PORTUGUESE BANKING SECTOR OVERVIEW

Transcription

1 PORTUGUESE BANKING SECTOR OVERVIEW

2 AGENDA I. Importance of the banking sector for the economy II. Credit activity III. Funding IV. Solvency V. State guarantee and recapitalisation schemes for credit institutions

3 PORTUGUESE BANKING SECTOR OVERVIEW I. Importance of the Banking Sector for the Economy

4 The financial crisis didn t slow down the Portuguese banks total assets growth, contrary to what happened in the Euro area. Banking sector s total assets evolution (December 2005=100) Index Average annual growth rate (YoY) Portugal = 9.5% Euro area = 11.1% Average annual growth rate (YoY) Portugal = 7.5% Euro area = 1.5% Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Source: ECB Portugal Euro area 4

5 The Portuguese banking sector plays an important role in the economy; nevertheless, its weight on the national GDP is still below Euro area s ratio. Banking sector s assets relative to GDP* for Portugal and Euro area 400% Euro area 300% Portugal 200% 100% Contrary to the recent stagnation of the Euro area s banking assets over GDP ratio, Portuguese banks weight on the national GDP kept growing. 0% * Nominal Gross Domestic Product. Source: ECB 5

6 In Portugal, the contribution of financial intermediation activities for the national Gross Value Added stays well above the one of the Euro area. Financial intermediation GVA relative to total GVA for Portugal and selected European Union countries* Ireland United Kingdom Portugal Greece Spain Italy Euro area France Germany In Portugal, financial service activities (except insurance and pension funding and including the ones carried out by Banco de Portugal), contribute to approximately 6% of the national Gross Value Added. This weight is relatively high when compared to other euro area countries. Financial intermediation activities (except insurance and pension funding) Insurance, pension funding and activities auxiliary to financial intermediation * Data refers to year % 2% 4% 6% 8% 10% 12% Source: Eurostat, Statistics Portugal (INE), Central Statistics Office Ireland 6

7 PORTUGUESE BANKING SECTOR OVERVIEW II. Credit Activity

8 For Portuguese banks, credit to customers absorbs just about 50% of total assets. Credit to customers* as a percentage of total assets (December 2011) 80% 70% 60% 50% 48.8% Comparing to most of their Euro area peers, Portuguese banks activity is mainly centered on credit to customers. 40% 36.7% 30% 20% 10% 0% * Loans to the non-monetary sector (gross outstanding amounts at the end of period). ** Aggregated data. Source: ECB 8

9 During the period that preceded the financial crisis, credit volumes have followed a strong increasing trend, both in Portugal and in the Euro area. Trends in credit* in Portugal and in the Euro Area (Dec. 2005=100) Index 140 Average annual growth rate (YoY) Portugal = 1.4% Euro area = 1.7% Portugal (100 = 253,683 M ) Euro area (100 = 13,678,287 M ) In the summer of 2008, credit growth began to show signs of slowdown. In Portugal, credit volume has even been decreasing since the 2 nd quarter of Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Loans to the monetary and non-monetary sectors (gross outstanding amounts at the end of period). Source: ECB 9

10 Despite the reduction in the Credit to GDP ratio in 2011, the Portuguese economy still presents relatively high levels of bank debt when compared with the Euro area. Credit to Customers* / GDP** ratio % GDP** 250% 200% At the end of 2011, credit to customers in Portugal represented around 163% of the nominal GDP. Since 2000 this ratio increased by approximately 45 percentage points. Nevertheless, Portugal s Credit to Customers/ GDP ratio dropped in the last two years. 150% 100% 50% 0% Ireland Spain United Kingdom Portugal Euro area Italy Greece Germany France * Loans to the non-monetary sector (gross outstanding amounts at the end of period). ** Nominal Gross Domestic Product. Source: ECB, Eurostat

11 Stocks of credit to households and non-financial corporations reveal divergent trends than stocks of credit to the general Government. Index 400 Trends in credit volumes* by institutional sector (Dec. 2005=100) The agreement on a financial support programme for Greece in May 2010 seriously worsened the Portuguese Republic s conditions in obtaining financing through financial markets. On that period, the 10yr bond yield hit its maximum since Portugal adopted the euro, 6.29%, leading to the abrupt growth in credit to general government. General Government** In April 2011, when Portugal asked for international financial assistance, credit volumes to general government hit its peak. Households Non-financial corporations*** 0 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Gross outstanding amounts at the end of period. ** Only includes loans (does not include public debt securities). *** Includes state-owned non-financial corporations. Source: Banco de Portugal 11

12 In Portugal, the reliance on credit of households and non-financial corporations is considerably higher than in the Euro area. Weight of credit to households, non-financial corporations and general Government, in Portugal vs. selected European Union countries (December 2011) = 183.4% 168.5% 155.4% 118.1% 117.6% 112.4% 112.2% 107.9% 106.5% 46.5% 8.3% 5.6% 64.7% 80.2% 68.0% 12.3% 6.5% 50.1% 52.5% 16.3% 57.1% 0.7% 32.4% 10.0% 15.3% 44.1% 35.3% 72.2% 80.1% 81.8% 55.7% 58.6% 39.0% 55,5% 53.8% 55.9% Ireland Spain Portugal Euro area Greece Italy United Kingdom France Germany * Nominal Gross Domestic Product. European Commission estimates for ** Only includes loans (does not include public debt securities). *** Includes state-owned non-financial corporations. Source: Ameco, ECB General Government** Non-financial corporations*** Households 12

13 However, state-owned entities account for almost 10% of the total debt of non-financial corporations to the resident financial sector. Credit to state-owned non-financial corporations in Portugal* 5.9% 6.2% 6.7% 10.5% 9.6% In Portugal, credit to the State-Owned Enterprise Sector absorbs an important share of the total outstanding amount of credit to non-financial corporations. Moreover, it has been increasing over the past years. 13.9% 86.1% 14.3% 85.7% Loans Debt securities * Percentages based on the amount of loans outstanding and debt securities owed by the State-Owned Enterprise Sector to the resident financial sector. The concept of resident financial sector includes not only banks but also other financial institutions. Source: Banco de Portugal 13

14 Credit to households is primarily mortgages, whereas credit to NFC is mainly intended to construction and real estate. Total credit* Consumer Credit 11% Credit to households Others 8% Mortgages 81% Others** 21% Households 42% Credit to non-financial corporations General Government 3% Nonfinancial corporations 34% *Loans to the monetary and non-monetary sectors including non residents (gross outstanding amounts at the end of December 2011). Source: Banco de Portugal Agriculture, forestry and fishing 2% Others 33% Industry 13% Construction & real estate 34% Trade, accomodation and food services 18% 14

15 In Portugal, mortgages account for a bigger share on the outstanding amount of loans to households than in the Euro area. Portugal 10.1% 8.6% 8.3% 10.8% 10.9% 10.7% 79.1% 80.5% 81.0% Euro area 15.7% 15.9% 16.1% 12.9% 12.4% 11.7% 71.4% 71.7% 72.2% The weight of consumer credit on the stock of loans to households decreased in the Euro area. Nevertheless, the relevance of this type of credit is still inferior in Portugal when compared with its Euro area peers Source: ECB Others Consumption Mortgage 15

16 The trend of residential property prices in Portugal shows a more stable pattern than the one of other Euro area countries. Residential property prices in Portugal and selected Euro area countries (Mar. 2000=100) Index Portugal Spain Euro area Ireland When the subprime crisis erupted, residential property prices in Portugal remained relatively constant. The real estate sector had not been influenced by a speculative boom, as happened in Spain or in Ireland. Source: ECB 16

17 Within the Euro area, the real estate sector absorbs the largest portion of the outstanding amount of loans to nonfinancial institutions. 45.6% Portugal 17.0% 19.3% 19.3% 23.8% 21.0% 20.7% 21.8% 20.2% 20.2% 18.1% Source: Banco de Portugal, ECB 18.3% 18.5% 19.3% 21.2% 21.3% June 2011 Euro area 22.2% 22.3% 22.7% 9.7% 9.3% 9.2% 40.9% 40.8% 42.3% 31.1% 33.2% 33.1% 15.0% 14.8% 14.9% 22.0% 20.4% 20.1% June 2011 In Portugal, the proportion of the construction and real estate sectors, in aggregated terms, has been decreasing since In contrary, the weight of these sectors of activity on the total credit to nonfinancial corporations of the euro area, increased because of the real estate sector. Agriculture & industry Construction Real estate, professional, technical and administrative activities Trade, accommodation and food service activities Others 17

18 NPL S grew since 2008 mainly in the corporate segment. Non-performing loans* as a percentage of the corresponding credit 8% 7% 6% 5% 4% Non-financial corporations Mortgages Total Non-financial corporations NPL s started to grow rapidly especially at the end of Meanwhile, mortgages NPL s remained relatively stable. 3% 2% 1% 0% * Overdue installments and other future installments of doubtful collection. Source: Banco de Portugal 18

19 PORTUGUESE BANKING SECTOR OVERVIEW III. Funding

20 Deposits from customers constitute the most important part of the financing structure of Portuguese banks. Financing structure of Portuguese and other European Union countries banks (December 2011) 15% 16% 10% 7% 27% 34% 48% 42% 13% 28% 25% 25% 9% 43% 5% 7% 11% 33% 43% 23% 35% 9% 18% 39% 37% 34% 33% 30% 28% 6% 43% 23% 36% 10% 38% 16% Compared with the European context, the Portuguese banking system has a bigger share of deposits from customers in its financing structure. Therefore, wholesale funding plays a less important role. Spain Portugal Greece Germany Italy Euro area United Kingdom France Ireland * Includes external liabilities, i.e., liabilities issued by non-residents in the Euro area. Deposits Wholesale Capital Others* Source: ECB 20

21 The trend followed by deposits from customers in Portugal reveals some differences compared with the Euro area. Evolution of deposits* in Portugal and in the Euro area (Dec. 2005=100) Index Portugal (100 = 155,185 M ) Euro area (100 = 7,386,698 M ) After mid-2010, deposits in Portugal began growing at a significantly higher rate than the ones of the Euro area Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Deposits from the non-monetary sector (outstanding amounts at the end of period). Source: ECB 21

22 The use of wholesale funding among Portuguese banks grew at a significantly higher rate when compared with its Euro area peers. Evolution of wholesale funding* in Portugal and in the Euro area (Dec. 2005=100) The growth of deposits in Portugal was not sufficient to compensate the growth of national banks assets, leading to a higher use of wholesale funding. Index Portugal (100 = 83,887 M ) Euro area (100 = 9,382,724 M ) Average annual growth rate (YoY) Portugal = 14.7% Euro area = 9.2% Average annual growth rate (YoY) Portugal = 9.7% Euro area= -3.6% 60 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Wholesale includes deposits from the monetary sector, debt securities issued and money market funds (outstanding amounts at the end of period). Source: ECB 22

23 In Portugal, deposits are mainly held by households. Evolution of deposits* in Portugal, by institutional sector M 300,000 General Government 250,000 Non-monetary financial institutions Non-financial corporations 200,000 Households Despite the considerable increase of the share of the non-monetary financial institutions over the last two years. 150, ,000 50,000 0 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Deposits from the non-monetary sector (outstanding amounts at the end of period). Source: Banco de Portugal 23

24 Deposits with maturities less than one year are the most notable, in spite of the recent growth in the share of deposits with longer maturities. Evolution of deposits* in Portugal, by maturity M 300, , ,000 Over 2 years From 1 to 2 years Up to 1 year Overnight deposits Reedemable at notice 150, ,000 50,000 0 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 * Deposits from the non-monetary sector (outstanding amounts at the end of period). Source: Banco de Portugal 24

25 The growth in deposits from households coincides with the decrease in their units issued by investment funds. Households deposits and units issued by investment funds growth rates, in Portugal (YoY) 30% 20% 10% 0% Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11-10% -20% -30% -40% Deposits Units issued by investment funds This trend exposes a substitution effect between investment and savings products with different risk profiles, revealing a bigger preference for less risky assets. Source: Banco de Portugal 25

26 The decrease of the Loan-to-Deposit ratio reflects the deleverage of the Portuguese banking sector. Loan*-to-Deposit ratio, on a consolidated basis 165% 155% 152.1% 155.7% 159.4% 160.8% 157.7% 146.4% 145% 143.5% 135% 125% 115% 115.3% 122.6% 130.7% 134.7% 136.5% Due to the Economic Adjustment Programme for Portugal, Banco de Portugal requires the eight largest Portuguese banking groups to reduce this ratio to 120% until % Set 2011 * Credit volumes net of impairments (includes securitized non derecognized credit). Outstanding amounts at the end of period. Source: Banco de Portugal 26

27 In Portugal as well as in the Euro area, deposits from the monetary sector are the main component of wholesale funding. Structure of wholesale funding, by type of instrument Portugal Euro area 0.3% 0.0% 0.0% 6.6% 5.5% 4.8% 55.2% 50.4% 68.0% 53.1% 51.4% 53.1% 44.7% 49.5% 31.7% 40.3% 43.1% 42.1% However, in Portugal, the importance of the market for debt securities increased comparing to Nowadays this source of funding is more important for Portuguese banks than for its euro area peers. Source: ECB Money market funds Deposits from the monetary sector Debt securities 27

28 In Portugal as well as in the Euro area, debt securities issued by banks are mainly long-term. Structure of debt securities, by maturity at issue date (December 2011) Portugal Euro area 3% 3% 94% 5% 11% 84% Still, the emission of short-term debt securities plays a more important role within the Euro area banking sector than in Portugal. Up to 1 year From 1 to 2 years Over 2 years Source: ECB 28

29 Over the past few years, covered bonds became increasingly important funding sources for Portuguese banks. Issuance and outstanding amounts of covered bonds in Portugal M 30,000 25,000 20,000 15,000 10,000 5,000 At the end of 2010, the outstanding amount of covered bonds represented approximately 5.9% of Portuguese banks assets. Covered bonds by type of underlying asset (2010) 95% Outstanding amounts at the end of period Source: European Covered Bond Council, Factbook, 2010 Issuance 5% Public sector Mortgages 29

30 The restrictions on the access to interbank markets contributed to a significant increase of Portuguese banks dependency on ECB. Liquidity-providing operations from the European Central Bank to Portuguese banks* M 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 * Outstanding amounts at the end of period. Source: Banco de Portugal 30

31 In percentage, the share of Portuguese banks on the total amount of the ECB s liquidity-providing operations also increased considerably. Share of Portuguese banks on the total amount of ECB s liquidity-providing operations* 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% * Percentage of liquidity-providing operations to Portuguese banks from the total amount given by the Eurosystem to Euro area countries (outstanding amounts at the end of period). Source: Banco de Portugal 31

32 PORTUGUESE BANKING SECTOR OVERVIEW IV. Solvency

33 Portuguese banks assets risk level has been decreasing over the past few years. Risk weighted assets as a percentage of total assets* 71.2% 71.5% 69.5% 67.5% The Risk Weighted Assets / Total Assets ratio for Portuguese banks suffered a considerable decrease over the past years. This trend reflects a decline of the average risk level of the assets that constitute Portuguese banks balance sheet * Risk weighted assets include off-balance sheet items. Data for domestic banking groups and stand-alone banks, on a consolidated basis which excludes insurance companies. Source: ECB 33

34 Total assets have been showing higher growth rates compared to risk weighted assets. Trend in Portuguese banks risk weighted assets and total assets* (Dec. 2007=100) Index Risk weighted assets Total assets * Data for domestic banking groups and stand-alone banks, on a consolidated basis which excludes insurance companies. Source: ECB 34

35 Portuguese bank s total own funds have been increasing mainly due to Tier 1 capital, particularly after Trend in Portuguese banks own funds* (Dec. 2007=100) Index Core Tier 1 Tier 1 Total own funds Average annual growth rate Core Tier 1 = 2.0% Tier 1 = 1.9% Total own funds = -3.2% * Data on a consolidated basis. Source: Banco de Portugal 35

36 Historically, the capital levels of Portuguese banks have stayed above the minimum legal requirements. Tier 1 ratio (%) Basel II agreement requires financial institutions to maintain the Tier 1 ratio equal or above 4% and the Overall Solvency ratio not below 8% Jun Overall Solvency ratio (%) Portugal EU Jun-11 * Data for domestic banking groups and stand-alone banks, on a consolidated basis which excludes insurance companies. Source: ECB 36

37 The core Tier 1 ratio of the 4 largest Portuguese banks has been increasing. Evolution of core Tier 1 ratio for the 4 largest Portuguese banks* While in previous years the increase in the core Tier 1 ratio of the 4 largest Portuguese banking groups occurred through higher capital levels; in 2011, there was a double effect from the growth of capital and the reduction of the risk weighted assets. p.p % % 1 8.5% % 0 7.5% % * Data on a consolidated basis. Source: APB, banks annual reports Contribution to core Tier 1 ratio from change in risk weighted assets Contribution to core Tier 1 ratio from change in capital Total change in core Tier 1 ratio Core Tier 1 ratio (right-hand scale) 37

38 Portuguese banks face new capital requirements within the scope of the Economic and Financial Assistance Program. Core Tier 1 ratio requirements Besides the increase of the core Tier 1 ratio that must be fulfilled, other factors contribute to augment the capital needs of the Portuguese banks, namely: % Source: APB, Banco de Portugal % Haircut Greece debt Transfer of banks Pension Schemes to the Social Security These impacts will be recognized for prudential purposes during the 1 st semester of 2012, reflecting in the core Tier 1 ratio then. Impacts Additional impairments recognized on the loans portfolio Increase of the own funds requirements for credit risk Results of the Special Inspections Programme carried out in the 8 largest banking groups, in This assessment aimed to validate the data that supports the calculation of the solvency position of the institutions. 38

39 Simultaneously, the EBA also imposed higher capital requirements for European banks to be fulfilled by June Core Tier 1 ratio 9% In order to deal with the sovereign crisis that affects Europe, the European Banking Authority, together with other European entities, established several measures that aim to strengthen the banking sector resilience. Additional capital needs New capital requirements were therefore introduced under two different measures, namely: Buffer sovereign debt exposures Increase of the core Tier 1 ratio from 4.5% to 9%; Establishment of a capital buffer for sovereign debt exposures as of 30 th September Source EBA 39

40 Results of the EU capital exercise reveal capital shortfalls for banks in 12 European countries. FR 6.4% PT 6.1% DE 11.4% CY AT 3.1% 3.4% BE 5.5% IT 13.4% NO 1.3% SI 0.3% NL 0.1% = Million EUR GR 26.2% ES 22.8% In December 2011, the European Banking Authority presented the results of the assessment made to the capital levels of the banking groups that were part of the stresstest, considering the market value of their sovereign exposures and capital as of 30 September The results of this exercise reveal that the additional core Tier 1 capital required to attain the 2 requirements imposed to all European banks goes up to 114,685 million euro. For the Portuguese banks included in this exercise, the overall shortfall of core Tier 1 capital identified was approximately 6,950 million euro. Source APB, EBA 40

41 Results of the EU Capital Exercise - I Core Tier 1 capital Capital shortfall Capital surplus Capital shortfall Core Tier 1 capital as of (milllion EUR) 26,170 85% Capital level needed to fulfill the requirements = 100% 12% 20% 14% 6% 3% 29% 15,366 13,107 80% 86% 94% 97% 71% 100% 100% 7,324 6, ES IT DE FR PT GB IE ES IT DE FR PT GB IE Source: APB, EBA 41

42 Results of the EU Capital Exercise - II Core Tier 1 ratio as of Core Tier 1 ratio (including the buffer for sovereign debt exposures) as of * 18% 17.5% 16% 14% 12% 10% Minimum required until June 2012 Core Tier 1 ratio = 9% 10.1% 10.0% 9.2% 9.9% 10.6% 9.5% 8% 6% 4% 2% 0% IE GB DE FR IT PT ES IE GB DE FR IT PT ES * Estimates. Source: APB, EBA 42

43 For Portuguese banks, the capital needs stem from exposure to sovereign debt as well as the increase of the minimum ratio requirements. Drivers of the capital needs, by country = 26,170 15,366 13,107 7,324 6,950 6,313 3,923 3,531 1, ,610 6,561 5,692 9,674 5,544 7,563 1,539 3,812 3,232 3,512 3,718 4,774 3,812 1,075 2,457 1, Spain (ES) Italy (IT) Germany (DE) France (FR) Portugal (PT) Belgium (BE) Austria (AU) Cyprus (CY) Norway (NO) Slovenia (SI) Netherlands (NL) Establishment of the buffer for sovereign debt exposures Increase of the core Tier 1 ratio and change in the calculation of the risk weighted assets Source: APB, EBA 43

44 The consequences of the new capital requirements for the 4 Portuguese banks assessed imply an increase in core Tier 1 capital of 40%. September 2011 Goal until June 2012 Core Tier 1 capital EUR 17,386 M Negative impact from the increase in the core Tier 1 ratio EUR 3,232 M Core Tier 1 capital EUR 20,618 M Negative impact from the exposure to sovereign debt EUR 3,718 M Sovereign debt exposure buffer EUR 3,718 M Risk weighted assets EUR 230,564 M Positive impact from the new rules on the calculation of the risk weighted assets (CRD 3 ) EUR -133 M Risk weighted assets EUR 229,091 M = EUR 24,336 M Shortfall 7.5% 9.0% EUR 6,950 M New ratio = 10.6% Source: APB, EBA 44

45 The European-wide requirements come to exacerbate the capital needs meanwhile imposed by the national authorities. Breakdown of the capital needs for the 4 Portuguese banks that were part of the EBA exercise The European Banking Authority estimates do not include the impacts on core Tier 1 capital resulting from the events that occurred in 2011 and will only be reflected on capital levels for prudential purposes in 2012, namely, the additional impairments on the loans portfolio, the change of the own funds requirements for credit risk, the haircut applied to Greek public debt imposed by Banco de Portugal and transfer of the banks pension schemes to the social security. Therefore, it is expected that the capital needs until June 2012 are higher than the ones calculated. Additionally, Portuguese banks will have to fulfill, by December 2012, the increase of the core Tier 1 ratio from 9% to 10%, which will imply new capital needs. * Does not include the effect from the reduction of the risk weighted assets. Source: APB, EBA 45

46 PORTUGUESE BANKING SECTOR OVERVIEW V. State Guarantee and Recapitalisation Schemes for Credit Institutions

47 Timeline of the Portuguese State guarantee and recapitalization schemes for credit institutions Economic Adjustment Programme October 2008 May 2009 February 2010 March 2010 July 2010 January 2011 June 2011 Guarantee Scheme Scheme approved till Dec 2009 EUR 20 B Budget changed EUR 16 B Extension till Jun 2010 Budget changed EUR 9.15 B Extension till Dec 2010 Extension till Jun 2011 Extension 31 Dec 2011 Budget changed EUR 35 B Recapitalisation Scheme Scheme approved till Nov 2009 EUR 4 B Extension till Jun 2010 Budget changed EUR 3 B* Extension till Dec 2010 Extension till Jun 2011 Extension 31 Dec 2011 Budget changed EUR 12 B Law nº 60-A/2008 Law nº 63-A/2008 Law nº 3-B/2010 Law nº 48/2011 * The usage of both schemes cannot exceed EUR 9.15 B. 47

48 Portuguese banks went through the financial crisis without any State support in terms of recapitalization State Support Scheme used until end of June 2011 By the end of June 2011: EUR 3 billion Not used* 6 banks (of which, CGD is State-owned) had used the State guarantee scheme; EUR 9.15 billion Σ= EUR 4.95 B > EUR 1,000 M 3 operations in 2008 < EUR 1,000 M > EUR 100 M < EUR 100 M 2 operations in operation in 2008, 2 operations in operations that amounted to EUR 75 M were over (one in 2009 and the other in 2010); Outstanding guarantees totaled up to EUR 4,875 M, which corresponded to 53% of the budget. * Not used by privately owned banks. In December 2010, CGD increased its capital by EUR 550 M, from which EUR 56 M were from the scheme budget. 48

49 meanwhile, the public debt crisis lead to the increase in the usage of guarantees from the State. State Support Scheme used since July 2011 EUR 12 billion EUR 35 billion Σ= EUR 8.88 B Not used > EUR 1,000 M 4 new operations < EUR 1,000 M > EUR 100 M 2 new operations < EUR 100 M 2 new operations Since July 2011: 6 banks used the State guarantee scheme for new operations; New operations amounted to EUR 8,880 M, which corresponds to 25.4% of the budget. In December 2011, the guarantees in effect (accumulated from previous years) total up to EUR 12,505 M. 49

50 Cost with commissions upon access of the State guarantee scheme Total cost of the guarantees issued in each year (EUR Million) The increase in commission costs results not only from the increment in the amount of guarantees issued in 2011 but also from a price effect since the commission fee has increased, on average, 43 basis points on the new operations. Total

51 Commissions paid and due upon access of the State guarantee scheme Annual commissions paid and due* (EUR Million) Cumulative paid until end = EUR Million * Estimates. 51

52 PORTUGUESE BANKING SECTOR OVERVIEW