Reuters: BANIF.LS Bloomberg: BANIF PL ISIN: PTBAF0AM0002 www.banif.pt/investidores

2014

CONSOLIDATED RESULTS

Lisbon, 28 February 2015

Unaudited information


CONSOLIDATED RESULTS: January to December 2014


Highlights: Strong recovery in operating income Structural streamlining with a positive impact in terms of cost savings Significant improvement in operating profits Non-recurrent factors impacted on 2014 results. Net provisions and impairments affected by extraordinary events Higher operating income, whichincreased by 48.0% year-on-year, to 208 million euros. This was due to an improvement in net interest income, net commissions and the profits from financial operations. Implementation of the cost reduction policy. In 2014, costs were cut by 4.7%, in year-on-year terms. If redundancy-related costs are excluded,structural costs came down by 10.% (-20.3 million euros). Improved operating profits. In 2014, these came to

+5.7 million euros, compared to -71.6 million euros. This growth is explained by the recovery in banking income and the reduction in structural costs. Excluding non- recurrent costs, the operational profit would amount to +145 million euros.

Non-recurrent factors impacted on 2014 results and more than outweighed the improvement in banking income and the less negative performance of the discontinued units, provisions and impairments. These non-recurrent factors amounted to 337.9 in 2014 and were particularly significant in Q4. Net profits amounted to

-295.4 million euros, which compares favourably with net profits for the previous year (-470.3 million euros).

Impairments reduced by 25.5%, year-on-year, to

271.9 million euros. This figure reflects the increase in net provisions for impairments in relation to the domestic business. This can be largely explained by extraordinary factors relating to the setting up of impairments to cover
the exposure to i) GES in the amount of 80.4 million euros

2

Consolidated Results - 2014

(credit impairment); ii) FINPRO in the amount of 17.9 million euros (impairment of financial assets), and also iii) real estate assets classified as Non-Current Assets Held for Sale (50.5 million euros).
It is worth noting the improvement in the credit
impairment, that decreased 124.1 million euros vis a vis
2013. Excluding the non-recurrent impairment related to GES, the credit impairment stood at 31% of the amount recorded in 2013 (from 295.9 to 91.8 million euros) representing 0.9% of the average gross credit.

Strengthened liquidity Substantial reduction in reliance on ECB facility and significant increase in assets available for discount Improved commercial gap: 1,310 million euros lower than at December 2013. The loan-to-deposit ratio improved by 21ppto 105.5%. A reduction of some1,584 million euros in ECB funding between December 2013 and December 2014. At the same time, Banif increased the value of its free assets in the ECB pool by 27%, by the end of December. Also of note is the fact that, at the beginning of October, the bank cancelled the remaining bond loans backed by the Portuguese Republic, in the amount of 595 million euros. The maturity date for the bonds was December 2014. Through this early repayment, Banif finished paying off of the full amount of 1,175 million euros that it had borrowed

in the form of state-backed loans.

Financial soundness: Capital ratio will benefit from ongoing asset sales Common Equity Tier 1 ratio: As at 31 December 2014, the Common Equity Tier 1 ratio, calculated in accordance with the CRD IV/CRR rules applicable in 2014 (phasing in) stood at 8.4% above the minimum level required by the regulatory authorities. This figure excludes the positive impact on the capital ratio from the ongoing asset sales,

expected to have an impact of more than 100bps. This

3

Consolidated Results - 2014

change in the ratio can be attributed to the net losses made in 2014. These losses were heavily influenced by non-recurrent factors that affected the fourth quarter of the year and by the calculation of negative actuarial differences in the pension fund, following changes made to
the actuarial assumptions at 31 December 2014.

4

Consolidated Results - 2014

Key Indicators

Dec-14

Dec-13

D

Restated

Results

Operating income 208.0 140.6 48.0% Operating costs -202.3 -212.2 -4.7% Operating costs excluding non-recurrent costs -173.5 -193.8 -10.5% Operating income 5.7 -71.6 - Operating income excluding non-recurrent costs 145.0 -8.1 - Loans impairment net of reversals and recovery -171.8 -295.9 -41.9% Impairment of other financial assets net of reversals and recovery -42.0 -7.7 - Impairment of other assets net of reversals and recovery -59.3 -61.0 -2.8% Income from discontinued operations -18.3 -75.2 75.7% Net income -295.4 -470.3 37.2%

Dec-14 Dec-13 D

Liquidity

Loans-to-deposits ratio 105.5% 126.4% -20.9pp

Capital

Common Equity Tier 1 ratio CRD IV/CRR (phasing in-2014) 8.4% 10.9% -2.5pp

Amounts in millions of euros, except where stated otherwise

Operating income Net income


5.7 -295.4

Restructuring costs 28.8 28.8

Real estate losses 76.4 135.5

Devaluation of FINPRO participation 12.6 30.5

Impairment related to GES exposure - 80.4

Exposure to Brasil 21.5 62.8

Total non-recurrent costs 139.3 337.9


Total excluding non-recurrent costs 145.0 42.5

Amounts in millions of euros.

5


Consolidated Results - 2014

Highlights - 2014



Results



Balance Sheet

Liquidity


Capital



Operating income: 208.0 million euros, +48.0%, year-on- year(yoy);

Net Interest Income: 84.5 million euros, +3.2%, year-on- year(yoy);

Net Commissions: 64.6 million euros, +2.4%, year-on- year(yoy);

Gains on Financial Operations: 98.9 million euros, which compares favourably to the 31.3 million euros of 2013.

Other operating income: -40.8 million euros, which compares with -38.1 million euros in 2013.

Operating costs: 202.3 million euros, -4.7%, (yoy). Excluding non-recurrent costs, operating costs fell 10.5% yoy (-20.3 million euros). Operating profit: +5.7 million euros, which compares to -

71.6 million euros in 2013. Excluding non-recurrent costs, the operational profit amounts to 145 million euros.

Net provisions and impairments: 271.9 million euros, -

25.5% yoy. This figure was penalised by the impairment set up for the exposure to GES and FINPRO and real estate assets.

Net losses of 295.4 million euros in 2014, which compares favourably with -470.3 million euros in 2013. This figure was heavily penalised by the net losses suffered in the 4th quarter of 2014. These amounted to -140.5 million euros and include non-recurrent factors totalling -163.4 million euros. Total customer resources on the balance sheet: 6.9 thousand million euros. Loan book (gross): 7.9 thousand million euros. Substantial reduction in reliance on ECB facility: 1,584 million euros lower than in December 2013.Loan-to-deposit ratio: 105.5%, compared to 126.4% in December 2013. Common Equity Tier 1 ratio. As at 31 December 2014, calculated in accordance with the CRD IV/CRR rules applicable in 2014 (phasing in), stood at 8.4%.This figureexcludes the positive impact from the ongoing asset sales, expected to

have an impact of more than 100bps.

6

Consolidated Results - 2014

Balance Sheet (millions of euros)

Dec-14 Dec-13

Cash and balances at central banks 113.8 152.3

Deposits w ith banks 102.9 186.8

Financial assets held for trading 65.1 40.1

Financial assets at fair value through profit or loss 48.8 73.7

Available-for-sale financial assets 1,960.8 1,782.0

Loans and advances to banks 250.8 117.5

Loans and advances to customers 6,855.0 7,969.0

Held-to-maturity investment securities 5.5 12.1

Financial assets w ith repurchase agreements 26.9 - Non-current assets held for sale 2,154.7 1,607.0

Investment property 736.5 827.6

Other tangible assets 207.3 247.7

Intangible assets 13.4 17.1

Investments in associates, affiliates and joint ventures 146.3 129.6

Current tax assets 1.6 3.4

Deferred tax assets 266.2 240.4

Other assets 169.9 197.2

Total Assets 13,125.5 13,603.5

Deposits from central banks 1,493.7 3,077.6

Financial liabilities helding for trading 30.4 28.8

Financial liabilities at fair value through profit or loss 12.8 12.4

Deposits from banks 882.5 348.7

Customer accounts and other loans 6,499.3 6,303.3

Financial liabilities 1,645.6 1,258.1

Non-current liabilities held for sale 1,130.0 994.3

Provisions 10.9 13.4

Current tax liabilities 3.9 5.4

Deferred tax liabilities 66.2 48.4

Instruments representing capital 130.2 260.1

Other subordinated liabilities 181.6 154.3

Other liabilities 234.9 219.3

Total Liabilities 12,322.0 12,723.9

Share capital 1,720.7 1,582.2

Issue premiums 199.8 199.8

Revaluation reserves 61.4 -18.8

Other reserves and retained earnings -952.2 -483.0

Profit for the period -295.4 -470.3

Minority interests 69.2 69.7

Total Equity 803.5 879.6


Total Equity + Liabilities 13,125.5 13,603.5

7


Consolidated Results - 2014

Profit and Loss Account (millions of euros)

Dec-14 Dec-13 D14/13

Restated (*)


Interest and similar income 369.3 435.8 -15.3%Interest and similar expense -284.8 -353.9 -19.5%Net interest income 84.5 81.9 3.2%

Dividend income 0.8 2.4 -67.3%

Net fees and commissions 64.6 63.1 2.4%

Fees and commission income 81.4 84.0 -3.1% Fees and commission expense -16.8 -20.9 -19.6% Gains and losses in financial operations 98.9 31.3-

Income from assets and liabilities valued at fair value through profit or loss -12.8 -5.8 121.9% Income from available-for-sale financial assets 114.2 37.8 202.0%

Foreign exchange income -2.5 -0.8 212.5%

Other operating income -40.8 -38.1 -

Operating revenue 208.0 140.6 48.0%

Personnel costs -128.2 -119.6 7.2%Selling and General Administrative costs -55.4 -67.5 -17.9%Depreciation and amortisation -18.7 -25.1 -25.5%

Operating Income 5.7 -71.6 108.0%

Provisions net of reinstatement and w rite-offs 1.2 -0.2 -Loans impairment net of reversals and recovery -171.8 -295.9 -41.9%Impairment of other financial assets net of reversals and recovery -42.0 -7.7 -Impairment on other assets net of reversals -59.3 -61.0 -2.8%

Equity accounted earnings -22.4 0.8 -

Profits before tax -288.5 -435.6 33.8%

Taxes 12.5 40.7 -

Profits after tax -276.0 -394.9 30.1%

Income from discontinued operations (*)-18.3 -75.2 75.7%

Minority interests -1.1 -0.2 -

Net income for the period -295.4 -470.3 37.2%

(*) The holdings in Banif - Banco Internacional do Funchal (Brasil), SA, Banif Bank (Malta), PLC, Banco Caboverdiano de

Negócios (BCN) and Banif Mais SGPS are classified as discontinued operational units in the consolidated profit and loss accounts, as at 31 December 2014 and 2013.

8


Consolidated Results - 2014

Business Summary Results

In 2014, operating income rose by 48.0%, year-on-year, to 208.0 million euros. A
number of factors contributed to this, including:

A 3.2% rise in net interest income,to 84.5 million euros. Despite the positive effect of the policy of reducing deposit costs, which have fallen significantly over recent quarters, due to changes made to the fundraising policy, this income was negatively affected by the following: (i) the effect of the fall in loan volumes, a consequence of the deleveraging of the non-financial sectors of the economy and the lowering of spreads on loans; (ii) reference interest rates that have remained historically low; and (iii) the cost of the interest on the CoCos, which came to 15.5

million euros in 2014.

An increase of 2.4% in commissions (net), to 64.6 million euros. This positive performance reflects the new commercial focus and the reduction in costs following the cancellation of issues backed by the state. However, this performance was penalised from the 3nd quarter of 2013 onwards, by the limitations arising from the Banco de Portugal rules on banking operation commissions as well as the fall-off in

the commercial and investment banking businesses.

The 98.9 million euro profit from financial operationsis largely a reflection of the capital gains made on the disposal of fixed income Portuguese public debt securities (113.7 million euros in 2014) and the capital losses related to the exposure to the Banif Infrastructure Fund and to FINPRO. This exposure totalled some 12.6

million euros.

Other operating resultsstood at -40.8 million euros. This can be largely accounted for by the 41.4 million euros earned on the disposal of the overdue loans portfolio (write-offs portfolio) and the losses of 93.1 million euro attributable to the devaluation and disposal of real estate assets. It is worth noting that FINPRO had a

negative global impact of around 30 million euros.

9

Consolidated Results - 2014

Banking Income: Structure

98.9

31.3

63.1 64.6

2.4 0.8

81.9 84.5

-38.1 -40.8

Dez-13 (*) Dec-14


Net interest income Dividend income


Net fees and comissions Gains and losses in financial operations

Other operating income

(*) Restated

Unit: (millions of euros)

In 2014, operating costs totalled 202.3 million euros. This is 4.7% lower than in
2013, despite being penalised by the cost of the measures implemented as part of the ongoing transformation process. 2014 was marked by a significant speeding up of the measures in the restructuring plan, specifically as regards the bringing forward of the branch closure plan and the reorganisation of central services and intermediate commercial structures. Excluding the non-recurrent costs associated with the voluntary redundancy programme, branch closure and the recapitalisation process, operating costs fell 10.5% compared to 2013 (-20.3 million euros).

Staff costs for 2014 were 128.2 million euros. Excluding the impact of non-recurring costs arising from the staff reduction programme, staff costsfell 7.8% year-on-year. The voluntary redundancy programme and the expansion of Banif's ongoing restructuring process, particularly as regards the accelerated closure of branches, both had a positive impact on this figure. General administrative costs totalled 55.4 million euros in 2014, adrop of 17.9% year-on-year. This is despite the considerable costs incurred by the current recapitalisation and restructuring processes. This decrease can be attributed to the gains

10

Consolidated Results - 2014

in operational efficiency resulting from the rationalisation and optimisation strategy being applied to operating procedures and also to the renegotiation of contracts and the resizing of the distribution network, at both the domestic and international level. Among other items, it is worth highlighting the significant costs savings achieved in the areas of communications, maintenance and repair and consultancy fees.

Amortisations for the period totalled 18.7 million euros at the end of 2014,25.5% less than in the previous year. This partly reflects the downsizing of the bank's structure and the rationalisation of the investment policy to provide a better fit to the reshaped business model. Operating profits were +5.7 million euros in 2014, which compares extremely favourably with the operating losses of -71.6 million euros suffered in 2013. This turnaround reflects the growth in banking income and the reduction in structural costs. This is a complete reversal of the situation in recent years and is attributable to the visible effects of the implementation of the strategic plan. It shows that the bank is on course for achieving sustainable profitability.Excluding non-recurrent costs, the operational profit would amount to +145 million euros. Net provisions and impairments for 2014 came to 271.9 million euros, against the

364.8 million euros recorded for 2013, a year-on-year reduction of 25.5%. This figure reflects the increase in net provisions for impairments in relation to the domestic business. This can be largely explained by extraordinary factors relating to the setting up of impairments to cover the exposure to i) GES in the amount of 80.4 million euros (credit impairment); ii) FINPRO in the amount of 17.9 million euros (impairment of financial assets), and also iii) real estate assets classified as Non-Current Assets Held for Sale (50.5 million euros).
It is worth noting the improvement in the credit impairment, that decreased 124.1 million euros vis a vis 2013. Excluding the non-recurrent impairment related to GES, the credit impairment stood at 31% of the amount recorded in 2013 (from 295.9 to 91.8 million euros) representing 0.9% of the average gross credit.

Losses at the discontinued operational units came to -18.3 million euros at the end of 2014. This compares with -75.2 million euros for 2013 and reflects the impact of the measures implemented at these business units to improve operational efficiency. The group maintained the following as discontinued operational units: Banco Banif Brasil, Banif Bank (Malta) and Banco Caboverdiano de Negócios. Under the purchase and sale agreement signed with COFIDIS in respect of the holding in Banif Mais SGPS, S.A., this

unit was also reclassified as a discontinued operational unit.

11

Consolidated Results - 2014

distributed by