This document is a translation from the Portuguese original "Relatório e Contas Banco BPI 1.º semestre de 2019". In the event of any inconsistency the Portuguese version shall prevail.

BANCO BPI

1st half 2019

Registered office: Rua Tenente Valadim, n.º 284, Porto Share Capital: 1 293 063 324.98 euros Registered in the Commercial Registry Office of Porto, with corporate registration number PTIRNMJ 501 214 534 and tax number 501 214 534 This page was intentionally left blank.

Index

REPORT

Key performance indicators 4
Summary of 1st half 2019 results 5
Governing Bodies 6
Financial structure and business model 7
Background to operations 9
- Financial review 12
- Rating 28
Annex ‐ Bank of Portugal Recommendations 29
Annex ‐ Alternative Performance Measures 31

FINANCIAL STATEMENTS AND NOTES

Consolidated financial statements 35
Notes to the consolidated financial statements 41
Report on the limited review of the consolidated financial statements 118
Individual financial statements 121
Notes to the individual financial statements 127
Report on the limited review of the individual financial statements 201
- Statement 203

Key performance indicators

	(Consolidated amounts in € million, except where otherwise stated)
Results and profitability	1st half 18	1st half 19
Net profit	366.1	134.5
Activity in Portugal	222.5	86.9
Contribution of equity holdings in BFA and BCI	143.5	47.6
Net profit per share (euros)	0.251	0.092
Weighted average no. of shares (in million)	1 456.8	1 456.9
Return on assets (ROA) (last 12 months)	1.5%	0.8%
Return on tangible equity (ROTE)1 (last 12 months)	17.3%	8.2%
Recurrent ROTE in Portugal1 (last 12 months)	8.8%	7.7%

Balance sheet, liquidity, risk management and capital	Dec.18	Jun.19
Total assets (net)	31 568	31 669
Loans to customers (gross)	23 487	23 823
Deposits2)	22 052	22 920
Total customer resources	33 195	34 100
Loan to deposit ratio	100%	97%
Liquidity coverage ratio	167%	167%
NPE ratio (EBA criteria)	3.5%	3.3%
NPE (EBA criteria) coverage by impairments and collaterals3)	127%	126%
Total past service liabilities	1 639	1 796
Coverage ratio of Employee pension liabilities 4)	99%	96%
Shareholders' equity attributable to BPI shareholders	3 206	3 162
CRD IV / CRR fully implemented
Common Equity Tier I ratio	13.8%	13.1% (5)
Total capital ratio	15.5%	14.9% (5)
Leverage ratio	7.3%	7.1% (5)
Book value per share (euros)	2.200	2.170
Distribution network in Portugal (no. units)	495	486
BPI Group headcount (no. employees) 6	4 888	4 830

1) In the calculation of ROTE, the average balance of intangible assets (average consolidated balance in the 12 months to June 2019: €49 million) and Unicre and BCI

goodwill (average consolidated balance in the 12 months to June 2019: €13 million) are deducted from the average capital considered.

2) Includes retail bonds of €18 million in Dec.18 and €10 million in Jun.19.

3) Coverage loan and guarantee impairment allowances accumulated on the balance sheet, and collaterals associated with these loans.

4) The pension funds' amount on 31 Dec.18 includes €5.5 million of contributions transferred to the Employees' pension funds at the start of 2019.

5) Fully loaded capital ratios excluding the 1st half 2019 net income. The proforma ratios including the 1st half 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend distribution policy were: proforma CET 1 ratio of 13.5%, proforma total capital ratio of 15.2% and proforma leverage ratio of 7.3%.

6) Excludes temporary work of persons with no employment contracts with BPI.

Summary of 1st half 2019 results

Banco BPI reported a consolidated net profit of €134.5 million in the 1st half of 2019. Return on consolidated tangible equity (ROTE) was 8.2% in the 12 months to June 2019.

The comparison with the consolidated net profit of the 1st half of 2018, in the amount of €366.1 million, it should be taken into account the non‐recurring positive impacts in the activity in Portugal in the period (+€118 million, essentially gains on the sale of equity holdings), which were not repeated in 2019, and also the change in the accounting classification of BFA at the end of 2018, as a result of which the consolidated net profit reflects BFA dividends, whereas before it reflected the appropriation of BFA's net income by the equity method.

The activity in Portugal contributed with €86.9 million to the consolidated net profit in the 1st half of 2019. Excluding the non‐recurring impacts in the 1st half of 2018 (comparable basis), net income from the activity in Portugal dropped by 16.6%, essentially as a result of losses on the revaluation of recovery funds, the reduction in gains from financial operations with Clients and the impact on the income basis of the sale of subsidiaries and businesses. Net interest income was up by 3.7% yoy while fees and commissions increased by 9.1% yoy, on a comparable basis.

Recurring return on tangible equity (ROTE) from the activity in Portugal reached 7.7% (in the last 12 months).

The equity holdings in the African banks contributed with €47.6 million to the 1st half of 2019 consolidated net profit: BFA with €38.1 million (reflects BFA dividends attributed to BPI relative to the 2018 financial year) and BCI with €9.5 million (+34% yoy).

Strong commercial performance in Portugal underpinned an expansion in both loans to customers and customer resources. customer deposits increased by 5.1% ytd (+€1 084 million) while total customer resources, including off‐balance sheet resources, were up by 2.7% ytd. The total loans to customers portfolio grew by 1.4% ytd in the 1st half of 2019 (+€336 million), with the corporate loans portfolio rising by 1.5% ytd and 6.8% yoy, driving up the segment's market share to 10%, and the personal loans portfolio increasing by 7.5% ytd.

Banco BPI reports low non‐performing loan levels, with its loan portfolio quality indicators continuing to show steady improvements. The NPE ratio ("non‐performing exposure", under the EBA criteria) stood at 3.3% at the end of June 2019 (‐0.2 p.p. ytd). The coverage of NPE by impairments and collaterals associated to credit operations was 126% at the end of June 2019.

BPI has a well‐balanced balance sheet funding structure and maintains a strong liquidity position. The loan to deposit ratio was 97% and the Liquidity Coverage Ratio (LCR) reached 167%.

The Bank shows a sound capitalisation. At 30 June 2019, the fully loaded capital ratios (without including the 1st half 2019 net income) were 13.1% for the CET1 ratio and 14.9% for the total capital ratio.

Including the 1st half 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend distribution policy, the proforma CET 1 ratio was 13.5% and the proforma total capital ratio was 15.2%.

Governing Bodies

At 30 June 2019

Chairman

Abel Suárez Busquets Members Carlos Moreira da Silva Xavier Coll Escursell Alternates Armand Reixach de Linares

Nomination, Evaluation and Remuneration Committee

Chairman

Tomás Jervell Members António José Cabral Lluís Vendrell Natividad Capella

Social Responsibility Committee

Chairman Artur Santos Silva Members Rafael Chueca José Pena do Amaral Isabel Jonet António Barreto

Risk Committee

Chairman Javier Pano Members António José Cabral Cristina Rios Amorim

Board of the General Meeting Chairman Carlos Osório de Castro Deputy‐Chairman Agostinho Cardoso Guedes Secretaries Alexandra Magalhães Remuneration Committee Supervisory Board

Board of Directors

Luís Manuel Amorim

Chairman Fernando Ulrich Deputy‐Chairmen Pablo Forero António Lobo Xavier Members Alexandre Lucena e Vale António Farinha Morais António José Cabral Cristina Rios Amorim Fátima Barros Francisco Barbeira Gonzalo Gortázar Rotaeche Ignacio Alvarez‐Rendueles Javier Pano Riera

João Pedro Oliveira e Costa José Pena do Amaral Lluís Vendrell Natividad Capella Pedro Barreto Tomás Jervell

Executive Committee of the Board of Directors

Chairman Pablo Forero Members Alexandre Lucena e Vale

António Farinha Morais Francisco Barbeira Ignacio Alvarez‐Rendueles João Pedro Oliveira e Costa José Pena do Amaral Pedro Barreto

Chairman

Manuel Ramos Sebastião Members Elsa Roncon Ricardo Frias Pinheiro Rui Campos Guimarães Alternate members Manuel Correia de Pinho Luis Roque de Pinho Patrício

Statutory Auditor

Member in Office PricewaterhouseCoopers & Associados,

SROC, Lda., represented by José Manuel Bernardo Alternate Ana Maria Ávila de Oliveira Lopes Bertão

Audit and Internal Control Committee

Chairman

António Lobo Xavier Members Alfredo Rezende de Almeida Fátima Barros Lluís Vendrell

Company Secretary

Member in office João Avides Moreira Alternate Miguel Pessanha Moreira

Financial structure and business model

BPI focuses on the commercial banking business in Portugal, offering a broad range of services and financial products to corporate, institutional and individual customers. BPI is part of the CaixaBank Group, which since the end of 2018 holds the entire share capital of BPI.

BPI is the fifth largest financial institution operating in Portugal in terms of assets (€31.7 billion), with market shares of 10% in loans and customer deposits.

With the aim of improving and expanding over the medium and long term the commercial offer to BPI's clients, create synergies with the CaixaBank Group, and allow BPI to concentrate on the core banking activity, a set of subsidiaries and businesses were sold to CaixaBank in 2017 and 2018: asset management (BPI Vida e Pensões, BPI Gestão de Activos, and BPI Global Investment Fund), the acquiring and cards businesses, and the investment banking business (equities and corporate finance).

In the context of this business reorganisation within the CaixaBank Group, BPI continues to offer those products and services to its Clients and to ensure the relationship with the Clients, acting as agent.

In non‐life and life‐risk insurance, BPI has a joint venture with Allianz, reflected in BPI's stake in Allianz Portugal (35%) and in an insurance distribution agreement using the Bank's commercial network. The life‐risk insurance distribution agreement terminates at the end of 2019, after which the Bank will maintain the contractual relationship with clients holding Allianz Portugal life‐risk insurance policies outstanding on that date. With regard to non‐life insurance, the Bank will maintain the partnership with Allianz for the sale of these products.

In credit insurance, BPI holds a 50% stake in Cosec in partnership with Euler Hermes (a company of the Allianz Group), which holds the remaining 50%.

BPI holds financial investments in two African banks: a 48.1% stake in Banco de Fomento Angola (BFA), which operates in commercial banking in Angola, and a 35.7% stake in Banco Comercial e de Investimentos (BCI), which operates in commercial banking in Mozambique.

1) In partnership with Allianz, which holds 65% of the share capital. | 2) In partnership with Euler Hermes, a company of the Allianz Group.

ESTABLISHMENT OF CAIXABANK INVESTMENT BANKING BRANCH IN PORTUGAL

Following the agreement to sell Banco Português de Investimento's investment banking businesses ‐ equities and corporate finance ‐ to CaixaBank, announced in November 2017, a Branch of CaixaBank was set up in Portugal, to which these investment banking businesses and the related assets and employees were transferred. This Branch started to operate in January 2019.

In July 2019, Banco BPI concluded the merger by incorporation of Banco Português de Investimento and BPI Private Equity into Banco BPI, with the consequent extinction of these two companies. The aim of these mergers by incorporation and legal extinction of the referred companies was to simplify the structure of BPI group.

BPI serves 1.9 million customers in the domestic market, having relevant market shares in the various products and services offered.

The business model is based on the provision of a complete range of financial products and services, structured to meet the specific needs of each segment ‐ Individuals, Companies, and the Public Sector and State Enterprise Sector ‐ through a specialist, omnichannel and fully integrated distribution network.

The distribution network comprises 486 business units, namely 412 retail branches, 1 mobile branch, 37 Premier centres, and 36 specialist branches and units serving corporate and institutional customers (including 3 Corporate and Investment Banking centres).

The network articulates with the virtual channels, which include homebanking services (BPI Net and BPI Net Empresas), telephone banking (BPI Directo) and mobile applications (BPI Apps), thus ensuring banking services coverage of all Clients.

The total number of regular users of BPI's digital banking services increased by 7% yoy, to 645 thousand. The number of BPI App's regular mobile users soared by 37% yoy, to 342 thousand Clients.

The Bank is market leader in homebanking penetration in the individual customers segment, according to BASEF data (May 2019). 43% of the Bank's customers are active digital clients.

Market shares

	30 Jun. 19
Loans	10.2%
Corporate loans	10.0%
Mortgage loans	11.5%
Personal loans (origination in 1st half 2019)	13.6%
Deposits	10.2%
Mutual Funds	13.9%
Retirement savings plans	10.9%
Capitalisation insurance	15.5%
Life insurance (written premiums)	12.3%
Non‐life insurance (written premiums)	10.6%
ATMs	11.9%
POS	10.2%
Debit cards	9.6%
Credit cards	9.0%

Background to operations

GLOBAL AND EUROPEAN ECONOMY

The world economy weakened in the first half of 2019, largely reflecting the effect of the US‐China trade tensions. The International Monetary Fund (IMF) estimates that the world economy will advance by 3.2% in 2019, accelerating to 3.5% in 2020, driven by the growth of the emerging economies (from 4.1% in 2019 to 4.7% in 2020). Latin America's growth should pick up from 0.6% in 2019 to 2.3% in 2020. China, in turn, is expected to slow down from 6.2% in 2019 to 6.0% in 2020, due to the impact of the increase in trade tariffs. On the other hand, the IMF reckons that the advanced economies will grow by 1.9% in 2019 and 1.7% in 2020, reflecting the US slackening pace of expansion, from 2.6% in 2019 to 1.9% in 2020. The Eurozone should register moderate growth: 1.3% in 2019 and 1.6% in 2020. Risks remain skewed to the downside, and linked to the persistence of factors of uncertainty and lingering trade tensions.

Monetary policy (again) more accommodative

In an environment of dwindling economic activity, persistent downside risks to growth and subdued inflationary pressures, the main central banks have adopted more accommodative postures. The Federal Reserve reduced the fed‐fund rate range by 25 bps in July and September, to 1.75‐2.00%, leaving open the possibility of further adjustments in the future.

The ECB also adopted a more accommodative posture, lowering the deposit facility rate by 10 bps, to ‐0.50%, and introducing a tiering system where only part of the funds deposited with the monetary authority (in surplus reserves) will be remunerated at this rate (the remainder being remunerated at zero percent); it also announced a new long‐term asset purchase programme, to be started in November, and voiced its intention to maintain interest rates at low levels until it has seen convincing signs that the inflation outlook is converging towards the target level. Based on the current scenario for inflation, policy rates will remain at the current levels at least until the end of 2021.

PORTUGUESE ECONOMY

In the first half of 2019, the Portuguese economy grew by 1.8%, a slowdown compared to the growth rates above 2.0% seen in recent years, but still a robust performance in terms of historical behaviour. In the first half of the year growth was driven by domestic demand, with investment showing a particularly good performance, standing as a growth prop for the medium term. The contribution of external demand was negative, translating both the slowdown of exports, in line with the cooling down of global demand, and also the strong expansion of imports, largely reflecting the increase in investment, which incorporates a high content of imported goods.

The labour market performed well, albeit at a slower place, with the rate of unemployment trending towards historically low levels. At the end of the first half of the year the unemployment rate stood at 6.3% (‐0.4 p.p. relative to 2018), while employment increased on average by 1.2% yoy.

In the first half of 2019 the trade deficit in goods increased to €10.3 billion (+€2.6 billion yoy). This performance reflects a 9.3% increase in imports, driven by capital goods and transport material (aircraft purchases by TAP). Exports, in turn, grew by 2.9% only, reflecting the deceleration of global demand. The deterioration in the trade deficit in goods was in part offset by the surplus in the balance of services, which, however, was not sufficient to prevent the current balance from returning to negative ground. This imbalance will likely persist until the end of the year, given the deterioration in global growth prospects, and in particular in demand targeting the Portuguese economy (notably from the Eurozone), and the idiosyncratic factors affecting some of the important partners for the national economy (in particular Angola and Brazil).

On the public accounts front, a general government balance (cash basis) of ‐€536 million at the end of the first half of the year (corresponding to ‐0.5% of GDP) translates an improvement of €2.1 billion yoy. This improvement stemmed from a substantial increase in revenue (+7.2%), in particular tax and contributory revenue (+6.9%).

Expenditure growth, in turn, was contained (1.5%), thanks to the reduction in interest paid and low investment execution. As to the public debt, the debt‐to‐ GDP ratio dropped to 122.2% in the first half of the year, down by 1.4 p.p. relative to the end of 20181 .

For the 2019 full year, the Treasury plans to issue €16.4 billion of medium‐ and long‐term debt. Up to September it had issued €12.2 billion, corresponding to 74% of the scheduled total issuance in the year and covering approximately 55% of the needs in 2019. The cost of medium‐ and long‐term debt issuance was 1.36%, and the average maturity of the issues was 11.7 years.

Outlook for 2019

The European Commission estimates that the pace of expansion of the Portuguese economy will slow to 1.7% in 2019, reflecting a lower contribution of external demand and the deceleration of private consumption. On the other hand, investment is expected to pick up, boosted by European funds. In this scenario the labour market should remain positive, with an expected rate of unemployment of 6.5% in 2019.

Concerning the public accounts, the Government estimates a budget deficit of 0.2% of GDP, benefiting from the continuation of a favourable economic and financial background, along with other factors, such as the payment of dividends by the Bank of Portugal and Caixa Geral de Depósitos.

On the other hand, the Current and Capital Account surplus is expected to shrink, reflecting the deterioration of the trade deficit. Despite this deterioration, certain factors that suggest that this could be a contained movement, as it reflects the expansion of investment, with a potential positive impact on growth in the medium term.

Financial system

The private sector pursued the deleveraging process. According to the Eurostat, the debt of non‐financial private companies represented in the 1st quarter 100.0% of GDP, which compares with a peak of 141.4% in March 2013; for private individuals, this ratio was

66.2%, down by 25.9 p.p. from the high registered in the 4th quarter of 2009.

The loan to deposit ratio fell to 87.7% in the 1st quarter, down by 4.7 p.p. yoy, and by ‐72.8 p.p. on the 1st quarter of 2008, when it had reached a peak of 160.5%. The CET 1 ratio closed the 1st quarter at 13.8%, having risen by 0.3 p.p. on a year earlier. In turn, the non‐ performing loans ratio in the non‐financial private sector dropped to 9.9%, which is 3.9 p.p less than in the 1st quarter of 2018 and 8.6 p.p. below the peak reached in the 2nd quarter of 2016.

Loans

In June 2019 the stock of credit to the non‐financial private sector had contracted by 1.3% yoy. In the households segment, the residential mortgage loan portfolio contracted by 1.4%, as the growth of new production was not sufficient to match the pace of amortisations; consumer loans, in turn, grew by 8.2%. Both segments show a slackening pace of new loan production compared to 2018, in part reflecting the macroprudential measures implemented in July 2018. The loan portfolio to non‐financial companies contracted by 2.4%, which is explained by the sale of non‐ performing loan portfolios. Without this effect, the loan portfolio would have increased by 2.6%. In 2019, it is expected that the balance sheet clean‐up and the macroprudential measures in place will continue to restrain activity in the credit market.

Deposits

The deposits of the non‐financial private sector increased by 4.2% yoy in June, with sight deposits growing by 12.7% and time deposits decreasing by 2.6%.

FINANCIAL MARKETS

In the interbank market, the Euribor rates hit new lows in the 1st half of 2019, reflecting the outlook for a more accommodative monetary policy. The 3‐ and 12‐month Euribor closed the semester at ‐0.345% and ‐0.214%, respectively. In the US, the dollar interest rates also retreated relative to the start of the year, with the 3‐month Libor closing the first semester at 2.16%.

¹⁾ The Bank of Portugal revised the methodology for calculating the public debt, to include saving certificates capitalised interests. The revised debt‐to‐GDP ratio was 123.6% at the end of 2018, versus 121.5% previously disclosed.

In the fixed income market, the main benchmarks reversed their upward trend, with the 10‐year UST falling by circa 65 bps between January and June, to 2.0%. In the Eurozone, the 10‐year Bund again fell into negative ground, closing the period at ‐0.33%.

Risk premia in the European peripheral countries shrank, with the spread of the Portuguese debt against the Bund falling to 81 bps at the end of June (‐74 bps since the start of the year). The Spanish and Italian debt spreads trended in the same direction, albeit not so steeply: since the start of the year the first fell by 52 bps, to 72 bps, and the latter by 11 bps, to 241 bps. In the foreign exchange market, the euro remained relatively stable against the main currencies, at around 0.89 to the British pound throughout the semester, and closing the period at around 1.14 against the US dollar.

Equity market

Despite the global economic deceleration caused by a climate of uncertainty surrounding the US‐China trade war and the Brexit process, the first half of 2019 was marked by a strong rally of the main equity indices, recovering from the sharp falls at the end of 2018. The benchmark European equities index Euro Stoxx 600 closed the semester with a gain of 14%, while the S&P 500 – the leading North‐American stock market index – advanced by 17%.

In Portugal, the PSI‐20 benchmark index gained 9% in the first half of 2019, with nine stocks closing the period with gains above 10%, and only five on negative ground. In Spain, the IBEX35 advanced by 8%, with 10 stocks only closing the period on negative ground, and 17 registering gains above 10%.

Financial review

CONSOLIDATED OVERVIEW

Consolidated net profit

BPI reported a consolidated net profit of €134.5 million in the 1st half of 2019. The activity in Portugal contributed with 65% to the consolidated net profit.

The comparison with the 1st half of 2018 should take into account that the evolution of consolidated net profit (‐63% yoy) is heavily influenced by extraordinary positive impacts in the 1st half of 2018 (+€118 million, essentially gains on the sale of equity holdings), not repeated in 2019, and by the change of the accounting classification of BFA at the end of 2018, as a result of which the consolidated net profit now only reflects BFA's dividends.

The activity in Portugal generated a recurring net profit of

€86.9 million in the 1st half 2019, corresponding to a yoy reduction of 17%, which is largely explained by impairments in recovery funds totalling €11 million, and a €5 million reduction in gains on financial assets and liabilities and other.

The contribution of the equity holdings in BFA (48.1%) and BCI (35.7%) totalled €47.6 million in the 1st half of 2019. BFA contributed €38.1 million to the 1st half of 2019 consolidated net profit, reflecting the 2018 net dividends attributed to BPI, while BCI contributed €9.5 million.

Consolidated net profit		Amounts in €million
	1st half 18	1st half 19
Activity in Portugal
Recurring net profit	104.2	86.9
Non‐recurring impacts	118.3	(0.0)
Net profit in Portugal	222.5	86.9
BFA contribution1	136.3	38.1
Contribution of BCI and other	7.3	9.5
Consolidated net profit	366.1	134.5

Non‐recurring impacts in the 1st half of 2018: €59.6 million gain on the sale of the holding in Viacer, €61.8 million gain on the sale of subsidiaries (BPI Gestão de Ativos and BPI GIF), €5.5 million cost (after tax) with early retirements, and €2.5 million of net income from discontinued operations.

1) At the end of 2018 BPI changed the accounting classification of its equity holding in BFA, from "associated company", consolidated by the equity method, to "financial investment", recognised under "shares at fair value through other comprehensive income". As from 1 January 2019, the

Accounting shareholders' equity and prudential capital

At 30 June 2019, the fully loaded Common Equity Tier I (CET1) totalled €2 277 million, and total own funds amounted to €2 577 million, not including the 1st half of 2019 net profit. The corresponding fully loaded capital ratios were: CET1 ratio of 13.1% and total capital ratio of 14.9%.

Including the 1st half of 2019 net income and assuming a dividend in line with the upper limit of the long‐term dividend policy, the proforma CET 1 ratio was 13.5% and the proforma total capital ratio was 15.2%.

Regulatory capital requirements ratio

In accordance with the fully loaded CRD IV / CRR rules Amounts in €million

		Dec.18	Jun.19 (2)	Jun.19 proforma(3)
Common Equity Tier I	1	2 335.0	2 277.0	2 341.3
Tier I	2	2 335.0	2 277.0	2 341.3
Tier II	3	300.0	300.0	300.0
Total own funds	4	2 635.0	2 577.0	2 641.3
Risk weighted assets	5	16 976.8	17 339.1	17 387.5
CET1 ratio [= 1 / 5]	6	13.8%	13.1%	13.5%
T1 ratio [= 2 / 5]	7	13.8%	13.1%	13.5%
Total Ratio [= 4 / 5]	8	15.5%	14.9%	15.2%

Note: the minimum prudential requirements established by the ECB (a decision based on the SREP results) for the 2019 consolidated CET1, T1 and total capital ratios (fully loaded) were 9.25%, 10.75% and 12.75%, respectively.

2) Does not include the 1st half of 2019 net income.

3) Proforma including the 1st half of 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend policy.

The leverage ratio is calculated as the ratio of Tier 1 capital to the total value of balance sheet assets and off‐ balance sheet items, and therefore is not subject to weighting coefficients as is the case when calculating risk‐weighted assets. At 30 June 2019 the fully loaded Leverage ratio was 7.1%.

consolidated profit of BPI recognises BFA's dividends attributed to BPI and not the appropriation of profits, as was the case when this equity holding was recognised by the equity method.

The proforma leverage ratio, including the 1st half of 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend policy, was 7.3% in June 2019.

Leverage ratio (CDR IV / CRR fully loaded)

	Dec.18	Jun.19	Jun.19 proforma (1)
Leverage ratio	7.3%	7.1%	7.3%

1) Proforma including the 1st half of 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend policy.

Issuance of €275 million of AT1 capital instruments in September 2019

In September 2019, BPI issued €275 million of Additional Tier 1 (AT11) capital instruments, which was fully subscribed by CaixaBank. This issue (AT1) sought a more optimised capital structure of the CET1, Tier 1 and Total Capital requirements as set in the CRR2.

The Additional Tier 1 capital instruments issued are perpetual securities, with an issuer option for early repayment on or after the 5th year (subject to the authorisation of the

Supervisory Authority) and have an automatic loss absorbing mechanism ("temporary write‐down") that is triggered if the consolidated or individual CET1 ratio falls below 5.125% ("trigger level").

The issue will have a positive impact of 1.6 p.p. on BPI's consolidated Tier 1 and total capital ratios, calculated by reference to 30 June 2019.

¹⁾ Undated deeply subordinated notes. 2) Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (Capital Requirements Regulation – CRR).

ACTIVITY IN PORTUGAL

Results and profitability

The net profit from the activity in Portugal totalled €86.9 million in the 1st half of 2019, which compares with €222.5 million in the same period in 2018, when it had benefited from non‐recurring gains in the amount of €118.3 million, essentially arising from the sale of equity holdings and subsidiaries.

On a comparable basis, the (recurring) net profit from the activity in Portugal decreased by 17% year‐on‐year, to €86.9 million, from €104.2 million in the 1st half of 2018.

Recurring ROTE from the activity in Portugal was 7.7% in the 12 months to June 2019.

Return on tangible equity (ROTE)

Last 12 months
	Jun.18	Jun.19
Activity in Portugal
Allocated capital (€ million)	2 220.4	2 599.1
Recurring ROTE	8.8%	7.7%

Commercial results

In the 1st half of 2019 Banco BPI saw an expansion of both customer resources and customer loans portfolios:

customer deposits were up by €1 084 million relative to Dec. 18 (+5.1% ytd);
▪the corporate loan book in Portugal expanded by €135 million relative to Dec. 18 (+1.5% ytd) and by 6.8% compared to June 18 (yoy);
▪the portfolio of personal loans and car finance grew by €104 million relative to Dec.18 (+7.5% ytd), while the mortgage loans portfolio remained relatively flat (‐0.5% ytd).

Asset quality

BPI continued to show a consistent improvement in credit quality indicators:

▪the NPE1 ratio decreased by 0.2 p.p., from 3.5% in Dec.18 to 3.3% in Jun.19;
cumulative impairments for loans and guarantees on the balance sheet plus collaterals covered 126% of NPE;
▪reversals of impairments and provisions for loans and guarantees on the income statement totalled €4.9 million in the 1st half of 2019. In addition, a total of €5.9 million in loans previously written off from assets was recovered.

Funding and liquidity

BPI shows a balanced funding structure and a strong liquidity position:

on‐balance sheet customer resources accounted for 74% of total assets in the activity in Portugal;
▪the loan to deposit ratio was 97%;
▪the Liquidity Coverage Ratio (LCR) stood at 167%.

¹) "Non-performing exposures" in accordance with the European Banking Authority (EBA) criteria; considering the prudential supervision perimeter.

Income statement

Net profit from the domestic activity totalled €86.9 million in the 1st half of 2019. In the same period of 2018 the net profit from the domestic activity, €222.5 million, included positive non‐recurring income in the amount of €118.3 million.

On a comparable basis (i.e., excluding non‐recurring impacts) the net profit from the activity in Portugal decreased by €17.4 million, or 17%, year‐on‐year.

This decrease resulted from:

▪impairments in recovery funds of €11 million (booked under gains/(losses) on financial assets and liabilities);
€9.9 million reduction in other gains/(losses) on financial assets and liabilities;
€7.6 million (+3.7%) increase in the net interest income, making up for the €7.5 million (‐5.6% yoy) reduction in net fee and commission income, explained by the sale of businesses;
4.6% increase in recurring operating expenses.

Income statement from the activity in Portugal					Amounts in € million
		1st half 18			1st half 19		%
	As reported	Non‐ recurr.1)	Exc. non‐ recurr.	As reported	Non recurr.	Exc. non‐ recurr.	Exc. non‐ recurr.
Net interest income	207.2		207.2	214.8		214.8	3.7%
Dividend income	1.5		1.5	2.3		2.3	53.2%
Equity accounted income	8.4		8.4	9.8		9.8	16.0%
Net fee and commission income	134.6		134.6	127.2		127.2	‐5.6%
Gains/(losses) on financial assets and liabilities and other	78.9	59.6	19.4	(1.7)		(1.7)	‐108.7%
Other operating income and expenses	(15.8)		(15.8)	(12.4)		(12.4)	21.0%
Gross income	414.9	59.6	355.3	339.8		339.8	‐4.3%
Operating expenses	(221.7)	(7.6)	(214.1)	(223.9)	(0.0)	(223.9)	4.6%
Net operating income	193.2	52.0	141.2	115.9	(0.0)	116.0	‐17.9%
Impairment losses and other provisions	11.1		11.1	10.7		10.7	3.7%
Gains and losses in other assets	(0.7)		(0.7)	1.2		1.2	275.4%
Net income before income tax	203.7	52.0	151.7	127.8	(0.0)	127.8	‐15.7%
Income tax	(45.4)	2.1	(47.4)	(41.0)	0.0	(41.0)	‐13.7%
Net income from continuing operations	158.3	54.1	104.2	86.9	(0.0)	86.9	‐16.6%
Net income from discontinued operations	64.2	64.2
Net Income	222.5	118.3	104.2	86.9	(0.0)	86.9	‐16.6%

1) Non‐recurring impacts in 1st half 2018 correspond to:

€59.6 million gain (after taxes) on sale of equity holding in Viacer

€5.5 million costs with early retirements (€7.6 million before taxes)

€61.8 million gain on the sale of BPI Gestão de Activos and BPI GIF (recognised under income from discontinued operations)

€2.5 million net income of BPI Gestão de Ativos and BPI GIF reclassified to income from discontinued operations

Gross Income

Gross income from the activity in Portugal totalled €339.8 million in the 1st half of 2019.

Recurring gross income (excluding the €59.6 million gain on the sale of the stake in Viacer in the 1st half of 2018) decreased by 4.3% yoy (‐€15.5 million yoy).

Gross income				Amounts in € million
		Jun.18	Jun.19	%
Net interest income	1	207.2	214.8	3.7%
Net fee and commission income	2	134.6	127.2	‐5.6%
Gains / (losses) on financial assets and liabilities and other net income	3	13.5		‐2.1 ‐115.5%
Recurring gross income [=  1 to 3]	4	355.3	339.8	‐4.3%
Non‐recurring	5	59.6		0.0 ‐100.0%
Total [= 4 + 5]	6	414.9	339.8	‐18.1%

Net interest income

Net interest income expanded by 3.7%, or €7.6 million, relative to the 1st half of 2018. The main factor behind this increase was the expansion of the loan portfolio, which generated a volume effect of +€9.5 million.

In addition, the sovereign debt portfolio contributed around €2 million to the increase in the net interest income. The increase in the contribution of the sovereign debt portfolio is explained by the extension of its average maturity as a result of the reduction of the exposure to Treasury Bills and the reinforcement of the Portuguese, Spanish and Italian medium‐term sovereign debt portfolio in 2018.

The average remuneration of the loan portfolio was 1.80% in the 1st half of 2019 (+0.02 p.p. yoy) while the average cost of deposits (in euro) was 0.02% (‐0.01 p.p. yoy).

The unitary intermediation margin (defined as the difference between income from interest on loans1 and the cost of customer deposits in euro) slightly increased in the 1st half of 2019 (+0.02 p.p. yoy), reaching 1.77%.

It should be noted that net interest income continued to be penalised by a context of Euribor interest rates at historical lows, close to zero or even negative, directly reflecting on the contraction in the average margin on sight deposits.

Net interest income								Amounts in € million
			Jun.18			Jun.19		 Interest
		Average balance	Average rate (%)	Interest	Average balance	Average rate (%)	Interest	(%)
Loans to customers1	1	21,549	1.78%	191.1	22,611	1.80%	202.2	5.8%
Customer deposits in euro	2	19,315	0.03%	3.2	20,801	0.02%	2.4	‐24.0%
Intermediation margin	3		1.75%	187.9		1.77%	199.8	6.3%
Other revenues and costs	4			19.3			15.0	‐22.0%
Net interest income [= 3 + 4 ]	5			207.2			214.8	3.7%

1) Excluding loans to employees

Net fee and commission income

Net fee and commission income contracted by 5.6% (‐€7.4 million) relative to the 1st half of 2018.

The year‐on‐year evolution of net fee and commission income was affected by the sale of the cards, acquiring and investment banking businesses. Excluding the sale of these businesses (i.e., considering a comparable perimeter), net fee and commission income increases by €10.6 million (+9.1% yoy).

Net fee and commission income				Amounts in € million
		Jun.18	Jun.19	%
Banking commissions	1	82.1	75.1	‐8.6%
Mutual funds	2	19.7	18.3	‐7.0%
Insurance	3	32.8	33.8	3.0%
Total [= 1+ 2 + 3]	4	134.6	127.2	‐5.6%

Equity accounted income

The contribution of the equity accounted associated companies amounted to €9.8 million in the 1st half of 2019 (€8.4 million in the 1st half of 2018).

Gains / (losses) on financial assets and liabilities and other

In the first half of 2019 the gains / (losses) on financial assets and liabilities and other amounted to ‐€1.7 million. This includes losses on recovery funds in the period of €11 million.

The 1st half of 2018 gains / (losses) on financial assets and liabilities and other, in the amount of €78.9 million, included a €59.6 million gain on the sale of the stake in Viacer.

Other operating income and expenses

Other operating income and expenses in the 1st half of 2019, amounting to ‐€12.4 million, include the annual contributions to the National Resolution Fund (‐€7.0 million) and European Resolution Fund (‐€11.3 million), and income from services provided to CaixaBank Group (€6.6 million).

Other operating income and expenses			Amounts in € million
		Jun.18	Jun.19
Contribution to the National Resolution Fund	1	(5.5)	(7.0)
Contribution to the European Resolution Fund	2	(11.8)	(11.3)
Subscriptions and donations	3	(1.4)	(0.7)
Services provided to CaixaBank Group companies	4	2.4	6.6
Other	5	0.4	(0.1)
Total [=  1 to 5]	6	(15.8)	(12.4)
Pro memoria
Extraordinary Contribution Levied on the Banking Sector	7	(7.3)	(7.9)

Operating expenses

Recurring operating expenses ‐ recurring staff expenses, other administrative expenses, depreciation and amortisation ‐ increased by 4.6% yoy, which is explained by the scheduled plan of investments, namely in the technological area.

Staff expenses (excluding non‐recurring) increased by 2.5%. The application of IFRS 16 (lease agreements) led to an increase in depreciation and amortisation, against a reduction in other administrative expenses. The impact of the application of IFRS 16 in total expenses, and in the net income, is immaterial.

The "adjusted operating expenses1 ‐to‐commercial banking gross income ratio2 " slightly improved, dropping from 61.4% in June 18 (last 12 months) to 61.0% in June 19 (last 12 months).

Operating expenses			Amounts in € million
		Jun.18	Jun.19	%
Recurring staff expenses	1	119.2	122.2	2.5%
Other administrative expenses	2	84.4	75.4	(10.7%)
Depreciation and amortisation	3	10.4	26.2	151.7%
Recurring operating expenses [=  1 to 3]	4	214.1	223.9	4.6%
Non‐recurring expenses	5	7.6	0.0	(99.8%)
Operating expenses, as reported [=4 + 5]	6	221.7	223.9	1.0%
Adjusted operating expenses / commercial banking gross income (last 12 months)	7	61.4%	61.0%	‐0.4 p.p.

1) Operating expenses excluding costs with early retirements and voluntary terminations (recurring operating expenses) ‐ income from services provided to CaixaBank Group.

2) Net interest income, net fee and commission income, dividend income and equity accounted income.

Employee pension liabilities

The present value of the Bank's total liabilities for Employees' past services amounted to €1 796 million at the end of June 2019.

The net assets of the Employees' pension funds amounted to €1 719 million, which guaranteed the funding of 96% of the pension liabilities.

Liabilities for Employee pensions and pension funds Amounts in € million

	Dec.18	Jun.19
Total past service liabilities	1 639	1 796
Net assets of the pension fund	1 618	1 719
Coverage ratio of pension liabilities 1)	99%	96%
Discount rate	2.0%	1.45%
Pensionable salaries growth rate	1.00%	1.00%
Pensions growth rate	0.50%	0.50%
Mortality Table: Men	TV 88/ 90	TV 88/ 90
Mortality Table: Women	TV 88/ 90 – 3 years	TV 88/ 90 – 3 years

1) At Dec. 18 includes €5.5 million in contributions to the pension fund made at the start of 2019.

Pension funds return

In the 1st half of 2019, the Bank's pension funds' return was 7.9% (non annualised), originating a positive actuarial deviation in revenue of €112 million.

Actuarial deviations

In the 1st half of 2019 there were negative actuarial deviations of €57 million, resulting from a positive deviation in the pension funds' return (€112 million) and the change of the discount rate from 2.0% to 1.45% (‐€159 million).

Actuarial deviations in 1st half 19 Amounts in € million
	1st half 19
Deviation in pension funds return	112
Change in discount rate	( 159)
Other	( 10)
Actuarial deviations in 1st half 19	( 57)

Note: Actuarial deviations recognised directly in equity, in accordance with IAS19.

Impairments and provisions for loans and guarantees

Reversals of impairments and provisions for loans and guarantees totalled €4.9 million in the 1st half of 2019 (€4.4 million in the 1st half of 2018).

Recoveries of loans, interest and expenses previously written off from assets amounted to €5.9 million in the 1st half of 2019 (€7.0 million in 1st half 18).

Consequently, the cost of credit risk (impairments and provisions for loans and guarantees, minus recoveries) was ‐€10.9 million, which corresponds to ‐0.09% of the loan portfolio, in annualised terms.

Impairments and provisions for loans and guarantees Amounts in € million

		Jun.18	Jun.19
Impairments	1	(4.4)	(4.9)
as % of loan portfolio1)	2	(0.04%)	(0.04%)
Recoveries	3	(7.0)	(5.9)
Cost of risk [= 1 + 3]	4	(11.3)	(10.9)
as % of loan portfolio1)	5	(0.09%)	(0.09%)
as % of loan portfolio (last 12 months)	6	(0.10%)	(0.18%)

1) As % of average gross loans and guarantees. In annualised terms.

BALANCE SHEET

At the end of June 2019 total assets (net) of the domestic activity amounted to €31.0 billion.

In June 2019 net loans to customers, in the amount of €23.3 billion, represented 75% of assets, and on‐balance sheet customer resources (€22.9 billion) were the main source of balance sheet funding (74% of assets).

BPI maintains a comfortable liquidity position and balanced funding structure:

▪the loan to deposit ratio was 97% in June 2019;
BPI holds a portfolio of short‐term Portuguese sovereign debt securities amounting to €0.8 billion, and a portfolio of medium and long‐term sovereign debt securities (Portuguese, Spanish and Italian) in the

amount of €2.5 billion, with an average residual maturity of 2.1 years.

▪total high‐quality liquid assets and assets eligible as collateral for additional funding from the ECB amounted to €9.8 billion at the end of June 2019. On this date, funding from the ECB totalled €1.4 billion.
▪funding obtained in the debt market (wholesale funding) amounted to €1.5 billion, of which €1.05 billion were covered bonds, €129 million were loan securitisations and €300 million were subordinated bonds.
▪the liquidity coverage ratio (LCR) stands at 167%1 .

1) 12‐month average, in accordance with the EBA guidelines. Average value (last 12 months) of the LCR calculation components: Liquidity reserves (€4 082 million); Total net outflows (€2 442 million).

Banco BPI | 1st half 2019 Report and Accounts 19

Loans to customers

The portfolio of loans and advances to customers (gross) expanded by 1.4% in June 2019 (ytd):

▪the portfolio of loans to companies and small businesses grew by 1.5% ytd (+€135 million). In year‐ on‐year terms, the portfolio of loans to companies and small businesses grew by 6.8%;
▪the Bank continued to gain market share in the corporate segment, where it reached 10.0% in June 2019.
▪the mortgage loan portfolio contracted by 0.5% ytd. The market share in mortgage loans remained unchanged relative to December 2018, at 11.5%;
▪the portfolio of other loans to individuals ‐ personal loans and car financing ‐ grew by 7.5% ytd (+€104 million).

Loans and advances to

customers (gross)	Amounts in € million
	Dec.18	Jun.19	ytd %
I. Loans to individuals	12 558	12 603	0.4%
Mortgage loans	11 171	11 112	(0.5%)
Other loans to individuals	1 387	1 491	7.5%
II. Loans to companies and small businesses	9 289	9 424	1.5%
III. Public Sector	1 544	1 689	9.4%
IV. Other1	96	106	10.7%
Total	23 487	23 823	1.4%
Pro memoria:
Net loan portfolio	22 949	23 311	1.6%

Note: Loans to customers (gross) corresponds to Loans and advances to customers (€21 972 million in Jun.19), excluding collateral accounts and other assets (€74 million and €13 million in Jun.19, respectively), added of debt securities issued by customers (€1 937 million in Jun.19), recognised under Financial assets at amortised cost.

1) Includes interest receivable.

Credit risk

Credit risk is defined as the risk of financial loss due to the loss of value of the Bank's assets as a result of the deterioration of the counterparties' capacity to honour their commitments.

Default levels, provisioning and recovery

Non‐performing exposures (NPE), calculated under the EBA criteria (EBA NPE), contracted by 6% (‐€64 million) in the 1st half of 2019, to €0.99 billion.

The EBA NPE ratio improved by 0.2 p.p, dropping to 3.3% in June 2019, from 3.5% in December 2018.

The coverage of NPE by accumulated impairments on the balance sheet slightly increased, from 53% in December 2018 to 54% in June 2019; considering accumulated impairments and the collaterals associated to the NPE, this coverage ratio was 126%.

Over the last few years there has been a consistent downward trend in the NPE ratio, alongside a high coverage of NPEs by impairments and collaterals.

Non‐performing exposures in the activity in Portugal (EBA criteria)					Amounts in € million
	31 Dec.14	31 Dec.15	31 Dec.16	31 Dec.17	31 Dec.18	30 Jun.19
1	28 741	26 842	27 081	27 520	29 721	29 847
2	2 581	2 074	1 790	1 408	1 055	991
3	9.0%	7.7%	6.6%	5.1%	3.5%	3.3%
4	977	895	706	603	561	532
5	38%	43%	39%	43%	53%	54%
6	‐(3)	‐(3)	110%	117%	127%	126%

Note: considering the prudential supervision perimeter.

2) Non‐Performing exposures include positions in default and positions marked according to "Unlikely To Pay" subjective criteria. Total NPE correspond to the sum of non‐ performing loans (NPL) and non‐performing debt securities.

3) No available data for Dec. 2014 and Dec. 2015.

In the corporate segment1 , the amount of NPE (EBA) was €447 million in June 2019, corresponding to 5.9 % of the gross credit exposure to the segment (6.4% in Dec.18). The coverage of NPE (EBA) by impairments in the corporate segment was 58%.

In turn, in the mortgage loans segment, the amount of NPE (EBA) was €478 million in June 2019, corresponding to a NPE ratio of 4.3% (4.6% in Dec.18). The analysis of the coverage level should take into account the relevant effect of collaterals (tangible guarantees) in reducing the risk of loss in this segment.

Non‐performing loans (Bank of Spain criteria)

Loans classified as "non‐performing", calculated under the Bank of Spain's criteria, decreased by €40 million in the first half of 2019, to €1 003 million, which corresponds to 3.9% of the gross loan portfolio and guarantees (4.2% in Dec.18).

The coverage of non‐performing loans by accumulated impairments on the balance sheet was 53% at Jun.19; considering accumulated impairments and the collaterals associated to the non‐performing loans, the coverage ratio was 118%.

Non‐performing loans (Bank of Spain criteria) Amounts in € million

		31	30
		Dec.18	Jun.19
Gross loan portfolio and guarantees	1	25 122	25 411
Non‐performing loans	2	1 043	1 003
Non‐performing loans ratio [= 2 / 1]	3	4.2%	3.9%
Impairments for loans and guarantees	4	561	532
Coverage by impairments [= 4 / 2]	5	54%	53%
Coverage by impairments and collaterals	6	120%	118%

Cost of Credit Risk

The steady improvement in credit quality indicators and high coverage levels, have translated, on the income statement, in a reduction of the cost of credit risk. In the first half of 2019 reversals of impairments and provisions for loans and guarantees totalled €4.9 million; in addition, a total of €5.9 million in loans, interest and expenses previously written off from assets, was recovered. The cost of credit risk was therefore negative by €10.9 million (representing a gain).

Restructured loans

The amount of restructured loans (forborne loans, under the EBA criteria) was €720 million at the end of June 2019. Of this amount, 31% are performing loans (Performing Exposures, under the EBA criteria) and the remaining 69% are included in the balance of non performing exposures (NPE). The forborne ratio decreased from 2.5% in December 2018 to 2.2% in June 2019.

In mortgage loans, the amount of restructured loans (forborne loans, under the EBA criteria) was €217 million at the end of June 2019 (2.0% of the gross credit exposure in this segment). Of this amount, €45 million correspond to performing loans and the remaining €172 million are included in non‐performing exposures (NPE).

Forborne loans (EBA criteria) Amounts in € million
		31 Dec.17		31 Dec.18		30 Jun.19
		Forborne loans	Forborne ratio	Forborne loans	Forborne ratio	Forborne loans	Forborne ratio
Performing loans	1	571	1.9%	254	0.8%	221	0.7%
Included in NPE	2	682	2.2%	559	1.7%	499	1.5%
Total [= 1+2]	3	1 253	4.1%	813	2.5%	720	2.2%

Note: considering the prudential supervision perimeter.

1) Large and medium‐sized companies, corporate & investment banking, small businesses.

Foreclosed properties

At the end of June 2019, the stock of foreclosed properties held by BPI had a gross balance sheet value of €44 million. Of this amount, €18.8 million concerned properties obtained through home‐loan recoveries and €25.2 million referred to properties repossessed for the recoupment of other loans.

On the same date the accumulated amount of impairments for foreclosed properties was €17.5 million. Therefore the net balance sheet value of these properties was €26.5 million. Their valuation value corresponded to 171% of the net balance‐sheet value.

Foreclosed properties

By source of credit at 30 Jun.19	Amounts in € million
	Home loans	Other	Total
Gross book value (GBV)	18.8	25.2	44.0
Impairments	2.9	14.6	17.5
Net book value (NBV)	15.9	10.6	26.5
Valuation as % of NBV	154%	197%	171%

Holdings in corporate recovery and restructuring funds

Banco BPI holds participation units in specialised loan recovery funds ("Fundo de Recuperação, FCR" and "Fundo de Reestruturação Empresarial FCR") which were subscribed against the transfer to these funds of customer loans.

At the end of June 2019, the share capital subscribed by BPI in the Fundo de Recuperação, FCR and Fundo de Reestruturação Empresarial FCR amounted to €96.0 million. BPI's paid‐up share capital in these funds was €87.3 million (€84.3 million in the Fundo de Recuperação, FCR, and €3.0 million in the Fundo de Reestruturação Empresarial FCR). Net exposure to these funds, after revaluation, was €44.1 million.

Net exposure to corporate recovery and restructuring funds at 30 Jun.19 Amounts in € million

	Subscribed	Paid up
Fundo Recuperação, FCR	92.7	84.3
Fundo de Reestruturação Empresarial, FCR	3.3	3.0
Total	96.0	87.3
Revaluation		(43.2)
Net Exposure		44.1

Customer Resources

Customer deposits increased by 5.1% in the 1st half of 2019 (ytd), or +€1 084 million ytd, reaching €22.2 billion at the end of June 2019.

The Bank has been actively reducing the volume of deposits of institutional and financial investors to optimise the liquidity ratios (LCR), which explains the reduction in this component of resources.

Total on‐ and off‐balance sheet resources increased by 2.7% (+€905 million) ytd, to €34.1 billion at the end of June 2019.

Customer resources	Amounts in € million
	Dec.18	Jun.19	ytd %
I. On‐balance sheet
resources	22 052	22 920	3.9%
Customer deposits	21 107	22 192	5.1%
Deposits of institutional and
financial investors	945	728	(23.0%)
II. Assets under management	9 191	9 409	2.4%
Mutual funds	5 083	5 068	(0.3%)
Capitalisation insurance	4 107	4 341	5.7%
III. Public subscription
offerings	1 952	1 772	(9.2%)
Total	33 195	34 100	2.7%

Funding structure and liquidity

BPI shows a balanced funding structure and a comfortable liquidity position.

Funding structure

Customer resources are the main source of funding of the balance sheet. At the end of June 2019, on‐balance sheet customer resources amounted to €22.9 billion and represented 74% of assets.

The loan to deposit ratio (CaixaBank criteria) stood at 97%.

Loan to deposit ratio		Amounts in € million
		Dec.18	Jun.19
Loans net of impairments	1	21 929	22 291
Deposits	2	22 036	22 902
Loan to deposit ratio [= 1 / 2]	3	100%	97%

In March 2019, BPI returned to the institutional debt market with a €500 million, 5‐year, covered bond issue. The success of this transaction is illustrated by the size of demand, which reached 6 times the amount of the issue.

At the end of June, the amount of covered bonds reached €1 050 million, complementing the basis of customer resources.

Refinancing of medium‐ and long‐term debt

Funding through the wholesale debt market is reduced. The portfolio of medium‐ and long‐term debt placed in the market with institutional investors amounted to €1.5 billion on 30 June 2019 (including €1.05 billion in covered bonds).

The medium/long‐term debt net refinancing needs in the coming years are small: €929 million in the next five years (of which €129 million in the 2nd half of 2019).

Liquidity

At the end of June 2019, the Bank's Liquidity Coverage Ratio (LCR) was 167%1 .

The overall portfolio of high liquidity assets held by the Bank ‐ high quality liquid assets2 and assets eligible as collateral for additional funding from the ECB – totalled €9 848 million at the end of June 2019. On this date, funding from the ECB totalled €1.4 billion.

Total liquid assets	Amounts in € million
		Dec.18	Jun.19
High Quality Liquid Assets	1	3 897	4 541
Other assets eligible as collateral with the ECB	2	5 601	5 307
Total Liquid Assets [= 1 + 2]	3	9 498	9 848

1) Average value (last 12 months) of the LCR calculation components: Liquidity reserves (€4 082 million); Total net outflows (€2 442 million).

CONTRIBUTION OF EQUITY HOLDINGS IN BFA AND BCI

Contribution to the consolidated net income

Banco BPI holds minority equity holdings in two African banks:

48.1% stake in Banco de Fomento Angola (BFA), which operates in commercial banking in Angola; and
35.7% stake in Banco Comercial e de Investimentos (BCI), which operates in commercial banking in Mozambique.

CHANGE OF ACCOUNTING CLASSIFICATION OF THE FINANCIAL INVESTMENT IN BFA

At the end of 2018, BPI changed the accounting classification of its equity holding in BFA, from "associated company", consolidated by the equity method, to "financial investment", recognised under "shares at fair value through other comprehensive income".

BPI believes that this is the more prudent accounting option and that it adequately reflects its current position in BFA (with no significant influence).

As from 1 January 2019, the consolidated profit of BPI only recognises BFA's dividends attributed to BPI and not the appropriation of profits, as was the case when this equity holding was recognised by the equity method.

BPI's equity holdings in BFA and BCI contributed with €47.6 million to the consolidated net income in the 1st half of 2019.

BFA's contribution to the consolidated net income amounted to €38.1 million in the 1st half of 2019, essentially corresponding to BFA dividends attributed to BPI relative to the 2018 net earnings. In the 1st half of 2018 the contribution of BFA (€136.3 million) reflected the appropriation of BFA net income through the equity method.

BCI's contribution to the consolidated net income increased from €7.1 million in the 1st half of 2018 to €9.5 million in the 1st half of 2019.

Shareholdings in African banks Amounts in € million
		Jun.18	Jun.19
BFA Contribution	1	136.3	38.1
BCI Contribution	2	7.1	9.5
BPI Capital África	3	0.2	‐
Total [=1+2+3]	4	143.5	47.6

	Jun.18	Jun.19
Gross income / ATA	3.8%	2.4%
Net income before income tax and income attributable to non‐controlling interests / ATA	2.8%	1.1%
Net income before income tax and income attributable to non‐controlling interests / average shareholders' equity (including non‐controlling interests)	29.1%	10.9%
Staff expenses / Gross income1)	20.8%	31.6%
Operating expenses / Gross income1)	37.4%	57.8%
Loan to deposit ratio	104%	102%
1) Excluding costs with early retirements.

Consolidated indicators of profitability and efficiency in accordance with Bank of Portugal instruction 16/2004, as amended by Instruction 6/2018

INDIVIDUAL FINANCIAL INFORMATION

Individual net income

The net income determined in Banco BPI's individual accounts for the 1st half of 2019 was €131.9 million.

The 1st half of 2018 individual net income, in the amount of €288.7 million, included positive non‐ recurring impacts totalling €132.0 million that essentially corresponded to gains on the sale of equity holdings.

If the non‐recurring impacts are excluded from net income (comparable basis), the individual net income decreases by 15.8% year‐on‐year.

Individual net income		Amounts in € million
	Jun.18	Jun.19
Recurring net income	156.7	131.9
Non‐recurring impacts
Capital gains on the sale of equity holdings	137.2	‐
Cost with early retirements and voluntary terminations	(5.2)	(0.0)
Non‐recurring impacts	132.0	(0.0)
Net Income	288.7	131.9

Individual income statement	Amounts in € million
		Jun.18	Jun.19	%
Net interest income	1	210.6	218.1	3.5%
Dividend income	2	71.0	61.0	(14.1%)
Net fee and commission income	3	127.2	123.3	(3.1%)
Gains/(losses) on financial assets and liabilities and other	4	69.9	(1.8)	(102.6%)
Other operating income and expenses	5	(20.3)	(17.6)	13.5%
Gross income [= (1 to 5)]	6	458.5	383.0	(16.5%)
Recurring staff expenses	7	(114.3)	(119.7)	4.7%
Other administrative expenses	8	(82.0)	(74.8)	(8.8%)
Depreciation and amortisation	9	(10.2)	(26.1)	155.1%
Recurring operating expenses [= (7 to 9)]	10	(206.6)	(220.6)	6.8%
Cost with early retirements and voluntary terminations	11	(7.2)	(0.0)	(99.8%)
Operating expenses [= 10 + 11]	12	(213.7)	(220.6)	3.2%
Net operating income [= 6 + 12]	13	244.7	162.4	(33.6%)
Impairment losses and other provisions	14	11.1	10.7	(3.7%)
Gains and losses in other assets	15	(0.9)	0.3	‐
Net income before income tax [= (13 to 15)]	16	255.0	173.4	(32.0%)
Income tax	17	(43.9)	(41.5)	(5.6%)
Net income from continuing operations [= 16 + 17]	18	211.1	131.9	(37.5%)
Net income from discontinued operations	19	77.7		(100.0%)
Net income [= 18 + 19]	20	288.7	131.9	(54.3%)

The individual gross income totalled €383.0 million in the 1st half of 2019. The 16.5% year‐on‐year reduction in gross income is essentially explained by the reduction in gains/(losses) in financial assets and liabilities, which in the 1st half of 2018 included a €59.6 million non‐recurring capital gain on the sale of the equity holding in Viacer, and in the 1st half of 2019 included €11 million losses in recovery funds.

Net interest income increased by 3.5% year‐on‐year, while net fee and commission income contracted by 3.1% yoy as a result of the sale of the cards and acquiring businesses. The 'Dividend income' caption includes €12.8 million in dividends from companies included in Banco BPI's consolidation perimeter.

Recurring operating expenses rose by 6.8% in Banco BPI's individual accounts.

On an individual basis, Banco BPI recorded reversals of total impairments and provisions plus recoveries, in the amount of €10.7 million (gain) in the 1st half of 2019 (reversals of total impairments and provision plus recoveries of €11.1 million in the 1st half of 2018).

Individual balance sheet

Total assets (net) of Banco BPI (individual basis) amounted to €35.7 billion at the end of June 2019. Individual accounting shareholders' equity totalled €2 990 million at the end of June 2019.

Individual balance sheet indicators	Amounts in € million
	31 Dec.18		%
Total assets (net)	35 786	35 671	‐0.3%
Loans to customers (gross)	23 487	23 823	1.4%
Deposits	22 236	23 103	3.9%
Shareholders' equity	3 049	2 990	‐1.9%

Banco BPI is the main business unit and is responsible for the development of the commercial banking business in Portugal. In 2018 Banco BPI completed the process of closing down all its representative offices and offshore branches (Paris, Madrid and Cayman), the objective of which was to focus BPI on the core banking activity in Portugal and at the same time promote a simpler and more efficient financial structure. For the

1) Does not include the 1st half of 2019 net income.

reasons pointed out, the description of Banco BPI's commercial performance on a consolidated basis is valid for the evolution of the various captions on an individual basis.

The portfolio of loans and advances to customers (gross), on an individual basis, expanded by 1.4% ytd, to €23.8 billion at the end of June 2019. Total deposits increased by 3.9% ytd, to €23.1 billion, while the Bank has been actively promoting the reduction of deposits from institutional and financial investors to optimise its liquidity ratios.

Individual capital ratios

At the end of June 2019, the fully loaded capital ratios (without including the 1st half of 2019 net income) were 12.8% for the CET1 ratio and 14.5% for the total capital ratio.

Including the 1st half of 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend distribution policy, the proforma individual CET 1 ratio was 13.1% and the proforma individual total capital ratio was 14.8%.

Fully loaded capital ratios (individual basis) Amounts in € million

		Dec.18	Jun.191	Jun.19 proforma2
Common Equity Tier I	1	2 276.8	2 229.9	2 291.3
Tier I	2	2 276.8	2 229.9	2 291.3
Tier II	3	300.0	300.0	300.0
Total own funds	4	2 576.8	2 529.9	2 591.3
Risk weighted assets	5	17 064.1	17 437.3	17 485.1
CET1 ratio [= 1 / 5]	6	13.3%	12.8%	13.1%
T1 ratio [= 2 / 5]	7	13.3%	12.8%	13.1%
Total Ratio [= 4 / 5]	8	15.1%	14.5%	14.8%
Leverage ratio		6.3%	6.2%	6.4%

2) Proforma including the 1st half of 2019 net income and assuming a dividend distribution in line with the upper limit of the long‐term dividend distribution policy.

Rating

BPI currently holds investment grade ratings for its long‐term debt (BBB), assigned by Fitch Ratings and S&P Global Ratings, and for long‐term deposits (Baa1), by Moody's.

The mortgage covered bonds issued by BPI are rated AA (Low) by DBRS and Aa3 by Moody's and qualify as level 1 assets for purposes of calculation of the LCR ratio.

The latest rating actions on BPI are described below:

Fitch Ratings did not change its ratings of BPI during the 1st half of 2019. On 11 October 2018, Fitch Ratings had raised by one notch the long‐term debt rating of Banco BPI, from BBB‐ to BBB, with stable Outlook. The ratings were reaffirmed on 6 December, with stable Outlook.
On 18 March 2019, S&P Global Ratings upgraded its long‐term debt rating of BPI by one notch, to BBB, with stable outlook. In its note, S&P Global Ratings positively highlighted BPI's solid commercial position, superior asset quality, low reliance on the debt markets and adequate liquidity.

On 26 June Moody's reaffirmed its Baa1 rating on the long‐term customer deposits, which represent BPI's main source of funding. Moody's highlighted the Bank's enhanced capital levels, its low level of non‐performing assets, well below the Portuguese system average and BPI's improving profitability metrics in the activity in Portugal.

On the same date, Moody's downgraded the rating assigned to the Bank's long‐term senior unsecured debt, from Baa2 to Ba1, reflecting the application of a specific Moody's analysis in connection with the entry into force of a new regulatory framework in Portugal, which, in the case of a bank resolution, strengthens the protection of deposits relative to senior unsecured debt. The rating assigned to the long‐term senior unsecured debt reflects this debt's very low weight in BPI's total funding (€10 million at the end of June).

In July, Moody's upgraded its Baseline Credit Assessment (BCA) of BPI by 1 notch, to "baa3", reaching investment grade, and reaffirmed its ratings on the long‐term deposits and long‐ term debt, with "Stable" Outlook.

				At 30 June 2019
	DBRS	Fitch Ratings	Moody's	S&P Global Ratings
Banco BPI credit ratings
Long‐Term Deposits			Baa1
Short‐Term Deposits			Prime‐2
Outlook on MLT deposits			Stable
Long‐Term Debt		BBB	Ba1	BBB
Short‐Term Debt		F2	Not prime	A‐2
Outlook on MLT debt		Stable	Stable	Stable
Individual Rating		bb+ (Viability rating)	ba1 (Baseline Credit Assessment)	bb+ (Stand‐alone credit profile‐SACP)
Collateralised senior debt
 Mortgage	AA (Low)		Aa3
 Public sector			A1
Senior non‐preferred debt			Ba1	BBB‐
Subordinated debt		BB+	Ba1	BB+
Junior subordinated debt			Ba2
Portuguese Republic sovereign risk1)
Long‐Term	BBB	BBB	Baa3	BBBu
Short‐Term	R‐2 (high)	F2	Prime‐3	A‐2u
Outlook	Positive	Positive	Stable	Stable

1) The ratings attributed by S&P Global Ratings to the Portuguese Republic are unsolicited ("u").

Annex ‐ Bank of Portugal Recommendations

ADOPTION OF THE FINANCIAL STABILITY FORUM (FSF) AND COMMITTEE OF EUROPEAN BANKING SUPERVISORS (CEBS) RECOMMENDATIONS ON THE TRANSPARENCY OF INFORMATION AND VALUATION OF ASSETS

The Bank of Portugal, through circular‐letters 97/08/DSBDR of 3 December 2008 and 58/09/DSBDR of 5 August 2009, has recommended that within the accounting documents, a separate chapter or a specific annex be included in the Annual Report, designed to respond to the recommendations of the CEBS and of the FSF, taking into account the principle of proportionality and following the questionnaire presented as an annex to Bank of Portugal's circular‐letter 46 / 08 / DSBDR.

In order to comply with Bank of Portugal's recommendation, the present chapter provides a response to the aforesaid questionnaire, using cross‐ references to the more detailed information presented in the 1st half 2019 Report.

Recommendation Summary	Reference to 1st half 2019 Report
I. BUSINESS MODEL
1. Description of the business model	MR – Financial structure and business model, page 7.
	NFS – 6. Segments, page 76.
2. Description of strategies and objectives	MR – Summary of 1st half 2019 results, page 5; Financial review,
	page 12;
	NFS –3. Risk management, page 54.
3. Description of the importance of the operations carried out	MR – Financial structure and business model, page 7; Financial
and the respective contribution to business	review, page 12.
	NFS – 6. Segments, page 76.
4. Description of the type of activities undertaken	MR – Financial structure and business model, page 7; Background to
5. Description of the objective and extent of the institution's	operations, page 9; Financial review, page 12.
involvement relating to each activity undertaken	NFS – 3. Risk management, page 54; 6. Segments, page 76.
II. RISKS AND RISK MANAGEMENT
6. Description of the nature and extent of the risks incurred in	MR –Financial review, page 12.
relation to the activities carried out and the instruments used	NFS – 3. Risk management, page 54; 8. Financial assets, page 81.
7. Description of major risk‐management practices in operations	MR –Financial review, page 12.
	NFS – 3. Risk management, page 54; 8. Financial assets, page 81.
	GovR 2018 – 2018 Corporate Governance Report, page.293.
III. IMPACT OF THE PERIOD OF FINANCIAL TURMOIL ON THE RESULTS
8. Qualitative and quantitative description of the results	MR – Financial review, page 12
9. Breakdown of the write‐downs / losses by types of products	NFS – 3. Risk management, page 54; 8. Financial assets, page 81;
and instruments affected by the period of turmoil	25. Gains / (losses) on financial assets and liabilities, page 103.
10. Description of the reasons and factors responsible for the	MR – Financial review, page 12; Background to the
impact suffered	operations, page 9.
11. Comparison of the i) impacts between (relevant) periods and	MR – Financial review, page 12.
ii) the financial statements before and after the period of turmoil
12. Breakdown of write‐downs between realised and non‐	MR – Financial review, page 12;
realised	NFS – 8. Financial assets, page 81; 25. Gains / (losses) on financial
	assets and liabilities, page 103.

13. Description of the influence of the financial turmoil on the	The Banco BPI shares were excluded from trading on the Euronext
behaviour of Banco BPI shares	Lisbon regulated market on 14 December 2018, following the CMVM's
	favourable decision on the loss of Banco BPI's public company status.
	On 27 December 2018 CaixaBank exercised its squeeze‐out right on the
	remaining shares it did not yet hold, following which it now holds the
	entire share capital of Banco BPI.
14. Disclosure of the maximum loss risk	NFS – 3. Risk management, page 54.
15. Disclosure of the impact that the trend in spreads	MR – Financial review, page 12.
associated with the institution's own liabilities had on earnings
IV. LEVEL AND TYPE OF EXPOSURES AFFECTED BY THE PERIOD OF FINANCIAL TURBULENCE
16. Nominal value (or amortised cost) and fair value of exposures	NFS – 8. Financial assets, page 81.
17. Information about credit risk mitigators and respective	MR –Financial review, page 12.
effects on existing exposures	NFS – 3. Risk management, page 54.
18. Detailed disclosure of exposures	MR –Financial review, page 12.
	NFS – 3. Risk management, page 54; 8. Financial assets, page 81.
19. Movements in exposures occurred between the relevant	MR –Financial review, page 12.
reporting periods and the reasons for these movements (sales,	NFS – 3. Risk management, page 54; 8. Financial assets, page 81.
write‐downs, purchases, etc.)
20. Explanations about exposures which have not been	Banco BPI consolidates all exposures in which it has control or
consolidated (or which have been recognised during the crisis)	significant influence, as provided for in IFRS 10, 11, IAS 28, IFRS 3 and
and the associated reasons	IFRS 5. No changes were made to BPI Group's consolidation perimeter
	as a consequence of the period of turmoil in the financial markets.
21. Exposure to monoline insurers and quality of the assets insured	At 30 June 2019, BPI had no exposure to monoline insurers.
V. ACCOUNTING POLICIES AND VALUATION METHODS
22. Classification of transactions and structured products for	NFS – 3. Risk management, page 54; 8. Financial assets, page 81;
accounting purposes and respective accounting treatment	15. Financial liabilities, page 91.
23. Consolidation of Special Purpose Entities (SPE) and other	The vehicles through which Banco BPI's debt securitisation operations
vehicles and their reconciliation with the structured products	are carried out are recorded in the consolidated financial statements
affected by the period of turmoil	according to the BPI Group's continued involvement in these operations,
	determined on the basis of the percentage of the equity interest held in
	the respective vehicles.
24. Detailed disclosure of the fair value of financial	NFS – 8. Financial assets, page 81.
instruments
25. Description of the modelling techniques used for valuing	NFS – 2. Bases of presentation and main accounting policies, page 45
financial instruments	and 8. Financial assets, page 81.
VI. OTHER RELEVANT ASPECTS OF DISCLOSURE
26. Description of the disclosure policies and principles used in	GovR 2018 – 2018 Corporate Governance Report, page 293.
financial reporting

MR – Management Report; NFS – Notes to the Financial Statements; GovR 2018 – 2018 Corporate Governance Report.

Annex ‐ Alternative Performance Measures

The European Securities and Markets Authority (ESMA) published on 5 October 2015 a set of guidelines relating to the disclosure of Alternative Performance Measures by entities (ESMA/2015/1415). These guidelines are to be obligatorily applied with effect from 3 July 2016.

BPI uses a set of indicators for the analysis of performance and financial position, which are classified as Alternative Performance Measures, in accordance with the abovementioned ESMA guidelines.

The information relating to those indicators has already been the object of disclosure, as required by the ESMA guidelines.

In the present report, the information previously disclosed is inserted by way of cross‐reference. A summarised list of the Alternative Performance Measures is presented next.

EARNINGS, EFFICIENCY AND PROFITABILITY INDICATORS

Reconciliation of income statement structure

With the entry into force of IFRS 9 at the beginning of 2018, Banco BPI decided to adopt a structure of the individual and consolidated financial statements consistent with the guidelines of Regulation (EU) 2017/1443 of 29 June 2017 and with the structure of the financial statements presented by CaixaBank (consolidating entity of Banco BPI).

The table below shows, for the income statement of the activity in Portugal, the reconciliation of the structure presented in the Management Report with the structure presented in the financial statements and respective notes.

Income statement from the activity in Portugal			Amounts in €million
Management Report structure	Jun.19	Jun.19	Structure of the Financial Statements and attached notes
Net interest income	214.8	214.8	Net interest income
Dividend income	2.3	2.3	Dividend income
Equity accounted income	9.8	9.8	Share of profit/(loss) of entities accounted for using the equity method
Net fee and commission income	127.2	139.1	Fee and commission income
		(11.9)	Fee and commission expenses
Gains/(losses) on financial assets and liabilities and other	(1.7)	(0.3)	Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net
		(0.8)	Gains/(losses) on financial assets and liabilities held for trading, net
		(7.3)	Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net
		1.0	Gains/(losses) from hedge accounting, net
		5.8	Exchange differences (gain/loss), net
Other operating income and	(12.4)	18.5	Other operating income
expenses		(30.9)	Other operating expenses
Gross income	339.8	339.8	GROSS INCOME
Staff expenses	(122.2)	(122.2)	Staff expenses
Other administrative expenses	(75.4)	(75.4)	Other administrative expenses
Depreciation and amortisation	(26.2)	(26.2)	Depreciation and amortisation
Operating expenses	(223.9)	(223.9)	Administrative expenses, depreciation and amortisation
Net operating income	115.9
Impairment losses and other	10.7	2.4	Provisions or reversal of provisions
provisions		8.3	Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss
Gains and losses in other assets	1.2	1.0	Impairment /(reversal) of impairment in subsidiaries joint ventures and associates
		1.7	Impairment/(reversal) of impairment on non‐financial assets
		(1.5)	Gains/(losses) on derecognition of non‐financial assets, net
		(0.1)	Profit/(loss) from non‐current assets and disposal groups classified as held for sale not qualifying as discontinued operations
Net income before income tax	127.8	127.8	PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
Income taxes	(41.0)	(41.0)	Tax expense or income related to profit or loss from continuing operations
Net income from continuing operations	86.9	86.9	PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS
Net income from discontinued operations	0.0	0.0	Profit/(loss) after tax from discontinued operations
Income attributable to non‐ controlling interests	0.0	0.0	Profit/(loss) for the period attributable to non‐controlling interests
Net income	86.9	86.9	PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT

The earnings, efficiency and profitability indicators are defined by reference to the aforementioned structure of the income statement presented in the Management Report.

EARNINGS, EFFICIENCY AND PROFITABILITY INDICATORS

Gross income = Net interest income + Dividend income + Net fee and commission income + Equity accounted income + Gains/(losses) on financial assets and liabilities and other + Other operating income and expenses

Commercial banking gross income = Net interest income + Dividend income + Net fee and commission income + Equity accounted income excluding the contribution of stakes in African banks

Operating expenses = Staff expenses + Other administrative expenses + Depreciation and amortisation

Adjusted Operating expenses = Staff expenses excluding cost with early retirements and voluntary terminations and (only in 2016) gains with the revision of the Collective Labour Agreement (ACT) + Other administrative expenses + Depreciation and amortisation ‐ Income from services rendered to CaixaBank Group (recorded in "Other operating income and expenses"

Net operating income = Gross income ‐ Operating expenses

Net income before income tax = Net operating income – Impairment losses and other provisions + Gains and losses in other assets

Cost‐to‐income ratio (efficiency ratio) 1) = Operating expenses / Gross income

Adjusted Operating expenses‐to‐commercial banking gross income 1) = Operating expenses, excluding costs with early‐retirements and voluntary terminations and (only in 2016) gains with the revision of the Collective Labour Agreement (ACT) ‐ Income from services rendered to CaixaBank Group / Commercial banking gross income

Return on Equity (ROE) 1) = Net income for the period / Average value in the period of shareholders' equity attributable to BPI shareholders after deduction of the fair value reserve (net of deferred taxes) related to available‐for‐sale financial assets

Return on Tangible Equity (ROTE) 1) = Net income for the period / Average value in the period of shareholders' equity attributable to BPI shareholders after deduction of intangible net assets and goodwill of equity holdings

Return on Assets (ROA) 1) = (Net income attributable to BPI shareholders + Income attributable to non‐controlling interests ‐ preference shares dividends paid) / Average value in the period of net total assets

Unitary intermediation margin = Loan portfolio (excluding loans to employees) average interest rate ‐ Deposits average interest rate

BALANCE SHEET AND FUNDING INDICATORS

On‐balance sheet customer resources = Deposits + Capitalisation insurance of fully consolidated subsidiaries + Participating units in consolidated investment funds

Where:

Deposits = Demand deposits and other + Term and savings deposits + Interest payable + Retail bonds (Fixed / variable rate bonds and structured products placed with customers + Certificates of deposit + Subordinated bonds placed with customers)
Capitalisation insurance of fully consolidated subsidiaries (BPI Vida e Pensões sold in Dec.17) = Unit links capitalisation insurance and "Aforro" capitalisation insurance and others (Technical provisions + Guaranteed rate and guaranteed retirement capitalisation insurance)

Note: The amount of on‐balance sheet customer resources is not deducted of applications of off‐balance sheet products (mutual funds and pension funds) in on‐balance sheet products

Assets under management = Mutual funds + Capitalisation insurance + Pension funds

Mutual funds = Unit trust funds + Real estate investment funds + Retirement‐savings and equity‐savings plans ("PPR" and "PPA" in Portuguese) + Hedge funds + Assets from funds under BPI Suisse management + Third‐party unit trust funds placed with customers
Capitalisation insurance = third‐party capitalisation insurance placed with customers

¹⁾ Ratio refers to the last 12 months, except where otherwise indicated. The ratio can be computed for the cumulative period since the beginning of the year, in annualised terms, in which case it will be clearly marked.

Pension Funds = pension funds under BPI management (includes BPI pension funds) Notes:

(i) Amounts deducted of participation units in the Group banks' portfolios and of placements of off‐balance sheet products (mutual funds and pension plans) in other off‐balance sheet products.

(ii) Following the sale of BPI Vida e Pensões in Dec. 17, the capitalisation insurance placed with BPI's customers was recognised off balance sheet, as "third‐party capitalisation insurance placed with customers" and pension funds management was excluded from BPI's consolidation perimeter.

Subscriptions in public offerings = Customer subscriptions of third‐party public offerings

Total customer resources On‐balance sheet customer resources + Assets under management + Subscriptions in public offerings

Gross loans to customers = Gross Loans and advances to customers (financial assets at amortized cost), excluding other assets (guarantee accounts and others) + Gross debt securities issued by customers (financial assets at amortized cost)

Note: gross loans = performing loans + loans in arrears + interest receivable

Net loans to customers = Gross loans to customers – Impairments for loans to customers

Loan to deposit ratio (CaixaBank criteria) = (Net loans to customers ‐ Funding obtained from the EIB, which is used to provide credit) / Deposits and retail bonds

ASSET QUALITY INDICATORS

Impairments and provisions for loans and guarantees (in income statement) = Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss relative to loans and advances to customers and debt securities issued by customers (financial assets at amortised cost), before deduction of recoveries of loans previously written off from assets, interest and others + Provisions or reversal of provisions for commitments and guarantees

Cost of credit risk = Impairments and provisions for loans and guarantees, net (in income statement) ‐ Recoveries of loans previously written off from assets, interest and other

Cost of credit risk as % of loan portfolio 1) = (Impairments and provisions for loans and guarantees, net (in income statement) ‐ Recoveries of loans previously written off from assets, interest and other) / Average value in the period of the gross loans and guarantees portfolio.

Performing loans portfolio = Gross customer loans ‐ (Overdue loans and interest + Receivable interests and other)

NPE Ratio = Ratio of non‐performing exposures (NPE) in accordance with the EBA criteria (prudential perimeter)

Coverage of NPE = [Impairments for loans and advances to customers (financial assets at amortised cost) + Impairments for debt securities issued by customers (financial assets at amortised cost) + Impairments and provisions for guarantees and commitments] / Non‐performing exposures (NPE)

Coverage of NPE by impairments and associated collaterals = [Impairments for loans and advances to customers (financial assets at amortised cost) + Impairments for debt securities issued by customers (financial assets at amortised cost) + Impairments and provisions for guarantees and commitments + Collaterals associated to NPE) / Non‐performing exposures (NPE)

Non‐performing loans ratio ("credito dudoso", Bank of Spain criteria) = Non performing loans (Bank of Spain criteria) / (Gross customer loans + guarantees)

Non‐performing loans (Bank of Spain criteria) coverage ratio = [Impairments for loans and advances to customers (financial assets at amortised cost) + Impairments for debt securities issued by customers (financial assets at amortised cost) + Impairments and provisions for guarantees and commitments] / Non performing loans (Bank of Spain criteria)

Coverage of non‐performing loans (Bank of Spain criteria) by impairments and associated collaterals = [Impairments for loans and advances to customers (financial assets at amortised cost) + Impairments for debt securities issued by customers (financial assets at amortised cost) + Impairments and provisions for guarantees and commitments] + Collateral associated to credit] / Non performing loans (Bank of Spain criteria)

Impairments cover of foreclosed properties = Impairments coverage of foreclosed properties = Impairments for real estate received in settlement of defaulting loans / Gross value of real estate received in settlement of defaulting loans

Banco BPI, S.A.

Condensed interim consolidated financial statements as at 30 June 2019

BANCO BPI, S.A. CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS AS OF 30 JUNE 2019 AND 31 DECEMBER 2018

Notes 30-06-2019 ASSETS Cash and cash balances at central banks and other demand deposits 8 2 008 548 2 452 916 Financial assets held for trading 8 246 123 Financial assets not designated for trading compulsorily measured at fair value through profit or loss 8 214 824 Equity instruments 151 403 Debt securities 63 421 Financial assets at fair value through other comprehensive income 8 2 143 468 1 875 160 Equity instruments 586 130 Debt securities 1 557 338 1 277 420 Financial assets at amortised cost 8 25 950 868 25 671 943 Debt securities 3 685 784 3 516 814 Loans and advances - Central Banks and other Credit Institutions 800 550 790 659 Loans and advances - Customers 21 464 534 21 364 470 Derivatives - Hedge accounting 9 34 522 Fair value changes of the hedged items in portfolio hedge of interest rate risk 61 153 Investments in joint ventures and associates 10 228 716 209 144 Tangible assets 11 144 257 Intangible assets 12 51 534 Tax assets 20 332 662 Other assets 13 224 839 Non-current assets and disposal groups classified as held for sale 14 27 550 Total assets 31 669 064 31 568 015 LIABILITIES Financial liabilities held for trading 15 164 294 Financial liabilities at amortised cost 15 27 646 390 27 515 745 Deposits - Central Banks 1 350 100 1 352 843 Deposits - Credit Institutions 1 399 694 1 853 501 Deposits - Customers 23 110 672 22 960 252 Debt securities issued 1 490 319 1 118 195 Memorandum items: subordinated liabilities 304 501 Other financial liabilities 295 605 Derivatives - Hedge accounting 9 76 363
	31-12-2018


	226 772
	228 582
	168 594
	59 988

	597 740





	14 320
	26 719

	67 252
	55 126
	352 763
	353 422
	33 896


	141 335





	304 514
	230 954
	56 010
Fair value changes of the hedged items in portfolio hedge of interest rate risk 25 324	3 594
Provisions 16 43 139	65 457
Pending legal issues and tax litigation 22 450	42 245
Commitments and guarantees given 20 689	23 212
Tax liabilities 20 73 103	73 802
Other liabilities 17 478 930	506 120
Total Liabilities 28 507 543 28 362 063
SHAREHOLDERS' EQUITY
Capital 19 1 293 063	1 293 063
Other equity 19	371
Accumulated other comprehensive income ( 291 419)	( 253 402)
Items that will not be reclassified to profit or loss ( 284 745)	( 232 788)
Tangible assets 703	703
Actuarial gains/ (losses) on defined benefit pension plans ( 332 198)	( 288 248)
Share of other recognised income and expense of investments in subsidiaries, joint ventures and associates 427	( 1 858)
Fair value changes of equity instruments measured at fair value through other comprehensive income 46 323	56 615
Items that may be reclassified to profit or loss ( 6 674)	( 20 614)
Foreign currency translation ( 36 159)	( 35 802)
Fair value changes of debt instruments measured at fair value through other comprehensive income 6 308	1 927
Share of other recognised income and expense of investments in subsidiaries, joint ventures and associates 23 177	13 261
Retained earnings 19 1 903 351	1 548 458
Other reserves 19 122 076	126 824
Profit/(loss) attributable to owners of the parent 134 450	490 638
Total Equity 3 161 521	3 205 952
Total Equity and Total Liabilities 31 669 064 31 568 015

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

	(Amounts expressed in thousand euros)
	Notes	30-06-2019	30-06-2018
Interest income	22	264 216	246 641
Interest expenses	22	( 49 437)	( 39 481)
NET INTEREST INCOME		214 779	207 160
Dividend income	23	48 256	1 471
Share of profit/(loss) of entities accounted for using the equity method	10	20 179	171 725
Fee and commission income	24	139 102	158 016
Fee and commission expenses	24	( 11 940)	( 23 380)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	25	( 347)	3 475
Gains/(losses) on financial assets and liabilities held for trading, net	25	( 817)	26 189
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	25	( 7 338)	60 314
Gains/(losses) from hedge accounting, net	25	971	425
Exchange differences (gain/loss), net		1 264	( 16 598)
Other operating income	26	18 461	11 465
Other operating expenses	26	( 35 507)	( 27 018)
GROSS INCOME		387 063	573 244
Administrative expenses		( 197 663)	( 211 293)
Staff expenses	27	( 122 248)	( 126 828)
Other administrative expenses	28	( 75 415)	( 84 465)
Depreciation and amortisation		( 26 243)	( 10 426)
Provisions or reversal of provisions	16	2 390	( 2 240)
Commitments and guarantees given		2 522	( 2 272)
Other provisions		( 132)	32
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss		8 335	13 590
Financial assets at amortised cost		8 335	13 590
Impairment/(reversal) of impairment in subsidiaries, joint ventures and associates	10	1 028
Impairment/(reversal) of impairment on non-financial assets		1 672
Gains/(losses) on derecognition of non-financial assets, net	30	( 1 476)	( 1 804)
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	31	( 70)	946
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS		175 036	362 017
Tax expense or income related to profit or loss from continuing operations		( 40 586)	( 60 174)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS		134 450	301 843
Profit/(loss) after tax from discontinued operations	32		64 214
Profit/(loss) before tax from discontinued operations			64 955
Tax expense or income related to profit or loss from discontinued operations			( 741)
PROFIT/(LOSS) FOR THE PERIOD		134 450	366 057
PROFIT OR LOSS (-) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	33	134 450	366 057

Earnings per share (euros)
Basic	5	0.092	0.251
Diluted	5	0.092	0.251
Earnings per share from continuing operations (euros)
Basic	5	0.092	0.207
Diluted	5	0.092	0.207
Earnings per share from discontinued operations (euros)
Basic	5		0.044
Diluted	5		0.044

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

	(Amounts expressed in thousand euros)
	30-06-2019	30-06-2018
PROFIT/(LOSS) FOR THE PERIOD	134 450	366 057
Other comprehensive income	( 38 017)	( 29 816)
Items that will not be reclassified to profit or loss	( 51 956)	130 877
Actuarial gains/ (losses) on defined benefit pension plans	( 59 546)	100 473
Share of other recognised income and expense of investments in joint ventures and associates	3 219	650
Fair value changes of equity instruments measured at fair value through other comprehensive income	( 11 513)	( 169)
Income tax relating to items that will not be reclassified	15 884	29 923
Items that may be reclassified to profit or loss	13 939	( 160 693)
Foreign currency translation	( 357)	( 173 266)
Translation gains/(losses) taken to equity	( 357)	( 173 266)
Debt securities classified as fair value financial assets through other comprehensive income	6 033	872
Valuation gains/(losses) taken to equity	8 575	( 357)
Transferred to profit or loss	( 2 542)	( 115)
Other reclassifications		1 344
Share of other recognised income and expense of investments in joint ventures and associates	13 202	( 6 517)
Income tax relating to items that may be reclassified to profit or loss	( 4 939)	18 218
Total comprehensive income for the period	96 433	336 241
Attributable to owners of the parent	96 433	336 241

The accompanying notes are an integral part of these financial statements.

BANCO BPI, S.A. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

								(Amounts expressed in thousand euros)
	Capital	Other equity (Note 19)	Accumulated other comprehensive income (Note 19)	Retained earnings (Note 19)	Other reserves (Note 19)	Treasury shares	Accumulated other comprehensive income relating to discontinued operations	Profit/(loss) for the period	Shareholders equity
Opening balances at 31 December 2017	1 293 063	2 276	( 163 559)	944 225	737 934	( 377)	( 185)	10 209	2 823 586
Effect of changes in accounting policies (IFRS 9 - Note 2.A)			( 22 740)	( 2 957)	( 14 580)				( 40 277)
Opening balances at 1 January 2018	1 293 063	2 276	( 186 299)	941 268	723 354	( 377)	( 185)	10 209	2 783 309
Transfer to reserves and retained earnings				108 108	( 97 899)			( 10 209)
Dividends distributed by associates				119 983	( 119 983)
Variable Remuneration program ("RVA")		( 682)							( 682)
Other comprehensive income relating to discontinued operations							185		185
Comprehensive income in the first semester of 2018			( 30 001)					366 057	336 056
Other changes in equity				3 868	2 970				6 838
Opening balances at 30 June 2018	1 293 063	1 594	( 216 300)	1 173 228	508 441	( 377)		366 057	3 125 706
Reclassification of equity holding in Banco de Fomento Angola				377 880	( 377 880)
Variable Remuneration program ("RVA")		( 1 223)		( 112)					( 1 335)
Sale / purchase of treasury shares						377			377
Comprehensive income in the second semester of 2018			( 37 102)					124 581	87 479
Other changes in equity				( 2 538)	( 3 737)				( 6 275)
Opening balances at 31 December 2018	1 293 063	371	( 253 402)	1 548 458	126 824			490 638	3 205 952
Transfer to reserves and retained earnings				469 330	21 308			( 490 638)
Dividends distributed				( 140 000)					( 140 000)
Dividends distributed by associates				25 568	( 25 568)
Variable Remuneration program ("RVA")		( 371)							( 371)
Comprehensive income in the first semester of 2019			( 38 017)					134 450	96 433
Other changes in equity				( 5)	( 488)				( 493)
Balances at 30 June 2019	1 293 063		( 291 419)	1 903 351	122 076			134 450	3 161 521

The accompanying notes are an integral part of these financial statements.

BANCO BPI, S.A. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

				(Amounts expressed in thousand euros)
	30-06-2019		30-06-2018
	Total	Continuing operations	Discontinued operations	Total
Cash flows from/(used in) operating activities
Interest, commissions and other income received	423 390	400 109	17 450	417 559
Interest, commissions and other expenses paid	( 100 248)	( 92 630)	( 22 323)	( 114 953)
Dividends received 1	48 256	1 471		1 471
Recovery of overdue loans and interest and gains/(losses) on the sale of real estate received in
settlement of defaulting loans	6 306	7 326		7 326
Payments to staff and suppliers	( 242 219)	( 243 657)	( 1 961)	( 245 618)
Net cash flow from income and expenses	135 485	72 619	( 6 834)	65 785
Decreases (increases) in:
Financial assets held for trading, at fair value through profit or loss, at fair value through other
comprehensive income and available-for-sale	( 286 440)	1 990 466		1 990 466
Financial assets at amortised cost - Central Banks and other Credit Institutions	173 836	( 463 923)		( 463 923)
Financial assets at amortised cost - Customers	( 377 368)	( 2 665 581)		( 2 665 581)
Other operating assets	175 411	248 918	560	249 478
Net cash flow from operating assets	( 314 561)	( 890 120)	560	( 889 560)
Increases (decreases) in:
Financial liabilities measured at amortised cost - Central Banks and other Credit Institutions	( 453 249)	1 319 805		1 319 805
Financial liabilities measured at amortised cost - Customers and other	182 606	1 381 513	6 536	1 388 049
Financial liabilities held for trading	22 959	( 15 477)		( 15 477)
Other operating liabilities	( 41 125)	( 6 000)	( 215)	( 6 215)
Net cash flow from operating liabilities	( 288 809)	2 679 841	6 321	2 686 162

Contributions to Pension Funds Income tax paid	( 10 960) ( 2 154)	( 13 142) 39 114	( 137)	( 13 142) 38 977

	( 480 999)	1 888 312	( 90)	1 888 222
Cash flows from/(used in) investing activities Sale of equity holding in BPI Gestão de Activos		75 000		75 000
Sale of equity holding in BPI GIF		8 000		8 000
Purchase of other tangible assets and intangible assets	( 12 005)	( 9 013)		( 9 013)
Sale of other tangible assets	1 789	2		2
Dividends received from joint ventures and associates	7 752	13 245		13 245
	( 2 464)	87 234		87 234
Cash flows from /(used in) financing activities
Repurchases and reimbursements of securitisation operations (Note 15)	( 116 673)	( 213 870)		( 213 870)
Issuance of debt securities and subordinated debt (Note 15)	500 000	452		452
Redemption of debt securities (Note 15)	( 7 980)	( 210 581)		( 210 581)
Purchase and sale of own debt securities and subordinated debt (Note 15)	( 114)	( 693)		( 693)
Interest on debt instruments and subordinated debt	( 11 977)	( 8 425)		( 8 425)
Dividends distributed	( 140 000)
	223 256	( 433 117)		( 433 117)
Net increase / (decrease) in cash and cash equivalents	( 260 207)	1 542 429	( 90)	1 542 339
Cash and cash equivalents at beginning of the period	2 504 507	1 186 205	363	1 186 568
BPI Gestão de Activos and BPI GIF desconsolidation in April 2018			( 273)	( 273)
Cash and cash equivalents at the end of the period	2 244 300	2 728 634		2 728 634
Cash and deposits at Central Banks (Note 8)	1 775 497	2 081 672		2 081 672
Deposits at other credit institutions (Note 8)	233 368	178 011		178 011
Cheques for collection and other cash items (Note 8)	63 134	58 753		58 753
Very short term applications (Note 8)	172 302	410 198		410 198
Cash and cash equivalents	2 244 300	2 728 634		2 728 634
Cash and cash equivalents by currency
EUR	1 962 779	2 272 487		2 272 487
USD	151 687	379 301		379 301
AKZ	67 086
Other currencies	62 748	76 846		76 846
Cash and cash equivalents	2 244 300	2 728 634		2 728 634

¹ At 30 June 2019, includes 46 003 t.euros dividend received from Banco de Fomento Angola, deposited in AKZ in a current account at BFA in Angola.

The accompanying notes are an integral part of these financial statements

The Registered Accountant The Executive Board Alberto Pitôrra Chairman Pablo Forero

Alexandre Lucena e Vale António Farinha Morais Francisco Barbeira Ignacio Alvarez-Rendueles João Pedro Oliveira e Costa José Pena do Amaral Pedro Barreto

Banco BPI, S.A.

Notes to the condensed interim consolidated financial statements at 30 June 2019

(Amounts in thousand euros - t.euros – save otherwise expressly indicated)

(These notes are a translation of notes originally issued in Portuguese – Note 38)

NOTES INDEX	PAGE
1. Financial group43
2. Bases of presentation and main accounting policies45
A) Bases of presentation 45
B) Main accounting policies50
3. Risk management54
4. Solvency management 74
5. Dividend distribution and earnings per share 75
6. Segments76
7. Disclosure of the remuneration of the corporate bodies 80
8. Financial assets 81
9. Derivatives – hedge accounting86
10. Investments in joint ventures and associates86
11. Tangible assets88
12. Intangible assets 88
13. Other assets88
14. Non-current assets and liabilities and disposal groups classified as available for sale 89
15. Financial liabilities91
16. Provisions and contingent liabilities 94
17. Other liabilities95
18. Liabilities for pensions and other benefits96
19. Shareholders' equity 98
20. Tax position99
21. Off balance sheet items101
22. Net interest income102
23. Dividend income 102
24. Fee and commission income and expenses102
25. Gains / (losses) of financial assets and liabilities103
26. Other operating income and expenses 104
27. Staff expenses104
28. Other administrative expenses105
29. Impairment of financial assets not measured at fair value through profit or loss105
30. Gains / (losses) on derecognition of non-financial assets105
31. Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations 106
32. Profit/(loss) after tax from discontinued operations106
33. Profit106
34. Related parties107
35. Workforce and commercial units111
36. Information on fair value112
37. Subsequent events117
38. Note added for translation 117

1. FINANCIAL GROUP

Banco BPI S.A., (Hereinafter referred to as "Banco BPI", "BPI " or "Bank"), with corporate tax identification no. 501 214 534 and registered under the same number in the Commercial registry office of Porto, with registered office at Rua Tenente Valadim, no. 284, in Porto, is an entity focusing its activity on commercial banking in Portugal, and providing financial services and products to Individuals and Corporate and institutional Customers. The Bank serves a Customer base of 1.91 million Customers through a multispecialist, multi-channel and fully integrated distribution network.

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

In the context of its public tender offer for the acquisition of all outstanding shares of Banco BPI, on 8 February 2017 (date of the "Regulated Market Special Session" conducted to announce the result of the public tender offer), CaixaBank acquired shares representative of 39.0% of Banco BPI voting rights. Considering CaixaBank previously owned 45.5%, its overall share ownership reached 84.5% of Banco BPI's voting rights. From February 2017, Banco BPI is included in the CaixaBank Group consolidation perimeter, and its financial statements are consolidated in accordance with the full consolidation method. Following the acquisition by CaixaBank of an 8.4% stake held by Allianz in the share capital of the Bank, and other acquisitions on the regulated market, on 29 June 2018 Banco BPI's General Meeting approved the Bank's loss of status of public company under the terms and for the purposes of Article 27-1-b) of the Securities Code. A request for approval of the loss of status of public company was submitted to the Securities and Exchange Commission (CMVM), and was approved on 14 December 2018. On 18 December 2018 CaixaBank launched a Tender Offer Aimed at Full Control and Compulsory Acquisition of Banco BPI S.A. shares. As of 31 December 2018, CaixaBank holds 100% of the share capital of Banco BPI.

In April 2018, the holdings in BPI Gestão de Activos and BPI Global Investment Management Company (BPI GIF) were sold to the Caixabank Group. The results generated by these entities in 2018 are presented in a single line of the Income Statement under the heading "Profit/(loss) from discontinued operations".

The winding-up process of Banco BPI Cayman, Ltd and BPI Capital Africa (Proprietary) Limited was concluded in 2018 and these two companies were closed down. These companies were fully held by BPI Madeira.

In 31 December 2018, following the loss of Banco BPI's significant influence over Banco de Fomento Angola (BFA), the equity holding in BFA was reclassified in the consolidated balance sheet from Investments in joint ventures and associates to Financial assets at fair value through other comprehensive income - equity instruments, and revalued at fair value.

In January 2019, the sale of the legal positions related to share brokerage, research and corporate finance activities to Caixabank was realized by Banco Português de Investimento, SA at the book value of the net assets of those activities at the closing date of the transaction (3.9 million euros).

As of 30 June 2019, Banco BPI on a consolidated basis, was made up of the following companies:

	Head office	Shareholders equity 1	Assets	Profit / (loss)	for the period Direct holding	Consolidation / Recognition method
Banks
Banco BPI, S.A.	Portugal	2 989 527	35 699 752	131 904
Banco Português de Investimento, S.A.	Portugal	23 200	26 180	( 197)	100.00%	100.00%Full consolidation
Banco Comercial e de Investimentos, S.A.	Mozambique	253 054	2 374 218	29 230	35.67%	35.67%Equity method
Asset Management
BPI (Suisse), S.A.	Switzerland	10 431	12 142	663	100.00%	100.00%Full consolidation
Venture / development capital
BPI Private Equity - Sociedade de Capital de
Risco, S.A.	Portugal	32 319	35 893	( 439)	100.00%	100.00%Full consolidation
Inter-Risco – Sociedade de Capital de Risco, S.A.	Portugal	901	1 257	( 33)		49.00%Equity method
Insurance
Cosec – Companhia de Seguros de Crédito, S.A.	Portugal	46 729	122 667	4 947	50.00%	50.00%Equity method
Companhia de Seguros Allianz Portugal, S.A.	Portugal	190 439	1 326 623	17 101	35.00%	35.00%Equity method
Other
BPI, Inc.	USA	748	749	( 4)	100.00%	100.00%Full consolidation
BPI Madeira, SGPS, Unipessoal, S.A.	Portugal	170 010	170 060	( 11)	100.00%	100.00%Full consolidation
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	90 694	404 637	7 515	21.01%	21.01%Equity method

Note: Unless otherwise indicated, all amounts are as of 30 June 2019 (accounting balances before consolidation adjustments).

1 Includes net profit (loss) for the period.

The financial information provided in the above table was drawn from the unaudited financial statements of the relevant companies as of 30 June 2019. However, the Executive Committee of the Board of Directors of Banco BPI believes that there will be no changes with a significant impact on the Bank's consolidated net profit.

The vehicles through which Banco BPI's debt securitisation operations are carried out are recorded in the consolidated financial statements according to BPI's continued involvement in these operations, determined based on the percentage of the equity interest held in the respective vehicles. As of 30 June 2019, BPI held 100% of the equity pieces in those vehicles, which are therefore fully consolidated. Securitisations, all issued through SAGRES - Sociedade de Titularização de Créditos, S.A., are as follows:

Securitisation of residential mortgage loans Douro Mortgages No. 2
Securitisation of residential mortgage loans Douro Mortgages No. 3
Securitisation of loans to SMEs Douro SME No. 2

On 21 June 2019 the notes under the Securitisation of residential mortgage loans - Douro Mortgages No. 1 were reimbursed in advance.

As of 31 December 2018, Banco BPI on a consolidated basis, was made up of the following companies:

		Head office Shareholders equity 1	Assets	Profit / (loss)	for the period Direct holding	Effective holding	Consolidation / Recognition method
Banks
Banco BPI, S.A.	Portugal	3 048 617	35 786 366	914 311
Banco Português de Investimento, S.A.	Portugal	24 391	29 688	2 083	100.00%	100.00%	Full consolidation
Banco Comercial e de Investimentos, S.A.	Mozambique	236 020	2 187 067	57 310	35.67%	35.67%	Equity method
Asset Management
BPI (Suisse), S.A.	Switzerland	9 626	11 398	2 936	100.00%	100.00%	Full consolidation
Venture / development capital
BPI Private Equity - Sociedade de Capital de
Risco, S.A.	Portugal	30 988	34 731	1 066	100.00%	100.00%	Full consolidation
Inter-Risco – Sociedade de Capital de Risco, S.A. Portugal		934	1 194	( 61)		49.00%	Equity method
Insurance
Cosec – Companhia de Seguros de Crédito, S.A. Portugal		46 508	115 247	5 504	50.00%	50.00%	Equity method
Companhia de Seguros Allianz Portugal, S.A.	Portugal	147 936	1 283 060	( 2 669)	35.00%	35.00%	Equity method
Other
BPI, Inc.	USA	743	744	( 5)	100.00%	100.00%	Full consolidation
BPI Madeira, SGPS, Unipessoal, S.A.	Portugal	170 023	170 484	18 768	100.00%	100.00%	Full consolidation
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	102 391	349 749	15 343	21.01%	21.01%	Equity method

Note: Unless otherwise indicated, all amounts are as of 31 December 2018 (accounting balances before consolidation adjustments).

1 Includes net profit (loss) for the period.

2. BASES OF PRESENTATION AND MAIN ACCOUNTING POLICIES

A) Bases of presentation

The condensed interim consolidated financial statements were prepared based on the accounting records of Banco BPI and its subsidiary and associated companies, in conformity with the International Accounting Standards / International Financial Reporting Standards (IAS/IFRS) as endorsed by the European Union and in force on 1 January 2018, in accordance with Regulation (EC) 1606/2002 of 19 July of the European Parliament and of the Council, transposed into Portuguese legislation through Bank of Portugal Notice no. 5/2015 of 30 December.

The consolidated financial statements have been prepared on a going concern basis, as provided for in IAS 1 – Presentation of financial statements.

The consolidated financial statements as of 31 December 2018 have been approved by the Board of Directors of Banco BPI at April 15 and by the general meeting of shareholders at 29 April 2019

In the preparation of the 2018 consolidated annual accounts, the consolidation principles, accounting policies and valuation criteria described in Note 2. Bases of Presentation and Main Accounting Policies, in the 2018 Annual Report, were applied with a view to obtaining a true picture of the financial situation of BPI as at 31 December 2018 as well as of its results, changes in shareholders' equity and cash flows at that date.

Banco BPI's condensed interim consolidated financial statements for 30 June 2019 were prepared based on the same principles and accounting policies described in Note 2 to the consolidated financial statements at 31 December 2018, applying in particular IAS 34 (Interim financial reporting), except those resulting from regulatory changes that came into effect on 01 January 2019, which are detailed in the section Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC), as endorsed by the European Union.

The condensed interim consolidated financial statements as of 30 June 2019 have been approved by the Executive Committee of the Board of Directors of Banco BPI at 24 September 2019.

In the preparation of the consolidated financial statements, BPI follows the historical cost convention, modified when applicable for the measurement at fair value of:

Financial assets and liabilities held for trading
Financial assets not designated for trading compulsorily measured at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Derivatives

The figures are presented in thousands of euros (t.euros) unless the use of another monetary unit is stated. Certain financial information in these notes was rounded off and, consequently, the figures shown herein as totals may differ slightly from the arithmetic sum of the individual figures given before them.

Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Union

At 1 January 2019 the following accounting standards came into force (Note 2. B - Main accounting policies):

Standards and interpretations	Name
IFRS 16	Leases
Amendment to IFRS 9	Accounting treatment options for financial assets with negative compensation features
Amendment to IAS 19	Requirement to use updated assumptions for the calculation of remaining responsibilities
Amendment to IAS 28	Long-term investments in associates and joint ventures
Annual improvements to IFRS 2015-2017	Clarifications to: IAS 23, IAS 12, IFRS 3 and IFRS 11
Interpretation to IFRIC 23	Uncertainty over income tax treatments

On 1 January 2019, Banco BPI adopted the following accounting standards:

IFRS 16 (new), 'Leases'. This new standard replaces IAS 17 'Leases' with a significant impact on the accounting by lessees who are now required to recognise a lease liability reflecting future lease payments and a "right-of-use asset" for all lease contracts, except for certain short-term leases and for low-value assets. The definition of a lease contract also changed, being based on the "right to control the use of an identified asset". The application of IFRS 16 may be retrospective or retrospective modified. The impacts from adoption of this standard are described in this note – Comparability of the Information.
IFRS 9 (amendment), 'Prepayment features with negative compensation'. The amendment introduces the possibility to classify certain financial assets with negative compensation features at amortised cost, provided that specific conditions are fulfilled, instead of being classified at fair value through profit or loss. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IAS 19 (amendment), Plan amendment, Curtailment or Settlement'. This amendment requires an entity to: i) use updated assumptions to determine the current service cost and net interest for the remaining period after amendment, reduction or settlement of the plan; and ii) recognise in the income statement as part of the cost of past services, or as a gain or loss in the settlement, any reduction in the excess of coverage, even if the excess of coverage had not been previously recognised, due to the impact of the asset ceiling. The impact on asset ceiling is recognised in Other Comprehensive Income, not being allowed to recycle it through profit for the year. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IAS 28 (amendment), 'Long-term interests in Associates and Joint Ventures'. The amendment clarifies that long-term investments in associates and joint ventures (components of an entity's investments in associates and joint ventures), that are not being measured through the equity method, are to be measured in accordance with IFRS 9 – 'Financial instruments'. The long-term investments in associates and joint ventures are subject to the expected credit loss impairment model, prior to being added, for impairment test purposes, to the whole investment in associates and joint ventures, when impairment indicators exist. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
Improvements to standards 2015 – 2017. The 2015-2017 annual improvements impact: IAS 23, IAS 12, IFRS 3 and IFRS 11. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IFRIC 23 (new), 'Uncertainty over income tax treatment'. This is an interpretation of IAS 12 'Income tax', and refers to the measurement and recognition requirements to be applied when there is uncertainty as to the acceptance of an income tax treatment by the tax authorities. In the event of uncertainty as to the position of the tax authority on a specific transaction, the entity shall make its best estimate and record the income tax assets or liabilities under IAS 12, and not under IAS 37 – 'Provisions, contingent liabilities and contingent assets', based on the expected value or the most probable value. The application of IFRIC 23 may be retrospective or retrospective modified. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.

The standards (new and amendments) that will become effective, on or after 1 January 2020, not yet endorsed by the EU, are the following:

Standards and interpretations issued by the IASB:

Standards and interpretations	Name	Mandatory application starting on:
Amendments to IFRS 3	Definition of a business	1 January 2020
Amendments to IAS 1 and IAS 8	Definition of material	1 January 2020
Conceptual structure	Amendments to references to other IFRS	1 January 2020
IFRS 17	Insurance contracts	1 January 2021

IFRS 3 (amendment), 'Definition of a business (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. The amendment revises the definition of a business in order to account for business combinations. The new definition requires that an acquisition include an input, as well as a substantial process that jointly generate outputs. Outputs are now defined as goods and services rendered to customers, that generate investment income and other income, and exclude returns as lower costs and other economic benefits for shareholders. Optional 'concentration tests' for the assessment if one transaction is the acquisition of an asset or a business combination, are allowed. This amendment will apply to transactions ocurring after its entry into force.
IAS 1 and IAS 8 (amendment), 'Definition of material' (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. The amendment revises the concept of material. Includes clarifications as to obscured information, its effect being similar to the omission or distortion of information; and also clarifications as to the term 'primary users of general purpose financial statements', defined as 'existing or potential investors, lenders and other creditors' that rely on general purpose financial statements to obtain a significant part of the information that they need. The future adoption of this amendment is not expected to have significant impact on the Bank's financial statements.
Conceptual framework, 'Amendments to references in other IFRS' (effective for annual periods beginning on or after 1 January 2020). These amendments are still subject to endorsement by the European Union. As a result of the publication of the new Conceptual Framework, the IASB introduced changes to the text of various standards and interpretations, like: IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, SIC 32, in order to clarify the application of the new definitions of asset / liability and expense / income, in addition to some of the characteristics of financial information. These amendments are retrospective, except if impractical. The future adoption of this amendments is not expected to have significant impacts on the Bank's financial statements.
IFRS 17 (new), 'Insurance contracts' (effective for annual periods beginning on or after 1 January 2021). This standard is still subject to endorsement by the European Union. This new standard replaces IFRS 4 and applies to all entities issuing insurance contracts, reinsurance contracts and investment contracts with discretionary participation characteristics. IFRS 17 is based on the current measurement of technical liabilities at each reporting date. The current measurement can be based on a complete "building block approach" or "premium allocation approach". The recognition of the technical margin is different depending on whether it is positive or negative. IFRS 17 is of retrospective application. Banco BPI does not have subsidiaries operating in the insurance business and therefore no effects on the Bank's financial statements are expected as a result of adoption of this standard.

Responsibility for the information and for the main estimates made

The preparation of the consolidated financial statements required to make certain judgements, estimates and assumptions in order to quantify some of the assets, liabilities, revenues, expenses and obligations recognised in them. These judgements, estimates and assumptions relate primarily to:

Impairment losses on financial assets and the associated guarantees based on their accounting classification imply the adoption of assumptions relating to: i) the consideration of "significant increase in credit risk" (SICR), ii) definition of default; and iii) the inclusion of forward-looking information (Note 8).
Fair value of some financial assets and liabilities (Note 36). The fair value of unlisted financial assets and derivatives was estimated based on valuation methods and financial theories, the results of which depend on the assumptions used.
Actuarial assumptions used to measure post-employment liabilities and commitments (Note 18). Retirement and survivor pension liabilities have been estimated based on actuarial tables, assumptions of the increase in pensions and salaries and discount rates. These assumptions are based on Banco BPI's expectations for the period during which the liabilities will be settled.
Current and deferred taxes have been recognised based on the tax legislation currently applicable to Banco BPI or on legislation already published for future application (Note 20). Different interpretations of tax legislation can influence the amount of income taxes. Deferred tax assets are recognised based on the assumption of future earnings and taxable income.
The measurement of investments in joint ventures and associates and determination of the share of profit/(loss) of these investments (Note 10).
The measurement of provisions and contingent liabilities and respective probability of occurring (Note 16).
The useful life of tangible assets, including rights-of-use assets and intangible assets (Notes 11 and 12).

Estimates used are based on the best information available at the time of preparation of the annual consolidated financial statements. Subsequent events may require changing the estimates in future periods. In accordance with the applicable legislation and BPI's governance systems, the effects of these changes would be accounted for on a prospective basis in the corresponding income statement, in accordance with IAS 8 - Accounting Policies, change in estimates and errors.

Comparability of the information

The figures for 31 December 2018, as well as for the six-month period ended on 30 June 2018, included in the condensed interim consolidated financial statements, are presented for comparative purposes only.

IFRS 16 – "Leases"

As stated in this note in the "A) Basis of presentation" section, Banco BPI has applied IFRS 16 – "Leases" from 1 January 2019. In this sense, it has decided not to reassess whether an agreement is a lease or contains a lease component in accordance with the criteria of the standard, applying it solely for agreements that had been identified as leases in accordance with the previous standard.

For leases in which the Bank intervenes as lessee, previously classified as operating leases, BPI applied the new standard retroactively, following the modified retrospective approach, which permits to estimate the value of the right of use by reference to the transaction's financial liability, therefore not requiring any adjustment to reserves as at 1 January 2019. In addition, it was decided to exclude from the scope, in line with the simplifications considered in the new regulatory framework, lease agreements whose term expires within the twelve months following the initial application date.

The main type of agreements identified for which a right-of-use asset and a lease liability had to be estimated at 1 January 2019 were real estate leases in connection with Banco BPI's operating activity (office buildings used by the commercial network and central services).

The balance sheet items at 31 December 2018 relative to lease agreements were not restated and therefore their detail is not directly comparable with the information presented for 30 June 2019.

At 1 January 2019 the coming into force of this standard implied the recognition of a right of use in the amount of 89 million euros and a transfer of costs for rents paid, in the amount of 12 million euros, recognised under other administrative expenses up to 31 December 2018, to costs with depreciation and amortisation of tangible assets, in the period ended on 30 June 2019.

The impact of the adoption of IFRS16 on 1 January 2019, by balance sheet caption, was as follows:

	31-12-2018	Adoption IFRS 16	01-01-2019
Tangible assets	67 252	88 705	155 957
Total assets	31 568 015	88 705	31 656 720
Other financial liabilities	230 954	88 705	319 659
Total liabilities	28 362 063	88 705	28 450 768

Restatement of the income statement as of 30-06-2018

In relation to the income statement as of 30 June 2018, the following reclassifications were made between headings:

	30-06-2018
	Restated	30-06-2018	Difference
Interest income	246 641	246 641
Interest expenses	( 39 481)	( 39 481)
NET INTEREST INCOME	207 160	207 160
Dividend income	1 471	1 471
Share of profit/(loss) of entities accounted for using the equity method	171 725	171 725
Fee and commission income	158 016	158 016
Fee and commission expenses	( 23 380)	( 23 380)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	3 475	3 475
Gains/(losses) on financial assets and liabilities held for trading, net	26 189	26 189
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	60 314	60 314
Gains/(losses) from hedge accounting, net	425	425
Exchange differences (gain/loss), net	( 16 598)	( 16 598)
Other operating income	11 465	5 110	6 355
Other operating expenses	( 27 018)	( 20 863)	( 6 155)
GROSS INCOME	573 244	573 044	200
Administrative expenses	( 211 293)	( 211 293)
Staff expenses	( 126 828)	( 126 828)
Other administrative expenses	( 84 465)	( 84 465)
Depreciation and amortisation	( 10 426)	( 10 426)
Provisions or reversal of provisions	( 2 240)	( 2 240)
Commitments and guarantees given	( 2 272)	( 2 272)
Other provisions	32	32
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit
or loss	13 590	13 590
Financial assets at amortised cost	13 590	13 590
Impairment/(reversal) of impairment on non-financial assets		( 1 017)	1 017
Gains/(losses) on derecognition of non-financial assets, net	( 1 804)	359	( 2 163)
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as	946		946
discontinued operations
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	362 017	362 017
Tax expense or income related to profit or loss from continuing operations	( 60 174)	( 60 174)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	301 843	301 843
Profit/(loss) after tax from discontinued operations	64 214	64 214
Profit/(loss) before tax from discontinued operations	64 955	64 955
Tax expense or income related to profit or loss from discontinued operations	( 741)	( 741)
PROFIT/(LOSS) FOR THE PERIOD	366 057	366 057
PROFIT OR LOSS (-) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	366 057	366 057

Gains on financial leases, in the amount of 6 355 t.euros, were reclassified from the caption "Gains or (-) losses on derecognition of non-financial assets, net" to the caption "Other operating income".
Losses on financial leases, in the amount of (6 104) t.euros, and other losses, (51) t.euros, were reclassified from the caption "Gains or (-) losses on derecognition of non-financial assets, net" to the caption "Other operating expenses"
Allowances net of impairment for assets received in settlement of defaulting loans and other tangible assets (1 017) t.euros, were reclassified from the caption "Impairment/(reversal) of impairment on non-financial assets" to "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations".
Gains and losses on assets received in settlement of defaulting loans and other tangible assets, 1 963 t.euros, were reclassified from the caption "Gains/(losses) on derecognition of non-financial assets, net" to the caption "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations".

B) Main accounting policies

Except as indicated below, Banco BPI's condensed interim consolidated financial statements as of 30 June 2019 were prepared using the same principles, accounting policies and criteria used for the 2018 consolidated annual accounts.

All accounting principles and measurement bases that could have a significant effect were applied in the preparation of the condensed interim consolidated financial statements.

For all the areas not stated in these condensed interim consolidated financial statements, the definitions, criteria and policies described in Note 2 of the 2018 consolidated annual report remain applicable.

2.1. Leases

During the first quarter of 2019, the Bank adopted IFRS 16 "Leases". As a result of this, an assessment has been carried out on the accounting policies in the areas indicated in this note, applicable from 1 January 2019. The main changes in the Bank's accounting policies, deriving from the adoption of IFRS16, are set out below:

¹ For agreements that have a leasing component, one or more additional leasing components and others that are not leasing components, the agreement payment will be distributed to each leasing component on the basis of the relative price, regardless of the leasing component, based on aggregate price, and on the basis of the independent aggregate price of the non-leasing components.

Lessor

	Finance leases	Operating leases
	Operations where, substantially, all the risks and rewards inherent to the leased asset are transferred to the lessee.	Operations where, substantially, all the risks and rewards inherent to the leased asset, as well as its ownership, are maintained by the lessor.
Recognition as lessor	- Are recognised as a loan granted under the balance sheet caption "Financial assets at amortised cost" as the sum of the present value of all payments receivable by the lessee during the period of the leasing plus any non-guaranteed residual amount
(According to the economic purpose of the operation, regardless of its legal form)	pertaining to the lessor. - Include fixed payments (minus payments made to the lessor) as well as variable payments determined in accordance with an index or rate, and also the exercise price of the purchase option, if there is reasonable certainty that it will be exercised by the lessee, and penalties for termination by the lessee if the term of the lease reflects the exercise of the termination option.	The acquisition cost of the leased assets is recognised in the "Tangible assets" caption of the balance sheet.
	The financial income obtained as a lessor is recognised in the	- They are depreciated using the same criteria as for the remaining tangible assets for own use.
	income statement caption "Interest income".	- Income is recognised in the income statement caption "Other operating income".

	Remaining agreements		Accounted for as operating leases
	000 euros)	Right-of-use asset ("Tangible assets")	Valued at cost and includes the initial valuation of the lease liability, payments made on or before the commencement date, initial direct costs, costs of dismantling or rehabilitation when there is an obligation to bear them.	Amortised on a straight-line basis and subject to impairment losses, in accordance with the treatment established for the remaining tangible and intangible assets.
Recognition as lessee	Agreements where the Accounting underlying asset record is not of low value (set at 6	Lease liability ("Other financial liabilities")	Valued based on the present value of future lease payments not yet made on this date, using as discount rate the interest rate2 that the lessee would have to pay to borrow, with a similar maturity and guarantee, the funds necessary to obtain an asset of similar value to that of the right-of-use asset in a similar economic context.	Valued at amortised cost using the effective interest rate method and revalued (with the corresponding adjustment to the related right-of use asset) when there is a change in future payments due to renegotiation, index or rate changes or in the event of a re evaluation of the agreement's options.
		Open-end agreements: For these agreements, and based on the terms of Law 13/2019, the lessor may terminate the agreement by notifying the bank (the lessee) not less than 5 years in advance of the date on which he intends to terminate the agreement. Therefore a term of 5 years was considered for these agreements, starting on 1 January 2019.
	Term of the agreement	Fixed-term agreements, with or without option of early termination by the Bank (with only a non-significant compensation): As a general rule, the lease term matches the initial agreement duration. For automatically renewable (annually or half-yearly) property leasing agreements with Banco BPI's Pension Fund, a term of 5 years1 was assumed, starting on 1 January 2019, taking into account that the pension fund in an entity related with the Bank, the agreements' automatic and constant renewal, and the fact that there is no economic incentive for the pension fund to exercise the termination options provided for in said agreements.
			At the start date of the agreement Subsequently

¹ The 5-year term is in line with Banco BPI's strategic guidelines on the renewal of current lease agreements, taking into account the Bank and industry context, from the standpoint of business risk management and management of the fixed assets associated to the agreements.

² The Bank calculated these interest rates taking as a reference the cost of debt instruments, adding to the base market curve (swaps vs 6M Euribor) the covered and senior debt spreads for BPI.

The implementation of IFRS16 involved making estimates on the duration of agreements and decisions on the disaggregation of components related to services that were included in the formalised lease agreements.

3. RISK MANAGEMENT

3.1. Overview and risk factors

The following risk factors had a significant influence on BPI's management in the 1st half of 2019, due to their impact during the period and their long-term implications for the Bank:

Macroeconomic environment

The global economy maintains a considerable level of uncertainty, the main source of which has been the persistence of trade strains between the U.S. and China and their potential impact on the European Union economy. The meeting at the end of June between Trump and Xi could have been a starting point for the resumption of negotiations, however geopolitical uncertainty is likely to linger over the medium term.
In the Eurozone the activity indicators continue to point to moderate economic growth, even if the first quarter GDP growth was higher than expected. On the other hand, the European scenario remains marked by the difficulties in reaching an exit agreement for the United Kingdom (the Brexit), and the risk of a disorderly Brexit has increased.
The Portuguese economy stands out from the European feeble economic growth context, posting lower growth rates, but still close to 2%. Nevertheless, high geopolitical uncertainty and the moderate growth of our European partners could constrain the pace of Portuguese exports, and a slower than initially estimated pace of growth should be expected for the second half of the year. This context will likely deepen the goods account deficit, with the vigour of tourism being insufficient to prevent a widening of the external deficit in 2019. Robust growth and funding costs at record lows, together with a budget consolidation policy, should support the path of sustained reduction in the public debt ratio.

Regulatory Framework

The main regulatory developments and public consultations in the area of risk are outlined below:

Approval and publication in the Official Journal of the European Union (OJ) of the "Proposal of CRDV Package": on 16 April the European Union approved the review, started in November 2016 by the European Commission, of the so-called "banking package", which covers the CRD V, CRR II, BRRD II and SRMR II texts¹ . The review basically transposes the standards agreed by the Basel Committee on Banking Supervision (prior to the 2017 agreement on the completion of Basel III, the adoption of which will be addressed from the second half of 2019). The aforementioned legislative package came into force on 27 June 2019, with December 2020 as the deadline for the adoption of the directives, whereas the majority of the changes included in the CRR II regulation are applicable from June 2021.
Brexit, Contingency Action Plan: at the beginning of 2019, a set of legislative measures were adopted at national level to prepare for a no-deal Brexit scenario, namely: Law no 27-A/2019 of 28 March, which approves contingency measures to be applied in the event of a no-deal exit of the United Kingdom from the European Union, and Council of Ministers Resolution no. 48/2019, which identifies preparedness and contingency measures which the Portuguese Government proposes to adopt to minimize the effects of the United Kingdom's departure from the European Union on economic agents, companies, investment and tourism. In addition, the European Banking Association (EBA), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) have agreed on a template for a Memorandum of Understanding (MoU) establishing the bases for cooperation and information exchange between the EU and UK authorities.
Exposures associated with high risks: the EBA published its final guidelines, applicable from 1 July 2019, regarding the types of exposures to be associated with particularly high risk under Article 128 (3) of Regulation (EU) 575/2013 (CRR), which should be assigned a risk weight of 150% under the standardised approach.
On 25 February the EBA published the new Guidelines on Outsourcing, which update the previous guidelines on Outsourcing, published in 2006 (CEBS), and incorporate the recommendations of December 2017 on outsourcing to cloud service providers. These guidelines apply as of 30 September 2019, and affect all outsourcing contracts.
On 25 May the EBA completed a consultation on its Guidelines on Credit Risk Mitigation techniques for banks that use internal models with own estimates of LGD. The guidelines aim to eliminate existing differences in risk mitigation techniques, deriving from supervisory practices or from choices specific to the entity.

¹ The acronyms correspond to Capital Requirements Regulation and Directive (CRR/CRD), Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism Regulation (SRMR), respectively.

On 6 March the EBA published the final version of its Guidelines for the estimation of LGD appropriate for an economic downturn (Downturn LGD estimation), supplementing the EBA Guidelines on PD and LGD estimation, which will apply from 1 January 2021.
On 13 March the consultation period for the EBA Guidelines on ICT and security risk management ended. These guidelines establish the requirements applicable to credit institutions, investment firms and payment services providers in relation to the mitigation and management of their ICT and security risks.
Publication in the Official Journal of the European Union of Regulation 2019/630, amending Regulation (EU) 575/2013 (CRR) as regards minimum loss coverage for non-performing exposures (NPLs), or prudential backstop. This regulation establishes the deductions to own funds which must be made if the minimum coverage levels for new loans that become NPLs are not reached. The amended regulation came into force on 26 April 2019.
On 18 June, the extension of the mandate of the Technical Expert Group on Sustainable Finance (TEG), which aims to assist the European Commission in the implementation of the Action Plan for sustainable finance, was announced. Simultaneously, within the same framework, the European Commission has published new Guidelines on climate-related disclosures, as part of its Action Plan for Sustainable Finance.
On 19 June the EBA launched the consultation process on its draft Guidelines on Loan Origination and Monitoring with the aim of ensuring that the institutions have robust and prudent standards for credit risk taking, management and monitoring. The proposed guidelines ensure alignment with the regulations in force on consumer protection and the prevention of money laundering.
Enactment on 6 August 2019 of the Framework Law on Housing, which establishes, inter alia, that "residential mortgage borrowers in a very difficult economic situation may benefit from a legal protection regime that, among others, provides for the possibility of debt restructuring, transfer in lieu of payment, or alternative measures to foreclosure". In this context "the transfer in lieu of payment of the debt, extinguishing the debtor's obligations regardless of the value attributed to the property for this purpose" can only be contemplated if it has been contractually established, the credit institution being responsible for providing this information prior to entering into the contract.
Publication in the Diário da República of Law 23/2019, of 13 March 2019, which established full deposit protection against senior unsecured debt instruments in the event of a bank resolution.
Finally, on 12 February 12, publication in Diário da República of Law No. 15/2019, which introduces changes to the General Regime of Credit Institutions and Financial Companies, clarifying the powers of the Assembly of the Republic's Parliamentary Committees of Inquiry and establishing the duties of transparency and scrutiny to which capitalisation, resolution, nationalisation or liquidation operations of credit institutions resorting, directly or indirectly, to public funds, will be subject. Article 6 of this Law imposed on Banco de Portugal the obligation to prepare and deliver to the Assembly of the Republic an Extraordinary Report containing a set of "Relevant Information" concerning the "Covered Credit Institutions" in which, in the twelve years prior to the publication of that Law, any of the situations provided for therein have occurred.

3.2. Credit risk

3.2.1. Overview

Credit risk is one of the most significant risks faced in Banco BPI 's operations. Further information about credit risk, namely regarding the management process for the various credit segments, can be found in the Risk Management section of the 2018 Annual Report.

Banco BPI receives, among others, the following collateral within the scope of its loan granting business:

Mortgages on own housing;
Mortgages on third-party property;
Deposit of assets;
Pledge of securities;
Guarantees provided by other credit institutions.

At 30 June 2019 the maximum exposures to credit risk on the balance sheet, including counterparty risk, was as follows:

	Maximum exposure to credit risk	Impairment	Credit conversion factors (CCF)1
Cash balances in other Credit Institutions2	233 368
Financial assets held for trading
Equity instruments	81 581
Debt securities	12 492
Financial assets not designated for trading compulsorily measured at fair value through
profit or loss
Equity instruments	151 403
Debt securities	63 421
Financial assets at fair value through other comprehensive income
Equity instruments	586 130
Debt securities	1 557 338
Financial assets at amortised cost
Debt securities	3 690 245	( 4 461)
Loans and advances - Central Banks and other Credit Institutions	800 550	0
Loans and advances - Customers	21 971 775	( 507 241)
Trading derivatives and hedge accounting	195 450
Total active exposure	29 343 753	( 511 702)
Total guarantees given and commitments	4 313 373	( 20 690)	(3 347 361)
Total	33 657 126	( 532 392)	(3 347 361)

¹ CCF – Credit Conversion Factor for guarantees given and credit commitments.

²Does not include cash and cash balances in Central Banks.

At 31 December 2018 the maximum exposures to credit risk on the balance sheet, including counterparty risk, was as follows:

	Maximum exposure to credit risk	Impairment	Credit conversion factors (CCF)1
Cash and cash balances in other credit institutions 2	223 992
Financial assets held for trading
Equity instruments	81 171
Debt securities	13 893
Financial assets not designated for trading compulsorily measured at fair value through profit or loss
Equity instruments	168 594
Debt securities	59 988
Financial assets at fair value through other comprehensive income
Equity instruments	597 740
Debt securities	1 277 420
Financial assets at amortised cost
Debt securities	3 521 342	( 4 528)
Loans and advances - Central Banks and other Credit Institutions	790 928	( 269)
Loans and advances - Customers	21 897 593	( 533 123)
Trading derivatives and hedge accounting	191 673
Total active exposure	28 824 334	( 537 920)
Total guarantees given and commitments	4 294 159	( 23 212)	(3 277 646)
Total	33 118 493	( 561 132)	(3 277 646)

¹ CCF – Credit Conversion Factor for guarantees given and credit commitments.

²Does not include cash and cash balances in central banks.

The maximum exposure to credit risk is the gross carrying amount, except in the case of derivatives, where it is the exposure value according to the mark-to-market method, which is calculated as the sum of current and potential exposures:

Current exposure: the highest value between zero and the market value of an operation or of a portfolio of operations with a counterparty which can be offset in the event of default by the counterparty, assuming that nothing from the value of the operations will be recovered in the event of insolvency or liquidation of the counterparty, except for the collateral received.
Potential risk: change in the credit exposure as a result of future changes in the valuation of an operation or in the valuation of operations that can be offset with a counterparty during the residual term to maturity.

Concerning BPI's commercial activity, the Bank gears its lending activity towards meeting the financing needs of families (consumer and residential mortgage loans) and businesses, seeking to maintain a medium-low risk profile, as established in the RAF and the 2019-2021 Strategic Plan.

BPI shares with the CaixaBank Group the principles and policies that support credit risk management, which may be summarised as follows:

An adequate relationship between income and the commitments assumed by the consumers.
Documentary proof of the information provided by the borrower concerning its solvency.
Adequate pre-contractual information about the personal circumstances and characteristics of each Customer and operation.
Adequate independent assessment of real estate collateral.

Risk mitigation

Lending is always based on the assessment of the Customer's capacity to generate sufficient funds for the timely service of the debt, and on a risk-adjusted pricing policy. The requirement of personal or real guarantees, as a risk mitigator, is always considered at the time of granting a loan.

In the decision to require guarantees, several factors are weighted, namely the rating assigned to the Customer, and the nature and term of the operations. The term in particular is one of the more sensitive factors due to the uncertainty it entails, which is why medium and long-term transactions usually have associated real guarantees.

The rules on the acceptance of guarantees, control of their formalisation, and monitoring of their value during the transactions lifetime, through regular evaluations and their release are set out in specific internal regulations.

The guarantees foreseen in the internal regulations are those typified in the law, the most usual being personal guarantees (of individuals or companies) by endorsement or security, and in the case of real guarantees, the mortgage, the pledge of assets and the financial pledge. Financial instruments such as derivatives or repos are covered by standard agreements that establish the daily exchange of collaterals, guaranteeing coverage of the counterparty risk.

All guarantees are recorded in a dedicated software application. The funds are only made available to the Customer after or upon verification of the guarantees provided.

The classification by stage of loans to Customers and associated guarantees is as follows:

		30-06-2019
	Gross amount	Allowance for Impairment loss	Guarantees1
Stage 1:	19 534 263	( 26 597)	10 556 340
No associated collateral	6 412 936	( 11 766)	0
With real estate collateral	11 238 085	( 8 169)	10 149 111
With other collateral	1 883 242	( 6 662)	407 229
Stage 2:	1 384 420	( 50 230)	739 154
No associated collateral	315 169	( 13 029)	0
With real estate collateral	831 527	( 27 937)	712 790
With other collateral	237 724	( 9 264)	26 364
Stage 3:	966 862	( 428 608)	320 339
No associated collateral	203 586	( 112 810)	0
With real estate collateral	631 611	( 257 139)	315 682
With other collateral	131 665	( 58 659)	4 657
	21 885 545	( 505 435)	11 615 833

¹ The value of the guarantee is the lower of the value of the guarantee received and the value of the loan, except for stage 3 operations, where fair value is calculated.

		31-12-2018
	Gross amount	Allowance for Impairment loss	Guarantees1
Stage 1:	19 248 322	( 25 133)	10 447 424
No associated collateral	6 712 857	( 13 227)	0
With real estate collateral	11 025 423	( 6 934)	10 081 688
With other collateral	1 510 042	( 4 972)	365 736
Stage 2:	1 472 225	( 52 875)	787 051
No associated collateral	355 715	( 14 362)	0
With real estate collateral	833 868	( 28 610)	726 602
With other collateral	282 642	( 9 903)	60 449
Stage 3:	1 017 326	( 453 659)	352 535
No associated collateral	205 964	( 123 838)	0
With real estate collateral	678 130	( 270 645)	348 951
With other collateral	133 232	( 59 176)	3 584
	21 737 873	( 531 667)	11 587 010

¹ The value of the guarantee is the lower of the value of the guarantee received and the value of the loan, except for stage 3 operations, where fair value is calculated.

Restructuring policies

A description of the restructuring policies is given in Note 2.8. Refinancing and restructuring operations in the 2018 annual report.

Restructured loans:

The breakdown of refinancing by industry sector is as follows:

30-06-2019

	Total
	Without collateral		With collateral
						Maximum amount of the collateral
	Number of transactions	Exposure					Number of	Exposure	that can be considered	Impairment
			transactions		Real estate mortgage	Other collateral
Public administrations	2	376	1	6 892		6 892
Other financial corporations and individual entrepreneurs (financial business)	9	188					( 66)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 714	118 185	410	342 649	144 235	77 543	( 180 284)
Individuals	4 298	32 973	6 423	221 716	216 619	573	( 75 439)
Total	6 023	151 722	6 834	571 257	360 854	85 008	( 255 789)

Note: Includes securitised loans, Customer loans and guarantees

		Of which: Stage 3
	Without collateral		With collateral
		Number of Exposure transactions	Number of transactions	Exposure	Maximum amount of the collateral that can be considered		Impairment
					Real estate mortgage	Other collateral
Other financial corporations and individual entrepreneurs (financial business)	4	151					( 64)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 144	67 969	284	232 426	119 042	62 105	( 175 343)
Individuals	2 344	20 908	5 124	172 447	167 919	282	( 73 447)
Total	3 492	89 028	5 408	404 873	286 961	62 387	( 248 854)

Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

31-12-2018

	Total
		Without collateral		With collateral
	Number of transactions	Exposure	Number of transactions	Exposure	Maximum amount of the collateral that can be considered		Impairment
					Real estate mortgage	Other collateral
Public administrations	24	6 340	4	11 819		11 818
Other financial corporations and individual entrepreneurs (financial business)	7	181	1	19	19		( 70)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 969	164 813	427	370 640	152 738	75 958	( 199 514)
Individuals	4 638	33 505	6 767	234 214	228 596	583	( 76 543)
Total	6 638	204 839	7 199	616 692	381 353	88 359	( 276 127)

Note: Includes securitised loans, Customer loans and guarantees

		Of which: Stage 3
		Without collateral		With collateral
		Number of Exposure transactions	Number of transactions		Maximum amount of the collateral
						that can be considered	Impairment
				Exposure	Real estate	Other collateral
					mortgage
Other financial corporations and individual entrepreneurs (financial business)	4	106	1	19	19		( 66)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 389	86 480	310	249 915	127 707	61 883	( 194 038)
Individuals	2 448	21 423	5 398	182 642	177 721	230	( 74 320)
Total	3 841	108 009	5 709	432 576	305 447	62 113	( 268 424)

Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

The detail of guarantees received to secure restructured loans¹ at 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Value of collateral	826 332	890 010
Of which: Stage 3 guarantee	595 903	634 501
Value of other guarantees	336 756	340 185
Of which: Stage 3 guarantee	310 754	310 229
	1 163 088	1 230 195

¹ The value of the guarantee is the maximum amount of the guarantee received, except for stage 3 operations, where it is considered at fair value.

The movement in restructured loans is as follows:

	30-06-2019	30-06-2018
Opening balance	545 404	987 183
Restructurings in the period	12 031	132 294
Debt amortisation	( 55 459)	( 153 752)
Property recovered or foreclosed	( 638)	( 669)
Other changes	( 34 148)	( 267 574)
Of which:
Exit from restructuring	( 30 421)	( 192 517)
Loan sales	( 1 926)	( 40 800)
Balance at end of period	467 190	697 482

3.2.2. Concentration Risk

In Banco BPI's Risk Catalogue, concentration risk is conceptually included within credit risk and is calculated according to CaixaBank Group's best practices.

Banco BPI's Risk Appetite Framework (RAF) uses metrics to systematically identify overall exposure to a particular Customer or geographic location, as well as appetite limits to concentration risk.

Concentration in customers or in "large exposures"

As part of the risk-taking process, the Bank monitors compliance with the regulatory limits (25% of own funds) as well as the limits to concentration risk appetite (according to the objectives defined in the RAF). At the close of the first semester of 2019, there was no breach of the defined limits.

Concentration by geographic location

The breakdown of risk of financial assets and guarantees and sureties provided, by geographical location, is as follows:

30-06-2019
	Total	Portugal	Other EU countries	Other world countries
Central Banks and credit institutions	3 265 565	1 950 384	549 520	765 661
Public sector	5 033 118	2 974 706	1 843 292	215 120
Central government	3 842 180	1 783 768	1 843 292	215 120
Other public administrations	1 190 938	1 190 938
Other financial corporations and individual entrepreneurs (financial business)	717 660	356 848	293 255	67 557
Non-financial corporations and individual entrepreneurs (non-financial business)	10 445 518	9 939 191	452 148	54 179
Real estate construction and development	531 740	527 196	3 868	676
Civil construction	257 135	246 074	11 061
Other	9 656 643	9 165 921	437 219	53 503
Large companies	5 762 238	5 316 871	411 557	33 810
Small and medium-sized companies	3 894 405	3 849 050	25 662	19 693
Individuals	12 379 367	12 309 740	17 006	52 621
Homes	10 952 103	10 940 478	2 304	9 321
Consumer spending	1 038 603	992 985	12 378	33 240
Other	388 661	376 277	2 324	10 060
Total	31 841 228	27 530 869	3 155 221	1 155 138

Note: Includes deposits at central banks and credit institutions, financial assets not designated for trading compulsorily measured at fair value through profit or loss, financial assets at fair value through other comprehensive income, financial assets at amortised cost, investments in joint ventures and associates, and guarantees and sureties. Amounts net of impairments.

31-12-2018

	Total		Portugal Other EU countries Other world countries
Central Banks and credit institutions	3 657 909	2 366 910	567 216	723 783
Public sector	4 661 776	2 729 873	1 710 069	221 834
Central government	3 583 269	1 651 366	1 710 069	221 834
Other public administrations	1 078 507	1 078 507
Other financial corporations and individual entrepreneurs (financial
business)	813 544	364 315	387 047	62 182
Non-financial corporations and individual entrepreneurs (non-financial business)	10 177 278	9 628 010	512 203	37 065
Real estate construction and development	511 879	506 757	4 248	874
Civil construction	265 659	255 714	9 945
Other	9 399 740	8 865 539	498 010	36 191
Large companies	5 528 403	5 048 720	455 185	24 498
Small and medium-sized companies	3 871 337	3 816 819	42 825	11 693
Individuals	12 353 896	12 281 310	17 067	55 519
Homes	11 001 828	10 987 944	2 804	11 080
Consumer spending	958 897	913 961	11 703	33 233
Other	393 171	379 405	2 560	11 206
Total	31 664 403	27 370 418	3 193 602	1 100 383

Concentration by industry sector

Risk concentration by economic sector is subject to BPI's RAF limits (level 1), differentiating between private sector economic activities and public sector financing.

At 30 June 2019 and 31 December 2018, the breakdown of credit by industry sector, type of collateral and loan to value (LTV) was as follows:

30-06-2019

		Of which: real					Collateralised loans. Carrying amount based on latest available appraisal (LTV)
	Balance net of impairments	estate mortgage secured	Of which: other collateral	≤ 40 %	> 40 % ≤ 60 %	> 60 % ≤ 80 %	> 80 % ≤ 100 %	> 100%
Central Banks and credit institutions	770 241
Public sector	1 245 997	3 707	300 756	60 385	73 328	92 345	53 641	24 764
Central government	366 550		8 726					8 726
Other public administrations	879 447	3 707	292 030	60 385	73 328	92 345	53 641	16 038
Other financial corporations and individual entrepreneurs (financial business)	186 922	6 256	801	5 599	357	317	11	773
Non-financial corporations and individual entrepreneurs (non-financial business)	7 546 733	1 480 443	1 592 378	747 581	459 204	413 742	276 330	1 175 964
Real estate construction and development	386 983	201 574	31 925	102 656	81 223	21 216	9 016	19 388
Civil construction	117 523	5 263	33 489	4 047	2 118	1 663	1 302	29 622
Other	7 042 227	1 273 606	1 526 964	640 878	375 863	390 863	266 012	1 126 954
Large companies	3 430 330	446 240	1 182 392	391 596	100 647	154 749	106 574	875 066
Small and medium-sized companies	3 611 897	827 366	344 572	249 282	275 216	236 114	159 438	251 888
Individuals	12 356 354	10 917 572	284 113	2 476 068	3 388 014	4 365 965	859 517	112 121
Homes	10 952 103	10 866 696	56 482	2 443 547	3 357 052	4 298 649	757 027	66 903
Consumer spending	1 038 603	75	177 340	7 059	16 425	43 051	80 593	30 287
Other	365 648	50 801	50 291	25 462	14 537	24 265	21 897	14 931
Total	22 106 247	12 407 978	2 178 048	3 289 633	3 920 903	4 872 369	1 189 499	1 313 622

Note: Includes Loans to central banks, credit institutions and Customers (does not include debt securities and other Customer applications) Map built based on commercial segmentation.

31-12-2018

		Of which: real					Collateralised loans. Carrying amount based on latest available appraisal (LTV)
	Balance net of impairments	estate mortgage secured	Of which: other collateral	≤ 40 %	> 40 % ≤ 60 %	> 60 % ≤ 80 %	> 80 % ≤ 100 %	> 100%
Central Banks and credit institutions	758 235
Public sector	1 219 795	3 878	327 232	61 320	82 842	91 762	65 992	29 194
Central government	367 500		13 026					13 026
Other public administrations	852 295	3 878	314 206	61 320	82 842	91 762	65 992	16 168
Other financial corporations and individual entrepreneurs (financial
business)	216 236	7 293	32	4 335	40	2 099	16	835
Non-financial corporations and individual entrepreneurs (non-financial business)	7 408 745	1 253 511	1 228 045	517 877	378 942	347 361	239 429	997 947
Real estate construction and development	376 074	120 390	84 030	91 694	13 589	18 260	5 811	75 066
Civil construction	111 454	6 361	31 820	1 507	4 832	57	761	31 024
Other	6 921 217	1 126 760	1 112 195	424 676	360 521	329 044	232 857	891 857
Large companies	3 326 480	361 485	825 970	192 804	111 135	109 732	91 045	682 739
Small and medium-sized companies	3 594 737	765 275	286 225	231 872	249 386	219 312	141 812	209 118
Individuals	12 330 456	10 966 551	296 555	2 267 439	3 050 262	4 441 386	1 363 255	140 764
Homes	11 001 828	10 912 508	60 040	2 238 635	3 018 819	4 371 757	1 253 880	89 457
Consumer spending	958 897	51	187 947	6 355	14 241	42 950	87 114	37 338
Other	369 731	53 992	48 568	22 449	17 202	26 679	22 261	13 969
Total	21 933 467	12 231 233	1 851 864	2 850 971	3 512 086	4 882 608	1 668 692	1 168 740

Note: Includes Loans to central banks, credit institutions and Customers (does not include debt securities and other Customer applications) Map built based on commercial segmentation.

Concentration by sovereign risk

Banco BPI's exposure to entities with sovereign risk is subject to the general risk-taking policy, which ensures that all positions taken are aligned with the target risk profile. Therefore, metrics and limits of exposure to the Portuguese public sector and to the public sector of all other countries were established in the Risk Appetite Framework. The Bank's exposure to entities with sovereign risk is for the most part concentrated in Portugal, Spain and Italy.

Exposure to entities with sovereign risk

The table below shows the breakdown of BPI's exposure to sovereign debt:

30-06-2019

Financial assets at amortised cost1	Financial assets at fair value through other comprehensive income	Financial assets held for trading
			Residual maturity	Country
3 715	225 237		Less than 3 months
62 442	576 565		3 months to 1 year
577 499		1 045	1 to 2 years
68 000		1 155	2 to 3 years
89 220	137 294	368	3 to 5 years	Portugal
461 337			5 to 10 years
628 607			More than 10 years
1 890 820	939 096	2 568
710 016	309 436		2 to 3 years
	308 806		3 to 5 years	Spain
710 016	618 242
501 316			1 to 2 years
501 316				Italy
49 486			1 to 2 years
17 199			3 to 5 years
77 016			5 to 10 years	Other
78 283			More than 10 years
221 984
3 324 136	1 557 338	2 568

¹ Does not include interest receivable.

31-12-2018

		Financial assets held for trading	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost1
Country	Residual maturity
	Less than 3 months		50 044	10 319
	3 months to 1 year		740 618	18 589
	1 to 2 years			53 415
	2 to 3 years	4 167		550 382
Portugal	3 to 5 years	365		143 777
	5 to 10 years			475 306
	More than 10 years			533 141
		4 532	790 662	1 784 929
	2 to 3 years		307 939	712 423
Spain			307 939	712 423
	Less than 3 months		178 819
	1 to 2 years			401 054
Italy	2 to 3 years			100 698
			178 819	501 752
	2 to 3 years			49 486
	3 to 5 years			9 698
Other	5 to 10 years			83 434
	More than 10 years			78 283
				220 901
		4 532	1 277 420	3 220 005

¹ Does not include interest receivable.

Concentration by credit quality

The tables below show the concentration of credit risk by rating of exposures in debt securities and loans and advances held by the Bank:

Credit risk quality (rating)

The breakdown of debt securities by rating at 30 June 2019 and 31 December 2018 is as follows:

30-06-2019

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
A+/A/A-				46 070	46 070
BBB+/BBB/BBB-	2 568	1 044	1 557 338	1 828 259	3 389 209
"Investment grade"	2 568	1 044	1 557 338	1 874 329	3 435 279
	21%	2%	100%	51%	65%
BB+/BB/BB-		57 040		355 254	412 294
No rating	9 924	5 337		1 456 201	1 471 462
"Non-investment grade"	9 924	62 377		1 811 455	1 883 756
	79%	98%		49%	35%
	12 492	63 421	1 557 338	3 685 784	5 319 035

31-12-2018

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
A+/A/A-				49 950	49 950
BBB+/BBB/BBB-	4 532	1 079	1 277 420	1 797 552	3 080 583
"Investment grade"	4 532	1 079	1 277 420	1 847 502	3 130 533
	33%	2%	100%	53%	64%
BB+/BB/BB-		53 868		269 991	323 859
No rating	9 361	5 041		1 399 321	1 413 723
"Non-investment grade"	9 361	58 909		1 669 312	1 737 582
	67%	98%		47%	36%
	13 893	59 988	1 277 420	3 516 814	4 868 115

The breakdown of loans and advances to central banks and other credit institutions by rating class is as follws:

		30-06-2019		31-12-2018
		800 550		790 659
	AAA to AA-	83 472	10%	89 924	11%
	A+ to A-	228 718	29%	212 214	27%
External Rating	BBB+ to BBB-	462 871	58%	479 019	60%
	BB+ to BB-	25 489	3%	9 502	1%
		800 550	100%	790 659	100%

Note: Exposure net of impairments (the amounts shown include accrued interest)

The breakdown of loans and advances to Customers by rating class is as follows:

			30-06-2019		31-12-2018
Exposures Non-Default			20 922 018	97%	20 799 221	97%
		AAA to AA-	63 027	0%	111 511	1%
		A+ to A-			3 124	0%
		BBB+ to BBB-	929 791	4%	870 114	4%
	External Rating	BB+ to BB-	37 869	0%	40 694	0%
		B+ to B-	48 701	0%	51 749	0%
		< B-	209	0%	34	0%
		Strong	65 000	0%	73 565	0%
	Rating	Good	657 346	3%	826 533	4%
	Project Finance	Satisfactory	396 682	2%	244 784	1%
		Weak	17 424	0%	17 891	0%
		E01 to E03	793 693	4%	875 301	4%
	Rating	E04 to E06	2 084 763	10%	1 973 240	9%
	Companies	E07 to E10	1 017 716	5%	972 417	5%
		ED1 to ED2	587	0%	907	0%
		N01 to N03	155 852	1%	76 262	0%
	Rating	N04 to N06	821 284	4%	735 409	3%
	Small businesses	N07 to N10	629 805	3%	800 144	4%
		ND1 to ND2	4 452	0%	3 162	0%
		01 to 03	4 312 886	20%	4 010 775	19%
		04 to 06	4 855 978	23%	5 083 357	24%
	Scoring	07 to 10	2 627 926	12%	2 646 132	12%
		D01 to D02	22 565	0%	17 031	0%
	No rating		1 378 463	6%	1 365 085	6%
Exposures Default			542 516	3%	565 249	3%
			21 464 534	100%	21 364 470	100%

Note: Exposure net of impairments ( the amounts shown include accrued interest)

CRR default criterion (Regulation (EU) 575/2013)

3.2.3. Relevant information regarding financing for property construction and development, home purchasing, and foreclosed assets

Relevant information regarding financing for property development, home purchasing, and foreclosed assets is provided in the following section.

Financing for real estate construction and development

The tables below show the level of financing provided to real estate construction and development (does not include advances).

30-06-2019

	Gross amount	Impairment	Value net of impairments	Excess over the maximum recoverable value of collateral
Real estate construction and development	440 245	( 53 262)	386 983	158 144
Of which: Stage 3	63 178	( 48 095)	15 083	2 371
31-12-2018
				Excess over the maximum

			Value net of	Excess over the maximum
	Gross amount	Impairment	impairments	recoverable value of collateral
Real estate construction and development	430 347	( 54 273)	376 074	229 498
Of which: Stage 3	64 959	( 49 331)	15 628	2 672

The following table presents the value of financial guarantees given for real estate construction and development, which indicates the maximum level of exposure to credit risk (i.e. the amount the Bank would have to pay if the guarantee were called on).

		30-06-2019		31-12-2018
	Gross amount	Impairments and provisions	Gross amount	Impairments and provisions
Guarantees provided
Real estate construction and development	144 264	5 943	135 490	5 972

The table below provides information on guarantees received for real estate development loans, broken down by classification of customer insolvency risk:

		30-06-2019		31-12-2018
	Real estate mortgage	Other	collateral Real estate mortgage	Other collateral
Real estate construction and development	640 187	58 464	468 950	46 194
of which: Non-performing	80 688	7	80 116	63

Home loans

The table below shows the evolution of home loans:

		30-06-20192		2 31-12-2018
Not real estate mortgage secured	85 407	1%	89 320	1%
Of which: Default 1	14 783		12 155
Real estate mortgage secured	10 866 695	99%	10 912 508	99%
Of which: Default 1	317 411		344 341
Total home loans	10 952 102	100%	11 001 828	100%

¹ CRR default criterion (Regulation (EU) 575/2013)

² Exposure net of impairments (the amounts shown include accrued interest)

The table below shows the amount of residential mortgage loans, by LTV brackets:

		30-06-2019 1
	Total	Of which: Default 2	Total	Of which: Default 2
LTV ≤ 40%	2 441 850	46 162	2 237 156	41 331
40% < LTV ≤ 60%	3 352 736	68 898	3 014 636	66 139
60% < LTV ≤ 80%	4 284 747	109 914	4 357 477	113 699
80% < LTV ≤ 100%	723 900	53 344	1 216 816	70 860
LTV > 100%	63 462	39 093	86 423	52 312
Total home loans	10 866 695	317 411	10 912 508	344 341

¹ Exposure net of impairments (the amounts include accrued interest).

² CRR default criterion (Regulation (EU) 575/2013).

The table below shows the book value and impairment of property foreclosed for the payment of debt:

	30-06-2019
	Gross Impairment		Net	Gross	Impairment	Net
	amount		amount amount			amount
Homes	18 834	2 948	15 886	22 591	3 093	19 498
Other	25 178	14 606	10 572	29 014	15 786	13 228
Total	44 012	17 554	26 458	51 605	18 879	32 726

3.3. Market risk

The table below shows the values of average VaR at 99% with a time horizon of two weeks (10 business days) in accordance with BPI's different risk factors. As can be seen, the value of the risk is immaterial, given the limited expression of open positions in the trading book.

	Total	Interest Rate	Exchange Rate	Share prices
Average VAR first semester 2019	136	100	56	49
Average VAR 2018	264	58	48	245

In the first semester of 2019, the average and the maximum value of the VaR at 99% with a time horizon of one day (adjusted for root of 10) in BPI's trading activities was 136 t.euros and 225 t.euros, respectively.

Capital requirements for market risk are determined based on the standardised approach. The values calculated are insignificant, given the low representativeness of the portfolio.

3.4. Structural interest rate risk

The management of this market risk by Banco BPI seeks to i) optimise the net interest income and ii) preserve the economic value of the balance sheet, while at all times taking into account the metrics and thresholds of the risk appetite framework in terms of the volatility of the net interest income and the sensitivity of economic value. These objectives are defined in accordance with the policies established at CaixaBank Group level.

The table below shows, using a static gap, the distribution of contractual maturities and interest rate repricings of interest-rate sensitive amounts in the banking book, at 30 June 2019:

	1 year	2 years	3 years	4 years	5 years	> 5 years	TOTAL
ASSETS
Interbank and Central Banks	2 235 285						2 235 285
Loans and advances to Customers	19 560 007	708 133	473 989	216 576	162 763	659 573	21 781 041
Fixed income portfolio	1 724 316	1 000 000	1 006 000	442 500		335 711	4 508 527
Total Assets	23 519 608	1 708 133	1 479 989	659 076	162 763	995 284	28 524 853
LIABILITIES
Interbank and Central Banks	1 915 730	953 830					2 869 560
Customer deposits	12 144 593	2 410 835	2 163 949	1 308 361	1 308 368	3 646 309	22 982 415
Own issues	986 700	2 456			500 000		1 489 156
Total Liabilities	15 047 023	3 367 121	2 163 949	1 308 361	1 808 368	3 646 309	27 341 131
Assets minus Liabilities	8 472 585	( 1 658 988)	( 683 960)	( 649 285)	( 1 645 605)	( 2 651 025)	1 183 722
Hedges	( 1 501 699)	927 940	954 213	( 225 904)	417 535	( 568 620)	3 466

Total difference	6 970 886	( 731 048)	270 253	( 875 189)	( 1 228 070)	( 3 219 645)	1 187 187

The sensitivity of net interest income and economic value are complementary measures that provide an overview of structural interest rate risk, which is more focused on the short and medium term in the first case and on the medium and long term in the second.

The table below shows the sensitivity of the net interest income and the economic value of interest rate-sensitive assets and liabilities to a 200 basis points interest rate instantaneous increase and decrease:

Amounts as % of baseline scenario	+200 pb	-200 pb3
Net interest income 1	+29.5%	-15.6%
Asset value (banking book)2	+7.8%	+2.6%

¹ Net interest income sensitivity at 1 year

² Economic value baseline sensitivity

3 In the case of falling-rate scenarios the applied internal methodology accepts negative interest rates. Given the current level of interest rates, the methodology accepts an interest-rate decline shock of up to approximately -1%. For example, considering a EONIA curve interest rate of -0.40%, the interest rate subject to a shock of -1% in this curve could be as low as -1.40%.

3.5. Exchange rate risk

Banco BPI has foreign currency assets and liabilities in its balance sheet, mainly as a result of its commercial activity, including foreign currency assets and liabilities deriving from the transactions carried out to mitigate exchange rate risk in that activity. The Bank also has some foreign currency structural positions related to equity holdings in financial Institutions outside the Eurozone.

At 30 June 2019, the equivalent euro value of all foreign currency assets and liabilities was as follows:

	USD	AKZ	MZN	Other currencies
Cash and cash balances at central banks and other demand deposits	12 789	67 086		29 256
Financial assets held for trading	9 693			180
Financial assets not designated for trading compulsorily measured at fair value
through profit or loss	62 331
Financial assets at fair value through other comprehensive income	9 090	501 009		101
Financial assets at amortised cost	423 121			74 749
Derivatives - Hedge accounting	7 358			172
Fair value changes of the hedged items in portfolio hedge of interest rate risk	3 661
Investments in subsidiaries, joint ventures and associates			95 545
Tangible assets				256
Intangible assets
Tax assets				28
Other assets	191		4 570	3 680
Non-current assets and disposal groups classified as held for sale
Foreign exchange operations pending settlement and forward position operations	1 225 632			85 549
Total Assets	1 753 866	568 095	100 115	193 971
Financial liabilities held for trading	1 970			123
Financial liabilities at amortised cost	1 747 949			181 906
Derivatives - Hedge accounting	3 659
Fair value changes of the hedged items in portfolio hedge of interest rate risk	2 724			38
Provisions
Tax liabilities		48 649	8 417
Other liabilities	( 5 718)			1 766
Total Liabilities	1 750 584	48 649	8 417	183 833

The exchange rate risk in the Bank's regular activity may be hedged through on-balance sheet operations (deposits or foreign currency investments) or through financial derivatives that mitigate the risk of positions in foreign currency. It should be noted that the nominal value of derivatives is not reflected directly in the balance sheet but in off-balance sheet accounts. The approach to foreign-exchange risk management at Banco BPI is to seek to minimise the positions assumed, which explains the Bank's low exposure to this risk.

The relevant foreign exchange positions held by Banco BPI result from the equity holdings in financial institutions of countries outside the Eurozone, notably in Banco de Fomento de Angola (position in Angolan Kwanzas) and Banco Comercial e de Investimentos S.A. (Positions in Mozambique Metical). BFA's fair value estimate factors in a projection of the foreign exchange devaluation of the Kwanza, and in the case of the equity holdings, the impact of foreign exchange changes also depends on the composition of the balance sheet of each of those companies.

Excluding the foreign currency positions in Kwanza and Metical resulting from the equity holdings in BFA and BCI, BPI's exposure and sensitivity to exchange rate risk is not significant, taking into account the existing hedges.

At 31 December 2018, the equivalent euro value of all foreign currency assets and liabilities was as follows:

	USD	AKZ	MZN	Other currencies
Cash and cash balances at central banks and other demand deposits	16 237	30 293		51 794
Financial assets held for trading	10 623			629
Financial assets not designated for trading compulsorily measured at fair value
through profit or loss	64 931
Financial assets at fair value through other comprehensive income	6 888	522 000		100
Financial assets at amortised cost	453 980			95 860
Derivatives - Hedge accounting	3 564			140
Fair value changes of the hedged items in portfolio hedge of interest rate risk	792
Investments in subsidiaries, joint ventures and associates			90 157
Tangible assets				319
Intangible assets
Tax assets
Other assets	191			2 771
Non-current assets and disposal groups classified as held for sale
Foreign exchange operations pending settlement and forward position operations	1 329 520			62 198
Total Assets	1 886 726	552 293	90 157	213 811
Financial liabilities held for trading	1 977			574
Financial liabilities at amortised cost	1 895 058			196 919
Derivatives - Hedge accounting	1 503			32
Fair value changes of the hedged items in portfolio hedge of interest rate risk	( 679)			( 34)
Provisions
Tax liabilities		50 748	8 038
Other liabilities	( 6 248)			( 68)
Total Liabilities	1 891 611	50 748	8 038	197 423

3.6. Liquidity risk

Banco BPI manages liquidity risk with the objective of maintaining liquidity levels that allow them to respond, in a timely manner, to its payment obligations, without investment activities being affected by lack of funds, while maintaining a balanced balance sheet structure in the long term. Liquidity risk is managed in its various aspects: i) the ability to keep up with assets growth and to meet cash requirements without incurring exceptional losses; ii) the maintenance in the portfolio of tradable assets that constitute a sufficient liquidity buffer; (iii) compliance with the various regulatory requirements in the context of liquidity risk.

The breakdown of BPI's total liquid assets is as follows:

Total liquid assets

	30-06-2019		31-12-2018
	Market value	Eligible value	Market value	Eligible value
Level 1 Assets	4 501 057	4 501 057	3 853 627	3 853 627
Level 2A Assets	46 820	39 797	50 695	43 091
Total HQLA 1	4 547 877	4 540 854	3 904 322	3 896 718
Other non-HQLA		5 307 305		5 600 891
Total liquid assets (HQLA + other non-HQLA)		9 848 159		9 497 609

1 In accordance with the liquidity coverage ratio (LCR) calculation criteria

The table below shows the detail of the average value (last 12 months) of the LCR calculation components at 30 June 2019 and 31 December 2018.

Liquidity coverage ratio (LCR)

(Average in last 12 months)	30-06-2019	31-12-2018
High quality liquid assets (numerator)	4 082 319	3 930 433
Total net outflows (denominator)	2 442 445	2 347 632
Cash outflows	3 396 644	3 319 896
Cash inflows	954 199	972 264
LCR	167%	167%

Note: The table presents the simple arithmetic mean in the last 12 months of the LCR ratio and respective calculation components. According to Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council regarding liquidity coverage requirement for Credit Institutions. The established regulatory limit for the LCR ratio is 100% from 1 January 2018.

At 30 June 2019 the main ratings assigned by international rating agencies to Banco BPI were the following:

	Long-term debt	Short-term debt	Outlook	Date of last review	Mortgage covered bonds rating
DBRS Rating Limited	-	-	-	-	AA (Low)
Fitch Ratings	BBB 1	F2	Stable	6/12/2018	-
Moody's Investors Service	Ba1 2	NP	Stable	6/26/2019	Aa3
Standard & Poor's Global Ratings	BBB 3	A-2	Stable	3/18/2019	-
1 Long-term issuer default rating

² Long term Debt Rating / Issuer rating

³ Long Term Issuer Credit Rating

The tables below show the breakdown of certain balance sheet items by contractual term to maturity, under normal market conditions:

Term to maturity of operations at 30 June 2019

	On demand	< 1 month	1-3 months	3-12 months	1-5 years	> 5 years	Total
Cash and cash balances at central banks and	2 008 548						2 008 548
other demand deposits
Derivatives
Financial assets held for trading	3 807	7 456	5 526	1 149	21 787	112 325	152 050
Hedge accounting		291	1 468	5 919	25 361	1 483	34 522
Debt securities
Financial assets held for trading				4 946	7 546		12 492
Financial assets not designated for
trading compulsorily measured at fair value through profit or loss				1 043		62 378	63 421
Financial assets at fair value through			225 237	576 565	755 536		1 557 338
other comprehensive income
Financial assets at amortised cost	9 456	243 421	240 171	287 059	2 231 680	673 997	3 685 784
Loans and advances	446 302	667 201	784 340	1 363 390	3 246 250	15 757 601	22 265 084
Total Assets	2 468 113	918 369	1 256 742	2 240 071	6 288 160	16 607 784	29 779 239
Derivatives
Financial liabilities held for trading	144	6 486	5 616	1 328	25 170	125 550	164 294
Hedge accounting		49	110	469	21 548	54 187	76 363
Financial liabilities at amortised cost
Deposits
Central Banks				405 872	944 228		1 350 100
Credit Institutions	50 566	800 723	9 387	91 060	383	447 575	1 399 694
Customers	14 408 158	1 005 656	1 687 164	3 623 333	2 384 492	1 869	23 110 672
Debt securities issued
Mortgage bonds					800 000	250 000	1 050 000
Bonds		740	397	4 269	1 715		7 121
Liabilities relating to assets not derecognised		128 697					128 697
Subordinated liabilities						304 501	304 501
Other financial liabilities	76 027	217 342	322	952	962		295 605
Total Liabilities	14 534 895	2 159 693	1 702 996	4 127 283	4 178 498	1 183 682	27 887 047
Of which wholesale funding:		128 697			800 000	554 501	1 483 198
Assets minus Liabilities	( 12 066 782)	( 1 241 324)	( 446 254)	( 1 887 212)	2 109 662	15 424 102	1 892 192

Term to maturity of operations at 31 December 2018

Cash and cash balances at central banks and 2 452 916 2 452 916 other demand deposits Derivatives Financial assets held for trading 4 990 8 579 7 556 2 734 19 728 88 121 131 708 Hedge accounting 683 2 399 3 195 7 732 311 14 320 Debt securities Financial assets held for trading 13 893 13 893 Financial assets not designated for trading compulsorily measured at fair 1 079 58 909 59 988 value through profit or loss Financial assets at fair value through 228 863 740 618 307 939 1 277 420 other comprehensive income Financial assets at amortised cost 271 403 244 225 182 133 2 126 902 692 151 3 516 814 Loans and advances 280 519 892 242 952 498 1 193 153 3 386 794 15 449 923 22 155 129 Total Assets 2 738 425 1 172 907 1 435 541 2 122 912 5 862 988 16 289 415 29 622 188 Derivatives Financial liabilities held for trading 8 781 7 686 2 435 21 514 100 919 141 335 Hedge accounting 84 4 009 12 220 15 861 23 836 56 010 Financial liabilities at amortised cost Deposits Central Banks 1 352 843 1 352 843 Credit Institutions 238 673 889 571 219 313 35 367 470 577 1 853 501 Customers 13 398 780 1 860 752 1 705 442 4 131 948 1 861 085 2 245 22 960 252 Debt securities issued Mortgage bonds 300 000 250 000 550 000 Bonds 534 5 430 5 716 6 671 18 351 Liabilities relating to assets not 89 782 155 550 245 330 derecognised Subordinated liabilities 304 514 304 514 Other financial liabilities 37 465 172 548 11 405 4 742 4 794 230 954 Total Liabilities 13 674 918 2 932 270 1 953 285 4 192 428 3 652 550 1 307 641 27 713 090 Of which wholesale funding: 389 782 710 063 1 099 845 Assets minus Liabilities ( 10 936 493) ( 1 759 363) ( 517 744) ( 2 069 516) 2 210 438 14 981 774 1 909 098	On demand	< 1 month	1-3 months	3-12 months	1-5 years	> 5 years	Total

3.7. Other risks

There were no significant changes in the risk levels and in the policies during the first semester of 2019.

4. SOLVENCY MANAGEMENT

4.1. Regulatory framework

The global regulatory framework for supervision and prudential rules on solvency, known as Basel III, came into force in the European Union through Directive 2013/36 (CRD IV) and Regulation 575/2013 (CRR), in which a progressive schedule of implementation is established for the respective requirements.

Furthermore, the Supervisory Review and Evaluation Process (SREP), which configures Pillar II of the Basel regulatory framework, consists of an ongoing supervision process to evaluate the adequacy of capital, liquidity, corporate governance, and risk management and control, harmonised at European level by the EBA. The SREP process may require additional capital or liquidity, or other qualitative measures in response to any risks and weaknesses specifically detected. The SREP seeks to assess the individual viability of entities, considering cross-cutting analyses and comparisons against their peers. Any potential additional capital requirements are complemented by combined capital buffer requirements.

4.2. Capital management

At 30 June 2019, Banco BPI had a Common Equity Tier 1 (CET1) ratio of 13.1%, a Tier 1 ratio of 13.1% and a total ratio of 14.9%, without considering the 2019 interim results in the calculation of these ratios.

Considering the inclusion of the interim results and the upper end (payout of 50%) of the range set forth in Banco BPI's Long-Term Dividend Policy² , as established in Art. 2 of Commission Delegated Regulation (EU) no. 241/2014, the CET1 ratio would be 13.4%, the Tier 1 ratio would be 13.4% and the total ratio would be 15.2%.

The following table shows the composition of Banco BPI consolidated own funds:

Amount 3 020 823 3 027 071 ( 6 248)	%	Amount 3 060 727 3 205 952 ( 140 000)	%





		( 725 689)
( 63 312)		( 66 904)
( 605 463)		( 613 356)
( 75 033)		( 45 429)
2 277 015	13.1%	2 335 038	13.8%
2 277 015	13.1%	2 335 038	13.8%
300 000		300 000
300 000	1.7%	300 000	1.8%
2 577 015	14.9%	2 635 038	15.5%
17 339 058		16 976 755

	13.1%		13.8%
	13.1%		13.8%
	14.9%		15.5%
	( 743 808)		( 5 226)

Note: In 2019, it incorporates 7 basis points impact from the first application of IFRS16.

The following chart sets out a summary of the minimum regulatory capital requirements on a consolidated basis at 30 June 2019.

	30-06-2019
	Amount	%	Amount	%
BAS III minimum requirements
CET11	1 603 863	9.25%	1 485 466	8.75%
Tier1	1 863 949	10.75%	1 740 117	10.25%
Capital Total	2 210 730	12.75%	2 079 653	12.25%
1

Includes the minimum requirement of Pilar I of 4.5%; the requirement of Pilar II (2.25% in 2018 and 2% in 2019); the capital conservation buffer (1.875% in 2018 and 2.5% in 2019); and the O-SII (Other Systemically Important Institution) buffer of 0.25% in 2019 (0.5% to be phased in over 4 years through to 2021).

² The Long-Term Dividend Policy of Banco BPI approved by the single shareholder, CaixaBank, S.A., by Unanimous Written Resolution on 31 January 2019, provides for the distribution of an annual dividend, tendentially between 30% and 50% of the net income reported in the individual accounts for the year to which it relates, where the exact amount to be proposed (by the Board of Directors to the General Meeting) shall be defined in light of a prudent judgement which takes into account, in view of the specific situation at the time of Banco BPI, the permanent satisfaction of adequate levels of liquidity and solvency.

The following table shows the breakdown of the leverage ratio:

Leverage ratio
	30-06-2019		31-12-2018
	Amount	%	Amount	%
Exposure	31 901 687		31 963 096
Leverage ratio		7.1%		7.3%

5. DIVIDEND DISTRIBUTION AND EARNINGS PER SHARE

Dividend policy

In line with the amendment to the articles of association of Banco BPI approved at the General Shareholders' Meeting of 20 April 2006, these articles now include the following rule (Article 26- 3): "The General Shareholders' Meeting shall decide on the long-term dividend policy proposed by the Board of Directors, which shall justify any deviations from that policy."

For compliance with this statutory rule, Banco BPI's long-term dividend policy was approved on 31 January 2019, as follows:

1. General Principle

Subject to a proposal to be submitted by the Board of Directors to the General Meeting, distribution of an annual dividend tendentially between 30% and 50% of the net income reported in the individual accounts for the year to which it relates, with the exact amount to be proposed being defined in accordance with a prudent judgement that balances the situation of the Bank at the time with the need to maintain at all times adequate levels of liquidity and solvency.

2. Conditioning factors

The provisions of point 1 above represent a mere principle, which, as such, is not binding upon the General Meeting, which can at any time, not only change it, but also resolve on a percentage of distribution below the minimum 30% threshold or above the maximum 50% threshold therein referred, or on no distribution at all.

The provisions of item 1 are therefore only intended to:

i) give the shareholders and third parties a medium/long term perspective of the company's objectives in terms of dividend distribution;
ii) impose on the Board of Directors, when it intends to propose a dividend distribution outside the thresholds therein established, the duty of substantiating this option.

In addition, the distribution principle set out in the previous paragraph shall be subject to:

a) Compliance with the capital ratios at any time applicable to the Bank, whether under Pillar 1 or Pillar 2, as well as with other applicable legal provisions, namely those governing what is considered the "maximum distributable amount ";
b) When the net income determined in the individual accounts includes dividends from companies that have not yet been paid to the Bank, the Board of Directors shall exclude the amount of these dividends from the base used for the definition of the dividends to be distributed, whenever a prudent judgement so advises;
c) Respect for the findings and guidelines of the Bank's ICAAP and RAF at any time in force;
d) the absence of exceptional circumstances that justify, in the Board of Directors reasoned opinion, submitting to the Shareholders' deliberation the distribution of a dividend below the 30% threshold or above the 50% threshold.

The distribution of the 2018 results, made through the payment of dividends in the amount of 140 million euros, was approved by the Board of Directors on 15 April 2019 and subsequently at the Shareholders General Meeting on 29 April 2019:

	2018
Net income reported in the individual accounts of Banco BPI	914 311
Net capital gain on revaluation of equity holding in BFA	( 456 676)
Net profit for dividend distribution purposes	457 635
Proposed appropriation of profit
To dividends	140 000
To legal reserve	91 431
To other reserves	682 880
Individual profit of Banco BPI in 2018	914 311
Payout ratio for dividend distribution purposes	30.6%

Basic and diluted earnings per share, as per the consolidated profit of Banco BPI attributable to its shareholders, are calculated as follows:

	30-06-2019	30-06-2018
Numerator (in thousand euros)
Profit/(loss) after tax and minority interests from continuing operations	134 450	301 843
Profit/(loss) after tax from discontinued operations	0	64 214
Consolidated profit/(loss)	134 450	366 057
Denominator (in thousand shares)
Average number of outstanding shares	1 456 924	1 456 924
Average number of treasury shares	0	151
Adjusted number of shares (basic earnings per share) 1	1 456 924	1 456 773
Basic earnings per share (in euros)
Profit/(loss) per share from continuing operations	0.092	0.207
Profit/(loss) per share from discontinued operations	0	0.044
Consolidated basic earnings per share	0.092	0.251
Diluted earnings per share (in euros)
Diluted earnings per share from continuing operations	0.092	0.207
Diluted earnings per share from discontinued operations	0	0.044
Consolidated diluted earnings per share	0.092	0.251

¹ Average number of shares outstanding, excluding the average number of treasury shares held during the period.

6. SEGMENTS

The objective of business segment reporting is to allow internal supervision and management of BPI's activity and consolidated income. To define and segregate segments, the inherent risks and management characteristics of each segment are considered. The information reporting used by management is essentially prepared on an accounting basis supported by the IFRS. Their preparation relies on i) the same presentation principles used for the Bank's management information, and ii) the same accounting principles and policies used to prepare the annual financial statements:

At 30 June 2019, BPI's segment reporting considers the following segments:

Domestic operations: includes the commercial banking business in Portugal and the equity holdings activity.
International operations: corresponds to the activity developed in Mozambique by Banco Comercial e de Investimentos, S.A.R.L. and the results associated to the equity holding in Banco de Fomento Angola, classified in the portfolio of equity instruments at fair value through other comprehensive income.

Commercial Banking

Banco BPI's operations are focused mainly on commercial banking. Commercial banking includes:

Retail Banking Commercial operations with individual Customers, individual entrepreneurs and companies with turnover of up to 5 million euros, developed through a multi-channel distribution network comprising traditional branches and investment centres. It also includes the Private Banking area, which is responsible for implementing strategies and submitting investment proposals to the Customers, and for the management of their financial assets.
Corporate Banking, Project Finance and Institutional Banking Commercial operations with companies with turnover above 2 million euros, operating alongside Retail banking in the segment of up to 5 million euros. Also includes project finance services and the relationship with Public Sector entities, state-owned and municipal Companies, the State Business Sector, Foundations and Associations. This segment operates through a network of corporate centres and institutional centres that cater to the area's business needs.

This segment also includes the Bank's residual activity, comprising segments that represent individually less than 10% of the Bank's total income, net profit and assets.

Equity holdings

This segment essentially comprises the income generated by associated companies and joint ventures in Portugal (Cosec, Allianz, Unicre and Inter-Risco) as well as the income associated to participation units in credit recovery and private equity funds, and to investments in shares.

At 30 June 2018:

The domestic activity also included the Asset Management and Investment Banking businesses, which were sold to CaixaBank in April 2018 and January 2019, respectively.
The international activity also included the equity holding in BPI Capital Africa (Proprietary) Limited, which was liquidated in December 2018.

The amount of inter-segment transactions is presented based on the effective conditions of the transactions and in accordance with the accounting policies used to prepare BPI's consolidated financial statements.

At 30 June 2019, the income statement by business segment of BPI was as follows: ¹

	Domestic Activity				International Activity
	Commercial Banking	Equity holdings	Inter-segment transactions	Total	Angola	Mozambique	Total	Banco BPI consolidated
1.Interest income	263 900	316		264 216				264 216
2.Interest expense	( 49 437)			( 49 437)				( 49 437)
3.Net interest income [1+2]	214 463	316		214 779				214 779
4.Income from equity instruments	46	2 207		2 253	46 003		46 003	48 256
5.Share of profit/(loss) of entities accounted for using the equity method		9 786		9 786		10 393	10 393	20 179
6.Fee and commission income	139 155		( 53)	139 102				139 102
7.Fee and commission expenses	( 11 991)	( 2)	53	( 11 940)				( 11 940)
8.Net fee and commission income [6+7]	127 164	( 2)		127 162				127 162
9.Gains/(losses) on financial operations	7 473	( 9 164)		( 1 691)	( 4 576)		( 4 576)	( 6 267)
10.Operating income and expenses	( 12 443)	( 3)		( 12 446)	( 4 600)		( 4 600)	( 17 046)
11.Gross income [3+4+5+8+9+10]	336 703	3 140		339 843	36 827	10 393	47 220	387 063
12.Staff expenses	( 122 183)	( 65)		( 122 248)				( 122 248)
13.Suppliers and external services	( 75 410)	( 5)		( 75 415)				( 75 415)
14.Fixed assets amortisation and depreciation	( 26 243)			( 26 243)				( 26 243)
15.Operating expenses [12+13+14]	( 223 836)	( 70)		( 223 906)				( 223 906)
16.Net operating income [11+15]	112 867	3 070		115 937	36 827	10 393	47 220	163 157
17.Impairment losses on financial assets	10 857			10 857				10 857
18.Other impairments and provisions	( 132)			( 132)				( 132)
19.Gains/(losses) in other assets	126	1 028		1 154				1 154
20.Profit/(loss) before tax [16+17+18+19]	123 718	4 098		127 816	36 827	10 393	47 220	175 036
21.Income tax	( 42 332)	1 375		( 40 957)	1 254	( 883)	371	( 40 586)
22.Profit/(loss) from continuing operations [20+21]	81 386	5 473		86 859	38 081	9 510	47 591	134 450
23.Net profit/(loss) from discontinued operations
24.Profit/(loss) attributable to minority interests
25.Net profit/(loss) [22+23+24]	81 386	5 473		86 859	38 081	9 510	47 591	134 450

1 Income statement structure presented in accordance with Banco BPI management information.

At 30 June 2018, the income statement by business segment of BPI was as follows: ¹

	Domestic Activity			International Activity
	Commercial banking	Investment banking	Asset management	Equity holdings Inter-segment transactions	Total	Angola	Mozambique	South Africa	Total	Banco BPI consolidated
1.Interest income	246 417	35	194	( 5)	246 641					246 641
2.Interest expense	( 39 473)	( 12)		5	( 39 480)			( 1)	( 1)	( 39 481)
3.Net interest income [1+2]	206 944	23	194		207 161			( 1)	( 1)	207 160
4.Income from equity instruments	1 194		277		1 471					1 471
5.Share of profit/(loss) of entities accounted for using the equity method			8 433		8 433	155 564	7 728		163 292	171 725
6.Fee and commission income	155 240	3 520		( 744)	158 016					158 016
7.Fee and commission expenses	( 23 681)	( 436)	( 7)	744	( 23 380)					( 23 380)
8.Net fee and commission income [6+7]	131 559	3 084	( 7)		134 636					134 636
9.Gains/(losses) on financial operations	18 018	1	60 913		78 932	( 5 127)			( 5 127)	73 805
10.Operating income and expenses	( 15 511)	( 41)	( 2)		( 15 554)			1	1	( 15 553)
11.Gross income [3+4+5+8+9+10]	342 204	3 067	69 808		415 079	150 437	7 728		158 165	573 244
12.Staff expenses	( 123 967)	( 2 834)	( 27)		( 126 828)					( 126 828)
13.Suppliers and external services	( 83 091)	( 1 339)	( 11)		( 84 441)			( 24)	( 24)	( 84 465)
14.Fixed assets amortisation and depreciation	( 10 356)	( 70)			( 10 426)					( 10 426)
15.Operating expenses [12+13+14]	( 217 414)	( 4 243)	( 38)		( 221 695)			( 24)	( 24)	( 221 719)
16.Net operating income [11+15]	124 790	( 1 176)	69 770		193 384	150 437	7 728	( 24)	158 141	351 525
17.Impairment losses on financial assets	11 318				11 318					11 318
18.Other impairments and provisions	( 178)				( 178)			210	210	32
19.Gains/(losses) in other assets	( 857)				( 857)					( 857)
20.Profit/(loss) before tax [16+17+18+19]	135 072	( 1 176)	69 770		203 666	150 437	7 728	186	158 351	362 017
21.Income tax	( 45 256)	82	( 192)		( 45 366)	( 14 151)	( 657)		( 14 808)	( 60 174)
22.Profit/(loss) from continuing operations [20+21]	89 816	( 1 094)	69 578		158 300	136 286	7 071	186	143 543	301 843
23.Net profit/(loss) from discontinued operations			64 214		64 214					64 214
25.Net profit/(loss) [22+23+24]	89 816	( 1 094)	64 214 69 578		222 514	136 286	7 071	186	143 543	366 057

1 Income statement structure presented in accordance with Banco BPI management information.

The caption Gains/(losses) on financial operations, in the segment of equity investments, includes 59 581 t.euros relating to the capital gain on the sale of the equity holding in Viacer.

7. DISCLOSURE OF THE REMUNERATION OF THE CORPORATE BODIES

The General Meeting of 20 April 2018 approved the "Remuneration Policy of Banco BPI applicable to the members of the Board of Directors and of the Supervisory Board" (hereinafter the "Remuneration Policy") for the 2017-2019 period.

In accordance with Banco BPI's Articles of Association, the members of the corporate bodies shall have a fixed remuneration and the members of the Executive Committee may receive, in addition to a fixed remuneration, a variable remuneration determined in accordance with the criteria defined in the remuneration policy for the members of the supervision and management bodies.

Note 8 to Banco BPI's 2018 consolidated financial statements presents in more detail the remuneration of the corporate bodies, namely of the members of Banco BPI's Board of Directors and Executive Committee.

By unanimous written resolution no. 2 of 29 April 2019, CaixaBank, Banco BPI's single shareholder, on a proposal by the Remuneration Committee, approved an amendment to the limit defined in paragraph b) of point 4.2.2 of the "Remuneration Policy of Banco BPI applicable to the members of the Board of Directors and of the Supervisory Board", to the effect of increasing the global limit of the variable component of the remuneration (under the form of a bonus) of executive directors from 1 400 t.euros to 1 550 t.euros, this new limit applying to the variable component of the remuneration of the executive directors to be attributed and/or paid in 2019 relative to their performance in 2018.

Fixed remuneration

The fixed remuneration and attendance fees received by the members of the Board of Directors, excluding those who are members of the Executive Committee, are shown below:

	30-06-2019		30-06-2018
Fixed remuneration		3059	3032
Attendance fees		216	160
		3275	3192
	Number of persons	18	20

Variable remuneration

The members of the Executive Committee of the Board of Directors may be entitled to receive a variable remuneration. This variable remuneration is dependent upon the performance during a given year, and its attribution is usually decided and made during the first half of the following year.

On April 2019 the payment of a variable remuneration in the global amount of 1 503 t.euros to the members of the Executive Committee of Banco BPI for their performance in financial year 2018 was approved.

Under the terms of the applicable remuneration policy, this variable remuneration comprises one part in cash and another in financial instruments (CaixaBank shares), and it is subject to deferral, i.e., one part thereof is paid in the year in which it is attributed and the other part over the subsequent years.

8. FINANCIAL ASSETS

This note details the various items of financial assets in BPI's balance sheet, except for the "Hedging derivatives" caption. The amounts presented are net of impairment, except where it is explicitly stated that gross amounts are being presented.

30-06-2019

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
Trading derivatives	152 050				152 050
Equity instruments	81 581	151 403	586 130		819 114
Debt securities	12 492	63 421	1 557 338	3 685 784	5 319 035
Loans and advances				22 265 084	22 265 084
Central banks				5 000	5 000
Credit institutions				795 550	795 550
Customers				21 464 534	21 464 534
	246 123	214 824	2 143 468	25 950 868	28 555 283

31-12-2018

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
Trading derivatives	131 708				131 708
Equity instruments	81 171	168 594	597 740		847 505
Debt securities	13 893	59 988	1 277 420	3 516 814	4 868 115
Loans and advances				22 155 129	22 155 129
Central banks				5 000	5 000
Credit institutions				785 659	785 659
Customers				21 364 470	21 364 470
	226 772	228 582	1 875 160	25 671 943	28 002 457

Cash and cash balances at central banks and other demand deposits

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Cash	231 360	278 878
Demand deposits at Bank of Portugal	1 544 137	1 950 209
Other demand deposits	233 368	223 992
Interest on demand deposits at Bank of Portugal	( 317)	( 163)
	2 008 548	2 452 916

The caption ''demand deposits at Bank of Portugal'' includes deposits made to comply with the minimum cash reserve requirements of the Eurosystem. The component of these deposits made to comply with the minimum cash reserve requirements is currently remunerated at 0% and the surplus funds have an interest rate of -0.40%. The minimum cash reserve corresponds to 1% of the amount of deposits and debt securities issued maturing in up to 2 years, excluding liabilities to other institutions subject to and not exempt from the same minimum cash reserve system and the liabilities to the European Central Bank and national central banks that participate in the euro.

Financial assets held for trading

The detail of this heading is as follows:

	30-06-2019	31-12-2018

Trading derivatives	152 050	131 708
Equity instruments
Shares in portuguese companies	81 581	81 171
	81 581	81 171
Debt securities
Bonds issued by portuguese government entities	2 568	4 532
Bonds issued by other foreign entities	9 924	9 361
	12 492	13 893
	246 123	226 772

At 30 June 2019 and 31 December 2018, the caption Equity Instruments corresponds to shares to hedge equity swaps transactions carried out with Customers (Note 25).

Financial assets not designated for trading compulsorily measured at fair value through profit or loss

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Equity instruments
Shares in portuguese companies	4 756	7 859
Shares in foreign companies	992
Participation units of portuguese issuers	128 061	136 248
Participation units of foreign issuers	17 594	24 487
	151 403	168 594
Debt securities
Bonds issued by other Portuguese entities	47	44
Bonds issued by other foreign entities	63 374	59 944
	63 421	59 988
	214 824	228 582

Financial assets designated at fair value through other comprehensive income

This caption is made up as follows:

	30-06-2019	31-12-2018
Equity instruments
Shares in Portuguese companies	73 436	66 232
Shares in foreign companies	512 694	531 508
	586 130	597 740
Debt securities
Bonds issued by Portuguese government entities
Treasury Bills	801 801	475 875
Treasury Bonds	137 295	314 786
Bonds issued by foreign government entities	618 242	486 759
	1 557 338	1 277 420
	2 143 468	1 875 160

In December 2018, following Banco BPI's loss of significant influence in BFA, this equity holding was reclassified from 'Investments in joint ventures and associates' 'to Financial assets at fair value through other comprehensive income - equity instruments' (Note 10).

The movement in the caption ''Equity instruments at fair value through other comprehensive income'', during the first semester of 2019, was as follows:

	31-12-2018	Purchases	Sales	Actual gains/(losses) recognised under other comprehensive income	Potential gains/(losses) recognised under other comprehensive income and exchange difference	30-06-2019
Banco de Fomento Angola, S.A.	522 000				( 20 992)	501 008
Other	75 740	1 900	( 1 504)	600	8 386	85 122
	597 740	1 900	( 1 504)	600	( 12 606)	586 130

Financial assets at amortised cost

Debt securities

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Sovereign debt
Portuguese sovereign debt	536 705	555 844
Foreign sovereign debt	1 216 353	1 216 597
	1 753 058	1 772 441
Customer debt
Other Portuguese public issuers	337 135	252 570
Other Portuguese issuers	1 565 847	1 455 969
Other foreign issuers	34 205	40 362
	1 937 187	1 748 901
Impairment	( 4 461)	( 4 528)
	3 685 784	3 516 814

In 2018 Banco BPI bought a portfolio of medium-long term public debt in the amount of 1.8 billion euros. At 30 June 2019 the average residual maturity of this portfolio was approximately 2 years. The sovereign debt portfolio is made up of Spanish and Italian public debt securities.

The portfolio of debt securities at amortised cost includes securities designated as interest rate hedged assets, the fair value change of which at 30 June 2019 and 31 December 2018 amounted to 14 217 t.euros and 2 621 t.euros, respectively.

Customer debt securities essentially include issues of commercial paper and bonds of Corporate Banking, Project Finance and Institutional Banking customers associated to Banco BPI's commercial loans portfolio.

At 30 June 2019 and 31 December 2018, debt securities included operations allocated to the Cover Pool given as collateral for Covered Bonds issued by Banco BPI (note 15), namely 45 301 t.euros and 49 879 t.euros, respectively, allocated as collateral for public sector bonds.

Loans and advances - Central Banks and other Credit Institutions

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Loans and advances to the Bank of Portugal	5 000	5 000
Very short term applications	25 483	9 502
Cheques for collection	61 668	49 906
Loans	242 467	204 639
Reverse repurchase agreements	12 701	6 661
Other	256	490
Interest receivable and commissions relating to amortised cost	279	153
	342 854	271 351
Loans and advances to other Credit Institutions abroad
Very short term applications	146 818	261 764
Deposits	128 329	72 367
Cheques for collection	1 211	1 032
Other loans and advances	164 980	167 380
Interest receivable and commissions relating to amortised cost	76	63
Debtors for futures operations	11 282	11 971
	452 696	514 577
Impairment		( 269)
	800 550	790 659

Loans and advances - Customers

The breakdown of loans and advances to Customers by activity at 30 June 2019 is as follows:

	30-06-2019
	Gross amount	Impairment
Public sector	1 255 167	( 97)
Other financial corporations and individual entrepreneurs (financial business)	302 539	( 370)
Non-financial corporations and individual entrepreneurs (non-financial business)	7 847 906	( 298 141)
Real estate construction and development	440 270	( 53 264)
Civil construction	125 020	( 7 496)
Other	7 282 616	( 237 381)
Large companies	3 561 414	( 128 530)
Small and medium-sized companies	3 721 202	( 108 851)
Individuals	12 566 163	( 208 633)
Homes	11 119 945	( 167 843)
Consumer spending	1 071 883	( 33 281)
Other	374 335	( 7 509)
	21 971 775	( 507 241)

The breakdown of loans and advances to Customers by activity at 31 December 2018 is as follows:

	31-12-2018
	Gross amount	Impairment
Public sector	1 227 118	( 208)
Other financial corporations and individual entrepreneurs (financial business)	380 428	( 406)
Non-financial corporations and individual entrepreneurs (non-financial business)	7 744 064	( 318 169)
Real estate construction and development	430 388	( 54 300)
Civil construction	119 214	( 7 755)
Other	7 194 462	( 256 114)
Large companies	3 467 960	( 133 485)
Small and medium-sized companies	3 726 502	( 122 629)
Individuals	12 545 983	( 214 340)
Homes	11 176 948	( 175 120)
Consumer spending	990 214	( 31 317)
Other	378 821	( 7 903)
	21 897 593	( 533 123)

The portfolio of loans and advances to Customers includes loans designated as interest rate hedged assets, the fair value change of which at 30 June 2019 and 31 December 2018 amounted to 46 936 t.euros and 24 097 t.euros, respectively.

The detail of guarantees received¹ to secure credit operations is as follows:

	30-06-2019	31-12-2018
Value of collateral	11 624 594	11 662 543
Of which: Stage 3 guarantee	320 339	352 956
Value of other guarantees	939 349	960 912
Of which: Stage 3 guarantee	10 359	10 288
	12 563 943	12 623 455

¹ The value of the guarantee is the minimum amount between the guarantee received and the net credit amount.

The movement in the caption Loans and advances to Customers during the first semester of 2019 was as follows:

	Of which: Loans and advances
	Stage 1	Stage 2	Stage 3
Balance at 31-12-2018 21 897 593	19 404 057	1 473 238	1 020 298
Exposure increases / reductions	93 807 241 398	( 93 049)	( 54 542)
Transfers
From stage 1:	( 443 770)	421 625	22 145
From stage 2:	411 058	( 456 247)	45 189
From stage 3:	3 090	39 845	( 42 935)
Write-offs ( 19 625)	( 3)	( 3)	( 19 619)
Balance at 30-06-2019 21 971 775	19 615 830	1 385 409	970 536

In the first semester of 2019, the impairments due to expected loss on Loans and advances to Customers was as follows:

	Impairments for loans		Of which:
	and advances	Stage 1:	Stage 2:	Stage 3:
Balance at 31-12-2018	( 533 123)	( 25 186)	( 52 878)	( 455 059)
Impairment / reversal of impairment due to changes in credit risk	( 1 758)	1 897	1 218	( 4 873)
Impairment allowance for new financial assets	( 19 617)	( 10 058)	( 1 766)	( 7 793)
Reversal of impairments due to reimbursements and recoveries	31 898	6 763	3 232	21 904
Write-offs	19 625	3	3	19 619
Transfers and other	( 4 266)	( 25)	( 42)	( 4 199)
Balance at 30-06-2019	( 507 241)	( 26 606)	( 50 233)	( 430 401)

The breakdown of Customer loan impairments by calculation method is as follows:

	30-06-2019	31-12-2018
Impairments determined individually / collectively
Specific identified individually	( 182 890)	( 199 611)
Collective	( 324 351)	( 333 512)

Loans and advances to Customers include the following non-derecognised securitised assets:

30-06-2019	31-12-2018


	1 150 034
	3 214 901
11 333	10 003
4 171 941	4 374 938
	855 827 3 304 781

¹ Excludes overdue loans and interest

The loans subject to securitisation operations carried out by Banco BPI were not derecognised from the Bank's balance sheet and are recorded under the caption 'Loans not represented by securities'. The amounts received by Banco BPI from these operations are recorded under the caption "Financial liabilities at amortised cost - debt securities issued" (Note 15).

At 30 June 2019 and 31 December 2018, the caption 'Loans and advances to Customers' included operations allocated to the Cover Pool given as collateral for Covered Bonds issued by Banco BPI (Note 15), namely:

7 610 825 t.euros and 7 576 415 t.euros, respectively, allocated as collateral to mortgage bonds;
721 918 t.euros and 694 340 t.euros, respectively, allocated as collateral to public sector bonds.

Written-off loans

The movement in loans written off from assets in the first semester of 2019 and during 2018 was as follows:

	30-06-2019	31-12-2018
Balance at beginning of period	1 114 459	1 262 523
Increases:
Value correction due to depreciation of assets	19 625	57 604
Other	286
Decreases:
Recovery of written-off principal and interest	( 5 933)	( 14 802)
Amount recovered on sale of written-off loans		( 22 090)
Remission of written-off credits due to disposals		( 162 855)
Other	( 1 146)	( 5 921)
Balance at end of period	1 127 291	1 114 459

Loans written off from assets because recovery was deemed to be remote are recognised under the off-balance sheet caption "Loans written off from assets".

9. DERIVATIVES – HEDGE ACCOUNTING

The detail of hedging derivatives is as follows:

	30-06-2019			31-12-2018
	Notional Amount	Assets	Liabilities	Notional Amount	Assets	Liabilities
Interest rates	7 903 483	34 522	76 363	7 703 360	14 320	56 010
By type of counterparty:
Of which: OTC - credit institutions	840 295	10 363	30 414	2 374 616	7 707	43 501
Of which: OTC - other financial companies	7 063 188	24 159	45 949	5 328 744	6 613	12 509

10. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The detail of investments in joint ventures and associates is as follows:

	Effective holding (%)		Book value
	30-06-2019	31-12-2018	30-06-2019	31-12-2018
Banco Comercial e de Investimentos, S.A.	35.7%	35.7%	95 545	90 156
Companhia de Seguros Allianz Portugal, S.A.	35.0%	35.0%	70 657	54 598
Cosec – Companhia de Seguros de Crédito, S.A.	50.0%	50.0%	35 485	34 883
Inter-Risco - Sociedade de Capital de Risco, S.A.	49.0%	49.0%	442	462
Unicre - Instituição Financeira de Crédito, S.A.	21.0%	21.0%	26 587	29 045
			228 716	209 144

The changes in investments in join ventures and associates in the first semester of 2019 were as follows:

	Book value	Goodwill	Impairment	Total
Balance at 31-12-2018	197 366	18 467	( 6 689)	209 144
Net profit / (loss) for the year	20 179		1 0271
Dividends distributed	( 12 830)
Exchange difference	( 514)
Changes in associates' other comprehensive income	12 201
Other	( 491)
Balance at 30-06-2019	215 911	18 467	( 5 662)	228 716

¹ Variation of impairment for the equity holding in Unicre.

None of BPI's associated companies is listed on the stock exchange.

The breakdown of profit/(loss) of investments in joint ventures and associates accounted for using the equity method is as follows:

	30-06-2019	30-06-2018
Banco de Fomento Angola, S.A.	0	155 564
Banco Comercial e de Investimentos, S.A.R.L.	10 394	7 728
Companhia de Seguros Allianz Portugal, S.A.	6 289	4 148
Cosec – Companhia de Seguros de Crédito, S.A.	2 965	2 110
InterRisco - Sociedade de Capital de Risco, S.A.	( 20)	( 42)
Unicre - Instituição Financeira de Crédito, S.A.	551	2 217
	20 179	171 725

Banco de Fomento Angola (BFA)

In January 2017 Banco BPI sold 2% of the share capital of Banco de Fomento Angola to Unitel, reducing its holding in BFA to 48.1%, and entering into an agreement with BFA's shareholders under which BPI was entitled to appoint two, from a maximum of fifteen, members of the Board of Directors of BFA, as well as one member of its Supervisory Board, and one member of the Risk Committee and the Remuneration Committee. BPI's stake in BFA's share capital and participation in BFA's governing bodies, although minoritary and not proportional to the share capital held, permitted to presume the existence of significant influence over BFA, in accordance with the IAS 28 provisions. Therefore, following the sale of 2% of BFA, Banco BPI classified its holding in BFA as an associate.

In December 2018, an assessment of the conditions on which the assumption of significant influence of Banco BPI over BFA in accordance with IAS 28 was based permitted to conclude that no real significant influence existed. From the main issues considered, one of the most important concerned the absence of BPI representatives in the executive body of BFA - the Executive Committee, which is the body responsible for the bank's operational management -, which determined BPI's lack of real power to participate in the financial and operating policy decisions of BFA under the terms set forth in paragraph 6 of IAS 28. BPI's minority position in BFA's Board of Directors, alongside a shareholder that holds control, also prevented BPI from having a real capacity to exercise significant influence in the management of BFA. In this context, the weight of BPI's participation in BFA's financial and operating policy decisions was much curtailed relative to initial expectations, based on the past experience of shareholders' relationship, where BPI played a key role in the management of BFA. Taking into account that increase in experience, assessment and knowledge about the shareholder relationship of BPI in BFA, it was considered that at the end of 2018 the circumstances on which the existence of real capacity on the part of BPI to exercise significant influence over BFA was based no longer existed. In view of these circumstances, at the end of 2018, BPI considered it appropriate to limit its presence in the committees and management bodies of BFA in which it was represented, maintaining only the minority presence in the aforementioned corporate bodies of BFA. The analysis and justification for the non-existence of significant influence are provided in Note 2.1 to the 2018 annual financial statements.

In accordance with the accounting standards, the loss of significant influence entailed, in Banco BPI's consolidated balance sheet, reclassifying the equity holding in BFA from Associate to Financial assets at fair value through other comprehensive income - Equity instruments, and its revaluation at fair value. This change generated an impact of (138 626) t.euros in BFA's contribution to Banco BPI's net income, of which:

(157 975) t.euros resulting from the transfer to profit/(loss) of foreign exchange differences accumulated in other comprehensive income in 2017 and 2018,
3 946 t.euros resulting from the revaluation of the equity holding in BFA at fair value, from 518 054 t.euros, to 522 000 t.euros ,
(15 403) t.euros of deferred tax liabilities associated to the above amounts.

In 2018 the total contribution of BFA to net consolidated income was as follows:
Income generated by BFA recognised in share of profit/(loss) in associates recognised by the equity method in 2018	241 645
Other Gains/(losses) on financial assets and liabilities and other	( 7 764)
Deferred taxes on net income/(loss) associated with BFA	( 22 037)
Reclassification of equity holding in BFA at 31 December 2018	( 138 626)
Gains/(losses) on derecognition of non-financial assets (Note 30)	( 154 029)
Deferred taxes	15 403
Impact of BFA reclassification on 2018 net income	73 218
In the first semester of 2018, the contribution of BFA to net consolidated income was as follows:
Income generated by BFA recognised in share of profit/(loss) in associates recognised by the equity method	155 564
Other Gains/(losses) on financial assets and liabilities and other	( 5 127)
Deferred taxes on net income/(loss) associated with BFA	( 14 152)

In 2019, changes in the fair value of the equity holding in BFA were recognised in other comprehensive income (Note 8).

11. TANGIBLE ASSETS

This item of assets includes the properties acquired for own use by the Bank.

On 1 January 2019, with the entry into force of IFRS 16 – "Leases", a right of use in the amount of 89 million euros was recognised (note 2A - Comparability of the information).

During the first half of 2019 no individually significant profits or losses were recorded on sales of real estate.

The investments in tangible assets made during the first half of 2019 totalled 2 834 t.euros.

Besides the impact from the application of IFRS16, there were no other relevant movements in this caption during the first half of 2019.

12. INTANGIBLE ASSETS

The investments made in the first half of 2019 totalled 9 170 t.euros, essentially concerning investment in the development of software commissioned by Banco BPI to external entities.

13. OTHER ASSETS

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Accrued income
Fees for Allianz's profit sharing	12 730	24 436
Other accrued income	33 205	29 211
	45 935	53 647
Deferred expenses
Rents	1 266	1 496
Other deferred expenses	8 284	7 755
	9 550	9 251
Other assets	2 918	3 042
Foreign exchange transactions pending settlement	547	3 624
Securities transactions pending settlement - stock exchange transactions	238	303
Credit operations pending settlement	165 651	283 555
	169 354	290 524
	224 839	353 422

The caption 'Stock exchange transactions pending settlement' relates to the acquisition of securities for which settlement only occurred in the following month.

At 30 June 2019 and 31 December 2018, the caption 'Credit operations pending settlement' included:

119 157 t.euros and 224 613 t.euros, respectively, relating to securitisation operations carried out by Banco BPI (notes 8 and 15), resulting from temporary differences between settlement of the securitised loans and settlement of the liability for assets not derecognised;

136 285

6 711 t.euros and 26 627 t.euros, respectively, relating to taxes paid but which were challenged by Banco BPI. At the date of the financial statements there was no expected date for a decision in this regard. The main ongoing tax processes concern processes paid under Decree-Law no. 248-A/02, of 14 November, in the amount of 5 126 t.euros. The remainder (1 585 t.euros) concerns other processes prior to the merger carried out in 2002, relating to tax processes of various types; In addition, the balance at 31 December 2018 also includes 19 916 t.euros relating to Banco BPI VAT processes arising from tax inspections carried out to financial years 2004 to 2009, which was paid under Decree-Law 151-A/13 of 31 October, and was simultaneously fully provisioned for due to the uncertainty about whether this amount would be recovered. Consequently, as of the date of the financial statements, the amount of the asset and liability arising from these processes was derecognised (Note 16);
2 216 t.euros and 2 683 t.euros, respectively, relating to home loans pending settlement.

14. NON-CURRENT ASSETS AND LIABILITIES AND DISPOSAL GROUPS CLASSIFIED AS AVAILABLE FOR SALE

This caption is made up as follows:

	30-06-2019	31-12-2018
Assets received in settlement of defaulting loans and other tangible assets
Buildings	45 186	52 879
Equipment	234	225
Other	61	61
Impairment	( 17 931)	( 19 269)
	27 550	33 896

The values registered in this heading are valued according to the accounting policy referred to in Notes 2.15 and 41.2 of the 2018 annual report.

The changes in assets received in settlement of	defaulting loans and other	tangible assets during the first	semester of 2019 were as follows
----------------------------------------------------------------------	-------------------------------------	----------------------------------------------	-------------------------------------------------

	Balance at 31-12-2018			Sales and write-offs Acquisitions and		Increase / reversals	Balance at 30-06-2019
	Gross amount	Impairment	Net value	transfers	Gross amount	Impairment	of impairment	Gross amount	Impairment	Net value
Assets received in settlement of defaulting loans
Buildings	51 605	( 18 879)	32 726	5 028	( 12 621)	2 842	( 1 518)	44 012	( 17 555)	26 457
Equipment	225	( 151)	74	187	( 178)	11	( 6)	234	( 146)	88
Other	61	( 61)						61	( 61)
Other tangible assets
Buildings	1 274	( 178)	1 096		( 100)	29	( 20)	1 174	( 169)	1 005
	53 165	( 19 269)	33 896	5 215	( 12 899)	2 882	( 1 544)	45 481	( 17 931)	27 550

15. FINANCIAL LIABILITIES

The detail of the financial liabilities, except for the heading "Derivatives – Hedge Accounting", at 30 June 2019 and 31 December 2018, is as follows:

30-06-2019

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL
Trading derivatives	164 294		164 294
Deposits		25 860 466	25 860 466
Central Banks		1 350 100	1 350 100
Credit Institutions		1 399 694	1 399 694
Customers		23 110 672	23 110 672
Debt securities issued		1 490 319	1 490 319
Other financial liabilities		295 606	295 606
	164 294	27 646 391	27 810 685

31-12-2018

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL
Trading derivatives	141 335		141 335
Deposits		26 166 596	26 166 596
Central Banks		1 352 843	1 352 843
Credit Institutions		1 853 501	1 853 501
Customers		22 960 252	22 960 252
Debt securities issued		1 118 195	1 118 195
Other financial liabilities		230 954	230 954
	141 335	27 515 745	27 657 080

Financial assets at amortised cost

Deposits - Central Banks and Credit Institutions

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Deposits - Central Banks
Deposits	1 363 830	1 363 830
Interest payable	( 13 730)	( 10 987)
	1 350 100	1 352 843
Deposits - Credit Institutions
Loans and advances to credit institutions in Portugal
Very short-term funds		26 201
Deposits	107 282	95 785
Other funds	270	820
Interest payable	83	112
	107 635	122 918
Funds of credit institutions abroad
International financial organisations	471 186	471 052
Very short-term funds	42 957
Deposits	308 269	564 864
Debt securities sold with repurchase agreement	458 609	663 117
Other funds	10 815	30 798
Interest payable	204	677
Commissions relating to amortised cost	19	75
	1 292 059	1 730 583
	1 399 694	1 853 501
	2 749 794	3 206 344

Deposits - Customers

The detail of this heading is as follows:

	30-06-2019	31-12-2018
By type
Demand deposits	14 350 596	13 233 854
Term deposits	8 471 348	8 633 430
Saving accounts	48 648	50 199
Compulsory deposits	21 552	100 143
Debt securities sold with repurchase agreement	201 257	926 142
Interest payable	17 265	16 424
Commissions relating to amortised cost, net	6	60
	23 110 672	22 960 252
By sector
Public sector	706 526	359 113
Private sector	22 404 146	22 601 139
	23 110 672	22 960 252

The portfolio of Customer deposits at amortised cost includes deposits designated as interest rate hedged liabilities, the fair value change of which at 30 June 2019 and 31 December 2018 amounted to ( 17 200) t.euros and ( 3 560) t.euros, respectively.

Debt securities issued

The detail of this heading is as follows:

	30-06-2019				31-12-2018
	Issues	Repurchased	Balance	Average interest rate	Issues	Repurchased	Balance	Average interest rate
Covered bonds	7 100 000	(6 050 000)	1 050 000		7 100 000	(6 550 000)	550 000	0.3%
Fixed-rate bonds Interest payable Commissions relating to amortised	12 128	( 1 929)	10 199 291		21 578	( 3 285)	18 293 57	0.3%
cost, net			( 3 369)
			1 057 121				568 350
Other subordinated bonds Interest payable	300 000		300 000 4 501	5.5%	300 000		300 000 4 514	5.5%
			304 501				304 514
Liabilities relating to assets not derecognised Interest payable	4 218 506	(4 089 549)	128 957 375		4 540 366	(4 294 735)	245 631 353
Commissions relating to amortised cost, net			( 635)				( 653)
			128 697				245 331
			1 490 319				1 118 195

The portfolio of debt issued at amortised cost includes securities designated as interest rate hedged liabilities, the fair value change of which at 30 June 2019 and 31 December 2018 amounted to ( 8 124) t.euros and ( 34) t.euros, respectively.

Issuances, repurchases and repayments of debt securities

During the first semester of 2019, Banco BPI made de following issues of debt securities:

	Amount	Expiry	Interest rate
Mortgage bonds	500000	5 years	0.25%

In addition, during the first half of 2019, a collateralised bond issue fully repurchased in the amount of 500 000 t.euros was reimbursed, and there were other reimbursements in the amount of 7 980 t.euros and repurchases in the amount of 114 t.euros.

In 2018, the Bank made a collateralised bond issue in the amount of 850 000 t.euros, of which 300 000 t.euros were repurchased, reimbursed covered bonds (series 11) in the amount of 200 000 t.euros and reimbursed fixed-rate bonds in the amount of 16 345 t.euros.

Liabilities relating to assets not derecognised in securitisation operations

This caption is made up as follows:
-------------------------------------	--	--	--	--	--

	30-06-2019	31-12-2018
Liabilities relating to assets not derecognised in securitisation operations (Note 8CA)
Non securitised loans
Home loans	882 806	1 192 066
Loans to SMEs	3 335 700	3 348 300
Liabilities held by BPI	(4 089 549)	(4 294 736)
Interest payable	375	353
Commission relating to amortised cost, net	( 635)	( 653)
	128 697	245 330

At June 2019 the notes under the Securitisation of residential mortgage loans - Douro Mortgages No. 1 were reimbursed in advance. The impact on this caption was - 111 million euros.

Other Financial Liabilities

This caption is made up as follows:

	30-06-2019	31-12-2018
Other Customer funds
Checks and orders payable	64 977	43 473
Guaranteed rate deposits	2 651	4 821
Interest payable	25	69
Creditors and other resources
Creditors for futures operations	10 666	13 026
Consigned resources	41 888	35 555
Captive account resources	3 945	4 747
Captive account resources	9 544	11 540
Public sector
VAT payable	125	272
Tax withheld at source	16 054	14 319
Contributions to the Social Security	3 710	3 786
Other	2 740	2 740
Contributions to other healthcare systems	1 350	1 337
Creditors for factoring agreements	16 851	43 854
Creditors for the supply of goods	5 519	7 988
Subscribed but not paid-up capital in venture capital funds
Fundo de Recuperação, FCR	8 451	8 639
Fundo InterRisco II CI	5 176	5 428
Fundo InterRisco II - Fundo de Capital de Risco	1 452	1 601
Fundo de Reestruturação Empresarial, FCR	308	661
Fundo Pathena SCA Sicar	3 313	3 429
Other funds	635	7
Sundry creditors	18 285	23 662
Usage rights (IFRS 16)	77 940
	295 605	230 954

At 1 January 2019 IFRS 16 - "Leases" entered into force, which implied an increase of 89 million euros under "Other Financial Liabilities" (Note 2.B - Comparability).

16. PROVISIONS AND CONTINGENT LIABILITIES

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Pending legal issues and tax litigation
VAT Recovery processes (2003 to 2016)	9 795	29 711
Tax contingencies and other	12 655	12 534
Impairment and provisions for guarantees and commitments	20 689	23 212
	43 139	65 457

The movement in provisions during the first semester of 2019 was as follows:

	Balance at 31-12-2018	Increases	Decreases / Reversals	Amounts used	Balance at 30-06-2019
Pending legal issues and tax litigation	42 245	244	( 112)	( 19 928)	22 449
Commitments and guarantees given	23 212	705	( 3 227)		20 690
	65 457	949	( 3 339)	( 19 928)	43 139

At 31 December 2018 the balance of provisions for pending legal issues and tax litigation included 19 916 t.euros in provisions for processes related to Banco BPI VAT arising from tax inspections carried out to financial years 2004 to 2009, which was paid under Decree-Law 151-A/13 of 31 October, and was simultaneously recognised under assets. In the first half of 2019 the Bank used these provisions and simultaneously derecognised the assets relating to those processes (Note 13).

Contingent liabilities

Competition Authority

In 2012, the Portuguese Competition Authority (CA), under the powers legally attributed to it, opened administrative infraction proceedings against 15 banks operating in the Portuguese market, including BPI, due to alleged competition restrictive practices. On 1 June 2015 Banco BPI was served the corresponding notice of illicit act. On 27 September 2017 the Bank presented its defence. During the process, and whenever appropriate, Banco BPI appealed against several interlocutory rulings issued by the Competition Authority, which the Bank considered as susceptible of violating its rights.

On 9 September 2019, the CA notified BPI and the other banks of its ruling whereby they had been found guilty. The penalty imposed on BPI was 30 million euros.

In its ruling, the CA:

a) Accuses BPI, as well as the other banks, of having engaged in exchanges of information during the period from May 2002 to March 2013 concerning (i) mortgage loan and consumer loan production volumes, and (ii) the commercial conditions for these types of loans and for loans to small businesses and SME, including spread tables;
b) Considers that such an exchange constitutes an infringement by object, i.e., an infringement which is deemed to have been committed irrespective of whether or not the conduct in question had negative effects on the competition, and therefore it is not necessary to prove such effects; in other words, for the infringement to be deemed as committed, it is sufficient to prove that the conduct is, in the abstract, capable of having adverse effects on competition.

Banco BPI argues that it did not commit the infringement of which it was accused by the CA, and will appeal from the aforementioned decision to the Competition, Regulation and Supervision Court, from where the appeal will be filed with the Lisbon Court of Appeal.

In addition to disputing that the exchange of information took place in the manner alleged in the decision imposing the sanction, BPI considers that the information allegedly exchanged, either on account of its form and the time at which such exchange occurred, or on account of its content, was not capable of producing negative effects on the competition, there being no grounds for the assumptions on which the existence of an infringement by object, and therefore the decision imposing the sanction, were based. It is also the understanding of BPI that the alleged exchange of information did not have any negative effects on the market or on consumers, but on the contrary, at least in part, that it had pro-competitive effects.

Based on this framework of non-existent grounds for the decision and sentencing to be maintained by a final court ruling, and supported by the substantiated opinion of external legal consultants, the Executive Committee of the Bank's Board of Directors believes that the probabilities of the process ending without the Bank having to pay a fine are higher than the reverse occurring, and therefore no provision for this process has been recognised in the Bank's financial statements as at 30 June 2019.

National Resolution Fund

There has been no change relative to the information published in Note 23. Provisions and contingent liabilities of the 2018 Annual Report.

17. OTHER LIABILITIES

This caption is made up as follows:

	30-06-2019	31-12-2018
Liabilities for pensions and other benefits
Pension fund assets (Note 18)	(1 775 530)	(1 662 358)
Past service liabilities (Note 18)	1 855 545	1 695 496
	80 015	33 138
Expenses payable
Staff Expenses	66 127	82 728
Other administrative expenses	35 362	63 249
Special tax on banks	7 801	15 187
Other	2 641	2 418
	111 931	163 582
Deferred income
From guarantees given and other contingent liabilities	1 731	1 940
Other	73	119
	1 804	2 059
Other adjustment accounts
Liabilities pending settlement	78 079	110 316
Other transactions pending settlement	207 101	197 025
	285 180	307 341
	478 930	506 120

At 30 June 2019 and 31 December 2018, the caption "Liabilities pending settlement" included:

3 144 t.euros and 66 641 t.euros, respectively, relating to transactions with loan securitisation funds;

21 767 t.euros and 24 501 t.euros, respectively, relating to ATM transactions pending settlement;
23 862 t.euros and 7 184 t.euros, respectively, relating to transactions with SIBS pending settlement;

At 30 June 2019 and 31 December 2018, the caption "Other transactions pending settlement" included 182 054 t.euros e 189 072 t.euros, respectively, relating to transfers under SEPA (Single Euro Payment Area).

18. LIABILITIES FOR PENSIONS AND OTHER BENEFITS

Past service liabilities for Pensioners, Employees and Directors that are, or have been, at the service of BPI companies³ , are calculated in accordance with IAS 19.

Benefits established by BPI are defined benefits based on the last salary earned and length of service, providing for the payment of benefits in the event of retirement due to old age or disability, death and end-of-career bonuses. The rules used to calculate these benefits are mainly drawn from the provisions of the Collective Labour Agreement for the Portuguese Banking Sector. There is also a restricted group of management staff that is covered by a supplementary defined benefit pension plan, based on the last salary earned and length of service.

With the publication of Decree-Law no. 1-A / 2011 of 3 January, from 1 January 2011 all banking sector employees who were beneficiaries of "CAFEB – Caixa de Abono de Família dos Empregados Bancários" were integrated into the General Social Security Scheme, being henceforth covered by this scheme for old-age pensions as well as for maternity, paternity and adoption allowances, which the Bank ceased to support. Given the complementary nature of the scheme under the rules of the Collective Labour Agreement for the Portuguese Banking Sector ("ACT"), the Bank continues to cover the difference relative to the amount of the benefits paid under the General Social Security Regime for the eventualities covered and the benefits established in the ACT.

Following the instructions of the National Council of Financial Supervisors (Conselho Nacional dos Supervisores Financeiros), the amount of past service liabilities remained unchanged at 31 December 2010. Current service cost decreased as from 2011 and the Bank became subject to the Single Social Tax (Taxa Social Única - TSU) at the rate of 23.6%.

Disability and survivor pensions and sick leave for these Employees continue to be the Bank's responsibility.

Decree-Law 127 2011 of 31 December established the transfer to the Social Security of liabilities for retirement and survivor pensions of retired personnel and pensioners that were in that situation at 31 December 2011 and were covered by the substitute social security regime included in the collective labour regulations instrument in force for the banking sector (Pillar 1), as well as the transfer to the Portuguese State of the corresponding pension fund assets covering these liabilities. Since the transfer to the Social Security corresponded to a settlement, extinguishing the corresponding liability of Banco BPI, the negative difference (99 507 t.euros) between the amount of the pension fund assets transferred to the Portuguese State and the amount of the liability transferred based on actuarial assumptions used by Banco BPI was fully recognised as a cost in 2011/12. For tax purposes, this cost is recognised over a period of 18 years.

Through its pension fund, Banco BPI retains the liability for payment of (i) the amount of updates to the pensions mentioned above, according to the criteria set out in the ACT; (ii) the complementary benefits to the retirement and survivor pensions assumed by the ACT; (iii) the fixed contribution to the Social and Medical Support Services (SAMS); (iv) death allowance; (v) survivor pensions to children and surviving spouse related to the same Employee and (vi) survivor pension due to the family of a retired Employee, in which the conditions for being granted occurred as from 1 January 2012.

BPI Vida e Pensões is the entity responsible for the actuarial calculations used to determine the amounts of the retirement and survivor pension liabilities, as well as for managing the respective Pension Funds.

The "Projected Unit Credit" method was used to calculate the normal cost and past service liabilities due to old age, and the "Single Successive Premiums" method was used to calculate the cost of the disability and survivor benefits.

The commitments assumed in the regulations of Banco BPI Pension Plans are funded by Pension Funds and therefore Banco BPI is exposed to risks resulting from the valuation of the liabilities and the value of the related pension funds. The Pension Funds of Banco BPI are disclosed in Note 34.

The funding requirements of the Pension Fund are defined in Bank of Portugal Notice no. 4/2005, which establishes the requirement to fully fund (100%) pensions under payment and a minimum of 95% of the past service liability for current personnel.

³ Fully consolidated companies (Banco BPI, BPI Investimentos and BPI Private Equity)

The main actuarial assumptions used to calculate the pension liabilities of Employees are as follows:

	30-06-2019	31-12-2018
Demographic assumptions:
	TV 88/90-H	TV 88/90-H
Mortality Table	TV 88/90-M - 3 years 1	TV 88/90-M - 3 years 1
Disability table	EKV 80	EKV 80
Staff turnover	0%	0%
Decreases	By mortality	By mortality
Financial assumptions
Discount rate
Start of the period	2.0%	2.0%
End of the period	1.5%	2.0%
Pensionable salaries growth rate 2	1.0%	1.0%
Pensions growth rate	0.5%	0.5%

¹ Life expectancy considered for women was 3 years longer than considered in the mortality table used.

² The mandatory promotions under the current ACT and the projected seniority payments are considered separately, i.e., directly in the estimate of salaries evolution, corresponding to an increase of approximately 0.5%.

The past service liabilities for Pensioners and Employees of BPI and respective coverage by the Pension Fund present the following composition:

	30-06-2019	31-12-2018
Total past service liabilities	(1 796 280)	(1 639 393)
Net assets of the Pension Fund	1 718 500	1 612 353
Contributions to be transferred to the Pension Fund		5 547
Coverage surplus/(shortfall)	( 77 780)	( 21 493)
Coverage ratio of liabilities	96%	99%

The return of the pension fund in the first half of 2019 was 7.9% (non-annualised). The return of the pension fund in the period benefited from the value increase of the portfolio of fixed-rate bonds as a result of the decrease in market interest rates.

The movement in deviations during the first semester of 2019 was as follows:
Amount at 31-12-2018	( 212 528)
Deviation in pension funds return	111 908
Changing financial and demographic assumptions
Change in discount rate	( 158 831)
Deviation in pensions paid	( 840)
Other deviations	( 9 551)
Amount at 30-06-2019	( 269 842)

The Members of the Executive Committee of the Board of Directors of Banco BPI, S.A. and the former Board Members of Banco Português de Investimento benefit from a supplementary retirement and survivor pension plan, the funding coverage of which is ensured through a pension fund.

The main actuarial assumptions used to calculate the pension liabilities of Board members are as follows:

	30-06-2019	31-12-2018
Demographic assumptions:
Mortality Table	TV 88/90-H TV 88/90-M - 3 years 1	TV 88/90-H TV 88/90-M - 3 years 1
Disability table	EKV 80	EKV 80
Staff turnover	0%	0%
Decreases	By mortality	By mortality
Financial assumptions
Discount rate
Start of the period	2.0%	2.0%
End of the period	1.5%	2.0%
Pensionable salaries growth rate	0.5%	0.5%
Pensions growth rates 2	0.5%	0.5%

¹ Life expectancy considered for women was 3 years longer than considered in the mortality table used.

² Rate of increase corresponds to Consumer Price Index rate of change, as per the pension plan rules.

The past service liabilities for Board members and respective coverage by the Pension Fund present the following composition:

	30-06-2019	31-12-2018
Total past service liabilities	( 59 265)	( 56 103)
Net assets of the Pension Fund	57 030	50 005
Contributions to be transferred to the Pension Fund		5 413
Coverage surplus/(shortfall)	( 2 235)	( 685)
Coverage ratio of liabilities	96%	99%

In the first semester of 2019, the return of the pension fund was 5.8% (not annualized).

The changes in actuarial deviations during the first half of 2019 were as follows:

Amount at 31-12-2018	( 17 247)
Deviation in pension funds return	2 398
Change in financial and demographic assumptions
Change in discount rate	( 3 576)
Deviation in pensions paid	115
Other deviations	( 221)
Amount at 30-06-2019	( 18 531)

19. SHAREHOLDERS' EQUITY

Capital

At 30 June 2019 and 2018, Banco BPI's share capital was 1 293 063 t.euros, represented by 1 456 924 237 ordinary dematerialised registered shares with no nominal value.

Other equity instruments and treasury shares

This caption has the following composition:

	30-06-2019	31-12-2018
Other equity
Cost of shares to be made available to Group Employees		371
	0	371

The caption 'Other equity' includes the accrued costs of the share-based variable remuneration program (RVA) relating to shares to be made available.

From 2018 onwards, and with reference to the 2017 variable remuneration program, in accordance with the Remuneration Policies approved for the members of the Board of Directors and members of the Identified Collective, any payments in equity instruments will be made, preferably, in CaixaBank shares.

In 2017 and 2018, considering the process of acquisition of the entire share capital of Banco BPI by CaixaBank and the impossibility of delivering BPI shares, all previous years' programs involving Banco BPI shares and options were concluded.

Accumulated other comprehensive income

The main movements in Accumulated other comprehensive income are shown in detail in the tables of the interim consolidated statements of profit and loss and other comprehensive income.

Retained earnings and other reserves

This caption is made up as follows:

	30-06-2019	31-12-2018
Retained earnings
Legal reserve	244 789	153 358
Other reserves and retained earnings	1 638 485	1 001 557
Reserves of fully consolidated companies	20 078	396 380
Profit/(loss) generated on change of accounting policies		( 2 837)
	1 903 352	1 548 458
Other reserves
Merger reserve	2 530	2 530
Reserves of equity consolidated companies	119 546	124 294
	122 076	126 824

In accordance with Article 97 of the General Law on Credit Institutions and Financial Companies, approved by Decree-Law no. 298/92 of 31 December and amended by Decree-Law no. 201/2002 of 26 September, Banco BPI must appropriate at least 10% of its net income each year to a legal reserve until the amount of the reserve equals the greater of the amount of share capital or the sum of the free reserves plus retained earnings.

20. TAX POSITION

Tax assets and liabilities

The breakdown of tax assets and liabilities is as follows:

Tax assets
	30-06-2019	31-12-2018
Current tax assets	4 722	3 701
Recoverable VAT	16 013	20 049
Deferred tax assets	311 927	329 013
	332 662	352 763
Tax liabilities
	30-06-2019	31-12-2018
Current tax liabilities	2 805	2 750
Deferred tax liabilities	70 298	71 052
	73 103	73 802

Deferred tax assets and liabilities

Deferred tax assets and liabilities correspond to the amount of tax recoverable and payable in future periods resulting from temporary differences between the amount of assets and liabilities on the balance sheet and their tax base. Deferred tax losses carried forward and tax credits are also recognised as deferred tax assets.

In accordance with IAS 12, deferred tax assets and liabilities are recognised to the extent that it is probable that taxable profits will be available in the future against which they can be utilised. Accordingly, Banco BPI prepared future taxable income projections to support the deferred tax assets accounted for.

Deferred tax assets and liabilities were measured at the tax rates that are expected to apply to the period when the asset is expected to be realised or the liability settled.

The breakdown of deferred tax assets in 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Tax losses	20 570	20 372
Application of Art. 4 of the regime set forth in Law 61/2014	5 460	5 170
Taxed provisions and impairments	166 231	179 743
Tax deferral of the impact of the partial transfer of pension liabilities to the Social Security	15 925	16 682
Early retirement	29 277	33 059
Actuarial deviations	66 806	66 837
Other	7 658	7 150
	311 927	329 013

At 30 June 2019 the amount of deferred tax assets generated until 2015 that could benefit from the Special regime approved by Law no. 61/2014 of 26 August was 108 728 t.euros.

The breakdown of deferred tax liabilities in 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Taxable temporary differences in subsidiaries and associated companies (BCI)	8 417	8 045
Financial instruments at fair value	59 878	62 747
Other	2 003	260
	70 298	71 052

At 30 June 2019, the caption Financial instruments at fair value included 48 648 t.euros in deferred tax liabilities associated with the unrealised capital gain in BFA.

Profits distributed to Banco BPI by subsidiaries and associated companies are not taxed in Banco BPI as a result of application of the regime established in article 51 of the Corporate Income Tax Code, which provides for the elimination of double taxation of profits distributed.

In this context, Banco BPI does not recognise deferred tax assets or liabilities for deductible or taxable temporary differences relating to investments in associated companies, since the stake held by BPI is higher than 10% and has been held for more than one year, which enables it to be considered in the Participation Exemption regime, except for Banco Comercial e de Investimentos, in which the deferred tax liabilities relating to taxation in Mozambique of all the distributable profits are recognised.

BPI does not recognise deferred tax assets or liabilities for deductible or taxable temporary differences relating to investments in subsidiaries as it is unlikely that such differences will be reversed in the foreseeable future.

21. OFF BALANCE SHEET ITEMS

This caption is made up as follows:

	30-06-2019	31-12-2018
Loan commitments given
Irrevocable credit lines	164	161
Securities subscribed	432 622	475 233
Revocable commitments	2 231 585	2 125 400
	2 664 371	2 600 794
Financial guarantees given
Financial guarantees and sureties	231 790	241 355
Financial standby letters of credit	6 954	7 280
Documentary credits	157 578	192 339
	396 322	440 974
Other commitments given
Non-financial guarantees and sureties	1 174 701	1 169 116
Non-financial standby letters of credit	18 648	25 475
Term liabilities for annual contributions to the Deposit Guarantee Fund	38 714	38 714
Term liabilities for annual contributions to the Resolution Fund	8 713	6 715
Potential liability to the Investor Compensation Scheme	10 925	11 639
Other irrevocable commitments	979	732
	1 252 680	1 252 391
	4 313 373	4 294 159
Assets pledged as collateral
European System of Central Banks	7 546 673	7 939 263
Deposit Guarantee Fund	45 229	43 341
Investors Compensation Scheme	5 841	5 926
European Investment Bank	618 783	619 956
Reports	669 872	1 604 613
Other collateral	33	53
	8 886 431	10 213 152

The breakdown by stage of the exposure and impairment in guarantees and commitments at 30 June 2019 is as follows:

		Exposure				Impairments
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Loan commitments given	2 604 704	55 522	4 145	2 664 371	33	2	6	41
Financial guarantees given	392 138	3 069	1 115	396 322	348	217	606	1 171
Other commitments given	1 104 560	55 081	93 039	1 252 680	313	520	18 645	19 478
	4 101 402	113 672	98 299	4 313 373	694	739	19 257	20 690

The breakdown by stage of the exposure and impairment in guarantees and commitments at 31 December 2018 is as follows:

		Exposure				Impairments
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Loan commitments given	2 561 990	34 174	4 630	2 600 794	57	1	7	65
Financial guarantees given	436 855	3 240	879	440 974	402	36	549	987
Other commitments given	1 103 616	53 153	95 622	1 252 391	296	457	21 407	22 160
	4 102 461	90 567	101 131	4 294 159	755	494	21 963	23 212

22. NET INTEREST INCOME

This Caption is made up as follows:

	30-06-2019	30-06-2018
Interest income
Financial assets held for trading	25 173	20 360
Financial assets not designated for trading compulsorily measured at fair value through profit or loss	2 339	2 644
Financial assets at fair value through other comprehensive income	5 761	6 308
Financial assets at amortised cost
Debt securities	14 022	12 427
Loans and advances - central banks and other credit institutions	5 600	3 917
Loans and advances - Customers	194 008	186 305
Derivatives - Hedge accounting, interest rate risk	5 837	671
Interest on demand deposits at Banco de Portugal	( 3 055)
Other assets	621	2 294
Interest income on liabilities	2 694	1 209
Commissions received relating to amortised cost	11 216	10 506
	264 216	246 641
Interest expense
Financial liabilities held for trading	( 12 307)	( 10 006)
Financial liabilities at amortised cost
Deposits - Credit Institutions	( 3 399)	( 2 207)
Deposits - Customers	( 12 098)	( 9 643)
Debt securities issued	( 12 425)	( 10 682)
Derivatives - Hedge accounting, interest rate risk	( 7 089)	( 5 768)
Other liabilities	( 1 901)	( 1 045)
Interest expense on assets	( 2)	( 12)
Commissions paid relating to amortised cost	( 216)	( 118)
	( 49 437)	( 39 481)
Net interest income	214 779	207 160

23. DIVIDEND INCOME

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Financial assets at fair value through other comprehensive income
Banco de Fomento Angola, S.A.	46 003
SIBS - Sociedade Interbancária de Serviços	1 573	1 116
Other	680	355
	48 256	1 471

24. FEE AND COMMISSION INCOME AND EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Fee and commission income
On guarantees provided	6 820	6 878
On commitments to third parties	1 297	2 044
On other banking services provided	118 369	132 116
On operations performed on behalf of third parties	5 533	6 710
Other	250	194
Refund of expenses	2 200	5 644
Income from provision of sundry services	4 633	4 430
	139 102	158 016
Fee and commission expenses
For guarantees received	( 25)	( 24)
On financial instruments transactions	( 186)	( 131)
On banking services provided by third parties	( 5 900)	( 18 007)
On operations performed by third parties	( 1 538)	( 1 577)
Commission-equivalent expenses	( 3 133)	( 3 350)
Other	( 1 158)	( 291)
	( 11 940)	( 23 380)

The reduction in fee and commission income and fee and commission expenses in the first half of 2019, compared to the 1st half of 2018, is in part explained by the effect of the sale of the cards, acquiring and investment banking businesses, estimated in -18 million euros.

25. GAINS / (LOSSES) OF FINANCIAL ASSETS AND LIABILITIES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	( 347)	3 475
Financial assets at fair value through other comprehensive income
Debt securities		416
Financial assets at amortised cost
Debt securities	( 354)	( 514)
Financial liabilities at amortised cost	6	3 572
Other	1	1
Gains/(losses) on financial assets and liabilities held for trading, net	( 817)	26 189
Financial assets held for trading
Trading derivatives	( 10 583)	31 965
Debt securities	1 179	189
Equity instruments	8 587	( 5 965)
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	( 7 338)	60 314
Debt securities	1 896	( 1 898)
Equity instruments	( 9 234)	62 212
Gains/(losses) from hedge accounting (net)	971	425
Hedging derivatives (Note 9)	( 5 729)	8 846
Hedged items (Note 9)	6 700	( 8 421)
Exchange differences (gain/loss), net	1 264	( 16 598)
	( 6 267)	73 805

At 30 June 2019 and 2018 the caption "Gains / (losses) on financial assets and liabilities held for trading - Hedging derivatives" included:

(8 680) t.euros and 5 472 t.euros, respectively, concerning equity swaps contracted with Customers, which are hedged through a portfolio of equities, in the caption "Gains / (losses) on financial assets and liabilities held for trading - Equity instruments";
(2 213) t.euros and 8 486 t.euros, respectively, in gains and losses on the revaluation of CVAs (Credit Valuation Adjustments) in derivatives contracted with Customers;
17 163 t.euros on 30 June 2018 in gains/(losses) on derivatives to hedge foreign exchange risk.

At 30 June 2018, gains/(losses) on equity instruments not designated for trading compulsorily measured at fair value through profit or loss, included 59 581 t.euros relating to the sale of the equity holding in Viacer - Sociedade Gestora de Participações Sociais, Lda.

26. OTHER OPERATING INCOME AND EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018 Restated
Other operating income
Service provision agreements with CaixaBank Group companies	6 591	2 390
Gains on finance leases	9 986	6 355
Other operating income	1 884	2 720
	18 461	11 465
Other operating expenses
Subscriptions and donations	( 663)	( 1 354)
Contributions to the Deposit Guarantee Fund	( 35)	( 34)
Contribution to the Resolution Fund	( 6 970)	( 5 452)
Contributions to the Single Resolution Fund	( 11 321)	( 11 761)
Contribution to the Investor Compensation Scheme	( 7)	( 7)
Losses on finance leases	( 9 552)	( 6 103)
Other operating expenses	( 1 021)	( 517)
Indirect taxes	( 1 079)	( 1 271)
Direct taxes	( 4 859)	( 519)
	( 35 507)	( 27 018)

As of 30 June 2019, the direct taxes caption includes 4 600 t.euros relating to dividend taxes paid by BFA in Angola.

27. STAFF EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Staff expenses
Remuneration	( 96 011)	( 94 188)
End-of-career bonus	( 294)	( 235)
Other mandatory social costs	( 25 897)	( 25 784)
Pension costs
Current service cost	2 952	2 429
Interest cost relating to the liabilities	( 15 747)	( 16 495)
Income on plan assets computed based on the discount rate	15 445	16 636
Other	( 280)	( 381)
Other staff costs	( 2 400)	( 1 230)
	( 122 232)	( 119 248)
Costs with early retirements and terminations
Early retirements	1	( 3 353)
Voluntary terminations	( 17)	( 4 227)
	( 16)	( 7 580)
	( 122 248)	( 126 828)

28. OTHER ADMINISTRATIVE EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
General administrative expenses
Supplies
Water, energy and fuel	( 3 513)	( 3 430)
Consumables	( 953)	( 941)
Other	( 235)	( 209)
Services
Rents and leases	( 5 521)	( 20 522)
Communications and IT	( 21 932)	( 17 545)
Travel, lodging and representation	( 2 033)	( 2 431)
Advertising and publishing	( 4 780)	( 6 476)
Maintenance and repairs	( 5 753)	( 7 125)
Insurance	( 791)	( 925)
Fees	( 1 435)	( 1 936)
Legal expenses	( 1 806)	( 2 511)
Security and cleaning	( 2 374)	( 2 056)
Information services	( 1 242)	( 2 156)
Temporary labour	( 225)	( 1 122)
Studies, consultancy and auditing	( 7 396)	( 3 693)
SIBS	( 1 673)	( 1 626)
Other	( 13 753)	( 9 761)
	( 75 415)	( 84 465)

At 30 June 2019 and 2018 the caption Rents and leases included 313 t.euros and 14 341 t.euros, respectively, concerning rents paid for buildings and commercial spaces used by the Bank. Following the coming into force of IFRS16, costs with real estate lease agreements are now recognised as the amortisation of the right-of-use, in the income statement captions Depreciation and amortisation and Interest expense, amounting to 12 159 t.euros and 505 t.euros, respectively.

29. IMPAIRMENT OF FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Financial assets at amortised cost
Loans and advances
Net allowances
Credit Institutions	269	( 168)
Customers	2 067	6 728
Recovery of loans written off from assets	5 933	6 967
Debt securities
Net allowances	66	63
	8 335	13 590

30. GAINS / (LOSSES) ON DERECOGNITION OF NON-FINANCIAL ASSETS

The detail of this heading is as follows:
	30-06-2019	30-06-2018 Restated
Gains in non-financial assets
Gains in other tangible assets		43
		43
Losses in non-financial assets
Losses in other tangible assets	( 1 476)	( 1 847)
	( 1 476)	( 1 847)
	( 1 476)	( 1 804)

31. PROFIT/(LOSS) FROM NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE NOT QUALIFYING AS DISCONTINUED OPERATIONS

This caption is made up as follows:

	30-06-2019	30-06-2018 Restated
Profit/(loss) on assets received in settlement of defaulting loans
Properties	1 246	1 726
Equipment	( 14)	( 6)
Impairments on assets received in settlement of defaulting loans
Properties	( 1 518)	( 961)
Equipment	( 6)	( 19)
Impairments on other tangible assets
Properties	( 20)	( 37)
Other profit/(loss)	242	243
	( 70)	946

32. PROFIT/(LOSS) AFTER TAX FROM DISCONTINUED OPERATIONS

During the first semester of 2018, the contribution of BPI Gestão de Activos and BPI GIF and the respective capital gains on sale, were included in the income statement caption ''Profit/(loss) after tax from discontinued operations'', broken down as follows:

BPI Gestão de Activos and BPI GIF Net Interest Income ( 1) Technical result of insurance contracts Fee and commission income and expenses 5 747 Gains/(losses) in financial operations 3 Other operating income and expenses ( 118) Gross income 5 631 Administrative expenses ( 2 431) Net income before income tax 3 200 Taxes ( 741) Net profit/(loss) 2 459 Gain/(loss) on sale 61 755 Profit/(loss) after tax from discontinued operations 64 214

33. PROFIT

In the first six months of 2019 and 2018, the contribution of Banco BPI and its subsidiaries and associates to the consolidated net income was as follows:

	30-06-2019	30-06-2018
Banks
Banco BPI, S.A.	114 210	207 966
Banco Português de Investimento, S.A.	( 233)	( 1 613)
Banco de Fomento Angola, S.A.1		140 007
Banco Comercial e de Investimentos, S.A.R.L.	9 510	7 071
Asset management
BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliários, S.A.		1 724
BPI - Global Investment Fund Management Company, S.A.		735
BPI (Suisse), S.A.	638	985
Venture / development capital
BPI Private Equity - Sociedade de Capital de Risco, S.A.	( 473)	585
Inter-Risco - Sociedade de Capital de Risco, S.A.	( 20)	( 42)
Insurance
Cosec - Companhia de Seguros de Crédito, S.A.	2 965	2 111
Companhia de Seguros Allianz Portugal, S.A.	6 289	4 148
Other
BPI, Inc	( 4)	( 4)
BPI Madeira, SGPS, Unipessoal, S.A.	( 11)	( 20)
BPI Capital Africa		187
Unicre - Instituição Financeira de Crédito, S.A.	1 579	2 217
	134 450	366 057

1 In December 2018, the equity holding in BFA was reclassified to financial assets at fair value through other comprehensive income - equity instruments and BPI no longer appropriates its results (Note 10).

30-06-2018

34. RELATED PARTIES

Javier Pano Riera João Pedro Oliveira e Costa José Pena do Amaral Lluís Vendrell Natividad Capela Pedro Barreto Tomás Jervell

In accordance with IAS 24, the entities considered to be related to Banco BPI are:

those in which the Bank has direct or indirect significant influence over their management and financial policies Associated companies and jointly controlled entities and pension funds;
those that have direct or indirect significant influence over the management and financial policies of the Bank Shareholders, this is presumed to happen when the equity holding is greater than 20%;
the members of the key management personnel of Banco BPI, such being considered for this purpose the executive and nonexecutive members of the Board of Directors and individual persons and companies related with them.

In accordance with these criteria, BPI's related parties at 30 June 2019 were the following:

	Registered	Effective	Direct
Name of related entity	office	holding	holding
Shareholders of Banco BPI
CaixaBank Group	Spain	100.0%
Associated and jointly controlled entities of Banco BPI
Banco Comercial e de Investimentos, S.A.	Mozambique	35.7%	35.7%
Companhia de Seguros Allianz Portugal, SA	Portugal	35.0%	35.0%
Cosec - Companhia de Seguros de Crédito, SA	Portugal	50.0%	50.0%
Inter-Risco – Sociedade de Capital de Risco, S.A.	Portugal	49.0%
Unicre - Instituição Financeira de Crédito, SA	Portugal	21.0%	21.0%
Pension Funds of BPI Employees
Fundo de Pensões Banco BPI	Portugal	100.0%
Fundo de Pensões Aberto BPI Acções	Portugal	7.7%
Fundo de Pensões Aberto BPI Valorização	Portugal	38.6%
Fundo de Pensões Aberto BPI Segurança	Portugal	22.0%
Fundo de Pensões Aberto BPI Garantia	Portugal	7.6%
Members of the Board of Directors of Banco BPI
Fernando Ulrich
Pablo Forero
António Lobo Xavier
Alexandre Lucena e Vale
António Farinha Morais
António José Cabral
Cristina Rios Amorim
Fátima Barros
Francisco Barbeira
Gonzalo Gortázar Rotaeche
Ignacio Alvarez-Rendueles

At 30 June 2019 the total amount of assets, liabilities and off-balance sheet commitments relating to transactions with associated and jointly controlled companies, pension funds of BPI's Employees, Shareholders of Banco BPI, members of the Board of Directors and companies in which these hold significant influence, were broken down as follows:

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Assets
Cash and cash balances at central banks and other demand deposits	255				936
Financial assets held for trading	16 151
Financial assets not designated for trading compulsorily measured at
fair value through profit or loss - equity instruments	991
Financial assets at fair value through other comprehensive income -
equity instruments	648				50 025
Financial assets at amortised cost
Debt securities					90 000
Loans and advances - central banks and credit institutions		18 533
Loans and advances - Customers	175 567			3 056	45 717
Derivatives - Hedge accounting	6 946
Tangible assets	247
Intangible assets	11 362
Other assets	20 221	12 730
	232 388	31 263		3 056	186 678
Liabilities
Financial liabilities held for trading	15 628
Financial liabilities at amortised cost
Deposits - Customers	357 988	29 737	96 664	7 124	11 321
Deposits - Credit Institutions	5 646	3 218			30
Debt securities issued	304 501
Other financial liabilities	4	( 3)		24
Fair value changes of the hedged items in portfolio hedge of interest
rate risk	57
Provisions - Commitments and guarantees given					3
Other liabilities	945
	684 769	32 952	96 664	7 148	11 354
Shareholders' equity
Fair value changes of equity instruments measured at fair value
through other comprehensive income

Off-balance sheet items
Guarantees given and other contingent liabilities
Guarantees and sureties	341	11 903	60	3	3 892
Guarantees received				90	1 055
Commitments to third parties
Revocable commitments	56 725	5 000		36	29 570
Liabilities for services provided
Deposit and safekeeping of valuables	6 228 386	1 173 995	1 717 668	2 888	125 272
Other	37 663
Foreign exchange transactions and derivative instruments
Purchase	1 283 523
Sale	(1 113 048)
Written-off loans					200
	6 493 590	1 190 898	1 717 728	3 017	159 989

1 Includes CaixaBank Group and the companies which it controls.

At 31 December 2018 the total amount of assets, liabilities and off-balance sheet commitments relating to transactions with associated and jointly controlled companies, pension funds of BPI's Employees, Shareholders of Banco BPI, members of the Board of Directors and companies in which these hold significant influence, were broken down as follows:

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Assets
Cash and cash balances at central banks and other demand deposits	7 941
Financial assets held for trading	3 547
Financial assets at fair value through other comprehensive income -
equity instruments	618				50 000
Financial assets at amortised cost
Debt securities					55 000
Loans and advances - central banks and credit institutions	94	24 714
Loans and advances - Customers	200 661			7 319	50 756
Derivatives - Hedge accounting	3 312
Tangible assets	167
Intangible assets	12 728
Other assets	18 699	24 436
Non-current assets and disposal groups classified as held for sale
	247 767	49 150		7 319	155 756
Liabilities
Financial liabilities held for trading	1 421
Financial liabilities at amortised cost
Deposits - Customers	623 990	19 855	90 690	6 604	22 606
Deposits - Credit Institutions	14 485	1 272
Debt securities issued	304 514
Other financial liabilities	3	97		24
Fair value changes of the hedged items in portfolio hedge of interest
rate risk	86
Provisions - Commitments and guarantees given					1
	944 499	21 224	90 690	6 628	22 607
Shareholders' equity
Fair value changes of equity instruments measured at fair value
through other comprehensive income	( 188)
	( 188)
Off-balance sheet items
Guarantees given and other contingent liabilities
Guarantees and sureties	341	11 870	60	3	3 509
Guarantees received				2 298	1 783
Commitments to third parties
Revocable commitments	225	5 000		53	27 558
Irrevocable commitments					10 000
Liabilities for services provided
Deposit and safekeeping of valuables	5 817 006	1 114 160	1 598 194	6 754	38 584
Other					2 500
Foreign exchange transactions and derivative instruments
Purchase	997 170
Sale	( 751 779)
Written-off loans					200
	6 062 963	1 131 030	1 598 254	9 108	84 134

1 Includes CaixaBank Group and the companies which it controls.

At 30 June 2019, the total amount of results relating to transactions with Banco BPI Shareholders, associated and jointly controlled companies, pension funds of BPI's Employees, members of the Board of Directors and companies in which these hold significant influence, were broken down as follows:

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Results
Net interest income	( 4)	30	( 118)	( 2)	246
Dividend income					1 573
Fee and commission income	21 266	26 360	5	2	3
Fee and commission expenses	( 1 437)	( 22)
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	36
Gains/(losses) from hedge accounting, net	28
Other operating income	6 930
Administrative expenses - Other administrative expenses	( 2 130)	( 485)	( 6 360)
Depreciation	( 2 498)
Provisions or reversal of provisions - Commitments and guarantees
given					( 2)
Impairment/(reversal) of impairment losses on financial assets not
measured at fair value through profit or loss				6	( 15)
Profit/(loss) from non-current assets and disposal groups classified as	230
held for sale not qualifying as discontinued operations
	22 421	25 883	( 6 473)	6	1 805

1 Includes CaixaBank Group and the companies which it controls.

2 Includes the companies in which the Members of the Board of Directors have significant influence, not included in other categories.

At 30 June 2018, the total amount of results relating to transactions with Banco BPI Shareholders, associated and jointly controlled companies, pension funds of BPI's Employees, members of the Board of Directors and companies in which these hold significant influence, were broken down as follows:

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Results
Net interest income	( 4 595)	( 1 603)	( 396)	( 2)	245
Dividend income					1 116
Fee and commission income	17 272	25 717	207	1	2
Gains/(losses) from hedge accounting, net	105
Other operating income	2 446	30
Administrative expenses - Other administrative expenses	( 1 015)	( 479)	( 7 659)
Provisions or reversa of provisions - Commitments and guarantees
given		20			79
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss	2			8	246
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	230
Profit/(loss) before tax from discontinued operations	61 755
	76 200	23 685	( 7 848)	7	1 688

1 Includes CaixaBank Group and the companies which it controls.

35. WORKFORCE AND COMMERCIAL UNITS

In the periods of six months ended at 30-06-2019 and 30-06-2018 the average headcount was broken down as follows:

	30-06-2019		30-06-2018
	Men	Women	Men	Women
Directors1	8		8
Senior management	255	134	286	148
Other management staff	1 776	2 442	1 721	2 272
Other employees	97	140	213	322
	2 136	2 716	2 228	2 742

¹Executive Directors of Banco BPI.

In the periods of six months ended at 30-06-2019 and 30-06-2018 the headcount was broken down as follows:

	30-06-2019		30-06-2018
	Men	Women	Men	Women
Directors1	8		8
Senior management	251	133	285	147
Other management staff	1 776	2 449	1 700	2 271
Other employees	95	140	195	297
	2 130	2 722	2 188	2 715

¹Executive Directors of Banco BPI.

At 30 June 2019 and 31 December 2018 the commercial units were broken down as follows:

	30-06-2019	31-12-2018
Activity in Portugal	486	495
Branches	413	422
Premier centres	37	39
Corporate centres	36	34
	486	495

36. INFORMATION ON FAIR VALUE

The fair value of financial instruments is estimated, whenever possible, based on prices in an active market. A market is considered active, and therefore liquid, when it is accessed by equally knowledgeable counterparties and where transactions are carried out on a regular basis. For financial instruments for which there is no active market, due to lack of liquidity or regular transactions, valuation methods and techniques are used to estimate fair value.

36.1. Fair value on financial instruments

Financial instruments on the balance sheet at fair value are classified into levels using the hierarchy defined in IFRS 13.

Debt securities and equity instruments

Level 1: This category includes, in addition to financial instruments listed on regulated markets, bonds and participating units in harmonised funds, valued based on prices / quotations in active markets, published in trading platforms, taking into account also the liquidity and quality of the prices.

The classification of fair value in level 1 is made automatically by SIVA ("Asset Valuation Integrated System") whenever the financial instruments are traded in an active market, considering, for this purpose, that this is the case when:

(i) financial instruments are priced daily by at least 6 contributors, at least three of them with firm offers, or there is a multi-contributed price (price formed by several firm offers from contributors available in the market) (active market), or;
(ii) such financial instruments have been classified as level 1, in accordance with the rule referred to in the preceding paragraph, in at least 50% of the last 30 calendar days.

For financial instruments that do not have a history in the 30 days calendar available in the system, allocation of fair value level will be carried out taking into account the history available in SIVA.

Level 2: Financial instruments that have not been traded on an active market or that are valued by reference to valuation techniques based on market data for financial instruments having the same or similar characteristics in accordance with the rules referred to below are considered as level 2. Level 2 fair value classification is determined automatically by SIVA in accordance with the following rules:

a) Financial instruments are classified daily in Level 2 if they are:

(i) Quoted by less than 6 contributors, regardless of the type of price, or;
(ii) valued based on models using inputs which are mainly observable in the market (such as interest rate curves or exchange rates), or;
(iii) valued based on third party indicative purchase prices, based on observable market data, and
(iv) have been classified as level 1 and level 2, in accordance with the rules mentioned above, in at least 50% of the last 30 calendar days.

b) For financial instruments that do not have a history in the 30 days calendar available in the system, allocation of fair value level will be carried out taking into account the history available in SIVA.

Level 3: Financial instruments are classified as Level 3 when they do not meet the criteria to be classified as Level 1 or Level 2, or if their value is the result of inputs not based on observable market data, namely:

a) financial instruments not admitted to trading on a regulated market, which are valued based on valuation models for which there is no generally accepted market consensus as to the inputs to be used, namely:

(i) valuation based on Net Asset Value of non-harmonized funds, updated and disclosed by their managing companies;
(ii) valuation based on indicative prices disclosed by the entities involved in the issue of certain financial instruments, without an active market; or
(iii) valuation based on impairment tests, using indicators of the performance of the underlying operations (degree of protection by subordination of notes held, delinquency rates of the underlying assets, evolution of ratings, among others).

b) financial instruments valued at indicative purchase prices based on theoretical models, disclosed by specialized third parties.

Automatic classification proposed by SIVA relating to the level of fair value is made on the day of measurement, being supervised by a specialized team, in order to ensure that the classification of the fair value level is considered the most appropriate, according to the principles set forth herein.

Derivative financial instruments

Financial derivative transactions in the form of foreign exchange contracts, interest rate contracts, contracts on shares or share indices, inflation contracts or a combination of these, are carried out in over-the-counter (OTC) markets and in organized markets (mainly stock exchanges). For the over-the-counter derivatives (swaps and options) the valuation is based on generally accepted methods, always giving priority to values from the market.

Level 1: This category includes futures and options and other derivative financial instruments traded on regulated markets.
Level 2: Level 2 includes derivatives, traded on over-the-counter markets, without an optional component.

Valuation of these derivatives is made by discounting the cash flows of the operations, using interest rate market curves deemed appropriate for the currency concerned, prevailing at the time of calculation. The interest rates are obtained from reliable sources of information (e.g. Bloomberg or Reuters). The same interest rate curves are used in the projection of non-deterministic cash flows such as interest calculated from indices. The rates for required specific periods are determined by appropriate interpolation methods.

Level 3: Level 3 includes options and derivatives traded in the over-the-counter market, with embedded optional elements.

The valuation of options is carried out using statistical models that consider the market value of the underlying assets and their volatilities (considering that the latter are not directly observable in the market). The theoretical models used to value derivatives classified in Level 3 are of two types:

(i) For simpler options the Black-Scholes model and their derivatives is used (commonly used models by the market in the valuation of this type of operation). The unobservable market inputs (implied volatility of the underlying assets) are collected from Bloomberg.
(ii) For exotic options or complex derivatives incorporating optional elements for which there are no valuation models available, the Bank contracts specialized entities that perform the valuation of these operations based on specific models that they develop using criteria and methodologies generally accepted by the sector for these types of instruments. On 31 December 2018, there were no outstanding operations of this type, therefore the Bank did not use valuations prepared by these entities.

In accordance with the policy defined by the Banco BPI as regards the management of exposures in options, significant open positions are not maintained, the risk being managed mainly through "back-to-back" hedges and portfolio hedges. Thus, the impact of possible changes in the inputs used in the valuation of the options, in terms of the Bank's income statement, tends to be negligible.

Valuations thus obtained are, in the case of interbank transactions, valued against those used by the counterparties and whenever there are significant differences, the models or assumptions are reviewed.

The valuation of the non-optional components, not adjusted for credit risk (cash flows from operations), is made based on discounted cash flows, using a methodology similar to that used for derivatives without an optional component. Nevertheless, the derivative instrument is classified (as a whole) in level 3.

Financial instruments recorded in the balance sheet at amortised cost

The fair value of financial instruments recorded in the balance sheet at amortised cost is determined by Banco BPI through valuation techniques.

The valuation techniques used are based on market conditions applicable to similar operations as of the date of the financial statements, such as the value of their discounted cash flows based on interest rates considered as most appropriate, namely:

the cash flows relating to Financial assets at amortised cost Loans and advances to Central Banks and Credit Institutions, and Financial liabilities at amortised cost - deposits from Central Banks and Credit institutions, were discounted based on interest rate curves for interbank operations on the date of the financial statements, except for medium and long term resources, the cash-flows of which were discounted based on the interest rate curve used by the Bank for senior issuances;
in operations with Customers (Financial assets at amortised cost loans and advances to Customers and Financial liabilities at amortised cost - Customer deposits), the weighted average of the reference rates used by the Bank in the previous month to contract similar operations is considered;

for bonds issued (Financial liabilities at amortised cost - debt securities issued), the Bank considered the reference interest rates and spreads available in the market, considering the residual maturity and degree of subordination of the issuances. For subordinated debt, the Bank used issuance proposals submitted to the Bank by other credit institutions, as the basis for the construction of subordination spread curves, also considering the senior debt curve, the Portuguese public debt curve and the evolution of the spread between the Portuguese and German public debts.

For on demand operations (namely Cash and cash balances at central banks and other demand deposits, and deposits included in Financial liabilities at amortised), fair value corresponds to the respective balance-sheet value.

Note that the fair value presented for these financial instruments may not correspond to their realizable value in a sale or liquidation scenario, as it was not determined for that purpose.

The fair value of the financial assets on the balance sheet, broken down by levels, is as follows:

			30-06-2019					31-12-2018
			Fair value				Fair value
	Book value	Total	Level 1	Level 2	Level 3	Book value	Total	Level 1	Level 2	Level 3
Financial assets held for trading	246 123	246 123	83 351	126 374	36 398	226 772	226 772	83 415	122 162	21 195
Derivatives	152 050	152 050	247	125 329	26 474	131 708	131 708	712	119 162	11 834
Equity instruments	81 581	81 581	81 581			81 171	81 171	81 171
Debt securities	12 492	12 492	1 523	1 045	9 924	13 893	13 893	1 532	3 000	9 361
Financial assets not designated for trading compulsorily
measured at fair value through profit or loss	214 824	214 824	991		213 833	228 582	228 582			228 582
Equity instruments	151 403	151 403	991		150 412	168 594	168 594			168 594
Debt securities	63 421	63 421			63 421	59 988	59 988			59 988
Financial assets at fair value through other comprehensive
income	2 143 468	2 143 468	1 558 882	9 090	575 496	1 875 160	1 875 160	1 278 796	6 888	589 476
Equity instruments	586 130	586 130	1 544	9 090	575 496	597 740	597 740	1 376	6 888	589 476
Debt securities	1 557 338	1 557 338	1 557 338			1 277 420	1 277 420	1 277 420
Financial assets at amortised cost	25 950 868	26 247 336		793 942	25 453 394	25 671 943	27 899 914		720 510	27 179 404
Debt securities	3 685 784	3 667 400			3 667 400	3 516 814	3 516 513			3 516 513
Loans and advances	22 265 084	22 579 936		793 942	21 785 994	22 155 129	24 383 401		720 510	23 662 891
Central Banks and Credit Institutions	800 550	793 942		793 942		790 659	783 908		720 510	63 398
Customers	21 464 534	21 785 994			21 785 994	21 364 470	23 599 493			23 599 493
Derivatives - Hedge accounting	34 522	34 522		34 522		14 320	14 320		14 320
Total	28 589 805	28 886 273	1 643 224	963 928	26 279 121	28 016 777	30 244 748	1 362 211	863 880	28 018 657

The fair value of financial liabilities on the balance sheet, broken down by levels, is as follows:

			30-06-2019					31-12-2018
			Fair value					Fair value
	Book value	Total	Level 1	Level 2	Level 3	Book value	Total	Level 1	Level 2	Level 3
Financial liabilities held for trading	164 294	164 294	26	145 577	18 691	141 335	141 335	83	136 531	4 721
Derivatives	164 294	164 294	26	145 577	18 691	141 335	141 335	83	136 531	4 721
Financial liabilities at amortised cost	27 646 390	27 723 141		1 341 967	26 381 175	27 515 745	27 532 378		1 352 964	26 179 414
Deposits	25 860 466	25 879 881		1 341 967	24 537 914	26 166 596	26 158 936		1 352 964	24 805 972
Central Banks	1 350 100	1 341 967		1 341 967		1 352 843	1 352 964		1 352 964
Credit Institutions	1 399 694	1 391 214			1 391 214	1 853 501	1 841 891			1 841 891
Customers	23 110 672	23 146 701			23 146 701	22 960 252	22 964 081			22 964 081
Debt securities issued	1 490 319	1 547 667			1 547 667	1 118 195	1 142 488			1 142 488
Other financial liabilities	295 605	295 593			295 593	230 954	230 954			230 954
Derivatives - Hedge accounting	76 363	76 363		76 363		56 010	56 010		56 010
Total	27 887 047	27 963 798	26	1 563 907	26 399 865	27 713 090	27 729 723	83	1 545 506	26 184 134

To determine whether there had been significant changes in the value of the Bank's subsidiaries due to changes in assumptions or valuation parameters, the Dividend Discount Method (DDM) assessment of the Bank's most significant holding, BFA, included making sensitivity analysis of its value to the projected macroeconomic scenario for Angola, objective capital ratio, cost of capital and growth rate in perpetuity. It should be noted that all other methodologies used yielded higher values than obtained through the DDM.

The movement in level 3 financial assets at fair value and financial liabilities held for trading, during the first six months of 2019, and in 2018 was as	follows:
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------	----------

			30-06-2019					31-12-2018
	Financial assets and liabilities held for trading		trading compulsorily measured at fair	Financial assets not designated for value through profit or loss	Financial assets at fair value through other comprehensive income		Financial assets and liabilities held for trading	trading compulsorily measured at fair	Financial assets not designated for value through profit or loss	Financial assets at fair value through other comprehensive income
	Debt	Trading	Equity	Debt	Equity	Debt	Trading	Equity	Debt	Equity
	securities	derivatives1	instruments	securities	instruments	securities	derivatives1	instruments	securities	instruments
Balance at beginning of period	9 361	7 113	168 594	59 988	589 476	12 184	4 734	243 048	54 983	74 673
Total profit or loss	370		( 9 411)	3 070	( 15 271)	( 137)		117 183	( 1 814)	( 18 235)
Losses or gains	370	1 342	( 9 411)	3 070		( 3)	34 136	115 889	( 867)	( 13 683)
Adjustments to equity					( 15 271)	( 134)		1 294	( 947)	( 4 552)
Purchases	193		17 279	375	1 901	2 870		21 577	6 982	16 841
Liquidations and other		( 672)	( 26 049)	( 12)	( 610)	( 5 556)	( 31 757)	( 213 214)	( 163)	516 197
Balance at end of period	9 924	7 783	150 412	63 421	575 496	9 361	7 113	168 594	59 988	589 476

¹Net value

37. SUBSEQUENT EVENTS

The public deed of the merger by incorporation of Banco Português de Investimento S.A. and BPI Private Equity – Sociedade de Capital de Risco, S.A. into Banco BPI, SA. was signed on 25 July.

The merger had already been publicly announced in October 2018. The merger, and consequent extinction of the two companies, became effective on 31 July 2019, with retroactive effects on the accounts as of 1 January 2019. The aim of these mergers by incorporation and legal extinction of the referred companies is to simplify the structure of BPI.

Law no. 98/2019, amending the provisions of the Corporate Income Tax Code with regard to the possibility of tax deduction of loan impairments, was published on the Diário da República on 4 September. This new regime provides for the possibility of any loan impairments recognised being deducted from the taxable profit of financial institutions, aligning the tax regime with the accounting regime and thus avoiding the generation of new deferred tax assets in this respect. The only exclusions from this alignment of the tax regime with the accounting regime are credits where the debtor is the state, a subsidiary or company holding more than 10% of the financial institution's share capital and members of its corporate bodies. With regard to impairments recognised prior to the adoption of the new regime, the former regime will continue to apply. Also in accordance with the referred regime, during the next five years, starting in 2019, financial institutions will be allowed to choose when to start adopting the new tax regime. The decision to adopt the new regime must be notified to the Tax and Customs Authority up to 30 October of the year in which this choice will apply.

38. NOTE ADDED FOR TRANSLATION

These consolidated financial statements are a translation of financial statements originally issued in Portuguese in conformity with the International Financial Reporting Standards (IFRS) as endorsed by the European Union, some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

Review Report on the Condensed Consolidated Financial Statements

(Free translation from the original in Portuguese)

Introduction

We have reviewed the accompanying condensed consolidated financial statements of Banco BPI, S.A. ("Grupo", "Banco BPI" or "Banco"), which comprise the condensed consolidated statement of financial position as at June 30, 2019 (which shows total assets of Euros 31.669.064 thousand and total shareholder's equity of Euros 3.161.521 thousand, including a net profit of Euros 134.450 thousand, the condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six month period then ended, and the accompanying explanatory notes to these condensed consolidated financial statements.

Management's responsibility

The Management is responsible for the preparation of the condensed consolidated financial statements in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union, as well as to create and maintain appropriate systems of internal control to enable the preparation of condensed consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the accompanying condensed consolidated financial statements. We conducted our review in accordance with ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Those standards require that we conduct the review in order to conclude whether anything has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union.

A review of financial statements is a limited assurance engagement. The procedures performed mainly consist of making inquiries and applying analytical procedures, and evaluating the evidence obtained.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing (ISAs). Accordingly, we do not express an opinion on these consolidated financial statements.

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Receção: Palácio Sottomayor, Avenida Fontes Pereira de Melo, nº16, 1050-121 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc. pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that accompanying condensed consolidated financial statements of Banco BPI, S.A. as at June 30, 2019 are not prepared, in all material respects, in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union.

September 27, 2019

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda represented by:

José Manuel Henriques Bernardo, R.O.C.

(This is a translation, not to be signed)

EXPLANATION ADDED FOR TRANSLATION (This report is a translation of a report originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.)

This page was intentionally left blank.

Banco BPI, S.A.

Condensed interim individual financial statements as at 30 June 2019

BANCO BPI, S.A. CONDENSED INTERIM INDIVIDUAL BALANCE SHEETS AS OF 30 JUNE 2019 AND 31 DECEMBER 2018

		(Amounts expressed in thousand euros)
	Notes	30-06-2019	31-12-2018
ASSETS
Cash and cash balances at central banks and other demand deposits	8	1 898 096	2 336 030
Financial assets held for trading	8	246 123	226 772
Financial assets not designated for trading compulsorily measured at fair value through profit or loss	8	406 013	437 666
Equity instruments		138 041	154 527
Debt securities		267 972	283 139
Financial assets at fair value through other comprehensive income	8	2 135 427	1 868 893
Equity instruments		578 140	591 523
Debt securities		1 557 287	1 277 370
Financial assets at amortised cost	8	29 810 506	29 705 103
Debt securities		7 546 057	7 556 295
Loans and advances - Central Banks and other Credit Institutions		800 651	790 761
Loans and advances - Customers		21 463 798	21 358 047
Derivatives - Hedge accounting	9	34 522	14 320
Fair value changes of the hedged items in portfolio hedge of interest rate risk		61 153	26 719
Investments in joint ventures and associates	10	302 490	302 379
Tangible assets	11	143 858	66 786
Intangible assets	12	51 512	55 037
Tax assets	20	330 303	350 249
Other assets	13	224 413	363 239
Non-current assets and disposal groups classified as held for sale	14	26 944	33 173
Total Assets		35 671 360	35 786 366
LIABILITIES
Financial liabilities held for trading	15	164 294	141 335
Financial liabilities at amortised cost	15	31 836 612	31 901 779
Deposits - Central Banks		1 350 100	1 352 843
Deposits - Credit Institutions		1 421 955	1 873 248
Deposits - Customers		23 294 559	23 144 139
Debt securities issued		1 361 622	872 864
Memorandum items: subordinated liabilities		304 501	304 514
Other financial liabilities		4 408 376	4 658 685
Derivatives - Hedge accounting	9	76 363	56 010
Fair value changes of the hedged items in portfolio hedge of interest rate risk		25 324	3 594
Provisions	16	43 139	65 457
Pending legal issues and tax litigation		22 450	42 245
Commitments and guarantees given		20 689	23 212
Tax liabilities	20	57 857	56 376
Other liabilities	17	478 245	513 198

Total Liabilities		32 681 834	32 737 749
SHAREHOLDERS' EQUITY
Capital	19	1 293 063	1 293 063
Other equity	19		322
Accumulated other comprehensive income	19	( 280 240)	( 229 568)
Items that will not be reclassified to profit or loss		( 286 548)	( 231 495)
Tangible assets
Actuarial gains/ (losses) on defined benefit pension plans		( 326 489)	( 283 499)
Fair value changes of equity instruments measured at fair value through other comprehensive income		39 941	52 004
Items that may be reclassified to profit or loss		6 308	1 927
Fair value changes of debt instruments measured at fair value through other comprehensive income		6 308	1 927
Retained earnings	19	1 842 269	1 067 959
Other reserves	19	2 530	2 530
Profit/(loss) attributable to owners of the parent		131 904	914 311
Total Equity		2 989 526	3 048 617
Total Equity and Total Liabilities		35 671 360	35 786 366

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM INDIVIDUAL STATEMENTS OF PROFIT OR LOSS FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

	(Amounts expressed in thousand euros)
	Notes	30-06-2019	30-06-2018 Restated
Interest income	22	267 635	250 735
Interest expenses	22	( 49 561)	( 40 118)
NET INTEREST INCOME		218 074	210 617
Dividend income	23	60 988	70 973
Fee and commission income	24	135 233	150 926
Fee and commission expenses	24	( 11 937)	( 23 685)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	25	3 619	( 89)
Gains/(losses) on financial assets and liabilities held for trading, net	25	( 817)	26 189
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	25	( 6 847)	59 989
Gains/(losses) from hedge accounting, net	25	971	425
Exchange differences (gain/loss), net	25	1 275	( 16 575)
Other operating income	26	18 383	11 445
Other operating expenses	26	( 35 950)	( 31 744)
GROSS INCOME		382 992	458 471
Administrative expenses		( 194 476)	( 203 497)
Staff expenses	27	( 119 705)	( 121 494)
Other administrative expenses	28	( 74 771)	( 82 003)
Depreciation and amortisation		( 26 127)	( 10 241)
Provisions or reversal of provisions	16	2 390	( 2 450)
Commitments and guarantees given		2 522	( 2 272)
Other provisions		( 132)	( 178)
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss	29	8 335	13 590
Financial assets at amortised cost		8 335	13 590
Impairment/(reversal) of impairment in subsidiaries, joint ventures and associates	10	106
Impairment/(reversal) of impairment on non-financial assets		1 672
Gains/(losses) on derecognition of non-financial assets, net	30	( 1 476)	( 1 806)
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	31	( 3)	948
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS		173 413	255 015
Tax expense or income related to profit or loss from continuing operations		( 41 509)	( 43 949)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS		131 904	211 066
Profit/(loss) after tax from discontinued operations	32		77 658
Profit/(loss) before tax from discontinued operations			77 658
PROFIT/(LOSS) FOR THE PERIOD		131 904	288 724
PROFIT OR LOSS (-) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT		131 904	288 724

Earnings per share (euros)
Basic	5	0.091	0.198
Diluted	5	0.091	0.198
Earnings per share from continuing operations (euros)
Basic	5	0.091	0.145
Diluted	5	0.091	0.145
Earnings per share from discontinued operations (euros)
Basic	5		0.053
Diluted	5		0.053

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM INDIVIDUAL STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

	(Amounts expressed in thousand euros)
	30-06-2019	30-06-2018
PROFIT/(LOSS) FOR THE PERIOD	131 904	288 724
Other comprehensive income	( 50 672)	131 693
Items that will not be reclassified to profit or loss	( 55 053)	131 058
Actuarial gains/ (losses) on defined benefit pension plans	( 58 421)	100 536
Fair value changes of equity instruments measured at fair value through other comprehensive income	( 13 284)	444
Income tax relating to items that will not be reclassified	16 652	30 078
Items that may be reclassified to profit or loss	4 381	635
Debt securities classified as fair value financial assets through other comprehensive income	6 034	875
Valuation gains/(losses) taken to equity	8 576	1 291
Transferred to profit or loss	( 2 542)	( 416)
Income tax relating to items that may be reclassified to profit or loss	( 1 653)	( 240)
Total comprehensive income for the period	81 232	420 417
Attributable to owners of the parent	81 232	420 417

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM INDIVIDUAL STATEMENTS OF CHANGES IN EQUITY FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

							(Amounts expressed in thousand euros)
	Capital	Other equity (Note 19)	Accumulated other comprehensive income (Note 19)	Retained earnings (Note 19)	Other reserves (Note 19)	Treasury shares	Profit/(loss) for the period	Shareholders equity
Opening balances at 31 December 2017	1 293 063	2 276	( 257 695)	862 853	2 530	( 377)	232 774	2 135 424
Effect of changes in accounting policies (IFRS 9)			1 756	( 27 556)				( 25 800)
Opening balances at 1 January 2018	1 293 063	2 276	( 255 939)	835 297	2 530	( 377)	232 774	2 109 624
Transfer to reserves and retained earnings				232 774			( 232 774)
Variable Remuneration program ("RVA")		( 719)						( 719)
Comprehensive income in the first semester of 2018			131 693				288 724	420 417
Opening balances at 30 June 2018	1 293 063	1 557	( 124 246)	1 068 071	2 530	( 377)	288 724	2 529 322
Variable Remuneration program ("RVA")		( 1 235)		( 112)				( 1 347)
Sale / purchase of preferred shares						377		377
Comprehensive income in the second semester of 2018			( 105 322)				625 587	520 265
Opening balances at 31 December 2018	1 293 063	322	( 229 568)	1 067 959	2 530		914 311	3 048 617
Transfer to reserves and retained earnings				914 311			( 914 311)
Dividends distributed				( 140 000)				( 140 000)
Variable Remuneration program ("RVA")		( 322)						( 322)
Comprehensive income in the first semester of 2019			( 50 672)				131 904	81 232
Other changes in equity				( 1)				( 1)
Balances at 30 June 2019	1 293 063		( 280 240)	1 842 269	2 530		131 904	2 989 526

The accompanying notes are an integral part of these financial statements.

CONDENSED INTERIM INDIVIDUAL STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED ON 30 JUNE 2019 AND 30 JUNE 2018

	(Amounts expressed in thousand euros)
	30-06-2019	30-06-2018
Cash flows from/(used in) operating activities
Interest, commissions and other income received Interest, commissions and other expenses paid	428 797 ( 109 021)	452 707 ( 97 978)
Dividends received 1	48 158
Recovery of overdue loans and interest and gains/(losses) on the sale of real estate received in settlement of defaulting loans	6 373	7 326
Payments to staff and suppliers	( 224 141)	( 207 312)
Net cash flow from income and expenses	150 166	154 743
Decreases (increases) in:
Financial assets held for trading, at fair value through profit or loss, at fair value through other comprehensive income and available-for-sale	( 219 427)	5 992 064
Financial assets at amortised cost - Central Banks and other Credit Institutions	( 97 327)	( 464 947)
Financial assets at amortised cost - Customers	( 177 100)	( 6 824 902)
Other operating assets	200 683	( 195 152)
Net cash flow from operating assets	( 293 171)	( 1 492 937)
Increases (decreases) in:
Financial liabilities measured at amortised cost - Central Banks and other Credit Institutions	( 450 735)	1 315 770
Financial liabilities measured at amortised cost - Customers and other	168 967	1 379 408
Financial liabilities held for trading	( 20 125)	11 617
Other operating liabilities	( 67 772)	( 8 644)
Net cash flow from operating liabilities	( 369 665)	2 698 151
Contributions to Pension Funds	( 10 139)	( 11 780)
Income tax paid	( 25 064)	6 339
	( 547 873)	1 354 516
Cash flows from/(used in) investing activities
Sale of equity holding in BPI Vida		75 000
Sale of equity holding in BPI GIF		8 000
Purchase of other tangible assets and intangible assets	( 10 129)	( 8 998)
Sale of other tangible assets	883	2 308
Dividends received from joint ventures and associates	7 752	45 698
	( 1 494)	122 008
Cash flows from /(used in) financing activities
Liabilities relating to assets not derecognised in securitisation operations (Note 15)	( 315 497)	( 116 426)
Issuance of debt securities and subordinated debt (Note 15)	500 000	452
Redemption of debt securities (Note 15)	( 7 980)	( 210 581)
Purchase and sale of own debt securities and subordinated debt (Note 15)	( 114)	( 693)
Interest on debt instruments and subordinated debt	( 11 977)	( 8 425)
Dividends distributed	( 140 000)
	24 432	( 335 673)
Net increase / (decrease) in cash and cash equivalents
Exchange variation occurred in the period	( 1 626)	334
Net increase / (decrease) in cash and cash equivalents	( 523 309)	1 140 520
Cash and cash equivalents at beginning of the period	2 663 886	1 063 452
Cash and cash equivalents at the end of the period	2 138 951	2 204 306
Cash and deposits at Central Banks (Note 8)	1 775 493	2 081 669
Deposits at other credit institutions (Note 8)	123 176	120 748
Cheques for collection and other cash items (Note 8)	62 879	1 473
Very short term applications (Note 8)	177 403	416
Cash and cash equivalents	2 138 951	2 204 306
Cash and cash equivalents by currency
EUR	1 865 444	2 163 439
USD	151 542	11 131
AKZ	67 086
Other currencies	54 880	29 736
Cash and cash equivalents	2 138 951	2 204 306

¹ At 30 June 2019, includes 45 997 t.euros dividends received from Banco de Fomento Angola, deposited in AKZ in a currente account at BFA in Angola.

The accompanying notes are an integral part of these financial statements.

The Registered Accountant The Executive Board

Alberto Pitôrra Chairman Pablo Forero Members Alexandre Lucena e Vale António Farinha Morais Francisco Barbeira Ignacio Alvarez-Rendueles João Pedro Oliveira e Costa José Pena do Amaral Pedro Barreto

Banco BPI, S.A.

Notes to the condensed interim individual financial statements at 30 June 2019

(Amounts in thousand euros - t.euros – save otherwise expressly indicated)

(These notes are a translation of notes originally issued in Portuguese – Note 37)

NOTES INDEX	PAGE
1. Financial group129
2. Bases of presentation and main accounting policies131
A) Bases of presentation 131
B) Main accounting policies136
3. Risk management139
4. Solvency management 159
5. Dividend distribution and earnings per share 160
6. Segments 161
7. Disclosure of the remuneration of the corporate bodies164
8. Financial assets 165
9. Derivatives – hedge accounting 170
10. Investments in joint ventures and associates170
11. Tangible assets171
12. Intangible assets171
13. Other assets172
14. Non-current assets and liabilities and disposal groups classified as available for sale 172
15. Financial liabilities174
16. Provisions and contingent liabilities 176
17. Other liabilities178
18. Liabilities for pensions and other benefits179
19. Shareholders' equity 181
20. Tax position182
21. Off balance sheet items184
22. Net interest income185
23. Dividend income 185
24. Fee and commission income and expenses186
25. Gains / (losses) of financial assets and liabilities187
26. Other operating income and expenses 187
27. Staff expenses188
28. Other administrative expenses188
29. Impairment of financial assets not measured at fair value through profit or loss189
30. Gains / (losses) on derecognition of non-financial assets189
31. Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations 189
32. Profit/(loss) after tax from discontinued operations189
33. Related parties190
34. Workforce and commercial units194
35. Information on fair value195
36. Subsequent events200
37. Note added for translation 200

1. FINANCIAL GROUP

As of 30 June 2019, Banco BPI on a consolidated basis, was made up of the following companies:

	Head office	Shareholders equity 1	Assets	Profit / (loss) for the period Direct holding		Effective holding	Consolidation / Recognition method
Banks
Banco BPI, S.A.	Portugal	2 989 527	35 699 752	131 904
Banco Português de Investimento, S.A.	Portugal	23 200	26 180	( 197)	100.00%		100.00% Full consolidation
Banco Comercial e de Investimentos, S.A.	Mozambique	253 054	2 374 218	29 230	35.67%	35.67%	Equity method
Asset Management
BPI (Suisse), S.A.	Switzerland	10 431	12 142	663	100.00%		100.00% Full consolidation
Venture / development capital
BPI Private Equity - Sociedade de Capital de
Risco, S.A.	Portugal	32 319	35 893	( 439)	100.00%		100.00% Full consolidation
Inter-Risco – Sociedade de Capital de Risco, S.A.	Portugal	901	1 257	( 33)		49.00%	Equity method
Insurance
Cosec – Companhia de Seguros de Crédito, S.A.	Portugal	46 729	122 667	4 947	50.00%	50.00%	Equity method
Companhia de Seguros Allianz Portugal, S.A.	Portugal	190 439	1 326 623	17 101	35.00%	35.00%	Equity method
Other
BPI, Inc.	USA	748	749	( 4)	100.00%		100.00% Full consolidation
BPI Madeira, SGPS, Unipessoal, S.A.	Portugal	170 010	170 060	( 11)	100.00%		100.00% Full consolidation
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	90 694	404 637	7 515	21.01%	21.01%	Equity method

Note: Unless otherwise indicated, all amounts are as of 30 June 2019 (accounting balances before consolidation adjustments).

1 Includes net profit (loss) for the period.

The vehicles through which Banco BPI's debt securitisation operations are carried out are recorded in the individual financial statements according to BPI's continued involvement in these operations, determined on the basis of the percentage of the equity interest held in the respective vehicles. As of 30 June 2019, BPI held 100% of the equity pieces in those vehicles all issued through SAGRES - Sociedade de Titularização de Créditos, S.A., are as follows:

Securitisation of residential mortgage loans Douro Mortgages No. 2
Securitisation of residential mortgage loans Douro Mortgages No. 3
Securitisation of loans to SMEs Douro SME No. 2

On 21 June 2019 the notes under the Securitisation of residential mortgage loans - Douro Mortgages No. 1 were reimbursed in advance.

As of 31 December 2018, Banco BPI on a consolidated basis, was made up of the following companies:

		Head office Shareholders equity1	Assets	Profit / (loss)	for the period Direct holding	Effective holding	Consolidation / Recognition method
Banks
Banco BPI, S.A.	Portugal	3 048 617	35 786 366	914 311
Banco Português de Investimento, S.A.	Portugal	24 391	29 688	2 083	100.00%	100.00%	Full consolidation
Banco Comercial e de Investimentos, S.A.	Mozambique	236 020	2 187 067	57 310	35.67%	35.67%	Equity method
Asset Management
BPI (Suisse), S.A.	Switzerland	9 626	11 398	2 936	100.00%	100.00%	Full consolidation
Venture / development capital
BPI Private Equity - Sociedade de Capital de
Risco, S.A.	Portugal	30 988	34 731	1 066	100.00%	100.00%	Full consolidation
Inter-Risco – Sociedade de Capital de Risco, S.A. Portugal		934	1 194	( 61)		49.00%	Equity method
Insurance
Cosec – Companhia de Seguros de Crédito, S.A.	Portugal	46 508	115 247	5 504	50.00%	50.00%	Equity method
Companhia de Seguros Allianz Portugal, S.A.	Portugal	147 936	1 283 060	( 2 669)	35.00%	35.00%	Equity method
Other
BPI, Inc.	USA	743	744	( 5)	100.00%	100.00%	Full consolidation
BPI Madeira, SGPS, Unipessoal, S.A.	Portugal	170 023	170 484	18 768	100.00%	100.00%	Full consolidation
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	102 391	349 749	15 343	21.01%	21.01%	Equity method

Note: Unless otherwise indicated, all amounts are as of 31 December 2018 (accounting balances before consolidation adjustments).

1 Includes net profit (loss) for the period.

2. BASES OF PRESENTATION AND MAIN ACCOUNTING POLICIES

A) Bases of presentation

The condensed interim individual financial statements were prepared based on the accounting records of Banco BPI, in conformity with the International Accounting Standards / International Financial Reporting Standards (IAS/IFRS) as endorsed by the European Union and in force on 1 January 2018, in accordance with Regulation (EC) 1606/2002 of 19 July of the European Parliament and of the Council, transposed into Portuguese legislation through Bank of Portugal Notice no. 5/2015 of 30 December.

The individual financial statements have been prepared on a going concern basis, as provided for in IAS 1 – Presentation of financial statements.

The individual financial statements as of 31 December 2018 have been approved by the Board of Directors of Banco BPI at April 15 and by the general meeting of shareholders at 29 April 2019

In the preparation of the 2018 individual annual accounts, the consolidation principles, accounting policies and valuation criteria described in Note 2. Bases of Presentation and Main Accounting Policies, in the 2018 Annual Report, were applied with a view to obtaining a true picture of the financial situation of BPI as at 31 December 2018 as well as of its results, changes in shareholders' equity and cash flows at that date.

Banco BPI's condensed interim individual financial statements for 30 June 2019 were prepared based on the same principles and accounting policies described in Note 2 to the individual financial statements at 31 December 2018, applying in particular IAS 34 (Interim financial reporting), except those resulting from regulatory changes that came into effect on 01 January 2019, which are detailed in the section Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC), as endorsed by the European Union.

The condensed interim individual financial statements as of 30 June 2019 have been approved by the Executive Committee of the Board of Directors of Banco BPI at 24 September 2019.

In the preparation of the consolidated financial statements, BPI follows the historical cost convention, modified when applicable for the measurement at fair value of:

Financial assets and liabilities held for trading
Financial assets not designated for trading compulsorily measured at fair value through profit or loss
Financial assets at fair value through other comprehensive income

Derivatives

Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Union

At 1 January 2019 the following accounting standards came into force (Note 2. B - Main accounting policies):

Standards and interpretations	Name
IFRS 16	Leases
Amendment to IFRS 9	Accounting treatment options for financial assets with negative compensation features
Amendment to IAS 19	Requirement to use updated assumptions for the calculation of remaining responsibilities
Amendment to IAS 28	Long-term investments in associates and joint ventures
Annual improvements to IFRS 2015-2017	Clarifications to: IAS 23, IAS 12, IFRS 3 and IFRS 11
Interpretation to IFRIC 23	Uncertainty over income tax treatments

On 1 January 2019, Banco BPI adopted the following accounting standards:

IFRS 16 (new), 'Leases'. This new standard replaces IAS 17 'Leases' with a significant impact on the accounting by lessees who are now required to recognise a lease liability reflecting future lease payments and a "right-of-use asset" for all lease contracts, except for certain short-term leases and for low-value assets. The definition of a lease contract also changed, being based on the "right to control the use of an identified asset". The application of IFRS 16 may be retrospective or retrospective modified. The impacts from adoption of this standard are described in this note – Comparability of the Information.
IFRS 9 (amendment), 'Prepayment features with negative compensation'. The amendment introduces the possibility to classify certain financial assets with negative compensation features at amortised cost, provided that specific conditions are fulfilled, instead of being classified at fair value through profit or loss. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IAS 19 (amendment), Plan amendment, Curtailment or Settlement'. This amendment requires an entity to: i) use updated assumptions to determine the current service cost and net interest for the remaining period after amendment, reduction or settlement of the plan; and ii) recognise in the income statement as part of the cost of past services, or as a gain or loss in the settlement, any reduction in the excess of coverage, even if the excess of coverage had not been previously recognised, due to the impact of the asset ceiling. The impact on asset ceiling is recognised in Other Comprehensive Income, not being allowed to recycle it through profit for the year. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IAS 28 (amendment), 'Long-term interests in Associates and Joint Ventures'. The amendment clarifies that long-term investments in associates and joint ventures (components of an entity's investments in associates and joint ventures), that are not being measured through the equity method, are to be measured in accordance with IFRS 9 – 'Financial instruments'. The long-term investments in associates and joint ventures are subject to the expected credit loss impairment model, prior to being added, for impairment test purposes, to the whole investment in associates and joint ventures, when impairment indicators exist. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
Improvements to standards 2015 – 2017. The 2015-2017 annual improvements impact: IAS 23, IAS 12, IFRS 3 and IFRS 11. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
IFRIC 23 (new), 'Uncertainty over income tax treatment'. This is an interpretation of IAS 12 'Income tax', and refers to the measurement and recognition requirements to be applied when there is uncertainty as to the acceptance of an income tax treatment by the tax authorities. In the event of uncertainty as to the position of the tax authority on a specific transaction, the entity shall make its best estimate and record the income tax assets or liabilities under IAS 12, and not under IAS 37 – 'Provisions, contingent liabilities and contingent assets', based on the expected value or the most probable value. The application of IFRIC 23 may be retrospective or retrospective modified. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.

The standards (new and amendments) that will become effective, on or after 1 January 2020, not yet endorsed by the EU, are the following:

Standards and interpretations issued by the IASB

Standards and interpretations	Name	Mandatory application starting on:
Amendments to IFRS 3	Definition of a business	1 January 2020
Amendments to IAS 1 and IAS 8	Definition of material	1 January 2020
Conceptual structure	Amendments to references to other IFRS	1 January 2020
IFRS 17	Insurance contracts	1 January 2021

IFRS 3 (amendment), 'Definition of a business (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. The amendment revises the definition of a business in order to account for business combinations. The new definition requires that an acquisition include an input, as well as a substantial process that jointly generate outputs. Outputs are now defined as goods and services rendered to customers, that generate investment income and other income, and exclude returns as lower costs and other economic benefits for shareholders. Optional 'concentration tests' for the assessment if one transaction is the acquisition of an asset or a business combination, are allowed. This amendment will apply to transactions ocurring after its entry into force.
IAS 1 and IAS 8 (amendment), 'Definition of material' (effective for annual periods beginning on or after 1 January 2020). This amendment is still subject to endorsement by the European Union. The amendment revises the concept of material. Includes clarifications as to obscured information, its effect being similar to the omission or distortion of information; and also clarifications as to the term 'primary users of general purpose financial statements', defined as 'existing or potential investors, lenders and other creditors' that rely on general purpose financial statements to obtain a significant part of the information that they need. The future adoption of this amendment is not expected to have significant impact on the Bank's financial statements.
Conceptual framework, 'Amendments to references in other IFRS' (effective for annual periods beginning on or after 1 January 2020). These amendments are still subject to endorsement by the European Union. As a result of the publication of the new Conceptual Framework, the IASB introduced changes to the text of various standards and interpretations, like: IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, SIC 32, in order to clarify the application of the new definitions of asset / liability and expense / income, in addition to some of the characteristics of financial information. These amendments are retrospective, except if impractical. The future adoption of this amendments is not expected to have significant impacts on the Bank's financial statements.
IFRS 17 (new), 'Insurance contracts' (effective for annual periods beginning on or after 1 January 2021). This standard is still subject to endorsement by the European Union. This new standard replaces IFRS 4 and applies to all entities issuing insurance contracts, reinsurance contracts and investment contracts with discretionary participation characteristics. IFRS 17 is based on the current measurement of technical liabilities at each reporting date. The current measurement can be based on a complete "building block approach" or "premium allocation approach". The recognition of the technical margin is different depending on whether it is positive or negative. IFRS 17 is of retrospective application. Banco BPI does not have subsidiaries operating in the insurance business and therefore no effects on the Bank's financial statements are expected as a result of adoption of this standard.

Responsibility for the information and for the main estimates made

The preparation of the individual financial statements required to make certain judgements, estimates and assumptions in order to quantify some of the assets, liabilities, revenues, expenses and obligations recognised in them. These judgements, estimates and assumptions relate primarily to:

Impairment losses on financial assets and the associated guarantees based on their accounting classification imply the adoption of assumptions relating to: i) the consideration of "significant increase in credit risk" (SICR), ii) definition of default; and iii) the inclusion of forward-looking information (Note 8).
Fair value of some financial assets and liabilities (Note 35). The fair value of unlisted financial assets and derivatives was estimated based on valuation methods and financial theories, the results of which depend on the assumptions used.
Actuarial assumptions used to measure post-employment liabilities and commitments (Note 18). Retirement and survivor pension liabilities have been estimated based on actuarial tables, assumptions of the increase in pensions and salaries and discount rates. These assumptions are based on Banco BPI's expectations for the period during which the liabilities will be settled.
Current and deferred taxes have been recognised based on the tax legislation currently applicable to Banco BPI or on legislation already published for future application (Note 20). Different interpretations of tax legislation can influence the amount of income taxes. Deferred tax assets are recognised based on the assumption of future earnings and taxable income.
The measurement of investments in joint ventures and associates and determination of the share of profit/(loss) of these investments (Note 10).
The measurement of provisions and contingent liabilities and respective probability of occurring (Note 16).
The useful life of tangible assets, including rights-of-use assets and intangible assets (Notes 11 and 12).

Comparability of the information

The figures for 31 December 2018, as well as for the six-month period ended on 30 June 2018, included in the condensed interim individual financial statements, are presented for comparative purposes only.

IFRS 16 – "Leases"

The balance sheet items at 31 December 2018 relative to lease agreements were not restated and therefore their detail is not directly comparable with the information presented for 30 June 2019.

The impact of the adoption of IFRS16 on 1 January 2019, by balance sheet caption, was as follows:

	31-12-2018	Adoption IFRS 16	01-01-2019
Tangible assets	66 786	88 705	155 491
Total assets	35 786 366	88 705	35 875 071
Other financial liabilities	4 658 685	88 705	4 747 390
Total liabilities	32 737 749	88 705	32 826 454

Restatement of the income statement as of 30-06-2018

In relation to the income statement as of 30 June 2018, the following reclassifications were made between headings:

	30-06-2018	30-06-2018	Difference
	Restated
Interest income	250 735	250 735
Interest expenses	( 40 118)	( 40 118)
NET INTEREST INCOME	210 617	210 617
Dividend income	70 973	70 973
Fee and commission income	150 926	150 926
Fee and commission expenses	( 23 685)	( 23 685)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or
loss, net	( 89)	( 89)
Gains/(losses) on financial assets and liabilities held for trading, net	26 189	26 189
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through
profit or loss, net	59 989	59 989
Gains/(losses) from hedge accounting, net	425	425
Exchange differences (gain/loss), net	( 16 575)	( 16 575)
Other operating income	11 445	5 089	6 356
Other operating expenses	( 31 744)	( 25 590)	( 6 154)
GROSS INCOME	458 471	458 269	202
Administrative expenses	( 203 497)	( 203 497)
Staff expenses	( 121 494)	( 121 494)
Other administrative expenses	( 82 003)	( 82 003)
Depreciation and amortisation	( 10 241)	( 10 241)
Provisions or reversal of provisions	( 2 450)	( 2 450)
Commitments and guarantees given	( 2 272)	( 2 272)
Other provisions	( 178)	( 178)
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or
loss	13 590	13 590
Financial assets at amortised cost	13 590	13 590
Impairment/(reversal) of impairment on non-financial assets		( 1 015)	1 015
Gains/(losses) on derecognition of non-financial assets, net	( 1 806)	359	( 2 165)
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as
discontinued operations	948		948
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	255 015	255 015
Tax expense or income related to profit or loss from continuing operations	( 43 949)	( 43 949)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	211 066	211 066
Profit/(loss) after tax from discontinued operations	77 658	77 658
Profit/(loss) before tax from discontinued operations	77 658	77 658
Tax expense or income related to profit or loss from discontinued operations
PROFIT/(LOSS) FOR THE PERIOD	288 724	288 724
PROFIT OR LOSS (-) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	288 724	288 724

Gains on financial leases, in the amount of 6 356 t.euros, were reclassified from the caption "Gains or (-) losses on derecognition of non-financial assets, net" to the caption "Other operating income".
Losses on financial leases, in the amount of (6 104) t.euros, and other losses, (50) t.euros, were reclassified from the caption "Gains or (-) losses on derecognition of non-financial assets, net" to the caption "Other operating expenses"
Allowances net of impairment for assets received in settlement of defaulting loans and other tangible assets (1 015) t.euros, were reclassified from the caption "Impairment/(reversal) of impairment on non-financial assets" to "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations".
Gains and losses on assets received in settlement of defaulting loans and other tangible assets, 1 963 t.euros, were reclassified from the caption "Gains/(losses) on derecognition of non-financial assets, net" to the caption "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations".

B) Main accounting policies

Except as indicated below, Banco BPI's condensed interim individual financial statements as of 30 June 2019 were prepared using the same principles, accounting policies and criteria used for the 2018 individual annual accounts.

All accounting principles and measurement bases that could have a significant effect were applied in the preparation of the condensed interim individual financial statements.

For all the areas not stated in these condensed interim individual financial statements, the definitions, criteria and policies described in Note 2 of the 2018 individual annual report remain applicable.

2.1. Leases

Lessor

	Finance leases	Operating leases
	Operations where, substantially, all the risks and rewards inherent to the leased asset are transferred to the lessee.	Operations where, substantially, all the risks and rewards inherent to the leased asset, as well as its ownership, are maintained by the lessor.
Recognition as lessor	- Are recognised as a loan granted under the balance sheet caption "Financial assets at amortised cost" as the sum of the present value of all payments receivable by the lessee during the period of the leasing plus any non-guaranteed residual amount pertaining to the lessor.
(According to the economic purpose of the operation, regardless of its legal form)	- Include fixed payments (minus payments made to the lessor) as well as variable payments determined in accordance with an index or rate, and also the exercise price of the purchase option, if there is reasonable certainty that it will be exercised by the lessee, and penalties for termination by the lessee if the term of the lease reflects the exercise of the termination option.	The acquisition cost of the leased assets is recognised in the "Tangible assets" caption of the balance sheet.
	The financial income obtained as a lessor is recognised in the	- They are depreciated using the same criteria as for the remaining tangible assets for own use.
	income statement caption "Interest income".	- Income is recognised in the income statement caption "Other operating income".

	Remaining agreements		Accounted for as operating leases
Recognition as lessee	value (set at 6 000 euros)	Right-of-use asset ("Tangible assets")	Valued at cost and includes the initial valuation of the lease liability, payments made on or before the commencement date, initial direct costs, costs of dismantling or rehabilitation when there is an obligation to bear them.	Amortised on a straight-line basis and subject to impairment losses, in accordance with the treatment established for the remaining tangible and intangible assets.
	Agreements where the Accounting record is not of low	Lease liability ("Other financial liabilities")	Valued based on the present value of future lease payments not yet made on this date, using as discount rate the interest rate2 that the lessee would have to pay to borrow, with a similar maturity and guarantee, the funds necessary to obtain an asset of similar value to that of the right-of-use asset in a similar economic context.	Valued at amortised cost using the effective interest rate method and revalued (with the corresponding adjustment to the related right-of use asset) when there is a change in future payments due to renegotiation, index or rate changes or in the event of a re evaluation of the agreement's options.
		Open-end agreements: For these agreements, and based on the terms of Law 13/2019, the lessor may terminate the agreement by notifying the bank (the lessee) not less than 5 years in advance of the date on which he intends to terminate the agreement. Therefore a term of 5 years was considered for these agreements, starting on 1 January 2019.
	Term of the agreement		compensation): As a general rule, the lease term matches the initial agreement duration. For automatically renewable (annually or half-yearly) property leasing agreements with Banco BPI's Pension Fund, a term of 5 years1 was assumed, starting on 1 January 2019, taking into account that the pension fund in an entity related with the Bank, the agreements' automatic and constant renewal, and the fact that there is no economic incentive for the pension fund to exercise the termination options provided for in said agreements.
	underlying asset		Fixed-term agreements, with or without option of early termination by the Bank (with only a non-significant At the start date of the agreement Subsequently

² The Bank calculated these interest rates taking as a reference the cost of debt instruments, adding to the base market curve (swaps vs 6M Euribor) the covered and senior debt spreads for BPI.

3. RISK MANAGEMENT

3.1. Overview and risk factors

The following risk factors had a significant influence on BPI's management in the 1st half of 2019, due to their impact during the period and their long-term implications for the Bank:

Macroeconomic environment

The global economy maintains a considerable level of uncertainty, the main source of which has been the persistence of trade strains between the U.S. and China and their potential impact on the European Union economy. The meeting at the end of June between Trump and Xi could have been a starting point for the resumption of negotiations, however geopolitical uncertainty is likely to linger over the medium term.
In the Eurozone the activity indicators continue to point to moderate economic growth, even if the first quarter GDP growth was higher than expected. On the other hand, the European scenario remains marked by the difficulties in reaching an exit agreement for the United Kingdom (the Brexit), and the risk of a disorderly Brexit has increased.
The Portuguese economy stands out from the European feeble economic growth context, posting lower growth rates, but still close to 2%. Nevertheless, high geopolitical uncertainty and the moderate growth of our European partners could constrain the pace of Portuguese exports, and a slower than initially estimated pace of growth should be expected for the second half of the year. This context will likely deepen the goods account deficit, with the vigour of tourism being insufficient to prevent a widening of the external deficit in 2019. Robust growth and funding costs at record lows, together with a budget consolidation policy, should support the path of sustained reduction in the public debt ratio.

Regulatory Framework

The main regulatory developments and public consultations in the area of risk are outlined below:

Approval and publication in the Official Journal of the European Union (OJ) of the "Proposal of CRDV Package": on 16 April the European Union approved the review, started in November 2016 by the European Commission, of the so-called "banking package", which covers the CRD V, CRR II, BRRD II and SRMR II texts¹ . The review basically transposes the standards agreed by the Basel Committee on Banking Supervision (prior to the 2017 agreement on the completion of Basel III, the adoption of which will be addressed from the second half of 2019). The aforementioned legislative package came into force on 27 June 2019, with December 2020 as the deadline for the adoption of the directives, whereas the majority of the changes included in the CRR II regulation are applicable from June 2021.
Brexit, Contingency Action Plan: at the beginning of 2019, a set of legislative measures were adopted at national level to prepare for a no-deal Brexit scenario, namely: Law no 27-A/2019 of 28 March, which approves contingency measures to be applied in the event of a no-deal exit of the United Kingdom from the European Union, and Council of Ministers Resolution no. 48/2019, which identifies preparedness and contingency measures which the Portuguese Government proposes to adopt to minimize the effects of the United Kingdom's departure from the European Union on economic agents, companies, investment and tourism. In addition, the European Banking Association (EBA), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) have agreed on a template for a Memorandum of Understanding (MoU) establishing the bases for cooperation and information exchange between the EU and UK authorities.
Exposures associated with high risks: the EBA published its final guidelines, applicable from 1 July 2019, regarding the types of exposures to be associated with particularly high risk under Article 128 (3) of Regulation (EU) 575/2013 (CRR), which should be assigned a risk weight of 150% under the standardised approach.
On 25 February the EBA published the new Guidelines on Outsourcing, which update the previous guidelines on Outsourcing, published in 2006 (CEBS), and incorporate the recommendations of December 2017 on outsourcing to cloud service providers. These guidelines apply as of 30 September 2019, and affect all outsourcing contracts.
On 25 May the EBA completed a consultation on its Guidelines on Credit Risk Mitigation techniques for banks that use internal models with own estimates of LGD. The guidelines aim to eliminate existing differences in risk mitigation techniques, deriving from supervisory practices or from choices specific to the entity.

¹ The acronyms correspond to Capital Requirements Regulation and Directive (CRR/CRD), Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism Regulation (SRMR), respectively.

On 6 March the EBA published the final version of its Guidelines for the estimation of LGD appropriate for an economic downturn (Downturn LGD estimation), supplementing the EBA Guidelines on PD and LGD estimation, which will apply from 1 January 2021.
On 13 March the consultation period for the EBA Guidelines on ICT and security risk management ended. These guidelines establish the requirements applicable to credit institutions, investment firms and payment services providers in relation to the mitigation and management of their ICT and security risks.
Publication in the Official Journal of the European Union of Regulation 2019/630, amending Regulation (EU) 575/2013 (CRR) as regards minimum loss coverage for non-performing exposures (NPLs), or prudential backstop. This regulation establishes the deductions to own funds which must be made if the minimum coverage levels for new loans that become NPLs are not reached. The amended regulation came into force on 26 April 2019.
On 18 June, the extension of the mandate of the Technical Expert Group on Sustainable Finance (TEG), which aims to assist the European Commission in the implementation of the Action Plan for sustainable finance, was announced. Simultaneously, within the same framework, the European Commission has published new Guidelines on climate-related disclosures, as part of its Action Plan for Sustainable Finance.
On 19 June the EBA launched the consultation process on its draft Guidelines on Loan Origination and Monitoring with the aim of ensuring that the institutions have robust and prudent standards for credit risk taking, management and monitoring. The proposed guidelines ensure alignment with the regulations in force on consumer protection and the prevention of money laundering.
Enactment on 6 August 2019 of the Framework Law on Housing, which establishes, inter alia, that "residential mortgage borrowers in a very difficult economic situation may benefit from a legal protection regime that, among others, provides for the possibility of debt restructuring, transfer in lieu of payment, or alternative measures to foreclosure". In this context "the transfer in lieu of payment of the debt, extinguishing the debtor's obligations regardless of the value attributed to the property for this purpose" can only be contemplated if it has been contractually established, the credit institution being responsible for providing this information prior to entering into the contract.
Publication in the Diário da República of Law 23/2019, of 13 March 2019, which established full deposit protection against senior unsecured debt instruments in the event of a bank resolution.
Finally, on 12 February 12, publication in Diário da República of Law No. 15/2019, which introduces changes to the General Regime of Credit Institutions and Financial Companies, clarifying the powers of the Assembly of the Republic's Parliamentary Committees of Inquiry and establishing the duties of transparency and scrutiny to which capitalisation, resolution, nationalisation or liquidation operations of credit institutions resorting, directly or indirectly, to public funds, will be subject. Article 6 of this Law imposed on Banco de Portugal the obligation to prepare and deliver to the Assembly of the Republic an Extraordinary Report containing a set of "Relevant Information" concerning the "Covered Credit Institutions" in which, in the twelve years prior to the publication of that Law, any of the situations provided for therein have occurred.

3.2. Credit risk

3.2.1. Overview

Banco BPI receives, among others, the following collateral within the scope of its loan granting business:

Mortgages on own housing;
Mortgages on third-party property;
Deposit of assets;
Pledge of securities;
Guarantees provided by other credit institutions.

At 30 June 2019 the maximum exposures to credit risk on the balance sheet, including counterparty risk, was as follows:

	Maximum exposure to credit risk	Impairment	Credit conversion factors (CCF)1
Cash and cash equivalents in other credit institutions2	122 920
Financial assets held for trading
Equity instruments	81 581
Debt securities	12 492
Financial assets not designated for trading compulsorily measured at fair value through
profit or loss
Equity instruments	138 041
Debt securities	267 972
Financial assets at fair value through other comprehensive income
Equity instruments	578 140
Debt securities	1 557 287
Financial assets at amortised cost
Debt securities	7 550 518	( 4 461)
Loans and advances - Central Banks and other Credit Institutions	800 651
Loans and advances - Customers	21 971 038	( 507 240)
Trading derivatives and hedge accounting	195 450
Total active exposure	33 276 090	( 511 701)
Total guarantees given and commitments	4 316 433	( 20 690)	(3 349 233)
Total	37 592 523	( 532 391)	(3 349 233)

¹ CCF – Credit Conversion Factor for guarantees given and credit commitments.

² Does not include cash and cash equivalents in central banks.

At 31 December 2018 the maximum exposures to credit risk on the balance sheet, including counterparty risk, was as follows:

	Maximum exposure to credit risk	Impairment	Credit conversion factors (CCF)1
Cash and cash equivalents in other credit institutions2	107107
Financial assets held for trading
Equity instruments	81 171
Debt securities	13 893
Financial assets not designated for trading compulsorily measured at fair value through
profit or loss
Equity instruments	154 527
Debt securities	283 139
Financial assets at fair value through other comprehensive income
Equity instruments	591 523
Debt securities	1 277 370
Financial assets at amortised cost
Debt securities	7 560 823	( 4 528)
Loans and advances - Central Banks and other Credit Institutions	791 030	( 269)
Loans and advances - Customers	21 891 166	( 533 119)
Trading derivatives and hedge accounting	191 673
Total active exposure	32 943 422	( 537 916)
Total guarantees given and commitments	4 297 226	( 23 212)	(3 279 523)
Total	37 240 648	( 561 128)	(3 279 523)

¹ CCF – Credit Conversion Factor for guarantees given and credit commitments.

² Does not include cash and cash equivalents in central banks.

Current exposure: the highest value between zero and the market value of an operation or of a portfolio of operations with a counterparty which can be offset in the event of default by the counterparty, assuming that nothing from the value of the operations will be recovered in the event of insolvency or liquidation of the counterparty, except for the collateral received.
Potential risk: change in the credit exposure as a result of future changes in the valuation of an operation or in the valuation of operations that can be offset with a counterparty during the residual term to maturity.

BPI shares with the CaixaBank Group the principles and policies that support credit risk management, which may be summarised as follows:

An adequate relationship between income and the commitments assumed by the consumers.
Documentary proof of the information provided by the borrower concerning its solvency.
Adequate pre-contractual information about the personal circumstances and characteristics of each Customer and operation.
Adequate independent assessment of real estate collateral.

Risk mitigation

All guarantees are recorded in a dedicated software application. The funds are only made available to the Customer after or upon verification of the guarantees provided.

The classification by stage of loans to Customers and associated guarantees is as follows:

		30-06-2019
	Gross amount	Allowance for Impairment loss	Guarantees 1
Stage 1:	19 534 372	( 26 597)	10 556 340
No associated collateral	6 413 045	( 11 766)	0
With real estate collateral	11 238 085	( 8 169)	10 149 111
With other collateral	1 883 242	( 6 662)	407 229
Stage 2:	1 384 420	( 50 230)	739 154
No associated collateral	315 169	( 13 029)	0
With real estate collateral	831 527	( 27 937)	712 790
With other collateral	237 724	( 9 264)	26 364
Stage 3:	966 863	( 428 608)	320 339
No associated collateral	203 587	( 112 810)	0
With real estate collateral	631 611	( 257 139)	315 682
With other collateral	131 665	( 58 659)	4 657
	21 885 655	( 505 435)	11 615 833

¹ The value of the guarantee is the lower of the value of the guarantee received and the value of the loan, except for stage 3 operations, where fair value is calculated.

		31-12-2018
	Gross amount	Allowance for Impairment loss	Guarantees 1
Stage 1:	19 248 554	( 25 133)	10 447 424
No associated collateral	6 713 089	( 13 227)	0
With real estate collateral	11 025 423	( 6 934)	10 081 688
With other collateral	1 510 042	( 4 972)	365 736
Stage 2:	1 472 225	( 52 875)	787 051
No associated collateral	355 715	( 14 362)	0
With real estate collateral	833 868	( 28 610)	726 602
With other collateral	282 642	( 9 903)	60 449
Stage 3:	1 017 326	( 453 659)	352 535
No associated collateral	205 964	( 123 838)	0
With real estate collateral	678 130	( 270 645)	348 951
With other collateral	133 232	( 59 176)	3 584
	21 738 105	( 531 667)	11 587 010

¹ The value of the guarantee is the lower of the value of the guarantee received and the value of the loan, except for stage 3 operations, where fair value is calculated.

Restructuring policies

A description of the restructuring policies is given in Note 2.8. Refinancing and restructuring operations in the 2018 annual report.

Restructured loans:

The breakdown of refinancing by industry sector is as follows:

30-06-2019

		Total
	Without collateral		With collateral
	Number of transactions		Number of transactions		Maximum amount of the collateral that can be considered		Impairment
		Exposure		Exposure	Real estate mortgage	Other collateral
Public administrations	2	376	1	6 892		6 892
Other financial corporations and individual entrepreneurs (financial business)	9	188					( 66)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 714	118 185	410	342 649	144 235	77 543	( 180 284)
Individuals	4 298	32 973	6 423	221 716	216 619	573	( 75 439)
Total	6 023	151 722	6 834	571 257	360 854	85 008	( 255 789)

Note: Includes securitised loans, Customer loans and guarantees

		Of which: Stage 3
	Without collateral		With collateral
	Number of transactions	Exposure	Number of transactions	Exposure	Maximum amount of the collateral that can be considered		Impairment
					Real estate mortgage	Other collateral
Other financial corporations and individual entrepreneurs (financial business)	4	151					( 64)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 144	67 969	284	232 426	119 042	62 105	( 175 343)
Individuals	2 344	20 908	5 124	172 447	167 919	282	( 73 447)
Total	3 492	89 028	5 408	404 873	286 961	62 387	( 248 854)

Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

31-12-2018

		Total
	Without collateral		With collateral
	Number of transactions	Exposure	Number of transactions		Maximum amount of the collateral that can be considered		Impairment
				Exposure	Real estate mortgage	Other collateral
Public administrations	24	6 340	4	11 819		11 818
Other financial corporations and individual entrepreneurs (financial business)	7	181	1	19	19		( 70)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 969	164 813	427	370 640	152 738	75 958	( 199 514)
Individuals	4 638	33 505	6 767	234 214	228 596	583	( 76 543)
Total	6 638	204 839	7 199	616 692	381 353	88 359	( 276 127)

Note: Includes securitised loans, Customer loans and guarantees

		Of which: Stage 3
	Without collateral		With collateral
		Number of Exposure transactions				Maximum amount of the collateral
			Number of transactions		that can be considered		Impairment
				Exposure	Real estate	Other collateral
					mortgage
Other financial corporations and individual entrepreneurs (financial business)	4	106	1	19	19		( 66)
Non-financial corporations and individual entrepreneurs (non-financial business)	1 389	86 480	310	249 915	127 707	61 883	( 194 038)
Individuals	2 448	21 423	5 398	182 642	177 721	230	( 74 320)
Total	3 841	108 009	5 709	432 576	305 447	62 113	( 268 424)

Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

The detail of guarantees received to secure restructured loans¹ at 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Value of collateral	826 332	890 010
Of which: Stage 3 guarantee	595 903	634 501
Value of other guarantees	336 756	340 185
Of which: Stage 3 guarantee	310 754	310 229
	1 163 088	1 230 195

¹ The value of the guarantee is the maximum amount of the guarantee received, except for stage 3 operations, where it is considered at fair value.

The movement in restructured loans is as follows:

	30-06-2019	30-06-2018
Opening balance	545 404	987 183
Restructurings in the period	12 031	132 294
Debt amortisation	( 55 459)	( 153 752)
Property recovered or foreclosed	( 638)	( 669)
Other changes	( 34 148)	( 267 574)
Of which:
Exit from restructuring	( 30 421)	( 192 517)
Loan sales	( 1 926)	( 40 800)
Balance at end of period	467 190	697 482

3.2.2. Concentration Risk

In Banco BPI's Risk Catalogue, concentration risk is conceptually included within credit risk and is calculated according to CaixaBank Group's best practices.

Banco BPI's Risk Appetite Framework (RAF) uses metrics to systematically identify overall exposure to a particular Customer or geographic location, as well as appetite limits to concentration risk.

Concentration in customers or in "large exposures"

Concentration by geographic location

The breakdown of risk of financial assets and guarantees and sureties provided, by geographical location, is as follows:

30-06-2019
	Total	Portugal	Other EU countries	Other world countries
Central Banks and credit institutions	3 081 648	1 932 755	447 368	701 525
Public sector	5 033 068	2 974 656	1 843 292	215 120
Central government	3 842 130	1 783 718	1 843 292	215 120
Other public administrations	1 190 938	1 190 938
Other financial corporations and individual entrepreneurs (financial business)	4 919 439	4 566 382	284 784	68 273
Non-financial corporations and individual entrepreneurs (non-financial business)	10 437 368	9 931 369	451 820	54 179
Real estate construction and development	531 740	527 196	3 868	676
Civil construction	249 609	238 548	11 061
Other	9 656 019	9 165 625	436 891	53 503
Large companies	5 761 705	5 316 663	411 232	33 810
Small and medium-sized companies	3 894 314	3 848 962	25 659	19 693
Individuals	12 378 881	12 309 254	17 006	52 621
Homes	10 952 103	10 940 478	2 304	9 321
Consumer spending	1 038 603	992 985	12 378	33 240
Other	388 175	375 791	2 324	10 060
Total	35 850 404	31 714 416	3 044 270	1 091 718

31-12-2018

			Other EU	Other world
	Total	Portugal	countries	countries
Central Banks and credit institutions	3 470 420	2 346 777	458 660	664 983
Public sector	4 661 726	2 729 823	1 710 069	221 834
Central government	3 583 219	1 651 316	1 710 069	221 834
Other public administrations	1 078 507	1 078 507
Other financial corporations and individual entrepreneurs (financial
business)	5 228 922	4 787 889	378 139	62 894
Non-financial corporations and individual entrepreneurs (non-financial business)	10 165 312	9 616 588	511 842	36 882
Real estate construction and development	511 879	506 757	4 248	874
Civil construction	259 907	249 962	9 945
Other	9 393 526	8 859 869	497 649	36 008
Large companies	5 522 189	5 043 050	454 824	24 315
Small and medium-sized companies	3 871 337	3 816 819	42 825	11 693
Individuals	12 353 408	12 280 822	17 067	55 519
Homes	11 001 828	10 987 944	2 804	11 080
Consumer spending	958 897	913 961	11 703	33 233
Other	392 683	378 917	2 560	11 206
Total	35 879 788	31 761 899	3 075 777	1 042 112

Concentration by industry sector

Risk concentration by economic sector is subject to BPI's RAF limits (level 1), differentiating between private sector economic activities and public sector financing.

At 30 June 2019 and 31 December 2018, the breakdown of credit by industry sector, type of collateral and loan to value (LTV) was as follows:

30-06-2019

	Balance net	Of which: real					Collateralised loans Carrying amount based on latest available appraisal (LTV)
	of impairments	estate mortgage secured	Of which: other collateral	≤ 40 %	> 40 % ≤ 60 %	> 60 % ≤ 80 %	> 80 % ≤ 100 %	> 100%
Central Banks and credit institutions	770 342
Public sector	1 245 997	3 707	300 756	60 385	73 328	92 345	53 641	24 764
Central government	366 550		8 726					8 726
Other public administrations	879 447	3 707	292 030	60 385	73 328	92 345	53 641	16 038
Other financial corporations and individual entrepreneurs (financial business)	186 922	6 256	801	5 598	358	317	11	773
Non-financial corporations and individual entrepreneurs (non-financial business)	7 547 327	1 480 443	1 592 378	747 581	459 204	413 742	276 330	1 175 964
Real estate construction and development	386 983	201 574	31 925	102 656	81 223	21 216	9 016	19 388
Civil construction	117 523	5 263	33 489	4 047	2 118	1 663	1 302	29 622
Other	7 042 821	1 273 606	1 526 964	640 878	375 863	390 863	266 012	1 126 954
Large companies	3 430 924	446 240	1 182 392	391 596	100 647	154 749	106 574	875 066
Small and medium-sized companies	3 611 897	827 366	344 572	249 282	275 216	236 114	159 438	251 888
Individuals	12 355 868	10 917 573	284 112	2 476 068	3 388 015	4 365 964	859 517	112 121
Homes	10 952 103	10 866 696	56 482	2 443 547	3 357 052	4 298 649	757 027	66 903
Consumer spending	1 038 603	75	177 339	7 059	16 425	43 050	80 593	30 287
Other	365 162	50 802	50 291	25 462	14 538	24 265	21 897	14 931
Total	22 106 456	12 407 979	2 178 047	3 289 632	3 920 905	4 872 368	1 189 499	1 313 622

Note: Includes Loans to central banks, credit institutions and Customers (does not include debt securities and other Customer applications) Map built based on commercial segmentation.

31-12-2018

	Balance net	Of which: real	Of which: other				Collateralised loans Carrying amount based on latest available appraisal (LTV)
	of impairments	estate mortgage secured	collateral	≤ 40 %	> 40 % ≤ 60 %	> 60 % ≤ 80 %	> 80 % ≤ 100 %	> 100%
Central Banks and credit institutions	758 337
Public sector	1 219 795	3 878	327 232	61 320	82 842	91 763	65 991	29 194
Central government	367 500		13 026					13 026
Other public administrations	852 295	3 878	314 206	61 320	82 842	91 763	65 991	16 168
Other financial corporations and individual entrepreneurs (financial
business)	216 236	7 293	32	4 335	40	2 099	16	835
Non-financial corporations and individual entrepreneurs (non-financial business)	7 409 465	1 253 511	1 228 045	517 877	378 942	347 361	239 429	997 947
Real estate construction and development	376 074	120 390	84 030	91 694	13 589	18 260	5 811	75 066
Civil construction	111 454	6 361	31 820	1 507	4 832	57	761	31 024
Other	6 921 937	1 126 760	1 112 195	424 676	360 521	329 044	232 857	891 857
Large companies	3 327 200	361 485	825 970	192 804	111 135	109 732	91 045	682 739
Small and medium-sized companies	3 594 737	765 275	286 225	231 872	249 386	219 312	141 812	209 118
Individuals	12 329 968	10 966 551	296 555	2 267 439	3 050 262	4 441 386	1 363 255	140 764
Homes	11 001 828	10 912 508	60 040	2 238 635	3 018 819	4 371 757	1 253 880	89 457
Consumer spending	958 897	51	187 947	6 355	14 241	42 950	87 114	37 338
Other	369 243	53 992	48 568	22 449	17 202	26 679	22 261	13 969
Total	21 933 801	12 231 233	1 851 864	2 850 971	3 512 086	4 882 609	1 668 691	1 168 740

Note: Includes Loans to central banks, credit institutions and Customers (does not include debt securities and other Customer applications) Map built based on commercial segmentation.

Concentration by sovereign risk

Exposure to entities with sovereign risk

The table below shows the breakdown of BPI's exposure to sovereign debt:

30-06-2019

		Financial assets held for trading	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost 1
Country	Residual maturity
	Less than 3 months		225 187	3 715
	3 months to 1 year		576 564	62 442
	1 to 2 years	1 045		577 499
Portugal	2 to 3 years	1 155		68 000
	3 to 5 years	368	137 294	89 220
	5 to 10 years			461 337
	More than 10 years			628 607
		2 568	939 045	1 890 820
	2 to 3 years		309 436	710 016
Spain	3 to 5 years		308 806
			618 242	710 016
	1 to 2 years			501 316
Italy				501 316
	1 to 2 years			49 486
	3 to 5 years			17 199
Other	5 to 10 years			77 016
	More than 10 years			78 283
				221 984
		2 568	1 557 287	3 324 136

¹Does not include interest receivable.

31-12-2018

		Financial assets held for trading	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost 1
Country	Residual maturity
	Less than 3 months		50 044	10 319
	3 months to 1 year		740 568	18 589
	1 to 2 years			53 415
	2 to 3 years	4 167		550 382
Portugal	3 to 5 years	365		143 777
	5 to 10 years			475 306
	More than 10 years			533 141
		4 532	790 612	1 784 929
	2 to 3 years		307 939	712 423
Spain			307 939	712 423
	Less than 3 months		178 819
	1 to 2 years			401 054
Italy	2 to 3 years			100 698
			178 819	501 752
	2 to 3 years			49 486
	3 to 5 years			9 698
Other	5 to 10 years			83 434
	More than 10 years			78 283
				220 901
		4 532	1 277 370	3 220 005

¹Does not include interest receivable.

Concentration by credit quality

The tables below show the concentration of credit risk by rating of exposures in debt securities and loans and advances held by the Bank:

Credit risk quality (rating)

The breakdown of debt securities by rating at 30 June 2019 and 31 December 2018 is as follows:

30-06-2019

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
AAA/AA+/AA/AA-				1 820 651	1 820 651
A+/A/A-				726 829	726 829
BBB+/BBB/BBB-	2 568	1 044	1 557 287	1 860 399	3 421 298
"Investment grade"	2 568	1 044	1 557 287	4 407 879	5 968 778
	21%	0%	100%	58%	64%
BB+/BB/BB-		57 040		379 225	436 265
B+/B/B-				17 252	17 252
No rating	9 924	209 888		2 741 701	2 961 513
"Non-investment grade"	9 924	266 928		3 138 178	3 415 030
	79%	100%		42%	36%
	12 492	267 972	1 557 287	7 546 057	9 383 808

31-12-2018

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
AAA/AA+/AA/AA-		loss		1 819 400	1 819 400
A+/A/A-				898 112	898 112
BBB+/BBB/BBB-	4 532	1 079	1 277 370	1 801 666	3 084 647
"Investment grade"	4 532	1 079	1 277 370	4 519 178	5 802 159
	33%	0%	100%	60%	64%
BB+/BB/BB-		53 868		302 034	355 902
B+/B/B-				18 208	18 208
No rating	9 361	228 192		2 716 875	2 954 428
"Non-investment grade"	9 361	282 060		3 037 117	3 328 538
	67%	100%		40%	36%
	13 893	283 139	1 277 370	7 556 295	9 130 697

The breakdown of loans and advances to central banks and other credit institutions by rating class is as follws:

			30-06-2019		31-12-2018
Exposures	800 651			790 761
		AAA t AA-	83 472	10%	89 923	11%
		A+ to A-	228 718	29%	212 214	27%
	External Rating	BBB+ to BBB-	462 972	58%	479 121	60%
		BB+ to BB- 25 489	3% 9 502		1%
			800 651	100%	790 761	100%

Note: Exposure net of impairments (the amounts shown include accrued interest)

The breakdown of loans and advances to Customers by rating class is as follows:

			30-06-2019		31-12-2018
Exposures Non-Default			20 921 282	97%	20 792 798	97%
		AAA to AA-	63 027	0%	111 511	1%
		A+ to A-			2 124	0%
		BBB+ to BBB-	929 791	4%	870 114	4%
	External Rating	BB+ to BB-	37 869	0%	40 694	0%
		B+ to B-	48 701	0%	51 749	0%
		< B-	209	0%	34	0%
		Strong	65 000	0%	73 565	0%
	Rating	Good	657 346	3%	826 533	4%
	Project Finance	Satisfactory	396 682	2%	244 784	1%
		Weak	17 424	0%	17 891	0%
		E01 to E03	793 693	4%	875 301	4%
	Rating	E04 to E06	2 084 763	10%	1 973 240	9%
	Companies	E07 to E10	1 017 716	5%	972 417	5%
		ED1 to ED2	587	0%	907	0%
		N01 to N03	155 852	1%	76 262	0%
	Rating	N04 to N06	821 284	4%	735 409	3%
	Small businesses	N07 to N10	629 805	3%	800 144	4%
		ND1 to ND2	4 452	0%	3 162	0%
		01 to 03	4 312 886	20%	4 010 775	19%
		04 to 06	4 855 978	23%	5 083 357	24%
	Scoring	07 to 10	2 627 926	12%	2 646 132	12%
		D01 to D02	22 565	0%	17 031	0%
	No rating		1 377 726	6%	1 359 662	6%
Exposures Default			542 516	3%	565 249	3%
			21 463 798	100%	21 358 047	100%

Note: Exposure net of impairments ( the amounts shown include accrued interest)

CRR default criterion (Regulation (EU) 575/2013)

3.2.3. Relevant information regarding financing for property construction and development, home purchasing, and foreclosed assets

Relevant information regarding financing for property development, home purchasing, and foreclosed assets is provided in the following section.

Financing for real estate construction and development

The tables below show the level of financing provided to real estate construction and development (does not include advances)

	Gross amount	Impairment	Value net of impairments	Excess over the maximum recoverable value of collateral
Real estate construction and development	440 245	( 53 262)	386 983	158 144
Of which: Stage 3	63 178	( 48 095)	15 083	2 371

	Gross amount	Impairment	Value net of impairments	Excess over the maximum recoverable value of collateral
Real estate construction and development	430 347	( 54 273)	376 074	229 498
Of which: Stage 3	64 959	( 49 331)	15 628	2 672

	30-06-2019		31-12-2018
	Gross amount	Impairments and provisions	Gross Impairments amount and provisions
Guarantees provided
Real estate construction and development	144 264	5 943	135 490 5 972

The table below provides information on guarantees received for real estate development loans, broken down by classification of Customer insolvency risk:

		30-06-2019		31-12-2018
	Real estate	Other	Real estate	Other
	mortgage	collateral	mortgage	collateral
Real estate construction and development	640 187	58 464	468 950	46 194
Of which: Non-performing	80 688	7	80 116	63

Home loans

The table below shows the evolution of home loans:

		2 30-06-2019		2 31-12-2018
Not real estate mortgage secured	85 408	1%	89 320	1%
Of which: Default 1	14 783		12 155
Real estate mortgage secured	10 866 695	99%	10 912 508	99%
Of which: Default 1	317 411		344 341
Total home loans	10 952 103	100%	11 001 828	100%

¹ CRR default criterion (Regulation (EU) 575/2013)

² Exposure net of impairments (the amounts shown include accrued interest).

The table below shows the amount of residential mortgage loans, by LTV brackets:

		30-06-20191
	Total	Of which: Default 2	Total	Of which: Default 2
LTV ≤ 40%	2 441 850	46 162	2 237 156	41 331
40% < LTV ≤ 60%	3 352 736	68 898	3 014 636	66 139
60% < LTV ≤ 80%	4 284 746	109 914	4 357 477	113 699
80% < LTV ≤ 100%	723 901	53 344	1 216 816	70 860
LTV > 100%	63 462	39 093	86 423	52 312
Total home loans	10 866 695	317 411	10 912 508	344 341

¹ Exposure net of impairments (the amounts include accrued interest).

² CRR default criterion (Regulation (EU) 575/2013)

The table below shows the book value and impairment of property foreclosed for loan recovery:

	30-06-2019			31-12-2018
	Gross		Net	Gross		Net
	amount	Impairment	amount amount		Impairment	amount
Homes	18 834	2 948	15 886	22 591	3 093	19 498
Other	25 178	14 607	10 571	28 721	15 611	13 110
Total	44 012	17 555	26 457	51 312	18 704	32 608

3.3. Market risk

	Total	Interest Rate	Exchange Rate	Share Prices
Average VAR first semester 2019	136	100	56	49
Average VAR 2018	264	58	48	245

Capital requirements for market risk are determined based on the standardised approach. The values calculated are insignificant, given the low representativeness of the portfolio.

3.4. Structural interest rate risk

The table below shows, using a static gap, the distribution of contractual maturities and interest rate repricings of interest-rate sensitive amounts in the banking book, at 30 June 2019:

	1 ano	2 anos	3 anos	4 anos	5 anos	> 5 anos	TOTAL
ATIVO
Interbank and Central Banks	2 235 285						2 235 285
Loans and advances to Customers	19 560 007	708 133	473 989	216 576	162 763	659 573	21 781 041
Fixed income portfolio	1 724 316	1 000 000	1 006 000	442 500		335 711	4 508 527
Total Assets	23 519 608	1 708 133	1 479 989	659 076	162 763	995 284	28 524 853
LIABILITIES
Interbank and Central Banks	1 915 730	953 830					2 869 560
Customer deposits	12 144 593	2 410 835	2 163 949	1 308 361	1 308 368	3 646 309	22 982 415
Own issues	986 700	2 456			500 000		1 489 156
Total Liabilities	15 047 023	3 367 121	2 163 949	1 308 361	1 808 368	3 646 309	27 341 131
Assets minus Liabilities	8 472 585	( 1 658 988)	( 683 960)	( 649 285)	( 1 645 605)	( 2 651 025)	1 183 722
Hedges	( 1 501 699)	927 940	954 213	( 225 904)	417 535	( 568 620)	3 466

Total difference	6 970 886	( 731 048)	270 253	( 875 189)	( 1 228 070)	( 3 219 645)	1 187 187

Amounts as % of baseline scenario	+200 bp	-200 bp3
Net interest income 1	+29.5%	-15.6%
Asset value (banking book)2	+7.8%	+2.6%

¹ Net interest income sensitivity at 1 year

² Economic value baseline sensitivity

3.5. Exchange rate risk

At 30 June 2019, the equivalent euro value of all foreign currency assets and liabilities was as follows:

	USD	AKZ	Other
Cash and cash balances at central banks and other demand deposits	12 643	67 086	21 387
Financial assets held for trading	9 693		180
Financial assets not designated for trading compulsorily measured at fair value through profit or
loss	62 330
Financial assets at fair value through other comprehensive income	9 089	500 946
Financial assets at amortised cost	422 409		74 646
Derivatives - Hedge accounting	7 358		172
Fair value changes of the hedged items in portfolio hedge of interest rate risk	3 661
Investments in subsidiaries, joint ventures and associates	712
Tangible assets
Intangible assets
Tax assets
Other assets	58		4 638
Non-current assets and disposal groups classified as held for sale
Foreign exchange operations pending settlement and forward position operations	1 225 632		85 549
Total Assets	1 753 585	568 032	186 572
Financial liabilities held for trading	1 970		123
Financial liabilities at amortised cost	1 747 949		181 930
Derivatives - Hedge accounting	3 659
Fair value changes of the hedged items in portfolio hedge of interest rate risk	2 724		38
Provisions
Tax liabilities
Other liabilities	( 5 814)		( 7)
Total Liabilities	1 750 488		182 084

At 31 December 2018, the equivalent euro value of all foreign currency assets and liabilities was as follows:

	USD	AKZ	Other
Cash and cash balances at central banks and other demand deposits	16 187	30 293	43 772
Financial assets held for trading	10 623		629
Financial assets not designated for trading compulsorily measured at fair value through profit or
loss	64 931
Financial assets at fair value through other comprehensive income	6 888	521 935
Financial assets at amortised cost	453 358		95 749
Derivatives - Hedge accounting	3 564		140
Fair value changes of the hedged items in portfolio hedge of interest rate risk	792
Investments in subsidiaries, joint ventures and associates	707
Other assets	69		25
Foreign exchange operations pending settlement and forward position operations	1 329 495		62 247
Total Assets	1 886 614	552 228	202 562
Financial liabilities held for trading	1 977		574
Financial liabilities at amortised cost	1 895 167		196 907
Derivatives - Hedge accounting	1 503		32
Fair value changes of the hedged items in portfolio hedge of interest rate risk	( 679)		( 33)
Other liabilities	( 6 334)		( 1 724)
Total Liabilities	1 891 634		195 756

3.6. Liquidity risk

The breakdown of BPI's total liquid assets is as follows:

Total liquid assets

		30-06-2019		31-12-2018
	Market value	Eligible value	Market value	Eligible value
Level 1 Assets	4 501 004	4 501 004	3 853 576	3 853 576
Level 2A Assets	46 820	39 797	50 695	43 091
Total HQLA 1	4 547 824	4 540 801	3 904 271	3 896 667
Other non-HQLA		5 307 305		5 600 891
Total liquid assets (HQLA + other non-HQLA)		9 848 105		9 497 558

1 In accordance with the liquidity coverage ratio (LCR) calculation criteria

The table below shows the detail of the average value (last 12 months) of the LCR calculation components at 30 June 2019 and 31 December 2018.

Liquidity coverage ratio (rácio LCR)

(Average in last 12 months)	30-06-2019	31-12-2018
High quality liquid assets (numerator)	4 082 149	3 930 123
Total net outflows (denominator)	2 590 897	2 629 318
Cash outflows	3 513 688	3 491 672
Cash inflows	922 791	862 353
LCR	158%	149%

Note: The table presents the simple arithmetic mean in the last 12 months of the LCR ratio and respective calculation components. According to Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions. The established regulatory limit for the LCR ratio is 100% from 1 January 2018.

At 30 June 2019 the main ratings assigned by international rating agencies to Banco BPI were the following:

	Long-term debt	Short-term debt	Outlook	Date of last review	Mortgage covered bonds rating
DBRS Rating Limited	-	-	-	-	AA (Low)
Fitch Ratings	BBB 1	F2	Stable	6/12/2018	-
Moody's Investors Service	Ba1 2	NP	Stable	6/26/2019	Aa3
Standard & Poor's Global Ratings	BBB 3	A-2	Stable	3/18/2019	-

¹ Long-term issuer default rating

² Long term Debt Rating / Issuer rating

³ Long Term Issuer Credit Rating

The tables below show the breakdown of certain balance sheet items by contractual term to maturity, under normal market conditions:

Term to maturity of operations at 30 June 2019

	On demand	< 1 month	1-3 months	3-12 months	1-5 years	> 5 years	Total
Cash and cash balances at central banks and	1 898 096						1 898 096
other demand deposits
Derivatives
Financial assets held for trading	3 807	7 456	5 526	1 149	21 787	112 325	152 050
Hedge accounting		291	1 468	5 919	25 361	1 483	34 522
Debt securities
Financial assets held for trading				4 946	7 546		12 492
Financial assets not designated for
trading compulsorily measured at fair		4 500		1 043		262 429	267 972
value through profit or loss
Financial assets at fair value through			225 187	576 564	755 536		1 557 287
other comprehensive income
Financial assets at amortised cost	9 461	495 612	240 282	287 192	2 232 717	4 280 793	7 546 057
Loans and advances	446 289	667 182	784 318	1 363 352	3 246 157	15 757 151	22 264 449
Total Assets	2 357 653	1 175 041	1 256 781	2 240 165	6 289 104	20 414 181	33 732 925
Derivatives
Financial liabilities held for trading	144	6 486	5 616	1 328	25 170	125 550	164 294
Hedge accounting		49	110	469	21 548	54 187	76 363
Financial liabilities at amortised cost
Deposits
Central Banks				405 872	944 228		1 350 100
Credit Institutions	51 370	813 458	9 536	92 508	389	454 694	1 421 955
Customers	14 522 800	1 013 657	1 700 589	3 652 164	2 403 465	1 884	23 294 559
Debt securities issued
Mortgage bonds					800 000	250 000	1 050 000
Bonds		740	397	4 269	1 715		7 121
Subordinated liabilities						304 501	304 501
Other financial liabilities	76 027	1 085 583	322	952	963	3 244 529	4 408 376
Total Liabilities	14 650 341	2 919 973	1 716 570	4 157 562	4 197 478	4 435 345	32 077 269
Of which wholesale funding:		128 697			800 000	554 501	1 483 198
Assets minus Liabilities	( 12 292 688)	( 1 744 932)	( 459 789)	( 1 917 397)	2 091 626	15 978 836	1 655 656

Term to maturity of operations at 31 December 2018

	On demand	< 1 month	1-3 months	3-12 months	1-5 years	> 5 years	Total
Cash and cash balances at central banks and	2 336 030						2 336 030
other demand deposits
Derivatives
Financial assets held for trading	4 990	8 579	7 556	2 734	19 728	88 121	131 708
Hedge accounting		683	2 399	3 195	7 732	311	14 320
Debt securities
Financial assets held for trading					13 893		13 893
Financial assets not designated for
trading compulsorily measured at fair				1 079		282 060	283 139
value through profit or loss
Financial assets at fair value through			228 863	740 568	307 939		1 277 370
other comprehensive income
Financial assets at amortised cost		270 716	243 606	181 671	2 121 512	4 738 790	7 556 295
Loans and advances	280 439	891 987	952 226	1 192 813	3 385 827	15 445 516	22 148 808
Total Assets	2 621 459	1 171 965	1 434 650	2 122 060	5 856 631	20 554 798	33 761 563
Derivatives
Financial liabilities held for trading		8 781	7 686	2 435	21 514	100 919	141 335
Hedge accounting		84	4 009	12 220	15 861	23 836	56 010
Financial liabilities at amortised cost
Deposits
Central Banks					1 352 843		1 352 843
Credit Institutions	241 216	899 048	221 650	35 744		475 590	1 873 248
Customers	13 506 089	1 875 655	1 719 101	4 165 041	1 875 990	2 263	23 144 139
Debt securities issued
Mortgage bonds					300 000	250 000	550 000
Other bonds		534	5 430	5 716	6 670		18 350
Subordinated liabilities						304 514	304 514
Other financial liabilities	14 110	439 378	4 295	580 595	1 806	3 618 501	4 658 685
Total Liabilities	13 761 415	3 223 480	1 962 171	4 801 751	3 574 684	4 775 623	32 099 124
Of which wholesale funding:
Assets minus Liabilities	( 11 139 956)	( 2 051 515)	( 527 521)	( 2 679 691)	2 281 947	15 779 175	1 662 439

3.7. Other risks

There were no significant changes in the risk levels and in the policies during the first semester of 2019.

4. SOLVENCY MANAGEMENT

4.1. Regulatory framework

In 2019, Banco BPI is not subject to Pillar 2 minimum requirements on an individual basis.

4.2. Capital management

At 30 June 2019, Banco BPI had a Common Equity Tier 1 (CET1) ratio of 12.8%, a Tier 1 ratio of 12.8% and a total ratio of 14.5%, without considering the 2019 interim results in the calculation of these ratios

Considering the inclusion of the interim results and the upper end (payout of 50%) of the range set forth in Banco BPI's Long-Term Dividend Policy² , as established in Art. 2 of Commission Delegated Regulation (EU) no. 241/2014, the CET1 ratio would be 13.1%, the Tier 1 ratio would be 13.1% and the total ratio would be 14.8%.

The following table shows the composition of Banco BPI individual own funds:

	30-06-2019		31-12-2018
	Amount	%	Amount	%
CET1 instruments	2 851 273		2 903 280
Accounting shareholders' equity	2 857 622		3 048 617
Dividends payable			( 140 000)
AVA adjustments and gains/(losses)	( 6 349)		( 5 337)
CET1 Deductions	( 621 340)		( 626 483)
Intangible assets	( 51 512)		( 55 037)
Deferred taxes assets and financial investments	( 494 796)		( 526 017)
Other deductions	( 75 032)		( 45 429)
CET1	2 229 933	12.8%	2 276 797	13.3%
TIER 1	2 229 933	12.8%	2 276 797	13.3%
TIER2 Instruments	300 000		300 000
TIER2	300 000	1.7%	300 000	1.8%
TOTAL CAPITAL	2 529 933	14.5%	2 576 797	15.1%
RWA	17 437 320		17 064 081
Fully Loaded
CET1		12.8%		13.3%
T1		12.8%		13.3%
Total capital		14.5%		15.1%

Note: In 2019, it incorporates 7 basis points impact from the first application of IFRS16.

The following table shows the breakdown of the leverage ratio:

Leverage ratio

	30-06-2019
	Amount	%	Amount	%
Exposure	36 055 932		36 281 730
Leverage ratio		6.2%		6.3%

5. DIVIDEND DISTRIBUTION AND EARNINGS PER SHARE

Dividend policy

For compliance with this statutory rule, Banco BPI's long-term dividend policy was approved on 31 January 2019, as follows:

1. General Principle

2. Conditioning factors

The provisions of item 1 are therefore only intended to:

i) give the shareholders and third parties a medium/long term perspective of the company's objectives in terms of dividend distribution;
ii) impose on the Board of Directors, when it intends to propose a dividend distribution outside the thresholds therein established, the duty of substantiating this option.

In addition, the distribution principle set out in the previous paragraph shall be subject to:

a) Compliance with the capital ratios at any time applicable to the Bank, whether under Pillar 1 or Pillar 2, as well as with other applicable legal provisions, namely those governing what is considered the "maximum distributable amount ";
b) When the net income determined in the individual accounts includes dividends from companies that have not yet been paid to the Bank, the Board of Directors shall exclude the amount of these dividends from the base used for the definition of the dividends to be distributed, whenever a prudent judgement so advises;
c) Respect for the findings and guidelines of the Bank's ICAAP and RAF at any time in force;
d) the absence of exceptional circumstances that justify, in the Board of Directors reasoned opinion, submitting to the Shareholders' deliberation the distribution of a dividend below the 30% threshold or above the 50% threshold.

The distribution of 2018 results, made through the payment of dividends in the amount of 140 million euros, was approved by the Board of Directors at 15 April 2019 and subsequently at the Shareholders General Meeting at 29 April 2019.

	2018
Net income reported in the individual accounts of Banco BPI	914 311
Net capital gain on revaluation of equity holding in BFA	( 456 676)
Net profit for dividend distribution purposes	457 635
Application of individual net profit of 2018
To dividends	140 000
To legal reserve	91 431
To other reserves	682 880
Individual profit of Banco BPI in 2018	914 311
Payout ratio for dividend distribution purposes	30.6%

Basic and diluted earnings per share, as per the individual profit of Banco BPI attributable to its shareholders, are calculated as follows:

	30-06-2019	30-06-2018
Numerator (in thousand euros)
Profit/(loss) after tax and minority interests from continuing operations	131 904	211 066
Profit/(loss) after tax from discontinued operations		77 658
Profit/(loss)	131 904	288 724
Denominator (in thousand shares)
Average number of outstanding shares	1 456 924	1 456 924
Average number of treasury shares		151
Adjusted number of shares (basic earnings per share) 1	1 456 924	1 456 773
Basic earnings per share (in euros)
Profit/(loss) per share from continuing operations	0.091	0.145
Profit/(loss) per share from discontinued operations		0.053
Basic earnings per share	0.091	0.198
Diluted earnings per share (in euros)
Diluted earnings per share from continuing operations	0.091	0.145
Diluted earnings per share from discontinued operations		0.053
Diluted earnings per share	0.091	0.198

¹ Average number of shares outstanding, excluding the average number of treasury shares held during the period.

6. SEGMENTS

The objective of business segment reporting is to allow internal supervision and management of BPI's activity and consolidated income. To define and segregate segments, are taking into account the inherent risks and management characteristics of each segment. The information reporting used by management is essentially prepared on an accounting basis supported by the IFRS. Their preparation relies on i) the same presentation principles used for the Bank's management information, and ii) the same accounting principles and policies used to prepare the annual financial statements:

At 30 June 2019, BPI's segment reporting considers the following segments:

Domestic operations: includes the commercial banking business in Portugal and the equity holdings activity.
International operations: includes the results generated in Mozambique by Banco Comercial e de Investimentos, S.A.R.L. and the results associated to the equity holding in Banco de Fomento Angola, classified in the portfolio of equity instruments at fair value through other comprehensive income.

Commercial Banking

Banco BPI's operations are focused mainly on commercial banking. Commercial banking includes:

Retail Banking Commercial operations with individual Customers, individual entrepreneurs and companies with turnover of up to 5 million euros, developed through a multi-channel distribution network comprising traditional branches and investment centres. It also includes the Private Banking area, which is responsible for implementing strategies and submitting investment proposals to the Customers, and for the management of their financial assets.
Corporate Banking, Project Finance and Institutional Banking Commercial operations with companies with turnover above 2 million euros, operating alongside Retail banking in the segment of up to 5 million euros. Also includes project finance services and the relationship with Public Sector entities, state-owned and municipal Companies, the State Business Sector, Foundations and Associations. This segment operates through a network of corporate centres and institutional centres that cater to the area's business needs.

This segment also includes the Bank's residual activity, comprising segments that represent individually less than 10% of the Bank's total income, net profit and assets.

Equity holdings

This segment essentially comprises the dividends distributed by associated companies and joint ventures in Portugal (Cosec, Allianz, Unicre and Inter-Risco) as well as the income associated to participation units in credit recovery and private equity funds, and to investments in shares.

At 30 June 2019, the income statement by business segment of BPI was as follows:¹

		Domestic Activity		International Activity
	Commercial Banking	Equity holdings	Total	Angola	Mozambique	Total	Banco BPI
1.Interest income	267 319	316	267 635				267 635
2.Interest expense	( 49 561)		( 49 561)				( 49 561)
3.Net interest income [1+2]	217 758	316	218 074				218 074
4.Income from equity instruments	46	9 867	9 913	45 997	5 078	51 075	60 988
5.Fee and commission income	135 233		135 233				135 233
6.Fee and commission expense	( 11 937)		( 11 937)				( 11 937)
7.Net fee and commission income [5+6]	123 296		123 296				123 296
8.Gains/(losses) on financial operations	11 450	( 8 673)	2 777	( 4 576)		( 4 576)	( 1 799)
9.Operating income and expenses	( 12 460)		( 12 460)	( 4 600)	( 508)	( 5 108)	( 17 567)
10.Gross income [3+4+7+8+9]	340 091	1 510	341 601	36 821	4 570	41 392	382 992
11.Staff expenses	( 119 705)		( 119 705)				( 119 705)
12.Suppliers and external services	( 74 771)	( 0)	( 74 771)				( 74 771)
13.Fixed assets amortisation and depreciation	( 26 127)		( 26 127)				( 26 127)
14.Operating expenses [11+12+13]	( 220 603)	( 0)	( 220 603)				( 220 603)
15.Net operating income [10+14]	119 488	1 510	120 998	36 821	4 570	41 392	162 389
16.Impairment losses on financial assets	10 857		10 857				10 857
17.Other impairments and provisions	( 132)		( 132)				( 132)
18.Gains/(losses) in other assets	299		299				299
19.Profit/(loss) before tax [15+16+17+18]	130 512	1 510	132 022	36 821	4 570	41 392	173 413
20.Income tax	( 44 138)	1 375	( 42 763)	1 254		1 254	( 41 509)
21.Profit/(loss) from continuing operations [19+20]	86 374	2 885	89 259	38 075	4 570	42 646	131 904
22.Net profit/(loss) from discontinued operations
23.Profit/(loss) attributable to minority interests
24.Net profit/(loss) [21+22+23]	86 374	2 885	89 259	38 075	4 570	42 646	131 904

1 Income statement structure presented in accordance with Banco BPI management information.

At 30 June 2018, the income statement by business segment of BPI was as follows: ¹

	Domestic Activity					International Activity
	Portugal		Rest of	Inter-segment				Banco BPI
	Commercial banking	Equity holdings	Europe2	transactions	Total	Angola	Total
1.Interest income	248 916	438	5 506	( 4 125)	250 735			250 735
2.Interest expense	( 41 566)		( 1 656)	3 104	( 40 118)			( 40 118)
3.Net interest income [1+2]	207 350	438	3 850	( 1 021)	210 617			210 617
4.Income from equity instruments	12 676	10 463			23 139	47 834	47 834	70 973
5.Fee and commission income	149 991		1 047	( 112)	150 926			150 926
6.Fee and commission expenses	( 23 508)		( 561)	384	( 23 685)			( 23 685)
7.Net fee and commission income [5+6]	126 483		486	272	127 241			127 241
8.Gains/(losses) on financial operations	37 833	61 831	( 25 645)	1 047	75 066	( 5 127)	( 5 127)	69 939
9.Operating income and expenses	( 15 366)		( 150)		( 15 516)	( 4 783)	( 4 783)	( 20 299)
10.Gross income [3+4+7+8+9]	368 976	72 732	( 21 459)	298	420 547	37 924	37 924	458 471
11.Staff expenses	( 120 576)	( 29)	( 889)		( 121 494)			( 121 494)
12.Suppliers and external services	( 80 677)	( 2)	( 1 324)		( 82 003)			( 82 003)
13.Fixed assets amortisation and depreciation	( 10 215)		( 26)		( 10 241)			( 10 241)
14.Operating expenses [11+12+13]	( 211 468)	( 31)	( 2 239)		( 213 738)			( 213 738)
15.Net operating income [10+14]	157 508	72 701	( 23 698)	298	206 809	37 924	37 924	244 733
16.Impairment losses on financial assets	( 11 492)		22 793	17	11 318			11 318
17.Other impairments and provisions	( 178)				( 178)			( 178)
18.Gains/(losses) in other assets	( 810)		( 48)		( 858)			( 858)
19.Profit/(loss) before tax [15+16+17+18]	145 028	72 701	( 953)	315	217 091	37 924	37 924	255 015
20.Income tax	( 44 143)	( 1 211)	( 8 426)	8 426	( 45 354)	1 405	1 405	( 43 949)
21.Profit/(loss) from continuing operations [19+20]	100 885	71 490	( 9 379)	8 741	171 737	39 329	39 329	211 066
22.Net profit/(loss) from discontinued operations	77 658				77 658			77 658
24.Net profit/(loss) [21+22+23]	178 543	71 490	( 9 379)	8 741	249 395	39 329	39 329	288 724

1 Income statement structure presented in accordance with Banco BPI management information.

2 Includes activity in Madrid and Paris.

The caption Gains/(losses) on financial operations, in the segment of equity investments, includes 59 581 t.euros relating to the capital gain on the sale of the equity holding in Viacer.

7. DISCLOSURE OF THE REMUNERATION OF THE CORPORATE BODIES

Note 8 to Banco BPI's 2018 individual financial statements presents in more detail the remuneration of the corporate bodies, namely of the members of Banco BPI's Board of Directors and Executive Committee.

Fixed remuneration

The fixed remuneration and attendance fees received by the members of the Board of Directors, excluding those who are members of the Executive Committee, are shown below:

		30-06-2019	30-06-2018
Fixed remuneration		3059	3032
Attendance fees		216	160
		3275	3192
	Number of persons	10	12

Variable remuneration

8. FINANCIAL ASSETS

30-06-2019

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
Trading derivatives	152 050				152 050
Equity instruments	81 581	138 041	578 140		797 762
Debt securities	12 492	267 972	1 557 287	7 546 057	9 383 808
Loans and advances				22 264 449	22 264 449
Central banks				5 000	5 000
Credit institutions				795 651	795 651
Customers				21 463 798	21 463 798
	246 123	406 013	2 135 427	29 810 506	32 598 069

31-12-2018

	Financial assets held for trading	Financial assets not designated for trading compulsorily measured at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortised cost	TOTAL
Trading derivatives	131 708				131 708
Equity instruments	81 171	154 527	591 523		827 221
Debt securities	13 893	283 139	1 277 370	7 556 295	9 130 697
Loans and advances				22 148 808	22 148 808
Central banks				5 000	5 000
Credit institutions				785 761	785 761
Customers				21 358 047	21 358 047
	226 772	437 666	1 868 893	29 705 103	32 238 434

Cash and cash balances at central banks and other demand deposits

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Cash	231 356	278 878
Demand deposits at Bank of Portugal	1 544 137	1 950 209
Other demand deposits	122 920	107 106
Interest on demand deposits at Bank of Portugal	( 317)	( 163)
	1 898 096	2 336 030

Financial assets held for trading

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Trading derivatives	152 050	131 708
Equity instruments
Shares in portuguese companies	81 581	81 171
	81 581	81 171
Debt securities
Bonds issued by portuguese government entities	2 568	4 532
Bonds issued by other foreign entities	9 924	9 361
	12 492	13 893
	246 123	226 772

At 30 June 2019 and 31 December 2018, the caption Equity Instruments corresponds to shares to hedge equity swaps transactions carried out with Customers (Note 25).

Financial assets not designated for trading compulsorily measured at fair value through profit or loss

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Equity instruments
Shares in portuguese companies	4 756	7 859
Shares in foreign companies	991
Participation units of portuguese issuers	125 193	133 112
Participation units of foreign issuers	7 101	13 556
	138 041	154 527
Debt securities
Bonds issued by other Portuguese entities	204 598	223 195
Bonds issued by other foreign entitites	63 374	59 944
	267 972	283 139
	406 013	437 666

Financial assets designated at fair value through other comprehensive income

This caption is made up as follows:

	30-06-2019	31-12-2018
Equity instruments
Shares in Portuguese companies	65 910	60 480
Shares in foreign companies	512 230	531 043
	578 140	591 523
Debt securities
Bonds issued by Portuguese government entities
Treasury Bills	801 751	475 875
Treasury Bonds	137 294	314 736
Bonds issued by foreign government entities	618 242	486 759
	1 557 287	1 277 370
	2 135 427	1 868 893

The movement in the caption ''Equity instruments at fair value through other comprehensive income'', during the first semester of 2019, was as follows:

	31-12-2018	Purchases	Sales	Actual gains/(losses) recognised under other comprehensive income	Potential gains/(losses) recognised under other comprehensive income and exchange difference	30-06-2019
Banco de Fomento Angola, S.A.	522 000				( 20 992)	501 008
Other	69 523	1 900	( 1 504)	600	6 613	77 132
	591 523	1 900	( 1 504)	600	( 14 379)	578 140

Financial assets at amortised cost

Debt securities

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Sovereign debt
Portuguese sovereign debt	536 705	555 844
Foreign sovereign debt	1 216 353	1 216 596
	1 753 058	1 772 440
Customer debt
Other Portuguese public issuers	337 135	252 570
Other Portuguese issuers	5 426 120	5 495 451
Other foreign issuers	34 205	40 362
	5 797 460	5 788 383
Impairment	( 4 461)	( 4 528)
	7 546 057	7 556 295

Loans and advances - Central Banks and other Credit Institutions

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Loans and advances to the Bank of Portugal	5 000	5 000
Loans and advances to Credit Institutions in Portugal
Very short term applications	25 584	9 502
Deposits		102
Cheques for collection	61 668	49 906
Loans	242 467	204 639
Reverse repurchase agreements	12 701	6 661
Other	256	490
Interest receivable and commissions relating to amortised cost	279	153
	342 955	271 453
Loans and advances to other Credit Institutions abroad
Very short term applications	146 818	261 764
Deposits	128 329	72 367
Cheques for collection	1 211	1 032
Other loans and advances	164 980	167 380
Interest receivable and commissions relating to amortised cost	76	63
Debtors for futures operations	11 282	11 971
	452 696	514 577
Impairment		( 269)
	800 651	790 761

Loans and advances - Customers

The breakdown of loans and advances to Customers by activity at 30 June 2019 is as follows:

	30-06-2019
	Gross amount	Impairment
Public sector	1 255 167	( 97)
Other financial corporations and individual entrepreneurs (financial business)	302 539	( 370)
Non-financial corporations and individual entrepreneurs (non-financial business)	7 847 655	( 298 141)
Real estate construction and development	440 269	( 53 264)
Civil construction	125 020	( 7 496)
Other	7 282 366	( 237 381)
Large companies	3 561 252	( 128 530)
Small and medium-sized companies	3 721 114	( 108 851)
Individuals	12 565 677	( 208 632)
Homes	11 119 945	( 167 842)
Consumer spending	1 071 883	( 33 281)
Other	373 849	( 7 509)
	21 971 038	( 507 240)

The breakdown of loans and advances to Customers by activity at 31 December 2018 is as follows:

	31-12-2018
	Gross amount	Impairment
Public sector	1 227 118	( 208)
Other financial corporations and individual entrepreneurs (financial business)	380 341	( 402)
Non-financial corporations and individual entrepreneurs (non-financial business)	7 738 212	( 318 168)
Real estate construction and development	430 388	( 54 299)
Civil construction	119 214	( 7 755)
Other	7 188 610	( 256 114)
Large companies	3 462 108	( 133 485)
Small and medium-sized companies	3 726 502	( 122 629)
Individuals	12 545 495	( 214 341)
Homes	11 176 948	( 175 120)
Consumer spending	990 214	( 31 317)
Other	378 333	( 7 904)
	21 891 166	( 533 119)

The detail of guarantees received¹ to secure credit operations is as follows:

	30-06-2019	31-12-2018
Value of collateral	11 624 594	11 662 543
Of which: Stage 3 guarantee	320 339	352 956
Value of other guarantees	939 349	960 912
Of which: Stage 3 guarantee	10 359	10 288
	12 563 943	12 623 455

¹ The value of the guarantee is the minimum amount between the guarantee received and the net credit amount.

The movement in the caption Loans and advances to Customers during the first semester of 2019 was as follows:

	Of which:
Loans and advances	Stage 1	Stage 2	Stage 3
Balance at 31-12-2018 21 891 166	19 397 630	1 473 238	1 020 298
Exposure increases / reductions 99 497	247 089	( 93 050)	( 54 542)
Transfers
From stage 1:	( 443 770)	421 625	22 145
From stage 2:	411 058	( 456 247)	45 189
From stage 3:	3 090	39 845	( 42 935)
Write-offs ( 19 625)	( 3)	( 3)	( 19 619)
Balance at 30-06-2019 21 971 038	19 615 094	1 385 408	970 536

In the first semester of 2019, the impairments due to expected loss on Loans and advances to Customers was as follows:

	Impairments for loans	Of which:
	and advances	Stage 1:	Stage 2:	Stage 3:
Balance at 31-12-2018	( 533 119)	( 25 186)	( 52 878)	( 455 055)
Impairment / reversal of impairment due to changes in credit risk	( 1 758)	1 897	1 218	( 4 873)
Impairment allowance for new financial assets	( 19 618)	( 10 058)	( 1 767)	( 7 793)
Reversal of impairments due to reimbursements and recoveries	31 899	6 763	3 232	21 904
Write-offs	19 625	3	3	19 619
Transfers and other	( 4 269)	( 25)	( 41)	( 4 203)
Balance at 30-06-2019	( 507 240)	( 26 606)	( 50 233)	( 430 401)

The breakdown of Customer loan impairments by calculation method is as follows:

	30-06-2019	31-12-2018
Impairments determined individually / collectively
Specific identified individually	( 182 889)	( 199 611)
Collective	( 324 351)	( 333 508)

Loans and advances to Customers include the following non-derecognised securitised assets:

30-06-2019	31-12-2018


	1 150 034
	3 214 901
11 333	10 003
4 171 941	4 374 938
	855 827 3 304 781

¹ Excludes overdue loans and interest.

7 610 825 t.euros and 7 576 415 t.euros, respectively, allocated as collateral to mortgage bonds;
721 918 t.euros and 694 340 t.euros, respectively, allocated as collateral to public sector bonds;

Written-off loans

The movement in loans written off from assets in the first semester of 2019 and during 2018 was as follows:

	30-06-2019	31-12-2018
Balance at beginning of period	1 114 236	1 262 300
Increases:
Value correction due to depreciation of assets	19 625	57 604
Other	283
Decreases:
Recovery of written-off principal and interest	( 5 933)	( 14 802)
Amount recovered on sale of written-off loans		( 22 090)
Remission of written-off credits due to disposals		( 162 855)
Other	( 1 146)	( 5 921)
Balance at end of period	1 127 065	1 114 236

Loans written off from assets because recovery was deemed to be remote are recognised under the off-balance sheet caption "Loans written off from assets".

9. DERIVATIVES – HEDGE ACCOUNTING

The detail of hedging derivatives is as follows:

		30-06-2019			31-12-2018
	Gross amount	Assets	Liabilities	Gross amount	Assets	Liabilities
Interest rates	7 903 483	34 522	76 363	7 703 360	14 320	56 010
By type of counterparty:
Of which: OTC - credit institutions	840 295	10 363	30 414	2 374 616	7 707	43 501
Of which: OTC - other financial companies	7 063 188	24 159	45 949	5 328 744	6 613	12 509

10. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The detail of investments in joint ventures and associates is as follows:

	Effective holding (%)		Book value
	30-06-2019	31-12-2018	30-06-2019	31-12-2018
Investments in joint ventures
Banco Português de Investimento	100.0%	100.0%	26 622	26 622
BPI Incorporated	100.0%	100.0%	4	4
BPI Madeira SGPS	100.0%	100.0%	150 000	150 000
BPI Suisse, S.A.	100.0%	100.0%	2 022	2 022
BPI Private Equity - Sociedade Capital de Risco	100.0%	100.0%	34 534	34 534
Impairments
Banco Português de Investimento			( 3 422)	( 2 231)
BPI Private Equity - Sociedade Capital de Risco			( 2 214)	( 3 511)
Investments in associates
Banco Comercial e de Investimentos, S.A.	35.7%	35.7%	39 651	39 651
Companhia de Seguros Allianz Portugal, S.A.	35.0%	35.0%	41 680	41 680
Cosec – Companhia de Seguros de Crédito, S.A.	50.0%	50.0%	7 051	7 051
Unicre - Instituição Financeira de Crédito, S.A.	21.0%	21.0%	5 850	5 850
			301 778	301 672
BPI INC - Cauções			712	707
			302 490	302 379

Banco de Fomento Angola (BFA)

Taking into account that increase in experience, assessment and knowledge about the shareholder relationship of BPI in BFA, it was considered that at the end of 2018 the circumstances on which the existence of real capacity on the part of BPI to exercise significant influence over BFA was based no longer existed. In view of these circumstances, at the end of 2018, BPI considered it appropriate to limit its presence in the committees and management bodies of BFA in which it was represented, maintaining only the minority presence in the aforementioned corporate bodies of BFA. The analysis and justification for the non-existence of significant influence are provided in Note 2.1 to the 2018 annual financial statements.

In accordance with the accounting standards, the loss of significant influence entailed, in Banco BPI's balance sheet, reclassifying the equity holding in BFA from Associate to Financial assets at fair value through other comprehensive income - Equity instruments, and its revaluation at fair value (521 935 m.euros).

Impact of reclassification of BFA on individual net income for the year 2018	456 676
Deferred taxes	( 50 742)
Gain on revaluation at fair value recorded in Gains or losses on derecognition of non-financial assets (Note 30)	507 418
The impact of the revaluation of the equity holding in BFA to Banco BPI's net income, in 2018, is as follows:

In 2019, changes in the fair value of the equity holding in BFA were recognised in other comprehensive (Note 8).

11. TANGIBLE ASSETS

This item of assets includes the properties acquired for own use by the Bank.

On 1 January 2019, with the entry into force of IFRS 16 – "Leases", a right of use in the amount of 89 million euros million euros was recognised (note 2A - Comparability of the information).

During the first half of 2019 no individually significant profits or losses were recorded on sales of real estate.

The investments in tangible assets made during the first half of 2019 totalled 2 803 t.euros.

Besides the impact from the application of IFRS16, there were no other relevant movements in this caption during the first half of 2019.

12. INTANGIBLE ASSETS

The investments made in the first half of 2019 totalled 9 170 t.euros, essentially concerning investment in the development of software commissioned by Banco BPI to external entities.

13. OTHER ASSETS

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Accrued income
Fees for Allianz's profit sharing	12 730	24 436
Other accrued income	29 555	26 413
	42 285	50 849
Deferred expenses
Rents	1 231	1 462
Other deferred expenses	8 269	7 742
	9 500	9 204
Other assets	2 807	2 906
Foreign exchange transactions pending settlement	547	3 624
Securities transactions pending settlement - stock exchange transactions	238	303
Credit operations pending settlement	165 264	283 197
Other transactions pending settlement	3 772	13 156
	172 628	303 186
	224 413	363 239

The caption 'Stock exchange transactions pending settlement' relates to the acquisition of securities for which settlement only occurred in the following month.

At 30 June 2019 and 31 December 2018, the caption 'Credit operations pending settlement' included:

119 157 t.euros and 224 613 t.euros, respectively, relating to securitisation operations carried out by Banco BPI (notes 8 and 15), resulting from temporary differences between settlement of the securitised loans and settlement of the liability for assets not derecognised;
6 711 t.euros and 26 627 t.euros, respectively, relating to taxes paid but which were challenged by Banco BPI. At the date of the financial statements there was no expected date for a decision in this regard. The main ongoing tax processes concern processes paid under Decree-Law no. 248-A/02, of 14 November, in the amount of 5 126 t.euros. The remainder (1 585 t.euros) concerns other processes prior to the merger carried out in 2002, relating to tax processes of various types; In addition, the balance at 31 December 2018 also includes 19 916 t.euros relating to Banco BPI VAT processes arising from tax inspections carried out to financial years 2004 to 2009, which was paid under Decree-Law 151-A/13 of 31 October, and was simultaneously fully provisioned for due to the uncertainty about whether this amount would be recovered. Consequently, as of the date of the financial statements, the amount of the asset and liability arising from these processes was derecognised (Note 16);
2 216 t.euros and 2 683 t.euros, respectively, relating to home loans pending settlement.

14. NON-CURRENT ASSETS AND LIABILITIES AND DISPOSAL GROUPS CLASSIFIED AS AVAILABLE FOR SALE

This caption is made up as follows:
	30-06-2019	31-12-2018
Assets received in settlement of defaulting loans and other tangible assets
Buildings	44 475	51 875
Equipment	234	225
Other	61	61
Impairment	( 17 826)	( 18 988)
	26 944	33 173

The values registered in this heading are valued according to the accounting policy referred to in Notes 2.15 and 41.2 of the 2018 annual report.

The changes in assets received in settlement	of defaulting loans and other	tangible assets during the	first semester of 2019 were as follows:
----------------------------------------------------------------	-------------------------------------------	-------------------------------------	-----------------------------------------------------------

		Balance at 31-12-2018		Acquisitions and	Sales and write-offs		Increase / reversals		Balance at 30-06-2019
	Gross amount	Impairment	Net value	transfers	Gross amount	Impairment	of impairment	Gross amount	Impairment	Net value
Assets received in settlement of defaulting loans
Buildings	51 312	( 18 706)	32 606	5 029	( 12 328)	2 666	( 1 517)	44 013	( 17 557)	26 456
Equipment	226	( 148)	78	186	( 178)	10	( 6)	234	( 144)	90
Other	61	( 61)						61	( 61)
Other tangible assets
Buildings	562	( 73)	489		( 100)	29	( 20)	462	( 64)	398
	52 161	( 18 988)	33 173	5 215	( 12 606)	2 705	( 1 543)	44 770	( 17 826)	26 944

15. FINANCIAL LIABILITIES

The detail of the financial liabilities, except for the heading "Derivatives – Hedge Accounting", at 30 June 2019 and 31 December 2018, is as follows:

30-06-2019

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL
Trading derivatives	164 294		164 294
Deposits		26 066 614	26 066 614
Central Banks		1 350 100	1 350 100
Credit Institutions		1 421 955	1 421 955
Customers		23 294 559	23 294 559
Debt securities issued		1 361 622	1 361 622
Other financial liabilities		4 408 375	4 408 375
	164 294	31 836 611	32 000 905

31-12-2018

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL

Trading derivatives	141 335		141 335
Deposits		26 370 230	26 370 230
Central Banks		1 352 843	1 352 843
Credit Institutions		1 873 248	1 873 248
Customers		23 144 139	23 144 139
Debt securities issued		872 864	872 864
Other financial liabilities		4 658 685	4 658 685
	141 335	31 901 779	32 043 114

Financial assets at amortised cost

Deposits - Central Banks and Credit Institutions

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Deposits - Central Banks
Deposits	1 363 830	1 363 830
Interest payable	( 13 730)	( 10 987)
	1 350 100	1 352 843
Deposits - Credit Institutions
Loans and advances to credit institutions in Portugal
Very short-term funds		26 201
Deposits	129 544	112 334
Other funds	270	820
Interest payable	83	112
	129 897	139 467
Funds of credit institutions abroad
International financial organisations	471 186	471 052
Very short-term funds	42 957
Deposits	308 269	568 062
Debt securities sold with repurchase agreement	458 608	663 117
Other funds	10 815	30 798
Interest payable	204	677
Commissions relating to amortised cost	19	75
	1 292 058	1 733 781
	1 421 955	1 873 248
	2 772 055	3 226 091

Deposits - Customers

The detail of this heading is as follows:

	30-06-2019	31-12-2018
By type
Demand deposits	14 531 586	13 414 843
Term deposits	8 474 243	8 636 325
Saving accounts	48 648	50 199
Compulsory deposits	21 554	100 146
Debt securities sold with repurchase agreement	201 257	926 142
Interest payable	17 265	16 424
Commissions relating to amortised cost, net	6	60
	23 294 559	23 144 139
By sector
Public sector	706 526	359 113
Private sector	22 588 033	22 785 026
	23 294 559	23 144 139

Debt securities issued

The detail of this heading is as follows:

	30-06-2019 31-12-2018
	Issues	Repurchased	Balance	Average interest rate	Issues	Repurchased	Balance	Average interest rate
Covered bonds	7 100 000	(6 050 000)	1 050 000	0.3%	7 100 000	(6 550 000)	550 000	0.3%
Fixed-rate bonds	12 128	( 1 929)	10 199	0.4%	21 578	( 3 285)	18 293	0.3%
Interest payable			291				57
Commissions relating to amortised cost,
net			( 3 369)
			1 057 121				568 350
Other subordinated bonds	300 000	0	300 000	5.5%	300 000		300 000	5.5%
Interest payable			4 501				4 514
			304 501				304 514
			1 361 622				872 864

Issuances, repurchases and repayments of debt securities

During the first semester of 2019, Banco BPI made the following debt securities issues:

	Amount	Expiry	Interest rate
Mortgage Bonds	500 000	5 years	0.25%

In addition, during the first half of 2019, a collateralised bond issue fully repurchased in the amount of 500 000 t.euros was reimbursed, and there were other reimbursements in the amount of de 7 980 t.euros and repurchases in the amount of 114 t.euros.

Other Financial Liabilities

This caption is made up as follows:

	30-06-2019	31-12-2018
Liabilities relating to assets not derecognised in securitisation operations
Non securitised loans
Home loans	871 870	1 174 766
Loans to SMEs	3 244 729	3 257 330
Interest payable	435	418
Commission relating to amortised cost, net	( 635)	( 653)
	4 116 399	4 431 861
Other Customer funds
Checks and orders payable	64 977	43 473
Guaranteed rate deposits	2 651	4 820
Interest payable	25	69
Creditors and other resources
Creditors for futures operations	10 666	13 026
Consigned resources	41 889	35 555
Captive account resources	3 945	4 747
Captive account resources	9 544	11 540
Public sector
Tax withheld at source	15 960	14 227
Contributions to the Social Security	3 803	3 789
Other	2 740	2 740
Contributions to other healthcare systems	1 346	1 329
Creditors for factoring agreements	16 851	43 854
Creditors for the supply of goods	5 518	7 980
Subscribed but not paid-up capital in venture capital funds
Fundo de Recuperação, FCR	8 451	8 639
Fundo InterRisco II CI	5 176	5 377
Fundo InterRisco II - Fundo de Capital de Risco	1 307	1 492
Fundo de Reestruturação Empresarial, FCR	308	661
Other funds	635	7
Sundry creditors	18 244	23 499
Usage rights (IFRS 16)	77 940
	291 976	226 824
	4 408 375	4 658 685

At 1 January 2019 IFRS 16 - "Leases" entered into force, which implied an increase of 89 million euros under "Other Financial Liabilities" (Note 2.B - Comparability).

16. PROVISIONS AND CONTINGENT LIABILITIES

The detail of this heading is as follows:

	30-06-2019	31-12-2018
Pending legal issues and tax litigation
VAT Recovery processes (2003 to 2016)	9 795	29 711
Tax contingencies and other	12 655	12 534
Impairment and provisions for guarantees and commitments	20 689	23 212
	43 139	65 457

The movement in provisions during the first semester of 2019 was as follows:

	Balance at 31-12-2018	Increases	Decreases / Reversals	Amounts used	Balance at 30-06-2019
Pending legal issues and tax litigation	42 245	244	( 111)	( 19 928)	22 450
Commitments and guarantees given	23 212	704	( 3 227)		20 689
	65 457	948	( 3 338)	( 19 928)	43 139

Contingent liabilities

Competition Authority

On 9 September 2019, the CA notified BPI and the other banks of its ruling whereby they had been found guilty. The penalty imposed on BPI was 30 million euros.

In its ruling, the CA:

a) Accuses BPI, as well as the other banks, of having engaged in exchanges of information during the period from May 2002 to March 2013 concerning (i) mortgage loan and consumer loan production volumes, and (ii) the commercial conditions for these types of loans and for loans to small businesses and SME, including spread tables;
b) Considers that such an exchange constitutes an infringement by object, i.e., an infringement which is deemed to have been committed irrespective of whether or not the conduct in question had negative effects on the competition, and therefore it is not necessary to prove such effects; in other words, for the infringement to be deemed as committed, it is sufficient to prove that the conduct is, in the abstract, capable of having adverse effects on competition.

National Resolution Fund

There has been no change relative to the information published in Note 23. Provisions and contingent liabilities of the 2018 Annual Report.

17. OTHER LIABILITIES

This caption is made up as follows:

	30-06-2019	31-12-2018
Liabilities for pensions and other benefits
Pension fund assets (Note 18)	(1 757 935)	(1 646 111)
Past service liabilities (Note 18)	1 836 765	1 678 366
	78 830	32 255
Expenses payable
Staff Expenses	63 221	78 903
Other administrative expenses	35 273	62 659
Special tax on banks	7 799	15 181
Other	2 278	1 336
	108 571	158 079
Deferred income
From guarantees given and other contingent liabilities	1 731	1 940
Other	73	118
	1 804	2 058
Other adjustment accounts
Liabilities pending settlement	78 074	110 311
Other transactions pending settlement	210 966	210 495
	289 040	320 806
	478 245	513 198

At 30 June 2019 and 31 December 2018, the caption "Liabilities pending settlement" included:

3 144 t.euros and 66 641 t.euros, respectively, relating to transactions with loan securitisation funds;
21 767 t.euros and 24 501 t.euros, respectively, relating to ATM transactions pending settlement;
23 862 t.euros and 7 184 t.euros, respectively, relating to transactions with SIBS pending settlement;

At 30 June 2019 and 31 December 2018, the caption "Other transactions pending settlement" included 182 054 t.euros and 189 072 t.euros, respectively, relating to transfers under SEPA (Single Euro Payment Area).

18. LIABILITIES FOR PENSIONS AND OTHER BENEFITS

Past service liabilities for Pensioners, Employees and Directors that are, or have been, at the service of BPI, are calculated in accordance with IAS 19.

Disability and survivor pensions and sick leave for these Employees continue to be the Bank's responsibility.

Decree-Law 127 2011 of 31 December established the transfer to the Social Security of liabilities for retirement and survivor pensions of retired personnel and pensioners that were in that situation at 31 December 2011 and were covered by the substitute social security regime included in the collective labour regulations instrument in force for the banking sector (Pillar 1), as well as the transfer to the Portuguese State of the corresponding pension fund assets covering these liabilities. Since the transfer to the Social Security corresponded to a settlement, extinguishing the corresponding liability of Banco BPI, the negative difference (99 177 t.euros) between the amount of the pension fund assets transferred to the Portuguese State and the amount of the liability transferred based on actuarial assumptions used by Banco BPI was fully recognised as a cost in 2011/12. For tax purposes, this cost is recognised over a period of 18 years.

The main actuarial assumptions used to calculate the pension liabilities of Employees are as follows:

	30-06-2019	31-12-2018
Demographic assumptions:
	TV 88/90-H	TV 88/90-H
Mortality Table	TV 88/90-M - 3 years 1	TV 88/90-M - 3 years 1
Disability table	EKV 80	EKV 80
Staff turnover	0%	0%
Decreases	By mortality	By mortality
Financial assumptions
Discount rate
Start of the period	2.0%	2.0%
End of the period	1.5%	2.0%
Pensionable salaries growth rate 2	1.0%	1.0%
Pensions growth rate	0.5%	0.5%

¹ Life expectancy considered for women was 3 years longer than considered in the mortality table used.

The past service liabilities for Pensioners and Employees of BPI and respective coverage by the Pension Fund present the following composition:

	30-06-2019	31-12-2018
Total past service liabilities	(1 784 868)	(1 629 103)
Net assets of the Pension Fund	1 707 777	1 602 146
Contributions to be transferred to the Pension Fund		5 400
Coverage surplus/(shortfall)	( 77 091)	( 21 557)
Coverage ratio of liabilities	96%	99%

The movement in deviations during the first semester of 2019 was as follows:
Amount at 31-12-2018	( 207 663)
Deviation in pension funds return	111 438
Changing financial and demographic assumptions
Change in discount rate	( 157 641)
Deviation in pensions paid	( 1 041)
Other deviations	( 9 315)
Amount at 30-06-2019	( 264 222)

The Members of the Executive Committee of the Board of Directors of Banco BPI, S.A. benefit from a supplementary retirement and survivor pension plan, the funding coverage of which is ensured through a pension fund.

The main actuarial assumptions used to calculate the pension liabilities of Board members are as follows:

	30-06-2019	31-12-2018
Demographic assumptions:
Mortality Table	TV 88/90-H TV 88/90-M - 3 years 1	TV 88/90-H TV 88/90-M - 3 years 1
Disability table	EKV 80	EKV 80
Staff turnover	0%	0%
Decreases	By mortality	By mortality
Financial assumptions
Discount rate
Start of the period	2.0%	2.0%
End of the period	1.5%	2.0%
Pensionable salaries growth rate	0.5%	0.5%
Pensions growth rates 2	0.5%	0.5%

¹ Life expectancy considered for women was 3 years longer than considered in the mortality table used.

² Rate of increase corresponds to Consumer Price Index rate of change, as per the pension plan rules.

The past service liabilities for Board members and respective coverage by the Pension Fund present the following composition:

	30-06-2019	31-12-2018
Total past service liabilities	( 51 897)	( 49 263)
Net assets of the Pension Fund	50 158	43 965
Contributions to be transferred to the Pension Fund		4 739
Coverage surplus/(shortfall)	( 1 739)	( 559)
Coverage ratio of liabilities	97%	99%

In the first semester of 2019, the return of the pension fund was 5.8% (not annualized).

The changes in actuarial deviations during the first half of 2019 were as follows:

Amount at 31-12-2018	( 15 877)
Deviation in pension funds return	2 109
Change in financial and demographic assumptions
Change in discount rate	( 3 086)
Deviation in pensions paid	185
Other deviations	( 123)
Amount at 30-06-2019	( 16 792)

19. SHAREHOLDERS' EQUITY

Capital

At 30 June 2019 and 2018 Banco BPI's share capital was 1 293 063 t.euros, represented by 1 456 924 237 ordinary dematerialised registered shares with no nominal value.

Other equity instruments and treasury shares

This caption has the following composition:

	30-06-2019	31-12-2018
Other equity
Cost of shares to be made available to Group Employees		322
	0	322

The caption 'Other equity' includes the accrued costs of the share-based variable remuneration program (RVA) relating to shares to be made available.

Accumulated other comprehensive income

The main movements in Accumulated other comprehensive income are shown in detail in the tables of the interim individual statements of profit and loss and other comprehensive income.

Retained earnings and other reserves

This caption is made up as follows:

	30-06-2019	31-12-2018
Retained earnings
Legal reserve	244 789	153 358
Other reserves and retained earnings	1 597 480	942 157
Profit/(loss) generated on change of accounting policies	0	( 27 556)
	1 842 269	1 067 959
Other reserves
Merger reserve	2 530	2 530
	2 530	2 530

20. TAX POSITION

Tax assets and liabilities

The breakdown of tax assets and liabilities is as follows:

Tax assets
	30-06-2019	31-12-2018
Current tax assets	4 484	3 237
Recoverable VAT	15 984	20 049
Deferred tax assets	309 835	326 963
	330 303	350 249
Tax liabilities

	30-06-2019	31-12-2018
Current tax liabilities	2 804	2 211
Deferred tax liabilities	55 053	54 165
	57 857	56 376

Deferred tax assets and liabilities

Deferred tax assets and liabilities were measured at the tax rates that are expected to apply to the period when the asset is expected to be realised or the liability settled.

The breakdown of deferred tax assets in 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Tax losses	19 609	19 609
Application of Art. 4 of the regime set forth in Law 61/2014	5 460	5 170
Taxed provisions and impairments	166 232	179 741
Tax deferral of the impact of the partial transfer of pension liabilities to the Social Security	15 872	16 628
Early retirement	29 211	32 982
Actuarial deviations	66 720	66 837
Other	6 731	5 996
	309 835	326 963

At 30 June 2019 the amount of deferred tax assets generated until 2015 that could benefit from the Special regime approved by Law no. 61/2014 of 26 August was 108 728 t.euros.

The breakdown of deferred tax liabilities in 30 June 2019 and 31 December 2018 is as follows:

	30-06-2019	31-12-2018
Financial instruments at fair value	54 801	53 904
Other	252	261
	55 053	54 165

At 30 June 2019, the caption Financial instruments at fair value included 48 643 t.euros in deferred tax liabilities associated with the unrealised capital gain in BFA.

21. OFF BALANCE SHEET ITEMS

This caption is made up as follows:

	30-06-2019	31-12-2018
Loan commitments given
Irrevocable credit lines	165	161
Securities subscribed	432 622	475 233
Revocable commitments	2 231 585	2 125 407
	2 664 372	2 600 801
Financial guarantees given
Financial guarantees and sureties	231 802	241 367
Financial standby letters of credit	6 953	7 280
Documentary credits	157 578	192 339
	396 333	440 986
Other commitments given
Non-financial guarantees and sureties	1 177 749	1 172 164
Non-financial standby letters of credit	18 648	25 475
Term liabilities for annual contributions to the Deposit Guarantee Fund	38 714	38 714
Term liabilities for annual contributions to the Resolution Fund	8 713	6 715
Potential liability to the Investor Compensation Scheme	10 925	11 639
Other irrevocable commitments	979	732
	1 255 728	1 255 439
	4 316 433	4 297 226
Assets pledged as collateral
European System of Central Banks	7 546 673	7 939 263
Deposit Guarantee Fund	45 229	43 341
Investors Compensation Scheme	5 841	5 926
European Investment Bank	618 783	619 956
Reports	669 872	1 604 613
Other collateral	33	53
	8 886 431	10 213 152

The breakdown by stage of the exposure and impairment in guarantees and commitments at 30 June 2019 is as follows:

		Exposure				Impairments
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Loan commitments given	2 604 705	55 522	4 145	2 664 372	33	2	6	41
Financial guarantees given	392 149	3 069	1 115	396 333	348	217	606	1 171
Other commitments given	1 107 608	55 081	93 039	1 255 728	313	520	18 645	19 478
	4 104 462	113 672	98 299	4 316 433	694	739	19 257	20 690

The breakdown by stage of the exposure and impairment in guarantees and commitments at 31 December 2018 is as follows:

		Exposure				Impairments
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Loan commitments given	2 561 997	34 174	4 630	2 600 801	57	1	7	65
Financial guarantees given	436 867	3 240	879	440 986	402	36	549	987
Other commitments given	1 106 664	53 153	95 622	1 255 439	296	457	21 407	22 160
	4 105 528	90 567	101 131	4 297 226	755	494	21 963	23 212

22. NET INTEREST INCOME

This caption is made up as follows:

	30-06-2019	30-06-2018
Interest income
Financial assets held for trading	25 173	20 360
Financial assets not designated for trading compulsorily measured at fair value through profit or loss	2 339	2 629
Financial assets at fair value through other comprehensive income	5 761	6 309
Financial assets at amortised cost
Debt securities	17 439	16 481
Loans and advances - central banks and other credit institutions	5 600	3 917
Loans and advances - Customers	194 008	186 305
Derivatives - Hedge accounting, interest rate risk	5 837	671
Interest on demand deposits at Banco de Portugal	( 3 055)
Other assets	707	2 736
Interest income on liabilities	2 694	1 209
Commissions received relating to amortised cost	11 132	10 118
	267 635	250 735
Interest expense
Financial liabilities held for trading	( 12 307)	( 10 006)
Financial liabilities at amortised cost
Deposits - Credit Institutions	( 3 399)	( 2 207)
Deposits - Customers	( 12 098)	( 9 647)
Debt securities issued	( 12 425)	( 10 683)
Derivatives - Hedge accounting, interest rate risk	( 7 089)	( 5 768)
Other liabilities	( 2 027)	( 1 689)
Commissions paid relating to amortised cost	( 216)	( 118)
	( 49 561)	( 40 118)
Net interest income	218 074	210 617

23. DIVIDEND INCOME

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Financial assets at fair value through other comprehensive income
Banco de Fomento Angola, S.A.	45 997
SIBS - Sociedade Interbancária de Serviços	1 573	1 116
Other	588	78
Investments in joint ventures and associates
Banco de Fomento Angola, S.A.		47 834
BPI Suisse		8 699
Companhia de Seguros Allianz Portugal, S.A.		5 952
Banco Comercial e de Investimentos, S.A.	5 078
Cosec - Companhia de Seguros de Crédito, S.A.	2 752	3 974
Unicre - Instituição Financeira de Crédito, S.A.	5 000	3 320
	60 988	70 973

24. FEE AND COMMISSION INCOME AND EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Fee and commission income
On guarantees provided	6 820	6 878
On commitments to third parties	1 297	2 044
On other banking services provided	114 511	125 981
On operations performed on behalf of third parties	5 522	5 754
Other	250	195
Refund of expenses	2 200	5 644
Income from provision of sundry services	4 633	4 430
	135 233	150 926
Fee and commission expenses
For guarantees received	( 24)	( 20)
On financial instruments transactions	( 186)	( 131)
On banking services provided by third parties	( 6 017)	( 17 929)
On operations performed by third parties	( 1 419)	( 1 963)
Commission-equivalent expenses	( 3 133)	( 3 350)
Other	( 1 158)	( 292)
	( 11 937)	( 23 685)

The reduction in fee and commission income and fee and commission expenses in the first half of 2019, compared to the first half of 2018, is in part explained by the effect of the sale of the cards, acquiring and investment banking businesses, estimated in -18 million euros.

25. GAINS / (LOSSES) OF FINANCIAL ASSETS AND LIABILITIES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	3 619	( 89)
Financial assets at fair value through other comprehensive income
Debt securities		416
Financial assets at amortised cost
Debt securities	3 612	( 514)
Financial liabilities at amortised cost	6	8
Other	1	1
Gains/(losses) on financial assets and liabilities held for trading, net	( 817)	26 189
Financial assets held for trading
Trading derivatives	( 10 583)	31 965
Debt securities	1 179	189
Equity instruments	8 587	( 5 965)
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	( 6 847)	59 989
Debt securities	1 896	( 1 898)
Equity instruments	( 8 743)	61 887
Gains/(losses) from hedge accounting (net)	971	425
Hedging derivatives (Note 9)	( 5 729)	8 846
Hedged items (Note 9)	6 700	( 8 421)
Exchange differences (gain/loss), net	1 275	( 16 575)
	( 1 799)	69 939

At 30 June 2019 and 2018, the caption "Gains / (losses) on financial assets and liabilities held for trading - Hedging derivatives" included:

(8 680) t.euros and 5 472 t.euros, respectively, concerning equity swaps contracted with Customers, which are hedged through a portfolio of equities, in the caption "Gains / (losses) on financial assets and liabilities held for trading - Equity instruments";
(2 213) t.euros and 8 486 t.euros, respectively, in gains and losses on the revaluation of CVAs (Credit Valuation Adjustments) in derivatives contracted with Customers;
17 163 t.euros on 30 June 2018 in gains/(losses) on derivatives to hedge foreign exchange risk.

26. OTHER OPERATING INCOME AND EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018 Restated
Other operating income
Service provision agreements with CaixaBank Group companies	6 591	2 390
Gains on finance leases	9 986	6 356
Other operating income	1 806	2 699
	18 383	11 445
Other operating expenses
Subscriptions and donations	( 659)	( 1 350)
Contributions to the Deposit Guarantee Fund	( 34)	( 34)
Contribution to the Resolution Fund	( 6 968)	( 5 450)
Contributions to the Single Resolution Fund	( 11 321)	( 11 760)
Contribution to the Investor Compensation Scheme	( 5)	( 5)
Losses on finance leases	( 9 552)	( 6 103)
Other operating expenses	( 1 016)	( 512)
Indirect taxes	( 1 055)	( 1 256)
Direct taxes	( 5 340)	( 5 274)
	( 35 950)	( 31 744)

As of 30 June 2019, the direct taxes caption includes 4 600 t.euros relating to dividend taxes paid by BFA in Angola.

27. STAFF EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Staff expenses
Remuneration	( 93 793)	( 89 970)
End-of-career bonus	( 291)	( 233)
Other mandatory social costs	( 25 712)	( 25 278)
Pension costs
Current service cost	2 942	2 477
Interest cost relating to the liabilities	( 15 592)	( 16 322)
Income on plan assets computed based on the discount rate	15 295	16 459
Other	( 138)	( 218)
Other staff costs	( 2 400)	( 1 229)
	( 119 689)	( 114 314)
Costs with early retirements and terminations
Early retirements	1	( 3 353)
Voluntary terminations	( 17)	( 3 827)
	( 16)	( 7 180)
	( 119 705)	( 121 494)

28. OTHER ADMINISTRATIVE EXPENSES

The detail of this heading is as follows:

	30-06-2019	30-06-2018
General administrative expenses
Supplies
Water, energy and fuel	( 3 501)	( 3 374)
Consumables	( 938)	( 917)
Other	( 235)	( 129)
Services
Rents and leases	( 5 267)	( 19 956)
Communications and IT	( 21 883)	( 17 373)
Travel, lodging and representation	( 1 912)	( 2 047)
Advertising and publishing	( 4 780)	( 6 478)
Maintenance and repairs	( 5 745)	( 6 984)
Insurance	( 787)	( 919)
Fees	( 1 234)	( 1 726)
Legal expenses	( 1 801)	( 2 508)
Security and cleaning	( 2 373)	( 2 062)
Information services	( 1 317)	( 1 472)
Temporary labour	( 225)	( 1 122)
Studies, consultancy and auditing	( 7 352)	( 3 608)
SIBS	( 1 674)	( 1 625)
Other	( 13 747)	( 9 703)
	( 74 771)	( 82 003)

At 30 June 2019 and 2018 the caption Rents and leases included 313 t.euros and 18 763 t.euros, respectively, concerning rents paid for buildings and commercial spaces used by the Bank. Following the coming into force of IFRS16, costs with real estate lease agreements are now recognised as the amortisation of the right-of-use, in the income statement captions Depreciation and amortisation and Interest expense, amounting to 12 159 t.euros and 505 t.euros, respectively.

29. IMPAIRMENT OF FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

The detail of this heading is as follows:

	30-06-2019	30-06-2018
Financial assets at amortised cost
Loans and advances
Net allowances
Credit Institutions	269	( 168)
Customers	2 067	6 728
Recovery of loans written off from assets	5 933	6 967
Debt securities
Net allowances	66	63
	8 335	13 590

30. GAINS / (LOSSES) ON DERECOGNITION OF NON-FINANCIAL ASSETS

The detail of this heading is as follows:

	30-06-2019	30-06-2018 Restated
Gains in non-financial assets
Gains in other tangible assets		42
		42
Losses in non-financial assets
Losses in other tangible assets	( 1 476)	( 1 848)
	( 1 476)	( 1 848)
	( 1 476)	( 1 806)

31. PROFIT/(LOSS) FROM NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE NOT QUALIFYING AS DISCONTINUED OPERATIONS

This caption is made up as follows:

	30-06-2019	30-06-2018 Restated
Profit/(loss) on assets received in settlement of defaulting loans
Properties	1 313	1 726
Equipment	( 14)	( 6)
Impairments on assets received in settlement of defaulting loans
Properties	( 1 518)	( 959)
Equipment	( 6)	( 19)
Impairments on other tangible assets
Properties	( 20)	( 37)
Other profit/(loss)	242	243
	( 3)	948

32. PROFIT/(LOSS) AFTER TAX FROM DISCONTINUED OPERATIONS

During the first semester of 2018, the realized gains on sale of BPI Gestão de Activos and BPI GIF, were included in the income statement caption ''Profit/(loss) after tax from discontinued operations'', broken down as follows:

	30-06-2018
BPI Gestão de Activos	69 808
BPI GIF	7 850
	77 658

33. RELATED PARTIES

In accordance with IAS 24, the entities considered to be related to Banco BPI are:

those in which the Bank has direct or indirect significant influence over their management and financial policies Associated companies and jointly controlled entities and pension funds;
those that have direct or indirect significant influence over the management and financial policies of the Bank Shareholders, this is presumed to happen when the equity holding is greater than 20%;
the members of the key management personnel of Banco BPI, such being considered for this purpose the executive and nonexecutive members of the Board of Directors and individual persons and companies related with them.

In accordance with these criteria, BPI's related parties at 30 June 2019 were the following:

Name of related entity	Registered office	Effective holding	Direct holding
Shareholders of Banco BPI
Caixa Bank Group	Spain	100.0%
Associated and jointly controlled entities of Banco BPI
Banco Português Investimento, S.A.	Portugal	100.0%	100.0%
BPI Incorporated	USA	100.0%	100.0%
BPI Madeira SGPS	Portugal	100.0%	100.0%
BPI Private Equity – Sociedade de Capital de Risco, S.A.	Portugal	100.0%	100.0%
Inter-Risco – Sociedade de Capital de Risco, S.A.	Portugal	49.0%
Banco Comercial e de Investimentos, S.A.R.L.	Mozambique	35.7%	35.7%
Companhia de Seguros Allianz Portugal, SA	Portugal	35.0%	35.0%
Cosec - Companhia de Seguros de Crédito, SA	Portugal	50.0%	50.0%
BPI (Suisse), S.A.	Switzerland	100.0%	100.0%
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	21.0%	21.0%
Members of the Board of Directors of Banco BPI
Fernando Ulrich
Pablo Forero
António Lobo Xavier
Alexandre Lucena e Vale
António Farinha Morais
António José Cabral
Cristina Rios Amorim
Fátima Barros
Francisco Barbeira
Gonzalo Gortázar Rotaeche
Ignacio Alvarez-Rendueles
Javier Pano Riera
João Pedro Oliveira e Costa
José Pena do Amaral
Lluís Vendrell
Natividad Capela
Pedro Barreto
Tomás Jervell
Pension Funds of BPI Employees
Fundo de Pensões Banco BPI	Portugal	100.0%
Fundo de Pensões Aberto BPI Acções	Portugal	7.7%
Fundo de Pensões Aberto BPI Valorização	Portugal	31.3%
Fundo de Pensões Aberto BPI Segurança	Portugal	21.5%
Fundo de Pensões Aberto BPI Garantia	Portugal	7.6%

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Assets
Cash and cash balances at central banks and other demand deposits	9				936
Financial assets held for trading	16 151
Financial assets not designated for trading compulsorily measured at	991
fair value through profit or loss - equity instruments
Financial assets at fair value through other comprehensive income -
equity instruments	648				50 025
Financial assets at amortised cost
Debt securities					90 089
Loans and advances - central banks and credit institutions	175 566	18 634		3 056	45 717
Loans and advances - Customers Investments in joint ventures and associates		302 490
Derivatives - Hedge accounting	6 946
Tangible assets	247
Intangible assets	11 362
Other assets	20 221	12 730
	232 141	333 854		3 056	186 767
Liabilities
Financial liabilities held for trading	15 628
Financial liabilities at amortised cost
Deposits - Customers	357 988	213 624	96 664	7 124	11 321
Deposits - Credit Institutions	5 646	25 479			30
Debt securities issued	304 501
Other financial liabilities	4	( 3)		24
Fair value changes of the hedged items in portfolio hedge of interest
rate risk	57
Provisions - Commitments and guarantees given					3
Other liabilities	945
	684 769	239 100	96 664	7 148	11 354
Shareholders' equity Fair value changes of equity instruments measured at fair value through other comprehensive income
Off-balance sheet items
Guarantees given and other contingent liabilities
Guarantees and sureties	341	14 963	60	3	3 892
Guarantees received				90	1 055
Commitments to third parties
Revocable commitments	56 725	5 000		36	29 570
Liabilities for services provided
Deposit and safekeeping of valuables	6 228 386	1 173 995	1 717 668	2 888	125 272
Other	37 663
Services provided by third parties		79 275
Foreign exchange transactions and derivative instruments
Purchase	1 283 523
Sale	(1 113 048)
Written-off loans					200
	6 493 590	1 273 233	1 717 728	3 017	159 989

1 Includes CaixaBank Group and the companies which it controls.

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Assets
Cash and cash balances at central banks and other demand deposits Financial assets held for trading	7 655 3 547
Financial assets at fair value through other comprehensive income - equity instruments	618				50 000
Financial assets at amortised cost Debt securities					55 106
Loans and advances - central banks and credit institutions	94	24 816
Loans and advances - Customers	200 661			7 319	50 756
Derivatives - Hedge accounting	3 312
Investments in joint ventures and associates		302 380
Tangible assets	167
Intangible assets	12 728
Other assets	15 574	24 436
Non-current assets and disposal groups classified as held for sale
	244 356	351 632		7 319	155 862
Liabilities
Financial liabilities held for trading	1 421
Financial liabilities at amortised cost
Deposits - Customers	623 990	203 742	90 690	6 604	22 606
Deposits - Credit Institutions	14 485	21 068
Debt securities issued	304 514
Other financial liabilities	3	97		24
Fair value changes of the hedged items in portfolio hedge of interest rate risk	86
Provisions - Commitments and guarantees given					1
Other liabilities		120
	944 499	225 027	90 690	6 628	22 607
Shareholders' equity Fair value changes of equity instruments measured at fair value
through other comprehensive income	( 188)
	( 188)
Off-balance sheet items
Guarantees given and other contingent liabilities
Guarantees and sureties	341	14 930	60	3	3 509
Guarantees received				2 298	1 783
Commitments to third parties
Revocable commitments	225	5 006		53	27 558
Irrevocable commitments					10 000
Liabilities for services provided
Deposit and safekeeping of valuables	5 817 006	1 114 160	1 598 194	6 754	38 584
Other					2 500
Services provided by third parties		79 320
Foreign exchange transactions and derivative instruments
Purchase	997 170	84
Sale	( 751 779)	( 84)
Written-off loans					200
	6 062 963	1 213 416	1 598 254	9 108	84 134

1 Includes CaixaBank Group and the companies which it controls.

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Results
Net interest income	( 4)	30	( 118)	( 2)	246
Dividend income		12 830			1 573
Fee and commission income	21 266	26 362	5	2	3
Fee and commission expenses	( 1 437)	( 73)
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	36
Gains/(losses) from hedge accounting, net	28
Other operating income	6 930
Administrative expenses - Other administrative expenses	( 2 130)	( 506)	( 6 360)
Depreciation	( 2 498)
Provisions or reversal of provisions - Commitments and guarantees
given					( 2)
Impairment/(reversal) of impairment losses on financial assets not
measured at fair value through profit or loss				6	( 14)
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	230
	22 421	38 643	( 6 473)	6	1 806

1 Includes CaixaBank Group and the companies which it controls.

2 Includes the companies in which the Members of the Board of Directors have significant influence, not included in other categories.

	Shareholders of Banco BPI 1	Associated and jointly controlled entities	Pension Funds of BPI Employees	Members of the Board of Directors of Banco BPI	Companies in which the Members of the Board of Directors of Banco BPI have significant influence 2
Results
Net interest income	( 4 595)	( 1 607)	( 395)	( 2)	245
Dividend income		69 778			1 116
Fee and commission income	17 272	25 723	207	1	2
Fee and commission expense		( 738)
Gains/(losses) from hedge accounting, net	105
Other operating income	2 446	30
Administrative expenses - Other administrative expenses	( 1 015)	( 503)	( 7 475)
Provisions or reversa of provisions - Commitments and guarantees					79
given		20
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss	2			9	246
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	230
Profit/(loss) before tax from discontinued operations	77 658
	92 103	92 703	( 7 663)	8	1 688

1 Includes CaixaBank Group and the companies which it controls.

34. WORKFORCE AND COMMERCIAL UNITS

In the periods of six months ended at 30 June 2019 and 30 June 2018 the average headcount was broken down as follows:

	30-06-2019		30-06-2018
	Men	Women	Men	Women
Directors1	8		8
Senior management	249	134	263	142
Other management staff	1 769	2 438	1 679	2 256
Other employees	94	136	208	310
	2 120	2 708	2 158	2 708

¹ Executive Directors of Banco BPI.

The headcount at 30 June 2019 and 30 June 2018 was broken down as follows:

	30-06-2019		30-06-2018
	Men	Women	Men	Women
Directors1	8		8
Senior management	246	133	268	145
Other management staff	1 770	2 445	1 680	2 262
Other employees	92	136	192	287
	2 116	2 714	2 148	2 694

¹ Executive Directors of Banco BPI.

At 30 June 2019 and 31 December 2018 the commercial units were broken down as follows:

	30-06-2019	31-12-2018
Activity in Portugal	486	495
Branches	413	422
Premier centres	37	39
Corporate Centres	36	34
	486	495

35. INFORMATION ON FAIR VALUE

The fair value of financial instruments is estimated, whenever possible, on the basis of prices in an active market. A market is considered active, and therefore liquid, when it is accessed by equally knowledgeable counterparties and where transactions are carried out on a regular basis. For financial instruments for which there is no active market, due to lack of liquidity or regular transactions, valuation methods and techniques are used to estimate fair value.

35.1. Fair value on financial instruments

Financial instruments on the balance sheet at fair value are classified into levels using the hierarchy defined in IFRS 13.

Debt securities and equity instruments

(i) financial instruments are priced daily by at least 6 contributors, at least three of them with firm offers, or there is a multi-contributed price (price formed by several firm offers from contributors available in the market) (active market), or;
(ii) such financial instruments have been classified as level 1, in accordance with the rule referred to in the preceding paragraph, in at least 50% of the last 30 calendar days.

a) Financial instruments are classified daily in Level 2 if they are:

(i) Quoted by less than 6 contributors, regardless of the type of price, or;
(ii) valued based on models using inputs which are mainly observable in the market (such as interest rate curves or exchange rates), or;
(iii) valued based on third party indicative purchase prices, based on observable market data, and
(iv) have been classified as level 1 and level 2, in accordance with the rules mentioned above, in at least 50% of the last 30 calendar days.

(i) valuation based on Net Asset Value of non-harmonized funds, updated and disclosed by their managing companies;
(ii) valuation based on indicative prices disclosed by the entities involved in the issue of certain financial instruments, without an active market; or
(iii) valuation based on impairment tests, using indicators of the performance of the underlying operations (degree of protection by subordination of notes held, delinquency rates of the underlying assets, evolution of ratings, among others).
b) financial instruments valued at indicative purchase prices based on theoretical models, disclosed by specialized third parties.

Derivative financial instruments

Level 1: This category includes futures and options and other derivative financial instruments traded on regulated markets.
Level 2: Level 2 includes derivatives, traded on over-the-counter markets, without an optional component.

Level 3: Level 3 includes options and derivatives traded in the over-the-counter market, with embedded optional elements.

(i) For simpler options the Black-Scholes model and their derivatives is used (commonly used models by the market in the valuation of this type of operation). The unobservable market inputs (implied volatility of the underlying assets) are collected from Bloomberg.
(ii) For exotic options or complex derivatives incorporating optional elements for which there are no valuation models available, the Bank contracts specialized entities that perform the valuation of these operations based on specific models that they develop using criteria and methodologies generally accepted by the sector for these types of instruments. On 31 December 2018, there were no outstanding operations of this type, therefore the Bank did not use valuations prepared by these entities.

Financial instruments recorded in the balance sheet at amortised cost

The fair value of financial instruments recorded in the balance sheet at amortised cost is determined by Banco BPI through valuation techniques.

the cash flows relating to Financial assets at amortised cost Loans and advances to Central Banks and Credit Institutions, and Financial liabilities at amortised cost - deposits from Central Banks and Credit institutions, were discounted based on interest rate curves for interbank operations on the date of the financial statements, except for medium and long term resources, the cash-flows of which were discounted based on the interest rate curve used by the Bank for senior issuances;
in operations with Customers (Financial assets at amortised cost loans and advances to Customers and Financial liabilities at amortised cost - Customer deposits), the weighted average of the reference rates used by the Bank in the previous month to contract similar operations is considered;
for bonds issued (Financial liabilities at amortised cost debt securities issued), the Bank considered the reference interest rates and spreads available in the market, considering the residual maturity and degree of subordination of the issuances. For subordinated debt, the Bank used issuance proposals submitted to the Bank by other credit institutions, as the basis for the construction of subordination spread curves, also considering the senior debt curve, the Portuguese public debt curve and the evolution of the spread between the Portuguese and German public debts.

Note that the fair value presented for these financial instruments may not correspond to their realizable value in a sale or liquidation scenario, as it was not determined for that purpose.

The fair value of the financial assets on the balance sheet, broken down by levels, is as follows:

	30-06-2019						31-12-2018
	Book		Fair value			Book		Fair value
	value	Total	Level 1	Level 2	Level 3	value	Total	Level 1	Level 2	Level 3
Financial assets held for trading	246 123	246 123	83 351	126 374	36 398	226 772	226 772	83 415	122 162	21 195
Derivatives	152 050	152 050	247	125 329	26 474	131 708	131 708	712	119 162	11 834
Equity instruments	81 581	81 581	81 581			81 171	81 171	81 171
Debt securities	12 492	12 492	1 523	1 045	9 924	13 893	13 893	1 532	3 000	9 361
Financial assets not designated for trading compulsorily
measured at fair value through profit or loss	406 013	406 013	991		405 022	437 666	437 666			437 666
Equity instruments	138 041	138 041	991		137 050	154 527	154 527			154 527
Debt securities	267 972	267 972			267 972	283 139	283 139			283 139
Financial assets at fair value through other comprehensive
income	2 135 427	2 135 427	1 558 831	9 090	567 506	1 868 893	1 868 893	1 278 746	6 888	583 259
Equity instruments	578 140	578 140	1 544	9 090	567 506	591 523	591 523	1 376	6 888	583 259
Debt securities	1 557 287	1 557 287	1 557 287			1 277 370	1 277 370	1 277 370
Financial assets at amortised cost	29 810 506	30 087 708		794 042	29 293 666	29 705 103	31 455 886		49 906	31 405 980
Debt securities	7 546 057	7 508 419			7 508 419	7 556 295	7 593 133			7 593 133
Loans and advances	22 264 449	22 579 289		794 042	21 785 247	22 148 808	23 862 753		49 906	23 812 847
Central banks and credit institutions	800 651	794 042		794 042		790 761	771 312		49 906	721 406
Customers	21 463 798	21 785 247			21 785 247	21 358 047	23 091 441			23 091 441
Derivatives - Hedge accounting	34 522	34 522		34 522		14 320	14 320		14 320
Total	32 632 591	32 909 793	1 643 173	964 028	30 302 592	32 252 754	34 003 537	1 362 161	193 276	32 448 100

The fair value of financial liabilities on the balance sheet, broken down by levels, is as follows:

		30-06-2019						31-12-2018
	Book	Fair value				Book	Fair value
	value	Total	Level 1	Level 2	Level 3	value	Total	Level 1	Level 2	Level 3
Financial liabilities held for trading	164 294	164 294	26	145 577	18 691	141 335	141 335	83	136 531	4 721
Derivatives	164 294	164 294	26	145 577	18 691	141 335	141 335	83	136 531	4 721
Financial liabilities at amortised cost	31 836 612	31 908 401		1 341 967	30 566 434	31 901 779	31 931 121		1 352 721	30 578 400
Deposits	26 066 614	26 086 181		1 341 967	24 744 215	26 370 230	26 379 733		1 352 721	25 027 012
Central Banks	1 350 100	1 341 967		1 341 967		1 352 843	1 352 721		1 352 721
Credit Institutions	1 421 955	1 413 340			1 413 340	1 873 248	1 862 383			1 862 383
Customers	23 294 559	23 330 874			23 330 874	23 144 139	23 164 629			23 164 629
Debt securities issued	1 361 622	1 414 018			1 414 018	872 864	895 247			895 247
Other financial liabilities	4 408 376	4 408 202			4 408 202	4 658 685	4 656 141			4 656 141
Derivatives - Hedge accounting	76 363	76 363		76 363		56 010	56 010		56 010
Total	32 077 269	32 149 058	26	1 563 907	30 585 125	32 099 124	32 128 466	83	1 545 262	30 583 121

The movement in level 3 financial assets at fair value and financial liabilities held for trading, during the first six months of 2019, and in 2018 was as follows:

		31-12-2018
	Financial assets and liabilities held for trading		30-06-2019 Financial assets not designated for trading compulsorily measured at fair value through profit or loss		Financial assets at fair value through other comprehensive income	Financial assets and liabilities held for trading		Financial assets not designated for trading compulsorily measured at fair value through profit or loss		Financial assets at fair value through other comprehensive income
	Debt	Trading	Equity	Debt	Equity	Debt	Trading	Equity	Debt	Equity
	securities	derivatives1	instruments	securities	instruments	securities	derivatives1	instruments	securities	instruments
Balance at beginning of period	9 361	7 113	154 527	283 139	583 259	12 184	4 734	229 243	322 986	65 441
Total profit or loss	370		( 8 904)	3 070	( 17 044)	( 137)		116 880	( 2 229)	506 694
Losses or gains	370	1 342	( 8 904)	3 070		( 3)	34 136	115 586	( 867)	508 252
Adjustments to equity					( 17 044)	( 134)		1 294	( 1 362)	( 1 558)
Purchases	193		17 279	375	1 901	2 870		21 577	6 982	16 841
Liquidations and other		( 672)	( 25 852)	( 18 612)	( 610)	( 5 556)	( 31 757)	( 213 173)	( 44 600)	( 5 717)
Balance at end of period	9 924	7 783	137 050	267 972	567 506	9 361	7 113	154 527	283 139	583 259

¹Net value

36. SUBSEQUENT EVENTS

The public deed of the merger by incorporation of Banco Português de Investimento S.A. and BPI Private Equity – Sociedade de Capital de Risco, S.A. into Banco BPI, SA. was signed on 25 July.

37. NOTE ADDED FOR TRANSLATION

These financial statements are a translation of financial statements originally issued in Portuguese in conformity with the International Financial Reporting Standards (IFRS) as endorsed by the European Union, some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

Review Report on the Condensed Financial Statements

(Free translation from the original in Portuguese)

Introduction

We have reviewed the accompanying condensed financial statements of Banco BPI, S.A. ("Banco BPI" or "Banco"), which comprise the condensed statement of financial position as at June 30, 2019 (which shows total assets of Euro 35.671.360 thousand and total shareholder's equity of Euros 2.989.526 thousand, including a net profit of Euros 131.904 thousand, the condensed statements of income, comprehensive income, changes in equity and cash flows for the six month period then ended, and the accompanying explanatory notes to these condensed financial statements.

Management's responsibility

The Management is responsible for the preparation of the condensed financial statements in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union, as well as to create and maintain appropriate systems of internal control to enable the preparation of condensed financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the accompanying condensed financial statements. We conducted our review in accordance with ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Those standards require that we conduct the review in order to conclude whether anything has come to our attention that causes us to believe that the condensed financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that accompanying condensed financial statements of Banco BPI, S.A. as at June 30, 2019 are not prepared, in all material respects, in accordance with International Accounting Standard 34 – Interim Financial Reporting as adopted by the European Union.

September 27, 2019

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda represented by:

José Manuel Henriques Bernardo, R.O.C.

(This is a translation, not to be signed)

EXPLANATION ADDED FOR TRANSLATION (This report is a translation of a report originally issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails.)

Statement

DECLARATION REFERRED TO IN ARTICLE 246 (1) C) OF THE SECURITIES CODE

Article 246 (1) (c) of the Securities Code prescribes that each one of the persons responsible for the company issues a declaration, the content of which is defined therein.

The Members of the Executive Committee of Banco BPI's Board of Directors, identified here by name, individually subscribe to the declaration transcribed as follows:

"I declare in the terms and for the purposes of article 246 (1) (c) of the Securities Code that, to the best of my knowledge, the financial statements and the directors' report of Banco BPI, S.A., relating to the 1st half of 2019, were prepared in conformity with the applicable accounting standards, giving a true and fair view of the assets and liabilities, the financial situation and the results of that company and of the companies included in the consolidation perimeter, and that the directors' report contains an indication of the important events which occurred in the 1st half of 2019 and their impact on the respective financial statements, as well as a description of the principal risks and uncertainties for the six following months."

Pablo Forero Calderon (Chairman) Alexandre Lucena e Vale (Member) António Farinha Morais (Member) Francisco Manuel Barbeira (Member) Ignacio Alvarez‐Rendueles (Member) João Pedro Oliveira e Costa (Member) José Pena do Amaral (Member) Pedro Barreto (Member)

Porto, 24 September 2019

AI Terminal

Banco Comercial Portugues

1913_ir_2019-11-28_d28b8d27-f157-4cc9-8214-dc92c1b243ff.pdf

BANCO BPI

1st half 2019

Index

REPORT

FINANCIAL STATEMENTS AND NOTES

Key performance indicators

Summary of 1st half 2019 results

Governing Bodies

At 30 June 2019

Chairman

Chairman

Social Responsibility Committee

Risk Committee

Board of the General Meeting Chairman Carlos Osório de Castro Deputy‐Chairman Agostinho Cardoso Guedes Secretaries Alexandra Magalhães Remuneration Committee Supervisory Board

Board of Directors

Chairman Pablo Forero Members Alexandre Lucena e Vale

Chairman

Statutory Auditor

Member in Office PricewaterhouseCoopers & Associados,

Audit and Internal Control Committee

Chairman

Company Secretary

Financial structure and business model

ESTABLISHMENT OF CAIXABANK INVESTMENT BANKING BRANCH IN PORTUGAL

Market shares

Background to operations

GLOBAL AND EUROPEAN ECONOMY

Monetary policy (again) more accommodative

PORTUGUESE ECONOMY

Outlook for 2019

Financial system

Loans

Deposits

FINANCIAL MARKETS

Equity market

Financial review

CONSOLIDATED OVERVIEW

Consolidated net profit

The activity in Portugal generated a recurring net profit of

1) At the end of 2018 BPI changed the accounting classification of its equity holding in BFA, from "associated company", consolidated by the equity method, to "financial investment", recognised under "shares at fair value through other comprehensive income". As from 1 January 2019, the

Accounting shareholders' equity and prudential capital

Regulatory capital requirements ratio

Leverage ratio (CDR IV / CRR fully loaded)

Issuance of €275 million of AT1 capital instruments in September 2019

ACTIVITY IN PORTUGAL

Results and profitability

Return on tangible equity (ROTE)

Commercial results

Asset quality

Funding and liquidity

Income statement

Gross Income

Net interest income

1) Excluding loans to employees

Net fee and commission income

Equity accounted income

Gains / (losses) on financial assets and liabilities and other

Other operating income and expenses

Operating expenses

Employee pension liabilities

Liabilities for Employee pensions and pension funds Amounts in € million

Pension funds return

Actuarial deviations

Impairments and provisions for loans and guarantees Amounts in € million

BALANCE SHEET

Loans to customers

Loans and advances to

Credit risk

Default levels, provisioning and recovery

Non‐performing loans (Bank of Spain criteria)

Non‐performing loans (Bank of Spain criteria) Amounts in € million

Cost of Credit Risk

Restructured loans

Foreclosed properties

Foreclosed properties

Holdings in corporate recovery and restructuring funds

Net exposure to corporate recovery and restructuring funds at 30 Jun.19 Amounts in € million

The detail of guarantees received to secure restructured loans¹ at 30 June 2019 and 31 December 2018 is as follows: