Banif : Banco Internacional do Funchal, SA informs about the operations and results in the 1st Quarter of 2014

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

2014

1Q2014

CONSOLIDATED RESULTS

Lisbon, May 2nd 2014

Unaudited information

Fulfilment of responsibilities under the Recapitalization Plan

1. Capital increase in a total amount of 311.5 million euros, between June and October 2013. In addition the final phase of the capital increase, in the amount of 138.5 million euros, is to be carried out and is expected to be completed by the end of May.

2. Repurchase of approximately 70% of contingent convertible subordinated bonds (CoCos) subscribed to by the State: 150 million euros in August 2013 and 125 million euros in April 2014.

Transformation process already visible in 2014:

Restructuring measures brought forward to maximize value creation through greater structural rationalization and operational efficiency

1. Acceleration of the program of closure of bank branches in Portugal: 60 by the end of 2014 (approximately 20% of the total number of branches in December 2013). Implementation of the plan will result in the closing of 35% of its branches between 2012 and the end of 2014.

2. Implementation of a headcount reduction program that extends to up to 300 employees at Banif, SA (domestic business). Implementation of the plan will result in the a headcount reduction of 25% between 2012 and the end 2014.

Highlights:

In line with the objective of redefining Banif's geographic presence, which is one of the key pillars of the Restructuring Plan, the process of disposing of Banif's controlling stakes in Banif - Banco Internacional do Funchal (Brasil), SA, Banif Bank (Malta), PLC and Banco Caboverdiano de Negócios (BCN) is currently in due course and the disposals are expected to be carried out in 2014. In this context, these business units are now classified as discontinued operations; they continue to be consolidated using the full consolidation method in the financial statements with reference to 31 March 2014.

Recovery in net interest income and operating income

Structural rationalization with a positive impact in terms of cost savings

Improved net interest income: Net interest income rose 59% year on year, to 33.3 million euros, reflecting the effects of the current process of business model adjustment, which consists in a strategy of repositioning Banif commercially, offering higher value products to the corporate segment and cutting funding costs through greater selectivity in the capture of customer resources.

Improved operating income, which increased by 77.4% year on year, to 86.0 million euros, on the back of the net interest income recovery and a higher result on financial operations.

Delivery of the cost reduction policy: excluding the effect of costs related with the voluntary redundancy program (5.1 million euros in the first quarter of 2014, compared with 0.2 million euros in the first quarter of  2013), costs fell by 4.9% versus the first quarter of 2013 (-6.9% excluding non-recurrent recapitalization-related costs). It is worth recalling that already in 2013 the Bank recorded a 12.8% reduction in operating costs, including a set of non-recurrent recapitalization-related costs that reached 13.2 million euros.

Net provisions and impairments in the first quarter of  2014 stood at 48.1 million euros. The coverage ratio of overdue credit (>90 days) by impairments stood at  High level of cover of credit more than  90 days past due by impairments  significant levels (96.5% at the end of March 2014, not including collateral guarantees), taking into account the effect of discontinued operations.

Consolidated net result was -39.7 million euros. This compares favorably with 3Q13 net result (-69.2 million euros) and was driven by an improved operating income, implementation of the cost reduction policy and the result of discontinued operational units, and despite being penalized by the increase in staff costs related to the headcount reduction program (5.1 million euros) and the increase in provisions and impairments (48.1 million  euros).

distributed by