Banco Comercial Portugues

Investor Presentation • Jul 29, 2016

EARNINGS PRESENTATION 1H 2016

The information in this presentation has been prepared under the scope of the International Financial Reporting Standards ('IFRS') of BCP Group for the purposes of the preparation of the consolidated financial statements under Regulation (CE) 1606/2002

The figures presented do not constitute any form of commitment by BCP in regard to future earnings

First 6 months figures for 2015 and 2016 not audited

The business figures presented exclude the former Banco Millennium Angola

Assumes maintenance of the framework regulating the limits to the deductions of credit impairment effective as at 31 December 2015

The European Central Bank (ECB) did not require or endorsed the publication of the outcome of the stress tests referred herein. Any references are to the stress test's bottom-up outcome, and it is not possible to infer from such references any information regarding the ECB's top-down projections or issues discussed in the quality assurance process

Agenda

• Highlights
• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Stress tests Strong results	• Strong results on ECB's stress tests (relevant for the calculation of minimum capital): phased-in common equity tier 1 in excess of 7% under the adverse scenario, compared to a reference value of 5.5% and to 2.99% in the 2014 stress tests.
Capital Adequate position	• Common equity tier 1 ratio of 12.3% according to phased-in criteria. This ratio stood at 9.6% under a fully implemented basis, the same figure posted as at June 30th 2015 (estimates).
Asset quality Coverage reinforced significantly	• NPE coverage by provisions, expected loss gap and collaterals strengthened to 97% (91% as at June 30th 2015), supporting the plan to bring NPEs down by more than €2 billion in December 2017. to 11.5% as at the end of the 1st • Non-performing loans ratio down half of 2016 from 12.1% as at the same date of 2015; NPL coverage by provisions strengthened to 61.4% (53.4% as at June 30th 2015), 113.0% including real and financial guarantees.

Profitability and efficiency Earnings excluding non usual items reinforced	Net result of -€197.3 million in the 1st half of 2016. Excluding non-usual • items, net profits amounted to €56.2 million in 1H16, compared to €21.2 million losses in 1H15. • Core net income up 10.3% to €437.1 million, resulting in cost to core income* improving by 4pp to 52.5% (cost to income of 45.7%).
Business performance Healthy balance sheet	Commercial gap improved further, with net loans as a percentage of on • balance sheet Customers funds now standing at 97%. As a percentage of deposits (BoP criteria)***, net loans improved to 102% (107% as at June 30th, 2015). Customer deposits totalled €48.8 billion, with deposits from individuals • in Portugal up by 3.7%. More than 5.3 million Customers, 5.9% up from the 1st • half of 2015.

* Non-usual items in 1H16: gains on Visa transaction, devaluation of corporate restructuring funds, additional impairment charges to increase coverage; non-usual items in 1H15: capital gains on Portuguese sovereign debt and devaluation of corporate restructuring funds. | ** Core net income = net interest income + net fees and commission income – operating costs, core income = net interest income + net fees and commission income. | ** According to the current version of Notice 16/2004 of the Bank of Portugal.

* Core net income = net interest income + net fees and commission income – operating costs. | ** Non-usual items in 1H16: gains on Visa transaction, devaluation of corporate restructuring funds, additional impairment charges to increase coverage; non-usual items in 1H15: capital gains on Portuguese sovereign debt and devaluation of corporate restructuring funds. | *** According to the current version of Notice 16/2004 of the Bank of Portugal. | *** Estimates.

6

12.3%

* Core net income = net interest income + net fees and commission s income – operating costs.

Portugal

38.8 44.4

+14.4%

Jun 15 Jun 16

• Cards up by 5.5% from the end of 1H15, exceeding 6.4 million at June 30th 2016. International operations up by 8.3%;

• Number of POS up by 14.8% from the end of 1h15 to approximately 52,000 equipments at June 30th 2016.

• Customers with bundled/pre-paid solutions now exceed 900,00

• Customer acquisition increases 11% (+25% for residents abroad)
• Mobile banking: number of users increases twofold from June 2015, exceeding 200,000
• Leader in online brokerage, with a market share in excess of 24%
• Up by 4.3% in insurance business, contrasting to a decrease of the insurance industry in Portugal

"Basef Banca"/ "Marktest", June 2016 scores

• Increased penetration as 1st bank (+1.9pp from June 2015)
• Main bank among upper and upper-middle classes: market share up by 3.5pp from June 2015
• Best bank in proximity to Customers
• Leader in overall Customer satisfaction in internet and mobile banking

Global Finance 2016

"Best Consumer Digital Bank" in Portugal

Retail Companies and Corporate

• Market share among exporting companies up to 16.2%
• New "2020" app, an innovating digital application allowing companies to monitor the execution or their projects approved under the "Portugal 2020" programme, on a daily basis
• New "Easy Confirming" product

"Bfin DataE" (Companies), 2016 scores

• Bank most used by used by companies as main bank
• Best bank in adequacy of products
• Best bank in innovation
• Best bank in efficiency
• Best bank in proximity to Customers

• Best bank (overall) for companies

• Highlights

• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Earnings excluding non-usual items improve

(million euros)	1H15	1H16	Impact on earnings
Core net income	396.4	437.1	+40.7
Mandatory contributions (Portugal and Poland)	-42.1	-80.4	-38.3
Other operating income	115.6	127.7	+12.2
Operating net income (bef. impairment and provisions)	469.9	484.4	+14.5
Impairment and provisions	-538.6	-390.3	+148.2
Net income before income tax	-68.7	94.1	+162.8
Income taxes, non-controlling interests and disc. operations	47.6	-37.8	-85.4
Net income excluding non-usual items	-21.2	56.2	+77.4
Gains on Visa transaction	0.0	47.1	+47.1
Capital gains on Portuguese sovereign debt	273.6	0.0	-273.7
Devaluation of corporate restructuring funds	-11.7	-89.0	-77.3
Additional impairment charges (to increase coverage)*	0.0	-211.5	-211.5
Total non-usual items, net	261.9	-253.5	-515.4
Net income	240.7	-197.3	-438.0

Earnings excluding non-usual items improve

Core net income improves, reflecting strong performance in Portugal

Net interest income: impact of the significant decrease of Euribor rates dampened by a lower cost of deposits

(Million euros)

Performance of commissions determined by a demanding regulatory environment and FX devaluation

Performance of other income influenced by gains on PT sovereign debt in 1H15 and gains on the Visa transaction in 1H16

(Million euros)

Cost reduction proceeds

Millennium bcp is one of the most efficient banks in Portugal and in the Eurozone

We have reinforced the balance sheet with a significant amount of additional impairment and provision charges...

… with lower delinquency and increased coverage

Diversified and collaterised portfolio

• Loans to companies accounted for 46% of the loan portfolio at June 30, 2016, including 9% to construction and real-estate sectors
• 92% of the loan portfolio is collateralised

• Mortgage accounted for 46% of the loan portfolio, with low delinquency levels and an average LTV of 67%

• Highlights

• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Deposits influenced by FX impact in international operations; individuals in Portugal stand out

Credit influenced by FX impact

(Million euros)

Continued improvement of the liquidity position, current ratios exceed future requirements

Lower refinancing needs in the medium to long term, Customer deposits are the main funding source

• Highlights
• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Outcome of the stress tests

Assumptions, adverse scenario

Adverse scenario		Euro Area			Portugal
	2016	2017	2018	2016	2017	2018
GDP growth	-1.0%	-1.3%	0.6%	-2.1%	-2.6%	-0.6%
HIPC inflation	-0.9%	-0.1%	0.1%	-1.3%	-1.9%	-1.0%
Unemployment rates	11.0%	11.7%	12.4%	12.4%	13.3%	15.2%
Residential property prices	-7.3%	-2.3%	0.1%	-7.3%	-3.4%	-1.2%
Prime commercial property prices	-4.5%	-5.7%	-1.5%	-4.9%	-5.9%	-2.0%
Public debt long term yields	2.1%	2.4%	2.3%	3.8%	3.9%	3.8%

Outcome for Millennium bcp

CET1 ratio		Adverse scenario
	2016	2017	2018
Phased-in	9.9%	8.6%	7.2%
Fully Loaded	6.3%	6.3%	6.1%

• As regard the Portuguese banks, the adverse scenario consisted of an economic recession, together with deflation, increase in unemployment, increase in public debt yields and a massive real estate devaluation.
• BCP's CET1 phased-in ratio stood at 7.2% under the adverse scenario (2.99% in the stress test of 2014).
• The minimum 5.5% CET1 ratio (phased-in) required in 2014 was kept as a reference in the adverse scenario.
• Test involved a significant sample of banks in the European Union; outcomes were disclosed for 51 banks, of which 37 directly supervised by the ECB, covering 70% of banking assets in the euro area.
• Led by EBA in articulation with the ECB. EBA was responsible for running the exercise for the major banks in the Euro Area. ECB has conducted a parallel stress test for the additional significant banks, including Millennium bcp.
• No minimum capital was set, but the outcome of the stress tests will be taken as an input for the 2016 Supervisory Review and Evaluation Processes (SREP).

Stable capital, supported by recurring profitability and lower RWAs

High leverage ratios and RWA density

Pension fund

	Jun 15	Dec 15	Jun 16
Pension liabilities	3,136	3,136	3,170
Pension fund	3,070	3,158	3,138
Liabilities' coverage	109%	111%	109%
Fund's profitability	0.5%	-0.8%	-2.8%
Actuarial differences	(38)	(111)	(189)

Assumptions

	Dec 14	Dec 15	Jun 15
Discount rate	2.5%
		0.75% until 2017
Salary growth rate		1.00% after 2017
	0.00% until 2017
Pensions growth rate	0.50% after 2017
Projected rate of return of fund assets	2.5%
Mortality Tables
Men	Tv 73/77-2 years Tv 88/90
Women	Tv 88/90-3 years

• Pension liabilities coverage at 109%
• Negative actuarial differences in 2016 resulting from the fund's profitability being below assumptions

• Change to men's mortality tables has a negative impact on actuarial differences

• Highlights

• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Portugal: deleveraging improves liquidity position

Earnings excluding non-usual items improve

(Million euros)

* Non-usual items in 1H16: gains on Visa transaction, devaluation of corporate restructuring funds, additional impairment charges to increase coverage; non-usual items in 1H15: capital gains on Portuguese sovereign debt and devaluation of corporate restructuring funds.

Improvement trend on core income and operating costs in Portugal proceeds

* Core net income = net interest income + net fees and commission income – operating costs.

Lower cost of deposits partially offset by the decrease of Euribor

• Net interest income increased from 1st quarter 2016, mainly driven by:
• Consistent reduction of the cost of term deposits
• Decreasing cost of funding, partially offset by the reduction of Euribor rates on the credit portfolio
• Growing contribution from the securities portfolio
• These impacts were partially offset by lower credit volumes
• Increase in net interest income from 1H2015 reflects the impact of the continuous decrease of time deposits pricing and from lower NPLs, that more than offset the unfavourable impacts stemming from lower Euribor rates, lower credit volumes and a lower contribution of the securities portfolio

Continued effort to reduce the cost of deposits

• Continued improvement of the spread of the portfolio of term deposits, up to -84bp in 2Q16; June's front book priced at an average yield of 32bp, substantially below current back book's
• Stable spread on the total loan book, at 2.9% again in the 2nd quarter of 2016
• NIM stood at 1.6% in the 2nd quarter of 2016, an improvement both from the previous quarter and from the same period of 2015

	1H15	1H16	YoY
Banking fees and commissions	197.7	203.3	+2.8%
Cards and transfers	48.8	47.7	-2.2%
Loans and guarantees	64.0	54.5	-14.8%
Bancassurance	37.7	39.1	+3.6%
Customer account related	39.8	45.4	+14.1%
Other fees and commissions	7.5	16.6	+121.9%
Market related fees and commissions	27.2	26.2	-3.9%
Securities operations	23.8	23.6	-1.0%
Asset management	3.4	2.6	-23.9%
Total fees and commissions	225.0	229.5	+2.0%

Continuous reduction of costs, in line with the new commercial approach

Reinforced coverage of NPLs

NPEs are decreasing, coverage is increasing and prospects are favourable

• Measures implemented in the last years with positive impact on NPEs: strengthening of the monitoring of credit quality, implementation and development of new assessment models, new internal regulations and recovery model, improvement to the risk management governance model
• Coverage of NPEs by provisions, expected loss gap and collaterals strengthened to 97%, supporting the goal to bring down NPEs by more than €2 billion at December 2017.
• We have a plan to bring down the level of NPEs significantly (>€2.0 billion) by December 2017. Key measures under this plan include:
• Stepping up write-offs;
• Loan sales, especially strongly-collateralised corporates and, for individuals, loans with low likelihood of recovery;
• Preventing mortgage cases from reaching courts and reducing the recovery period for cases handled by external law offices.

Specific issues affect NPLs in Portugal

DK AT CZ HU FI RO SE LV FR DE EL PT

Source: CEPEJ (EC), 2015 Study on the functioning of judicial systems in the EU Member States.

0

clearly excessive: a large part of NPLs booked in Portugal's banks balance sheets would be already written-off in most other European countries

Foreclosed assets sold above book value; construction restructuring funds affected by international environment

• Generic funds: stakes in companies from several industries (textiles, food, automobile, fuel, chemicals, building materials). EBITDA growth rate: 18.2%.
• RE/tourism: real estate and tourist assets in Portugal (projects to be developed; projects under development; hotels under operation; housing, commercial and industrial buldings for sale). EBITDA growth rate: 65.5%.

• Construction: includes stakes in construction companies operating in Portugal and abroad. Negative performance in 1H16 resulting from distress in countries to which these companies are exposed, notably Angola, Mozambique, Venezuela and other African and Latin-American countries.

• Highlights

• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Contribution from international operations

		1H15	1H16	Δ % local currency	Δ % euros	ROE
	International operations
	Poland	74.9	98.4	+31.5%	+24.1%	13.1%
Contribution	Mozambique	32.2	36.8	+14.1%	-23.3%	21.1%
	Angola*	12.8	21.4	+66.5%	+11.8%
international	Other	7.6	4.2	-44.5%	-45.7%
	Net income	127.5	160.8	+26.1%	+4.3%
increases on a	Non-controlling interests Poland and Mozambique	-42.4	-61.4
comparable basis	Exchange rate effect	19.4	--
	Total contribution international operations	104.6	99.4		-4.9%
	On a comparable basis:
	Millennium Poland shareholding at 50.1% in 1Q15	98.6	99.4		+0.9%
	Same as above without FX effect	79.4	99.4		+25.2%

Poland: growing Customer funds

New banking tax and Visa Europe transaction strongly impact net earnings

(Million euros)

FX effect excluded. €/Zloty constant at June 2016 levels: Income Statement 4.37878333; Balance Sheet 4.4362.

Stronger net interest income, other income impacted by Visa Europe transaction

(Million euros)

* Pro forma data. Margin from derivative products, including those from hedging FX denominated loan portfolio, is included in net interest income, whereas in accounting terms, part of this margin (€7.5 million in 1H15 and €5.1 million in 1H16) is presented in net trading income.

FX effect excluded. €/Zloty constant at June 2016 levels: Income Statement 4.37878333; Balance Sheet 4.4362.

Improved credit quality and coverage

Mozambique: strong volume growth

Increasing net income in a complex environment

Growth in core income partially offset by the increase in operating costs

Credit quality and coverage

• Highlights
• Group
• Profitability
• Liquidity
• Capital
• Portugal
• International operations
• Conclusions

Road to 2018: targets

1H15*	1H16*	Target 2018
CET1 phased-in ratio** 13.1%	12.3%	≥11%
CET1 fully implemented ratio** 9.6%	9.6%
Loans to Deposits 107%	102%	<100%
Cost-core income 56.3%	52.5%	<50%
Cost-income 37.3%	45.7%	<43%
Cost of risk 165 bp	234 bp	<75 bp
ROE 11.4%	-8.8%	>11%***

* Includes gains on sovereign debt and devaluation of corporate restructuring funds in 2015, and, in 2016, gains on the Visa transaction, devaluation of corporate restructuring funds and additional impairment charges to reinforce coverage, impacting cost-income and ROE. | ** Estimates. | ***Consistent with a 11% CET1 ratio.

Appendix

Consolidated earnings

(million euros)	1H15	1H16	Impact on earnings
Net interest income	571.5	600.8	+29.3
Net fees and commissions	336.1	320.3	-15.8
Other operating income	461.6	138.3	-323.3
Of which: Visa transaction	0.0	91.0	+91.0
Of which: Mandatory contributions in Portugal	-32.6	-51.7	-19.1
Of which: Capital gains on Portuguese sovereign debt	388.1	0.0	-388.2
Banking income	1,369.2	1,059.4	-309.8
Staff costs	-288.6	-273.7	+14.9
Other administrative costs and depreciation	-222.6	-210.4	+12.2
Operating costs	-511.2	-484.1	+27.1
Operating net income (before impairment and provisions)	858.0	575.4	-282.6
Of which: core net income	396.4	437.1	+40.7
Loans impairment (net of recoveries)	-463.7	-618.7	-155.0
Other impairment and provisions	-91.6	-198.0	-106.4
Of which: Devaluation of corporate restructuring funds	-16.7	-126.3	-109.6
Impairment and provisions	-555.3	-816.6	-261.4
Net income before income tax	302.8	-241.3	-544.0
Income taxes	-46.1	78.3	+124.4
Non-controlling interests	-68.9	-79.5	-10.7
Net income from discontinued or to be discontinued operations	52.9	45.2	-7.7
Net income	240.7	-197.3	-438.0

Sovereign debt portfolio

• Sovereign debt portfolio totals €8.5 billion, €1.9 billion of which maturing in less than 1 year
• The value of Portuguese and Polish sovereign portfolios increased from June 30th 2015; exposure to Angolan and Mozambican sovereign debt decreased

Sovereign debt portfolio

(Million euros, June 2016)

	Portugal Poland		Mozambique	Other	Total
Trading book*	392	37	0	39	467
≤ 1 year	215	9	0	0	225
> 1 year and ≤ 2 years	117	11	0	38	166
> 2 years and ≤ 5 years	56	17	0	0	73
> 5 years and ≤ 8 years	0	0	0	0	0
> 8 years and ≤ 10 years	2	0	0	0	2
> 10 years	1	0	0	0	1
Banking book**	4,939	2,703	302	53	7,998
≤ 1 year	1,046	481	168	0	1,696
> 1 year and ≤ 2 years	386	836	48	0	1,271
> 2 years and ≤ 5 years	1,002	1,262	85	51	2,400
> 5 years and ≤ 8 years	2,119	82	0	1	2,202
> 8 years and ≤ 10 years	380	5	0	1	386
> 10 years	7	36	0	0	42
Total	5,331	2,740	302	92	8,465
≤ 1 year	1,261	490	168	0	1,920
> 1 year and ≤ 2 years	503	847	48	38	1,437
> 2 years and ≤ 5 years	1,058	1,279	85	51	2,473
> 5 years and ≤ 8 years	2,119	83	0	1	2,203
> 8 years and ≤ 10 years	382	5	0	1	388
> 10 years	8	36	0	1	44

* Includes financial assets held for trading at fair value through net income (€145 million).

** Includes AFS portfolio (€7,947 million) and HTM portfolio (€51 million).

Financial Statements

Consolidated balance sheet

(Million euros)

	30 June	30 June		30 June	30 June
	2016	2015		2016	2015
Assets			Liabilities
Cash and deposits at central banks	2,178.3	2,426.8	Amounts owed to credit institutions	11,228.6	12,412.9
Loans and advances to credit institutions			Amounts owed to customers	48,762.0	50,601.1
Repayable on demand	415.5	1,140.8	Debt securities	4,018.1	5,262.9
Other loans and advances	1,389.2	831.0	Financial liabilities held for trading	613.6	824.2
Loans and advances to customers	49,186.1	53,408.6	Hedging derivatives	484.3	779.3
Financial assets held for trading	1,234.3	2,216.9	Provisions for liabilities and charges	290.5	302.8
Financial assets available for sale	11,023.4	11,703.6	Subordinated debt	1,659.5	1,660.5
Assets with repurchase agreement	10.6	31.3	Current income tax liabilities	18.2	6.5
Hedging derivatives	115.0	80.9	Deferred income tax liabilities	1.7	13.1
Financial assets held to maturity	419.0	436.7	Other liabilities	977.3	1,216.1
Investments in associated companies	558.7	305.4	Total Liabilities	68,053.9	73,079.5
Non current assets held for sale	1,906.1	1,674.7
Investment property	133.2	166.4	Equity
Property and equipment	475.2	706.1	Share capital	4,094.2	4,094.2
Goodwill and intangible assets	195.0	207.2	Treasury stock	(3.7)	(120.1)
Current tax assets	36.1	40.5	Share premium	16.5	16.5
Deferred tax assets	2,767.4	2,544.6	Preference shares	59.9	171.2
Other assets	879.4	808.8	Other capital instruments	2.9	9.9
	73,067.5	78,730.4	Fair value reserves	(52.1)	(100.9)
			Reserves and retained earnings	238.2	313.7
			Net income for the year attrib. to Shareholders	(197.3)	240.7
			Total equity attrib. to Shareholders of the Bank	4,158.6	4,625.2

-

-

73,067.5 78,730.4

Non-controlling interests 855.0 1,025.7

Total Equity 5,013.6 5,650.9

(Million euros)

												Internatio nal o	peratio	ns
		Gro up			P o rtugal			T o tal		B ank M	illennium (P	o land)	M	illennium bim (M	o z.)	Other int. o		peratio ns
	Jun 15	Jun 16	Δ %	Jun 15	Jun 16	Δ %	Jun 15	Jun 16	Δ %	Jun 15	Jun 16	Δ %	Jun 15	Jun 16	Δ %	Jun 15	Jun 16	Δ %
Interest income	1,092	965	-11.6%	694	598	-13.8%	398	367	-7.8%	278	258	-7.1%	117	106	-9.5%	3	3	1.8%
Interest expense	521	365	-30.0%	365	240	-34.2%	156	125	-20.1%	117	91	-22.3%	42	36	-16.2%	-3	-2	47.2%
N et interest inco me	571	601	5.1%	329	358	8.8%	242	243	0.2%	161	168	3.9%	7 5	7 0	-5.7%	6	5	-24.8%
Dividends from equity instruments	3	6	81.0%	3	5	87.9%	0	0	21.6%	0	0	21.6%	0	0	--	0	0	--
Intermediatio n margin	575	607	5.6%	332	364	9.5%	243	243	0.2%	162	168	3.9%	7 5	7 0	-5.7%	6	5	-24.8%
Net fees and commission income	336	320	-4.7%	225	229	2.0%	111	91	-18.2%	74	63	-14.9%	25	17	-31.9%	13	12	-11.3%
Other operating income	-41	-88	<-100%	-43	-55	-28.1%	1	-33	<-100%	-5	-37	<-100%	7	3	-54.1%	0	0	28.5%
B asic inco me	870	839	-3.5%	514	538	4.6%	355	300	-15.4%	230	194	-15.5%	106	9 0	-15.0%	19	16	-15.4%
Net trading income	479	183	-61.8%	426	76	-82.2%	53	107	>100%	29	88	>100%	22	18	-19.2%	2	2	-37.0%
Equity accounted earnings	21	38	82.9%	21	35	65.9%	0	3	>100%	0	0	100.0%	0	0	--	0	3	--
B anking inco me	1,369		1,059 -22.6%	961	649	-32.5%	408	410	0.6%	258	282	9.2%	128	108	-15.7%	2 1	2 0	-4.0%
Staff costs	289	274	-5.2%	187	181	-3.1%	101	92	-9.0%	67	63	-4.7%	26	20	-22.3%	9	9	-3.4%
Other administrative costs	195	185	-5.1%	117	114	-2.6%	78	71	-9.0%	51	48	-4.9%	24	19	-18.1%	3	3	-6.6%
Depreciation	28	25	-7.9%	15	14	-7.3%	12	11	-8.5%	6	6	9.5%	6	5	-25.7%	0	0	-11.6%
Operating co sts	511	484	-5.3%	320	310	-3.1%	191	174	-9.0%	123	118	-4.1%	56	44	-20.9%	12	12	-4.4%
Operating net inco me bef. imp.	858		575 -32.9%	642	339	-47.1%	216	236	9.2%	135	164	21.3%	7 3	6 4	-11.8%	9	9	-3.6%
Loans impairment (net of recoveries)	464	619	33.4%	420	583	38.8%	44	36	-18.1%	32	23	-29.2%	12	13	7.7%	0	1	>100%
Other impairm. and provisions	92	198	>100%	88	190	>100%	3	8	>100%	2	8	>100%	1	-1	<-100%	0	0	-100.0%
N et inco me befo re inco me tax	303		-241 <-100%	134	-434	<-100%	169	192	13.9%	100	133	32.1%	6 0	5 2	-13.3%	9	8	-9.3%
Income tax	46	-78	<-100%	13	-128	<-100%	33	50	48.3%	21	34	62.1%	11	15	29.2%	1	1	-21.8%
Non-controlling interests	69	80	15.5%	0	-1	<-100%	69	80	16.0%	0	0	--	1	1	-15.9%	69	80	16.3%
N et inco me (befo re disc. o per.)	188		-242 <-100%	121	-305	<-100%	6 6	6 3	-5.7%	7 9	9 8	24.1%	4 8	3	7 -23.3%	-61	-73	-19.3%
Net income arising from discont. operations	53	45	-14.6%				38	37	-3.6%							38	37	-3.6%
N et inco me	241		-197 <-100%				105	9 9	-4.9%							-23	-36	-57.9%

Income statement (Portugal and International operations) For the 6-month periods ended 30th June, 2015 and 2016

(Million euros)

	Quarterly
	2Q 15	3Q 15	4Q 15	1Q 16	2Q 16
Net interest income	273.6	305.1	314.0	292.4	308.4
Dividends from equity instruments	1.3	0.3	6.2	2.0	3.8
Net fees and commission income	173.8	161.8	162.3	163.9	156.4
Other operating income	-24.0	-12.3	-66.4	-12.4	-75.6
Net trading income	287.7	26.9	33.5	28.3	154.5
Equity accounted earnings	14.6	4.5	-1.6	13.9	23.8
Banking income	727.0	486.4	447.9	488.1	571.3
Staff costs	145.2	141.6	143.7	138.4	135.2
Other administrative costs	97.8	94.4	100.0	91.8	93.1
Depreciation	13.9	13.3	13.1	12.8	12.7
Operating costs	256.9	249.3	256.8	243.1	241.0
Operating net income bef. imp.	470.1	237.1	191.1	245.1	330.3
Loans impairment (net of recoveries)	262.6	150.0	204.2	160.7	458.0
Other impairm. and provisions	21.4	25.5	43.0	15.4	182.6
Net income before income tax	186.1	61.7	-56.1	69.1	-310.3
Income tax	13.3	21.0	-29.4	15.0	-93.3
Non-controlling interests	38.7	36.1	20.7	36.4	43.1
Net income (before disc. oper.)	134.1	4.5	-47.3	17.7	-260.2
Net income arising from discont. operations	36.3	19.3	18.1	29.0	16.2
Net income	170.3	23.8	-29.2	46.7	-243.9

Glossary (1/2)

Capitalisation products – includes unit linked saving products and retirement saving plans ("PPR", "PPE" and "PPR/E").

Commercial gap – total loans to customers net of BS impairments accumulated minus on-balance sheet customer funds.

Cost of risk, gross (expressed in bp)- ratio of impairment charges accounted in the period to customer loans (gross).

Cost of risk, net (expressed in bp)- ratio of impairment charges (net of recoveries) accounted to customer loans (gross).

Cost to income – operating costs divided by net operating revenues.

Cost to core income - operating costs divided by the net interest income and net fees and commission income.

Core income - net interest income plus net fees and commission income.

Core net income - corresponding to net interest income plus net commissions deducted from operating costs.

Coverage of credit at risk by balance sheet impairments – total BS impairments accumulated for risks of credit divided by credit at risk (gross)

Coverage of credit at risk by balance sheet impairments and real/financial guarantees –total BS impairments accumulated for risks of credit plus real and financial guarantees divided by credit at risk (gross).

Coverage of non-performing loans by balance sheet impairments – total BS impairments accumulated for risks of credit divided by NPL

Credit at risk – definition broader than the non performing loans which includes also restructured loans whose changes from initial terms have resulted in the bank being in a higher risk position than previously; restructured loans which have resulted in the bank becoming in a lower risk position (e.g. reinforced collateral) are not included in credit at risk.

Credit at risk (net) – credit at risk deducted from BS impairments accumulated for risks of credit.

Customer spread – Difference between the spread on the loans to customers book over 3 months Euribor and the spread on the customers' deposits portfolio over 3 months Euribor.

Debt securities - debt securities issued by the Bank and placed with customers.

Dividends from equity instruments - dividends received from investments in financial assets held for trading and available for sale.

Equity accounted earnings - results appropriated by the Group related to the consolidation of entities where, despite having a significant influence, the Group does not control the financial and operational policies.

Loan book spread - average spread on the loan portfolio over 3 months Euribor.

Loan to value ratio (LTV) – Mortgage amount divided by the appraised value of property.

Loan to Deposits ratio (LTD) – Total loans to customers net of accumulated BS impairments for risks of credit to total customer deposits.

Net interest margin - net interest income for the period as a percentage of average interest earning assets.

Net operating revenues - net interest income, dividends from equity instruments, net commissions, net trading income, equity accounted earnings and other net operating income.

Net trading income - net gains/losses arising from trading and hedging activities, net gains/losses arising from available for sale financial assets, net gains/losses arising from financial assets held to maturity.

Non-performing loans – Overdue loans more than 90 days including the non-overdue remaining principal of loans, i.e. portion in arrears, plus non-overdue remaining principal.

Non-performing loans ratio (net) – Loans more than 90 days overdue and doubtful loans reclassified as overdue for provisioning purposes less BS impairments accumulated for credit risk divided by total loans (gross).

Non-performing loans coverage ratio – total BS impairments accumulated for credit risk divided by overdue and doubtful loans divided.

Glossary (2/2)

Loans more than 90 days overdue coverage - total BS impairments accumulated for risk of credit divided by total amount of loans overdue with installments of capital and interest overdue more than 90 days.

Operating costs - staff costs, other administrative costs and depreciation.

Other impairment and provisions - other financial assets impairment, other assets impairment, in particular provision charges related to assets received as payment in kind not fully covered by collateral, goodwill impairment and other provisions.

Other net income – net commissions, net trading income, other net operating income, dividends from equity instruments and equity accounted earnings.

Other net operating income - other operating income, other net income from non-banking activities and gains from the sale of subsidiaries and other assets.

Overdue loans - loans in arrears, not including the non-overdue remaining principal.

Overdue loans coverage ratio – total BS impairments accumulated for risks of credit divided by total amount of loans overdue with installments of capital and interest overdue.

Overdue and doubtful loans - loans overdue by more than 90 days and the doubtful loans reclassified as overdue loans for provisioning purposes.

Return on equity (ROE) – Net income (including the minority interests) divided by the average attributable equity, deducted from preference shares and other capital instruments.

Return on average assets (ROA) – Net income (including minority interests) divided by the average total assets.

Securities portfolio - financial assets held for trading, financial assets available for sale, assets with repurchase agreement, financial assets held to maturity and other financial assets held for trading at fair value through net income.

Spread on term deposits portfolio – average spread on terms deposits portfolio over 3 months Euribor.

Total customer funds - amounts due to customers (including debt securities), assets under management and capitalisation products.

Total operating income – net interest income, dividends from equity instruments, net fees and commissions income, trading income, equity accounted earnings and other operating income.