PHAROL, SGPS, S.A. — Interim / Quarterly Report 2008

Nov 6, 2008

Banif - SGPS, SA

The Banif Financial Group

Information on the operations and results of the Banif Financial Group in the 3rd quarter of 2008

(unaudited figures)

Banif - SGPS, SA Public Limited Company Company Headquarters: Rua de João Tavira, 30 – 9000 Funchal Registered at Funchal Company Registry Office Single Registration and Collective Person Number 511 029 730 Share Capital: 350,000,000 Euros

OPERATIONS, HIGHLIGHTS AND RESULTS OF THE BANIF FINANCIAL GROUP IN THE THIRD QUARTER OF 2008

Banif – SGPS, SA, the holding company of the Banif Financial Group, achieved a consolidated net profit of 50.1 million euros in the period to the end of the third quarter of 2008. This result represents a decrease of 22.6% on the equivalent period of the previous year.

Balance Sheet Analysis

The Banif Financial Group had total net assets of 12,742 million euros as at 30 September 2008. This corresponds to an increase of 25.1% compared with the end of the third quarter of 2007.

For its part, (gross) credit to customers, excluding debt securities reclassified as "loans and receivables", came to 10,324 million euros, 23.1% higher than the figure recorded on 30 September 2007. Over the same period the ratio of credit impairment/total credit rose from 2.08% to 2.29%, reflecting the adverse effects of the current economic situation.

Customer deposits on the balance sheet grew by 20.4% relative to 30 September 2007, to 8,533 million euros. In terms of "off-balance sheet" funds, the figure for the Group was 2,419 million euros (+13.6% versus the year-earlier period). The rise in total customer funds was fuelled in part by an increase in the number of Banif Financial Group points of sale from 423 to 474 between the ends of the third quarters of 2007 and 2008¹ . The number of bank branches in Portugal rose from 266 to 309.

So far this year, the Banif Financial Group has opened 37 branches in Portugal, three in Malta and two in Brazil. It is foreseen that a further 13 branches will open in Portugal in the final quarter of 2008, along with another three in Brazil and three more in Malta.

It is important to note, moreover, the strong growth in the number of banking customers of the Group as a result of the marketing campaigns conducted in recent years and the policy of expansion and diversification of distribution networks. A three-year programme is currently under way to increase the number of products and services sold to customers, with the objective of reinforcing their loyalty and identification with the Banif Financial Group and so obtaining a greater value from cross-selling activities among the various Group companies.

The equity of the Banif Financial Group (excluding minority interests) increased by 20.2%, as a result of the following situations:

• An increase of 100 million euros in the share capital of Banif SGPS, SA. This operation, which was carried out in June 2008, generated a net capital in-flow of the same amount;
• Undistributed results for the year 2007 in the amount of 63.6 million euros;
• An accumulated profit of 50.1 million euros to the end of the third quarter of 2008;
• A decrease in revaluation reserves for securities classified on the balance sheet under the item "financial assets available for sale" in the amount of -96,4 million euros (sale of shareholdings in Brazil: - 62.5 million euros; effect of the decrease in the equity of Companhia de Seguros Açoreana: - 22.8 million euros; and decrease in the market value of the shareholding in Finibanco Holdings SGPS: - 9.2 million euros).

Thus the Group had equity of 626.1 million euros at the end of the third quarter of 2008.

¹ Excluding the following banks in which Banif-SGPS, SA does not have a majority shareholding: Banca Pueyo (Spain), with 82 branches; Bankpime (Spain), with 23 branches; and Banco Caboverdiano de Negócios, with 14 branches.

Income Statement Analysis

The Banif Financial Group had operating revenues of 354.0 million euros at the end of third quarter 2008, an increase of 18.5% in relation to the year-earlier period. The main components of revenue were:

• Financial margin, including income from securities, rose 8.9% to 198.6 million euros. This item has been affected by a decrease in the total intermediation margin (credit portfolio margin plus margin on the on-balance sheet customer funds portfolio), which fell from 3.02% to 2.71% between the ends of the third quarters of 2007 and 2008 respectively, because of the increase in funding costs and the narrower margin on the credit portfolio as a consequence of the growing proportion of mortgage loans;
• Other net income, which includes net commissions, rose 5.1%, to 95.1 million euros. Progress in this domain continues to be affected by the ongoing crisis in the main international financial markets, This has had the consequence of lowering levels of activity in the areas of investment banking and asset management. Nevertheless, it is worth highlighting the 9.3% increase in net commissions, as a result above all of strong growth in the Group's lending business over the period in question.
• Profits on financial operations increased 132.5%, to 60.3 million euros, benefiting from the realisation of capital gains on disposal of shareholdings in Brazil, but also held back by losses associated with updating the Banif Group's investment and trading portfolios to reflect market values.

Operating costs, which comprise general administrative expenditure and staff costs, came to a total of 210.4 million euros, 21.3% more than over the same period in 2007. This was due to the major expansion of distribution networks in Portugal, Brazil and Malta, and to costs associated with the advertising campaign to promote the Banif Financial Group's new image, which ran in the first few months of this year.

Net provisions and impairment for the period show an increase of 100.5%, reaching 46.8 million euros at the end of the third quarter of 2008. This reflects the current deterioration in the domestic and international macroeconomic situation, as a consequence of which it has been necessary to adopt a policy of greater prudence in the evaluation of certain collective credit impairment indicators.

The Banif Financial Group's consolidated operational cash flow came to 143.6 million euros (+ 14.6% on the year-earlier period), while the cost-to-income ratio (operating costs + depreciation / operating revenues) increased, from 61.4% in the third quarter of 2007, to 64.4% in the third quarter of 2008.

Considering only recurrent profits in the period in question, there was a decrease of 51.10% between third quarter 2007 and third quarter 2008: the consolidated net result fell from 57.7 million euros on 30 September 2007, to 28.2 million euros on 30 September 2008. This decrease reflects the narrower financial intermediation margin and greater provisions for credit impairment, as mentioned above, and lower profits from insurance business and investment banking at the level of commissions and trading operations.

As far as the insurance business of the Banif Financial Group is concerned, the total volume of premiums issued came to 338.8 million euros (9.8% less than at the end of the third quarter of 2007); within this total there was a 2.9% increase in the value of non-life premiums.

On the basis of the Banif Financial Group's net profit of 50.1 million euros as at 30 September 2008, ROE (Return on Equity) was 11.4% (as against 19.5% in the year-earlier period), while ROA (Return on Assets) came to 0.57% (versus 0.95% in the year-earlier period). Both ratios have been annualised and calculated using average values for the Group's equity and assets.

Lisbon, 6 November 2008

THE BOARD OF DIRECTORS

COMPARATIVE ANALYSIS

Banif Financial Group '000 Euros

Balance sheet	30-09-2008	30-09-2007	Absolute	%
			variation	variation
1 Net assets	12.741.968	10.182.064	2.559.904	25,1%
2 Lending (gross) (1)	10.323.604	8.387.131	1.936.473	23,1%
3 Customer deposits (balance sheet)	8.533.063	7.085.223	1.447.840	20,4%
4 Equity (2)	626.112	520.948	105.164	20,2%
Income statement	30-09-2008	30-09-2007	Absolute	%
			variation	variation
5 Interest margin (including earnings on equity instruments)	198.578	182.380	16.198	8,9%
6 Profits on financial operations (net)	60.338	25.955	34.383	132,5%
7 Other income (net)	95.095	90.517	4.578	5,1%
8 Operating revenue	354.011	298.852	55.159	18,5%
9 Personnel costs	119.995	98.519	21.476	21,8%
10 Overheads	90.445	75.008	15.437	20,6%
11 Cash flow	143.571	125.325	18.246	14,6%
12 Depreciation in the period	22.207	19.710	2.497	12,7%
13 Provisions and impairment (net)	46.855	23.364	23.491	100,5%
14 Equity method	4.505	9.363	-4.858	-51,9%
15 Pre-tax profit	79.014	91.614	-12.600	-13,8%
16 Taxes (current and deferred)	23.196	18.589	4.607	24,8%
17 Minority interests	5.738	8.340	-2.602	-31,2%
18 Consolidated income for the period	50.080	64.685	-14.605	-22,6%
Other indicators	30-09-2008	30-09-2007	Absolute	%
			variation	variation
19 Insurance premiums (total)	338.823	375.449	-36.626	-9,8%
- Life	208.191	248.439	-40.248	-16,2%
- Non-life	130.632	127.010	3.622	2,9%
20 Assets under management (in million euros)	2.419	2.129	290	13,6%
21 Credit impaiment / Total lending	2,29%	2,08%	-	-
22 ROE	11,4%	19,5%	-	-
23 ROA	0,57%	0,95%	-	-
24 Pre-tax profit and minority interests / Average net assets	0,90%	1,34%	-	-
25 Operating revenue / Average net assets	4,03%	4,38%	-	-
26 Pre-tax profit and minority interests /Average equity (including minority interests)	13,9%	22,2%	-	-
27 Operating costs + Depreciation / Operating revenue (3)	64,4%	61,4%	-	-
28 Personnel costs / Operating revenue (3)	33,8%	32,6%	-	-

(1) Excluding debt securities classified as "loans and receivables"

(2) Less minority interests

(3) These ratios exclude non-financial and auxiliary activities. Operating revenues include profits on investment in associates excluded from consolidated accounts.

* ANNEX II *

INDIVIDUAL/CONSOLIDATED QUARTERLY REPORT (Unaudited)

(Form applicable to entities subject to accounting rules for the banking/leasing/factoring system)

Company: BANIF - SGPS, S.A.
	Reg.Off.: Rua de Joao Tavira, 30 9004 - 509 Funchal				511 029 730
Reference period:					01-01-2008
	1st Quarter	X 3rd Quarter	5th Quarter(1)	(000 euros)	30-09-2008

BalanceSheet Items	Individual			Consolidated
	30/09/08	30/09/07	Var. (%)	30/09/08	30/09/07	Var. (%)
(000 EUR)	AAS	AAS	AAS	IAS	IAS	IAS
NET ASSETS
Due from other banks	15.842	17.014	(6,9%)	621.243	679.443	(8,6%)
Loans and advances to customers	-	-	-	10.156.858	8.196.475	23,9%
Trading securities	1.766	1.272	38,8%	559.652	520.126	7,6%
Available-for-sale financial assets	488.006	435.097	12,2%	162.275	96.503	68,2%
Held-to-maturity investment securities	-	-	-	75.620	-	-
EQUITY AND EQUIVALENT
Share Capital	350.000	250.000	40,0%	350.000	250.000	40,0%
No. ordinary shares (5)	350.000.000	250.000.000	40,0%	350.000.000	250.000.000	40,0%
No. other shares	-	-	-	-	-	-
Treasury shares	-	-	-	-	-	-
No. of voting shares (voting rights impaired)	-	-	-	6.005	130.261	(95,4%)
No. non-voting shares	-	-	-		-	-
Subordinated loans	-	-	-	349.397	379.400	(7,9%)
Minority interests	-	-	-	197.732	122.348	61,6%
LIABILITIES
Deposits from other banks	38.655	69.747	(44,6%)	2.254.686	1.662.598	35,6%
Customer accounts and other loans	35.011	15.000	133,4%	6.508.263	4.945.901	31,6%
Debt securities in issue	123.693	72.236	71,2%	2.024.800	2.139.322	(5,4%)
TOTAL ASSETS (NET)	672.221	536.427	25,3%	12.741.968	10.182.064	25,1%
TOTAL EQUITY	458.682	365.896	25,4%	823.844	643.296	28,1%
TOTAL LIABILITIES	213.539	170.531	25,2%	11.918.124	9.538.768	24,9%

Income Statement Items	Individual		Consolidated
	30/09/08	30/09/07	Var. (%)	30/09/08	30/09/07	Var. (%)
(EUR)	AAS	AAS	AAS	IAS	IAS	IAS
Interest margin (2)	(6.475)	(2.470)	(162,1%)	195.968	179.302	9,3%
Fee and commission income (net)	(178)	(137)	29,9%	95.095	90.517	5,1%
Income on securities and financial operating profits (net)	1.856	9.607	(80,7%)	62.948	29.033	116,8%
Operating income	(4.797)	7.000	(168,5%)	354.011	298.852	18,5%
Personnel, admin. and other costs	1.870	690	171,0%	210.440	173.527	21,3%
Depreciation	13	31	(58,1%)	22.207	19.710	12,7%
Provision / Impairment	68	506	(86,6%)	46.855	23.364	100,5%
Income from companies recognized by equity method	-	-	-	4.505	9.363	(51,9%)
Pre-tax profits	(6.748)	5.773	(216,9%)	79.014	91.614	(13,8%)
Tax on income (3)	950	(1.483)	164,1%	(23.196)	(18.589)	24,8%
Minority interests	-	-	-	(5.738)	(8.340)	(31,2%)
Net profit for the quarter	(5.798)	4.290	(235,2%)	50.080	64.685	(22,6%)
Net profit for the quarter per share EUR (5)	-0,02	0,02	(196,5%)	0,14	0,26	(44,7%)
Net cash flow (4)	(5.717)	4.827	(218,4%)	119.142	107.759	10,6%

(1) Applicable in the first accounting period of companies which adopt a company year different from the calendar year (Article 65-A of the Companies Code)

(2) Interest margin = Interest and equivalent income - Interest and equivalent expense

(3) Estimate of tax on income and deferred taxes

(4) Net cash flow = Net profits + Depreciation + Provisions

NIC - International Accounting Standards

NCA - Adjusted Accounting Standards

(Summary ofthe company's operations so as to permit investors to form an opinion on its affairs over the quarter)

An account of the business affairs of Banif - SGPS, S.A., in the third quarter of 2008 is contained in item 1 of the Report preceding this Annex.

(Persons who take responsibility for the information, office held and respective signatures)

The Board of Directors

EXPLANATORY NOTES

* Save as otherwise indicated, the figures required should be expressed in thousands of euros, without decimals. * Negative amounts should be stated in brackets ( ).