A NALYST:P EDROM ALCATA

DISCLOSURES AND DISCLAIMER AT THE END OF THE DOCUMENT PAGE 1/35 SEE MORE INFORMATION AT WWW.FE.UNL.PT

 The Euribor rate fall, the low liquidity in the money markets and the increasing spreads on Portuguese debt are

suppressing margins in the credit granting activities. The slow adjustment of the yielding assets spreads drove the net interest margin from 1,39%, in 2007, to an expectable 0,99% in 2010.

 Although the loans in the domestic activity registered an annualized 2,8% increase during the 1Q10, the expectable deceleration of the loans production will

lead to an estimated 1,2% growth rate during 2010. The economic slowdown is limiting the re-pricing of the credit portfolio.

 At December 2009, BPI accounted with a 3,5 B€

exposure to marketable public debt from Portugal and

Greece. As of 6 of June, its capital loss was estimated at 338 M€.

 The Pension Fund remains a non-issue, supported by the 108% assets coverage over the pensions’ liabilities and the inexistence of deviations outside the corridor.

 Angola operations continued to be the most privileged growth driver for the entire bank. Although the deposits will maintain its growth at a nearly 20% CAGR, the return on equity is expected to decrease to reflect a higher competition level by 2018. BFA’s net profits are

expected to improve at a CAGR of 7,45%.

07

J

2010

B

ANCO

BPI

C

OMPANY

R

EPORT

B

ANKING

S

ECTOR

A

NALYST

:

P

EDRO

M

ALCATA

Mst16000220@fe.unl.pt

The financial markets’ instability...

And the hedge from the emerging markets

Recommendation: BUY

Vs Previous Recommendation BUY

Price Target FY10: 2.48 €

Vs Previous Price Target 2.35 €

Price (as of 7-Jun-10) 1.48 €

Reuters: BPI.LS, Bloomberg: BPI PL

52-week range (€) 1.45-2.57

Market Cap (€M) 1.328

Outstanding Shares (M) 900

Source: Bloomberg

Source: Bloomberg

2009 2010E 2011E

Net Interest Income (M€) 617 627 769 Complementary Income

(M€) 548 510 628

Net Profit (M€) 182 142 224

Core Tier I (%) 7,8 7,9 7,9

Loans / Deposits (%) 126 124 120

EPS 0,20 0,16 0,25

P/E 12,3 15,7 10,0

PAGE 2/35

Table of Contents

Executive Summary ... 3

Company Overview ... 4

Company description ... 4

Shareholder structure ... 4

Domestic Activities ... 5

Banco BPI in the context ... 8

Risk Analysis ... 16

Pension Fund ... 17

Liquidity & Refinance Risk ... 18

Regulatory Risk ... 19

Valuation ... 21

Angola ...23

BFA in the context ... 25

Valuation ... 28

Appendix ...31

Financials ...32

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Executive Summary

The great differences between the operational activities and the macroeconomic environment involving the activities in Portugal and overseas impels different valuations for the domestic and international business units. Nevertheless, we used the flow-to-equity method (FTE) to evaluate the two major sources of revenues for the entire group, Banco BPI and BFA. Due to the small weight on profits of the Mozambique’s activities, we valued BCI and the brokerage firm through multiples (namely the average price-to-earnings ratio of comparable listed financial institutions in South Africa).

The forecasts on domestic operations were based on projections for the macroeconomic conjecture, the most relevant market trends and the evolution of the efficiency and performance ratios. Also, our valuation forces the future dividends to be dependent on the performance and the capital requirements by defining a target core tier 1 ratio for each year.

For Angolan activities, we predict variables as economic growth, investment, inflation, exchange currency rates and evolution of the banking penetration. Based on an industry analysis we forecasted the evolution of the BFA market share. Furthermore, in the short term, efficiency ratios move according to the strengths and organizational capabilities that BFA has already demonstrated in the past. However, in a more distant future we evaluate the effects of an increasing competition in the industry which will force the net interest income margins and cost-to-income ratios to approach the efficiency levels similar to comparable banks in Sub-Saharan African countries in higher development stages and where banks competition is stronger.

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Company overview

Founded in 1981 as an investment bank, the BPI Group is nowadays one of the leading Portuguese banking institutions. With more than 89% of its shared capital allocated on the domestic operation, BPI is a universal bank, acting in activities such as Commercial Banking, Investment Banking, Private Equity & Financial Investments and Insurance. Also important to BPI is the Asset Management sector, where according to the bank, BPI Gestão de Activos was the fourth largest fund manager in Portugal, with a market share of 16%, BPI Pensões was the second biggest pension fund manager with a 17,5% market share, and BPI Vida had an 8% market share in the segment of capitalisation and PPR products in the form of insurance.

The Portuguese distribution network comprises 697 retail branches, 38 investment centres, 16 branches exclusively dedicated to mortgage-related products and 54 centers dedicated to Corporates, Institutionals and Project Finance. The distribution network is completed with highly developed telephone and homebanking services.

The major BPI’s participation on an overseas activity is in Angola through a 50,1% capital participation on Banco de Fomento Angola (BFA). BFA is a pure retail banking dedicated to collect deposits and invest mainly in credit concession to the corporate and family segments. With 129 branches and strong brand awareness, BFA is one of the biggest banks in Angola. The international portfolio is completed with a 30% stake in Mozambique retail bank (BCI) and a 92,7% stake on a Mozambique brokerage firm.

Shareholder structure

Banco BPI possesses a reliable shareholders structure where 76,4% of the equity is held by qualified investors.

Despite the recent rumours that La Caixa was buying BPI’s shares to prepare a future take-over, we believe that this increase is only part of the strategy that the Spanish group has been following for the past two years: buying shares in an attempt to lower the average price of its shares in BPI. Therefore, we do not envision any take-over offer at least until the election of new board members in 2011.

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Domestic Market

Although, more than 30 banks dispute the market, over 85% of the deposits and loans are detained by the 5 market leaders: Caixa Geral de Depósitos (CGD), Banco Espírito Santo (BES), Millenium BCP (BCP), Banco BPI (BPI) and Santander Totta (Santander).

The dimension of the five main market leaders allowed them to expand and universalize their capabilities and offer services of Commercial & Investment Banking, Private Equity & Financial Investments, Asset Management, Corporate Finance and Insurance services.

However, since Lehman Brothers bankruptcy in September 2008, the banks in Portugal have been facing great challenges. Several effects were registered and had great impacts on the financials of the banks. First, the non-negligible exposure over the heart of the crisis forced banks to increase their impairments and reduce profits. Secondly, the trading revenues also abruptly declined with massive devaluation of the stock markets worldwide. At least, with very high loans to deposits ratios, financial institutions were relaying on the wholesale market as a primordial liquidity supply facility. Nonetheless, the lack of liquidity registered in 2008 in the interbank’s market increased the market spreads and forced banks to refocus on the competition for new deposits. The indispensable transformations of the bank’s funding structure deteriorated the net interest margins and the pressured even more the earnings.

Furthermore, the rise of cost structures is even more dramatic for banks. The re-pricing strategy is limited by the aggressive response of competitors and the creation of new loans.

During the past 15 years, Portugal registered a rapid expansion of the banks’ retail structures, supported by the rapid growth of the lending activities and increasing companies and households’ leverage levels. The sustainability of this trend seems to have achieved its end in 2008 and the consequent market saturation ceased the profitability of further investment in new commercial

The shortfall of the trading income and the liquidity in the money markets are creating additional pressure to the banks

Source: Bank of Portugal

PAGE 6/35

branches and made the organic growth be mostly limited to the natural market evolution.

Source: Bank of Portugal

Therefore, more than ever, banks are susceptible to the economic growth expectations. In fact, with the saturation of the market and an adverse economic environment over the past three years the profitability margins are dropping at a worrying scale.

1) Only considers the domestic operations

Source: Bank of Portugal, Company Reports and Analyst estimates

With the deceleration of Portuguese economic growth the demand is decreasing in every class of borrowings.

Source: Bank of Portugal, IMF World Economic Outlook

Furthermore, the slowdown of the economic environment and the effects of the financial crisis on the real economy are creating great tests to companies’ solvability and, in most cases, forcing them to downsize their structures. The higher difficulties for companies to face their liabilities and the growing unemployment rates are having visible consequences in the non-performing loans and forcing banks to further increase their impairments.

2004

2005

2006

2007

2008

2009

Real GDP Growth

Inflation

Unemployment

Portugal BPI

Cost of

Credit Risk 1,03% 0,37%

PAGE 7/35

Source: Bank of Portugal

As mortgage loans have, in average, maturities of 33 years and it is not possible for banks to change spreads during the lifetime of a loan, this impact is even greater to banks that are more exposed to mortgage credit. To banks like CGD and BPI the impact of a negative alteration of the cost structure may have longer and more profound effects on the profitability as they take more time to re-price their loans portfolio.

Although by 2009 the financial turmoil seemed to be ceasing and the interbank markets started to have more liquidity and allowing banks to alleviate the competition for deposits, the turn of the decade revealed new challenge to the Portuguese banking sector. The announcement of high public deficits and debt of countries like Portugal, Spain, Ireland and, most of all, Greece fired up the fears of insolvent sovereign debt. The speculation over the ability to repay its debt is increasing the spreads asked to lend money to those countries. The subsequent downgrading of the sovereign debt by rating agencies transfigured the activities in the fixed income markets.

While the markets do not achieve a consensus about the effectiveness of the austerity plans, the spreads over the sovereign debt of these countries may still be very high and show great volatilities.

The current events have two major impacts on BPI and other Portuguese banks. First of all, Portuguese banks are highly exposed to Portuguese sovereign debt and companies bonds. As they use mark to market accounting standards, the

The low elasticity of the loans spreads, especially in the mortgage segment, is a barrier to banks’ ability to maintain their profitability levels

Source: Company Reports

PAGE 8/35

devaluation of the bonds may lead to a rapid depreciation of the assets value. In this context, BPI, whose assets portfolio was restructured during the financial crisis to increase its assets quality by reducing its exposure to stock markets and increasing its volume of fixed income assets, is highly vulnerable to the decrease of, most of all, the Portuguese bonds. Fortunately, as the bonds were denominated in Euros, the increase risk of these financial assets has no direct impact on risk weighted assets and, consequently, does not force banks to retain more earnings to face their capital requirements or respect their target core capital and tier 1 ratios.

Secondly, due to the banks’ exposure to sovereign debt and to the great correlation with the overall economy, the day S&P downgrade Portugal it also increased the perceived risk level of the bank. The lower ratings hampered the banks’ access conditions to refinance in the international markets. As mentioned above, the high dependence on the wholesale credit markets and the increasing funding costs due to a higher perceived risk of Portuguese banks are shrinking the margins that banks gain over the credit conceded and the loans taken.

Source: Bank of Portugal

Our valuation takes into consideration the effects on the assets value and on the funding costs.

Nevertheless, the current crisis has being an additional confirmation of the impact of the international activities. During the past decades, with the slowdown of Portugal’s economy and the maturation of the market, the four main Portuguese banks have been privileging the investments overseas.

Although with different internationalization strategies and market focuses, the activities outside Portuguese territory have been working as a growth driver and, more than ever, as a shield for negative economic and financial cycles. In fact, after 2007, with the decline of domestic activities profitability, the operations overseas maintained its growth rates and contributed to more stable banks’ earnings, especially in those whose international operations relay more on operations outside the European markets.

The strategy to reduce the exposure to the equity markets has led BPI to increase its portfolio of sovereign bonds

The downgrade of the Portuguese governmental bonds also increased the perceived risk of its domestic banks...

PAGE 9/35

Nevertheless, the shield of the non-domestic banking activities is not enough to hide the extraordinary downturn of the operations in Portugal. Therefore, is our conviction that in the near future banks will concentrate their efforts to increase their efficiency levels. To decrease the cost-to-income ratios is expectable that being the revenues difficult to have a remarkable growth, especially in the context of net interest margins being pressured down, banks like CGD, BES, BCP and BPI will have to focus on the evolution of their structural costs by stooping further investment on the retail chains and stagnate or even diminish the personnel and other administrative costs. In the long-term, if the struggle for better efficiency levels is not producing the expectable results is possible to assist a new M&A trend. The mergers on the Portuguese sector may be one of the solutions to drop the relative weight of the bank’s structural costs by unifying retail chain and suppress some of the common services and overcapacity of determinant business units. However, although Dr. Fernando Teixeira dos Santos, the Portuguese Minister of Finance, recently recognized that there is space for consolidation on the Portuguese banking industry, the lack of liquidity in the debt markets turns unviable to raise funds to enable acquisitions. Also, the generalized low valuation of banks in the equity markets raises extraordinary barriers to new all-stock deal. Therefore, our valuation does not include any take-over premium.



Banco BPI in the context

During the past decade, the organic growth was visible on the growing assets, loans to clients and deposits. By the end of 2009, BPI accounted for more than 7.500 employees and a retail chain with 697 branches, 38 investment centres and 16 branches exclusively dedicated to the mortgage segment.

However, although BPI was experiencing an interesting domestic growth, the saturation of the market and the challenging environment stopped the organic growth process and the retail chain expansion seems to have achieved an end. Furthermore, since 2008 the economic cycle greatly reduced the net profits by affecting the operational results and the assets quality.

There are four main variables that affect the operational results: the Net Interest Income (NII), the commissions received, the gains from financial operations and the structural costs.

Net Interest Income

To BPI in 2009, the difference between the interests obtained from the yielding assets and the costs related to the liabilities represented 54,6% of the entire operational revenues. Although, loans to clients signified 85% of the yielding assets for the domestic operations, the costumers’ resources only financed 59%

2004

2009

Employees

7.599

Retail

Branches

697

Investment

Centers

38

Mortgage

Centers

16

Source: Company Reports

Source: Company Reports

PAGE 10/35

of the bank’s yielding liabilities, showing, once again, the BPI’s dependence on the interbank market to finance itself.

Since 2004, the increasing competition to attract new clients had two distinguish effects. In terms of volume, the better conditions offered to the clients allowed a rapid growth of the credit conceded. By the other side, since 2004 the spreads of the loans over the yielding assets have been shrinking.

Source:Banco BPI

Although until 2007 the volume effect was sufficient to counterbalance the relative profitability of the loans, since 2008, with the economic slowdown, the deceleration of loans demand and, most of all, the difficult access to refinance, the net revenues from the clients’ credit decreased. In fact, the financial crisis started in 2007 and the fears of spreading systemic risk reduced the markets confidence on the banking sector. The perception of a greater banks’ default risk reduced the liquidity in the wholesale fund markets and generated the increase in loans spreads.

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In addition to the increasing spreads, the rapid decrease of the Euribor rates had direct impact on the net interest margin due to a lower elasticity of the liabilities. As the loans granted are mostly defined as a spread over the 3 or 6-month Euribor, their rapid decline after November 2008, made the interests received drop 35,6% (i.e. 631,6 M€). Although the cost of fixed term liabilities also accompanied the reference rates fall, the reduction was only 498,6 M€. As deposits have interest equal to zero or close to it, when the reference rate drops, the value BPI obtains from conceiving loans falls proportionately to the reference rate evolution. The combined effect of the spreads rise, the lower loans’ production and the Euribor decrease, reduced the difference between interest received and paid by 30%, i.e. 133 M€.

Worth noticing are the BPI’s risk management practices while dealing with the interest rate risk. Although the net interest received dropped by 233 M€, the gains obtained by the hedging and trading derivatives allowed to partially shield the abrupt fall of the interest rates by registering a positive incremental return of 81,7M€. excluding the revenue from the derivatives the net interest margin would drop from 1,05 to 0,86%.

For 2010, although it is not expectable to observe increases at the ECB reference rates, we forecasted that Euribor rates will slightly increase to reflect the high funds demand on a low liquid market. Nevertheless, it will remain at historically low levels as registered nowadays.

Furthermore, the low fluctuations of Euribor rates allowed us to predict a great reduction on the derivatives revenues. Additionally, in the long term and by definition, the hedging derivatives should have a null net present value on the bank’s valuation.

On the positive side we highlight the re-pricing strategy and the better than expected growth on the mortgage loans during the 1Q10 has allowed to better accommodate the worsened financing conditions. The increase from 11,9 in 2009 to 12,1 B€ in the first quarter of the current year yields an annualized growth rate of 6,9%. However, the low liquidity registered on the interbank market since

2005 2006 2007 2008 2009

Narrow Interest Income 440.500 454.400 476.800 470.400 420.300

Interests Received 823.000 1.072.000 1.526.900 1.776.000 1.144.400

Interests Payed - 426.800 - 651.000 - 1.061.800 - 1.332.300 - 833.700 Other income and costs 14.250 21.600 22.300 25.100 26.300 Trading derivatives - 1.100 12.800 6.400 6.700 50.400 Hedging derivatives 31.150 - 1.000 - 17.000 - 5.100 32.900 Commissions related to deferred cost & Other Rev. 34.800 40.636 53.900 33.300 32.900 Net Interest Income 475.300 495.036 530.700 503.700 453.200

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February and the tougher refinance conditions for Portuguese banks since their downgrade will condition the new loans production until the end of the year. Also, as banks have recently announced the financing of the Portuguese economy will be more difficult which will affect mostly the concession of new loans for the small business and companies, institutional and corporate finance segments.

With the combined effect of the decreasing income from derivatives, the loans re-pricing and the slow growth of the economy led us to predict for 2010 historically low net interest margins (0,99%).

As showed in the graphic above, the recuperation will be visible already in 2011 due to the expectable revitalization of the liquidity in the money market, better growth forecast and the expectable rise of Euribor rates. However, we maintain a negative outlook on the markets’ perception of the austerity plans effectiveness and on the evolution of the debt crisis. Any unexpected shock can affect the confidence in the markets and constraint, even more, the net interest income.

Commissions

Although BPI is mostly known as a leading commercial bank, its roots as an investment bank can still be observed today. The structural higher than average weight of commissions-based income on the total revenues, provides not only the diversification benefits of different source of income but also the capacity to easier re-price and innovate its products offer.

2005 2006 2007 2008 2009

Comissions

245.600

269.100

298.600

255.800

262.500

YoY % -0,24% 9,57% 10,96% -14,33% 2,62%

Although registering a remarkable YoY growth of 16,6% in the 1Q10, we detach the decrease from 73,7 (4Q09) to 66,3 M€ in the first quarter of 2010. Although during 2009, the re-pricing strategy of commissions related to the commercial banking allowed BPI to register an increase in the commissions-based income, for 2010, the price effect will be marginal and we expect the commercial banking commissions to follow the evolution of the mortgage and consume growth.

Source:Bank of Portugal and Company

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Furthermore, the positive evolution of off-balance resources will improve the annual income from the asset-management division. On the investment banking side, the great markets’ volatility got on the first five months of 2010 led to higher investors’ risk aversion and, ultimately, to lower brokerage revenues. However, the increasing activities in the M&A sector and the expectations of further initial public offer (IPO) of public companies like EDP or Galp are positive news for the investment banking business unit by potentially introduce a new impulse to the brokerage and, most of all, the corporate finance fees.

For 2011 to 2013, commission-based income will register a new impulse sustained on the stabilization of the economy worldwide which may prompt the liquidity in the financial markets and lead investors to refocus on riskier products which will benefit revenues from investment banking and asset management. Also, the predictable higher growth on consumption loans is expected to produce positive effects on the credit card commissions.

From 2014 to 2018, we expect commissions to follow the inflation and real GDP growth.

Gains from financial operations

Other important source of revenues in the banking industry is the gains from financial operations. The extraordinary results from the pension fund BPI Vida and the capital gains gain from the assets available for sale and for negotiation at the fair value are the main contributors for these non-interest based income. As they are composed mainly by marketable assets, the revenues are completely dependent on the financial markets evolution. This fact can easily be assessed in 2008 where the 22 M€ loss reflects the impairment obtained with the BPI’s exposure to BCP.

The rapid improvement to 93 M€ in 2009 reflects not only the extinguished exposure to BCP, but also the increase from 2.735 to 7.762 M€ of the portfolio available for sale. During 2009, BPI continued the strategic decision to minimize its exposure to the equity markets and refocused its investments portfolio on the fixed-income markets, mainly through a higher exposure to long-term sovereign debt from Portugal and Greece.

Note: Values are in Billion €

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As of 4 of June, the Portuguese and Greek governmental bonds registered a total 338 M€ devaluation when compared to the values stated in the 2009 annual report. The total balance of capital gains affects the fair value reserve rubric at the shareholders’ equity. As in 2009 the assets available for sale already incorporated a loss of 67 M€, we adjusted the reserves at the fair value by the differential. However, the potential capital losses on sovereign bonds from Eurozone and denominated in Euros do not affect the own funds computation and, therefore, has no direct impact on the core tier and tier I ratios.

Moreover, the losses are only recognized in the income statement when the assets are sold or the counterpart defaults. Therefore, BPI does not intend to sell it during 2010 and will continue to take advantage of the yield curves’ high slope.

Therefore, in this context of a sovereign debt crisis, especially affecting Portugal and Greece, and with the negative behavior of the financial markets worldwide, the capability of having trading income will be reduced specially on the fixed income markets. Nevertheless, although we do not expectable a massive loss recognition on this rubric, we forecast a great fall on income obtained by trading marketable company and governmental bonds. Together with the equity markets’ deceleration, the total impact translates into a 45,92% reduction, i.e. from 92,7 to 50,1M€ in 2010.

Structural Costs

Even though 2008 and 2009 registered a rapid decrease of the banks’ revenues, the structural costs are much less volatile.

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2009) and consequently showed reduced capacity to cut other expenses, namely on the personnel and administrative salaries. As BPI will not be able to promote further significant cuts on the structural costs in 2010 it will also imply the end of its retail structure expansion and the stagnation of its recruitment process. The focus on controlling the costs and the forecasted decline of the bank’s revenue, will lead to historically low efficiency levels. In the medium and long term, revenues will grow at a faster rate than the costs, which will have a positive impact on the cost-to-income ratios. However, due to the already high indebtedness levels of Portuguese families and companies and the weak growth forecasts, the growth rates will not achieve the values registered in the past decade. Therefore, and with the strong effective competitiveness in the sector, we believe that banks will not be able to achieve again the margins and profitability levels observed until 2007.

Source: Company Reports

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

Risk Analysis

Counterpart Risk

Underlying to the banking business is always the counterpart risk. One of the banks’ value drivers is their ability to assess and manage the risk of their investments (i.e. loans granting and possession of financial products). The importance of controlling risk is visible not only on the banks’ organizational structure but also on the need to prevent for expectable losses of non-performing loans (NPLs).

With an impact over 60% on the operating profits, it is essential to understand its behavior for the next years.

Source: Company Reports

The effect of the financial crisis pushed the impairments to historically high levels. Although BPI accounted for a rapid improvement during 2010, the maintenance of high loans in arrears ratio, the historically high unemployment and the current companies difficulties to refinance themselves, made us maintain the credit cost estimation at 0,31%.

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bursting speculative bubble. Moreover, the mortgage NPLs ratio is traditionally much lower than the registered in the other types of credit. Therefore, the higher-than-peer exposure to the mortgage loans allows the bank to sustainably have lower cost of risk than most of its competitors.

In the long term, the improvement of the macroeconomic scenario will lead us to drop the NPLs to meet historical levels at 0,24%

Pension Fund

One additional source of risk in the Portuguese banking industry is the requirement for banks to manage the pension liabilities of people who collaborated or still work at the bank through their pension funds. BPI pension fund was created in 1992 and is currently responsible to face the pension liabilities of 7727 workers, 7394 pensioners and still 2846 ex-workers.

Source: Companies’ reports and Bloomberg

In this context, the fund assets should cover 100% of the funds liabilities. Nevertheless, the Bank of Portugal allows a corridor of 10% on the maximum value of the assets or the fund liabilities to accommodate cyclical deviations. Additionally, in 2008, due to the impact on the assets’ value due to the massive devaluations on the financial markets, the Bank of Portugal allowed that the actuarial losses taken in 2008 could be differed during 4 years.

Any deviations from the corridor must be covered by the banks own funds which reduces the capital eligible to calculate the tier and core tier I ratios. In this context, BPI has a competitive advantage.

Two factors allowed BPI to be the only private Portuguese leading bank to do not have their capital requirements affected by the pension fund. First of all, the 14,7% valuation (9,2% higher than the expected return) allowed a 194,9 M€ decrease on the deviation. The complementary effect, 84,1 M€, was due to the alteration of the actuarial assumptions.

Source: Companies’ Reports

Note: As of December 2009

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Notice that these modifications were in line with the practices in the industry but are feasible only during periods of low inflation and weak economic prospects. However, although the pension funds are a source of risk because high deviations may reduce the shareholders’ equity and affect the capital ratios, the positive result in the first quarter, the 108% liabilities coverage and the inexistence of deviation outside the corridor make the direct impact null.

Liquidity & Refinance Risk

The obligation to manage the treasury to be able to meet the operational and the non-current liabilities is a need in every industry. However, in the banking sector this activity assumes even more importance due to the soaring leverage levels and the maturity gaps between assets and liabilities. To banks that are highly exposed to the short-term debt like the monetary markets, a perfect treasury plan is essential to guarantee new source of funds in order to be able to face the short, medium and long term maturing liabilities.

During 2008, and to prevent from the lack of liquidity on the short-term debt markets, BPI focused its corporate strategy on reducing its liquidity risk by focusing on capturing clients resources and relay less on the wholesale funds markets. This funding strategy, although perspicacious during the crisis, elevated the costs of funding and pressured down the interest margins. In 2009, and with the cyclical economy recover the debt markets regained some of its liquidity and allowed BPI to slowdown the deposits competition in order to find unds at more convenient conditions. This refinance was based on higher exposure to the short-term markets and the diversification of its finance sources in the medium and long term.

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Positive signs were showed at early 2010 when BPI issued five-years 1.000M€ mortgage bonds with a spread over the 6-month Euribor of 62 b.p. and 500M€ of 3-year senior debt with a 85 b.p. spread over the 3-month Euribor.

However, the fixed-income markets suffered new hit that got its peak during the sovereign debt crisis. The return of the lack of confidence to the markets led again the liquidity to historically low levels and hardened the refinancing conditions.

Although the Portuguese government already announced an extension of the credit guarantees to the Portuguese banks, no financial institution has used it since May 2010.

Furthermore, if conditions do not alleviate during the current year, BPI still counts with alternative funding strategies. In this context of refinance difficulties, the refocus on deposits as in 2008 is an expectable market trend. However, the higher competition and the main focus on 2,3 and 5-year deposits, may elevate the spreads again, pressuring even more the interest rate margins.

However, in the case of debt markets and deposit captures are not enough to face the 5.600M€ debt maturing this year, BPI can still i) use its more than 2.800 M€ of eligible assets to refinance with the European Central Bank or ii) sell the part of its 5.300 M€ portfolio of highly liquid sovereign bonds.

In line with this analysis, the rating agency Moody’s announced in its recently released Portuguese banking sector report that “despite the structural dependence on foreign financing (...), all Portuguese banks may survive a foreclosure of funding over a period of 12 months, making use of the liquidity that would apply to the current assets, and increasing dependence of the ECB". In this context, the liquidity risk is not a major concern for our valuation but, still, prints a negative outlook for the net interest margin evolution.

Regulatory Risk

The financial crisis started in 2007 and, especially, the Lehman Brothers bankruptcy in September 2008, exposed to the entire world the consequences of the uncontrolled systemic risk in the financial sector. The severe effects to the real economy worldwide gave new strength to the political and supervisory organizations that proclaimed the need to increase their powers and further control the willingness to take risk of, most of all, the “too big to fail” banks. In this context, several countries have been adopting new rules to elevate the monitoring power of the central banks. However, the effectiveness of new rules depends on its adoption at a world scale. Therefore, being the new Basel

The lack of liquidity in the markets is hardening the access to new funds...

... however, the BPI’s ability

to seek funds in the

PAGE 20/35

agreements the privileged vehicle to redefine the standards on the financial sector it assume a renewed importance.

Since the first guidelines were made public in 2009, a lot of speculation about its measures urged. Nevertheless, there is a certain consensus about the focus of the new Basel agreements.

New liquidity requirements and restrains on the assets composition are some of the most expected instruments to be created. The goal is to assure that banks are able to cover its short-term liabilities and further try to match the duration of its assets and liabilities to avoid liquidity problems.

However, is the definition of the new capital requirements and the rules for its calculations that have been raising more anxiety. Currently, the computation of the core capital has an enormous complexity and involves items that generate a great discussion. Consequently, it is expectable that the Basel III will redefine the electable assets to the calculus of the Tier ratios (e.g. by excluding the minority interests, investments in subsidiaries, deferred taxes and including pensions’ gaps). The impact of these new directives is the decrease of the core tier and tier 1 capital ratios. Moreover, it is also foreseeable that the minimum capital ratios will increase.

The combination of the stiffing rules and the increasing minimum capital ratios requirements will create the necessity to hold more equity in the balance sheets than before. The effects are clear. First, as the equity requirement is higher, the dividend policies will be constrained. Second, the return on equity (ROE) will decrease as the assets evolve more than proportionally to the banks net profits. Although the raise of the requirements reduces the bank’s risks and might decrease the return on investment demanded by the equity holders, it is our opinion that it may not be enough to compensate for the decreasing ROEs. Third, for most of the banks retaining earnings will not be sufficient to meet the capital ratios at new obligatory levels, forcing financial institutions to raise its shared capital by issuing new shares.

In fact, Pedro Duarte Neves, vice-governor of the Portuguese Central Bank, recently proclaimed that the new standards may require more than 700 B€ capital reinforcements, just in Europe. A generalized demand for new equity investors will create a serious challenge to the liquidity of the markets. Therefore, is our believe that, in a situation like we are facing, the high competition for equity funds will force banks to issue new shares at a discount, diluting, more than fairly, the current equity holders positions. As profitability decreases due to deleveraging and fear of new shares issuing in the near future at much more attractive prices, investors may be led to hold their investments on banks, specially on those who are in the verge to be forced to issue more capital.

Basel III may bring new liquidity requirements, limit the riskiness of the assets composition,...

...define new capital requirements and stiffen the rules of its computation

Constraints on dividend

policy, decreasing sector’s

profitability and a high demand for extraordinary equity funds may be some of the consequences of the future agreement

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However, the BPI group registered a core Tier 1 capital of 7,8% in 2009 and appears to be in an enviable position. By excluding the minority interests from the core tier 1 computation, the ratio would drop almost 0,7%. Furthermore, if speculation is right, the new core tier 1 requirement will be set in the range from 6 to 8% by 2012. In the worst case scenario, with the capital ratio being set at 8% and with no enlarged adaptation period, BPI will be forced to retain most of its net profits in 2010 and 2011. On the other hand, if earnings are retained it will not need to raise capital from the markets. In times of a massive demand for equity funds, the fact that BPI does not need to go to the market, decreases the fear of new shares issued at a discount and may, in fact, constitute a competitive advantage.

At least, as the markets will not present the ideal conditions to capture new equity funds, the solution to increase capital ratios may rely on decreasing the risk weighted assets. Although Basel III will propose alterations to assets compositions by demanding higher liquidity and lower counterpart risk, it does not exclude the possibility of raising a new wave of assets securitization in order to take risky assets out of the banks’ balance sheet. As these instruments are similar to those that primarily originated the financial crisis it is crucial to see which measures Basel III will be able to implement in order to prevent this new trend and avoid reinforced fears of increasing systemic risk due to new massification of assets securitizations.



Valuation

Due to the unfeasible distinction between the operating and financial debt we used the Flow-to-Equity methodology to evaluate the domestic operations. One of the main idiosyncrasies of this approach is the direct impact of the retained earnings on the determination of the discounted cash flows.

As banks are required to maintain a minimum capital level we, according to the anticipation of the stiffening regulations in the market, defined the retained earnings as a function of a target core tier I ratio.

Furthermore, in 2009 BES and BCP started to compute the risk-weighted assets by the IRB method resulting in a positive effect on the core tier I of 0,4% and

The creation of new rules for the own funds

calculation may imply a decrease from 7,8 to 7,1% on the actual core tier 1 ratio.

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0,7% respectively. It is expectable that in 2013, BPI will be able to implement it with an expected positive impact on the core tier I of 0,6%.

At least we defined the equity discount rate according to the CAPM model. The risk-free rate adopted was the 10-years German Bond. According to this definition and due to the increasing risk in Portuguese activities we defined a country risk-premium by adjusting the Credit Default Spreads according to the disparity between the volatility registered in the PSI-20 index and the Portuguese bond holding returns.

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Angola

Although Angola obtained its independence from Portugal in 1974, the subsequent civil war for the governmental power lasted almost 20 years. Since 2002, with the end of the active military struggle for Angola’s authority, the country started to embrace an extraordinary economic growth. Supported on the increasing revenues from oil extraction, Angola has been trying to reconstruct its extremely damaged infra-structure and create a better environment for business development.

Together, the elevated revenues from natural resources, the strong public investment and the remarkable dynamics of a booming domestic demand, have been the lever for flourish new investments in non-oil sectors. However, even though the economy has been registering a widespread economic growth, Angola is still alarmingly dependent on oil. In fact, almost 60% of the GDP comes from the Oil & Gas sector, while the exports are almost exclusively of raw petroleum.

The stabilization of the political environment with the consequent great decrease of necessity to finance military investments and the rapid increase of oil revenue have allowed not only to increase funds’ transfers to infra-structure reconstruction and implementation of other intuitions to support the economy but also allowed a great reduction of money printing. In fact, inflation has been one of the biggest dramas in Angola which generalized the adoption of the US dollar as a safer wealth reserve.

With inflation above 3 digits in 2002, the government has successfully been reducing it and have the goal to shrink it to less than 10% in the near future. To achieve it, the government has to overcome the challenge of the monetary mass’ boost and control the exchange ratios.

In fact, although Angola was almost self-sufficient in 1974, the civil war destroyed most of the industry and the farming sector. Nowadays, Angola is forced to import most of its aliments and other capital items. Therefore, imported inflation is a major threat in scenarios of Kwanza’s devaluation.

In order to respond to such threat the Angola Authorities have been controlling the exchange ratios by trying to maintain a semi-peg in the reference exchange ratio, the US Dollar/Kwanza ratio. While the oil production and prices were sustainably increasing during the second half of the past decade, the balance of trade was having a positive sign and contributing to augment the foreign currency

2002 2003 2004 2005 2006 2007 2008 2009 2010E Inflation 108,90% 98,30% 43,60% 23,00% 13,30% 12,20% 12,50% 14,00% 15,40%

Until the end of the first semester of 2008, the increasing oil prices and the raise of oil production, allowed Angola to

comfortably sustain high real growth rates

Source: IMF

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reserves of Angola’s Central Bank and allowing it to comfortably manage the US Dollar/Kwanza ratio or even alleviate the inflation pressure by promoting the Kwanza valuations.

However, when the financial crisis started in 2007 reached the real economy world-wide, the oil prices got massive devaluations. As the petroleum barrels were losing value, Angola’s exportations started to follow the trend. With an internal demand for foreign products still growing, the foreign currencies reserves of Angola’s Central Bank started to decrease. Therefore, in order to avoid liquidity problems, the Angola’s authorities were forced to promote the first Kwanza devaluation in more than three years.

Source: Bloomberg

Due to the importance of deposits and credits’ forecast in nominal terms, we constructed our analysis in the domestic currency. The first obvious impact is the need to foresee the evolution of the exchange rate. As previously explained, the action of the Central Bank drastically reduces its volatility towards the US Dollar. The expectation of the a sustained oil price above 75 dollars during the next years, allow us to believe that Angola’s trade balance will remain positive, while the foreign currency reserves stagnate or, most likely, increase. As a result, with the US dollar/Kwanza ratio at 120, we forecast that the ratio may stabilize during the next years. The conversion to Euro was based on the market average predictions.

Source: Bloomberg and Analyst Estimates

Finally, with the predictable Angola’s Authorities measures to fight inflation and the stabilization of the exchange rates, we took the IMF inflation decrease predictions over the next 4 years, and estimated an equilibrium rate at 6,0% by 2018.

2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E US $ / Kwanza 89 95 98 98 98 98 98 98 98 98

EUR / US $ - 1,32 1,33 1,30 1,34 1,33 1,33 1,33 1,33 1,33

EUR / Kwanza 125 130 127 131 130 130 130 130 130

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

The Banking Sector

Angola, even though being one of the fastest growing countries in the world, can still be considered undeveloped and great social disparities are easily identified. The process of economic urge and the great inequalities among the population are straightforwardly assessed when looking to the banking sector where the fact that still only 8% of the population has a banking account reveals the immaturity of this growing sector. Some other barriers to the sector development due to the reconstruction of the economy, institutions and social organization are, among other, the lack of notarial records, the deficient available information for better segmentation processes and lack of specialized human resources. Nevertheless, the attractiveness of the industry is unquestionable.

Since 2003, the deposits and the credit conceded have been increasing at a CAGR of around 50 and 60%, respectively.

Source: Bank of Angola and Analyst Estimates

The astonishing growth is evidently related with the economic growth, public investment, inflation, the focus on organic growth and increasing banking penetration. BFA is no exception on such an appealing market. The credit and deposits’ boom is also reflected in BFA’s corporate strategy. The rapid increase of the retail structure has allowed, from 2006 to 2009, to lever the deposits at a CAGR of 44,1%. As data of bankarized population is not easily obtained and due to difficulties to estimate the marginal effect of new accounts on deposits and credit, we used the ratio total deposits to the GDP and the transformation ratio to calculate their future growth.

Source: Analyst Estimates

2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Inflation 14,00% 15,40% 14,05% 12,22% 10,90% 9,59% 7,79% 6,90% 6,00% 6,00%

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Furthermore, with only 6 banks operating before the year 2000, the government started to emit new licences with intuit to increase competitiveness in the sector.

Even though the number of banks operating in Angola has remarkably increased during the past decade, the amplified competition for deposits and credit concession has not been enough to substantially reduce the market shares of the main market leaders over the past 3 years. However, we highlight that, even though BFA solved the divergences with the Angola’s Authorities and sold 49,9% of the shareholders’ equity to UNITEL, the entry of this new strategic partners has not delivered the advantages forecasted and the market shares has continued to decrease. Nevertheless, we believe that the deposits and credit’ market share will continue to drop, but at a much slower pace, stagnating around 15,7 and 15% by 2012, respectively.

Also, the increasing competition has not yet produced the expectable effects on commissions and margins due to, most of all, the growth dynamics that allowed the banks to still maintain high levels of profitability. The table below summarizes some of the most relevant indicators for the entire sector.

Source: Company Reports and Analyst Estimates

Moreover, the excess of liquidity present in the entire market, the plainness of the financial products offered by most of the banks and the inexistence of a stock

2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Deposits' Market Share 23,8% 20,9% 19,0% 15,9% 15,8% 15,8% 15,7% 15,7% 15,7% 15,7% 15,7% 15,7% 15,7% Loans' Market Share 23,8% 22,8% 20,9% 15,9% 15,4% 15,2% 15,0% 15,0% 15,0% 15,0% 15,0% 15,0% 15,0% The entrance of UNITEL in

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exchange allow retail banks to have simple assets structures. On the liabilities side, most of the banks obligations are the demand or the short-term deposits. By the other side, the assets are mostly divided into two rubrics: the credit to clients and the short-term loans to the state. In fact, although the transformation ratio at 88% is not alarming a further analysis show some sources of concern. Even though the loans granted to the private sector have been growing at an extraordinary rhythm, the credit granted to the state represented over 40% of the total market.

Therefore, taking from the relation between the credits and the deposits the weight of the state, the ratio would drop to 50,06%. BFA is in a more vulnerable position, where only 43,23% of the total loans in 2009 were conceded to clients. Nonetheless, this ratio is expected to increase to equilibrium levels registered in other markets.

Therefore, the excess of liquidity forces BFA to use the investments in short-term sovereign debt to i) profit from the deposits surplus and ii) to try to match the durations of such simple and liquid liabilities’ structure.

The weight of the state loans on BFA assets structure makes it too dependent on Angola’s authorities. Changes in the context, as public-investment cuts and subsequent reduction of loans demand from the state may create great difficulties to the bank that will be forced to find new alternative investments that grant such high yields as the loans from the Angola Government. Moreover, the substitution of sovereign debt assets by other riskier ones would lead the adjusted risk-weighted assets to upper levels and reinforce the need to retain or raise additional capital. Also, the liberalization of access of the Angola’s sovereign debt to international financial players is a further threat because it may increase the supply of funds and probably bring the yields down.

2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Loans to Clients / Total Loans 43,5% 46,2% 48,8% 51,4% 54,0% 56,7% 59,3% 59,3% 59,3% 59,3%

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

Valuation

The lack of historical data, the fast economy recovery and the increasing competitiveness of the sector, require an extended analysis of the macroeconomic environment and a scrutiny of international banks for comparison purposes.

To predict the margins and operational performances in the long run we used comparables from the banking sector in three different African countries: South Africa, Botswana and Nigeria.

Although Nigeria is not more developed than Angola, its great dependence on the Oil & Gas sector is helpful to understand the impacts of the barrels’ price volatility in the macroeconomic environment and its effects on the financial sector. Furthermore, with 21 listed commercial banks is a nice approach to forecast the dynamics of the competition.

In addition, Botswana and South Africa, geographically close countries, have higher development standards and the banking sector has already reached much higher maturity levels than in Angola. Moreover, both share identical industry structures where the four main retail banks have more than 75% of market share on deposits and credits. Therefore, and remembering BFA as fundamentally one retail bank and a main market leader in Angola, we defined the biggest retail banks in both countries as our key comparables to forecast the impact of an increasing competitiveness in the financial sector in Angola.

The growth forecasts were made taking into consideration the evolution of the deposits, credit and BFA market shares. The main variables were already disclosed on the sector analysis: increasing banking penetration, inflation, economic growth and market shares’ evolution.

Nevertheless, the demonstration over the past years of BFA’s remarkable ability to obtain great efficiency levels, make us predict that no large changes will occur in the short-term. However, with the banks starting to fulfil the limited segments and its probable increasing saturation it is expectable to observe banks’ performance ratios as, among other, the ROE, the Cost-to-Income and the Net Interest Margin to converge to new equilibrium levels in the long term.

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The conjecture of a fast economic recovery during 2010 and 2011, allow us to be optimistic about the production of new credit and the evolution of the deposits. We expect the Net Interest Income to grow to 206,7 M€ in 2010 and the complementary to follow a similar path until 172,8 M€.

By the other side, the BFA’s physical expansion and increasing number of employee will increase the structural costs (excluding amortizations) by 36,5%.Nevertheless, the efficiency levels are expected to be higher than the markets’ average during 2010 and 2011. However, in the long run we forecast the cost-to-income ratio will increase to 51,2% until 2018 to reflect the development of the market’s competition and the slowdown of the economic dynamics. The effects on the performance and net profits are reflected in the table below.

Although the net profits at a CAGR of 8,26% until 2018 contrast with a 48,9% annual growth registered in the past 3 years, it reflects the new equilibrium levels registered in more mature African markets (in South Africa and Nigeria we registered an average ROE of 15,6% and 18,75%, respectively).

Similar approach was made to forecast the retained earnings. In the short-term, dividends were calculated in order to maintain BFA’s capital ratios according to

2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Industry Indicators

Deposits/GDP 24,03% 32,97% 36,88% 37,95% 41,27% 44,59% 47,16% 49,72% 52,29% 54,86% 57,43% 60,00% Deposits Market Share 20,90% 19,00% 15,90% 15,60% 15,40% 15,40% 15,40% 15,40% 15,40% 15,40% 15,40% 15,40% Loans Market Share 22,80% 20,90% 15,90% 15,40% 15,20% 15,00% 15,00% 15,00% 15,00% 15,00% 15,00% 15,00%

Income Statement

Net Interest Margin 4,92% 3,80% 3,98% 4,11% 4,23% 4,17% 4,12% 4,06% 4,00% 3,94% 3,89% 3,83% Comissions/NII 15,97% 13,08% 22,95% 21,77% 20,58% 19,40% 18,21% 17,02% 17,02% 17,02% 17,02% 17,02% Cost-to-Income 30,88% 28,70% 29,10% 30,95% 33,79% 36,63% 39,15% 41,68% 44,20% 46,72% 49,25% 51,77% Amortizations/Tangible Assets 10,93% 13,09% 11,20% 11,14% 11,09% 11,08% 11,08% 11,08% 11,08% 11,08% 11,08% 11,08%

Balance Sheet

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the most recent trends and regulatory changes made due to the financial crisis. However, in a longer period, we expect a higher leverage of retail banks, which in our opinion will tend to the assets to equity ratios registered in the four biggest retail banks in South Africa (7,64%).

At least, as the valuation was made on nominal terms the discount rates were influenced by the inflation’s estimations. The lack of rating classification and the inexistence of plain-vanilla medium or long-term sovereign bonds available for common investors led us to use the American risk-free rate adjusted by the inflations’ differential to properly discount the generated cash-flows.

𝑅𝑖𝑠𝑘 − 𝐹𝑟𝑒𝑒𝑅𝑎𝑡𝑒 = ( 1 + 𝑅𝑓_𝑈𝑆𝐴) × 1+ 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛𝐴𝑛𝑔𝑜𝑙𝑎 1+𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛_𝑈𝑆𝐴 −1

Furthermore, with current inflation at approximately 15% and with the governmental goal to decline it to much lower levels in the next years, the expectations of a significant decrease on the following years must be incorporated in the valuation. Therefore, to accommodate the evolution of the inflation on the nominal discount rates, it was allowed to discount cash flows at a yearly based adjusted rate.

Note: The country risk-premium is equal to the implied risk-premium of countries with similar risk as rated by OECD

Source: World Economic Outlook and Analyst Estimates

For the free-cash flow computation we only considered the depreciations as a non cash-out cost. The discounted cash flows are as presented in the following table.

The sum of the discount cash flows yields a valuation of 1042,8 M€. Therefore, our valuation for the 50,1% stake on BFA is 522,4 M€, i.e., 0,586€ per Banco BPI share.

2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Adjusted Risk-Free 16,1% 17,6% 15,6% 13,5% 12,2% 11,2% 9,3% 8,4% 7,5% 7,5%

Risk-Free USA 3,40% 3,40% 3,40% 3,40% 3,40% 3,40% 3,40% 3,40% 3,40% 3,40%

Angola Inflation 14,0% 15,4% 14,1% 12,2% 10,9% 9,6% 7,8% 6,9% 6,0% 6,0%

USA Inflation 1,6% 1,5% 2,1% 2,3% 2,2% 1,9% 1,9% 1,9% 1,9% 1,9%

Beta 1,03 1,03 1,03 1,03 1,03 1,03 1,03 1,03 1,03 1,03

Market Risk-Premium 9,25% 9,25% 9,25% 9,25% 9,25% 9,25% 9,25% 9,25% 9,25% 9,25%

Mature Markets 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 4,00%

Country Risk Premium 5,25% 5,25% 5,25% 5,25% 5,25% 5,25% 5,25% 5,25% 5,25% 5,25%

2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E Terminal Value

Free Cash-Flow 119,8 114,7 104,4 143,2 172,7 178,0 184,3 186,7 209,2 Net Profit 190,6 217,8 247,9 269,8 297,0 311,1 329,8 342,5 366,8 Retained Earnings - 86,4 - 120,4 - 163,8 - 149,2 - 150,5 - 163,3 - 180,1 - 195,6 - 203,5 Depreciations 15,6 17,2 20,3 22,6 26,2 30,1 34,7 39,8 45,8

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Appendix

Comparables- Angola

Source: Company Reports and Analyst estimates

Source: Bloomberg

Cost-to-Income Tier 1 Credit Loss Ratio

2008 2008 2008 2008 2009

South Africa

STANDARD BANK GROUP LTD 44,10% 9,3 2,10% 2,44%

-FIRSTRAND LTD 52,60% - 1,28% 2,23% 2,18%

ABSA GROUP LTD 54,40% - 1,72% 3,34% 3,05%

NEDBANK GROUP LTD 51,10% 9,6 1,17% 2,00% 1,69%

Botswana

FIRST NATIONAL BANK BOTSWANA 38% - - 3,49% 4,20%

BARCLAYS BANK OF BOTSWANA 48% 10,8 1,1% 5,7%

-STANDARD CHART BANK BOTSWANA 43,60% - 1,5% 7,6%

-Nigeria

ZENITH BANK LTD 67% - 2,3% 4,8% 6,6%

FIRST BANK OF NIGERIA PLC 64,48% - - 4,5% 5,1%

UNITED BANK FOR AFRICA PLC 54,80% 20,90% 2,08% 5,90%

ACCESS BANK PLC 51,40% - 3,66% 2,2% 5,1%

NIM

P/E ROE 5Yr Avg ROE ROA 5Yr Avg ROA P/B P/B 5Yr Avg Beta YTD Assets/Equity LF South Africa

STANDARD BANK GROUP LTD 15 13,3 20 0,8 1,0 2,0 1,8 0,92 13,5

FIRSTRAND LTD 15 14,9 28 0,9 1,5 2,2 2,0 0,86 14,0 ABSA GROUP LTD 13 14,0 20 0,9 1,2 1,7 1,7 0,82 12,7 NEDBANK GROUP LTD 14 12,9 18 0,8 1,1 1,7 1,5 0,89 12,7

Botswana

FIRST NATIONAL BANK BOTSWANA 16 49,0 51 3,4 4,0 7,0 8,0 0,98 13,0

BARCLAYS BANK OF BOTSWANA 14 64,0 56 3,0 3,4 7,0 8,9 0,82 18,2

STANDARD CHART BANK BOTSWANA 17 92,0 78 3,5 3,0 14,9 12,8 0,30 27,0

Nigeria

ZENITH BANK LTD 7 22,0 24 3,0 2,0 1,4 - - 5,0

FIRST BANK OF NIGERIA PLC 38 3,0 20 0,7 2,0 1,4 3,0 - 5,0

GUARANTY TRUST BANK 17 20,0 28 3,0 3,0 2,0 3,0 - 4,0

UNITED BANK FOR AFRICA PLC 4 22,0 25 2,0 2,0 1,0 2,5 - 8,0