BANCO BPI COMPANY REPORT

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

EQUITY RESEARCH MASTERS IN FINANCE

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 JUNE 2010

BANCO BPI COMPANY REPORT

BANKING SECTOR

ANALYST: PEDRO MALCATA [email protected]

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

Source: Company reports and analyst estimates

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“BANCO BPI” COMPANY REPORT EQUITY RESEARCH 07 JUNE 2010

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

Counterpart Risk ............................................................................................... 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

Disclosures and Disclaimer ..................................................................35


PAGE 3/35

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.

The following table resumes the results obtained:


PAGE 4/35

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.

We also highlight the presence of the leader of the Santoro

Financial Holding, Isabel dos Santos. The daughter of the

President of Angola also controls UNITEL (BPI’s partner in

Angola) and posseses interests in other bank instituitions

like BES Angola and BIC.


PAGE 5/35

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

Banks transformation ratio

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.


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 1,6% 0,9% 1,4% 1,9% 0,1% -2,7%

Inflation 3,3% 2,1% 2,3% 2,1% 3,3% 0,3%

Unemployment 7,1% 8,0% 8,2% 7,8% 7,8% 10,1%

Portugal BPI Cost of Credit Risk 1,03% 0,37%

Source: Bank of Portugal, Company Reports


PAGE 7/35


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

Source: Eurostat


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.


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...

... and made even more difficult the access to funds in the wholesale markets


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

6.490

7.599

Retail Branches

508

697

Investment Centers

15

38

Mortgage Centers

18

16



The low growth prospects for the domestic market are forcing banks to refocus on the cost control


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.

Source:Bloomberg


PAGE 11/35

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

Net Interest Margin 1,63% 1,44% 1,39% 1,29% 1,05%


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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

Reports


PAGE 13/35

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 € Source: Company Reports


PAGE 14/35

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.

The natural lower capability to adjust costs implied a lower efficiency ratio.

Although 2009 exhibited a structural costs’ reduction of 45,9 M€ we highlight that

it was mostly due to the cut on the retirement anticipations (from 37,7 M€ to 0 in


PAGE 15/35

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.




PAGE 16/35

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.


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%.

However, we highlight that although the unemployment has been rising the NPLs

ratio on the mortgage segment, the stability of the houses prices have not lead

the ratio to worrying levels as registered in countries like Spain that are facing a


PAGE 17/35

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 Source: Companies’ Reports


PAGE 18/35

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.

In this context, in 2010 BPI has to re-structure its funds in order to be able to

meet the 4.800 M€ gap in the short-term and to amortize 2.300 M€ of maturing

medium and long term debt.


PAGE 19/35

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 European Central Bank and its vast portfolio of assets available for sale, are helping BPI to mitigate the refinance risk


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


PAGE 21/35

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.


PAGE 22/35

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.

The sum of the discount cash flows yields a valuation of 1.638 M€, equivalent to

1,82€ per share.


PAGE 23/35

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

Source: Ministry of Finance

High inflation rates have promoted the dollarization of the economy


PAGE 24/35

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

Source: BNA and Bloomberg


PAGE 25/35

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%

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

Total 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%



PAGE 26/35

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 December 2008, did not stop the market share losses

during 2009


PAGE 27/35

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%

The excess of liquidity in the market forces banks to be highly exposed to Angola’s sovereign debt Tabela, PIB GHP listed banks 4 c

Tabela, PIB GHP listed banks 4 c

Tabela, PIB GHP listed banks 4 c


PAGE 28/35

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.

To analyze the impact of a growing competition in an increasingly saturated

market, we used the comparables presented in the Appendix. The table below

shows the forecast of the main value drivers for the future.


PAGE 29/35

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

Loans to Clients/Total Loans 52,09% 37,25% 43,54% 46,17% 48,79% 51,42% 54,05% 56,67% 59,30% 59,30% 59,30% 59,30%

Other Assets (Annual Growth) 126,76% -29,39% -46,33% 26,13% 23,63% 18,34% 18,08% 16,27% 13,94% 12,56% 11,30% 11,30%

Cash available/Total Loans 14,63% 13,31% 30,16% 24,11% 18,05% 16,71% 15,36% 14,01% 14,01% 14,01% 14,01% 14,01%

Other Liabilities/ Total Assets 4,17% 3,36% 1,59% 2,69% 3,78% 4,88% 4,88% 4,88% 4,88% 4,88% 4,88% 4,88%

Other Impairments / Total Assets -1,26% -0,38% -0,90% -0,85% -0,81% -0,77% -0,77% -0,77% -0,77% -0,77% -0,77% -0,77%

Equity / Total Assets 10,69% 8,93% 9,57% 9,61% 9,46% 9,25% 8,71% 8,50% 8,28% 8,07% 7,85% 7,64%


PAGE 30/35

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 − 𝐹𝑟𝑒𝑒 𝑅𝑎𝑡𝑒 = ( 1 + 𝑅𝑓𝑈𝑆𝐴) × 1+ 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 𝐴𝑛𝑔𝑜𝑙𝑎

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

Discounted Cash-Flow 119,8 91,7 67,9 76,5 76,4 66,3 58,2 50,3 435,8

Discount Factor 1,00 1,25 1,54 1,87 2,26 2,69 3,17 3,71 4,34


PAGE 31/35

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

ACCESS BANK PLC 8 11,0 11 2,0 1,0 1,0 1,0 - 3,0


PAGE 32/35

Financials

Portugal (values in Thousands) Balance

Income Statement

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

Cash and deposits at central banks 601.100 626.629 664.937 717.328 753.911 778.226 804.117 833.326 866.141 902.893

Amounts ow ed by credit institutions 239.600 270.461 307.698 353.042 402.857 415.849 429.685 445.293 462.827 482.466

Financial assets for dealing at fair value 1.389.700 1.298.554 1.316.780 1.340.577 1.372.928 1.415.811 1.461.471 1.510.093 1.564.944 1.626.568

Financial assets available for sale 7.761.650 7.103.585 7.481.140 7.533.507 7.593.774 7.692.492 7.800.186 7.917.187 8.059.696 8.228.948

Loans and advances to credit institutions 2.062.350 1.982.060 1.935.210 1.916.434 1.894.778 1.832.641 1.766.268 1.830.426 1.902.504 1.983.231

Loans to Clients 28.739.800 29.084.678 29.986.303 31.455.631 33.059.869 34.126.073 35.261.448 36.542.284 37.981.247 39.592.867

Financial assets held until maturity 808.100 1.306.615 1.324.954 1.348.899 1.381.450 1.424.599 1.470.543 1.519.467 1.574.659 1.636.665

Hedging derivatives 316.500 448.475 539.145 633.359 658.748 676.112 694.635 717.345 743.016 771.904

Fixed Assets 153.400 155.088 156.793 159.303 162.170 165.089 168.061 171.086 174.165 177.300

Intangible Assets 9.200 9.301 9.404 9.554 9.726 9.901 10.079 10.261 10.445 10.633

Other Assets 1.270.400 1.285.645 1.845.084 1.918.734 1.995.647 2.048.253 2.104.366 2.173.164 2.250.933 2.338.449

Total Assets 43.351.800 43.571.090 45.567.446 47.386.368 49.285.857 50.585.046 51.970.857 53.669.930 55.590.577 57.751.924

Resources of Central Banks 2.773.400 2.898.203 2.811.257 2.726.919 2.645.112 2.565.758 2.488.786 2.414.122 2.341.698 2.271.447

Resources of Other Credit Institutions 4.659.000 3.800.128 4.585.357 4.546.668 4.650.429 4.606.160 4.523.206 4.673.465 4.838.879 5.002.249

Resources of Clients 19.032.600 19.758.613 20.489.445 21.716.004 22.902.576 23.723.374 24.623.916 25.518.355 26.523.217 27.648.650

Debt Securities 9.088.600 9.216.170 9.382.735 9.609.163 9.909.309 10.228.891 10.569.207 10.953.122 11.384.435 11.867.499

Financial liabilities relating to transferred assets 1.764.600 1.789.368 1.821.708 1.865.670 1.923.945 1.985.994 2.052.068 2.126.607 2.210.348 2.304.138

Hedging derivatives 423.800 595.153 709.027 825.351 850.555 864.888 880.273 900.470 923.806 950.489

Technical provisions 2.139.400 2.169.429 2.208.638 2.261.937 2.332.590 2.407.818 2.487.926 2.578.297 2.679.825 2.793.536

Other Liabilities 1.560.700 1.668.786 1.780.859 1.940.828 2.103.154 2.178.528 2.261.225 2.343.362 2.435.639 2.538.988

Total Liabilities 41.442.100 41.895.849 43.789.024 45.492.540 47.317.670 48.561.410 49.886.605 51.507.800 53.337.847 55.376.996

Share Capital 1.561.600 1.364.327 1.398.797 1.466.264 1.510.623 1.541.728 1.576.000 1.631.691 1.704.172 1.813.825

Minority interests 262.600 264.463 264.463 264.463 264.463 264.463 264.463 264.463 264.463 264.463

Net Profit of the year 85.500 46.451 115.161 163.101 193.101 217.445 243.789 265.976 284.095 296.640

Total Shareholders' Equity 1.909.700 1.675.241 1.778.421 1.893.828 1.968.187 2.023.636 2.084.252 2.162.130 2.252.730 2.374.928

Total Liabilities & Shareholders' equity 43.351.800 43.571.090 45.567.446 47.386.368 49.285.857 50.585.046 51.970.857 53.669.930 55.590.577 57.751.924

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

Net Interest Income 453.200 420.025 505.799 563.898 610.737 660.462 713.102 772.092 821.498 857.638

Technical results of insurance contracts 11.800 11.966 12.182 12.476 12.866 13.280 13.722 14.221 14.781 15.408

Comissions & other similar Income 262.500 265.456 296.567 309.787 331.171 358.134 386.678 418.665 445.456 465.053

Gains and losses in f inancial operations 92.700 50.131 110.104 112.761 116.283 120.033 124.026 128.532 133.593 139.262

Operating income and charges 9.600 9.735 9.911 10.150 10.467 10.804 11.164 11.569 12.025 12.535

Net operating revenue 829.800 757.312 934.561 1.009.071 1.081.523 1.162.714 1.248.693 1.345.078 1.427.353 1.489.896

Depreciations -39.500 -39.659 -39.980 -40.545 -41.406 -42.327 -43.312 -44.452 -45.758 -47.242

Other Structural Costs -538.000 -532.414 -626.923 -647.440 -688.118 -733.513 -780.825 -843.300 -896.295 -936.089

Operating Profit Bef. Provisions 252.300 185.239 267.658 321.086 352.000 386.874 424.556 457.327 485.300 506.564

Recovery of loans w ritten-off 18.200 19.487 19.623 19.780 20.037 20.318 20.623 20.994 21.435 21.949

Loan provisions and impairments -102.200 -109.358 -101.054 -100.658 -105.792 -109.203 -112.837 -116.935 -121.540 -126.697

Non-Recurrent -33.200 0 0 0 0 0 0 0 0 0

Other Impairments -34.600 -35.859 -34.692 -24.625 -19.057 -19.560 -20.096 -20.753 -21.495 -22.331

EBT 100.500 59.508 151.536 215.583 247.188 278.428 312.246 340.632 363.699 379.485

Tax -18.900 -15.180 -38.654 -54.992 -56.874 -64.062 -71.843 -78.374 -83.681 -87.314

Equity-accounted results of subsidiaries 12.700 12.878 13.111 13.427 13.847 14.293 14.769 15.305 15.908 16.583

Minority Interests -8.800 -10.756 -10.831 -10.918 -11.060 -11.215 -11.383 -11.588 -11.831 -12.115

Net Profit 85.500 46.451 115.161 163.101 193.101 217.445 243.789 265.976 284.095 296.640


PAGE 33/35

Angola (values in Thousands) Balance

Income Statement

Financial Statements for the entire BFA

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

Cash and deposits at central banks 1.213.147 1.179.134 1.170.536 1.407.678 1.663.353 1.913.220 2.292.502 2.707.259 3.154.267 3.667.730



Investments in Credit Institutions 411.104 446.803 498.880 573.711 659.768 758.733 872.543 1.003.425 1.153.939 1.327.029

Loans to Clients 1.751.154 2.258.133 3.164.135 4.333.059 5.853.174 7.737.643 9.701.223 11.456.359 13.347.971 15.520.801

Fixed Assets 170.405 185.202 206.789 237.807 273.478 314.500 361.674 415.926 478.314 550.062

Intangible Assets 864 1.027 1.230 1.456 1.719 1.999 2.277 2.563 2.853 3.176

Other Assets 11.956 14.202 17.018 20.138 23.780 27.650 31.504 35.461 39.468 43.928

Total Assets 5.911.460 6.826.185 8.476.814 10.793.903 13.590.456 16.835.998 20.117.233 23.718.462 27.608.732 32.082.251

Resources of Other Institutions 62.948 456.364 251.738 199.657 347.334 640.426 778.819 940.157 1.126.566 1.347.564


Technical Provisions 36.011 39.138 41.895 48.180 55.407 63.718 73.275 84.267 96.907 111.442

Other Liabilities 82.106 149.539 270.881 446.728 557.908 684.032 819.636 967.924 1.127.742 1.311.320


Share Capital 373.053 424.325 534.553 697.151 927.443 1.133.726 1.338.560 1.561.851 1.805.591 2.073.772


Total Shareholders' Equity 565.953 614.933 752.345 945.072 1.197.257 1.430.776 1.649.682 1.891.608 2.148.045 2.440.611


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

Net Interest Income 164.000 206.744 262.985 338.792 408.969 504.102 594.296 690.991 792.847 907.941

Comissions & other similar Income N.A. 45.002 54.126 65.712 74.475 85.823 101.178 117.641 134.982 154.576

FX Gains N.A. 91.650 98.721 104.169 116.488 132.174 155.822 181.175 207.882 238.059

Other Income N.A. 36.180 46.496 60.745 74.023 91.242 107.568 125.069 143.505 164.337

Net Operating Income 335.100 379.576 462.328 569.419 673.955 813.341 958.864 1.114.876 1.279.217 1.464.913

Depreciations 13.300 15.627 17.243 20.268 22.613 26.200 30.130 34.650 39.848 45.825

Other Structural Costs 70.900 101.852 138.998 188.302 241.255 312.766 393.681 486.252 590.121 712.561

Operating Profit Bef. Provisions 250.900 262.097 306.087 360.849 410.087 474.375 535.053 593.974 649.248 706.528

Other Impairments 37.000 44.168 51.642 63.636 77.731 97.018 115.927 136.679 159.097 184.876

EBT 213.900 217.929 254.445 297.213 332.356 377.357 419.126 457.295 490.151 521.652

Tax 21.000 27.321 36.653 49.292 62.542 80.307 108.004 127.537 147.697 154.813

Net Profit 192.900 190.608 217.792 247.921 269.814 297.050 311.122 329.758 342.454 366.839


PAGE 34/35

Consolidated (values in Thousands) Balance

Income Statement

Cash-flow statement

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

Cash and deposits at central banks 1.814.247 1.805.763 1.835.474 2.125.005 2.417.265 2.691.446 3.096.619 3.540.585 4.020.408 4.570.623



Financial assets available for sale 7.761.650 7.103.585 7.481.140 7.533.507 7.593.774 7.692.492 7.800.186 7.917.187 8.059.696 8.228.948

Loans and advances to credit institutions 2.473.454 2.428.863 2.434.089 2.490.146 2.554.546 2.591.374 2.638.811 2.833.850 3.056.443 3.310.260

Loans to Clients 30.490.954 31.342.811 33.150.438 35.788.691 38.913.042 41.863.716 44.962.670 47.998.644 51.329.218 55.113.668

Fixed Assets 323.805 340.290 363.582 397.109 435.648 479.589 529.735 587.011 652.480 727.362

Intangible Assets 10.064 10.328 10.634 11.010 11.445 11.900 12.357 12.824 13.299 13.809

Other Assets 2.406.956 3.054.937 3.726.200 3.921.131 4.059.625 4.176.614 4.301.047 4.445.436 4.608.076 4.790.946

Total Assets 49.263.260 50.397.275 54.044.260 58.180.271 62.876.313 67.421.044 72.088.090 77.388.392 83.199.309 89.834.175

Resources of Central Banks 2.773.400 2.898.203 2.811.257 2.726.919 2.645.112 2.565.758 2.488.786 2.414.122 2.341.698 2.271.447

Resources of Other Credit Institutions 4.721.948 4.256.492 4.837.095 4.746.325 4.997.763 5.246.586 5.302.025 5.613.621 5.965.445 6.349.813


Debt Securities 9.088.600 9.216.170 9.382.735 9.609.163 9.909.309 10.228.891 10.569.207 10.953.122 11.384.435 11.867.499

Technical provisions 2.175.411 2.208.567 2.250.533 2.310.117 2.387.996 2.471.535 2.561.201 2.662.564 2.776.732 2.904.978

Other Liabilities 3.834.190 4.206.241 4.586.751 5.084.155 5.442.982 5.722.511 6.023.910 6.350.857 6.711.980 7.121.525


Share Capital 1.748.499 1.576.914 1.666.608 1.815.537 1.975.272 2.109.725 2.246.619 2.414.178 2.608.773 2.852.785

Minority interests 542.026 567.920 635.607 730.477 854.475 969.350 1.076.946 1.195.881 1.321.893 1.465.738


Total Shareholders' Equity 2.472.668 2.286.779 2.526.490 2.833.322 3.158.024 3.445.342 3.723.226 4.041.244 4.386.330 4.798.949


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

Net Interest Income 617.200 626.769 768.784 902.690 1.019.706 1.164.564 1.307.398 1.463.082 1.614.346 1.765.579

Comissions & Other Income 547.700 510.119 628.105 675.800 735.773 811.491 900.159 996.872 1.092.223 1.189.230

Net Operating Income 1.164.900 1.136.888 1.396.889 1.578.490 1.755.478 1.976.055 2.207.557 2.459.954 2.706.569 2.954.809

Depreciations -52.800 -55.286 -57.222 -60.813 -64.019 -68.527 -73.442 -79.102 -85.605 -93.067

Other Structural Costs -608.900 -634.266 -765.921 -835.742 -929.373 -1.046.279 -1.174.506 -1.329.552 -1.486.416 -1.648.650

Operating Profit Bef. Provisions 503.200 447.335 573.745 681.935 762.087 861.249 959.608 1.051.300 1.134.548 1.213.092

Impairments -188.800 -169.899 -167.765 -169.139 -182.543 -205.464 -228.237 -253.373 -280.698 -311.955

EBT 314.400 277.437 405.981 512.796 579.544 655.785 731.372 797.927 853.850 901.137

Tax -39.900 -42.500 -75.308 -104.284 -119.416 -144.369 -179.846 -205.911 -231.378 -242.126

Equity-accounted results of subsidiaries 12.700 12.878 13.111 13.427 13.847 14.293 14.769 15.305 15.908 16.583

Minority Interests -105.057 -105.869 -119.509 -134.631 -145.697 -159.443 -166.633 -176.137 -182.716 -195.168

Net Profit 182.143 141.945 224.275 287.309 328.278 366.267 399.661 431.185 455.664 480.426

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

Net Profit 237.059 332.953 411.022 462.915 514.495 554.911 595.734 626.549 663.479

Depreciations 52.800 55.286 57.222 60.813 64.019 68.527 73.442 79.102 85.605

Cash-Flow from operations 289.859 388.239 468.244 523.728 578.513 623.439 669.176 705.651 749.084

Credit portfolio 851.856 - 1.807.627 - 2.638.253 - 3.124.352 - 2.950.674 - 3.098.954 - 3.035.974 - 3.330.574 - 3.784.450 -

Financial assets portfolio 386.861 1.083.284 - 849.283 - 975.591 - 1.080.399 - 896.373 - 1.370.246 - 1.495.650 - 1.722.177 -

Loans to other institutions 12.772 - 31.503 - 130.109 - 126.372 - 78.093 - 91.510 - 247.984 - 276.288 - 319.762 -

Other Assets 717.530 - 750.146 - 286.057 - 238.281 - 225.403 - 243.564 - 275.575 - 307.685 - 343.868 -

Cash-Flow from investment operations 1.195.298 - 3.672.561 - 3.903.702 - 4.464.595 - 4.334.568 - 4.330.400 - 4.929.778 - 5.410.196 - 6.170.257 -

Deposits 1.127.779 2.324.578 3.220.870 3.464.856 3.405.294 3.679.317 3.933.124 4.279.828 4.887.274

Wholesale Funding 213.083 - 660.221 51.320 469.777 489.052 318.781 620.849 710.712 797.181

Other Liabilities 405.207 422.476 556.988 436.706 363.068 391.064 428.310 475.291 537.792

Dividends & Reserves at fair value 422.948 - 93.242 - 104.189 - 138.213 - 227.177 - 277.028 - 277.716 - 281.463 - 250.860 -

Cash-flow from financing operations 896.956 3.314.032 3.724.990 4.233.127 4.030.237 4.112.135 4.704.568 5.184.368 5.971.387

Total Cash-flow 8.484 - 29.711 289.532 292.259 274.181 405.173 443.966 479.823 550.215

Beggining Cash 1.814.247 1.805.763 1.835.474 2.125.005 2.417.265 2.691.446 3.096.619 3.540.585 4.020.408

Δ Cash 8.484 - 29.711 289.532 292.259 274.181 405.173 443.966 479.823 550.215

Ending Cash 1.805.763 1.835.474 2.125.005 2.417.265 2.691.446 3.096.619 3.540.585 4.020.408 4.570.623


PAGE 35/35

Disclosures and Disclaimer

Research Recommendations

Buy Expected total return (including dividends) of more than 15% over a 12-month period.

Hold Expected total return (including dividends) between 0% and 15% over a 12-month period.

Sell Expected negative total return (including dividends) over a 12-month period.

This report has been prepared by a Masters of Finance student following the Equity Research – Field Lab Work Project for exclusively academic purposes. Thus, the author is the sole responsible for the information and estimates contained herein and for the opinions expressed, which exclusively reflect his/her own personal judgement. All opinions and estimates are subject to change without notice. NOVA or its faculty accepts no responsibility whatsoever for the content of this report nor for any consequences of its use. The information contained herein has been compiled by students from public sources believed to be reliable, but NOVA or the students make no representation that it is accurate or complete and accept no liability whatsoever for any direct or indirect loss resulting from the use of this report or its content. The author hereby certifies that the views expressed in this report accurately reflect his/her personal opinion about the subject company and its securities. He/she has not received or been promised any direct or indirect compensation for expressing the opinions or recommendation included in this report. The author of this report may have a position, or otherwise be interested, in transactions in securities which are directly or indirectly the subject of this report. NOVA may have received compensation from the subject company during the last 12 months related to its fund raising program. Nevertheless, no compensation eventually received by NOVA is in any way related to or dependent on the opinions expressed in this report. The School of Economics and Management at NOVA is a public university thus not dealing for, advising or otherwise offering any investment or intermediate services to market counterparties, private or intermediate customers. This report may not be reproduced, distributed or published without the explicit previous consent of its author, unless when used by NOVA for academic purposes only. At any time, NOVA may decide to suspend this report reproduction or distribution without further notice.

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