Banco Comercial Portugues

Interim / Quarterly Report • Apr 3, 2019

This document is a translation from the Portuguese original "Relatório e Contas Banco BPI 1.º semestre de 2018". In the event of any inconsistency the Portuguese version shall prevail.

BANCO BPI

1st half 2018

Public held company Registered in Oporto C.R.C. and tax identification under the sole number 501 214 534 Headquarters: Rua Tenente Valadim, n.º 284, 4100‐476 Porto, PORTUGAL Share Capital: EUR 1 293 063 324.98 Registered in Oporto C.R.C. and tax identification under the sole number 501 214 534 This page was intentionally left blank

Index

REPORT

• Key performance indicators 4
• Summary of 1st half 2018 results 5
• Governing Bodies 6
• Financial structure and business model 7
• Human resources 9
• Background to operations 10
  • Financial review 13
  • Rating 28
  • Banco BPI shares 29
• Annex ‐ Bank of Portugal Recommendations 30
• Annex ‐ Alternative Performance Measures 32

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 37

• Condensed interim consolidated financial statements 37
• Notes to the condensed interim consolidated financial statements 43
• Statement 117
• Audit report prepared by an auditor registered with the Portuguese Securities Market Commission (CMVM) 118

Key performance indicators

		(Figures in €million, except where otherwise indicated)
Results and profitability	1st half 18	1st half 17 restated
Net profit	366.1	(101.7)
Activity in Portugal	222.5	10.7
Contribution of equity holdings in BFA and BCI	143.5	(112.4)
Net profit per share (euros)	0,251	(0,070)
Weighted average no. of shares (in million)	1 456.8	1 455.7
Return on Assets (ROA) (last 12 months)	1.5%	0.5%
Return on tangible equity (ROTE)1 (last 12 months)	17.3%	4.2%
Balance sheet, liquidity, risk management and capital	Jun 18	Dec. 17
Total assets (net)	32 278	29 640
Loans to Customers (gross)2)	23 080	22 223
Deposits3)	21 618	20 719 (4)
Total Customer resources	33 311	32 624 (4)
Loan to deposit ratio	99%	99%
Liquidity coverage ratio	173%	171%
NPE ratio (EBA criteria)	3.8%	5.1%
NPE coverage (EBA criteria) 5) by impairments and collaterals	125%	117%
Total past service liabilities	1 592	1 601
Coverage ratio of Employee pension liabilities	105%	98%
Shareholders' equity attributable to BPI shareholders	3 126	2 824
CRD IV / CRR fully implemented
Common Equity Tier I ratio	12.8%	12.3%
Total capital ratio	14.6%	14.0%
Leverage ratio	6.7%	6.8%
Book value per share (euros)	2,146	1,938
Closing price (euro)	1,450	1,173
Stock market capitalisation at end of period	2 113	1 709
Distribution network in Portugal (no. units)	497	505
BPI Group Employees (no.)	4.843	4.931

1) The average capital considered in the calculation of ROTE is deducted from the average balance of intangible assets (average consolidated balance in the 12 months to June 2018: €34 million) and other comprehensive income (reserves) (average consolidated balance in the 12 months to June 2018: €8 million).

2) Gross loans to Customers correspond to Loans and advances to Customers (€21 559 million in Jun.18), excluding collateral accounts and other assets (€78 million and €27 million in Jun.18, respectively), added of debt securities issued by Customers (€1 626 million in Jun.18), recognised under Financial assets at amortised cost.

3) Includes retail bonds of €25 million in Jun.18 and €35 million in Dec.17.

4) Proforma considering the sale of BPI Gestão de Ativos and BPI GIF.

5) Coverage by impairments for loans and guarantees accumulated on the balance sheet and collaterals associated with these loans.

Summary of 1st half 2018 results

Banco BPI reported a consolidated net profit of €366.1 million in the 1st half of 2018. The activity in Portugal contributed with €222.5 million, or 61%, to the consolidated net income. This figure includes gains on the sale of the holding in Viacer (€59.6 million) and on the sale of BPI Gestão de Ativos and BPI GIF (€61.8 million).

Net profit from the activity in Portugal, excluding non‐ recurring impacts, surged by 32%, to €104.2 million, with recurring return on tangible equity (ROTE) standing at 9.0% (last 12 months). These results were underpinned by strong commercial activity, driving up recurring gross income by 8.3% ‐ with the net interest income increasing by 7.6% and net fee and commission income by 9.4% ‐, a 3.7% reduction in operating expenses and the low cost of credit risk.

Regarding the equity holdings in the African banks, BFA gave a positive contribution of €136.3 million to the 1st half of 2018 consolidated results, which includes the impacts of recognition of this holding under IAS 29 and of the devaluation of the kwanza, while BCI contributed with €7.1 million.

Banco BPI reported good commercial results, as shown by the expansion of both Customer resources and loans to Customers, as well as by market share gains across most segments. Customer deposits increased by €1 445 million, to €20.8 th.M (+7.5% ytd), while total customer

resources, including off‐balance sheet resources, were up by 2.1% ytd, to €33.3 th.M. The total portfolio of loans to companies in Portugal climbed by €593 million (+8.3% ytd), while new mortgage loans production reached €712 million in the 1st half of 2018 (+44% yoy), swelling the mortgage loans portfolio by 1.1% ytd. The total loans to Customers portfolio increased by 3.9% in the period (ytd), to €23.1 th.M.

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) improved by 1.3 p.p., to 3.8% at the end of June 2018, from 5.1% at the end of 2017. The coverage of NPEs by impairments and collaterals associated was 125% at the end of June 2018.

BPI has a well‐balanced balance sheet funding structure and maintains a strong liquidity position. The loan to deposits ratio was 99% and the Liquidity Coverage Ratio (LCR) reached 173%.

Alongside the improvement in both consolidated results and the results from the activity in Portugal (the Bank expects to reach a recurring ROTE in Portugal above 10% in 2020), and its excellent credit quality indicators, the Bank shows a sound capitalisation. At 30 June 2018 the CET1 ratio (fully loaded) was 12.8% and the total capital ratio was 14.6%.

Governing Bodies

On 30 June 2018

Remuneration Committee

Chairman José Villalonga Pons Members in office Carlos Moreira da Silva Xavier Coll Escursell Alternates Armand Reixach de Linares Abel Suárez Busquets

Nominations, Evaluation and Remuneration Committee

Chairman Tomás Jervell Members Lluís Vendrell Juan Alcaraz 2)

Social Responsibility Committee

Chairman

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

Risks Committee

Chairman Javier Pano Members Cristina Rios Amorim

General Meeting Committee

Chairman Carlos Osório de Castro Deputy‐Chairman Agostinho Cardoso Guedes Secretaries Alexandra Magalhães Luís Manuel Amorim

Board of Directors

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 Juan Alcaraz 2) Lluís Vendrell 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

Artur Santos Silva Honorary Chairman of the Board of Directors

Supervisory Board

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

Portuguese Statutory Auditor

Member in Office PricewaterhouseCoopers & Associados, SROC, Lda.1 Alternate Ana Maria Ávila de Oliveira Lopes Bertão

Audit and Internal Control Committee

Chairman

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

Company Secretary

Member in office João Avides Moreira Alternate Miguel Pessanha Moreira

1) PricewaterhouseCoopers & Associados, SROC, Lda. appointed José Manuel Bernardo to represent it in this position.

2) On 21 June 2018 Juan Antonio Alcaraz Garcia handed in his resignation to the positions of member of the Board of Directors and member of the Nominations, Evaluation and Remuneration Committee of Banco BPI, S.A.. To fill in this vacancy, the Board of Directors of Banco BPI resolved to co‐opt as member of the Board of Directors Ms. Natividad Capella Pifarré. The Board also resolved to appoint Ms. Natividad Capella Pifarré as member of Banco BPI's Nominations, Evaluation and Remuneration Committee. Under the terms of Article 30‐B (4) of the General Law on Credit Institutions and Financial Companies (Regime Geral das Instituições de Crédito e das Sociedades Financeiras), Ms. Natividad Capella Pifarré can only take up office once the authorisation of the competent supervision authorities (Bank of Portugal/ECB) has been obtained. In accordance with the law, this cooptation shall be submitted to the Shareholders, for ratification, at the next General Meeting.

Financial structure and business model

BPI focuses its activity on commercial banking in Portugal.

BPI is part of the CaixaBank Group (which holds a 94.9%1 stake in BPI) and is the fifth largest financial institution operating in Portugal in terms of assets (€32 th.M), with market shares of 9.8% in loans and 10.1% in Customer deposits.

Banco BPI is the main business unit and is responsible for the development of the commercial banking business in

Portugal, offering a broad range of services and financial products to corporate, institutional and individual customers. Banco BPI offers, through its distribution network, investment funds, capitalisation insurance and pension funds. In the insurance business, 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.

BPI also holds minority interests in African banks (48.1% in BFA in Angola and 35.67% in BCI in Mozambique).

Main units of the BPI Group

1) Equity‐accounted subsidiaries.

2) Under a joint venture with Allianz, which holds 65% of the share capital.

3) Under a joint venture with Euler Hermes, a company of the Allianz Group.

4) Under a joint venture with Caixa Geral de Depósitos, which holds 61.51% of the share capital. On 12 December 2017 Banco BPI informed the market that its stake in BCI – Banco Comercial e de Investimentos, S.A. (BCI) had been increased from 30% to 35.67%. This increase resulted from an agreement entered into by CGD and BPI with Insitec Capital, S.A..

5) On 23 November 2017 Banco BPI announced it had agreed on the sale to CaixaBank of its equities and corporate finance businesses. These transactions should be completed in the 2nd half of 2018.

BPI serves 2 million Customers in the domestic market, having a penetration rate of 13.3% in the individual customers segment, and relevant market shares in the various products and services offered.

Its 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, Public Sector and the State Enterprise Sector ‐ through a specialist, multichannel and fully integrated distribution network.

The distribution network comprises 497 business units, of which 423 are retail branches, 39 premier centres, specialist branches and units serving corporate and institutional Customers, including 31 corporate and institutional centres, 1 project finance centre and 3 Corporate and Investment Banking centres.

The distribution 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).

Segmentation of the distribution network in Portugal

Corporates, institutionals & project finance
CORPORATE & INVESTMENT BANKING CIB 3 Centres
PROJECT FINANCE Project PORTUGAL Finance 1 Centre
CORPORATE BANKING AND Public Sector INSTITUTIONALS and SEE 31 Centres
Large corporates
Medium corporates
Small Businesses

Market shares

	30 Jun. 18	31 Dec. 17
Penetration rate in individuals segment	13.3%	13.7%
Loans	9.8%	9.4%
Corporate loans	9.0%	8.4%
Mortgage loans 1	11.4%	11.2%
Personal loans new production	12.9%	11.8%
Deposits1,2	10.1%	9.8%
Unit Trust Funds	16.0%	16.4%
Retirement savings plans3	11.9%	12.8%
Capitalisation insurance 3	15.0%	14.3%
Life insurance	11.9%	12.7%
Non‐life insurance	10.9%	11.7%
ATMs	11.5%	11.3%
POS	10.8%	10.9%
Debit cards	9.8%	9.6%
Credit cards	8.2%	8.8%

3) These include retirement savings plans under the form of mutual funds and capitalisation insurance. Therefore, they are not included in the calculation of market shares in mutual funds and capitalisation insurance.

2) Does not include the effect of securitisation operations (BPI calculation).

Human Resources

At 30 June 2018, BPI had a workforce of 4 843 Employees.

From December 2017 to June 2018 BPI reduced its payroll by 88 employees (‐2%).

BPI Employees

		End‐of‐period values Averages in the period
		Jun. 18	Dec. 17	%	1st half 18	1st half 17	%
Activity in Portugal
Banco BPI	1	4 759	4 781	(0%)	4 762	5 230	(9%)
Banco Português de Investimento		29	33	(12%)	31	49	(37%)
Other subsidiaries	3	0	48	(100%)	36	71	(49%)
[= Σ 1 to 3]	4	4 788	4 862	(2%)	4 829	5 350	(10%)
Branches and Representative Offices	5	55	69 2)	(20%)	62	125	(50%)
Total 1 [=4+5]	6	4 843	4 931 2)	(2%)	4 891	5 475	(11%)

1) Includes fixed‐term contracts and excludes temporary work of people with no work contracts with BPI. On 30 June 2018, the number of Employees with fixed‐term contracts was 50 in Portugal and 1 abroad. In average terms, the number of Employees with fixed‐term contracts was 38 in Portugal and 1 abroad in the 1st half of 2018. 2) Includes one employee in BPI Capital África.

Background to operations

GLOBAL AND EUROPEAN ECONOMY

The International Monetary Fund estimates that the world economy will advance by 3.9% in 2018 and 2019, after growing by 3.7% in 2017. This acceleration of growth reflects an improved outlook for the emerging economies, which are expected to expand by 4.9% in 2018. In turn the advanced economies should grow by 2.4%, the same as in 2017. Within this block, the North‐ American economy is expected to speed up, while the Eurozone will likely slacken its growth pace. In the emerging economies, China is set to grow by 6.5%, the same as in 2017, and the Latin American economies should register a slight acceleration of 0.3 percentage points (p.p.), to 1.6%. Despite the good prospects for global growth, the IMF believes that risks are biased to the downside, being mainly associated to escalating trade tensions, the result of more protectionist policies in the US and less accommodative financial conditions.

Monetary policy pursues tapering of stimuli

The strengthening of economic activity warranted the tapering of monetary stimuli. In the US, the improvement of the labour market and accelerating inflation led the Federal Reserve to raise the Fed Funds rate to the range of 1.75%‐2.0% in its meeting of June, and another two 25 basis points (bps) hikes should be announced before the end of the year, lifting the key rate to 2.25‐2.5% at the end of 2018. In turn, the European Central Bank (ECB) decided to reduce is monthly long‐term asset purchases to €15 th.M as from October and to close the programme at the end of the year. At the same time the ECB also announced its decision to reinvest the principal from maturing securities and to maintain key interest rates unchanged through the summer of 2019, while ensuring that the financing conditions of the economy will remain accommodative.

PORTUGUESE ECONOMY

In the first half of 2018, economic activity grew by 2.2%, signalling a slowdown compared to 2017, but still maintaining a high pace of expansion when set in historical terms. The performance in the first six months of the year was affected by circumstantial factors ‐ reduction in exports of oil products and adverse weather conditions ‐ which are expected to wear off during the second half of the year. The surge in exporting activity, the improvement of the labour market and the policies aimed at capturing foreign investment supported the recovery of investment and in turn explain the good performance of economic activity.

As regards foreign trade, the available information (in current prices) for the first half of the year points to increases in exports and imports of goods of 6.6% and 8.8%, respectively, leading to a €1.2 th.M year‐on‐year deterioration in the trade balance, to ‐€7.6 th.M. According to the National Statistics Institute (INE), the economy's financing capacity stood at 1.2% of GDP in the year to March 2018, continuing to contribute to the reduction of external imbalances. By industry sector and compared to the previous period, the financing capacity/requirements are influenced by the CGD operation in the first quarter of 2017, which represented 2.1% of GDP Excluding this effect, the public sector borrowing requirements improved by 0.2 p.p., to 0.7% of GDP, and the financial sector's lending capacity stabilised at 1.9% of GDP. Over the same period the financing capacity/requirements of families and non‐financial companies deteriorated very slightly. The household savings rate continued to fall, reaching 5.1% of disposable income, reflecting a stronger increase in consumption than in disposable income. On the public accounts front, the first half of the year was marked by a reduction of the deficit (public accounting basis) by €400 million to €2.62 th.M, suggesting that the deficit will be in line with the European Commission's estimate for 2018 (0.9% of GDP). Over the same period, and according to the Bank of Portugal, the public debt (Maastricht definition) stood at €246.7 th.M (125.8% of GDP), an increase of €3.1 th.M that mostly resulted from the intensification of medium‐ and long‐term debt issuance to take advantage of favourable funding conditions, while also broadening the range of securities eligible for the European Central Bank's public debt purchase programme. Up to July 2018 the Portuguese Treasury issued €13.7 th.M bonds with an average maturity of 11.5 years and an average yield of 1.85%.

The labour market showed a favourable evolution during the first half of the year, with the unemployment rate falling to 6.7%, the lowest since 2004. The unemployment rate of the population below 25 years decreased to 19.4%.

The private sector pursued a deleveraging process. The private sector corporate debt represented 133.1% of GDP in June 2018, which compares with 138.4% in June 2017; among individuals, this ratio was 72.4%, down by 23.4 pp on its peak observed in September 2009.

The real estate market has shown great vitality, with house prices climbing by 12.2% year‐on‐year in the first quarter of 2018. This market's rebound is closely linked to the growth of tourism and the tax incentives granted to non‐residents.

Outlook for 2018

The European Commission estimates that the pace of expansion of the Portuguese economy will slow to 2.2% in 2018, reflecting a slightly negative contribution of external demand. This body expects domestic demand to contribute around 2.3 pp to GDP growth, notably with investment surging by more than 5.0%. Private consumption, in turn, may grow at a slower pace than in 2017, reflecting a more cautious behaviour of families, given their low levels of savings and still high levels of indebtedness.

Bearing in mind the rise in oil prices and the depreciation of the euro, the European Commission reckons that the inflation rate will stand at 1.4% at the end of 2018.

Concerning the process of fiscal consolidation, the Government estimates that the budget deficit will decrease to 0.7% of GDP, down by 2 p.p. on 2017 (this excludes the CGD capitalisation operation). On the external accounts front, the Current and capital account surplus is expected to stabilise at around 2.0% of GDP, according to the Bank of Portugal.

Financial system

In the first quarter of 2018 the loan to deposits ratio was 92.5%, flatlining when compared to the end of 2017 but decreasing by 66.3 bps relative to the second quarter of 2010, when it had reached its highest level. At the end of the first quarter of 2018 the resident banking sector's solvency ratios had slightly deteriorated relative to the end of 2017: the common equity tier I ratio stood at 13.6%, down by 0.3 p.p., while the total solvency ratio was 15.0%, down by 0.1 p.p.. However, it should be noted that both ratios stand considerably above the lows observed in the second quarter of 2014: 10.6% and 11.9%, respectively. The non‐performing loans ratio dropped by 0.3 p.p. relative to the end of 2017, to 13.0%. In absolute value, non‐performing loans contracted by 30.1% from their peak in the second quarter of 2016, totalling €35.3 th.M in the first quarter of 2018.

Funding from the ECB decreased to €19.8 th.M in the first half of 2018, which is €2.4 th.M less than at the end of 2017. The funding obtained by Portuguese banks from the Eurosystem consisted almost entirely in long‐term refinancing operations.

Loans

In June 2018 the stock of credit to the non‐financial private sector (corrected for securitisation operations) had contracted by 1.6% year‐on‐year, showing a substantially lower rate of decline than a year before (‐ 4.3%). The contraction in the stock of credit reflects drops in loans to non‐financial companies and loans to individuals of 3.6% and 0.4%, respectively. The decrease in loans to individuals resulted from the contraction in the stock of residential mortgage loans, despite the strong increase in new production. The contracting pace of loans granted should continue to slow down in the second half of 2018.

Deposits

The deposits of the non‐financial private sector increased by 4.9% year‐on‐year in June 2018, with sight deposits expanding by 16.2% and time deposits decreasing by 2.5%.

Financial markets

The diverging stance in the US and Eurozone monetary policy cycle induced a depreciating trend in the euro from April onwards, with the single currency's exchange rate against the dollar closing the first half of the year at 1.17, below the 1.23 recorded between February and April. Against the pound, the euro remained relatively stable, at 0.88.

In the interbank market, the euro rates remained close to historical lows: the 3‐month Euribor closed the period at

‐0.322% and the 12‐month Euribor at ‐0.181%. The consolidation of the sentiment that the ECB will not change benchmark rates before the summer of 2019 justifies the behaviour of short‐term rates. In the US, the surge in the 3‐ and 12‐month US dollar Libor rates, which reached 2.39% and 2.77%, respectively, went hand in hand with a cycle of Fed‐funds interest rate hikes.

Despite the rising trend in yields, the fixed‐income market remains conditioned by the persistence of accommodative monetary policies and low levels of inflation. In the US, the main benchmark's rate of return closed the first half of 2018 at 2.95%, up by 50 bps on the end of 2017. In the Eurozone this upward movement was more subdued, with the yield on the 10‐year German Bund reaching the end of the period at 0.4%, which is 5 bps higher than at the end of 2017.

The behaviour of the peripheral sovereign debt market was marked by rising volatility and an increase in risk premia, after the election results in Italy raised fears about the formation of a eurosceptic government.

The deterioration in the perception of the peripheral countries' debt risk explains why Portugal's risk premium rose to the same level as at the end of 2017, 148 bps, after having hit a low of 105 bps in mid‐April. Once the Italian political crisis was over, there was a gradual movement of correction of the risk premium, which nevertheless maintained some volatility and has not returned to its previous lows: at the end of August, it was above 140 bps. Portugal's return to the class of assets classified as investment grade, in addition to all factors of a structural and conjunctural nature, also induces a shrinking trend in the Portuguese benchmark spread.

Equity market Global context

The first half of 2018 was marked by some signs of slowing economic growth in the Eurozone, uncertainty surrounding the world trade context, and the announcement by the ECB of a reduction as from September and conclusion before the end of the year of its net acquisitions under the asset purchase programme, as well as the postponement of interest rate hikes to at least after the summer of 2019. The benchmark European equities index Euro Stoxx 600 closed the first hall of the year with a loss of 2%, while the S&P 500 – the leading North‐American stock market index – ended the period with a 2% rise.

Portugal and Spain ‐ primary and secondary markets

The first half of 2018 saw no relevant primary market activity in Portugal. In Spain the main transactions were the Metrovacesa public offering for sale (€646 million) and the capital increases of Duro Felguera (€126 million) and Quabit (€63 million).

In Portugal, the PSI‐20 benchmark index advanced by 3% in the first half of 2018, driven by increases in the EDP, EDPR, Navigator and Altri shares, of 25%, 29%, 26%, and 74%, respectively. In Spain, the IBEX 35 index closed the 1st half with a loss of 4%, brought about by depreciations in the Santander, BBVA, Telefónica and Bankia shares, of 14%, 12%, 8%, and 17%, respectively. Trading volumes suffered a contraction compared to the first half of 2017, of 4% in the PSI20, to €9.3 th.M, and of 12% in the Ibex, to €286.1 th.M. This compares with a 4% rise in the Euro Stoxx 600 and a 26% gain in the S&P 500.

Financial review

CONSOLIDATED OVERVIEW

Consolidated net profit

BPI reported a consolidated net profit of €366.1 million in the 1st half of 2018.

The activity in Portugal contributed with a net profit of

€222.5 million, or 61%, to the 1st half of 2018 consolidated net income. This figure includes positive non‐recurring impacts in the amount of €118.3 million, essentially corresponding to gains on the sale of the holdings in Viacer (€59.6 million) and BPI Gestão de Ativos and BPI GIF (€61.8 million).

Recurring net profit from the activity in Portugal reached €104.2 million, having increased by 32% relative to the 1st half of 2017 (€79.0 million).

The contribution of the equity holdings in BFA (48.1%) and BCI (35.7%) totalled €143.5 million in the 1st half of 2018. In the 1st half of 2017 these holdings had given a negative contribution of €112.4 million, having been sharply penalised by the €212 million1 negative impact from the sale of 2% of BFA and deconsolidation.

Contribution to the consolidated

net income	Amounts in €million
	1st half 18	1º half 17
Net profit in Portugal	222.5	10.7
Recurring net profit	104.2	79.0
Non‐recurring impacts	118.3	(68.3)
Contribution of BFA and BCI	143.5	(112.4)
Consolidated net income	366.1	(101.7)

Non‐recurring impacts:

In the 1st half of 2017 ‐ €76.3 million cost (after taxes) with early retirements and voluntary terminations and €8.0 million of net income from discontinued operations (BPI Vida e Pensões, BPI Gestão de Ativos, BPI GIF and others).

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 voluntary terminations and €2.5 million of net income from discontinued operations.

Accounting shareholders' equity and prudential capital

At the end of June 2018, the fully loaded Common Equity Tier I (CET1) totalled €2 161 million, having increased by €121 million since the end of 2017.

On the same date the fully loaded CET 1 ratio was 12.8% (+0.5 p.p. ytd), while the fully loaded total capital ratio was 14.6% (+0.5 p.p. ytd). The capital ratios in June 18 incorporate a dividend distribution in accordance with the new long‐term dividend policy approved at the General Shareholders' Meeting of 29 June 2018.

On 30 June 2018 the fully loaded proforma CET1 and total capital ratios were 13.0% and 14.8%, respectively, taking into account the sales of operations announced in November and December 20172 .

Regulatory capital requirements ratio Amounts in €million

In accordance with the fully loaded CRD IV / CRR rules
		Jun. 18	Dec. 17
Common Equity Tier I	1	2 161.0	2 040.0
Tier I	2	2 161.0	2 040.0
Tier II	3	296.8	297.5
Total own funds	4	2 457.8	2 337.5
Risk weighted assets	5	16 882.3	16 644.1
CET1 ratio [= 1 / 5]	6	12.8%	12.3%
T1 ratio [= 2 / 5]	7	12.8%	12.3%
Total Ratio [= 4 / 5]	8	14.6%	14.0%

Note: the minimum prudential requirements established by the ECB for 2018 (a decision based on the SREP results) for the fully loaded consolidated CET1, T1 and total ratios were 8.75%, 10.25% and 12.25%, respectively.

Leverage ratios (CRD IV / CRR)

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 2018 the fully loaded Leverage ratio was 6.7%.

Leverage ratio

	Jun.18	Dec.17
Leverage ratio ‐ fully loaded	6.7%	6.8%

1) Of which ‐‐€182.million correspond to the transfer to the year's net income of negative accumulated currency differences resulting from conversion of BFA's financial statements from AKZ to EUR.

2) Sale of the equity trading and corporate finance, issuance of cards and merchant acquiring operations.

ACTIVITY IN PORTUGAL

Key performance indicators	(Amounts in €million, except where otherwise indicated)
Results and profitability	1st half 18	1st half 17 restated
Net profit	222.5	10.7
Recurring net profit	104.2	79.0
Recurring return on total assets (ROA) (last 12 months)	0.6%	0.6%
Recurring return on tangible equity (ROTE)1) (last 12 months)	9.0%	10.6%
Gross income	414.9	327.9
Commercial banking gross income 2)	351.7	331.0
Adjusted operating expenses 3)	214.1	222.3
Adjusted operating expenses as % of commercial banking gross income (last 12 months)	61.5%	66.4%
Cost of credit risk4) (+ cost / ‐ gain); in last 12 months	(0.11%)	(0.01%)

Balance sheet, liquidity, risk management and capital	Jun. 18	Dec. 17
Total assets (net)	31 594	28 982
Loans to Customers (gross)5)	23 080	22 223
Deposits and retail bonds	21 618	20 719 (6)
Total Customer resources	33 311	32 624 (6)
Loan to deposit ratio	99%	99%
Liquidity coverage ratio (LCR) (last 12 months average) 7)	173%	171%
NPE ratio	3.8%	5.1%
Coverage of NPE by impairments and collaterals	125%	117%
Total past service liabilities	1 592	1 601
Coverage ratio of pension liabilities	105%	98%
Distribution network in Portugal (no. units) 8)	497	505
BPI Group headcount (no. employees) 9)	4 843	4 930

1) The average capital considered in the calculation of ROTE is deducted from the average balance of intangible assets (average balance in the activity in Portugal in the 12 months to June 2018: €34 million) and other comprehensive income (reserves) (average balance in the activity in Portugal in the 12 months to June 2018: €65 million). 2) 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

3) Excluding costs with voluntary terminations and early retirements.

4) (Net impairments and provisions for loans and guarantees ‐ Recovery of loans, interest and expenses previously written‐off) / Average value in the period of the performing loan portfolio.

5) Gross loans to customers correspond to Loans and advances to Customers (€21 559 million in Jun.18), excluding collateral accounts and other assets (€78 million and €27 million in Jun.18, respectively), added of debt securities issued by Customers (€1 626 million in Jun.18), recorded under Financial assets at amortised cost. 6) Proforma considering the sale of BPI Gestão de Ativos and BPI GIF.

7) Average value (last 12 months) of the LCR calculation components at 30 Jun. 2018: Liquidity reserves (€4 102 million); Total net outflows (€2 369 million).

8) The Bank's distribution network also includes a branch in Madrid and another in France.

9) Staff (excludes temporary work) in the activity in Portugal.

Results and profitability

Net income from the activity in Portugal reached €222.5 million in the 1st half of 2018 (€10.7 million in the 1st half of 2017).

The 1st half of 2018 net income benefited from non‐ recurring gains in the amount of €118.3 million, essentially corresponding to gains on the sale of the

holdings in Viacer and subsidiaries (BPI Gestão de Ativos and BPI GIF).

Excluding non‐recurring impacts, the (recurring) net income from the activity in Portugal increased by 32% year‐on‐year, to €104.2 million, from €79.0 million in the 1st half of 2017.

Net income from activity in Portugal Amounts in €million
	1st half 18	1st half 17	Chg. €million
Net income	222.5	10.7	+ 211.8
Non‐recurring impacts
Cost with early retirements and voluntary terminations	(5.5)	(76.3)	+ 70.8
Gains on sale of equity holdings1	121.3		+ 121.3
Income from discontinued operations	2.5	8.0	(5.6)
Non‐recurring impacts	118.3	(68.3)	+ 186.6
Recurring net income	104.2	79.0	+ 25.2

Recurring ROTE from the activity in Portugal was 9.0% in the 12 months to June 2018.

BPI expects to achieve a recurring ROTE in Portugal above 10% by 2020.

Return on tangible equity (ROTE)

	Jun.18 (last 12 months)	Jun.17 (last 12 months)
Consolidated
Adjusted allocated capital (M.€)2.	2 770	2 516
ROTE	17.3%	4.2%
Portugal
Adjusted allocated capital (M.€)2	2 165	1 902
Recurring ROTE	9.0%	10.6%

Commercial results

Banco BPI reported good commercial results in the 1st half of 2018, as shown by the expansion of both the Customer resources and the Customer loans portfolios:

• Customer deposits were up by €1 445 million relative to Dec. 17 (+7.5% ytd);
• ▪the corporate loan book in Portugal expanded by €593 million relative to Dec. 17 (+8.3% ytd);
• new mortgage loans production surged by 44% yoy, to €712 million in the 1st half of 2018.
• new personal and car loans production climbed by 40% yoy, to €352 million in the 1st half of 2018.

1) Gains on sale of equity holdings in Viacer (€59.6 million) and BPI Gestão de Activos and BPI GIF (€61.8 million).

2) The average capital considered in the calculation of ROTE is deducted from the average balance of intangible assets (average balance in the activity in Portugal in the 12 months to June 2018: €34 million) and other comprehensive income (reserves) (average balance in the activity in Portugal in the 12 months to June 2018: €65 million).

Asset quality

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

• ▪the NPE1 ratio decreased by 1.3 p.p., from 5.1% in Dec.17 to 3.8% in Jun.18;
• ▪the accumulated impairments for loans and guarantees on the balance sheet plus collaterals covered NPE at 125%;
• Reversals of impairments and provisions for loans and guarantees on the income statement totalled €4.5 million in the 1st half 2018. In addition, a total of €7.0 million in loans previously written off from assets was recovered during the same period.

Discontinued operations in accordance with IFRS 5

In accordance with IFRS 5 ‐ Non‐current assets held for sale and discontinued operations, BPI Vida e Pensões, BPI Gestão de Activos and BPI GIF were classified as discontinued operations on 31 December 2017, following the signature of the corresponding sale contracts disclosed to the market on 23 November 2017.

Consequently, the assets and liabilities of these units are presented in the consolidated balance sheet of Banco BPI in the captions "Non‐current assets and disposal groups classified as held for sale" and the respective contribution to consolidated results is presented under the caption "Net income from discontinued operations".

Adoption of the new financial statements' 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).

Funding and liquidity

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

• on‐balance sheet Customer resources accounted for 68% of the assets in the activity in Portugal;
• ▪the loan to deposit ratio was 99%;
• ▪the Liquidity Coverage Ratio (LCR) stood at 173%.

Reclassification of Other administrative expenses to Fee and commission expenses

Up to December 2017, Banco BPI followed the Bank of Portugal's Plan of Accounts defined in Instruction no. 9/2005, which determined the inclusion of certain costs items under Other administrative expenses. Considering that this instruction was revoked and the integration / alignment of accounting policies with CaixaBank, costs that depended on the evolution of the business and were offset by a revenue charged to the clients, were reclassified from Other administrative expenses to Fee and commission expenses.

Restated 2017 income statement

The 1st half of 2017 income statement items were restated to reflect the restatement of the contribution of BPI Vida e Pensões, BPI Gestão de Ativos and BPI GIF to the consolidated results in accordance with IFRS 5, the adoption of a new income statement structure as a result of the entry into force of IFRS 9 and the reclassification of Other administrative expenses to Fee and commission expenses, as described above.

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

Income statement

The €25.2 million (+32% yoy) increase in recurring net profit from the activity in Portugal was underpinned by the following factors:

▪ €27.3 million increase in recurring gross income (+8.3% yoy), mainly driven by increases in net interest income (+7.6% or +€14.7 million) and in net fee and commission income (+9.4%, or +€11.5 million);

• 3.7% yoy reduction (‐€8.2 million) in recurring operating expenses;
• ▪reversals of total impairments and provisions in the amount of €11.1 (gain) in the 1st half of 2018, which compares with total impairments and provisions charges of €8.5 million (cost) in the 1st half of 2017.

Income statement from the activity in Portugal Amounts in €million
		1st half 2018			1st half 2017 restated		%
	As	Non‐	Exc. non‐	As	Non‐	Exc. non‐	Exc. non‐
	reported	recurr.	recurr.	reported	recurr.	recurr.	recurr.
Net interest income	207.2		207.2	192.5		192.5	7.6%
Dividend income	1.5		1.5	6.4		6.4	‐77.0%
Equity accounted income	8.4		8.4	9.0		9.0	‐6.2%
Net fee and commission income	134.6		134.6	123.1		123.1	9.4%
Gains/(losses) on financial assets and liabilities and other	78.9	59.6	19.4	14.6		14.6	32.6%
Other operating income and expenses	(15.8)		(15.8)	(17.7)		(17.7)	10.8%
Gross income	414.9	59.6	355.3	327.9		327.9	8.3%
Staff expenses	(126.8)	(7.6)	(119.2)	(238.1)	(105.1)	(132.9)	‐10.3%
Other administrative expenses	(84.4)		(84.4)	(78.4)		(78.4)	7.7%
Depreciation and amortisation	(10.4)		(10.4)	(11.0)		(11.0)	‐5.0%
Operating expenses	(221.7)	(7.6)	(214.1)	(327.4)	(105.1)	(222.3)	‐3.7%
Net operating income	193.2	52.0	141.2	0.5	(105.1)	105.7	33.6%
Impairments and provisions net of recovery of loans, interest and expenses	11.1		11.1	(8.5)		(8.5)	‐230.4%
Gains and losses in other assets	(0.7)		(0.7)	7.7		7.7	‐108.5%
Net income before income tax	203.7	52.0	151.7	(0.3)	(105.1)	104.8	44.7%
Income tax	(45.4)	2.1	(47.4)	3.0	28.8	(25.8)	83.7%
Net income from continuing operations	158.3	54.1	104.2	2.7	(76.3)	79.0	31.9%
Net income from discontinued operations	64.2	64.2		8.0	8.0
Income attributable to non‐controlling interests				(0.0)		(0.0)
Net income	222.5	118.3	104.2	10.7	(68.3)	79.0	32.0%

Non‐recurring impacts on the activity in Portugal correspond to:

In 1st half 2017,

Costs with voluntary terminations and early retirements of €76.3 million (€105.1 million before taxes).

€8.0 million net income from discontinued operations (BPI Vida e Pensões, BPI Gestão de Ativos and BPI GIF).

In 1st half 2018,

€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 net income from discontinued operations)

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

Restated figures

The figures presented in the Management Report are "as reported", except where expressly stated that they are restated figures.

Gross income

Gross income from the activity in Portugal (including non‐recurring income) increased by 26.5% yoy in the 1st half of 2018, to €414.9 million (+€86.9 million).

Recurring gross income (excluding the €59.6 million gain on the sale of the stake in Viacer in the 1st half of 2018) was up by 8.3% yoy (+€27.3 million yoy).

Net interest income

The net interest income expanded by 7.6%, or €14.7 million, relative to the 1st half of 2017.

The unitary intermediation margin (defined as the difference between income from interest on loans1 and the cost of Customer deposits in euro) increased by 3.7% yoy (+€6.6 million), to €187.9 million in the 1st half of 2018. The main factors behind this increase were the expansion of the loan portfolio, which generated a +€5.5 million volume effect, and the reduction in the average

cost of term deposits, from 0.11% in the 1st half of 2017 to 0.07% in the 1st half of 2018 (for deposits expressed in euros).

The average remuneration of the loan portfolio remained practically unchanged at 1.78% (‐0.01 p.p. yoy).

The unitary intermediation margin (defined as the difference between the interest rates on customer loans and on customer deposits in euros) stood at 1.75% in the 1st half of 2018 (+0.01 p.p. yoy).

It should be noted that the 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

Net interest income Amounts in €million
			Jun. 18			Jun‐17 restated		 Interest (%)
		Average balance	Average rate (%)	Interest	Average balance	Average rate (%)	Interest
Customer Loans 1	1	21.549	1.78%	191.1	20.929	1.79%	185.9	2.8%
Customer Deposits in euros	2	20.025	0.03%	3.2	19.402	0.05%	4.7	‐31.2%
Intermediation margin	3		1.75%	187.9		1.74%	181.3	3.7%
Other revenues and costs2	4			19.3			11.3	71.2%
Net interest income [= 3 + 4 ]	5			207.2			192.5	7.6%

1) Excluding loans to employees.

2) Includes increase in income from derivatives (+€4.9 million), covered bonds (+€2.0 million) and cost (+ €4 million) of Tier II subordinated debt issued in

Mar.17 (€300 million, with remuneration corresponding to the 6‐month Euribor + 5.74%).

Net fee and commission income

Net fee and commission income increased by 9.4% (+€11.5 million) relative to the 1st half of 20171 .

Net fee and commission income	Amounts in €million
		Jun.18	Jun.17 restated	 yoy
Banking commissions	1	101.8	92.9	9.6%
Insurance brokerage	2	32.8	30.2	8.8%
Total [= 1 + 2]	3	134.6	123.1	9.4%

Equity accounted income

The contribution of the equity accounted associated companies amounted to €8.4 million in the 1st half of 2018 (€9.0 million in the 1st half of 2017).

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

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

In the first half of 2017 the gains/(losses) on financial assets and liabilities and other totalled €14.6 million.

Operating expenses

Recurring operating expenses ‐ recurring staff expenses, other administrative expenses, depreciation and amortisation ‐ decreased by 3.7% yoy.

Staff expenses (excluding non‐recurring) fell by 10.3% (‐€13.7 million) and depreciation and amortisation by 5.0% (‐€0.5 million). The increase in other administrative expenses (+7.7%) is in line with the budgeted figure.

BPI continues to show an improving trend in efficiency levels. The "adjusted operating expenses2 ‐to‐commercial banking gross income3 ratio" improved by 4.9 p.p., dropping from 66.4% in Jun.17 (last 12 months) to 61.5% in Jun.18 (last 12 months).

BPI expects to achieve a cost‐to‐income in its activity in Portugal of close to 50% by 2020.

Operating expenses		Amounts in € million
		Jun. 18	Jun. 17 restated	%
Staff expenses, excluding non‐ recurring costs	1	119.2	132.9	(10.3%)
Other administrative expenses	2	84.4	78.4	7.7%
Depreciation and amortisation	3	10.4	11.0	(5.0%)
Operating expenses, excluding non‐recurring costs [=  1 to 3]	4	214.1	222.3	(3.7%)
Cost with early retirements and voluntary terminations	5	7.6	105.1	(92.8%)
Operating expenses, as reported [=4 + 5]	6	221.7	327.4	(32.3%)
Adjusted operating expenses2 as % of commercial banking gross income3	7	61.5%	66.4%	‐4.9 p.p.

¹⁾ BPI Alternative Fund ceased to be consolidated in Banco BPI's accounts as from March 2017. Net commissions of €2.2million paid by the BPI Alternative Fund in the 1st quarter of 2017 were recognised on the consolidation of this fund.

²⁾ Operating expenses excluding costs with early retirements and voluntary terminations and (in 2016 only) gains with the revision of the Collective Labour Agreement (ACT).

³⁾ 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 €1 592 million at the end of June 2018.

The net assets of the Employees' pension funds amounted to €1 668 million, which guaranteed the funding of 105% of the pension liabilities.

Liabilities for Employees pensions and pension funds		Amounts in €million
	30 Jun. 18	31 Dec. 17
Total past service liabilities	1 592	1 601
Net assets of the pension fund	1 668	1 565
Coverage ratio of pension liabilities	105%	98%
Discount rate	2.02%	2.00%
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 years1	TV 88/ 90 – 3 years1

Pension funds return

In the 1st half of 2018 the Bank's pension funds' return was 7.5% (non annualised), originating a positive actuarial deviation in revenue of €102 million.

Actuarial deviations

In the 1st half of 2018 there were positive actuarial deviations of €101 million, which essentially corresponded to the positive deviation in the pension funds' return (€102 million).

At the end of June 2018, a total of €110 million of negative actuarial deviations (accumulated) were recognised directly in accounting shareholders' equity.

Actuarial deviations in 1st half 18

	€million
Total actuarial deviations at 31 Dec. 17	(211)
Deviation in pension funds return	102
Change in discount rate	6
Other	(7)
Total actuarial deviations at 30 Jun. 18	(110)

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

Impairments and provisions for loans and guarantees

Reversals of impairments and provisions for loans and guarantees totalled €4.5 million in the 1st half of 2018 (impairments and provisions or loans and guarantees totalled €16.6 million in the 1st half of 2017).

Recoveries of loans, interest and expenses previously written off from assets amounted to €7.0 million in the 1st half of 2018 (€9.1 million in 1st half 17).

Impairments and provisions

for loans and guarantees Amounts in €million
		Jun. 18	Jun.17 restated
Impairments and provisions	1	(4.5)	16.6
as % of loan portfolio (annualised)	2	(0.04%)	0.15%
Recoveries of loans, interest and expenses previously written off	3	(7.0)	(9.1)
Cost of risk [= 1 + 3]	4	(11.5)	7.5
as % of loan portfolio (annualised)	5	(0.10%)	0.07%
as % of loan portfolio (last 12 months)	6	(0.11%)	(0.01%)

Note that the application of IFRS 9 led to a €35 million increase in loan impairments, which was directly recognised in shareholders' equity, and an impact in shareholders' equity of ‐€26 million2 in the activity in Portugal.

1) For the population covered, the age taken into consideration is 2 years less than the beneficiaries' actual age in the case of men and 3 years less in the case of women, which is equivalent to considering a longer life expectancy.

²⁾ Essentially corresponds to the impact on loan impairments after taxes in the activity in Portugal. In addition, the application of IFRS 9 to the equity holdings in BFA and BCI had a negative impact on shareholders' equity of €8 million.

BALANCE SHEET

Total assets (net) of the domestic activity amounted to €31.6 th.M at the end of June 2018.

In June 2018 net loans to Customer, in the amount of €22.5 th.M, represented 71% of assets and on‐balance sheet Customer resources (€21.6 th.M) were the main source of balance sheet funding (68% of assets).

BPI maintains a comfortable liquidity position and balanced funding structure:

• ▪the loan to deposit ratio1 was 99% in June 2018;

• BPI holds a portfolio of short‐term Portuguese sovereign debt securities amounting to €1.3 th.M with an average maturity of 0.4 years;

• ▪the portfolio of medium‐ and long‐term sovereign debt securities (Portugal, Spain and Italy) totalled €2.6 th.M, and had an average residual maturity of 1.7 years; of this amount €2.1 th.M were purchased in the 1st half of 2018 (average residual maturity of 2.8 years);

• ▪funding from the ECB amounted to €2.0 th.M; the Bank also has €9.0 th.M in high‐quality liquid assets and assets eligible as collateral in additional funding from the ECB;
• ▪funding through the wholesale debt market is reduced (2% of assets);
• ▪the liquidity coverage ratio (LCR) stands at 173%2 .

Domestic activity balance sheet	Amounts in € million
	30 Jun. 18	31 Dec. 17 restated
ASSETS
Cash and cash balances at central banks and other demand deposits	2 259.7	1 094.2
Financial assets held for trading, at fair value through profit or loss and at fair value through other comprehensive income	2 652.5	4 175.9
Financial assets at amortised cost	25 636.4	22 506.3
Of which: Loans to Customers	22 505.8	21 638.2
Investments in joint ventures and associates	130.0	136.9
Tangible assets	38.6	45.3
Intangible assets	45.3	42.3
Tax assets	421.6	453.2
Non‐current assets and disposal groups classified as held for sale	54.6	7.3
Other assets	355.2	520.9
Total assets	31 593.9	28 982.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Financial liabilities held for trading	154.6	170.0
Financial liabilities at amortised cost	28 164.3	25 961.4
Deposits ‐ Central Banks and Credit Institutions	5 294.7	3 978.0
Deposits ‐ Customers	22 113.6	20 713.6
Debt securities issued	593.6	1 020.0
Memorandum items: subordinated liabilities	304.4	305.1
Other financial liabilities	162.4	249.8
Provisions	66.9	64.0
Tax liabilities	17.1	8.3
Liabilities included in disposal groups classified as held for sale	0.0	4.5
Other liabilities	596.9	545.8
Total Liabilities	28 999.8	26 754.1
Shareholders' equity attributable to the shareholders of BPI	2 594.1	2 228.2
Non controlling interests	‐	‐
Total liabilities and Shareholders' equity	31 593.9	28 982.3

Note: The balance sheet for 31 December 2017 was restated to reflect the adoption of a new balance sheet structure, as a result of the entry into force of IFRS 9 (see note to the financial statements "2. Bases of presentation and main accounting policies ‐ Comparability of the Information").

1) Calculated in accordance with CaixaBank's criteria. 2) 12‐month average, in accordance with EBA guidelines. Average value (last 12 months) of the LCR calculation components: Liquidity reserves (€4 102 million); Total net outflows (€2 369 million).

Loans to Customers

The portfolio of loans and advances to Customers (gross) expanded by 3.9% in June 2018 (ytd).

The portfolio of loans to Portuguese companies1 grew by 8.3% ytd (+€593 million):

• ▪the portfolio of loans to Large companies and Corporate & Investment Banking grew by 17.0% ytd (+€380 million);
• ▪the portfolio of loans to medium‐sized companies grew by 4.7% ytd (+€134 million);
• ▪the portfolio of loans to small businesses grew by 3.7% ytd (+€79 million).
• The Bank continued to gain market share in the corporate segment, which reached 9.0% in June 2018.

Loans to individuals reported a ytd increase of 1.9% (+€232 million):

• The mortgage loan portfolio grew by 1.1% ytd as a result of the sharp expansion of new production, which grew by 44% yoy to €712 million in the 1st half of 2018, surpassing the amount of redemptions occurred in the period. The market share in mortgage loans rose to 11.4% in June 2018;
• The portfolio of other loans to individuals ‐ personal loans, car financing and credit cards ‐ grew by 9.4% ytd (+€112 million).

Loans and advances to customers (gross)			Amounts in € million
	Jun. 18	Dec. 17	YtD
I. Loans to individuals	12 512	12 280	1.9%
Mortgage loans	11 204	11 084	1.1%
Other loans to individuals	1 308	1 196	9.4%
II. Loans to companies	8 930	8 515	4.9%
Large companies and Corporate & Investment Banking	2 618	2 238	17.0%
Medium‐sized companies	2 947	2 813	4.7%
Small businesses	2 197	2 117	3.7%
Total companies in Portugal	7 761	7 168	8.3%
Project Finance and Madrid branch	1 168	1 347	(13.2%)
III. Public Sector	1 518	1 305	16.4%
IV. Other	119	123	(3.3%)
Total	23 080	22 223	3.9%
Note:
Net loan portfolio	22 506	21 638	4.0%

Note: Gross customer loans portfolio corresponds to loans and advances to Customers (€21 559 million in Jun.18), excluding collateral accounts and other assets (€78 million and €27 million in Jun.18, respectively), added of debt securities issued by Customers (€1 626 million in Jun.18), recognised under Financial assets at amortised cost.

1) Excludes the project finance and the Madrid branch portfolios.

Credit risk

Default levels, provisioning and recovery

Non‐performing exposures (NPE), calculated under the EBA criteria (EBA NPE), contracted by 19.0% (‐€267 million) in the 1st half of 2018. The NPE ratio (EBA) improved by 1.3 p.p., dropping to 3.8% in June 2018, from 5.1% in Dec. 2017.

The coverage of NPE by accumulated impairments on the balance sheet was 52% in June 2018; considering

accumulated impairments and also the collaterals associated to the NPE, the coverage of NPE ratio was 125%.

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

"Non‐performing exposures" (EBA criteria) Amounts in €million
	31 Dec.14	31 Dec.15	31 Dec.16	31 Dec.17	30 Jun.18
1	28 741	26 842	27 081	27 520	30 397
2	2 581	2 074	1 790	1 408	1 141
3	9.0%	7.7%	6.6%	5.1%	3.8%
4	977	895	706	603	595
5	38%	43%	39%	43%	52%
6	‐(2)	‐(2)	110%	117%	125%

Note: considering the prudential supervision perimeter.

1) 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. 2) Data for Dec. 2014 and Dec. 2015 not available.

Non‐performing loans (Bank of Spain criteria)

Loans classified as "non‐performing", calculated under the Bank of Spain's criteria, amounted to €1 083 million in June 2018 and represented 4.4% of the gross loan portfolio and guarantees, which is a marked improvement compared to December 2017.

The coverage of non‐performing loans by accumulated impairments on the balance sheet was 55%; considering accumulated impairments and also the collaterals associated to the non‐performing loans, the coverage ratio was 123% in June 2018.

Non‐performing loans

(Bank of Spain criteria) Amounts in €million
		30 Jun.18	31 Dec.17
Gross loan portfolio and guarantees	1	24 676	23 796
Non‐performing loans	2	1 083	1 219
Non‐performing loans ratio [= 2 / 1]	3	4.4%	5.1%
Impairments for loans and guarantees.	4	595	603
Coverage by impairments [= 4 / 2]	5	55%	50%
Coverage by impairments and collaterals	6	123%	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. Reversals of impairments and provisions for loans and guarantees totalled €4.5 million in the 1st half of 2018; in addition, a total of €7.0 million in loans, interest and expenses previously written off from assets, were recovered.

Restructured loans

The amount of restructured loans (forborne loans, under the EBA criteria) was €1 017 million at the end of June 2018. Of this amount, 40% are performing loans (Performing Exposures, under the EBA criteria) and the remaining 60% are included in the balance of non‐ performing exposures (NPE). The forborne ratio decreased from 4.1% on 31 de December 2017 to 3% in June 2018.

Forborne loans (EBA criteria) Amounts in €million
		31 Dec.16		31 Dec.17				30 Jun.18
		Forborne loans	Forborne ratio	Forborne loans	Forborne ratio	Forborne loans	Forborne ratio
Performing loans	1	574	1.9%	571	1.9%	409	1.2%
Included in NPE	2	915	3.0%	682	2.2%	608	2.0%
Total [= 1+2]	3	1 489	4.9%	1 253	4.1%	1 017	3.0%

Note: considering the prudential supervision perimeter.

Foreclosed properties

At the end of June 2018, the stock of foreclosed properties held by BPI had a gross balance sheet value of €68 million. Of this amount, €29 million concerned properties obtained through home‐loan recoveries and €39 million referred to properties repossessed for the recoupment of other loans.

On the same date the accumulated amount of impairments for foreclosed properties was €15 million. Therefore, the net balance sheet value of these properties was €53 million. Their valuation value corresponded to 128% of net balance‐sheet value.

Foreclosed properties

By source of credit at 30 Jun.18				Amounts in €thousand
		Home loans	Other	Total
Gross book value (GBV)	1	28.7	39.4	68.0
Impairments	2	1.0	13.8	14.9
Net book value (NBV) [= 1 ‐2 ]	3	27.6	25.5	53.2
Valuation as % of NBV	4	130%	125%	128%

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 loans to Customers.

At the end of June 2018, the share capital subscribed by BPI in the Fundo de Recuperação, FCR and Fundo de Reestruturação Empresarial FCR amounted to € 100.1 million.

BPI's paid‐up share capital in these funds was €90.6 million (€86.7 million in the Fundo de Recuperação, FCR and €3.9 million in the Fundo de Reestruturação Empresarial FCR).

Net exposure to these funds, after revaluation1 , was €55.4 million.

Net exposure to corporate recovery and

restructuring funds at 30 June 2018		Amounts in €million
	Subscribed	Paid up
Fundo Recuperação, FCR	95.6	86.7
Fundo de Reestruturação	4.5	3.9
Empresarial, FCR
Total	100.1	90.6
Revaluation1		(35.2)
Net Exposure		55.4

1) Includes €34.7 million of impairments booked in the P&L account until 31 Dec. 2017 and €0.2 million of unrealised capital losses on the date of transition to IFRS 9.

Customer resources

Customer deposits increased by 7.5% ytd, or €1 445 million, in the 1st half of 2018, reaching €20.8 th.M at the end of June 2018.

The Bank has been actively reducing its deposits offer to institutional 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 2.1% (+€687 million) ytd, to €33.3 th.M at the end of June 2018.

¹⁾ Includes €34.7 million of impairments booked in the P&L account until 31 Dec. 2017 and €0.3 million of unrealised capital losses on the date of transition to IFRS 9.

Customer resources portfolio				Amounts in € million
	Jun. 18	Dec. 17 proforma1	YtD	Dec. 17 as reported
I. On‐balance sheet resources	21 618	20 719	4.3%	20 686
Customer Deposits2	20 813	19 368	7.5%	19 368
Deposits of institutional and financial investors	805	1 351	(40.4%)	1 318
II. Assets under Management	9 799	9 754	0.5%	10 123
Mutual Funds	5 638	5 658	(0.3%)	6 027
Capitalisation insurance	4 160	4 096	1.6%	4 096
III. Public subscription offerings	1 894	2 151	(11.9%)	2 151
Total	33 311	32 624	2.1%	32 960

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 2018 on‐balance sheet Customer resources amounted to €21.6 th.M and represented 68% of assets.

The loan to deposit ratio (CaixaBank criteria) stood at 99%.

Loan to deposit ratio

CaixaBank criteria Amounts in €million
	Jun. 18
Loan portfolio net of impairments3	1	21 420	20 373
Deposits2, 4	2	21 604	20 673
Loan to deposit ratio [= 1 / 2]	3	99%	99%

Refinancing of medium‐ and long‐term debt

Funding through the wholesale debt market is reduced. The portfolio of medium and long‐term (including MLT loans) debt placed in the market with institutional investors amounted to €1 385 million on 30 June 2018.

The medium/long‐term debt net refinancing needs in the coming years are small: €920 million in the next five years (of which €315 million in the 2nd half of 2018).

Liquidity

At the end of June 2018, the Bank's Liquidity Coverage Ratio (LCR) was 173%5 .

Total funding from the ECB was €2.0 th.M on 30 June 2018 and 31 December 2017. At the end of June 2018 BPI had the capacity to raise €7 184 million6 additional funding from the ECB.

The overall portfolio of high liquidity assets held by the Bank ‐ high quality liquid assets7 and assets eligible as collateral for additional funding from the ECB – totalled €8 953 million at the end of June 2018.

Total liquid assets			Amounts in €million
		Jun. 18	Dec. 17
High Quality Liquid Assets5	1	4 142	4 227
Other assets eligible as collateral with the ECB	2	4 811	4 664
Total Liquid Assets [= 1 + 2]	3	8 953	8 890

1) Proforma considering the sale of BPI Gestão de Ativos and BPI GIF.

6) Based on the overall portfolio of assets eligible as collateral for Eurosystem credit operations of €12 081 million (net of price appreciation and haircuts) and the drawdowns from this portfolio, for repos, collateralisation of various obligations and ECB funding.

7) High quality liquid assets (HQLAS) are used in the calculation of the Liquidity Coverage Ratio (LCR).

²⁾ Includes retail bonds of €25 million in Jun.18 and €35 million in Dec.17.

³⁾ Net loans are presented net of finance obtained from the EIB with the objective of granting credit.

⁴⁾ Excludes interest (€15 million in Jun.18 and €13 million in Dec.17).

⁵⁾ Average value (last 12 months) of the LCR calculation components: Liquidity reserves (€4 102 million); Total net outflows (€2 369 million).

CONTRIBUTION OF EQUITY HOLDINGS IN BFA AND BCI

Contribution to the consolidated net income

Banco BPI holds minority equity holdings in two African banks1 :

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

BPI's equity holdings in BFA and BCI contributed with €143.5 million to the Bank's consolidated net income in the 1st half of 2018.

Contribution of the equity holdings in BFA and BCI to consolidated net income Amounts in €million

		1st half 18	1st half 17
BFA Contribution	1	136.3(2)	(115.6)
Of which
Impact from sale of 2% of BFA and deconsolidation			(211.6)
High inflation in 2018 (IAS 29)		(25.5)
BCI Contribution	2	7.1	4.6
Other3	3	0.2	(1.4)
Total [=1+2+3]	4	143.5	(112.4)

BFA's contribution to the 1st half of 2018 consolidated net income amounted to €136.3 million. This figure includes the impacts from recognition of the stake in BFA under IAS 29 and from the devaluation of the AKZ.

In the 1st half of 2018 the Angolan local currency (AKZ) depreciated by 36% against the EUR, with BFA recording large, non‐recurring net income on financial operations,

of which BPI appropriated €101.5 million (after taxes). This compares with an average appropriation in half‐year periods of €12 million in 2017.

BCI's contribution to the consolidated net income increased from €4.6 million in the 1st half of 2017 to €7.1 million in the 1st half of 2018.

IMPACT OF AKZ DEVALUATION ON THE EVOLUTION OF THE VALUE OF STAKE IN BFA

On 4 January 2018, the National Bank of Angola (BNA) adopted a new exchange regime with an exchange rate fluctuation band. The exchange rate is now determined in currency auctions.

In the 1st half of 2018, the AKZ depreciated around 36% against the Euro.

Evolution of the value of the equity holding in BFA	€million
Book value of stake in BFA at 31 Dec.17	576
Change from earnings generated in 1st half 18	156
Distribution of 2017 dividends	‐48
Change in foreign exchange revaluation reserves and other	‐184
Book value of stake in BFA at 30 Jun.18	500

Note: Amounts before deferred taxes

BNA reference rates

	30 Jun.18	31 Dec.17	% (EUR or USD) / 1 AKZ1)
AKZ / 1 EUR	288.9	185.4	‐36%
AKZ / 1 USD	248.3	165.9	‐33%

Average bid / ask prices.

1) Change in the AKZ value when expressed in EUR or USD.

1) These holdings are equity accounted.

2) Corresponds to results booked as equity accounted income (€156 million), gains/(losses) on financial assets and liabilities (€‐5 million) and income tax (€14 million).

3) Contribution of BPI Moçambique and BPI Capital África.

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

	30 Jun. 18	30 Jun. 17
Gross income and equity accounted income / ATA	3.9%	1.7%
Net income before income tax and income attributable to non‐controlling interests / ATA	2.1%	‐0.3%
Net income before income tax and income attributable to non‐controlling interests / average shareholders' equity (including non‐controlling interests)	20.9%	‐4.3%
Staff expenses / Gross income and equity accounted income 1	20.8%	46.9%
Operating expenses / Gross income and equity accounted income 1	37.4%	80.3%
Loans (net) to deposits ratio	104%	106%

1) Excluding costs with early retirements and voluntary terminations.

ATA = Average total assets.

Rating

BPI has investment grade credit ratings from Fitch Ratings (BBB‐) and S&P (BBB‐).

Moody's assigned an investment grade rating to BPI's long‐term deposits (Baa3) and a non‐investment grade rating (Ba1) to long‐term debt.

	Fitch Ratings	Standard & Poor's	Moody's
Banco BPI credit ratings
Long‐Term Deposits			Baa3
Short‐Term Deposits			Prime‐3
Long‐Term Debt	BBB‐	BBB‐	Ba1
Short‐Term Debt	F3	A‐3	Not prime
Outlook	Positive	Stable	Positive
Individual Rating	Viability rating bb+	Stand‐alone credit profile (SACP) bb‐	Baseline Credit Assessment ba3
Portuguese Republic sovereign risk1)
Long‐Term	BBB	BBB‐	Ba1
Short‐Term	F2	A‐3u	Not prime

Fitch Ratings: on 21 December 2017 Fitch Ratings affirmed its credit ratings (LT/ST) at BBB‐/F3 with positive Outlook and upgraded by one notch the Viability Rating (individual rating) to bb+.

Outlook Stable Stable Positive

Standard & Poor's: rating decision of 19 September 2017. Standard & Poor's upgraded the long‐term ratings from BB+ to BBB‐, and the short‐term ratings from B to A‐3. The Outlook is stable.

Moody's: credit ratings decision of 7 December 2017. Moody's revised upwards its rating of long‐term deposits by 3 notches, from Ba3 to Baa3 (investment grade), its rating of short‐term deposits from "Not Prime" to "Prime‐3" and its rating of long‐term debt by 2 notches, from Ba3 to Ba1. Its Outlook on deposits and long‐term debt improved from "Stable" to "Positive".

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

Banco BPI shares

STOCK MARKET PERFORMANCE

In May 2018, CaixaBank acquired from Allianz its 8.425% stake in BPI's share capital, at the price of €1.45 per share, thus increasing its holding to 92.935%, and announced its intention to propose to the shareholders, at a General Meeting, the loss of Banco BPI's status of public company, and subsequently, to purchase the remaining shares so as to hold 100% of the Bank's share capital.

The General Meeting held on 29 June 2018 approved the loss of BPI's status of public company and CaixaBank was appointed as the shareholder which undertakes to purchase the shares from the shareholders which did not approve said proposal. BPI subsequently requested to CMVM the necessary approval for its loss of publicly‐ held company status.

BPI's share opened the year trading at €1,173. Following CaixaBank's announcement to the market in May about the agreement on the acquisition of the stake held by Allianz and its intention to hold 100% of BPI's share capital, the BPI share price rose by 24%, to €1.45. In the same period, the Portuguese PSI‐20 index advanced by 2.6%. The European banking sector, represented by the DJ Euro Stoxx Banks index, lost 12.4% in the 1st half of 2018.

SHAREHOLDERS

The following table shows the shareholders holding more than 2% of Banco BPI's share capital at 22 August 2018.

Shareholders holding more than 2% of Banco BPI's share capital At 22 August 2018

Shareholder	No. of shares	% capital held
CaixaBank, S.A.	1 383 342 383	94.949%
Source: Information received from Caixabank and disclosed by BPI to the market on 22 August 2018. According to information received from the Central Securities Depository (Central de Valores Mobiliários ‐ CVM), besides the stake held by CaixaBank, there were no other equity holdings above 2% of the Bank's share capital registered at the CVM as at 30 June 2018.

At 30 June 2018, the Bank's share capital was €1 293 063 324.98, represented by 1 456 924 237 ordinary dematerialised registered shares with no nominal value. All the shares were admitted to trading on the Euronext market. Codes and tickers ‐ ISIN and Euronext code: PTBPI0AM004; Reuters: BBPI.LS; Bloomberg: BPI PL.

At 30 June 2018, CaixaBank held a 94.2% stake in Banco BPI's share capital.

Selected indicators

	1st half 18	2017
Banco BPI share price (€)
Closing price	1.450	1.173
Price change	23.6%	3.7%
Maximum price	1.460	1.220
Minimum price	1.092	0.781
Average price	1.379	1.046
Data per share (€)
Net profit	0,251	0,007
Book value	2.146	1.938
Weighted average no. of shares (in million)	1 456.8	1 456.2
Market valuation indicators
Price Earnings (P/(E)	5.8	Not relevant
Price book value (PBV)	0.7	0.6
Stock market capitalisation (M.€)	2 112.5	1 709.0
Liquidity
Annual trading volume (M.€)	63.0	62.4
Average daily trading volume (M.€)	0.5	0.2

TREASURY SHARES

As at 30 June 2018, Banco BPI held 150 896 own shares (0.01% of the share capital).

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 Report and Accounts, 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 of 2018 Interim Report.

Recommendation Summary	Reference to 1st half 2018 Interim Report
I. BUSINESS MODEL
1. Description of the business model	MR – Financial structure and business model, page 7. NFS – 29. Segment reporting, page 111.
2. Description of strategies and objectives	MR – Summary of 1st half 2018 results, page.5; Financial review, page 13;
3. Description of the importance of the operations carried out and the respective contribution to business	MR – Financial structure and business model, page 7. Financial review, page 13; NFS – 29. Segment reporting, page 111.
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 involvement relating to each activity undertaken	operations, page 10; Financial review, page 13; NFS – 29. Segment reporting, page 111.
II. RISKS AND RISK MANAGEMENT
6. Description of the nature and extent of the risks incurred in relation to the activities carried out and the instruments used	MR – Financial review, page13; NFS – 2.3. Impairment of financial assets, page 58, 3. Risk management, page 63 and 7. Financial assets, page 79 and following.
7. Description of major risk‐management practices in operations	MR – Financial review, page13; NFS – 2.3. Impairment of financial assets, page 58, 3. Risk management, page 63 and 7. Financial assets, page 79 and following; 2017 MR – Risk Management, page 75; 2017 GovR – Internal Organisation C, III. Internal Control and Risk Management, page 352
III. IMPACT OF THE PERIOD OF FINANCIAL TURMOIL ON THE RESULTS
8. Qualitative and quantitative description of the results	MR – Financial review, page 13.
9. Breakdown of the write‐downs / losses by types of	NFS – 3. Risk management, page 63, 7. Financial assets, page 79, 22.
products and instruments affected by the period of turmoil	Gains or losses in financial assets and liabilities, page 102;
10. Description of the reasons and factors responsible for the impact suffered	MR – Financial review, page 13; Background to the operations, page 10.
11. Comparison of the i) impacts between (relevant) periods and ii) the financial statements before and after the period of turmoil	MR – Financial review, page 13.
12. Breakdown of write‐downs between realised and non‐ realised	MR – Financial review, page 13. NFS – 7. Financial assets, page 79; 22. Gains or losses in financial assets and liabilities, page 102
13. Description of the influence of the financial turmoil on the behaviour of Banco BPI shares	MR –Banco BPI shares, page 29.

14. Disclosure of the maximum loss risk	NFS – 3. Risk management, page 63
15. Disclosure of the impact that the trend in spreads associated with the institution's own liabilities had on earnings	MR – Financial review, page 13 and 3.3 Structural interest rate risk, page 71. The Bank did not revalue its liabilities.
IV. LEVEL AND TYPE OF EXPOSURES AFFECTED BY THE PERIOD OF FINANCIAL TURMOIL 16. Nominal value (or amortised cost) and fair value of	NFS –7. Financial assets, page 79.
exposures
17. Information about credit risk mitigators and respective effects on existing exposures	MR – Financial review, page 13. NFS – 3.1 Credit, page 64 and following.
18. Detailed disclosure of exposures	NFS ‐3. Risk management, page 63, 7. Financial assets, page 79
19. Movements in exposures occurred between the relevant reporting periods and the reasons for these movements (sales, write‐downs, purchases, etc.)	MR – Financial review, page 13. NFS – 7. Financial assets, page 79.
20. Explanations about exposures which have not been consolidated (or which have been recognised during the crisis) and the associated reasons	Banco BPI consolidates all exposures in which it has control or significant influence, as provided for in IFRS 10, 11, IAS 28, IFRS 3 and 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 2018, BPI had no exposure to monoline insurers.
V. ACCOUNTING POLICIES AND VALUATION METHODS 22. Classification of transactions and structured products for accounting purposes and respective accounting treatment	NDF – 2.1 Financial instruments, page 55; 2.3 Impairment of financial assets, page 58; 7. Financial assets, page 79; 14. Financial liabilities, page 93.
23. Consolidation of Special Purpose Entities (SPE) and other vehicles and their reconciliation with the structured products affected by the period of turmoil	The vehicles through which Banco BPI's debt securitisation operations are effected are recorded in the consolidated financial statements 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 instruments	NFS – 7. Financial assets, page 79 and following.
25. Description of the modelling techniques used for valuing financial instruments	NFS – 2. Bases of presentation and main accounting policies, page 47 and 7. Financial assets, page 79 and following.
VI. OTHER RELEVANT ASPECTS OF DISCLOSURE
26. Description of the disclosure policies and principles used in financial reporting	2017 GovR – Internal Organisation C, IV. Investor Support, page 352

MR – Management Report; NFS – Notes to the Financial Statements; 2017 GovR – BPI 2017 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 separate 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 (3. Segment reporting")

Domestic activity income statement Amounts in €million Management Report structure Jun.18 Jun.18 New structure of the Financial Statements and attached notes Net interest income 207.2 207.2 Net interest income Dividend income 1.5 1.5 Dividend income Equity accounted income 8.4 8.4 Share of profit/(loss) of entities accounted for using the equity method Net fee and commission income 134.6 158.0 Fee and commission income (23.4) Fee and commission expenses Gains/(losses) on financial assets and liabilities and other 78.9 3.5 Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net 9.0 Gains/(losses) on financial assets and liabilities held for trading, net 60.3 Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net 0.4 Gains/(losses) from hedge accounting, net 5.7 Exchange differences (gain/loss), net Other operating income and expenses (15.8) 5.1 Other operating income (20.9) Other operating expenses Gross income 414.9 414.9 GROSS INCOME Staff expenses (126.8) (126.8) Staff expenses Other administrative expenses (84.4) (84.4) Other administrative expenses Depreciation and amortisation (10.4) (10.4) Depreciation and amortisation Operating expenses (221.7) (221.7) Administrative expenses, depreciation and amortisation Net operating income 193.2 193.2 NET OPERATING INCOME Impairments and provisions net of recovery of loans, interest and expenses 11.1 (2.5) Provisions or reversal of provisions 13.6 Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss Gains and losses in other assets (0.7) (1.0) Impairment/(reversal) of impairment on non‐financial assets 0.4 Gains/(losses) on derecognition of non‐financial assets, net Net income before income tax 203.7 203.7 PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS Income tax (45.4) (45.4) Tax expense or income related to profit or loss from continuing operations Net income from continuing operations 158.3 158.3 PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS Net income from discontinued operations 64.2 64.2 Profit/(loss) after tax from discontinued operations Income attributable to non‐controlling interests Profit/(loss) for the period attributable to non‐controlling interests Net income 222.5 222.5 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

Net operating income = Gross income ‐ Operating expenses

Net income before income tax = Net operating income + Impairments and provisions net of recovery of loans, interest and expenses + 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) / 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 net intangible assets and other comprehensive income (reserves)

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 from the 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

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.

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.

(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 is 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 for loans and guarantees as % of the loan portfolio 1)= Impairments and provisions for loans and guarantees, net / Average value in the period of the performing loan portfolio

Where:

Impairments and provisions for loans and guarantees = 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 as % of loan portfolio 1)= (Impairments and provisions for loans and guarantees, net ‐ Recoveries of loans previously written off from assets, interest and other) / Average value in the period of the performing loan portfolio. Where:

Impairments and provisions for loans and guarantees = 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

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 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 Customer (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 Customer (financial assets at amortised cost) + Impairments and provisions for guarantees and commitments + Collaterals associated to NPE] / Non‐performing exposures (NPE)

Non performing loans ratio ("crédito duvidoso"; 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 collateral = [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)

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.

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

MARKET INDICATORS

Earnings per share (EPS) = Net income / Weighted average no. of shares in the period (basic or diluted)

The earnings per shares (basic or diluted) are calculated in accordance with IAS 33 ‐ Earnings per share.

Cash‐flow after taxes per share (CF per share or CFPS) = Cash‐flow after taxes / Weighted average no. of shares in the period.

Note: the denominator corresponds to the weighted average no. of shares used in the calculation of earnings per share (basic or diluted).

Book value per share (BV per share or BVPS) = Shareholders' equity attributable to BPI shareholders / No. of shares at end of the period

Note: the number of shares considered in the denominator is deducted of the treasury stocks portfolio and is adjusted for capital increases, whether by incorporation of reserves (bonus issue) or by subscription reserved for shareholders (rights issue), amongst other events, in a similar way to the calculation of earnings per share.

Price to earnings ratio (PER) = Stock market share price / Earnings per share (EPS)

Price to cash flow (PCH) = Stock market share price / Cash‐flow after taxes per share (CFPS)

Price to book value (PBV) = Stock market share price / Book value per share (BVPS)

Earnings yield = Earnings per share (EPS) in the year / Stock market share price (at beginning or end of the period)

Dividend yield = Dividend per share relating to the year / Stock market share price (at beginning or end of the period)

Banco BPI S.A.

Condensed interim consolidated financial statements as at 30 June 2018

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS AT 30 JUNE 2018 AND 31 DECEMBER 2017

			(Amounts expressed in euro thousands)
	Notes		30-06-2018 31-12-2017 Restated
ASSETS
Cash and cash balances at central banks and other demand deposits	7	2 259 683	1 094 150
Financial assets held for trading	7	294 859	294 481
Financial assets not designated for trading compulsorily measured at fair value through profit or loss	7	234 960
Equity instruments		174 544
Debt securities		60 416
Financial assets designated at fair value through profit or loss	7		6 055
Financial assets at fair value through other comprehensive income	7	2 141 742
Equity instruments		79 348
Debt securities		2 062 394
Available-for-sale financial assets	7		3 875 370
Financial assets at amortised cost	7	25 636 436	22 506 670
Debt securities		3 400 133	1 306 130
Loans and advances - Central Banks and other Credit Institutions		1 247 015	816 783
Loans and advances - Customers		20 989 288	20 383 757
Derivatives - Hedge accounting	8	12 094	12 740
Fair value changes of the hedged items in portfolio hedge of interest rate risk		22 181	20 574
Investments in joint ventures and associates	9	717 001	794 483
Tangible assets	10	38 619	45 309
Intangible assets	11	45 277	42 315
Tax assets	27	421 576	453 183
Other assets	12	399 304	487 615
Non-current assets and disposal groups classified as held for sale	13	54 579	7 264
Total assets		32 278 311	29 640 209
LIABILITIES
Financial liabilities held for trading	14	154 571	170 048
Financial liabilities at amortised cost	14	28 261 767	25 961 415
Deposits - Central Banks		1 992 631	1 995 374
Deposits - Credit Institutions		3 302 066	1 982 648
Deposits - Customers		22 113 627	20 713 633
Debt securities issued		593 638	1 019 977
Memorandum items: subordinated liabilities		304 421	305 077
Other financial liabilities		259 805	249 783
Derivatives - Hedge accounting	8	55 983	69 880
Fair value changes of the hedged items in portfolio hedge of interest rate risk		1 472	218
Provisions	15	66 893	64 238
Pending legal issues and tax litigation		42 191	42 367
Commitments and guarantees given		21 498	18 441
Other provisions		3 204	3 430
Tax liabilities	27	72 475	70 622
Other liabilities	16	539 444	475 731
Liabilities included in disposal groups classified as held for sale	13		4 471
Total Liabilities		29 152 605	26 816 623
SHAREHOLDERS' EQUITY
Capital	18	1 293 063	1 293 063
Other equity	18	1 594	2 276
Accumulated other comprehensive income	18	( 216 300)	( 163 559)
Items that will not be reclassified to profit or loss		( 122 051)	( 313 417)
Tangible assets		703	703
Actuarial gains/ (losses) on defined benefit pension plans		( 181 959)	( 312 310)
Share of other recognised income and expense of investments in joint ventures and associates		( 1 291)	( 1 810)
Fair value changes of equity instruments measured at fair value through other comprehensive income		60 496
Items that may be reclassified to profit or loss		( 94 249)	149 858
Foreign currency translation		( 112 570)	43 104
Fair value changes of debt instruments measured at fair value through other comprehensive income		1 370
Available-for-sale financial assets			84 150
Share of other recognised income and expense of investments in joint ventures and associates		16 951	22 604
Retained earnings	18	1 173 228	945 294
Other reserves	18	508 441	736 865
Treasury shares	18	( 377)	( 377)
Accumulated other comprehensive income related to discontinued operations			( 185)
Profit/(loss) attributable to owners of the parent		366 057	10 209
Total Equity		3 125 706	2 823 586
Total Equity and Total Liabilities		32 278 311	29 640 209

The accompanying notes are an integral part of these financial statements

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF PROFIT AND LOSS FOR THE SIX-MONTH PERIODS ENDED ON 30 JUNE 2018 AND 2017 RESTATED

		(Amounts expressed in euro thousands)
			30-06-2017
	Notes	30-06-2018	Restated
Interest income	20	246 641	239 459
Interest expenses	20	( 39 481)	( 47 062)
NET INTEREST INCOME		207 160	192 397
Dividend income		1 471	6 401
Share of profit/(loss) of entities accounted for using the equity method	9	171 725	120 712
Fee and commission income	21	158 016	147 274
Fee and commission expenses	21	( 23 380)	( 23 587)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	22	3 475	968
Gains/(losses) on financial assets and liabilities held for trading, net	22	26 189	8 710
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	22	60 314
Gains/(losses) on financial assets and liabilities measured at fair value through profit or loss, net	22	0	13
Gains/(losses) from hedge accounting, net		425	124
Exchange differences (gain/loss), net		( 16 598)	4 777
Other operating income	23	5 110	2 602
Other Operating expenses	23	( 20 863)	( 20 256)
GROSS INCOME		573 044	440 135
Administrative expenses		( 211 293)	( 317 503)
Staff expenses	24	( 126 828)	( 238 884)
Other administrative expenses	25	( 84 465)	( 78 619)
Depreciation and amortisation		( 10 426)	( 11 002)
NET OPERATING INCOME		351 325	111 630
Provisions or reversal of provisions		( 2 240)	425
Commitments and guarantees given		( 2 272)	1 916
Other provisions		32	( 1 491)
Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss		13 590	( 9 666)
Available-for-sale financial assets			( 258)
Financial assets at amortised cost		13 590	( 9 408)
Impairment/(reversal) of impairment on non-financial assets		( 1 017)	4 713
		359	2 993
Gains/(losses) on derecognition of non-financial assets, net		362 017	110 095
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
Tax expense or income related to profit or loss from continuing operations		( 60 174)	( 8 193)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS		301 843	101 902
Profit/(loss) after tax from discontinued operations	13	64 214	( 203 603)
Profit/(loss) before tax from discontinued operations	13	64 955	( 164 047)
Tax expense or income related to profit or loss from discontinued operations	13	( 741)	( 39 556)
PROFIT/(LOSS) FOR THE PERIOD		366 057	( 101 701)
PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO NON-CONTROLLING INTERESTS			( 24)
Profit/(loss) of non-controlling interests			( 24)
PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	26	366 057	( 101 725)
Earnings per share (euros)
Basic	5	0.251	( 0.070)
Diluted	5	0.251	( 0.070)
Earnings per share from continuing operations (euros)
Basic	5	0.207	0.070
Diluted	5	0.207	0.070
Earnings per share from discontinued operations (euros)
Basic	5	0.044	( 0.140)
Diluted	5	0.044	( 0.140)

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 SIX-MONTH PERIODS ENDED ON 30 JUNE 2018 AND 2017 RESTATED

		(Amounts expressed in euro thousands)
	30-06-2018	30-06-2017 Restated
PROFIT/(LOSS) FOR THE PERIOD	366 057	( 101 701)
Other comprehensive income	( 29 816)	216 901
Items that will not be reclassified to profit or loss	130 877	23 225
Actuarial gains/ (losses) on defined benefit pension plans	100 473	32 763
Share of other recognised income and expense of entities accounted for using the equity method	650
Fair value changes of equity instruments measured at fair value through other comprehensive income	( 169)
Income tax relating to items that will not be reclassified	29 923	( 9 538)
Items that may be reclassified to profit or loss	( 160 693)	193 676
Foreign currency translation	( 173 266)	186 046
Translation gains/(losses) taken to equity	( 173 266)	3 925
Transferred to profit or loss	0	182 121
Debt instruments classified as fair value financial assets through other comprehensive income	872
Valuation gains/(losses) taken to equity	( 357)
Transferred to profit or loss	( 115)
Other reclassifications	1 344
Available-for-sale financial assets		10 087
Valuation gains/(losses) taken to equity		10 236
Transferred to profit or loss		( 149)
Share of other recognised income and expense of investments in joint ventures and associates	( 6 517)	2 593
Income tax relating to items that may be reclassified to profit or loss	18 218	( 5 050)
Total comprehensive income for the period	336 241	115 200
Attributable to minority interests (non-controlling interests)	0	24
Attributable to owners of the parent	336 241	115 176

The accompanying notes are an integral part of these financial statements

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED ON 30 JUNE 2018 AND 2017 RESTATED

						(Amounts expressed in euro thousands)
	Capital	Other equity	Accumulated other comprehensive income	Retained earnings and other reserves	Treasury shares	Other accumulated comprehensive income related to discontinued operations	Profit/(loss) for the period	Non-controlling interests	Shareholders' equity
Opening balances at 31 December 2016 Restated	1 293 063	4 309	( 347 090)	1 369 895	( 10 809)	( 182 121)	313 230	468 048	2 908 525
Accumulated other comprehensive income relating to discontinued operations at 31
December 2016			285			( 285)
Transfer to reserves and retained earnings				313 230			( 313 230)
Preferred share dividends								( 20)	( 20)
Variable remuneration program ("RVA")		( 2 587)		( 2 923)	10 432				4 922
Sale / purchase of preferred shares								( 24)	( 24)
Deconsolidation of equity holding in Banco de Fomento Angola								( 466 274)	( 466 274)
Other comprehensive income relating to discontinued operations						( 119)			( 119)
Comprehensive income in first half of 2017			9 664	25 235		182 121	( 101 725)	24	115 319
Other				( 11)					( 11)
Balances at 30 June 2017 Restated	1 293 063	1 722	( 337 141)	1 705 426	( 377)	( 404)	( 101 725)	1 754	2 562 318
Preferred share dividends								( 9)	( 9)
Sale / purchase of preferred shares								( 1 732)	( 1 732)
Variable remuneration program ("RVA")		554							554
Other comprehensive income relating to discontinued operations						219			219
Comprehensive income in second half of 2017			173 582	( 25 490)			111 934	( 13)	260 013
Other				2 223					2 223
Balances as at 31 December 2017	1 293 063	2 276	( 163 559)	1 682 159	( 377)	( 185)	10 209		2 823 586
Impacts of 1st time application of IFRS 9 (Note 2.A)			( 22 740)	( 10 815)					( 33 555)
Balances as at 01 January 2018	1 293 063	2 276	( 186 299)	1 671 344	( 377)	( 185)	10 209		2 790 031
Transfer to reserves and retained earnings				10 209			( 10 209)
Variable remuneration program ("RVA")		( 682)							( 682)
Other comprehensive income relating to discontinued operations						185			185
Comprehensive income in first half of 2018			( 30 001)				366 057		336 056
Other				116					116
Closing balances as at 30 June 2018	1 293 063	1 594	( 216 300)	1 681 669	( 377)		366 057		3 125 706

The accompanying notes are an integral part of these financial statements

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

					(Amounts expressed in euro thousands)
		30-06-2018			30-06-2017 Restated
	Continuing operations Discontinued operations		Total	Continuing operations Discontinued operations		Total
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Interest, commissions and other income received	400 109	17 450	417 559	351 792	226 102	577 894
Interest, commissions and other expenses paid	( 92 630)	( 22 323)	( 114 953)	( 83 664)	( 230 920)	( 314 584)
Recovery of overdue loans and interest and gains/(losses) on the sale of real estate received in	7 326		7 326	11 853		11 853
settlement of defaulting loans
Payments to staff and suppliers Net cash flow from income and expenses	( 243 657) 71 148	( 1 961) ( 6 834)	( 245 618) 64 314	( 279 649) 332	( 3 753) ( 8 571)	( 283 402) ( 8 239)
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	1 580 268		1 580 268	199 208	( 287 391)	( 88 183)
Financial assets at amortised cost - Central Banks and other Credit Institutions	( 463 923)		( 463 923)	( 182 927)	75 780	( 107 147)
Financial assets at amortised cost - Customers	( 2 665 581)		( 2 665 581)	( 169 358)	58 620	( 110 738)
Other operating assets	248 918	560	249 478	217 378	8 203	225 581
Net cash flow from operating assets	( 1 300 318)	560	( 1 299 758)	64 301	( 144 788)	( 80 487)
Increases (decreases) in:
Financial liabilities measured at amortised cost - Central Banks and other Credit	1 319 805		1 319 805	47 073		47 073
Institutions
Financial liabilities measured at amortised cost - Customers and other	1 381 513	6 536	1 388 049	78 631	177 821	256 452
Financial liabilities held for trading	( 15 477)		( 15 477)	( 26 926)		( 26 926)
Other operating liabilities	( 6 000)	( 215)	( 6 215)	( 81 727)	23	( 81 704)
Net cash flow from operating liabilities	2 679 841	6 321	2 686 162	17 051	177 844	194 895
Contributions to Pension Funds	( 13 142)		( 13 142)	( 84 171)	( 184)	( 84 355)
Income tax paid	39 114	( 137)	38 977	( 16 562)	( 964)	( 17 526)
	1 476 643	( 90)	1 476 553	( 19 049)	23 337	4 288
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Sale of 2% equity holding in Banco de Fomento Angola				28 000		28 000
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 and intangible assets	( 9 013)		( 9 013)	( 5 220)		( 5 220)
Sale of other tangible assets	2		2
Dividends received and other income	14 716		14 716	19 283	9	19 292
	88 705		88 705	80 927	9	80 936
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
Repurchases and reimbursements of securitisation operations	( 213 870)		( 213 870)	( 43 952)		( 43 952)
Issuance of debt securities and subordinated debt.	452		452	307 270		307 270
Redemption of debt securities Purchase and sale of own debt securities and subordinated debt	( 210 581) ( 693)		( 210 581) ( 693)	( 244 335) ( 1 102)		( 244 335) ( 1 102)
Sale / purchase of preferred shares				( 25)		( 25)
Interest on debt instruments and subordinated debt.	( 8 425)		( 8 425)	( 959)	( 403)	( 1 362)
Preferred share dividends				( 20)		( 20)
Dividends received by BPI				12 635	( 12 635)
Purchase and sale of treasury shares				4 921		4 921
	( 433 117)		( 433 117)	34 433	( 13 038)	21 395
Net increase (decrease) in cash and cash equivalents	1 132 231	( 90)	1 132 141	96 311	10 308	106 619
Cash and cash equivalents at the beginning of the period	1 186 205	363	1 186 568	1 170 636	1 520 686	2 691 322
Deconsolidation of BFA in January 2017					( 1 514 511)	( 1 514 511)
Deconsolidation of BPI Gestão de Activos and BPI GIF in April 2018		( 273)	( 273)
Cash and cash equivalents at the end of period	2 318 436		2 318 436	1 266 947	16 483	1 283 430
Cash and deposits at Central Banks Deposits at other credit institutions	2 259 683 58 753		2 259 683 58 753	983 403 283 544	16 483	983 403 300 027
Cash and cash equivalents	2 318 436		2 318 436	1 266 947	16 483	1 283 430
Cash and cash equivalents by currency
EUR	2 272 487		2 272 487	1 208 856	16 483	1 225 339
USD	11 313		11 313	22 969		22 969
Other currencies	34 636		34 636	35 122		35 122
Cash and cash equivalents	2 318 436		2 318 436	1 266 947	16 483	1 283 430

The accompanying notes are an integral part of these financial statements

The Chief Accountant The Executive Committee of the Board of Directors

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 consolidated financial statements as at 30 June 2018

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

(These notes are a translation of notes originally issued in Portuguese – Note 32)

1. THE FINANCIAL GROUP

Banco BPI S.A., (Hereinafter referred to as "Banco 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 Head office at Rua Tenente Valadim, no. 284, in Porto, is a multi-specialist financial entity focusing its activity on banking, and providing a broad range of financial services and products to private individuals, companies, and institutional investors.

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 the BPI Group'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. At 30 June 2018, following the acquisition from Allianz of an 8.4% stake in the Bank and other acquisitions in the regulated market, CaixaBank held 94.2% of the voting rights in Banco BPI.

Banco BPI has been listed on the Stock Exchange since 1986. 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 is pending a decision. As soon as Banco BPI loses its status of public company, upon the CMVM's approval, CaixaBank intends to exercise its right of squeeze-out under the terms of article 490 of the Companies Code ("Código das Sociedades Comerciais").

In November 2017 Banco BPI, S.A. entered an agreement to sell its holdings in BPI Vida e Pensões, BPI Gestão de Activos and BPI Global Fund Investment Management Company (BPI GIF) to the CaixaBank Group. The sale of BPI Vida e Pensões was completed before the end of 2017 and those of BPI Gestão de Activos and BPI GIF were concluded in April 2018. In this context, at the end of 2017 the BPI Vida e Pensões, BPI Gestão de Activos and BPI GIF operations were classified as discontinued operations, in accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, with the comparative balances in the Consolidated Statements of Profit and Loss and Other Comprehensive Income as of 30 June 2017 being restated, and all income and expenses generated by these entities in the first half of 2017 and first half of 2018 being presented in a single line in the Consolidated Statement of Profit and Loss designated "Profit and loss from discontinued operations" Also in accordance with IFRS 5, the total assets and liabilities of BPI Gestão de Ativos and BPI GIF as of 31 December 2017 are presented in the captions "Non-current assets and disposal groups classified as held for sale and discontinued operations" and "Liabilities included in disposal groups classified as held for sale and discontinued operations", respectively. At 31 December 2017 these holdings continued to be fully consolidated since on that date Banco BPI still had control over those entities.

In the 2nd half of 2017, Banco BPI ceased having control over BPI Alternative Fund: Iberian Equities Long/Short Fund (Lux), as defined by IFRS 10, as it held less than 20% of the participating units of the fund. Accordingly, the BPI Alternative Fund ceased to be fully consolidated.

In the 4th quarter of 2017 BPI Capital Finance Ltd. was liquidated. The ordinary shares representing this entity's equity were fully owned by Banco BPI.

In the 4th quarter of 2017 BPI sold its fully-owned equity holding in BPI Moçambique – Sociedade de Investimento, S.A..

In the 4th quarter of 2017, as a result of an agreement entered into by Banco BPI and Caixa Geral de Depósitos with Insitec Capital, S.A., the BPI Group increased its equity holding in Banco Comercial e de Investimentos, S.A. from 30% to 35.67%.

	He a d Offic e	Sha re hol quity 1 de rs' e	Asse ts	Ne t Inc ome (loss) for the pe riod	Dire c t holding	Effe c tive holding	Consolida tion / Re c ognition me thod
Ba nks
Banco BPI S.A.	Portugal	2 529 321	36 053 118	288 724
Banco Português de Investimento, S.A.	Portugal	21 501	26 062	( 1 613)	100.00%		100.00% Full consolidation
Banco Comercial e de Investimentos, S.A.	Mozambique	227 706	2 196 504	16 672	35.67%		35.67% Equity method
Banco de Fomento Angola, S.A.	Angola	986 948	5 343 134	337 354	48.09%		48.09% Equity method
Banco BPI Cayman, Ltd. 2	Cayman Islands	168 898	168 898	3			100.00% Full consolidation
Asse t ma na ge me nt BPI (Suisse), S.A.	Switzerland	7 507	8 187	991	100.00%		100.00% Full consolidation
Ve nture / de ve lopme nt c a pita l BPI Private Equity - Sociedade de Capital de
Risco, S.A. Portugal		33 991	37 967	585	100.00%		100.00% Full consolidation
Inter- Risco – Sociedade de Capital de Risco, S.A. Portugal		908	1 156	( 87)			49.00% Equity method
Insura nc e
Cosec – Companhia de Seguros de Crédito, S.A. Companhia de Seguros Allianz Portugal, S.A.	Portugal Portugal	44 679 167 415	132 056 1 262 353	3 035 11 410	50.00% 35.00%		50.00% Equity method 35.00% Equity method
Othe r
BPI Capital Africa (Proprietary) Limited 2	South Africa			170			100.00% Full consolidation
BPI, Inc.	U.S.A	729	730	( 4)	100.00%		100.00% Full consolidation
BPI Madeira, SGPS, Unipessoal, S.A.	Portugal	151 705	151 709	282	100.00%		100.00% Full consolidation
Unicre - Instituição Financeira de Crédito, S.A.	Portugal	99 167	340 763	10 863	21.01%		21.01% Equity method

Note: Unless otherwise indicated, all amounts are as of 30 June 2018 (accounting balances before consolidation adjustments).

1 Includes net income for the period.

2 Entity in liquidation process.

The financial information related to the entities of BPI was drawn from their unaudited financial statements as of 30 June 2018. The Executive Committee of the Board of Directors believes that these are properly presented in the consolidated accounts of the Bank.

The vehicles through which Banco BPI's debt securitisation operations are effected are recorded in the consolidated financial statements 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. As of 30 June 2018 and 31 December 2017 the BPI Group 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. 1
• 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

As of 31 December 2017, the BPI Group was made up of the following companies:	He a d Offic e	Sha re hol quity 1 de rs' e	Asse ts	Ne t Inc ome (loss) for the ye a r	Dire c t holding	Effe c tive holding	Consolida tion / Re c ognition me thod
Ba nks Banco BPI S.A. Banco Português de Investimento, S.A. Banco Comercial e de Investimentos, S.A. Banco de Fomento Angola, S.A. Banco BPI Cayman, Ltd. 2	Portugal Portugal Mozambique Angola Cayman Islands	23 421 219 653 1 172 717 168 895	2 135 424 33 260 476 29 323 2 192 848 7 783 519 168 895	232 774 ( 3 431) 34 997 372 627 9 301	100.00% 35.67% 48.09%		100.00% Full consolidation 35.67% Equity method 48.09% Equity method 100.00% Full consolidation
Asse t ma na ge me nt BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliários, S.A BPI – Global Investment Fund Management Company, S.A. Luxembourg BPI (Suisse), S.A.	Portugal Switzerland	16 200 2 559 14 988	36 064 9 200 15 689	7 329 1 958 3 935	100.00% 100.00% 100.00%		100.00% Full consolidation (IFRS5) 100.00% Full consolidation (IFRS5) 100.00% Full consolidation
Ve nture / de ve lopme nt c a pita l BPI Private Equity - Sociedade de Capital de Risco, S.A. Portugal Inter- Risco – Sociedade de Capital de Risco, S.A. Portugal		32 829 994	38 128 1 264	31 ( 144)	100.00%		100.00% Full consolidation 49.00% Equity method
Insura nc e Cosec – Companhia de Seguros de Crédito, S.A. Companhia de Seguros Allianz Portugal, S.A.	Portugal Portugal	50 303 178 961	114 266 1 303 015	7 948 6 375	50.00% 35.00%		50.00% Equity method 35.00% Equity method
Othe r BPI Capital Africa (Proprietary) Limited 2 BPI, Inc. BPI Madeira, SGPS, Unipessoal, S.A. Unicre - Instituição Financeira de Crédito, S.A.	South Africa U.S.A Portugal Portugal	117 708 151 420 102 658	322 709 151 426 350 623	( 1 338) ( 6) ( 609) 24 309	100.00% 100.00% 21.01%		100.00% Full consolidation 100.00% Full consolidation 100.00% Full consolidation 21.01% Equity method

Note: Unless otherwise indicated, all amounts are as of 31 December 2017 (accounting balances before consolidation adjustments).

1 Includes net income for the period.

2 Entity in liquidation process.

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. 1/2005 of 21 February.

BPI's consolidated financial statements as of 31 December 2017 were approved by the Board of Directors on 23 March 2018 and by the ordinary General Meeting of Shareholders on 20 April 2018.

In the preparation of the 2017 consolidated annual accounts, the consolidation principles, accounting policies and valuation criteria described in Note 2 to the 2017 Annual Report were applied with a view to obtaining a true picture of the financial situation of the BPI Group as at 31 December 2017 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 2018 were prepared based on the same principles and accounting policies described in Note 2 to the consolidated financial statements at 31 December 2017, applying in particular IAS 34 (Interim financial reporting), except those resulting from regulatory changes that came into effect on 1 January 2018, 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 for 30 June 2018 were approved by the Executive Committee of the Board of Directors of Banco BPI at its meeting of 24 September 2018.

In accordance with IAS 34, the condensed interim consolidated financial statements include, primarily, an explanation of the events and changes that are significant to an understanding of the changes in the financial position and performance of the Entity since the approval of the last annual consolidated financial statements. Accordingly, the notes focus on new activities, events, and circumstances in the first six months of the year and do not duplicate information previously reported in the last annual consolidated accounts. Therefore, for an appropriate understanding of the information contained in the condensed interim consolidated financial statements, they should be read in conjunction with BPI Group's 2017 annual consolidated financial statements.

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.

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

In deciding what information to disclose in this report, its materiality was assessed in relation to the annual financial data.

With the entry into force of IFRS 9, Banco BPI decided to adopt a structure of the 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).

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.

On 1 January 2018, the following accounting standards came into force (Note 2. B - Main accounting policies):

Standards and interpretations that came into force in 2018

Standards and Interpretations	Name
IFRS 15	Revenue from contracts with customers
Amendment to IFRS 15	Revenue from contracts with customers
IFRS 9	Financial instruments
Amendment to IFRS 4	Insurance contracts (application of IFRS 4 with IFRS 9)
Amendment to IFRS 2	Share- based payment
Amendment to IAS 40	Transfer of investment property
IFRS 1	First- time adoption of the IFRS
IFRS 12	Disclosure of interests in other entities
IAS 28	Investments in associates and joint ventures
IFRIC 22	Foreign currency transactions and advance consideration

On 1 January 2018, Banco BPI adopted the following accounting standards:

• IFRS 15 (new) 'Revenue from contracts with customers'. This new standard applies only to contracts for the delivery of products or services, and requires an entity to recognise revenue when the contractual obligation to deliver assets or services is satisfied and in the amount that reflects the consideration to which the entity is expected to be entitled to, as provided for in the "5 steps method". There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
• Amendments to IFRS 15 'Revenue from contracts with customers'. These changes refer to the additional steps to be followed to determine the performance obligations of a contract, the timing of revenue recognition from a license of intellectual property, the review of the indicators for the classification of the principal versus agent relationship, and the new regimes foreseen to simplify the transition. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
• IFRS 9 (new) 'Financial instruments'. IFRS 9 replaces the requirements of IAS 39, regarding: (i) the classification and measurement of financial assets and liabilities; (ii) the recognition of impairment of receivables (through the expected credit losses model); and (iii) the requirements for the recognition and classification of hedge accounting. The impacts from adoption of this standard are described in Note 2.A.
• IFRS 2 (amendment) 'Classification and Measurement of Share-based Payment Transactions'. This amendment clarifies the measurement basis for cash-settled share-based payments and the accounting for modifications in a share-based payment plan from cash-settled to equity-settled. In addition, an exception was introduced in the principles of IFRS 2, which now requires that a share-based payment plan be treated as if it was fully equity-settled when the employer is required to withhold the tax due and to settle it with the tax authority on behalf of the employee. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
• IAS 40 (amendment) 'Transfer of investment properties'. This amendment clarifies that assets can only be transferred to and from the investment property category when there is evidence of change in use. The change of management's intention alone is not sufficient to effect the transfer. There has been no material impact on the Bank's financial statements as a result of the adoption of this standard.
• IFRS 1 'First-time Adoption of the IFRS'. This improvement eliminates the short-term exemptions for IFRS 7, IFRS 10 and IAS 19, as they no longer apply.

• IFRS 12 'Disclosure of interests in other entities'. This improvement aims to clarify that the standard's scope includes investments classified under IFRS 5 and that the only exemption concerns the disclosure of those entities' condensed financial information.

• IAS 28 'Investments in associates and joint ventures'. This improvement aims to clarify that Investments in associates and joint ventures held by venture capital companies may be individually measured at fair value in accordance with IFRS 9. It is also clarified that an entity that is not an investment entity but holds investments in associates and joint ventures that are investment entities may retain the fair value measurement of the holdings of the associates or joint ventures in their own subsidiaries.

• IFRIC 22 (new), 'Foreign currency transactions and down payments'. This is an interpretation of IAS 21 'The effects of changes in exchange rates' and refers to the determination of the "transaction date" when an entity pays or receives in advance the consideration of contracts denominated in foreign currency. The "transaction date" determines the exchange rate to be used to convert foreign-currency transactions.

The standards (new and amendments) published by the IASB up to the date of approval of the interim financial statements, which are of mandatory application for annual periods beginning on or after 1 January 2019, are as follows:

Standards and Interpretations issued by the IASB

	Standards and Interpretations issued by the IASB
Sta nda rds a nd Inte rpre ta tions	Na me	Ma nda tory a pplic a tion for ye a rs sta rting on
Endorsed by the European Union
IFRS 16	Leases	01 January 2019
Amendment to IFRS 9	Prepayment features with negative compensation	01 January 2019
Non Endorsed by the European Union
Amendment to IAS 19	Amendment, curtailment or settlement of defined benefit plans	01 January 2019
Amendment to IAS 28	Long- term interests in associates and joint ventures	01 January 2019
IAS 23	Borrowing costs	01 January 2019
IAS 12	Income taxes	01 January 2019
IFRS 3	Business combinations	01 January 2019
Conceptual structure	Amendments to references to other IFRS	01 January 2020
Interpretation of IFRIC 23	Uncertainty about treatment of income tax	01 January 2019

IFRS 16 (new) 'Leases' (to be applied to annual periods beginning on or after 1 January 2019). This new standard replaces IAS 17, with a significant impact on the accounting by lessees that are now obliged to recognise future lease liabilities reflecting lease payments and an asset for "right of use" for all lease contracts, except certain short-term leases and lowvalue assets. The definition of a lease was also changed, being now based on the "right to control the use of an identified asset". As regards the transitional regime, the new standard can be applied retrospectively or a modified retrospective approach can be followed.

Banco BPI has initiated a specific project for the implementation of this standard, centred on the analysis of all lease agreements entered into by the Bank. The main typology of contracts identified that requires estimating an asset by right of use and a lease liability are leases of real estate (branches and central buildings) that are used for the activity of the bank. No significant impact on assets is expected from the coming into force of this standard.

• IFRS 9 (amendment) 'Pre-payment features with negative compensation' (to be applied to annual periods beginning on or after 01 January 2019). This amendment introduces the possibility of classifying financial assets with conditions for prepayment with negative compensation at amortised cost, instead of at fair value through profit or loss, providing specific conditions are met. The future adoption of this standard is not expected to have significant impacts on the Bank's financial statements.
• IAS 19 (amendment) 'defined benefit plan amendment, curtailment or settlement' (to be applied to annual periods beginning on or after 01 January 2019). This amendment is still subject to endorsement by the European Union. This amendment to IAS 19 requires an entity to: (I) use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and (ii) recognise in profit or loss as part of past service cost, or a gain or loss on settlement, and through Other comprehensive income, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.

• IAS 28 (amendment) 'Long-term interests in associates and joint ventures' (to be applied to annual periods beginning on or after 01 January 2019). This amendment is still subject to endorsement by the European Union. This amendment clarifies that long-term interests in an associate or joint venture that form part of the net

• investment in the associate or joint venture but to which the equity method is not applied, are accounted for under IFRS 9 and subject to the expected loss impairment model prior to any impairment testing to the investment as a whole.

• IAS 23 'Borrowing costs' (to be applied to annual periods beginning on or after 01 January 2019). This cycle of improvements is still subject to endorsement by the European Union. This improvement clarifies that specific loans obtained that remain outstanding after the qualifying assets to which they refer are suitable for sale or use, should be added to the generic loans for the calculation of the average capitalisation rate of interest on other qualifying assets.
• IAS 12 'Income taxes' (to be applied to annual periods beginning on or after 01 January 2019). This cycle of improvements is still subject to endorsement by the European Union. This improvement clarifies that the tax impact inherent to the dividends is recorded at the date when the entity records liability for the payment of dividends which are recorded in the income statement of the year, in other comprehensive income or in equity in accordance with the transaction or event that gave rise to the dividends.
• IFRS 3 'Business combinations' and IFRS 11, 'Joint arrangements' (to be applied to annual periods beginning on or after 01 January 2019). This cycle of improvements is still subject to endorsement by the European Union. These improvements clarify that: i) upon obtaining control of a business that is a joint operation, the interests previously held by the investor are remeasured at fair value; and ii) when an investor in a joint operation which does not exercise joint control obtains jointly control in an operation that is a business, the interest previously held is not remeasured.
• Conceptual framework Amendments to references to other IFRS (to be applied to annual periods beginning on or after 01 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 several standards and interpretations, namely 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, and 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 apply retrospectively, save where impractical.
• IFRIC 23 (new), 'Uncertainty over Income Tax Treatments', (to be applied to annual periods beginning on or after 1 January 2019). This interpretation is still subject to endorsement by the European Union. IFRIC 23 provides an interpretation to IAS 12 - 'Income taxes' concerning the measurement and recognition requirements to be applied when there is uncertainty about whether a given tax treatment of income tax will be accepted by the Tax Authorities. If there is uncertainty about the position of the Tax Authorities regarding a specific transaction, the entity shall make its best estimate and recognise the income tax assets or liabilities according to IAS 12, rather than IAS 37 - "Provisions, contingent liabilities and contingent assets", based on the expected value or the most likely amount. IFRIC 23 may be applied using the full retrospective or modified retrospective approach.

Main estimates and uncertainties regarding the application of the accounting policies

BPI's condensed interim consolidated financial statements have been prepared using estimates and expected future amounts, namely in the following areas

Retirement and survivor pensions

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 BPI Group's expectations for the period during which the liabilities will be settled.

Fair value of derivatives and unlisted financial assets

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

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

Loan impairment

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

Income taxes

Current and deferred taxes have been recognised based on the tax legislation currently applicable to BPI or on legislation already published for future application. 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.

Estimates used are based on the best information available at the time of preparation of the condensed interim 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 2017, as well as for the six-month period ended on 30 June 2017, included in the condensed interim consolidated financial statements, are presented for comparative purposes only.

As referred in the "Bases of Presentation" section of this note, Banco BPI adopted IFRS 9 "Financial instruments" for the first time on 1 January 2018. This required making changes in the classification and valuation of certain financial assets, with the following impacts:

Consolidated Assets - Impacts of first-time adoption of IFRS9:

impacts:
Consolidated Assets - Impacts of first-time adoption of IFRS9:
	3 1- 12 - 2 0 17	Re c la ssific a tion of portfolios	Cha nge in va lue	0 1- 0 1- 2 0 18
Ca sh a nd c a sh ba la nc e s a t c e ntra l ba nks a nd othe r de ma nd de posits	1 0 9 4 15 0			1 0 9 4 15 0
Fina nc ia l a sse ts he ld for tra ding	2 9 4 4 8 1			2 9 4 4 8 1
Fina nc ia l a sse ts not de signa te d for tra ding c ompulsorily me a sure d a t fa ir va lue through profit or loss		3 0 2 4 4 5		3 0 2 4 4 5
Equity instruments		241 994		241 994
Debt securities		60 451		60 451
Fina nc ia l a sse ts a t fa ir va lue through profit or loss	6 0 5 5	( 6 0 5 5 )
Fina nc ia l a sse ts a t fa ir va lue through othe r c ompre he nsive inc ome		3 5 8 3 8 2 4		3 5 8 3 8 2 4
Equity instruments		85 170		85 170
Debt securities		3 498 654		3 498 654
Ava ila ble - for- sa le fina nc ia l a sse ts	3 8 7 5 3 7 0	( 3 8 7 5 3 7 0 )
Fina nc ia l a sse ts a t a mortise d c ost	2 2 5 0 6 6 7 0	( 4 8 4 5 )	( 3 4 6 11)	2 2 4 6 7 2 14
Debt securities	1 306 130	( 5 053)	5 330	1 306 407
Loans and advances - Central Banks and Credit Institutions	816 783			816 783
Loans and advances - Customers	20 383 757	208	( 39 941)	20 344 024
De riva tive s - He dge a c c ounting	12 7 4 0			12 7 4 0
Fa ir va lue c ha nge s of the he dge d ite ms in portfolio he dge of inte re st ra te risk	2 0 5 7 4			2 0 5 7 4
Inve stme nts in joint ve nture s a nd a ssoc ia te d c ompa nie s	7 9 4 4 8 3		( 8 6 2 6 )	7 8 5 8 5 7
Ta ngible a sse ts	4 5 3 0 9			4 5 3 0 9
Inta ngible a sse ts	4 2 3 15			4 2 3 15
Ta x a sse ts	4 5 3 18 3		9 7 0 0	4 6 2 8 8 3
Othe r a sse ts	4 8 7 6 16			4 8 7 6 16
Non- c urre nt a sse ts a nd disposa l groups c la ssifie d a s he ld for sa le	7 2 6 3			7 2 6 3
Consolida te d Tota l Asse ts	2 9 6 4 0 2 0 9		( 3 3 5 3 6	) 2 9 6 0 6 6 7 2

On 1 January 2018, Banco BPI reclassified its financial assets to the portfolios established in IFRS 9 (Note 2.1):

• The Customer loans portfolio (loans and securitised debt instruments) remains recorded in the portfolio of assets at amortised cost, except for debt instruments for which it is not possible to conclude that their contractual cash flows are Solely Payments of Principal and Interest on the Principal outstanding ("SPPI tests") and which were reclassified to the portfolio of financial assets not designated for trading, which are compulsorily recorded at fair value through profit or loss (5 053 t.euros).
• The debt instruments classified as available-for-sale financial assets at 31 December 2017 (3 554 053 thousand) and managed under a 'hold to collect and sell' business model were reclassified to the financial assets portfolio at fair value through other comprehensive income (3 498 654 t.euros), with the exception of securities that did not pass the SPPI tests and were reclassified to financial assets not designated for trading, required to be accounted for at fair value through profit or loss (55 398 t.euros).
• Banco BPI took the irrevocable option to classify the equity instruments (which are not classified in the trading book) in the portfolio of financial assets at fair value through other comprehensive income. Accordingly, the equity instruments classified as available-for-sale financial assets at 31 December 2017 (321 100 t.euros) were reclassified as follows:
• to the portfolio of financial assets at fair value through other comprehensive income: shares in the amount of 85 170 t.euros.
• to the portfolio of financial assets not designated for trading, compulsorily accounted for at fair value through profit or loss: 235 939 t.euros relating to investment funds (which, being considered "puttable instruments" under IAS 32, could not be included in the previous category) and shares expected to be sold in the short-term.

Consolidated Liabilities - Impacts of first-time adoption of IFRS9:

Consolidated Liabilities - Impacts of first-time adoption of IFRS9:	3 1- 12 - 2 0 17	Re c la ssific a tion of portfolios	Cha nge in va lue	0 1- 0 1- 2 0 18
Fina nc ia l lia bilitie s he ld for tra ding	17 0 0 4 8			17 0 0 4 8
Fina nc ia l lia bilitie s a t a mortise d c ost	2 5 9 6 1 4 15			2 5 9 6 1 4 15
Deposits - Central Banks	1 995 374			1 995 374
Deposits - Credit Institutions	1 982 648			1 982 648
Deposits - Customers	20 713 633			20 713 633
Debt securities issued	1 019 977			1 019 977
Memorandum items: subordinated liabilities	305 077			305 077
Other financial liabilities	249 783			249 783
De riva tive s - He dge a c c ounting	6 9 8 8 0			6 9 8 8 0
Fa ir va lue c ha nge s of the he dge d ite ms in portfolio he dge of inte re st ra te risk	2 18			2 18
Provisions	6 4 2 3 8		7 8 5	6 5 0 2 3
Pending legal issues and tax litigation	42 367			42 367
Commitments and guarantees given	18 441		785	19 226
Other provisions	3 430			3 430
Ta x lia bilitie s	7 0 6 2 2		( 7 6 6 )	6 9 8 5 6
Othe r lia bilitie s	4 7 5 7 3 1			4 7 5 7 3 1
Lia bilitie s inc lude d in disposa l groups c la ssifie d a s he ld for sa le	4 4 7 1			4 4 7 1
Tota l Consolida te d Lia bilitie s	2 6 8 16 6 2 3		19	2 6 8 16 6 4 2

For financial liabilities, the categories defined in IFRS 9 are similar to those defined in IAS 39.

Consolidated Shareholders' Equity - Impacts of first-time adoption of IFRS9:
	31- 12- 2017	Reclassifica tion of portfolios	Change in value	01- 01- 2018
Capital	1 293 063			1 293 063
Other equity	2 276			2 276
Accumulated other comprehensive income	( 163 559)	( 22 740)		( 186 299)
Items that will not be reclassified to profit or loss	( 313 417)	60 673		( 252 744)
Items that may be reclassified to profit or loss	149 858	( 83 413)		66 445
Retained earnings	944 225	22 740	( 33 555)	933 410
Other reserves	737 934			737 934
(- ) Treasury shares	( 377)			( 377)
Accumulated other comprehensive income from discontinued operations	( 185)			( 185)
Profit or loss attributable to owners of the parent	10 209			10 209
Total Consolidated Shareholders' Equity	2 823 586		( 33 555)	2 790 031
Total Equity and Total Liabilities	29 640 209			( 33 536) 29 606 673

The impact on Shareholders' equity of the first-time adoption of IFRS 9, on 1 January 2018 (-33 555 t.euros after tax) resulted from the following:

• (25 696) t.euros (after tax) from the change of the methodology used to estimate impairment losses in financial instruments, based on the expected loss concept defined in IFRS9 wich implied an increase of impairment for loans, commitements and guarantees given in the amount of 35 396 t.euros relatively to the method provided in IAS 39 based on the accounting of losses incurred by credit risk.
• Banco de Fomento Angola and Banco Comercial e de Investimentos (Mozambique) adopted the IFRS 9 for the first time in the 1st half of 2018. This had an impact on Banco BPI shareholders' equity of (6 898) t.euros relative to BFA and (961) t.euros relative to BCI.

The adoption of IFRS 9 caused a decrease in the fully-loaded CET 1 ratio of 18 basis points at transition date. Due to the limited impact, Banco BPI opted out of the voluntary phase-in period for absorbing the prudential impact of the first-time adoption of IFRS 9.

In addition, as a result of the reclassification of the financial assets to the portfolios established in IFRS 9, the unrealised gains and losses associated with available-for-sale financial assets accounted for in revaluation reserves at 31 December 2017 (84 150 t.euros after taxes) were reclassified to:

• Retained earnings (22 740 t.euros), the unrealised gains and losses in debt and equity instruments reclassified to the portfolio of financial assets not designated for trading, compulsorily measured at fair value through profit or loss;
• Other comprehensive income Items that will not be reclassified to profit or loss (60 673 t.euros), the unrealised gains and losses in equity instruments reclassified to the financial assets portfolio at fair value through other comprehensive income;
• The remaining portion of unrealised gains and losses in debt instruments reclassified to the financial assets portfolio at fair value through other comprehensive income (737 t.euros) remained accounted for in the caption Other comprehensive income - Items that may be reclassified to profit or loss.

Given the difficulty of retroactively estimating the impact arising from the adoption of IFRS 9, the BPI Group has made use of the provisions of IAS 8.40 in order not to restate the opening balance at 1 January 2017 or the 2017 income statement. Similarly, based on the possibility allowed in the section IFRS 9.7.2.15, the breakdowns, at 31 December 2017, of certain balance sheet items referring to financial instruments have not been restated, which is why they cannot be compared with the information referring to 30 June 2018.

With the entry into force of IFRS 9, Banco BPI decided to adopt a structure of the 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). This implied the following reclassifications between balance sheet captions with reference to 31 December 2017: 3 1- 12 - 2 0 17

(consolidating entity of Banco BPI). This implied the following reclassifications between balance sheet captions with reference to 31
December 2017:
	31-12-2017 Restated	31-12-2017	Difference
ASSETS
Cash and cash balances at central banks and other sight deposits	1094 150	1186205	(92055)
Financial assets held for trading at fair value through profit or loss	300 536	300 536
Available-for-sale financial assets	3875370	3875370
Financial assets at amortised cost	22 506 670	22 383 509	123 161
Debt securities	1306 130	1306 130
Loans and advances - Central Banks and Credit Institutions	816783	724727	92 055
Loans and advances - Customers	20 383 757	20 352 652	31105
Derivatives - Hedge accounting	12 740	12 740
Fair value changes of the hedged items in portfolio hedge of interest rate risk	20574		20574
Investments in joint ventures and associated companies	794 483	794 483
Tangible assets	45 309	45 309
Intangible assets	42 3 15	42 3 15
Tax assets	453 183	435 415	17768
Other assets	487 615	557063	(69448)
Non-current assets and disposal groups classified as held for sale	7 2 6 4	7264
Consolidated Total Assets	29 640 209	29 640 209
LIABILITIES
Financial liabilities held for trading	170 048	170 048
Financial liabilities at amortised cost	25 961 415	25781894	179521
Derivatives - Hedge accounting	69880	69880
Fair value changes of the hedged items in portfolio hedge of interest rate risk	218		218
Provisions	64 238	64 238
Tax liabilities	70622	70622
Other liabilities	475731	655 470	(179739)
Liabilities included in disposal groups classified as held for sale	4 4 7 1	4 4 7 1
Total Consolidated Liabilities	26 816 623	26 816 623
Total Consolidated Shareholders' Equity	2823586	2823586
Total Equity and Total Liabilities	29 640 209	29 640 209
Chaques and orders payable (92.055 t ourse) were reclassified from Deposits at other credit institutions to Loans and

Cheques and orders payable (92 055 t.euros) were reclassified from Deposits at other credit institutions to Loans and advances - Central Banks and Credit Institutions.

Value adjustments in hedged assets (20 574 t.euros) included in Customer Loans were reclassified to the caption Fair value changes of the hedged items in portfolio hedge of interest rate risk.

• Recoverable VAT (17 768 t.euros) was reclassified from Other assets to Tax assets.
• The caption Debtors (51 680 t.euros) was reclassified from Other assets to Loans and advances Customers.
• Value adjustments in hedged assets (218 t.euros) included in Resources of Customers and other debts were reclassified to the caption Fair value changes of the hedged items in portfolio hedge of interest rate risk.
• The caption Creditors and other resources (179 739 t.euros) was reclassified from Other liabilities to Financial liabilities measured at amortised cost.

B - MAIN ACCOUNTING POLICIES

Except as indicated below, Banco BPI's condensed interim consolidated financial statements as of 30 June 2018 were prepared using the same principles, accounting policies and criteria used for the 2017 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.

Changes in accounting policies

On 1 January 2018, Banco BPI adopted IFRS 9 - Financial Instruments. As a result of this, the accounting policies were changed in the areas indicated in this note, applicable from 1 January 2018. For all the areas not stated in these condensed interim consolidated financial statements, the definitions, criteria and policies described in Note 2 of the 2017 consolidated annual report continued to be applied.

2.1. Financial instruments (IAS 32, IFRS 7, IFRS 9 e IFRS 13)

Classification of financial assets

Financial assets are included for measurement purposes in one of the following portfolios:

• a) Financial assets at amortised cost
• b) Financial assets at fair value through other comprehensive income
• c) Financial assets compulsorily measured at fair value through profit or loss
• i. Financial assets held for trading
• ii. Financial assets not designated for trading compulsorily measured at fair value through profit or loss:
• d) Financial assets designated at fair value through profit or loss
• e) Derivatives Hedge accounting

The above classification of assets in the aforementioned categories is carried out based on the two following elements:

• BPI's business model for managing financial assets, and
• the characteristics of the contractual cash flows of some financial assets.

In order to measure a financial asset, BPI classifies it:

• In the portfolio "Financial assets at amortised cost", when the two following conditions are met
• a) it is managed using a business model that aims to hold financial assets in order to receive contractual cash flows, and
• b) the contractual conditions result in cash flows on specific dates, which are solely principal and interest payments on the amount of principal outstanding.
• In the portfolio "Financial assets at fair value through other comprehensive income", when the following two conditions are met:
• a) it is managed using a 'hold to collect and sell' business model, and
• b) the contractual conditions result in cash flows on specific dates, which are solely principal and interest payments on the amount of principal outstanding.

• In the portfolio of financial assets measured at fair value through profit or loss: whenever, due to the Bank's business model for management these assets or due to the characteristics of their contractual cash flows, it is not appropriate to classify the assets in any of the aforementioned portfolios. At the transition date, to classify financial assets in this portfolio, the Bank also considered whether it expects to recover the book value of the asset through sale to a third party.

• Within the portfolio of "Financial assets compulsorily measured at fair value through profit or loss", all the instruments that fulfil one or more of the following characteristics are included:

• a) those originating from or acquired with the aim of realising them in the short term;
• b) those that are part of a group of financial instruments identified and managed together, for which there is evidence of a recent pattern of short-term profit-taking;
• c) derivative instruments that do not meet the definition of a financial guarantee contract and have not been designated as hedging instruments.

Investments in equity instruments are an exception to the aforementioned general valuation criteria. In general, at initial recognition the Bank irrevocably exercises the option of including - in the portfolio of financial assets at fair value through other comprehensive income - investments in equity instruments that are not classified as held for trading and that, in the event this option were not exercised, would be classified as financial assets compulsorily measured at fair value through profit or loss.

As for the assessment of the business model, this does not depend on the intentions for an individual instrument, but rather for a set of instruments, taking into account the frequency, amount and schedule of sales in previous years, the reasons for these sales and the expectations for futures sales. Infrequent or insignificant sales, sales near the maturity date of the asset and sales driven by increased credit risk of the financial assets or to manage the concentration risk, among others, can be compatible with the model of holding assets to receive contractual cash flows.

If a financial asset is subject to a contractual clause under which the schedule or amount of its contractual cash flows can be modified (e.g. if the asset can be redeemed in advance or its maturity can be extended), the Bank determines whether the contractual cash flows the instrument generates over its life, as a result of the exercise of the aforementioned contractual clause, are solely principal and interest payments on the outstanding principal.

The contractual conditions of financial assets that, at the time of initial recognition, have a minimum effect on the cash flows or depend on exceptional and highly unlikely events taking place (such as liquidation by the issuer) do not prevent the asset from being classified in the amortised cost portfolio or fair value portfolio through other comprehensive income.

Classification of financial liabilities

No difference is shown between the classification of financial liabilities under IFRS 9 and the accounting policies established under IAS 39 (Note 2 from 2017 consolidated financial statements).

Initial recognition and measurement

Upon initial recognition, all financial instruments are recognised at fair value. For the financial instruments that are not registered at fair value through profit or loss, the fair value amount is adjusted, adding or deducting transaction costs directly attributable to the acquisition or issuance thereof. In the case of financial instruments at fair value through profit or loss, the directly attributable transaction costs are immediately recognised in the statement of profit or loss.

The transaction costs are defined as expenses directly attributable to the acquisition or sale of a financial asset, or to the issuance or assumption of a financial liability, which would not have been incurred if the Bank had not made the transaction. These include, among others, fees paid to intermediaries (such as promoters) and mortgage arrangement expenses.

Subsequent measurement of financial assets

After its initial recognition, the Bank measures a financial asset at amortised cost, at fair value through other comprehensive income, at fair value through profit or loss, or at cost.

Receivables for trading operations that do not have a significant financing component and the commercial loans and short-term debt instruments that are initially measured by the price of the transaction or its outstanding principal, respectively, continue to be measured by said amount, deducted of impairment losses, as described in section 2.3.

Income and expenses of financial assets and liabilities

The income and expenses of financial instruments at amortised cost are recognised according to the following criteria:

• a) Accrued interest is recorded in the statement of profit or loss using the effective interest rate of the transaction on the gross carrying amount of the transaction (except in the case of non-performing assets, where it is applied to the net carrying amount).
• b) The remaining changes in value will be recognised as an income or expense when the financial instrument is derecognised from the balance sheet, when it is reclassified, and in the case of financial assets, when there are impairment losses or gains due to their subsequent recovery.

The income and expenses of financial instruments at fair value through profit or loss are recognised according to the following criteria:

• a) Fair value changes are recorded directly in the statement of profit or loss, separating between the part attributed to the income from the instrument, which is recorded as interest or dividends according to its nature, and the remainder, which is recorded as results of financial operations in the corresponding item.
• b) Interest earned on debt instruments is calculated using the effective interest rate method.

The income and expenses of financial instruments at fair value through other comprehensive income are recognised according to the following criteria:

• a) Interest earned or, where applicable, the dividends earned are recognised in the statement of profit or loss. In the case of interest, the procedure applied is the same as for assets at amortised cost.
• b) Foreign exchange differences are recognised in the statement of profit or loss in the case of monetary financial assets, and in other comprehensive income, in the case of non-monetary financial assets.
• c) In the case of debt instruments, impairment losses or gains due to their subsequent recovery are recognised in the statement of profit or loss.
• d) The remaining changes in value are recognised in other comprehensive income.

Thus, when a debt instrument is measured at fair value through other comprehensive income, the amounts recognised as profit or loss for the period are the same as those that would be recognised if measured at amortised cost.

When a debt instrument measured at fair value through other comprehensive income is derecognised from the balance sheet, the profit or loss recognised as other comprehensive income is reclassified as profit or loss for the period. In turn, when an equity instrument measured at fair value through other comprehensive income is derecognised from the balance sheet, the profit or loss recognised as other comprehensive income is not reclassified to the profit or loss statement but instead remains in the corresponding item of accumulated other comprehensive income in equity.

Financial assets designated as hedged assets or liabilities are measured taking into account the hedging relationship, there being no differences relative to the accounting policies set out in IAS 39 (Note 2 from 2017 consolidated financial statements).

Reclassifications between financial instrument portfolios

According to the provisions set out in IFRS 9, only in the event the Bank decided to change its financial assets portfolio management business model, would all the affected financial assets be reclassified. This reclassification would be carried out prospectively from the date of the reclassification. In accordance with the IFRS 9 approach, in general, changes in the business model occur very infrequently. Financial liabilities cannot be reclassified between portfolios.

2.2. Hedge accounting

From 1 January 2018, the Bank has applied the provisions of IFRS 9, except as concerns the portfolio fair value hedge, as per IAS 39, relating to hedge accounting, as it believes that this option best suits its risk management strategy, in so far as there are changes with respect to IAS 39 in a number of areas, such as hedged items, hedging instruments, the accounting of the time value of options and the assessment of effectiveness, which enable the expansion of the transactions to which hedge accounting is applied and facilitate its application.

Other than the attendant greater disclosure requirements and the update to the technical notes that document hedging, no significant quantitative impacts have emerged.

The Bank maintains the hedging relationship documentation, which includes the identification of the hedging instrument and of the hedged item, the nature of the risk to be hedged and the way in which the Bank assesses whether the hedging relationship meets the requirements of hedging effectiveness. In accordance with IFRS 9, to ensure that the effectiveness requirement is met:

• a) There must be an economic relationship between the hedged item and the hedging instrument,
• b) The credit risk of the hedged item's counterparty or of the hedging instrument should not have a dominant effect on changes in value resulting from said economic relationship, and
• c) The coverage ratio of the hedging accounting relationship, understood as the share of the item hedged by the hedging instrument, must be the same as the coverage ratio used for management purposes.

2.3. Impairment of financial assets

The Bank determines impairment losses for debt instruments that are measured at amortised cost and at fair value through other comprehensive income, as well as for other exposures that involve credit risk, such as granted financial guarantees and other granted commitments.

The aim of the IFRS 9 requirements is to ensure recognition of expected credit losses on operations, assessed collectively or individually, considering all the reasonable, reliable and duly substantiated information available at each reporting date, including forward looking information.

Impairment losses on debt instruments in the period are recognised as an expense under the heading Impairment/(reversal) of impairment losses on financial assets not measured at fair value through profit or loss or net profit or loss in the statement of profit and loss. Impairment losses on debt instruments that are measured at amortised cost are recognised against an accumulated impairment caption on the balance sheet, which reduces the book value of the asset, while impairments of assets measured at fair value through other comprehensive income are recognised against other comprehensive income, in the corresponding equity caption.

Impairment losses in exposures involving credit risk other than debt instruments are recorded as a provision under the heading "Provisions – Commitments and guarantees given" in the liabilities of the balance sheet. Additions to and reversals are recognised under the heading "Provisions or reversal of provisions for commitments and guarantees given" in the statement of profit and loss.

For the purpose of accounting for impairment losses in debt instruments, the following definitions must be taken into account:

Credit losses: these correspond to the difference between all the contractual cash flows owed to the Bank in accordance with the financial asset's contractual conditions and all the cash flows that the Bank is due to receive (i.e. the entire cash flow shortfall), discounted at the original effective interest rate or, for financial assets that were purchased with or that originated with credit impairment, discounted at the effective interest rate adjusted to reflect credit quality, or the interest rate on the date referred to in the financial statements in the case of a variable rate.

In the case of granted loan commitments, the contractual cash flows that would be owed to the Group in the event the loan commitment were drawn down are compared to the cash flows that it would expect to receive when the asset is recognised. In the case of granted financial guarantees, the Bank considers the payments that it expects to make less the cash flows it expects to receive from the guarantee holder.

The Bank estimates the cash flows taking into account the contractual duration established for the operations. In the case of credit cards and overdrafts on current accounts of individual clients, the Bank considers that the expected life of these operations is 12 months.

The calculation of cash flows also takes into account those deriving from the sale of collateral, taking into account the cash flows that would be obtained from the sale thereof, minus the costs required to obtain them, maintain them and subsequently sell them, or other credit improvements forming an integral part of the contractual conditions, such as financial guarantees received.

• Expected credit losses: these correspond to the weighted average of the credit losses, using as weighting the respective risk of default events. The following distinction will be taken into account:
• i. Expected credit losses during the lifetime of the operation: these are expected credit losses resulting from all the possible default events during the expected lifetime of the operation.
• ii. Expected credit losses at 12 months: these are the part of the credit losses expected during the lifetime of the operation corresponding to the expected credit losses resulting from any default events during the twelve months following the reference date.

The amount of the impairment loss is calculated according to whether there has been a significant increase in credit risk since the operation's initial recognition, and whether or not a default event has occurred:

	Improvement	Credit risk since initial recognition	Deterioration
Credit Risk Category	Stage 1	Stage 2	Stage 3
Provision for loss (Updated at each reporting date)	Expected credit losses at 12 months	Expected credit losses during lifetime
Classification Criteria	No material increase in credit quality since initial recognition	Material increase in credit risk since initial recognition*	Credit classified as in default
		Tolerance matrix1 Mandatory criteria Scoring / Rating2 at reference date Restructurings Indications in Central Credit Register, List of high-risk users > 2 active EWS3 (PARI) > 30 days overdue Combination of tolerance matrix with 1 active EWS Indicators that, in accordance with market indicators / triggers, may determine a significant deterioration in risk
Interest on income calculated based on:		Effective interest rate on gross amount	Effective interest rate on amortised cost
	1) To capture a significant deterioration in the probability of default (PD).		* The criteria indicated are considered in

2) Scoring / Rating above a given classification.

* The criteria indicated are considered in case they apply to the risk segment.

3) Early Warning Signal.

Regardless of its subsequent classification, in the event that an operation is bought or originated with credit impairment, its hedging would be equal to the accumulated amount of the changes in the credit losses after initial recognition and the interest income of these assets would be calculated by applying the effective interest rate adjusted to reflect credit quality, to the amount of impairment of the instrument.

Monitoring and measurement of credit risk

The purpose of the monitoring process is to assess the quality of the risk taken in lending operations to a borrower and to decide on any actions that need to be taken, including the estimation of impairment. The targets of risk monitoring are borrowers that hold debt instruments and off-balance-sheet exposures that bear credit risk, with the results being set as a reference for the future lending policy.

The monitoring of exposures is mainly performed according to the exposure and the risk level of the operations / borrowers, being segregated into different areas in accordance with the analysis methodology, as shown below:

Credit risk parameters

Risk measurement is based on the segmentation of risk and the factors associated with the calculation of the expected loss:

Exposure at default (EAD): provides an estimate of the outstanding debt in the event of default. This measurement is significant for financial instruments with a repayment structure that varies according to customer drawdowns (credit accounts, credit cards and, in general, any revolving credit product).

The estimate is based on the observation of historical data for defaulting borrowers, comparing the drawdown levels at the time of default and during the 12 preceding months. This permits to estimate future drawdown levels according to product type, current drawdown levels and credit ceilings.

Probability of default (PD): the Bank uses management tools covering virtually all its loan portfolios and main risk segments to help predict the probability of default (PD) associated with each borrower. These tools are an integral part of the credit granting and monitoring process, having been developed and calibrated in accordance with the Bank's past experience of defaults.

• Product-oriented tools are used mainly within the scope of authorisation of new loans to individuals and take account the debtor's characteristics, information on the relationship with the customer, internal and external warnings, and the specific characteristics of the transaction - Admission Scoring.
• The monitoring tools for lending operations to individual customers are also product-oriented, taking into account relationship variables relating to the Bank and the financial system - Behavioural Scoring.

Rating tools for companies, entrepreneurs and small businesses vary considerably depending on the risk segment. The assessment process for medium-sized Companies is based on a hybrid model that combines two components: (i) a quantitative algorithm that mainly draws information from the financial statements, and (ii) an expert analysis component that takes into account other quantitative and qualitative aspects, namely management quality, market position, and others.

For large companies, the Group uses models that seek to replicate the ratings assigned by rating agencies and require the expert criteria of rating analysts. In view of the lack of sufficient statistical frequency of internal default delinquency in this segment, the models were built in line with Moody's methodology.

Individual clients' operations are scored on a monthly basis in order to keep the credit rating up-to-date. Large companies' ratings are updated at least annually, and whenever significant events occur that can alter the borrower's credit quality. In this segment, qualitative information and information about the financial statements is updated on a regular basis so as to achieve the maximum level of coverage of the internal rating.

Loss given default (LGD): is the percentage of debt that cannot be recovered in the event of default by the client. LGD is calculated based on internal historical information, taking into account the cash flows associated with contracts from the moment of default until the default has been corrected or until there cease to exist any relevant expectations of recovery. This calculation also includes estimates of loan recovery costs.

Methodologies for estimating expected credit losses

The Group estimates the expected credit losses of an operation so that these losses reflect:

• An amount weighted for the unbiased probabilities of occurrence of a series of possible future results;
• the time value of money; and
• Reasonable and substantial information that is available at the reference date, at no disproportionate cost or effort, on past events, current conditions and forecasts of future economic conditions.

Collective credit impairment is calculated using probability of default (PD) estimation models, loss given default (LGD) estimation models, models to estimate drawdowns on credit ceilings, and adjustments to factor in lifetime and forward-looking effects.

Impairment calculation models are generally based on the Bank's internal historical experience of defaults and recoveries. The models are updated periodically to reflect the clients' economic situation and the economic context at any given time. This makes it possible to reduce the differences between estimated losses and recently observed losses. To determine the expected loss, forwardlooking economic projections are also incorporated into the models, based on key factors such as: (i) GDP growth, (ii) unemployment rate, (iii) 12-month Euribor (iv) evolution of the real estate market. Following on from this, the Group generates a basic forwardlooking scenario focused on the economic variables, as well as a range of potential scenarios that make it possible to adjust, based on the probability and incidence in each sector, the estimated expected loss.

The necessary improvements detected in the backtesting and benchmarking exercises are also inserted in the review processes. Similarly, the models developed are documented so they can be replicated by a third party. The documentation contains key definitions, information regarding the data processing procedures, methodological principles and results obtained, as well as the comparison of said results with those of previous years.

Customised monitoring ratings

The customised monitoring procedures are applied in portfolios with material risk exposures and/or have specific characteristics. These procedures consist of drafting regular reports on the borrowers' economic groups with the aim of assessing the existence of objective evidence of impairment and/or a significant increase in credit risk (SICR) since the initial recognition of the borrower.

The triggers subject to monitoring for the detection of a SICR and/or default are grouped into the following categories:

• Financial difficulties of the issuer or debtor (rating deterioration, defaults registered in the Bank of Portugal's Central Credit Register, lawsuits brought by third parties, etc.)
• Breach of contract clauses, non-payments or delays in the payment of interest or principal on loans contracted with the Bank;
• In the event of financial difficulties, the borrower is given concessions or advantages that would otherwise not be considered;
• Probability of restructuring of the debtor's exposures.

Additionally, the reports consider sector/segment-specific information, in the case of project finance, public administrations and market operations.

3. RISK MANAGEMENT

European banking is at a new stage featuring reduced non-performing loans and improved returns. However, despite this brighter context, the current level of interest rates and increased pressures to reduce problematic assets continue to be a challenge to the sector.

The Global Risks Report 2018 of the World Economic Forum, published in January, highlights the fact that although we have learnt to understand and mitigate the risks that can be isolated and managed, we are less competent when it comes to dealing with complex risks in interconnected systems that we currently face: environmental risks, and cybersecurity and geopolitical risks.

In line with the previous report, the report released in April by the Joint Committee of the European Supervisory Authorities, "Risks and vulnerabilities in the EU financial system", highlights the cyber risks that threaten data integrity, business continuity and virtual currencies, as well as other aspects. Similarly, climate change and the transition to a lower-carbon economy have received greater attention from supervisory/regulatory bodies. Along these lines, BPI is working on assessing and implementing the latest developments in bank regulation and supervision.

European framework for the management of Non-Performing Loans (NPLs) Despite the fact that the average NPL ratio remains on a clear downward trend, the high volume of NPLs on the European market represents one of the key concerns of regulators and supervisors. For this reason, with the aim of reducing and avoiding future concentrations of NPLs, European authorities and companies established an "Action plan to address NPLs in Europe" at the July 2017 ECOFIN.

In March 2018 the Commission presented a package of measures to tackle high levels of NPLs, which included: (i) measures to encourage the development of secondary markets and more effective debt recovery (proposed directive on credit servicers, loan purchasers and an accelerated mechanism to enforce secured loans); (ii) a proposed amendment of the Capital Requirements Regulation (CRR), aligned with the provisions of the Addendum to the ECB Guide on NPLs to ensure sufficient loss coverage; and, lastly, (iii) a technical blueprint for how to set up national Asset Management Companies (AMCs).

Additionally, the EBA has recently closed its consultation on the update to the guidelines on the management of impaired exposure, which aims to establish (i) solid management practices; (ii) clarity in recognition definition and processes; as well as, (iii) the threshold that determines the banks deemed to have high exposure and requirements for the supervisory assessment. In the short term, it will also close its consultation on the disclosure of NPL and forborne exposure, and before the end of the year, it is expected to launch a consultation on detailed guidelines on the origin, supervision and internal governance on banking loans.

2018 stress test exercise

In January 2018 The EBA launched the 2018 stress test on all portfolios. Banco BPI will participate indirectly in the exercise as a subsidiary of the CaixaBank Group. The published methodology is similar to that of 2016 and, as a new feature, the exercise already includes the application of IFRS 9.

As in previous years, it is an exercise with a bottom-up approach with constraints and with a time horizon of 3 years, under 2 stages (one central scenario and another adverse scenario). The result, just as during 2016, constitutes a critical component in the supervisory review and evaluation process (SREP). The results are scheduled to be published in November 2018.

Action plan on sustainable finance

On 28 May the European Parliament backed the initiatives proposed in the European Commission's Action Plan, which aim to: (i) reorient capital flows, boosting investment in sustainable and inclusive projects; (ii) improve the management of financial risk from climate change, and environmental and societal issues; and (iii) foster transparency and long-term thinking in finance and economic activities.

Complying with the planning set out, various legislative proposals have recently been launched that include a taxonomy proposal, which aims to provide a unified classification for properly identifying environmentally sustainable companies; a disclosure proposal, enabling companies to reflect the integration of these kinds of risks in investment decision making and advisory services; and establishing benchmarks to allow portfolios to be evaluated in terms of climatic objectives. Furthermore, in order to adapt investment products to consumer sustainability needs, it sets out specific reviews on the MiFID II Directive and the Insurance Distribution Directive.

Various regulatory initiatives have filled the EU's financial sector, featuring the consultation on the update to the first chapter of the ECB guide to internal models, the EBA consultation on exposures associated with high risk, or those associated with an especially high risk, as well as the double consultation on RTS for determining periods of recession and estimating LGD in such scenarios.

3.1. Credit risk

Credit risk is one of the most significant risks faced in 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 2017 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.

30-06-2018
	Ba la nc e ne t	Of whic h:	Of whic h:	Colla te ra lise	d loa ns. Ca rrying a	mount ba se (LTV)	d on la te st a va ila	ble a ppra isa l
	of impa irme nts	Re a l e sta te c olla te ra l	Othe r c olla te ra l	≤ 4 0 %	> 4 0 % ≤ 6 0 %	> 6 0 % ≤ 8 0 %	> 8 0 % ≤ 10 0 %	> 10 0 %
Central Banks and credit institutions	3 289 843	0	0	0	0	0	0	0
Public sector	1 241 946	4 048	325 413	69 744	96 996	47 121	69 636	45 964
Central government	399 427	0	17 846	0	0	61	0	17 785
Other public administrations	842 519	4 048	307 567	69 744	96 996	47 060	69 636	28 179
Other financial corporations and individual entrepreneurs (financial business)	17 600	7 679	369	5 734	1 043	303	19	948
Non- financial corporations and individual entrepreneurs (non- financial business)	7 196 459	1 082 446	1 267 166	435 144	333 787	318 608	305 787	956 286
Real estate construction and development	266 469	68 092	29 715	31 814	15 443	23 476	8 233	18 841
Civil engineering	103 664	5 993	34 142	3 319	3 010	924	1 015	31 868
Other	6 826 326	1 008 361	1 203 309	400 011	315 334	294 208	296 540	905 577
Large companies	3 334 978	317 605	847 416	187 367	107 649	80 812	114 412	674 781
Small and medium- sized companies	3 491 347	690 756	355 894	212 644	207 685	213 396	182 128	230 796
Individuals	12 391 508	10 981 621	319 425	2 131 868	2 808 844	4 390 402	1 800 300	169 633
Home loans	11 037 560	10 925 947	70 042	2 100 748	2 777 524	4 316 806	1 682 747	118 163
Consumer spending	882 343	102	185 084	6 019	14 268	42 092	86 475	36 332
Other	471 605	55 572	64 299	25 100	17 052	31 504	31 078	15 138
Tota l	2 4 13 7 3 5 6	12 0 7 5 7 9 4	1 9 12 3 7 3	2 6 4 2 4 9 0	3 2 4 0 6 7 0	4 7 5 6 4 3 4	2 17 5 7 4 2	1 17 2 8 3 1

Note: Includes deposits at central banks and credit institutions and loans and advances to Customers (does not include debt securities placed with Customers and other customer placements).

	31-12-2017

31-12-2017
	Ba la nc e ne t	Of whic h:	Of whic h:	Colla te ra lise	d loa ns. Ca rrying a	mount ba se (LTV)	d on la te st a va ila	ble a ppra isa l
	of impa irme nts	Re a l e sta te c olla te ra l	Othe r c olla te ra l	≤ 4 0 %	> 4 0 % ≤ 6 0 %	> 6 0 % ≤ 8 0 %	> 8 0 % ≤ 10 0 %	> 10 0 %
Central Banks and credit institutions	1 605 494	0	0	0	0	0	0	0
Public sector	1 106 235	11 089	273 870	54 337	89 341	87 533	44 101	9 647
Central government	326 059	0	61	0	0	61	0	0
Other public administrations	780 176	11 089	273 809	54 337	89 341	87 472	44 101	9 647
Other financial corporations and individual entrepreneurs (financial business)	124 780	7 066	379	6 013	38	363	1	1 029
Non- financial corporations and individual entrepreneurs (non- financial business)	6 892 276	1 017 199	1 129 633	387 846	317 314	272 277	221 912	947 483
Real estate construction and development	238 584	72 534	25 575	34 014	14 450	22 752	7 567	19 326
Civil engineering	115 435	7 537	34 441	2 556	2 091	3 027	1 294	33 010
Other	6 538 257	937 128	1 069 617	351 276	300 773	246 498	213 051	895 146
Large companies	3 207 649	301 678	708 608	163 991	121 950	57 916	34 777	631 653
Small and medium- sized companies	3 330 608	635 450	361 009	187 285	178 823	188 582	178 275	263 493
Individuals	12 200 998	10 866 862	323 053	1 966 576	2 584 762	4 091 636	2 317 874	229 067
Home loans	10 923 556	10 811 119	70 376	1 935 608	2 553 375	4 016 719	2 205 334	170 459
Consumer spending	785 792	81	177 272	5 779	13 923	39 294	83 733	34 624
Other	491 651	55 663	75 406	25 189	17 464	35 623	28 807	23 985
Tota l	2 1 9 2 9 7 8 4	11 9 0 2 2 16	1 7 2 6 9 3 5	2 4 14 7 7 1	2 9 9 1 4 5 6	4 4 5 1 8 0 9	2 5 8 3 8 8 9	1 18 7 2 2 6

Note: Includes deposits at central banks and credit institutions and loans and advances to Customers (does not include debt securities placed with Customers and other customer placements).

The breakdown of loans to real estate construction and development companies is as follows:

30-06-2018
Loans and advances at amortised cost	Gross amount	Impairment	Net of impairments	Excess over the maximum recoverable value of collateral
Real estate construction and development	319 484	( 53 015)	266 469	170 948
of which: Stage 3	69 187	( 50 178)	19 009	2 698
31-12-2017
Loans and advances at amortised cost	Gross amount	Impairment	Net of impairments	Excess over the maximum recoverable value of collateral
Real estate construction and development	296 678	( 58 094)	238 584	143 498
of which: Stage 3	103 572	( 56 765)	46 807	4 320

The breakdown of guarantees received for loans to real estate construction and development companies, showing loans classified as non-performing, is given below: 30- 06- 2018 31- 12- 2017

	Mortgage guarantees	Other collateral	Mortgage guarantees	Other collateral
Real estate construction and development	269 270	36 810	320 804	41 042
of which: Non- performing	84 636	20	201 351	20

The breakdown of guarantees given related to real estate construction and development companies, in nominal value, is as follows:

The breakdown of guarantees given related to real estate construction and development companies, in nominal value, is as follows:	30- 06-	2018	31- 12-	2017
	Gross amount	Impairment losses and provisions	Gross amount	Impairment losses and provisions
Guarantees provided
Real estate construction and development	129 464	5 908	124 268	3 794

		30- 06- 2018			31- 12- 2017
	Gross Book Value	Impairment	Net Book Value	Gross Book Value	Impairment	Net Book Value
Residential	28 652	1 038	27 614	35 215	1 163	34 052
Other	39 355	13 816	25 539	45 095	14 611	30 485
Total	68 007	14 853	53 154	80 310	15 773	64 537

Restructured loans

30-06-2018

Restructured loans
The breakdown of restructured loans by industry sector is as follows:
30-06-2018
				Tota l
	Unse c ure d Se c ure d
	Numbe r of Numbe r of Exposure Exposure		Ma ximum a c tha t c a	mount of the olla te ra l n be c onside re d	Impa irme nt
	tra nsa c tions		tra nsa c tions		Re a l e sta te c olla te ra l	Othe r c olla te ra l
Public sector	27	28 941	2	2 569	0	2 569	0
Other financial corporations and individual entrepreneurs (financial business)	9	191	1	22	22	0	( 112)
Non- financial corporations and individual entrepreneurs (non- financial business)	2 962	402 958	293	268 472	91 242	63 182	( 206 729)
Individuals	8 039	122 050	5 049	166 651	163 674	614	( 87 530)
Tota l	11 0 3 7	5 5 4 14 0	5 3 4 5	4 3 7 7 14	2 5 4 9 3 8	6 6 3 6 5	( 2 9 4 3 7 1)
Note: Includes securitised loans, customer loans and guarantees
				Of whic h: Sta	ge 3
	Unse c	ure d			Se c ure d
					Ma ximum a	mount of the

Individuals	8 039	122 050	5 049	166 651	163 674	614	( 87 530)
Note: Includes securitised loans, customer loans and guarantees
	Unse c	ure d Se c ure d
	Numbe r of	Exposure	Numbe r of	Exposure	Ma ximum a mount of the c olla te ra l tha t c a n be c onside re d		Impa irme nt
	tra nsa c tions		tra nsa c tions	Re		Othe r c olla te ra l
Other financial corporations and individual entrepreneurs (financial business)	7	162	1	22	22	0	( 112)
Non- financial corporations and individual entrepreneurs (non- financial business)	2 379	189 055	214	159 658	72 283	47 829	( 198 027)
Individuals	5 186	93 627	4 121	133 599	131 319	186	( 84 489)
Tota l	7 5 7 2	2 8 2 8 4 4	4 3 3 6	2 9 3 2 7 9	2 0 3 6 2 3	4 8 0 15	( 2 8 2 6 2 8 )
Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

31-12-2017

31-12-2017
				Tota l
	Unse c	ure d Se c ure d
					Ma ximum a c	mount of the olla te ra l
	Numbe r of tra nsa c tions	Exposure	Numbe r of	Exposure	tha t c a	n be c onside re d	Impa irme nt
			tra nsa c tions		Re a l e sta te c olla te ra l	Othe r c olla te ra l
Public sector	28	23 458	4	10 072	0	10 072	( 1)
Other financial corporations and individual entrepreneurs (financial business)	17	287	1	25	25	0	( 139)
Non- financial corporations and individual entrepreneurs (non- financial business)	4 323	382 402	394	510 627	152 013	93 849	( 228 651)
Individuals	6 843	62 262	6 869	236 218	229 189	874	( 91 445)
Tota l	11 2 11	4 6 8 4 10	7 2 6 8	7 5 6 9 4 2	3 8 1 2 2 7	10 4 7 9 5	( 3 2 0 2 3 5 )
Note: Includes securitised loans, customer loans and guarantees				Of whic h: Sta	ge 3
	Unse c	ure d			Se c ure d
					Ma ximum a	mount of the

Individuals	6 843	62 262	6 869	236 218	229 189	874	( 91 445)
Note: Includes securitised loans, customer loans and guarantees
	Unse c	ure d Se c ure d
	Numbe r of	Exposure	Numbe r of	Exposure	Ma ximum a c olla tha t c a n be	Impa irme nt
	tra nsa c tions		tra nsa c tions		Re a l e sta te c olla te ra l	Othe r c olla te ra l
Public sector	1	32	0	0	0	0	( 1)
Other financial corporations and individual entrepreneurs (financial business)	13	210	1	25	25	0	( 138)
Non- financial corporations and individual entrepreneurs (non- financial business)	3 733	196 452	282	165 032	75 124	7 964	( 210 428)
Individuals	4 365	39 607	6 321	213 237	206 897	363	( 89 482)
Tota l	8 112	2 3 6 3 0 2	6 6 0 4	3 7 8 2 9 4	2 8 2 0 4 6	8 3 2 7	( 3 0 0 0 5 0 )
Note: Includes securitised loans, customer loans, guarantees, and stage 3 loans

The detail of guarantees received for restructured loans¹ at 30 June 2018 and 31 December 2017, according to the customer's risk of default classification, is as follows:

default classification, is as follows:
	30- 06- 2018	31- 12- 2017
Value of collateral	641 701	877 255
Of which: Stage 3 guarantee	472 179	569 330
Value of other guarantees	281 943	154 604
Of which: Stage 3 guarantee	261 407	8 436
Total	923 644	1 031 859

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

The movement in restructured loans in the first half of 2018 and 2017 is as follows:
30- 06- 2018	30- 06- 2017
987 183	1 157 656
132 294	193 104
( 153 752)	( 134 674)
( 669)	( 955)
( 267 574)	( 74 070)
697 482	1 141 061

Concentration Risk

Concentration by geographic location

The breakdown of risk of financial assets and guarantees and sureties provided, by geographical location, is as follows:
30-06-2018
	Tota l	Portuga l	Othe r EU c ountrie s	Othe r world c ountrie s
Central banks and credit institutions	3 989 283	2 355 664	968 383	665 236
Public sector	5 495 351	3 517 292	1 715 808	262 252
Central government	4 408 845	2 430 786	1 715 808	262 252
Other public administrations	1 086 506	1 086 506	0	0
Other financial corporations and individual entrepreneurs (financial
business)	564 315	380 808	120 617	62 890
Non- financial corporations and individual entrepreneurs
(non- financial business)	9 848 165	9 272 340	539 579	36 246
Real estate construction and development	399 747	393 619	5 174	955
Civil engineering	269 678	259 568	10 104	6
Other	9 178 739	8 619 153	524 301	35 285
Large corporations	5 422 033	4 922 282	475 331	24 420
Small and medium- sized companies	3 756 707	3 696 871	48 971	10 865
Individuals	12 413 320	12 319 436	40 645	53 238
Home loans	11 037 561	11 002 775	22 725	12 061
Consumer spending	882 343	842 797	12 608	26 937
Other	493 416	473 865	5 312	14 239
Tota l	3 2 3 10 4 3 4	2 7 8 4 5 5 4 0	3 3 8 5 0 3 1	1 0 7 9 8 6 2

Note: Includes deposits at central banks and credit institutions, financial assets not designated for trading compulsorily accounted for at fair value through profit or loss, financial assets at fair value through other comprehensive income, financial assets at amortised cost and investments in joint ventures and associates.
31-12-2017
	Tota l	Portuga l	Othe r EU c ountrie s	Othe r world c ountrie s
Central Banks and credit institutions	2 419 851	1 081 526	459 971	878 355
Public sector	4 910 728	4 527 059	197 633	186 036
Central government	3 999 526	3 615 857	197 633	186 036
Other public administrations	911 202	911 202	0	0
Other financial corporations and individual entrepreneurs (financial business)	634 543	388 576	167 700	78 267
Non- financial corporations and individual entrepreneurs (non- financial business)	9 392 570	8 775 282	582 520	34 768
Real estate construction and development	363 691	356 699	6 948	44
Civil engineering	257 327	246 071	11 221	35
Other	8 771 552	8 172 512	564 351	34 689
Large corporations	5 189 582	4 636 276	529 046	24 260
Small and medium- sized companies	3 581 970	3 536 236	35 305	10 429
Individuals	12 249 965	12 152 227	41 767	55 970
Home loans	10 923 557	10 884 731	24 875	13 949
Consumer spending	785 792	751 204	12 098	22 489
Other	540 617	516 292	4 794	19 532
Tota l	2 9 6 0 7 6 5 8	2 6 9 2 4 6 7 0	1 4 4 9 5 9 1	1 2 3 3 3 9 6

Note: Includes deposits at central banks and credit institutions, financial assets at fair value through profit or loss, available-for-sale financial assets, financial assets at amortised cost and investments in joint ventures and associates.

3.2. Market risk

The trading activity of Banco BPI is small, as evidenced by the Value at Risk (VaR) figures. The total average VaR in BPI's trading portfolio in the first half of 2018 was 315 t.euros, with a peak of 571 t.euros (with a 99% confidence level and a time horizon of two weeks).

Average VaR by risk factor
(99% confidence level and time horizon of two weeks)
	Global	Interest Rate	Exchange rate	Share price	Comm. price
VaR by risk factor	526	240	109	459	0
1st half 2018	315	5 7	4 4	306	0

VaR measures the maximum potential loss of the portfolio for a given time horizon and with a given level of confidence using a statistical model based on a year of information on daily price changes. The daily price change is considered to follow a normal distribution and the risk diversification effect is measured by the correlation between price changes.

3.3. Structural interest rate risk

	1 ye a r	2 ye a rs	3 ye a rs	4 ye a rs	5 ye a rs	> 5 ye a rs	TOTAL
ASSETS
Interbank and Central Banks	3 028 118	0	0	0	0	0	3 028 118
Customer Loans	19 259 114	640 355	323 911	248 323	135 621	590 447	21 197 771
Bonds portfolio	2 589 284	0	1 000 000	1 008 000	17 500	154 750	4 769 534
Tota l a sse ts	2 4 8 7 6 5 16	6 4 0 3 5 5	1 3 2 3 9 11	1 2 5 6 3 2 3	15 3 12 1	7 4 5 19 7	2 8 9 9 5 4 2 3
LIABILITIES
Interbank and Central Banks	4 373 918	410 000	953 830	0	0	0	5 737 748
Customer deposits	14 522 988	1 289 593	1 503 500	1 070 648	1 070 186	2 139 538	21 596 453
Own issues	578 602	8 132	2 712	0	0	0	589 446
Tota l Lia bilitie s	19 4 7 5 5 0 8	1 7 0 7 7 2 5	2 4 6 0 0 4 2	1 0 7 0 6 4 8	1 0 7 0 18 6	2 13 9 5 3 8	2 7 9 2 3 6 4 7
Asse ts le ss Lia bilitie s	5 4 0 1 0 0 8	( 1 0 6 7 3 7 0 )	( 1 13 6 13 1)	18 5 6 7 5	( 9 17 0 6 5 )	( 1 3 9 4 3 4 2 )	1 0 7 1 7 7 6
He dge s	( 1 2 19 5 2 5 )	1 3 8 2 0 7 1	4 9 5 2 5 3	( 2 18 0 0 7 )	( 15 2 4 2 5 )	( 2 8 1 4 0 4 )	5 9 6 2
Tota l diffe re nc e	4 18 1 4 8 3	3 14 7 0 1	( 6 4 0 8 7 8 )	( 3 2 3 3 2 )	( 1 0 6 9 4 9 0 )	( 1 6 7 5 7 4 6 )	1 0 7 7 7 3 8

The sensitivities of net interest income and equity are measurements that complement each other and provide an overview of the banking book interest rate risk, the first more focused on the short/medium term and the latter on medium/long-term. In accordance with the methodology used by BPI to calculate sensitivity, the breakdown is displayed below:

amounts in € million	+100 bps	100 bps 3 -
Net interest income 1	( 9)	3
Asset value:(banking book)2	( 69)	379

1 Net interest income sensitivity at 1 year to a 100 basis points instantaneous and parallel impact on interest rates (increase and decrease)

2 Sensitivity of the banking book economic value to the chocks described in ¹

3 A zero floor is considered, except for interest rates below 0%

3.4. Liquidity risk

Banco BPI continuously tracks the evolution of its liquidity, monitoring the inflows and outflows of funds in real time in accordance with their various origins and recipients, in order to ensure that it is at all times in a position to comply with its contractual and prudential obligations. Projections of liquidity are carried out periodically to allow planning the short- and medium-term funding strategy.

Liquidity risk is managed in its various aspects: i) the ability to monitor 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.

At the end of June 2018 BPI held a set of highly liquid assets (total net assets) totalling 8 953 million (8 890 in December 2017). This portfolio of assets consists of high-quality liquid assets (HQLAs), which are used to calculate the Liquidity Coverage Ratio (LCR), and amounted to 4 142 million (4 227 million in December 2017), and assets eligible as collateral for additional funding from the ECB, in the amount of 4 811 million (4 664 million in December 2017).

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

Total liquid assets ¹

Total liquid assets 1
	30- 06-	2018	31- 12-	2017
	Market value	Eligible value	Market value	Eligible value
Level 1 Assets	4 141 018	4 141 018	4 225 870	4 225 870
Level 2A Assets	-	-	-	-
Level 2B Assets	1 535	767	1 354	677
Total HQLA	4 142 553	4 141 786	4 227 224	4 226 547
Other liquid assets non- HQLA		4 810 785		4 663 833
Total liquid assets (HQLA + other non- HQLA)		8 952 570		8 890 380
1 In accordance with the liquidity coverage ratio (LCR) calculation criteria

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

On 30 June 2018 and 31 December 2017, the LCR ratio was 197% and 153%, respectively. The average LCR in the last 12 months was 173% ¹ .

Total funding from the ECB was 2 001 million on 30 June 2018 and 31 December 2017. This amount comprised 637 million obtained under the Targeted Longer–term Refinancing Operations 1 (TLTRO 1), - a 4-year fixed-rate operation launched by the ECB at the end of 2014 to promote lending to the economy, maturing in September 2018 -, and 1 364 million obtained under the TLTRO 2, a second loan incentive programme launched in June 2016 and maturing in four years

At 30 June 2018 Banco BPI had 5 million in overnight placements and 1 693 million in sight deposits with the ECB (5 million in overnight placements and 500 million in sight deposits at 31 December 2017), in addition to the deposits made to comply with the Eurosystem's minimum cash reserve requirements.

At the end of June 2018, the Bank's portfolio of assets eligible for Eurosystem funding totalled 12 081 million (net of price appreciation and haircuts), having increased by 822 million compared to December 2017 (11 260 million). Taking into account the drawdowns from the portfolio at the end of June 2018 - for repos, collateralisation of various obligations and ECB funding -, BPI had the capacity to raise additional funding from the ECB in the amount of 7 184 million (7 963 million on 31 December 2017).

BPI has a Euro Medium Term Notes (EMTN) Programme and a Mortgage Covered Bonds Programme, both with a maximum issuance amount of 7 000 million, and a Public Sector Covered Bonds Programme with a maximum issuance amount of 2 000 million. The Base Prospectuses of the EMTN, Mortgage Covered Bonds and Public Sector Covered Bonds programmes were updated and approved by the respective Market Supervision Authorities on 20 March 2018, 22 February 2018 and 12 October 2018, respectively.

At 30 June 2018 the nominal amount issued under the EMTN, Mortgage Covered Bonds and Public Sector Covered Bonds programmes was 329 million, 6 250 million, and 600 million. The current issues of Mortgage Bonds and Public Sector Bonds in progress were fully retained in portfolio by Banco BPI with the main objective of integrating the pool of assets eligible for funding from the ECB.

The potential for additional issues of Mortgage Bonds and Public Sector Bonds depends on the maximum amount of each Programme and the existence of available mortgage and public sector loans in portfolio. The issues retained in portfolio may be

Average value (12 months to 30 June 2018) of the LCR calculation components: Liquidity reserves (4 102 million); Total net outflows (2 369 million).

partially or totally cancelled by decision of Banco BPI if it decides to make market issues for a higher amount than that currently available.

Debt issuance capacity

	Maximum amount of the	Nominal used
	Programme	at 30- 06- 2018
Euro Medium Term Note (EMTN) Programme 1	7 000 000	328 548
Mortgage Covered Bonds Programme 2	7 000 000	6250000 3
Public Sector Covered Bonds Programme 4	2 000 000	600000 3
1Registered on Luxembourg's " Commission de surveillance du secteur financier"	(" CSSF" ) on 20 M arch 2018.
2Registered on the" Comissão do M ercado de Valores M obiliários" (" CM	VM " ) on 22 February 2018.
3

⁴Registered on the" Comissão do M ercado de Valores M obiliários" (" CM VM " ) on 12 October 2017. 3 The M ortgage and Public Sector Bond issues are retained in portfolio by Banco BPI and included in the pool of assets eligible for funding from the ECB.

Customer deposits are the Bank's main source of funding, with funding through the wholesale debt market being quite immaterial. The portfolio of medium and long-term (MLT) debt placed in the market with institutional investors amounted to 1 385 million on 30 June 2018.

During the 1st half of 2018 BPI made no issues in the debt markets targeting institutional investors. However, Banco BPI consistently monitors its capacity and the conditions for issuing debt in the market.

Own debt repayments in the 1st half of 2018 totalled 242 million.

The medium/long-term debt net refinancing needs in the coming years are small: 920 million in the next five years (of which 315 million in the 2nd half of 2018).

The table below shows the repayments of debt placed in the market (net of securities held in portfolio):

Amounts in Euro million	Up to 1 month	1- 3 months	3- 12 months	1- 5 years	>5 years	Total
MLT senior unsecured debt						0
MLT loans	300 1	15	0	305	465	1 085
Mortgage Bonds						0
Public Sector Bonds						0
Subordinated debt				300		300
Maturity of own debt placed in the market	300	15	0	605	465	1 385

Financial instruments that include accelerated repayment terms

Banco BPI has bilateral loans and covered bonds subscribed by the European Investment Bank (EIB) that include an early redemption clause.

On 30 June 2018 instruments with early redemption clauses amounted to 25.5 million (the same as at 31 December 2017). That amount corresponded to a bilateral loan with the EIB, which included an early repayment clause associated with the Bank's rating, with the EIB having the option of requiring additional guarantees. This clause was triggered by Moody's rating below AR, but the EIB waived the early repayment.

The detail of these issues by contract nature is shown below.

Instruments with early repayment clauses
30- 06-	2018	31- 12- 2017
Bilateral loans with the EIB	25 490	25 490
Collateralised bonds subscribed by the EIB	0	200 000

3.5. Operational risk

Operational risk is part of BPI's Catalogue of Risks, where it is defined as "the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk." This definition excludes strategy and reputational risks.

BPI's operational risk management is conducted in accordance with its Operational Risk Management Policy, which is based on the following principles: Identification, Measurement, Monitoring, Control, Mitigation, Information, documentation, Universality, Knowledge and Best Practices.

The application of these principles is developed through the Operational Risk Management Model, which is based upon the three pillars of the risk management cycle:

• identification and evaluation of the operational risks to which BPI is exposed, by pooling the evaluation of the risk levels of all the activities and tasks carried out;
• maintenance and monitoring of a database of operational risk losses and classification of the occurrences that caused them, by categories of risk and causes that originated them, monitoring all operational events, including an individual assessment of the most significant incidents.
• implementation of adequate mitigation measures to reduce BPI's exposure to risk.

The Operational Risk Management Model adopted aims to ensure the involvement of all the employees and structures of BPI in the management of Operational Risk, in alignment with the regulatory framework that establishes the three lines of defence, and with responsibilities based on each of the basic pillars of management. This model facilitates and promotes the dissemination of the principles and culture of risk management.

In terms of operational risk, the first half of 2018 was marked by the adoption of procedures to meet the management requirements of the standard approach for calculating capital requirements for operational risk, implemented for the first time in the 2017 close of accounts, in order to be aligned to the methodology used by CaixaBank.

Following the guidelines of the European Banking Authority on operational risk management, a database of operational risk exposure indicators (KRIs) was also initiated in order to improve the monitoring of changes in exposure to this type of risk.

3.6 Other risks

There were no significant changes in risk levels and policies during the 1st half of 2018.

4. CAPITAL MANAGEMENT

On 30 June 2018 BPI reported a regulatory Common Equity Tier 1 (CET1) ratio of 12.8%, a Tier 1 ratio of 12.8% and a total ratio of 14.6%. These ratios were calculated taking into account the new dividend policy approved by the General Meeting on 29 June 2018.

The adoption of the transitional provisions scheduled for 2018 led to a -0.9 p.p. impact on CET1 relative to 31 December 2017. Note that 2018 is the last year of application of the transitional provisions and BPI has already calculated its ratios for 2018 on a full implementation basis.

In the first half of 2018, CET1 also reflects the entry into force of IFRS9 (-0.2pp on CET1) and the deduction of the FUR/FGD irrevocable commitments (-0.3pp in CET1).

In addition to the impacts referred to in the previous paragraphs, in the first half of 2018 CET1 evolved 0.4 p.p. through capital generation and 0.6 p.p. through the market's performance.

Risk-weighted assets at 30 June 2018 totalled 16 882 million, having decreased by 80 million (-0.5%) relative to December 2017.

For 2018 the ECB requires BPI to maintain a CET1 ratio of 8.75%, which includes: the regulatory minimum required under Pillar 1, of 4.5%; the requirement of Pillar II (SREP - supervisory review and evaluation process) of 2.25%; a capital conservation buffer of 1.875% (2.5% to be phased in over 4 years through to 2019); and an O-SII (Other Systemically Important Institutions) buffer of 0.125% defined by Banco de Portugal (0.5% to be phased in over 4 years through to 2021). On a fully-loaded basis and maintaining the SREP requirement at 2.25%, the minimum requirement for CET1 is 9.750%.

Likewise, and based on Pillar 1's requirement of 6% for the Tier 1 ratio and 8% for the total capital ratio, the minimum requirements would be 10.25% (phase-in) and 11.25% (fully loaded) for the Tier 1 ratio and 12.25% (phase-in) and 13.25% (fully loaded) for the total capital ratio.

Pillar 2 guidance for BPI was maintained at 1.0%.

In 2018 Banco BPI is not subject to Pillar 2 minimum requirements on an individual basis.

	3 0 - 0 6 - 2 0 18		3 1- 12 - 2 0 17
	Amount	%	Amount	%
CET1 instrume nts	2 9 9 9 15 0		2 8 0 3 10 3
Accounting shareholders' equity	3 125 706		2 823 586
Dividends payable	( 123 662)
AVA adjustments and unrealised gains/(losses)	( 2 894)		( 20 483)
De duc tions to CET1	( 8 3 8 13 6 )		( 5 6 9 0 9 3 )
Intangible assets	( 60 540)		( 46 062)
Pension Funds assets	( 74 716)
Deferred tax assets and financial investments	( 650 105)		( 479 008)
Other deductions	( 52 775)		( 44 022)
CET1	2 16 1 0 14	12 .8 %	2 2 3 4 0 10	13 .2 %
TIER 1	2 16 1 0 14	12 .8 %	2 2 3 4 0 10	13 .2 %
TIER2 instruments	300 000		300 611
Deductions to TIER2	( 3 177)		( 62 148)
TIER2	2 9 6 8 2 3	1.8 %	2 3 8 4 6 3	1.4 %
TOTAL CAPITAL	2 4 5 7 8 3 7	14 .6 %	2 4 7 2 4 7 3	14 .6 %
RWA	16 8 8 2 3 0 2		16 9 6 2 0 6 6
Credit Risk	14 625 257		14 441 763
Shareholder risk	701 581		921 927
Operational Risk	1 281 298		1 281 298
Market Risk	274 165		317 078
Fully Loa de d
CET1		12 .8 %		12 .3 %
T1		12 .8 %		12 .3 %
Total Capital		14 .6 %		14 .0 %

The table below presents a summary at 30 June 2018 of the minimum regulatory capital requirements:
	30- 06- 2018		31- 12- 2017
	Amount	%	Amount	%
BIS III phase- in minimum requirements
CET1 1	1 477 201	8.75%	1 399 370	8.25%
Tier1	1 730 436	10.25%	1 653 801	9.75%
Total Capital	2 068 082	12.25%	1 993 043	11.75%

Includes the minimum requirement of Pillar I of 4.5% (2.5% in 2017 and 2.25% in 2018); the capital conservation reserve buffer of 1.875% (2.5% to be phased in over 4 years through to 2019); and the O-SII (Other Systemically Important Institution) buffer of 0.125% (0.5% to be phased in over 4 years through to 2021).

At 30 June 2018 BPI had a leverage ratio (ratio of Tier 1 to total eligible assets) of 6.7%. During the first half of 2018 the leverage ratio decreased by 0.7 p.p., reflecting the reduction in Tier 1 capital and the increase in total eligible assets.

At 30 June 2018 BPI had a leverage ratio (ratio of Tier 1 to total eligible assets) of 6.7%. During the first half of 2018 the leverage ratio decreased by 0.7 p.p., reflecting the reduction in Tier 1 capital and the increase in total eligible assets.
	30- 06-	2018	31- 12- 2017
	Amount	%	Amount	%
Exposure	32 456 715		30 314 016
Leverage ratio		6.7%		7.4%

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-no.3): "The General Shareholders' Meeting shall decide on the longterm dividend policy proposed by the Board of Directors, which shall justify any deviations from that policy."

For compliance with this statutory rule, the General Meeting held on 29 June 2018 approved BPI's long-term dividend policy, 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 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 Internal Capital Adequacy Assessment Process (ICAAP) and Risk Appetite Framework (RAF) at any time in force.
• a) The absence of exceptional circumstances that justify, in the Board of Directors reasoned opinion, submitting to the Shareholders' resolution the distribution of a dividend below the 30% threshold or above the 50% threshold.

5. EARNINGS PER SHARE

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

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
Nume ra tor (in € thousa nd)
Profit/(loss) after tax and minority interests from continued operations	301 843	101 878
Profit/(loss) after tax from discontinued operations	64 214	(203 603)
Consolida te d profit/(loss)	3 6 6 0 5 7	(10 1 7 2 5 )
De nomina tor (in thousa nd sha re s)
Average number of outstanding shares	1 456 924	1 456 924
Average number of treasury shares	151	1 268
) 1 Adjuste d numbe r of sha re s (ba sic e a rnings pe r sha re	1 4 5 6 7 7 3	1 4 5 5 6 5 7
Ba sic e a rnings pe r sha re (in e uros)
Basic profit/(loss) per share from continuing operations	0.207	0.070
Profit/(loss) per share from discontinued operations	0.044	(0.140)
Consolida te d ba sic e a rnings pe r sha re	0 .2 5 1	(0 .0 7 0 )
uros) 2 Dilute d e a rnings pe r sha re (in e
Diluted profit/(loss) per share from continuing operations	0.207	0.070
Diluted profit/(loss) per share from discontinued operations	0.044	(0.140)
Consolida te d dilute d e a rnings pe r sha re	0 .2 5 1	(0 .0 7 0 )
1

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

iluted earnings per share, the weighted average number of shares was adjusted by adding the portfolio of treasury shares allocated to the attribution of shares and execution of the Share-based variable remuneration programme that was in force until the end of 2016. No other dilution effects on earnings per share are calculated.

6. DISCLOSURE OF REMUNERATION

The remuneration of the members of BPI's Board of directors and Executive Committee in 2017 are detailed in note 4.48 to BPI's consolidated financial statements for 31 December 2017.

Remuneration of the Board of directors

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

the Executive Committee, are shown below:
	30- 06- 2018	30- 06- 2017
Fixed remuneration	772	263
Attendance fees	160	7 0
	932	333
Number of persons	12	11

The increase in costs with the remunerations of the Board of Directors was due to three factors:

• Increase in the number of directors;
• Revision of the amount of the remuneration of the Chairman of the Board of Directors, as decided in the 2017 General Meeting;
• Revision of the amount of the remuneration of the non-executive directors, as decided at the Remuneration Committee's meeting of March 2018, involving the retroactive payment of the difference since July 2017, in April 2018.

Remuneration of the Executive Committee of the Board of Directors

The remuneration and other benefits received by the members of the Executive Committee of the Board of Directors are shown below:

shown below:
	30- 06- 2018	30- 06- 2017
Fixed remuneration	2 260	1 082
Variable remuneration (registry multiple accounts programs)	847	330
	3 107	1 412
Number of persons	8	6

The increase in costs with the remunerations of the Executive Committee of the Board of Directors is explained by the increase in the number of directors and the revision of the remuneration structure.

7. FINANCIAL ASSETS

This note presents the detail of financial assets, except as concerns "hedging derivatives". Where applicable, all assets are shown net of impairment allowances:

30-06-2018

net of impairment allowances:
30-06-2018
	Fina nc ia l a sse ts he ld for tra ding	Fina nc ia l a sse ts not de signa te d for tra ding c ompulsorily me a sure d a t fa ir va lue through profit or loss	Fina nc ia l a sse ts a t fa ir va lue through othe r c ompre he nsive inc ome	Fina nc ia l a sse ts a t a mortise d c ost	TOTAL
Trading derivatives	158 978				158 978
Equity instruments	119 478	174 544	79 348		373 370
Debt instruments	16 403	60 416	2 062 394	3 400 133	5 539 346
Loans and advances
Central Banks				5 000	5 000
Credit Institutions				1 242 015	1 242 015
Customers				20 989 288	20 989 288
	2 9 4 8 5 9	2 3 4 9 6 0	2 14 1 7 4 2	2 5 6 3 6 4 3 6	2 8 3 0 7 9 9 7
31-12-2017 Restated
	Financial assets held for trading	Financial assets at fair value through profit or loss	Available- for sale financial assets	Financial assets at amortised cost	TOTAL
Trading derivatives	136 777				136 777
Equity instruments	134 336	6 055	321 109		461 500
Debt instruments	23 368		3 554 053	1 306 130	4 883 551
Loans and advances			208	21 200 540	21 200 748
Central Banks				5 000	5 000
Credit Institutions				811 783	811 783
Customers			208	20 383 757	20 383 965
	294 481	6 055	3 875 370	22 506 670	26 682 576

Cash and cash balances at central banks and other demand deposits This caption is made up as follows:

Cash and cash balances at central banks and other demand deposits
This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Cash	194 966	221 173
Demand deposits at Bank of Portugal	1 883 657	686 862
Demand deposits at foreign Central Banks	3 049	1 816
Other demand deposits	178 011	184 299
	2 259 683	1 094 150

The caption 'demand deposits with the 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 This caption is made up as follows:

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Tra ding de riva tive s	15 8 9 7 8	13 6 7 7 7
Equity instrume nts
Shares of national issuers	103 218	117 563
Shares of foreign issuers	2	2
Participation units of national issuers		66
Participation units of foreign issuers	16 258	16 705
	119 4 7 8	13 4 3 3 6
De bt instrume nts
Bonds issued by portuguese government entities	5 415	5 466
Bonds issued by foreign government entities	1 526	5 719
Bonds issued by other foreign entities	9 462	12 183
	16 4 0 3	2 3 3 6 8
	2 9 4 8 5 9	2 9 4 4 8 1

Financial assets not designated for trading compulsorily measured at fair value through profit or loss This caption is made up as follows:

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18
Equity instrume nts
Shares of national issuers	7 867
Participation units of national issuers	141 779
Participation units of foreign issuers	24 898
	17 4 5 4 4
De bt instrume nts
Bonds issued by other portuguese entities	44
Bonds issued by other foreign entities	60 372
	6 0 4 16
	2 3 4 9 6 0

The balance in this caption at 30 June 2018 corresponds to amounts reclassified from the portfolios of 'Available-for-sale financial assets' and 'Financial assets at fair value through profit or loss' within the scope of IFRS 9 (Note 2.A).

In June 2018 Banco BPI and the Banco BPI Pension Fund sold their stake in Viacer – Sociedade Gestora de Participações Sociais, Lda, which in turn holds 56% of Super Bock Group, SGPS, SA. Banco BPI and the Banco BPI Pension Fund held 14% and 11% each in Viacer, having sold their equity holdings for 130 million and 103 million, respectively. This transaction generated a 60 million capital gain in the income statement caption 'profit/(loss) in financial assets not designated for trading compulsorily measured at fair value through profit or loss'.

Financial assets at fair value through profit or loss This caption is made up as follows:

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Equity instruments
Participation units of foreign issuers		6 055
		6 055

The balance in this caption at 31 December 2017 was reclassified to the portfolio of 'financial assets compulsorily measured at fair value through profit or loss' within the scope of IFRS 9 (Note 2.A).

Financial assets at fair value through other comprehensive income This caption is made up as follows:

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18
Equity instrume nts
Shares of national issuers	69 240
Shares of foreign issuers	10 108
	7 9 3 4 8
De bt instrume nts
Bonds issued by portuguese government entities
Treasury Bills	1 255 288
Treasury Bonds	314 920
Bonds issued by foreign government entities	492 186
	2 0 6 2 3 9 4
Loa ns a nd a dva nc e s - Custome rs
	2 14 1 7 4 2

Movements in equity instruments at fair value through other comprehensive income

	Financial assets at fair value through other comprehensive income - equity instruments
Balance at 01- 01- 2018 (Note 2.A)	85 170
Purchases	781
Sales	( 4 131)
Gains /(losses) recognised against other comprehensive
income	( 2 475)
Other	2
Balance at 30- 06- 2018	79 348

Available-for-sale financial assets

	3 1- 12 - 2 0 17
	Re sta te d
Equity instrume nts
Shares of national issuers	79 737
Quotas	70 899
Shares of foreign issuers	13 142
Participation units of national issuers	140 562
Participation units of foreign issuers	16 769
	3 2 1 10 9
De bt instrume nts
Bonds issued by portuguese government entities
Treasury Bills	2 982 602
Treasury Bonds	328 781
Bonds issued by foreign government entities	187 272
Bonds issued by other foreign entities	55 398
	3 5 5 4 0 5 3
Loa ns a nd othe r re c e iva ble s	2 0 8
	3 8 7 5 3 7 0

On transition to IFRS 9 on 1 January 2018, the balances recognised under available-for-sale financial assets were reclassified as follows:

• Debt instruments classified at 31 December 2017 under financial assets held for sale that did not pass the SPPI tests (55 398 t.euros) were reclassified to financial assets not designated for trading compulsorily measured at fair value through profit or loss.
• Equity instruments considered as "puttable instruments" under IAS 32 (essentially investment funds) that could not be included in this portfolio, and the equity holding in Viacer (considering the expectation of its sale in the short-term) (235 940 t.euros), were reclassified to the portfolio of financial assets not designated for trading compulsorily measured at fair value through profit or loss.
• Loans and other receivables (208 t.euros) were reclassified to assets at amortised cost loans and advances to Customers.
• The remaining debt and equity instruments in the available for sale portfolio (3 583 824 t.euros) were classified as financial assets at fair value through other comprehensive income.

Debt instruments

This caption is made up as follows:

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Sovereign debt
Portuguese sovereign debt	555 891
Foreign sovereign debt	1 222 094
	1 777 985
Customer debt
Other portuguese public issuers	253 188	140 655
Other portuguese issuers	1 373 274	1 170 596
Other foreign issuers		4 602
	1 626 462	1 315 853
Impairment	( 4 314)	( 9 723)
	3 400 133	1 306 130

In the first half of 2018 Banco BPI bought a portfolio of medium-long term public debt in the amount of 1.8 billion with an average residual maturity of 3 years. The sovereign debt portfolio mainly comprises Spanish and Italian public debt securities.

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

Loans and advances - Central Banks and Credit Institutions

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Loans and advances to Bank of Portugal	5 000	5 000
Loans and advances to Credit Institutions in Portugal
Very short term applications	96 704	6 243
Cheques for collection	56 449	89 441
Loans	144 781	167 694
Reverse repurchase agreements	91 998	50 383
Other	831	130
Other loans and advances	30	4 724
Interest receivable and commissions relating to amortised cost	48	271
	390 841	318 886
Loans and advances to other Credit Institutions abroad
Very short term applications	313 494	206 121
Deposits	20 683	34 329
Cheques for collection	1 473	2 484
Loans	44	44
Reverse repurchase agreements	320 871
Other loans and advances	194 458	249 601
Interest receivable and commissions relating to amortised cost	319	318
	851 342	492 897
Impairment	( 168)
	1 2 4 7 0 15	8 16 7 8 3

Loans and advances - Customers

The breakdown of loans and advances to Customers is as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Customer loans
Companies
Loans	6 187 369	6 121 977
Loans on current account	623 933	579 089
Sight deposits - overdrafts	241 303	216 039
Invoices received – factoring	744 865	587 927
Finance leases	323 164	309 744
Real estate leasing	403 190	396 006
Car finance	222 293	187 985
Other loans	77 691	80 340
Individuals	12 632 881	12 440 532
Other loans and advances	102 233	39 395
Impairment	( 569 635)	( 575 276)
	2 0 9 8 9 2 8 8	2 0 3 8 3 7 5 7

The caption Other loans and advances essentially refers to margin accounts.

The portfolio of Customer loans includes Loans designated as interest rate hedged assets, the fair value change of which at 30 June 2018 and 31 December 2017 amounted to 22 181 t.euros and 20 574 t.euros, respectively.

	3 0 - 0 6 - 2 0 18
	Gross a mount	Impa irme nts
Public sector	1 248 910	( 249)
Other financial corporations and individual entrepreneurs
(financial business)	133 772	( 332)
Non- financial corporations and individual
entrepreneurs (non- financial business)	7 543 360	( 328 926)
Real estate construction and development	319 526	( 53 042)
Civil engineering	111 583	( 7 918)
Other	7 112 251	( 267 966)
Large companies	3 474 964	( 122 356)
Small and medium- sized companies	3 637 287	( 145 610)
Individuals	12 632 881	( 240 128)
Home loans	11 232 813	( 195 252)
Consumer spending	917 826	( 35 483)
Other	482 243	( 9 392)
Tota l	2 1 5 5 8 9 2 3	( 5 6 9 6 3 5 )

Loans and advances to Customers include the following non-derecognised securitised assets:
	30- 06- 2018	31- 12- 2017 Restated
derecognised securitised assets1 Non-
Loans
Home loans	1 221 895	1 292 423
Loans to SMEs	3 313 631	3 226 084
Interest receivable	11 939	10 698
	4 547 465	4 529 205

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 measured at amortised cost - debt securities issued (Note 14.)

At 30 June 2018 and 31 December 2017, 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 14), namely:

• 7 561 413 t.euros and 7 461 814 t.euros, respectively, allocated as collateral to mortgage bonds;
• 756 830 t.euros and 750 298 t.euros, respectively, allocated as collateral to public sector bonds.

At 30 June 2018 and 1 January 2018, the breakdown of Loans and advances to Customers by risk categories was as follows:

	30- 06-	2018 01- 01- 2018
	Gross amount		Impairments Gross amount Impairments
Stage 1	19 012 577	( 25 685)	18 192 561	( 23 811)
Stage 2	1 437 546	( 60 530)	1 474 765	( 64 226)
Stage 3	1 108 800	( 483 420)	1 291 707	( 530 569)
	21 558 924	( 569 635)	20 959 033	( 618 606)

The detail of guarantees received as security for lending transactions is as follows:
	30- 06- 2018	01- 01- 2018
Value of collateral	11 932 643	11 352 323
Of which: Stage 3	385 641	478 328
Value of other guarantees	769 230	595 935
Of which: Stage 3	10 898	24 700
	12 701 873	11 948 258

The value of the guarantee is the lower of the net loan value and the value of the guarantee received.

The following table shows the changes in "Loans and advances to customers" in the first half of 2018, classified in Stage 3:

	30- 06- 2018
	Exposure	Impairment
Balance at 01- 01- 2018	1 291 707	530 569
Additions:
Increase due to restructurings	28 503	16 114
Increase due to deterioration of credit risk (entries in
Stage 3 during the 1st half of the year)	45 832	9 175
Decreases:
Property recovered or foreclosed (loans to individuals)	( 4 618)	( 1 559)
Standardised assets and other (exits from Stage 3 and
settlements)	( 156 510)	( 22 944)
Assets disposed of	( 260)	( 241)
Written off from assets	( 40 900)	( 40 900)
Maintenance in Stage 3 (amortisation)	( 54 955)	( 6 794)
Balance at end of period	1 108 800	483 420

The changes in impairment for expected loss in Financial assets at amortised cost - Loans and advances to Customers in the first half of 2018 were as follows:

of 2018 were as follows:
	In Stage 1:	In Stage 2:	In Stage 3:	Total
Balance at 31- 12- 2017	53 719	34 046	487 511	575 276
1st time adoption of IFRS9	( 29 908)	30 180	43 058	43 330
Balance at 01- 01- 2018	23 811	64 226	530 569	618 606
Provisions charged to income (net)	1 874	( 3 696)	( 4 398)	( 6 220)
Amounts used			( 42 751)	( 42 751)
Total	25 685	60 530	483 420	569 635

The breakdown of impairments for Financial assets at amortised cost - Loans and advances to Customers according to how they are identified, is shown below:

identified, is shown below:
	30- 06- 2018	01- 01- 2018
Allowance identified individually	189 690	213 802
Allowance identified collectively	379 945	404 785
Total	569 635	618 588

The movement in loans written off from assets in the first half of 2018 is as follows:
	30- 06- 2018	31- 12- 2017
Balance at beginning of period	1 262 523	1 285 006
Increases:
Value correction due to depreciation of assets	43 181	98 132
Other	82	22
Decreases:
Due to loan recoveries	6 967	13 039
Due to sale of loans written off from assets		94 785
Other	5 292	12 813
Balance at end of period	1 293 527	1 262 523

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".

Fair value of financial assets

Note 4.45 to the 2017 consolidated financial statements provides the criteria for classification of financial assets into levels and the methodology used to obtain the respective fair value in accordance with IFRS13. During the 1st half of 2018, there were no significant changes in the valuation techniques, inputs, and sensitivity analysis results from those described in the notes to the 2017 consolidated financial statements.

This caption is made up as follows:

This caption is made up as follows:		3	0 - 0 6 - 2 0 18				3 1- 12	- 2 0 17 Re sta	te d
			Fa ir va lue					Fa ir va	lue
	Book va lue	Tota l	Level 1.	Level 2.	Level 3.	Book va lue	Tota l	Level 1.	Level 2.	Level 3.
Fina nc ia l a sse ts he ld for tra ding	2 9 4 8 5 9	2 9 4 8 5 9	12 6 7 6 7	3 3 8 7 4	13 4 2 18	2 9 4 4 8 1	2 9 4 4 8 1	14 5 8 2 6	12 8 7 7 0	19 8 8 6
Derivatives	158 978	158 978	348	33 874	124 756	136 777	136 777	305	128 770	7 702
Equity instruments	119 478	119 478	119 478			134 336	134 335	134 335
Debt instruments	16 403	16 403	6 941		9 462	23 368	23 369	11 186		12 184
Fina nc ia l a sse ts not de signa te d for
tra ding c ompulsorily me a sure d a t fa ir
va lue through profit or loss	2 3 4 9 6 0	2 3 4 9 6 0			2 3 4 9 6 0	6 0 5 5	6 0 5 5			6 0 5 5
Equity instruments	174 544	174 544			174 544	6 055	6 055			6 055
Debt instruments	60 416	60 416			60 416
Fina nc ia l a sse ts a t fa ir va lue through
othe r c ompre he nsive inc ome	2 14 1 7 4 2	2 14 1 7 4 2	2 0 6 4 5 9 4	6 9 8 4	7 0 16 4
Equity instruments	79 348	79 348	2 200	6 984	70 164
Debt instruments	2 062 394	2 062 394	2 062 394
Ava ila ble - for- sa le fina nc ia l a sse ts						3 8 7 5 3 7 0	3 8 7 5 3 7 0 3	5 0 2 4 2 6	5 7 5 2	3 6 7 19 2
Equity instruments						321 109	321 110	3 772	5 752	311 586
Debt instruments						3 554 053	3 554 053	3 498 654		55 399
Loans and advances						208	207			207
Fina nc ia l a sse ts a t a mortise d c ost	2 5 6 3 6 4 3 6	2 4 9 7 0 2 3 4		1 18 8 2 7 0	2 3 7 8 1 9 6 3 2	2 5 0 6 6 7 0	2 1 3 7 8 3 8 6		7 2 5 6 7 8	2 0 6 5 2 7 0 8
Debt instruments	3 400 133	3 389 471			3 389 471	1 306 130	1 293 904			1 293 904
Loans and advances	22 236 303	21 580 763		1 188 270	20 392 492	21 200 540	20 084 482		725 678	19 358 804
Central banks and credit institutions	1 247 015	1 375 019		1 188 270	186 749	816 783	817 751		725 678	92 073
Customers	20 989 288	20 205 744			20 205 744	20 383 757	19 266 731			19 266 731
De riva tive s - He dge a c c ounting	12 0 9 4	12 0 9 4		12 0 9 4		12 7 4 0	12 7 4 0	11	12 7 2 9
Tota l	2 8 3 2 0 0 9 1	2 7 6 5 3 8 8 9	2 19 1 3 6 1	1 2 4 1 2 2 3	2 4 2 2 1 3 0 5	2 6 6 9 5 3 16 2	5 5 6 7 0 3 3 3	6 4 8 2 6 3	8 7 2 9 2 9	2 1 0 4 5 8 4 1

The movement in level 3 financial assets in the first half of 2018 was as follows:	Fina nc ia va lue	Fina l a sse ts a t fa ir through profit or loss
	De bt instrume nts	Equity instrume nts	Equity instrume nts
Ba la nc e a t 0 1- 0 1- 2 0 18	5 5 0 0 2	2 4 3 0 4 8	7 4 6 7 2
Total profit or loss	( 382)	116 240	( 900)
Losses or gains Adjustments to equity	( 97) ( 285)	115 935 305	( 24) ( 876)
Purchases	5 894	19 587	115
Liquidations and other	( 98)	( 204 331)	( 3 723)
Ba la nc e a t 3 0 - 0 6 - 2 0 18	6 0 4 16	17 4 5 4 4	7 0 16 4

Exposure to sovereign debt

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

30-06-2018

		Fina nc ia l a sse ts he ld for tra ding - de bt instrume nts	Fina nc ia l a sse ts a t fa ir va lue through othe r c ompre he nsive inc ome	Fina nc ia l a sse ts a t ost 1 a mortise d c
Country	Re sidua l ma turity
	Less than 3 months		471 243	5 170
	Between 3 months and 1 year		1 098 965	62 473
	Between 1 and 2 years			13 379
Portuga l	Between 2 to 3 years	3 889		611 572
	Between 3 to 5 years	1 526		118 455
	Between 5 to 10 years			395 101
	More than 10 years			577 515
		5 4 15	1 5 7 0 2 0 8	1 7 8 3 6 6 5
Spa in	Between 3 and 5 years		309 553	714 878
			3 0 9 5 5 3	7 14 8 7 8
	Between 3 months and 1 year	1 526	182 633
Ita ly	Between 2 and 3 years			502 196
		1 5 2 6	18 2 6 3 3	5 0 2 19 6
	Less than 3 months			10
	Between 1 and 2 years			2
	Between 2 and 3 years			74 229
Othe r	Between 3 and 5 years			17 626
	Between 5 and 10 years			89 852
	More than 10 years			78 283
				2 6 0 0 0 3
l		6 9 4 1	2 0 6 2 3 9 4	3 2 6 0 7 4 1

not include interest receivable.

31-12-2017 Restated

		Fina nc ia l a sse ts he ld for tra ding - de bt instrume nts	Fina nc ia l a sse ts a t fa ir va lue through othe r c ompre he nsive inc ome	Fina nc ia l a sse ts a t ost 1 a mortise d c
Country	Re sidua l ma turity
	Less than 3 months		895 281	3 197
	Between 3 months and 1 year		2 087 321	19 333
	Between 1 and 2 years		328 781	15 778
	Between 2 and 3 years			76 240
Portuga l	Between 3 and 5 years	5 466		83 156
	Between 5 and 10 years			376 743
	More than 10 years			479 603
		5 4 6 6	3 3 11 3 8 3	1 0 5 4 0 5 0
	Less than 3 months	1 567
Spa in		1 5 6 7
	Between 3 months and 1 year	4 152
Ita ly	Between 1 and 2 years		187 272
		4 15 2	18 7 2 7 2
	Less than 3 months			9
	Between 1 and 2 years			6 811
Othe r	Between 2 and 3 years			7
	Between 3 and 5 years			98 724
	More than 10 years			78 283
				18 3 8 3 5
l		11 18 5	3 4 9 8 6 5 5	1 2 3 7 8 8 5

not include interest receivable.

Credit risk quality (rating)

Credit risk quality (rating)
The breakdown of debt instruments by rating class is as follows:
30-06-2018
	Fina nc ia l a sse ts he ld for tra ding	Fina nc ia l a sse ts not de signa te d for tra ding c ompulsorily me a sure d a t fa ir va lue through profit or loss	Fina nc ia l a sse ts a t fa ir va lue through othe r c ompre he nsive inc ome	Fina nc ia l a sse ts a t a mortise d c ost - de bt instrume nts	TOTAL
A+/A/A-				53 782	53 782
BBB+/BBB/BBB-	6 941	1 140	2 062 394	1 247 327	3 317 802
Inve stme nt gra de	6 9 4 1 42%	1 14 0 2 %	2 0 6 2 3 9 4 100%	1 3 0 1 10 9 38%	3 3 7 1 5 8 4 61%
BB+/BB/BB-		53 534		657 064	710 598
B+/B/B-				168 751	168 751
No rating	9 462	5 742		1 273 209	1 288 413
Non- inve stme nt gra de	9 4 6 2	5 9 2 7 6		2 0 9 9 0 2 4	2 16 7 7 6 2
	58%	98%		62%	39%
	16 4 0 3	6 0 4 16	2 0 6 2 3 9 4	3 4 0 0 13 3	5 5 3 9 3 4 6
31-12-2017 Restated

31-12-2017 Restated
	Fina nc ia l a sse ts he ld for tra ding	Ava ila ble - for- sa le fina nc ia l a sse ts	Fina nc ia l a sse ts a t a mortise d c ost - de bt instrume nts	TOTAL
A+/A/A-			57 103	57 103
BBB+/BBB/BBB-	11 185	3 500 116		3 511 301
Inve stme nt gra de	11 18 5	3 5 0 0 116	5 7 10 3	3 5 6 8 4 0 4
	48%	98%	4 %	73%
BB+/BB/BB-		53 937	101 888	155 825
B+/B/B-			54 362	54 362
No rating	12 183		1 092 778	1 104 961
Non- inve stme nt gra de	12 18 3	5 3 9 3 7	1 2 4 9 0 2 8	1 3 15 14 8
	52%	2 %	96%	27%
	2 3 3 6 8	3 5 5 4 0 5 3	1 3 0 6 13 0	4 8 8 3 5 5 1

			3 0 - 0 6 - 2 0 18		3 1- 12 - 2 0 17 Re sta	te d
Non- De fa	ult Exposure s		2 0 3 6 4 6 10	97%	19 5 8 3 3 4 8	96%
		BBB+ to BBB-	789 474	4 %	787 959	4 %
		BB+ to BB-	43 803	0 %	46 265	0 %
	External Rating	B+ to B-	54 887	0 %	57 208	0 %
		< B-	346	0 %	138	0 %
		Strong	79 808	0 %	88 062	0 %
	Project	Good	791 587	4 %	929 734	5 %
	Finance	Satisfactory	166 615	1%	136 786	1%
	Rating	Weak	5 605	0 %	6 397	0 %
		E01 to E03	809 857	4 %	696 488	3 %
	Corporate	E04 to E06	2 102 942	10%	1 912 778	9 %
	Rating	E07 to E10	887 224	4 %	905 314	4 %
		ED1 to ED2	1 806	0 %	5	0 %
	Entrepreneurs	N01 to N03	60 739	0 %	62 165	0 %
	and	N04 to N06	695 831	3 %	639 549	3 %
	Businesses	N07 to N10	775 861	4 %	766 005	4 %
	Rating	ND1 to ND2	2 953	0 %	671	0 %
		01 to 03	4 390 490	21%	4 277 096	21%
		04 to 06	4 865 471	23%	4 898 798	24%
	Scoring	07 to 10	2 480 175	12%	2 254 734	11%
		D01 to D02	20 337	0 %	13 767	0 %
	No rating		1 338 798	6 %	1 103 430	5 %
De fa	ulting Exposure s		6 2 4 6 7 8	3 %	8 0 0 4 10	4 %
Tota l			2 0 9 8 9 2 8 8	10 0 %	2 0 3 8 3 7 5 7	10 0 %

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

8. DERIVATIVES - HEDGE ACCOUNTING

The detail of hedging derivatives is as follows:			31-
	30-	06- 2018		12- 2017 Restated
	Assets	Liabilities	Assets	Liabilities
Fair value hedges
Macro- hedge	12 094	55 983	12 740	69 880
	12 094	55 983	12 740	69 880

9. INVESTMENTS IN JOINT VENTURES AND ASSOCIATED COMPANIES

	Effective holding (%)		Book value
	30- 06- 2018	31- 12- 2017 Restated	30- 06- 2018	31- 12- 2017 Restated
Banco de Fomento Angola, S.A.	48.1	48.1	500 491	576 359
Banco Comercial e de Investimentos, S.A.	35.7	35.7	86 503	81 237
Companhia de Seguros Allianz Portugal, S.A.	35.0	35.0	62 348	66 234
Cosec – Companhia de Seguros de Crédito, S.A.	50.0	50.0	33 185	35 404
Inter- Risco - Sociedade de Capital de Risco, S.A.	49.0	49.0	445	487
Unicre - Instituição Financeira de Crédito, S.A.	21.0	21.0	34 029	34 762
			717 001	794 483

The changes in investments in joint ventures and associated companies in the 1st half of 2018 were as follows:

	AssetValue	Goodwill	Total
Balance at 31- 12- 2017	776 016	18 467	794 483
Profit/(loss) for the period	171 725
Dividends distributed	( 61 086)
Exchange difference	( 173 500)
Transition to IFRS9	( 8 626)
Other changes	( 5 995)
Balance at 30- 06- 2018	698 534	18 467	717 001

The value of goodwill at 30 June 2018 and 31 December 2017 resulted from the acquisition of equity holdings in Unicre (13 194 t.euros) and BCI Moçambique (5 273 t.euros).

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

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

as follows:
	30- 06- 2018	30- 06- 2017
Banco de Fomento Angola, S.A.	155 564	106 671
Banco Comercial e de Investimentos, S.A.R.L.	7 727	5 051
Companhia de Seguros Allianz Portugal, S.A.	4 148	4 260
Cosec – Companhia de Seguros de Crédito, S.A.	2 111	2 062
InterRisco - Sociedade de Capital de Risco, S.A.	( 42)	( 51)
Unicre - Instituição Financeira de Crédito, S.A.	2 217	2 719
	171 725	120 712

Banco de Fomento Angola (BFA)

In January 2018 the National Bank of Angola (BNA) changed the foreign exchange regime, from a central bank administratively fixed exchange rate regime to a floating rate system, dependent on supply and demand. This led to an orderly and gradual process of devaluation of the kwanza against the US dollar. In the first half of 2018 the Angolan kwanza depreciated 36%. This impact of this depreciation on the value of the holding in Banco de Fomento Angola in the first half of 2018 was (175 925) t.euros.

The exchange rates used for the translation to euros of the accounts of Banco de Fomento Angola were as follows:

	30- 06- 2018	31- 12- 2017
Kwanza - Angola	288.872	185.400

In order to determine the value of its participation (48.1%) in the net assets and results of BFA at 30 June 2018 and 31 December 2017, Banco BPI considered an estimate of the impact of application of IAS 29 – Financial reporting in hyperinflationary economies, on the financial statements of BFA.

The results of BFA, accounted for by the equity method, at 30 June 2018, include an adjustment of (28 320) t.euros resulting from application of IAS 29, assuming an inflation rate of 7.69 % in the first half of the year.

10. TANGIBLE ASSETS

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

During the first six months of 2018 no individually significant profits or losses were recorded on sales of real estate.

There were no relevant movements in this caption during the first half of 2018.

The investments made during the first half of the year totalled 1 204 t.euros.

11. INTANGIBLE ASSETS

The change in intangible assets mainly translates the movement in the caption Intangible assets in progress (28 533 t.euros), which essentially relates to investment in the development of software commissioned by Banco BPI to external entities.

The investments made during the first half of 2018 totalled 7 809 t.euros.

12. OTHER ASSETS

This caption is made up as follows:

12. OTHER ASSETS
This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Asse ts re c e ive d in se ttle me nt of de fa ulting loa ns a nd othe	r ta ngible a sse ts
Buildings		81 729
Equipment		568
Other		61
Impairments		( 16 358)
		6 6 0 0 0
Ac c rue d inc ome
Dividends receivable from Banco de Fomento Angola	78 383	57 631
Fees for Allianz's profit sharing (Notes 2.15 and 4.38)	12 822	22 732
Other receivables	23 244	26 863
	114 4 4 9	10 7 2 2 6
De fe rre d e xpe nse s
Rents	1 518	1 602
Other deferred expenses	9 390	6 984
	10 9 0 8	8 5 8 6
Lia bilitie s for pe nsions a nd othe r be ne fits (Note 4 .2 8 )
Pension fund assets
Pensioners and Employees	1 668 226
Directors	53 632
Past service liabilities
Pensioners and Employees	(1 591 803)
Directors	( 55 338)
	7 4 7 17
Other assets	3 586	2 958
Foreign exchange transactions pending settlement	4 200
Credit operations pending settlement	191 444	302 845
	19 9 2 3 0	3 0 5 8 0 3
	3 9 9 3 0 4	4 8 7 6 15

At 30 June 2018 assets received in settlement of defaulting loans and other tangible assets were classified in the balance sheet caption 'Non-current assets and disposal groups classified as held for sale' (Note 13).

At 30 June 2018 and 31 December 2017, the caption 'Asset operations pending settlement' included:

• 126 120 t.euros and 256 807 t.euros, respectively, relating to securitisation operations carried out by Banco BPI (notes 4.7 and 4.20 to the 2017 consolidated financial statements), resulting from temporary differences between settlement of the securitised loans and settlement of the liability for assets not derecognised;
• 26 627 t.euros 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 are VAT processes arising from tax inspections carried out from 2004 to 2009, of which a total of 19 916 t.euros was paid under Decree-Law 151-A/13 of 31 October. The remainder (6 711 t.euros) refers to amounts paid under Decree-Law 248-A/02 of 14 November, as well as other processes prior to the merger carried out in 2002, relating to tax processes of various types.
• 2 846 t.euros and 2 175 t.euros, respectively, relating to housing loans pending settlement.

13. NON-CURRENT ASSETS AND LIABILITIES AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE

	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Asse ts re c e ive d in se ttle me nt of de fa ulting loa ns a nd othe	r ta ngible a sse ts
Buildings	69 421
Equipment	583
Other	61
Impairments	( 15 486)
	5 4 5 7 9
Asse ts of subsidia rie s c la ssifie d a s he ld for sa le
BPI Gestão de Activos		4 072
BPI Global Investment Fund Management		3 192
		7 2 6 4
	5 4 5 7 9	7 2 6 4
Lia bilitie s of subsidia rie s c la ssifie d a s he ld for sa le
BPI Gestão de Activos		4 027
BPI Global Investment Fund Management		444
		4 4 7 1

At 31 December 2017 assets received in settlement of defaulting loans and other tangible assets were classified in the balance sheet caption 'Other assets' (Note 12).

The changes in assets received in settlement of defaulting loans and other tangible assets in the 1st half of 2018 were as follows:

The changes in assets received in settlement of defaulting loans and other tangible assets in the 1st half of 2018 were as follows:
Balance at 31- 12- 2017 Acquisitions Sales and write- offs					Increase /	Balance at 30- 06- 2018
	Gross amount	Impairment Net value		and transfers	Gross amount	Impairment	reversals of impairment	Gross amount	Impairment	Net value
Assets received in settlement of
defaulting loans
Buildings	80 310	( 15 773)	64 537	6 424	( 18 727)	1 882	( 962)	68 007	( 14 853)	53 154
Equipment	568	( 301)	267	61	( 46)	3	( 19)	583	( 317)	266
Other	61	( 51)	10				1	61	( 50)	11
Other tangible assets
Buildings	1 419	( 233)	1 186		( 5)	4	( 37)	1 414	( 266)	1 148
Other
	82 358	( 16 358)	66 000	6 485	( 18 778)	1 889	( 1 017)	70 065	( 15 486)	54 579

Subsidiaries classified as held for sale: BPI Vida e Pensões, BPI Gestão de Activos and BPI Global Investment Fund Management

On 23 November 2017, Banco BPI publicly announced that, following the acquisition proposals presented to it by its shareholder CaixaBank S.A., it had signed the agreements on the following transactions:

• Sale of shares representing the entire share capital of BPI Vida e Pensões, Companhia de Seguros, S.A., to the CaixaBank Group company VidaCaixa S.A.U. de Seguros y Reaseguros, for the price of 135 million;
• Sale of shares representing the entire share capital of BPI Gestão de Activos, Sociedade Gestora de Fundos de Investimento, S.A. and BPI Global Investment Fund Management Company S.A. (BPI GIF) to the CaixaBank Group company CaixaBank Asset Management SGIIC, S.A.U, for the price of 75 million and 8 million, respectively.

In the context of the transactions described above, Banco BPI entered several service provision contracts under which it will provide to the companies sold or to the purchasing companies a set of instrumental services to the operations sold.

Banco BPI's Board of Directors approved the transactions described above with the aim of improving over the medium and long term the commercial offer to its Customers, creating synergies with the CaixaBank Group and enabling Banco BPI to concentrate on the banking business. Banco BPI maintains the relationship with the Customers of the activities concerned, acting as agent for the companies sold or for the acquiring companies.

The sale of BPI Vida e Pensões was concluded at the end of December 2017, generating a capital gain before taxes in the amount of 7 677 t.euros.

The sales of BPI Gestão de Activos and BPI GIF were completed in April 2018, generating capital gains before taxes of 57 049 t.euros and 4 706 t.euros, respectively.

In accordance with IFRS 5 - Non-current assets held for sale and discontinued operations, BPI Gestão de Activos and BPI GIF were classified as discontinued operations on 31 December 2017, in so far as they represented a separate major line of business, from BPI's other operating units.

Consequently:

• As of 31 December 2017, the total assets and liabilities of BPI Gestão de Activos and BPI GIF were presented in Banco BPI's consolidated balance sheet under the captions 'Non-current assets and disposal groups classified as held for sale' and 'Liabilities included in disposal groups classified as held for sale'.
• The contribution of the operations of BPI Gestão de Activos and BPI GIF (sold in April 2018) to BPI's consolidated profit and loss and consolidated other comprehensive income at 30 June 2018 is presented in the captions 'Profit/(loss) after tax from discontinued operations' and 'Profit/(loss) related to discontinued operations not included in the consolidated income statement'
• The comparative balances in the Consolidated Statements of Profit and Loss and Consolidate Statements of Profit and Loss and Other Comprehensive Income for the first half of 2017 were restated (30 June amounts Restated). The contribution of the operations of BPI Gestão de Activos, BPI GIF and BPI Vida e Pensões (the latter sold at the end of December 2017) to the consolidated profit and loss and other comprehensive income at 30 June 2017 - Restated, is shown in the captions 'Profit/(loss) after tax from discontinued operations' and 'Profit/(loss) related to discontinued operations not included in the consolidated income statement'.

BPI's consolidated balance sheet for 31 December 2017 included the following sums relative to BPI Gestão de Activos and BPI GIF, adjusted for intragroup balances, in the captions 'Non-current assets held for sale and discontinued operations' and 'Non-current liabilities held for sale and discontinued operations', respectively:

liabilities held for sale and discontinued operations', respectively:
	3 1- 12 - 2 0 17
ASSETS
Cash and cash balances at central banks and other demand deposits 1 Financial assets held for trading	363
Available- for- sale financial assets	80
Tangible assets	1
Tax assets	281
Other assets 2	6 538
	7 2 6 3
LIABILITIES
Tax liabilities	1 637
Other liabilities 3	2 834
1	4 4 7 1

1 Does not include 32 734 t.euros in deposits of BPI Gestão de Activos and BPI GIF in BPI Group.

2 Does not include 5 004 t.euros in income receivable by BPI Gestão de Activos from BPI Group.

3 Does not include 21 772 t.euros in expenses payable by BPI Gestão de Activos and BPI GIF to BPI Group.

At 31 December 2017, the balance sheet caption 'Other accumulated comprehensive income from discontinued operations" included (187) t.euros of actuarial deviations in liabilities for retirement and survivor pensions and end-of-career premiums, net of taxes, of BPI Gestão de Activos.

In the first half of 2018 the contribution of BPI Gestão de Activos and BPI GIF, and in the first half of 2017 the contribution of BPI Gestão de Activos, BPI GIF and BPI Vida e Pensões, and the respective capital gains on sale, were included in the Statement of Profit and Loss in the caption 'Profit/(loss) after tax from discontinued operations', broken down as follows 3 0 - 0 6 - 2 0 18 3 0 - 0 6 - 2 0 17

	BPI Ge stã o de Ac tivos a nd BPI GIF	BPI Vida e Pe nsõe s	BPI Ge stã o de Ac tivos a nd BPI GIF
Net interest income	( 1)	6 713	( 1)
Technical result of insurance contracts		7 437
Fee and commission income and expenses	5 747	( 5 426)	7 847
Gains/(losses) on financial operations	3	554	2
Other operating income and expenses	( 118)	( 249)	( 316)
Gross inc ome	5 6 3 1	9 0 2 9	7 5 3 2
Administrative expenses	( 2 431)	( 1 104)	( 3 975)
Depreciation and amortisation			( 1)
Profit/(loss) be fore ta x	3 2 0 0	7 9 2 5	3 5 5 6
Taxes	( 741)	( 1 978)	( 808)
Gain/(loss) on sale	61 755
Profit/(loss) a fte r ta x from disc ontinue d ope ra tions	6 4 2 14	5 9 4 7	2 7 4 8

Banco de Fomento Angola

At 30 June 2017 the caption 'Profit/(loss) from discontinued operations included (212 298) thousand relative to the sale and deconsolidation of Banco de Fomento Angola:

deconsolidation of Banco de Fomento Angola:
	30- 06- 2017
Capital gain on the sale of 2% of the share capital of BFA, net of taxes	6 593
Reclassification of foreign exchange reserves to profit or loss	( 182 121)
Profit/(loss) before tax from discontinued operations	( 175 528)
Deferred tax liabilities	( 36 770)
Profit/(loss) after tax from discontinued operations	( 212 298)

14. FINANCIAL LIABILITIES

This note presents the detail of financial liabilities, except as concerns "hedging derivatives".

30-06-2018

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL
Trading derivatives	154 571		154 571
Deposits		27 408 324	27 408 324
Central Banks		1 992 631	1 992 631
Credit Institutions		3 302 066	3 302 066
Customers		22 113 627	22 113 627
Debt securities issued		593 638	593 638
Other financial liabilities		259 805	259 805
	154 571	28 261 767	28 416 338

31-12-2017 Restated

	Financial liabilities held for trading	Financial liabilities at amortised cost	TOTAL
Trading derivatives	170 048		170 048
Deposits		24 691 655	24 691 655
Central Banks		1 995 374	1 995 374
Credit Institutions		1 982 648	1 982 648
Customers		20 713 633	20 713 633
Debt securities issued		1 019 977	1 019 977
Other financial liabilities		249 783	249 783
	170 048	25 961 415	26 131 463

Financial liabilities held for trading

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Trading derivatives	154 571	170 048
	154 571	170 048

Financial liabilities at amortised cost

Deposits from Central Banks and Credit Institutions

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Deposits - Central Banks
Deposits	2 000 830	2 000 830
Interest payable	( 8 199)	( 5 456)
	1 9 9 2 6 3 1	1 9 9 5 3 7 4
Deposits - Credit Institutions
Loans and advances to credit institutions in Portugal
Very short term funds	38 600	6 671
Deposits	116 620	142 870
Other funds	1 520	1 520
Interest payable	15	73
Loans and advances to other credit institutions abroad
Deposits from international financial organisations	1 086 207	1 086 204
Very short term funds	12 904	3 445
Deposits	769 378	681 658
Debt securities sold with repurchase agreement	1 254 564	51 200
Other funds	21 630	8 050
Interest payable	203	943
Commissions relating to amortised cost	425	14
	3 3 0 2 0 6 6	1 9 8 2 6 4 8
	5 2 9 4 6 9 7	3 9 7 8 0 2 1

Customer deposits

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Demand deposits	12 897 163	12 038 740
Term deposits	8 614 153	8 532 552
Savings accounts	51 815	52 060
Compulsory deposits	14 957	14 347
Debt securities sold with repurchase agreement	520 225	40 687
Other Customer funds	538	21 399
Interest payable	14 665	13 844
Commissions relating to amortised cost, net	111	4
	22 113 627	20 713 633

Debt securities

This caption is made up as follows:
		3 0 - 0 6 - 2 0	18			3 1- 12 - 2 0 17 Re	sta te d
	Issue s	Re purc ha se	d Ba la nc e	Ave ra ge inte re st ra te	Issue s	Re purc ha se	d Ba la nc e	Ave ra ge inte re st ra te
Cove re d bonds	6 850 000	(6 850 000)	0	0.3%	6 750 000	(6 550 000)	200 000	0.4%
Fixe d- ra te bonds	28 590	( 3 533)	25 057	0.3%	39 609	( 4 341)	35 268	0.3%
Interest payable			22				1 648
Commissions relating to amortised cost, net							( 1)
			2 5 0 7 9				2 3 6 9 15
Othe r subordina te d bonds	300 000		300 000	5.5%	300 000		300 000	5.5%
Pa rtic ipa tion se c uritie s					28 081	( 27 470)	611
Interest payable			4 421				4 466
			3 0 4 4 2 1				3 0 5 0 7 7
Lia bilitie s re la ting to a sse ts not de re c ognise d
in se c uritisa tion ope ra tions (note 9 )	4 619 508	(4 355 119)	264 389		4 736 640	(4 258 381)	478 259
Interest payable			422				420
Commissions relating to amortised cost, net			( 672)				( 694)
			2 6 4 13 9				4 7 7 9 8 5
			5 9 3 6 3 8				1 0 19 9 7 7

Issuances, repurchases, and repayments of debt securities

During the first six months of 2018 the reimbursements and repurchases of debt securities totalled 210 581 t.euros and 300 693 t.euros, respectively. In addition, the following issues were made in the first half of 2018.

		Amount Maturity	Interest rate
Fixed- income bonds	120	2 years	0.15%
Rising, fixed- income bonds	332	3 years	Coupon: 1st and 2nd 0.15% / 3rd and 4th 0.25% / 5th and 6th 0.35%
Mortgage Bonds 1	300 000	5 years	3 month Euribor + 0.40%

1 The issue was fully repurchased by BBPI.

In 2017, BPI reimbursed the following bond issues: collateralised bonds (mortgage bonds series 8) in the amount of 200 000 t.euros, all the variable-income bond issues, in the amount of 16 248 t.euros, and several fixed-rate bond issues in the amount of 62 617 t.euros. The collateralised bond issues made in 2017 - two of mortgage bonds and one of public sector bonds - were fully repurchased (2 800 000 t.euros). Also in 2017 BPI issued fixed-rate bonds in the amount of 10 688 t.euros, of which 2 422 t.euros were repurchased.

Financial liabilities relating to transferred assets

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Liabilities relating to assets not derecognised
in securitisation operations (note 7)
Non- securitised loans
Home loans	1 267 208	1 344 340
Loans to SMEs	3 352 300	3 392 300
Liabilities held by the BPI Group	(4 355 119)	(4 258 381)
Interest payable	422	420
Commissions relating to amortised cost, net	( 672)	( 694)
	264 139	477 985

Other financial liabilities

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Othe r Custome r funds
Cheques and orders payable	76 983	58 140
Guaranteed rate deposits	6 878	11 906
Cre ditors a nd othe r re sourc e s
Creditors for futures operations	15 635	12 732
Consigned resources	28 496	22 337
Captive account resources	6 708	6 808
Guarantee account resources	16 750	16 717
Public sector
VAT payable	255	129
Tax withheld at source	16 547	14 593
Contributions to the Social Security.	3 526	4 338
Other	2 740	2 741
Contributions to other healthcare systems	1 323	1 337
Creditors for factoring agreements	33 971	37 418
Creditors for the supply of goods	10 520	13 713
Subscribed but not paid- up capital
Fundo de Recuperação, FCR	8 841	9 056
Fundo InterRisco II CI	6 099	8 015
Fundo InterRisco II - Fundo de Capital de Risco	1 607	2 759
Fundo de Reestruturação Empresarial, FCR	683	714
Fundo Pathena SCA Sicar	3 685	4 909
Other funds	7	17
Sundry creditors	18 557	21 415
Deferred expenses	( 6)	( 11)
	2 5 9 8 0 5	2 4 9 7 8 3

Fair value of financial liabilities

Note 4.45 to the 2017 consolidated financial statements provides the criteria for classification of financial liabilities into levels and the methodology used to obtain the respective fair value in accordance with IFRS13. During the 1st half of 2018, there were no significant changes in the valuation techniques, inputs, and sensitivity analysis results from those described in the notes to the 2017 consolidated financial statements.

This caption is made up as follows:

consolidated financial statements.
This caption is made up as follows:
		3 0	- 0 6 - 2 0 18				3 1- 12 - 2	0 17 Re sta	te d
			Fa ir va	lue				Fa ir va	lue
	Book va lue	Tota l	Level 1.	Level 2.	Level 3.	Book va lue	Tota l	Level 1.	Level 2.	Level 3.
Fina nc ia l lia bilitie s he ld for tra ding	15 4 5 7 1	15 4 5 7 1	4 2	15 2 3 7 1	2 15 8	17 0 0 4 8	17 0 0 4 8	4	16 7 0 7 6	2 9 6 8
Derivatives	154 571	154 571	42	152 371	2 158	170 048	170 048	4	167 076	2 968
Fina nc ia l lia bilitie s a t a mortise d c ost Deposits	2 8 2 6 1 7 6 7 27 408 324	2 8 2 19 2 9 5 27 346 495		1 9 9 2 3 3 6 1 992 336	2 6 2 2 6 9 5 8 25 354 159	2 5 9 6 1 4 15 2 24 691 655	5 8 7 7 7 5 6 24 643 733		3 9 3 4 2 3 8 3 934 238	2 1 9 4 3 5 18 20 709 495
Central Banks Credit Institutions	1 992 631 3 302 066	1 992 336 3 242 238		1 992 336	3 242 238	1 995 374 1 982 648	1 995 046 1 939 192		1 995 046 1 939 192
Customers Debt securities issued	22 113 627 593 638	22 111 921 612 994			22 111 921 612 994	20 713 633 1 019 977	20 709 495 984 239			20 709 495 984 239
Other financial liabilities De riva tive s - He dge a c c ounting	259 805 5 5 9 8 3	259 805 5 5 9 8 3	4	5 5 9 7 9	259 805	249 783 6 9 8 8 0	249 783 6 9 8 8 0		6 9 8 8 0	249 783
Tota l	2 8 4 7 2 3 2 1	2 8 4 2 9 8 4 9	4 6 2	2 0 0 6 8 6	2 6 2 2 9 116	2 6 2 0 1 3 4 3	2 6 117 6 8 4	4	4 17 1 19 4	2 1 9 4 6 4 8 6

15. PROVISIONS

This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Pending legal issues and tax litigation
VAT Recovery processes (2003 to 2016)	29 711	29 711
Tax contingencies and other	12 480	12 656
Impairment losses and provisions for guarantees and commitments	21 498	18 441
Other provisions	3 204	3 430
	66 893	64 238

The movement in provisions in the first half of 2018 was as follows:
	Balance at 31- 12- 2017	IFRS9 Impact	Increases	Decreases / Reversals	Amounts used	Exchange differences and others	Balance at 30- 06- 2018
Pending legal issues and tax litigation	42 367		350	( 171)	( 355)		42 191
Commitments and guarantees given	18 441	785	2 945	( 673)			21 498
Other provisions	3 430			( 211)	( 19)	4	3 204
	64 238	785	3 295	( 1 055)	( 374)	4	66 893

16. OTHER LIABILITIES

This caption is made up as follows:

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Lia bilitie s for pe nsions a nd othe r be ne fits (Note 4 .2 6 )
Pension fund assets
Pensioners and Employees		(1 564 913)
Directors		( 51 219)
Past service liabilities
Pensioners and Employees		1 601 350
Directors		55 980
		4 1 19 8
Expe nse s pa ya ble
Staff Expenses	67 906	84 329
General administrative costs	23 825	38 944
Contribution to the Deposit Guarantee Fund
Special tax on banks	7 293	14 323
Other	6 853	2 183
	10 5 8 7 7	13 9 7 7 9
De fe rre d inc ome
From guarantees given and other contingent liabilities	2 020	3 654
Other	9 131	8 772
	11 15 1	12 4 2 6
Othe r a djustme nt a c c ounts
Foreign exchange transactions pending settlement		31 565
Securities transactions pending settlement – stock exchange transactions	113 211	6
Liabilities operations pending settlement	81 337	86 270
Other transactions pending settlement	227 868	164 487
	4 2 2 4 16	2 8 2 3 2 8
	5 3 9 4 4 4	4 7 5 7 3 1

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

At 30 June 2018 and 31 December 2017, the caption 'Liabilities operations pending settlement' included:

• 3 228 t.euros and 44 997 t.euros, respectively, relating to transactions with loans securitisation funds;
• 17 060 t.euros and 18 900 t.euros, respectively, relating to ATM transactions to be settled;
• 24 150 t.euros and 8 982 t.euros, respectively, relating to transactions to be settled with SIBS;

At 30 June 2018 and 31 December 2017, the caption 'Other transactions pending settlement' included 185 852 t.euros and 143 284 t.euros, respectively, relating to transfers under SEPA (Single Euro Payment Area).

17. LIABILITIES FOR PENSIONS AND OTHER BENEFITS

Past service liabilities for Pensioners, Employees and Directors that are, or have been, at the service of BPI companies¹ , are calculated in accordance with IAS 19.

Benefits established by BPI are defined benefits based on the last salary earned and the length of service, involving 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.

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.

¹ Fully consolidated companies (Banco BPI, BPI Investimentos and BPI Private Equity)

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 21.

	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17
De mogra phic a ssumptions:
	TV 88/90- M	TV 88/90- M
Mortality Table	3 years1 TV 88/90- W -	3 years1 TV 88/90- W -
Disability table	EKV 80	EKV 80
Staff turnover	0 %	0 %
Decreases	by mortality	by mortality
Fina nc ia l a ssumptions
Discount rate
Beginning of period	2.00%	2.00%
End of period	2.02%	2.00%
Pensionable salaries growth rate 2	1.00%	1.00%
Pensions growth rate	0.50%	0.50%

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 the BPI Group and respective coverage by the Pension Fund are broken down as follows: 30- 06- 2018 31- 12- 2017

Total past service liabilities	(1 591 803)	(1 601 350)
Net assets of the pension fund	1 668 226	1 564 913
Contributions to be transferred to the Pension Fund		9 010
Coverage surplus/(shortfall)	76 423	( 27 427)
Coverage ratio of liabilities	105%	98%

In accordance with Decree-Law 12/2006 of 20 January, only in very special conditions is it possible to return excess funding, so it is assumed that any excess will be used to reduce future contributions.

The return of the pension fund in the first half of 2018 was 7.5% (non-annualised).

The return of the pension fund in the period benefited from the gains on the sale of the equity holding in Viacer - Sociedade Gestora de Participações Sociais, Lda and on the sale of property.

The movement in actuarial deviations in the first half of 2018 was as follows:

Amount at 31 December 2017	( 211 218)
Deviation in pension funds return	102 027
Change in financial and demographic assumptions
Change in discount rate	5 798
Impact on ACT table from the national minimum wage increase	( 5 608)
Deviation in pensions paid	( 1 274)
Amount at 30 June 2018	( 110 275)

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.

	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17
De mogra phic a ssumptions:
	TV 88/90- M	TV 88/90- M
Mortality Table	3 years1 TV 88/90- W -	3 years1 TV 88/90- W -
Disability table	EKV 80	EKV 80
Staff turnover	0 %	0 %
Decreases	by mortality	by mortality
Fina nc ia l a ssumptions
Discount rate
Beginning of period	2.00%	2.00%
End of period	2.08%	2.00%
Pensionable salaries growth rate	0.50%	0.50%
Pensions growth rate 2	0.50%	0.50%

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

The liabilities for past services of Board members and respective coverage by the Pension Fund are as follows:
	30- 06- 2018	31- 12- 2017
Current past services liabilities	( 55 338)	( 55 980)
Net assets of the Pension Fund	53 632	51 219
Contributions to be transferred to the Pension Fund		4 132
Coverage surplus/(shortfall)	( 1 706)	( 629)
Coverage ratio of liabilities	97%	99%

The return of the pension fund in the first half of 2018 was -0.9% (non-annualised).

The movement in actuarial deviations in the first half of 2018 was as follows:

Amount at 31 December 2017	( 12 467)
Deviation in pension funds return	( 1 028)
Change in financial and demographic assumptions
Change in discount rate	137
Deviation in pensions paid	151
Amount at 30 June 2018	( 13 207)

18. SHAREHOLDERS' EQUITY

Capital

As at 30 June 2018 and 31 December 2017, Banco BPI 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

Other equity instruments and treasury shares The caption has the following composition:
	30- 06- 2018	31- 12- 2017 Restated
Other equity
Cost of shares to be made available to Group Employees	508	1 211
Costs of options not exercised (premiums)	1 086	1 065
	1 594	2 276
Own shares hedging RVA options	377	377
	377	377

The caption 'Other equity instruments includes the accrued costs of the share-based variable remuneration programme (RVA) relating to shares to be made available and options not yet exercised.

The Bank holds a portfolio of treasury shares, which are recorded at cost in equity captions and are not subject to revaluation. Realised gains and losses on the sale of treasury shares, as well as the resulting taxes, are recorded directly in shareholders' equity, not affecting net income for the period.

These treasury shares are intended to provide coverage for the RVA programme maintained by the Bank until 2016.

From 2018 onwards, and with reference to the RVA 2017 programme, 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.

Accumulated other comprehensive income

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

The most significant change in this caption resulted from the impact of the devaluation of the Angolan kwanza on the carrying value of the holding in Banco de Fomento Angola (Note 9).

Retained earnings and other reserves

Retained earnings and other reserves This caption is made up as follows:
	30- 06- 2018	31- 12- 2017 Restated
Legal reserve	153 358	130 081
Merger reserve	2 530	2 530
Other reserves and retained earnings	1 007 406	815 821
Reserves of fully consolidated companies	12 464	( 608)
Reserves of equity consolidated companies	508 748	735 404
Profit/(loss) generated on change of accounting policies	( 2 837)	( 1 069)
	1 681 669	1 682 159

In accordance with Article 97 of the General Law on Credit Institutions and Financial Companies, approved by Decree-Law no. 298/91 of 31 December and amended by Decree-Law no. 201/2002 of 25 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.

19. OFF-BALANCE SHEET ITEMS

This caption is made up as follows:
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Guarantees given and other contingent liabilities
Guarantees and sureties	1 379 697	1 394 398
Standby letters of credit	44 265	47 448
Documentary credits	172 036	130 946
Sureties and indemnities	66	66
	1 5 9 6 0 6 4	1 5 7 2 8 5 8
Assets pledged as collateral
European System of Central Banks	7 814 818	7 530 249
Deposit Guarantee Fund	43 431	43 819
Investors Compensation Scheme	5 996	5 725
European Investment Bank	1 367 801	1 362 939
Reports	1 821 009	93 414
Other	54	56
	11 0 5 3 10 9	9 0 3 6 2 0 2
Commitments to third parties
Irrevocable commitments
Options on assets	6	6
Irrevocable credit lines	310	737
Securities subscribed	464 419	407 926
Term liabilities for annual contributions to the Deposit Guarantee Fund	38 714	38 714
Term liabilities for annual contributions to the Resolution Fund	6 715	4 640
Potential liability to the Investor Compensation Scheme	11 303	10 825
Other irrevocable commitments	1 704	1 457
Revocable commitments	2 634 820	2 821 200
	3 15 7 9 9 1	3 2 8 5 5 0 5

20. NET INTEREST INCOME

This caption is made up as follows:

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
Inte re st inc ome
Financial assets held for trading	20 360	20 997
Financial assets at fair value through profit or loss	2 644
Financial assets at fair value through other comprehensive income 1	6 308	9 415
Financial assets at amortised cost
Debt securities	12 427	9 942
Loans and advances - Central Banks and Credit Institutions	3 917	4 010
Loans and advances - Customers	186 305	180 750
Derivatives - Hedge accounting, interest rate risk	671	1 183
Other assets	2 294	1 627
Interest income on liabilities	1 209	1 143
Commissions received relating to amortised cost
From Customer loans	9 721	9 759
From other operations	785	633
	2 4 6 6 4 1	2 3 9 4 5 9
Inte re st e xpe nse s
Financial liabilities held for trading	( 10 006)	( 15 362)
Financial liabilities at amortised cost
Deposits - Credit Institutions	( 2 207)	( 2 767)
Deposits - Customers	( 9 643)	( 10 625)
Debt securities issued	( 10 682)	( 9 251)
Derivatives - Hedge accounting, interest rate risk	( 5 768)	( 8 453)
Other liabilities	( 1 045)	( 547)
Interest expense on assets	( 12)	( 10)
Commissions paid relating to amortised cost
On other operations	( 118)	( 47)
	( 3 9 4 8 1)	( 4 7 0 6 2 )
Ne t inte re st inc ome	2 0 7 16 0	19 2 3 9 7

1 At 30 June 2017 includes interest from available-for-sale financial assets

21. FEE AND COMMISSION INCOME AND EXPENSES

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
Fe e a nd c ommission inc ome
On guarantees provided	6 878	6 227
On commitments to third parties	2 044	1 102
On other banking services provided	121 786	114 717
On operations performed on behalf of third parties	6 710	6 989
Other	971	262
Refund of expenses	15 197	14 848
Income from provision of sundry services	4 430	3 129
	15 8 0 16	14 7 2 7 4
Fe e a nd c ommission e xpe nse s
For guarantees received	( 24)	( 28)
On financial instruments' transactions	( 131)	( 98)
On banking services provided by third parties	( 18 007)	( 17 591)
On operations performed by third parties	( 1 577)	( 1 876)
Commission- equivalent expenses	( 3 350)	( 3 795)
Other	( 291)	( 199)
	( 2 3 3 8 0 )	( 2 3 5 8 7 )

22. GAINS/(LOSSES) ON FINANCIAL ASSETS AND LIABILITIES

This caption is made up as follows:	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
Ne t ga in/(loss) on de re c ognition of fina nc ia l a sse ts a nd lia bilitie s not me a sure d a t fa ir va lue through profit or loss	3 4 7 5	9 6 8
Financial assets at fair value through other comprehensive income Debt instruments	416
Available- for- sale financial assets Debt instruments Equity instruments Other securities		811 ( 1) ( 64)
Financial assets at amortised cost Debt instruments Financial liabilities at amortised cost	( 514) 3 572	( 597) 818
Other	1	1
Ne t ga in/(loss) on fina nc ia l a sse ts a nd lia bilitie s he ld for tra ding Trading derivatives Debt instruments	2 6 18 9 31 965 189	8 7 10 ( 24 543) ( 4 429)
Equity instruments Financial liabilities held for trading	( 5 965)	38 011 ( 329)
Ne t ga in/(loss) on non- tra ding fina nc ia l a sse ts ma nda torily a c c ounte d for a t fa ir va lue through profit or loss Debt instruments Equity instruments	6 0 3 14 ( 1 898) 62 212
Ne t ga in/(loss) on fina nc ia l a sse ts a nd lia bilitie s a c c ounte d for a t fa ir va lue through profit or loss		13
Equity instruments	8 9 9 7 8	13 9 6 9 1

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..

23. OTHER OPERATING INCOME AND EXPENSES

This caption is made up as follows:	30- 06- 2018	30- 06- 2017 Restated
Other operating income	5 110	2 602
	5 110	2 602
Other Operating expenses
Subscriptions and donations	( 1 354)	( 1 411)
Contributions to the Deposit Guarantee Fund	( 34)	( 18)
Contributions to the Resolution Fund	( 5 452)	( 3 876)
Contributions to the Single Resolution Fund	( 11 761)	( 11 355)
Contributions to the Investor Compensation Scheme	( 7)	( 7)
Other operating expenses	( 465)	( 1 338)
Indirect taxes	( 1 271)	( 1 235)
Direct taxes	( 519)	( 1 016)
	( 20 863)	( 20 256)

24. STAFF EXPENSES

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
Sta ff Costs
Remuneration	( 94 188)	( 104 254)
Other mandatory social costs	( 25 785)	( 28 425)
Pension costs (Note 4.xx)
Current service cost	2 429	1 267
Interest cost relating to the liabilities	( 16 495)	( 14 921)
Income on plan assets computed based on the discount rate	16 636	14 513
Other	( 380)	1 171
Other staff costs	( 1 465)	( 3 111)
	( 119 2 4 8 )	( 13 3 7 6 0 )
Costs with e a rly re tire me nts a nd te rmina tions
Early retirements (Note 4.xx)	( 3 353)	( 68 605)
Voluntary terminations	( 4 227)	( 36 519)
	( 7 5 8 0 )	( 10 5 12 4 )
	( 12 6 8 2 8 )	( 2 3 8 8 8 4 )

In 2017, Banco BPI implemented an early retirement and voluntary terminations programme that resulted in the progressive termination of 515 Employees' contracts, of which 289 due to early retirement, and 226 due to voluntary termination, with a total cost of 90 million. An additional 98 workers had already settled a voluntary agreement for contract termination, to whom the same conditions of the program were applied. At 30 June 2017 Banco BPI recognised the total estimated cost on that date of the retirement and terminations programme, in the amount of 105 million.

25. OTHER ADMINISTRATIVE EXPENSES

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17 Re sta te d
General administrative costs
Supplies
Water, energy and fuel	( 3 430)	( 3 475)
Consumables	( 941)	( 1 089)
Other	( 209)	( 257)
Services
Rents and leases	( 20 522)	( 20 005)
Communications and IT	( 17 545)	( 16 000)
Travel, lodging and representation	( 2 431)	( 2 371)
Advertising and publishing	( 6 476)	( 4 699)
Maintenance and repairs	( 7 125)	( 6 419)
Insurance	( 925)	( 1 400)
Fees	( 1 936)	( 2 373)
Legal expenses	( 2 511)	( 2 715)
Security and cleaning	( 2 056)	( 1 942)
Information services	( 2 156)	( 2 437)
Temporary labour	( 1 122)	( 1 320)
Studies, consultancy and auditing	( 3 693)	( 2 418)
SIBS	( 1 626)	( 1 655)
Other	( 9 761)	( 8 044)
	( 8 4 4 6 5 )	( 7 8 6 19 )

26. PROFIT

	3 0 - 0 6 - 2 0 18	3 0 - 0 6 - 2 0 17
Ba nks
Banco BPI S.A.	207 966	( 12 120)
Banco Português de Investimento, S.A.	( 1 613)	( 2 237)
Banco de Fomento Angola, S.A.	140 007	( 115 650)
Banco Comercial e de Investimentos, S.A.R.L.	7 071	4 621
Banco BPI Cayman, Ltd		4 913
Asse t ma na ge me nt
BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliários, S.A.	1 724	1 729
BPI - Global Investment Fund Management Company, S.A.	735	1 020
BPI (Suisse), S.A.	985	1 615
BPI Alternative Fund: Iberian Equities Long/Short Fund Luxemburgo		794
Ve nture / de ve lopme nt c a pita l
BPI Private Equity - Sociedade de Capital de Risco, S.A.	585	41
Inter- Risco - Sociedade de Capital de Risco, S.A.	( 42)	( 51)
Insura nc e
BPI Vida e Pensões - Companhia de Seguros, S.A.		5 947
Cosec - Companhia de Seguros de Crédito, S.A.	2 111	2 062
Companhia de Seguros Allianz Portugal, S.A.	4 148	4 260
Othe r
BPI, Inc	( 4)	( 4)
BPI Madeira, SGPS, Unipessoal, S.A.	( 20)	( 6)
BPI Moçambique - Sociedade de Investimento, S.A.		( 21)
BPI Capital Africa	187	( 1 356)
Unicre - Instituição Financeira de Crédito, S.A.	2 217	2 718
	3 6 6 0 5 7	( 10 1 7 2 5 )

27. TAX POSITION

Tax Assets and Liabilities

The breakdown of tax assets and liabilities is as follows:

Tax assets
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Current tax assets	5 537	30 232
Recoverable VAT	18 412	17 768
Deferred tax assets	397 627	405 183
Tota l	4 2 1 5 7 6	4 5 3 18 3

Tax liabilities
	30- 06- 2018	31- 12- 2017 Restated
Current tax liabilities	3 121	3 830
Deferred tax liabilities	69 354	66 792
Total	72 475	70 622

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 loses carried forward and tax credits are also recognised as deferred tax assets.

In accordance with IAS 12, deferred tax assets 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 and liabilities is as follows:
Deferred tax assets
	3 0 - 0 6 - 2 0 18	3 1- 12 - 2 0 17 Re sta te d
Tax losses	21 181	20 559
Application of Art. 4 of the regime set forth in Law 61/2014	31 976	65 549
Taxed provisions and impairments Tax deferral of the impact of the partial transfer of pension liabilities	182 603	158 542
to the Social Security	17 441	18 198
Pension liabilities	34 630	37 954
Actuarial deviations	71 224	75 611
Voluntary terminations programme	5 319	7 014
End of career bonus	1 467	1 463
Tax on dividends	30 650	17 544
Financial instruments at fair value	271	1 570
Other	865	1 179
Tota l	3 9 7 6 2 7	4 0 5 18 3

Deferred tax liabilities
	30- 06- 2018	31- 12- 2017 Restated
Taxable temporary differences in subsidiaries and associated companies (BFA	55 414	62 292
Financial instruments at fair value	2 214	3 255
Other	11 726	1 245
Total	69 354	66 792

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 Corporation Income Tax Code, which provides for the elimination of double taxation of profits distributed.

BPI does not recognise deferred tax assets and liabilities for deductible or taxable temporary differences relating to investments in associated companies, since the stake held by BPI is greater than 10% and was held for more than one year, which enables it to be considered in the Participation Exemption regime, except for Banco Comercial e de Investimentos and Banco de Fomento Angola, in which the deferred tax liabilities relating to taxation in Mozambique and Angola, respectively, 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.

At 30 June 2018 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 158 471 t.euros.

28. 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 their 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.

Na me of re la te d e ntity	He a d	Effe c tive	Dire c t
	Offic e	holding	holding
Assoc ia te d a nd jointly c ontrolle d e ntitie s of Ba nc o BPI
Banco de Fomento Angola, S.A.	Angola	48.1%	48.1%
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%
Pe nsion Funds of Employe e s of the BPI Group
Fundo de Pensões Banco BPI	Portugal	100.0%
Fundo de Pensões Aberto BPI Acções	Portugal	8.2%
Fundo de Pensões Aberto BPI Valorização	Portugal	39.6%
Fundo de Pensões Aberto BPI Segurança	Portugal	21.2%
Fundo de Pensões Aberto BPI Garantia	Portugal	8.3%
Sha re holde rs of Ba nc o BPI
Grupo Caixa Bank	Spain	94.2%
Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI
Fernando Ulrich
Pablo Forero
António Lobo Xavier
Alexandre Lucena e Vale
António Farinha Morais
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
Juan Alcaraz
Lluís Vendrell
Pedro Barreto
Tomás Jervell

At 30 June 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: Compa nie s in

	Assoc ia te d a nd jointly c ontrolle d e ntitie s	Pe nsion Funds of BPI´s Employe e s	Sha re hol de rs of o BPI 1 Ba nc	Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI	Compa nie s in whic h the Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI ha ve signific a nt 2 influe nc e
Asse ts
Cash and cash balances at central banks and other demand deposits			2 046
Financial assets held for trading	19 023		1 859
Financial assets at fair value through other comprehensive income - equity instruments Financial assets at amortised cost			754		50 000
Debt securities					33 000
Loans and advances - Central Banks and Credit Institutions	26 060
Loans and advances - Customers	16		301	7 529	45 182
Derivatives - Hedge accounting			718
Tangible assets Intangible assets			200 13 313
Other assets	91 218		13 908
	13 6 3 17		3 3 0 9 9	7 5 2 9	12 8 18 2
Lia bilitie s
Financial liabilities held for trading			711
Financial liabilities at amortised cost
Deposits - Customers	74 443	91 869	395 257	5 731	4 948
Deposits - Credit Institutions	684 011		9 963
Debt securities issued			304 421
Other financial liabilities	10		56	24	19
Fair value changes of the hedged items in portfolio hedge of interest rate risk			160
Provisions - Commitments and guarantees given	1				5
	7 5 8 4 6 5	9 1 8 6 9	7 10 5 6 8	5 7 5 5	4 9 7 2
Ca pita l Fair value changes of equity instruments measured at fair value through
other comprehensive income			( 98)
			( 9 8 )
Off ba la nc e she e t ite ms
Guarantees given and other contingent liabilities
Guarantees and sureties	11 624	60	341	3	20 349
Open documentary credits	72 790
Guarantees received	89 633			2 843	2 234
Commitments to third parties
Revocable commitments	5 136		225	214	35 611
Irrevocable commitments	1 236				21 000
Liabilities for services provided
Deposit and safekeeping of valuables	1 091 944	1 587 159	6 142 460	6 732	37 690
Other					4 000
Foreign exchange transactions and derivative instruments
Purchase	40 965		932 897		254
Sale	( 40 980)		( 848 856)		( 255)
Written- off loans					200
Other off- balance sheet items					350

¹Includes the CaixaBank Group and the companies which it controls.

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

At 31 December 2017 Restated, 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: Compa nie s in

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:
	Assoc ia te d a nd jointly c ontrolle d e ntitie s	Pe nsion Funds of BPI's Employe e s	Sha re hol de rs of o BPI 1 Ba nc	Me mbe rs of the Boa rd of Dire c tors of o BPI 2 Ba nc	Compa nie s in whic h the Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI ha ve signific a nt e 3 influe nc
Asse ts
Cash and cash balances at central banks and other demand deposits			2 569
Financial assets held for trading	1 843		1 871
Available- for- sale financial assets			88		122 211
Financial assets at amortised cost
Loans and advances - Central Banks and Credit Institutions	21 498		800
Loans and advances - Customers	12		1 371	7 837	87 522
Derivatives - Hedge accounting			108
Tangible assets			243
Intangible assets			13 209
Other assets	80 363		17 699	1
Non- current assets and disposal groups classified as held for sale			165
	10 3 7 16		3 8 12 3	7 8 3 8	2 0 9 7 3 3
Lia bilitie s
Financial liabilities held for trading			1 354
Financial liabilities at amortised cost
Deposits - Customers	55 437	293 069	546 456	8 101	26 852
Deposits - Credit Institutions	602 584		3 087		630
Debt securities issued Other financial liabilities			304 466	24	19
Provisions - Commitments and guarantees given	21		2		116
Other liabilities	83
	6 5 8 12 5	2 9 3 0 6 9	8 5 5 3 6 5	8 12 5	2 7 6 17
Off ba la nc e she e t ite ms
Guarantees given and other contingent liabilities
Guarantees and sureties	11 313	60	1 613	14	24 895
Open documentary credits	33 108
Guarantees received	84 005		66	2 876	2 231
Commitments to third parties
Revocable commitments	467		237	849	37 361
Irrevocable commitments	971				32 401
Liabilities for services provided
Deposit and safekeeping of valuables	1 122 790	1 210 366	5 510 394	195 272	45 087
Other			6 661 665		438
Foreign exchange transactions and derivative instruments
Purchase	62 625		254 103
Sale	( 62 629)		( 222 972)
Written- off loans					200
	1 2 5 2 6 5 0	1 2 10 4 2 6	12 2 0 5 10 6	19 9 0 11	14 2 6 13

¹Includes the CaixaBank Group and the companies which it controls.

2 Includes the Members of the Board of Directors, also including Allianz Europe Ltd., the companies that control it, including Allianz SE, and the companies controlled by it, except Allianz Portugal,

which was considered under associated companies.

3 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 profit/(loss) 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: Compa nie s in

	Assoc ia te d a nd jointly c ontrolle d e ntitie s	Pe nsion Funds of BPI's Employe e s	Sha re hol de rs of o BPI 1 Ba nc	Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI	Compa nie s in whic h the Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI ha ve signific a nt 2 influe nc e
Profit or loss
Net interest income	( 1 603)	( 396)	( 4 595)	( 2)	245
Dividend income					1 116
Fee and commission income	25 717	207	17 272	1	2
Net gain/(loss) from hedge accounting			105
Other operating income	30		2 676
Administrative expenses - other administrative expenses	( 479)	( 7 659)	( 1 015)
Provisions or reversal of provisions - Commitments and guarantees given	20				79
Impairment or reversal of impairment on financial assets not measured at fair value			2	8	246
Profit/(loss) before tax from discontinued operations			61 755
	2 3 6 8 5	( 7 8 4 8 )	7 6 2 0 0	7	1 6 8 8

¹Includes the 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 2017 Restated the total amount of profit/(loss) 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: Compa nie s in whic h the

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:	Assoc ia te d a nd jointly c ontrolle d e ntitie s	Pe nsion Funds of BPI's Employe e s	Sha re hol de rs of o BPI 1 Ba nc	Me mbe rs of the Boa rd of Dire c tors of o BPI 2 Ba nc	whic h the Me mbe rs of the Boa rd of Dire c tors of Ba nc o BPI ha ve signific a nt 3 influe nc e
Profit or loss
Net interest income	( 141)	( 395)	( 3 209)		260
Dividend income					5 154
Fee and commission income	22 156	30	144	27	177
Administrative expenses - other administrative expenses	( 476)	( 1 714)
Provisions or reversal of provisions - Commitments and guarantees given	( 5)			47	( 153)
Impairment or reversal of impairment on financial assets not measured at fair value			( 4)		( 72)
Profit/(loss) before tax from discontinued operations	18	1 000	( 1)	( 7)	1 715
	2 1 5 5 2	( 1 0 7 9 )	( 3 0 7 0 )	6 7	7 0 8 1
1 Includes the CaixaBank Group and the companies which it controls.

2 Includes the Members of the Board of Directors, also including Allianz Europe Ltd., the companies that control it, including Allianz SE, and the companies controlled by it, except Allianz Portugal, which was considered under associated companies.

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

29. SEGMENT REPORTING

BPI's segment reporting is broken down as follows:

• Domestic operations: corresponds to the commercial banking business in Portugal (including the Madrid and Paris branches), and the investment banking, private equity, asset management and insurance operations. Thus, domestic operations are divided into:
• o Commercial Banking
• o Asset Management
• o Investment Banking
• o Equity holdings and other
• International operations: corresponds to the activity developed in Angola by Banco de Fomento, S.A., in Mozambique by Banco Comercial e de Investimentos, S.A. and BPI Moçambique – Sociedade de Investimento, S.A. and in South Africa by BPI Capital Africa (Proprietary) Limited.

Commercial Banking

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

• Retail Banking Ensures commercial operations with individual clients, individual entrepreneurs and companies with revenue of up to 5 million, 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 revenue above 2 million, operating alongside Retail banking in the segment of up to 5 million. 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.

Asset Management

Following the agreement to sell the equity holdings in BPI Vida e Pensões, BPI Gestão de Activos and BPI GIF to the Caixabank Group, a new segment – Asset Management - was introduced in 2017 in BPI's Segment Reporting. In 2017 this segment includes the life insurance, pension fund management and investment fund management businesses conducted by those entities. The commissions received by Banco BPI for the distribution of capitalisation life insurance and investment funds to its Customers (acting as agent for these entities) continue to be included in the commercial banking segment.

In accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, at 30 June 2018 and 2017 the caption 'Profit/(loss) after tax from discontinued operations' includes the net profit/(loss) of BPI Vida e Pensões (only for 30 June 2017), BPI Gestão de Activos and BPI GIF.

Investment Banking

Investment banking covers the following business areas:

• Corporate Finance Consultancy and advisory services related to the structuring of merger and acquisition processes, capital market operations and the analysis of investment projects and decisions.
• Equities Department Includes trading activity, activity in the primary market in financial instruments, brokerage and research.
• Portfolio Management Includes services rendered to BPI Global Investment Fund Management Company, S.A. in connection to the management of the BPI Alternative Fund - Iberian Equities Long Short (until June 2017).

Equity holdings and other

This segment essentially includes the activity related to Equity Holdings and Private Equity. The Private Equity area basically promotes investment in unlisted companies with the following objectives: the development of new products and technologies, the financing of investments in working capital, acquisitions, and the reinforcement of financial autonomy.

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

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.

The accounting information used in management reporting is essentially based on the IFRS.

At 30 June 2018 BPI statement of profit or loss by business segment was as follows:

At 30 June 2018 BPI statement of profit or loss by business segment was as follows:			Dome stic	Ac tivity			Inte rna	tiona l Ac tivity
	Commercial Banking	Investment Banking	Asset Management	Equity holdings and other	Inter- segment transactions	Tota l	Angola	Other	Tota l	BPI Group
Interest income	246 417	35		194	( 5)	246 641				246 641
Interest expenses	( 39 473)	( 12)			5	( 39 480)		( 1)	( 1)	( 39 481)
NET INTEREST INCOME	2 0 6 9 4 4	2 3		19 4		2 0 7 16 1		( 1)	( 1)	2 0 7 16 0
Dividend income	1 194			277		1 471				1 471
Share of profit/(loss) of investments in joint ventures and associates accounted for using the equity method	4 148			4 285		8 433	155 564	7 728	163 292	171 725
Fee and commission income	155 240	3 520			( 744)	158 016				158 016
Fee and commission expenses	( 23 681)	( 436)		( 7)	744	( 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				3 475
Gains/(losses) on financial assets and liabilities held for trading, net	9 026					9 026	17 163		17 163	26 189
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through
profit or loss, net	( 599)			60 913		60 314				60 314
Gains/(losses) from hedge accounting, net	425					425				425
Exchange differences, net gain/(loss)	5 691	1				5 692	( 22 290)		( 22 290)	( 16 598)
Other operating income	5 107	2				5 109		1	1	5 110
Other operating expenses	( 20 819)	( 42)		( 2)		( 20 863)				( 20 863)
GROSS INCOME	3 4 6 15 1	3 0 6 8		6 5 6 6 0		4 14 8 7 9	15 0 4 3 7	7 7 2 8	15 8 16 5	5 7 3 0 4 4
Administra tive e xpe nse s	( 2 0 7 0 5 8 )	( 4 17 3 )		( 3 8 )		( 2 11 2 6 9 )		( 2 4 )	( 2 4 )	( 2 11 2 9 3 )
Staff expenses	( 123 967)	( 2 834)		( 27)		( 126 828)				( 126 828)
Other administrative expenses	( 83 091)	( 1 339)		( 11)		( 84 441)		( 24)	( 24)	( 84 465)
De pre c ia tion a nd a mortisa tion	( 10 3 5 6 )	( 7 0 )				( 10 4 2 6 )				( 10 4 2 6 )
NET OPERATING INCOME	12 8 7 3 7	( 1 17 5 )		6 5 6 2 2		19 3 18 4	15 0 4 3 7	7 7 0 4	15 8 14 1	3 5 1 3 2 5
Provisions or re ve rsa l of provisions	( 2 4 5 0 )					( 2 4 5 0 )		2 10	2 10	( 2 2 4 0 )
Commitments and guarantees given	( 2 272)					( 2 272)				( 2 272)
Other provisions	( 178)					( 178)		210	210	32
Impa irme nt/(re ve rsa l) of impa irme nt losse s on fina nc ia l a sse ts not me a sure d a t fa ir va lue
through profit or loss	13 5 9 0					13 5 9 0				13 5 9 0
Financial assets at amortised cost	13 590					13 590				13 590
Impairment/(reversal) of impairment on non- financial assets	( 1 015)	( 2)				( 1 017)				( 1 017)
Gains/(losses) on derecognition of non- financial assets, net	359					359				359
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	13 9 2 2 1	( 1 17 7 )		6 5 6 2 2		2 0 3 6 6 6	15 0 4 3 7	7 9 14	15 8 3 5 1	3 6 2 0 17
Tax expense or income related to profit or loss from continuing operations	( 45 256)	82		( 192)		( 45 366)	( 14 151)	( 657)	( 14 808)	( 60 174)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	9 3 9 6 5	( 1 0 9 5 )		6 5 4 3 0		15 8 3 0 0	13 6 2 8 6	7 2 5 7	14 3 5 4 3	3 0 1 8 4 3
Profit/(loss) a fte r ta x from disc ontinue d ope ra tions			6 4 2 14			6 4 2 14				6 4 2 14
Profit/(loss) before tax from discontinued operations			64 955			64 955				64 955
Tax expense or income related to profit or loss from discontinued operations			( 741)			( 741)				( 741)
PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	9 3 9 6 5	( 1 0 9 5 )	6 4 2 14	6 5 4 3 0		2 2 2 5 14	13 6 2 8 6	7 2 5 7	14 3 5 4 3	3 6 6 0 5 7

The caption 'Gains/(losses) on assets not designated for trading compulsorily measured at fair value through profit or loss', in the segment Equity holdings and other, includes 59 581 t.euros relating

to the sale of the equity holding in Viacer.

At 30 June 2017 Restated BPI statement of profit or loss by business segment was as follows:
			Dome stic	Ac tivity			Inte rna tiona l Ac tivity
	Commercial Banking	Investment Banking	Asset Management	Equity holdings and other	Inter- segment transactions	Tota l	Angola	Other	Tota l	Inte r se gme nt tra nsa c tions	BPI Group
Interest income	239 252	( 122)		174	145	239 449		34	34	( 24)	239 459
Interest expenses	( 46 485)	( 308)			( 145)	( 46 938)		( 148)	( 148)	24	( 47 062)
NET INTEREST INCOME	19 2 7 6 7	( 4 3 0 )		17 4		19 2 5 11		( 114 )	( 114 )		19 2 3 9 7
Dividend income	3 980			2 421		6 401					6 401
Share of profit/(loss) of investments in joint ventures and associates accounted
for using the equity method	4 260			4 730		8 990	106 670	5 052	111 722		120 712
Fee and commission income	143 948	5 618			( 2 866)	146 700		574	574		147 274
Fee and commission expenses	( 23 696)	( 2 755)		( 2)	2 866	( 23 587)					( 23 587)
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through
profit or loss, net	968					968					968
Gains/(losses) on financial assets and liabilities held for trading, net	5 902	2 808				8 710					8 710
Gains/(losses) on financial assets and liabilities accounted for at fair value through profit or loss, net	13					13					13
Gains/(losses) from hedge accounting, net	124					124					124
Exchange differences, net gain/(loss)	4 777					4 777					4 777
Other operating income	2 567					2 567		35	35		2 602
Other operating expenses	( 20 088)	( 109)		( 28)		( 20 225)		( 31)	( 31)		( 20 256)
GROSS INCOME	3 15 5 2 2	5 13 2		7 2 9 5		3 2 7 9 4 9	10 6 6 7 0	5 5 16	112 18 6		4 4 0 13 5
Administra tive e xpe nse s	( 3 0 8 5 3 4 )	( 7 7 8 0 )		( 118 )		( 3 16 4 3 2 )		( 1 0 7 1)	( 1 0 7 1)		( 3 17 5 0 3 )
Staff expenses	( 232 054)	( 5 904)		( 105)		( 238 063)		( 821)	( 821)		( 238 884)
Other administrative expenses	( 76 480)	( 1 876)		( 13)		( 78 369)		( 250)	( 250)		( 78 619)
De pre c ia tion a nd a mortisa tion	( 10 8 9 2 )	( 8 3 )				( 10 9 7 5 )		( 2 7 )	( 2 7 )		( 11 0 0 2 )
NET OPERATING INCOME	( 3 9 0 4 )	( 2 7 3 1)		7 17 7		5 4 2	10 6 6 7 0	4 4 18	111 0 8 8		111 6 3 0
Provisions or re ve rsa l of provisions	4 2 5					4 2 5					4 2 5
Commitments and guarantees given	1 916					1 916					1 916
Other provisions	( 1 491)					( 1 491)					( 1 491)
Impa irme nt/(re ve rsa l) of impa irme nt losse s on fina nc ia l a sse ts not me a sure d a t fa ir
va lue through profit or loss	( 8 7 9 0 )	2		( 17 9 )		( 8 9 6 7 )		( 6 9 9 )	( 6 9 9 )		( 9 6 6 6 )
Available- for- sale financial assets	620			( 179)		441		( 699)	( 699)		( 258)
Financial assets at amortised cost	( 9 410)	2				( 9 408)					( 9 408)
Impairment/(reversal) of impairment on non- financial assets	4 713					4 713					4 713
Gains/(losses) on derecognition of non- financial assets, net	2 993					2 993					2 993
	( 4 5 6 3 )	( 2 7 2 9 )		6 9 9 8		( 2 9 4 )	10 6 6 7 0	3 7 19	110 3 8 9		110 0 9 5
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS Tax expense or income related to profit or loss from continuing operations	3 249	830		( 1 098)		2 981	( 10 699)	( 475)	( 11 174)		( 8 193)
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	( 1 3 14 )	( 1 8 9 9 )		5 9 0 0		2 6 8 7	9 5 9 7 1	3 2 4 4	9 9 2 15		10 1 9 0 2
Profit/(loss) a fte r ta x from disc ontinue d ope ra tions	( 6 7 7 )		8 6 9 5			8 0 18	( 2 11 6 2 1)		( 2 11 6 2 1)		( 2 0 3 6 0 3 )
Profit/(loss) before tax from discontinued operations	( 677)		11 481			10 804	( 174 851)		( 174 851)		( 164 047)
Tax expense or income related to profit or loss from discontinued operations			( 2 786)			( 2 786)	( 36 770)		( 36 770)		( 39 556)
PROFIT/(LOSS) FOR THE PERIOD	( 1 9 9 1)	( 1 8 9 9 )	8 6 9 5	5 9 0 0		10 7 0 5	( 115 6 5 0 )	3 2 4 4	( 112 4 0 6 )		( 10 1 7 0 1)
						( 2 4 )					( 2 4 )
PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE NO NON- CONTROLLING INTERESTS	( 2 4 )
Profit/(loss) of non- controlling interests	( 24)					( 2 4 )					( 2 4 )
PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	( 2 0 15 )	( 1 8 9 9 )	8 6 9 5	5 9 0 0		10 6 8 1	( 115 6 5 0 )	3 2 4 4	( 112 4 0 6 )		( 10 1 7 2 5 )

30. WORKFORCE AND COMMERCIAL UNITS

The table below shows the breakdown of the average and end-of period number of employees in June 2018 and 2017.

	30- 06-	2018	30- 06- 2017
	Average in period	End of period	Average in period	End of period
Directors	8	8	7	7
Management staff	434	432	3960	4249
Other staff	3993	3971	889	553
Other employees	535	492	737	715
	4970	4903	5593	5524

	30- 06- 2018
	Average in period	End of period
Activity in Portugal	502	497
Branches (no.)	428	423
Premier centres	3 9	3 9
Corporate Centres	3 5	3 5
Branches abroad	2	2
	504	499

31. SUBSEQUENT EVENTS

Sale of equity holdings and businesses

On 23 November 2017 and 21 December 2017, Banco BPI publicly announced that, following the acquisition proposals presented to it by its shareholder CaixaBank S.A., it had signed the agreements on the following transactions:

• Sale of shares representing the entire share capital of BPI Vida e Pensões, Companhia de Seguros, S.A., to the CaixaBank Group company VidaCaixa S.A.U. de Seguros y Reaseguros, for the price of 135 million; This transaction was completed in December 2017.
• Sale of shares representing the entire share capital of BPI Gestão de Activos, Sociedade Gestora de Fundos de Investimento, S.A. and BPI Global Investment Fund Management Company S.A. (BPI GIF) to the CaixaBank Group company CaixaBank Asset Management SGIIC, S.A.U, for the price of 75 million and 8 million, respectively. This transaction was completed in April 2018.
• Sale by Banco Português de Investimento, S.A. to CaixaBank of the legal positions in the stock brokerage, research and corporate finance operations for a consideration equivalent to the book value of the net assets of those activities on the transaction closing date (estimated at around 4 million).
• Sale of the legal positions in the means of payment (debit and credit cards) issuance business to CaixaBank Payments Establecimiento Financiero de Credito de Entidades de Pago S.A. (CB Payments), a company fully held by CaixaBank, for the price of 53 million. This transaction also included the sale of the outstanding credit arising from the utilisation of credit cards for their book value net of impairments less the amount corresponding to the respective capital requirements.
• Sale of the legal positions in the merchant acquiring business to Comercia Global Payments, Entidad de Pago, S.L, for a consideration of 60 million (pre-tax capital gain of 58 million). Comercia is a joint venture vehicle of CaixaBank and Global Payments Inc.Global Payments Inc.. The operation was completed in August 2018.

In the context of the transactions described above, Banco BPI entered several service provision agreements under which it will provide to the companies sold or to the purchasing companies a set of instrumental services to the operations sold.

Banco BPI's Board of Directors approved the transactions described above with the aim of improving over the medium and long term the commercial offer to its Customers, creating synergies with the CaixaBank Group and enabling Banco BPI to concentrate on the banking business. Banco BPI will maintain the relationship with the Customers of the activities concerned, acting as agent for the companies sold or for the acquiring companies.

Given that the transactions concerned constitute related party transactions, the corresponding resolutions taken by the Board of Directors required a previous analysis and opinion issued by a Board of Directors committee composed of non-executive members of the Board of Directors and by the Supervisory Board.

The conclusion of the transactions still outstanding is pending the fulfilment of the conditions precedent to which they were subject, namely obtaining the authorisations from the relevant authorities. These transactions are expected to be concluded in the 4th quarter of 2018.

Loss of Banco BPI's public company status

On 29 June the General Meeting of Banco BPI resolved, under the terms of article 27 (1-b) of the Portuguese Securities Code, on the loss of Banco BPI's public company status.

On 12 July, pursuant to said resolution, Banco BPI submitted to the CMVM a request for approval to the loss of public company status.

On 23 August the CMVM informed BPI and the market that, pursuant to Article 188/4 of the Securities Code, applicable by reference to Article 27/4 of same Code, it had on the same date requested the Chartered Accountants Bar Association to appoint an independent auditor to set the minimum consideration to be offered due to loss of public company status of Banco BPI, SA, for the acquisition of the shares belonging to the shareholders who were not present or represented or voted in favour at the meeting where the resolution on loss of public company status was passed.

As stated therein, this resolution of the CMVM is based on the fact that the consideration offered was set by agreement between the acquirer and the seller via private negotiation, thus being presumed unfair, pursuant to Article 188/3/a of the Securities Code.

On 11 September the CMVM informed Banco BPI that, by indication of the Management Board of the Chartered Accountants Bar Association, the company "RSM & Associados, SROC, Lda" represented by Joaquim Patrício da Silva Statutory Auditor no. 320 registered in the CMVM under no. 20160076, had been appointed as independent auditor to exercise the public interest functions of setting the minimum consideration to be offered in the context of the process of Banco BPI's loss of public company status.

32.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.

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 2018, 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 2018 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)
José Pena do Amaral	(Member)
Pedro Barreto	(Member)
João Pedro Oliveira e Costa (Member)
Alexandre Lucena e Vale	(Member)
António Farinha de Morais (Member)
Francisco Manuel Barbeira (Member)
Ignacio Alvarez Rendueles	(Member)

Porto, 24 September 2018

Auditors' Report

(Free translation from the original in Portuguese)

Report on the audit of the condensed interim consolidated financial statements

Opinion

We have audited the accompanying condensed interim consolidated financial statements of Banco BPI, S.A. ("Group", "Banco BPI" or "Bank"), which comprise the statement of financial position as at June 30, 2018 (which shows total assets of Euro 32.278.311 thousand and total shareholders' equity of Euro 3.125.706 thousand including a net profit of Euro 366.057 thousand), the statement of income, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the six-month period then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying condensed interim consolidated financial statements present fairly in all material respects, the financial position of Banco BPI, S.A. as at June 30, 2018, and its financial performance and its cash flows for the year then ended in accordance with International Accounting Standard 34 (IAS 34), as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Our responsibilities under those standards are described in the "Auditor's responsibilities for the audit of the condensed interim consolidated financial statements" section below. In accordance with the law we are independent of the Entity and we have fulfilled our other ethical responsibilities in accordance with the ethics code of the Institute of Statutory Auditors.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of management and supervisory board for the condensed interim consolidated financial statements

Management is responsible for:

a) the preparation of the condensed interim consolidated financial statements, which present fairly the financial position, the financial performance and the cash flows of the Entity in accordance with International Accounting Standard 34 (IAS 34), as adopted by the European Union;

b) the preparation of the Directors' Report in accordance with the applicable law and regulations;

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

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c) the creation and maintenance of an appropriate system of internal control to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;

d) the adoption of appropriate accounting policies and criteria; and

e) the assessment of the Entity's ability to continue as a going concern, disclosing, as applicable, events or conditions that may cast significant doubt on the Entity's ability to continue its activities.

The supervisory board is responsible for overseeing the process of preparation and disclosure process of the Entity's financial information.

Auditor's responsibilities for the audit of the financial statements

Our responsibility is to obtain reasonable assurance about whether the condensed interim consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

a) identify and assess the risks of material misstatement of the condensed interim consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

b) obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;

c) evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

d) conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern;

e) evaluate the overall presentation, structure and content of the condensed interim consolidated financial statements, including the disclosures, and whether those financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

f) obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the condensed interim consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion; and

g) communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Our responsibility also includes verifying that the information included in the Directors' report is consistent with the financial statements

Report on other legal and regulatory requirements

Director's report

In our opinion the Director's report has been prepared in accordance with applicable requirements of the law and regulation, the information included in the Directors' report is consistent with the audited condensed interim consolidated financial statements and, taking into account the knowledge and assessment about the Bank, no material misstatements were identified.

27 September 2018

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:

José Manuel Henriques Bernardo, R.O.C.

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.)