Banco Comercial Portugues

Quarterly Report • Sep 14, 2015

Banco Popular Portugal, SA

Interim Report and Accounts

Half-Year 2015

This is a mere translation of the original Portuguese documents prepared by Banco Popular Portugal, S.A., which was made with the single purpose of simplifying their consultation to English speaking stakeholders. In case of any doubt or contradiction between these and the original documents, their Portuguese version prevails.

General Information4
Board and Management 5
Banco Popular Portugal Financial Highlights 6
Interim Management Report 7
Macroeconomic scenario8
Commercial strategy 9
Income and profitability11
Net interest income 11
Banking income 13
Operating income14
Net income16
Investments and assets16
Total assets16
Customer funds16
Lending operations18
Main risks and uncertainties 20
Events that occurred after 30 June21
Annex 1 - Shareholding position of the members of the governing and supervisory bodies
23
Annex 2 - Qualifying holdings23
Declaration of compliance of the financial information 24
Half-Year Accounts25
Balance Sheet25
Income Statement 26
Statement of Comprehensive Income27
Individual Statement of Changes in Equity 27
Cash Flow Statements 28
Notes to the Financial Statements29

General Information

Banco Popular Portugal, S.A., was founded on 2 July 1991. The head office is located at 51 Ramalho Ortigão in Lisbon. It is registered at the Lisbon Commercial Registry under the taxpayer No. 502.607.084. The Bank adopted its current corporate name in September 2005 to the detriment of its former name 'BNC-Banco Nacional de Crédito, S.A.'. Banco Popular Portugal is a member of the Deposit Guarantee Fund and it has a share capital of 476 million euros.

The financial and statistical data provided herein were prepared according to analytical criteria based on the utmost objectivity, detail, reporting transparency and consistency over time, from the financial information periodically sent to the Bank of Portugal. The financial statements are presented in accordance with the legislation in force in 2015, particularly those issued by the Bank of Portugal regarding the presentation of accounting information.

The interim management report, the half-year accounts and their accompanying documents are available at Banco Popular Portugal's Internet website: www.bancopopular.pt.

Board and Management

Board of the General Meeting

Augusto Fernando Correia Aguiar-Branco - Chairman João Carlos de Albuquerque de Moura Navega - Secretary

Executive Board of Directors

Rui Manuel Morganho Semedo - Chairman Carlos Manuel Sobral Cid da Costa Álvares - Member Tomás Pereira Pena - Member Susana de Medrano Boix - Member

Supervisory Board

Rui Manuel Ferreira de Oliveira - Chairman António Luis Castanheira da Silva Lopes António Manuel Mendes Barreira

Rui Manuel Medina da Silva Duarte - Alternate

Statutory Auditor

PricewaterhouseCoopers & Associados, Sociedade de Revisores Oficiais de Contas, Lda., represented by António Alberto Henriques Assis or José Manuel Henriques Bernardo

Alternate Statutory Auditor

Jorge Manuel Santos Costa, Statutory Auditor (No. 847).

Banco Popular Portugal Financial Highlights

(million euros, unless otherwise stated)

	jun-15	Var. (% e p.p.)	jun-14
Business Turnover
Total assets managed	9 212	-10.7%	10 318
On-balance sheet total assets	8 230	-11.8%	9 333
Own resources (a)	720	1.1%	712
Customer funds:	5 159	3.6%	4 980
on-balance	4 177	4.5%	3 995
other intermediated customer funds	982	-0.3%	985
Loans and advances to customers	5 918	4.8%	5 649
Contingent risks	398	-30.0%	569
Solvency
Total capital ratio	12.7%	-0.2	12.9%
Tier 1 capital ratio	12.0%	-0.4	12.4%
Common Equity Tier 1	12.0%	-0.4	12.4%
Gestão do Risco
Total risks	6 316	1.6%	6 218
Non-performing loans	364	17.9%	309
Non-performing loans for more than 90 days	353	23.7%	285
Non-performing loan ratio (%)	6.1%	0.7	5.5%
Non-performing loan coverage ratio	108.7%	-3.1	111.9%
Earnings
Net interest income	60.4	-2.7%	62.1
Banking income	131.5	42.4%	92.3
Operating income	75.7	119.7%	34.4
Income before tax	44.7	3405.1%	1.3
Net income	32.0	2561.7%	1.2
Profitability and efficiency
Average net assets	8 170	-15.1%	9 619
Average own assets	715	2.7%	696
ROA (%)	0.79%	0.8	0.03%
ROE (%)	9.03%	8.7	0.35%
Eficiência operativa (Cost to income) (%)	41.3%	-19.2	60.5%
Per share data
Final number of shares (millions)	476	0.0%	476
Average number of shares (millions)	476	0.0%	476
Share book value (€)	1.514	1.1%	1.497
Earnings per share (€)	0.067	2134.8%	0.003
Other data
Number of employees	1 296	0.1%	1 295
Number of branches	169	-1.7%	172
Employees per branch	7.7	1.9%	7.5

(a) After appropriation of results for each year

Interim Management Report

As at 30 June 2015, Banco Popular Portugal reported shareholder's equity of 720,478 thousand euros, managed over 9.2 billion euros of total assets, including customer funds in the amount of 5.1 billion euros. At the end of the first half of 2015, Banco Popular's net assets amounted to 8.2 billion euros and net losses amounted to 32 million euros. The bank's activity was supported by a network of 169 branches and a team of around 1,296 staff.

Banco Popular Portugal offers a full range of products and services, together with the following companies that are connected with the Banco Popular Español Group:

• Popular Gestão de Activos, S.A., wholly owned by BPE, is a Fund Management Company that manages, among others, the securities and real estate investment funds commercialised by the Bank;

• Popular Factoring, S.A., 99.8% held by BPE, is a credit institution that provides Factoring services;

• Eurovida - Companhia de Seguros de Vida, S.A., is an insurance company that provides life and capitalisation insurance, and is 84.1% held by BPE and 15.9% held by the Bank;

• Popular Seguros - Companhia de Seguros, S.A., is wholly owned by Eurovida, and trades in non-life insurance products.

Macroeconomic scenario

According to Statistics Portugal, Gross Domestic Product increased by 1.4% between January and March when compared with the same period last year. Growth was due to a slowdown in imports (influenced by the fall in oil prices) and increased exports, i.e., both net external demand and domestic demand have once again contributed favourably to GDP, although the latter has had a less significant impact due to reduced stockpiles.

Domestic demand including both private consumption and gross fixed capital formation (GFCF) increased in the first quarter of 2015 when compared with the last quarter of 2014. In the case of private consumption, together with a relative stabilization of consumer confidence in the first four months of 2015 posting figures that are higher than the average of the past 10 years, deflated retail trade turnover increased when compared with the same period last year.

Year-on-year growth trajectory of exports in the first quarter of 2015 represents an increase in both the exports of goods (mostly energy goods) and service exports (chiefly tourism).

In the first quarter of 2015, imports increased when compared with the previous quarter although they were lower when compared with the same period last year. This decrease mostly reflects the evolution of the import of goods, while growth in service imports remained stable.

Portuguese GDP growth in the first quarter was higher than the average in the Euro Zone, whose economy improved by 1% when compared with the same period last year. Portugal performed better than Germany, Italy, France or Greece, although it is far from economies that had more robust growth, such as Spain, the Netherlands or Slovakia (in excess of 2.5%). When compared with the European Union, Portugal had the same year-on-year growth. All the 28 EU countries increased GDP by 1.4%.

According to Statistics Portugal, the unemployment rate eased to 13.2% in May year-on-year.

Bank of Portugal forecasts for the Portuguese economy point to the continuation of the gradual recovery of the economic activity initiated in 2013. After an increase in GDP by 0.9% in 2014, a 1.7% increase is expected in 2015, followed by increases by 1.9% and 2.0% for 2016 and 2017 respectively. Exports are expected to post strong growth, private domestic demand shall also grow at a pace that is compatible with the deleveraging of private economic agents. The higher nominal growth of the economy, the prevalence of historically low interest rates and the existence of positive primary balances will allow the public debt as a percentage of GDP to start decreasing. Projected growth for the Portuguese economy is

compatible with the progressive drop in the unemployment rate in spite of its still high levels. Inflation shall remain low.

Commercial strategy

In the first half of 2015, Banco Popular has maintained its strategy of being a leading Bank for companies while still meeting the needs of private individuals, focusing particularly on the affluent segment, with a customer-centred approach and prepared for their everyday needs.

Regarding the private customer segment, there was a net increase of around 12 thousand new customers, raised mostly via corporate customers, as well as via the launch of addedvalue campaigns targeted at the private segment. In the first half of 2015, the Bank invested in a strong Home Loan campaign, the launch of some thematic Time Deposits, and the increase in transactions and customer loyalty in this segment.

Within the scope of partnerships, and continuing the strategy initiated in 2014, special emphasis was given to the sale of Médis health insurance called Popular Saúde by Médis, as well as Cofidis Personal Loan in order to strengthen the Bank's offer and thus meet the needs of its customers.

In the Corporate segment, there was an increase by around 3.5 thousand new customers, with significant growth in the number of companies receiving loans and an average increase in terms of loyalty of new customers.

Customer proximity, operational agility, and the interaction with qualified commercial teams have enabled the Bank to strengthen its position as a reference for Companies, complementing this with sector-specific offers and strong support to internationalization. This positioning was more visible in the Bank's performance regarding loans, customized SMEs lines, and leasing, where the Bank has won market shares that are higher than its natural market share.

Growth in the credit business, without property development, stood at around 150 million euros, and this is expected to increase in the second half of 2015 based on the loan requests that have been made and the investment projects that are being prepared.

Maintaining a multichannel strategy, and aiming at strengthening the message that the Bank is always available for its customers via the means that are most convenient to them, whenever they want and wherever they are, a new app and a new site were launched, both with new images and added functionalities Additionally, a new service was made available to our customers, which consists on receiving warnings via text messages, with gains in terms of safety and information when carrying out daily transactions.

9

In terms of brand and communication, Banco Popular adopted a new institutional image in 2015 in line with the Group in Spain, strengthening the brand Popular and dropping 'Banco' from the name. In June, the Bank launched an advertising campaign that followed the presentation of the new image. The main aim of the campaign was to strengthen the support of Banco Popular to the corporate sector, featuring the image of a 'lift that conveys the idea of helping companies to go up'. Banco Popular thus presented itself as a bank that is focused on the corporate segment with a wide range of products, flexibility and swiftness in its response to its customers' needs.

This communication strategy has accompanied and reflected the strategic positioning of the Bank, conjugating several multimedia communication actions. Besides the above-mentioned institutional advertising campaign for which the TV was the preferred communication medium since it is the most appropriate vehicle for the creation of a baseline of awareness, radio and the Internet also played an important role in the exposure of the brand Banco Popular in the first half of 2015 through an institutional campaign and several product campaigns Home Loans, Thematic Time Deposits, Real Estate, and Corporate Offers.

Additionally, and to further promote its image, the Bank has maintained its association with important national events, its presence in trade fairs, congresses and sponsoring shows, thus contributing to consolidate its investment in the corporate sector, showing the Bank's availability and know-how with employers and associations. Following the attribution of Prémios PME Excelência (SMEs Excellence Awards) promoted by IAPMEI, the Bank also launched a series of breakfasts with several of its corporate customers that were distinguished as Excellent SMEs.

Income and profitability

The income statement is summarised in table 1, based on the first half of 2015 and the corresponding period of 2014 pursuant to the regulations issued by the Bank of Portugal.

	Table 1 . Individual Income Statement
	(€ thousand)
					Change
		jun-15	jun-14	Amount	%
1	Interest and similar income	106 630	133 481	- 26 851	-20.1
2	Interest and similar charges	46 213	71 407	- 25 194	-35.3
3	Net interest income (1-2)	60 417	62 074	- 1 657	-2.7
4	Return on equity instruments	63	58	5	7.8
5	Net fees and commissions	25 144	29 819	- 4 675	-15.7
6	Income from financial transactions (net)	805	8 765	- 7 960	-90.8
7	Income from the sale of other assets	42	- 5 181	5 223	100.8
8	Other operating income	45 015	- 3 214	48 229	1500.5
9	Banking income (3+4+5+6+7+8)	131 486	92 320	39 166	42.4
1 0	Personnel expenses	29 965	28 585	1 380	4.8
1 1	General administrative expenses	24 403	27 293	- 2 890	-10.6
1 2	Depreciation	1 456	2 003	- 547	-27.3
1 3	Operating income (9-10-11-12)	75 662	34 440	41 222	119.7
1 4	Provisions net of recoveries and write-offs	3 382	337	3 045	903.4
1 5	Value adjustments net of loans and advances to customers	23 371	35 866	- 12 495	-34.8
1 6	Impairment and other net provisions	4 168	- 3 040	7 208	237.1
1 7	Profit before tax (13-14-15-16)	44 741	1 276	43 464	3405.1
1 8	Income tax	12 746	74	12 672	17031.6
1 9	Net income for the period (17-18)	31 995	1 202	30 793	2561.7

Net interest income

In the first half of 2015, net interest income amounted to 60.4 million euros, 1,657 thousand euros less, i.e. -2.7%, when compared with the same period in 2014. This result was derived from a drop by over 20% in interest and similar income and a decrease by over 35% in interest and similar charges. Around the middle of 2014, the Bank adopted a commercial policy of reducing the cost of its assets, which was continued in 2015. In the first half of 2015, this policy resulted in savings of over 25 million euros in interest and similar charges paid. Most of this amount, around 21 millions, was due to the price effect and only 4 millions were due to volume. Taking into consideration the total of investments, we also witnessed a decrease by over 26.8 million euros, more than 22.3 of which resulted from the effect of the interest rate of the credit granted, and 4.7 million euros were due to the effect of the reduction in the financial assets portfolio. The volume of credit granted contributed positively with over 3 million euros to net interest income (see table 2).

The combination of these two components of net interest income has confirmed the efficient management of interest rates even in an unfavourable scenario.

	Table 2. Annual changes in net interest income - Causal analysis Jun/2015 - Jun/2014
$(f$ thous and)
Changes in:	Due to changes in business volume	Due to changes in interest rates	Due to changes in period	Total change
Loans and advances to customers	3081	$-22376$	0	$-19295$
Deposits with banks	- 1807	$-995$	0	$-2802$
Financial assets	$-4744$	131	$\Omega$	$-4613$
Other assets		$-61$ $-80$	0	$-141$
Total net investments	$-3531$	- 23 320	0	- 26 851
Deposits from customers	$-3553$	$-17456$	$\Omega$	$-21009$
Deposits from banks	$-2105$	$-4885$	$\Omega$	$-6990$
Own assets		$\Omega$ O	0	0
Other liabilities	1 3 8 9	1416	0	2805
Total assets	-4269	-20925	0	$-25194$
Net interest income		738 $-2395$	0	$-1657$

Regarding average balances and rates, and according to table 3, average assets in the first half of 2015 were supported by customer funds (53%) and deposits from banks (35%). The average balance of loans and advances to customers is still their main component, representing over 70% of total average assets. In the first half of 2015, when compared with the same period last year, there was a significant change in the structure of the balance, with credit granted weighing over 12.4%.

Table 3. Evolution of equity and average annual rates. Margins
(€ thousand and %)
			$Jun-15$				$Jun-14$
	Average Balance	Dist. (%)	Income or expense	Average Rate (%)	Average Balance	Dist. (%)	Income or expense	Average Rate (%)
Loans and advances to customers (a)	5763549	70.5%	82984	2.90	5 590 467	58.1%	102 279	3.69
Deposits with banks	229 386	2.8%	130	0.11	1 312 320	13.6%	2932	0.45
Financial assets	1915960	23.5%	23 4 4 8	2.47	2 303 632	23.9%	28 061	2.46
Other assets	261 026	3.2%	68	0.05	412640	4.3%	209	0.10
Total Assets (b)	8 169 922	100%	106 630	2.63	9 619 059	100%	133 481	2.80
Deposits from customers (c)	4 3 1 1 2 8 7	52.8%	29933	1.40	4 657 488	48.4%	50 942	2.21
Deposits from banks	2834548	34.7%	2088	0.15	3998949	41.6%	9078	0.46
Equity accounts	714 818	8.7%	0	0.00	695979	7.2%	0	0.00
Other liabilities	309 269	3.8%	14 192	9.25	266 643	2.8%	11 387	8.61
Total Liabilities and Equity (d)	8 169 922	100%	46 213	1.14	9619059	100%	71 407	1.50
Customer spread (a - c)				1.50				1.48
Net Interest Income (b - d)				1.49				1.30

Taking into consideration the evolution of the average interest rates of loans and deposits, we would like to stress that the average assets, which amounted to over 8.1 billion euros, posted

an overall profitability of 2.63%, which, when compared with the average cost of total resources allocated to the financing of assets (1.14%), has enabled an annual net interest income of 1.49%, 19 basis points lower than in the previous year.

The policy of reducing the cost of liabilities implemented around the middle of 2014 led to an 81 basis points reduction in the annual average rate of customer funds and stood at 1.40% at the end of the June 2015, compared with 2.21% in the same period last year (table 3a). The average annual rate of loans dropped by 79 basis points, from 3.69% to 2.90%. Due to this combined effect, customer spread decreased by 2 basis points to 1.50%.

Table 3a . Evolution of annual average rates. Margins
	Average annual rate	Average annual rate	Change
	Jun-15	Jun-14	Jun-15 / Jun-14
	(%)	(%)	(p.p.)
Loans and advances to customers (a)	2.90	3.69	-0.79
Deposits with banks	0.11	0.45	-0.34
Financial assets	2.47	2.46	0.01
Other assets	0.05	0.10	-0.05
Total Assets ( b )	2.63	2.80	-0.17
Deposits from customers ( c )	1.40	2.21	-0.81
Deposits from banks	0.15	0.46	-0.31
Equity accounts	0.00	0.00	0.00
Other liabilities	9.25	8.61	0.64
Total Liabilities and Equity (d)	1.14	1.50	-0.36
Customer spread (a - c)	1.50	1.48	0.02
Net Interest Income (b - d)	1.49	1.30	0.19

Banking income

In the first half of 2015, net fees and commissions charged to customers for the sale of products and services totalled 25.1 million euros, which corresponds to a decrease by around 15.7% when compared with the same period last year.

Complementing that information, table 4 shows the main items that have contributed to that change in net fees and commissions for the period. We would like to highlight the positive contribution of fees and commissions related with asset management (+6.8%), lending (+5.6%), and other fees and commissions (+4.9%). The overall less favourable performance was achieved due to the negative contribution of a drop by -16.3% in fees and commissions related with means of collection and payment, by -13% in fees and commissions from guarantees and sureties, and especially due to the decrease by -81.4% in terms of insurance

sales. We would like to add that the latter posted extraordinary earnings in June 2014, which justifies the sharp decrease in 2015.

Table 4 . Net Fees and Commissions
(€ thousand)
			Change
	jun-15	jun-14	Amount	%
Commissions from lending	7 158	6 776	382	5.6
Commissions from guarantees and sureties	3 034	3 486	- 452	-13.0
Commissions from collection and payment handling (net)	6 430	7 683	- 1 253	-16.3
Commissions from asset management (net)	1 260	1 180	80	6.8
Commissions from insurance sales	782	4 196	- 3 414	-81.4
Commissions from account management	2 779	2 918	- 139	-4.8
Processing fees	774	791	- 17	-2.1
Other fees and commissions (net)	2 927	2 789	138	4.9
Total	25 144	29 819	- 4 675	-15.7

Regarding the remaining components of banking income, we would like to highlight the decrease by around 8 million euros in terms of financial transactions and the increase by around 5.2 million euros from the sale of other assets. The item other operating results had a positive performance of over 48.2 million euros, resulting from the sale of the business unit that was in charge of property management and credit exposures of customers associated with the real estate sector. This fact has contributed to the upsurge in the banking product by over 39.1 million euros, now amounting to 131.5 million euros.

Operating income

In the first half of 2015, the consolidation of the actions implemented in the previous years regarding the cost control policy was continued. As at 30 June 2015, operating expenses totalled 55.8 million euros, which represents a decrease by over 2 million euros, or -3.6%, when compared with the same period last year.

Table 5 shows that personnel costs amounted to around 30 million euros, which corresponds to an increase by 4.8% when compared with the first half of 2014. This increase was mostly due to an increase by 599 thousand euros in salaries and the corresponding social charges, as well as a larger contribution to the Pension Fund of over 546 thousand euros.

General administrative expenses totalled 24.4 million euros, which corresponds to a decrease by 10.6%, or around 2.9 million euros, when compared with the same period last

year. This cost control was achieved with the significant contribution of a reduction in the items fees and regular payment agreements, with savings of around 1.2 million euros (-37.1%), and IT services, with savings of over 1.5 million euros (-23.7%). Item external real estate appraisers represented the largest growth in terms of costs with an increase by 366 thousand euros when compared with the same period last year.

In terms of allocations for depreciation of fixed assets we have witnessed a positive change (-0.5 million euros, or -27.3%) to around 1.4 million euros.

Table 5 . Operating Expenses
(€ thousand)
			Change
	jun-15	jun-14	Amount	%
Personnel expenses (a)	29 965	28 585	1 380	4.8
Wages and salaries	21 687	21 088	599	2.8
Social security charges	5 955	5 689	266	4.7
Pension fund	2 011	1 465	546	37.2
Other expenses	312	343	- 31	-9.0
General administrative expenses (b)	24 403	27 293	- 2 890	-10.6
External supplies	1 286	1 309	- 23	-1.8
Rents and leasing	2 219	2 175	44	2.0
Communications	2 040	2 222	- 182	-8.2
Travel, hotel and representation	641	578	63	10.9
Advertising and publications	1 995	1 892	103	5.4
Maintenance of premises and equipment	1 527	1 709	- 182	-10.6
Transports	625	560	65	11.7
Fees and regular payment agreements	2 032	3 228	- 1 196	-37.1
Legal expenses	1 009	959	50	5.3
IT Services	4 894	6 414	- 1 520	-23.7
Security, surveillance and cleaning	217	465	- 248	-53.3
Temporary work	2 010	2 317	- 307	-13.3
External consultants and auditors	268	337	- 69	-20.4
External real estate appraisers	420	54	366	677.3
Services rendered by Banco Popular Group	1 600	1 685	- 85	-5.1
Other services	1 620	1 389	231	16.6
Other operating expenses (c=a+b)	54 368	55 878	- 1 510	-2.7
Amortization for the period (d)	1 456	2 003	- 547	-27.3
Total (c+d)	55 824	57 881	- 2 057	-3.6

The burden of personnel costs in total administrative expenses amounted to 55%, which compares with the 51% seen at the end of the first half of 2014. In the first half of 2015, operating income amounted to over 75.6 million euros, i.e., 41.2 million euros higher than figures for the same period last year.

Net income

Net income for the first half of 2015 amounted to around 32 million euros, which compares with 1.2 million euros in the first half of 2014. For this result the item other operating income contributed with around 45 million euros resulting from the sale of the business unit in charge of property asset management and credit exposures of customers associated with real estate; operating cost control, whose reduction amounted to around 2 million euros; and a better performance of credit provisions, which dropped by around 36 million euros to 27 million euros.

Investments and assets

Total assets

As at 30 June 2015, Banco Popular's net assets amounted to around 8,230 million euros, 1,103 million euros less than in the same period last year, which corresponds to a decrease by around 11.8%.

The Bank also manages other customer funds applied in investment, savings and retirement instruments, which amounted to 982 million euros at the end of June 2015, representing a slight decrease by 0.3% when compared with the same period last year.

Therefore, total assets managed by the Bank amounted to 9,212 million euros at the end of the first half of the year, which represents a 10.7% drop when compared with the first half of 2014.

Adjustments to the size of the financial asset portfolio, the decrease of the number of properties in the balance sheet, and the reduction of financing for institutional customers and through bond issues have contributed to this decrease.

Customer funds

As at 30 June 2015, the total amount of on- and off-balance sheet customer funds amounted to 5,159 million euros, 3.6% more when compared with the previous year. Table 6 represents the evolution of total customer funds in the first half of 2015 and 2014.

On-balance sheet funds, essentially through customer deposits, reached approximately 4,177 million euros, which corresponds to an increase by 4.5% when compared with the same period last year, i.e., an overall increase in excess of 181.3 million euros.

Demand accounts significantly increased by 159 million euros, or 18.3%, from 869 million euros to 1,028 million euros.

Table 6 . Customer funds
(€ thousand)
	Jun-15	Jun-14	Change
			Amount	%
CUSTOMER FUNDS :
Deposits	4 147 027	3 949 199	197 828	5.0
Demand accounts	1 028 381	869 211	159 170	18.3
Time deposits	3 112 459	3 075 531	36 928	1.2
Savings accounts	6 187	4 457	1 730	38.8
Cheques, payment orders, and other funds	9 578	12 175	- 2 597	-21.3
Interest payable	19 950	33 800	- 13 850	-41.0
ON-BALANCE SHEET FUNDS ( a )	4 176 555	3 995 174	181 381	4.5
Disintermediation funds
Investment funds	254 148	307 259	- 53 111	-17.3
Investment and capitalisation insurance	502 716	501 366	1 350	0.3
Retirement insurance plans	100 075	87 501	12 574	14.4
Customer portfolio under management	125 082	88 783	36 299	40.9
OFF-BALANCE SHEET FUNDS ( b )	982 021	984 908	- 2 888	-0.3
TOTAL CUSTOMER FUNDS ( a + b )	5 158 576	4 980 082	178 493	3.6

Off-balance sheet funds – which include investment fund applications, retirement plans, funds raised through investment insurance products, and assets managed through private banking – decreased by 0.3%, dropping from around 985 million euros at the end of the first half of 2014 to around 982 million euros in the first half of 2015. The evolution of this item was due to the increase in financial and retirement insurance by over 13.9 million euros and the management of portfolios of over 36.2 million euros, which was nevertheless insufficient to offset the drop by 53.1 million euros in investment funds.

As at 30 June 2015, Banco Popular Portugal was the depositary of 12 investment funds managed by Popular Gestão de Activos, whose total portfolio amounted then to over 254 million euros. Table 7 shows the assets that compose each managed investment fund with reference to the first half of 2015 and 2014.

Table 7 . Investment Fund Portfolio ( asset value )
(€ thousand)
	Jun-15	Jun-14	Change
Funds			Amount	%
Popular Acções	8 135	10 787	- 2 652	-24.6
Popular Euro Obrigações	10 457	25 610	- 15 153	-59.2
Popular Global 25	52 298	29 133	23 165	79.5
Popular Global 50	48 407	24 820	23 587	95.0
Popular Global 75	22 406	14 239	8 168	57.4
Popular Tesouraria	15 751	8 349	7 402	88.7
Popular Economias Emergentes II	0	9 959	- 9 959	-100.0
Popular Multiactivos (*)	0	3 114	- 3 114	-100.0
Popular obrig. Ind.Emp. Germany and USA	0	5 978	- 5 978	-100.0
Popular obrig.Ind.Ouro (London)	0	3 981	- 3 981	-100.0
Imourbe	10 353	12 628	- 2 275	-18.0
ImoPopular	20 726	21 548	- 822	-3.8
ImoPortugal	0	22 734	- 22 734	-100.0
Popular Predifundo	10 423	12 001	- 1 578	-13.2
Popular Objectivo Rendimento 2015	2 167	2 379	- 212	-8.9
Popular Objectivo Rendimento 2021	1 270	1 323	- 53	-4.0
Popular Arrendamento	51 754	98 676	- 46 922	-47.6
Total	254 148	307 259	- 53 111	-17.3

(*) Popular Multiactivos results from the merger by incorporation of Popular Multiactivos I, Popular Multiactivos II and Popular Multiactivos III.

Banco Popular Portugal also sells Eurovida's retirement plans and investment insurance, holding a 15.9% equity stake in that company.

Lending operations

Loans and advances to customers totalled around 5,918 million euros at the end of the first half of 2015, representing 71.9% of total assets, or 67.8% if provisions for past-due loans are deducted. Loans and advances to corporate customers and the public sector totalled almost 3,281 million euros (excluding other securitized loans and overdue loans), which corresponds to 63% of total lending operations. Total loans and advances to private customers representing 37% of total lending grew by 3.1%, which corresponds to over 57.8 million euros, and stood at over 1,931 million euros.

The following table shows the distribution of loans and advances to customers in the first half of 2015 and 2014.

Table 8 . Loans and advances to customers
(€ thousand)
	Jun-15	Jun-14		Change
			Amount	%
Loans and advances to customers ( a )
Public sector	3 280 854	3 108 726	172 128	5.5
Private individuals	1 931 276	1 873 358	57 918	3.1
Residential mortgage loans	1 537 934	1 475 228	62 706	4.3
Personal and consumer loans	36 880	41 461	- 4 581	-11.0
Other personal lending	356 462	356 669	- 207	-0.1
Total	5 212 130	4 982 084	230 046	4.6
Other loans (represented by securities) ( b )	336 937	350 398	- 13 461	-3.8
Interest and commissions receivable ( c )	4 898	7 836	- 2 938	-37.5
Past-due loans and interest ( d )
Due within 90 days	11 236	23 522	- 12 286	-52.2
Over 90 days	352 710	285 113	67 597	23.7
Total	363 946	308 635	55 311	17.9
Total Gross Lending ( a + b + c + d )	5 917 911	5 648 953	268 958	4.8
Specific Loan Provisions	341 103	295 177	45 926	15.6
Total Net Lending	5 576 808	5 353 776	223 032	4.2

The increase by 230 million euros in lending, 4.6% more when compared with the same period last year, was mostly due to the increase by around 172 million euros, or 5.5%, in corporate lending and 62.7 million euros, or 4.3%, in home loans, since the remaining items have decreased. Total net lending was affected by the increase in provisions due to the upsurge of past-due loans by around 46 million euros, i.e., 15.6%, thus posting an increase by 223 million euros that corresponds to a lower year-on-year change but is still of around 4.2%.

The amount of past-due loans and interest at the end of the first half of 2015 totalled over 363.9 million euros, which represents an increase by 17.9% when compared with the same period last year. This type of loans represented 6.15% of total lending. Taking into consideration only loans that have been non-performing for more than 90 days this indicator stood at 5.96%.

Total past-due loans amounted to over 483.3 million euros at the end of 2015, which represented around 8.17% of total lending, thus showing an upward trend that was constant until the end of the first half of the year.

19

Table 9 . Past-due Loans and Non-performing Loans
(€ thousand)
	Jun-15	Jun-14	Change
			Amount	% / p.p.
Past-due loans and interest	363 946	308 635	55 311	17.9
Past-due loans by more than 90 days (a)	352 710	285 113	67 597	23.7
Doubtful loans reclassified as past-due loans (b)	130 611	156 647	-26 036	-16.6
Non-performing loans (a+b)	483 321	441 760	41 561	9.4
Past-due loans / total loans (%)	6.15	5.46		0.69
Past-due loans over 90 days / total lending (%)	5.96	5.05		0.91
Non-performing loans / total lending (%)	8.17	7.82		0.35
Net non-performing loans / total net lending (%)	2.59	2.88		-0.28
Provisions for Credit risks	395 721	345 293	50 428	14.6
Hedging Ratio (%)	108.7	111.9		-3.2
memorandum item:
Total lending	5 917 911	5 648 953	268 958	4.8

As at 30 June 2015, provisions for credit risks amounted to 395.7 million euros, ensuring a hedging ratio of 108.7%.

Main risks and uncertainties

In the second half of 2015, and in spite of the recent recovery signs of the economic situation of the country, there are still many challenges ahead and therefore we need to take into consideration a series of situations that may originate certain risks to the development of Banco Popular's activity, namely those that may condition the fulfilment of the goals defined in the Budget and in the Financing and Capital Plan.

At this point, we would like to identify the main risks that may have an impact on the activity of the Bank during the second half of 2015 and that may lead future results to be materially different from those expected, namely:

• In Portugal, and despite some positive signs that we have been witnessing since 2013 and the end of the financial assistance programme, there are still some risks and uncertainties tied with the socio-economical condition that remains frail and the uncertain political scenario that is dependant upon the upcoming elections.

• In Europe, the European Central Bank has maintained an accommodative monetary policy by keeping the reference interest rate at low levels for a long period of time and enforcing a policy on refinancing lines for banks, while strengthening the construction of the

Banking Union in the sense of maintaining financial stability and trust in the euro and the economies that comprise it.

• Future regulatory developments that may introduce additional challenges for the banking sector on the short term.

Risks associated with the Bank's activity

Despite the several control mechanisms and the measures implemented to mitigate them, the Bank is exposed to specific risks in its activity, namely:

• Credit and Concentration Risk - This is the main risk that the Bank is exposed to; we cannot exclude the possibility of a decline in the quality of its assets.

• Market Risk - The Bank's trading portfolio is not very significant, thus we do not expect any relevant impact via this type of risk during the second half of 2015.

• Liquidity Risk - In the past few years, the Bank has significantly reduced its liquidity dependence on the parent company. However, in a possible crisis scenario, it might be more difficult to obtain funding via the financial markets; the impossibility of resorting to this financing source would imply an almost exclusive funding by the parent company.

• Interest Rate Risk - Although not expected, a significant change in interest rates might have a relevant impact on net interest income and the bank's equity.

• Exchange Rate Risk - The global currency position tends to be null and therefore any impact on the Bank's earnings as a result of fluctuations in exchange rates is immaterial.

• Operational Risk - According to the latest self-assessment exercise regarding operational risks inherent to each area in the Bank, residual risk is concentrated mostly in a low-risk category. Quantitatively, losses due to operational risk in the first half of the year compare favourably with the same period last year and we expect a similar behaviour in the second half of the year.

• Reputational and Compliance Risk - These are risks to which the Bank is also exposed, although the internal governance system reduces the probability of occurrence of events with impact on the results.

• Other Risks - The Bank is also exposed to other risks (for example, technological risk, real estate risk or the risk inherent to the application of its strategy). However, we do not anticipate that these risks shall have a significant influence on the Bank's activity and its results during the second half of the year.

Events that occurred after 30 June

Following the unexpected demise of Mr. Rui Manuel Morganho Semedo, Chairman of the Executive Board of Directors of Banco Popular Portugal, on the past 3 July, the sole

shareholder, Banco Popular Español approved at the General Meeting of Banco Popular Portugal that took place on 13 July 2015 the appointment of Mr. Carlos Manuel Sobral Cid da Costa Álvares as Chairman of the Executive Board of Directors of the Bank for the ongoing four-year period.

Lisbon, 31 July 2015

The Board of Directors

Annex 1 - Shareholding position of the members of the governing and supervisory bodies

(Article 447 of the Commercial Companies Code - 'Código das Sociedades Comerciais') Nothing to report.

Annex 2 - Qualifying holdings

(Article 448 of the Commercial Companies Code and Article 20 of the Securities Code 'Código dos Valores Mobiliários')

Shareholders No. of Shares		Shareholding position	Voting Rights
Banco Popular Español, SA	476 000 000	100%	100%

Declaration of compliance of the financial information

STATEMENT REFERRED TO IN ARTICLE 246(1)(c)

OF THE PORTUGUESE SECURITIES CODE

Paragraph (c) of article 246(1) of the Portuguese Securities Code states that each of the responsible persons shall issue a statement as explained therein.

STATEMENT OF THE BOARD OF DIRECTORS

The members of the Board of Directors of Banco Popular Portugal, S.A., identified below by name, have individually signed the following statement:

'Pursuant to paragraph (c) of article 246(1) of the Portuguese Securities Code, I declare that, to the best of my knowledge, the condensed financial statements of Banco Popular Portugal, S.A. referred to the first half of 2015, were drawn up in accordance with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and the results of that entity and that the interim management report faithfully states the information required in accordance with article 246(2) of the Portuguese Securities Code.'

Lisbon, 31 July 2015

Executive Board of Directors

Carlos Manuel Sobral Cid da Costa Álvares - Chairman

Tomás Pereira Pena - Member

Susana de Medrano Boix - Member

Half-Year Accounts

Balance Sheet

Individual Balance Sheet as at 30 June 2015 and 2014

					(€ thousand)
			3 0 - 0 6 - 2 0 14
	N o te/ T able A nnex	A mo unt befo re pro visio ns, impairment & depreciatio n	P ro visio ns, impairment & depreciatio n	N et amo unt	3 0 - 0 6 - 2 0 14
		1	2	3 = 1 - 2
Assets
Cash and balances w ith central banks Deposits w ith banks	17 18	73 032 56 718		73 032 56 718	50 712 66 622
Financial assets held for trading	19	47 719		47 719	103 903
Available-for-sale financial assets	21	1 812 508		1 812 508	1 869 916
Loans and advances to banks	22	68 036		68 036	1 260 684
Loans and advances to customers	23	5 917 911	341 103	5 576 808	5 353 776
Non-current assets held for sale	25	20 747		20 747	20 747
Other tangible assets	26	160 096	90 438	69 658	79 820
Intangible assets	27	20 868	20 822	46	111
Current income tax assets	15	0		0	3 566
Deferred income tax assets	28	68 640		68 640	78 458
Other assets	29	468 231	32 540	435 691	444 457
Total Assets		8 714 506	484 903	8 229 603	9 332 772
Liabilities
Deposits from central banks	30	900 009		900 009	1 307 918
Financial liabilities held for trading	19	37 633		37 633	36 184
Deposits from banks	31	2 087 953		2 087 953	2 333 034
Deposits from customers	32	4 176 555		4 176 555	3 995 174
Debt securities issued	33	56 470		56 470	711 299
Hedging derivatives	34	108 798		108 798	119 294
Provisions	35	55 957		55 957	51 391
Current income tax liabilities	15	10 419		10 419	528
Deferred income tax liabilities	28	21 090		21 090	24 749
Other liabilities	36	54 241		54 241	40 767
Total Liabilities		7 509 125	0	7 509 125	8 620 338
Equity
Equity	39	476 000		476 000	476 000
Share premium	39	10 109		10 109	10 109
Revaluation reserves	40	- 5 980		- 5 980	- 8 760
Other reserves and retained earnings	41	208 354		208 354	233 883
Income for the period		31 995		31 995	1 202
Total Equity		720 478	0	720 478	712 434
Total Liabilities + Equity		8 229 603	0	8 229 603	9 332 772

Income Statement

			(€ thousand)
	N o te/ T able A nnex	3 0 - 0 6 - 2 0 15	3 0 - 0 6 - 2 0 14
Interest and similar income Interest and similar charges	6 6	106 630 46 213	133 481 71 407
Net interest income		60 417	62 074
Return on equity instruments Fees and commissions received Fees and commission paid Net gains from financial assets and liabilities at fair value	7 8 8	63 28 712 3 568	58 34 168 4 349
through profit or loss	9	- 81	- 1 499
Net gains from available-for-sale financial assets Net gains from foreign exchange differences Income from the sale of other assets	9 10 11	- 1 887 42	9 702 562 - 5 182
Other operating income Banking income	12	45 015 131 486	- 3 214 92 320
Personnel expenses General administrative expenses Depreciation and amortization Provisions net of recoveries and w rite-offs Adjustments to loans and advances to customers	13 14 26/27 35	29 965 24 403 1 456 3 382	28 585 27 293 2 003 337
(net of reversals)	23	23 371	35 866
Impairment of other assets net of reversals	29	4 168	- 3 040
Net income before tax		44 741	1 276
Income tax Current tax Deferred tax	15 15	12 746 9 811 2 935	74 587 - 513
Net income after taxes		31 995	1 202
Of w hich: Net income from discontinued operations		0	0
Net income for the period		31 995	1 202
Earnings per share (euro)		0.067	0.003

Individual Income Statement as at 30 June 2015 and 2014

Statement of Comprehensive Income

Statement of Comprehensive Income

		(€ thousand)
	30-06-2015	30-06-2014
Net income	31 995	1 202
Other comprehensive income:
Items not reclassified as income
Retirement pensions
Recognition of actuarial gains and losses	- 11 051	- 340
	- 11 051	- 340
Items reclassified as income
Available-for-sale financial assets
Revaluation of available-for-sale financial assets	- 4 722	60 602
Tax burden	1 051	- 14 918
	- 3 671	45 684
Income not recognised in the income statement	- 14 722	45 344
Individual comprehensive income	17 273	46 546

CHIEF ACCOUNTANT THE BOARD OF DIRECTORS

Individual Statement of Changes in Equity

Individual Statement of Changes in Equity

						(€ thousand)
	Share Capital	Share premium	Fair value reserves	Other reserves and retained earnings	Net income	Total
Balance as at 01 January 2014	476 000	10 109	- 54 143	265 642	- 31 720	665 888
Transferred to reserves				- 31 720	31 720	0
Actuarial gains and losses						0
Others			-1595	1 595		0
Comprehensive income for the period			53 453	- 18 419	2 283	37 317
Balance as at 31 December 2014	476 000	10 109	- 2 285	217 098	2 283	703 205
Transferred to reserves				2 283	- 2 283	0
Actuarial gains and losses						0
Others			- 23 528	23 528		0
Comprehensive income for the period			- 3 671	- 11 051	31 995	17 273
Balance as at 30 June 2015	476 000	10 109	- 29 484	231 858	31 995	720 478

Cash Flow Statements

Individual Cash Flow Statements for the years ended 30 June 2015 and 2014

(€ thousand)

	Notes	30-06-2015	30-06-2014
Cash flow from operating activities
Interest, fees and other income received		112 539	140 585
Interest, fees and other expenses paid		- 41 529	- 56 059
Recovery of outstanding loans and interest		1 789	2 185
Cash paid to suppliers and employees		- 51 231	- 55 627
Contributions to the pension fund	37	- 1 019	- 1 524
Sub-total		20 549	29 560
Changes in operating assets and liabilities
Deposits from central banks		52 576	- 6 580
Financial assets held for trading and available for sale		647	- 35
Loans and advances to banks		- 4 982	-1 070 137
Deposits from banks		23 993	412 446
Loans and advances to customers		- 176 005	- 177 718
Deposits from customers		69 258	- 217 204
Risk management derivatives		- 48 536	6 128
Other operating assets and liabilities		38 553	- 41 813
Net cash flow from operating activities before
income taxes		- 23 947	-1 065 353
Income tax		2 357	- 59
Net cash flow from operating activities		- 21 590	-1 065 412
Investment funds
Dividends received		63	58
Purchase of available for sale financial assets		- 6 212	- 714 254
Sale of available for sale financial assets		117 173	646 722
Sale of non-current tangible assets held for sale		9 493	101 054
Purchase and sale of assets		- 841	- 351
Net cash flow from investing activities		119 676	33 229
Cash flow from financing activities
Issue of ow n equity instruments	33	225 000	8 622
Redemption of ow n equity instruments		- 488 960	- 173 158
Net cash flow from financing activities		- 263 960	- 164 536
Net changes in cash and cash equivalents
Cash and cash equivalents at the beginning of the period	46	325 415	1 487 896
Effect of exchange rate fluctuations on cash and cash equivalents		- 1 080	659
Net changes in cash and cash equivalents		- 165 874	-1 196 719
Cash and cash equivalents at year end	46	158 461	291 836

Notes to the Financial Statements

NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS AS AT 30 JUNE 2015 AND 2014

(€ thousand)

1. INTRODUCTION

1.1 Activity

The Bank – then named BNC-Banco Nacional de Crédito Imobiliário – was founded on 2 July 1991, following the authorization given by Decree order No. 155/91, of 26 April, issued by the Ministry for Finances. On 12 September 2005, the name of the Bank was changed to Banco Popular Portugal, S.A.

The Bank is authorized to operate pursuant to the rules and regulations currently applicable to banks in Portugal and its corporate purpose is raising funds from third parties in the form of deposits or other, which it applies, together with its own funds, in granting loans or in other assets, also providing additional banking services in the country and abroad.

The accounts of the Bank are consolidated at the parent company, Banco Popular Español, S.A., ('BPE') whose Head Office is located in Madrid, Spain, at 34 Calle Velázquez.BPE accounts are available at its respective Head Office as well on its webpage (www.bancopopular.es).

BPE accounts are available at its respective Head Office as well on its webpage (www.bancopopular.es).

The Bank is not a listed company.

1.2 Bank structure

As a result of the restructuring process initiated in previous years, during 2011, the Bank ceased to hold any equity stake in any subsidiary and ceased to reclassify 'Class D Notes' issued by Navigator Mortgage Finance Nº 1 Plc ('Navigator') into the available-for-sale asset portfolio.

Based on the assumption that the investment in Navigator and its potential impact on the financial statements were considered immaterial, and pursuant to IAS 1 revised, the Bank decided not to prepare consolidated financial statements from 2011 onwards, since that information is not materially relevant for effects of the presentation of the Bank's financial information nor does it influence the decision of the readers of those statements.

Thus, as at 30 June 2015, the Bank detained only one equity stake in the associated company Eurovida – Companhia de Seguros de Vida, S.A. (see Note 25).

2. Summary of the Main Accounting Principles

The main accounting principles and valuation criteria adopted in the preparation of these financial statements are stated below. These principles were consistently applied to every year presented, except when otherwise stated.

2.1 Bases of preparation

Individual financial statements

Individual financial statements for Banco Popular Portugal were prepared in accordance with the Adjusted Accounting Standards ('Normas de Contabilidade Ajustadas' - NCA) as defined by Notice No. 1/2005, of 21 February, and defined in Instructions Nos.9/2005 and 23/2004 issued by the Bank of Portugal.

The Adjusted Accounting Standards fundamentally correspond to the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) pursuant to Regulation (EC) No. 1606/2002, of the European Parliament and of the Council, of 19 July, except for the following matters:

• Valuation of loans to customers and other receivables On the date of their first recognition they are booked by their nominal value, while the component of interest, commissions and external expenses is attributable to their respective underlying transactions recognised according to the pro rata temporis rule, when dealing with operations that produce revenue flows over a period of more than one month;
• Provisions for loans to customers and other receivables Provisions for this class of financial assets are subject to a minimum framework for the constitution of specific provisions (general and country risk) pursuant to Notice No. 3/95 of the Bank of Portugal;
• Tangible assets On the date of initial recognition they are booked at acquisition cost, and subsequently the historical cost is maintained, except in case of legally authorized revaluations.

2.2 Segmental reporting

As of 1 January 2009, the Bank has adopted IFRS 8 – Operating Segments for effects of disclosing financial information analysed by operating segments (see Note 5).

An operational segment in a business is a group of assets and operations used to provide products or services, subject to risks and benefits that are different from those seen in other segments.

The Bank determines and presents operational segments based on in-house produced management information.

2.3 Equity stakes in associated companies

Associated companies are those in which the Bank has, directly or indirectly, a significant influence over its management and financial policy but does not hold control over the company. It is assumed that the Bank has a significant influence when it holds the power to control over 20% of the voting rights of the associate. Even when voting rights are lower than 20%, the Bank may have significant influence through the participation in management bodies or the composition of the Executive Boards of Directors.

In the Bank's individual financial statements, associated companies are valued at historical cost. The dividends from associated companies are booked in the Bank's individual income on the date they are attributed or received.

In case of objective evidence of impairment, the loss by impairment is recognised in the income statement.

2.4 Foreign currency transactions

a) Functional currency and presentation currency

The financial statements are presented in euros, which is both the functional and presentation currency of the Bank.

b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using indicative exchange rates prevailing on the dates of transactions. Gains and losses resulting from the conversion of foreign currency transactions, deriving from their extinction and conversion into monetary assets and liabilities in foreign currencies at the exchange rate at the end of each period, are recognised in the income statement, except when they are part of cash flow hedges or net investment in foreign currency, which are deferred in equity.

Conversion differences in non-monetary items, such as equity instruments measured at fair value with changes recognised in net income, are booked as gains and losses at fair value. For non-monetary items, such as equity instruments, classified as available for sale, conversion differences are booked in equity, in the fair value reserve.

2.5 Derivative financial instruments

Derivative financial instruments are initially recognised at fair value on trade date and subsequently remeasured at fair value. Fair values are based on quoted market prices, including recent market transactions and evaluation models, namely: discounted cash flow models and option valuation models. Derivatives are considered assets when their fair value is positive and liabilities when their fair value is negative.

Certain derivatives embedded in other financial instruments – such as debt instruments whose profitability is indexed to share or share index price – are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value and subsequent changes are recognised in the income statement.

The Bank holds: (i) trading derivatives, measured at fair value – gains and losses arising from changes in their fair value are immediately included in the income statement, and (ii) fair value hedging derivatives accounted for in conformity with note 3.1 a).

2.6 Recognition of interest and similar income and interest and similar charges

Interest income and charges are recognised in the income statement for all instruments measured at amortized cost in accordance with the pro rata temporis accrual method.

Once a financial asset or group of financial assets has been written down as a result of an impairment loss, interest income should be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

2.7 Fees and commissions

Fees and commissions are generally recognised using the accrual method when the service has been provided. Revenue from credit line fees, which are expected to originate a loan, is differed (together with any cost directly related) and recognised as an adjustment at the effective interest rate. Fees and commissions on trades, or participation in third party trades – such as purchasing stock or purchasing or selling a business – are recognised as earned when the service has been provided. Portfolio and other management advisory fees are recognised based on the applicable service contracts – usually recognised proportionally to the time elapsed. Asset management fees related to investment funds are recognised rateably over the period the service is provided.

2.8 Financial assets

Financial assets are recognised in the Balance Sheet on trade date – the date on which the Bank commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus direct transaction costs, except for financial assets carried at fair value through profit or loss for which transaction cost are directly recognised in the income statement. Financial assets are derecognised when (i) the rights to receive cash flows from these assets have expired, (ii) the Bank has substantially transferred all risks and rewards of ownership, or (iii) notwithstanding the fact that the Bank may have retained part, but not substantially all, of the risks and benefits associated with holding them, control over the assets was transferred.

Financial assets and liabilities are offset and the net amount booked in the income statement when, and only when, the Bank has a currently enforceable legal right to offset the recognised amounts and intends to settle them on a net basis.

The Bank classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. Management determines the classification of the financial instruments at initial recognition.

a) Financial assets at fair value through profit or loss

This category has two sub-categories: Financial assets held for trading, and those designated at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by Management. Derivative financial assets are also categorised as held for trading unless they qualify for hedge accounting.

The fair value option is only used for financial assets and liabilities in one of the following circumstances:

• There is a significant reduction in the measurement inconsistencies that would arise if the related derivatives were treated as held for trading and the underlying financial instruments were carried at amortised cost, such as loans and advances to customers or banks and debt securities;
• Certain investments, such as equity investments, that are managed and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to management on that basis; and
• Financial instruments, such as holdings of debt securities, with one or more embedded derivatives that significantly modify cash flows, are carried at fair value through profit and loss.

These assets are assessed daily or at each reporting date based on fair value. In the case of bonds and other fixed-income securities the balance sheet contains the amount of unpaid accrued interest.

Gains and losses arising from changes in fair value are included directly in the income statement, which also includes interest revenue and dividends on traded assets and liabilities at fair value. Revenue from interest on financial assets at fair value through profit or loss is carried in net interest income.

Gains and losses arising from changes in the fair value of the derivatives that are managed together with designated financial assets and liabilities are included in item 'Income from assets and liabilities at fair value through profit and loss.

b) Loans and receivables

Loans and receivables includes loans to customers and banks, leasing operations, factoring operations, participation in syndicated loans and securitised loans (commercial paper and corporate bonds) that are not traded in an active market and for which there is no selling intention.

Loans and securitised loans traded in an active market are classified as available-for-sale financial assets.

Loans and receivables are initially recognised at fair value. In general, fair value at inception corresponds to transaction value and includes fees, commissions or other credit-related costs and revenues.

Subsequently, loans and receivables are valued at amortised cost based on the effective interest rate method and subject to impairment tests.

Interest, fees, commissions and other credit-related costs and revenues are recognised on an accrual basis over the period of the transactions regardless of the moment when they are charged or actually paid. Fees on loan commitments are recognised on a deferred and linear basis during the lifetime of the commitment.

The Bank classifies as non-performing loans instalments of principal or interest after, at most, thirty days of their due date. In case of litigation, all principal instalments are considered non-performing (current and past due).

Factoring

Credit to customers includes advances within factoring operations with recourse and the amount of the invoices granted without recourse, whose intention is not a short run sale, and is recorded on the date the accounts receivable are assigned by the seller of the product or service who issues the invoice.

Accounts receivables assigned by the issuer of the invoices or other commercial credits for recourse or non-recourse factoring are registered on assets under the item Loans and advances to customers. As a counterpart it changes the item Other liabilities.

When invoices are taken with recourse but cash advances on those respective contracts have not been made yet, they are registered in off-balance sheet accounts on the amount of the invoices that have been received. The off-balance sheet account is rectified as the cash advances are made.

Commitments arising from credit lines to factoring customers that have not been utilized yet are registered in off-balance sheet accounts.

Guarantees granted and irrevocable commitments

Liabilities for guarantees granted and irrevocable commitments are registered in off-balance sheet accounts by the value at risk and interest flows, commissions or other revenues recorded in the income statement during the lifetime of the operations. These operations are subject to impairment tests.

c) Held-to-maturity investments

This item includes non-derivative financial assets with fixed or determinable payments and defined maturities that the Bank has the intention and ability to hold to maturity.

These assets are initially recognised at fair value, minus possible commissions included in the effective rate, plus all direct incremental costs. They are subsequently valued at amortised cost, using the effective interest rate method and subject to impairment tests. If during a subsequent period the amount of the loss of impairment decreases, and that decrease may be objectively tied to an event that happened after the impairment was recognised, this is reversed through the income statement.

d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that: (i) the Bank intends to keep for an undetermined period of time, (ii) are recognised as available for sale at inception, or (ii) are not categorized into any of the other categories described above.

This item includes:

• Fixed-income securities that have not been classified in the trading book or the credit portfolio, or held-to-maturity investments;
• Available-for-sale variable-yield securities; and
• Available-for-sale financial asset funds and supplementary funds.

Available-for-sale assets are recognised at fair value, except for equity instruments that are not listed on any active market and whose fair value may not be reliably measured or estimated, in which case they are recognised at cost value.

Gains and losses arising from changes in the fair value of available-for-sale financial assets are directly recognised in equity in item Fair value revaluation reserves, except for impairment losses and foreign exchange gains and losses of monetary assets, until the asset is sold, when the gain or loss previously recognised in equity is carried in the income statement.

Interest from bonds and other fixed-income securities and the differences between acquisition cost and the nominal value (premium or discount) are registered in the income statement using the effective rate method.

Revenue from variable-income securities (dividends in the case of shares) are booked in the income statement on the date they are attributed or received. According to this criterion, interim dividends are recorded as profit in the exercise their distribution is decided.

In case of objective impairment evidence – resulting from a significant and prolonged decline in the fair value of the security or from financial problems on the part of the issuer – the cumulative loss on the fair-value revaluation reserve is removed from equity and recognised in the income statement.

Impairment losses on fixed-income securities may be reversed on the income statement if there is a positive change in the security's fair value as a result of an event that occurred after the initial impairment recognition. Impairment losses on variable-income securities may not be reversed. In the case of impaired securities, subsequent negative fair-value changes are always recognised in the income statement.

Exchange rate fluctuations of non-monetary assets (equity instruments) classified in the available-forsale portfolio are registered in fair-value reserves. Exchange rate fluctuations in the other securities are booked in the income statement.

2.9 Impairment of financial assets

a) Assets carried at amortised cost

The Bank assess on each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. A financial asset, or group of financial assets, is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated. Objective evidence that an asset, or group of assets, is impaired includes observable data that the Bank is aware of, regarding the following loss events:

• (i) significant financial stress of the borrower;
• (ii) a breach of contract, such as a default in principal and/or interest payments;
• (iii) concessions granted to the borrower, for reasons relating to the borrower's financial difficulty, that the lender would not have otherwise considered;
• (iv) probability that the borrower will go into bankruptcy or other financial reorganisation;
• (v) disappearance of an active market for that financial asset because of financial difficulties;
• (vi) information indicating that there will be a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although that decrease cannot yet be identified with the Bank's assets, including:
• adverse changes in the group of financial assets' condition and/or payment capacity;
• national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Bank assesses initially whether objective evidence of impairment exists for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes that asset in a group of financial assets with similar credit risk and collectively assesses them for impairment.

If there is objective evidence of an impairment loss on loans and receivables, or held-to-maturity investments, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future impairment losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the provisions account. The Bank may also determine impairment losses through the instrument's fair value at observable market prices.

When analysing impairment in a portfolio, the Bank estimates the probability of an operation or a customer to default during the estimated period between impairment occurs and the loss is identified.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar risk characteristics (i.e., based on the Bank's classification process that takes into account asset type, geographical location, collateral type, past due status and other relevant factors). These characteristics are relevant to estimate future cash flows for groups of financial assets by being indicative of the counterpart's ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

If, in a subsequent period, the amount of the impairment loss decreases and that decrease can be related objectively to an event occurring after the impairment was recognised (e.g., improvement in a debtor's credit rating), the previously recognised impairment loss is reversed through the provisions account. The amount of the reversal is recognised directly in the income statement.

Loans to customers whose terms have been renegotiated are no longer considered past due and are treated as new loan contracts. Restructuring procedures include: extended payment conditions, approved management plans, payment change and deferral. Restructuring practices and policies are based on criteria that, from the point of view of the Bank's management, indicate that payment has a high probability of occurring.

b) Assets carried at fair value

The Bank assess at each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. In the case of equity securities classified as availablefor-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, minus any impairment loss on that financial asset previously recognised in the income statement — is removed from equity and recognised in the income statement.

Impairment losses on equity instruments that have been recognised in the income statement are not reversible. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and growth can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement.

2.10. Intangible assets

- Software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives.

Costs associated with software development and maintenance are recognised as expenses when incurred. Costs directly associated with developing unique and identifiable software, controlled by the Bank and where it is probable that they will generate future economic benefits, are recognised as intangible assets.

Costs associated with software development recognised as assets are amortized during its useful life using the straight-line method.

2.11. Tangible assets

The Bank's property is comprised essentially of offices and branches. All tangible assets are stated at historical cost minus depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation of other tangible assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

	Estimated useful life (years)
Freehold buildings	50
Adaptation works in leasehold property	10, or during the lease period if lower than 10 years
Furniture, fixtures and fittings	5 to 8
Computers and similar equipment	3 to 4
Transport equipment	4
Other tangible assets	4 to 10

Tangible assets subject to depreciation are submitted to impairment tests whenever events or changes in certain circumstances indicate their carrying amount may no longer be recovered. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher between the value in use and the asset's fair value, minus sale costs.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These gains and losses are included in the income statement.

2.12 Tangible assets held for sale

Assets acquired in exchange for loans (real estate property, equipment and other assets) are recorded in the item Tangible assets held for sale by the value stated in the agreement that regulates the asset's delivery, which corresponds to the lower of the outstanding amount of the debt or the asset's evaluation at the time of its delivery.

The Bank's policy for this type of assets is to sell them as soon as possible.

These assets are periodically assessed and impairment losses are recognised whenever the result of that appraisal is lower than the asset's book value (see note 29).

Potential realized gains on these assets are not recorded in the Balance Sheet.

2.13 Leases

a) As lessee

Leases entered by the Bank are essentially related to transport equipment, where there are contracts classified as financial leases and others as operating leases.

Payments made on operating leases are recognised in the income statement.

When an operating lease is terminated before the end of the lease period, any payment required by the lessor, by way of compensation, is recognised as an expense in the period the operation is terminated.

Financial leases are capitalised at the inception of the lease in the respective item of tangible or intangible assets, as a counterpart to the item Other liabilities, at the lower of (i) the fair value of the leased asset and (ii) the present value of the minimum lease payments. Incremental costs paid for leases are added to the recognised asset. Tangible assets are depreciated pursuant to Note 2.11. Rents are comprised of (i) financial cost charged to expenses and (ii) financial depreciation of premium which is deducted from the item Other liabilities. Financial charges are recognised as expenses over the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. However, when there is no reasonable certainty that the Bank will obtain possession of the asset at the end of the lease, the asset must be totally depreciated during the smaller of the lease period or its useful life.

b) As lessor

Assets held under a financial lease are recognised as an expense in the period to which they relate by the current amount of the payments to be made. The difference between the gross amount receivable and the current balance receivable is recognised as receivable financial income.

Interest included in the rents charged to customers is registered as income, while principal depreciation, also included in the rents, is deducted from the overall amount initially lent. Recognition of the financial result reflects a constant periodical return rate over the remaining net investment of the lessor.

2.14 Provisions

Provisions for other risks and charges

Provisions for restructuring costs and legal expenses are recognised whenever: the Bank has a legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle that obligation; the amount can be reliably estimated.

Provisions for specific and general credit risks

In the financial statements, the credit and guarantee portfolio is subject to provisioning pursuant to the terms of Notice No. 3/95 issued by the Bank of Portugal, namely for:

• past due and non-performing loans;
• general credit risks; and
• country risk.

These provisions include:

(i) a specific provision for past due credit and interest presented in assets as a deduction to the item Loans and advances to customers, calculated using rates that vary between 0.5% and 100% on past due loan and interest balances, according to risk classification and whether secured or unsecured with collaterals (see note 23);

(ii) a specific provision for doubtful loans, recognised in assets as a deduction from the item Loans and advances to customers, which corresponds to the application of the rates foreseen for nonperformance classes, to instalments reclassified as past due in a single credit operation, as well as its application to the outstanding loan instalments of any single customer, where it was ascertained that the past due instalments of principal and interest exceeded 25% of principal outstanding plus past due interest, of half the provisioning rates applicable to credit past due (see note 23);

(iii) a general provision for credit risks, presented as a liability in item Provisions for risks and charges, corresponding to a minimum of 1% of total outstanding credit, including guarantees and other instruments, except for consumer loans, where the provisioning rate was at least 1.5% of such loans, and for mortgage loans whenever the real estate asset (collateral) was for the borrower's own use, in which case the minimum rate of 0.5% is applied (see note 35); and

(iv) a provision for country risk, constituted to face the risk attached to financial assets and off-balance sheet elements on residents from high risk countries according to Instruction No. 94/96 issued by the Bank of Portugal (see notes 23 and 35).

2.15 Employee benefits

a) Pension liabilities and other post-retirement benefits

In compliance with the Collective Bargaining Agreement (ACT) for the banking sector, the Bank has established a Pension Fund designed to cover retirement benefits on account of age, including disability, and survivor's benefits, set up for the entire work force, calculated based on projected salaries of staff in active employment. The pension fund is supported by the contributions made, based on the amounts determined by periodic actuarial calculations. A defined benefit plan is a pension plan that generally defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

Every year the Bank determines the amount of liabilities for past services using actuarial calculations based on the Project Unit Credit method for liabilities for past services in the case of old age and the Unique Successive Premium to calculate disability and survivor's benefits. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible. The amount of liabilities includes, besides retirement pensions, post-employment medical care (SAMS) and post-retirement death benefits.

Until 31 December 2012, the Bank recognized the net accumulated amount (after 1 January 2004) of actuarial gains and losses resulting from changes in the financial and actuarial assumptions and differences between the financial and actuarial assumptions used and the actual amounts in the item Other Assets or Other Liabilities – Actuarial Gains/Losses.

Accumulated actuarial gains or losses that did not exceed 10% of the highest of the current value of liabilities for past services or the value of the pension funds were included in the 'corridor'. Actuarial

gains/losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.

As at 1 January 2013 the Bank changed its accounting policy of recognising financial and actuarial gains and losses for pension plans and other defined benefit post-employment benefits pursuant to IAS 19 Revised. Financial and actuarial gains and losses are now recognised in the period they occur directly in equity in the Statement of Comprehensive Income.

Increases in past service liabilities resulting from early retirement are fully recognised as expenses in the income statement for the year in which they occur.

Increases in past service liabilities resulting from changes in the conditions of Pension Plans are fully recognised as expenses in the case of acquired benefits or depreciated during the period that remains until those benefits are acquired. The balance of the increases in liabilities not yet recognised as expenses are registered in the item 'Other Assets'.

Past service liabilities (post-employment benefits) are covered by a pension fund. The amount of the pension funds corresponds to the fair value of its assets at the balance sheet date.

The financing regime by the pension fund is established in Notice No. 4/2005 issued by the Bank of Portugal, which determines the compulsory fully financing pension liabilities and a minimum level of 95% financing of past service liabilities for staff in active employment.

In the Bank's financial statements, the amount of past service liabilities for retirement pensions, minus the amount of the pension fund, is stated in item Other Liabilities.

The Bank's income statement includes the following expenses related to retirement and survivor pensions:

• Current service cost;
• Interest expense on the total outstanding liabilities;
• Expected revenue of the pension fund;
• Expenses with increases in early retirement liabilities;
• 'Multiprotecção' life insurance premium (see note 37);
• Management fee paid to the fund management company.

On the transition date, the Bank adopted the possibility permitted by IFRS 1 of not recalculating deferred actuarial gains and losses from the beginning of the plans (normally known as the reset option). Thus, deferred actuarial gains and losses recognised in the Bank's accounts as at 31 December 2003 were fully reversed in retained earnings on the transition date – 1 January 2004.

b) Seniority bonuses

In compliance with the Collective Bargaining Agreement (ACT) for the banking sector in Portugal, the Bank has committed to attribute to active staff that complete fifteen, twenty-five and thirty years of good and effective service, a seniority bonus equal, respectively, to one, two or three months of their effective monthly salary on the year of the attribution.

Every year the Bank determines the amount of liabilities for seniority bonuses using actuarial calculations based on the Project Unit Credit method for liabilities for past services. The actuarial assumptions (financial and demographic) are based on expectation at the balance sheet date for the growth in salaries and pensions and are based on mortality tables adapted to the Bank's population. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities. The assumptions are mutually compatible.

Liabilities for seniority bonuses are recognised in the item Other Liabilities.

The Bank's income statement includes the following expenses regarding seniority bonus liabilities:

• cost of current service (cost of one year);
• interest expenses;
• actuarial gains/losses, changes in assumptions or changes in the conditions of the benefits.

2.16 Deferred taxes

Deferred taxes are recognised using the balance sheet debt method, based on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using the effective tax rate on profits at the balance sheet date which is expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.

Deferred income tax is recognised when it is probable that in the future there is enough tax on profits so that it can be used.

Taxes on profits based on the application of legal rates for each jurisdiction are recognised as expenses in the period when the profit is originated. The tax effects of reportable tax losses are recognised as an asset when it is likely that the future profitable profit is enough for the reportable tax loss to be utilized.

Deferred tax related to fair value revaluation of an available-for-sale asset, which is charged or credited directly in equity, is also credited or charged in equity and subsequently recognised in the income statement together with deferred gains or losses.

2.17 Financial liabilities

The Bank classifies its financial liabilities into the following categories: held-for-trade financial liabilities, other financial liabilities at fair value through profit and loss, deposits from central bank, deposits from other banks, customer deposits, securitised liabilities and other subordinated liabilities. Management determines the classification of the financial instruments at initial recognition.

a) Financial liabilities held for trading and at fair value through profit and loss

This item essentially includes deposits whose yield is indexed to stock portfolios or indexes and the negative fair value of derivative contracts. The evaluation of these liabilities is made based on fair value. The balance sheet value of deposits includes the amount in accrued interest not paid.

b) Central banks, other banks, and customer funds

After the initial recognition, deposits and other financial assets from customers, central banks and other banks are revalued at amortized cost based on the effective interest rate method.

c) Securitised liabilities, and other subordinated liabilities

These liabilities are initially recognised at fair value, which is the amount for which they were issued net of transaction costs incurred. These liabilities are subsequently measured at amortized cost and any difference between the net amount received on transaction and their redemption value is recognised in the income statement over the liability period using the effective interest rate method.

If the Bank acquires its own debt, this amount is removed from the balance sheet and the difference between the balance sheet amount of the liability and the amount spent to acquire it is recognised in the income statement.

2.18 Non-current assets held for sale

Non-current assets, or disposal groups, are classified as held for sale whenever their book value is recoverable through sale. This condition can only be met when the sale is highly probable and the asset is available for immediate sale in its current condition. The sale must be performed within one year from the date on which they are included in this item. An extension of the period during which the asset must be sold does not exclude that asset, or a disposal group, from being classified as held for sale if the delay is caused by an event or circumstances that the Bank cannot control and if the selling purpose is maintained. Immediately before the initial classification of the asset, or disposal group, as held for sale, the book value of non-current assets (or of every asset and liability in the group) is carried pursuant to the applicable IFRS. Subsequently these assets, or disposal group, will be remeasured at the lower between the initial carrying amount and the fair value minus selling costs.

2.19 Insurance and reinsurance brokerage

Banco Popular Portugal is authorized by the Authority for the Supervision of Insurances and Pension Funds to act as an insurance broker in the category of Associated Insurance Broker pursuant to paragraph 8(i) of Decree-law No. 144/2006 of 31 July, performing its brokerage activity in the area of life and non-life insurances.

Within the scope of its insurance brokerage services, Banco Popular sells insurance contracts. For the services rendered as an insurance broker, Banco Popular receives fees and commissions from insurance contracts and investment contracts, which are defined in agreements/protocols established between the Bank and the Insurance Companies.

The fees and commissions received for insurance brokerage services are recognized on an accrual basis, which means that those paid at a different moment from the period their refer to are booked as receivable in item Other Assets (see note 8).

3. Financial risk management

3.1 Strategy used for financial instruments

In view of its activity, the Bank raises funds essentially through customer deposits and monetary market operations.

Besides the activities of credit granting, the Bank also applies its funds in financial investments, particularly in the group of investments that currently comprise the Bank's portfolio.

The Bank's portfolio – including available-for-sale financial assets and trading portfolio – amounted to around 1.9 billion euros at the end of 2014, representing around 23% of the Bank's total net assets. The typology of these assets was broken down as follows: public Portuguese debt (0.7%), public Spanish debt (73.2%), financial institutions (21.6%) and others (4.5%).

To hedge its investment against interest rate risk, the Bank carried out interest rate swap operations and monetary market operations, thus trying to control the variability of interest rate risk and the flows generated by these assets.

a) Fair value hedge accounting

Gains and losses resulting from the revaluation of hedge derivatives are recognised in the income statement. Gains and losses deriving from differences in terms of the fair value of hedged financial assets and liabilities, corresponding to the hedged risk, are also recognised in the income statement as a counterpart for the carrying value of the hedged assets and liabilities, in the case of operations at amortized cost, or by counterpart of the reserve for fair value revaluation in the case of available-forsale assets.

Efficacy tests for hedges are accordingly documented on a regular basis, ensuring the existence of proof during the lifetime of the hedged operations. If the hedge no longer meets the criteria demanded by hedge accounting, it shall be prospectively discontinued.

b) Cash flow hedge accounting

In a cash flow hedge, the effective part of the changes in fair value for the hedged derivative is recognised in reserves, and transferred to the income statement in the periods when the respective hedged item affects results. If it is foreseeable that the hedged operation will not take place, the amounts still stated in equity are immediately recognised in the income statement and the hedged instrument is transferred to the trading book.

The Bank is exposed to a certain cash flow risk as regards open positions in foreign currency. However, in view of the little materiality of the normally existing overall position, no hedge operations are carried out in this case.

3.2 Financial assets and liabilities at fair value

The Board of Directors considered that as at 30 June 2015, the fair value of assets and liabilities at amortised cost did not differ significantly from its book value.

In order to determine the fair value of a financial asset or liability, its market price is applied whenever there is an active market for it. In case there is no active market, which happens with some financial assets and liabilities, generally accepted valuation techniques based on market assumptions are employed.

The net income of financial assets and liabilities at fair value that have not been classified as hedging includes an amount of 990 thousand euros (2014: 9 275 thousand euros).

Consequently, the fair value change recognized in the income statement for the period is analysed as follows:

	30-06-2015		30-06-2014
	Fair value	Change	Fair value	Change
Financial assets at fair value through profit or loss
Trading derivatives
Interest rate sw aps	33 167	22 250	32 498	13 974
Futures	1 912	-	79	-
Options	5	260	11	393
Available-for-sale financial assets
Debt instruments issued by residents	34 973	- 1	47 152	212
Equity instruments issued by residents	652	-	653	-
Other equity instruments issued by residents	46 419	-	-	-
Debt instruments issued by non-residents	1 730 390	-	1 822 048	9 490
Equity instruments issued by non-residents	74	-	63	-
Financial liabilities at fair value through profit or loss
Trading derivatives
Interest rate sw aps	36 697	- 21 489	36 053	- 14 721
Futures	925	-	112	-
Options	11	- 30	19	- 73
		990		9 275

The table below classifies the fair value assessments of the Bank's financial assets and liabilities based on a fair value hierarchy that reflects the significance of the inputs that were used in the assessment, according to the following levels:

• Level 1: (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2: different inputs for market prices included in Level 1 that are observable for assets and liabilities either directly (i.e., as prices) or indirectly (i.e. derived from prices);
• Level 3: inputs for assets and liabilities that are not based on observable market data (nonobservable inputs).

	30-06-2015				30-06-2014
Assets and Liabilities at fair value	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets held for trading Variable income securities Derivatives	2 477 -	- 35 084	10 158 -	12 635 35 084	2 692 -	- 32 588	68 622 -	71 314 32 588
Other financial assets at fair value through profit or loss Fixed income securities	-	-	-	0	-	-	-	0
Available-for-sale financial assets Debt securities	1 764 001	1 362	-	1 765 363	1 864 032	5 168	-	1 869 200
Equity securities Total Assets at fair value	- 1 766 478	- 36 446	47 145 57 303	47 145 1 860 227	- 1 866 724	- 37 756	716 69 338	716 1 973 818
Financial liabilities held for sale (Derivatives) Hedging derivatives	- -	37 633 108 798	- -	37 633 108 798	- -	36 184 119 295	- -	36 184 119 295
Total Liabilities at fair value	0	146 431	0	146 431	0	155 479	0	155 479

3.3 Credit risk

The Bank is exposed to credit risk, which is the possible loss that arises when the Bank's counterparties fail to fulfil their obligations. In the case of lending, it implies the loss of principal, interest and commissions, regarding amount, period and other conditions set forth in the contracts. Concerning off-balance sheet risks, it derives from the non-compliance of the counterparts regarding their obligations with third parties, which implies that the Bank has to assume as its own certain obligations depending on the contracts.

The Bank structures the levels of credit risk it is exposed to by establishing pre-defined acceptable risk amounts regarding the borrower or group of borrowers and geographical or business activity segments.

Exposure to credit risk is managed through a regular analysis of the capacity of borrowers and potential borrowers of meeting payment obligations for principal and interest, and by changing these loan limits when appropriate. Exposure to credit risk is also managed in part by obtaining collaterals and personal or corporate guarantees.

- Collaterals

The Bank employs a series of policies and practices in order to mitigate credit risk. The most traditional one is securing collaterals at the moment funds are advanced. The Bank implements guidelines regarding the acceptability of specific classes of collaterals or mitigation of credit risk. The main types of collaterals for loans and receivables are:

• Property mortgages;
• Pledges of operations made within the Bank;
• Pledges on assets such as premises, inventory and accounts receivable;
• Pledges on financial instruments, such as securities and shares.

Long-term loans to corporate and private customers usually require a collateral; lower amounts and recurring personal loans generally require no collateral. Additionally, with the intention of minimising loss, at the time an impairment indicator for loans and receivables is identified the Bank tries to obtain additional collaterals from the relevant counterparts.

Collaterals held for financial assets, except for loans and advances, are determined by the nature of the instrument. Debt instruments, treasury bonds and other securities usually are not collateralised.

- Lending commitments

The main objective of these instruments is to ensure that funds are made available to customers as they require them. Loan extension commitments represent non-utilized parts of credit extension authorizations in the form of loans, guarantees or letters of credit. Regarding the credit risk associated with loan extension commitments, the Bank is potentially exposed to a loss in the amount of the total of non-utilized commitments. However, the probable loss amount is much lower than the sum of the nonutilized commitments since loan extension commitments are revocable and depend on a specific customer's credit worthiness. The Bank monitors the maturity of lending commitments since long term commitments usually present a greater credit risk than short term commitments.

- Maximum exposure to credit risk

As at 30 June 2015 and 2014, maximum exposure to credit risk was as follows:

	30-06-2015	30-06-2014
On-balance sheet
Deposits w ith banks	80 219	66 622
Financial assets held for trading	39 496	32 588
Available-for-sale financial assets	1 857 868	1 869 200
Loans and advances to banks	197 962	1 260 684
Loans and advances to customers	5 775 248	5 353 776
Other assets	287 053	262 883
	8 237 846	8 845 753
Off-balance sheet
Financial guarantees	385 722	420 400
Other guarantees	105 972	108 615
Lending commitments	820 518	828 153
Documentary credits	46 531	39 633
	1 358 743	1 396 801
Total	9 596 589	10 242 554

The table above shows the worst-case scenario in terms of the level of exposure to credit risk the Bank faced as at 30 June 2015 and 2014, without considering any collateral held or other credit enhancements. For on-balance sheet assets, the above stated exposure is based on their carrying amount on the balance sheet.

As can be seen from the table above, 68.7% of total maximum exposure results from loans and advances to customers (2014: 60.4%).

The Bank's management trusts its capacity to control and maintain a minimal exposure to credit risk, which results mainly from its customer portfolio, based on the following assumptions:

• 50.83% of the amount of loans and advances to customers has eligible collaterals;
• 93.85% of customer credit portfolio is not past due.

- Concentration by activity segment of financial assets with credit risk

The tables below show the exposure of the Bank according to the assets' carrying amount (excluding accrued interest) broken down by activity segment.

3 0 - 0 6 - 2 0 15	Financial Institutions	Public Sector	Property constr. & development	Other industries	Services	Private individuals Home loans Other loans
Deposits with banks	56 718
Financial assets held for trading	15 328		19 243		13 148
Available- for- sale financial assets	322 404	1 401 897			88 207
Loans and advances to banks	68 011
Loans and advances to customers		5 419	820 159	1 030 882	2 302 714	1 554 678	199 161
Non- current assets held for sale					20 747
Other assets	144 318	18 838
	606 779	1 426 154	839 402	1 030 882	2 424 816	1 554 678	199 161

	Financial	Public	Property constr.	Other			Private individuals
3 0 - 0 6 - 2 0 14	Institutions	Sector	& development	industries	Services		Home loans Other loans
Deposits with banks	66 622
Financial assets held for trading	72 506		18 554	60	12 783
Available- for- sale financial assets	424 758	1 418 681			26 476
Loans and advances to banks	1 260 561
Loans and advances to customers		3 601	833 816	886 548	2 171 180	1 491 505	254 467
Non- current assets held for sale	20 747
Other assets	158 334	18 210
	2 003 528	1 440 492	852 370	886 608	2 210 439	1 491 505	254 467

3.4 Geographic breakdown of assets, liabilities and off-balance sheet items

The Bank operates fully on the national market. Therefore, it is not relevant to perform an analysis by geographical sector, since there is no identifiable item within a specific economic environment that is subject to differentiated risks or benefits.

3.5 Market risk

Market Risk is the probability of negative impact on the Bank's earnings or capital due to adverse changes in the market prices of the instruments in the trading book, caused by the volatility of equity prices, interest rates, and foreign exchange rates.

As at 30 June 2015, the Bank's portfolio amounted to around 2.2 billion euros, of which around 12.6 million were classified as financial assets held for trading.

- Risk-sensitivity analysis

Within the scope of the stress test performed, Banco Popular carries out a sensitivity analysis to a 30% fluctuation in stock indexes. In case of devaluation within such order of magnitude, we can conclude that there is no need for additional capital.

We would also like to add that on that date, market risk represented only around 0.002% of total risk weighted assets (RWA) calculated pursuant to CRD IV/CRR.

3.6 Exchange rate risk

The national currency equivalent, in thousands of euros, of assets and liabilities at sight expressed in foreign currency is as follows:

30 June 2015	USD	GBP	CHF	JPY	CAD	Other
Assets
Cash and cash equivalents	292	54	52	3	17	16
Deposits w ith banks	5 929	430	323	7	2 139	849
Available-for-sale financial assets	58	-	-	-	-	-
Loans and advances to banks	52 050	6	-	-	-	-
Loans and advances to customers	18 283	-	-	- 5	-	-
Other assets	37 769	18	1	-	79	254
	114 381	508	376	5	2 235	1 119
Liabilities
Deposits from banks	112 236	20 112	98	23	45	64
Deposits from customers	54 417	28 994	241	-	2 756	8 412
Provisions	152	-	-	-	-	-
Other liabilities	4 494	80	8	17	9	324
	171 299	49 186	347	40	2 810	8 800
Net balance sheet position	- 56 918	- 48 678	29	- 35	- 575	- 7 681
Forw ard transactions	40 384	33 723	-	-	650	7 681
Net position	- 16 534	- 14 955	29	- 35	75	0
30 June 2014
Total assets	88 733	3 330	572	51	539	1 406
Total liabilities	111 888	22 718	419	63	578	7 249
Net balance sheet position	- 23 155	- 19 388	153	- 12	- 39	- 5 843
Forw ard transactions	22 024	19 305	-	-	-	-
Net position	- 1 131	- 83	153	- 12	- 39	- 5 843

- Risk-sensitivity analysis

The activity of Banco Popular Portugal regarding foreign currency consists in making transactions based on customer operations. In this framework, the overall foreign exchange position of the Bank is virtually non-existent.

Thus, as can be seen, whatever the impact of foreign currency prices on foreign exchange terms, it is financially immaterial for the Bank's income, which is why no risk-sensitivity analysis are carried out.

3.7 Interest rate risk

This risk assesses the impact on net interest income and equity as a result in fluctuation in market interest rates.

The interest rate risk of the balance sheet is measured using a repricing gap model applied to assets and liabilities that are susceptible to interest rate fluctuations pursuant to Instruction No. 19/2005 issued by the Bank of Portugal. Briefly, this model groups assets and liabilities that are sensitive to fluctuations at fixed time brackets (maturity dates or the first interest rate revision in case of indexation), from which one calculates the potential impact on the intermediation margin.

M aturity and repricing gap for the Bank's activity as at 30 June 2015

	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Not sensitive	Total
Monetary market	195 970	1 100	-	40	676	197 786
Loans and advances to customers	1 447 370	2 331 467	1 377 733	392 350	27 889	5 576 809
Securities market	75	-	-	1 597 243	262 908	1 860 226
Other assets	-	-	-	-	594 782	594 782
Total Assets	1 643 415	2 332 567	1 377 733	1 989 633	886 255	8 229 603
Monetary market	2 042 661	199 452	245 873	497 336	2 639	2 987 961
Deposit market	563 976	344 267	1 511 570	1 710 953	45 789	4 176 555
Securities market	-	1 455	10 268	43 450	1 297	56 470
Other liabilities	-	-	-	-	288 139	288 139
Total Liabilities	2 606 637	545 174	1 767 711	2 251 739	337 864	7 509 125
Gap	- 963 222	1 787 393	- 389 978	- 262 106	548 391
Accumulated gap	- 963 222	824 171	434 193	172 087	720 478
M aturity and repricing gap for the Bank's activity as at 30 June 2014
Gap	-1 852 973	2 339 583	429 604	- 678 943	475 163
Accumulated gap	-1 852 973	486 610	916 214	237 271	712 434

- Risk-sensitivity analysis

Pursuant to the referred to model, the Bank calculates the potential impact on net interest income and net income.

In the table below, this model considers a potential 1% immediate impact on interest rates, i.e., on the date interest rates are revised. Therefore, the new interest rates will start to show this effect both on assets and liabilities.

	Up to 1 month	1 to 3 months	3 to 12 months	Over 12 months	Not sensitive	Total
Monetary market	195 970	1 100	-	40	676	197 786
Loans and advances to customers	1 447 370	2 331 467	1 377 733	392 350	27 889	5 576 809
Securities market	75	-	-	1 597 243	262 908	1 860 226
Other assets	-	-	-	-	594 782	594 782
Total Assets	1 643 415	2 332 567	1 377 733	1 989 633	886 255	8 229 603
Monetary market	2 042 661	199 452	245 873	497 336	2 639	2 987 961
Deposit market	563 976	344 267	1 511 570	1 710 953	45 789	4 176 555
Securities market	-	1 455	10 268	43 450	1 297	56 470
Other liabilities	-	-	-	-	288 139	288 139
Total Liabilities	2 606 637	545 174	1 767 711	2 251 739	337 864	7 509 125
Gap	- 963 222	1 787 393	- 389 978	- 262 106	548 391
Accumulated gap	- 963 222	824 171	434 193	172 087	720 478
Impact of a 1% increase	- 378	401	15 050
Accumulated impact	- 378	23	15 073
Accumulated effect	15 073
Net interest income	120 836
Accumulated gap	12.47%

3.8 Liquidity risk

The Bank permanently follows the evolution of its liquidity, monitoring cash inflows and outflows at all times. Liquidity projections are prepared in order to allow for careful planning of short and mediumterm funding strategies.

The Bank's primary source of funding are deposits from customers, complemented by access to the capital markets via bond issues and to the interbank market, where we focus on operations with Banco Popular Group. Simultaneously the Bank has tried to ensure other sources of funding, carefully selected for each maturity depending on pricing, stability, speed of access, depth, and compliance with the pre-established risk management policies.

The liquidity management process, as performed by the Bank, includes:

• The daily funding needs that are managed by monitoring future cash flows in order to guarantee that the requirements are met. This includes write-backs as loans mature or are granted to customers;
• Maintaining a high-liquidity asset portfolio so that these can be easily converted into cash as a protection against any unexpected interruption in cash flows;
• Monitoring liquidity ratios taking into account external and internal requirements;
• Managing the concentration and profile of debt maturities resorting to the liquidity gap model.

Besides the obligations established by the Bank of Portugal under the terms of Instruction No. 13/2009, the Bank also resorts to the concept of liquidity gap, i.e., from the balance sheet of the Bank as at 30 June 2015, based on the maturities of assets and liabilities it is possible to ascertain the ratio between the referred to maturities (positive or negative) according to residual maturity deadlines called liquidity gaps. The Bank also calculates LCR (Liquidity Coverage Ratio) and NSFR (Net Stable Funding Ratio), with the aim to monitor the evolution of liquidity and report it to the supervising authorities.

The table below presents the Bank's balance sheet (without accrued interest) at the end of June 2015 with the main classes grouped by maturity date:

	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over 5 years
Cash and balances w ith central banks	73 032	-	-	-	-
Deposits w ith banks	56 718	-	-	-	-
Financial assets held for trading	1 390	23	17 094	18 633	17 807
Available-for-sale financial assets	0	-		1 680 018	132 490
Loans and advances to banks	61 871	5 000		-	1 140
Loans and advances to customers	771 714	457 769	943 484	1 435 028	1 941 073
Other assets	358	246	24 140	190 012	376
Total Assets	965 083	463 038	984 718	3 323 691	2 092 886
Deposits from central banks	900 000	-		-	-
Financial assets held for trading	1 183	7	4 409	18 056	17 991
Deposits from banks	1 142 598	86 831	243 749	413 906	200 000
Deposits from customers	1 574 940	346 962	1 496 164	738 539	-
Debt securities issued	0		10 795	44 378	-
Current income tax liabilities	-	-	2 103	-	-
Other liabilities	4 600	2 080	9 942	76	7 076
Total Liabilities	3 623 321	435 880	1 767 162	1 214 955	225 067
Gap	-2 658 238	27 158	- 782 444	2 108 736	1 867 819
Accumulated gap	-2 658 238	-2 631 080	-3 413 524	-1 304 788	563 031
Liquidity gap as at 30 June 2014
Gap	-2 136 390	- 415 560	-1 134 422	1 737 821	2 456 360
Accumulated gap	-2 136 390	-2 551 950	-3 686 372	-1 948 551	507 809

Liquidity gap of the balance sheet as at 30 June 2015

- Off-balance sheet exposures (Liquidity risk)

As at 30 June 2015, maturities for the contracted amounts of off-balance sheet financial instruments that may commit the Bank to lending and other facilities to customers were as follows:

30-06-2015	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over 5 years	Undated
Contingent liabilities: Documentary credits Guarantees and Sureties	- 2 629	- 5 113	- 10 300	- 51 451	- 4 992	42 518 280 925
Commitments: Irrevocable loans	-	-	-	-	-	-
Revocable loans	44 453	69 834	295 860	20 100	106 450	234 077
Total	47 082	74 947	306 160	71 551	111 442	557 520
30-06-2014	Up to 1 month	1 to 3 months	3 to 12 months	1 to 5 years	Over 5 years	Undated
Contingent liabilities: Documentary credits Guarantees and Sureties	- 645	- 8 448	- 10 551	- 200 278	- 2 047	39 633 307 046
Commitments: Irrevocable loans	-	-	-	-	-	-
Revocable loans	72 347	60 882	309 929	95 131	38 034	251 830
Total	72 992	69 330	320 480	295 409	40 081	598 509

3.9 Operational risk

Banco Popular Portugal interprets Operational Risk as defined in the Basel II Accord, i.e., as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

The management process is based on an analysis by functional area listing the risks inherent in the specific functions and tasks of each body in the structure.

Involving the whole organization, the management model is ensured by the following structures:

Executive Committee (CE) – top management structure that is the main responsible for management guidelines and policies, establishing and monitoring risk appetite and risk tolerance limits.

Risk Management (DGR) - Integrates the unit exclusively dedicated to managing operational risk. It is in charge of boosting and coordinating the remaining structures towards the application of methodologies and employment of corporate tools to support the model.

Heads of Operational Risk (RRO) – Corresponding to the basis of the organization, these are elements appointed by the hierarchies of each organic unit who have the role of facilitators and promoters of the operational risk management model.

In the process of operational risk management, they also play a key role in the auditing structures, internal control and security of the Bank.

3.10 Fiduciary activities

The Bank provides custody services, guarantees, corporate management services, investment management and third party advisory services. These activities demand the allocation of assets and purchasing and sale transactions regarding a wide range of financial instruments. These assets, which are kept in fiduciary capacity, are not included in these financial statements. As at 30 June 2015, the Bank held investment accounts in the amount of 16 112 296 thousand euros (2014: 7 815 939 thousand euros) and managed estimated financial assets in the amount of 170 787 thousand euros (2014: 139 386 thousand euros).

3.11 Capital management and disclosures

The main objective of capital management at the Bank is meeting the minimum requirements defined by supervisory entities in terms of capital adequacy and ensuring that the strategic objectives of the Bank in terms of capital adequacy are met.

The definition of the strategy to adopt in terms of capital management is in the scope of the Bank's Board of Directors.

In prudential terms, the Bank is subject to the supervision of the Bank of Portugal, which issues the rules and regulations regarding this matter that guide the several institutions under their supervision. These rules and regulations determine a minimum ratio of total own funds in relation to the requirements demanded due to committed risks, which the institutions must abide by.

As at 30 June 2015, Core Tier 1 ratio calculated pursuant to CRD IV/CRR rules stood at 12.0% (2014: 12.4%), which was highly above the minimum regulatory amount of 7%.

	30-06-15	30-06-14
Own funds
Common Equity Tier 1 (CET1)	691,344	718,366
Basic ow n funds (Tier 1)	691,344	718,366
Eligible ow n funds (Total)	732,357	748,990
Risk weighted assets (RWA)	5,765,852	5,811,538
Solvency ratios
CET1	12.0%	12.4%
Tier 1	12.0%	12.4%
Total	12.7%	12.9%

4. Estimates and assumptions in the application of accounting policies

The Bank makes estimates and assumptions with impact on the reported amount of assets and liabilities in the following year. These estimates and assumptions are continuously assessed and conceived based on historical data and other factors, such as expectations regarding future events.

a) Impairment losses on loans

Every month, the Bank assesses its securities portfolio to evaluate potential impairment losses. In determining whether an impairment loss should be recorded in the income statement, the Bank analyses observable data that may be indicative of a measurable decrease in estimated cash flows both of the trading book and of specific individual cases within a trading book. This analysis may indicate, for example, an adverse event in the capacity of a customer to pay a loan or the worsening of macroeconomic conditions and related indicators. Management uses estimates based on historical data available for assets with similar credit risk and possible impairment losses. The methodology and assumptions used to calculate these estimates are revised regularly aiming at reducing any differences between estimated and actual losses.

b) Fair value of derivatives and unlisted financial assets

The fair value of derivatives and unlisted financial assets was determined based on evaluation methods and financial theories whose results depend on the assumptions that have been used.

c) Impairment of equity investments in the portfolio of Available-for-sale financial assets

The Bank determines that there is impairment of equity investments of available-for-sale assets when there has been a significant or prolonged decline in the fair value below its cost. The required quantification for the expressions 'significant' and 'prolonged' imply professional judgement. When making this judgement, the Bank assesses among other factors the normal volatility of share prices. As a complement, impairment should be recognised when there are events that show the deterioration of the viability of the investment, the performance of the industry and the sector, technological changes and operational and financial cash flows.

d) Retirement and survivor's pensions

Liabilities for retirement and survivor's pensions are estimated based on actuarial tables and assumptions on the growth of pensions and salaries. These assumptions are based on the Bank's expectations for the period when the liabilities are to be settled.

e) Deferred taxes

The recognition of a deferred tax asset assumes the existence of profit and a future tax base. Deferred tax assets and liabilities have been determined based on tax legislation currently in effect or on legislation already published for future application. Changes in the interpretation of tax legislation may influence the amount of deferred tax that has been recognised.

5. Segmental reporting

The Bank operates essentially in the financial sector and its activity is targeted at corporate, institutional and private customers.

The products and services offered by the Bank include deposits, loans to companies and private individuals, brokerage and custody services, investment banking services, and selling investment funds and life and non-life insurance. Additionally, the Bank makes short, medium, or long term investments in financial and foreign exchange markets in order to take advantage of price variations or as a means to make the most of available financial assets.

Banco Popular operates in the following segments:

• (1) Retail Banking, which includes the sub-segments: Private Individuals, Self-employed people, Small and Medium-sized Enterprises, and Private Social Solidarity Institutions;
• (2) Commercial Banking, which includes Large Corporations, Financial Institutions, and Public Administration Sector;
• (3) Other Segments, which group all the operations not included in the other segments, namely operations and management of the Bank's Own Portfolio and Investments in Banks.

Geographically, Banco Popular operates exclusively in Portugal.

Segmental reporting is as follows:

30-06-2015	Retail Banking	Commercial Banking	Other Segments	Total
Interest and similar income Interest and similar charges	53 305 - 26 703	29 321 - 2 468	24 004 - 17 042	106 630 - 46 213
Return on equity instruments	-	-	63	63
Revenue from Fees and Commissions Expenses w ith Fees and Commissions	12 832 - 482	5 311 - 1	10 570 - 3 085	28 713 - 3 568
Income from Financial Operations (net)	17	0	787	804
Gains from the sale of other assets	-	-	42	42
Other Operating Income (net)	-	-	45 015	45 015
Net assets	3 588 891	1 973 641	2 667 071	8 229 603
Liabilities	3 332 642	2 987 004	1 189 479	7 509 125

30-06-2014	Retail Banking	Commercial Banking	Other Segments	Total
Interest and similar income	60 924	41 313	31 244	133 481
Interest and similar charges Return on equity instruments	38 113 -	9 483 -	23 811 58	71 407 58
Revenue from Fees and Commissions Expenses w ith Fees and Commissions	16 486 983	6 579 225	11 103 3 141	34 168 4 349
Income from Financial Operations (net)	107	- 551	9 209	8 765
Gains from the sale of other assets	-	-	- 5 182	- 5 182
Other Operating Income (net)	-	-	- 3 214	- 3 214
Net assets	3 371 364	2 073 031	3 888 377	9 332 772
Liabilities	3 174 576	1 227 865	4 217 897	8 620 338

6. Net interest income

This item is broken down as follows:

	30-06-15	30-06-14
Interest and similar income from:
Cash and cash equivalents	25	77
Deposits w ith banks	105	2 855
Loans and advances to customers	82 984	102 279
Other financial assets at fair value	-	117
Other available-for-sale financial assets	23 448	27 944
Other	68	209
	106 630	133 481
Interest and similar charges from:
Deposits from Central Banks	226	1 531
Deposits from banks	1 861	7 547
Deposits from customers	26 754	40 362
Debt securities issued	3 179	10 580
Interest from hedging derivatives	14 121	11 387
Other	72	-
	46 213	71 407
Net interest income	60 417	62 074

7. Return on equity instruments

Balance for this item is as follows:

	30-06-15	30-06-14
Available-for-sale financial assets	63	58
	63	58

8. Revenue and expense with fees and commissions

These items are broken down as follows:

	Popular

30-06-15	30-06-14
7 158	6 776
3 034	3 486
8 276	9 620
2 200	2 339
782	4 196
2 779	2 918
774	791
812	1 470
2 897	2 572
28 712	34 168
1 846	1 937
940	1 159
373	172
107	810
302	271
3 568	4 349

9. Net income from financial operations

This item is broken down as follows:
		30-06-2015		30-06-2014
	Gains	Losses	Gains	Losses
Financial assets and liabilities held for trading
Fixed income securities	-	-	-	-
Variable income securities	118	235	128	1 120
Derivative financial instruments	22 510	21 519	14 366	14 793
	22 628	21 754	14 494	15 913
Assets and liabilities at fair value through profit or loss
Fixed income securities	-		-	80
	0	0	0	80
Hedging derivatives at fair value	48 642	49 597	48 545	48 545
Available-for-sale financial assets and liabilities
Fixed income securities	-	1	9 702	-
	0	1	9 702	0
Income from financial assets and liabilities held for
trading and at fair value through profit or loss	71 270	71 352	72 741	64 538

During the first half of 2015, the Bank received 27.1 thousand euros in dividends from financial assets held for trading (2014: 2.3 thousand euros). In 2015 and 2014, the Bank did not earn any income from financial assets at fair value through profit or loss.

The effect seen in the item Hedging derivatives at fair value results from fluctuations in the fair value of hedging instruments (interest rate swaps) and variations in the fair value of hedged assets, resulting from the hedged risk (interest rate). Since the hedging instrument is accounted for in the Available-forsale financial assets portfolio, that variation in fair value is carried from Fair value revaluation reserve to the income statement.

10. Net gains from foreign exchange differences

These items are broken down as follows:

	30-06-15	30-06-14
Exchange gains
Spot	74	61
Forw ard	3 447	3 351
	3 521	3 412
Exchange losses
Forw ard	2 634	2 850
	2 634	2 850
Income from exchange differences (net)	887	562

11. Net gains from the sale of other assets

This item is broken down as follows:

	30-06-15	30-06-14
Gains from the sale of held-for-sale tangible assets	345	637
Gains from other tangible assets	4	-
	349	637
Provisions for customer loan losses	-	563
Losses from the sale of held-for-sale tangible assets	307	5 256
	307	5 819
	42	- 5 182

12. Other operating income

This item is broken down as follows:

	30-06-15	30-06-14
Contributions to the DGF	- 83	- 515
Contributions to the IIS	- 444	- 436
Other operating expenses	- 2 148	- 1 043
Other taxes	- 625	- 963
Contribution on the banking sector	- 2 624	- 2 005
Income from staff transfer	684	607
Income from property	435	306
Income from the sale of business units	48 666	-
Other income and operating revenue	1 154	835
	45 015	- 3 214

The amount in the capital gains item is due to the income obtained from the sale of the business unit in charge of property management and credit exposures of customers associated with the real estate sector from Banco Popular Portugal to Recbus – Recovery to Business, S.A ('Recbus, S.A.'), 20% owned by Banco Popular Español. This transaction implied the transference of the legal status of employer in the employment contracts of this unit's employees, who have now become Recbus' employees. Also in this regard, several agreements have been signed, among which a service

rendering contract between the Bank and Recbus, S.A., for the management of the concerned assets for a period of 10 years.

13. Personnel expenses

This item is broken down as follows:

	30-06-15	30-06-14
Wages and salaries	21 687	21 088
Obligatory social security charges from:
- Wages and salaries	5 864	5 577
- Pension Fund	2 011	1 465
- Other obligatory social security charges	91	112
Other expenses	312	343
	29 965	28 585

14. General administrative expenses

This item is broken down as follows:

	30-06-15	30-06-14
With supplies
Water, energy and fuel	839	828
Items of regular consumption	106	166
Softw are licences	180	161
Other third party supplies	161	154
With services
Rents and leasing	2 219	2 175
Communications	2 040	2 222
Travel, hotel and representation	641	578
Advertising and publicity	1 995	1 892
Maintenance of premises and equipment	1 527	1 709
Transports	625	560
Fees and regular payment agreements	2 032	3 228
Legal expenses	1 009	959
IT Services	4 894	6 414
Security, surveillance and cleaning	217	465
Temporary w ork	2 010	2 317
External consultants and auditors	268	337
SIBS	510	500
External real estate appraisers	420	54
Services rendered by the parent company	1 600	1 685
Other third party services	1 110	889
	24 403	27 293

15. Income tax

Income tax for the first half of 2015 was calculated based on a nominal rate of 21% over the tax base (23% in 2014). Both in 2015 and 2014, besides the nominal rate, a municipal surcharge of 1.5% was also levied on taxable income, as well as a variable state surcharge that depended on the below indicated tiers:

Less than 1.5 M $\epsilon$	$0\%$
Between 1.5 M€ and 7.5 M€	3%
Between 7.5M $\epsilon$ and 35 M $\epsilon$	5%
Over 35 M $\epsilon$	7%

As at 30 June 2015 and 2014, tax expenses on net profit, as well as the tax burden, measured by the relation between income taxes and the profit for the year before those taxes may be summed up as follows:

	30-06-15	30-06-14
Current tax on profits
For the year	9 770	614
Adjustments in respect of prior years	41	- 27
	9 811	587
Deferred taxes
Origination and reversal of temporary differences	2 935	- 513
Total tax in the income statement	12 746	74
Net income before tax	44 741	1 276
Tax burden	28.5%	5.8%

The reconciliation between the nominal tax rate and the tax burden for 2015 and 2014, as well as the reconciliation between tax expense/income and the product of accounting profit multiplied by the nominal tax rate, after deferred tax, is analysed as follows:

	30-06-15		30-06-14
	Tax rate	Amount	Tax rate	Amount
Net income before tax		44 741		1 276
Tax at nominal rate	21.0%	9 396	23.0%	293
Municipal surcharge after deferred tax	8.7%	3 884	4.0%	51
Autonomous taxation	0.7%	305	24.5%	313
Tax benefits	-0.2%	- 84	-9.3%	- 119
Effect of provisions not acceptable as costs	-1.7%	- 744	-111.3%	- 1 420
Other net value adjustments	0.1%	47	115.4%	1 473
Contribution on the banking sector	1.2%	551	36.1%	461
Tax loss	-1.5%	- 650	0.0%	0
Tax from previous years	0.1%	41	-76.6%	- 978
	28.5%	12 746	5.8%	74

For additional information on deferred tax assets and liabilities see note 28.

16. Financial assets and liabilities classified in accordance with IAS 39 categories

Classification of financial assets and liabilities in accordance with IAS 39 categories has the following structure:

30-06-2015		Booked at fair value	Loans	Available-for-sale	Non-fin.
	Traded	Fair value op.	receivable	financial assets	assets	Total
Assets
Cash and balances w ith central banks			73 032			73 032
Deposits w ith other banks			56 718			56 718
Financial assets held for trading	47 719					47 719
Other fin. assets at fair value thr. prof./loss						0
Available-for-sale financial assets				1 812 508		1 812 508
Loans and advances to banks			68 036			68 036
Loans and advances to customers			5 576 808			5 576 808
Non-current assets held for sale				20 747		20 747
Other assets			266 212		169,479	435 691
	47 719	0	6 040 806	1 833 255	169 479	8 091 259

30-06-2015	Booked at fair value	Other Financial	Hedging	Non-fin.
	Traded	liabilities	derivatives	liabilities	Total
Liabilities
Deposits from central banks		900 009			900 009
Deposits from banks	2 087 952				2 087 952
Financial liabilities held for trading	37 633				37 633
Deposits from customers		4 176 555			4 176 555
Debt securities issued		56 470			56 470
Hedging derivatives			108 798		108 798
Other liabilities		26 230		28 011	54 241
	37 633	7 247 216	108 798	28 011	7 421 658

30-06-2014		Booked at fair value	Loans	Available-for-sale	Non-fin.
	Traded	Fair value op.	receivable	financial assets	assets	Total
Assets
Cash and balances w ith central banks			50 712			50 712
Deposits w ith other banks			66 622			66 622
Financial assets held for trading	103 903					103 903
Other fin. assets at fair value thr. prof./loss						0
Available-for-sale financial assets				1 869 916		1 869 916
Loans and advances to banks			1 260 684			1 260 684
Loans and advances to customers			5 353 776			5 353 776
Non-current assets held for sale				20 747		20 747
Other assets			227 498		216,959	444 457
	103 903	0	6 959 292	1 890 663	216 959	9 170 817
30-06-2014	Booked at fair value		Other Financial	Hedging	Non-fin.
	Traded		liabilities	derivatives	liabilities	Total
Liabilities
Deposits from central banks			1 307 918			1 307 918
Deposits from banks			2 333 034			2 333 034
Financial liabilities held for trading	36 184					36 184
Deposits from customers			3 995 174			3 995 174
Debt securities issued			711 299			711 299
Hedging derivatives				119 294		119 294
Other liabilities			29 617		11 150	40 767
	36 184		8 377 042	119 294	11 150	8 543 670

17. Cash and balances with Central Banks

The balance of this item is broken down as follows:

	30-06-15	30-06-14
Cash and cash equivalents	39 872	39 176
Demand accounts w ith the Bank of Portugal	33 160	11 536
	73 032	50 712

Deposits with Central Banks include mandatory deposits with the Bank of Portugal intended to meet legal minimum cash requirements.

18. Deposits with banks

Balance for this item is as follows:

	30-06-15	30-06-14
Deposits w ith banks in Portugal
Demand accounts	511	725
Cheques payable	18 669	23 901
Other deposits	1 052	2 145
	20 232	26 771
Deposits w ith banks abroad
Demand accounts	35 166	38 605
Cheques payable	1 320	1 246
	36 486	39 851
	56 718	66 622

Cheques payable from Portuguese and foreign banks were sent for settlement on the first working day after the reference dates.

19. Financial assets and liabilities held for trading

The Bank uses the following derivatives:

Currency forward represents a contract between two parties for the exchange of currencies at a determined exchange rate established at the moment of the accomplishment of the contract (forward) for a determined future date. These operations have the purpose of hedging and managing currency risk, through the elimination of the uncertainty of the future value of certain exchange rate, which is immediately fixed by the forward operation.

Interest rate swap, which in conceptual terms can be perceived as an agreement between two parties who compromise to exchange (swap) interest rate differential between them for a specified amount and period of time, periodic payments of fixed rate for floating rate payments. It involves a single currency and consists in the exchange of fixed cash flows for variable ones or vice versa. This kind of instrument is aimed at hedging and managing the interest rate risk, regarding the income of a financial asset or the cost of a loan that a given entity intends to take in a determined future moment.

The fair value of derivative instruments held for trading is set out in the following table:

30-jun-2015
	Contract value	Fair value
	(Notional amount)	Assets	Liabilities
Trading derivatives
a) Foreign currency derivatives
Currency forw ards	187 643	1 912	925
b) Interest rate derivatives
Interest rate sw aps	363 285	33 167	36 697
Options	34 660	6	11
Total derivatives held for trading (assets/liabilities)		35 085	37 633
30-jun-2014
	Contract value		Fair value

	Contract value		Fair value
	(Notional amount)	Assets	Liabilities
Trading derivatives
a) Foreign currency derivatives Currency forw ards	56 086	79	112
b) Interest rate derivatives Interest rate sw aps	394 624	32 498	36 053
Options	64 363	11	19
Total derivatives held for trading (assets/liabilities)		32 588	36 184

As at 30 June 2015, the fair value of other financial assets and liabilities held for trading was as follows:

	30-06-15	30-06-14
Other financial assets
Variable income securities
Equity stakes	12 634	71 315
	12 634	71 315
Total	12 634	71 315
Total financial assets held for trading	47 719	103 903
Total financial liabilities held for trading	37 633	36 184

20. Financial assets and liabilities at fair value through profit or loss

The Bank has no transactions that fall into the scope of this item.

21. Available-for-sale financial assets

The balance of this item is broken down as follows:

	30-06-15	30-06-14
Securities issued by residents
Government bonds - at fair value	13 614	13 361
Other debt securities - at fair value	21 359	33 791
Equity securities - at fair value	652	653
Other securities	46 419	-
	82 044	47 805
Securities issued by non-residents
Government bonds - at fair value	609 843	617 652
Other debt securities - at fair value	1 120 547	1 204 396
Other securities	74	63
	1 730 464	1 822 111
Total	1 812 508	1 869 916

As at 30 June 2015, the Bank had no unlisted equity instruments classified as available-for-sale financial assets, which, since their fair value cannot be reliably measured, were recognised as costs (2014: 0 thousand euros).

The Bank has in its available-for-sale financial assets portfolio an investment of 1 362 thousand euros regarding subordinate bonds (Class D Notes) purchased in June 2002 associated with the securitisation of home loans, in the amount of 250 million euros named Navigator Mortgage Finance No. 1.

Within the scope of that securitisation operation, assets were acquired by a loan securitisation fund named Navigator Mortgage Finance No. 1, which simultaneously issued securitisation units fully subscribed by Navigator Mortgage Finance No. 1 Plc, which also issued bonds with the following characteristics:

	Nominal amount	Rating		Interest rate
	thousand euros	Standard & Poors	Moody's	(until May 2035)
Class A Notes (Senior)	230 000	AAA	Aaa	3-month Euribor + 0.21%
Class B Notes (Senior)	10 000	A A	Aa2	3-month Euribor + +0.38%
Class C Notes (Senior)	10 000	A	A 2	3-month Euribor + +0.55%
Class D Notes (Subordinate)	4 630	n.a.	n.a.	n.a.

Under the terms of the agreement that was signed the Bank did not assume any commitment regarding cash availabilities of the issuer, as well as liquidity lines, credits, guarantees, rights and residual profits, or any other risks, besides the Class D Notes.

Intervening entities:

• Navigator Mortgage Finance No. 1 Fundo, a Portuguese loan securitization fund that purchased the loans;
• Navigator, SGFTC, a loan securitisation fund manager that manages the fund;
• Navigator Mortgage Finance No. 1 Plc, the company that purchased the securitization units and issued the notes.

The most relevant financial data extracted from Navigator's unaudited financial statements as at 30 June 2015 were as follows:

	30-06-15	30-06-14
Net assets	50 887	56 675
Liabilities	57 441	62 312
Equity	-6 554	-5 637
Income for the period	0	- 297

22. Loans and advances to banks

The nature of loans and advances to banks is as follows:

	30-06-15	30-06-14
Loans and advances to banks in Portugal
Time deposits	40	45
Loans	15 000	10 121
Other	35	77 510
Interest receivable	0	91
	15 075	87 767
Loans and advances to banks abroad
Time deposits	52 937	176 805
Reverse repurchase agreements	0	995 832
Other	0	248
Interest receivable	24	32
	52 961	1 172 917
	68 036	1 260 684

Set out below is a breakdown of loans and advances to banks by period to maturity:

	30-06-15	30-06-14
Up to 3 months	61 872	186 037
From 3 months to 1 year	5 000	1 073 424
Over 5 years	1 140	1 100
Interest receivable	24	123
	68 036	1 260 684

23. Lending operations

Loans are granted via loan agreements, including overdraft facilities in demand accounts, and by the discount of effects. Total amounts of loans and advances to customers in the balance sheet, by nature, are as follows:

	30-06-15	30-06-14
Internal credit operations
Public sector	3 250 146	3 077 105
Private individuals	1 905 425	1 852 836
Home loans	1 518 823	1 459 107
Personal and consumer loans	36 854	41 417
Other personal lending	349 748	352 312
	5 155 571	4 929 941
External credit operations
Public sector	30 708	31 621
Private individuals	25 851	20 522
Home loans	19 111	16 121
Personal and consumer loans	26	44
Other personal lending	6 714	4 357
	56 559	52 143
Other loans (represented by securities)	336 937	350 398
Interest and commissions receivable	4 898	7 836
Past-due loans and interest
Due w ithin 90 days	11 236	23 522
Over 90 days	352 710	285 113
	363 946	308 635
Gross Total	5 917 911	5 648 953
Minus:
Provision for doubtful loans	68 421	82 165
Provision for past-due loans and interest	272 681	213 012
Provision for country risk	1	-
	341 103	295 177
Net total	5 576 808	5 353 776

As at 30 June 2015, credit operations included 871 145 thousand euros in mortgage loans assigned to the issuance of mortgage bonds (2014: 866 152 thousand de euros) (note 33).

Set out below is a breakdown of loans and advances to customers by period to maturity:

	30-06-15	30-06-14
Up to 3 months	1 229 482	1 177 979
From 3 months to 1 year	943 484	990 991
1 to 5 years	1 435 028	1 339 923
Over 5 years	1 941 073	1 823 589
Undetermined maturity (past due)	363 946	308 635
Interest and commissions receivable	4 898	7 836
	5 917 911	5 648 953

During the first half of 2014, the Bank carried out a credit assignment operation to Banco Popular Español in the total gross amount of 8.06 million euros for the total amount of 7.50 million euros. This operation had an overall negative result of 0.56 million euros

Provisions for customer loan losses

The balance of the provisions for specific credit risks account is detailed in the following table:

	30-06-2015	30-06-2014
Balance as at 1 January	316 465	260 893
Appropriations	90 573	120 608
Used	522	4 506
Cancelled	65 413	81 818
Balance as at 30 June	341 103	295 177
Appropriations for provisions	90 573	120 608
Write-offs	- 65 413	- 81 818
Recoveries of bad debts	- 1 789	- 2 924
Provisions net of w rite-offs and recoveries of bad debts	23 371	35 866

24. Held-to-maturity investments

In June 2013, the Bank sold 210 million of Spanish debt securities that were classified as held-tomaturity investments. Due to this sale, and pursuant to IAS 39, at the end of June, the Bank reclassified the remaining portfolio as available for sale without going through the profit or loss account.

Still pursuant to IAS 39, the Bank may only hold held-to-maturity instruments again in 2016.

25. Non-current assets held for sale

As at 30 June 2015, the Bank only held an equity stake in the associate company Eurovida – Companhia de Seguros de Vida, S.A., booked for 20 747 thousand euros (2014: 20 747 thousand euros).

The most important financial data extracted from the consolidated financial statements of Eurovida, prepared according to the IFRS, as well as the impact of the equity method of accounting, were as follows as at 30 June 2015 and 2014.

	Financial consolidated results for Eurovida as at 30-06-2015				Impact of the application of the equity method
Effective stake $(\%)$	Net Assets	Net Shareholders' equity Income		In consolidated reserves	In net income
15.9348%	1 030 387	99 036	6561	$-6011$	1045
		Financial consolidated results for	Impact of the application
	Eurovida as at 30-06-2014			of the equity method
Effective	Net	Shareholders'	Net	In consolidated	In net
stake $(\%)$	Assets	equity	Income	reserves	income
15.9348%	975 940	99 746	7948	$-6119$	1 2 6 6

26. Other tangible assets

This item is broken down as follows:

			30-06-2015			30-06-2014
			Art &	Assets
	Properties	Equipment	antiques	in progress	Total	Total
Balance as at 01 January
Acquisition costs	108 232	51 003	149	863	160 247	178,696
Accumulated depreciation	- 37 635	- 49 571		0	- 87 206	-89,720
Accumulated impairment	- 2 410				- 2 410	-6,595
Acquisitions		604		239	843	351
Transfers	- 46
Acquisition costs	- 46			- 788	- 834	- 1 428
Accumulated depreciation	446				446	458
Disposals / Write-offs
Acquisition costs		- 160			- 160	- 39
Accumulated depreciation		158			158	39
Depreciation for the year	- 952	- 458		- 16	- 1 426	-1,942
Balance as at 30 June
Acquisition costs	108 186	51 447	149	314	160 096	177,580
Accumulated depreciation	- 38 141	- 49 871		- 16	- 88 028	-91,165
Accumulated impairment	- 2 410				- 2 410	-6,595
Net amount	67 635	1 576	149	298	69 658	79,820

27. Intangible assets

This item is broken down as follows:

		30-06-2015		30-06-2014
	Softw are	Miscellaneous	Total	Total
Balance as at 01 January
Acquisition costs	18 767	2 097	20 864	20 832
Accumulated depreciation	- 18 700	- 2 093	- 20 793	- 20 660
Acquisitions	4		4	0
Transfers
Acquisition costs			0	0
Depreciation for the year	- 28	- 1	- 29	- 61
Balance as at 30 June
Acquisition costs	18 771	2 097	20 868	20 832
Accumulated depreciation	- 18 728	- 2 094	- 20 822	- 20 721
Net amount	43	3	46	111

28. Deferred taxes

Deferred taxes are calculated in respect of all the temporary differences using an effective tax rate of 22.5%, except those regarding tax loss for which a 21% rate was used.

Balances for these items are as follows:

	Balance as at		Equity	Reserves		Balance as at
	31-12-14	Expense	Income	Increase	Decrease	30-06-15
Deferred Tax Assets
Available-for-sale securities	26 623				3 651	22 972
Tangible assets	1 087	5				1 082
Taxable provisions	20 716	1 870	4 933			23 779
Fees and commissions	143	2				141
Seniority bonus	980		34			1 014
RGC provisions	11 156	172	1 305			12 289
Other assets/liabilities	7 367	4				7 363
Tax loss	7 154	7 799	645			0
	75 226	9 852	6 917	0	3 651	68 640
Deferred Tax Liabilities
Available-for-sale securities	25 743			7 733	3 031	21 041
Retirement pensions	0					0
Property revaluation	50		1			49
Shareholdings	0					0
	25 793	0	1	7 733	3 031	21 090

29. Other assets

This item is detailed as follows:

	30-06-15	30-06-14
Recoverable government subsidies	219	79
Taxes recoverable	18 619	18 131
Pledge accounts	144 906	159 012
Other debtors	101 864	49 528
Other income receivable	477	623
Expenses w ith deferred charges	7 782	9 292
Asset operations pending settlement - Miscellaneous	25 257	24 996
Assets received in lieu of payment	167 479	208 971
Other tangible assets held for sale	958	5 321
Other exchange transactions pending settlement	670
Other transactions pending settlement		8 465
	468 231	484 418
Impairment of Assets received in lieu of payment	- 29 354	- 36 157
Impairment of Other tangible assets held for sale	- 89	- 2 930
Provisions for other assets	- 3 097	- 874
	435 691	444 457

Balances and movements in the accounts of provisions for other assets are as follows:

Provisions for other assets	30-06-15	30-06-14
Balance as at 1 January	1 224	874
Appropriations	2 150	-
Used	-	-
Cancelled	277	-
Balance as at 30 June	3 097	874

Movements in the account assets received in lieu of payment in 2014 were as follows:

	Popular

	30-06-2015				30-06-2014
	Available	Properties
	for-sale	not available	Equipment	Total	Total
	properties	for sale
Balance as at 01 January
Gross amount	139 767	5 427	726	145 920	286 458
Accumulated impairment	- 27 691	-	- 113	- 27 804	- 48 342
Net amount	112 076	5 427	613	118 116	238 116
Additions
Acquisitions	30 292	546	100	30 938	34 350
Other	1 123	-	-	1 123	167
Disposals
Gross amount	- 9 910	- 20	- 271	- 10 201	- 111 747
Transfers	- 251	- 51	-	- 302	- 257
Impairment losses	- 1 423	- 1 073	- 27	- 2 523	- 1 023
Used	654	-	91	745	8 575
Reversed	217	-	11	228	4 633
Balance as at 30 June
Gross amount	161 021	5 902	555	167 478	208 971
Accumulated impairment	- 28 243	- 1 073	- 38	- 29 354	- 36 157
Net amount	132 778	4 829	517	138 124	172 814

30. Deposits from central banks

This item is detailed as follows:

	30-06-15	30-06-14
Deposits from central banks
Deposits	900 000	1 295 000
Interest payable	9	12 918
	900 009	1 307 918

In terms of residual maturity, these funds are broken down as follows:

	30-06-15	30-06-14
Forw ard
Up to 3 months	900 000	400 000
From 3 months to 1 year	-	895 000
Interest payable	9	12 918
	900 009	1 307 918

31. Deposits from banks

The balance of this item, spot and forward, is composed as follows in terms of nature:

	30-06-15	30-06-14
Domestic credit institutions
Deposits	361 935	487 115
Interest payable	560	3 407
	362 495	490 522
International credit institutions
Loans	112 500	118 750
Deposits	803 589	381 469
Repurchase agreements	808 585	1 339 188
Other funds	475	2 929
Interest payable	309	176
	1 725 458	1 842 512
	2 087 953	2 333 034

The item International credit institutions – Deposits essentially includes deposits made by the shareholder BPE.

In terms of residual maturity, these funds are broken down as follows:

	30-06-15	30-06-14
Spot	9 325	5 248
Forw ard
Up to 3 months	1 220 104	1 894 174
From 3 months to 1 year	243 749	311 279
1 to 5 years	413 906	118 750
Over 5 years	200 000	-
Interest payable	869	3 583
	2 078 628	2 327 786
	2 087 953	2 333 034

32. Customer funds

The balance of this item is composed as follows in terms of nature:

	30-06-15	30-06-14
Resident funds
Demand accounts	987 515	842 219
Time deposits	3 074 005	3 051 820
Savings accounts	6 187	4 457
Cheques payable	9 263	12 158
Other funds	31	13
	4 077 001	3 910 667
Non-resident funds
Demand accounts	40 866	26 992
Time deposits	38 454	23 711
Cheques payable	284	4
	79 604	50 707
Interest payable	19 950	33 800
	4 176 555	3 995 174

In terms of residual maturity, these funds are broken down as follows:

	30-06-15	30-06-14
Spot	1 028 381	869 211
Forw ard
Up to 3 months	893 521	848 205
From 3 months to 1 year	1 496 164	1 598 670
1 to 5 years	738 539	645 288
Interest payable	19 950	33 800
	3 148 174	3 125 963
	4 176 555	3 995 174

33. Debt securities issued

The balance of this item is broken down as follows:

	30-06-15	30-06-14
Bonds	2 383	3 749
Mortgage bonds	0	515 000
Euro Medium Term Note	52 790	190 384
Interest payable	1 297	2 166
	56 470	711 299

During 2010, Banco Popular Portugal constituted a Mortgage Bond Issuance Programme whose maximum amount is 1 500 million euros. Within the scope of this programme, the Bank made six mortgage bond issuances in the total amount of 1 330 million euros.

On 30 June 2015 the 4th Series (300 million euros), the 5th Series (290 million) euros, and the 6th Series (225 million euros) are booked in the balance sheet. This last issuance was fully repurchased by the Bank.

These bonds are covered by a group of home loans and other assets that have been segregated as autonomous equity in the Bank's accounts, therefore grating special credit privileges to the holders of these securities over any other creditors. The conditions of the aforementioned issuances are in accordance with Decree-law No. 59/2006, and Notices Nos.5/2006, 6/2006, 7/2006 and 8/2006 and Instruction No. 13/2006 issued by the Bank of Portugal.

On 30 June 2015, the characteristics of these issuances were the following:
N ame	N ominal value	C arrying amount	Issue dat e	R eimbursement dat e	Int erest f requency	Int erest rat e	D B R S R at ing
BAPOP M ortgage bonds 26/09/2015	300 000	0	26-09-2012	26-09-2015	M onthly	1M Euribor+1.20%	BBB (high)
BAPOP M ortgage bonds 30/12/2017	290 000	0	30-12-2014	30-12-2017	M onthly	1M Euribor+1.20%	BBB (high)
BAPOP M ortgage bonds 30/06/2018	225 000	0	30-06-2015	30-06-2018	M onthly	1M Euribor+1.20%	BBB (high)

On 30 June 2015, autonomous equity assigned to these issuances amounted to 872 652 thousand euros (2014: 867 979 thousand de euros) (see Note 23).

During 2011, Banco Popular Portugal constituted a Mortgage Bond Issuance Programme whose maximum amount is 2.5 billion euros. Within the scope of this programme, the Bank has already carried out 36 issuances and as at 30 June 2015, its balance was broken down as follows:

	Issuance date	Serial			Nominal	Reimbursement
			Amount	Number
		number			unit value	date
	26-10-2012	10th	20 000	200	100 000	26-10-2016
	26-02-2013	18th	6 676	6 676	1 000	26-02-2016
	30-07-2013	26th	4 576	4 576	1 000	30-07-2016
	27-08-2013	27th	1 834	1 834	1 000	27-08-2016
	30-09-2013	30th	4 475	4 475	1 000	30-09-2017
	21-10-2013	32nd	2 664	2 664	1 000	21-10-2015
	30-10-2013	31st	4 650	4 650	1 000	30-10-2017
	29-11-2013	33rd	2 660	2 660	1 000	29-11-2017
	30-12-2013	34th	1 300	1 300	1 000	30-06-2017
	10-01-2014	36th	3 955 52 790	3 955	1 000	10-01-2017
34. Hedging derivatives
The item hedging derivatives is composed as follows:
			30-06-2015			30-06-2014
			Notional		Notional
			amount	Liabilities	amount	Liabilities
	Interest rate contracts
	Sw aps		1 257 000	108 798	978 000	119 294
				108 798		119 294
			Other Provisions (Liabilities) - Movements		30-06-15	30-06-14
		Balance as at 1 January			52 575	51 054
	Appropriations				8 443	1 594
	Cancelled				5 061	1 257
As referred to previously, the Bank covers part of its interest rate risk, resulting from any possible decrease in the fair value of fixed interest rate assets, using interest rate swaps. On 30 June 2015, the net fair value of hedging and trading interest rate swaps (see above) was negative (see Note 19) in the amount of -112 328 thousand euros (2014: -122 849 thousand euros). Fluctuations in the fair value associated with hedged assets and their respective hedging derivatives are booked in the income statement under item Net income from financial operations (see Note 9). 35. Other provisions Balances and movements for the provisions account were as follows:		Balance as at 30 June			55 957	51 391
			Other Provisions (Liabilities) - Balances		30-06-15	30-06-14
	Provisions for risk country				172	64
	Provisions for general credit risks				54 618	49 350
	Other provisions				1 167 55 957	1 977 51 391

34. Hedging derivatives

		30-06-2015		30-06-2014
	Notional amount	Liabilities	Notional amount	Liabilities
Interest rate contracts
Sw aps	1 257 000	108 798	978 000	119 294
		108 798		119 294

As referred to previously, the Bank covers part of its interest rate risk, resulting from any possible decrease in the fair value of fixed interest rate assets, using interest rate swaps. On 30 June 2015, the net fair value of hedging and trading interest rate swaps (see above) was negative (see Note 19) in the amount of -112 328 thousand euros (2014: -122 849 thousand euros).

Fluctuations in the fair value associated with hedged assets and their respective hedging derivatives are booked in the income statement under item Net income from financial operations (see Note 9).

35. Other provisions

Other Provisions (Liabilities) - Movements	30-06-15	30-06-14
Balance as at 1 January	52 575	51 054
Appropriations	8 443	1 594
Cancelled	5 061	1 257
Balance as at 30 June	55 957	51 391
Other Provisions (Liabilities) - Balances	30-06-15	30-06-14
Provisions for risk country	172	64
Provisions for general credit risks	54 618	49 350
Other provisions	1 167	1 977
	55 957	51 391

36. Other liabilities

Suppliers of goods	1 644	1 797
Tax w ithheld at source	3 241	3 414
Personnel expenses	12 036	11 459
Pension liabilities	11 934	197
Other expenses	9 308	12 948
Other revenues w ith deferred income	1 831	2 616
Funding operations pending payment	10 736	7 958
Other accruals and deferred income	3 511	378
	54 241	40 767

The amount of liabilities with pensions in the first half of 2015 is explained by the decrease in the discount rate from 2.40% to 1.89% that occurred on 30 June 2015. (see Note 37).

37. Retirement pensions

The Pension Plan of Banco Popular Portugal is a scheme of benefits that comprehends all the benefits foreseen in the Collective Bargaining Agreement that regulates the banking sector in Portugal

The fund assumes the liabilities with past services of former employees in the proportion of their time of service. As a counterpart, from the amount of liabilities we deduct the amount of liabilities with past services of current employees as regards the time of service rendered in other institutions in the banking sector. These liabilities for services rendered are calculated pursuant to IAS 19 Revised.

The Pension Plan of the executive members of the Board of Directors intends to ensure payment for old age pensions, disability pensions and survivor's pensions for the executive members of the Bank's Board of Directors.

With the publication of Decree-law No. 1-A/2011, of 3 January, the employees comprehended by the Collective Bargaining Agreement and in active life on 4 January 2011 started to be comprehended within the General Social Security Scheme ('Regime Geral da Segurança Social' - RGSS) as regards the benefits of old age pensions. Therefore, from that date on the benefits plan defined for employees comprehended in the Collective Bargaining Agreement as regards retirement pensions started to be funded by the Pension Fund and Social Security. However, the Pension Fund still has the responsibility, after 4 January 2011, to cover liabilities on death, disability and survivor's pensions, as well as the old age complement in order to match the retirement of the participants in the Pension Fund to the amounts of the current pension plan. the allocation of the proportional part of accumulated actuarial gains/losses and the actuarial 30-06-15 30-06-14

According to guidelines derived from the Note issued on 26 January 2011 by the National Council of Financial Supervisors, the Bank has kept with reference to 31 December 2010 the recognition and measurement method for past services of active employees regarding the events transferred to the RGSS used in previous years.

In accordance with Decree-law No. 127/2011 of 31 December, Banco Popular Portugal transferred to Social Security the liabilities for pensions in payment on 31 December 2011, as well as the part of the assets contained in the pension fund that already covered such liabilities. The liabilities transferred amounted to 6.3 million euros and have already been fully paid (55% in December 2011 and 45% in March 2012).

This transference was booked in the income statement in the amount of 795 thousand euros due to

gains/losses originated by the difference in actuarial assumptions used for the calculation of the transferred liabilities. In accordance with Decree-law No. 127/2011 of 31 December, this amount shall be deductible for effects of determining taxable profit, in equal parts, from the fiscal year started on 1 January 2012, regarding the average of the number of years of life expectancy of the pensioners whose responsibilities have been transferred. The respective deferred taxes have been on the amount recognised in the year's net income.

Until 31 December 2012, the Bank recognized the net accumulated amount (after 1 January 2004) of actuarial gains and losses resulting from changes in the financial and actuarial assumptions and differences between the financial and actuarial assumptions used and the actual amounts in the item 'Other Assets or Other Liabilities – Actuarial gains/losses'. Accumulated actuarial gains or losses that did not exceed 10% of the highest of the current value of liabilities for past services or the value of the pension funds were included in the 'corridor'. Actuarial gains/losses in excess of the corridor were recognised against results over the average remaining period of service of the employees covered by the plan.

As at 1 January 2013 Banco Popular changed its accounting policy of recognising financial and actuarial gains and losses for pension plans and other defined benefit post-employment benefits pursuant to IAS 19 Revised. Financial and actuarial gains and losses are now recognised in the period they occur directly in equity in the Statement of Comprehensive Income.

On 30 June 2015, the number of participants in the fund was 1 121 (2014: 1 139). On this date, there were 44 retired people and 15 pensioners, and the remaining employees were active.

Current amount of liabilities

Past Services	30-06-15	30-06-14
Obligations at the beginning of the year	154 196	128 411
Service expenses:
Bank	1 008	670
Employees	383	378
Interest expense	1 878	2 360
Pensions paid	- 554	- 479
Actuarial gains/losses	11 196	1 418
Obligations as at 30 June	168 107	132 758

The liabilities assumed for retirement and survivor's pensions are as follows:

Every year the Bank determines the amount of liabilities for past services using actuarial calculations based on the Project Unit Credit method for liabilities for past services in the case of old age and the Unique Successive Premium to calculate disability and survivor's benefits. The discount rate is determined based on market rates for high quality corporate bonds, with periods to maturity similar to those for settlement of pension liabilities.

In the first half of 2015, those have showed a significant reduction with subsequent impact on actuarial gains and losses and on the obligations for services rendered.

Obligations for survival and disability, foreseen in the Collective Bargaining Agreement and insurable are covered by the subscription of a multi-protection life insurance policy for the population at stake, except for those whose urgency of disability or survival is considered unfit to insure.

This is an annual renewable temporary contract in which the Insurance company guarantees the Pension Fund of Banco Popular Portugal, S.A., in case of death or disability assessed at 66% or more according to the National Table for Disability, for any of the people comprehended within the insured group, the payment of the hired premiums.

This insurance contract was signed with Eurovida – Companhia de Seguros de Vida S.A., an insurance company that is an associate of Banco Popular Portugal, SA.

Total Amount of the Fund

The movements occurred in the total amount of the pension fund were as follows:

Equity amount of the Fund	30-06-15	30-06-14
Amount at the beginning of the year	154 305	128 495
Contributions paid
Employer	600	1 500
Employees	383	378
Return on Fund assets	2 024	3 440
Pensions paid	- 554	- 479
Other net differences	- 585	- 773
Amount of the Fund as at 30 June	156 173	132 561
Current obligations for past services	168 107	132 758
Coverage level	92.9%	99.9%

Evolution of Liabilities and Total Amount of the Fund

The evolution of liabilities and the total amount of the pension fund in the past five years was as follows:

	30-06-15	31-12-14	31-12-13	31-12-12	31-12-11
Current amount of liabilities	168 107	154 196	128 411	108 961	94 708
Equity amount of the Fund	156 173	154 305	128 495	121 796	113 703
Net Assets/(Liabilities)	-11 934	109	84	12 835	18 995
Coverage level	92.9%	100.1%	100.1%	111.8%	120.1%

Banco Popular Portugal assesses the recoverability of any eventual excess in the fair value of the assets included in the pension fund when compared with the liabilities for pensions at each reporting date based on the expectation of the reduction in the future necessary contributions.

Structure of the Assets that comprise the Fund

On 30 June, The Pension Fund's portfolio broken down by asset type was as follows:

CLASS OF ASSETS	30-06-2015	30-06-2014
Fixed income securities	35.64%	44.28%
Variable income securities	57.15%	45.55%
Real estate	3.76%	4.68%
Liquidity	3.45%	5.49%
	100.00%	100.00%

Exposure to credit risk

Regarding the credit risk of the assets with debt characteristics that comprise the fund, the exposure by rating had the following structure:

Ratings	30-06-2015	30-06-2014
AAA	4.39%	0.74%
A A	8.09%	3.63%
A	14.31%	13.76%
BBB	45.89%	34.80%
Other (NR)	27.32%	47.07%
	100.00%	100.00%

As at 30 June 2015, the Fund had 1 000 000 BPE Financiaciones 4% shares due on 17-07-2015 in the amount of 1 038 thousand euros and 1 000 000 Banco Popular Español 1% bonds due on 07-04-2025 in the amount of 937 thousand euros. In the first half of 2015, these bonds had, respectively, a positive change in fair value of 4 thousand euros and a negative change in fair value of 55 thousand euros.

Costs for the year

The amounts recognised as costs for the year are analysed as follows:

Cost for the year	30-06-15	30-06-14
Service Cost	1 391	1 048
Interest expense	1 878	2 360
Expected return on Fund assets	- 1 879	- 2 362
Other	592	395
Total	1 982	1 441

Actuarial gains and losses

The amount of actuarial gains and losses as at 30 June 2015 and 2014 is broken down as follows:

Actuarial gains and losses	30-06-15	30-06-14
Actuarial gains/losses as at 1 January	- 28 686	735
Actuarial losses for the year - obligations	- 11 196	- 13 384
Actuarial gains for the year - Fund	145	2 382
Actuarial gains/losses as at 30 June	- 39 737	- 10 267

Actuarial assumptions

The main actuarial and financial assumptions used were as follows:

	30-06-15		30-06-14
	Assump.	Real	Assump.	Real
Discount rate	1.89%	1.89%	3.63%	3.63%
Expected return of Fund assets	1.89%	1.31%	3.63%	2.68%
Salaries and other benefits increase rate	0.8%	0.0%	1.5%	0.0%
Pensions increase rate	0.5%	0.0%	1.0%	0.0%
Mortality table	TV 88/90		TV 88/90
Disability table	ERC Frankona		ERC Frankona
Turnover	n.a.	n.a.	n.a.	n.a.

Gains and losses arising from experience adjustments and changes in actuarial assumption are recognised in other comprehensive income in Retained Earnings in the period they occur.

Sensitivity analysis to the Main Assumptions that contribute to the liabilities amount

Taking into consideration the most significant impacts on the amount of liabilities, we have performed a sensitivity analysis through a positive and negative fluctuation in the main assumptions that contribute to the amount of the liabilities, whose impact is analysed as follows:

	Impact on current liabilities
	Assumption change	Assumption increase	Assumption decrease
Discount rate	0.25%	Decrease by 6.2%	Increase by 6.7%
Salaries and other benefits increase rate	0.25%	Increase by 5.1%	Decrease by 4.8%
Pensions increase rate	0.25%	Increase by 2.6%	Decrease by 2.5%
		Increase by 1 year	Decrease by 1 year
Average life expectancy		Increase by 3.5%	Decrease by 3.5%

The sensitivity analyses above are based on the change in a given assumption, keeping all other assumptions equal. In practice, that is very unlikely to occur given the correlations that exist between the several assumptions. When calculating the sensitivity of the amount of liabilities for significant actuarial assumptions we applied the same methods used to calculate the positions in the Balance Sheet.

The methodology used to perform the sensitivity analysis remained unchanged from the previous period.

Expected future cash flows

The future undiscounted cash flows of pension benefits are as follows:

	Up to 1 year	1 to 3 years	3 to 5 years	Over 5 years	Total
Benefit (monthly)	124	214	235	3 703	4 276

38. Contingent commitments and liabilities

The following table shows the contractual amount of off-balance financial instruments, which imply lending to customers.

	30-06-15	30-06-14
Contingent liabilities
Guarantees and Sureties	355 410	529 015
Documentary credits	42 518	39 633
Commitments
Irrevocable loans	664 084	833 134
Revocable loans	770 774	828 153
	1 832 786	2 229 935

On 30 June 2015, the item Irrevocable loans included the amount of 5 314 thousand euros (2014: 5 314 thousand euros) concerning forward liabilities for the Deposit Guarantee Fund regarding the part of annual contributions which, pursuant to the deliberations of the Fund, were not paid in cash.

	30-06-15	30-06-14
Assets pledged as collateral	1 191 000	1 744 700

The amount of the item Assets pledged as collateral includes 1 191.0 thousand euros from the Bank's own portfolio aimed almost entirely at collateralising an irrevocable credit line with the Bank of Portugal pursuant to the large-amount payment system ('Sistema de Pagamentos de Grandes Transacções – SPGT') and the Intervention Operations Market ('Mercado de Operações de Intervenção' - MOI) (2014: 1 744.7 thousand euros).

Additionally, as at 30 June 2015 and 2014, the balances regarding off-balance sheet accounts were as follows:

	30-06-15	30-06-14
Deposit and custody of securities	6 112 296	7 815 938
Amounts received for collection	87 631	92 189
	6 199 927	7 908 127

39. Share capital and share premium

As at 30 June 2015, the Bank's share capital was represented by 476 000 thousand shares with the nominal value of 1 euro each, which were subscribed and fully paid by Banco Popular Español, SA.

The amount recognised in item Share premiums originated in the premiums paid by the shareholders in the share capital increases made in 2000, 2003 and 2005.

40. Fair value reserves

The movements in this account are detailed on the following table:

	30-06-15	30-06-14
Revaluation reserves and Fair Value
Available-for-sale investments
Net balance as at 1 January	- 2 981	- 56 434
Revaluation at fair value	- 4 722	60 602
Deferred taxes	1 051	- 14 918
Balance as at 30 June	- 6 652	- 10 750
Revaluation reserves ( Legal provisions )	672	1 990
Balance as at 30 June	- 5 980	- 8 760

Revaluation reserves regarding available-for-sale assets result from the adequacy to the fair value of the securities in the Bank's portfolio. These balances shall be reversed through the income statement at the time the securities that originated them are disposed of or in case there is any impairment.

The revaluation reserve regarding the adequacy to fair value of tangible assets for own use is related to the property on Rua Ramalho Ortigão (Note 26).

The revaluation reserve for tangible assets calculated in accordance with Decree-law No. 31/98 shall only be moved when it is considered realized, total or partially, and pursuant to the following priorities:

• (i) To correct any excess found on the date of the revaluation between the net book value of the elements being revalued and their current real value;
• (ii) To absorb accumulated loss until the revaluation date, inclusively;
• (iii) To incorporate in the share capital for the remaining part.

41. Other reserves and retained earnings

The balances of the accounts for other reserves and retained earnings are analysed as follows:

	30-06-15	30-06-14
Statutory reserve	35 450	35 221
Other reserves	292 700	289 328
Retained earnings	- 119 796	- 90 666
	208 354	233 883

The movements in the items reserves and retained earnings were as follows:

	30-06-15	30-06-14
Statutory reserve
Balance as at 1 January	35 221	35 221
Trasnf. Retained earnings	229	0
Balance as at 30 June	35 450	35 221
Other reserves
Balance as at 1 January	290 622	289 027
Trasnf. Retained earnings	2 054	0
Trasnf. Revaluation Reserves	24	301
Balance as at 30 June	292 700	289 328
Retained earnings
Balance as at 1 January	- 108 744	- 58 606
Net income for the previous year	2 282	- 31 720
Dif. result. from changing account. standard (IFRS)	- 11 051	- 340
Transf.Legal Reserve	- 229	0
Transf.Other Reserves	- 2 054	0
Balance as at 30 June	- 119 796	- 90 666
	208 354	233 883

- Statutory Reserve

The statutory reserve can only be used to absorb accumulated losses or to increase share capital. Portuguese legislation applicable to the banking sector (Article 97 of Decree-Law No. 298/92, of 31 December) requires that 10% of the profit for the year be transferred to the statutory reserve until it is equal to the share capital.

42. Personnel expenses

The number of employees of the Bank according to their professional category was as follows:

	30-06-15	30-06-14
Directors	100	95
Management	441	453
Technical personnel	525	517
Clerical staff	232	232
	1 298	1 297

43. Remunerations of the governing bodies and the personnel with responsibility over risk taking and control

As at 30 June, the amounts earned by the members of the Board of Directors and the Supervisory Board are detailed, individually and in group, on the following table:

	Fixed remuneration	Complement for personal performance	Total remuneration
Board of Directors
Rui Manuel Morganho Semedo - Chairman	198	130	328
Carlos Manuel Sobral Cid da Costa Alvares - Member	142	53	195
	340	183	523
Supervisory Board
Rui Manuel Ferreira de Oliveira - Chairman	5	0	5
António José Marques Centúrio Monzelo - Member	2	0	2
Telmo Francisco Salvador Vieira - Member	2	0	2
	9	0	9

The remunerations earned and the number of employees who have responsibilities in terms of risk taking regarding the Bank or its customers as well as those who assume control functions pursuant to Notice 5/2008 issued by the Bank of Portugal are detailed below:

	Fixed remuneration	Complement for personal performance	Total remuneration
Executive Committee	459	149	608
Risk Management	19	5	24
Compliance	24	3	27
Asset Management	44	7	51
Auditing	41	8	49
	587	172	759

44. Remuneration of the Statutory Auditor

The amounts paid to the Audit Firm PricewaterhouseCoopers in the first half of 2015 and 2014 were:

	30-06-15	30-06-14
Statutory audit	56	74
Other guarantee and reliability services	76	47
	132	121

45. Relationship with related companies

As at 30 June 2015 and 2014, the amounts payable and receivable regarding related companies was as follows:

	Credit			Debit	Income		Expense
	30-06-15	30-06-14	30-06-15	30-06-14	30-06-15	30-06-14	30-06-15	30-06-14
Consulteam	-	-	12 546	32 395	377	315	-	-
Eurovida, SA	4 055	4 023	53 000	143 960	1 339	4 493	1 339	3 070
Popular Gestão de Activos, SA	111	157	2 403	2 164	893	939	13	3
Popular Factoring, SA	93 368	78 836	-	-	925	1 268	166	335
Imopopular Fundo Especial I.I. Popular Arrendamento	3 784 0	7 927 8	221 6 978	19 47 120	49 26	152 49	- 10	- 223
Popular Seguros, SA	0	-	1 068	1 711	360	372	-	-
Popular Predifundo	466	1 475	1	-	11	38	-	-
SPE-Special Pourpuse Entities	1 437	1 879	-	-	251	-	-	-
	103 221	94 305	76 217	227 369	4 231	7 626	1 528	3 631
Banco Popular Español, SA	212 535	1 356 424	1 759 068	2 391 938	61 632	53 705	80 388	87 782
As at 30 June 2015, the guarantees pledged by the Bank to related companies amounted to 64 910 thousand euros (2014: 5 472 thousand euros). As at 30 June 2015, the Bank received deposits from BPE to guarantee the risk associated with loans
granted by the Bank in the amount of 86 384 thousand euros (2014: 103 526 thousand euros).
Transactions with related companies are based on common market conditions.
As at 30 June 2015, the members of the Bank's Board of Directors did not hold any deposits or loans with Banco Popular.
46. Cash and cash equivalents
For effects of the cash flow statement, Cash and cash equivalents includes the following balances
with maturities of less than 90 days:
					30-06-15	30-06-14
Cash (note 17)					39 872	39 177
Cash and balances w		ith banks (note 18)			56 718	66 622
Deposits w	ith banks w		ith maturities of less than 3 months		61 871	186 037
					158 461	291 836
47. Measurement of portfolio impairment and respective disclosures (Circular Letter No. 02/2014/DSP issued by the Bank of Portugal) Qualitative disclosures:
a) Credit risk management policy
The Bank is exposed to credit risk, which is the possible loss that arises when the Bank's counterparts fail to fulfil their obligations. In the case of refundable financing it arises as a consequence of the non recovery of principal, interest and commissions, regarding amount, period and other conditions stipulated in the contracts. Concerning off-balance sheet risks, it derives from the non-compliance of the counterparts regarding their obligations with third parties, which implies that the Bank has to assume as its own certain obligations depending on the contracts.
The Bank structures the levels of credit risk it is exposed to by establishing pre-defined acceptable risk limits regarding the borrower or group of borrowers and geographical or business activity segments.

46. Cash and cash equivalents

	30-06-15	30-06-14
Cash (note 17)	39 872	39 177
Cash and balances w ith banks (note 18)	56 718	66 622
Deposits w ith banks w ith maturities of less than 3 months	61 871	186 037
	158 461	291 836

47. Measurement of portfolio impairment and respective disclosures (Circular Letter No. 02/2014/DSP issued by the Bank of Portugal)

Qualitative disclosures:

a) Credit risk management policy

Exposure to credit risk is managed through a regular analysis of the capacity of borrowers and potential borrowers of meeting payment obligations for principal and interest, and by changing these credit limits when appropriate. Exposure to credit risk is also managed in part by obtaining collaterals and personal or corporate guarantees.

Collaterals

The Bank employs a series of policies and practices in order to mitigate credit risk. The most traditional one is securing collaterals at the moment funds are advanced. The Bank implements guidelines regarding the acceptability of specific classes of collaterals or mitigation of credit risk. The main types of collaterals for loans and receivables are the following:

- Property mortgages;

• Pledges of operations made within the Bank;
• Pledges on assets such as premises, inventory and accounts receivable;
• Pledges on financial instruments, such as securities and shares.

Long-term loans to corporate and private customers usually require a collateral; lower amounts and recurring personal loans generally require no collateral. Additionally, with the intention of minimising loss, at the time an impairment indicator for loans and receivables is identified the Bank tries to obtain additional collaterals from the relevant counterparts.

Collaterals held for financial assets, except for loans and advances, are determined by the nature of the instrument. Debt instruments, treasury bonds and other securities usually are not collateralised.

Lending commitments

The main objective of these instruments is to ensure that funds are made available to customers as they require them. Loan extension commitments represent non-utilized parts of credit extension authorizations in the form of loans, guarantees or letters of credit. Regarding the credit risk associated with loan extension commitments, the Bank is potentially exposed to a loss in the amount of the total of non-utilized commitments. However, the probable loss amount is much lower than the sum of the non-utilized commitments since loan extension commitments are revocable and depend on a specific customer's credit worthiness. The Bank monitors the maturity of lending commitments since long term commitments usually present a greater credit risk than short term commitments.

Concentration Risk

Concentration risk is managed and monitored by Risk Management that also ensures that adequate policies and procedures are maintained and implemented to monitor and manage credit concentration risk. It is also in charge of monitoring delegated powers in terms of concentration risk and periodically presents reports on concentration risk to the Board of Directors.

The Bank has defined a structure of limits aimed at maintaining an exposure level in line with its risk profile and an adequate diversification of its loan portfolio.

The limits currently approved for credit concentration risk are the following:

i) Risk limit for a Group/Customer

Pursuant to the delegations attributed by BAPOP to the Bank, the maximum limit for total exposure with a Group/Customer is 10% of GBP's Tier I. The maximum limit for a Group/Customer, except bank and technical guarantees and transactions guaranteed with deposits is 5% of GBP's Tier I.

ii) Risk limit by transaction amount

The maximum amount for a lending transaction is defined.

In case of funding working capital or without a specific destination every risk with that characteristic shall be aggregated.

Regarding project finance and syndicated financing, BAPOP's participation shall not be higher than 25% of the total amount, in case the transaction is higher than the limit defined for this type of lending.

iii) Limit of participation in the Credit Risk Central (CRC)

The maximum limit for participation in the CRC with a Group/Customer shall be the following:

Group/Customer with risks of over € 500 million - Lower than 10% of CRC.

Group/Customer with risks of over € 250 million - Lower than 15% of CRC.

Group/Customer with risks of over € 100 million - Lower than 25% of CRC.

Group/Customer with risks of over € 20 million - Lower than 50% of CRC.

iv) Limit of risk concentration by activity sector

The maximum limits of concentration of total risk by activity sector are the following:

• Construction and property development: 25%;
• Manufacturing and mining industries: 15%;
• Information and communication, education and other services: 5%;
• Remaining sectors: 10% (Agriculture, forestry and fisheries; Energy and water supply; Wholesale and retail trade, repair of motor vehicles; Hotels and restaurants; Transport and storage; Banking and insurance; Administrative, professional sanitary and artistic activities).

v) Limit of risk concentration in large companies

There is a maximum limit of 30% of total risk for the Large Companies segment.

vi) Limit of risk concentration by product

There are also defined limits according to the type of product:

• Transactions with mortgages on land;
• Property development;
• Loans to purchase securities.

vii) Assessment of mortgage collaterals

A set of limits is also defined according to the loan to value (LTV) of lending transactions with mortgage collaterals.

b) Loan write-off policy.

The loan write-off policy may only be applied when the loan dos not have any real collateral, when it is 100% provisioned and, simultaneously, when Management estimates that there will be no recovery arising from the fact that every due diligence has been taken to collect and recover said loans.

c) Impairment reversion policy.

The analysis and subsequent determination of individual impairment of a customer that has shown impairment in previous periods may only result in a reversion in case it is related with the occurrence of an event after the initial recognition (e.g. improvement of the customer's rating or strengthening collaterals).

Additionally, there may be implicit reversions of impairment, resulting from new estimates of collective parameters or changes in the type of customer analysis (individual or collective).

The reversal amount may not be higher than the accumulated impairment amounts previously recorded.

d) Conversion of the debt into debtor's equity.

The Bank does not usually employ this type of solution and solely holds an exposure on an economic group that was subject to this type of loan restructuring. In this case, the loan is replaced by a position comprised of shares from a Restructuring Fund.

These positions are subject to impairment tests every six months from the moment those shares are included in the Restructuring Fund. For junior debt positions maintained in companies held by these Funds a 100% impairment is estimated regarding their respective exposure.

e) Description of restructuring measures applied and their respective associated risks, as well as control and monitoring mechanisms

The Bank has defined a vast set of restructuring measures, which are negotiated by a large set of Agencies specialising in credit recovery. The most common measures are extending the maturity date of the loan or the inclusion of a grace period.

In terms of characteristics, these restructuring operations are divided into large groups: without pastdue loans (with or without collateral strengthening) and with past-due loans (with or without collateral strengthening).

The Bank's decision-making body in terms of loan granting shall identify the restructuring operations that result from customers' financial difficulties. These are subsequently classified by the Bank's computer system. Costumers with lending operations that are undergoing a restructuring process are also subject to an internal definition of a loan restrictive classification. Agencies are thus forced to act on this policy, which may imply maintaining, reducing or extinguishing risks.

Regarding monitoring in terms of the loan impairment model, these transactions shall bear the restructuring brand for a two-year healing period pursuant to Instruction No. 32/2013 issued by the Bank of Portugal.

f) Description of the process of assessing and managing collaterals.

For situations in which it is admissible that credit recovery shall occur via foreclosure the amounts that shall be considered (market value of the most recent appraisal known with the application of a haircut) are also defined by internal regulations.

Reappraisals of these collaterals are usually done within the time frames defined by Notices Nos.3/95 and 5/2006 issued by the Bank of Portugal. However, in the case of properties related with transactions done with customers with significant exposures (over 1 million euros), reappraisals are carried out more often.

Despite the pre-defined time frames, appraisals are carried out whenever they are considered relevant to monitor the value of the collateral.

The value of the properties considered as collaterals is adjusted to the current macroeconomic scenario through the application of haircuts, based on Management analysis and market practices.

		Haircut
Time frame of the assessment	$>= 50\%$ Work completed	$< 50\%$ Work completed
Less than 6 months	$0\%$	$0\%$
6 months	5%	5%
From 6 months to 1 year	10%	10%
From 1 to 2 years	15%	20%
From 2 to 3 years	25%	35%
Over 3 years	50%	60%

Regarding financial collaterals and securities, we have defined the periodical monitoring of the lending operations collateralised with this type of assets, and these are regularly reported to Management. Assets used as collateral are indicated, as well as the overall hedging ratio. These amounts are considered in the scope of an individual impairment analysis.

g) Nature of main judgements, estimates and hypotheses used to determine impairment.

Losses due to impairment correspond to estimates based on judgements made by top management in view of the facts and circumstances on a given date. Consequently, future events and developments are expected, in some cases, to converge into a different result vis-à-vis the estimate amount.

In order to ensure the adequacy of the impairment model to the macroeconomic scenario, the Bank carries out monthly impairment reviews of its individually analysed customers, as well as reviewing every six months the parameters applied to the collective part of its credit portfolio.

In terms of the individual analysis, impairment depends on the disbursement capacity of the debtor and/or respective guarantors, or the collaterals the Bank has to guarantee the lending transactions, applying the reference criteria described in Circular Letter 02/2014/DSP issued by the Bank of Portugal.

As far as the collective part of the portfolio is concerned and especially the calculation of LGD estimates, these are calculated based on the history of effective recoveries, as well as on conservative assumptions, defined and approved by Management for future estimates.

h) Description of the methods employed to calculate impairment, including the way portfolios are segmented in order to reflect the different characteristics of the lending operations.

In compliance with the conceptual model on which impairment calculations are based, every month an analysis is carried out to the overall credit portfolio divided into seven main groups: (i) default loans, (ii) loans in arrears (30- 90 days), (iii) restructured loans, (iv) non-performing loans (with impairment signs), (v) healing loans, (vi) healed loans, and (vii) performing loans.

Definition of default

A loan is considered defaulted whenever it shows at least one of the following signs:

• Loans in arrears for more than 90 days;
• Customers in insolvency/bankruptcy situations or undergoing a special revitalisation process (PER); or
• Bank guarantees called in by the beneficiary.

A customer's full exposure is considered defaulted whenever the sum of their transactions in arrears for more than 90 days exceeds 20% of total exposure.

Homogeneous segments result from the creation of transaction groups that have similar credit risks, taking into consideration the Bank's management model. In order to do so, we have defined as relevant segmentation factors some lending transactions characteristics, such as type of customer, materiality of the exposure, type of product and type of associated collateral.

The segmentation currently in force distinguishes between specific PD segmentation and specific LGD segmentation:

PD segmentation	LGD segmentation
	State and Other Public Bodies
	Banco Popular Group
	Employees
	Corporate Customers
	Relevant Customers
	Credit cards - Private individuals
	Home loans with LTV <=80%
Home loans	Home loans with $LTV > 80\%$
	Collateralised private individuals
Consumer credit	Consumer credit
	Non-collateralised private individuals
	Property development
Property construction	Collateralised construction loans
	Non-collateralised construction loans
	Credit cards - Corporate
Corporate customers	Collateralised companies
	Non-collateralised companies

Probability of default (PD) represents the estimate based on the last 5 years of the Bank's history of the number of transactions with or without impairment signs that can default during a given period of time (emerging period). So that the Bank's history may reflect the current economic conditions, observations obtained are adjusted according to the following weights:

	Year 1	Year 2	Year 3	Year 4	Year 5
Weight	10%	15%	15%	30%	30%

PD is also differentiated according to the classification of each loan: (i) loans in arrears (30- 90 days), (ii) restructured loans, (iii) non-performing loans (with impairment signs), (iv) healing loans, (v) healed loans, and (vi) performing loans.

i) Impairment signs by credit segment.

The Bank considers that a loan shows impairment signs when one of the following events occurs.

• Customers with at least 1 loan of a material amount in arrears for more than 30 days;
• Customers in litigation;
• Customers with at least 1 loan of a material amount restructured due to financial difficulties of the customer or perspective/request for restructuring;
• Customers with at least 1 loan undergoing out of court procedures to regularise their situation (PERSI);
• Customers with at least 1 loan of material amount in the banking system in arrears, premium and interest cancelled/annulled or in court, according to information made available by the Central for Credit Liabilities of the Bank of Portugal;
• Customers with loan transactions written-off by BAPOP in the past 12 months;
• Customers with banking guarantees made by the Bank which have been foreclosed within the past 24 months;
• Costumers with pledges or assignments to the Bank in the past 24 months;
• Customers with non-performing operations in other entities of Popular Group;
• Any other signs that cause a higher probability of defaulting detected in the individual analysis.

j) Limits defined for individual analysis.

On each reporting date a set of customers is selected, who due to the materiality of their exposure to the Bank are considered significant. Those customers are subject to an individual analysis procedure in order to conclude whether there is evidence of impairment or to determine the amount of impairment.

Individual analyses are carried out on:

• Default customers or customers showing impairment signs with total liabilities of over 750,000 euros;
• Significant customer portfolio with no impairment signs and total liabilities of over 2,500,000.

Customer lending subject to individual analysis in which no objective evidence of impairment is identified shall be included in homogeneous risk segments in order to be considered for collective impairment.

k) Policy on internal risk levels, specifying the treatment given to a borrower classified as impaired.

Operations that have been in arrears for more than 90 days, or in insolvency situations or undergoing a special revitalisation process (PER), or that require more specialised monitoring are regularly migrated to a set of Agencies named Specialised Business Network (RNE).

The mission and objectives of that Network are the rigorous analysis, monitoring and management of customers and risks, carried out by Specialised Managers distributed into 3 segments (Private individuals, Corporate, and Large Risks). From a comprehensive vision of the whole recovery process, we try to find and employ the most adequate solutions for a swift credit recovery.

l) General description of the calculation of the current amount of future cash flows when calculating impairment losses assessed individual and collectively

According to the impairment model used by the Bank, when objective evidence of an event that originated a loss due to impairment is identified, the amount of that loss shall be determined as the difference between the amount on the balance sheet and the present amount of the estimated future cash flows (excluding losses due to events that have not occurred yet), discounted at the original effective interest rate.

Estimated future cash flows included in the calculation regard the contractual amount for the loans, adjusted by any amounts that the Bank expects not to recover and the time frame in which it is foreseeable that those shall be carried out. The time frame for the recovery of cash flows is a very significant variable for the calculation of impairment, since an impairment loss is always recognised, even in the cases in which total recovery of the contractual outstanding cash flows is expected to be received but after the agreed dates. This situation shall not be verified in case the Bank receives compensation in full (for example, as interest or default interest) for the period in which the loan was overdue.

Estimating an amount and the moment future cash flows shall be recovered for a loan involves professional judgement. The best estimate for those, taking into consideration the guidelines defined on Circular Letter No. 02/2014/DSP, is based on reasonable assumptions and on observable data at the date impairment is assessed, on the capacity of a customer to pay or on the possibility of a foreclose on a collateral.

In the case of collective portfolios, a probability of default (PD) and a rate of loss given default (LGD) are applied to each homogeneous segment.

In the case of defaulted loans, PD is 100% and the balance is established at the moment each loan defaults.

LGD is an estimate of loss given default of a customer. For the calculation of this variable, a random sample of the Bank's history is used, based on a trust interval of 95% regarding every customer that has defaulted. Thus, the average loss is calculated for each segment based on every recovery discounted at the effective rate for the month in which that operation defaulted until maturity date/settlement, as well as possible future estimates for the cases in which operations have not been settled when the analysis is carried out.

Recovery of the loans included in the sample are checked on a case-by-case basis, including:

• Historical recoveries via payments made by the debtor (recoveries since the date of default until the date of analysis);
• Historical recoveries via foreclosure, deducted from expenses;
• Estimates of recoveries after the reference dates used for the analysis;

Recoveries after write-off.

We would like to highlight that BAPOP's project for calculating LGD based on the whole portfolio and not simply on a sample is almost complete. This project is being internally developed with the support of the Group and shall be independently validated.

m) Description of the emerging period(s) used for the different segments and justification of their adequacy

Emerging periods, which result from internal studies and the estimate of time management in the time frame between the event and default, are the following:

Past-due loans - 30 to 90 days	З
Restructured loans	12
Other signs of default	12
Healing	12
Performing and healed	12

Except for the 30-90 day overdue index, which remained with an emerging period of 3 months, the remaining indexes had that period increased to 12 months as a result of the backtesting exercise.

n) Detailed description of the cost associated with credit risk, including disclosure of PD, EAD, LGD and healing rates.

For restructured or healing loans, average PD is determined for each month of the demarcation stage (24 or 12 months respectively); after that time curves are drawn and applied.

In the segments where those time curves do not show correlations that can be considered explanatory, the PD applied during the demarcation stage results from the weighted average by the total number of restructured or healing loans in each segment and in each month (without attributing different weights to moment PD was observed).

Additionally, from a conservative perspective, the minimum point of each curve may never be lower than the PD obtained for performing loans for the same period.

The following table shows currently used PDs:

	Normal portfolio			PD portfolio
Segment:	Performing	Healed	Healing	$>$ 30 days	Other default signs	Restructured
Credit cards - Private individuals	2.8%	4.0%	$[29.2\% - 29.2\%]$	51.5%	16.9%	$[9.1\% - 9.1\%]$
Relevant customers	1.4%	5.3%	$[0.9\% - 0.9\%]$	61.6%	29.6%	$[1.4\% - 59.0\%]$
Corporate Customers	0.9%	$0.0\%$	$[38.0\% - 38.0\%]$	66.5%	20.7%	$[0.9\% - 43.9\%]$
Property construction	5.0%	4.1%	$[5.0\% - 71.1\%]$	59.0%	37.9%	$[5.0\% - 49.6\%]$
Home loans	1.1%	4.2%	$[1.1\% - 37.9\%]$	43.0%	17.7%	$[1.1\% - 44.0\%]$
Consumer credit	5.0%	10.9%	[14.2% - 38.0%]	52.6%	26.6%	$[5.0\% - 35.6\%]$
Employees	0.1%	$0.0\%$	$[3.7\% - 3.7\%]$	37.9%	4.3%	$[0.1\% - 0.1\%]$
Corporate customers	3.8%	6.6%	$[6.6\% - 65.8\%]$	58.4%	31.7%	$[3.8\% - 49.3\%]$
State and Other Public Bodies	$0.0\%$	$0.0\%$	$[0.0\% - 0.0\%]$	35.0%	18.3%	$[0.0\% - 0.0\%]$
Banco Popular Group	$0.0\%$	$0.0\%$	$[0.0\% - 0.0\%]$	$0.0\%$	$0.0\%$	$[0.0\% - 0.0\%]$
Property development	9.4%	4.8%	$[9.4\% - 46.2\%]$	59.3%	42.8%	$[9.4\% - 43.0\%]$

LGDs applied to 30 June 2015 are the following:

Segment	LGD
Credit cards - Companies	57.8%
Credit cards - Private individuals	45.0%
Corporate Customers	10.1%
Relevant customers	10.8%
Collateralised construction loans	19.5%
Non-collateralised construction loans	37.2%
Home loans with LTV $\leq 80\%$	8.3%
Home loans with $LTV > 80\%$	10.5%
Consumer credit	47.9%
Employees	6.3%
Collateralised companies	20.5%
Non-collateralised companies	30.8%
State and Other Public Bodies	0.0%
Banco Popular Group	0.0%
Collateralised private individuals	8.6%
Non-collateralised private individuals	32.1%
Property development	8.8%

We would like to stress once more that the project that will allow the Bank to calculate LGD based on the whole portfolio and not simply on a sample is almost complete as mentioned on paragraph (l).

Conclusions on the sensitivity analyses performed on impairment amounts and changes to the main assumptions.

As at 30 June 2015, an increase by 10% in PD would imply an increase by 4.3 million euros in the total amount of impairment. A similar increase in LGD would imply an increase by 17.3 million euros.

An increase by 10% in both variables would imply a 21.9 million euro increase in the total amount of impairment.

Quantitative disclosures:

a) Detailed exposures and impairments by segment.

			Exposure as at 30-06-2015		Impairment as at 30-06-2015
Segment:	Total exposure	Performing loans	Of which: healed	Of which: restructured	Default loans	Of which: restructured	Total impairment	Performing loans	Default loans
Corporate	223 438	156 318	9 1 0 5	13 4 63	67 120	14 701	18 633	337	18 2 9 6
Property construction and CRE	550 663	356 913	1002	46 655	193 750	80 386	84 033	11 3 8 8	72 645
Home loans	1665687	1545481	4 0 6 0	111 230	120 206	46 102	19 544	6432	13 112
Relevant	1 141 148	911 122	0	47453	230 026	112 974	87 199	25 604	61 595
Companies	1956064	1613581	6320	50 172	342 483	80 628	145 939	29 154	116 785
Other	380 911	331 724	107	9630	49 187	10 0 51	22 954	3 5 0 6	19 4 48
Total	5917911	4915139	20 594	278 603	1002772	344 842	378 302	76 421	301881

		Impairment as at 30-06-2014:
Segment	Total exposure	Performing loans	Of which: healed	Of which: restructured	Default loans	Of which: restructured	Total impairment	Performing loans	Default loans
Corporate	492 923	447917	5 4 6 1	30 123	45 006	12 5 16	33 004	20 489	12 5 15
Property construction and CRE	544 386	358 920	1 2 3 9	56 709	185 466	73 643	76 954	14 2 64	62 690
Home loans	1612409	1483539	5083	99 213	128 870	35 320	19 503	5 4 1 1	14 092
Relevant	983 597	792 591	6342	60 853	191 006	87 138	62 114	9 3 6 7	52 747
Companies	L760387	1455272	5701	36 933	305 115	56 438	128 467	25 006	103 461
Other	255 251	208 390	106	7019	46 861	6493	21 5 98	3 0 9 1	18 507
Total	5 648 953	4746629	23 932	290 850	902 324	271 548	341 640	77 628	264 012

			Exposure as at 30-06-2015		Impairment as at 30-06-2015
	Performing loans				Default loans				Performing loans	Default loans
		Days past due < 30		Days past due	Days past due		Total		Days past due	Days past due
Segment:	Total exposure	Performing	Non- performing	between 30-90	$\leq$ 90	> 90	impairment	< 30	entre 30 - 90	$\leq$ 90	> 90
Corporate	223 438	140 464	15 25 1	603	22 240	44 880	18 633	297	40	6 2 0 2	12 094
Property construction and	550 663	266 735	81 0 27	9 1 5 1	36 584	157 166	84 033	9 9 9 1	1397	11 256	61 389
Home loans	1665687	1 297 440	211 634	36 407	8353	111853	19 5 44	5 0 1 6	1416	1019	12 093
Relevant	1 141 148	799 998	108 036	3088	34 360	195 666	87 199	25 321	283	11 5 53	50 042
Companies	1956064	1489185	109 044	15 3 5 2	61 249	281 234	145 939	26 323	2831	20 485	96 300
Other	380 911	307 093	20 663	3 9 6 8	2971	46 216	22 9 54	2761	745	1 2 7 8	18 170
Total	5917911	4 300 915	545 655	68 569	165 757	837 015	378 302	69 709	6712	51793	250 088

			Exposure as at 30-06-2014			Impairment as at 30-06-2014
			Performing loans		Default loans				Performing loans	Default loans
	Total exposure	Days past due < 30		Days past due	Days past due		Total Days past due			Days past due
Segment:		Performing Non-			> 90 $= 90$		impairment	< 30	entre 30 - 90	$= 90$	> 90
Corporate	492 923	342 774	104 413	730	15 2 9 4	29 712	33 004	19 807	682	5 4 0 2	7 1 1 3
Construção e CRE	544 386	252 976	94 041	11 903	33 052	152 414	76 954	12 676	1588	12 139	50 551
Habitação	1612409	1 2 2 5 1 2 3	220 492	37924	7 1 0 3	121 767	19 503	3939	1472	911	13 18 1
Relevantes	983 597	631 630	145 018	15 943	52 624	138 382	62 114	9339	28	16 911	35 836
Empresas	1760387	1 317 581	108 830	28 861	56 132	248 983	128 467	21 043	3 9 6 3	19 612	83 849
Outros	255 251	185 028	18841	4521	743	46 118	21 5 98	2 1 8 1	910	309	18 198
Total	5 648 953	3 955 112	691 635	99 882	164 948	737 376	341 640	68 985	8643	55 284	208 728

b) Detailed credit portfolio by segment and year of production.

30/06/15	Corporate				Property construction and CRE		Home loans
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$= 2004$	2	19	6	401	22 842	5 2 7 8	3 3 5 1	154 878	2 1 1 4
2005		12	12	115	9 2 9 3	2 5 2 4	1991	108 762	1720
2006	3	6 3 0 4	6	182	16 567	1608	1809	96 006	1620
2007		0	0	284	36 297	5 3 3 1	2098	117 502	2799
2008		0	0	224	16 113	2054	2772	163 810	2 111
2009		11 140	4709	408	28 511	7750	3 2 1 6	203 716	2752
2010	6	16 139	705	564	44 971	12 983	4 172	294 342	3 0 1 1
2011	69	10 219	49	620	33 390	8921	2 0 4 0	164 186	1 3 0 5
2012	20	18 250	5422	846	53 280	9085	903	75 451	1010
2013	32	30 775	3741	844	56 599	8 3 6 9	1071	82 299	564
2014	105	110 992	3966	3569	178 650	17637	582	133 722	413
2015	147	19 588	17	877	54 150	2493	693	71 013	125
Total	386	223 438	18 633	8934	550 663	84 033	25 698	1665687	19 544

30/06/15	Relevant				Companies		Other
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$= 2004$	15	25 4 19	2428	972	8 4 6 5	1698	2536	18 335	624
2005	11	16 503	1 0 3 2	397	7929	1 0 9 1	1 1 9 1	8777	471
2006	17	54 873	9496	616	9 3 1 1	1821	1755	12 334	251
2007	28	67 272	5011	960	27 925	4 3 3 1	2475	11 384	2 2 6 9
2008	17	90 870	6086	877	18 4 8 9	4 1 3 5	2496	16 687	2 1 9 1
2009	268	95 145	2 902	359	57 039	11 457	3461	21 900	2665
2010	37	61 604	5973	2444	91 210	18 665	4891	35 603	3752
2011	56	65 770	1634	2458	86 510	14 957	3 973	31 153	2982
2012	60	53 158	1 7 1 8	4 4 2 4	163 432	15 953	3837	14 902	1078
2013	103	172 680	20 339	4 9 9 1	241 753	19426	3822	19 392	1 333
2014	229	232 717	13 4 8 8	18 625	923 034	43 973	13 119	159 300	2 5 2 6
2015	90	205 137	17 092	5 603	320 967	8432	4 101	31 144	1812
Total	931	1 141 148	87 199	43726	956 064	145 939	47 657	380 911	22 954

30/06/14		Corporate			Property construction and CRE		Home loans
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$\leq$ 2004				149	30 656	4 6 9 0	3469	168 603	2 2 7 2
2005				85	16 449	1605	2058	116 673	1578
2006	5	12 534	20	121	23 239	1743	850	104 150	2 4 6 7
2007		959		254	47 585	4 4 4 1	2 157	128 407	3012
2008	23	16 423	546	1 270	27 997	4 2 1 6	2837	174 478	2 0 6 2
2009	15	103 190	854	708	39 905	9 2 2 6	3 3 1 4	216 075	2 5 2 5
2010	48	59 510	3785	1 1 9 2	61 164	13 9 24	4 2 8 6	308 940	2920
2011	102	51 037	7516	1 2 5 8	64 812	11 0 25	2 103	172 642	1 2 1 7
2012	52	40 263	5 2 7 4	1485	85 451	11 165	976	80 714	868
2013	109	162 261	9442	1479	92 324	10 136	1 107	85 814	467
2014	49	46 746	4 5 6 6	1 3 2 8	54 804	4783	673	55913	115
Total	405	492 923	33 004	9 3 2 9	544 386	76 954	24 830	1612409	19 503

30/06/14		Relevant			Companies		Other
Production year	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment	Number of transactions	Amount	Constituted impairment
$\leq$ 2004	16	35 859	2 7 9 6	161	10 143	930	946	19 439	246
2005	14	25 1 26	575	197	14 065	3 5 6 6	552	8718	304
2006	15	44 338	8 4 6 7	340	15876	2762	389	12 2 2 9	934
2007	34	93 456	6 3 5 2	848	39 201	4 9 8 5	866	11 922	2 2 0 4
2008	62	112 119	7978	4 3 6 4	42 973	7 3 9 2	19601	27 360	3868
2009	286	85 330	2946	2671	77 954	13 536	8952	26 306	2970
2010	78	87 677	7885	4 9 6 7	165 365	21 683	11 740	43 314	4 1 9 3
2011	92	116 866	1772	5692	227 366	19 976	8488	37 058	3 4 4 4
2012	62	117 242	8 1 0 8	7482	325 879	20 25 6	11 944	19 332	1 323
2013	112	221 247	9490	9 1 3 9	471 735	19 253	10 655	33 037	392
2014	114	44 337	4 7 4 4	9423	369830	14 129	4 740	16 536	720
Total	885	983 597	62 113	45 284	1760387	128 468	80 873	255 251	21 598

c) Detailed amount of gross credit exposure and individual and collectively assessed impairment by segment, business sector and geography.

c.1) By segment:

Interim Report and Accounts

1 st Half of 2015

30/06/15		Corporate		Property construction and CRE		Home loans
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	208 540	18 5 60	123 735	38 159	8618	1084
Collective	14 8 98	73	426 928	45 874	1657069	18 4 60
Total	223 438	18 633	550 663	84 033	1665687	19 544
	Relevant		Companies			Other	Total
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	1 141 085	87 192	122 372	42 411	37 143	987	1641493	188 393
Collective	63	$\overline{7}$	1833692	103 528	343 768	21 967	4 276 418	189 909
Total	1 141 148	87 199	1956064	145 939	380 911	22 954	5917911	378 302
30/06/14	Corporate		Property construction and CRE			Home loans
	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Assessment
Individual	455 242	32 058	128 531	33749	12795	2 0 4 9
Collective	37 681	946	415 855	43 205	1599614	17 454
Total	492 923	33 004	544 386	76 954	1612409	19 503
30/06/14	Relevant		Companies			Other	Total
	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Assessment
Individual	983 597	62 114	113 590	34 815	12 0 24	51	1705779	164 836

c.2) By business sector:

30/06/15	Property construction		Industries		Commerce
Assessment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	309 854	62 437	196 886	15 701	121 368	23 350
Collective	201 518	25 3 96	686 791	33 545	696 789	47791
Total	511 372	87833	883 677	49 246	818 157	71 141

	Financial/Insurance Companies			Real Estate Companies	Other		Total
Assessment	Impairment Exposure		Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Individual	257 989	12 470	177 398	23 990	345 356	39 449	1408851	177 397
Collective	130 532	570	108 430	7539	510860	26 058	2 3 3 4 9 2 0	141 999
Total	388 521	14 140	285 828	31 529	856 216	65 507	3743771	319 396

30/06/14	Property construction		Industries		Commerce
	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Assessment
Individual	339 140	57 000	144 131	13 083	134 786	20 189
Collective	210 298	25 009	624 317	30 667	660 123	43 120
Total	549 438 82 009		768 448	43 750	794 909	63 309

30/06/14	Financial/Insurance Companies		Real Estate Companies			Other	Total
	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment	Exposure	Impairment
Assessment
Individual	381761	19852	213 576	22 656	333 426	25 876	1546820	158 656
Collective	34 967	1 332	110 023	7758	496 141	23 584	2 135 869	131 470
Total	416 728	21 184	323 599	30 414	829 567	49 460	3682689	290 126

c.3) By geography:

30/06/15	Portugal
	Exposure	Impairment
Assessment
Individual	1 641 493	188 393
Collective	4 276 418	189 909
Total	5917911	378 302
30/06/14	Portugal
	Exposure	Impairment
Assessment
Individual	1705779	164 836
Collective	3 943 174	176804

d) Detailed portfolio of restructured loans by applied restructuring measure

	30/06/15
		Performing loans			Default loans			Total
Measure	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment
Deadline extension	1 1 4 4	134 576	7516	523	115 406	21 843	1667	249 982	29 3 5 9
Grace period	1 1 4 2	97 232	3 1 9 5	1 1 6 8	167 076	48 313	2 3 1 0	264 308	51 508
Other measures	1 2 4 4	46 795	5036	960	62 360	16 570	2 2 0 4	109 155	21 60 6
Total	3 5 3 0	278 603	15 747	2651	344 842	86 726	6 1 8 1	623 445	102 473
					30/06/14
		Performing loans			Default loans			Total
Measure	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment	Number of transactions	Exposure	Impairment
Deadline extension	506	95 783	3872	244	83 684	11 3 8 7	750	179 467	15 25 9
Grace period	1 2 3 8	50 567	2760	864	55 984	15 287	2 1 0 2	106 551	18 047
Other measures	1602	144 500	6991	992	131 880	35 695	2 5 9 4	276 380	42 686
Total	3 3 4 6	290 850	13 623	2 100			5 4 4 6	562 398	75 992

e) In and out movements in the restructured loan portfolio.

	30/06/15	30/06/14
Initial balance of the portfolio of restructured loans (gross of impairment)	599 089	551 689
Restructured loans during the period	121 525	61 903
Interest from the restructured portfolio	4935	4 2 9 6
Settlement of restructured loans (partial of full)	$-42666$	$-52664$
Loans reclassified from 'restructured' to 'performing'	$-59053$	$-8512$
Other	$-385$	5686
Final balance of the portfolio of restructured loans (gross of impairment)	623 445	562 398

f) Detailed fair value of collaterals underlying the credit portfolio for the Corporate, Construction, Commercial Real Estate (CRE) and Residential segments.

30/06/15		Corporate				Property construction and CRE				Home loans
		Properties		Other real collaterals		Properties		Other real collaterals		Properties		Other real collaterals
Fair value	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount
< 0.5 M€		572		93	1658	194 846	920	50 501	20 160	2769960	459	17725
$>= 0.5$ ME and < 1 ME	0	$\Omega$		1 1 1 1	145	101 081	17	10 4 30	217	139 309	-5	1860
$>= 1$ ME and < 5 ME		6 3 2 4		3576	113	211 022		5990	31	48 945	6	10 970
$>= 5$ ME and < 10 ME		16 388	0		8	47865	0	$\Omega$			0	$\Omega$
$>= 10$ ME and < 20 ME	0	$\Omega$		10 3 9 2		13 500	$\Omega$	$\Omega$			$\Omega$	$\Omega$
$>= 20$ ME and < 50 ME	0	$\Omega$	$\mathbf 0$		$\Omega$	O	$\Omega$	$\Omega$			0	$\Omega$
$>=$ 50M $\epsilon$	$\cup$	$\cup$	$\cup$		$\mathbf{0}$	$\cup$	$\cup$	$\cup$			$\cup$	$\cup$
Total		23 284	ь	15 172	1925	568 314	942	66 921	20 408	2958214	468	30 555

30/06/14	Corporate				Property construction and CRE			Home loans
		Properties		Outros Colat, Reais		Properties		Other real collaterals		Properties		Other real collaterals
Fair value	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount
< 0.5 M€		425	3	375	1 1 3 7	162 650	987	52 946	18 3 8 4	2584820	503	21 770
$>= 0.5$ M $\epsilon$ and $< 1$ M $\epsilon$			-5	1611	159	111 031	32	20 14 6	212	136 549	з	1750
$>= 1$ ME and < 5 ME		6708		4656	122	231 357	17	33 399	31	48 986		7970
$>= 5$ M€ and < 10 M€		13 0 71		5 9 9 7	9	54 639
$>= 10$ ME and < 20 ME		12 501		22 655
$>= 20$ ME and < 50 ME				24 303
$>=$ 50M $\epsilon$	2	476 892
Total	8	509 597	12	59 597	1427	559 677	1036	106 491	18 627	2770355	511	31 490

g) LTV ratio for the Corporate, Construction, CRE and Residential segments.

	30/06/15
Segment/Ratio	Number of properties	Performing loans	Default loans	Impairment
Corporate
Without any collateral	n.a.	143 216	53 577	17920
< 60%	2	6 600	388	6
$>= 60\%$ and $< 80\%$	1	1591	0	$\mathbf{1}$
$>= 80\%$ and $< 100\%$	1	$\mathbf 0$	8029	7
$>= 100%$	3	4911	5 1 2 6	699
Property construction and CRE
Without any collateral	n.a.	173 158	100 161	56 706
< 60%	1 3 3 4	82 587	35 276	9 1 3 5
$>= 60\%$ and $< 80\%$	146	28 277	10 307	2 2 0 1
$>= 80\%$ and $< 100\%$	182	21853	11 408	3 100
$>= 100%$	262	51038	36 598	12 891
Home loans
Without any collateral	n.a.	31889	5 0 6 4	1316
< 60%	9993	473 038	29 3 24	4 5 6 3
$>= 60\%$ and $< 80\%$	5 602	533 139	22 5 95	3850
$>= 80\%$ and $< 100\%$	3783	404 451	28 5 82	5067
$>= 100%$	1030	102 964	34 641	4748

	30/06/14
Segment/Ratio	Number of properties	Performing loans	Default loans	Impairment
Corporate
Without any collateral	n.a.	$-54187$	$-24308$	$-10767$
< 60%	3	25 580	$\Omega$	7473
$>= 60\%$ and $< 80\%$	3	38 056	16 265	685
$>= 80\%$ and $< 100\%$	1	4088	0	6
$>= 100%$	1	6952	8043	2 603
Property construction and CRE
Without any collateral	n.a.	- 197 949	$-83985$	$-26862$
$<60\%$	448	91 905	27 037	9507
$>= 60\%$ and $< 80\%$	51	33 409	11891	2064
$>= 80\%$ and $< 100\%$	22	25 916	10761	3 3 3 2
$>= 100%$	66	60 983	34 296	11 959
Home loans
Without any collateral	n.a.	$-1372851$	$-99045$	$-15246$
$<60\%$	8644	359 738	15 761	2511
$>= 60\%$ and $< 80\%$	5 1 8 1	487 579	18 5 5 9	3 0 0 7
$>= 80\%$ and $< 100\%$	4 3 3 4	426 384	28 5 5 6	4644
$>= 100%$	1 3 0 8	104 561	36 169	5084

h) Detailed fair value and net book value of repossessed properties or foreclosed properties, by type of asset or time elapsed.

		30/06/15
Assets	No. of properties	Fair value of the asset	Booked amount
Land
Urban	69	6960	5441
Rural	33	6545	5 2 5 0
Properties under development
Home loans	346	30 892	30 050
Commercial	24	1 1 5 1	965
Other	163	5878	5 3 6 3
Built properties
Home loans	455	57 359	53 538
Commercial	91	8 1 5 7	7 1 6 3
Other	114	22899	21 2 28
Other	19	3997	3780
	1 3 1 4	143838	132 778

	30/06/15
Time elapsed since repossession/foreclosure	< 1 year	$>= 1$ year and $< 2.5$ years	$>= 2.5$ year and $< 5$ years	$>= 5$ years	Total
Land
Urban	3 1 2 6	520	1719	76	5441
Rural	582	866	3535	267	5 2 5 0
Properties under development
Home loans	1 504	7650	7499	13 3 9 7	30 050
Commercial	0	$\Omega$	$\Omega$	965	965
Other	533	198	3708	924	5 3 6 3
Built properties
Home loans	24 318	17986	4 6 67	6 5 67	53 538
Commercial	4 0 1 6	1 2 3 1	845	1071	7 1 6 3
Other	6472	10 780	2 2 8 0	1696	21 228
Other	352	877	1751	800	3780
	40 903	40 108	26 004	25 763	132 778

		30/06/14
Assets	No. of properties	Fair value of the asset	Booked amount
Land
Urban	94	12 267	10 438
Rural	21	5 5 5 6	4 3 1 1
Properties under development
Home loans	391	34 377	33 797
Commercial	25	1776	1587
Other	123	4 604	4 1 2 4
Built properties
Home loans	553	72 603	68 632
Commercial	136	14 787	13 695
Other	179	26 325	24 168
Other	38	8401	7 908
	1560	180 696	168 660

	30/06/14
Time elapsed since repossession/foreclosure	< 1 year	$>= 1$ year and $< 2.5$ years	$>= 2.5$ year and $< 5$ years	$>= 5$ years	Total
Land
Urban	1071	2 2 5 2	2 5 7 3	4 5 4 2	10 438
Rural	46	3 7 5 4	244	267	4 3 1 1
Properties under development
Home loans	5 2 7 3	11 4 11	473	16 640	33797
Commercial	625	0	$\Omega$	961	1586
Other	0	$\mathbf 0$	3708	416	4 1 2 4
Built properties
Home loans	28 595	26 372	6949	6716	68 632
Commercial	4 4 5 3	3 5 6 0	1992	3690	13 695
Other	10 719	8856	2923	1671	24 169
Other	4 4 9 4	3 0 3 7	173	204	7908
	55 276	59 24 2	19 0 35	35 107	168 660

i) Distribution of the credit portfolio measured by degrees of internal risks.

Banco Popular does not employ any internal credit ratings.

j) Disclosure of the risk parameters associated with the impairment model by segment

Risk parameters associated with the impairment model by segment are explained in paragraph (n) of the qualitative disclosures of this note.

48. Reconciliation of AAS accounts with IAS/IFRS (in compliance with No. 2(d) of Instruction No. 18/2005 issued by the Bank of Portugal)

Had the Bank's individual financial statements been prepared according to the International Financial Reporting Standards (IAS/IFRS), they would show the following changes:

1) Description of changes in accounting policies

After applying the IFRS, the accounting policies would reflect the following changes:

a) Loans and advances to customers

According to the IFRS the accounting policies applicable to loans and advances to customers correspond to what is stated on item 2.1 of the Notes to the Financial Statements, except for credit provisioning as foreseen in Notice No. 3/95 issued by the Bank of Portugal, which is replaced by impairment determined according to the model described on note 47.

b) Other tangible assets

With respect to property for own use at the date of transition to IFRS (1 January 2006) we have elected to use the option provided by IFRS 1 using fair value as deemed cost obtained through an assessment made by independent experts, considering the difference between that amount and the

property's carrying value in retained earnings minus deferred tax. That amount becomes the cost amount on that date subject to future depreciation.

2) Estimates of material adjustments and reconciliation between the balance sheet, the income statement and the statement of changes in equity

Estimates for material adjustments that would derive from changes in accounting policies alluded to in the previous number, and the reconciliation between the balance sheet, the income statement and the statement of changes in equity in conformity with AAS for the ones resulting from the application of IFRS are presented in the following tables:

				(€ thousand)
			30/06/15			30/06/14
		AAS		IFRS	AAS		IFRS
		Net amount	Adjust.	Amount Net	Net amount	Adjust.	Amount Net
Assets
Cash and balances with central banks		73 032		73 032	50 712		50712
Deposits with banks		56 718		56 718	66 622		66 622
Financial assets held for trading		47 719		47 719	103 903		103 903
Available-for-sale financial assets		1812508		1812508	1869916		1869916
Loans and advances to banks		68 036		68 036	1 260 684		1 260 684
Loans and advances to customers		5 576 808	$-40218$	5 536 590	5 3 5 3 7 7 6	$-48928$	5 304 848
Non-current assets held for sale		20 747		20 747	20 747		20 747
Other tangible assets		69 658	9792	79 450	79 820	9792	89 612
Intangible assets		46		46	111		111
Current income tax assets		0		0	3 5 6 6		3 5 6 6
Deferred income tax assets		68 640	$-3279$	65 361	78 458	$-119$	78 339
Other assets		435 691		435 691	444 457		444 457
	Total assets	8 229 603	$-33705$	8 195 898	9 332 772	$-39255$	9 293 517
Liabilities
Deposits from central banks		900 009		900 009	1 307 918		1 307 918
Financial liabilities held for trading		37 633		37 633	36 184		36 184
Deposits from banks		2 087 953		2 087 953	2 333 034		2 333 034
Deposits from customers		4 176 555		4 176 555	3 995 174		3 995 174
Debt securities issued		56 470		56 470	711 299		711 299
Hedging derivatives		108 798		108 798	119 294		119 294
Provisions		55 957	$-54790$	1 1 6 7	51 391	$-49413$	1978
Current income tax liabilities		10419		10 4 19	528		528
Deferred income tax liabilities		21 090	2 2 0 3	23 293	24 749	2 3 9 9	27 148
Other liabilities		54 241		54 241	40 767		40 767
	Total Liabilities	7 509 125	$-52587$	7 456 538	8 620 338	$-47014$	8 573 324
Shareholders' equity
Shareholders' equity		476 000		476 000	476 000		476 000
Share premium		10 109		10 109	10 109		10 109
Fair value reserves		$-5980$	6916	936	$-8760$	5 4 0 2	$-3358$
Other reserves and retained earnings		208 354	10 891	219 245	233 883	4 6 7 3	238 556
Income for the year		31 995	1075	33 070	1 202	$-2316$	$-1114$
	Total Equity	720 478	18882	739 360	712 434	7759	720 193
	Total Liabilities + Equity	8 229 603	$-33705$	8 195 898	9 332 772	$-39255$	9 293 517

						$(E$ thousand)
		30/06/15			30/06/14
	AAS	Adjust.	IFRS	AAS	Adjust.	IFRS
Interest and similar income	106 630		106 630	133 481		133 481
Interest and similar charges	46 213		46 213	71 407		71 407
Net interest income	60 417	0	60 417	62 074	$\bf{0}$	62 074
Return on equity instruments	63		63	58		58
Fees and commissions received	28712		28712	34 168		34 168
Fees and commission paid	3568		3568	4 3 4 9		4 3 4 9
Net gains from financial assets at fair value						$\Omega$
through profit or loss	$-81$		$-81$	$-1499$		$-1499$
Net income from available-for-sale financial assets	$-1$		$-1$	9702		9702
Net income from foreign exchange differences	887		887	562		562
Income from the sale of other assets	42		42	$-5182$		$-5182$
Other operating income	45 015		45 015	$-3214$		$-3214$
Banking income	131 486	0	131 486	92 3 20	0	92 3 20
Personnel expenses	29 965		29 965	28 5 85		28 5 85
General administrative expenses	24 403		24 403	27 293		27 293
Depreciation and amortization	1456		1456	2003		2003
Provisions net of reversals	3 3 8 2	$-4948$	$-1566$	337	$-161$	176
Adjustments to loans and advances to customers
(net of reversals)	23 371	3561	26 932	35 866	3 2 2 9	39 0 95
Impairment of other assets net of reversals	4 1 6 8		4 1 6 8	$-3040$		$-3040$
Income before tax	44 741	1 3 8 7	46 128	1 2 7 6	$-3068$	$-1792$
Income tax	12746	312	13 058	74	$-752$	$-678$
Current tax	9811		9811	587		587
Deferred tax	2935	312	3 2 4 7	$-513$	$-752$	$-1265$
Net income for the period	31 995	1075	33 070	1 2 0 2	$-2316$	$-1114$

						(€ thousand)
	Share Capital	Share premium	Fair value reserves	Other reserves and retained earnings	Net income	Total
Balances as at 30-06-2015 - AAS	476 000	10 109	- 5980	208 354	31 995	720 478
Credit impairment
- Adjustments - regulatory provisions				13 186	1 3 8 7	14 573
- Deferred tax				$-2967$	$-312$	$-3279$
Valuation of own property
- Fair value			9 1 1 9	672		9791
- Deferred tax			$-2203$			$-2203$
Balances as at 30-06-2015 - IFRS	476 000	10 109	936	219 245	33 070	739 360

	Share Capital	Share premium	Fair value reserves	Other reserves and retained earnings	Net income	Total
Balances as at 30-06-2014 - AAS	476 000	10 109	$-8760$	233 883	1 202	712 434
Credit impairment
- Adjustments - regulatory provisions				3553	$-3067$	486
- Deferred tax				$-870$	751	$-119$
Valuation of own property
- Fair value			7801	1990		9791
- Deferred tax			$-2399$			$-2399$
Balances as at 30-06-2014 - IFRS	476 000	10 109	$-3358$	238 556	$-1114$	720 193