Banco Espirito Santo présentation

9M11 Results Presentation(Unaudited Figures)

27th October 2011

19M11 Results Presentation

27 October 2011

The third quarter of 2011 was marked by the deepening of the Euro Zone debt crisis, with an increase in fears over Greece’s default, a more visible effect of contagion to Spain and Italy and the growing difficulties of European financial institutions to access the interbank money market and medium and long term debt issues. Reflecting high risk aversion levels, the deposits of monetary financial institutions with the ECB increased from Eur 66 billion to Eur 200 billion (reaching Eur 256 billion in October).

The period of July to September 2011 was also marked by the worsening of expectations about global economic growth, which, together with fears of contagion to the financial sector, was responsible for the poor performance of the main stock market indices. In this context, the Fed maintained the fed funds target rate close to 0% and announced new measures to contain long-term interest rates. In Europe, by contrast, the ECB lifted in July the key benchmark rate by 25 bps, to 1.5% (having in October announced a reinforcement of liquidity injections in the financial system). Demand for safe haven assets caused the yield on 10-year Bunds to fall from 3.025% to 1.887%.

In Portugal, the first assessment of Portugal’s adjustment program by the IMF/EU/ECB (carried out in August) was globally favourable, citing the “broad and ambitious” compliance of the program. This gave way to the disbursement of additional tranches of the financial assistance program. The early identification of some deviations from the 2011 fiscal target has allowed for the adoption of timely corrective measures. The commitment of the Government to the targets agreed in the MoU has been highlighted in this first assessment.

The Government presented the 2012 Budget to Parliament, maintaining the targets for the public deficit agreed with the IMF/EU/ECB. This deficit is expected to be cut from 5.9% to 4.5% of GDP, with GDP falling 2.8%. Should the 2011 and 2012 fiscal targets be met, we expect Portugal to avoid a Greek-style vicious circle and to return to growth in 2013-2014, with the economy showing sounder economic indicators, including an external deficit close to 2% of GDP and a declining public debt ratio. Exports and net external demand are growing (real annual growth in exports should reach close to 7% in 2011 and slightly above 4% in 2012) and should continue to show strong potential, as firms increasingly focus on external markets and, particularly, on fast growing markets in Africa, Latin America and Asia. Over the medium term, economic growth should be supported by the ongoing structural reforms, implemented in the context of the MoU.

Macroeconomic highlights


27 October 2011

150

160

170

180

190

200

210

220

230

240

250

Jan.2008

Jul.2008

Jan.2009

Jul.2009

Jan.2010

Jul.2010

Jan.2011

Jul.2011

An extremely challenging environment for Portuguese Banks

Since April 2010 Portuguese Banks have been facing a strong squeeze of liquidity, not only having no access to MLT debt markets but also assisting to a significant reduction of short term liquidity facilities (CD, CP, money market). At the end of September, BES closed a 3-year USD 300 million credit facility agreement with China Development Bank Corporation, a senior unsecured deal which is a relevant capital markets transaction in the Portuguese Market.

Despite having to cope with liquidity needs without markets, ie, having to use ECB facilities vis-à-vis the lack of funding alternatives, banks are required to reduce ECB exposure and, at the same time, to hold low levels of sovereign debt (even because it is now damaging for the capital base), while the sovereign debt is the only one not affected by ratings downgrades for eligibility criteria with the ECB.

Moreover, amidst a process of adjustment of the economy with significant impacts expected at asset quality levels, Portuguese banks are required to strengthen provisions, to deleverage the balance sheet while avoiding a credit crunch, and to reinforce capital ratios while continuing to finance the corporate sector.

On top of a tough operating environment, markets and rating agencies continue penalising Portuguese banks, on the back of liquidity concerns, capital concerns, macroeconomic concerns and an overall negative sentiment towards European banks.

In this context, Portuguese banks have been maintaining a resilient operating performance, deleveraging the balance sheets, strengthening capital ratios and reinforcing provision levels. Furthermore, Portuguese banks’ deposits continue to show a rising trend in 2011, with a 14% YoY growth as of August, which reflects Portuguese depositors confidence in the banking sector.

Portuguese Banks’ deposits Eur bn, August 2011


27 October 2011

A strict financial discipline has been the main focus of BES, implementing a wide set of measures focusing on deleveraging the balance sheet, reinforcing provisioning coverage and strengthening capital ratios, while maintaining a sound international profile and a strict cost control, key to sustain future profitability

Deleverage the Balance Sheet

Reinforce Risk Mgmt

Strengthen capital ratios

Early adoption of a deleverage plan since 2H10 has driven a significant decrease of the LTD ratio from 198% in Jun 10 to 146% in Sep 11

Strong focus on deposit growth (+ Eur 7.8bn since Jun 10), bolstered by BES franchise

Reduction of the net loan portfolio (- Eur 1.8 bn since Jun 10) focused on international credit has allowed to continue supporting Portuguese SME sector, namely exporting and innovative companies

On-balance sheet provisions have been significantly reinforced to Eur 2.1 bn (4.04% of gross loans) in Sep 11, in anticipation of an expected macro deterioration

Asset quality indicators consistently better that system average, even in periods of recession, and despite higher weight of corporate loans (73% of loan book)

Low European sovereign exposure, concentrated in Portuguese short term sovereign debt (total Eur 3.6bn Portugal, 4% of net assets, 84% maturing within 1Y. Total potential loss on European sovereign debt amounts to Eur 121mn, an impact of 13bps in core capital as of Sep 11.

Following the latest EU Summit, BES announced that according to BoP and applying EBA’smethodology, total capital needs for the new 9% EBA CTI is Eur 687mn. In October, BES convened an EGM to propose, among other items, the increase of BES’ share capital by new contributions in kind, up to Eur 790.7mn to boost core capital ratios. This transaction could generate a positive impact of up to 145 bp in core capital (which stands at 8.1% in Sep 11)


27 October 2011

146%

198% 171%165%

163%155%

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 (…) Target

Main KPI show management’s focus on deleverage plan and balance sheet strength. Resilient core operating performance backed by sustained international business and domestic cost control

0Greece

5Spain

3 600Total

0Italy

0Ireland

3 595Portugal

4.043.833.473.38

3.07

2.382.29

2007 2008 2009 2010 1Q11 2Q11 3Q11

Resilient core operating performance

Deleverage of the B/S on track Asset quality: strong provision coverage

Loans to Deposit Ratio

120%

B/S provisions as % of Gross Loans

242

197169

0.00

50.00

100.00

150.00

200.00

250.00

1Q11 2Q11 3Q11

Limited exposure to Sovereign debt

European Sovereign portfolio (Eur mn)

<3M33%

3M to 1Y

51%

> 1Y16%

* According to BoP Instruction 23/2011

*

(Core Net Operating Income: Commercial Bkg Income – Op. Costs; Eur mn)

+ 43%


27 October 2011

Table of contents

I. Focus on Balance Sheet: deleverage plan delivering. Funding and liquidity still affected

II. Conservative risk management: continued increase of provision reserve to anticipate

asset quality deterioration in the domestic portfolio

III. Solvency: Low sovereign exposure, concentrated in Portugal. Proposed Debt/Equity

transaction to reinforce core capital

IV. 9M 2011 P&L: Resilient core operating performance. Focus on international business

to sustain future profitability. Strict cost control measures producing results

V. Wrap upAppendix 1: Detailed financial dataAppendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil


27 October 2011

*

26.5 26.1

29.9 30.8 30.532.0

33.9

24.425.225.3 25.4

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

50.849.9 49.7 49.9

51.049.9

49.047.647.347.1

51.7

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Net Loan Portfolio Evolution(EUR bn; excludes securitised credit)

Total Deposits(EUR bn)

Loans to Deposits Ratio

155%163%

146%

188%192%195%188%186%

171%165%

198%

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

Targ

et

-1.8 bn+4.6 bn

+0.8 bn

LTD of 120% should be achieved by reducing the loan portfolio, namely by disposing of international credit portfolios (such as project finance), and simultaneously focusing on increasing core deposits.

In the absence of debt markets for 18 months, BES management has implemented a deleverage programme in 2H2010, acting on both assets and liabilities. LTD ratio continues a downward trend, having decreased to 146% from 198% in 1H2010

120%

+7.8 bn

* According to BoP Instruction 23/2011


27 October 2011

Gross Loan Portfolio Evolution since 2H10 (beginning of deleverage plan)

On the asset side, the sale of international loans coupled with the reduction of the Spanish loan book more than offset increasing loans in Angola. Consolidated portfolio decreased Eur 1.4bn since 2H10, with domestic loan book barely unchanged

Loan

Boo

kJu

n-10

Dom

estic

UK

& U

S

Spai

n

Ang

ola

Bra

zil

Oth

er

Loan

Boo

k3Q

11

-0.2

-1.8

-0.6

+1.1+0.2

-0.1

53.4

52.0

Dom.:41.7 (78%)

Int.:11.7 (22%)

Gross Loan Portfolios growth rates by country

(from Jun-10 to Sep-11 Deleverage plan)

Total: Eur -1.4 bn, o.w:Domestic: Eur -0.2bn

International: Eur -1.2bn

(EUR bn)

Dom.:41.5 (80%)

Int.:10.5 (20%)

0%

-26%

58%

47%

-15%

-10%

-30%

-57%

Other

Brazil

Angola

Spain

US

UK

International

Domestic

YtD

0%

-6%

-23%

-36%

-13%

+27%

+45%

-20%


27 October 2011

On the liability side, the focus has been on growing core deposits, which increased 13% YoY (Eur 3.9bn) or 30% since 2H10 (Eur 7.8 bn)

Total Deposits

(EUR bn)

Domestic deposits(EUR bn)

26.1

30.8 30.532.0

33.9

Jun-10 Dec-10 Mar-11 Jun-11 Set-11

20.023.3 23.0 24.6 26.4


6%

30%

International deposits

(EUR bn)

6.17.5 7.6 7.4 7.5


77% 76% 75% 77%

Weight in total deposits

23% 24% 25% 23%

Weight in total deposits

32%

23%

78%

10%

22%


27 October 2011

The credit sale programme as well as domestic Retail and Private Banking had a strong contribution to the deleverage program

-31pp

27pp

-50pp-41pp

-25pp

YoYevolution of Loans-to-Deposits3Q11

Total Group Retail*Private

Banking

Corporate and Institutional

Clients

Investment Banking and International Commercial

Banking

Loans-to-Deposits3Q11.

146% 116% 46% 209% 154%

Focus on deposits growth and reinforced credit selectivity

Focus on credit sales in non-core geographies

* Excludes securitized credit. Including these portfolios, Retail’s Loans-to-Deposits ratio is 152% (-50pp YoY)

Support to exporting and

innovative companies


27 October 2011

Domestically, Retail and Private Banking showed a remarkable ability to grow deposits, that more than compensated the impact of the current economic context in terms of the treasury levels of corporations

-11.4%

28.4%17.4%

52.0%

117.8%

3.0%

-6.6%

4.1%

-3.3%-4.2%

On-Balance Sheet Client FundsΔ YoY. %. 3Q11

Gross Loans to Clients*Δ YoY.%. 3Q11

PrivateBanking

Corporate and InstitutionalMass Market

Small BusinessesAffluent

* Includes securitized credit


27 October 2011

Total MLT debt maturing in 2011 was fully repaid. BES closed a 3-year USD 300mn credit facility agreement with China Development Bank (senior unsecured)

0.0

0.6

1.1

2.6

1Q11 2Q11 3Q11 4Q11

0.00.2

0.6

2.8

1Q12 2Q12 3Q12 4Q12

14%3Q11

26%2Q11 60%

1Q11

Medium and Long Term Debt maturing in 2011 Medium and Long Term Debt maturing in 2012

Already repaid

Medium and Long Term Debt maturity profile

(Eur bn)

0.0

3.6

2.1

3.3 3.5

2011 2012 2013 2014 2015

(EUR bn; Total Eur 4.3bn) (EUR bn; Total Eur 3.6bn)

Ow: Eur 0.5bn EMTN and Eur

0.4bn Sub. Ow: Eur 0.5bn EMTN

Ow: Eur 1. 5bn Senior Guar.

and Eur 1.2bn EMTN

Ow: Eur 0.4bn EMTN and Eur

0.2bn Sub (UTII).

Eur 0.2bn EMTN


27 October 2011

ECB

Use

Dec

10

9M11

MLT

Red

empt

ions

Loan

por

tfolio

redu

ctio

n

Dep

osits

Shor

t-ter

mfu

ndin

g

Oth

er

ECB

Use

Set

11

ECB liquidity facilities have been key to cope with short term liquidity needs. BES increased its exposure to ECB to Eur 9.3bn as of Sep-11. The buffer of repoablesecurities (ECB and other) continues to be increased

BES use of ECB liquidity facilities (net)

(EUR bn)

15 Mar

16.5

14.3

16.9

19.5

10.89.7

13.2

15.6

FY2010 1Q11 2Q11 3Q11

ECB Eligible Total

Total Repoable Securities

(EUR bn)

ECB: +4.8 bnTotal: +3.8 bn

3.9

4.3

-0.6

-3.1

2.9

9.31.9


27 October 2011

Table of contents








V. Wrap up

Appendix 1: Detailed financial data

Appendix 2: Macro fundamentals and forecasts: Portugal, Spain, Angola and Brazil


27 October 2011

258327

126

37

62

56

146

9M10 9M11

OtherSecuritiesAdditional Credit provisionsCredit

Total Provisions Credit Provisions

(Eur mn) (EUR mn)

126

0

100

200

300

400

500

600

700

1Q11 2Q11 3Q11 9M10 9M11

88%76%

An expected deterioration of macro conditions in 2011 and 2012 led to a continued effort to reinforce the provision reserve. Total provisions increased to Eur 660.7 in 9M11 (+88.3% YoY)

258

453

81

225

351

661

In order to adapt the risk structure to the Medium

Term Plan assumptions,

total provisions reached Eur

661mn (+88% YoY). Credit provisions totalled Eur

453mn (including an additional

credit provision charge of Eur

126mn in 1H11). Additionally,

Securities and Other provisions

were also reinforced in a total amount of

Eur 208mn

Securities & Other Provisions

(EUR mn)

0

50

100

150

200

250

300

1Q11 2Q11 3Q11 9M10 9M11

2.2x

148

142

2243

93

207

99


27 October 2011

8199

148

97

138104 96

80 95 84 94

12640

66

0

50

100

150

200

250

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

Quarterly Credit Provisions Cost of Risk

Eur 40 mnadditional charge

(Eur mn) (%)

Credit provisions continued to be increased in light of the expected deterioration of asset quality. The new austerity measures announced by the government reinforce the need of a prudent stance vis-à-vis 2012. Including additional LLC in 2Q11, accumulated cost of risk stands at 1.16% in 9M11


0.8

1.14

0.85 0.760.62 0.71 0.63 0.71 0.63

0.76

1.14

0.33

0.52

0.98

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11


1.47%, includingadditional LLC

1.28%, includingadditional LLC

1.74% includingadditional LLC


27 October 2011

Total provisions reserve is now Eur 2.1 bn, or 4.04% of the loan portfolio. Total credit at risk totals 6.2% of the loan portfolio, with a 65% coverage by provisions on BS

BES On-BS Provisions Reserve

1 9832 101

1 7901 777

1 552

1 148

990

2007 2008 2009 2010 1Q11 2Q11 3Q11

Overdue and Credit at Risk (*) ratios and coverage

(Eur mn) (%)

Provisions as % of Gross Loans

2.29% 2.38% 3.07% 3.38% 3.47%

2.1x

3.83%

Overdue loans

+ 90 days

4.04%

6.22%

2.85%2.60%

Overdue loans

+ 30 days

Credit at Risk

155%

Coverage

142% 65%

(*) According to Instruction 23/2011 of Bank of Portugal. Credit at risk includes: a) total value of credit with capital or interest past due by 90 days or more; b) other restructured credit, where the principal or interest payments were past due by more than 90 days and have been capitalized or refinanced without full coverage by collaterals or the interest fallen due have not been fully paid by the debtor and c) credits of an insolvent or bankrupt debtors.


27 October 2011

On top of a strong coverage, BES’s overdue loans ratios have been consistently below the Portuguese average

1. 9%2 . 1%

1. 9%

1. 5%1. 3 %

1. 2 %1. 3 %

1. 8%

2 . 1%2 . 4%

4. 8%

2 . 1% 2 . 2%2 . 0%

1. 7%

2 . 2 %

3 . 4%

2 . 9%2 . 6%

3 . 2%

2 . 4%2 . 3%

1. 8%

2 . 1%

4. 3%

3 . 8%3 . 9%

3 . 6%

2 . 6%

2 . 2% 2 . 3%

1. 9%1. 6%

3 . 2%

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Total Overdue Loans/Gross Loans BESTotal Overdue Loans/Gross Loans System

BES Overdue Loans Ratio* Evolution vs Portuguese System

Source: BES and BoP. Data for System as of Aug 2011* Overdue loans + 30 days

3.33%

0.85%

4.87%

5.57%

1.81%

9.15%Consumer

& Other

Mortgage

Corporate

System

BES

1Q11

2Q11

Overdue loans continue to increase, reflecting the

deterioration of macroeconomic conditions

3Q11


27 October 2011

Credit portfolio is mainly composed by Corporate loans. Despite its higher weight, there is no major concentration per sector

Credit Portfolio as of September 2011 (Eur 52.0 bn Gross Loans)

Excludes securitised credit

Corporate72.8%

(Eur 37.9 bn)

Consumer & Other4.9% (Eur 2.5bn)

Mortgage22.3%

(Eur 11.6 bn)

1 Represents a composite of other sectors of the economy none representing more than 2% per se.

Services

Con.& Pub Works

Real Estate

Retail

Other Man.

T&C

Other Services1

Fin. Inst.

15.7%

9.8%

13.5%

6.6%

6.7%

4.3%

3.6%

12.6%

Services

Const. & Public Works

Real Estate

Whol. & Retail

Other Manuf.

T&C

Fin. Inst.

Other Sectors1

(15.5%)

(9.9%)

(11.7%)

(7.0%)

(6.3%)

(4.2%)

(4.9%)

(12.7%)

(2Q11)

% of Total Credit Portfolio


27 October 2011

Credit Portfolio as of September 2011 (Eur 52.0 bn Gross Loans)

Excludes securitised credit

Domestic79.8%

(Eur 41.5 bn)

International20.2%

(Eur 10.5 bn)

6.9%

6.9%

4.0%

1.2%

0.9%

0.4%

Angola

Spain

UK

EUA

(Eur 3.6bn)

Brazil

Other

(Eur 3.6bn)

(Eur 2.1bn)

(Eur 0.6bn)

(Eur 0.5bn)

(Eur 0.2bn)

International loans accounts for 20.2% (Eur 10.5bn) of total credit portfolio. Main exposures are Angola, Spain and UK which, individually, do not represent more than 7% each


27 October 2011

Table of contents








V. Wrap up




27 October 2011

BES European sovereign exposure amounts to Eur 3.6 bn (4% of net assets) in Sep 11, concentrated in short term Portuguese public debt. No exposure to Greece or Ireland. Total potential loss on European sovereign debt amounts to Eur 121mn

3 6001 1692 431Total

000Greece

884

4

0

0

1 165

Bonds

51Spain

3 3202 436Total 1H11

00Italy

00Ireland

3 5952 430Portugal

TotalTreasury Bills

European Sovereign Exposure

<3M31%

3M to 1Y

53%

> 1Y16%

Maturity profile of the European Sovereign Exposure

(Eur mn) (%)

Breakdown of European Sovereign Exposure by portfolio

(Eur mn)

AFS95%

HTM0%

Trading5%

84% of BES’

sovereign exposure matures within 1

year


27 October 2011

Core capital at 8.1% in Sep 11. Proposed Debt / Equity transaction could add up to 145bps in core capital, considering Sep 11 RWA of Eur 66.7bn. The mark-to-market of total European sovereign debt would impact 13bps on core capital

8.4

8.8

9.2

8.18.27.97.9

9.0

Jun-10 Dec-10 Jun-11 Sep-11

Core Tier I

Notes: BIS II IRB corresponds to calculations based on IRB Foundation for credit risk and standardised approach for operational risk. Preliminary data as of Sep 11.

Solvency Ratios (%) Risk weighted assets and Capital

1,517

6,127

384

187

5,445

7,644

3,973

2,976

59,482

66,431

Jun 11

373359- Actuarial Dif.

ow deductions:

26484- AFS

5,3805,416… Core Tier I

6,0206,040… Tier I

2,2184,219… Trading book

3,9733,973… Oper. Risk

7,0387,798Total Capital

1,018

60,524

66,715

Sep 11

1,758

60,610

68,802

Dec 10

... Tier II and Other

… Banking book

RWA (BoP)

Eur bn


27 October 2011

Following the latest EU Summit, BES announced that according to BoP and applying EBA’s methodology, total capital needs for the new 9% EBA CTI is Eur 687mn. In October, BES convened an EGM to propose, among other items, the increase of BES’share capital by new contributions in kind, up to Eur 790.7mn

Targeted securities

1,040.1

409.4

158.1

152.7

50.0

4.9

265.0

OutstandingAmount

61% * Nominal value / Max (P5; Eur 1.8)BES FinanceXS0171467854VM BESF 3

-

BES Finance

BES Finance

BES Investimento

BES

BES

Issuer

--Total

Nominal value / Max (P5; Eur 1.8)PTESSMOOM0016VM BESI

74% * Nominal value / Max (P5; Eur 1.8)XS0147275829VM BESF 1

66% * Nominal value / Max (P5; Eur 1.8)XS0207754754VM BESF 2

Nominal value / Max (P5; Eur 1.8)

Nominal value / Max (P5; Eur 1.8)

Number of new shares

PTBER00M0030

PTBENBOM0021

ISIN

VM BES 2

VM BES 1

Short reference

P5 = Volume-weighted average price of BES on the 5 trading days prior to the date of launching the Public Offer

In order to continue to reinforce its capital ratios, BES will maintain itsdeleverage plan and will consider, if necessary, other options in capital markets


27 October 2011

Table of contents








V. Wrap up




27 October 2011

Resilient core operating performance backed by international business and strict cost control measures. Profitability hampered by conservative provision charges and international credit sales.

Core Operating Performance Core revenues (NII + Fees & Commissions)

(Eur mn)

460.9 484.8 526.6

0

100

200

300

400

500

600

700

800

1Q11 2Q11 3Q11

+14.3%

Operating Costs

(Eur mn)

292.3 287.7 284.2

0

50

100

150

200

250

300

350

400

450

500

1Q11 2Q11 3Q11

-2.8%168.6

197.1

242.4

0

50

100

150

200

250

300

1Q11 2Q11 3Q11

+43.7%

(Core Net Operating Income: Commercial Bkg Income – Op. Costs; Eur mn)


27 October 2011

653

211 209 202

0

100

200

300

400

500

600

700

9M10 9M11 1Q11 2Q11 3Q11

827981

201

0

50

100

150

200

250

300

9M10 9M11 1Q11 2Q11 3Q11

287.7

26.2

107.9

153.6

2Q11

864.3

78.8

313.5

472.0

9M11

-9.0%98.1107.5-3.2%323.8Admin.

QoQ3Q11

1.2%

4.0%

3.9%

YoY

853.9

75.8

454.3

9M10

-1.2%284.2292.3Total

3.9%159.6158.7Staff

26.1

1Q11

26.5 1.0%Dep.

Domestic operating costs

International operating costs

(Eur mn)

(EUR mn)

Operating costs under strict control, with cost cutting measures already producing results. Like-for-like costs decreased 4.8% YoY

Operating costs affected by the incorporation of domestic employees in Social Security and by

international expansion (namely the consolidation of Execution Noble). Excluding these effects, costs would

have reached Eur 812.9mn, decreasing 4.8%

Operating costs

(Eur mn)

854

292 288 284

9M10 9M11 1Q11 2Q11 3Q11

864

622

241

Includes Eur 10.1mn related to additional social contribution costs. Without these effect, domestic costs would have decreased 6.2% YoY

Includes Eur 41.3mn related to changes in consolidation perimeter. Without these

effect, international costs would have decreased 0.2% YoY

51813

-4.7%

-3%

20%

4%

1.2%

-1%


27 October 2011

Domestic activity reflects Portuguese adverse macro conditions and focus on balance sheet management, with a significant increase in provisioning coverage. International activity affected by loan sales in UK, but supported by the Strategic Triangle

50.1%-11.2%304.6343.00.9%303.5300.9Net operating Income ex-Mkts& Other

95.0%-21.2%130.9166.2-97.1%6.9239.2Net Income=

InternationalDomestic

7.4%

-28.6%

-14.3%

-8.7%

-13.3%

20.3%

-1.5%

-38.2%

0.5%

3.2%

-0.6%

YoY

94.1

37.4

262.4

60.2

322.6

241.9

564.5

18.0

546.5

149.6

396.9

9M11

87.6

52.3

306.1

65.9

372.0

201.0

573.0

29.0

544.0

144.9

399.1

9M10

n.a.

-25.7%

-96.0%

110.7%

16.5%

-4.7%

4.8%

37.6%

-2.9%

-2.5%

-3.3%

YoY

1.1

1.7

9.7

600.5

610.2

622.4

1,232.6

306.7

925.9

448.6

477.3

9M11

-2.8

2.4

238.8

284.9

523.7

652.9

1,176.6

222.9

953.7

460.2

493.5

9M10

-

-

=

-

=

-

=

+

=

+

+

n.a.Minority Interests

n.a.Taxes

96.5%Income Bef. Taxes and Minorities

9.1%Net Provisions

34.6%Net Operating Income

27.9%Operating Costs

31.4%Banking Income

5.5%Capital Markets Results & Other

37.1%Commercial Banking Income

25.0%Fees and Commissions

45.4%Net Interest Income

% of Total (Consolid.)

(Eur million)


27 October 2011

Net income from the Strategic Triangle (Africa, Brazil and Spain) reached Eur 95.4mn and already accounts for 73% of international business. Deleverage plan with a significant impact on UK and US

-21%9.512.0US

69%25%% of consolidated

-21%130.9166.2Total International

73%61%% of international

-62%19.049.7UK

2.8

101.7

9M10

Net Income Contribution

7.0

95.4

9M11

150%

-6%

YoY

France, Lux. & Other

Strategic Triangle(1)

International Net Income Breakdown – 9M11

(Eur mn)

UK: 19.0(49.7)

( ) 9M10

US: 9.5(12.0)

France, Luxembourg & Other: 7.0

(2.8)

(1) Includes Africa, Brazil and Spain

Strategic Triangle:

95.4(101.7)

Africa: 71.9 *(65.4)

Brazil: 18.6(26.0)

Spain: 4.9(10.3)

International Business(Eur mn)

(*) Includes Angola, C. Verde, Libya and Mozambique


27 October 2011

Investment Banking: Focusing on Advisory and Capital Markets with increased geographic diversification

• Portugal: #1 in the Brokerage market (11.4% market share) and #1 in

the M&A market, by both number and value of announced transactions

(Mergermarket/Bloomberg). Mandated Lead Arranger (MLA) on the

financing to Mares Lusos, S.A. for the acquisition of ETE Group.

• Spain: # 4 in the Madrid Stock Exchange with a market share of 7.2%

and #3 in the Iberian M&A market, by number of announced deals

(Bloomberg). Co-Bookrunner on the Banca Cívica’s IPO (Eur 599mn) and

Financial Adviser and MLA on the financing to Gusanitos I for a 3,5 MW

solar photovoltaic power generation facility in Córdoba.

• Brazil: Joint Global Coordinator and Bookrunner in the follow-on of EDP

- Energias do Brasil, (R$ 811mn); Joint Bookrunner in the debentures

issue by IESA (R$ 60 mn) and in the commercial paper issue by Unidas

(R$ 325mn). Financial adviser to Bascol Group on the sale of a 50% stake

in Bascol Brasil Incorporação Imobiliária to Espírito Santo Property Brasil.

• UK: Joint Bookrunner on the GBP 66mn rights Issue of Workspace

Group Plc.

Banking Income: Eur 182 mn (-7.5%)

NII31%

Fees & Commissions

59%

Capital Mkts10%

0

50

100

150

200

9M10 9M11

197 182

International

Domestic

Net Profit: Eur 10mn (-80%)

32%

68%

29%

71%

0

10

20

30

40

50

60

9M10 9M11

49

10

Domestic Market: Leadership of the Brokerage and M&A activities

International activity: continued business flow with emphasis in Brazil


27 October 2011

Table of contents








V. Wrap up




27 October 2011

Under an extremely challenging environment, BES has been deleveraging the balance sheet, strengthening capital ratios and reinforcing provision levels, while maintaining a resilient core operating performance backed by international business and strict cost control measures

Implementation of a balance sheet deleverage plan in 2H10 aiming to reduce the LTD ratio to 120%. Core deposits increased 30% since Jun 10 (+Eur 7.8bn), reflecting Portuguese depositors confidence. Net loan portfolio decreased Eur 1.8bn in the same period, leading the LTD ratio to fall by 52 p.p., from 198% to 146%.

Proposal of a Debt/Equity exchange transaction that could increase core capital up to 145bps (which reached 8.1% in Sep 11).

Low exposure to European sovereign debt (Eur 3.6bn, 4% of net assets), concentrated in Portugal, of which 84% matures within 1 year. No exposure to Greece, Ireland or Italy and immaterial exposure to Spain.

Strong provision reserve covering 4.04% of gross loans provides a cushion to expected asset quality deterioration in domestic business.

Resilient core operating performance backed by international business and strict cost control measures. International activity affected by loan sales in UK, but supported by the Strategic Triangle, which accounted for 73% of 9M11 international net income. Operating costs under strict control, with cost cutting measures already producing results: 9M11 like-for-like costs decreased 4.8% YoY.

Prudent and

conservative

management


27 October 2011

Table of contents








V. Wrap up




27 October 2011

23.0%242.4197.1168.6-5.5%608.1643.8Net Op. Income ex-Mkts & Other

95.1

16.9

7.6

-21.0

91.0

366.5

457.5

287.7

745.3

-7.2

15.7

244.7

484.8

213.3

271.5

2Q11

-66.0%

12.3%

n.a.

-28.5%

-50.1%

88.3%

4.1%

1.2%

2.7%

n.a.

n.a.

57.2%

-1.7%

-1.1%

-2.1%

YoY

405.4

84.8

-

54.7

544.9

350.8

895.7

853.9

1,749.6

-1.4

11.0

240.9

1,497.7

605.1

892.6

9M10

-7.67.622.9o.w. Special tax on banks

n.a.-23.0-38.6-68.8o.w. Sale of other assets

137.8

95.2

39.1

272.1

660.7

932.8

864.3

1,797.1

-54.1

378.8

1,472.4

598.2

874.2

9M11

60.9

39.1

29.9

129.8

103.1

233.0

292.3

525.3

-35.9

100.4

460.9

189.6

271.3

1Q11

n.a.

132.3%

n.a.

-43.8%

-47.9%

-47.1%

-1.2%

-29.4%

n.a.

-86.2%

8.6%

-8.5%

22.1%

QoQ

-18.2Net Income=

-33.9Other results+

-

-

=

-

=

-

=

+

=

+

+

39.2Minority Interests

30.2Taxes

51.1Income Bef. Taxes and Minorities

191.0Net Provisions

242.2Net Operating Income

284.2Operating Costs

526.4Banking Income

33.7Capital Markets Results

526.6Commercial Banking Income

195.2Fees and Commissions

331.4Net Interest Income

3Q11(EUR million)

Consolidated P&L: quarter performance hampered by provisions and credit sales


27 October 2011

Quarterly consolidated income statement

23.0%-10.5%242.4197.1168.5157.7270.9196.4176.3Net Op. Income ex-Mkts & Other

59.3%

38.6%

95.1

16.9

7.6

-79.4

50.7

-21.0

91.0

366.5

457.5

287.7

745.2

15.7

244.7

484.8

213.3

271.5

2Q11

n.m.

n.m.

n.m.

n.m.

n.m.

n.m.

-43.8%

-47.9%

-47.1%

-1.2%

-29.4%

n.m.

-86.2%

8.6%

-8.5%

22.1%

QoQ

n.m.7.67.60000… Special Tax

n.m.0.413.3-0.518.86.734.8… Income Tax

54.8%22.29.0-10.314.3-15.3-4.6… Deferred Taxes

54.0%

54.0%

-18.2

39.2

30.2

51.1

191.0

242.2

284.2

526.4

-33.9

33.7

526.6

195.2

331.4

3Q11

66.7%

48.2%

105.1

61.7

-10.8

155.9

182.8

338.7

315.5

654.2

52.9

128.1

473.2

201.8

271.4

4Q10

63.4%

55.6%

60.9

39.1

29.9

129.9

103.1

233.0

292.3

525.3

-35.9

100.4

460.9

189.6

271.3

1Q11

51.7%

47.8%

123.2

49.0

33.1

205.3

112.0

317.3

290.6

607.9

0.2

46.2

561.7

215.5

346.2

3Q10

60.0%60.4%Cost to Income ex-Markets

50.2%48.5%Cost to Income

n.m.163.1119.1= Net Income

14.1

-8.6

168.6

123.7

292.3

294.1

586.4

-1.9

97.8

490.5

197.8

292.7

2Q10

21.7

30.2

171.0

115.1

286.1

269.2

555.3

12.7

97.1

445.5

191.8

253.7

1Q10

-19.9%

-8.7%

-75.1%

70.5%

-23.7%

-2.2%

-13.4%

n.m.

-26.8%.

-6.3%

-9.4%

-4.3%

YoY

- Minorities

- Taxes

= Income Bef. Tax & Min.

+ Other Results

- Net Provisions

= Net Operating Income

- Operating Costs

= Banking Income

+ Capital Markets Results

= Commercial Bkg Income

+ Fees and Commissions

+ Net Interest Income

(EUR million)


27 October 2011

Quarterly domestic income statement

14.1%17.1%136.0119.247.833.8116.1105.279.4Net Op. Income ex-Mkts & Other

59.7%

61.0%

-65.8

2.4

18.0

-45.7

174.7

128.9

202.7

331.7

-7.1

338.8

150.6

188.2

3Q11

n.m.

n.m.

n.m.

n.m.

-47.9%

-65.3%

-3.0%

-42.8%

n.m.

3.2%

-8.1%

14.5%

QoQ

81.6%

65.8%

4.9

-0.2

14.2

18.8

90.7

109.6

211.3

320.9

61.8

259.0

134.2

124.8

1Q11

87.3%

51.5%

67.5

25.1

-18.4

74.1

145.5

219.8

233.7

453.5

186.0

267.4

149.8

117.7

4Q10

63.7%

36.0%

67.8

-1.1

-30.5

36.2

335.1

371.3

208.9

580.2

252.1

328.1

163.7

164.4

2Q11

65.3%

59.2%

53.2

0.4

6.7

60.2

90.7

150.9

218.8

369.7

34.8

334.9

163.1

171.8

3Q10



n.m.115.071.0= Net Income

-1.5

-20.5

93.1

101.4

194.4

227.4

421.9

89.2

332.7

147.8

184.9

2Q10

-1.8

16.3

85.5

92.8

178.3

206.7

385.0

98.9

286.1

149.3

136.8

1Q10

n.m.

n.m.

n.m.

92.5%

-14.4%

-7.4%

-10.2%

n.m.

1.2%

-7.7%

9.5%

YoY

- Minorities

- Taxes

= Income Bef. Taxes and Min.

- Net Provisions


- Operating Costs

= Banking Income

+ Capital Mkts & Other Results




(EUR million)


27 October 2011

Quarterly international income statement

36.8%-31.4%106.477.8120.9123.9155.091.196.9Net Op. Income ex-Mkts & Other

43.7%

42.1%

47.6

36.9

12.2

96.9

16.4

113.3

81.5

194.8

7.0

187.9

44.6

143.2

3Q11

75.1%

104.7%

28.8%

76.8%

-47.9%

31.4%

3.4%

18.0%

-17.1%

19.9%

-10.0%

33.7%

QoQ

40.1%

39.6%

56.0

39.3

15.7

111.0

12.4

123.4

81.0

204.4

2.5

201.9

55.3

146.6

1Q11

39.8%

40.9%

37.6

36.6

7.4

81.7

37.2

118.9

81.8

200.7

-5.0

205.8

52.0

153.7

4Q10

50.3%

47.8%

27.3

18.0

9.4

54.9

31.3

86.2

78.9

165.1

8.4

156.7

49.6

107.1

2Q11

42.3%

40.5%

48.0

15.6

12.0

75.4

22.3

97.8

66.7

164.5

6.7

157.8

50.0

107.8

2Q10


-32.0%70.148.1= Net Income


48.6

26.4

145.1

21.3

166.4

71.8

238.2

11.4

226.8

52.4

174.4

3Q10

23.5

13.9

85.5

22.3

107.8

62.5

170.3

10.9

159.4

42.5

116.9

1Q10

-24.1%

-54.0%

-33.4%

-23.2%

-32.1%

13.6%

-18.4%

-41.0%

-17.2%

-15.0%

32.9%

YoY

- Minorities

- Taxes

= Income Bef. Taxes & Min.

- Net Provisions


- Operating Costs

= Banking Income

+ Capital Mkts & Other Res.




(EUR million)


27 October 2011

Accumulated income statement: domestic, international and consolidated

58.7%57.0%44.3%36.9%67.2%68.5%Cost to Income ex-Markets

75.6%453.2258.1-14.2%53.562.3n.m.399.7195.8… credit

65.9%61.737.2-88.1%.-0.1-0.464.2%61.837.6… securities

n.m.145.855.570.6%6.84.0n.m.139.051.5… other

ConsolidatedInternationalDomestic

48.1%

137.8

134.3

272.1

660.7

932.8

864.3

1,797.1

324.7

1,472.4

598.2

874.2

9M11

-21.2%

-6.1%

-14.3%

-8.7%

-13.3%

20.3%

-1.5%

-38.2%

0.5%

3.2%

-0.6%

YoY

35.1%

166.2

140.0

306.2

65.9

372.1

201.0

573.1

29.0

544.1

144.9

399.1

9M10

-66.0%

-3.7%

-50.1%

88.3%

4.1%

1.2%

2.7%

28.9%

-1.7%

-1.2%

-2.1%

YoY

42.9%

130.9

131.6

262.4

60.2

322.6

241.9

564.5

18.0

546.5

149.6

396.9

9M11

n.m.

n.m.

-96.0%

n.m.

16.5%

-4.7%

4.8%

37.6%

-2.9%

-2.5%

-3.3%

YoY

48.8%50.5%55.5%Cost to Income

405.46.9239.3= Net Income

2.7

9.7

600.5

610.2

622.4

1,232.6

306.7

925.9

448.6

477.3

9M11

-0.7

238.6

285.0

523.6

652.9

1,176.5

222.9

953.6

460.2

493.4

9M10

139.5

544.9

350.8

895.7

853.9

1,749.6

251.9

1,497.7

605.1

892.6

9M10

- Taxes & Minorities


- Net Provisions


- Operating Costs

= Banking Income

+ Capital Markets & Other




(EUR million)


27 October 2011

Accumulated income statement: Strategic Triangle (Angola, Brazil and Spain)

57.3%

10.2

2.6

12.8

36.5

49.3

66.1

115.5

5.2

110.2

40.1

70.2

9M10

Spain

56.2%

4.9

0.0

4.9

44.6

49.5

63.6

113.1

7.6

105.6

37.5

68.1

9M11

-51.8%

n.m.

-61.7%

22.1%

0.3%

-3.8%

-2.0%

44.7%

-4.2%

-6.5%

-2.9%

YoY

Strategic TriangleBrazilAngola

21.8%

64.6

112.1

176.8

9.0

185.8

51.7

237.5

14.6

222.9

19.5

203.4

9M10

21.1%

70.7

123.2

193.9

17.2

211.1

56.5

267.6

13.0

254.6

18.2

236.3

9M11

9.4%

9.9%

9.7%

90.6%

13.6%

9.2%

12.7%

-11.0%

14.2%

-6.7%

16.2%

YoY

33.4%

94.2

138.9

233.1

65.0

298.0

149.3

447.3

20.0

427.5

84.6

342.7

9M11

-28.5%

-2.5%

-18.5%

-19.8%

-18.7%

7.9%

-8.8%

n.m.

-0.9%

1.4%

-2.5%

YoY

37.0%

26.0

16.1

42.1

3.9

46.0

27.0

73.1

5.2

67.9

28.5

39.3

9M10

-6.5%

1.1%

0.6%

31.6%

6.0%

3.1%

5.0%

-20.0%

-4.0%

-4.0%

9.6%

YoY

43.8%

18.6

15.7

34.3

3.2

37.4

29.2

66.6

-0.6

67.3

28.9

38.3

9M11

34.0%Cost to Income

100.8= Net Income

130.8

231.7

49.4

281.1

144.8

426.1

25.0

401.0

88.1

312.6

9M10

- Taxes & Min.


- Net Provisions

= Net Op. Income

- Operating Costs

= Banking Income

+ Markets & Other

= Com. Bkg Income

+ Fees and Com.


(EUR million)


27 October 2011

Angola: Quarterly income statement

653.6

3579.5

6,880.8

19.4%

29.0

50.3

79.3

7.4

86.7

20.8

107.5

9.4

98.0

5.8

92.3

3Q11

11.1%

14.8%

-27.4%

98.7%

96.4%

97.2%

44.9%

91.3%

26.2%

73.9%

n.m.

54.3%

-8.6%

61.2%

QoQ

556.1526.9485.7419.0369.0303.1Equity

3,029.4

6,210.1

19.5%

27.1

47.3

74.4

4.7

79.2

19.2

98.3

5.3

93.0

6.2

86.8

1Q11

3,221.2

5,992.8

26.7%

14.6

25.6

40.2

5.1

45.3

16.5

61.8

-1.8

63.6

6.3

57.3

2Q11

2,823.6

5,923.9

18.6%

26.3

46.6

72.9

14.2

87.1

20.0

107.1

8.8

98.3

6.0

92.3

4Q10

2,443.1

5,520.8

35.2%

10.8

18.6

29.5

3.0

32.4

17.6

50.0

3.9

46.1

7.5

38.6

2Q10 (EUR million)

2,553.9

5,211.6

15.7%

35.8

63.1

98.9

3.8

102.7

19.2

121.9

-0.5

122.4

6.3

116.1

3Q10

1,966.9

4,775.5

22.8%

18.0

30.4

48.4

2.3

50.7

14.9

65.6

11.2

54.4

5.8

48.7

1Q10

32.0%Total Assets

40.2%Total Credit (Gross)

23.3%Cost to Income

-19.9%= Commercial Bkg Income

-19.1%= Net Income

-20.3%

-19.9%

94.5%

-15.6%

8.8%

-11.8%

n.m.

-8.1%

-20.5%

YoY

- Taxes & Minority Interests


- Net Provisions


- Operating Costs

= Banking Income

+ Capital Mkts & Other




27 October 2011

Brazil: Quarterly income statement

2,502.1

49.7%

5.0

4.4

9.4

0.0

9.4

9.3

18.7

-1.8

20.5

6.9

13.6

3Q11

-7.7%

-37.6%

-22.1%

-31.1%

-

-38.3%

-10.0%

-26.9%

n.m.

-9.2%

-41.9%

27.4%

QoQ

2,755.7

42.7%

5.7

5.6

11.3

1.5

12.8

9.6

22.4

-1.8

24.2

10.1

14.1

1Q11

8.7%2,711.42,672.22,301.52,340.51,962.4Assets

40.4%

8.0

5.6

13.6

1.6

15.2

10.3

25.5

3.0

22.6

11.9

10.7

2Q11

55.8%

6.1

1.8

7.9

1.2

9.1

10.2

19.2

-3.2

22.4

8.5

14.0

4Q10

40.2%

7.3

6.0

13.3

-0.1

13.2

8.9

22.1

0.2

21.9

7.9

14.0

2Q10(EUR million)

28.0%

15.7

7.8

23.4

1.4

24.8

9.6

34.5

7.8

26.7

13.9

12.8

3Q10

51.6%

3.1

2.3

5.4

2.6

8.0

8.5

16.5

-2.8

19.3

6.8

12.5

1Q10

Cost to Income


-68.2%= Net Income

-43.3%

-59.9%

-

-62.2%

-3.6%

-45.8%

n.m.

-50.1%

6.0%

YoY



- Net Provisions


- Operating Costs

= Banking Income





27 October 2011

Spain: Quarterly income statement

4,874.2

161 bp

3,564.8

64.5%

-1.7

-1.0

-2.7

14.4

11.6

21.1

32.7

-0.1

32.8

12.3

20.5

3Q11

1.7%

-0.7%

n.m.

n.m.

n.m.

-15.2%

-32.3%

3.9%

-12.7%

n.m.

-6.1%

-2.5%

-8.1%

QoQ

5,502.6

142 bp

3,736.4

51.9%

5.8

1.6

7.4

13.3

20.7

22.3

43.0

5.1

37.9

12.5

25.4

1Q11

4,792.0

178 bp

3,690.5

54.1%

0.8

-0.6

0.2

16.9

17.2

20.3

37.5

2.5

34.9

12.7

22.3

2Q11

5,498.4

60 bp

4,093.7

64.7%

2.6

1.0

3.5

8.8

12.4

22.7

35.1

-0.5

35.6

11.1

24.5

4Q10

5,722.3

105 bp

4,197.7

55.0%

5.6

0.5

6.0

11.1

17.2

21.0

38.1

1.4

36.7

12.8

23.9

2Q10(EUR million)

5,527.0

103 bp

4,111.7

60.1%

2.1

1.8

3.9

10.7

14.6

22.0

36.7

2.2

34.5

12.8

21.7

3Q10

6,029.4

141 bp

4,156.1

56.9%

2.5

0.4

2.9

14.6

17.5

23.1

40.7

1.6

39.1

14.6

24.5

1Q10

Cost of Risk (bp)

-13.3%Credit (Gross)

Cost to Income


n.m.= Net Income

-11.8%

n.m.

n.m.

33.8%

-20.5%

-4.5%

-10.9%

n.m.

-3.2%

-5.8%

YoY

Assets



- Net Provisions


- Operating Costs

= Banking Income





27 October 2011

UK: Quarterly income statement

2,079

93.5%

11.5

-4.0

7.5

-6.2

1.3

18.7

20.0

-2.6

22.6

13.0

9.6

3Q11

-2.5%

n.m.

n.m.

n.m.

n.m.

-2.3%

6.7%

6.1%

n.m.

24.2%

53.0%

-1.0%

QoQ

2,349

76.2%

10.2

-0.2

10.0

-4.3

5.7

18.3

24.0

-7.2

31.1

18.4

12.8

1Q11

2,123

92.9%

-2.7

-3.6

-6.3

7.6

1.3

17.5

18.9

0.6

18.2

8.5

9.7

2Q11

2,699

84.9%

-2.5

-6.7

-9.1

11.5

2.3

13.1

15.4

-10.8

26.2

13.3

12.9

4Q10

2,987

14.0%

20.9

2.2

23.1

3.6

26.7

4.4

31.1

0.8

30.3

11.3

19.0

2Q10(EUR million)

2,814

16.5%

20.5

1.9

22.4

-0.2

22.2

4.4

26.7

-0.3

26.9

6.5

20.5

1Q10

2,980

22.0%

8.3

2.9

11.2

6.1

17.3

4.9

22.2

1.2

20.9

5.7

15.2

3Q10

-30.5%Credit (Gross)

Cost to Income

8.2%= Commercial Bkg Income

38.4%= Net Income

n.m.

-33.0%

n.m.

n.m.

n.m.

-9.7%

n.m.

n.m.

-36.7%

YoY



- Net Provisions


- Operating Costs

= Banking Income





27 October 2011

Quarterly Net Interest Income(N

IM in

bp;

Qua

rterly

Fig

ures

)

254

293

346

271

271

272

331

258

253

269

306

315

335

300

250

187155

156152

190161141

176 169167188193 171199

141

0

50

100

150

200

250

300

350

400

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

0

50

100

150

200

NII

NIM

454 455 507437397401380375423 406 395

3.923.553.553.32.983.08

3.583.38 3.253.02 3.03

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Credit NII (LHS, Eur mn) Credit Margin (RHS, %)

-146-129-136-110

-66-57

-52-41-39-36

-47

-1.78-1.64-1.78-1.45

-0.97-0.88-0.83-0.66-0.61-0.59-0.74

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

Deposits NII (LHS, Eur mn) Deposits Margin (RHS, %)

Credit Margin Deposit Margin

Quarterly Net Interest Income & NIM Euribor 3M (quarterly average)(%)

0.660.690.871.021.091.411.56

4.484.864.98

4.21

2.01

1.310.870.72

0

1

2

3

4

5

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

75

95

115

135

155

175

195


27 October 2011

Quarterly fees & commissions

(1) Includes trade finance and letters of credit(2) Includes Brokerage(3) Includes discretionary management

195.4

16.2

2.2

10.3

10.2

21.2

19.5

27.4

10.8

32.9

24.9

20.0

3Q11

-8.4%

-0.2%

12.0%

1.9%

2.1%

-15.3%

-14.0%

-25.7%

-50.8%

53.5%

-10.2%

2.0%

QoQ

189.6

16.8

1.9

11.7

9.7

23.7

29.6

25.6

15.0

12.3

23.8

19.4

1Q11

213.3

16.1

2.0

10.2

10.0

25.0

22.6

36.9

21.9

21.4

27.7

19.6

2Q11

201.8

17.8

2.1

12.9

10.8

26.1

14.8

28.4

15.6

15.4

35.3

22.4

4Q10

197.8

21.3

1.9

17.0

9.8

24.7

12.1

23.6

17.2

16.3

32.6

21.2

2Q10

191.8

20.6

2.2

13.0

8.9

25.2

15.6

18.1

13.9

27.6

27.1

19.6

1Q10

215.5

17.8

2.2

13.5

10.5

25.9

8.4

22.1

22.8

35.0

35.8

21.6

3Q10

-9.3%

-9.4%

1.6%

-23.6%

-3.5%

-18.2%

131.5%

24.1%

-52.7%

-5.8%

-30.4%

-7.8%

YoY

Trade Finance & Exp. related (1)

Corporate & Project Finance

Other

Bancassurance

Factoring

Guarantees

Total Fees & Commissions

Cards

Asset Management (3)

Securities related fees (2)

Commissions on Loans

Account Management Fees

(EUR million)


27 October 2011

Quarterly capital markets results and VAR

0.4%

22.2

-17.1

19.0

10.3

10.0

188.8

55.8

244.6

136.7

100.3

237.0

-12.2

14.3

5.5

7.6

2Q11

0.4%

21.83

-13.42

13.03

11.51

10.71

28.6

5.3

33.9

1.2

-131.5

-130.3

18.2

99.6

46.4

164.2

3Q11

0.6%

38.2

-19.1

32.9

9.4

15.0

99.8

0.6

100.4

4.3

45.6

49.9

4.3

8.4

37.8

50.5

1Q11

0.4%

22.4

-27.1

19.1

14.2

16.2

88.7

39.4

128.1

116.9

144.9

261.8

-8.0

-147.7

22.0

-133.7

4Q10

0.7%

38.6

-33.2

43.2

15.1

13.5

41.2

4.8

46.0

7.5

-19.6

-12.1

22.9

44.7

-9.5

58.1

3Q10

0.6%

34.5

-20.0

13.4

31.6

9.5

81.8

16.0

97.8

65.7

32.7

98.4

28.7

-32.3

3.0

-0.6

2Q10

0.8%

43.3

-15.5

35.1

18.7

4.9

80.7

16.4

97.1

3.2

45.2

48.4

16.0

18.3

14.4

48.7

1Q10

VAR – Value at Risk

Interest Rate

FX

Equity & Commodities

Diversification Effect

Global VAR

Capital Markets net of Provisions for securities

… Interest rate

… Credit

… FX & Other

Provisions for Securities

Capital market results

… Income from securities

Global VAR as % of Tier I

… Trading

Equity

Interest Rate, Credit & FX

(EUR million)


27 October 2011

64

36

3

24

-115

88

283525

5150545355

193526

51

84

13

46

8082

44

666873

196

3955

72

155

-14

16

48

124108

9798

46

128

100

245

3449

27

2

84

109

109

1Q99

2Q99

3Q99

4Q99

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

2Quarterly capital markets results

Quarterly history of capital markets results since 1999

(EUR mn)


27 October 2011

Quarterly equity accounted earnings and other results

15.7

-7.2

6.9

9.0

-0.2

8.8

2Q11

-35.9

-38.6

-40.0

1.2

2.9

4.1

1Q11

-33.9

-23.0

-24.5

3.1

-12.6

-9.5

3Q11

0.2

1.9

-16.5

11.4

5.3

8.4

3Q10

52.9

35.4

44.9

4.8

3.2

8.0

4Q10

-2.6-0.6… Results from sale other assets

1.73.8… Other

-14.14.1Other Results, ow

12.7

4.8

8.6

1Q10

-1.9

2.2

12.2

2Q10

Equity Accounted Earnings and Other Results (Quarterly)

Total Equity Accounted and Other Results

… BES Vida

Equity Accounted Earnings

(EUR million)

-57.5-33.1-40.018.4-26.5-10.04.1Other Results, ow

-33.1

2.7

12.9

6M11

-40.0

2.9

4.1

3M11

-68.8

-9.9

3.4

9M11

-26.5

12.3

29.2

9M10

-10.0

7.0

20.8

6M10

4.1

4.8

8.6

3M10

18.4

15.5

37.2

FY10

Equity Accounted Earnings and Other results (Accumulated)

… Results from sale of other assets

… BES Vida

Equity Accounted Earnings, ow

(EUR million)


27 October 2011

Quarterly other results: Reconciliation between IFRS P&L and Presentation

14.1

-7.6

111.4

9.3

127.2

2Q11

-1.4

-7.6

36.0

9.0

36.0

1Q11

-7.6--------… Special Tax on Banks

9.5

-29.1

6.2

-13.4

4Q10

-10.0

-7.6

12.6

-5.1

3Q10

-11.4

-8.1

8.2

-11.2

2Q10

-1.44.6-2.2-24.1-11.7-7.2… Other

-16.7

14.2

-4.8

4Q09

0.8

10.7

16.1

1Q10

13.3

9.1

-1.7

3Q09

10.2

5.3

3.8

2Q09

96.5

9.2

98.5

1Q09

Quarterly

192.1… Capital Markets

7.7… Fees

190.7Other Results (IFRS), ow

3Q11(EUR million)

12.7

-15.2

147.4

18.3

163.2

6M11

-1.4

-7.6

36.0

9.0

36.0

3M11

-22.9--------… Special Tax Banks

-7.3

-44.0

37.7

-13.6

FY10

-16.8

-14.9

31.5

-0.2

9M10

-6.8

-7.3

18.9

4.9

6M10

11.34.6-45.2-43.0-18.9-7.2… Other

0.8

10.7

16.1

3M10

103.3

37.8

95.8

FY09

120.0

23.6

100.6

9M09

106.7

14.5

102.3

6M09

96.5

9.2

98.5

3M09

Accumulated

339.5… Capital Markets

26.0… Fees

353.9Other Results (IFRS), ow

9M11(EUR million)


27 October 2011

864.3

78.8

313.5

72.8

53.7

345.4

471.9

9M11

292.3

26.1

107.5

24.6

18.1

116.0

158.7

3M11

580.0

52.3

215.4

48.9

35.5

227.9

312.3

6M11

1,169.4

100.1

441.0

71.9

90.7

465.8

628.4

12M10

563.3

50.5

213.9

33.7

40.9

224.3

298.9

6M10

269.2

23.7

100.6

16.5

20.3

108.1

144.9

3M10

42.7%51.0…Long term service benefits & Other

-18.6%66.0…Pension Benefits

853.9

75.8

323.8

337.3

454.3

9M10

1.2%

4.0%

-3.2%

2.4%

3.9%

YoY

…Remunerations

Admin costs

Total Operating Costs

Depreciation

Staff costs

Accumulated Operating Costs(EUR million)

Breakdown of operating costs

-1.0%

1.1%

-9.1%

-1.6%

4.6%

5.0%

3.9%

QoQ

284.2

26.5

98.1

23.9

18.2

117.5

159.6

3Q11

292.3

26.1

107.5

24.6

18.1

116.0

158.7

1Q11

287.7

26.2

107.9

24.3

17.4

111.9

153.6

2Q11

315.5

24.3

117.2

20.9

24.7

128.5

174.1

4Q10

294.1

26.8

113.3

17.2

20.6

116.2

154.0

2Q10

269.2

23.7

100.6

16.5

20.3

108.1

144.9

1Q10



290.6

25.3

109.9

113.0

155.4

3Q10

-2.2%

4.7%

-10.7%

4.0%

2.7%

YoY

…Remunerations

Admin costs

Total Operating Costs

Depreciation

Staff costs

Quarterly Operating Costs(EUR million)


27 October 2011

Quarterly operating costs: domestic and international

78.9

6.2

29.3

2.2

0.8

40.3

43.4

208.8

20.0

78.6

22.1

16.6

71.6

110.3

2Q11

81.0

5.8

28.9

2.2

0.9

43.2

46.3

211.3

20.3

78.6

22.4

17.2

72.8

112.4

1Q11

81.5

6.2

27.8

1.3

0.8

45.9

48.0

202.7

20.2

70.4

22.7

17.4

71.6

111.7

3Q11

3.4%

0%

-5.1%

-40.9%

0%

13.9%

10.6%

-3.0%

1%

-10.4%

2.7%

4.8%

0%

1.2%

QoQ

81.9

4.7

30.4

5.0

0.4

41.4

46.8

233.7

19.6

86.8

15.8

24.3

87.1

127.3

4Q10

71.8

6.4

25.1

1.9

1.1

37.3

40.3

218.8

18.9

84.8

15.5

24.1

75.6

115.1

3Q10

62.5

4.3

21.0

1.1

0.8

35.2

37.2

206.7

19.4

79.6

15.3

19.4

73.0

107.7

1Q10

-31.6%2.3… Long term service benefits & Other



23.1%34.0…Remunerations

19.1%37.3Staff Costs

International

66.7

5.3

24.1

1.0

227.4

21.6

89.2

82.2

116.7

2Q10

13.6%

-3.1%

10.8%

-27.3%

-7.4%

6.9%

-17.0%

-5.3%

-3.3%

YoY

…Remunerations

International Operating Costs

Admin costs

Depreciation

Admin costs

…Pension Benefits

Domestic Operating Costs

Depreciation

Staff costs

Domestic

(EUR million)


27 October 2011

Breakdown of accumulated operating costs: domestic and international

241.9

18.2

86.0

5.7

2.5

129.4

137.6

622.4

60.5

227.6

67.1

51.2

216.0

334.3

9M11

81.0

5.8

28.9

2.2

0.9

43.2

46.3

211.3

20.3

78.6

22.4

17.2

72.8

112.4

3M11

159.9

12.0

58.2

4.4

1.7

83.5

89.6

420.2

40.3

157.2

44.5

33.8

144.4

222.7

6M11

282.9

20.7

100.6

10.3

3.3

147.9

161.6

886.6

79.5

340.4

61.5

87.4

317.9

466.8

12M10

201.0

16.0

70.2

5.3

2.9

106.5

114.8

652.9

59.8

253.5

45.7

63.1

230.8

339.6

9M10

62.5

4.3

21.0

1.1

0.8

35.2

37.2

206.7

19.4

79.6

15.3

19.4

73.0

107.7

3M10

7.5%3.4… Long term service benefits & Other



21.5%69.3…Remunerations

19.9%74.6Staff Costs

International

129.2

9.6

45.0

1.8

434.1

41.0

168.9

155.1

224.4

6M10

20.3%

13.7%

22.5%

-13.8%

-4.7%

1.2%

-10.2%

-6.4%

-1.6%

YoY

…Remunerations

International Operating Costs

Admin costs

Depreciation

Admin costs

…Pension Benefits

Domestic Operating Costs

Depreciation

Staff costs

Domestic

(EUR million)


27 October 2011

Quarterly provisions

366.5

86.1

55.7

104bp

27.2

191bp

197.4

174bp

224.6

2Q11

191.0

37.9

5.3

59bp

15.4

128bp

132.4

114bp

147.8

3Q11

70.5%

60.9%

9.6%

-9bp

-20.8%

66bp

106.5%

51bp

76.8%

YoY

-47.9%

-56.0%

-90.5%

-45bp

-43.2%

-63bp

-32.9%

-60bp

-34.2%

QoQ

660.7

145.8

61.7

68bp

53.5

128bp

399.7

116bp

453.2

9M11

103.0

21.6

0.6

40bp

10.7

68bp

70.1

63bp

80.9

1Q11

350.8

55.5

37.2

73bp

62.3

63bp

195.8

65bp

258.1

9M10

182.8

49.7

39.4

110 bp

30.8

61 bp

62.9

71 bp

93.7

4Q10

112.0

23.6

4.8

68 bp

19.5

62 bp

64.1

63 bp

83.6

3Q10

115.1

18.7

16.4

74bp

19.9

59bp

60.1

62bp

80.0

1Q10

123.7

13.2

16.0

78 bp

22.9

69 bp

71.6

71 bp

94.5

2Q10

-5bpcost of risk (bp)

104.2%… Domestic

65bpcost of risk (bp)

-14.4%… International

65.9%…Securities

162.6%…Other

51bpcost of risk (bp)

88.3%

75.6%

YoY

…Credit

Total Provisions

(EUR million)

Note: Detailed credit provisions and asset quality data in following slides


27 October 2011

Quarterly balance sheet: assets

82,767

4,467

375

40

948

223

823

-

674

435

-

2,092

(2,101)

49,933

4,049

12,137

1,487

3,458

610

1,015

Sep 11

3.2%

-5.0%

-0.4%

-62.5%

-1.4%

0.7%

3.1%

5.8%

32.3%

-7.1%

5.9%

0.4%

17.7%

11.1%

39.8%

15.0%

13.5%

-6.4%

QoQ

80,746

3,886

292

99

961

230

780

-

605

296

-

2,349

( 1,790)

49,862

3,765

10,777

1,525

3,398

671

1,252

Mar 11

80,162

4,704

377

108

961

221

798

-

637

329

-

2,252

(1,983)

49,718

3,439

10,925

1,063

3,007

538

1,085

Jun 11

83,655

4,083

283

99

962

234

809

-

575

447

-

2,459

(1,777)

50,829

4,245

11,775

1,424

3,942

558

931

Dec 10

82,137

3,719

220

29

868

153

792

-

636

524

-

2,606

(1,725)

51,032

2,596

11,642

1,618

4,300

555

847

Sep 10

84,874

3,705

237

25

852

153

746

-

486

533

-

2,757

(1,682)

51,674

3,570

10,115

1,611

5,966

501

1,943

Jun 10

0.8%

20.1%

70.8%

37.8%

9.2%

45.7%

3.9%

6.1%

-16.9%

-19.7%

21.8%

-2.2%

56.0%

4.2%

-8.1%

-19.6%

9.9%

19.8%

YoY

84,098Total Assets

3,670Other assets

191Deferred income tax assets

18Current income tax assets

872Investments in associated companies

135Intangible assets

712Other tangible assets

-Investment property

440Non current assets held for sale

486Hedging derivatives

-Financial Assets with repurchase agreements

2,664Held to maturity investments

(1,609)(Provisions)

49,898Loans and advances to customers

6,635Loans and advances to banks

9,058Financial assets available for sale

2,653Financial assets at fair value through P&L

4,041Financial assets held for trading

509Deposits with banks

2,115Cash and deposits at central banks

Mar 10(Eur mn)


27 October 2011

Quarterly balance sheet: liabilities

75,863

1,950

1,158

-

94

24

200

5

225

18,649

33,854

6,170

-

2,113

11,422

Sep 11

3.7%

18.7%

-26.6%

18.0%

-4.6%

-3.2%

-

-2.2%

-6.3%

5.9%

3.5%

11.5%

18.1%

QoQ

73,386

1,603

2,327

-

110

27

212

5

217

-

20,742

30,545

7,199

-

1,875

8521

Mar 11

73,175

1,642

1,578

-

79

25

207

5

230

-

19,907

31,972

5,961

-

1,895

9,673

Jun 11

76,179

1,935

2,292

-

116

25

215

5

229

-

24,110

30,819

6,381

-

2,088

7,965

Dec 10

74,874

1,226

2,311

-

94

84

192

43

214

-

25,643

29,923

6,215

-

2,275

6,654

Sep 10

76,978

1,219

2,306

-

70

126

172

26

215

-

33,062

26,522

7,302

-

1,736

4,222

Mar 10

1.3%

59.0%

-49.9%

-0.7%

-71.9%

4.0%

-87.5%

5.1%

-27.3%

13.1%

-0.7%

-7.1%

71.7%

YoY

77,959Total Liabilities

1,197Other liabilities

2,306Other subordinated loans

-Instruments representing capital

92Deferred income tax liabilities

97Current income tax liabilities

180Provisions

35Non current liabilities held for sale

241Hedging derivatives

-Financial liabilities assoc. to transferred assets

29,451Debt securities

26,082Due to customers

7,112Deposits from banks

-Financial assets at fair value through P&L

2,169Financial liabilities held for trading

8,996Amounts owed to central banks

Jun 10(Eur mn)


27 October 2011

Quarterly balance sheet: equity

6,904

634

-

138

1,337

(467)

409

(1)

269

1,085

3,500

6,132

Sep 11

-1.2%

8.7%

-

1.1%

-

-10.2%

-

-

-

-

-1.9%

QoQ

7,361

562

-

61

1,317

(33)

600

(1)

269

1,085

3,500

6,738

Mar 11

6,987

583

-

156

1,322

(383)

456

(1)

269

1,085

3,500

6,274

Jun 11

7,476

491

-

511

979

( 10)

600

-

320

1,085

3,500

6,474

Dec 10

7,263

412

-

405

993

292

600

(25)

-

1,085

3,500

6,446

Sep 10

7,120

315

-

119

1,198

326

600

(25)

-

1,086

3,500

6,686

Mar 10

6,915

390

-

282

1,023

60

600

(25)

-

1,085

3,500

6,243

Jun 10

-4.9%

53.8%

-66.0%

34.6%

-

-31.8%

-

-

-

-

-4.9%

YoY

Total Equity

Minority interests

Anticipated dividends

Net Profit for the period / year

Other reserves and retained earnings

Fair value reserve

Preference shares

Treasury stock

Other capital instruments

Share premium

Share capital

Shareholders' Equity

(Eur mn)


27 October 2011

Quarterly loan portfolio (including securitised)

19%

10,534

44,431

54,965

9,718

28,159

37,877

334

2,228

2,562

483

14,044

14,527

17,089

Sep 11

0.7%

0.5%

0.5%

0.8%

1.4%

1.3%

-2.1%

-3.3%

-3.2%

1.9%

-0.8%

-0.7%

-1.1%

QoQ

20%

10,686

44,011

54,697

9,878

27,441

37,319

335

2,348

2,683

473

14,222

14,695

17,378

Mar 11

19%

10,460

44,229

54,689

9,645

27,764

37,409

341

2,305

2,646

474

14,160

14,634

17,280

Jun 11

20%

11,186

44,527

55,713

10,349

27,734

38,083

354

2,468

2,822

483

14,324

14,808

17,630

Dec 10

20%

11,403

44,427

55,929

10,577

27,701

38,278

329

2,428

2,757

496

14,398

14,894

17,651

Sep 10

20%

10,810

44,054

54,864

9,972

27,164

37,136

333

2,461

2,794

504

14,429

14,933

17,728

Mar 10

21%

11,673

44,925

56,597

10,833

27,990

38,823

343

2,451

2,794

497

14,484

14,981

17,775

Jun 10

-7.6%

-0.2%

-1.7%

-8.1%

1.7%

-1.0%

1.4%

-8.2%

-7.1%

-2.7%

-2.5%

-2.5%

-3.2%

YoY

… International

… Domestic

Loan portfolio

… International

Int as % total

… ow Other

… Domestic

Corporate Lending

… International

… Domestic

… International

… Domestic

… ow Mortgages

Loans to Individuals

(EUR million)

(1) Considering the outstanding amounts of securitised credit. Securitised credit only includes domestic loans.


27 October 2011

Quarterly gross loan portfolio (excluding securitised)

20%

10,534

41,499

52,033

9,717

28,159

37,876

334

2,228

2,562

483

11,112

11,595

14,157

Sep 11

0.7%

0.6%

0.6%

0.8%

1.4%

1.3%

-2.1%

-3.4%

-3.2%

1.9%

-0.5%

-0.4%

-0.9%

QoQ

21%

10,686

40,966

51,652

9,878

27,441

37,319

335

2,348

2,683

473

11,177

11,650

14,333

Mar 11

20%

10,460

41,241

51,701

9,645

27,764

37,409

341

2,305

2,646

474

11,172

11,646

14,292

Jun 11

21%

11,186

41,420

52,606

10,349

27,734

38,083

354

2,468

2,822

483

11,217

11,701

14,523

Dec 10

22%

11,403

41,354

52,757

10,577

27,701

38,279

329

2,428

2,757

496

11,225

11,722

14,479

Sep 10

21%

10,810

40,697

51,507

9,972

27,164

37,137

333

2,461

2,794

504

11,072

11,576

14,371

Mar 10

22%

11,673

41,682

53,355

10,833

27,990

38,823

343

2,451

2,794

497

11,242

11,739

14,532

Jun 10

-7.6%

0.4%

-1.4%

-8.1%

1.7%

-1.0%

1.4%

-8.2%

-7.1%

-2.7%

-1.0%

-1.1%

-2.2%

YoY

… International

… Domestic

Loan portfolio

… International

Int as % total

… ow Other

… Domestic

Corporate Lending

… International

… Domestic

… International

… Domestic

… ow Mortgages

Loans to Individuals

(EUR million)


27 October 2011

Quarterly asset quality indicators

183bp

104bp

191bp

174bp

3.83%

148.3%

3.00%

4.55%

0.82%

2.59%

163.0%

2.35%

Jun11

142bp

40bp

68bp

63bp

3.47%

145.4%

2.27%

4.46%

0.84%

2.38%

159.4%

2.17%

Mar11

165bp

59bp

128bp

114bp

4.04%

141.6%

3.33%

4.87%

0.85%

2.85%

155.0%

2.60%

Sep11

103 bp

68 bp

62 bp

63 bp

3.27%

157.8%

2.30%

4.14%

0.84%

2.07%

172.5%

1.90%

Sep 10

60 bp

110 bp

61 bp

71 bp

3.38%

160.6%

2.36%

4.08%

0.80%

2.10%

173.0%

1.95%

Dec 10

141 bp

74 bp

59 bp

62 bp

3.12%

160.7%

2.16%

3.59%

0.86%

1.94%

187.5%

1.67%

Mar 10

1.70%Overdue Loans >90 days / Gross Loans

184.9%Coverage of Overdue Loans > 90 days

2.09%Corporates (>30d)

3.64%Consumer (>30d)

0.82%Mortgage (>30d)

106 bpSpain

69 bp… Domestic

78 bp… International

71 bpQoQ Provision Charge

166.3%Coverage of Overdue Loans >30 days

3.15%Provisions for Credit / Total Gross Loans


Jun 10

(1) According to Bank of Portugal rules (Circular Letter N. 99/09/2003)


27 October 2011

1.60% 1.67% 1.70%1.90% 1.95%

2.17%2.35% 2.60%

192% 188%185%

173% 173%

159% 163%155%

4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

0.13%

1.03%

0.23%

0.74%

0.37%

1.23%

0.88%

1.29%

4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Overdue loans ratios and coverage

Total Overdue Loans Ratio (+30d) & Coverage (%)

Net New Entries as % of Performing Loans

(quarterly annualised)Quarterly Write Offs (Eur mn)

Overdue Loans +90 days Ratio & Coverage (%)

17.7 22.8 20.0 14.1 34.8 30.0

1.77% 1.94% 1.90% 2.07% 2.10%2.38% 2.85%2.59%

174% 161% 166% 158% 161%145% 148% 142%

4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

5.0 16.4


27 October 2011

Quarterly asset quality indicators: Domestic and International

287.8

1,694.8

1,982.6

220.2

996.0

1,216.2

236

1,101.1

1,337.1

10,459.7

41,240.9

51,700.5

Jun11

273.8

1,516.3

1,790.1

191.0

931.7

1,122.7

212.8

1018.7

1,231.5

10,685.8

40,966.3

51,652.1

Mar11

301.8

1,798.7

2,100.6

253.9

1,101.3

1,355.2

270

1,213.5

1,483.4

10,534.3

41,499.2

52,033.5

Sep11

256.0

1,469.2

1,725.3

167.9

833.1

1,000.1

192.5

900.9

1,093.4

11,402.7

41,354.3

52,757.0

Sep 10

1,494.71,421.91,367.1…Domestic

282.3259.6241.8… International

913837.4812.4…Domestic

193174.0189.0… International

1,777.0

176.7

850.4

1,027.1

1,106.7

11,186.5

41,419.6

52,606.1

Dec 10

41,682.340,697.3…Domestic

11,672.810,809.8… International

764.6719.0…Domestic

144.7139.0… International

1,608.9

858.0

1,001.3

51,509.2

Mar 10

53,355.1Gross Loans

1,011.4Total Overdue Loans (> 30 days)

1,681.5Total Credit Provisions (BS)

909.3Overdue Loans > 90 days

Jun 10(EUR million)


27 October 2011

Quarterly asset quality indicators: Domestic and International

121.9%

153.9%

148.3%

2.26%

2.67%

2.59%

130.7%

170.2%

163.0%

2.11%

2.41%

2.35%

Jun 11

128.6%

148.8%

145.4%

1.99%

2.49%

2.38%

143.3%

162.7%

159.4%

1.79%

2.27%

2.17%

Mar 11

146.0%

163.7%

160.6%

1.73%

2.21%

2.10%

159.5%

175.8%

173.0%

1.58%

2.05%

1.95%

Dec 10

133.0%

163.1%

157.8%

1.69%

2.18%

2.07%

152.5%

176.4%

172.5%

1.47%

2.01%

1.90%

Sep 10

148.2%170.4%168.3%…Domestic

111.8%149.2%127.9%… International

163.3%186.0%190.1%…Domestic

118.9%179.4%174.0%… International

141.6%

2.56%

2.92%

2.85%

155.0%

2.41%

2.65%

2.60%

Sep 11

1.83%1.77%…Domestic

1.24%1.29%… International

2.01%2.00%…Domestic

1.49%1.75%… International

160.7%

1.94%

187.5%

1.67%

Mar 10


184.9%Coverage of Overdue Loans > 90 days

166.3%Coverage of Overdue Loans >30 days


Jun 10

(1) According to Bank of Portugal rules (Circular Letter N. 99/09/2003)


27 October 2011

Quarterly and accumulated credit provision charge & net new entries

5.0

105bp

88bp

331bp

71bp

130bp

118bp

29.7

37.9

267.5

305.4

183bp

104bp

191bp

174bp

16.4

27.2

197.4

224.6

2Q11

30.0

123bp

123bp

142bp

40bp

68bp

63bp

13.3

10.7

70.1

80.9

142bp

40bp

68bp

63bp

13.3

10.7

70.1

80.9

1Q11

16.4

113bp

129bp

167bp

68bp

128bp

116bp

44.0

53.5

399.7

453.2

161bp

59bp

128bp

114bp

14.3

15.4

132.4

147.8

3Q11

14.1

66 bp

74 bp

118 bp

73 bp

63 bp

65 bp

36.3

62.3

195.8

258.1

103 bp

68 bp

62 bp

63 bp

10.6

19.5

64.1

83.6

3Q10

20.0

61 bp

23 bp

123 bp

73 bp

63 bp

65 bp

25.7

42.8

131.7

174.5

106 bp

78 bp

69 bp

71 bp

11.1

22.9

71.6

94.5

2Q10

59 bp103 bpNet new entries as % Performing Loans (accum.)

28.8

103 bp

141 bp

74 bp

59 bp

62 bp

14.6

19.9

60.1

80.0

141 bp

74 bp

59 bp

62 bp

14.6

19.9

60.1

80.0

1Q10

37 bpNet new entries as % Performing Loans (quarter)

258.7… Domestic

93.1… International

42.5ow Spain

62 bp… Domestic


104 bpow Spain

61 bp… Domestic


60 bpow Spain

6.2ow Spain

62.9… Domestic

30.8… International

34.8

67 bp

351.8

71 bp

93.7

4Q10

Quarterly Write Offs (Eur mn)

As % Loan Portfolio (bp)

P&L Credit Provisions Accumulated

As % Loan Portfolio (bp)

P&L Credit Provisions Quarter

(EUR million; % annualised)


27 October 2011

Quarterly customer funds

24%

13,430

42,057

55,487

14,788

40,699

5,273

1,573

25,124

8,730

33,854

Sep 11

-2.5%

-0.7%

-1.1%

-10.5%

2.7%

-11.9%

-4.7%

6.9%

3.1%

5.9%

QoQ

25%

14,281

41,732

56,013

17,715

38,298

5,747

2,006

22,401

8,145

30,545

Mar 11

25%

13,781

42,351

56,132

16,522

39,610

5,988

1,650

23,506

8,466

31,972

Jun 11

23%

12,841

43,147

55,988

17,094

38,894

6,326

1,749

22,143

8,676

30,819

Dec 10

28%

15,472

40,375

55,847

18,006

37,841

5,924

5,834

18,108

7,974

26,082

Jun 10

23%31%% total

18,865

41,728

60,594

18,985

41,609

6,460

8,626

19,469

7,053

26,522

Mar 10

12,965

43,969

56,934

17,763

39,171

5,596

3,653

21,994

7,929

29,923

Sep 10

10.1%… Sight

14.2%… Term

13.1%Deposits

-56.9%Certificates of Deposits

3.6%

-4.3%

-2.5%

-16.7%

3.9%

-5.8%

YoY

Total

… International

… Domestic

Off-BS Funds

On-BS Customer Funds

Debt Securities placed with Clients

(EUR million)


27 October 2011

Quarterly off-BS customer funds

3,895

12,627

16,522

804

2,349

3,153

4,315

239

2,448

2,687

80

1,249

1,329

2,772

2,267

5,038

Jun 11

-9.4%

-10.8%

-10.5%

-20.6%

-20.2%

-30.3%

-12.1%

-6.5%

-4.8%

-4.9%

9.3%

-3.2%

-2.4%

-7.0%

-9.5%

-8.1%

QoQ

3,873

13,842

17,715

806

2,638

3,444

4,805

134

2,539

2,673

81

1,275

1,356

2,852

2,585

5,437

Mar 11

3,528

11,260

14,788

639

1,874

2,513

3,794

223

2,332

2,555

88

1,209

1,297

2,578

2,051

4,629

Sep 11

2,700

14,394

17,094

430

2,801

3,231

5,374

133

2,522

2,655

84

1,291

1,375

2,053

2,406

4,459

Dec 10

2,666

15,340

18,006

450

3,053

3,503

5,716

153

2,486

2,639

86

1,353

1,439

1,977

2,732

4,709

Jun 10

2,838

16,147

18,985

488

3,437

3,925

5,846

138

2,569

2,707

77

1,251

1,328

2,135

3,044

5,179

Mar 10

2,611

15,152

17,763

436

2,930

3,366

5,705

135

2,508

2,643

79

1,350

1,429

1,961

2,659

4,620

Sep 10

-10.5%… Domestic

11.3%… International

35.1%

-25.7%

-16.7%

46.5%

-36.0%

-25.3%

-33.5%

65.4%

-7.0%

-3.3%

-9.3%

31.5%

-22.9%

0.2%

YoY

… Domestic

Total Off-BS Funds

… International

… Domestic

… International

Pension Funds

Other (*)

Bancassurance (Domestic)

… International

… Domestic

Real Estate Funds

… International

… Domestic

Mutual Funds

(EUR million)

(*) Other includes off-BS structured products, discretionary management and venture capital


27 October 2011

Available for Sale Portfolio – main equity holdings potential gains & losses. Potential losses on equity holdings are deducted to Core Tier I

-161.7

5.2

-146.8

-20.1

0.0

2Q11

112.6

6.3

-28.7

0.0

135.0

1Q11

120.3

7.3

-7.3

-49.9

170.2

4Q10

-224.8

6.2

-200.9

-30.1

0.0

3Q11

383.4

6.5

141.2

-55.8

291.5

3Q10

324.5

7.1

51.4

-18.9

284.9

1Q10

162.9

6.0

46.5

-74.7

185.1

2Q10

977.7Total

Bradesco

0.25%

11.70%*

1.98%

Stake (%)

2.5BMCE

777.7PT

197.5EDP

Acquis.

Value(EUR million)

Potential Gains and Losses

(*) BES reduced the position in PT to 10.74% in October 2011


27 October 2011

Quarterly solvency ratios

11. 5%

9.2%

8.2%

13%

775

1,517

6,127

5,445

7,577

3,973

2,976

59,482

66,431

Jun 11

(IRB)

11.4%

8.8%

7.9%

15%

920

1,805

6,033

5,395

7,838

3,973

4,389

60,214

68,576

Mar 11

(IRB)

11.3%

8.8%

7.9%

15%

920

1,758

6,040

5,416

7,798

3,973

4,219

60,610

68,802

Dec 10

(IRB)

11.0%

8.3%

7.9%

11%

600

1,807

5,589

5,303

7,393

3,668

3,900

59,642

67,210

Sep 10

(IRB)

10.6%

9.0%

8.1%

12%

729

1,018

6,020

5,380

7,038

3,973

2,218

60,524

66,715

Sep 11

(IRB)

10.6%

8.1%

7.9%

11%

600

1,699

5,405

5,276

7,104

3,668

4,303

59,092

67,063

Mar 10

(IRB)

11.2%

8.4%

7.9%

11%

600

1,857

5,668

5,300

7,516

3,668

4,408

59,115

67,191

Jun 10

(IRB)

As % Tier I

…Banking Book

…Trading Book

…Oper. Risk

Core Tier I

Tier I (%)

Total Capital

Tier I

Tier II and Other

Core Tier I (%)

Total (%)

Hybrid Capital

RWA (BoP)

(EUR million)

Notes: BIS II IRB corresponds to calculations based on IRB Foundation for credit risk and standardised approach for operational risk. Preliminary data as of Sep 2011.


27 October 2011

Table of contents








V. Wrap up




27 October 2011

Following several rating downgrades, Portugal requested financial aid on April 6th. The MoU signed between the new Portuguese government and IMF / EC / ECB implies several adjustments for the economy and for the banking sector

6 Apr

5 Jul

MoU signed between Portugal and IMF / EC and ECB3 May

Portuguese General Elections took place. A coalition between Social Democrats and Popular party obtained a right-wing majority in the Parliament

5 Jun

17 Jun New government announced

30 JunPortuguese Government announced new austerity measures, including a new social one-off tax on income

Moody’s downgraded Portugal to Ba2, below investment grade

ECB suspended minimum credit rating threshold for Portuguese debt

EBA released Stress Tests results. All Portuguese banks passed

8 Jul

15 Jul

4th Growth & Stability Programme rejected by the Parliament23 Mar

Mar - Apr Potugal faced several rating downgrades

Portugal announced the financial aid request

Jul-Aug

MoU: targets for the Portuguese banking sector

Ratings and recent downgrades

Target

Loans to Deposit Ratio 120% Dez 2014

Core Tier I Ratio 9% Dez 2011

Core Tier I Ratio 10% Dez 2012

Stable Funding Ratio 100% Dez 2014

Dec. 10 Sep. 11 Notches

Portugal A- BBB- -3

BES A- BBB- -3

Portugal A1 Ba2 -7

BES A2 Ba1 -5

Portugal A(L) BBB(H) -1

BES A(L) BBB(H) -1

Portugal A+ BBB- -5

BES - - -

European summit of July seemed to calm down markets. However, in August fears regarding contagion effects spread and the European debt crisis worsened


27 October 2011

Provision of EUR 78 billion in financing for the Portuguese economy between 2011 and 2013.

Budget deficit to be reduced from 9.8% of GDP in 2010 (EUR 16.7 billion) to 5.9% in 2011 (EUR 10.1 billion), 4.5% in 2012 (EUR 7.6 billion) and 3% in 2013 (EUR 5.2 billion).

Positive: Special focus on growth enhancing measures and competitiveness; extension of the budget consolidation period.

Negative: Expected retreat in real GDP in 2011 and 2012.

Risks: Implementation, Greece contagion, negative external environment.

Social Security Reform

Financial Sector Stability

Liquidity support, with the increase in Government guarantees to Banks’bond issues to a total of EUR 35 billion.

Periodic targets for leverage ratios.

Core Tier 1 ratio of 9% by end-2011 and of 10% by end-2012. Public solvency support facility increased to EUR 12 billion.

Structural Reforms – Public Sector

Acceleration of the privatization program (EDP, REN and TAP to be fully privatized by end-2011). Updated privatization program to be presented by 1Q 2012.

State-Owned Enterprise sector to be streamlined. Lower spending and higher fees in National Health System. Review of the PPP program.

Structural Reforms – Economy

Labor Market: Lower value and duration of unemployment benefits. Reduction in severance payments, with gradual alignment with average EU practices. Higher flexibility in dismissals and working time arrangements. Promotion of the rental market. Reform of the judicial system and higher competition in energy, transports and telecoms.

Fiscal Consolidation

Lower Spending: Up to 10% cuts in public sector wages (Budget 2011) and in pensions above EUR 1500; Cuts in health care spending, unemployment insurance, operating costs, capital expenditure, etc.

Higher Revenues: Increases in corporate and personal income taxes, VAT, property taxes and excise taxes.

IMF/EC/ECB Stabilisation Program is on the way


27 October 2011

-15000

-13000

-11000

-9000

-7000

-5000

-3000

-1000

Jan Feb Mar Apr May Jun Jul Aug Set Oct Nov Dec

2010

2011

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal consolidation is going in the right direction, but there is still a lot to do

State Budget Balance on a Cash Basis (EUR million)

General Government Deficit on a National Accounts Basis (% GDP)1

Deficit for the year ending in each quarter

2Q 20118.8%

September 2011– 30 % y-o-y

Inclusion of some public companies and PPP projects in the Public Administration perimeter, and the one off accounting Government assistance to two minor banks resulted in upward revision of the 2010 deficit, to 9.8% of GDP.

The State deficit on a cash basis fell 30% y-o-y in September. On a National Accounts basis (the relevant criteria for the 5.9% of GDP 2011 target), the General Government deficit1 reached 8.3% of GDP in 1H 2011 and 8.8% of GDP in the year ending in 2Q 2011, in this case down from a peak of 10.5% in 2Q 2010.

Target for 4Q 2011: 5.9%

(1) Includes the deficit for the State, Autonomous Funds, Social Security and Local/Regional Government. In contrast with the cash basis criteria, revenues and spending in the National Accounts criteria are accounted for when they are earned and incurred, and not necessarily when a payment is made or received.

OE2011 target


27 October 2011

Deviations related

to the budget

execution

Total deviation

before corrective measures

2% of GDPor

aroundEUR 3.4bn

Wages

Intermediate consumptions

Concessions and sales

Interests

EUR 300 mn

EUR 560 mn

EUR 250 mn

EUR 200 mn

Dividends EUR 220 mn

Deviations related to one-off operations

Expenditure

side

0.8% of GDPor

aroundEUR 1.3 bn

0.7% of GDPor

aroundEUR 1.3 bn

Fees and other revenues (from Justice) EUR 500 mn

Social Security contributions EUR 80 mn

BPN privatization EUR 350 mn

Consolidation of two SOE’s debt (from Madeira) EUR 570 mn

Other operations EUR 350 mn

Revenue side

0.5% of GDPor

aroundEUR 0.8bn

Early identification of some deviations from the 2011 fiscal target…

Estimated deviations from the 2011 fiscal target (5.9% of GDP ) on a National Accounts basis.

Sources: MF, ES Research – NCPAMoU.


27 October 2011

… has allowed for the timely adoption of further consolidation measures

Total corrective measures

2% of GDPor

aroundEUR3.4bn

One-time surcharge in the personalincome tax

Partial transfer of banks’ pensionfunds

Anticipation of the VAT increase ingas and electricity

Concessions

0.5% ofGDP

1.6% ofGDP

0.1% ofGDP

-0.2% ofGDP

Specific corrective measures

on the revenue

side

Sources: IMF, ES Research –NCPAMoU.

Additional fiscal consolidation measures to cover the estimated deviations from the 2011 fiscal target, on a National Accounts basis.


27 October 2011

The implementation of the MoU measures is on track

Sources: MF,FMI, BCE, CE, ES Research – NCPAMoU.

Assessment of the MoU execution – Measures to be implemented by August 2011.

Measures not executed or with no decision by September 2011, by

subject.Number Implementation

Implemented or decided No decision or no implementation

Competitiveness(19 measures)

Public financial management and

contingent liabilities(17 measures)

Previous actions

Previous actions

JuneJune

55

1212JulyJuly 99

AugustAugust 33

11

5

3

6

SeptemberSeptember 5959 2336

1

3

Renegotiated


27 October 2011

First IMF review with a globally favourable assessment…

The first quarterly review of Portugal’s performance under the economic and financial assistance program took place between August 1st and August 12th. According to the IMF, the European Commission and the ECB, the assessment is globally positive. The second review is projected to take place in November.

First review of the economic and financial assistance programme

+• Economic growth and inflation in line with the assistance program forecasts;• Strong commitment to the target for the budget deficit of 5.9% of GDP in end-2011, namely through the adoption

of measures aimed at correcting the fiscal slippages occurred in the first half of the year;• Bank capital is improving and the deleveraging process is on track;• Strengthening of government guarantees’ mechanisms for bank bond issuance and of the capital position of the

financial system;• Progress in enhanced bank regulation and supervision;• All special rights of the State in private companies have been abolished;• Labour market reform;

• Progress in the convergence between open-ended and fixed-term contracts in what concerns labour protection rights;

• Preparation of a draft law regulating the functioning of the employer-financed dismissal fund;• Preparation of a fiscal devaluation, and commitment to further steps in the 2012 Budget.

June July August September October November December

1st Assessment

2nd Assessment

-Negative remarks

Reviews of the Economic and Financial Assistance Program

• Deviation from fiscal target;• Recourse to one-off revenue measures, with low expenditure cuts;• Not all measures related to SOEs have been attended.

Positive remarks


27 October 2011

… leading to the disbursement of another tranche of financial assistance

IMF, EFSM and EFSF Disbursements within the Economic Adjustment Program for Portugal, 2011(EUR billion and percentages)

Sources: IMF, EC, EFSF, Bank of Portugal, ES Research –NCPAMoU. (1) Notincluding administrative costs.

Tranches already received

Tranche Loan Date Entity Maturity Value CouponRate

Est. InterestRate1

(NºYears)

(EUR billion) (%) (%)

1ª 1º 25/May IMF 7.5 6.3 Variable 3.25

1ª 1º 01/Jun EFSM 10 1.75 5.65 5.692º 04/Jun EFSM 5 4.75 4.90 4.96

1ª 1ª 23/Jun EFSF 10 4.6 3.375 5.812ª 30/Jun EFSF 5 2.5 2.75. 5.03

2ª 1º 14/Sep IMF 7.5f 4.0 Variable 3.25

2ª 1º 21/Sep EFSM 10 5.0 n.d. n.d.2º 29/Sep EFSM 15 2.0 n.d. n.d.

Tranches to receive by end-2011

Exp. Date Entity Est. ValueEst.

InterestRate

(EUR billion) (%)

15/Dec

IMF 2.7 3.25

EFSM5.0

5.5

EFSF 3.5


27 October 2011

Public refinancing needs 2011-2013 (EUR million).*

Public refinancing needs in 2012-2013 close to EUR 34 billion

Sources: Ministry of Finance, Bloomberg. * Not including state-owned enterprises.

10163 9738

0

2000

4000

6000

8000

10000

12000

14000

Nov. 2011 Mai. 2012 Nov. 2012 Mai. 2013 Nov. 2013

EUR

Milli

on

OTs PrincipalOTs Interest

BTs PrincipalOTs PrincipalOTs Interest

BTs Principal

2011: 5 8382012: 205062013:13 899


27 October 2011

The Government presented the 2012 Budget to Parliament, maintaining the targets for the public deficit agreed with the IMF/EU/ECB…

Budget 2012: Macroeconomic Environment Fiscal Consolidation

The deficit is expected to be cut from 5.9% to 4.5% of GDP. However, because of the deviations in the budget execution identified in 1H 2011, the 2011 target will be met through one-off revenues, which means that the underlying 2011 deficit (and the actual starting point for the 2012 deficit) will be higher than 5.9% (around 2 p.p. higher, or 7.9% of GDP). The need for a stronger deficit reduction effort next year has resulted in the adoption of new, tough, austerity measures in the 2012 Budget. Overall, measures on the revenue side will represent 1.7% of GDP, while expenditure cuts will reach 4.4% of GDP, or 72% of the effort. Naturally, this strongly restrictive nature of fiscal policy will have a negative short-term impact on economic activity, deepening the recession that was already expected.

The Government expects GDP to fall 2.8% in 2012, with a significant retreat in all components of domestic demand. Exports are seen decelerating, following a deterioration in the external environment (particularly in Europe). But, with imports also contracting as a result of lower domestic demand, the contribution of net external demand to growth should remain supported. The unemployment rate should increase to 13.4% of the labour force. Although these macroeconomic assumptions should be seen as credible, we see downside risks toGDP growth in 2012, mainly related to the possibility of a worse than expected external environment (leading to lower than expected exports growth), as well as to the possibility of a slightly stronger decline in private domestic demand. Our own forecast now points to a real fall in GDP of around 3% in 2012, after a 2% fall in 2011.

Real growth in % 2011 2012 GDP -1.9 -2.8 Private Consumption -3.5 -4.8 Public Consumption -5.2 -6.2 Investment (GFCF) -10.6 -9.5 Exports 6.7 4.8 Imports -4.5 -4.3 Unemployment rate (%) 12.5 13.4 Inflation rate (%) 3.5 3.1 GDP deflator (%) 1.0 1.7

2011 2012

% GDP EUR

Million % GDPTotal Expenditure 49.3 79557 47.0 of which:

Current Primary Expenditure 41.1 65545 38.7

Interest Payments 4.3 8824 5.2 Capital Spending 4.0 5188 3.1 Total Revenues 43.4 72000 42.5 of which: Taxes and Social

Contributions 35.9 61481 36.4

Budget Balance -5.9 -7557 -4.5 Primary Balance -1.6 1267 0.7

Public Debt* 100.3 - 105.8

Budget 2012: Main Indicators

Source: Ministry of Finance, Budget 2012. * Excluding any support to bank recapitalisation.


27 October 2011

… with very tough new measures, mainly (but not only) on the spending side.

Source: Ministry of Finance, Budget 2012.

‐4.4

‐1.6 ‐1.8

‐0.5 ‐0.5

1.7 1.40.4

‐0.2

0.1

‐5‐4‐3‐2‐10123

Expend

iture

Wage bill

Social transfers

Consum

ption &

Subsidies

Capital expenditure

Revenu

e

Indirect Taxes

Direct Taxes

Social Con

tributions

Non

‐Tax Revenue

Breakdown of fiscal savings, 2012 Budget (% of GDP)


27 October 2011

… with very tough new measures, mainly (but not only) on the spending side.

On the spending side

• A reduction in public sector pay, in the amount of EUR 2.7 billion (or 1.6% of GDP). This will be achieved through (i) a freeze in wages (with the 5% average cut implemented in 2011 still in place), (ii) a further cut in public sector employment in the Central Government (-2%, at least, or close to 10000 workers) and, above all, (iii) the suspension (“for the duration of the financial adjustment programme”) of the holiday and Christmas bonuses (basically equivalent to 2 months wages) for public sector workers with wages above EUR 1000. Between EUR 485 and EUR 1000, the average reduction will amount to 1 month’s wage.

• Cuts in social transfers. Pecuniary social payments will be reduced in the amount of EUR 2.1 billion (or 1.2% of GDP), mainly through the suspension of the holiday and Christmas bonuses in pension payments in the general pension system. Social payments in kind will be cut by EUR 1 billion (or 0.6% of GDP), mainly through reductions in health related spending.

• Cuts in intermediate consumption (EUR 690 million, 0.4% of GDP)and in subsidies (EUR 88 million, 0.1% of GDP).

• Cuts in public investment of public institutes, State Owned Enterprises (SOEs) and Local and Regional Government (EUR 923 million, 0.5% of GDP).

Source: Ministry of Finance, Budget 2012.

• A change in the VAT rate structure – with the VAT rate for several goods and services increasing from 6% to 23% (eg. electricity) and from 13% to 23% (eg. several food and beverage products, restaurant services, etc.). An increase in property taxes (lower exemptions, higher rates, revaluations). An increase in specific consumption taxes (eg. road tax) and the creation of a new electricity tax. The overall increase in indirect taxes should lead to additional revenues in the amount of EUR 2.4 billion (1.4% of GDP), mainly related to the changes in the VAT.

• Benefits and deductions should be strongly limited or cut, both in personal and corporate income taxes (eg. households with taxable incomes above EUR 66045 will not be able to deduct any spending on health, education, housing, etc. Below these levels, deductions will see the respective limits strongly reduced).

• Households with taxable incomes above EUR 153300 will pay a special tax of 2.5%, on top of the maximum marginal rate of 46.5%. The tax on capital gains will increase from 20% to 21.5%.

• Corporate profits above EUR 1.5 million will be subject to a surtax of 3%, on top of the regular 25%+1.5% tax rate. Profits above EUR 10 million will be subject to a 5% surtax. The lower 12.5% corporate tax rate will be eliminated.

• Overall, the increases in direct taxes will lead to additional revenues of EUR 683 million (0.4% of GDP). This takes into account the loss of revenue associated with the expected fall in labour and pension income.

On the revenue side


27 October 2011

Public debt expected to peak in 2013.

* Assumptions: Nominal GDP growth: 2013, 0%; 2014, 2%; 2015-2020, 3.5%. Interest spending (% GDP): 2013, 5%; 2014-2020, 4.5%. Primary balance (% GDP): 2013, 2.1%; 2014, 3.3%; 2015, 4.5%; 2016-2020, 3%.

Sources: Ministry of Finance (Budget 2012), ES Research.

Privatisations are expected to generate revenues of close to EUR 5 billion in 2011 and 2012, of which EUR 4.6 billion should be allocated to public debt redemptions (EUR 600 million in 2011, EUR 4 billion in 2012). The pipeline of privatisations includes mainly companies in the energy and transport sectors: EDP, REN, GALP, TAP, ANA, CP Carga and, outside these sectors, CTT (postal services). The privatisations of Águas de Portugal (the water company) and RTP (television), which were previously part of this pipeline, appear to have been postponed and should not take place in 2012.

In this context, the Budget sees public debt rising from 100.3% to 105.8% of GDP in 2012. In a scenario of banking sector recapitalization with the support of public funds, the Budget assumes public debt ratios of 101.9% in 2011 and 110.5% in 2012. With a 0.7% of GDP surplus, the primary balance is already assumed to contribute to a reduction in the debt ratio in 2012, but this is still insufficient to counterbalance the effects of higher interest payments and negative nominal GDP growth.

The Government’s medium term fiscal strategy assumes primary surpluses of 2.1% of GDP in 2013, 3.3% in 2014 and 4.5% in 2015.Assuming very conservative scenarios for nominal growth and interest payments, this would mean that the stock of public debt as a percentage of GDP would start to decline in 2014, peaking in 2013 at around 108% (or at around 113%, in a scenario of public support to bank recapitalization).

60

70

80

90

100

110

120

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

A scenario for public debt (% of GDP).*


27 October 2011

The June 2011 General Election resulted in a change in Government. The new Government is supported by a coalition between two centre-right parties, PSD and CDS-PP. Together, these two parties hold a comfortable majority in Parliament. The IMF/EU/ECB stabilisation program is being implemented in an environment of political stability.

It should be highlighted that the three parties that publicly supported the IMF/EU/ECB stabilisation program (PSD, PS and CDS-PP) received close to 80% of the votes.

The Budget will be discussed in Parliament in the beginning of November, with a first general vote expected for November 4th. The different Parliamentary commissions will then hold discussions on the specific sectoral issues of the Budget, which could give way to minor changes in the document. The final vote in Parliament will take place on November 29th. There is no doubt that the Budget will be approved.

The Stabilisation Program is being implemented by a Government supported by an absolute majority in Parliament


27 October 2011Sources: INE, Bank of Portugal.

GDP growth in 2Q 2011 better than expected GDP and components (%, q-o-q).

GDP posted 0% q-o-q growth in 2Q 2011 (-0.9% y-o-y), up from a 0.6% retreat in 1Q (-0.6% y-o-y), a better result than expected. While domestic demand continues its downward adjustment (also leading to a retreat in imports), exports posted yet another strong reading (8.4% y-o-y in real terms), therefore continuing to support GDP growth. This is particularly important, as better than expected growth improves the chances of a successful fiscal consolidation.

Real exports growth (%, y-o-y). GDP and components (%, y-o-y).

Year Quarter Private Cons

Public Cons Inv Exp Imp GDP

2007 4Q 0.8 -0.1 3.5 0.7 1.2 1.0

2008

1Q 0.0 -0.2 -2.1 1.8 0.4 0.02Q -0.2 0.1 1.2 -1.2 -0.1 -0.23Q 1.1 0.5 -1.7 -0.5 1.8 -0.54Q -0.9 0.9 -3.7 -8.8 -6.7 -1.3

2009

1Q -2.1 2.7 -12.1 -9.8 -11.4 -1.92Q 0.3 -0.7 0.6 3.6 1.2 0.73Q 1.4 1.2 4.6 6.1 9.2 0.54Q 0.7 -0.3 -4.8 -0.2 -0.7 -0.4

2010

1Q 0.4 0.3 -3.2 -0.3 -3.2 0.92Q 0.5 3.1 -0.5 3.9 4.5 0.43Q 0.4 -5.1 -0.4 5.0 0.8 0.34Q -0.2 4.0 -1.2 -0.9 1.8 -0.5

2011 1Q -2.9 -5.0 -4.3 0.2 -7.6 -0.62Q -0.7 1.8 -7.1 4.0 -0.2 0.0

Year Quarter Private Cons

Public Cons Inv Exp Imp GDP

2007 4Q 3.0 0.6 7.0 5.5 7.4 2.4

2008

1Q 2.1 0.1 2.5 5.0 7.0 0.92Q 1.3 -0.1 2.7 2.7 4.0 0.73Q 1.8 0.2 0.8 0.8 3.4 0.34Q 0.1 1.2 -6.2 -8.8 -4.7 -2.0

2009

1Q -2.0 4.1 -15.7 -19.2 -15.9 -3.92Q -1.6 3.3 -16.2 -15.3 -14.8 -3.03Q -1.2 4.1 -10.9 -9.7 -8.6 -2.04Q 0.4 2.8 -12.0 -1.2 -2.8 -1.1

2010

1Q 2.9 0.4 -3.1 9.2 6.2 1.72Q 3.1 4.3 -4.1 9.6 9.6 1.43Q 2.1 -2.2 -8.7 8.5 1.2 1.24Q 1.1 2.1 -5.2 7.8 3.7 1.1

2011 1Q -2.2 -3.3 -6.2 8.4 -0.9 -0.52Q -3.4 -4.5 -12.5 8.4 -5.4 -0.9


27 October 2011

2000 2002 2004 2006 2008 2010

Per

cent

-5

-4

-3

-2

-1

0

1

2

3

4

5

Bal

ance

-60

-50

-40

-30

-20

-10

0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

2006 2007 2007 2008 2008 2009 2009 2010 2010 2011

%

Total

-4.4

Food products

Non Food products

Total excl. fuel

-3.6

-0.5

-7.9

2000 2002 2004 2006 2008 2010

-70-65-60-55-50-45-40-35-30-25-20-15-10

3

4

5

6

7

8

9

10

11

12

13

Retail sales (% y-o-y)

Sources: INE, Bank of Portugal, European Commission.

Lower private consumption is expected for 2011, mainly as a result of restrictive fiscal policy measures (eg. lower wages, higher taxes and social contributions) and a fall in confidence levels. Domestic demand should also be constrained by tighter financing conditions.

Loans to households are showing a decelerating trend, reflecting the ongoing deleverage in the economy. Non-performing loans have remained contained as a proportion of total loans.

Loans to households (% y-o-y)

Households’ savings rate (% disposable income) and 12-month savings’ intentions (net balances)

Households’ savings rate remains supported, and loans to households are showing a decelerating trend, reflecting the ongoing deleverage in the economy

Private consumption coincident indicator (y-o-y) and consumer confidence indicator (net balances).

2Q 2011

September2011

September2011

September 2011

August 2011

Per

cent


27 October 2011

-5

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

-0.4-40

-30

-20

-10

0

10

20

30

40

50

Nov. 2006

Abr. 2007

Set. 2007

Fev. 2008

Jul. 2008

Dez. 2008

Mai. 2009

Out. 2009

Mar. 2010

Ago. 2010

Jan. 2011

Jun. 2011

%

21%

Sources: Reuters EcoWin Pro, Bank of Portugal, European Commission, INE.

Exports(nominal % y-o-y, 3-month MA)

New manufacturing orders, external market (%, y-o-y, 6-month MA)

Stronger external demand has continued to support business activity. In August 2011, merchandise exports were up by 13.2% YoY and services exports were up by 8.2% YoY (nominal growth, 3 month MA). New external orders to the manufacturing sector increased close to 21% YoY in August (6 month MA).

Loans to non-financial corporations are showing low growth, reflecting lower demand for business investment and tighter financing conditions.

Loans to non-financialcorporations (%, y-o-y)

External demand remains strong, partially compensating the ongoing decline in domestic demand

August2011

August2011

2006 2007 2008 2009 2010 2011

-25

-20

-15

-10

-5

0

5

10

15

20

25


27 October 2011

Euro Area 64.5

EU-27 (excl. Euro Area)

10.5

Africa9.9

Other4.6

Asia3.4

Americas 7.1

Portugal with stronger growth in exports to the Euro Area in 2011, while also expanding its relevant market to fast growing emerging markets

Portuguese Exports to selected countries and regions

(growth rate, %, August 2010 / August 2011)

Portuguese Exports breakdown

(August 2011, weight, %)

5.7

6.3

11.4

16.5

19.6

20.3

24.4

35.8

46.0

46.5

6.0

8.3

16.6

16.6

17.3

21.0

22.7

29.8

0 10 20 30 40 50 60

UKUSA

SpainAngola

ItalyFrance

GermanyBrazil

MozambiqueChina

Middle EastAmericasPALOP *

WorldEuro Area

OPEC Africa

Asia

(1) o.w.: PALOP*: 6.3%

*African Countries of Official Portuguese Language(Angola, Cape Verde, Mozambique, Guinea-Bissau and Sao Tome and Principe)

(1)


27 October 2011

Portuguese exports profile has been changing, with an increase in the weight of high value added goods and services

1996 2010

Services

Goods with hightechnological components

(from 44% to 52%)

Traditional goods (from 56% to 48%)

Goods 68%

32%

76%

24% Services

Goods

Goods with high technological components: machinery and equipment, transport material, optical products, chemical products, plastic products.Traditional goods: textiles, food products, shoes, cork.

Sources: INE, Eurostat, ES Research.

Portuguese Exports Profile (1996-2010)


27 October 2011

Strong transport and logistic potential. Portuguese ports can play an important role in the trade flows between America, Africa, Asia and Europe

(…)

Potential routes to the Portuguese ports

Main maritime trade routes from South America and Western Africa are experiencing very strong growth.

Portuguese ports are becoming privileged gateways into the European market given the signs of congestion at the major seaports of Europe.

Container cargo, Portuguese Ports, 2009-2010 (annual change)

22% 19% 11% 39% Share in total


27 October 2011

180

190

200

210

220

230

240

250

Jan-08 Jun-08 Nov-08 Abr-09 Set-09 Fev-10 Jul-10 Dez-10 Mai-11150

155

160

165

170

175

180

185

190

Jan-08Mai-08Set-08Jan-09Mai-09Set-09Jan-10Mai-10Set-10Jan-11Mai-11150

160

170

180

190

200

210

220

230

240

250

Jan. 2008 Jul. 2008 Jan. 2009 Jul. 2009 Jan. 2010 Jul. 2010 Jan. 2011 Jul. 2011

Sources: Reuters EcoWin Pro, Bank of Portugal, European Commission, INE; Central Bank of Greece.

Liquidity provision by the ECB

Portuguese Banks’ deposits Greek Banks’ deposits

• The increase in Portuguese banks’ demand for central bank liquidity has been a direct result of the downgrade in sovereignratings. It has not been the result of any intrinsic fragilities of the banking system.

• Without access to wholesale funding market for a year, Portuguese banks have been pursuing an aggressive deleverage process. Households deposits reached a historical high in June, reflecting the ongoing confidence in the banking sector.

• Portuguese banks deposits continue to show a rising trend in 2011, in contrast with deposits in Greek and Irish banks.

Irish Banks’ deposits

Portuguese banks’ fundamentals remain solid, as they had no exposure to toxic assets, are not suffering any effects of a real estate bubble and non-performing loans are contained, in spite of the recent increase

€ bn, July 2011 € bn, August 2011

-8.0% YoY -7.0%

YoY

€ bn, August 2011 +13.7% YoY

020406080

100120140160180200

2007 2008 2009 2010 2011

EUR

Billio

n

Portugal(45.6; Sep. 2011)

Spain(69.3; Sep. 2011)

Greece(93.1; Aug. 2011)

Ireland(100.4; Sep. 2011)

Italy(87.8; Aug. 2011)

France(69.8; Aug. 2011)


27 October 2011

10

15

20

25

30

35

40


80

90

100

110

120

130


Source: Bank of Portugal

Households’ deposits continue to show a rising trend. External financial assistance to the Portuguese Government should contribute to an improvement in liquidity

Households’ deposits – the most important component of Banks’ deposits – have maintained a steady rising trend, as a result of (i) higher financial savings efforts on the part of households; (ii) a re-intermediation of savings and (iii) sustained confidence in the Portuguese banking sector. External financial assistance should allow for a recovery in Public Administration’s deposits.

Non-Financial Corporations’ depositsHouseholds’ deposits

€ bn, August 2011

€ bn, August 2011

+7.4% YoY


27 October 2011

0

10

20

30

40

50

60

Germany Greece Spain Italy Netherlands Portugal

Q1 Q2 Q3 Q4

%

Households’ Mortgage Debt Service by Income Quartile(% of Disposable Income)

Household Financial Indebtedness(% of Disposable Income)

After reaching a peak of 129% of disposable income in 2009 (or 95% of GDP), aggregate household indebtedness started a correction trend in 2010, reflecting the beginning of a deleverage process that is expected to proceed in the future. In 2010, aggregate household indebtedness represented 127% of disposable income (and 93.8% of GDP). The increase in household indebtedness over the last decade has mainly reflected an increase in the number of households with access to mortgage loans, and not any significant increase in individual situations of heavy debt burdens. In average, mortgage debt service ratiosremain contained across all income quartiles. Vulnerability to interest changes is higher among lower income households.

Source: Bank of Portugal.

Household indebtedness mainly related to mortgages

0

1

2

3

4

5

6

7

8

9

0

20

40

60

80

100

120

140

160

1995 199619971998 19992000200120022003 200420052006 2007200820092010

Housing indebtedness (left scale)Consumption indebtebdness (left scale)Interest payments (right scale)

% %

127


27 October 2011

10

43 46

103

‐5

15

35

55

75

95

115

Portugal Euro Area Ireland Spain

No bubble in house prices. Between 1998 and 2010, Portugal real estate prices have shown very little real growth, in clear contrast with other Euro Area economies

The Portuguese housing market faced the recent global financial crisis in a very different cyclical position from those in economies such as Ireland or Spain. House price growth has been moderate over the last years, essentially reflecting macroeconomic developments and fundamentals. In this context, Portuguese banks haven’t been facing the hangover of a bubble burst in house prices. The lack of evidence of overvaluation mitigates any potential downside expectations in prices.

Sources: ECB, Bloomberg, ES Research.

(1) Accumulated nominal house price growth minus accumulated CPI growth

Residential Property, Accumulated Real Price Growth 1998-2010 (%)1

100

120

140

160

180

200

220

240

260

280

300

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Nominal House Price Index1998 = 100

Spain

IrelandEuro Area

Portugal


27 October 2011

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Ongoing deleverage process in the Portuguese economy has already translated into a lower external deficit

The deleverage of the economy is underway, with the domestic savings rate (including all sectors of the economy) stabilising above 9% of GDP (9.1% in 2Q 2011 vs. 9% one year earlier). Net external financing needs have declined from 11.1% of GDP in 2008 to 7.7% of GDP in June 2011. This trend is expected to proceed in the near future, to an estimated external deficit around 6% and 4% of GDP by the end of 2011 and 2012, respectively.

Domestic Savings Rate (% GDP)

Sources: INE, ES Research

External Deficit (net external financing needs of the economy), % GDP

2Q 20119.1%

9.1 9.5

6.8

4.6

6.9

9.210

8.9

11.110.1

8.87.7

6.1

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jun-11

Est. Dec 2011


27 October 2011

0

2

4

6

8

10

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011%

of G

DP0

25

50

75

100

125

150

175

200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (2Q)

% o

f GDP

Sources: Bank of Portugal, ES Research.

Ample external assets provide stability in the face of a tough financing environment. Portugal is one of the main world holders of gold reserves

Portugal’s gold reserves (% GDP)Portugal’s gross external assets (% GDP)

In the face of a difficult financing environment, Portugal benefits from holding ample external assets (close to 176% of GDP in 2Q2011). Also, Portugal is one of the main world holders of gold reserves (currently estimated at 9% of GDP).

176 9.0

Oct(Est.)


27 October 2011

2006 2007 2008 2009 2010 2011F 2012F

GDP 1.4 2.4 0.0 -2.5 1.3 -2.0 -3.0

Private Consumption 1.8 2.5 1.3 -1.1 2.3 -3.8 -4.9

Public Consumption -0.7 0.5 0.4 3.7 1.2 -3.7 -4.6

Investment -0.6 2.0 -0.1 -13.7 -5.3 -10.2 -8.7

Exports 11.6 7.6 -0.1 -11.6 8.8 6.7 4.1

Imports 7.2 5.5 2.3 -10.6 5.1 -3.2 -3.5

Inflation (%) 3.1 2.5 2.6 -0.8 1.4 3.6 2.3

Budget Balance (% GDP) -4.1 -3.1 -3.6 -10.1 -9.8 -5.9 -4.5

Public Debt (% GDP) 63.9 68.3 71.6 83.0 93.3 100.3 105.8

Unemployment (% Labour Force) 7.7 8.0 7.6 9.5 10.8 12.6 13.7

Current & Capital Account Balance (% GDP)

-10.0 -8.9 -11.1 -10.1 -8.8 -6.1 -3.9

Annual growth rates (%), except where indicated

E: Estimate; F: Forecast.Sources: Bank of Portugal, INE, ES Research, European Commission, IMF, OECD.

Portugal: Main Forecasts 2011-2012


27 October 2011 95October 2011 9595

Macro Spain Highlights: Return to growth, but feeling the contagion of the debt crisis

Sources: INE & Bloomberg (Spain)

After the deep recession lived in 2009 (-3.7%) and stagnation in 2010 (-0.1%), the Spanish economy picked up in the first half of 2011, subsiding in the second half due to the slowdown of activity in the Euro Zone. The outlook for the European economy gradually deteriorated, largely as a result of persistent doubts over Greece’s financial situation, constant wavering on the part of several Euro Zone policy makers and fears of contagion of the debt crisis to the European financial system. This economic performance should not allow any improvement at the labour market level, with the rate of unemployment still above 20% of the labour force.

GDP growth(%, y-o-y and q-o-q).

-5-4-3-2-10123456

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

Y-o-Y

Q-o-Q

0.20.7

Investment, private consumption andexports (%, y-o-y)

-20

-15

-10

-5

0

5

10

15

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

Private consumption

Investment Exports


27 October 2011 969696

Sources: INE, Bank of Spain, ES Research, European Commission.

Spain: Main Forecasts 2011-2012

Annual real growth rates (%), except where indicated. 2006 2007 2008 2009 2010F 2011F 2012F

GDP 3.9 3.6 0.9 -3.7 -0.1 0.6 0.5

Private Consumption 3.9 3.6 -0.6 -4.3 1.3 0.5 0.5

Public Consumption 4.6 5.5 5.8 3.2 -0.1 -0.2 -0.3

Investment 7.1 4.6 -4.8 -16.0 -7.4 -3.3 -1.5

Exports 6.7 6.6 -1.1 -11.6 9.2 10.0 5.0

Imports 10.3 8.0 -5.3 -17.8 3.5 4.0 2.0

Inflation (%) 3.4 2.8 4.1 -0.3 1.8 3.0 1.6

Budget Deficit (% GDP) 2.0 1.9 -4.2 -11.1 -9.2 -6.0 -4.4

Public Debt (% GDP) 39.6 36.1 39.9 53.3 60.1 71.9 73.5

Current & Capital Account Balance (% GDP) -8.4 -9.6 -9.1 -4.5 -3.7 -3.5 -3.1

Unemployment (% of Labour Force) 8.5 8.3 11.3 18.0 20.0 20.5 20.5

October 2011


27 October 2011 979797

GDP growth (%)*.

Macro Angola Highlights: Recovery underway, driven by oil and investment.

* IMF ForecastSources: BNA, OPEC & Bloomberg

The outlook for the Angolan economy for the final months of this year and 2012 is extremely bright. The International Monetary Fund estimates that the Angolan economy will grow by 10.8% in 2012, quite above the world economy’s (4%) and above the estimated average growth of emerging and developing economies (6.1%). Even against a background surrounded by uncertainties, namely global deceleration and consequent decrease in raw-materials prices, including oil, Angola’s growth will mainly derive from the resuming of oil production, after an interruption in 2011. The upward revision of Angola’s risk rating by the three main rating agencies, all with a stable outlook, attests for the confidence placed in the country.

1.4

1.5

1.6

1.7

1.8

1.9

2

579

1113151719212325

Jan. May Sep. Jan. May Sep. Jan. May Sep. Jan. May Sep.2008 2009

USD

billio

ns mb/diay

Oil production (Rhs)

Net external reserves(Lhs)

2010 2011

Net external reserves (%, yoy) and oil production (mb/day)

3.3

11.2

20.618.6

22.6

13.8

2.4 3.4 3.7

10.8

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008 2009 2010F2011F2012F

%

October 2011


27 October 2011 989898

Sources: IMF, Angolan Central Bank, Finance Ministry, ES Research.

Angola: Main Forecasts 2011-2012

2006 2007 2008 2009 2010F 2011F 2012F

GDP (real growth rate, %) 20.7 22.6 13.8 2.4 3.4 3.7 10.0

GDP per capita (USD, current prices) 2 445 3 443 4 671 4 081 4 328 5 061 5 390

Inflation (%) 13.3 12.3 12.5 13.7 14.5 15.0 13.0

Current Account Balance (% GDP) 25.6 17.5 8.5 -10.0 8.9 12.0 7.3

Budget Balance (% GDP) 11.8 11.3 8.9 -4.9 7.7 7.9 7.7

Exchange Rate (USD/KZ), annual

average80.4 76.8 75.0 79.2 91.9 93.0 93.0

BNA Rediscount Rate (%), end of period 14.0 19.6 19.6 30.0 25.0 20.0 15.0

October 2011


27 October 2011

Macro Brazil Highlights: Slowdown imposes interest rate cuts

Selic Target Interest Rate (%).Y-o-Y Inflation Rate (%).

Sources: IBGE, BACEN & Bloomberg

The financial instability of the summer months (August and September), driven largely by the sovereign debt crisis in the Euro Zone, rapidly deteriorated the growing environment of global economy. The shock waves were felt in Brazil, which was forced to reverse the cycle of rising rates, in order to contain inflation. The Central Bank made two cuts of 50 bp at the end of August and at mid-October, putting the Selic rate at 11.5%. Until the end of the year it can be admitted a further 50 bp cut to 11%, a level that should be kept in 2012. The continued acceleration of inflation since October 2010 peaked in September, 7.31% y-o-y, with an estimated a value at the end of this year at 6.5% and 5.7% in 2012. GDP should grow by only 3.5% this year and 4.5% in 2012.

2.0

3.0

4.0

5.0

6.0

7.0

2006 2007 2008 2009 2010 2011

%7.3%

Inflation target (2011-2012)

8

10

12

14

1618

20

22

24

26

28

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

11.5%


27 October 2011

Sources: IBGE, Central Bank of Brazil, ES Research.

Brazil: Main Forecasts 2010-2011

2006 2007 2008 2009 2010F 2011F 2012F

GDP (real growth rate, %) 4.0 6.1 5.2 -0.6 7.5 3.5 4.5

Inflation (%) 3.1 4.5 5.9 4.3 5.9 6.5 5.7

Primary Budget Balance (% GDP) 3.2 3.4 4.0 2.0 2.8 3.0 2.7

Public Debt (% GDP) 47.0 45.1 38.1 42.8 40.4 38.2 37.8

Unemployment (% of Labour Force) 10.0 9.3 7.9 8.1 6.7 6.2 6.7

Current Account Balance (% GDP) 1.2 0.1 -1.7 -1.5 -2.3 -2.2 -2.5

Exchange Rate (USD/BRL), annual

average2.18 1.95 1.84 1.99 1.76 1.64 1.63

SELIC Interest Rate (%, End of Period) 13.25 11.25 13.75 8.75 10.75 11.00 11.00


27 October 2011

Disclaimer

This news release may include certain statements relating to the Banco Espírito Santo Group that are neither reported financial results nor other historical information. These statements, which may include targets, forecasts, projections, descriptions of anticipated cost savings, statements regarding the possible development or possible assumed future results of operations and any statement preceded by, followed by or that includes the words “believes”, “expects”, “aims”, “intends”, “may” or similar expressions or negatives thereof are or may constitute forward-looking statements.

By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, changes in economic conditions in individual countries in which the BES Group conducts its business and internationally, fiscal or other policies adopted by various governments and regulatory authorities of Portugal and other jurisdictions, levels of competition from other banks and financial services companies as well as future exchange and interest rates.

Banco Espírito Santo does not undertake to release publicly any revision to the forward-looking information included in this news release to reflect events, circumstances or unanticipated events occurring after the date hereof.


27 October 2011

Investor Relations

Investor Relations Contacts

Website: www.bes.pt/irPhone: + 351 21 359 7390E-mail: [email protected]: + 351 21 359 7001

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