Banco Comercial Portugues

Investor Presentation • Feb 20, 2020

FEBRUARY 2020

Banco Comercial Português

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

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

l Figures for 2019 are not audited.

l The information in this presentation is for information purposes only, and should be read in conjunction with all other information made public by the BCP Group.

Significant decrease of NPEs (-€1.3 billion from end-2018) and of cost of risk (72bp in 2019); increased coverage (by loan-loss reserves and total)

Capital ratio of 15.6%*, comfortably above SREP requirements. Organic capital generation and AT1+T2 issues (Jan.19 and Sep.19, respectively) more than compensate for the negative impacts of Euro Bank's acquisition and related to the pension fund

Increasing business volumes, with performing loans up by €5.0 billion and total Customers funds up by €7.7 billion from end-2018

7 *Including unaudited earnings for 2019. | **Minimum phased-in prudential requirements from January 1, 2020, as communicated to the market on December 17, 2019. | ***Deposits, debt securities, assets under management, assets placed with Customers and insurance products (savings and investments).

Growing Customer base, mobile Customers standing out

'000 Customers

Millennium app: increasingly relevant in Customer relationship Annual growth rates (2018-2019)

% digital Customers 47%

% mobile Customers 31%

Dec 17	Dec 18	Dec 19

Strong growth in mobile

+61	+102
%	%
Logins	Sales
+66	+87
%	%
Payments	Transfers

Mobile first: a catalyst for digital growth

• Superior convenience and speed of transactions, with new navigation and expanded payment services, including Mbway
• Redesigned experience on main Customer journeys (e.g. personal credit, savings) with end-to-end transformation of processes
• Customised offer and communication with advanced analytical models
• Product innovation with native digital component (e.g. On/off insurance)
• Open banking and management of other bank's accounts in the app
• 9 • Safety with convenience (e.g. biometrics in MbWay transactions) and privacy mode

Bringing new technologies to processes and business model, with a positive impact on Customer relationship and on the Bank's efficiency

Open banking and new Customer solutions Operating efficiency

Open banking "M Contabilidade"

More than 4,000 companies and accountants already benefit from payment integration, information collection and support to account reconciliation

Account aggregation

Customers can centralise information on their accounts on the Millennium bcp app, including those from other banks

Robotization and artificial intelligence for process automation

at scale, with competence centre equipped with new technologies and creation of a model for industrialization

Reinforcement of internal skills:

New skills and ways of working

new technologies, customer experience and design, advanced analytics and AI, robotics

New service and operative model for the operations area with a strong technological component:

chatbot, new process management and analytics platform, dynamic allocation of tasks to operators to optimize quality and service level

Focus on the development of skills: Millennium Digital Academy

More technology at the service of Customers also at branches: account-

opening with an ID card, digital mobile key and ID card to formalize processes and reinforced self-assisted machines at branches with 24x7 operation

Multidisciplinary teams focused on specific Customer needs; iterative agile methodology for greater speed and scale

Rating upgrades in 2019 recognise Millennium bcp's improved profitability, asset quality and business model

Net earnings of €302.0 million, with a 29% improvement of activity-related earnings

(Million euros)

*Non-usual impact on income taxes in excess of the marginal tax rate on the domestic activity, resulting from the derecognition of DTAs. No impact on capital ratio.

Net earnings of €302.0 million in 2019

(Million euros)	2018	2019	YoY	Impact on earnings
Net interest income	1 423 6 ,	1 548 5 ,	+8 8%	+124 9
Commissions	684 0	703 5	+2 8%	+19 5
Core income	2 107 7 ,	2 252 0 ,	+6 9%	+144 4
Operating excluding non-usual costs items	000 -1 5 ,	103 -1 1 ,	+10 3%	-102 6
Core earnings	1 107 2 ,	1 148 9 ,	+3 8%	+41 7
Non-usual operating costs for salary Bank Compensation temporary cuts, restructuring costs, Euro integration	-26 7	-66 4	+148 3%	-39 6
Other income*	78 9	86 4	+9 5%	+7 5
Operating net income	1 159 3 ,	1 168 9 ,	+0 8%	+9 6
Impairment and provisions	-601 1	-541 6	-9 9%	+59 5
income before income Net tax	558 2	627 3	+12 4%	+69 1
Income , non-controlling interests and discontinued operations taxes	-257 1	-325 3	+26 5%	-68 1
Net income	301 1	302 0	+0 3%	+0 9

*Includes dividends from equity instruments, other net operating income, net trading income and equity accounted earnings. 14

Net interest income increases in spite of an adverse environment

Stronger commissions, in spite of lower market-related fees

Performance of other income reflects stronger trading gains

Recurring operating costs reflect growth strategy

Millennium bcp: one of the most efficient banks in the Eurozone

*Core income = net interest income + net fees and commission income.

Cost of risk continues trending to normalisation

Lower NPEs and strengthened coverage

*By loan-loss reserves, expected loss gap and collaterals. NPE include loans to Customers only, except if otherwise indicated.

21

Customer funds keep growing

*Deposits, debt securities, assets under management, assets placed with Customers and insurance products (savings and investments).

Increasing loan portfolio

Comfortable liquidity position

Capital levels adjusted to business model

**Minimum phased-in prudential requirements from January 1, 2020, as communicated to the market on December 17, 2019.

Capital at adequate levels

Leverage ratio

(Fully implemented, latest available data)

Leverage ratio at 7.0% as of December 31, 2019, a comfortable and comparatively strong figure in European banking

RWA density

(RWAs as % of assets, latest available data)

High RWA density (55% as of December 31, 2019), comparing favourably to most European banking markets

Pension fund

Key figures

(Million euros)

	Dec 18	Jun 19	Dec 19
Pension liabilities	3 066 ,	3 319 ,	3 490 ,
Pension fund	3 078 ,	3 174 ,	3 501 ,
Liabilities' coverage	100%	96%	100%
Fund's profitability	+0 2%	+4 7%	+8 2%

Assumptions

	Dec 18	Jun 19	Dec 19
Discount rate	2.10%	1.60%	1.40%
	0.25% until 2019	0.25% until 2019
Salary growth rate	0.75% after 2019 0.75% after 2019		0.75%
	0.00% until 2019	0.00% until 2019
Pensions growth rate	after 0.50% 2019	after 0.50% 2019	0.50%
Projected of of fund rate return	2.10% assets	1.60%	1.40%
Mortality Tables
Men	Tv 88/90	Tv 88/90	Tv 88/90
Women	Tv 88/90-3 years	Tv 88/90-3 years	Tv 88/90-3 years

Pension fund

• Discount rate and projected rate of return revised downwards to 1.40%, mainly reflecting lower market rates
• Fully-covered (100%) liabilities

Portugal

Increased net income

Net operating revenue

(Million euros)

• Net earnings of €144.8 million in 2019, +25,4% compared to €115.5 million in the previous year
• Net earnings were driven by a significant reduction in credit-loss charges (-28.3%, with cost of risk decreasing to 76bp from 105bp)

Net interest income

(Million euros)

Net interest income stood at €789.2 million in 2019, compared to €803.3 million in 2018. The favourable impacts of a lower wholesale funding cost, of the continued decline in the remuneration of time deposits and of a growing credit portfolio (as the expansion of the performing portfolio exceeded the decrease in NPEs) did not compensate the negative effects of lower credit yields, reflecting the normalisation of the macro-economic environment, and of a lower contribution from the securities portfolio, resulting from both a lower balance of Portuguese sovereign debt and from decreased yields thereon

Continued effort to reduce the cost of deposits

Spread on the performing loan book

• Spread on the book of term deposits of -0.56% in both 2018 and 2019; front book priced at an average spread of -40bp in 2019, still below the current back book's
• Spread on the performing loan portfolio stood at 2.74% in 2019, compared to 2.72% in 2018
• NIM stood at 1.67%

Commissions and other income

Fees and commissions Other income

	2018	2019	YoY
Banking fees and commissions	411 0	431 4	+5 0%
Cards and transfers	111 3	111 2	-0 0%
Loans and guarantees	108 9	112 0	+2 8%
Bancassurance	81 2	86 7	+6 8%
Customer related account	94 8	105 2	+11 0%
Other fees and commissions	14 8	16 2	+9 8%
Market related fees and commissions	64 2	51 8	-19 3%
Securities operations	58 0	46 1	-20 4%
Asset management	6 3	5 7	-9 8%
Total fees and commissions	475 2	483 2	+1 7%

(Million euros)

• Stable commissions in Portugal, despite the challenging context. Income related to bancassurance and to accounts stood out, more than compensating for lower marketrelated fees

Controlled recurring operating costs

Lower NPEs, with reinforced coverage

Non-performing exposures (NPE)

(Million euros)

NPE build-up

	Dec 19	Dec 19	Dec 19
(Million euros)	vs.Dec 18	vs.Sep 19	vs.Jun 19
balance Opening	4 797 ,	3 691 ,	4 088 ,
Net exits	-561	-223	-304
Write-offs	-521	-136	-200
Sales	-469	-86	-338
Ending balance	246 3 ,	246 3 ,	246 3 ,

• NPEs in Portugal down by €1.6 billion, from €4.8 billion as at December 31, 2018 to €3.2 billion as at the same date of 2019

• This decrease results from net outflows of €0.6 billion, sales of €0.5 billion and write-offs of €0.5 billion
• The decrease of NPEs from December 31, 2018 is attributable to a €1.0 billion reduction of NPL>90d and to a €0.6 billion decrease of other NPEs
• Reduction of the cost of risk to 76bp in 2019 from 105bp in 2018, with a reinforcement of NPE coverage by loan-loss reserves to 58% from 50%, respectively

NPE include loans to Customers only.

NPE coverage

NPL>90d total coverage*

• Total coverage* ≥100%, for both individuals and companies, and for both NPE categories (NPL>90d and other NPE)
• Coverage by loan-loss reserves is stronger in loans to companies, where real-estate collateral, usually more liquid and with a more predictable market value, accounts for a lower coverage than in loans to individuals: coverage by loan-losses was 67% for companies NPE as at December 31, 2019, reaching 77% for companies NPL>90d (89% and 111%, respectively, if cash, financial collateral and expected loss gap are included)

*By loan-loss reserves, expected loss gap and collaterals. NPE include loans to Customers only.

Foreclosed assets and corporate restructuring funds

Corporate restructuring funds

(Million euros)

• Net foreclosed assets were down by 34.0% between December 31, 2018 and December 31, 2019. Valuation of foreclosed assets by independent providers exceeded book value by 26%
• 5,689 properties were sold during 2019 (4,780 properties in 2018), with sale values exceeding book values by €76 million
• Corporate restructuring funds decreased 8.2% to €924 million at December 31, 2019. The original credit exposure on these funds totals €2,006 million, with total reserves (original credit, plus restructuring funds) corresponding to a 54% coverage

Growing customer funds and performing loans to Customers

1.2 1.6 14.4 15.8 53.3 56.8 +6.6% (Billion euros) Off-BS funds Individuals: +8.5% Total Customers funds* Loans to Customers (gross)

19.5 22.7

Dec 18 Dec 19

18.2 16.7

Term deposits

Demand deposits

Other BS funds

(Billion euros)

Prudent and balanced growth of credit in Portugal

• Performing credit portfolio in Portugal up by €1.1 billion (+3.3%) from December 31, 2018
• Millennium bcp reinforced its role as the Bank of Portuguese Companies:
• Strong performance of loans to companies, which accounted for 34% of the total performing loan growth from December 31, 2018. Leading bank in specialised credit, with factoring invoicing up by 14% and new leasing business of €601 million
• Main bank for Portuguese companies (18.1% market share), closest to Customers, most appropriate products (BFin Data-E 2019)
• Most innovating and most used bank in NetBanking, with a 26.9% market share (BFin Data-E 2019), with a strong focus on digital channels and on solutions that simplify companies' management

International operations

Contribution from international operations to group earnings

			(Million	euros)
	2018	2019	Δ % local currency	Δ % euros
Poland	177 1	130 5	-26 3%	-26 8%
Poland , comparable*	177 1	207 0	+16 9%	+16 0%
Mozambique	96 4	99 5	+3 2%	+5 8%
Angola**
Before IAS 29 impact	15 0	8 2
IAS 29 impact***	0 5	-5 7
Total Angola including IAS 29 impact	15 5	2 5
Other	13 6	9 5
Net income	302 6	242 0
Non-controlling interests (Poland and Mozambique)	-120 5	-98 3
Exchange effect rate	4 8	--
Contribution from international operations	186 9	143 8		-23 1%
	-23.1%
186.9
			143.8
Contribution 2018			Contribution 2019

42 *One-offs excluded in 2019: integration costs and initial provisions for Euro Bank, release of tax asset provision, positive revaluation of shares in PSP and provisions for FX mortgage legal risk. | **Contribution of the Angolan operation. | ***Goodwill impairment (-€9.1 million) and contribution revaluation (+€9.7 million) in 2019; amortisation of the effect of the IAS 29 application calculated for December 31, 2018 (-€5.7 million) in 2019. Subsidiaries' net income presented for 2018 at the same exchange rate as of 2019 for comparison purposes.

Net earnings affected by Euro Bank's acquisition

Net operating revenue

(Million euros)

• Net earnings of €130.5 million, with ROE of 6.4%*
• Net operating revenue up by 27.3%, driven by net interest income; operating costs impacted by a higher contribution to the resolution fund, by increased staff and integrations costs (Euro Bank) and by higher IT costs
• Business volumes impacted by Euro Bank's acquisition: Customer funds up by 20.8%, while loans to Customers increased by 42.3%, excluding FXdenominated mortgage loans
• CET1 ratio of 16.9% as of December 31, 2019, with total capital of 20.1%
• Bank Millennium was considered best bank in Poland by Global Finance. This magazine also voted its website as the best website design in Central and Eastern Europe. Bank Millennium is also the most recommended bank and leader in Customer satisfaction in Poland (according to the survey "Customer satisfaction monitor of retail banks ARC Rynek i Opinia")

FX effect excluded. €/Zloty constant at September 2019 levels: Income Statement 4.30; Balance Sheet 4.25. | *ROE excluding one-offs: 10.2%. One-offs: integration costs and initial provisions for Euro Bank, release of tax asset provision, positive revaluation of shares in PSP and provisions for FX mortgage legal risk.

Well succeeded integration of Euro Bank, in all fronts

Euro Bank integration costs

-4	-10	-12	-27
1	3	2	1
-18	-1	0	-20
8	9	0	6
-22	-12	-12	-47
9	2	2	7
6	-9	-9	6
-18	9	8	-38

• Customers: significant expansion of the Customer base
• Operating model: combining traditional and franchise approach
• Geographical reach: extended branch network covers additional 200 towns in Poland
• Digital: significant potential for growing digital sales and for reinforcing cross-selling
• Companies: potential for scaling-up micro companies business to new markets
• Costs related to the integration totalled €47.7 million in 2019 (€38.6 million net of taxes)
• Integration costs estimates were revised downwards to a total of €70 million (initial estimate of €81 million)
• Integration costs of €19 million expected in 2020, with synergies in excess of €23 million projected for the same year

FX mortgage loans legal risk

• 2,010 loan agreements of Bank Millennium under individual litigation as at the end of 2019.
• 19 cases resolved in 2nd instance courts, the vast majority of which (≈90%) in favour of Bank Millennium.
• Bank Millennium has appealed non-favourable court decisions: there were no final unfavourable court decisions up to now.
• A class action involving 3,281 loan agreements was filed at the end of 2014.

FX mortgage litigation Provisions and capital for legal risk

• Public advertising campaigns to encourage claims against banks may lead to an increase in the number of court disputes.
• Bank Millennium has created a PLN 223 million (€51.9 million) provision for legal risks connected with FX mortgage loans in Q4'2019.
• Bank Millennium has specific additional capital requirements related to FX mortgage risks: at the end of 2019, such requirements amounted to 4.95pp, equivalent to PLN 1.85 billion (€435 million).

Increased net interest income

Commissions and other income

(Million euros; does not include tax on assets and contributions to the resol. fund and to the DGF)

*Pro forma data. Margin from derivative products, including those from hedging FX denominated loan portfolio, is included in net interest income, whereas in accounting terms, part of this margin (€14.5 million in 2019 and €14.1 million in 2018) is presented in net trading income. FX effect excluded. €/Zloty constant at September 2019 levels: Income Statement 4.30; Balance Sheet 4.25.

Credit quality

• impairment Euro Bank NPL>90d accounted for 2.7% of total credit as of December 31, 2019 (2.5% as of December 31, 2018)
• Coverage of NPL>90d by loan-loss reserves of 107% (133% as of December 31, 2018)
• Cost of risk of 70bp (48bp in 2018), 57bp if initial impairment related to the acquisition of Euro Bank is excluded

Growing volumes

Loans to Customers (gross)

FX effect excluded. €/Zloty constant at September 2019 levels: Income Statement 4.30; Balance Sheet 4.25.

Stable earnings, reflecting the normalisation of the interest rate environment

Net operating revenue

(Million euros)

• Net earnings of €99.5 million, with ROE of 20.3%
• Customer funds grew 6.6%, with loan portfolio down by 11.1% reflecting a conservative approach under a challenging environment
• Capital ratio of 45.8%
• Best bank in Mozambique by Global Finance, for the 10th year in a row, and Bank of the Year 2019, by The Banker

Net interest income reflects the normalisation of the interest rate environment

FX effect excluded. €/Metical constant at September 2019 levels: Income Statement 69.94; Balance Sheet 70.08.

Credit quality performance influenced by challenging environment

Business volumes reflect a conservative approach under a challenging environment

Key figures

Strategic Plan 2021

Franchise growth		2018	2019	2021
	Active Customers	4.9 million	5.6 million	>6 million
	Digital Customers	55%	58%	>60%
Value creation	Mobile Customers	34%	40%	>45%
	Cost to income	47% (46% excluding non-usual costs)	50% (47% excluding non-usual costs)	≈40%
	RoE	5.2%	5.1%	≈10%
	CET1	12.0%	12.2%	≈12%
	Loans-to-deposits	87%	86%	<100%
Asset quality	Dividend payout	10%		≈40%
	NPE stock	€5.5 billion	€4.2 billion	≈€3 billion Down ≈60% from 2017
	Cost of risk	92bp	72bp	<50bp

Commitment to People and Society

Culture of Social Responsibility

Influence the Bank's long-term value proposition, in balance with the well-being of people, the company and communities, respecting natural resources, climate and the environment.

Commitment to Create Social Value

Undertake actions for various Stakeholder groups aimed at contributing to the economic and social development of the countries where we are present.

Dimensions of Millennium bcp intervention

The new Sustainability Master Plan 2021 will guide the implementation of ESG (Environmental, Social and Governance) policies and practices, in three areas of operation:

Environmental

Implementation of measures that foster the fair and inclusive transition to a de-carbonised economic development model, including the incorporation of the environmental issue into the Bank's risk models.

Social

Involvement with the external and the internal communities.

Governance

Integration of sustainability principles into the Bank's decision-making processes.

Main initiatives

Sustainability

"Millennium Festival ao Largo" bringing free -for -all classical music shows to the streets

Reconstruction of the "3rd of February" elementary school, in Mozambique, with funds raised through a Millennium bim campaign

The 5th edition of Bank Millennium's "Financial ABC" financial literacy program in Poland trained >10,000 students

Inclusion in the Bloomberg 2020 Gender -Equality Index, together with a group of 325 global companies that stand out in the implementation of gender equality policies

Subscription of the Charter of Commitment to Sustainable Financing in Portugal

Signing of the Lisbon Business Mobility Pact and of the Compromisso Lisboa Capital Verde Europeia 2020, for climate action

Signing of 22 agreements for cooperation, entrepreneurship and promotion of microcredit

Support to the Portuguese Food Bank to fight hunger, involving several employees of the Bank as voluntaries

Millennium bcp has published its firts Plan for gender -equality, including several actions and practices to foster diversity and inclusion

Millennium bcp foundation Commitments

Restoration of the Panels of St. Vincent of the National Museum of Ancient Art (2020 -2022)

Restoration of the D. João IV Room, at the National Palace of Ajuda

Renovation of a wing of the National Museum of Contemporary Art to hold temporary exhibitions based on the Bank's and the Museum's collection

Archaeological Centre of Rua dos Correeiros: renovation of museography, a project by Atelier Bruckner. Re -opening scheduled for June 2020

Money Lab: financial literacy program for young students

56

Awards in 2019

Millennium bcp: Leadership in the "PME Excelência '18" and "PME Líder '18" programmes , with the largest number of submissions and awards

Millennium bcp: Marketeer award, "Banking" category (3rd year in a row) among participating banks

Millennium bcp: Closest to Customers; leader in Customer global satisfaction, in quality service, in satisfaction with products and services; most recommended bank (Basef Banca, Dec. 2019)

Millennium bcp: Best investment bank in Portugal

Millennium bcp: Best investment bank im Portugal

Millennium bcp: Market leader in factoring, confirming and leasing, according to the Portuguese association of leasing, factoring and renting companies

ActivoBank: "5 estrelas 2020" award, "Digital Banking" category

ActivoBank: "Right Choice" by Deco Proteste, "personal loans above 5,000 euros" category

ActivoBank: Best commercial bank, Best consumer digital Bank and Best mobile banking app in Portugal

Bank Millennium: Best website design in Central and Eastern Europe

Bank Millennium : Best trade finance provider in Poland

Bank Millennium: Most recommended bank and leader in Customer satisfaction ("Customer satisfaction monitor of retail banks ARC Rynek i Opinia")

Millennium bim: Best bank in Mozambique (10th year in a row)

Millennium bim: Bank of the year in Mozambique

Millennium bim: Best Information Security and Fraud Management in Mozambique

Millennium bim: Best trade finance provider in Mozambique

Millennium bim: Global Finance Innovators 2019 award, "Payments" category, for the "Millennium IZI" service

Millennium bcp

Best consumer digital bank in Portugal; Best Information Security and Fraud Management in Portugal

ActivoBank

Consumer choice 2020, "Digital Banks" category

Millennium bcp

Main bank for companies; most appropriate products; most innovating; closest to Customers

Millennium bcp Best private bank in Portugal

Appendix

Sovereign debt portfolio

(Consolidated, million euros)

	Dec 18	Mar 19	Jun 19	Sep 19	Dec 19	YoY
Portugal	6,609	7,375	7,229	7,413	6,520	-1%
T-bills and other	853	1,932	1,665	1,536	1,923	+125%
Bonds	5,755	5,443	5,564	5,876	4,597	-20%
Poland	4,925	5,385	4,328	4,645	5,077	+3%
Mozambique	698	263	290	320	257	-63%
Other	857	1,091	1,010	940	571	-33%
Total	13,089	14,115	12,857	13,317	12,426	-5%

Sovereign debt portfolio Sovereign debt maturity

• ✓ The sovereign debt portfolio totalled €12.4 billion, €10.4 billion of which maturing until 5 years
• ✓ The Portuguese sovereign debt portfolio totalled €6.5 billion, whereas the Polish and Mozambican portfolios amounted to €5.1 billion and to €0.3 billion, respectively; "other" includes Italian and Spanish sovereign debt (€0.4 billion and €0.1 billion, respectively)

Sovereign debt portfolio

	Portugal	Poland	Mozambique	Other	Total
Trading book*	35	206	0	1	241
1 ≤ year	35	18	0	0	53
1 and 2 year ≤ years >	0	73	0	0	73
2 and 5 > years ≤ years	0	55	0	0	55
and 8 5 years years > ≤	0	11	0	0	11
8 and 10 > years ≤ years	0	48	0	0	48
10 > years	0	0	0	1	1
Banking book**	6 486 ,	4 872 ,	257	571	12 185 ,
1 ≤ year	971 1 ,	58	22	444	2 495 ,
1 and 2 > year ≤ years	19	2 690 ,	66	1	2 776 ,
2 and 5 years ≤ years >	2 933 ,	1 815 ,	60	119	4 926 ,
5 and 8 > years ≤ years	1 266 ,	225	38	6	1 535 ,
and 8 10 years years > ≤	289	82	0	0	371
10 years >	7	3	71	0	81
Total	6 520 ,	5 077 ,	257	571	12 426 ,
1 year ≤	2 006 ,	76	22	444	2 548 ,
1 and 2 > year ≤ years	19	2 763 ,	66	1	2 849 ,
2 and 5 > years ≤ years	2 933 ,	1 870 ,	60	119	4 981 ,
and 8 5 years ≤ years >	1 266 ,	236	38	6	1 546 ,
8 and 10 > years ≤ years	289	130	0	1	419
10 > years	7	3	71	1	81

*Includes financial assets held for trading at fair value through net income (€31 million).

**Includes financial assets at fair value through other comprehensive income (€11,747 million) and financial assets at amortised cost (€438 million).

Diversified and collateralised portfolio

Loans

• Loans to companies accounted for 42% of the loan portfolio as at December 31, 2019, including 6% to construction and real-estate sectors
• Mortgage accounted for 47% of the loan portfolio, with low delinquency levels and an average LTV of 60%
• 85% of the loan portfolio is collateralised

Collaterals

• Real estate accounts for 93% of total collateral value
• 80% of the real estate collateral is residential

Consolidated earnings

(Million euros)	2018	2019	YoY	Impact on earnings
interest income Net	1 423 6 ,	1 548 5 ,	+8 8%	+124 9
fees and commissions Net	684 0	703 5	+2 8%	+19 5
Other income*	78 9	86 4	+9 5%	+7 5
Net operating revenue	2 186 5 ,	2 338 4 ,	+6 9%	+151 9
Staff costs	-592 8	-668 2	+12 7%	-75 4
Other administrative and depreciation costs	-434 4	-501 2	+15 4%	-66 8
Operating costs	-1 027 2 ,	-1 169 5 ,	+13 8%	-142 3
Profit before impairment and provisions	1 159 3 ,	1 168 9 ,	+0 8%	+9 6
of Loans impairment (net recoveries)	-464 6	-390 2	-16 0%	+74 4
Other and impairment provisions	-136 5	-151 4	0% +11	0 -15
and Impairment provisions	-601 1	-541 6	-9 9%	+59 5
income before income Net tax	558 2	627 3	+12 4%	+69 1
Income taxes	-138 0	-239 3	+73 4%	-101 3
Non-controlling interests	-117 8	-99 4	-15 6%	+18 4
Net income from discontinued be discontinued operations to or	-1 3	13 4		+14 7
income Net	301 1	302 0	+0 3%	+0 9

*Includes dividends from equity instruments, other net operating income, net trading income and equity accounted earnings.

Consolidated balance sheet

(Million euros)

	31 December	31 December
	2019	2018
ASSETS
Cash and deposits at Central Banks	5,166.6	2,753.8
Loans and advances to credit institutions repayable on demand	320.9	326.7
Financial assets at amortised cost
Loans and advances to credit institutions	893.0	890.0
Loans and advances to customers	49,847.8	45,560.9
Debt instruments	3,185.9	3,375.0
Financial assets at fair value through profit or loss
Financial assets held for trading	878.3	870.5
Financial assets not held for trading mandatorily at fair value through profit or loss	1,405.5	1,404.7
Financial assets designated at fair value through profit or loss	31.5	33.0
Financial assets at fair value through other comprehensive income	13,216.7	13,845.6
Assets with repurchase agreement	-	58.3
Hedging derivatives	45.1	123.1
Investments in associated companies	400.4	405.1
Non-current assets held for sale	1,279.8	1,868.5
Investment property	13.3	11.1
Other tangible assets	729.4	461.3
Goodwill and intangible assets	242.6	174.4
Current tax assets	26.7	32.7
Deferred tax assets	2,720.6	2,916.6
Other assets	1,239.1	811.8
TOTAL ASSETS	81,643.4	75,923.0

	31 December 2019	31 December 2018
LIABILITIES
Financial liabilities at amortised cost
Resources from credit institutions	6,367.0	7,752.8
Resources from customers	59,127.0	52,664.7
Non subordinated debt securities issued	1,594.7	1,686.1
Subordinated debt	1,577.7	1,072.1
Financial liabilities at fair value through profit or loss
Financial liabilities held for trading	343.9	327.0
Financial liabilities at fair value through profit or loss	3,201.3	3,603.6
Hedging derivatives	229.9	177.9
Provisions	345.3	350.8
Current tax liabilities	22.0	18.5
Deferred tax liabilities	11.1	5.5
Other liabilities	1,442.2	1,300.1
TOTAL LIABILITIES	74,262.2	68,959.1
EQUITY
Share capital	4,725.0	4,725.0
Share premium	16.5	16.5
Other equity instruments	400.0	2.9
Legal and statutory reserves	240.5	264.6
Treasury shares	(0.1)	(0.1)
Reserves and retained earnings	435.8	470.5
Net income for the period attributable to Bank's Shareholders	302.0	301.1
TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS	6,119.7	5,780.5
Non-controlling interests	1,261.5	1,183.4
TOTAL EQUITY	7,381.3	6,963.9
TOTAL LIABILITIES AND EQUITY	81,643.4	75,923.0

Consolidated income statement per quarter

(Million euros)

	4Q 18	1Q 19	2Q 19	3Q 19	4Q 19
interest income Net	370 8	362 7	377 4	412 9	395 6
Dividends from equity instruments	0 0	0 0	0 6	0 1	0 1
Net fees and commission income	174 0	166 6	175 6	176 9	184 4
Other operating income	-1 0	-10 6	-64 8	-12 5	-12 8
trading Net income	-11 0	60 3	35 2	23 6	24 2
Equity accounted earnings	17 3	18 6	2 6	17 8	4 0
Banking income	550 1	597 7	526 6	618 8	595 4
Staff costs	2 157	152 2	172 0	163 8	180 2
Other administrative costs	100 9	80 5	86 5	102 5	107 0
Depreciation	14 8	26 8	30 1	32 9	35 0
Operating costs	273 0	259 5	288 6	299 1	322 2
Profit bef impairment and provisions	277 1	338 1	237 9	319 6	273 2
of Loans impairment (net recoveries)	127 9	86 5	113 8	98 7	91 2
Other impairm . and provisions	44 2	17 4	25 4	35 2	73 4
before Net income income tax	105 0	234 2	98 7	185 7	108 7
Income tax	28 5	65 4	6 55	52 9	65 2
Non-controlling interests	31 9	28 4	27 1	32 2	11 8
income (before disc . oper.) Net	44 5	140 4	16 0	100 5	31 7
income arising from discont . operations Net	-0 9	13 5	0 0	0 0	0 0
Net income	43 6	153 8	15 9	100 5	31 7

Income statement

(Million euros)

For the 12-month periods ended December 31st, 2018 and 2019

		Internatio nal o peratio ns
	Gro up		P o rtugal		T o tal		B ank M illennium (P o land)		M illennium bim (M o z.)			Other int. o peratio ns
	D ec 18	D ec 19	Δ %	D ec 18	D ec 19	Δ %	D ec 18	D ec 19	Δ %	D ec 18	D ec 19	Δ %	D ec 18	D ec 19	Δ %	D ec 18	D ec 19	Δ %
Interest income	1,890	1,991	5.4%	991	948	-4.3%	899	1,043	16.1%	601	786	30.8%	285	248	-13.1%	13	10	-22.1%
Interest expense	466	443	-5.0%	188	159	-15.3%	278	284	2.0%	175	218	25.1%	102	65	-35.7%	2	0	-92.2%
N et interest inco me	1,424	1,549	8.8%	803	789	-1.8%	620	759	22.4%	426	567	33.1%	184	182	-0.6%	10	10	-8.4%
Dividends from equity instruments	1	1	25.4%	0	0	>100%	1	1	25.1%	1	1	22.7%	0	0	89.4%	0	0	-100.0%
Intermediatio n margin	1,424	1,549	8.8%	803	789	-1.8%	621	760	22.4%	427	568	33.1%	184	182	-0.6%	11	10	-8.4%
Net fees and commission income	684	703	2.8%	475	483	1.7%	209	220	5.5%	155	163	5.0%	30	32	7.2%	24	25	6.8%
Other operating income	-89	-101	-12.6%	-32	-30	6.3%	-57	-71	-23.3%	-75	-88	-16.8%	19	18	-3.6%	0	0	7.6%
B asic inco me	2,019	2,152	6.6%	1,246	1,242	-0.3%	773	910	17.8%	507	643	26.9%	232	233	0.2%	3 4	3 5	2.3%
Net trading income	79	143	82.5%	12	51	>100%	66	92	38.6%	53	73	38.5%	10	15	56.4%	4	4	-4.9%
Equity accounted earnings	89	43	-51.8%	55	40	-26.6%	34	3	-92.6%	0	0	--	0	0	--	34	3	-92.6%
B anking inco me	2,187	2,338	6.9%	1,314	1,334	1.6%	873	1,004	15.1%	560	716	28.0%	242	247	2.4%	7 2	4 1	-43.2%
Staff costs	593	668	12.7%	386	411	6.6%	207	257	24.2%	150	195	30.1%	39	42	7.0%	18	20	12.6%
Other administrative costs	377	376	-0.1%	219	194	-11.4%	158	182	15.6%	108	133	23.3%	44	43	-0.7%	7	6	-3.5%
Depreciation	58	125	>100%	36	69	89.5%	21	56	>100%	13	42	>100%	8	12	47.3%	0	1	>100%
Operating co sts	1,027	1,169	13.8%	641	674	5.2%	386	495	28.3%	270	370	36.9%	91	98	7.1%	25	28	12.6%
P ro fit bef. impairment and pro visio ns	1,159	1,169	0.8%	672	660	-1.9%	487	509	4.6%	289	346	19.7%	150	150	-0.5%	4 7	13	-72.1%
Loans impairment (net of recoveries)	465	390	-16.0%	389	279	-28.3%	75	111	47.2%	46	94	>100%	34	20	-41.5%	-5	-2	48.9%
Other impairm. and provisions	136	151	11.0%	122	92	-24.6%	15	60	>100%	3	58	>100%	-1	1	>100%	13	0	-100.0%
N et inco me befo re inco me tax	558	627	12.4%	161	289	79.0%	397	339	-14.7%	240	194	-19.1%	117	129	9.7%	3 9	16	-60.4%
Income tax	138	239	73.4%	50	144	>100%	88	95	8.4%	62	64	3.3%	22	28	26.8%	4	3	-15.3%
Non-controlling interests	118	99	-15.6%	-5	0	92.1%	122	100	-18.5%	0	0	--	1	1	-4.9%	121	99	-18.6%
N et inco me (befo re disc. o per.)	302	289	-4.6%	116	145	25.4%	187	144	-23.1%	178	131	-26.8%	9 4	9 9	5.8%	-86	-86	-0.8%
Net income arising from discont. operations	-1	13	>100%
N et inco me	301	302	0.3%

Glossary (1/2)

Assets placed with customers – amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions.

Balance sheet customer funds – deposits and other resources from customers and debt securities placed with customers.

Commercial gap – loans to customers (gross) minus on-balance sheet customer funds.

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

Core net income - net interest income plus net fees and commissions income deducted from operating costs.

Cost of risk, net (expressed in basis points) - ratio of loans impairment (P&L) accounted in the period to loans to customers at amortised cost and debt instruments at amortised cost related to credit operations before impairment at the end of the period.

Cost to core income - operating costs divided by core income.

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

Coverage of non-performing exposures by impairments – loans impairments (balance sheet) divided by the stock of NPE.

Coverage of non-performing loans by impairments – loans impairments (balance sheet) divided by the stock of NPL.

Coverage of overdue loans by impairments - loans impairments (balance sheet) divided by overdue loans.

Coverage of overdue loans by more than 90 days by impairments - loans impairments (balance sheet) divided by overdue loans by more than 90 days.

Debt instruments – non-subordinated debt instruments at amortised cost and financial liabilities measured at fair value through profit or loss (debt securities and certificates).

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

Deposits and other resources from customers – resources from customers at amortised cost and customer deposits at fair value through profit or loss.

Dividends from equity instruments - dividends received from investments classified as financial assets at fair value through other comprehensive income and from financial assets held for trading.

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

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

Loans impairment (balance sheet) – balance sheet impairment related to loans to customers at amortised cost, balance sheet impairment associated with debt instruments at amortised cost related to credit operations and fair value adjustments related to loans to customers at fair value through profit or loss.

Loans impairment (P&L) – impairment (net of reversals and net of recoveries - principal and accrual) of financial assets at amortised cost for loans to customers and for debt instruments related to credit operations.

Loans to customers (gross) – loans to customers at amortised cost before impairment, debt instruments at amortised cost associated to credit operations before impairment and loans to customers at fair value through profit or loss before fair value adjustments.

Loans to customers (net) - loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations net of impairment and balance sheet amount of loans to customers at fair value through profit or loss.

Loan to Deposits ratio (LTD) – loans to customers (net) divided by deposits and other resources from customers.

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

Net commissions - net fees and commissions income.

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

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

Glossary (2/2)

• Net trading income results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost and results from derecognition of financial assets measured at fair value through other comprehensive.
• Non-performing exposures (NPE) non-performing loans and advances to customers (loans to customers at amortised cost and loans to customers at fair value through profit or loss) more than 90 days past-due or unlikely to be paid without collateral realisation, if they recognised as defaulted or impaired.
• Non-performing loans (NPL) overdue loans (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss) more than 90 days past due including the non-overdue remaining principal of loans, i.e. portion in arrears, plus non-overdue remaining principal.

Off-balance sheet customer funds – assets under management, assets placed with customers and insurance products (savings and investment) subscribed by customers.

• Operating costs staff costs, other administrative costs and depreciation.
• Other impairment and provisions impairment (net of reversals) of financial assets at amortised cost for loans and advances of credit institutions, impairment of financial assets (at fair value through other comprehensive income and at amortised cost not associated with credit operations), other assets impairment, in particular provision charges related to assets received as payment in kind not fully covered by collateral, investments in associated companies and goodwill of subsidiaries and other provisions.
• Other net income dividends from equity instruments, net commissions, net trading income, other net operating income and equity accounted earnings.
• Other net operating income net gains from insurance activity, other operating income/(loss) and gains/(losses) arising from sales of subsidiaries and other assets.
• Overdue loans total outstanding amount of past due loans to customers (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests.
• Overdue loans by more than 90 days total outstanding amount of past due loans to customers by more than 90 days (loans to customers at amortised cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value through profit or loss), including principal and interests.
• Resources from credit institutions resources and other financing from Central Banks and resources from other credit institutions.
• Return on average assets (Instruction from the Bank of Portugal no. 16/2004) net income (before tax) divided by the average total assets (weighted average of the average of monthly net assets in the period).
• Return on average assets (ROA) net income (before minority interests) divided by the average total assets (weighted average of the average of monthly net assets in the period).
• Return on equity (Instruction from the Bank of Portugal no. 16/2004) net income (before tax) divided by the average attributable equity + non-controlling interests (weighted average of the average of monthly equity in the period).
• Return on equity (ROE) net income (after minority interests) divided by the average attributable equity, deducted from preference shares and other capital instruments (weighted average of the average of monthly equity in the period).
• Securities portfolio debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to customers and trading derivatives), financial assets at fair value through other comprehensive income and assets with repurchase agreement.
• Spread increase (in percentage points) to the index used by the Bank in loans granting or fund raising.
• Total customer funds balance sheet customer funds and off-balance sheet customer fund.