Banco Comercial Portugues

Investor Presentation • Sep 24, 2015

Matías Rodríguez Inciarte

Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the "SEC") could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.

Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever.

Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities. No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000.

Note: Statements as to historical performance, share price or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast.

Note: The businesses included in each of our geographical segments and the accounting principles under which their results are presented here may differ from the businesses included in our public subsidiaries in such geographies and the accounting principles applied locally. Accordingly, the results of operations and trends shown for our geographical segments may differ materially from those disclosed locally by such subsidiaries.

1 Santander Risk Management Model

3 Conclusions

Risk management levers

Simple commercial business

Balance-sheet focused on retail and commercial activities customer oriented

(Dec'14, €bn)

Cash and deposits at credit institutions	156	• Credit Risk
Derivatives	77	Our core business
AFS Portfolio	115
Trading Portfolio	67
Gross loans to customers	762	• Operational Risk Limited exposure with strong control culture
		• Market and Structural Risk Low complexity and customer driven activity
Others	89

1,266

Credit Risk Diversification

Risk Appetite: medium-low risk profile

Group Wide Risk Management in an autonomous subsidiary model

Group-Subsidiaries model: adding value to the sum of the parts

• Double control layer both local and global, ensuring effectively a low medium risk profile
• Sharing best risk management practices across all geographies
• Forward looking approach both at local and global functions
• Excellence in risk management models: the global methodology boosts R&D which is cascaded down into local units
• Embedding of risk management in the strategic plans both at local and global levels

Independent risk management

Pro-active and effective risk management

Santander's risk management capabilities have been successfully applied across different geographies and scenarios

SPAIN - Real Estate portfolio run down

Real Estate Stock Evolution (€bn)

	Dec'11	Jun'15	Var 11-15		Coverage Jun'15
Santander	32.0	14.8	-17.2	-54%	58%
Peer 1(1)	27.0	26.2	-0.8	-3%	55%
Peer 2(1)	37.5	27.8	-9.7	-26%	45%
Peer 3(1)	29.0	26.2	-2.8	-10%	43%

(1) CaixaBank, Sabadell (Dec'14), BBVA

(2) Cost of credit = 12 month loan-loss provisions / average lending

Note graph "over 90 rate": Itaú, Bradesco

BRAZIL- Better mix and pro-active risk management explains Cost of Credit2 reduction and the convergence in over 90 rate with our peers

Cost of credit2 (%)

Jun'12 Dec'12 Jun'13 Dec'13 Jun'14 Dec'14 Jun'15

Sustainability, low volatility and improving solvency (1/2)

(1) Global systemic all-important banks excluding Chinese banks (2) PPP: pre-provision profit

Sustainability, low volatility and improving solvency (2/2)

Capital adequacy resilience under the ECB Comprehensive Assessment stress test

• The comprehensive assessment underscored the resilience of the Group's balance sheet
• Lowest adjustment among its peers (-4 b.p.), which shows risks correctly classified and adequate coverage ratios
• In the adverse scenario, Santander is the bank with the least negative impact (-33 b.p) among the big European banks

Santander	-4
DB	-7
BNP	-15
C. Agricole	-18
Unicredit	-19
BBVA	-21
SocGen	-22
Intesa	-25
ING	-29
-55 Commerzbank

AQR impact on CET1 (b.p.) Stress test impact1 on fully loaded CET1 adverse scenario (b.p.)

Santander	-33
BBVA	-102
ING	-142
Nordea	-156
HSBC	-160
Barclays	-199
Commerzbank	-200
DB	-214
C. Agricole	-225
Unicredit	-250
SocGen	-253
BNP	-272
RBS	-292
Intesa	-300
Lloyds	-410

(1) Difference between fully loaded CET1 2013 and fully loaded CET1 2016 adverse scenario

1 Santander Risk Management Model

3 Conclusions

Credit Risk Forecast

proactive risk pricing policies

(1) Average cost of credit 2015, 2016, 2017, 2018 Cost of credit = 12 month loan-loss provisions / average lending

Credit Risk Forecast: Brazil

Increased resilience through tighter Risk policies and better portfolio mix will enable Santander Brazil to successfully overcome a tougher environment

• Improved underwriting models: enhanced capabilities for discrimination in Individuals and SMEs
• Focused on products with a better risk profile (payroll loans, mortgages, adquirência1)
• Migration from revolving to instalment products alongside higher collateralisation of the portfolio
• Management of risk appetite by sectors
• Customer vision centrered risk models
• Boosting non-standardised management in SMEs
• Improved collection models, focused on early delinquency, and channels, leveraging the branch network

(1) Adquirência: Financing of delay on credit card payments to retail stores (2) Cost of credit = 12 month loan-loss provisions / average lending (3) Average 2015, 2016, 2017, 2018

Brazil cost of credit2 projection (%)

Change in portfolio mix 2009 – 2015

Underwriting, Monitoring & Recoveries

Market Risk

(1) Relative to the trading activity of wholesale banking in financial markets. There are other positions catalogued as trading for accounting purposes. The total VaR of trading of this accounting perimeter was EUR13MM

Structural Risk

Interest Rate Risk: profile remains low, covering budgeted financial margin (sens. 100b.p. <3%) and equity value (sens. 100b.p.<4%)

• Management decisions taken by country's ALCO in coordination with Global ALCO under risk policies and limits approval
• ALCO decisions aim to give stability and recurrence to the net interest margin of commercial activity and the economic value, while keeping appropriate levels of liquidity and solvency

Liquidity: comfortable liquidity position under normal and stressed circumstances, meeting regulatory requirements ahead of schedule

• Comfortable and stable liquidity levels thanks to solid retail banking business model, decentralised funding model and prudent risk management
• Compliance ahead of schedule with regulatory requirements
• High level of customer deposits. Loan to Deposit ratio (LTD) for parent company was 117% as of June 2015
• Sound short and long-term liquidity ratios. Liquidity Coverage Ratio (LCR) and Structural Funding Ratio for parent company as of June 2015 were 142% and 107%, respectively
• Under stress scenarios the situation remains appropriate, with liquidity horizons above minimum limits

FX Rate Risk hedging policy: mitigates impact on core capital ratio

Operational Risk

Risk profile aligned with our business activities under a conservative risk appetite framework

• Increasing awareness of operational risk in the Group. Integral transformation programme in order to implement AMA1 in all units
• The ratio of operational risk losses vs gross margin is 2.50% as of end 2Q'15, but it is reduced to 1.60% when excluding Brazil´s labor losses (industry wide issue)
• Control of stable Brazil industry labour (trabalhistas) and customer (civeis) cost. Downward trend expected
• Cyber risk: increasing resources and controls. Procurement of insurance policy, creating greater awareness and culture in the bank
• Increasing controls in certain geographies as to mitigate external fraud related to cards and internet banking

(1) Advanced Measurement Approach

Conduct and customer protection, Regulatory Compliance and Reputational Risk

Conduct, Compliance and Reputational Risks, focus for next years

• Conduct, AML, Regulatory and Reputational risks are gaining relevance due to the current regulatory environment
• Control of these risks always has been embedded in our risk culture trough
• Global Product Committee
• Monitoring Global Product Committee
• Board Risk Committee
• This control environment has allowed us not to suffer idiosyncratic events, focusing our losses in common events for all industry
• We continue reinforcing risk management and control of conduct, compliance, reputational and operational risks

2

1 Santander Risk Management Model

Risk profile and strategy

Key takeaways (1/2)

Build our future through forward looking management of all risks, protecting our present through a sound robust control environment

Maintain our risk management model and reinforce:

• Risk Appetite
• Risk Identification and Assessment
• Stress Test and Scenario Analysis
• Models and Model Risk Management
• Lines of Defence (LoD) Framework
• RDA1
• Contingency Plans and Crisis Response
• Risk Culture and Talent

Key takeaways (2/2)

Sustainable growth plan in a medium-low risk profile

Balance sheet focus on retail and commercial

Diversification by geography, segment and customer

Budget and strategic plans embedded in medium-low risk appetite

Double control layer (global and local)

Proactive risk transformation capabilities

• Stability and controlled volatility of results
• Normalisation of cost of credit c.1%(1)

(1) Lower than 1% excluding SCUSA

Appendix

Current focus

(1) Advanced Measurement Approach

Credit Risk by segment and product

(€MM)	Gross loans	% NPL	PD	EL
Mortgages	304,466	2.73%	1.66%	0.15%
Consumer Lending	145,017	5.47%	6.97%	3.70%
SMEs1	55,773	9.17%	5.01%	1.99%
Corporates1	118,981	6.78%	3.21%	0.94%
Real Estate	49,726	15.99%	9.77%	2.41%
SGCB	88,141	2.67%	0.80%	0.30%

TOTAL 762,104 5.19%

• Improving risk profile and maintaining credit policies that ensure portfolio and collateral quality
• Ensuring portfolio quality and improving riskreturn balance
• Strategic portfolio which is intended to consolidate supported by corporate projects initiated in 2014 (e.g., Santander Advance)
• Good quality portfolio reflected in the AQR exercise
• Decrease of the RE concentration in terms of Group exposure and improvement of the portfolio´s credit risk profile
• Business focused on customers, serving their global and local needs with very low NPL ratios

Figures at Dec'14 (1) excl. Real Estate PD: probability of default of a customer within a year EL: expected loss within a year

Credit Risk by segment and product: Mortgages

Improving risk profile and maintaining credit policies that ensure portfolio and collateral quality

(€MM)	Gross loans	% NPL	PD	EL
UK	193,048	1.62%	1.28%	0.03%
Spain	47,721	5.82%	2.48%	0.44%
Portugal	14,805	4.12%	1.73%	0.25%
USA1	11,877	3.43%	3.03%	0.82%
Others	Chile represents 3% of total mortgages / SCF Germany 2% / Poland 2%

TOTAL	304,466	2.73%	1.66%	0.15%

Figures at Dec'14

(1) USA Holding Mortgages include Home Equity loans

PD: probability of default of a customer within a year EL: expected loss within a year

Helping people and businesses prosper 27

• Positive macroeconomic environment. Risk policy is maintained

• Normalisation of the NPL portfolio evolution

• Mortgages portfolio remains stable

• Asset reduction aimed to rebalance the portfolio and improve profitability

Credit Risk by segment and product: Consumer lending

Ensuring portfolio quality and improving risk-return balance

(€MM)	Gross loans	% NPL	PD	EL
Brazil	26,578	8.43%	7.80%	4.56%
USA	25,155	3.93%	17.88%	7.73%
SCF Germany	23,882	3.94%	1.65%	0.80%
SCF Others	27,772	6.55%	3.20%	1.48%

UK represents 8% of total consumer 
              lending / Chile 5% / Spain 5% / SCF Spain 
                                 4%
Others

TOTAL	145,017	5.47%	6.73%	3.46%

• Rebalance risk strategy while keeping high profitability

• SCUSA's growth drives high PD levels and robust risk-adjusted profitability

• Extremely low expected losses

Figures at Dec'14

Credit Risk by segment and product: SMEs¹

Strategic portfolio which is intended to consolidate supported by corporate projects initiated in 2014 (e.g., Santander Advance)

(€MM)	Gross loans	% NPL	PD	EL
Spain	16,482	13.69%	3.88%	1.15%
UK	11,213	5.53%	4.13%	0.90%
Brazil	10,435	8.46%	7.50%	5.25%
USA	4,706	1.34%	1.18%	0.56%
Mexico	2,901	3.13%	7.01%	4.06%
Others	Chile represents 9% of total SMEs / Poland	5% / Portugal 4%
TOTAL	55,773	9.17%	5.01%	1.99%

• Trend to normalisation: improving behaviours along with a positive macro economy
• Extended capacity to service to follow strategy of evolving the portfolio mix

• Policies tightened 2 years ago, predictive admission models help to achieve a better performance

• Outstanding quality standards

• Most of the portfolio are under government guarantee programmes

Figures at Dec'14 (1) excl. Real Estate

Credit Risk by segment and product: Corporates¹

Good quality portfolio reflected in the AQR exercise

(€MM)	Gross loans	% NPL	PD	EL
Spain	57,089	7.70%	3.78%	1.08%
Brazil	14,325	5.04%	3.21%	1.56%
UK	9,214	1.63%	4.13%	0.90%
USA	9,346	1.63%	1.15%	0.16%
Others	Chile represents 6% of total Middle Market/ Mexico 5% / Portugal 3%

• New production increase aligned with positive macro environment. Starting the downward trend of the risk indicators levels
• Tight underwriting criteria and ongoing deleveraging of potential risky customers

• Strengthen risk capabilities to accompany transition for building a retail and corporate bank

• High quality portfolio with low risk profile

Figures at Dec'14

Credit Risk by segment and product: Real estate

Decrease of the RE concentration in terms of Group exposure and improvement of the portfolio´s credit risk profile

(€MM)	Gross loans	% NPL	PD	EL	% Coverage
UK	20,531	1.64%	1.35%	0.20%	34.02%
USA	13,277	0.99%	0.38%	0.08%	103.67%
Spain	9,014	68.19%	44.67%	19.31%	64.60%

Mexico represents 3% of total Real Estate / Poland 3% / Brazil 3% Others

• Run-off portfolio continues to fall at rates of over 45% (YoY)

• On-going deleveraging strategy (-27% YoY)

TOTAL 49,726 15.99% 9.77% 2.41%