cost, using the effective interest rate method and subject to impairment tests. If during a subsequent period the amount of the loss of impairment decreases, and that decrease may be objectively tied to an event that happened after the impairment was recognised, this is reversed through the income statement.

d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that: (i) the Bank intends to keep for an undetermined period of time, (ii) are recognised as available for sale at inception, or (ii) are not categorized into any of the other categories described above.

This item includes:

Fixed-income securities that have not been classified in the trading book or the credit portfolio, or held-to-maturity investments;
Available-for-sale variable-yield securities; and
Available-for-sale financial asset funds and supplementary funds.

Available-for-sale assets are recognised at fair value, except for equity instruments that are not listed on any active market and whose fair value may not be reliably measured or estimated, in which case they are recognised at cost value.

Gains and losses arising from changes in the fair value of available-for-sale financial assets are directly recognised in equity in item Fair value revaluation reserves, except for impairment losses and foreign exchange gains and losses of monetary assets, until the asset is sold, when the gain or loss previously recognised in equity is carried in the income statement.

Interest from bonds and other fixed-income securities and the differences between acquisition cost and the nominal value (premium or discount) are registered in the income statement using the effective rate method.

Revenue from variable-income securities (dividends in the case of shares) are booked in the income statement on the date they are attributed or received. According to this criterion, interim dividends are recorded as profit in the exercise their distribution is decided.

In case of objective impairment evidence – resulting from a significant and prolonged decline in the fair value of the security or from financial problems on the part of the issuer – the cumulative loss on the fair-value revaluation reserve is removed from equity and recognised in the income statement.

Impairment losses on fixed-income securities may be reversed on the income statement if there is a positive change in the security's fair value as a result of an event that occurred after the initial impairment recognition. Impairment losses on variable-income securities may not be reversed. In the case of impaired securities, subsequent negative fair-value changes are always recognised in the income statement.

Exchange rate fluctuations of non-monetary assets (equity instruments) classified in the available-forsale portfolio are registered in fair-value reserves. Exchange rate fluctuations in the other securities are booked in the income statement.

2.9 Impairment of financial assets

a) Assets carried at amortised cost

The Bank assesses on each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. A financial asset, or group of financial assets, is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated. Objective evidence that an asset, or group of assets, is impaired includes observable data that the Bank is aware of, regarding the following loss events:

(i) significant financial stress of the borrower;
(ii) a breach of contract, such as a default in principal and/or interest payments;
(iii) concessions granted to the borrower, for reasons relating to the borrower's financial difficulty, that the lender would not have otherwise considered;
(iv) probability that the borrower will go into bankruptcy or other financial reorganisation;
(v) disappearance of an active market for that financial asset because of financial difficulties;
(vi) information indicating that there will be a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although that decrease cannot yet be identified with the Bank's assets, including:
adverse changes in the group of financial assets' condition and/or payment capacity;
national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Bank assesses initially whether objective evidence of impairment exists for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes that asset in a group of financial assets with similar credit risk and collectively assesses them for impairment.

If there is objective evidence of an impairment loss on loans and receivables, or held-to-maturity investments, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future impairment losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the provisions account. The Bank may also determine impairment losses through the instrument's fair value at observable market prices.

When analysing impairment in a portfolio, the Bank estimates the probability of an operation or a customer to default during the estimated period between impairment occurs and the loss is identified.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar risk characteristics (i.e., based on the Bank's classification process that takes into account asset type, geographical location, collateral type, past due status and other relevant factors). These characteristics are relevant to estimate future cash flows for groups of financial assets by being indicative of the counterpart's ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

If, in a subsequent period, the amount of the impairment loss decreases and that decrease can be related objectively to an event occurring after the impairment was recognised (e.g., improvement in a

debtor's credit rating), the previously recognised impairment loss is reversed through the provisions account. The amount of the reversal is recognised directly in the income statement.

Loans to customers whose terms have been renegotiated are no longer considered past due and are treated as new loan contracts. Restructuring procedures include: extended payment conditions, approved management plans, payment change and deferral. Restructuring practices and policies are based on criteria that, from the point of view of the Bank's management, indicate that payment has a high probability of occurring.

b) Assets carried at fair value

The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. In the case of equity securities classified as availablefor-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, minus any impairment loss on that financial asset previously recognised in the income statement - is removed from equity and recognised in the income statement.

Impairment losses on equity instruments that have been recognised in the income statement are not reversible. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and growth can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement.

2.10 Intangible assets

- Software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives.

Costs associated with software development and maintenance are recognised as expenses when incurred. Costs directly associated with developing unique and identifiable software, controlled by the Bank and where it is probable that they will generate future economic benefits, are recognised as intangible assets.

Costs associated with software development recognised as assets are amortized during its useful life using the straight-line method.

2.11 Intangible assets

The Bank's property is comprised essentially of offices and branches. All tangible assets are stated at historical cost minus depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation of other tangible assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

	Estimated useful life (years)
Freehold buildings	50
Adaptation works in leasehold property	10, or during the lease period if lower than 10 years
Furniture, fixtures and fittings	5 to 8
Computers and similar equipment	3 to 4
Transport equipment	4
Other tangible assets	4 to 10

Tangible assets subject to depreciation are submitted to impairment tests whenever events or changes in certain circumstances indicate their carrying amount may no longer be recovered. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher between the value in use and the asset's fair value, minus sale costs.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These gains and losses are included in the income statement.

2.12 Tangible assets held for sale

Assets acquired in exchange for loans (real estate property, equipment and other assets) are booked in item Tangible assets held for sale at the amount stated in the agreement that regulates the asset's delivery, which corresponds to the lower of the outstanding amount of the debt or the asset's evaluation at the time of its delivery.

The Bank's policy for this type of assets is to sell them as soon as possible.

These assets are periodically assessed and impairment losses are recognised whenever the result of that appraisal is lower than the asset's book value (see Note 29).

Potential realized gains on these assets are not recorded in the Balance Sheet.

2.13 Leases

a) As lessee

Leases entered by the Bank are essentially related to transport equipment, where there are contracts classified as financial leases and others as operating leases.

Payments made on operating leases are recognised in the income statement.

When an operating lease is terminated before the end of the lease period, any payment required by the lessor, by way of compensation, is recognised as an expense in the period the operation is terminated.

Financial leases are capitalised at the inception of the lease in the respective item of tangible or intangible assets, as a counterpart to the item Other liabilities, at the lower of (i) the fair value of the leased asset and (ii) the present value of the minimum lease payments. Incremental costs paid for leases are added to the recognised asset. Tangible assets are depreciated pursuant to Note 2.11. Rents are comprised of (i) financial cost charged to expenses and (ii) financial depreciation of premium that is deducted from the item Other liabilities. Financial charges are recognised as expenses over the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability

for each period. However, when there is no reasonable certainty that the Bank will obtain possession of the asset at the end of the lease, the asset must be totally depreciated during the smaller of the lease period or its useful life.

b) As lessor

Assets held under a financial lease are recognised as an expense in the period to which they relate by the current amount of the payments to be made. The difference between the gross amount receivable and the current balance receivable is recognised as receivable financial income.

Interest included in the rents charged to customers is registered as income, while principal depreciation, also included in the rents, is deducted from the overall amount initially lent. Recognition of the financial result reflects a constant periodical return rate over the remaining net investment of the lessor.

2.14 Provisions

Provisions for other risks and charges

Provisions for restructuring costs and legal expenses are recognised whenever: the Bank has a legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle that obligation; and the amount can be reliably estimated.

Loan impairment and Provisions for specific and general credit risks

In accordance with No. 7 of the aforementioned legislation, Notice No. 3/95 issued by the Bank or Portugal was revoked and therefore the Bank prepared its respective financial statements in terms of recognition, classification and measurement of loans granted and other accounts receivable, and determination of impairment entirely pursuant to the reference criteria and principles disclosed by the Bank of Portugal in the Circular Letter No. 02/2014/DSP of 26 February.

2.15 Employee benefits

a) Pension liabilities and other post-retirement benefits

In compliance with the Collective Bargaining Agreement (ACT) for the banking sector, the Bank has established a Pension Fund designed to cover retirement benefits on account of age, including disability, and survivor's benefits, set up for the entire work force, calculated based on projected salaries of staff in active employment. The pension fund is supported by the contributions made, based on the amounts determined by periodic actuarial calculations. A defined benefit plan is a pension plan that generally defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

Unique Successive Premium to calculate disability and survivor's benefits. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible. The amount of liabilities includes, besides retirement pensions, post-employment medical care (SAMS) and post-retirement death benefits.

Accumulated actuarial gains or losses that did not exceed 10% of the highest of the current value of liabilities for past services or the value of the pension funds were included in the 'corridor'. Actuarial gains/losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.

As at 1 January 2013 the Bank changed its accounting policy of recognising financial and actuarial gains and losses for pension plans and other defined benefit post-employment benefits pursuant to IAS 19 Revised. Financial and actuarial gains and losses are now recognised in the period they occur directly in equity in the Statement of Comprehensive Income.

Increases in past service liabilities resulting from early retirement are fully recognised as expenses in the income statement for the year in which they occur.

Increases in past service liabilities resulting from changes in the conditions of Pension Plans are fully recognised as expenses in the case of acquired benefits or depreciated during the period that remains until those benefits are acquired. The balance of the increases in liabilities not yet recognised as expenses are registered in the item Other Assets.

Past service liabilities (post-employment benefits) are covered by a pension fund. The amount of the pension funds corresponds to the fair value of its assets at the balance sheet date.

The financing regime by the pension fund is established in Notice No. 4/2005 issued by the Bank of Portugal, which determines the compulsory fully financing pension liabilities and a minimum level of 95% financing of past service liabilities for staff in active employment.

In the Bank's financial statements, the amount of past service liabilities for retirement pensions, minus the amount of the pension fund, is stated in item Other Liabilities.

The Bank's income statement includes the following expenses related to retirement and survivor pensions:

Current service cost;
Interest expense on the total outstanding liabilities;
Expected revenue of the pension fund;
Expenses with increases in early retirement liabilities;
'Multiprotecção' life insurance premium (see Note 37);
Management fee paid to the fund management company.

On the transition date, the Bank adopted the possibility permitted by IFRS 1 of not recalculating deferred actuarial gains and losses from the beginning of the plans (normally known as the reset

option). Thus, deferred actuarial gains and losses recognised in the Bank's accounts as at 31 December 2003 were fully reversed in retained earnings on the transition date – 1 January 2004.

b) Seniority bonuses

In compliance with the Collective Bargaining Agreement (ACT) for the banking sector in Portugal, the Bank has committed to attribute to active staff that complete fifteen, twenty-five and thirty years of good and effective service, a seniority bonus equal, respectively, to one, two or three months of their effective monthly salary on the year of the attribution.

Every year the Bank determines the amount of liabilities for seniority bonuses using actuarial calculations based on the Project Unit Credit method for liabilities for past services. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible.

Liabilities for seniority bonuses are recognised in the item Other Liabilities.

The Bank's income statement includes the following expenses regarding seniority bonus liabilities:

cost of current service (cost of one year);
interest expenses;
actuarial gains/losses, changes in assumptions or changes in the conditions of the benefits.

2.16 Deferred taxes

Deferred taxes are recognised using the balance sheet debt method, based on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using the effective tax rate on profits at the balance sheet date that is expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.

Deferred income tax is recognised when it is probable that in the future there is enough tax on profits so that it can be used.

Taxes on profits based on the application of legal rates for each jurisdiction are recognised as expenses in the period when the profit is originated. The tax effects of reportable tax losses are recognised as an asset when it is likely that the future profitable profit is enough for the reportable tax loss to be utilized.

Deferred tax related to fair value revaluation of an available-for-sale asset, which is charged or credited directly in equity, is also credited or charged in equity and subsequently recognised in the income statement together with deferred gains or losses.

2.17 Financial liabilities

The Bank classifies its financial liabilities into the following categories: held-for-trade financial liabilities, other financial liabilities at fair value through profit and loss, deposits from central bank, deposits from other banks, customer deposits, securitised liabilities and other subordinated liabilities. Management determines the classification of the financial instruments at initial recognition.

a) Financial liabilities held for trading and at fair value through profit and loss

This item essentially includes deposits whose yield is indexed to stock portfolios or indexes and the negative fair value of derivative contracts. The evaluation of these liabilities is made based on fair value. The balance sheet value of deposits includes the amount in accrued interest not paid.

b) Central banks, other banks, and customer funds

After the initial recognition, deposits and other financial assets from customers, central banks and other banks are revalued at amortized cost based on the effective interest rate method.

c) Securitised liabilities, and other subordinated liabilities

These liabilities are initially recognised at fair value, which is the amount for which they were issued net of transaction costs incurred. These liabilities are subsequently measured at amortized cost and any difference between the net amount received on transaction and their redemption value is recognised in the income statement over the liability period using the effective interest rate method.

If the Bank acquires its own debt, this amount is removed from the balance sheet and the difference between the balance sheet amount of the liability and the amount spent to acquire it is recognised in the income statement.

2.18 Non-current assets held for sale

Non-current assets, or disposal groups, are classified as held for sale whenever their book value is recoverable through sale. This condition can only be met when the sale is highly probable and the asset is available for immediate sale in its current condition. The sale must be performed within one year from the date on which they are included in this item. An extension of the period during which the asset must be sold does not exclude that asset, or a disposal group, from being classified as held for sale if the delay is caused by an event or circumstances that the Bank cannot control and if the selling purpose is maintained. Immediately before the initial classification of the asset, or disposal group, as held for sale, the book value of non-current assets (or of every asset and liability in the group) is carried pursuant to the applicable IFRS. Subsequently these assets, or disposal group, will be remeasured at the lower between the initial carrying amount and the fair value minus selling costs.

2.19 Insurance and reinsurance brokerage

Banco Popular Portugal is authorized by the Authority for the Supervision of Insurances and Pension Funds to act as an insurance broker in the category of Associated Insurance Broker pursuant to paragraph 8(i) of Decree-law No. 144/2006 of 31 July, performing its brokerage activity in the area of life and non-life insurances.

In the scope of its insurance brokerage services, Banco Popular sells insurance contracts. As remuneration for the services rendered as an insurance broker, Banco Popular receives fees and commissions for insurance contracts and investment contracts, which are defined in agreements/protocols established between the Bank and the Insurance Companies.

The fees and commissions received for insurance brokerage services are recognized on an accrual basis, which means that those paid at a different moment from the period their refer to are booked as a receivable in item Other Assets (see Note 8).

	30/06/16	30/06/15	2015	2014	2013	2012
Life	891	489	944	4 6 3 7	1574	974
Non-life	308	293	578	642	507	462
	1 199	782	1 522	5 2 7 9	2081	436

3. Financial risk management

3.1 Strategy used for financial instruments

In view of its activity, the Bank raises funds essentially through customer deposits and monetary market operations.

Besides the activities of credit granting, the Bank also applies its funds in financial investments, particularly in the group of investments that currently comprise the Bank's portfolio.

The Bank's securities portfolio - including available-for-sale financial assets and trading portfolio amounted to around 1.4 billion euros in the first half of 2016, representing around 15% of the Bank's total net assets. The typology of these assets was broken down as follows: public Portuguese debt (15.6%), public Spanish debt (60.3%), banks (20.9%) and others (3.2%).

To hedge its investment against interest rate risk, the Bank carried out interest rate swap operations and monetary market operations, thus trying to control the variability of interest rate risk and the flows generated by these assets.

a) Fair value hedge accounting

Gains and losses resulting from the revaluation of hedge derivatives are recognised in the income statement. Gains and losses deriving from differences in terms of the fair value of hedged financial assets and liabilities, corresponding to the hedged risk, are also recognised in the income statement as a counterpart for the carrying value of the hedged assets and liabilities, in the case of operations at amortized cost, or by counterpart of the reserve for fair value revaluation in the case of available-forsale assets.

Efficacy tests for hedges are accordingly documented on a regular basis, ensuring the existence of proof during the lifetime of the hedged operations. If the hedge no longer meets the criteria demanded by hedge accounting, it shall be prospectively discontinued.

b) Cash flow hedge accounting

In a cash flow hedge, the effective part of the changes in fair value for the hedged derivative is recognised in reserves, and transferred to the income statement in the periods when the respective hedged item affects results. If it is foreseeable that the hedged operation will not take place, the amounts still stated in equity are immediately recognised in the income statement and the hedged instrument is transferred to the trading book.

The Bank is exposed to a certain cash flow risk as regards open positions in foreign currency. However, in view of the little materiality of the normally existing overall position, no hedge operations are carried out in this case.

3.2 Financial assets and liabilities at fair value

The Board of Directors considered that as at 30 June 2016, the fair value of assets and liabilities at amortised cost did not differ significantly from its book value.

In order to determine the fair value of a financial asset or liability, its market price is applied whenever there is an active market for it. In case there is no active market, which happens with some financial assets and liabilities, generally accepted valuation techniques based on market assumptions are employed.

The net income of financial assets and liabilities at fair value that have not been classified as hedging includes an amount of 41 858 thousand euros (June 2015: 990 thousand euros).

Consequently, the fair value change recognized in the income statement for the period is analysed as follows:

	CONSOLIDATED		INDIVIDUAL
	30/06/16		30/06/16		30/06/15
	Fair value	Change	Fair value	Change	Fair value	Change
Financial assets at fair value through profit or loss
Trading derivatives Interest rate swaps Futures and other forward contracts Options	43 237 1 1 5 1 119	15 096 872	43 237 1 1 5 1 119	15 096 ٠ 872	33 167 1912 5	22 250 260
Available-for-sale financial assets
Debt instruments issued by residents	224 063	822	224 063	822	34 973	$-1$
Equity instruments issued by residents	759	0	37849	$\Omega$	652
Other equity instruments issued by residents	46 538	۰	46 538	٠	46 419
Debt instruments issued by non-residents	1 127 464	37 973	1 127 464	37973	1730390
Equity instruments issued by non-residents	74	2993	74	2993	74
Financial liabilities at fair value through profit or loss
Trading derivatives
Interest rate swaps	47 657	$-15710$	47 657	$-15710$	36 697	$-21489$
Futures and other forward contracts	59		59	٠	925
Options	119	$-188$	119	$-188$	11	$-30$
		41858		41858		990

The table below classifies fair value assessment of the Bank's financial assets and liabilities based on a fair value hierarchy that reflects the significance of the inputs that were used in the assessment, according to the following levels:

Level 1: (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2: different inputs for market prices included in Level 1 that are observable for assets and liabilities either directly (i.e., as prices) or indirectly (i.e. derived from the prices);
Level 3: inputs for assets and liabilities that are not based on observable market data (nonobservable inputs).

Individual

		30-06-2016				31-12-2015
Ativos e Passivos mensurados ao justo valor	Nível 1	Nível 2	Nível 3	Total	Nível 1	Nível 2	Nível 3	Total
Ativos financeiros detidos para negociação Títulos de rendimento variável Derivados	455 -	- 44 506	14 -	469 44 506	2 038 -	- 37 901	9 954 -	11 992 37 901
Ativos financeiros disponíveis para venda Títulos de dívida Títulos de capital Derivados de cobertura	1 350 206 - -	1 321 - -	- 84 461 -	1 351 527 84 461 -	1 866 044 - -	1 158 - 1 055	- 47 228	1 867 202 47 228 1 055
Total dos Ativos mensurados ao justo valor	1 350 661	45 827	84 475	1 480 963	1 868 082	40 114	57 182	1 965 378
Passivos financeiros detidos para negociação (Derivados) Derivados de cobertura	- -	41 452 121 337	- -	41 452 121 337	- -	41 452 121 337	- -	41 452 121 337
Total dos Passivos mensurados ao justo valor	0	162 789	0	162 789	0	162 789	0	162 789

3.3 Credit risk

The Bank is exposed to credit risk, which is the possible loss that arises when the Bank's counterparties fail to fulfil their obligations. In the case of lending, it implies the loss of principal, interest and commissions, regarding amount, period and other conditions set forth in the contracts. Concerning off-balance sheet risks, it derives from the non-compliance of the counterparts regarding their obligations with third parties, which implies that the Bank has to assume as its own certain obligations depending on the contracts.

The Bank structures the levels of credit risk it is exposed to by establishing pre-defined acceptable risk amounts regarding the borrower or group of borrowers and geographical or business activity segments.

Exposure to credit risk is managed through a regular analysis of the capacity of borrowers and potential borrowers of meeting payment obligations for principal and interest, and by changing these loan limits when appropriate. Exposure to credit risk is also managed in part by obtaining collaterals and personal or corporate guarantees.

- Collaterals

The Bank employs a series of policies and practices in order to mitigate credit risk. The most traditional one is securing collaterals at the moment funds are advanced. The Bank implements guidelines regarding the acceptability of specific classes of collaterals or mitigation of credit risk. The main types of collaterals for loans and receivables are:

Property mortgages;
Pledges of operations made within the Bank;
Pledges on assets such as premises, inventory and accounts receivable;
Pledges on financial instruments, such as securities and shares.

Long-term loans to corporate and private customers usually require a collateral; lower amounts and recurring personal loans generally require no collateral. Additionally, with the intention of minimising loss, at the time an impairment indicator for loans and receivables is identified the Bank tries to obtain additional collaterals from the relevant counterparties.

Collaterals held for financial assets, except for loans and advances, are determined by the nature of the instrument. Debt instruments, treasury bonds and other securities usually are not collateralised.

- Lending commitments

The main objective of these instruments is to ensure that funds are made available to customers as they require them. Loan extension commitments represent non-utilized parts of credit extension authorizations in the form of loans, guarantees or letters of credit. Regarding the credit risk associated with loan extension commitments, the Bank is potentially exposed to a loss in the amount of the total of non-utilized commitments. However, the probable loss amount is much lower than the sum of the nonutilized commitments since loan extension commitments are revocable and depend on a specific customer's credit worthiness. The Bank monitors the maturity of lending commitments since long term commitments usually present a greater credit risk than short-term commitments.

- Maximum exposure to credit risk

As at 30 June 2016 and 31 December 2015, maximum exposure to credit risk was as follows:

	CONSOLIDATED		INDIVIDUAL
	30-06-2016	30-06-2016	31-12-2015
On-balance sheet
Deposits w ith banks	89 820	89 820	76 428
Financial assets held for trading	44 506	44 506	37 900
Available-for-sale financial assets	1 351 528	1 351 528	1 867 203
Loans and advances to banks	1 405 171	1 405 171	606 616
Loans and advances to customers	6 013 920	5 958 914	6 085 775
Other assets	245 729	245 284	272 676
	9 150 674	9 095 223	8 946 598
Off-balance sheet
Financial guarantees	127 341	127 341	288 817
Other guarantees	258 533	258 533	102 654
Lending commitments	948 762	863 659	904 138
Documentary credits	44 614	44 614	44 034
	1 379 250	1 294 147	1 339 643
Total	10 529 924	10 389 370	10 286 241

The table above shows the worst-case scenario in terms of the level of exposure to credit risk the Bank faced as at 30 June 2016 and 31 December 2015, without considering any collateral held or other credit enhancements. For on-balance sheet assets, the above stated exposure is based on their carrying amount on the balance sheet.

As seen in the table above, 65.7% of total maximum exposure results from loans and advances to customers (dec 2015: 68.0%).

The Bank's management trusts its capacity to control and maintain a minimal exposure to credit risk, which results mainly from its customer portfolio, based on the following assumptions:

54.15% of the amount of loans and advances to customers has eligible collaterals;
93.72% of customer loan portfolio is not past due.

- Concentration by activity segment of financial assets with credit risk

The tables below show the exposure of the Bank according to the assets' carrying amount (excluding accrued interest) broken down by activity segment.

Individual

	Financial	Public	Property constr.	Other		Private
30-06-2016	Institutions	Sector	& develop.	Industries	Services		Home loans Other loans
Deposits w ith banks	89 820
Financial assets held for trading	1 930		27 841	71	15 133
Available-for-sale financial assets	177 463	1 242 558		0	15 967
Loans and advances to banks	1 405 113
Loans and advances to customers		5 574	803 617	1 129 482	2 362 007	1 676 716	334 581
Investment in subsidiaries and associates	20 243
Other assets	124 359	77 908		334
	1 818 928	1 326 040	831 458	1 129 887	2 393 107	1 676 716	334 581

	Financial	Public	Property constr.	Other		Private
31-12-2015	Institutions	Sector	& develop.	Industries	Services		Home loans Other loans
Deposits w ith banks	76 428
Financial assets held for trading	12 963		23 605	73	13 252
Available-for-sale financial assets	246 651	1 580 344			87 435
Loans and advances to banks	606 543
Loans and advances to customers		5 470	846 071	1 131 245	2 322 899	1 603 497	173 323
Non-current assets held for sale					20 243
Other assets	160 960	18 653
	1 103 545	1 604 467	869 676	1 131 318	2 443 829	1 603 497	173 323

Consolidated

30-06-2016	Financial Institutions	Public Sector	Property constr. & develop.	Other Industries	Services	Private	Home loans Other loans
Deposits w ith banks	89 820
Financial assets held for trading	1 930		27 841	71	15 133
Available-for-sale financial assets	140 374	1 242 558		0	15 967
Loans and advances to banks	1 405 171
Loans and advances to customers		5 574	822 656	1 203 040	2 328 670	1 676 716	334 581
Investment in subsidiaries and associates	20 243
Other assets	124 359	78 199		365
	1 781 897	1 326 331	850 497	1 203 476	2 359 770	1 676 716	334 581

3.4 Geographic breakdown of assets, liabilities and off-balance sheet items

The Bank operates fully on the national market. Therefore, it is not relevant to perform an analysis by geographical sector, since there is no identifiable item within a specific economic environment that is subject to differentiated risks or benefits.

3.5 Market risk

Market Risk is the probability of negative impact on the Bank's earnings or capital due to adverse changes in the market prices of the instruments in the trading book, caused by the volatility of equity prices, interest rates, and foreign exchange rates.

As at 30 June 2016, the Bank's portfolio amounted to around 1.8 billion euros, of which only around 0.47 million euros were classified as financial assets held for trading.

- Risk-sensitivity analysis

In the scope of the stress test performed, Banco Popular carries out a sensitivity analysis to a 30% fluctuation in stock indexes. In case of devaluation within such order of magnitude, we can conclude that there is no need for additional capital.

We would also like to add that on that date, market risk represented only around 0.002% of total risk weighted assets (RWA) calculated pursuant to CRD IV/CRR.

3.6 Exchange rate risk

The national currency equivalent, in thousands of euros, of assets and liabilities at sight expressed in foreign currency is as follows:

Individual

30 June 2016	USD	GBP	CHF	JPY	CAD	AUD	NOK	Other
Assets
Cash and cash equivalents	172	119	80	7	39	9	4	13
Deposits w ith banks	12 457	8 481	424	44	762	4 407	2 923	272
Available-for-sale financial assets	58	-	-	-	-	-	-	-
Loans and advances to banks	36 704	18 403	-	-	-	-	-	-
Loans and advances to customers	3 171	1 474	-	-	-	-	-	-
Other assets	3 685	259	2	5	3	256	2	1
	56 247	28 736	506	56	804	4 672	2 929	286
Liabilities
Deposits from banks	37 289	18 412	373	52	23	-	-	147
Deposits from customers	59 617	9 435	118	-	786	4 457	2 926	156
Other liabilities	2 738	798	11	1	31	309	18	2
	99 644	28 645	502	53	840	4 766	2 944	305
Net balance sheet position	- 43 397	91	4	3	- 36	- 94	- 15	- 19
Foreign exchange forw ard transactions 44 967		-	-	-	-	-	-	- 13
Net position	1 570	91	4	3	- 36	- 94	- 15	- 32
31 December 2015
Total assets	103 035	66 312	461	155	8 104	5 272	2 950	469
Total liabilities	90 554	66 399	217	50	6 300	5 364	2 852	129
Net balance sheet position	12 481	- 87	244	105	1 804	- 92	98	340
Foreign exchange forw ard transactions - 12 096		-	- 258	- 170	- 1 984	-	- 137	- 401
Net position	385	- 87	- 14	- 65	- 180	- 92	- 39	- 61

30 June 2016	USD	GBP	CHF	JPY	CAD	AUD	NOK	Other
Assets
Cash and cash equivalents	172	119	80		39	9	4	13
Deposits with banks	12 457	8481	424	44	762	4 4 0 7	2923	272
Available-for-sale financial assets	58		$\overline{\phantom{a}}$	$\overline{\phantom{0}}$	۰	۰	$\overline{\phantom{a}}$
Loans and advances to banks	36 704	18 403	٠	۰	۰
Loans and advances to customers	3 2 5 1	1474	٠		۰	۰
Other assets	3685	259	2	5	3	256	2
	56 327	28 736	506	56	804	4 6 7 2	2929	286
Liabilities
Deposits from banks	37 289	18412	373	52	23			147
Deposits from customers	59 617	9435	118		786	4457	2926	156
Other liabilities	2818	798	11		31	309	18	2
	99 724	28 645	502	53	840	4766	2944	305
Net balance sheet position	$-43397$	91	4	3	$-36$	$-94$	$-15$	$-19$
Foreign exchange forward transactions	44 967	۰		۰	۰	۰	٠	$-13$
Net position	1570	91	Δ	3	$-36$	$-94$	$-15$	$-32$

- Risk-sensitivity analysis

The activity of Banco Popular Portugal regarding foreign currency consists in making transactions based on customer operations. In this framework, the overall foreign exchange position of the Bank is virtually non-existent.

Thus, as can be seen, whatever the impact of foreign currency prices on foreign exchange terms, it is financially immaterial for the Bank's income, which is why no risk-sensitivity analysis are carried out.

3.7 Interest rate risk

This risk assesses the impact on net interest income and equity as a result in fluctuation in market interest rates.

The interest rate risk of the balance sheet is measured using a repricing gap model applied to assets and liabilities that are susceptible to interest rate fluctuations pursuant to Instruction No. 19/2005 issued by the Bank of Portugal. Briefly, this model groups assets and liabilities that are sensitive to fluctuations at fixed time brackets (maturity dates or the first interest rate revision in case of indexation), from which one calculates the potential impact on the intermediation margin.

M aturity and repricing gap for the Bank's activity as at 30 June 2016

	Up to 1 month	1 to 3 months	3 to 12 months	Over 12 months	Not sensitive	Total
Cash and Currency Market	257 980	1 259 175	34	-	60 669	1 577 859
Loans and advances to customers	1 308 601	1 901 632	2 172 359	526 717	49 604	5 958 914
Securities market	14 000	593 053	243 000	80 990	258 072	1 189 116
Other assets	-	-	-	-	551 429	551 429
Total Assets	1 580 581	3 753 861	2 415 393	607 707	919 774	9 277 317
Currency market	771 199	1 830 753	1 036 841	50 000	0,01	3 688 793
Deposit market	904 476	476 813	1 598 823	1 816 570	31 673	4 828 355
Securities market	4 536	-	22 000	-	542	27 078
Other liabilities	-	-	-	-	301 298	301 298
Total Liabilities	1 680 211	2 307 566	2 657 664	1 866 570	333 513	8 845 524
Gap	( 99 630)	1 446 295	( 242 271)	(1 258 863)	586 261
Accumulated gap	( 99 630)	1 346 665	1 104 394	( 154 469)	431 792
M aturity and repricing gap for the Bank's activity as at 31 December 2015
Gap	30 069	2 311 978	(1 059 425)	(1 137 290)	534 727
Accumulated gap	30 069	2 342 047	1 282 622	145 332	680 059

- Risk-sensitivity analysis

Pursuant to the referred to model, the Bank calculates the potential impact on net interest income and net income.

In the table below, this model considers a potential 1% immediate impact on interest rates, i.e., on the date interest rates are revised. Therefore, the new interest rates will start to show this effect both on assets and liabilities.

	Up to 1 month 1 to 3 months		3 to 12 months	Over 12 months	Not sensitive	Total
Cash and Currency Market	257980	1 259 175	34		60 669	1577859
Loans and advances to customers	1 308 601	1901632	2 172 359	526 717	49 604	5958914
Securities market	14 000	593 053	243 000	372838	258 072	1480964
Other assets					551 429	551 429
Total Assets	1 580 581	3753861	2415393	899 555	919 774	9 569 165
Currency market	771 199	1830753	1036841	50 000	5518	3694312
Deposit market	904 476	476813	1598823	1816570	26 137	4822819
Securities market	4 5 3 6		22 000		989	27 525
Other liabilities	۰				252 320	252 320
Total Liabilities	1 680 211	2 307 566	2 657 664	1866 570	284 964	8796975
Gap	99630	1446 295	(242 271)	(967015)	634 810
Accumulated gap	99 630)	1 346 665	1 104 394	137 379	772 189
Impact of a 1% increase	(42)	666	10581
Accumulated impact	42)	625	11 205
Accumulated effect	11 205
Net interest income	133 052
Accumulated gap	8.42%

3.8 Liquidity risk

The Bank permanently follows the evolution of its liquidity, monitoring cash inflows and outflows at all times. Liquidity projections are prepared in order to allow for careful planning of short and mediumterm funding strategies.

The Bank's primary source of funding are deposits from customers, complemented by access to the capital markets via bond issues and to the interbank market, where we focus on operations with Banco Popular Group. Simultaneously the Bank has tried to ensure other sources of funding, carefully selected for each maturity depending on pricing, stability, speed of access, depth, and compliance with the pre-established risk management policies.

The liquidity management process, as performed by the Bank, includes:

The daily funding needs that are managed by monitoring future cash flows in order to guarantee that the requirements are met. This includes write-backs as loans mature or are granted to customers;
Maintaining a high-liquidity asset portfolio so that these can be easily converted into cash as a protection against any unexpected interruption in cash flows;
Monitoring liquidity ratios taking into account external and internal requirements;
Managing the concentration and profile of debt maturities resorting to the liquidity gap model.

Besides the obligations established by the Bank of Portugal under the terms of Instruction No. 13/2009, the Bank also resorts to the concept of liquidity gap, i.e., from the balance sheet of the Bank as at 30 June 2016, based on the maturities of assets and liabilities it is possible to ascertain the ratio between the referred to maturities (positive or negative) according to residual maturity deadlines called liquidity gaps. The Bank also calculates LCR (Liquidity Coverage Ratio), NSFR (Net Stable Funding Ratio), and ALMM (Additional Liquidity Monitoring Metrics), with the aim to monitor the evolution of liquidity and report it to the supervising authorities.

The table below presents the Bank's balance sheet (without accrued interest) at the end of June 2016 with the main classes grouped by maturity date:

	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over ₅ years
Cash and balances with central banks	82 867
Deposits with banks	89820
Financial assets held for trading	1 693	14	4 966	16 284	15724
Available-for-sale financial assets			216 443	629 399	590 146
Loans and advances to banks	141 858	1 258 071	4 0 5 0		1 1 3 4
Loans and advances to customers	788 954	357 456	980 273	1650328	2 138 281
Other assets	362	31	49 786	173 925	334
Total Assets	1 105 554	1615572	1 255 518	2469936	2745619
Deposits with central banks
Financial liabilities held for trading	1729		4 4 4 4	16 130	15 566
Deposits from banks	770 276	1672498	843 772	206 250	200 000
Deposits from customers	2 207 489	466 868	1 603 094	532 127	80
Debt securities issued	4536		20 928	1072
Current income tax liabilities			521
Other liabilities	3 3 8 4	1809	33827	72	7 2 2 4
Total Liabilities	2987414	2 141 176	2 506 586	755 651	222 870
Gap	(1881860)	525 604)	(1251068)	1714 285	2 522 749
Accumulated gap	(1881860)	(2407464)	(3658532)	(1944247)	578 502
Liquidity gap as at 30 June 2015
Gap	(2026542)	(427955)	(2 117 117)	2 060 394	3 104 102
Accumulated gap	(2026542)	(2454497)	(4571614)	(2511220)	592882

	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over ₅ years
Cash and balances with central banks	82 867
Deposits with banks	89 820
Financial assets held for trading	1 693	14	4966	16 284	15724
Available-for-sale financial assets	$\blacksquare$	۰	216 443	629 399	553 057
Loans and advances to banks	141858	1 258 071	4 0 5 0		1 1 3 4
Loans and advances to customers	775 556	414 078	987 036	1650362	2 138 281
Other assets	393	31	49 786	173 925	334
Total Assets	1092187	1 672 194	1 262 281	2469970	2708530
Deposits with central banks
Financial liabilities held for trading	1729	1	4 4 4 4	16 130	15 5 66
Deposits from banks	770 276	1672498	843 772	206 250	200 000
Deposits from customers	2 205 338	466 868	1 603 094	532 127	80
Debt securities issued	4536		20 928	1072
Current income tax liabilities			903
Other liabilities	12 599	7885	35 068	76	7 2 2 4
Total Liabilities	2994478	2 147 252	2 508 209	755 655	222870
Gap	(1902291)	(475 058)	(1245928)	1714315	2485660
Accumulated gap	(1902291)	(2 377 349)	(3623277)	(1908962)	576 698

- Off-balance sheet exposures (Liquidity risk)

As at 30 June 2016, maturities for the contracted amounts of off-balance sheet financial instruments that may commit the Bank to lending and other facilities to customers were as follows:

Individual

30-06-2016	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over 5 years	Undated
Contingent liabilities:
Documentary credits	-	-	-	-	-	44 614
Guarantees and Sureties	5 922	6 546	16 143	47 008	4 615	305 639
Commitments:
Irrevocable loans	-	-	-	-	-	-
Revocable loans	52 528	81 301	332 612	28 767	113 279	255 172
Total	58 450	87 847	348 755	75 775	117 894	605 425

31-12-2015	Up to 1 month	1 to 3	3 to 12	1 to 5	Over 5	Undated
		months	months	years	years
Contingent liabilities:
Documentary credits	-	-	-	-	-	44 034
Guarantees and Sureties	2 226	1 541	7 486	52 985	5 731	321 502

Commitments:
Irrevocable loans	-	-	-	-	-	-
Revocable loans	54 592	102 980	327 991	26 041	114 315	278 219
Total	56 818	104 521	335 477	79 026	120 046	643 755
Consolidated
30-06-2016	Up to 1 month	1 to 3	3 to 12	1 to 5	Over 5	Undated
		months	months	years	years
Contingent liabilities:
Documentary credits	-	-	-	-	-	44 614
Guarantees and Sureties	5 922	6 546	16 143	47 008	4 615	305 639
Commitments:
Irrevocable loans	-	-	-	-	-	-
Revocable loans	187 979	172 549	190 961	28 767	113 279	255 228
Total	193 901	179 095	207 104	75 775	117 894	605 481

3.9 Operational risk

Banco Popular Portugal interprets Operational Risk as defined in the Basel II Accord, i.e., as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

The management process is based on an analysis by functional area listing the risks inherent in the specific functions and tasks of each body in the structure.

Involving the whole organization, the management model is ensured by the following structures:

Executive Committee (CE) – top management structure that is the main responsible for management guidelines and policies, establishing and monitoring risk appetite and risk tolerance limits.

Risk Management (DGR) - integrates the unit exclusively dedicated to managing operational risk. It is in charge of boosting and coordinating the remaining structures towards the application of methodologies and employment of corporate tools to support the model.

Heads of Operational Risk (RRO) – corresponds to the basis of the organization, these are elements appointed by the hierarchies of each organic unit who have the role of facilitators and promoters of the operational risk management model.

In the process of operational risk management, they also play a key role in the auditing structures, internal control and security of the Bank.

3.10 Fiduciary activities

The Bank provides custody services, guarantees, corporate management services, investment management and third party advisory services. These activities demand the allocation of assets and purchasing and sale transactions regarding a wide range of financial instruments. These assets, which are kept in fiduciary capacity, are not included in these financial statements. As at 30 June 2016, the Bank held investment accounts in the amount of 5 615 124 thousand euros (dec 2015: 5116508 thousand euros) and managed estimated financial assets in the amount of 175 742 thousand euros (dec 2015: 179144 thousand euros).

3.11 Capital management and disclosures

The main objective of capital management at the Bank is meeting the minimum requirements defined by supervisory entities in terms of capital adequacy and ensuring that the strategic objectives of the Bank in terms of capital adequacy are met.

The definition of the strategy to adopt in terms of capital management is in the scope of the Bank's Board of Directors.

In prudential terms, the Bank is subject to the supervision of the Bank of Portugal, which issues the rules and regulations regarding this matter that guide the several institutions under their supervision. These rules and regulations determine a minimum ratio of total own funds in relation to the requirements of committed risks that the institutions must abide by.

As at 30 June 2016, Core Tier 1 ratio calculated pursuant to CRD IV/CRR stood at 13.8% (dec 2015: 12.0%) highly above the minimum amount required by the Bank of Portugal (7%).

	Consolidated	Individual
	30/06/16	30/06/16
Own funds
Common Equity Tier 1 (CET1)	757,857	757,958
Basic own funds (Tier 1)	757,857	757,958
Eligible own funds (Total)	757,857	757,958
Risk-weighted assets (RWA)	5,392,943	5,489,863
Solvency ratios
CET ₁	14.1%	13.8%
Tier 1	14.1%	13.8%
Total	14.1%	13.8%

4. Estimates and assumptions in the application of accounting policies

The Bank makes estimates and assumptions with impact on the reported amount of assets and liabilities in the following year. These estimates and assumptions are continuously assessed and conceived based on historical data and other factors, such as expectations regarding future events.

a) Impairment losses on loans

Every month, the Bank assesses its securities portfolio to evaluate potential impairment losses. In determining whether an impairment loss should be recorded in the income statement, the Bank analyses observable data that may be indicative of a measurable decrease in estimated cash flows both of the trading book and of specific individual cases within a trading book. This analysis may indicate, for example, an adverse event in the capacity of a customer to pay a loan or the worsening of macroeconomic conditions and related indicators. Management uses estimates based on historical data available for assets with similar credit risk and possible impairment losses. The methodology and assumptions used to calculate these estimates are revised regularly aiming at reducing any differences between estimated and actual losses.

b) Fair value of derivatives and unlisted financial assets

The fair value of derivatives and unlisted financial assets was determined based on evaluation methods and financial theories whose results depend on the assumptions that have been used.

c) Impairment of equity investments in the portfolio of Available-for-sale financial assets

The Bank determines that there is impairment of equity investments of available-for-sale assets when there has been a significant or prolonged decline in the fair value below its cost. The required quantification for the expressions 'significant' and 'prolonged' imply professional judgement. When making this judgement, the Bank assesses among other factors the normal volatility of share prices. As a complement, impairment should be recognised when there are events that show the deterioration of the viability of the investment, the performance of the industry and the sector, technological changes and operational and financial cash flows.

d) Retirement and survivor's pensions

Liabilities for retirement and survivor's pensions are estimated based on actuarial tables and assumptions on the growth of pensions and salaries. These assumptions are based on the Bank's expectations for the period when the liabilities are to be settled.

e) Deferred taxes

The recognition of a deferred tax asset assumes the existence of profit and a future tax base. Deferred tax assets and liabilities have been determined based on tax legislation currently in effect or on legislation already published for future application. Changes in the interpretation of tax legislation may influence the amount of deferred tax that has been recognised.

5. Segmental reporting

The Bank operates essentially in the financial sector and its activity is targeted at corporate, institutional and private customers.

The products and services offered by the Bank include deposits, loans to companies and private individuals, brokerage and custody services, investment banking services, and selling investment funds and life and non-life insurance. Additionally, the Bank makes short, medium, or long term

investments in financial and foreign exchange markets in order to take advantage of price variations or as a means to make the most of available financial assets.

Banco Popular operates in the following segments:

(1) Retail Banking, which includes the sub-segments: Private Individuals, Self-employed people, Small and Medium-sized Enterprises, and Private Welfare Institutions;
(2) Commercial Banking, which includes Large Corporations, Financial Institutions, and the Public Administration Sector;
(3) Other Segments, which groups all the operations that are not included in the other segments, namely operations and management of the Bank's Own Portfolio and Investments in Banks.

Geographically, Banco Popular operates exclusively in Portugal.

Segmental reporting is as follows:

Individual

30-06-2016	Retail Banking	Commercial Banking	Other Segments	Total
Interest and similar income Interest and similar charges	50 347 ( 18 515)	26 521 ( 2 015)	25 647 ( 15 459)	102 515 ( 35 989)
Revenue from equity instruments	-	-	94	94
Fees and Commissions received Fees and Commissions paid	1 991 ( 267)	1 159 ( 2)	18 062 ( 2 425)	21 212 ( 2 694)
Income from Financial Operations (net)	74	-	18 659	18 733
Income from the sale of other assets	-	-	( 6 023)	( 6 023)
Other Operating Income (net)	161	478	( 8 035)	( 7 396)

Net assets	3 785 489	3 581 197	2 202 479	9 569 165
Liabilities	3 876 365	4 643 273	277 338	8 796 976

30-06-2015	Retail Banking	Commercial Banking	Other Segments	Total
Interest and similar income Interest and similar charges	58 633 ( 26 703)	30 099 ( 2 468)	25 056 ( 17 042)	113 788 ( 46 213)
Revenue from equity instruments	-	-	62	62
Fees and Commissions received Fees and Commissions paid	7 505 ( 482)	4 532 ( 1)	9 518 ( 3 085)	21 555 ( 3 568)
Income from Financial Operations (net)	17	-	787	804
Income from the sale of other assets	-	-	42	42
Other Operating Income (net)	-	-	46 804	46 804

Net assets	3 568 891	1 949 102	2 667 071	8 185 064
Liabilities	3 311 642	2 956 232	1 189 479	7 457 353

Consolidated

30-06-2016	Retail Banking	Commercial Banking	Other Segments	Total
Interest and similar income	50 347	29 429	25 647	105 423
Interest and similar charges	( 18 515)	( 2 015)	( 15 459)	( 35 989)
Revenue from equity instruments	-	-	94	94
Fees and Commissions received	1 991	783	18 062	20 836
Fees and Commissions paid	( 267)	( 149)	( 2 425)	( 2 841)
Income from Financial Operations (net)	74	-	18 660	18 734
Income from the sale of other assets	-	-	( 6 023)	( 6 023)
Other Operating Income (net)	161	349	( 8 035)	( 7 525)

Net assets	3 785 489	3 598 457	2 202 479	9 586 425
Liabilities	3 876 365	4 659 416	277 338	8 813 119

6. Net interest income

This item is broken down as follows:

	CONSOLIDATED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
Interest and similar income from:
Cash and cash equivalents	42	42	24
Deposits with banks	995	995	105
Loans and advances to customers	75 502	72760	90 141
Other financial assets at fair value	o		o
Other available-for-sale financial assets	20 804	20 804	23 448
Held-to-maturity investments	n		0
Loan-related fees and commissions	8019	7853
Other	61	61	69
	105 423	102 515	113 787
Interest and similar charges from:
Deposits from central banks	n		226
Deposits from banks	2050	2050	1861
Deposits from customers	20 043	20 043	26 754
Debt securities issued	977	977	3 1 7 9
Interest from hedging derivatives	12918	12918	14 121
Other			71
	35 989	35 989	46 212
Net interest income	69 434	66 526	67 575

7. Return on equity instruments

Balance for this item is as follows:

	INDIVIDUAL
	30/06/16	30/06/15
Available-for-sale financial assets	94	62
	94	62

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

8. Revenue and expense with fees and commissions

These items are broken down as follows:

	CONSOLIDATED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
Revenue from Fees and Commissions from:
Guarantees and sureties	2020	2020	3 0 3 4
Means of collection and payment	7502	7502	8 2 7 6
Asset management	2079	2079	2 200
Insurance brokerage	1 199	1 199	782
Account maintenance	3 1 5 8	3 158	2779
Processing fees	796	796	774
Structured operations	1092	1092	812
Other	2990	3 3 6 6	2898
	20836	21 21 2	21 555
Expenses with Fees and Commissions from:
Means of collection and payment	1 350	1 350	1846
Asset management	919	919	941
Brokers and agents	270	270	373
Other	302	155	408
	2841	2694	3568

9. Net income from financial operations

This item is broken down as follows:

		30/06/16		30/06/15
	Gains	Losses	Gains	Losses
Financial assets and liabilities held for trading
Variable-income securities	28	244	118	235
Derivative financial instruments	15 968	15898	22 511	21 519
	15 996	16 142	22 6 29	21 754
Hedging derivatives at fair value	55 709	79 396	48 642	49 598
Hedging derivatives at fair value
Fixed income securities	39 34 9	553	۰
Variable-income securities	2993	0
	42 342	553	o
Income from financial assets and liabilities held
for trading through profit or loss	114 047	96 091	71 271	71 353

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

During the first half of 2016, the Bank received 11.0 thousand euros in dividends from financial assets held for trading (2015: 27.1 thousand euros). In 2016 and 2015 the Bank did not earn any income from financial assets at fair value through profit or loss.

The effect seen in the item Hedging derivatives at fair value results from fluctuations in the fair value of hedge instruments (interest rate swaps) and variations in the fair value of hedged assets, resulting from the hedged risk (interest rate). Since the hedging instrument is accounted for in the Available-forsale financial assets portfolio, that variation in fair value is carried from Fair value revaluation reserve to the income statement.

10. Net gains from foreign exchange differences

These items are broken down as follows:

Individual
	30/06/16	30/06/15
Exchange gains
Spot	16	74
Forward	2 7 8 3	3447
	2799	3521
Exchange losses
Spot
Forward	2022	2634
	2022	2634
Income from exchange differences (net)	777	887

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

11. Net gains from the sale of other assets

This item is broken down as follows:

Individual
	30/06/16	30/06/15
Gains from the sale of tangible assets held for sale	382	345
Gains from other tangible assets	4	4
	386	349
Losses from the sale of tangible assets held for sale	6409	307
	6409	307
	(6023)	42

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

12. Other operating income

This item is broken down as follows:

	CONSOLIDATED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
Contributions to the DGF	(2)	(2)	(83)
Contributions to the Resolution Fund	990)	(990)	(445)
Contributions to the Single Resolution Fund	(3 123)	(3 123)
Contributions to the Investor Compensation Scheme	(5)	(5)
Other operating expenses	(2 596)	(2, 410)	(2 148)
Council tax	293)	(292)	282)
Other taxes	(413)	(413)	343)
Contribution on the banking sector	(2 591)	(2591)	(2624)
Income from staff transfer	599	599	684
Income from real estate properties	296	296	435
Capital gains on the sale of business unit		۰	48 667
Loan, interest and expense recovery	1 192	1 188	1789
Other operating income and revenues	401	347	1 154
	(7525)	(7396)	46804

The amount in the capital gains item, in June 2015, is due to the income obtained from the sale of the business unit in charge of managing real estate and credit exposures of customers associated with the real estate sector from Banco Popular Portugal to Recbus - Recovery to Business, S.A. ('Recbus, S.A.'), 20% owned by Banco Popular Español. This transaction implied the transference of the legal status of employer in the employment contracts of this unit's employees, who are now employed by Recbus, S.A. Also in this regard, several agreements have been signed, among which a service rendering contract between the Bank and Recbus, S.A., for the management of the concerned assets for a period of 10 years.

13. Personnel expenses

This item is broken down as follows:

	CUNSULIDAI ED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
Wages and salaries	17577	17 180	21 687
Obligatory social security charges from:
- Wages and salaries	5 2 1 8	5 0 9 9	5864
- Pension Fund	2 2 2 5	2 2 2 5	2011
- Other obligatory social security charges	102	98	91
Other expenses	293	233	312
	25 415	24 835	29 965

14. Administrative overheads

This item is broken down as follows:

	CONSOLIDATED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
With supplies
Water, energy and fuel	692	691	840
Items of regular consumption	133	131	106
Software licences	179	179	180
Other third party supplies	245	245	161
With services
Rents and leasing	2 182	2 139	2 2 1 9
Communications	1900	1928	2040
Travel, hotel and representation	598	584	641
Advertising and publications	1 0 3 1	1010	1995
Maintenance of premises and equipment	1622	1621	1527
Transports	528	528	625
Fees and regular payment agreements	1319	1 3 2 0	2032
Legal expenses	1011	971	1 0 0 9
IT Services	4 9 0 9	4887	4894
Security, surveillance and cleaning	205	205	217
Temporary work	1976	1976	2010
External consultants and auditors	461	432	268
SIBS	583	583	510
Services rendered by the parent company	1 603	1568	1 600
Other third party services	4532	4537	1529
	25709	25 535	24 403

15. Income tax

Income tax for the first half of 2016 was calculated based on a nominal rate of 21% over the tax base (21% in 2015). Both in 2016 and 2015, besides the nominal rate, a municipal surcharge of 1.5% was also levied on taxable income, as well as a variable state surcharge that depended on the below indicated tiers:

- Less than 1.5 ME	0%
- Between 1.5 M€ and 7.5 M€	3%
- Between 7.5 M€ and 35 M€	5%
- Over 35 M $\epsilon$	7%

In March 2016, Banco Popular Portugal, S.A., joined the Special Tax Framework for Groups of Companies (Regime Especial de Tributação para Grupos de Sociedades - RETGS), having appointed its sole shareholder, Banco Popular Español, S.A. (BPE), as the leading company in the tax group of companies it owns in Portugal with a stake of 75% or higher, taking the responsibility for the fulfilment of the obligations of the dominant company. The companies owned by BPE that comprise the aforementioned tax group are the following: Popular Factoring, S.A.; Popular Gestão de Activos, S.A.; Eurovida - Companhia de Seguros de Vida, S.A.; Popular Seguros - Companhia de Seguros, S.A.; and Consulteam - Consultores de Gestão, Lda.

As at 30 June 2016, tax expenses on net profit, as well as the tax burden, measured by the relation between income taxes and the profit for the year in the scope of RETGS may be summed up as follows:

	30/06/16
Current tax on profits
For the year	849)
Adjustments in respect of prior years	466
	1 383)
Deferred taxes
Origination and reversal of temporary differences	3430
Total tax in the income statement	2047
Income before tax (Fiscal Consolidation)	( 6 449)
Tax burden	(31.74%)

As at 30 June 2016 and 2015, tax expenses on individual net profit (excluding RETGS) attributed to Banco Popular, S.A., as well as the tax burden, measured by the relation between income taxes and the profit for the year before those taxes may be summed up as follows:

	30/06/16	30/06/15
Current tax on profits
For the year	409	9770
Adjustments in respect of prior years	466	41
	875	9811
Deferred taxes
Origination and reversal of temporary differences	3 3 8 5	2935
Total tax in the income statement	4 2 6 0	12746
Net income before tax	11839	44 741
Tax burden	36.0%	28.5%

The reconciliation between the nominal tax rate and the tax burden for 2016 and 2015, as well as the reconciliation between tax expense/income and the product of the individual accounting profit multiplied by the nominal tax rate, after deferred tax, is analysed as follows:

	30/06/16		30/06/15
	Tax rate	Amount	Tax rate	Amount
Income before tax		11839		44 741
Tax at nominal rate	21.0%	2486	21.0%	9 3 9 6
Municipal surcharge after deferred tax	0.4%	51	8.7%	3884
Autonomous taxation	1.9%	222	0.7%	305
Tax benefits	$(0.44\%)$	(52)	(0.19%)	84)
Effect of provisions not acceptable as costs	1.6%	189	(1.66%)	(744)
Other net value adjustments	7.2%	860	0.1%	47
Contribution on the banking sector	4.6%	544	1.2%	551
Tax loss	(4.27%)	506)	(1.45%)	650)
Tax from previous years	3.9%	466	0.1%	41
	36.0%	4 2 6 0	28.5%	12746

For additional information on deferred tax assets and liabilities see Note 28.

16. Financial assets and liabilities classified in accordance with IAS 39 categories

Classification of financial assets and liabilities in accordance with IAS 39 categories has the following structure:

30/06/16		Booked at fair value	Accounts	Available-for-sale	Hedging	Non-fin.
	Trading	Fair value op.	receivable	financial assets	derivatives	assets	Total
Assets
Cash and balances with central banks			82 867				82 867
Deposits with banks			89820				89820
Financial assets held for trading	44 975						44 975
Other fin. assets at fair value thr. prof./loss							0
Available-for-sale financial assets				1435988			1435988
Loans and advances to banks			1 405 171				1405 171
Loans and advances to customers			5958914				5958914
Hedging derivatives					0		0
Other assets			218 926			191.197	410 123
	44 975	0	7755698	1435988	o	191 197	9 427 858

30/06/16	Booked at fair value Trading	Other financial liabilities	Hedging derivatives	Non-fin. liabilities	Total
Liabilities
Deposits from central banks					0
Deposits from banks		3694312			3694312
Financial liabilities held for trading	47835				47835
Deposits from customers		4822819			4822819
Debt securities issued		27 525			27 525
Hedging derivatives			75 761		75 761
Other liabilities		46 316		64 015	110 331
	47835	8 590 972	75761	64 015	8778583

Half Year 2016

31-12-2015	Booked at fair value	AccountsAvailable-for-sale Non-fin.
	Trading Fair value op. receivablefinancial assets			assets	Total
Assets
Cash and balances w ith central banks		55 505
Deposits w ith banks		76 428
Financial assets held for trading	49 893
Other fin. assets at fair value thr. prof./loss
Available-for-sale financial assets			1 914 430
Loans and advances to banks		606 616
Loans and advances to customers		6 085 775
Non-current assets held for sale				1.055
Other assets		243 309			201 034
	49 893 0	7 067 633	1 914 430	1 055	201 034
31-12-2015	Booked at fair value	Other financial	Hedging	Non-fin.
	Trading	liabilities	derivatives	liabilities	Total
Liabilities
Deposits from central banks					0
Deposits from banks		2 924 272			2 924 272
Financial liabilities held for trading	41 452				41 452
Deposits from customers		5 034 537			5 034 537
Debt securities issued		38 092			38 092
Hedging derivatives			121 337		121 337
Other liabilities		35 479		18 300	53 779
	41 452	8 032 380	121 337	18 300	8 213 469

30/06/16		Booked at fair value	Accounts	Available-for-sale	Hedging	Non-fin.
	Trading	Fair value op.	receivable	financial assets	derivatives	assets	Total
Assets
Cash and balances with central banks			82 867				82 867
Deposits with banks			89 820				89820
Financial assets held for trading	44 975						44 975
Other fin. assets at fair value thr. prof./loss							0
Available-for-sale financial assets				1 398 899			1 398 899
Loans and advances to banks			1405 171				1405 171
Loans and advances to customers			6013921				6013921
Hedging derivatives					0		0
Other assets			224 469			184,401	408 870
	44 975	o	7816248	1398899	o	184 401	9 444 523

30/06/16	Booked at fair value		Other financial	Hedging	Non-fin.
	Trading	Fair value op.	liabilities	derivatives	liabilities	Total
Liabilities
Deposits from central banks						0
Deposits from banks			3694312			3694312
Financial liabilities held for trading	47835					47835
Deposits from customers			4 820 668			4 820 668
Debt securities issued			27 525			27 525
Hedging derivatives				75 761		75 761
Other liabilities			62 852		65 391	128 243
	47835	0	8 605 357	75761	65 391	8794344

17. Cash and balances with Central Banks

The balance of this item is broken down as follows:

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Cash and cash equivalents	43 860	43 860	43 911
Demand accounts w ith the Bank of Portugal	39 007	39 007	11 594
	82 867	82 867	55 505

Deposits with Central Banks include mandatory deposits with the Bank of Portugal intended to meet legal minimum cash requirements.

18. Deposits with banks

Balance for this item is as follows:

Individual
	30-06-16	31-12-15
Deposits w ith banks in Portugal
Demand accounts	456	460
Cheques payable	17 150	13 150
Other deposits	862	2 120
	18 468	15 730
Deposits w ith banks abroad
Demand accounts	70 146	59 169
Cheques payable	1 206	1 529
	71 352	60 698
	89 820	76 428

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

Cheques payable from Portuguese and foreign banks were sent for settlement on the first working day after the reference dates.

19. Financial assets and liabilities held for trading

The Bank uses the following derivatives:

Currency forward represents a contract between two parties for the exchange of currencies at a determined exchange rate established at the moment of the accomplishment of the contract (forward) for a determined future date. These operations have the purpose of hedging and managing currency risk, through the elimination of the uncertainty of the future value of certain exchange rate, which is immediately fixed by the forward operation.

Interest rate swap, which in conceptual terms can be perceived as an agreement between two parties who compromise to exchange (swap) interest rate differential between them for a specified amount and period of time, periodic payments of fixed rate for floating rate payments. It involves a single currency and consists in the exchange of fixed cash flows for variable ones or vice versa. This kind of instrument is aimed at hedging and managing the interest rate risk, regarding the income of a financial asset or the cost of a loan that a given entity intends to take in a determined future moment.

The fair value of derivative instruments held for trading is set out in the following table:

30/jun/2016
	Contract value	Fair value
	(Notional amount)	Assets	Liabilities
Trading derivatives
a) Foreign currency derivatives
Currency forwards	53 052	1 150	59
b) Interest rate derivatives
Interest rate swaps	370 055	43 237	47 657
Options	38 648	119	119
Total derivatives held for trading (assets/liabilities)		44 506	47835

31-Dez-2015
	Contract value	Fair value
	(Notional amount)	Assets	Liabilities
Trading derivatives
a) Foreign currency derivatives
Currency forw ards	59 476	334	284
Currency Options	5 298	0	41
b) Interest rate derivatives
Interest rate sw aps	402 147	37 534	41 094
Options	47 498	33	33
Total derivatives held for trading (assets/liabilities)		37 901	41 452

As at 30 June 2016, the fair value of other financial assets and liabilities held for trading was as follows:

	30-06-16	31-12-15
Other financial assets
Variable-income securities
Equity stakes	469	11 992
	469	11 992
Total	469	11 992

Total financial assets held for trading	44 975	49 893
Total financial liabilities held for trading	47 835	41 452

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

20. Investments in subsidiaries and associates

As at 30 June 2016, the Bank only held an equity stake in the associate company Eurovida - Companhia de Seguros de Vida, S.A., booked for 20 243 thousand euros, net of impairment, which was reclassified from non-current assets held for sale.

		Consolidated Financial Results for Eurovida at 30/06/2016		Impact of the application of the equity method On
Effective stake	Net Assets	Shareholde rs' Equity	Net Profit	consolidation reserves	On Net Income

This reclassification results from the fact that IFRS 5 establishes the requirement that for an asset to be classified as non-current its sale should be completed within a year from the date of the reclassification, except as allowed in paragraph 9 of that standard, a situation that was not in effect at the end of December 2015.

21. Available-for-sale financial assets

The balance of this item is broken down as follows:

	30-06-16	31-12-15
Securities issued by residents
Government bonds - at fair value	224 063	45 117
Other debt securities - at fair value	-	-
Equity securities - at fair value	37 849	652
Equity stakes	46 538	46 500
	308 450	92 269
Securities issued by non-residents
Government bonds - at fair value	865 787	758 407
Other debt securities - at fair value	261 677	1 063 678
Other securities	74	76
	1 127 538	1 822 161
Total	1 435 988	1 914 430

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

As at 30 June 2016, the Bank had no unlisted equity instruments classified as available-for-sale financial assets, which, since their fair value cannot be reliably measured, were recognised as costs (dec 2015: 0 thousand euros).

The Bank has in its available-for-sale financial assets portfolio an investment of 1 362 thousand euros regarding subordinate bonds (Class D Notes) purchased in June 2002 associated with the securitisation of home loans, in the amount of 250 million euros named Navigator Mortgage Finance No. 1.

In the scope of that securitisation operation, assets were acquired by a loan securitisation fund named Navigator Mortgage Finance No. 1, which simultaneously issued securitisation units fully subscribed by Navigator Mortgage Finance No. 1 Plc, which also issued bonds with the following characteristics:

	Nominal value	Rating		Interest rate
	thousand euros	Standard & Poors	Moody's	(until May 2035)
Class A Notes (Senior)	230 000	AAA	Ааа	3 month Euribor+0.21%
Class B Notes (Senior)	10 000	AA	Aa2	3 month Euribor+0.38%
Class C Notes (Senior)	10 000	А	A2	3 month Euribor+0.55%
Class D notes (Subordinate)	4 630	n.a.	n.a.	n.a.

Under the terms of the agreement that was signed the Bank did not assume any commitment regarding cash availabilities of the issuer, as well as liquidity lines, credits, guarantees, rights and residual profits, or any other risks, besides the Class D Notes.

Intervening entities:

Navigator Mortgage Finance No. 1 Fundo, a Portuguese loan securitization fund that purchased the loans;
Navigator, SGFTC, a loan securitisation fund manager that manages the fund;
Navigator Mortgage Finance No. 1 Plc, the company that purchased the securitization units and issued the notes.

The most relevant financial data extracted from Navigator's unaudited financial statements as at 30 June 2016 were as follows:

	30-06-16	31-12-15	30-06-15
Net assets	44 615	47 401	50 887
Liabilities	51 641	54 154	57 441
Shareholders' equity	(7 026)	(6 753)	(6 554)
Income for the period	( 273)	( 608)	( 410)

22. Loans and advances to banks

The nature of loans and advances to banks is as follows:

	30-06-16	31-12-15
Loans and advances to banks in Portugal
Time deposits	34	37
Loans	9 050	10 000
Other	85	5
Interest receivable	0	0
	9 169	10 042
Loans and advances to banks abroad
Time deposits	1 221 327	594 564
Reverse repurchase agreements	171 485	-
Other	3 133	1 937
Interest receivable	57	73
	1 396 002	596 574
	1 405 171	606 616

Set out below is a breakdown of loans and advances to banks by period to maturity:

	30-06-16	31-12-15
Up to 3 months	1 399 929	475 137
From 3 months to 1 year	4 050	130 269
Over 5 years	1 134	1 137
Interest receivable	58	73
	1 405 171	606 616

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

23. Lending operations

Loans are granted via loan agreements, including overdraft facilities in demand accounts, and by the discount of effects. Total amounts of loans and advances to customers in the balance sheet, by nature, are as follows:

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Internal credit operations
Public sector	3 508 544	3 459 182	3 345 956
Private customers	2 014 737	2 014 737	1 945 814
Residential mortgage loans	1 637 707	1 637 707	1 568 480
Personal and consumer loans	30 700	30 700	32 211
Other personal lending	346 329	346 329	345 123
	5 523 281	5 473 919	5 291 770
External credit operations
Public sector	31 381	30 722	29 322
Private customers	30 400	30 400	27 976
Residential mortgage loans	22 310	22 310	19 359
Personal and consumer loans	58	58	16
Other personal lending	8 032	8 032	8 601
	61 781	61 122	57 298
Other loans (represented by securities)	380 251	380 251	355 677
Interest and commissions receivable	- 861	- 496	3 270
Past-due loans and interest
Due w ithin 90 days	16 376	9 707	11 957
Over 90 days	390 409	386 978	365 803
	406 785	396 685	377 760
Gross Total	6 371 237	6 311 481	6 085 775
Minus:
Customer loan impairment	357 316	352 567	383 288
	357 316	352 567	383 288
Net total	6 013 921	5 958 914	5 702 487

As at 30 June 2016, credit operations included 882 905 thousand euros in mortgage loans assigned to the issuance of mortgage bonds (dec 2015: 889775 thousand de euros) (Note 33).

Set out below is a breakdown of loans and advances to customers by period to maturity:

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Up to 3 months	1 189 668	1 146 410	876 237
From 3 months to 1 year	987 036	980 273	692 505
1 to 5 years	1 650 328	1 650 328	1 300 943
Over 5 years	2 138 281	2 138 281	2 835 060
Undetermined maturity (past due)	406 785	396 685	377 760
Interest and commissions receivable	( 861)	( 496)	3 270
	6 371 237	6 311 481	6 085 775

Provisions for customer loan losses

The balance of the provision account for specific credit risks is detailed in the following table:

	CONSOLIDATED	INDIVIDUAL
	30/06/16	30/06/16	30/06/15
Balance as at 1 January	388 047	383 288	350 832
Appropriations	19565	19 316	27 993
Used	49 220	49 220	523
Cancelled	1076	817	۰
Balance as at 30 June	357 316	352 567	378 302
Appropriations for provisions	19565	19 316	27 993
Write-offs	(1076)	(817)	۰
Provisions net of write-offs and recoveries of bad debts	18 489	18 499	27 993

24. Held-to-maturity investments

In June 2013, the Bank sold 210 million of Spanish debt securities that were classified as held-tomaturity investments. Due to this sale, and pursuant to IAS 39, at the end of June, the Bank reclassified the remaining portfolio as available for sale without going through the profit or loss account.

Still pursuant to IAS 39, the Bank may only hold held-to-maturity instruments in 2016.

25. Non-current assets held for sale

As at 30 June 2016, the Bank only held an equity stake in the associate company Eurovida - Companhia de Seguros de Vida, S.A., booked for 20 243 thousand euros (dec 2015: 20243 thousand euros).

This participation was reclassified in investments in subsidiaries and associates, see Note 20.

26. Other tangible assets

This item is broken down as follows:

		30-06-2016
			Art and	Assets
	Real estate	Equipment	antiques	in progress	Total	Total
Balance as at 01 January
Acquisition cost	108 310	49 443	149	65	157 967	160 247
Accumulated depreciation	(38 887)	(48 173)		-	(87 060)	(87 207)
Accumulated impairment	(2 410)				(2 410)	(2 410)
Acquisitions		358		40	398	1 478
Transfers
Acquisition cost	(1 502)			( 65)	(1 567)	(1 392)
Accumulated depreciation	277				277	702
Disposals / Write-offs
Acquisition cost	-	( 7)			( 7)	(2 366)
Accumulated depreciation	-	7			7	2 364
Impairment depreciation	-				-	0
Depreciation for the year	( 878)	( 386)		( 2)	(1 266)	(2 919)
Balance as at 30 June
Acquisition cost	106 808	49 794	149	40	156 791	157 967
Accumulated depreciation	(39 488)	(48 552)		( 2)	(88 042)	(87 060)
Accumulated impairment	(2 410)				(2 410)	(2 410)
Net amount	64 910	1 242	149	38	66 339	68.497

			30/06/2016
	Real estate	Equipment	Art and antiques	Assets in progress	Total
Balance as at 01 January
Acquisition cost	108 310	49 443	149	65	157 967
Accumulated depreciation	(38887)	(48 173)			(87 060)
Accumulated impairment	(2410)				(2410)
Acquisitions		358		40	398
Transfers
Acquisition cost	(1191)	611		(65)	(645)
Accumulated depreciation	170	(608)			(438)
Disposals / Write-offs
Acquisition cost		(7)			(7)
Accumulated depreciation		7			7
Impairment depreciation
Depreciation for the year	(880)	(387)		(2)	(1269)
Balance as at 30 June
Acquisition cost	107 119	50 405	149	40	157 713
Accumulated depreciation	(39 597)	(49 161)		(2)	(88 760)
Accumulated impairment	(2410)				(2410)
Net amount	65 112	1 244	149	38	66 543

27. Intangible assets

This item is broken down as follows:

Individual

			30-06-2016		31-12-2015
	Softw	areMiscellaneous	in progress	Total	Total
Balance as at 01 January
Acquisition cost	18 775	2 240	-	21 015	20 864
Accumulated depreciation	(18 760)	(2 109)	-	(20 869)	(20 793)
Acquisitions	39		519	558	151
Transfers
Acquisition cost				-	-
Accumulated depreciation					( 76)
Depreciation for the year	( 26)	( 29)		( 55)
Balance as at 30 June
Acquisition cost	18 814	2 240	519	21 573	21 015
Accumulated depreciation	(18 786)	(2 138)	-	(20 924)	(20 869)
Net amount	28	102	519	649	146

	30/06/2016
	Software	Miscellaneous	in progress	Total
Balance as at 01 January
Acquisition cost	18775	2 2 4 0	-	21 015
Accumulated depreciation	(18760)	(2109)		(20 869)
Acquisitions	39		519	558
Transfers
Acquisition cost	932			932
Write-offs
Acquisition cost
Accumulated depreciation
Accumulated depreciation	822)
Depreciation for the year	(36)	(29)		(65)
Balance as at 30 June
Acquisition cost	19746	2 240	519	22 505
Accumulated depreciation	(19618)	(2 138)		(21756)
Net amount	128	102	519	749

28. Deferred taxes

Deferred taxes are calculated in respect of all the temporary differences using an effective tax rate of 22.5%, except those regarding tax loss for which a 21% rate was used.

Balances for these items are as follows:

	Balance as at	Equity		Reserves		Balance as at
	31/12/15	Expense	Income	Increase	Decrease	30/06/16
Deferred Tax Assets
Available-for-sale securities	20 583			3 3 7 7	5 0 6 9	18891
Tangible assets	1075	51	46			1070
Taxable provisions	24 400	27919	28 491			24 972
Fees and commissions	113	15				98
Seniority bonus	1021	-	33			1054
RGC provisions	12671	12671				0
Other assets/liabilities	7 351	3				7 348
Tax loss	456	1 2 2 8	1415			643
	67 670	41887	29 985	3 3 7 7	5 0 6 9	54 076
Deferred Tax Liabilities
Available-for-sale securities	21 082			8 3 8 7	1832	14 5 27
Property revaluation	49					48
	21 131			8 3 8 7	1832	14 575

	Balance as at	Equity		Reserves		Balance as at
	31/12/14	Expense	Income	Increase	Decrease	30/06/15
Deferred Tax Assets
Available-for-sale securities	26 623				3651	22972
Tangible assets	1 0 8 7	5				1082
Taxable provisions	20 716	1870	9883			28729
Fees and commissions	143	2				141
Seniority bonus	980		34			1014
RGC provisions	11 156	12 4 6 1	1 3 0 5			o
Other assets/liabilities	7 3 6 7	4				7 3 6 3
Tax loss	7 154	7799	645			0
	75 226	22 14 1	11867	٥	3651	61 301
Deferred Tax Liabilities
Available-for-sale securities	25 743			7733	3 0 3 1	21 041
Retirement pensions	٥					0
Property revaluation	50					49
Equity stakes	0					0
	25 793			7733	3 0 3 1	21 090

	Balance as at	Equity		Reserves		Balance as a
	31/12/15	Expense	Income	Increase	Decrease	30/06/16
Deferred Tax Assets
Available-for-sale securities	20 583			3 3 7 7	5 0 6 9	18891
Tangible assets	1075	51	46			1070
Taxable provisions	24 400	27919	28 511			24 992
Fees and commissions	113	15				98
Seniority bonus	1021		59			1 0 8 0
RGC provisions	12671	12 671	197			197
Other assets/liabilities	7 3 5 1	4				7 3 4 7
Tax loss	456	1 2 2 8	1415			643
	67 670	41888	30 228	3 3 7 7	5 0 6 9	54 318
Deferred Tax Liabilities
Available-for-sale securities	21 082			8 3 8 7	1832	14 527
Property revaluation	49					48
						0
	21 131			8 3 8 7	1832	14 575

29. Other assets

This item is detailed as follows:

	CONSOLIDATED		INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Recoverable government subsidies	91	91	77
Recoverable taxes	23 741	23 741	18 576
Pledge accounts	125 760	125 760	161 681
Other debtors	74 484	74 453	63 115
Other income receivable	261	261	328
Expenses w ith deferred charges	8 331	8 312	4 673
Asset operations pending settlement - Miscellaneous	19 676	20 979	29 367
Assets received in lieu of payment	190 836	190 836	197 650
Other tangible assets held for sale	1 574	1 574	958
Foreign exchange transactions to be settled	56	56	146
	444 810	446 063	476 631
Impairment of assets received in lieu of payment	(30 052)	(30 052)	(31 324)
Impairment of other tangible assets held for sale	( 376)	( 376)	( 367)
Provisions for other assets	(5 512)	(5 512)	(2 905)
	408 870	410 123	442 035

Balances and movements in the accounts of Provisions for other assets are as follows:

	CONSOLIDATED		INDIVIDUAL
Provisions for other assets	30-06-16	30-06-16	31-12-15
Balance as at 1 January	2 905	2 905	1 313
Appropriations	2 607	2 607	7 237
Used	-	-	5 000
Cancelled	-	-	278
Balance as at 30 June	5 512	5 512	3 272

Movements in the account Assets received in lieu of payment in 2016 were as follows:

		31-12-2015
	Available	Properties
	for-sale	not available	Equipment	Total	Total
	properties	for sale
Balance as at 01 January
Gross amount	193 034	4 109	506	197 649	145 921
Accumulated impairment	(30 285)	( 998)	( 41)	(31 324)	(27 804)
Net amount	162 749	3 111	465	166 325	118 117
Additions
Acquisitions	46 638	4 377	77	51 092	88 093
Other	2 263	-	-	2 263	1 246
Disposals
Gross amount	(59 907)	-	( 116)	(60 023)	(37 236)
Transfers	513	( 658)	-	( 145)	( 375)
Impairment losses	(6 932)	-	( 45)	(6 977)	(6 920)
Used	6 002	-	62	6 064	1 266
Reversed	2 183	-	2	2 185	2 134
Balance as at 31 December
Gross amount	182 541	7 828	467	190 836	197 649
Accumulated impairment	(29 032)	( 998)	( 22)	(30 052)	(31 324)
Net amount	153 509	6 830	445	160 784	166 325

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

30. Deposits from central banks

The bank doesn't have resources in central banks both in individual and considated terms

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

31. Deposits from banks

The balance of this item, spot and forward, is composed as follows in terms of nature:

Individual

	30-06-16	31-12-15
Recursos de instituições de crédito no país
Depósitos	202 577	482 774
Juros a pagar	332	596
	202 909	483 370
Recursos de instituições de crédito no estrangeiro
Empréstimos	106 250	106 250
Depósitos	2 391 527	1 539 470
Oper. venda com acordo recompra	992 211	794 379
Outros recursos	231	5
Juros a pagar	1 184	798
	3 491 403	2 440 902
	3 694 312	2 924 272

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

The item International credit institutions - Deposits includes essentially deposits made by the shareholder BPE.

In terms of residual maturity, these funds are broken down as follows:

	30-06-16	31-12-15
Spot	36 017	16 199
Forw ard
Up to 3 months	2 406 757	1 162 837
From 3 months to 1 year	843 772	1 693 842
1 to 5 years	206 250	50 000
Over 5 years	200 000	-
Interest payable	1 516	1 394
	3 658 295	2 908 073
	3 694 312	2 924 272

32. Customer funds

The balance of this item is composed as follows in terms of nature:

CONSOLIDATED
30-06-16	30-06-16	31-12-15

		1 102 703
3 300 062	3 300 062	3 772 675
5 799	5 799	6 386
6 973	6 973	4 328
22	22	9
		4 886 101

50 141	50 141	36 811
61 804	61 804	95 122
573	573	0
112 518	112 518	131 933
13 161	13 161	16 503
4 820 668	4 822 819	5 034 537
	1 382 133 4 694 989	INDIVIDUAL 1 384 284 4 697 140

In terms of residual maturity, these funds are broken down as follows:

	CONSOLIDATED		INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Spot	1 432 275	1 434 426	1 139 515
Forw ard
Up to 3 months	1 239 932	1 239 932	1 599 448
From 3 months to 1 year	1 603 094	1 603 094	1 632 538
1 to 5 years	532 126	532 126	645 725
Over 5 years	80	80	808
Interest payable	13 161 16 502 533	13 161 16 502 533	16 503 ########
	3 388 393	3 388 393	3 895 022
	4 820 668	4 822 819	5 034 537

33. Debt securities issued

The balance of this item is broken down as follows:

	30-06-16	31-12-15
Bonds	2 000	2 383
Euro Medium Term Note	24 536	35 167
Interest payable	989	542
	27 525	38 092

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item.

During 2010, Banco Popular Portugal constituted a Mortgage Bond Issuance Programme whose maximum amount is 1 500 million euros. Within the scope of this programme, the Bank made six mortgage bond issuances in the total amount of 1 330 million euros.

On 30 June 2016, the 5th Series (290 million euros), the 6th Series (225 million) euros, and the 7th Series (300 million euros) were booked in the balance sheet.

On 31 December 2015, , the 5th Series (290 million) euros, the 6th Series (225 million euros) and the 7 th Series (300 million euros) were booked in the balance sheet. This last issuance was fully repurchased by the Bank.

These bonds are covered by a group of residential mortgage loans and other assets that have been segregated as autonomous equity in the Bank's accounts, therefore grating special credit privileges to the holders of these securities over any other creditors. The conditions of the aforementioned issuances are in accordance with Decree-law No. 59/2006, and Notices Nos.5/2006, 6/2006, 7/2006 and 8/2006 and Instruction No. 13/2006 issued by the Bank of Portugal.

On 30 June 2016, the characteristics of these issuances were the following:

Name	Nominal value	Issuance date	Reimbursement date	Interest payment frequency	Interest rate	DBRS Rating
BAPOP Mortgage bonds 30/12/2017	290 000	30/12/2014	30/12/2017	Monthly	1M Euribor+1.20%	BBBL
BAPOP Mortgage bonds 30/06/2018	225 000	30/06/2015	30/06/2018	Monthly	1M Euribor+1.20%	BBBL
BAPOP Mortgage bonds 28/09/2018	300 000	28/09/2015	28/09/2018	Monthly	1M Euribor+1.20%	BBBL

On 30 June 2016, autonomous equity assigned to these issuances amounted to 883 628 thousand euros (dec 2015: 890993 thousand de euros) (see Note 23).

During 2011, Banco Popular Portugal constituted a Euro Medium Term Notes Issuance Programme whose maximum amount is 2.5 billion euros. In the scope of this programme, the Bank has already carried out 36 issuances and as at 30 June 2016, its balance was broken down as follows:

Issuance date 26/10/12 30/07/13	Serial number 10th 26th	Amount 20,000 4536	Number 200 4536	Nominal unit value 100 000 1000	Reimbursement date 26/10/16 30/07/16
		24 536

34. Hedging derivatives

The item hedging derivatives is composed as follows:

	30-06-2016				31-12-2015
	Notional	Carrying amount		Notional		Carrying amount
	Amount	Assets	Liabilities	Amount	Assets	Liabilities
Interest rate contracts
Sw aps	792 000	0	75 761	1 370 000	1 055	121 337

As referred to previously, the Bank covers part of its interest rate risk, resulting from any possible decrease in the fair value of fixed interest rate assets, using interest rate swaps. On 30 June 2016, the net fair value of hedging interest rate swaps (see above) and trading swaps was negative (see Note 19) in the amount of -80 182 thousand euros (dec015: -123843 thousand euros).

Fluctuations in the fair value associated with hedged assets and their respective hedging derivatives are registered in the income statement under item Net income from financial operations (see Note 9).

35. Other provisions

Balances and movements for the Provisions account were as follows:

Other Provisions (Liabilities) - Balances	30-06-16	31-12-15
Impairment for guarantees and committments	2 169	2 183
Other provisions	1 128	677
	3 297	2 860

36. Other liabilities

This item is detailed as follows:

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Suppliers of goods	3 646	3 641	3 307
Tax w ithheld at source	2 547	2 456	3 582
Personnel expenses	12 778	12 288	13 075
Pension fund liabilities	12 276	12 276	-
Other expenses payable	28 126	27 931	15 515
Other revenues w ith deferred income	2 256	2 229	2 297
Factoring creditors	15 754		-
Stock market transactions pending settlement	10 106	10 106	-
Liabilities pending settlement	36 860	35 572	12 898
Other accounts pending settlement	3 894	3 832	3 105
	128 243	110 331	53 779

The amount of liabilities with pensions in the first half of 2016 is explained by the decrease in the discount rate from 2.40% to 1.88% that occurred on 30 June 2016. (see Note 37).

37. Retirement pensions

The Pension Plan of Banco Popular Portugal is a scheme of benefits that comprehends all the benefits foreseen in the Collective Bargaining Agreement that regulates the banking sector in Portugal

The fund assumes the liabilities with past services of former employees in the proportion of their time of service. As a counterpart, from the amount of liabilities we deduct the amount of liabilities with past services of current employees as regards the time of service rendered in other institutions in the banking sector. These liabilities for services rendered are calculated pursuant to IAS 19 Revised.

The Pension Plan of the executive members of the Board of Directors intends to ensure payment for old age pensions, disability pensions and survivor's pensions for the executive members of the Bank's Board of Directors.

With the publication of Decree-law No. 1-A/2011, of 3 January, the employees comprehended by the Collective Bargaining Agreement and in active life on 4 January 2011 started to be comprehended within the General Social Security Scheme ('Regime Geral da Segurança Social' - RGSS) as regards the benefits of old age pensions. Therefore, from that date on the benefits plan defined for employees comprehended in the Collective Bargaining Agreement as regards retirement pensions started to be funded by the Pension Fund and Social Security. However, the Pension Fund still has the responsibility, after 4 January 2011, to cover liabilities on death, disability and survivor's pensions, as

well as the old age complement in order to match the retirement of the participants in the Pension Fund to the amounts of the current pension plan.

According to guidelines derived from the Note issued on 26 January 2011 by the National Council of Financial Supervisors, the Bank has kept with reference to 31 December 2010 the recognition and measurement method for past services of active employees regarding the events transferred to the RGSS used in previous years.

In accordance with Decree-law No. 127/2011 of 31 December, Banco Popular Portugal transferred to Social Security the liabilities for pensions in payment on 31 December 2011, as well as the part of the assets contained in the pension fund that already covered such liabilities. The liabilities transferred amounted to 6.3 million euros and have already been fully paid (55% in December 2011 and 45% in March 2012).

This transference was booked in the income statement in the amount of 795 thousand euros due to the allocation of the proportional part of accumulated actuarial gains/losses and the actuarial gains/losses originated by the difference in actuarial assumptions used for the calculation of the transferred liabilities. In accordance with Decree-law No. 127/2011 of 31 December, this amount shall be deductible for effects of determining taxable profit, in equal parts, from the fiscal year started on 1 January 2012, regarding the average of the number of years of life expectancy of the pensioners whose responsibilities have been transferred. The respective deferred taxes have been on the amount recognised in the year's net income.

Until 31 December 2012, the Bank recognized the net accumulated amount (after 1 January 2004) of actuarial gains and losses resulting from changes in the financial and actuarial assumptions and differences between the financial and actuarial assumptions used and the actual amounts in the item 'Other Assets or Other Liabilities – Actuarial gains/losses'. Accumulated actuarial gains or losses that did not exceed 10% of the highest of the current value of liabilities for past services or the value of the pension funds were included in the 'corridor'. Actuarial gains/losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.

As at 1 January 2013 Banco Popular changed its accounting policy of recognising financial and actuarial gains and losses for pension plans and other defined benefit post-employment benefits pursuant to IAS 19 Revised. Financial and actuarial gains and losses are now recognised in the period they occur directly in equity in the Statement of Comprehensive Income.

On 30 June 2016, the number of participants in the fund was 1 107 (dec 2015: 1 111. On this date, there were 49 retired people and 24 pensioners, and the remaining employees were active.

Current amount of Liabilities

The liabilities assumed for retirement and survivor's pensions are as follows:

Past Services	30-06-16	31-12-15
Obligations at the beginning of the period	163 299	154 196
Service expenses	1 243	2 781
Interest expense	1 922	3 756
Pensions paid	( 783)	( 1 307)
Actuarial deviations	9 799	3 813
Obligations as at 30 June	175 480	163 239

Every year the Bank determines the amount of liabilities for past services using actuarial calculations based on the Project Unit Credit method for liabilities for past services in the case of old age and the Unique Successive Premium to calculate disability and survivor's benefits. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities.

In 2015, those showed a significant reduction with subsequent impact on actuarial gains and losses and on the obligations for services rendered.

Obligations for survival and disability, foreseen in the Collective Bargaining Agreement and insurable are covered by the subscription of a multi-protection life insurance policy for the population at stake, except for those whose urgency of disability or survival is considered unfit to insure.

This is an annual renewable temporary contract in which the Insurance company guarantees the Pension Fund of Banco Popular Portugal, S.A., in case of death or disability assessed at 66% or more according to the National Table for Disability, for any of the people comprehended within the insured group, the payment of the hired premiums.

This insurance contract was signed with Eurovida - Companhia de Seguros de Vida S.A., an insurance company that is an associate of Banco Popular Portugal, S.A.

Equity Amount of the Fund

Equity amount of the Fund	30-06-16	31-12-15
Amount at the beginning of the period	163 299	154 305
Contributions paid
Employer	0	11 300
Employees	386	766
Return on Fund assets	1 249	627
Pensions paid	( 783)	( 1 307)
Other net differences	( 946)	( 2 392)
Amount of the Fund as at 30 June	163 205	163 299
Current obligations for past services	175 480	163 239
Coverage level	93,0%	100,0%

The movements occurred in the total amount of the pension fund were as follows:

Evolution of Liabilities and Total Amount of the Fund

The evolution of liabilities and the total amount of the pension fund in the past five years was as follows:

	30/06/16	31/12/15	31/12/14	31/12/13	31/12/12	31/12/11	31/12/10
Current amount of liabilities	175 480	163 239	154 196	128 411	108 961	94 708	102 746
Equity amount of the Fund	163 205	163 299	154 305	128 495	121 796	113 703	118 246
Net Assets/(Liabilities)	(12 275)	60	109	84	12835	18 995	15 500
Coverage level	93.0%	100.0%	100.1%	100.1%	111.8%	120.1%	115.1%

Banco Popular Portugal assesses the recoverability of any eventual excess in the fair value of the assets included in the pension fund when compared with the liabilities for pensions at each reporting date based on the expectation of the reduction in the future necessary contributions.

Structure of the Assets that comprise the Fund The Pension Fund's portfolio broken down by asset type was as follows:

Types of assets	30-06-2016	31-12-2015
Fixed income securities	67,58%	59,85%
Variable income securities	18,19%	29,80%
Real Estate	3,41%	3,46%
Liquidity	10,82%	6,89%
	100,00%	100,00%

Exposure to credit risk

Regarding the credit risk of the assets with debt characteristics that comprise the fund, the exposure by rating had the following structure:

Ratings	30-06-2016	31-12-2015
AAA	0,55%	5,67%
A A	4,14%	6,41%
A	20,95%	11,75%
BBB	36,71%	52,45%
Other (NR)	37,65%	23,72%
	100,00%	100,00%

On 30 June 2016, the Fund had: 1 000 000 BPE Financiaciones 2.5% bonds, whose maturity was on 1-02-2017, in the amount of 1 022 thousand euros and 1 000 000 Banco Popular Español 1% bonds, whose maturity was on 07-04-2025, in the amount of 1 021 thousand euros. In the first half of 2016, these bonds respectively had a negative fair value change of 9 thousand euros and a positive fair value change of 26 thousand euros.

On 31 December 2015, the Fund had: 1 000 000 BPE Financiaciones 4% bonds, in the amount of 1 040 thousand euros, and 1 000 000 Banco Popular Español 1% bonds,in the amount of 951 thousand euros

Costs for the year

The amounts recognised as costs for the year are analysed as follows:

Cost for the year	30-06-16	31-12-15
Service expenses	1 243	2 782
Interest expense	1 922	3 756
Expected return on Fund assets	( 1 923)	( 3 758)
Other	950	1 626
Total	2 192	4 406

Actuarial gains and losses

The amount of actuarial gains and losses as at 30 June 2016 and 31 December 2015 is broken down as follows:

Actuarial gains and losses	30-06-16	31-12-15
Actuarial gains/losses as at 1 January	( 35 629)	( 28 686)
Actuarial losses for the year - obligations	( 9 860)	( 3 812)
Actuarial gains for the year - Fund	( 674)	( 3 131)
Actuarial gains/losses	( 46 163)	( 35 629)

Actuarial assumptions

The main actuarial and financial assumptions used were as follows:

	30-06-16		31-12-15
	Assump.	Real	Assump.	Real
Discount rate	1,88%	1,88%	2,33%	2,40%
Expected return rate on Fund assets	1,88%	1,56%	2,33%	0,46%
Salaries and other benefits grow th rate	0,75%	0,0%	0,8%	0,0%
Pensions grow th rate	0,5%	0,0%	0,5%	0,0%
Mortality table	TV 88/90		TV 88/90
Disability table	ERC Frankona		ERC Frankona
Turnover	n.a.	n.a.	n.a.	n.a.

Gains and losses arising from experience adjustments and changes in actuarial assumption are recognised in other comprehensive income in Retained Earnings in the period they occur.

Sensitivity analysis to the Main Assumptions that contribute to the liabilities amount

Taking into consideration the most significant impacts on the amount of liabilities, we have performed a sensitivity analysis through a positive and negative fluctuation in the main assumptions that contribute to the amount of the liabilities, whose impact is analysed as follows:

		Impact on current liabilities
	Assumption change	Assumption increase	Assumption decrease
Discount rate	0.25%	Decrease by 6.0%	Increase by 6.5%
Salaries and other benefits growth rate	0.25%	Increase by 5.2%	Decrease by 4.9%
Pensions growth rate	0.25%	Increase by 2.7%	Decrease by 2.6%
		Increase by 1 year	Decrease by 1 year
Average life expectancy		Increase by 3.5%	Decrease by 3.6%

The sensitivity analyses above are based on the change in a given assumption, keeping all other assumptions equal. In practice, that is very unlikely to occur given the correlations that exist between the several assumptions. When calculating the sensitivity of the amount of liabilities for significant actuarial assumptions we applied the same methods used to calculate the positions in the Balance Sheet.

The methodology used to perform the sensitivity analysis remained unchanged from the previous year.

Expected future cash flows

The future undiscounted cash flows of pension benefits are as follows:

	Up to 1 year	1 to 3 years	3 to 5 years	Over 5 years	Total
Benefit (monthly)	150	183	223	3.674	4 2 3 0

These amounts are similar to consolidated amounts given that the consolidated company does not book any amount in this item. The consolidated company has subscribed with exceptions the Collective Bargaining Agreement for the Banking Sector (Acordo Colectivo de Trabalho Vertical - ACTV) and its employees are covered by the general social security scheme. The consolidated company has no liabilities on account of post-employment medical care due to the exception foreseen by Popular Factoring, S.A., paragraph (e) of the Bulletin of Work and Employment, 1st series, No. 31, of 22 August 1990, given that its employees are covered by the general social security scheme.

38. Contingent commitments and liabilities

The following table shows the contractual amount of off-balance financial instruments, which imply lending to customers.

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Contingent liabilities
Guarantees and Sureties	385 874	385 874	391 471
Documentary credits	44 614	44 614	44 034
Commitments:
Irrevocable loans	463 882	463 882	609 985
Revocable loans	948 763	863 659	904 138
	1 843 133	1 758 029	1 949 628

On 30 June 2016, the item Irrevocable loans included the amount of 5 314 thousand euros (dec 2015: 5 314 thousand euros) regarding forward liabilities for the Deposit Guarantee Fund regarding the part of annual contributions which, pursuant to the deliberations of the Fund, were not paid in cash.

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Assets pledged as collateral	45 000	45 000	1 269 000

The amount of the item Assets pledged as collateral includes 45 thousand euros from the Bank's own portfolio aimed, almost entirely, at collateralising an irrevocable credit line with the Bank of Portugal pursuant to the large-amount payment system ('Sistema de Pagamentos de Grandes Transacções – SPGT') and the Intervention Operations Market ('Mercado de Operações de Intervenção' - MOI) (dec 2015: 214 thousand euros).

Additionally, as at 30 June 2016 and 31 December 2015, the balances regarding off-balance sheet accounts were as follows:

	CONSOLIDATED	INDIVIDUAL
	30-06-16	30-06-16	31-12-15
Deposit and custody of securities	5 615 124	5 615 124	5 166 509
Amounts received for collection	93 135	86 593	84 630
	5 708 259	5 701 717	5 251 139

39. Share capital and share premium

As at 30 June 2016, the Bank's share capital was represented by 513 000 thousand shares with the nominal value of 1 euro each, which was subscribed and fully paid by Banco Popular Español, S.A. On 4 April 2016, a share capital increase in the amount of 37 000 000 euros was approved, through the issuance of 37 000 thousand shares with the nominal value of 1 euro each, subscribed and paid by Banco Popular Español, S.A., by delivering 2 495 631 Popular Factoring, S.A., shares with a nominal value of 5 euros each.

As at 31 December 2015, the Bank's share capital was represented by 476 000 thousand shares with the nominal value of 1 euro each, which was subscribed and fully paid by Banco Popular Español, S.A.

The amount recognised in item Share premiums originated in the premiums paid by shareholders in the share capital increases made in 2000, 2003 and 2005.

40. Fair value reserves

The movements in this account are detailed on the following table:

	30-06-16	31-12-15
Revaluation reserves and Fair Value
Available-for-sale investments
Net balance as at 1 January	1 722	(2 981)
Revaluation at fair value	(21 615)	6 083
Deferred taxes	4 863	(1 380)
Balance as at 30 June	(15 030)	1 722

Revaluation reserves regarding available-for-sale assets result from the adequacy to the fair value of the securities in the Bank's portfolio. These balances shall be reversed through the income statement at the time the securities that originated them are disposed of or in case there is any impairment.

The revaluation reserve regarding the adequacy to fair value of tangible assets for own use is related to the property on Rua Ramalho Ortigão (Note 26).

The revaluation reserve for tangible assets calculated in accordance with Decree-law No. 31/98 shall only be moved when it is considered realized, total or partially, and pursuant to the following priorities:

(i) To correct any excess found on the date of the revaluation between the net book value of the elements being revalued and their current real value;
(ii) To absorb accumulated loss until the revaluation date, inclusively;
(iii) To incorporate in the share capital for the remaining part.

41. Other reserves and retained earnings

The balances of the accounts for other reserves and retained earnings are analysed as follows:

	INDIVIDUAL
	30-06-16	31-12-15
Statutory reserve	36 785	35 450
Other reserves	304 708	292 699
Retained earnings	( 87 219)	( 107 362)
	254 274	220 787

Movements in the items reserves and retained earnings were as follows:

	INDIVIDUAL
	30-06-16	31-12-15
Statutory reserve
Balance as at 1 January	35 450	35 221
Transf. Retained earnings	1 335	229
Balance as at 30 June	36 785	35 450
Other reserves
Balance as at 1 January	292 699	290 622
Transf. Retained earnings	12 009	2 054
Transf. Revaluation reserves	-	23
Balance as at 31 December	304 708	292 699
Retained earnings
Balance as at 1 January	( 115 688)	( 108 745)
Net income for the previous year	13 343	2 283
Actuarial gains/losses of the Pension Fund	( 10 534)	( 6 943)
Accounting change due to the revocation of Notice 3/95	39 004	8 326
Transf. to statutory reserve	( 1 335)	( 229)
Transf. to other reserves	( 12 009)	( 2 054)
Balance as at 30 June	( 87 219)	( 107 362)
	254 274	220 787

- Statutory Reserve

The statutory reserve can only be used to absorb accumulated losses or to increase share capital. Portuguese legislation applicable to the banking sector (Article 97 of Decree-Law No. 298/92 of 31 December) requires that at least 10% of the profit for the year be transferred to the statutory reserve until it is equal to the share capital.

The individual values are similar to the consolidated, as the society doesn't have any values in this item

42. Personnel expenses

The number of employees of the Bank according to their professional category was as follows:

	Consolidated	Individual
	30-06-16	30-06-16	31-12-15
Directors	104	101	81
Management	389	384	378
Technical personnel	503	503	493
Clerical staff	187	171	210
	1 183	1 159	1 162

43. Remunerations of the governing bodies and the personnel with responsibility over risk taking and control

As at 30 June 2016, the annual amounts earned by the members of the Board of Directors and the Supervisory Board are detailed, individually and in group, on the following table:

The remunerations earned and the number of employees who have responsibilities in terms of risk taking regarding the Bank or its customers as well as those who assume control functions pursuant to Notice 5/2008 issued by the Bank of Portugal are detailed below:

	No. of Benef.	Fixed Remun.	Total Remun.
Executive Committee	4	319	319
Risk Management		21	21
Compliance		26	26
Asset Management		44	44
Auditing		41	41
	8	451	451

44. Remuneration of the Statutory Auditor

The amounts paid to the Audit Firm PricewaterhouseCoopers in the first half of 2016 and in the first half of 2015 were:

	Consolidated	Individual
	30/06/16	30/06/16	30/06/15
Statutory audit	68	48	56
Other guarantee and reliability services	60	60	76
	128	108	132

45. Relationship with related companies

As at 30 June 2016 and 2015, the amounts payable and receivable regarding related companies was as follows:

	Credit		Debit		Income		Expense
	30-06-16	30-06-15	30-06-16	30-06-15	30-06-16	30-06-15	30-06-16	30-06-15
Consulteam, Lda	-	-	35 723	12 546	360	377	-	-
Eurovida, SA	2 007	4 055	69 032	53 000	1 674	1 339	932	1 339
Popular Gestão de Activos, SA	99	111	1 583	2 403	816	893	36	13
Popular Factoring, SA	99 071	93 368	-	-	1 117	925	90	166
Imopopular Fundo Especial I.I.	20	3 784	376	221	16	49	-	-
Popular Arrendamento	3	0	10 730	6 978	22	26	9	10
Popular Seguros, SA	-	0	635	1 068	371	360	-	-
Popular Predifundo	-	466	-	1	-	11	-	-
SPE-Special Pourpuse Entities	1 272	1 437	-	-	337	251	-	-
	102 472	103 221	82 356	76 217	4 353	4 231	1 067	1 528
Banco Popular Español, SA	1 580 579	212 535	3 522 746	1 759 068	60 361	61 632	112 729	80 388
	Credit		Debit		Income		Expense
	31-12-15	31-12-14	31-12-15	31-12-14	31-12-15	31-12-14	31-12-15	31-12-14
Eurovida, SA	2 002	4 004	58 605	117 668	4 201	5 971	2 317	6 096
Popular Gestão de Activos, SA	111	119	1 524	2 572	1 775	1 931	23	8
Popular Factoring, SA	98 303	87 321	-	35	1 816	2 195	315	267
Imopopular Fundo Especial I.I.	2 716	4 039	66	2	86	238	-	-
Popular Arrendamento	4	4	13 612	5 061	52	91	24	273
Popular Seguros, SA	-	-	775	680	701	748	-	-
Popular Predifundo	3 228	1 065	1	-	57	75	-	-
SPE-Special Pourpuse Entities	1 221	1 621	-	-	1 062	810	-	-
				5 078	740	674	-	-
Consulteam, Lda	-	-	47 722

As at 30 June 2016, the guarantees pledged by the Bank to related companies amounted to 78 150 thousand euros (dec 2015: 76196 thousand euros).

Banco Popular Español, SA 802 137 423 029 2 497 710 2 028 211 94 611 86 299 150 099 150 293

As at 30 June 2016, the Bank received deposits from BPE to guarantee the risk associated with loans granted by the Bank in the amount of 49 404 thousand euros (dec 2015: 98690 thousand euros).

Transactions with related companies are based on common market conditions.

As at 30 June 2016, the members of the Bank's Board of Directors did not hold any deposits with Banco Popular and had loans, granted before they were appointed, in the total amount of 239 thousand euros.

46. Cash and cash equivalents

For effects of the cash flow statement, Cash and cash equivalents include the following balances with maturity of less than 90 days:

	Consolidated	Individual
	30-06-16	30-06-16	31-12-15
Cash (Note 18)	43 859	43 859	43 914
Cash and balances w ith banks (note 18)	89 820	89 820	76 428
Deposits w ith banks w ith maturities of less than 3 months 1 399 930		1 399 930	475 135
	1 533 609	1 533 609	595 477

47. Measurement of portfolio impairment and respective disclosures (Circular Letter No. 02/2014/DSP issued by the Bank of Portugal)

Qualitative disclosures:

a) Credit risk management policy.

The Bank is exposed to credit risk, which is the possible loss that arises when the Bank's counterparts fail to fulfil their obligations. In the case of refundable financing it arises as a consequence of the nonrecovery of principal, interest and commissions, regarding amount, period and other conditions stipulated in the contracts. Concerning off-balance sheet risks, it derives from the non-compliance of the counterparts regarding their obligations with third parties, which implies that the Bank has to assume as its own certain obligations depending on the contracts.

The Bank structures the levels of credit risk it is exposed to by establishing pre-defined acceptable risk limits regarding the borrower or group of borrowers and geographical or business activity segments.

Exposure to credit risk is managed through a regular analysis of the capacity of borrowers and potential borrowers of meeting payment obligations for principal and interest, and by changing these credit limits when appropriate. Exposure to credit risk is also managed in part by obtaining collaterals and personal or corporate guarantees.

Collaterals

Property mortgages;
Pledges of operations made within the Bank;
Pledges on assets such as premises, inventory and accounts receivable;
Pledges on financial instruments, such as securities and shares.

Collaterals held for financial assets, except for loans and advances, are determined by the nature of the instrument. Treasury bonds and other debt instruments usually are not collateralised.

Lending commitments

The main objective of these instruments is to ensure that funds are made available to customers as they require them. Loan extension commitments represent non-utilized parts of credit extension authorizations in the form of loans, guarantees or letters of credit. Regarding the credit risk associated with loan extension commitments, the Bank is potentially exposed to a loss in the amount of the total of non-utilized commitments. However, the probable loss amount is much lower than the sum of the non-utilized commitments since loan extension commitments are revocable and depend on a specific customer's credit worthiness. The Bank monitors the maturity of lending commitments since long-term commitments usually present a greater credit risk than short-term commitments.

Concentration Risk

Concentration risk is managed and monitored by Risk Management that also ensures that adequate policies and procedures are maintained and implemented to monitor and manage credit concentration risk. It is also in charge of monitoring delegated powers in terms of concentration risk and periodically presents reports on concentration risk to the Board of Directors.

The Bank has defined a structure of limits aimed at maintaining an exposure level in line with its risk profile and an adequate diversification of its loan portfolio.

The limits currently approved for credit concentration risk are the following:

i) Risk limit for a Group/Customer

Pursuant to the delegations attributed by BAPOP to the Bank, the maximum limit for total exposure with a Group/Customer is 10% of GBP's Tier I. The maximum limit for a Group/Customer, except bank and technical guarantees and transactions guaranteed with deposits is 5% of GBP's Tier I.

ii) Risk limit by transaction amount

The maximum amount for a lending transaction is defined.

In case of funding working capital or without a specific destination every risk with that characteristic shall be aggregated.

Regarding project finance and syndicated financing, BAPOP's participation shall not be higher than 25% of the total amount, in case the transaction is higher than the limit defined for this type of lending.

iii) Limit of participation in the Credit Risk Central (CRC)

The maximum limit for participation in the CRC with a Group/Customer shall be the following:

Group/Customer with risks of over € 500 million - Lower than 10% of CRC.

Group/Customer with risks of over € 250 million - Lower than 15% of CRC.

Group/Customer with risks of over € 100 million - Lower than 25% of CRC.

Group/Customer with risks of over € 20 million - Lower than 50% of CRC.

iv) Limit of risk concentration by activity sector

The maximum limits of concentration of total risk by activity sector are the following:

Construction and property development: 25%;
Manufacturing and mining industries: 15%;
Information and communication, education and other services: 5%;

Remaining sectors: 10% (Agriculture, forestry and fisheries; Energy and water supply; Wholesale and retail trade, repair of motor vehicles; Hotels and restaurants; Transport and storage; Banking and insurance; Administrative, professional sanitary and artistic activities).

v) Limit of risk concentration in large companies

There is a maximum limit of 30% of total risk for the Large Companies segment.

vi) Limit of risk concentration by product

There are also defined limits according to the type of product:

Transactions with mortgages on land;
Property development;
Loans to purchase securities.

vii) Assessment of mortgage collaterals

A set of limits is also defined according to the loan to value (LTV) of lending transactions with mortgage collaterals.

b) Loan write-off policy.

The loan write-off policy determines that write-offs may only be carried out when the loans simultaneously have been non-performing for 2 years and have an impairment level of 100%

c) Impairment reversion policy.

The analysis and subsequent determination of individual impairment of a customer that has shown impairment in previous periods may only result in a reversion in case it is related with the occurrence of an event after the initial recognition (e.g. improvement of the customer's rating or strengthening collaterals).

Additionally, there may be implicit reversions of impairment, resulting from new estimates of collective parameters or changes in the type of customer analysis (individual or collective).

The reversal amount may not be higher than the accumulated impairment amounts previously recorded.

d) Conversion of the debt into debtor's equity.

The Bank does not usually employ this type of solution and solely holds an exposure on an economic group that was subject to this type of loan restructuring. In this case, the loan is replaced by a position comprised of shares from a Restructuring Fund.

These positions are subject to impairment tests every six months from the moment those shares are included in the Restructuring Fund. For junior debt positions maintained in companies held by these Funds a 100% impairment is estimated regarding their respective exposure.

e) Description of restructuring measures applied and their respective associated risks, as well as control and monitoring mechanisms.

The Bank has defined a vast set of restructuring measures, which are negotiated by a large set of Agencies specialising in credit recovery. The most common measures are extending the maturity date of the loan or the inclusion of a grace period.

In terms of characteristics, these restructuring operations are divided into large groups: without overdue credit (with or without strengthening collaterals); and with overdue credit (with or without strengthening collaterals).

The Bank's decision-making body in terms of loan granting shall identify the restructuring operations that result from customers' financial difficulties. These are subsequently classified by the Bank's computer system. Costumers with lending operations that are undergoing a restructuring process are also subject to an internal definition of a loan restrictive classification. Agencies are thus forced to act on this policy, which may imply maintaining, reducing or extinguishing risks.

Regarding monitoring in terms of the loan impairment model, these transactions shall bear the restructuring brand for a two-year healing period pursuant to Instruction No. 32/2013 issued by the Bank of Portugal.

f) Description of the process of assessing and managing collaterals.

For situations in which it is admissible that credit recovery shall occur via foreclosure the amounts that shall be considered (market value of the most recent appraisal known with the application of a temporal haircut) are also defined by internal regulations.

Reappraisals of these collaterals are usually done within the time frames defined by Notices Nos.3/95 and 5/2006 issued by the Bank of Portugal. However, in the case of properties related with transactions done with customers with significant exposures (over 1 million euros), reappraisals are carried out more often.

Despite the pre-defined time frames, appraisals are carried out whenever they are considered relevant to monitor the value of the collateral.

The value of the properties considered as collaterals is adjusted to the current macroeconomic scenario through the application of haircuts, based on Management analysis and market practices.

		Haircut
Time frame of the assessment	>= 50% Work completed	$< 50\%$ Work completed
Less than 6 months
6 months
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, From 6 months to 1 year
From 1 to 2 years
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, From 2 to 3 years
Over 3 vears

Regarding financial collaterals and securities, we have defined the periodical monitoring of the lending operations collateralised with this type of assets, and these are regularly reported to Management. Assets used as collateral are indicated, as well as the overall hedging ratio. These amounts are considered in the scope of an individual impairment analysis.

g) Nature of main judgements, estimates and hypotheses used to determine impairment.

Losses due to impairment correspond to estimates based on judgements made by top management in view of the facts and circumstances on a given date. Consequently, future events and developments are expected, in some cases, to converge into a different result vis-à-vis the estimate amount.

In order to ensure the adequacy of the impairment model to the macroeconomic scenario, the Bank carries out monthly impairment reviews of its individually analysed customers, as well as reviewing every six months the parameters applied to the collective part of its credit portfolio.

In terms of the individual analysis, impairment depends on the disbursement capacity of the debtor and/or respective guarantors, or the collaterals the Bank has to guarantee the lending transactions, applying the reference criteria described in Circular Letter 02/2014/DSP issued by the Bank of Portugal.

As far as the collective part of the portfolio is concerned and especially the calculation of LGD estimates, these are calculated based on the history of effective recoveries, as well as on conservative assumptions, defined and approved by Management for future estimates.

h) Description of the methods employed to calculate impairment, including the way portfolios are segmented in order to reflect the different characteristics of the lending operations.

In compliance with the conceptual model on which impairment calculations are based, every month an analysis is carried out to the overall credit portfolio divided into seven main groups: (i) default loans, (ii) loans in arrears (30- 90 days), (iii) restructured loans, (iv) non-performing loans (with impairment signs), (v) healing loans, (vi) healed loans, and (vii) performing loans.

Definition of default

A loan is considered defaulted whenever it shows at least one of the following signs:

Loans in arrears for more than 90 days;
Customers in insolvency/bankruptcy situations or undergoing a special revitalisation process (PER); or
Bank guarantees called in by the beneficiary.

A customer's full exposure is considered defaulted whenever the sum of their transactions in arrears for more than 90 days exceeds 20% of total exposure.

Homogeneous segments result from the creation of transaction groups that have similar credit risks, taking into consideration the Bank's management model. In order to do so, we have defined as relevant segmentation factors some lending transactions characteristics, such as type of customer, materiality of the exposure, type of product and type of associated collateral.

The segmentation currently in force distinguishes between specific PD segmentation and specific LGD segmentation:

PD segmentation	LGD segmentation
	State and other public bodies
	Banco Popular Group
	Employees
	Corporate Customers
	Relevant Customers
	Credit cards - Private individuals
	Residential mortgage loans with LTV <=80%
Residential Mortgage Ioans	Residential mortgage loans with LTV > 80%
	Collateralised private individuals
Consumer credit	Consumer credit
	Non-Collateralised private individuals
	Property development
Property construction	Collateralised construction loans
	Non-collateralised construction loans
	Credit cards - Companies
Companies	Collateralised companies
	Non-collateralised companies

Probability of default (PD) represents the estimate based on the last 5 years of the Bank's history of the number of transactions with or without impairment signs that can default during a given period of time (emerging period). So that the history reflects the current economic conditions, the observations obtained are adjusted through the following risk weights that may be adjusted every six months according to the regular exercise of PD back testing:

	Year 1	Year ₂	Year ₃	Year 4	Year 5
Weight	10%	15%	15%	30%	30%

PD is also differentiated according to the classification of each loan: (i) default loans, (ii) loans in arrears (30- 90 days), (iii) restructured loans, (iv) non-performing loans (with impairment signs), (v) healing loans, (vi) healed loans, and (vii) performing loans.

i) Impairment signs by credit segment

The Bank considers that a loan shows impairment signs when one of the following events occurs.

Customers with at least 1 loan of a material amount in arrears for more than 30 days;
Customers in litigation;
Customers with at least 1 loan of a material amount restructured due to financial difficulties of the customer or perspective/request for restructuring;
Customers with at least 1 loan undergoing out of court procedures to regularise their situation (PERSI);
Customers with at least 1 loan of material amount in the banking system in arrears, premium and interest cancelled/annulled or in court, according to information made available by the Central for Credit Liabilities of the Bank of Portugal;
Customers with loan transactions written-off by BAPOP in the past 12 months;
Customers with banking guarantees made by the Bank which have been foreclosed within the past 24 months;
Costumers with pledges or assignments to the Bank in the past 24 months;
Customers with non-performing operations in other entities of Popular Group;
Any other signs that cause a higher probability of defaulting detected in the individual analysis.

j) Limits defined for individual analysis.

On each reporting date a set of customers is selected, who due to the materiality of their exposure to the Bank are considered significant. Those customers are subject to an individual analysis procedure in order to conclude whether there is evidence of impairment or to determine the amount of impairment.

Individual analyses are carried out on:

Default customers or customers showing impairment signs with total liabilities of over 750,000 euros;
Significant customer portfolio with no impairment signs and total liabilities of over 2,500,000.

At all times, between 25% and 30% of total on-balance sheet loans of BAPOP have to be individually analysed. In case the above-mentioned limits do not allow that percentage to be within that interval they may be adjusted.

Customer lending subject to individual analysis in which no objective evidence of impairment is identified shall be included in homogeneous risk segments in order to be considered for collective impairment.

k) Policy on internal risk levels, specifying the treatment given to a borrower classified as impaired.

Operations that are in arrears for more than 90 days, or in insolvency situations or undergoing a special revitalisation process (PER), or that require more specialised monitoring are regularly migrated to a set of Agencies.

The mission and objectives of that set of agencies are the rigorous analysis, monitoring and management of customers and risks, carried out by Specialised Managers distributed into 3 segments (Private individuals, Corporate, and Large Risks). From a comprehensive vision of the whole recovery process, we try to find and employ the most adequate solutions for a swift credit recovery.

l) General description of the calculation of the current amount of future cash flows when calculating impairment losses assessed individual and collectively.

According to the impairment model used by the Bank, when objective evidence of an event that originated a loss due to impairment is identified, the amount of that loss shall be determined as the difference between the amount on the balance sheet and the present amount of the estimated future cash flows (excluding losses due to events that have not occurred yet), discounted at the original effective interest rate.

Estimated future cash flows included in the calculation regard the contractual amount for the loans, adjusted by any amounts that the Bank expects not to recover and the time frame in which it is foreseeable that those shall be carried out. The time frame for the recovery of cash flows is a very significant variable for the calculation of impairment, since an impairment loss is always recognised, even in the cases in which total recovery of the contractual outstanding cash flows is expected to be

received but after the agreed dates. This situation shall not be verified in case the Bank receives compensation in full (for example, as interest or default interest) for the period in which the loan was overdue.

Estimating an amount and the moment future cash flows shall be recovered for a loan involves professional judgement. The best estimate for those, taking into consideration the guidelines defined on Circular Letter No. 02/2014/DSP, is based on reasonable assumptions and on observable data at the date impairment is assessed, on the capacity of a customer to pay or on the possibility of a foreclose on a collateral.

In the case of collective portfolios, a probability of default (PD) and a rate of loss given default (LGD) are applied to each homogeneous segment.

In the case of defaulted loans, PD is 100% and the balance is established at the moment each loan defaults.

LGD is an estimate of loss given default of a customer. For the calculation of this variable, a random sample of the Bank's history is used, based on a trust interval of 95% regarding every customer that has defaulted. Thus, the average loss is calculated for each segment based on every recovery discounted at the effective rate for the month in which that operation defaulted until maturity date/settlement, as well as possible future estimates for the cases in which operations have not been settled when the analysis is carried out.

Recovery of the loans included in the sample are checked on a case-by-case basis, including:

Historical recoveries via payments made by the debtor (recoveries since the date of default until the date of analysis);
Historical recoveries via foreclosure, deducted from expenses;
Estimates of recoveries after the reference dates used for the analysis;
Recoveries after write-off.
m) Description of the emerging period(s) used for the different segments and justification of their adequacy.

Emerging periods, which result from internal studies and the estimate of time management in the time frame between the event and default, are the following:

Past-due loans - 30 to 90 days	3
Restructured loans	12
Other signs of default	12
Healing	12
Performing and healed	12

n) Detailed description of the cost associated with credit risk, including disclosure of PD, EAD, LGD and healing rates.

For restructured or healing loans, average PD is determined for each month of the demarcation stage (24 or 12 months respectively); after that time curves are drawn and applied.

In the segments where those time curves do not show correlations that can be considered explanatory, the PD applied during the demarcation stage results from the weighted average by the total number of restructured or healing loans in each segment and in each month (without attributing different weights to moment PD was observed).

Additionally, from a conservative perspective, the minimum point of each curve may never be lower than the PD obtained for performing loans for the same period.

In the following tables, the main points of their respective curves applied to restructured or healing loans are shown as follows:

Performing loans or loans with probability of default

	Regular Portfolio			Portfolio with impairment signs
Segment:	Performing	Healed	$> 30$ days	Other signs
Credit cards - Private individuals	2.3%	0.0%	46.5%	13.4%
Relevant Customers	1.1%	4.2%	68.1%	34.1%
Corporate Customers	0.8%	0.0%	75.7%	22.2%
Property construction	4.4%	4.7%	53.0%	36.2%
Residential mortgage loans	1.0%	3.3%	42.6%	14.7%
Consumer credit	3.1%	5.9%	28.6%	17.8%
Employees	0.1%	0.0%	49.4%	4.6%
Corporate customers	3.2%	6.2%	50.5%	28.4%
State and other public bodies	0.0%	0.0%	22.0%	0.0%
Banco Popular Group	0.0%	0.0%	0.0%	0.0%
Property development	10.0%	0.0%	59.7%	42.5%

Restructured loans

					Time frame of the restructuring (in months):
Segment:	n+1	n+2	n+3	n+4	n+5	n+6	n+7	n+8	n+9	n+10	n+11	n+12
Credit cards - Private individuals	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%	4,9%
Relevant Customers	59,1%	53,6%	48,5%	43,6%	38,9%	34,5%	30,4%	26,5%	22,8%	19,4%	16,3%	13,4%
Corporate Customers	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%	33,3%
Property construction	46,4%	44,3%	42,2%	40,1%	38,0%	35,9%	33,9%	31,8%	29,7%	27,6%	25,5%	23,4%
Residential mortgage loans	31,1%	27,8%	24,9%	22,3%	19,9%	17,8%	15,9%	14,3%	12,8%	11,4%	10,2%	9,1%
Consumer credit	45,8%	39,8%	34,6%	30,0%	26,0%	22,5%	19,6%	17,2%	15,2%	13,5%	12,1%	11,0%
Employees	9,6%	4,3%	2,5%	1,7%	1,1%	0,8%	0,5%	0,3%	0,2%	0,1%	0,1%	0,1%
Corporate customers	47,5%	42,4%	37,8%	33,7%	30,2%	27,1%	24,5%	22,2%	20,2%	18,6%	17,1%	15,9%
State and other public bodies	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%
Banco Popular Group	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%	0,0%
Property development	46,5%	44,0%	41,5%	39,0%	36,5%	34,0%	31,5%	29,0%	26,5%	24,0%	21,5%	19,0%

					Time frame of the restructuring (in months):
Segment:	$n+13$	$n + 14$	n+15	$n+16$	$n+17$	$n+18$	$n+19$	$n+20$	$n+21$	$n+22$	$n+23$	$n+24$
Credit cards - Private individuals	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%	4.9%
Relevant Customers	10.8%	8.4%	6.3%	4.5%	2.9%	1.5%	1.1%	1.1%	1.1%	1.1%	1.1%	1.1%
Corporate Customers	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%	33.3%
Property construction	21.3%	19.2%	17.1%	15.0%	12.9%	10.8%	8.7%	6.6%	4.5%	4.4%	4.4%	4.4%
Residential mortgage loans	8.2%	7.3%	6.5%	5.8%	5.2%	4.7%	4.2%	3.7%	3.3%	3.0%	2.7%	2.4%
Consumer credit	10.1%	9.4%	8.7%	8.1%	7.5%	6.8%	6.1%	5.1%	4.0%	3.1%	3.1%	3.1%
Employees	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%
Corporate customers	14.8%	13.8%	12.8%	11.9%	10.9%	9.8%	8.7%	7.3%	5.7%	3.9%	3.4%	3.4%
State and other public bodies	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Banco Popular Group	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Property development	16.5%	14.0%	11.5%	10.0%	10.0%	10.0%	10.0%	10.0%	10.0%	10.0%	10.0%	10.0%

Healing loans

Segment:							Time frame of the healing (in months):
	$n+1$	$n+2$	$n+3$	$n+4$	$n+5$	$n+6$	$n+7$	$n+8$	$n+9$	$n+10$	$n + 11$	$n+12$
Credit cards - Private individuals	35.2%	31.5%	27.8%	24.1%	20.4%	16.7%	13.0%	9.3%	5.6%	2.3%	2.3%	2.3%
Relevant Customers	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%	32.8%
Corporate Customers	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%	0.7%
Property construction	55.1%	44.8%	35.4%	27.1%	19.9%	13.6%	8.4%	4.4%	4.4%	4.4%	4.4%	4.4%
Residential mortgage loans	40.6%	36.7%	32.8%	28.9%	25.0%	21.1%	17.2%	13.2%	9.3%	5.4%	1.5%	1.0%
Consumer credit	27.3%	24.9%	22.5%	20.0%	17.6%	15.2%	12.8%	10.4%	8.0%	5.6%	3.1%	3.1%
Employees	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%	14.3%
Corporate customers	45.6%	41.8%	38.0%	34.2%	30.4%	26.6%	22.8%	19.0%	15.2%	11.4%	7.6%	3.8%
State and other public bodies	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Banco Popular Group	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Property development	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%	40.6%

LGDs applied as at 30 June 2016 were the following:

Segment:	LGD
Credit cards - Corporate	57.8%
Credit cards - Private individuals	45.0%
Corporate Customers	10.1%
Relevant Customers	10.8%
Collateralised construction loans	19.5%
Non-collateralised construction loans	37.2%
Residential mortgage loans with LTV <= 80%	8.3%
Residential mortgage loans with LTV >80%	10.5%
Consumer credit	47.9%
Employees	6.3%
Collateralised companies	20.5%
Non-collateralised companies	30.8%
State and other public bodies	0.0%
Banco Popular Group	0.0%
Collateralised private individuals	8.6%
Non-Collateralised private individuals	32.1%
Property development	8.8%

We would like to stress once more that the project that will allow the Bank to calculate LGD based on the whole portfolio and not simply on a sample is almost complete as mentioned in paragraph (l).

o) Conclusions of the sensitivity analysis to the amount of impairment and changes to the main assumptions

As at 31 December 2015, an increase by 10% in PD would imply an increase by 4 million euros in the total amount of impairment. A similar increase in LGD would imply an increase by 18.3 million euros.

An increase by 10% in both variables would imply a 22.7 million euro increase in the total amount of impairment.

p) Qualitative disclosures of Popular Factoring, S.A.

The impairment model used by Popular Factoring, S.A., in view of the specificity of its business and the fact that it had been an independent legal person until now, is not based on the same methodology that regulates Banco Popular, S.A., although it achieved results that are very close to those that Popular Factoring, S.A., has historically showed. In this scope, Banco Popular Portugal, S.A., after the merger project with that company, which is now under way, will homogenize data.

In this note, we present a brief description of the model that exists in the consolidated company and its main impact on the reference values of Banco Popular, S.A., which we consider of little significance. For this reason, in this interim report, the tables in the quantitative disclosures, in face of the size and complexity of the factoring business inside the consolidated portfolio, will be presented only when materially relevant.

The impairment of the credit portfolio of Popular Factoring, S.A., is calculated with reference to the bases, reasonability, results, and experience, given the reality of the company and the type of product that factoring represents. The company has a calculation model that intends to be reliable and timely, and corresponds to an impairment model.

The model developed by Popular Factoring, S.A., is based on three major areas: I-Seniority; II-Internal credit rating; and III-Subjective analysis.

Seniority is measured from the maturity date of two invoices granted. The greater the seniority, the larger the weight for the constitution of impairment.

The internal credit rating of the customers (the internal classification of the customer based on the notation defined by the company) contributes to calculate impairment, combined with the remaining available information on customers and adherents.

The model is based on an internal credit rating of its customers, whose classification varies from 1 (excellent risk) to 5 (high risk). This system is based on two aspects, incorporating the specific risk of the operation/customer portfolio and the company risk, obtained through the points that result from the analysis of the updated financial information on the companies. The higher the rating, the higher the impairment.

Finally, impairment is defined and calculated based on a subjective credit analysis.

Quantitative disclosures:

a) Detailed exposures and impairments by segment.

Individual
			Exposure as at 30/06/2016					Impairment as at 30/06/2016
Segment:	Total exposure	Performing loans	Of which: healed	Of which: restructured	Non-performing loans	Of which: restructured	Total impairment	Performing loans	Non-performing loans
Corporate	357 661	295 949	0	4 1 2 6	61712	20 20 8	36 169	2789	33 380
Property construction and CRE	539 933	350 160	358	30 473	189773	84 334	73 516	8 1 3 9	65 378
Residential mortgage loans	1816369	1705772	775	94 175	110 597	49 177	17617	5 2 8 1	12 3 36
Relevant	1055882	899 499	14 044	75812	156 383	71 194	75 867	27 499	48 3 69
Corporate customers	2038998	1697017	2637	43 162	341 981	94 5 23	128 470	24 175	104 296
Other	502 639	450 998	58	4953	51 642	10478	20 927	1565	19 3 62
Total	6311481	5 399 393	17872	252700	912088	329 914	352 567	69 447	283 120

				Exposure as at 31/12/2015				Impairment as at 31/12/2015
		Performing	Of which:	Of which:	Non-performing	Of which:	Total	Performing	Non-performing
Segment:	Total exposure	loans	healed	restructured	loans	restructured	impairment	loans	loans
Corporate	326 012	269 988	0	4 207	62 023	21 462	30 077	466	26 911
Property construction and CRE 548 971		347 213	201	34 071	201 757	87 047	87 918	8 424	79 494
Residential mortgage loans 1 726 927		1 612 328	1 631	100 156	114 599	47 731	18 340	5 765	12 574
Relevant	1 139 249	949 517	14 910	53 614	189 732	75 942	85 069	28 453	56 616
Corporate customers	1 981 021	1 627 616	987	36 349	353 405	88 108	140 584	24 818	115 766
Other	363 595	314 008	88	6 247	49 587	9 358	21 300	2 380	18 920
Total	6 085 775	5 114 670	17 824	234 643	971 104	329 647	383 288	70 306	312 981

			Exposure as at 30/06/2016				Impairment as at 30/06/2016
Segment:	Total exposure	Performing loans	Of which: healed	Of which:	Non-performing	Of which:	Total impairment	Performing loans	Non-performing
				restructured	loans	restructured			loans

Corporate	390 548	327 629	0	4 1 2 6	62 919	20 20 8	37 608	3085	34 5 23
Property construction and CRE	565 059	374 893	358	30 473	190 166	84 334	74 093	8323	65 771
Residential mortgage loans	1816369	1705772	775	94 175	110 597	49 177	17617	5 2 8 1	12 3 36
Relevant	1055882	899 499	14 044	75812	156 383	71 194	75867	27 499	48 3 69
Corporate customers	2 131 203	1787399	2637	43 162	343 804	94 5 23	131 210	25 134	106 077
Other	509 992	458 343	58	4953	51 650	10478	20920	1565	19 355
Total	6469052	5 5 5 3 5 3 3	17872	252 700	915 519	329 914	357 316	70886	286 430

				Exposure as at 30/06/2016			Impairment as at 30/06/2016
			Performing loans			Non-performing loans			Performing loans	Non-performing loans
		Over 30 days past due Between 30 and 90 Total exposure			Days past due		Total impairment		Days past due	Days past due
Segment:		Performing loans	With imp. signs	days past due	$\leftarrow 90$	> 90		< 30	between 30 and 90	$5 = 90$	> 90
Corporate	357 661	276 195	19754		27 694	34 018	36 169	2789		11 731	21 649
Property construction and CR	539 933	295 020	47975	7164	34 5 62	155 211	73516	6995	1144	10854	54 5 23
Residential mortgage loans	1816369	1481107	191766	32898	9390	101 207	17617	4010	1 2 7 0	1 1 3 3	11 203
Relevant	1055882	805 490	82 30 6	11702	9971	146 413	75 867	27484	14	2009	46 359
Corporate customers	2038998	1588523	98 699	9795	50 140	291 840	128 470	23 0 28	1147	14 4 65	89830
Other	502 639	432 530 16 480 1988			1 2 6 0	50 382	20927	1342	223	387	18975
Total	456 982 133 016 6311481 4878864 63 547					779 072	352 567	65 649	3799	40 580	242 539

				Exposure as at 31/12/2015					Impairment as at 31/12/2015
		Performing loans			Non-performing loans				Performing loans	Non-performing loans
		Over 30 days past due	Between 30 and		Days past due			Days past due		Days past due
Segment:	Total exposure	Performing loans	With imp. signs	90 days past due	<= 90	> 90	Total impairment	< 30	between 30 and 9 0	<= 90	> 90

Corporate	326 012	249 480	14 390	119	29 318	32 705	30 077	455	10	10 975	18 637
Property construction and CRE 548 971		280 095	63 397	3 721	39 276	162 481	87 918	7 923	500	13 654	65 839
Residential mortgage loans 1 726 927		1 380 870	200 722	30 736	9 361	105 238	18 340	4 564	1 201	1 156	11 419
Relevant	1 139 249	845 808	103 685	24	40 701	149 031	85 069	28 429	24	12 267	44 349
Corporate customers	1 981 021	1 520 295	92 342	14 979	55 385	298 020	140 584	22 551	2 267	16 877	98 888
Other	363 595	296 373	15 176	2 459	1 483	48 104	21 300	1 917	463	475	18 445
Total	6 085 775	4 572 921	489 712	52 037	175 525	795 579	383 288	65 840	4 466	55 404	257 577

	Exposure as at 30/06/2016						Impairment as at 30/06/2016
			Performing loans			Non-performing loans			Performing loans		Non-performing loans
	Total exposure		Over 30 days past due	Between 30 and 90	Days past due		Total impairment		Days past due	Days past due
Segment:		Performing loans	With imp. signs	days past due	490	> 90		< 30	between 30 and 90	$= 90$	> 90

Corporate	390 548	307875	19754		27 694	35 225	37 608	3085		11731	22792
Property construction and CR	565 059	319753	47975	7164	34 5 62	155 604	74 093	7179	1144	10854	54 916
Residential mortgage loans	1816369	1481107	191766	32 898	9390	101 207	17617	4010	1270	1133	11 203
Relevant	1055882	805 490	82 306	11702	9971	146 413	75867	27 484	14	2009	46 35 9
Corporate customers	2 131 203	1678905	98 699	9795	50 140	293 663	131 210	23 987	1 1 4 7	14 4 65	91 611
Other	509 992	439 875	16 480	1988	1 2 6 0	50 390	20927	1342	223	387	18975

Total	6 4 69 0 52	5 033 004	456 982	63 547	133 016	782 503	357 323	67088	3799	40 580	245 856

b) Detailed credit portfolio by segment and year of production.

30/06/16	Corporate				Property construction and CRE			Residential mortgage loans
Production vear	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$\leq$ 2004		13	8	662	17383	2603	4631	142 314	1936
2005	4	4		186	9 1 1 4	1074	1912	100 763	1 2 0 1
2006	29	5 2 2 1		280	12 48 1	1567	1739	88 950	1 2 8 4
2007	46	O	0	417	31959	7587	2005	108 162	2 1 6 8
2008	15	O	0	390	13 657	1564	2669	152 762	1565
2009	21	11 6 64	7320	515	18 681	3626	3 1 0 1	189 672	2 2 5 2
2010	43	5420	3420	645	32 183	10 386	4055	277 195	2501
2011	78	9646	280	664	28 187	7845	1954	153 688	1046
2012	20	10483	8806	632	37 048	7718	863	70 631	926
2013	41	22891	3994	821	44 906	7 200	1052	78735	562
2014	30	12 946	3655	768	56 587	7940	1512	124 814	485
2015	92	257 754	8633	3821	184 716	12965	2027	190 198	1555
2016	64	21 6 20	44	960	53 030	1441	1435	138 486	137
Total	490	357 661	36 169	10761	539 933	73 516	28 955	1816369	17617

30/06/16		Relevant			Corporate customers			Other
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$\leq$ 2004	40	18415	976	1469	6981	1257	3472	14 4 64	585
2005	16	3550	4	505	6448	717	1883	5856	501
2006	25	35 585	5324	748	9 1 0 8	2041	2894	10809	1 2 1 6
2007	20	37 126	633	1 1 4 1	27 106	4359	3 3 4 9	10026	2 1 8 6
2008	23	84 114	5835	1065	12019	1822	3 2 2 5	13 309	2015
2009	187	69 434	9726	1429	50 096	7792	5 1 6 9	17901	2406
2010	84	41 980	3457	2052	66 743	13 2 2 5	7 1 1 9	28 7 74	3492
2011	62	44 006	326	1900	68727	10781	5597	24 279	2737
2012	85	27598	98	3 1 3 2	103822	13 5 53	7631	11571	1 1 8 2
2013	122	83 532	21 663	4423	161755	15 684	7504	14 3 7 1	1026
2014	202	156 847	5 1 9 9	4887	281 239	20 006	8890	41577	1 2 0 1
2015	433	362 316	21 538	19 307	982 001	31 000	17005	137 114	2 1 6 1
2016	335	91379	1087	6385	262 953	6 2 3 2	7350	172 589	220
Total	634	1055882	75867	48 443	2038998	128 470	81088	502 639	20 9 27

31-12-2015	Corporate			Property construction and CRE			Residential mortgage loans
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
<= 2004	26	55	9	656	22 657	6 750	4 706	148 385	2 150
2005	14	393	5	185	10 512	2 937	1 940	104 558	1 312
2006	30	5 703	6	305	14 122	1 888	1 774	91 610	1 374
2007	51	0	0	446	36 474	7 650	2 046	111 954	2 232
2008	17	0	0	433	14 312	1 890	2 718	157 523	1 727
2009	20	11 402	4 886	550	24 934	7 785	3 159	195 851	2 328
2010	44	5 344	3 344	722	38 120	11 934	4 092	284 399	2 581
2011	95	10 184	412	767	32 385	9 195	2 014	160 279	1 237
2012	24	10 555	8 811	865	43 830	7 590	876	72 599	942
2013	46	29 121	3 931	867	52 737	8 129	1 063	80 171	582
2014	30	12 749	2 572	828	65 894	7 990	1 531	127 559	450
2015	107	240 506	6 102	4 118	192 992	14 181	2 057	192 039	1 426
Total	504	326 012	30 077	10 742	548 971	87 918	27 976	1 726 927	18 340
31-12-2015		Relevant			Corporate customers			Other
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
<= 2004	23	21 337	781	1 455	7 436	1 409	3 567	17 785	666
2005	9	7 083	13	504	7 102	935	1 958	6 598	514
2006	23	48 606	9 185	737	9 049	1 920	2 949	11 857	1 258
2007	28	46 628	2 558	1 147	29 386	4 844	3 394	11 035	2 241
2008	25	87 468	6 226	1 081	16 511	3 942	3 411	15 784	2 054
2009	192	81 854	6 011	1 509	54 747	10 818	5 374	20 218	2 441
2010	100	48 716	6 700	2 193	77 657	16 873	7 490	32 569	3 588
2011	81	55 976	765	2 282	79 016	14 458	6 046	27 760	2 870
2012	101	34 168	802	4 129	131 645	15 308	8 085	13 474	1 138
2013	153	114 688	18 494	4 825	196 813	18 749	8 022	17 311	1 212
2014	205	154 998	6 324	5 240	328 417	19 616	9 450	45 074	1 255
2015	574	437 727	27 209	21 769	1 043 242	31 712	18 854	144 131	2 063
Total	1 514	1 139 249	85 069	46 871	1 981 021	140 584	78 600	363 595	21 300

c) Detailed amount of gross credit exposure and individual and collectively assessed impairment by segment, business sector and geography.

c.1) By segment:

Individual

30/06/16	Corporate		Property construction and CRE		Residential mortgage loans
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	329 291	36 082	101 159	32 256	7 1 7 5	1439
Collective	19 264	87	438 774	41 260	1809 194	16 178
Total	348 555	36 169	539 933	73516	1816369	17617

	Relevant		Corporate customers			Other	Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	1064988	75 867	102 601	30 4 63	27458	74	1632671	176 182
Collective			1936396	98 007	475 181	20853	4678810	176 385
Total	1 064 988	75 867	2038998	128 470	502 639	20927	6 311 481	352 567

31-12-2015	Corporate			Property construction and CRE	Residential mortgage loans
Assessment	Exposure Impairment		Exposure Impairment		Exposure	Impairment
Individual	304 969	30 023	119 500	45 150	10 080	1 385
Collective	21 043	54	429 471	42 767	1 716 848	16 955
Total	326 012 30 077		548 971	87 918	1 726 927	18 340

	Relevant		Corporate customers			Other	Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	1 139 249	85 062	122 136	41 810	28 973	49	1 724 906	203 480
Collective	0	7	1 858 885	98 774	334 622	21 251	4 360 868	179 808
Total	1 139 249	85 069	1 981 021	140 584	363 595	21 300	6 085 775	383 288

Consolidated

30/06/16	Corporate			Property construction and CRE	Residential mortgage loans
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	358 623	36 425	126 285	32 316	7175	1439
Collective	22819	1 1 8 3	438 774	41 777	1809194	16 178

Total	381 442	37 608	565 059	74 093	1816369	17617

	Relevant		Corporate customers		Other		Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment

Individual	1064988	75867	102 601	30 4 63	27458	74	1687129	176 585
Collective			2028 601	100 747	482 534	20853	4781923	180738

Total	1064988	75867	2 131 203	131 210	509 992	20 927	6469052	357 323

c.2) By business sector:

Individual

30/06/16	Property construction			Industries	Commerce
Assessment	Exposure	Impairment		Impairment Exposure		Impairment
Individual	247 938	68081	266 551	13 639	132 244	20 268
Collective	192 699	24 0 76	728 733	31781	703 457	45 600
Total	92 157 440 638		995 284	45 420	835 701	65868

	Financial/Insurance Companies		Real Estate Agents		Other		Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	191 584	18 18 8	183 404	13 553	376 237	32 887	1397958	166 616
Collective	141 062	1 4 1 9	121 558	5860	577 908	23 704	2 465 417	132 440
Total	332 646	19606	304 962	19414	954 145	56 590	3863375	299 055

Property construction				Commerce
Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
285 168	71 571	277 252	16 145	132 614	24 219
193 295	24 548	713 223	32 384	695 667	46 381
478 463	96 118	990 475	48 529	828 281	70 600
				Industries

	Financial/Insurance Companies		Real Estate Agents		Other		Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	192 596	17 278	201 653	24 172	342 046	38 773	1 431 329	192 158
Collective	140 000	1 319	113 957	6 024	551 250	23 892	2 407 393	134 549
Total	332 596	18 597	315 611	30 196	893 296	62 666	3 838 721	326 707

Consolidated

30/06/16		Property construction		Industries	Commerce
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	256 621	68 14 1	310 171	14 0 94	132 244	20 268
Collective	203 041	24 5 14	757 243	33 032	703 457	45 600
Total	459 663	92 655	1067414	47 126	835 701	65868

Financial/Insurance Companies		Real Estate Agents				Total
Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment

191584	18 18 8	183 404	13 5 53	376 237	32887	1450261	167 131
141 062	1 4 1 9	121558	5860	644 324	26 25 6	2570685	136 681

332 646	19606	304 962	19414	1020561	59 142	4 0 20 9 46	303 811
						Other

c.3) By geography:

Individual

	30/06/16
		Portugal
Assessment	Exposure	Impairment
Individual	1632671	176 182
Collective	4678810	176 385
Total	6311481	352 567

	31-12-2015
	Portugal
Assessment	Exposure	Impairment

Individual	1 724 906	203 480
Collective	4 360 868	179 808

Total	6 085 775	383 288

Consolidated

	30/06/16 Portugal
Assessment	Exposure	Impairment
Individual	1670686	176 585
Collective	4 798 366	180738
Total	6469052	357 323

d) Detailed portfolio of restructured loans by applied restructuring measure.

		30/06/16
		Performing loans			Non-performing loans			Total
Measure	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment
Maturity date extension	247	56819	2441	332	62 335	15 5 24	579	119 154	17965
Grace period	1001	80 315	2149	1072	143 891	38 372	2073	224 206	40 5 21
Other measures	1682	115 566	24 847	1613	123 688	41810	3 2 9 5	239 254	66 657
Total	2930	252700	29 437	3017	329 914	95 706	5947	582 614	125 143

					31-12-2015
		Performing loans			Non-performing loans		Total
Measure	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment
Maturity date extension	299	53 123	2 278	336	73 482	15 472	635	126 605	17 750
Grace period	1 173	106 227	4 560	1 067	138 391	40 780	2 240	244 618	45 340
Other measures	1 718	75 293	3 855	1 494	117 774	39 033	3 212	193 067	42 888
Total	3 190	234 643	10 694	2 897	329 647	95 285	6 087	564 290	105 979

e) In and out movements in the restructured loan portfolio.

	31-12-2015
Initial balance of the restructured portfolio (gross of impairment)	599 089
Restructured loans in the period	167 934
Interest on the restructured portfolio	- 335
Loan repayment (partial or total)	- 117 976
Loans reclassified from 'restructured' to 'regular''	- 82 043
Other	- 2 378
Final balance of the restructured portfolio (gross of impairment)	564 290

f) Detailed fair value of collaterals underlying the credit portfolio for the Corporate, Construction, Commercial Real Estate (CRE) and Residential segments.

30/06/16			Corporate			Property construction and CRE				Residential mortgage loans
		Properties		Other real collaterals		Properties		Other real collaterals		Properties		Other real collaterals
Fair value	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount
$< 0.5 M\epsilon$		572			1899	217 373	842	57 169	20 977	2962335	536	19736
$>= 0.5$ ME E < 1 ME	0	Ō		541	123	86 436	19	10 946	253	163 300		1610
$>= 1$ ME E < 5 ME		14 3 8 2		3576	90	171839	11	17768	42	63 085		9270
$>5$ ME E < 10 ME		8 1 9 4				55 619				5198
$>= 10 \text{ M} \in E < 20 \text{ M} \in$		O		10 3 92		0				0
$>= 20$ ME E < 50 ME										Λ
$>=$ 50M $\epsilon$										0
Total		23 148		14508	2 1 2 0	531 267	872	85 883	21 273	3 193 919	545	30 616

31-12-2015		Corporate				Property construction and CRE				Residential mortgage loans
		Properties		Other real collaterals		Properties		Other real collaterals		Properties		Other real collaterals
Fair value	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount
< 0.5 M€	2	572	1	0	1 877	217 545	923	55 316	19 975	2 806 871	510	18 526
>= 0.5 M€ and < 1 M€	0	0	1	541	128	89 778	18	10 313	240	154 743	2	1 110
>= 1 M€ and < 5 M€	3	6 324	1	3 576	96	176 958	8	9 995	38	57 725	7	10 270
>= 5 M€ and < 10 M€	1	8 194	0	0	8	53 766	0	0	2	10 397	0	0
>= 10 M€ and < 20 M€	0	0	1	10 392	0	0	0	0	0	0	0	0
>= 20 M€ and < 50 M€	0	0	0	0	0	0	0	0	0	0	0	0
>= 50M€	0	0	0	0	0	0	0	0	0	0	0	0
Total	6	15 090	4	14 508	2 109	538 048	949	75 624	20 255	3 029 736	519	29 906

g) LTV ratio for the Corporate, Construction, CRE and Residential segments.

	30/06/16
Segment/Ratio	Number of properties	Performing loans	Non-performing loans	Impairment
Corporate
Without any collateral	n.a.	258 199	55 971	32 694
< 60%	1	5 2 2 1	321	36
$>= 60\%$ and $< 80\%$	1	1326	o	1
$>= 80\%$ and $< 100\%$	1	8053	0	7
$>= 100%$	5	14 044	5420	3431
Property construction and CRE
Without any collateral	n.a.	146 003	99 056	45 29 2
< 60%	1 1 5 1	76997	27 265	7400
$>= 60\%$ and $< 80\%$	255	33 131	10949	1628
$>= 80\%$ and $< 100\%$	393	26747	14 255	2323
$>= 100%$	320	67 281	38 248	16873
Residential mortgage loans
Without any collateral	n.a.	3.634	9 2 7 5	2.040
< 60%	9676	501 205	27 124	3693
$>= 60\%$ and $< 80\%$	6546	654 072	19525	3 1 4 0
$>= 80\%$ and $< 100\%$	3934	434 482	22 455	3693
$>= 100%$	1 1 1 6	112 379	32 218	5050

			31-12-2015
Segment/Ratio	Number of	Performing	Non-performing	Impairment
	properties	loans	loans
Corporate		156 318	67 120	18 633
Without any collateral	n.a.	244 711	56 281	26 713
< 60%	2	5 703	398	6
>= 60% and < 80%	1	1 464	0	2
>= 80% and < 100%	1	8 052	0	8
>= 100%	2	4 059	5 344	3 349
Property construction and CRE		347 213	201 757	87 918
Without any collateral	n.a.	140 057	111 297	58 343
< 60%	10 235	83 775	29 597	6 326
>= 60% and < 80%	7 902	29 397	11 400	2 526
>= 80% and < 100%	5 545	30 104	6 368	1 553
>= 100%	1 943	63 879	43 096	19 170
Residential mortgage loans		1 612 328	114 599	18 340
Without any collateral	n.a.	6 753	10 775	2 177
< 60%	10 235	475 333	27 085	3 751
>= 60% and < 80%	7 902	593 991	19 544	3 240
>= 80% and < 100%	5 545	425 911	23 092	3 974
>= 100%	1 943	110 340	34 104	5 199

h) Detailed fair value and net book value of repossessed properties or foreclosed properties, by type of asset or time elapsed.

	30/06/16
Assets	Number of properties	Fair value of the asset	Carrying amount
Land
Urban	113	17047	12859
Rural	75	12 3 32	8027
Properties under development
Residential	371	39 492	38 843
Commercial	10	1 2 7 5	1 2 2 2
Other	36	2748	2587
Built properties
Residential	464	58 917	54 844
Commercial	113	9 3 8 3	7946
Other	302	29 160	24 742
Other	9	2 503	2439
	1.00	470.057	APO POOL

	31-12-2015 Fair value

	Number of	of the	Carrying
Assets	properties	asset	amount
Land
Urban	114	10 134	8 700
Rural	49	7 098	5 974
Properties under development
Residential	312	38 196	37 407
Commercial	24	1 150	958
Other	163	6 151	5 541
Built properties
Residential	459	57 148	54 266
Commercial	129	14 546	12 679
Other	213	28 594	25 814
Other	17	11 737	11 410
	1 480	174 754	162 749

Time elapsed since repossession/foreclosure	30/06/16
	$<$ 1 year	$\geq$ 1 year and $< 2.5$ years	$>= 2.5$ years and $<$ 5 years	$>= 5$ years	Total
Land
Urban	10 083	1 187	1 146	443	12859
Rural	4742	686	2 2 5 7	343	8 0 28
Properties under development
Residential	17 003	9647	1503	10 690	38 843
Commercial	589	46	0	587	1 2 2 2
Other	0	38	1721	828	2587
Built properties
Residential	26 974	15 0 29	6 2 5 3	6588	54 844
Commercial	3017	2989	864	1076	7946
Other	10 394	6087	1714	6546	24 741
Other	278	0	1 3 6 1	800	2439
	73 080	35 709	16819	27 901	153 509

	31-12-2015
Time elapsed since repossession/foreclosure	< 1 year	>= 1 year and < 2.5 years	>= 2.5 years and < 5 years	>= 5 years	Total
Land
Urban	5 004	1 901	1 700	95	8 700
Rural	1 039	849	3 809	277	5 974
Properties under development
Residential	13 041	7 209	5 838	11 319	37 407
Commercial	0	0	0	958	958
Other	66	626	3 747	1 102	5 541
Built properties
Residential	23 170	15 803	6 981	8 312	54 266
Commercial	7 374	2 850	1 105	1 350	12 679
Other	9 163	10 297	4 996	1 358	25 814
Other	9 059	36	1 515	800	11 410
	67 916	39 571	29 691	25 571	162 749

i) Distribution of the credit portfolio measured by degrees of internal risks.

Although Banco Popular possesses internal rating models, these are still at their validation stage.

j) Disclosure of the risk parameters associated with the impairment model by segment.

Risk parameters associated with the impairment model by segment are explained in paragraph (n) of the qualitative disclosures of this note.

THE CERTIFIED PUBLIC ACCOUNTANT THE BOARD OF DIRECTORS

AI Terminal

Banco Comercial Portugues

1913_ir_2016-09-28_d58f0fc9-7c61-4457-91a4-8139f2bf7df6.pdf

Banco Popular Portugal, S.A.

General Information

Board and Management

Board of the General Meeting

Board of Directors

Supervisory Board

Statutory Auditor

Alternate Statutory Auditor

Banco Popular Portugal Financial Highlights

Interim Management Report

Macroeconomic scenario

Commercial strategy

Income and profitability

Net interest income

Banking income

Half Year 2016

Operating income

Net Income

Investments and assets

Total assets

Customer funds

Lending operations

Main risks and uncertainties

Half Year 2016

Annex 1 - Shareholding position of the members of the governing and supervisory bodies

Annex 2 - Qualifying holdings

Declaration on the financial information reported

STATEMENT REFERRED TO IN ARTICLE 8(4) OF THE PORTUGUESE SECURITIES CODE

Declaration of compliance of the financial information

STATEMENT REFERRED TO IN ARTICLE 246(1)(c)

OF THE PORTUGUESE SECURITIES CODE

STATEMENT OF THE BOARD OF DIRECTORS

Half-Year Accounts

Balance Sheet

Income Statement

Individual Income Statement as at 30 June 2016 and 2015

Consolidated Income Statement as at 30 June 2016

Statement of Comprehensive Income

Individual Statement of Comprehensive Income

Individual Statement of Changes in Equity

Individual Statement of Changes in Equity

Consolidated Statement of Changes in Equity

Cash Flow Statement

Notes to the Financial Statements

NOTES TO THE INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS AS AT 30 June 2016 AND 2015

1. INTRODUCTION

1.1 Activity

1.2 Bank structure

2. Summary of the Main Accounting Principles

2.1 Bases of preparation

Individual financial statements

Consolidated financial statements

2.2 Segmental reporting

2.3 Equity stakes in associated companies

2.4 Foreign currency transactions

a) Functional currency and presentation currency

b) Transactions and Balances

2.5 Derivative financial instruments

2.6 Recognition of interest and similar income and interest and similar charges

2.7 Fees and commissions

2.8 Financial assets

a) Financial assets at fair value through profit or loss

b) Loans and receivables

Factoring

Guarantees granted and irrevocable commitments

c) Held-to-maturity investments

d) Available-for-sale financial assets

2.9 Impairment of financial assets

a) Assets carried at amortised cost

b) Assets carried at fair value

2.10 Intangible assets

- Software

2.11 Intangible assets

2.12 Tangible assets held for sale

2.13 Leases

a) As lessee

b) As lessor