000432-2021-12-31

Joint Message of the Chairman of the

Board of Directors and of the CEO

The past year was marked by a strong recovery in economic activity, after the strong recession recorded in 2020,

resulting from the adverse effects of the pandemic on economic activity.

In Portugal, the resumption of activity was accentuated from the second quarter onwards, as the health situation

was increasingly under control. The annual growth of the economy, at 4.9%, was driven by an increase in

consumption and robust investment, together with the recovery of exports, whose performance remained below

pre-pandemic levels, due to the moderate recovery of tourism. The greater dynamism of economic activity helped

the labor market improved, with the unemployment rate easing from 7.0% to 6.6%.

In Poland, GDP grew by 5.7% in 2021, a strong expansion of activity after the 2.5% drop in the previous year. In

this environment, inflationary pressures increased during the year, leading to a greater tightening of monetary

policy.

In Mozambique, the upturn in economic activity, which resulted in GDP growth of 2.2% in 2021, contributed to

greater exchange rate stability, which has allowed inflationary risks to be kept under control.

In Angola, economic activity began in 2021 on a recovery path, and the prospects for the coming years are

encouraging, in part because of reforms that have been implemented.

In 2022, the trajectory of global GDP recovery may, however, be conditioned by the adverse effects of the conflict

between Russia and Ukraine, namely through the worsening of inflationary pressures, bottlenecks in production

chains and increased uncertainty and instability in international financial markets.

In general terms, 2021 was still influenced by the effects of the pandemic, but the signs of economic recovery

reinforced the confidence of the various economic agents and allowed the Millennium bcp Group to continue its

trajectory of affirmation in the markets in which it operates, highlighting the resilience of our business models

and operating processes and once again showing our ability to adapt to unpredictable and complex situations.

Millennium bcp ended 2021 with a consolidated net income of 138.1 million euros, which was greatly influenced

by charges of 532.6 million euros associated with the Swiss franc loan portfolio in Poland, by specific items of 90.7

million euros in Portugal, and by mandatory contributions to the banking sector, also in Portugal, in the amount of

56.2 million euros. Excluding the charges associated with loans in Swiss francs in Poland, the consolidated net

profit at the end of 2021 would have totaled 404.9 million euros, a rise of 56.6% on a comparable basis from the

previous year.

The contribution of the activity in Portugal to consolidated net income, notwithstanding the aforementioned

extraordinary costs of 90.7 million euros essentially related to the adjustment of the staff, amounted to 172.8

million euros, a gain of 28.5% compared to the previous year. This favorable evolution in the activity in Portugal

did not, however, fully offset the lower results obtained by the international activity, whose result in 2021

amounted to a negative 34.7 million euros.

The intensification of litigation in Poland regarding loans in Swiss francs that were granted until 2008 by Bank

Millennium led to a significant increase throughout 2021 in the provisions associated with this portfolio, which

strongly affected the results of the Polish and consequently the consolidated results.

The net result in 2021 of Bank Millennium in Poland was a negative 291.9 million euros, which, excluding the

provisions for legal risks associated with the loan portfolio in Swiss francs, would have been a positive 240.7

million euros, up 57.9% compared to the adjusted net income of 152.4 million euros in 2020, confirming the

robustness of the business model and the Bank's growing relevance in the Polish market.

2020 REPORT & ACCOUNTS

| 5

In the opposite direction, the contribution of the Mozambican operation to the result of the international activity

proved to be higher than that of 2020. Millennium bim's net income for 2021 was 82.8 million euros, an increase of

37.7% compared to the 60.1 million euros achieved in 2020.

In consolidated terms, the core recurring operating result, excluding the costs of adjusting the workforce in

Portugal, amounted to 1.29 billion euros, an increase of 10.9% compared to 2020.

This was driven by the 4.9% growth in core revenues, with the positive contribution of net interest income and net

commissions, as well as the 1.8% reduction in recurring operating costs.

The priority of action defined by the Bank at the beginning of the pandemic, to support families and companies

even in periods of greater uncertainty, proved decisive in 2021, placing Millennium bcp in a privileged position

with customers that helped boost the growth of income when the upward phase of economic recovery began to

take hold in the markets where we operate.

Despite the restrictions that in 2021 still affected relevant sectors of activity, Millennium bcp maintained a very

intense commercial activity and focused on increasing its involvement with customers, resulting in an increase of

3.1 billion euros in performing credit in consolidated terms compared to 2020, of which 1.88 billion euros in

Portugal, representing growth of 5.9% and 5.2% respectively.

The quality of the loan portfolio continued to be one of the Bank's main priorities, with emphasis on the decline in

NPEs in 2021 of 16.5% and 20.5% in consolidated terms and in Portugal, respectively, with a reduction of 543

million euros at the consolidated level and 485 million euros in Portugal, achieved despite the still adverse

context.

This reduction puts the NPE ratio (EBA) of Millennium bcp in Portugal, in December 2021, at 3.1%, which compares

with 4.2% at the end of 2020, confirming the skills developed by the Bank as it successfully and consistently

improved the quality of the balance sheet since 2014. During that period Millennium bcp achieved an accumulated

reduction of around 9 billion euros in NPE, achieved in a balanced way and protecting the capital position.

The general improvement in credit quality indicators was accompanied by an increase of 5 percentage points in

the coverage of NPEs by impairments in 2021, which reached 68%, a level that positions Millennium well in a

comparative analysis of the sector, with total coverage also rising to 118%.

The moratoriums implemented during the pandemic, which in Portugal were highly relevant and covered 8.2

billion of Millennium bcp's loans at the end of 2021, were gradually reversed throughout the year without a

significant impact on overdue credit, thanks in large part to the monitoring and preventive action model that

implemented by the Bank to avoid possible situations of the degradation of customer risk profiles.

The evolution of loan impairment charges (net of recoveries) allowed the cost of risk to continue on a downward

trajectory, recording in 2021 a significant improvement both in the activity in Portugal and in the international

activity. In consolidated terms, the cost of risk in 2021 stood at 60 basis points, considerably below the 92 basis

points observed in 2020, and in Portugal it fell from 92 basis points to 69 basis points.

There was also strong growth in customer deposits in 2021, which continue to be very relevant to Millennium bcp's

commercial banking business model, based on stable, long-term relationships with customers who consider us

their main banking partner. In 2021, total customer deposits increased by 7.8 billion euros at the consolidated

level, up 9.5%, with the bank ending the year with 90.1 billion euros in total customer resources. Also of note was

the 4.1% increase in off-balance sheet resources, amounting to 18.9 million euros, which proves Millennium bcp's

competence in advising and providing savings solutions.

Millennium bcp's liquidity levels remain high, well above regulatory requirements, with 25.5 billion euros in assets

eligible for funding from the European Central Bank.

Millennium bcp’s commercial dynamism and ability to attract customers was reflected in the growth of the

customer base, which at the end of 2021 exceeded 6.1 million at the Group level and 2.5 million in Portugal, with

emphasis on the 20% growth in mobile customers both in Portugal and at a consolidated level, which represent 56%

of the Group's customers and 46% of the customers in Portugal.

It was a particularly demanding and complex year for the retail segment. While dealing with the restrictions of the

pandemic, the Bank concluded a significant reduction of the workforce in Portugal, a very difficult process that

nevertheless took place with serenity, carried out simultaneously with profound changes in the structure and

operating model of the branch network. It should be noted that despite the adverse context, Millennium bcp

achieved, for the first time, a leadership position in all dimensions of the quality and customer satisfaction

2020 REPORT & ACCOUNTS

6 |

indicators prepared by Marktest (CSI and BASEF), and was also named Consumer’s Choice in 2021, a distinction

also renewed for 2022.

Millennium also reinforced its leadership among companies in Portugal, having been nominated for the fourth

consecutive year as the “Main Bank for Companies,” according to the BFIN survey carried out by Data E.

In 2021, Millennium bcp concluded the sale of Banque Privée BCP (Suisse) SA to Union Bancaire Privée, UBP SA and

Millennium bim formalized the sale to Fidelidade of shares representing 70% of the share capital of Seguradora

Internacional de Mozambique (“SIM”), maintaining a stake of approximately 22% in SIM, which may be reduced to

9.9% by the subsequent exercise of the call or put options provided for in the transaction.

Also of note was the investment made to bolster the staff and skills of the Macau Branch, with a view to preparing

it for a more intensive performance in the local market and in commercial transactions between China and

Portuguese-speaking countries.

The capital position in 2021 remained stable, with a total capital ratio of 15.8% and a CET1 ratio of 11.7%, both

above the regulatory requirements of 13.75% and 9.16%, respectively. The previously mentioned adverse effects

related to the Polish operation, with the derecognition of minority interests in Mozambique and Poland and with

the rise in sovereign debt interest rates, more than offset the positive effects of the organic generation of capital

and of the sale of subsidiaries concluded in 2021.

Although the pandemic is currently more controlled because of the high level of community immunity achieved

and the resumption of growth in the main economic blocs, 2022 presents very significant challenges and

uncertainties, in particular the scope and magnitude of the impacts resulting from the conflict between Russia and

Ukraine.

The challenges faced by the Bank in the geographies in which it operates will require intense action and rigorous

and prudent management, to ensure Millennium bcp continues on the path of growth and profitability that

underlies our ambitious strategic plan for the 2021-2024 cycle, called “Excelling 24.” We are confident that we

will continue to deserve the indispensable support and trust of our Customers, Shareholders, Employees and other

Stakeholders.

Miguel Maya

Nuno Amado

Chief Executive Officer

Chairman of the Board of Directors

Vice-Chairman of the Board of Directors

2020 REPORT & ACCOUNTS

| 7

2020 REPORT & ACCOUNTS

8 |

BCP in 2021

•Net income of the Group of 138.1 million euros in 2021, influenced by 532.61 million euros of costs associated

with loans in Swiss francs granted by the subsidiary in Poland, by specific items of 90.7 million euros (mainly

related to headcount adjustment costs) in Portugal and by 56.2 million euros of mandatory contributions for the

banking sector in Portugal. Excluding the costs associated with loans granted in Swiss francs, net income of the

Group reached 404.9 million euros (+56.6%, from 2020).

•Net income of 172.8 million euros in Portugal (+28.5% from 2020).

•Core operating profit, excluding specific items, of 1,291.4 million euros, corresponding to a growth of 10.9%.

•Estimated Fully-implemented Total capital ratio and Core Equity Tier 1 ratio at 15.8% and 11.7%, respectively,

above regulatory requirements.

•High liquidity levels, comfortably above regulatory requirements. Eligible assets for ECB funding of 25.5 billion

euros.

•Performing loans of the Group up by 3.1 billion euros, +5.9% from December 2020 (+1.9 billion euros in Portugal,

+5.2%). NPE reduction of 0.5 billion euros, even in adverse context. Total customer funds of the Group up by 7.8

billion euros. Off- balance sheet customer funds of the Group up by 4.1%, to 18.9 million euros.

•Cost of risk of 60 bp for the Group and of 69 bp in Portugal.

•Growing Customer base; +571,000 mobile Customers (+20%).

2020 REPORT & ACCOUNTS

| 9

1 Net of tax and before minority interests; includes provisions for legal risks, costs with out-of-court settlements and legal advice.

Note: change in loans to customers and customer funds on a proforma basis (excludes, in 2020, the amounts from disposed operations).

Main highlights (1)

Euro million

2021

2020

restated

2019

2018

2017

Chg. %

21/20

BALANCE SHEET

Total assets

92,905

85,715

81,643

75,923

71,939

8.4%

Equity

7,062

7,386

7,381

6,964

7,180

-4.4%

Loans and advances to customers (net)

56,360

53,975

52,275

48,123

47,633

4.4%

Total customer funds

90,097

84,492

81,675

74,023

70,344

6.6%

Balance sheet customer funds

71,175

64,764

62,607

56,585

52,688

9.9%

Deposits and other resources from customers

69,560

63,259

60,847

55,248

51,188

10.0%

Loans to customers (net) / Deposits and other resources from customers (2)

81%

85%

86%

87%

93%

Shareholders' equity and subordinated debt

7,514

7,626

7,697

6,853

7,250

-1.5%

RESULTS

Net interest income

1,589

1,532

1,549

1,424

1,391

3.7%

Net operating revenues

2,334

2,257

2,335

2,184

2,197

3.4%

Operating costs

1,116

1,090

1,166

1,024

954

2.3%

Operating costs excluding specific items (3)

1,025

1,044

1,100

995

968

-1.8%

Impairment and Provisions

1,061

841

542

601

925

26.1%

Income tax

204

132

239

138

Net income attributable to shareholders of the Bank

138

183

302

301

186

PROFITABILITY AND EFFICIENCY

Net operating revenues / Average net assets (2)

2.6%

2.7%

2.9%

3.0%

Return on average total assets (ROA)

0.0%

0.2%

0.5%

0.6%

0.4%

Income before tax and non-controlling interests / Average net assets (2)

0.3%

0.4%

0.8%

0.4%

Return on average shareholders' equity (ROE)

2.4%

3.1%

5.1%

5.2%

3.3%

Income before tax and non-controlling interests / Average equity (2)

3.3%

4.8%

8.9%

8.1%

4.8%

Net interest margin

1.9%

2.0%

2.2%

Cost to core income (3)

44.2%

47.3%

48.8%

47.2%

47.1%

Cost to income (2)

47.8%

48.3%

49.9%

46.9%

43.4%

Cost to income (2)(3)

43.9%

46.3%

47.1%

45.6%

44.1%

Cost to income - activity in Portugal (2)(3)

42.6%

46.2%

47.4%

46.5%

44.5%

Staff costs / Net operating revenues (2)(3)

24.1%

25.9%

26.9%

25.9%

24.6%

CREDIT QUALITY

Non-performing exposures

2,752

3,295

4,206

5,547

7,658

Non-performing exposures / Loans to customers

4.7%

5.9%

7.7%

10.9%

15.0%

Total impairment / NPE

68.0%

62.9%

58.2%

52.4%

43.4%

Restructured loans

2,564

2,661

3,097

3,598

4,184

Restructured loans / Loans to customers

4.4%

4.7%

5.7%

7.1%

8.2%

Cost of risk (net of recoveries)

60 b.p.

92 b.p.

72 b.p.

92 b.p.

122 b.p.

LIQUIDITY

Liquidity Coverage Ratio (LCR)

269%

230%

216%

218%

158%

Net Stable Funding Ratio (NSFR)

150%

140%

135%

133%

124%

CAPITAL (4)

Own Funds fully implemented

7,247

7,213

7,028

5,663

5,457

Risk Weighted Assets fully implemented

45,863

46,322

44,972

41,819

39,799

Common equity tier I fully implemented

11.7%

12.2%

12.0%

11.9%

Total ratio fully implemented

15.8%

15.6%

13.5%

13.7%

Common equity tier I phased-in

11.7%

12.2%

12.1%

13.2%

BCP SHARE

Market capitalisation (ordinary shares)

2,130

1,862

3,065

3,469

4,111

Adjusted basic and diluted earnings per share (euros)

0.007

0.010

0.018

0.020

0.014

Market values per share (euros)

High

0.1709

0.2108

0.2889

0.3339

0.2720

Low

0.1126

0.0697

0.1771

0.2171

0.1383

0.1409

0.1232

0.2028

0.2295

0.2720

2021 REPORT & ACCOUNTS

10 |

(1)Some indicators are presented according to management criteria of the Group, which concepts are described

and detailed at the glossary and at alternative performance measures chapter, being reconciled with the

accounting values in the respective chapters. From 31 May 2019, financial statements of the Group reflect the

consolidation of Euro Bank S.A., the entity acquired by Bank Millennium S.A. Following the sale of the entire share

capital of Banque Privée BCP (Suisse) SA to Union Bancaire Privée, UBP SA and the sale of 70% of the investment

held in Seguradora Internacional de Moçambique, S.A. (“SIM”), through its subsidiary BIM - Banco Internacional de

Moçambique S.A., the contribution of these subsidiaries to the consolidated results of the Group, till the date of

disposal, is reflected as income from discontinued operations in the international activity and the historical

information related to 2020 has been restated in order to ensure its comparability, as defined in the IFRS 5. The

accounting of assets and liabilities of Banque Privée BCP (Suisse) S.A. and of SIM was not changed compared to the

criteria considered in the financial statements published in previous periods. In this context and taking into

account the immateriality of the balance sheet balances of these operations in the Group, the calculation of the

indicators relating the performance of the profit and loss account to the balance sheet items was not adjusted,

with the exception of net interest margin, that reflects the fact that the assets of that subsidiary were no longer

considered interest earning assets in the current period or in historical information regarding 2020. The gains

obtained with the disposal of both operations are also recognised as income from discontinued operations in the

international activity.

(2)According to Instruction no. 16/2004 from the Bank of Portugal, as the existing version as of 31 December

2020. Following the repeal in 2018 of the Instruction No. 22/2011 from the Bank of Portugal, which defined the

criteria for calculating the amount of credit, the ratio "Loans to customers (net) / Deposits and other resources

from customers", is now calculated in accordance with the management criteria used by the Group, and the

historical figures have been restated accordingly.

(3)Excludes the impact of specific items: negative impact of 91 million Euros in 2021, fully recognized as staff

costs in the activity in Portugal, mainly related to the adjustment of headcount, identified under the Mobilising

2018/2021 strategic plan, including a provision in the amount of 84 million Euros. In 2020, the impact was also

negative, in the amount of 46 million Euros, of which 32 million Euros recognized as staff costs in the activity in

Portugal (related to headcount adjustment costs, compensation cost for temporary remuneration cuts of

employees under the participation in the results and income arising from the agreement with a former director of

the Bank), and 15 million Euros related to acquisition, merger and integration of Euro Bank S.A., recognized by the

Polish subsidiary (9 million Euros as staff costs, 5 million Euros as other administrative costs and 1 million Euros as

depreciation). In 2019, the impact was also negative in the amount of 66 million Euros, of which 40 million Euros

related to headcount adjustment costs and costs with compensation for temporary remuneration cuts, both

recognized as staff costs in the activity in Portugal and 26 million Euros related to acquisition, merger and

integration of Euro Bank S.A., recognized by the Polish subsidiary, mainly as other administrative costs. In 2018,

the negative impact amounted to 29 million Euros, of which 27 million Euros related to headcount adjustment

costs recognized as staff costs and 3 million Euros associated with the ongoing digital transformation project,

recognized as other administrative costs, both in the activity in Portugal. In 2017, the impact was positive, arising

from the gains from negotiation/revision of Collective Labour Agreement, net of headcount adjustment costs, in

the amount of 14 million Euros, recorded as staff costs in the activity in Portugal. The profitability and efficiency

indicators does not consider the specific items recognized in net operating revenues (1 million Euros in 2019 and

an immaterial amount in 2020 and 2021), related to costs with the acquisition, merger and integration of Euro

Bank S.A. in the Polish subsidiary.

(4)Presented figures include the cumulate net results of the respective periods.

2021 REPORT & ACCOUNTS

|11

Information on BCP Group

Brief description

Banco Comercial Português, S.A. (BCP, Millennium bcp

or Bank) is the largest Portuguese private sector bank.

The Bank, with its decision centre in Portugal,

operates and acts with respect for people and

institutions, focusing on the Customer, pursuing a

mission of excellence, trust, ethics and responsibility,

and is a distinguished leader in various financial

business areas in the Portuguese market and a

reference institution on an international level. The

Bank also holds a prominent position in Africa through

its banking operations in Mozambique (in Angola,

Banco Millennium Angola - BMA merged with Banco

Privado Atlântico-BPA and now the Bank holds a equity

accounted shareholding) and in Europe through its

banking operation in Poland. Since 2010, the Bank

operates in Macau through a full branch.

Bank History

BCP was incorporated on 17 June 1985 as a limited

liability company ("sociedade anónima") organised

under the laws of Portugal, following the deregulation

of the Portuguese banking industry. BCP was founded

by a group of over 200 shareholders and a team of

experienced banking professionals who sought to

capitalise on the opportunity to form an independent

financial institution that would serve the then

underdeveloped Portuguese financial market more

effectively than state-owned banks.

While the Bank's development was initially

characterised by organic growth, a series of strategic

acquisitions helped solidify its position in the

Portuguese market and increase its offering of

financial products and services. In March 1995, BCP

acquired control of Banco Português do Atlântico, S.A.

("Atlântico"), which was then the largest private

sector bank in Portugal. This was followed by a joint

takeover bid for the whole share capital of Atlântico.

In June 2000, Atlântico was merged into BCP. In 2000,

BCP also acquired Império, along with Banco Mello and

Banco Pinto & Sotto Mayor.

In 2004, with a view to strengthening its focus on the

core business of distribution of financial products and

optimising capital consumption, BCP sold insurers

Império Bonança, Seguro Directo, Impergesto and

Servicomercial to the Caixa Geral de Depósitos group.

BCP also entered into agreements with Fortis (now

named Ageas) for the sale of a controlling stake and

management control of insurers Ocidental -

Companhia Portuguesa de Seguros, S.A., Ocidental -

Companhia Portuguesa de Seguros de Vida, S.A. and

Médis - Companhia Portuguesa de Seguros de Saúde,

S.A., as well as the pension fund manager

PensõesGere - Sociedade Gestora de Fundos de

Pensões, S.A.

After the consolidation of its position in the

Portuguese banking market, the Bank focused on the

development of its retail business in new regions, with

the goal of attaining significant positions in emerging

markets in Europe and in Africa. The Bank

concentrated on businesses with strong growth

prospects in foreign markets with a close historical

connection to Portugal or that have large communities

of Portuguese origin (such as Angola, Mozambique, the

United States, Canada, France, Luxembourg and

Macao), as well as in markets where the Bank's

successful Portuguese business model could be

effectively exported to and tailored to suit such local

markets (such as Poland, Greece and Romania).

The Bank has pursued a consistent strategy of market

segmentation. Until 2003, these segments were served

through autonomous distribution networks operating

under a variety of brand names. In October 2003, BCP

began the process of replacing these brands in

Portugal with a single brand name: Millennium bcp.

The rebranding in other markets was completed in

2006. All banking operations controlled by BCP are

now carried out under the "Millennium" brand. In

Portugal, the Bank also operates under the

"ActivoBank" brand.

In 2004, the Bank sold its non-life insurance businesses

and divested a portion of its life insurance business by

entering into a joint venture with Ageas (formerly

Fortis), named Millenniumbcp Ageas, of which 51% is

held by Ageas and 49% by the Bank.

In recent years, the Bank has refocused on operations

that it considers core to its business. As part of this

refocus, the Bank divested several of its international

operations (in France, Luxembourg, United States,

Canada, Greece, Turkey and Romania), while retaining

commercial protocols to facilitate remittances from

Portuguese emigrants in some markets. In 2010, the

Bank transformed its Macao off-shore branch into an

on-shore branch.

In February 2012, the Bank adopted a management

restructuring through the introduction of a one-tier

management and supervisory model, in which the

Board of Directors includes an Executive Committee

and an Audit Committee (the latter comprising non-

executive members, in accordance with the applicable

law).

In December 2012, the Bank prepared and presented

to the Portuguese government a Restructuring Plan,

required by national law and by the applicable

European rules on matters of State aid. The

Restructuring Plan was formally submitted by the

Portuguese government to the EC and, In July 2013,

the Bank agreed on the plan with the EC, entailing an

2021 REPORT & ACCOUNTS

12 |

improvement of the profitability of the Bank in

Portugal through continued cost reduction, among

other drivers. On September 2013, the DG Comp

announced its formal decision in connection with its

agreement with the Portuguese authorities concerning

the Bank's Restructuring Plan. Pursuant to the

decision, the Bank's Restructuring Plan was found in

compliance with the European Union's rules relating to

State aid, demonstrating the Bank's viability without

continued State support. The implemented

Restructuring Plan aimed at strengthening the Bank's

strategy by focusing on its core activities.

In May 2014, as part of a process to refocus on core

activities defined as a priority in its Strategic Plan, the

Bank announced that it agreed with the international

insurance group Ageas a partial recast of the strategic

partnership agreements entered into in 2004, which

included the sale of its 49% interest in the (currently

jointly owned) insurance companies that operate

exclusively in the non-life insurance business, i.e.

Ocidental – Companhia Portuguesa de Seguros, S.A.

and Médis – Companhia Portuguesa de Seguros de

Saúde, S.A..

In April 2016, the Bank announced the conclusion of

the merger between Banco Millennium Angola, S.A.

with Banco Privado Atlântico, S.A., resulting in the

second-largest private sector bank in Angola in terms

of loans to the economy, with a market share of

approximately 10% in business volume. The entity

resulting from this merger ceased to be controlled by

BCP.

In January 2017, BCP announced a Euros 1.3bn rights

issue with transferable pre-emptive subscription

rights. The aim of this transaction was to bring

forward the full repayment of remaining Government

Subscribed Securities and the removal of key State-aid

related restrictions, including the dividend ban, the

risk of potential sale of core businesses and the tail

risk of conversion. This transaction was designed to

strengthening the balance sheet through the

improvement of the CET1 FL ratio and Texas ratio,

bringing them in line with new industry benchmarks

and above regulatory requirements.

On December 27, 2019, the merger deed of Banco de

Investimento Imobiliário, S.A., a wholly-owned

subsidiary of Banco Comercial Português, S.A., by

incorporation into the latter, was signed, thus

completing the incorporation process of Banco de

Investimento Imobiliário, S.A. into Banco Comercial

Português, S.A..

On 27 August 2019, the Extraordinary General Meeting

of Bank Millennium S.A., in which 216 shareholders

representing 78.53% of its share capital, participated,

approved the merger of Bank Millennium S.A. with

Euro Bank S.A.. The completion of the integration of

Eurobank S.A. into Bank Millennium S.A. took place in

November, with the Bank resulting from the merger

now operating under a single brand, a single operating

system and a single legal entity.

On June 29, 2021 BCP entered into an agreement with

Union Bancaire Privée, UBP SA regarding the sale of

the entire share capital of Banque Privée BCP (Suisse)

SA (“Banque Privée”). The sale of the entire share

capital of Banque Privée BCP (Suisse) SA (“Banque

Privée”) to Union Bancaire Privée, UBP SA was

completed on November 2, 2021. The sale of Banque

Privée allows BCP Group to pursue its strategy of

focusing resources and management on core

geographies, enhancing their development and thus

creating value for stakeholders.

On 29 December 2021, BIM – Banco Internacional de

Moçambique, SA (a bank incorporated under

Mozambican law in which BCP indirectly holds a stake

of 66.69%) formalized the entry into force of a long-

term agreement with Fidelidade – Companhia de

Seguros, SA, with a view to strengthening capabilities

and expanding the offer of insurance through the

banking channel (bancassurance) in Mozambique.

Under this partnership, the possibility of which was

provided for in the memorandum of understanding

signed between BCP and the Fosun Group in November

2016, BIM and Fidelidade also formalized the sale by

BIM to Fidelidade of shares representing 70% of the

share capital and voting rights of Seguradora

Internacional de Moçambique, SA, with BIM

maintaining approximately 22% of its share capital.

BIM and Fidelidade also agreed call and put options

with a view to enabling Fidelidade to acquire

additional shares, and BIM's shareholding, as a result

of these options, may be reduced to 9.9% of SIM's

capital. Under the long-term exclusive distribution

agreement, BIM will promote the distribution of SIM

insurance through the banking channel, continuing to

provide its customers with a wide range of

competitive insurance products, which is reinforced by

the partnership with Fidelidade, an Insurance Group of

reference.

2021 REPORT & ACCOUNTS

|13

Governance

Banco Comercial Português, S.A. has a one-tier

management and supervision model, composed of

a Board of Directors (BD), which includes an

Executive Committee (EC) and an Audit Committee

composed of only non-executive directors. The

Company also has a Remuneration and Welfare

Board (RWB) and an International Strategic Board.

In addition, the Group uses a Statutory Auditor and

an external auditing firm to audit the individual

and consolidated accounts of the Bank, elected at

the General Meeting.

The General Meeting is the highest governing body

of the company, representing all shareholders, and

its resolutions are binding for all when adopted

under the terms of law and the articles of

association. The General Meeting is responsible

for:

•Electing and dismissing the Board, as well as

the members of the management and

supervisory bodies, and the RWB;

•Approving amendments to the articles of

association;

•Resolving on the annual management report

and accounts for the year and proposed

appropriation of profits;

•Resolving on matters submitted upon request of

the management and supervisory bodies;

•Resolving on all issues especially entrusted to it

by the law or articles of association, or on

those not included in the duties of other

corporate bodies.

The BD is the governing body of the Bank with the

amplest powers of management and representation,

pursuant to the law and the articles of association.

Under the terms of the articles of association, the

BD is composed of a minimum of 15 and a maximum

of 19 members with and without executive duties,

elected by the General Meeting for a period of four

years, and can be re-elected. The current Board of

Directors is composed of 17 members, of which 6 are

executive and 11 are non-executive, with 5 qualified

as independent.

The BD began its functions on July 23, 2018 and

appointed an EC on July 24, 2018, composed of six

of its members, with the Chief Executive Officer

being appointed by the General Meeting.

The BD has delegated to the EC the day-to-day

management of the Bank, which is assisted by

several committees and subcommittees in the

exercise of this management function, to which it

monitors certain relevant matters.

The supervision of the company is made by an

Audit Committee elected by the General Meeting

of Shareholders and composed of 3 to 5 elected

members. The lists proposed for the BD should

indicate the members to be part of the Audit

Committee and indicate the respective

Chairperson.

The RWB is elected by the General Meeting.

The Company Secretary and the Alternate

Secretary are appointed by the Bank's BD, and

their term-of-office matches that of the BD that

appointed them.

2021 REPORT & ACCOUNTS

14 |

Corporate Governance Model

Identification and composition of the Corporate Bodies and Committees from

the Board of Directors

Board of

Directors

Executive

Committee

Audit

Committee

Remuneration

and Welfare

Board

Board for

International

Strategy *

Committee

for

Corporate

Governance,

Ethics and

Professional

Conduct

Committee

for

Nominations

and

Remunerati

ons

Committee

for Risk

Assessment

Nuno Manuel da Silva Amado (Board of Directors President)

Jorge Manuel Baptista Magalhaes Correia (Board of

Directors Vice-President and RWB President)

Valter Rui Dias de Barros (Board of Directors Vice-

President)

Miguel Maya Dias Pinheiro (Board of Directors Vice-

President and CEO)

Ana Paula Alcobia Gray

Cidalia Maria da Mota Lopes (Audit Comittee President)

Fernando da Costa Lima**

Joao Nuno de Oliveira Jorge Palma

Jose Manuel Alves Elias da Costa (CNR President)

Jose Miguel Bensliman Schorcht da Silva Pessanha

Lingjiang Xu (CCGEPC President)

Maria Jose Henriques Barreto de Matos de Campos

Miguel de Campos Pereira de Bragan^a

Rui Manuel da Silva Teixeira

Teofilo Cesar Ferreira da Fonseca (CRA President)

Wan Sin Long

Xiao Xu Gu (Julia Gu)

Antonio Vitor Martins Monteiro

Nuno Maria Pestana de Almeida Alves

* Chairman and Vice- chairman to be nominated.

2021 REPORT & ACCOUNTS

|15

Main events in 2021

In 2021, the Bank kept its focus on supporting

households and companies, particularly with the

agents most affected by the effects of the

COVID-19 pandemic.

On 5 February, 2021, Banco Comercial Português,

S.A. (“Bank”) fixed the terms for a new issue of

senior preferred debt securities, under its Euro

Note Programme. The issue, in the amount of 500

million euros, has a tenor of 6 years, with the

option of early redemption by the Bank at the end

of year 5, an issue price of 99.879% and an annual

interest rate of 1.125% during the first 5 years

(corresponding to a spread of 1.55% over the 5-

year mid-swap rate). The annual interest rate for

the 6th year was set at 3-month Euribor plus a

1.55% spread.

On 20 May, 2021, Banco Comercial Português,

S.A. informed about the resolutions of the General

Meeting of Shareholders. Of special note:

•Approval of the management report, the

individual and consolidated annual report,

balance sheet and financial statements of 2020,

including the Corporate Governance Report and

of the proposal for the appropriation of profit

regarding the 2020 financial year;

•Approval of the Dividend Policy;

•Approval of the remuneration policy of Members

of Management and Supervisory Bodies;

•Approval of the policy for the selection and

appointment of the statutory auditor or Audit

Firm and well as for the engagement of non-audit

services that are not prohibited under the terms

of the applicable legislation;

•Re-appointment of Deloitte & Associados –

Sociedade de Revisores Oficiais de Contas, S.A.,

as the Single Auditor, that selected Mr. Paulo

Alexandre de Sá Fernandes, ROC nr. 1456, to

represent it, and of Mr. Jorge Carlos Batalha

Duarte Catulo, ROC nr. 992, as his alternate,

during the triennial 2021/2023;

•Re-appointment of Deloitte & Associados -

Sociedade de Revisores Oficiais de Contas, S.A.,

to perform functions of External Auditor in the

triennial 2021/2023;

•Approval of the maintenance of the voting

limitations foreseen in articles 25 and 26 of the

Banks’s Articles of Association.

On June 29, 2021 BCP entered into an agreement

with Union Bancaire Privée, UBP SA regarding the

sale of the entire share capital of Banque Privée

BCP (Suisse) SA (“Banque Privée”). The sale of the

entire share capital of Banque Privée BCP (Suisse)

SA (“Banque Privée”) to Union Bancaire Privée,

UBP SA was completed in November 2, 2021. The

amount received for the sale of Banque Privée’s

share capital is CHF 113,210,965.00, reflecting the

distribution of dividends and the share capital

reduction that have occurred in the meantime.

The sale of Banque Privée allowed BCP Group to

pursue its strategy of focusing resources and

management on core geographies, enhancing their

development and thus creating value for

stakeholders.

On 1 August, 2021, Banco Comercial Português,

S.A. (BCP) informed about the results of the 2021

stress test, regarding the European Union.

Considering the results of BCP, in the stress test, it

should be highlighted the following:

•the application of the adverse scenario resulted

in a reduction of 406 b.p. in the fully loaded

CET1 capital ratio at the end of 2023 versus the

data as at December 2020 (which compares with

an average reduction of 485 b.p. in the universe

of 50 banks submitted to this exercise);

•the application of the base scenario resulted in

an increase of 163 b.p. in the fully loaded CET1

capital ratio at the end of 2023 versus the data

as at December 2020 (which compares with an

average increase of 78 b.p. in the universe of 50

banks submitted to this exercise).

On 21 September, 2021, Banco Comercial

Português, S.A. informed that Moody’s rating

agency upgraded in one-notch BCP's deposits

ratings from Baa3/Prime-3 to Baa2/Prime-2, driven

by the higher rating uplift for the deposits,

stemming from the upgrade of Portugal’s sovereign

bond rating. This upgrade and the affirmation of

the senior unsecured debt ratings of Ba1 reflect

the affirmation of BCP’ BCA (Baseline Credit

Assessment) and Adjusted BCA, Moody's Advanced

LGF (Loss Given Failure) analysis and unchanged

moderate government support assumptions for

BCP. The outlook on BCP's long-term deposit and

senior unsecured debt ratings remains stable,

reflecting Moody's view that the bank's

creditworthiness will be steady over the outlook

horizon.

On 29 September, 2021, Banco Comercial

Português, S.A. informed that it has set the

conditions for an issue of social senior preferred

debt securities under its Euro Note Programme,

the first of this type to be carried out by a

Portuguese issuer. The issue, in the amount of 500

million euros, has a tenor of 6.5 years, with an

option for early redemption by the Bank at the end

of 5.5 years, an issue price of 99.527% and an

interest rate of 1.75% per year for the first 5.5

2021 REPORT & ACCOUNTS

16 |

years. From the 5th year and a half, the interest

rate will result from the sum of the 3-month

Euribor with a spread of 2.00%. This will be the

first issue carried out by the Bank in the ESG

(Environmental, Social and Governance) segment,

focusing on the social component. Thus, an

amount equivalent to the net proceeds of the Issue

will be applied as a priority to the financing and/or

refinancing of loans granted by the Bank under the

COVID-19 lines, under the terms of the Bank's

Green, Social and Sustainability Bond Framework,

representing a clear demonstration of the

commitment assumed by Millennium bcp in

supporting the economy, in particular in financing

the micro and, small and medium-sized companies

most affected by the recent pandemic context.

The issue is part of the funding plan defined by the

Bank within the scope of its Strategic Plan

2021-2024, specifically aimed at meeting the MREL

requirements (Minimum Requirements for Own

Funds and Eligible Liabilities) and the strategy of

strengthening its presence in capital markets and

broadening its investor base. The transaction,

which followed a successful roadshow, was placed

with a very diversified group of European

institutional investors, many of which are

dedicated to ESG investments, which indicates, on

one hand, the market's confidence in the Bank

and, on the other, the recognition of Millennium

bcp's commitments in terms of sustainable

financing.

On October 11, Fitch Ratings revised the Outlook

for BCP's long-term issuer rating (IDR) from

Negative to Stable and affirmed the long-term

issuer rating (IDR) at "BB" and the viability rating

(VR ) in "bb".

On 10 November 2021, Banco Comercial

Português, S.A. set the terms of a new issue of

subordinated notes under its Euro Note

Programme. The Notes are expected to be eligible

as Tier 2 own funds. The issue will be in the

aggregate amount of €300 million, with a tenor of

10.5 years and the option of early redemption by

the Bank at any time during the six months

between year 5 and year 5.5, a fixed annual

interest rate of 4% during the first 5.5 years

(corresponding to a spread of 4.065% over the 5-6

year mid-swap rate). From year 5.5 to maturity

the interest rate will be determined on the basis of

the then applicable 5-year mid-swap rate plus the

Spread. The Notes were placed with a very

diversified group of European institutional

investors. The issue is part of Millennium bcp’s

strategy of continuing optimization of its capital

structure, reinforcement of own funds and MREL

(Minimum Requirements for Own Funds and

Eligible Liabilities) eligible liabilities, as well as

regularly accessing the international capital

markets.

On December 14, 2021, Banco Comercial

Português, S.A. informed that it has been notified

by Banco de Portugal, as the national resolution

authority, about the establishment of its minimum

requirement for own funds and eligible liabilities

("MREL" or "Minimum Requirement for own funds

and Eligible Liabilities") as decided by the Single

Resolution Board. The resolution strategy applied

continues to be that of a multiple point of entry

("MPE"), with three different BCP Group resolution

groups (in addition to the BCP resolution group,

the resolution groups corresponding to (i) Bank

Millennium, S.A. and its subsidiaries and (ii) Banco

Internacional de Moçambique S.A. and its

subsidiaries). The MREL requirements to be met

by BCP, on a consolidated basis (taking as

reference BCP’s resolution group, which is

composed of the Bank, Banco ActivoBank, S.A. and

all the subsidiary companies of BCP apart from

Bank Millennium S.A. and Banco Internacional de

Moçambique and their respective subsidiaries), is

of:

•23.79% of the total risk exposure amount

("TREA") (to which adds further a combined

buffer requirement ("CBR") of 3.5%, thus

corresponding to total requirements of 27.29%);

and

•7.23% of the leverage ratio exposure measure

("LRE").

The Bank's compliance with these requirements

must be ensured by 1 January 2024, with an

interim target set at 1 January 2022, by which BCP

must comply with a requirement of:

•18.17% of TREA (to which adds a further 3.25%

CBR requirement, thus corresponding to a total

requirements of 21.42%); and

•7.23% of the LRE.

No subordination requirements have been applied

to the Bank.

In accordance with the regulations in force, MREL

requirements must be updated or reconfirmed

annually, and therefore these targets replace

those previously set.

The MREL requirements, now communicated to the

BCP resolution group described above, are in line

with the 2021-24 Strategic Plan and are consistent

with its ongoing funding plan, and based on the

information available to date, the compliance with

the respective MREL requirements established for

January 1, 2022, both as a percentage of the TREA

(also including the applicable CBR) and as a

percentage of the LRE, are already ensured,

considering the senior preferred debt and

subordinated debt (Tier 2) issues carried out in

2021.

On 29 December 2021, BIM – Banco Internacional

de Moçambique, SA (a bank incorporated under

Mozambican law in which BCP indirectly holds a

stake of 66.69%) formalized the entry into force of

a long-term agreement with Fidelidade –

2021 REPORT & ACCOUNTS

|17

Companhia de Seguros, SA, with a view to

strengthening capabilities and expanding the offer

of insurance through the banking channel

(bancassurance) in Mozambique. Under this

partnership, the possibility of which was provided

for in the memorandum of understanding signed

between BCP and the Fosun Group in November

2016, BIM and Fidelidade also formalized the sale

by BIM to Fidelidade of shares representing 70% of

the share capital and voting rights of Seguradora

Internacional de Moçambique, SA, with BIM

maintaining approximately 22% of its share capital.

BIM and Fidelidade also agreed call and put options

with a view to enabling Fidelidade to acquire

additional shares, and BIM's shareholding, as a

result of these options, may be reduced to 9.9% of

SIM's capital. Under the long-term exclusive

distribution agreement, BIM will promote the

distribution of SIM insurance through the banking

channel, continuing to provide its customers with a

wide range of competitive insurance products,

which is reinforced by the partnership with

Fidelidade, an Insurance Group of reference. The

amount received by BIM for the sale of 70% of SIM

is €46.8 million. Considering this value, the

operation had a (positive) impact on BCP's

consolidated results for the current year, on a pro

forma basis as of 11/30/2021, of approximately

5.2 million euros and a positive impact on the

consolidated CET1 ratio and in the total capital of

7 basis points.

Millennium bcp and the European Investment Fund

signed two contracts under the Pan-European

Guarantee Fund in the amount of around 1,200

million euros, aiming to support the recovery of

Portuguese SMEs affected by the economic crisis

caused by the pandemic COVID-19. On October

2021, Millennium bcp and the EIF renewed the

partnership and started to provide support to

Portuguese SMEs with an additional 1,650 million

euros.

Millennium bcp signed two agreements, one with

the Portuguese Industrial Association and the other

with the Confederation of Portuguese Farmers,

reinforcing its commitment to support the

Portuguese businesses, worth 120 and 100 million

euros, respectively.

Millennium bcp signed an agreement with the

Business Confederation of Portugal (CIP), which

reinforces its commitment to support the

Portuguese companies, with financing of 300

million euros.

Millennium bcp is the Bank with the most valuable

brand, according to the study “Most Valuable

Portuguese Brands 2021” by the OnStrategy

Consultant.

AWARDS

Millennium bcp was distinguished with the

"Consumer Choice 2021", in the category "Largest

Banks", standing out in the attributes: "Digital

Channels", "Security", "Clear Information", "Brand

Credibility", "Response Capacity", "Fees Charged", "

Simple and Easy-to-Understand Communication of

Products ”, “ Quick Response ”and“ Good Online

Service ”.

Millennium bcp was, for the 3rd consecutive year,

the Bank with the highest number of PME Líder

statutes attributed to SMEs.

Millennium bcp was named the “Main Bank for

Companies” in Portugal for the fourth consecutive

year, according to the BFIN 2021 study carried out

by consultants DATA E, with a leading share of

19.6% for companies of various sizes

(microbusinesses, SMEs and large companies).

BCP returned in 2021 to "The Sustainability

Yearbook", a reference publication in the

Sustainability area now edited by the S&P analyst

based on the information gathered from

companies' answers to the "Dow Jones

Sustainability Indices".

Millennium bcp integrates, for the 2nd consecutive

year, the Bloomberg Gender-Equality Index 2021,

standing out in the implementation of practices

and policies of gender equality, diversity and

inclusion. At the same time, the Bank also joined

the United Nations Women's Empowerment

Principles, an international platform for promoting

gender equality.

Millennium bcp was distinguished by Global

Finance magazine as “Best Investment Bank” in

Portugal in 2021.

Millennium bcp was distinguished by Global

Finance magazine as the “Best Consumer Digital

Bank” in Portugal in 2021.

Millennium bcp was awarded as “Best Private

Bank” in Portugal by The Banker and PWM

magazines, publications of the Financial Times

Group specialized in financial services.

Millennium bcp was elected “Consumer's Choice”

in the category "Largest Banks", in 2022, for the

second consecutive year. The Bank was ranked 1st

among 8 out of 10 categories evaluated in this

study by independent consumers: Clear

information, Responsiveness, Brand credibility,

Easy-to-use digital channels, Fees charged, Simple

and easy-to-understand communication of

products, Speed of response and Good online

service.

Millennium bcp was distinguished at the Meios &

Publicidade Communication Awards, having been

awarded with the film “Vai Correr Bem”, in the

2021 REPORT & ACCOUNTS

18 |

categories “Banking, Finance and Insurance” and

“Internal Communication” and with the Millennium

Festival ao Largo 2020, in the category “Events”.

Millennium bcp was distinguished at the 2021

Communication Efficiency Awards for the

campaigns "Vai Correr Bem" and "É tempo de pôr a

economia a andar, Vamos lá!"

ActivoBank was once again distinguished, for the

fourth consecutive time, with the “Consumer

Choice” award, in the “Digital Banking” category,

with a Satisfaction Score of 85.57% and a

Recommendation Score of 91.80%.

BCP Group was awarded “Best Foreign Exchange

Provider” in Portugal, Mozambique and Poland in

2021.

Bank Millennium was ranked third in the top 200 of

the best Polish brands, according to Forbes

magazine.

Bank Millennium distinguished in the FT ranking on

diversity - Bank Millennium was one of the 850

companies chosen for the Financial Times

“European Diversity Leaders 2022” ranking, which

support and promote diversity in their

organisations.

Bank Millennium was distinguished by the

consultancy Bain & Company as one of the ten

most digitally advanced European banks.

Bank Millennium was distinguished in the category

of Best Performance in Poland, in the 2021 edition

of the SRP European Awards, the most prestigious

competition in the structured products sector,

organized by SRP Structured Retail Products.

Bank Millennium was the best performing bank in

Forbes magazine's "Climate Leaders Poland 2021"

ranking, achieving second place among Polish

companies in the list regarding the reduction of

greenhouse gas emissions.

Bank Millennium was distinguished as “Best Bank in

Poland” by Global Finance.

Bank Millennium was distinguished by Global

Finance magazine as the “Best Consumer Digital

Bank” in Poland in 2021.

Bank Millennium was distinguished as the best

mortgage loan in Poland in the Golden Banker

ranking.

Bank Millennium distinguished with the CSR Golden

Leaf award, integrating a restricted group of

institutions with the highest scores in terms of

Corporate Social Responsibility.

Bank Millennium won second place in the “2021

Best Bank” competition, in the group of small and

medium commercial banks, organized by “Gazeta

Bankowa”.

Millennium bim was distinguished by Global

Finance magazine as the “Best Consumer Digital

Bank” in Mozambique in 2021.

Millennium bim was awarded as “Best Bank” in

Mozambique, by The Banker magazine of the

Financial Times Group.

Millennium bim was awarded as “Best Private

Bank” in Mozambique, by Global Finance

magazine.

2021 REPORT & ACCOUNTS

|19

BCP Share

During 2021, the performance of financial markets

continued to be strongly constrained by the

dissemination of the pandemic. Subsequently, this

situation led to significant increases in inflation

levels in the main world economies. After the most

intense periods of lockdown, the world market was

faced with a boom in demand, which could not be

matched by supply. This phenomenon generated

constraints in global distribution chains, giving rise

to the scarcity of some goods and products

necessary for economic development, leading to a

general increase in prices.

The increase in the price of raw materials, the

difficulty in hiring manpower, the constraints in

supply and the energy crisis, giving rise to

substantial increases in producer prices, which the

industry passed in part to the consumer, making

inflation more persistent than initially predicted

by analysts. The price of oil has increased by more

than 50%, despite OPEC's decision to increase

production.

In response to this reality, throughout 2021 the

main central banks left indications about possible

changes in the monetary policies in force, raising

the possibility of: (i) starting the movement of

interest rate hikes and (ii) starting to reduce the

asset purchase programs initiated in the context of

the pandemic.

In this context, the US Federal Reserve

accelerated the pace of reduction in asset

purchases, leaving an indication of the possibility

of recording three interest rate increases in 2022,

three in 2023 and two in 2024, with an increase

expected in each movement. increase in the

reference rate of 25 basis points.

In the United Kingdom, the Bank of England raised

the benchmark interest rate for the first time

during the period of the pandemic, after the

indication that inflation in the country has

increased significantly compared to expectations.

In the Euro Zone, the ECB maintained a moderate

stance with regard to monetary policy, with the

market attributing a probability of interest rate

hikes only in the last months of 2022.

The year 2021 proved to be positive for the capital

markets, with the renewal of new historical highs

in the main North American stock indices and also

in the European Stoxx 600.

Despite the volatility recorded in equity markets,

the European stock market recorded an

appreciation of 22.1% in 2021, led by the progress

of the vaccination process and less need for

lockdowns. The economic growth registered in

2021 and the higher-than-expected results of

companies were also levers for the performance

recorded in the equity markets.

The approval of Joe Biden's mega stimulus plan,

which includes investment in infrastructure, was

another supporting factor. In the pandemic

situation, the positive evolution of the vaccination

plans that helped the gradual reopening of

economies, despite the emergence of new

variants, such as Delta and Ómicron, which,

although bringing the reintroduction of some

restrictions and lockdowns, resulted in a very less

aggressive than in 2020. Global activity performed

positively, with the PMI levels of the main

economies reaching the maximum of recent years

(with the exception of China) exceeding pre-

pandemic records.

In the national business scenario, a reference for

BCP, which entered the FT European Climate

Leaders ranking in 2021, due to the recognition of

a 34.9% reduction in GHG emissions in Portugal

during 2020.

2021 REPORT & ACCOUNTS

20 |

BCP SHARES INDICATORS

Units

2021

2020

ADJUSTED PRICES

Maximum price

(€)

0.1709

0.2108

Average price

(€)

0.1355

0.1170

Minimum price

(€)

0.1126

0.0697

Closing price

(€)

0.1409

0.1232

SHARES AND EQUITY

Number of ordinary shares (outstanding)

(M)

15,114

Shareholder's Equity attributable to the group

(M€)

6,119

6,221

Shareholder's Equity attributable to ordinary shares (1)

(M€)

6,119

6,221

VALUE PER SHARE

Adjusted net income (EPS) (1)

(€)

0.007

0.010

Book value (2)

(€)

0.378

0.385

MARKET INDICATORS

Closing price to book value

(PBV)

0.35

0.30

Market capitalisation (closing price)

(M€)

2,130

1,862

LIQUIDITY

Turnover

(M€)

1,932

1,562

Average daily turnover

(M€)

7.5

6.1

Volume

(M)

13,989

13,791

Average daily volume

(M)

54.2

53.7

Capital rotation (3)

(%)

92.6%

91.2%

(1)Based on the average number of shares outstanding

(2)Based on the average number of shares minus the number of treasury shares in portfolio

(3)Total number of shares traded divided by the average number of shares issued in the period

The BCP share ended 2021 with an appreciation of 14.4%, which compares with a 34.0% appreciation of the

European bank index. This performance of BCP also compares with the average valuation of 22.0% of Spanish

banks.

The performance of the BCP share in 2021 was conditioned by the uncertainties related to the continued spread of

the Covid-19 pandemic, namely with the potential economic and social impacts arising from the pandemic

situation recorded globally. The evolution of the BCP share was also influenced by additional factors of

uncertainty, related to the evolution of the subject of mortgage loans granted in foreign currency associated with

the Polish operation.

Based on analysts who regularly follow BCP, at the end of 2021, buy recommendations represented 62% vs 55% at

the end of 2020. 23% of analysts have a neutral recommendation vs 45% in December 2020 and 15% of analysts

recommends selling the stock.

The average price target for BCP shares at the end of 2021, after several upward revisions, stood at €0.18, which

compares with the price target of €0.14 recorded at the end of 2020, corresponding to a variation of +28.6%.

Positive impacts:

2021 REPORT & ACCOUNTS

|21

Intrinsic to BCP:

•Disclosure of 2020 results, with the 4th quarter results exceeding analysts' expectations, especially with regard

to the resilience of the Portuguese operation's business model in an extremely challenging context;

•Disclosure of results for the 1st and 3rd quarters of 2021 with a positive reaction to the operational trends

registered in the different operations of the Group;

•Upward revision – by several analysts – of the BCP share price target.

Extrinsic to BCP:

•Continuation of the economic stimulus plans implemented by the various European governments and the

measures to support banks implemented by the ECB;

•Success of the vaccination process against Covid 19 in Portugal and the EU, with Portugal being one of the

countries in the world with the highest percentage of vaccinated population;

•Lifting of lockdowns imposed in several countries, following a successful vaccination process and greater control

of the pandemic situation;

•Start of interest rate hikes by the Polish Central Bank, with three increases in the 4th quarter of 2021 and a

fourth at the beginning of 2022;

•Upward revision - by several entities - of the macroeconomic projections for the Euro Zone.

Negative impacts:

Intrinsic to BCP:

•High levels of provisioning in Poland, to face legal risks associated with the mortgage loan portfolio granted in

foreign currency;

•High adherence to the moratorium scheme, increasing uncertainty regarding the economy's ability to react and

its impact on asset quality;

Extrinsic to BCP:

•New lockdown in Portugal in early 2021;

•Rising geopolitical tensions between the US and China and between the US and Russia;

•Beginning of the 4th wave of the pandemic and the appearance of new, more contagious variants

(Omicron);

•Imposition of quarantines on travelers originating in Portugal, by several European countries, jeopardizing

the revenues of the Tourism sector and contributing to the delay of the economic recovery;

•Political instability in Portugal, after the fall of the State Budget for 2022, leading the President of the

Republic to announce early legislative elections for January 30, 2022.

2021 REPORT & ACCOUNTS

22 |

PERFORMANCE

Index

Change 2021

BCP share

14.4%

Eurostoxx 600 Banks

34.0%

PSI20

13.7%

IBEX 35

7.9%

CAC 40

28.9%

DAX XETRA

15.8%

FTSE 100

14.3%

MIB FTSE

23.0%

Dow Jones Indu Average

18.7%

Nasdaq

26.6%

S&P500

26.9%

Source: Euronext, Reuters, Bloomberg

Liquidity

During 2021, 1,932 million euros in BCP shares were traded, corresponding to an average daily turnover of 7.5

million euros. 13,989 million shares were traded during this period of time, corresponding to a daily average

volume of 54.2 million shares. The capital turnover index stood at 92.6% of the average annual number of shares

issued.

Follow-up with Investors

The Bank participated in several events during 2021, having attended 10 conferences and 7 road shows in Europe

and in the USA, where it held one-on-one and group meetings with investors. Approximately 210 meetings were held

with analysts and institutional investors, demonstrating significant interest in the Bank.

Indexes listing BCP shares

The BCP share is part of more than 50 domestic and international stock exchange indexes, among which we point

out the Euronext 150, the PSI 20 and the PSI Geral.

Additionally, at the end of 2021, Millennium bcp also included the following Sustainability indices/statutes: “Ethibel

EXCELLENCE Investment Register”, “Ethibel Excellence Europe” and “European Banks Index”. Bank Millennium, in

Poland, is also part of the “WIG-ESG” of the Warsaw Stock Exchange. In 2022, the BCP Group rejoined, for the 3rd

year running, the Bloomberg Gender-Equality Index.

Sustainability Indexes

2021 REPORT & ACCOUNTS

|23

Material information announced to the market and impact on the share price

The following table summarizes the material information announced in 2021 and the price changes in the following

day and 5 days, comparing it also to performance of the main domestic and European index in the same periods:

13/Jan

Banco Comercial Português, S.A. informs

about notice of acquisition of perpetual

note

0.4%

-0.1%

-0.3%

-4.6%

-4.2%

-3.7%

25/Jan

Banco Comercial Português, S.A. informs

about provisions for FX-denominated

mortgage loans booked by Bank

Millennium, S.A.

-0.8%

0.7%

-2.3%

-1.5%

2.0%

-0.1%

2/Feb

Banco Comercial Português, S.A. informs

about Bank Millennium (Poland) results in

2020

-0.8%

-1.1%

-1.5%

8.5%

7.8%

3.4%

5/Feb

Banco Comercial Português, S.A. informs

about issue of senior preferred debt

securities

1.1%

0.9%

0.3%

-3.0%

-0.6%

-4.9%

25/Feb

Millennium bcp Earnings release as at 31

December 2020

-2.8%

-1.0%

-0.6%

-3.2%

-0.3%

-4.2%

4/Mar

Banco Comercial Português, S.A. informs

about notice of transactions of

subordinated notes

0.3%

-0.2%

-0.7%

-0.9%

-5.8%

-2.6%

8/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.5%

-2.6%

-0.4%

-4.0%

-6.8%

-1.5%

11/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of

subordinated notes

0.7%

1.2%

-0.6%

2.1%

3.8%

-1.3%

15/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

0.0%

-0.4%

-0.2%

-0.6%

-1.0%

-0.1%

17/Mar

Banco Comercial Português, S.A. informs

about qualified shareholding of

BlackRock

3.0%

2.6%

1.0%

2.9%

1.3%

3.7%

18/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.2%

-2.4%

1.1%

-2.8%

-2.3%

0.7%

25/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of perpetual

notes

1.4%

-0.1%

0.5%

1.9%

-2.6%

0.5%

Nr.

Date

Material Events

Chg. +1D

Chg. vs.

PSI20 (1D)

Chg. vs.

STOXX®

Europe 600

Banks (1D)

Chg. +5D

Chg. vs

PSI20 (5D)

Chg. vs

STOXX®

Europe 600

Banks (5D)

(Continues)

2021 REPORT & ACCOUNTS

24 |

(Continuation)

Nr.

Date

Material Events

Chg. +1D

Chg. vs.

PSI20 (1D)

Chg. vs.

STOXX®

Europe 600

Banks (1D)

Chg. +5D

Chg. vs

PSI20 (5D)

Chg. vs

STOXX®

Europe 600

Banks (5D)

29/Mar

Banco Comercial Português, S.A. informs

about notice of acquisition of perpetual

notes

2.4%

1.9%

-0.3%

1.3%

-1.8%

-0.7%

5/Apr

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

0.4%

-0.3%

0.0%

2.9%

2.3%

2.8%

13/Apr

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

0.4%

-0.2%

-5.8%

-4.8%

-3.7%

14/Apr

Banco Comercial Português, S.A. informs

about provisions for FX-denominated

mortgage loans booked by Bank

Millennium, S.A.

-3.5%

-2.7%

-2.2%

-7.2%

-5.7%

-4.1%

21/Apr

Banco Comercial Português, S.A. informs

about qualified shareholding of

BlackRock

0.6%

-0.5%

0.5%

3.8%

2.5%

-1.6%

27/Apr

Banco Comercial Português, S.A. informs

about qualified shareholding of

BlackRock

1.5%

1.4%

0.0%

8.2%

7.5%

7.2%

30/Apr

Banco Comercial Português, S.A. informs

about qualified shareholding of

BlackRock

1.0%

-0.6%

0.9%

4.9%

2.9%

3.3%

11/May

Banco Comercial Português, S.A. informs

about Bank Millennium (Poland) results in

1Q 2021

5.3%

4.9%

4.4%

17.2%

13.4%

14.9%

17/May

Millennium bcp Earnings release as at 31

March 2021

3.7%

3.0%

3.2%

-2.9%

-2.5%

-3.1%

20/May

Banco Comercial Português, S.A. informs

about resolutions of the Annual General

Meeting

0.9%

1.0%

0.0%

-2.1%

-1.5%

-4.0%

25/May

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.5%

-1.6%

-0.4%

3.5%

3.4%

1.9%

(Continues)

2021 REPORT & ACCOUNTS

|25

(Continuation)

Nr.

Date

Material Events

Chg. +1D

Chg. vs.

PSI20 (1D)

Chg. vs.

STOXX®

Europe 600

Banks (1D)

Chg. +5D

Chg. vs

PSI20 (5D)

Chg. vs

STOXX®

Europe 600

Banks (5D)

26/May

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

3.6%

3.1%

1.7%

5.0%

6.1%

1.7%

31/May

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

2.0%

1.3%

0.6%

1.4%

-0.7%

2/Jun

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.4%

-0.6%

-1.6%

-4.0%

-3.1%

-2.0%

29/Jun

Banco Comercial Português informs about

the sale of Banque Privée BCP (Suisse) SA

-1.4%

-0.4%

-3.0%

-4.4%

-1.4%

29/Jun

Banco Comercial Português, S.A. informs

about results of meeting of holders of CB

and written resolution of the issuer

-1.4%

-0.4%

-3.0%

-4.4%

-1.4%

29/Jun

Banco Comercial Português, S.A. informs

about granting of shares to the Executive

Directors and Managers

-1.4%

-0.4%

-3.0%

-4.4%

-1.4%

2/Jul

Banco Comercial Português releases

additional information on the sale of

Banque Privée BCP (Suisse) SA

0.4%

0.1%

-1.3%

0.1%

-0.4%

1.3%

7/Jul

Banco Comercial Português, S.A. informs

about provisions for FX-denominated

mortgage loans booked by Bank

Millennium, S.A.

-2.4%

-1.6%

0.1%

0.0%

0.4%

0.6%

26/Jul

Millennium bcp Earnings release as at 30

June 2021

-4.8%

-3.6%

-4.3%

-6.6%

-5.9%

-6.2%

26/Jul

Banco Comercial Português, S.A. informs

about Bank Millennium (Poland) results in

1H 2021

-4.8%

-3.6%

-4.3%

-6.6%

-5.9%

-6.2%

1/Aug

Banco Comercial Português, S.A. informs

about 2021 EU-Wide Stress Test Results

0.6%

-0.6%

-0.3%

6.0%

4.3%

1.2%

12/Aug

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.0%

-1.2%

-1.1%

-2.5%

-4.2%

1.8%

(Continues)

2021 REPORT & ACCOUNTS

26 |

(Continuation)

Nr.

Date

Material Events

Chg. +1D

Chg. vs.

PSI20 (1D)

Chg. vs.

STOXX®

Europe 600

Banks (1D)

Chg. +5D

Chg. vs

PSI20 (5D)

Chg. vs

STOXX®

Europe 600

Banks (5D)

21/Sep

Banco Comercial Português, S.A. informs

about the upgrade of deposits ratings by

Moody's to Baa2/Prime-2

5.3%

3.1%

2.2%

20.7%

18.5%

14.4%

29/Sep

Banco Comercial Português, S.A. informs

about the inaugural issue of social senior

preferred notes

3.8%

3.1%

3.6%

7.4%

6.6%

5.6%

6/Oct

Banco Comercial Português, S.A. informs

about provisions for FX-denominated

mortgage loans booked by Bank

Millennium, S.A.

5.5%

4.2%

3.8%

-3.4%

-5.8%

-4.5%

26/Oct

Banco Comercial Português, S.A. informs

about Bank Millennium (Poland) results in

9M 2021

-1.7%

-1.3%

-0.5%

0.1%

-1.2%

0.3%

27/Oct

Millennium bcp Earnings release as at 30

September 2021

0.7%

-0.3%

1.1%

2.3%

0.6%

2/Nov

Banco Comercial Português informs about

the completion of the sale of Banque

Privée BCP (Suisse) SA

0.4%

2.1%

-0.2%

1.6%

3.4%

3.0%

2/Nov

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

0.4%

2.1%

-0.2%

1.6%

3.4%

3.0%

4/Nov

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

0.0%

1.0%

-1.0%

1.5%

1.4%

0.6%

9/Nov

Banco Comercial Português, S.A. informs

about potential issue of subordinated

notes

-0.4%

-0.8%

-1.0%

-0.1%

0.4%

-1.2%

10/Nov

Banco Comercial Português, S.A. informs

about issue of subordinated notes

1.7%

1.6%

1.1%

0.6%

1.1%

-0.1%

11/Nov

Banco Comercial Português, S.A. informs

about notice of acquisition of securities

-1.2%

-1.8%

-0.7%

-4.5%

-2.3%

-3.5%

14/Dec

Banco Comercial Português, S.A. informs

on notification by Banco de Portugal of

its MREL requirements

-2.1%

-1.8%

-1.2%

-2.9%

-3.0%

-4.0%

31/Dec

Banco Comercial Português informs about

the partnership for the insurance market

in Mozambique and the sale of a

shareholding in Seguradora Internacional

Moçambique, S.A.

3.2%

2.0%

2.3%

14.6%

14.1%

7.9%

2021 REPORT & ACCOUNTS

|27

The following chart depicts BCP's share price performance in 2021:

Dividend policy

The BCP Group's dividend policy takes into account in particular: (i) the promotion of conditions for sustainable

compliance with the capital ratios applicable to the Bank at any given time, as well as other applicable legal provisions,

including the limitations applicable at any given time that result from the calculation of the maximum distributable

amount; (ii) retention of own funds to promote consistency with the Risk Appetite Statement (RAS) and with the results

of the internal capital adequacy self-assessment process (ICAAP); and (iii) safeguarding an appropriate safety margin

over the values established by the regulator within the scope of its analysis and assessment regarding the adequacy of

strategies, processes, capital and liquidity, to the risks to which the Bank is exposed (SREP). In the current context, it

will naturally still be worth considering the guidance issued by the ECB mentioned above.

The decision on the application of profits for the year is the responsibility of the General Meeting, based on a proposal

from the Board of Directors.

Bearing in mind the permanent consideration of the Bank's capital needs to meet its strategic objectives, it is the

intention of the Board of Directors, in a context of macroeconomic stability, to re-establish a distribution of net profits,

determined in the individual accounts for each year, that goes to meeting the legitimate expectations of its

shareholders and that, in the medium term, it is in line with the best practices of the reference banking sector.

The Board of Directors will define the implications of these criteria in the maximum limit of prospective dividend

payout resulting from the dividend policy, as well as the respective application period, which must be evidenced in the

Bank's annual budgets.

Own shares

As at 31 December 2021, Banco Comercial Português, S.A. does not hold treasury shares and did not purchase or sold

own shares during the period. However, as at 31 December 2020, this balance included 323,738 shares owned by

clients. Considering that, for some of these clients there is evidence of impairment, the shares of the Bank owned by

these clients were considered as treasury shares, and, in accordance with the accounting policies, deducted to equity.

The own shares held by the companies included in the consolidation perimeter are within the limits established by the

Bank's by-laws and by the Commercial Companies Code.

As at 31 December 2021, regarding treasury shares owned by associated companies of the BCP Group, Millenniumbcp

Ageas Grupo Segurador, S.G.P.S., S.A. owns 142,601,002 BCP shares in the amount 20,078,000 euros (31 December

2020: 17,568,000 euros), according to note 51.

2021 REPORT & ACCOUNTS

28 |

Shareholder structure

According to Interbolsa, Banco Comercial Português had 142,309 Shareholders at 31 December 2021.

At the end of December 2021 there were four qualified shareholders, two of which with a stake above 5% of the

Bank's share capital.

Shareholder structure

Number of Shareholders

% of share capital

INDIVIDUAL SHAREHOLDERS

Group Employees

2,613

0.32%

Other

135,454

24.16%

COMPANIES

Institutional

285

17.24%

Qualified Shareholders

51.80%

Other companies

3,953

6.47%

TOTAL

142,309

100%

Shareholders with more than 5 million shares represented 74.71% of the share capital.

Number of shares per Shareholder

Number of Shareholders

% of share capital

> 5,000,000

104

74.71%

500,000 a 4,999,999

1,292

9.34%

50,000 a 499,999

12,565

11.11%

5,000 a 49,999

36,723

4.30%

< 5,000

91,625

0.54%

TOTAL

142,309

100%

The Bank’s shareholding structure remained stable in terms of geographical distribution in 2021. Domestic

shareholders held 30.4% of the total shares of the Bank as of December 31, 2020.

Nr. of Shares (%)

Portugal

30.4%

China

30.0%

Africa

19.6%

UK / EUA

10.8%

Other

9.2%

Total

100%

2021 REPORT & ACCOUNTS

|29

Qualified Holdings

The following Shareholders held more than 2% of the share capital of Banco Comercial Português, S.A. as of

December 31, 2021:

31 December 2021

Shareholder

Nr. of shares

% of share

capital

% of voting

rights

Chiado (Luxembourg) S.a.r.l., an affiliate of Fosun, whose parent company

is Fosun International Holdings Ltd

4,525,940,191

29.95%

TOTAL FOR FOSUN GROUP

4,525,940,191

29.95%

Sonangol - Sociedade Nacional de Combustíveis de Angola, EP, directly

2,946,353,914

19.49%

TOTAL FOR SONANGOL GROUP

2,946,353,914

19.49%

BlackRock*

404,590,600

2.68%

TOTAL FOR BLACKROCK

404,590,600

2.68%

EDP Group Pensions Fund **

311,616,144

2.06%

TOTAL EDP GROUP

311,616,144

2.06%

TOTAL OF QUALIFIED SHAREHOLDERS

8,188,500,849

54.18%

* In accordance with the announcement on April 30, 2021 (last information available).

** Allocation in accordance with Art. 20 (1.f) of the Portuguese Securities Code.

The voting rights referred to above are the result of the direct and indirect stakes of Shareholders in the share

capital of Banco Comercial Português. No other imputation of voting rights foreseen in article 20 of the Securities

Code was communicated or calculated. At the date of preparation of this Report (March 2022), the Blackrock Group

and the EDP Group, in accordance with article 16 of the Portuguese Securities Code, do not hold a qualifying holding

in BCP.

2021 REPORT & ACCOUNTS

30 |

Regulatory, economic and

financial system environment

Regulatory environment

The initiatives under the "Covid-19" pandemic

aiming at the transition to a "new normal context"

even if subject to uncertainty, continued to

influence the regulatory framework. Governance

and internal control frameworks of the

institutions as well as risk management and

capital adequacy, remain current matters and

with increased relevance due to emerging risk

factors such as climate and environmental risks

and cybersecurity.

The European Commission has adopted a review

of the EU banking rules for the implementation of

the Basel III agreement in the EU (Capital

Requirements Regulation and Capital

Requirements Directive), known as the "Banking

Package". The review includes the following

legislative elements: (i) proposal to amend the

Capital Requirements Directive (Directive

2013/36/EU), proposal to amend the Capital

Requirements Regulation (Regulation 2013/575/

EU) and changes to the resolution framework. The

legislative package is currently under discussion

by the European Parliament and the European

Council and in its current form with entry into

force, phased-in, from 1 January 2025. An EC

public consultation is underway towards a

legislative proposal for the EU’s macro-prudential

framework for the banking sector.

The European Union and its Member States

maintained or reformulated in 2021 some support

measures to minimise the economic consequences

of the pandemic of COVID-19, namely the support

to households, companies and Member States,

flexibility and reinforcement of the Stability and

Growth Pact and economic recovery measures.

Some of the extraordinary supervisory monitoring

and reporting procedures for banks are being

reviewed under the expectations of a less

relevant pandemic scenario in the future, while

the focus remains on the lagged effects of the

pandemic, notably on credit risk.

As part of a wide-ranging response, an EU

recovery fund - the Recovery and Resilience

Mechanism – was set up to mitigate the effects of

the pandemic crisis. The European Commission

approved a scheme worth 13.9 billion euros in

grants to support Portugal and 2.7 billion euros in

loans, totalling 8% of 2020 GDP.

Poland has requested a total of 23.9 billion euros

in guarantees under the RRF and 12.1 billion euros

in loans, totalling 7% of Poland's 2020 GDP. Access

to the funds is subject to Poland's acceptance of a

set of justice reforms.

The ECB maintained favourable funding

conditions, at a slower pace, for net asset

purchases under the pandemic emergency

purchase programme (PEPP) - due to be phased

out in March 2022-, asset purchase programme

(APP) - still without a date to be discontinued but

with values reduced to around half of current

ones in a phased manner over 2022 - and the

reinvestment policies and special conditions

associated with the longer-term refinancing

operations, expected to end in June 2022. No

indications were given regarding an increase of

policy rates as long as the context is interpreted

as one of temporary inflationary pressures.

The exceptional capital and liquidity relief

measures allowed by the ECB due to the COVID-19

pandemic will expire at the end of the year.

Banks can exclude certain central bank exposures

from the leverage ratio until 31 March 2022 - as

an exceptional macroeconomic measure and can

temporarily operate below the level of capital

defined by their Pillar 2 Guidance until the end of

2022. Restrictions on the payment of bank

dividends have been lifted.

The environmental, social and governance factors

(ESG) policies have been extended.

Complementing the sustainability taxonomy

defined by Regulation (EU) 2020/852, Delegated

Regulation (EU) 2021/2139 has set out the

technical assessment criteria for determining

under which conditions an economic activity

qualifies as contributing substantially to climate

change mitigation or climate change adaptation

and establish that such economic activity does not

contribute substantially to any one of the

environmental objectives set out in the

Regulation.

The integration of ESG risks into the supervisory

framework will be supported by the ongoing ECB’s

economy-wide climate stress test, while EBA is

assessing the inclusion of ESG related risks in the

Pillar 2 framework.

The EBA is also working to incorporate money

laundering and terrorist financing issues into

prudential and governance models.

2021 REPORT & ACCOUNTS

|31

The national authorities have adopted measures

within their competence, namely macro-

prudential, behavioural, and financial markets, in

line with the local context and, when applicable,

in accordance with the guidelines issued by the

European authorities, namely:

•Decree-Law no. 22-C/2021, of 22 March, that

extends the grace periods of state granted

credit lines and approves a special regime for

granting the public guarantees by the “Fundo de

Contragarantia Mútuo”, within the scope of

COVID-19 pandemic;

•Resolution no. 63-A/2021, of 27 May 2021, of

the Council of Ministers, that authorizes

amendments to the framework agreement with

the Resolution Fund, as well as the financing

contracts between the State and the Resolution

Fund;

•Law no. 70-B/2021, of 6 August, updated the

scope of PARI and PERSI regulations under the

public banking moratoria regime;

•With a view to the convergence of the average

maturity of new credit agreements for house

purchase towards 30 years by the end of 2022,

Banco de Portugal recommends new limits to

the maximum maturity of new credit for house

purchase based on the age of borrowers;

•Instruction 2/2021, of Banco de Portugal, which

defines low and high-risk factors for money

laundering and terrorist financing and specific

simplified or reinforced identification and due

diligence measures;

•Notice 4/2021, of Banco de Portugal, which

regulates the typology and registration of

agencies and the framework applicable to

agency extensions;

•The revised version of the draft Banking Activity

Code, which aims to replace the General

Regime of Credit Institutions and Financial

Companies (RGICSF) and transpose the European

directives relating to the so-called “Banking

Package” (CRD V and BRRD II) is under analysis

by the Ministry of Finance;

•Decree-Law No. 65/2021, regulates the Legal

Regime of Cyberspace Security and defines the

obligations regarding cybersecurity

certification;

•Decree-Law no. 70-B/2021, of 6 August,

establishes protective measures for bank

customers with credit contracts covered by

moratoria and amends the general default

regime, approved by Decree-Law no. 227/2012,

of 25 October;

•Under the COVID-19 pandemic, bank moratoria

were extended (Law No. 50/2021, 30 July 2021)

until the end of 2021;

•On a macro-prudential level, the countercyclical

own funds buffer applicable to credit exposures

to the domestic non-financial private sector

remained at 0% of the total amount of

exposures and, in accordance with the annual

procedure, the values given for the O-SII buffer

to be applied to systemically relevant banks in

Portugal were defined.

The EU Benchmarks Regulation has been amended

by Regulation 2021/168, granting the European

Commission powers on the LIBOR transition in the

European Union. An alternative interest rate to

LIBOR CHF, "SARON", has already been

designated, while initiatives to designate other

interest rates as statutory replacements for

certain LIBOR rates that have already been

discontinued are under consideration. The "risk-

free interest rate working group" for the euro

area has published guiding principles and high-

level recommendations in this area, but these are

not binding in nature.

The Single Resolution Board, the European

authority responsible for the resolution of banks,

updated the MREL policy, allowing it to restrict

banks’ earnings distribution if there are MREL

breaches, defining MREL-eligibility of UK

instruments without bail-in clauses while refining

the MREL methodology.

Poland presented a stimulus plan for 2021-30 -

the "Polish Deal" - designed to strengthen the

economy following the coronavirus pandemic.

Faced with inflationary pressures, which have

supported the increases of official Polish interest

rates since mid-Q4 2021, the Polish government

implemented a set of measures to mitigate the

effects of high inflation, namely through the

reduction of some taxes and duties on consumer

goods.

The CRD V and the BRRD II have been transposed

into Polish law. The Civil Chamber of the Polish

Supreme Court postponed – with no defined date -

the disclosure of the understanding regarding

foreign currency-denominated loans that could

contribute to increase the uniformity in related

court decisions – potentially relevant to the size

of potential losses to the banking sector from for

legal risks provisions.

In Mozambique, the measures to mitigate the

effects of the pandemic in the banking sector

have been progressively watered down given the

improved context, the regulatory frameworks for

crisis management (recovery and resolution of

credit institutions) are being drawn up, and the

reforms to the Money Laundering Act, the Bank

Accounts Act, the creation of the Unique Bank

Identification Number and the Foreign Exchange

Act are under consideration.

2021 REPORT & ACCOUNTS

32 |

Economic environment

Global Economic Environment

The world economy recovered strongly in 2021,

after the fall of 3,1% in the preceding year,

consequent of the adverse effects of the

pandemic on economic activity.

In 2022, this trajectory may, however, be strongly

conditioned by the adverse effects of the war

between Russia and Ukraine, namely through the

worsening of inflationary pressures, restrictions in

production chains and the increase in uncertainty

and instability in international financial markets.

In 2022, the International Monetary Fund (IMF)

forecasts a slowdown of the global GDP growth

rate, from 5.9% to 4.4%. The risks to this

projection are tilted to the downside, and relate

to the evolution of the pandemic, the effects of

disruptions of the global supply chains, and the

possibility of more restrictive monetary policies,

induced by sharp increases in inflation.

Global Financial Markets

In financial markets, the year of 2021 was

characterized, on one hand, by marked valuations

of the main global stock indexes, supported by

the strong recovery of economic activity and, on

the other hand, by the increase in long term

interest rates, which followed the rise in inflation

and the consequent expectations of removal of

monetary stimuli measures, namely in the USA.

Given this, the USD appreciated in the whole

year, particularly against the Euro. The favorable

macroeconomic picture and the optimistic

environment that prevailed in the markets

benefited credit spreads in developed economies.

In emerging markets, however, the performance

of several asset classes turned out less positive,

against a background of more difficulties in

controlling the pandemic and of idiosyncratic

frailties.

In the Euro Area, the controlled increase in the

inflation rate throughout 2021 allowed the

European Central Bank to progress very gradually

in reducing the degree of accommodation of

monetary policy. As a result, Euribor interest

rates have stayed relatively stable throughout the

year, as well as the risk premia of government

bonds of periphery countries, including Portugal.

Outlook for the Portuguese Economy

In 2021 the GDP grew 4.9%, which represented a

strong recovery compared to the contraction of

8,4% observed in the preceding year. The

performance of the Portuguese activity benefited

particularly from the removal of containment

measures on the second quarter, which triggered

a strong increase in consumption, in the context

of elevated levels of accumulated savings by the

families and an improving labour market.

Investment has kept its robustness throughout the

year, boosted by the execution of the Recovery

and Resiliency Plan (RRP), and exports exhibited a

marked rebound, despite the less favorable

performance of services associated with tourism,

consequent of the erratic dynamic of the

pandemic.

The European Commission (EC) foresees that the

Portuguese GDP will grow 5.5% in 2022, bolstered

by the dynamism in domestic demand and the

recovery of external demand, namely regarding

tourism.

Regarding the inflation rate, an annual increase

was registered in 2021, from -0.1% to 0.9%, as a

result of the strong increase in energy prices. For

2022, the EC forecasts that the upwards

trajectory of inflation should steepen, estimating

an increase in consumer prices of 2.3%.

The budgetary measures implemented in 2020 and

2021, which proved vital in attenuating the

adverse effects of the pandemic, have translated

into a substantial aggravation of the public debt

ratios, which should, however, see a progressive

improvement, in tandem with the strong rebound

of economic activity.

2021 REPORT & ACCOUNTS

|33

International Operations

In Poland, GDP growth was of 5,7% in the whole

year. The strong expansion of GDP, together with

inflationary pressures coming from rising

commodity prices and wage increases, resulted in

a significative increase of the inflation rate that,

in 2021, rose to 5.2%. Against this background,

the central bank started a cycle of increased

restrictiveness of monetary policy, by raising the

reference interest rate from 0,10% to 1,75%.

Despite the dynamism of economic activity and

the increase in interest rates, the Zloty

depreciated against the Euro in the whole year,

penalized by divergences between national

authorities and the European institutions.

In 2022, the expectations of maintained

dynamism in activity, together with increases in

wages, should contribute to the persistence of the

elevated level of prices. However, the

geopolitical instability between Russia and

Ukraine may represent an important risk for

economic activity in Eastern European countries.

In Mozambique, the GDP registered a growth of

2,2% in 2021, which represents a strong recovery

after the fall of 1,2% in 2020. In 2022, the

execution of natural gas projects in the Rovuma

bay, and the favorable evolution of global

demand should contribute to reinforce the

trajectory of the economic activity. The economic

rebound has contributed to exchange rate

stability, which has allowed inflationary risks to

be kept relatively controlled.

In Angola, the economic activity started to

increase, after five consecutive years of

recession. In 2022, the IMF forecasts a GDP

growth of 2.9%. In this context, the Kwanza has

been appreciating.

GROSS DOMESTIC PRODUCT

Annual growth rate (in %)

2019

2020

2021

2022

2023

EUROPEAN UNION

1.8

-5.9

5.3

4.0

2.8

Portugal

2.7

-8.4

4.9

5.5

2.6

Poland

4.7

-2.5

5.7

5.5

4.2

SUB-SAHARAN AFRICA

3.1

-1.7

4.0

3.7

4.0

Angola

-0.5

-5.2

0.1

2.9

3.3

Mozambique

2.3

-1.2

2.2

5.3

12.6

Source: EC, February 2022 for the EU, Portugal and Poland. IMF, October 2021 for Sub-saharan Africa, Angola and Mozambique. National Statistics

Institutes

Estimates

2021 REPORT & ACCOUNTS

34 |

Financial system

Central Banks and Governments maintained in 2021,

as in 2020, unprecedented coordinated global

policy stimulus, in particular: i) maintenance of

zero or negative reference rates and asset purchase

programmes; and ii) major fiscal programmes to

support the economy but revealing widely diverging

levels of support from member States to the private

sector. Such differences generate large competitive

distortions due to different levels of indirect State

support to Banks and Companies in each EU

jurisdiction. Also of note are the positive

developments in the European crisis response

programmes, of which the approval of the Recovery

and Resilience Plan for Portugal ('PRR') is worth

highlighting. It should also be noted that Central

Banks at the end of the year took the first steps

towards the normalization of the monetary policy,

with the Fed announcing the end of its asset

purchase programme and indicating the possibility

of three interest rate hikes in 2022. The ECB, which

continued to consider inflation levels as

'temporary', does not anticipate changes in the

interest rates in 2022, but announced the end of

the Pandemic Emergency Programme and the

gradual reduction of volumes asset purchase during

2022.

In a context that remains very challenging due in

part to the maintenance of negative interest rates,

the legislative pressure on commissioning and the

maintenance of disturbance factors of a

geopolitical nature (e.g. persistence of commercial

and socio-political tensions between the major

economic blocks), the Portuguese banking system

managed to achieve positive profitability levels

(although reduced in relation to its cost of capital)

while maintaining conservative provisioning levels

to reflect the deterioration of the macroeconomic

forecasts induced by the pandemic. The evolution

and performance of the banking system continued

to be impacted by increasingly demanding and

costly Supervision and Regulation. Despite some

temporary pandemic-induced flexibility, ad-hoc

reporting demands have greatly intensified, and

regulatory contributions increased (e.g.

contributions to the European and National

Resolution Funds, and Contributions to the Banking

Sector, in these last two cases at a clear

disadvantage compared to other European

jurisdictions). In spite of being an exogenous event,

the pandemic outbreak brought high uncertainty to

the Portuguese banking system, which is facing this

crisis in better conditions than in previous crises,

showing greater strength both in terms of capital

and liquidity, and improved asset quality indicators,

reflecting the efforts made in recent years to

reduce NPE and to reinforce provisioning and

coverage level. The exception continues to be one

player that keeps relying on the National Resolution

Fund to top-up its capital ratios to comply with its

minimum requirements. This situation, together

with the other financial needs generated by the

resolution processes of Banco Espírito Santo and

BANIF, remains a source of risk potentially affecting

the normalisation of the profitability of the

Portuguese banking system and raising questions

around the fairness of the competition.

The Covid-19 pandemic accelerated the

transformation process of the banking system and

confirmed the merits of the business model and

customers relationship adjustment strategy adopted

in recent years by some of the main domestic

banks, making it more digital, closer, simpler, safer

and more sustainable, and by improving the quality

service to increasingly demanding customers. The

absence of a single regulatory framework applying

to all entities that can operate in specific business

segments, which would ensure a level playing field,

is forcing Banks to further accelerate their digital

transformation processes and to adjust their cost

structure to compensate for the loss of business and

revenues to unregulated non-bank players,

inevitably implying the adaptation of their business

models to the new environment. As in recent years,

the mitigation of compliance risks (associated for

example with money laundering and the financing

of illicit activities, e.g. terrorism) and

cybersecurity, required enhanced investment in

appropriate operating and technological risk

assessment and control policies, as well as in IT,

and particularly data security systems and the

defence lines of the Banks, together with the

increasing integration of sustainability issues ('ESG')

in daily management which will contribute to a

more resilient response of the Portuguese financial

system to the public health and economic crisis.

The consequences of the invasion of Ukraine by

Russia on the financial markets are still not fully

known and could be significant for different

sectors, namely for European banks. Most banks in

Europe have a very limited direct exposure to the

risk of conflict, being practically negligible at the

level of the Portuguese banking system. However,

indirect consequences of the conflict should be

taken into account, namely through the rise in

inflation and the deceleration of economic growth

in Europe, generating uncertainty about the

macroeconomic policy decisions of the ECB and

other central banks in Europe. International

economic and financial sanctions will continue to

evolve and are unlikely to cause directly significant

constraints to Portuguese banks.

2021 REPORT & ACCOUNTS

|35

Business Model

Nature of operations and main

activities

The Group provides a wide variety of banking

services and financial activities in Portugal and

abroad, where it is present in the following

markets: Poland, Mozambique, Angola (through its

associate BMA) and China (Macao). All its banking

operations develop their activity under the

Millennium brand. The Group also ensures its

international presence through representation

offices and/or commercial protocols.

The Bank offers a vast range of financial products

and services: current accounts, payment systems,

savings and investment products, private banking,

asset management and investment banking,

including mortgage loans, personal loans,

commercial banking, leasing, factoring and

insurance, among others. The back-office

operations for the distribution network are

integrated to benefit from economies of scale.

In Portugal, Millennium bcp is focused on the

retail market, providing services to its Customers

in a segmented manner. The subsidiary companies

generally provide their products through the

Bank's distribution networks, offering a wide

range of products and services.

Distinctive factors of the business

model

Largest private sector banking

institution

Millennium bcp is Portugal's largest private sector

banking institution on business volumes, with a

leading position and particular strength in various

financial products, services and market segments

based on a modern branch network with

nationwide coverage. The Bank also offers remote

banking channels (banking service by telephone,

mobile banking and online), which operate as

distribution points for its financial products and

services.

The activity in the domestic market focuses on

Retail Banking, which is segmented in order to

best serve Customer needs, through a value

proposition based on innovation and speed

targeted at Mass-market Customers, and through

the innovation and customized management of

service for Prestige, Business, Companies,

Corporate and Large Corporate Customers Retail

Banking and also through ActivoBank, a bank

aimed specifically at Customers who are young in

spirit, intensive users of new communication

technologies and prefer a banking relationship

based on simplicity and offering innovative

products and services.

At the end of June 2021, Millennium bcp was the

largest Portuguese privately-owned bank on

business volumes with a relevant position in the

countries where it operates.

On 31 December 2021, operations in Portugal

accounted for 72% of total assets, 68% of total

loans to Customers (gross) and 74% of total

customer funds. The Bank had over 2.5 million

active Customers in Portugal and market shares of

17.5% and 18.3% of loans to Customers and

customer deposits, respectively, in November

2021.

International presence as a platform

for growth

At the end of December 2021, Millennium bcp was

also present throughout the world through its

banking operations, representation offices and/or

commercial protocols, serving over 6.1 million

active Customers.

In Poland, Bank Millennium has a well distributed

network of branches, supported by a modern

multi-channel infrastructure, on a reference

service quality, with high brand recognition, a

robust capital base, comfortable liquidity and

sound risk management and control. In December

2021, Bank Millennium had a market share of 6.1%

in loans to Customers and of 5.5% in deposits.

On June 29, 2021 BCP entered into an agreement

with Union Bancaire Privée, UBP SA regarding the

sale of the entire share capital of Banque Privée

BCP (Suisse) SA (“Banque Privée”). The sale of

the entire share capital of Banque Privée BCP

(Suisse) SA (“Banque Privée”) to Union Bancaire

Privée, UBP SA was completed on November 2,

2021. The amount received for the sale of Banque

Privée’s share capital is CHF 113,210,965.00,

reflecting the distribution of dividends and the

share capital reduction that have occurred in the

meantime. Considering this amount, the

transaction has a (positive) impact on the

consolidated results for the current year, on a pro

forma basis as at 30/09/2021, of approximately €

46 million and a positive impact on the

consolidated CET1 ratio of 15 basis points and on

total capital of 17 basis points, confirming the

amounts previously announced. The final price is

still subject to adjustments arising from the

evolution of assets under management and the

2021 REPORT & ACCOUNTS

36 |

activity of Banque Privée BCP (Suisse) SA. The

sale of Banque Privée allows BCP Group to pursue

its strategy of focusing resources and

management on core geographies, enhancing

their development and thus creating value for

stakeholders.

Concerning the operations in Africa, Millennium

bcp operates through Millennium bim, a universal

bank that has been operating since 1995 in

Mozambique, where it has about 1.1 million

Active Customers and is the reference bank in this

country, with market shares of 16.7% in loans and

advances to Customers and of 23.9% in deposits,

in December 2021. Millennium bim is a highly

reputed brand in the Mozambican market,

associated with innovation, major penetration in

terms of electronic banking and exceptional

capacity to attract new Customers, as well as

being a reference in terms of profitability.

On 29 December 2021, BIM – Banco Internacional

de Moçambique, SA (a bank incorporated under

Mozambican law in which BCP indirectly holds a

stake of 66.69%) formalized the entry into force

of a long-term agreement with Fidelidade –

Companhia de Seguros, SA, with a view to

strengthening capabilities and expanding the offer

of insurance through the banking channel

(bancassurance) in Mozambique. Under this

partnership, the possibility of which was provided

for in the memorandum of understanding signed

between BCP and the Fosun Group in November

2016, BIM and Fidelidade also formalized the sale

by BIM to Fidelidade of shares representing 70% of

the share capital and voting rights of Seguradora

Internacional de Moçambique, SA, with BIM

maintaining approximately 22% of its share

capital. BIM and Fidelidade also agreed call and

put options with a view to enabling Fidelidade to

acquire additional shares, and BIM's shareholding,

as a result of these options, may be reduced to

9.9% of SIM's capital. Under the long-term

exclusive distribution agreement, BIM will

promote the distribution of SIM insurance through

the banking channel, continuing to provide its

customers with a wide range of competitive

insurance products, which is reinforced by the

partnership with Fidelidade, an Insurance Group

of reference.

The deed of the merger of Banco Millennium

Angola, S.A. with Banco Privado Atlântico, S.A.

was signed on 22 April 2016. The bank resulting

from the merger is an associate of Banco

Comercial Português.

The Group also operates in the Far East since

1993. The activity of the existing branch in Macau

was expanded in 2010, through the attribution of

a full license (onshore) aimed at establishing an

international platform for business operations

between Europe, China and Portuguese-speaking

African countries.

The Bank also has 7 representation offices (1 in

the United Kingdom, 2 in Switzerland, 2 in Brazil,

1 in China, in Guangzhou, and 1 in South Africa),

3 commercial protocols (USA, France and

Luxembourg).

Growth based on digital/mobile

banking

Since its incorporation, the Bank has been

recognized by the innovation. The Bank was the

first in Portugal to introduce specific innovative

concepts and products, including direct marketing

methods, branch formats based on customer

profiles, salary accounts, simplified branches

("NovaRede"), telephone banking services,

through Banco 7, which later became the first

online banking services platform, health insurance

(Médis) and direct insurance, and a website

dedicated to individual Customers and corporate

banking. The Bank was also a pioneer in the

launching of a new Internet Banking concept,

based on the ActivoBank platform, which provides

a simplified service to the Customer, including

the opening of a current account using Mobile

Banking solutions.

Digital banking

At Group level, mobile Customers grew 20% (+571

thousand customers), surpassing 3.4 million

customers, thus representing a penetration rate

of 56% over the active Customer base.

With regard to digital Customers, within the

Group, there was an increase of 12%, representing

currently 69% of the Active Customer base.

In Portugal, mobile Customers grew 20% (+192

thousand customers), surpassing 1.1 million

customers, already representing 46% of Portugal's

active Customer base.

With regard to digital Customers, there was a 12%

increase in Portugal, thus allowing them to

represent in December 2021, 59% of the Active

Customer base in Portugal.

Digital sales

In 2021, sales made through digital channels

represented 38% of the Bank's total sales, an

increase of 6 pp compared to 2020. In a context

still very conditioned by the pandemic, mainly

during the 1st half of the year, the Bank

continued its plan to develop a new standard of

digital experience focused on mobile, with the

application of a more personalized and targeted

communication strategy with Customers,

highlighting the greater convenience of the

products and services available in the Millennium

2021 REPORT & ACCOUNTS

|37

app and always seeking to simplify everyday life

of the Customer.

With the gradual and careful lifting of restrictions

in the Bank's credit policy, it was possible to carry

out own media and paid media campaigns

customized to the profile of each Customer and

with a promotional rate at different times of the

year. Thus, levels of monthly production of

personal digital credit were possible higher than

those seen in the pre-pandemic months, with a

product penetration rate of 44% in 2021 in

number of transactions (+15 pp compared to

2020), with the app to be responsible for 83% of

them (+20p.p compared to 2020).

The credit card ordering process in the app, with

an automatic decision to increase the credit limit,

also proved to have been a good initiative to

increase sales, representing 81% of digital card

sales in 2021. The Bank provided a process of card

limit increase in the app with 100% digital

approval and features such as monitoring the

issuance and receipt of the card and the

acceptance of payments through 3D Secure

through the app were very important to ensure

more service to Customers.

Also in terms of credit, a new mortgage loan

simulator was developed for a website and app

with a credit request, a faster, more intuitive

journey with contextual explanations for greater

financial literacy of Customers.

In the creation and reinforcement of savings,

there was an aggregate growth of 16 p.p.

compared to December 2020 in the penetration

rate in number of transactions, with the app

representing around 83% of the digital total.

In terms of investments, the significant weight of

most products sold on digital was maintained: 34%

of subscriptions to investment funds, 89% of

subscriptions to Millennium bcp stock exchange

certificates and 98% of stock exchange orders

were carried out on digital in 2021. It should be

noted that the Millennium app already represents

32% of the sale of investment funds in digital and

this year a new investment area was launched in

the Millennium app, with the availability of

trading stock exchange certificates and the

completion and consultation of the Questionnaire

of the Investor, in addition to the investment

portfolio monitoring screen whose information

has been reinforced. In the online trading

business, we highlight the significant growth in

the value of orders +29% carried out on our digital

channels and the weight of the Bank's online

trading platform – MTrader –, with 75% of orders

placed, having registered around 10,000 new

additions in 2021.

In risk insurance, the Bank ended the year with a

weight of 32% of digital sales (+4 p.p. compared

to December 2020). Following the trend of

increasing demand from Customers for products

related to their protection, the Bank made

available the Médis Dental Health Insurance,

Médis Health Insurance and YOLO! insurance

through the app.

Customer-oriented relationship model

2021 was a year of excelling. Excelling Teams,

Business and Communication with Customers.

The beginning of the year was marked by the

recognition of Millennium as a “Consumer's

Choice” in the “Largest Banks” category, allowing

the Bank to reinforce its positioning of excellence

and number 1 among Customers and Non-

Customers.

The communication path taken was based on the

pursuit of this commitment and respect for the

needs, ambitions and projects of the Customers.

In a year still marked by the effects of the

pandemic, the Bank continued to reinforce its

communication strategy on the subject of

Mortgage Loans and Personal Credit - as well as in

the offer of differentiating solutions and

products, always maintaining a focus on the

Mobile aspect.

The Millennium app reinforced its path of

innovation, with actions such as the launch of

StayON, as well as the “App Millennium, again

from the Best” campaign, following the “Best

Digital Bank in Portugal” award given by the

prestigious international magazine Global

Finance.

Millennium's positioning as a pioneering and

dynamic bank of the financial system was also

reinforced by the strong focus on new Means of

Payment solutions, such as Swatch Pay, Fitbit and

Garmin, which joined the solutions already

available through Apple Pay and, as early as 2022,

from Google Pay.

Also noteworthy is the strong visibility of other

strategic segments such as Companies, Prestige

and Diaspora.

The business segment was undoubtedly one of the

most dynamic in terms of communication. With a

strong commitment to the recovery of the

Economy, the Bank launched the “Lets go!”

Campaign, in an affirmation of will, dynamism

and proximity to its Customers. The motto and

promise were reinforced with the launch of the

subsequent campaign – the Savings and Recovery

Plan (PRR). With the claim “Resilience is with us.

Lets go!" the Campaign pays tribute to all

businesses and companies that had the ability to

resist and overcome themselves in such a complex

moment, being also a tribute to the country as a

whole and to the way it fought and fights against

adversity.

2021 REPORT & ACCOUNTS

38 |

In 2021, Millennium consolidated its positioning as

a “Corporate Bank”, having obtained leadership in

the attribution of PME Líder statutes, as well as

the COTEC Inovadora Award, being recognized as

the Best Bank for Companies by the DATAE study.

In turn, Millennium's communication with Prestige

Customers was marked by the launch of

Personalized Investment, as well as by the

dynamics of migration and reinforcement of

Prestige Direct, with strategic and segmented

campaigns for this purpose.

In terms of the Diaspora, the strong multimedia

campaign “More Digital. More Portuguese” should

be highlighted, which allowed the Bank and its

Customers to support the teaching of the

Portuguese language abroad, in a partnership

carried out with the Camões Institute that

awarded Millennium of “Company promoting the

Portuguese language”.

The Bank's Communication strategy maintained a

clear focus on the constant presence in external

Media, but also on the Bank's Social Networks, in

order to reinforce and consolidate the Millennium

Brand's reputation among its most diverse targets.

Millennium sought to be where people are. The

challenge remained high, given the limitations in

social interaction and contact. But the Bank knew

how to respond. In fact, and in terms of events,

2021 was marked by the safe and controlled

return of a set of initiatives that are part of the

Bank's history as an agent of Society, Economy

and Culture, such as the Millennium Festival ao

Largo, the Millennium Estoril Open (in 2021, still

without an audience), Agricultural Fairs and art

sharing, through the Millennium Foundation. In

this context, reference should be made to the

inauguration of the Millennium Gallery at the

Museum of Contemporary Art and the reopening

of the Rua dos Correeiros Archaeological Center

(NARC).

The Millennium Brand remembrance and notoriety

index and the Awards received in 2021 prove the

effectiveness and success of the strategy

undertaken.

According to the 2021 BrandScore study,

Millennium achieved leadership in Banking in

Communication Visibility, both in Campaigns and

Sponsorships. In fact, the Corporate Campaigns

“Lets go” and “Resilience is with us”, and the

Millennium Estoril Open were the actions with the

most memory, respectively, in Campaigns and

Sponsorships. This study also showed that

Millennium maintained its leadership as the best

Digital Bank and Best Corporate Bank, in both

cases with the highest increases in the sector.

The reinforcement of leadership also allowed

Millennium to be the institution in Portugal whose

brand registered the highest appreciation,

measured through the Brand Impact indicator.

Business Model Sustainability

Millennium bcp, answering to the increasing

importance of Sustainability and responsible

financing for its Stakeholders and also to the

expectations of regulators in these areas of

action, has been leading an accelerated

transformation and adaptation to new ESG

(Environmental, Social and Governance)

requirements.

Within this context of evolution the Bank revised

its governance and decision-making model,

creating a Sustainability Committee led by the

CEO and reinforcing the perimeter of its multi-

annual Sustainability Master Plan, as a reference

framework and instrument for aggregating the

actions to be carried out within the scope of of

the ESG dimensions.

Millennium bcp's intervention is thus divided into

three fundamental axes: Environmental, aiming at

the implementation of measures that promote a

fair and inclusive transition to a decarbonized

economic development model, including the

incorporation of the climate dimension in the

Bank's risk models and in the offer of products

and services; Social, which ensures proximity and

involvement with external and internal

communities in the creation of shared value,

notwithstanding the role that the Millennium BCP

Foundation already plays in this dimension; and

Corporate Governance, promoting the integration

of Sustainability principles into the Bank's

decision-making and management processes.

This alignment is central to Sustainability at

Millennium bcp, and organizations in general,

being a privileged mean of determining the social

and environmental impact of the activity carried

out and the expected corporate performance of

the company. The Bank is aware of the

competitive advantage of incorporating

environmental, social and governance factors,

opportunities and risks into decision-making

processes and of reflecting them in the

commercial offer of products and services, a

conviction that is well expressed in the inclusion

of Sustainability as one of the structuring vectors

of the 2024 Strategic Plan, document that

summarizes the essence of Millennium bcp's

vision, objectives and value proposition for the

next three years.

The consolidation of a Responsible Business

culture and the ability to positively influence the

organization's long-term value proposition, in

balance with the well-being of people, the

company and the communities in which it

operates, with respect for the preservation of

natural resources, climate and the environment,

represent the priority objectives of the strategy,

policies and Sustainability practices defined and

implemented by the BCP Group.

2021 REPORT & ACCOUNTS

|39

Millennium network

2021 REPORT & ACCOUNTS

40 |

2021 REPORT & ACCOUNTS

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Financial information

2021 REPORT & ACCOUNTS

42 |

Results and Balance Sheet

The consolidated Financial Statements were prepared under the terms of Regulation (EC) 1606/2002, of 19

July (in the version in force), and in accordance with the reporting model determined by Banco de Portugal

(Banco de Portugal Notice 5/2005, in the version in force), following the transposition into Portuguese law of

Directive 2003/51/EC, of 18 June, of the European Parliament and Council in the version currently in force.

To provide a better reading of the evolution of the Group’s financial situation and to ensure comparability

with the information from previous periods, a set of concepts are described in this analysis that reflect the

management criteria adopted by the Group in the preparation of the financial information, whose accounting

correspondence is presented in the glossary and throughout the document, whenever applicable.

Banco Comercial Português, S.A. (“BCP”) established, on 29 June 2021, an agreement with Union Bancaire

Privée, UBP SA concerning the sale of the entire the share capital of Banque Privée BCP (Suisse) S.A.

("Banque Privée"). On 2 November 2021, after obtaining the non-opposition of the local competent

supervisory entities and all the remaining conditions agreed were complied with, the sale was completed.

The final price is still subject to adjustments due to the performance of assets under management and the

activity of Banque Privée BCP (Suisse) SA. The completion of the sale of Banque Privée allows BCP Group to

continue its strategy focused on the allocation of resources and on the management of core geographies,

enhancing its development and thus ensuring the creation of value for stakeholders.

On 31 December 2021, BIM – Banco Internacional de Moçambique, S.A. (a bank incorporated under

Mozambican law where BCP holds, indirectly, a 66.69% stake) (“BIM”) formalized the entry into force of a

long-term agreement with Fidelidade – Companhia de Seguros, S.A. (“Fidelidade”), to enhance capacities and

increase the offer of insurances in the banking channel (bancassurance) in Mozambique. Within the scope of

this partnership, which was planned in the memorandum of understanding signed between BCP and Group

Fosun in November 2016, BIM and Fidelidade also formalised the sale by BIM to Fidelidade of shares

representing 70% of the share capital and voting rights of Seguradora Internacional de Moçambique, S.A.

(“SIM”), remaining BIM with approximately 22% of the respective share capital. BIM and Fidelidade also

agreed call and put options to enable Fidelidade to acquire additional shares. Thus, the stake held by BIM,

due to those options, may be reduced to 9.9 % of SIM’s share capital. Within the scope of the agreement for

the long-term exclusive distribution, BIM shall promote the distribution of insurances from SIM through the

banking channel, continuing to providing its customers with a wide range of competitive insurance products,

an offer reinforced by the partnership established with Fidelidade, an Insurance Group of reference.

Following the sales mentioned above and as defined in IFRS 5, the contribution from the Swiss subsidiary and

from SIM for the consolidated earnings of the Group is reflected in the income arising from discontinued or

discontinuing operations in the international activity and the historical information has been restated since

January 2020, to ensure comparability. Accordingly, the figures related to the Group's income statement,

presented for periods prior to January 2020 have not been changed, since it is considered that the size of the

activity of the subsidiaries sold does not materially distort the comparability of the data. The booking of the

assets and liabilities of Banque Privée BCP (Suisse) S.A., and of SIM in the historical periods was not changed

versus the criteria considered in the consolidated financial statements previously published. Within this

context, and considering the immateriality of the respective balance sheets in the Group as a whole, the

calculation of the several indicators presented that relate the performance of the profit and loss account

with the balance sheet aggregates were not adjusted, with exception of the interest margin rate, whose

estimation reflects the fact that the assets of the subsidiaries mentioned above are no longer considered as

interest earning assets in the period in question and in the historical information submitted. The gains

generated with the sale of both operations are also recognised as a income arising from discontinued or

discontinuing operations in the international activity.

The figures associated to discontinued or discontinuing operations also include the ones related with the

Planfipsa Group, which was considered as a discontinued or discontinuing operation with reference to the 3rd

quarter of 2018 (after the communication of the quarterly earnings to the market and respective publication)

and was sold in February 2019. In addition, in 2019, gains and losses related with the sale of Millennium bcp

Gestão de Ativos, following adjustments introduced in the sale price agreed in the sale of that company were

also recognised in the item income from discontinued or discontinuing operations.

During the first half of 2021, the Group changed the way it presents the provisions booked by Bank

Millennium to face the legal risk associated with mortgage loans in Swiss francs, being now recognised as a

reduction of the gross carrying amount of the loans for which a reduction in future cash flows is expected, in

2021 REPORT & ACCOUNTS

|43

accordance with the provisions of IFRS 9 - Financial Instruments, and which were previously recognised in

liabilities, in accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets. Accordingly,

the Group restated the information previously published for all periods, beginning on 1 January 2020, with a

simultaneous reduction in the book value of the portfolio of loans to customers and other liabilities

provisions, versus the financial position previously disclosed by the Group. Provisions in accordance with the

framework foreseen in IAS 37 will only be applied to disputes related with loans already repaid and not

reflected in the Group’s Balance Sheet. In addition, Bank Millennium changed the presentation of interest on

derivative financial instruments, which do not meet the definition of formal hedge accounting provided for in

IFRS 9. Considering that these instruments, although included in the trading portfolio, were contracted with

the objective of establishing an economic hedging relationship for the risk of the hedged financial assets or

liabilities, the Polish subsidiary started, as of the first six months of 2021 onwards, to record the respective

interests in net interest income, when previously the same were recognised in net trading income. In that

sense, the financial statements of the Group published in prior periods were restated, as of 1 January 2020,

to ensure the comparability of the information.

During 2021, some commissions were re-classified to improve the quality of the information reported. The

historical figures of 2020 and 2019 of the items which were re-classified, considered for the purposes of this

analysis, are shown on a “pro forma” basis, in accordance with the reclassifications made, with the purpose

of ensuring their comparability. Except in what regards the impacts produced by the classification of entities

as discontinued operations, within the scope of the sale agreements established in 2021, as required by IFRS

5, the total amount of net fees disclosed in previous periods remains unchanged.

In 2021, with the exception of the restatement and reclassifications made with the purpose of ensuring the

comparability of information, exclusively resulting from the situations previously mentioned, no other

changes were introduced in the way information regarding previous financial years was presented.

In 2021, Millennium bcp continued to show the resilience of its business model and its capacity to adjust to a

context strongly influenced by the evolution of the pandemic crisis. The Bank continued to provide support

to companies and families, seeking to respond to the needs of its Customers at all times. Thereon, it is worth

mentioning the relevance of the credit granted under the COVID-19 lines guaranteed by the Portuguese State

and also the agreements established with the European Investment Fund. By the end of the third quarter,

the Bank carried out an issue of preferred senior social debt securities under its Euro Note Programme,

becoming the first Portuguese issuer to carry out this type of issue in the ESG segment (Environmental, Social

and Governance), focused on the social component. This issue represented a clear demonstration of the

commitment assumed by Millennium bcp in supporting the economy, especially in the financing to micro,

small and medium-sized companies, the ones most affected by the recent pandemic context, evidencing, at

the same time, the recognition of the commitments assumed by Millennium bcp in terms of sustainable

financing.

At the same time, the Bank remains focused on pursuing an ongoing technological innovation that, together

with the recovery of the economic activity in the previous year, enabled carrying out the headcount

adjustment plan, initially foreseen to take place in 2020, in the wake of the strategic plan Mobilizar

2018/2021, but which was postponed due to the emergence of the pandemic associated with COVID-19. On

the other hand, the reinforcement of the Bank’s digital capacities is increasingly valued, a fact proven by the

continuing growth of its customer base, particularly in terms of mobile customers and also through its

external recognition materialised by the several distinctions and awards received by the Bank, which are also

a recognition of its commitment towards people and society.

The consolidated net earnings of Millennium bcp reached 138 million Euros in 2021, standing below the 183

million Euros achieved in the previous year.

Despite the fact that the net income of the activity in Portugal recorded a positive performance in 2021 and

grew 28.5% versus 2020, consolidated net income of the Group ended by being heavily penalised by the

increase in the costs associated with the portfolio of mortgage loans in Swiss francs recognised by Bank

Millennium, S.A., in Poland. Excluding those costs, in both years, the net income of the Group would have

recorded a 56.6% growth, from 259 million Euros in 2020 to 405 million Euros in 2021.

The performance of the Group’s net income is also influenced by the capital gains generated with the

completion of the sale, in the last quarter of 2021, of the entire share capital of Banque Privée BCP (Suisse)

S.A., and of the stake held by the Group in SIM, whose impact in consolidated income amounted to 51 million

Euros and to 10 million Euros (amount net of taxes and non-controlling interests), respectively.

The consolidated core operating profits of Millennium bcp, recorded a growth of 7.4% versus the 1,118

million Euros recorded in the previous year, amounting to 1,201 million Euros in 2021. In the activity in

Portugal, notwithstanding the impact caused by the constitution of an extraordinary provision recognised as

2021 REPORT & ACCOUNTS

44 |

staff costs to deal with the costs related with the headcount adjustment, the core operating profit stood

2.5% above the 637 million Euros recorded in 2020, amounting to 653 million Euros at the end of 2021. On its

turn, the operating profits of the international activity recorded a growth of 13.9%, from 482 million Euros in

2020 to 548 million Euros in 2021, for which the major contribution was given by the Polish subsidiary and

also by the subsidiary company in Mozambique.

Millennium bcp’s consolidated balance sheet total stood at 92,905 million Euros on 31 December 2021,

showing a 8.4% increase in comparison with the 85,715 million Euros computed at the end of 2020. This

increase was mostly originated by the expansion of the activity in Portugal, but also, although to a lesser

extent, of the international activity, triggered, in both cases, by the growth recorded by the credit portfolio.

Consolidated loans to customers of Millennium bcp amounted to 58,231 million Euros on December 31 2021,

showing a 4.6% growth versus the 55,694 million Euros recorded at the end of 2020, benefiting mostly from

the growth in mortgage loans, but also from loans to companies. In terms of the international activity, we

must also highlight the growth of personal loans in Poland.

Total liabilities of the Group stood at 85,843 million Euros in 2021, up 9.6% comparing to the 78,329 million

Euros recorded at the end of 2020, determined essentially by the evolution of deposits and other customer

funds.

On 31 December 2021, total customer funds amounted to 90,097 million Euros, showing a positive

performance by increasing 9.5% against the 82,306 million Euros recorded at the end of 2020. This increase

mostly shows the expansion of the portfolio of customer deposits that recorded a very expressive growth in

Portugal, although in Poland there was also a significant increase in funds raised, mainly from individual

customers.

2021 REPORT & ACCOUNTS

|45

PROFITABILITY ANALYSIS

NET INCOME

The consolidated net income of Millennium bcp

amounted to 138 million Euros in 2021, below the

183 million Euros reached in the previous year, as

the favourable evolution in the activity in

Portugal was not enough to outweigh the lower

results obtained in the international activity.

NET INCOME

Million euros

The net income of the Group was heavily

impacted by the increase in costs associated with

the foreign exchange mortgage loans portfolio

accounted for by Bank Millennium, S.A. in Poland,

which, in consolidated terms, amounted to 2672

million Euros in 2021, more than three times the

762 million Euros reported in the previous year.

Excluding this impact in both years, the net

income of the Group would have grown by 56.6%,

from 259 million Euros in 2020 to 405 million

Euros in 2021.

The impact of the overall costs associated with

foreign exchange mortgage loans on Bank

Millennium's results amounted to 5333 million

Euros, reflecting substantial growth compared to

the 1513 million Euros, which had been recorded

in the previous year. These costs materialised

mainly in the recognition of additional provisions

to face the legal risk implicit in the portfolio of

foreign exchange mortgage loans, mainly

reflecting the continued negative trends in court

rulings, the increase in the number of new

lawsuits and the most conservative assumptions

applied in risk assessment. In addition, the costs

associated with foreign exchange mortgage loans

also incorporate the costs of agreements

concluded in the meantime by the Polish

subsidiary with its customers, aimed at converting

the loans into local currency or their early

repayment (total or partially), recognised mainly

as costs of foreign exchange transactions in net

trading income, the costs of legal advice and the

costs of litigation brought by the Bank against its

customers.

Other impairments and provisions of the Group,

together with loans impairments, totalled 1,061

million Euros in 2021, reflecting a growth of 26.1%

compared to the previous year, in which 841

million Euros had been recorded. As previously

stated, this growth was mainly influenced by the

contribution of the Polish subsidiary, whose

provisions booked to meet the legal risk

associated with foreign exchange mortgage loans

totalled 457 million Euros, well above the 152

million Euros recorded in 2020 (net amounts of

the value originated by the operations of Euro

Bank S.A., to be repaid by a third party).

Inversely, loans impairment showed a transversal

reduction, both in the activity in Portugal and in

the international activity, in both cases

influenced by the impact of the extraordinary

impairments that had been booked in 2020 and

were intended to meet the risks associated with

the COVID-19 pandemic.

The core operating profit in 2021 amounted to

1,201 million Euros, showing a growth of 7.4%

compared to the 1,118 million Euros reached in

the previous year. It is worth noting that this

favourable development was possible despite the

recognition of an extraordinary provision,

recognised as staff costs in the activity in

Portugal, in the amount of 84 million Euros,

intended to cover the costs with the headcount

adjustment plan. This adjustment, initially

planned for the year 2020, still under the previous

strategic plan Mobilising 2018/2021, would

eventually be postponed due to the outbreak of

the pandemic COVID-19.

2021 REPORT & ACCOUNTS

46 |

2 Net of tax and after minority interests.

3 Net of tax and before minority interests.

Excluding the aforementioned provision,

considered as a specific item, and also excluding

the remaining specific items4 in both periods, the

Group's core operating profit increased by 10.9%

compared to 2020. For this evolution, the growth

in core income, both in the activity in Portugal

and in the international activity, was decisive. In

consolidated terms, core income amounted to

2,316 million Euros in 2021, 4.9% above the 2,208

million Euros posted in the previous year, having

benefited from both the 3.7% growth in net

interest income and the 7.6% increase in net

commissions.

CORE OPERATING PROFIT

Million euros

The performance of the Group's net income was

also influenced by the income arising from

discontinued operations, which progressed from

16 million Euros in 2020, to 71 million Euros in

2021, reflecting the positive impacts of the sale,

in 2021, of the total share capital of Banque

Privée BCP (Suisse) S.A., and of 70% of the stake

that the Group held in Seguradora Internacional

de Moçambique, S.A. (“SIM”).

In this sense, under the agreement to sell the

entire share capital of Banque Privée BCP (Suisse)

S.A. to Union Bancaire Privée, UBP SA, concluded

on 29 June 2021, and in accordance with the

provisions of IFRS 5, this operation was considered

as discontinued operation in June 2021, and since

then its result considered as income from

discontinued operations.

According to the provisions of that regulation, the

results of the corresponding period, previously

distributed over the various lines of the income

statement, are now also reflected as income

arising from discontinued operations in order to

ensure that the information is comparable (1

million Euros in 2021 and 7 million Euros in 2020).

The implementation of the sale of the operation,

on 2 November 2021, allowed the recognition of a

gain, in the amount of 51 million Euros, also

recognised as income from discontinued

operations. Considering the costs assumed by the

subsidiary related to the sale, the impact in

income arising from discontinued operations was

approximately 47 million Euros.

Additionally, at the end of 2021, the Group,

through its subsidiary BIM - Banco Internacional de

Moçambique, S.A., sold 70% of its stake in

Seguradora Internacional de Moçambique, S.A.

(“SIM”), and now only holds a minority stake of

about 22% in the insurance company. In

accordance with IFRS 5 and similarly to what

happened with the Swiss subsidiary, this entity

was also classified as a discontinued operation,

and the gain generated with the sale, in the

amount of 12 million Euros, net of taxes and

before minority interests, in consolidated terms,

was recorded as income arising from discontinued

operations. Considering a provision set up for

contingencies related to the sale, recorded by BIM

- Banco Internacional de Moçambique, S.A. as

other impairment and provisions, the impact of

this operation on the Group's net income (after

non-controlling interests) was approximately 6

million Euros.

The result generated by the insurance company

up to the moment of conclusion of its sale, as

well as the result generated by its activity in the

previous year, in the amount of 7 million Euros

and 8 million Euros, respectively, are also

reflected as income arising from discontinued

operations.

2021 REPORT & ACCOUNTS

|47

4 Net income includes the negative impact of 91 million Euros in 2021 and of 46 million Euros in 2020, both before taxes, recognized as specific items. In

2021, specific items were fully recognized as staff costs in the activity in Portugal, mainly related to the adjustment of headcount, identified under

Mobilising 2018/2021 strategic plan, including a provision, in the amount of 84 million Euros. In 2020, from the total amount of 46 million Euros

considered as specific items, 32 million Euros were recognized as staff costs in the activity in Portugal (related to headcount adjustment costs,

compensation cost for temporary remuneration cuts of employees and income arising from the agreement with a former director of the Bank), and 15

million Euros related to acquisition, merger and integration of Euro Bank S.A., recognized by the Polish subsidiary (9 million Euros as staff costs, 5 million

euros as other administrative costs and 1 million Euros as depreciations). Net income also includes specific items, of an immaterial amount included in the

net operating revenues, related to costs with the acquisition, merger and integration of Euro Bank S.A., recognized in the Polish subsidiary in 2020.

QUARTERLY INCOME ANALYSIS

Million euros

2021

1st

quarter

2nd

quarter

3rd

quarter

4th

quarter

Total

2020

restated

2019

NET INTEREST INCOME

375

391

399

424

1,589

1,532

1,549

OTHER NET INCOME

Dividends from equity instruments

Net commissions

171

182

193

728

677

703

Net trading income

(9)

141

143

Other net operating income

(25)

(87)

(4)

(9)

(126)

(165)

(104)

Equity accounted earnings

TOTAL OTHER NET INCOME

203

148

182

213

746

725

787

NET OPERATING REVENUES

578

539

581

637

2,334

2,257

2,335

OPERATING COSTS

Staff costs

141

231

143

138

654

625

668

Other administrative costs

324

330

373

Depreciation

137

136

125

TOTAL OPERATING COSTS

252

338

259

266

1,116

1,090

1,166

RESULTS BEFORE PROVISIONS AND IMPAIRMENTS

326

201

322

371

1,219

1,166

1,169

IMPAIRMENT

For loans (net of recoveries)

111

107

349

510

390

Other impairment and provisions

132

173

157

250

712

331

151

INCOME BEFORE INCOME TAX

(18)

158

325

627

INCOME TAX

Current

109

101

Deferred

122

138

NET (LOSS) / INCOME AFTER INCOME TAX FROM

CONTINUING OPERATIONS

(63)

(27)

(46)

193

388

Income from discontinued operations

NET INCOME AFTER INCOME TAX

(60)

208

401

Non-controlling interests

(29)

(14)

(26)

(44)

(113)

NET INCOME ATTRIBUTABLE TO SHAREHOLDERS OF THE

BANK

(46)

138

183

302

2021 REPORT & ACCOUNTS

48 |

In the activity in Portugal, net income amounted

to 173 million Euros in 2021, showing a growth of

28.5% compared to the 134 million Euros reached

in the previous year.

NET INCOME

Activity in Portugal

Million euros

The performance of the activity in Portugal

benefited from the favourable evolution of most

items, with particular emphasis on the growth of

core income of 59 million Euros, as a result of the

positive performance shown by both net interest

income and net commissions. Indeed, net

commissions recorded a solid growth of 33 million

Euros compared to the previous year, which was

reflected in almost all types of commissions, as a

result not only of the increase in transactions to

pre-pandemic levels, but also of the commercial

initiatives implemented by the Bank. On the other

hand, net interest income increased 26 million

Euros compared to the same period of the

previous year, mainly due to the reduction in the

cost of funding, which benefited from the

additional financing obtained from the European

Central Bank, through the TLTRO III operation.

The significant reduction of the need for

provisioning of the loan portfolio over the

previous year also contributed, to a large extent,

to the favourable trend of net income from

activity in Portugal. In 2021, loans impairments

fell 81 million Euros from the previous year,

mainly reflecting the effect of the extraordinary

reinforcements that had been recorded in 2020 in

order to meet the increased risks implicit in the

adverse and uncertain context associated with the

COVID-19 pandemic.

Although of lesser importance, net trading income

and other net operating income, in turn, also

contributed to the positive evolution of net

income in the activity in Portugal, insofar as net

trading income showed a growth of 14 million

Euros compared to the previous year, while other

net operating income turned out to be 7 million

Euros less negative than in 2020.

By contrast, the evolution of net income from

activity in Portugal was penalised by the increase

in other impairments and provisions by 47 million

Euros, mainly justified by the reinforcement of

provisions for other risks and by the performance

of operating costs, which were 43 million Euros

higher than the amount calculated in 2020. It is

worth noting that the performance of operating

costs was determined by the recognition of a

provision, in the amount of 84 million Euros,

booked as staff costs, to cover the costs with the

headcount adjustment plan, which although,

under the Mobilising 2018/2021 strategic plan,

was planned for 2020, it was eventually

postponed due to the emergence of the pandemic

associated with COVID-19. It is important to

mention that, despite the recognition of this

provision, considered as a specific item, the core

operating profit of the activity in Portugal stood

at 2.5% above the 637 million Euros reached in

2020, amounting to 653 million Euros at the end

of 2021. Excluding the aforementioned provision,

as well as the remaining specific items in both

years, operating costs reflect a reduction of 2.7%,

which combined with the favourable performance

of core income, translates into a growth of 11.3%

in core operating profit, from 668 million Euros in

2020, to 743 million Euros in 2021.

CORE OPERATING PROFIT

Activity in Portugal

Million euros

2021 REPORT & ACCOUNTS

|49

In the international activity, net income in 2021

was negative in 35 million Euros, showing a

relevant decline compared to the profits of 49

million Euros reached in 2020.

NET INCOME

International activity

Million euros

This evolution was mainly determined by the

activity of the Polish subsidiary, whose

performance was strongly penalised by the

increase in costs associated with foreign exchange

mortgage loans. Although it was reflected in

various items of the profit and loss account of the

international activity, the increase in costs

associated with foreign exchange mortgage loans

was particularly relevant at the level of other

impairments and provisions, with the recognition

of a substantial amount of provisions to deal with

the legal risk implicit in the portfolio of foreign

exchange mortgage loans. Net trading income

were also widely penalised, as they incorporate

relevant amounts of exchange rate losses arising

from agreements with customers to convert loans

into local currency or to repay them (total or

partially) beforehand.

Excluding the full impact of these impacts in both

years, the international activity would show

profits of 232 million Euros in 2021, showing a

relevant growth compared to the 124 million

Euros obtained in 2020.

Although the Polish subsidiary's negative

contribution was decisive for the fall in net

income from international activity, the lower

appropriation of the results generated by Banco

Millennium Atlântico compared to the previous

year also conditioned the performance of the

foreign operations aggregate, though to a lesser

extent.

On the contrary, the contribution of the operation

in Mozambique to the result of the international

activity proved to be higher than in 2020, due not

only to the positive performance of the

subsidiary's current activity, but also to the

recognition of the gain generated by the sale of

70% of the stake held in Seguradora Internacional

de Moçambique, S.A. (“SIM”), at the end of 2021.

Within the scope of the analysis of the

development of the net income of the

international activity, the positive performance of

the core operating profit, which recorded a

growth of 13.9%, from 481 million Euros in 2020,

to 548 million Euros in 2021, to which the Polish

subsidiary, but also the operation in Mozambique,

contributed most of all, must be emphasized.

CORE OPERATING PROFIT

International activity

Million euros

Moreover, net income of the international activity

also benefited from the gain, in the amount of 51

million Euros, generated as a result of the

conclusion of the agreement for the sale of the

entire share capital of Banque Privée BCP (Suisse)

S.A., to Union Bancaire Privée, UBP SA. It should

be noted that the gain obtained with the sale

operation was recorded as income from

discontinued operations together with the results

generated by the current activity of that entity (1

million Euros in 2021 and 7 million Euros in 2020).

Considering the costs assumed by the subsidiary

related to the sale, the impact in income from

discontinued operations was approximately 47

million Euros.

Bank Millennium in Poland showed a negative net

income of 292 million Euros in 2021, which

compares with 5 million Euros of profit achieved

in the previous year. This evolution was shaped by

the recognition of significant costs with the

portfolio of foreign exchange mortgage loans,

whose impact on the subsidiary's net income

amounted to 533 million Euros in 2021, more than

triple the already high amount registered in 2020

(151 million Euros). Excluding these impacts in

both years, the Polish subsidiary's net income

would have evidenced a 54.3% growth in its

profit, from 156 million Euros in 2020 to 241

million Euros in 2021, indicating that the

operation has successfully overcome the direct

and indirect impacts of the pandemic crisis.

2021 REPORT & ACCOUNTS

50 |

Of the total costs associated with foreign

exchange mortgage loans, special mention should

be made of the reinforcement of impairments and

provisions, to address the legal risk associated

with this portfolio which, in 2021, reached 457

million Euros, higher than the 152 million Euros

recognised in 2020 (net of the amount originated

by the operations of Euro Bank S.A., to be repaid

by a third party in both years). The reinforcement

made was due to the use of more conservative

parameters considered in the provisioning

methodology of Bank Millennium, S.A., in order to

reflect the negative trends of court rulings, the

increase in the number of proceedings and the

changes in the risk assessment methodology.

On the other hand, the agreements concluded in

the meantime with customers holding foreign

exchange loans, which resulted in the conversion

of loans in Swiss francs into local currency or in

early repayments (total or partially), had a

negative impact of 80 million Euros in 2021,

reflected mainly as net trading income, an impact

that largely explains the reduction that the Polish

subsidiary showed in this item, compared to the

amount posted in 2020. Although less significant,

there were also other items in the profit and loss

account whose evolution also reflects impacts

associated with foreign exchange mortgage loans,

namely other administrative costs, which include

costs with legal advice and other net operating

income, which incorporate the amounts of legal

costs associated with dispute proceedings filed in

the meantime by the subsidiary and which are

mainly aimed at requesting the return of costs

associated with the use of capital by customers

during the period of the respective loans.

Excluding the problems associated with foreign

exchange mortgage loan portfolio, the results of

Bank Millennium, S.A. reflect a solid growth in

core income, in particular in net interest income,

which benefited mainly from the fact that the

Polish Central Bank increased its reference rates

by 165 bps in the last quarter of the year (from

0.1% to 1.75%), but also from the growth in loan

volumes, despite a reduction in the foreign

exchange loans portfolio. Furthermore, in 2021

commissions also reflect relevant growth

compared to the previous year, especially

commissions associated with banking transactions,

reaching in some cases similar levels to those

prior to the pandemic.

At the same time, also worth noting is the

improved efficiency of the Polish subsidiary that

reflects the impact associated with the reduction

in the number of employees and the optimisation

of the physical distribution network, with the

reduction in the number of branches

demonstrating the Bank's progress in the

digitalisation of the commercial business.

The efficiency improvement measures

implemented by the Polish subsidiary together

with the synergies obtained after the merger with

Euro Bank S.A. were decisive for, together with

the increase in core income, an improvement in

the cost to income ratio and in the cost to core

income ratio.

Even without excluding the impacts associated

with foreign exchange mortgage loans, the

subsidiary's core operating profit grew by 13.2%,

increasing from 395 million Euros in 2020 to 447

million Euros at the end of 2021 and the cost to

income and cost to core income ratios recorded

an improvement from 49.0% and 47.2% in 2020 to

46.5% and 42.5% in 2021, respectively.

Lastly, the Polish subsidiary's net income also

benefited from the lower level of loan portfolio

provisioning due to the improvement in the risk

implicit in the portfolio, both in the individual

customers and companies’ segments. The impact

of the sale of non-performing loan portfolios,

together with the extraordinary reinforcement of

impairments, which had been made in the

previous year by the subsidiary, to deal with the

risks implicit in the COVID-19 pandemic,

contributed so that in 2021 the cost of risk was

substantially lower than in 2020.

Millennium bim in Mozambique, in turn, showed a

net income of 96 million Euros in 2021, which

translates into an increase of 43.0% compared to

the 67 million Euros obtained in the previous

year. This evolution resulted, on the one hand,

from the favourable performance of most items in

the profit and loss account and, on the other

hand, from the gain generated by the sale of 70%

of the subsidiary's stake in Seguradora

Internacional de Moçambique, S.A. (“SIM”), at the

end of 2021, now holding only a minority stake of

22%. In this context it is important to note that,

in accordance with IFRS 5, the insurance company

is now classified as a discontinued operation and

its income is reflected as income from

discontinued operations in both years. In this way,

net income previously mentioned includes income

from discontinued operations, in the amount of 13

million Euros in 2021, of which 6 million Euros

related to the gain recorded with the sale

operation, and 8 million Euros in 2020.

2021 REPORT & ACCOUNTS

|51

Accordingly, with the exception of other

impairments and provisions which stood at a

higher threshold than in 2020, largely due to the

recognition of a provision for the real estate

property corresponding to the Bank's former

headquarters and operating costs which in 2021

reflect, among others, the effect of inflation,

additional payments for employees' health

insurance and medical expenses associated with

COVID-19, the other items showed a favourable

performance in the last year. Therefore, in a

positive trend, we highlight the lower levels of

loans provisioning, influenced by the reversal of

impairment associated with an individual

customer, due to the accord and satisfaction

agreement for the property given as guarantee,

and the growth in net interest income, mostly

justified by the increase in investment in public

debt.

In what Angola is concerned, its contribution to

net income from international activity in 2021

was negative by 11 million Euros, compared to an

also negative amount of 7 million Euros in 2020.

This change resulted from the lower appropriation

of the results of Banco Millennium Atlântico

recognised in equity accounted earnings, although

it was offset by the lower level of provisioning

aimed at tackling the risks associated with the

context in which the Angolan operation develops

its activity.

NET INCOME OF INTERNATIONAL ACTIVITY

Million euros

2021

2020

restated

2019

Chg. %

21/20

Bank Millennium in Poland (1)

(292)

131

<-200%

Costs associated with foreign exchange mortgage loans

(533)

(151)

(52)

<-200%

Bank Millennium (exc. costs associated with foreign exchange mortgage loans)

241

156

182

54.3%

Millennium bim in Mozambique (2)

100

40.3%

Banco Millennium Atlântico (BMA) (3)

(11)

(7)

-50.5%

Other (4)

-29.9%

Income from discontinued operations (5)

–

>200%

Banque Privée BCP (Suisse) S.A.

–

>200%

Seguradora Internacional de Moçambique, S.A.

–

120.5%

Non-controlling interests

(113)

100

<-200%

NET INCOME OF INTERNATIONAL ACTIVITY

(35)

143

-171.5%

NET INCOME OF INTERNATIONAL ACTIVITY

(exc. costs associated with foreign exchange mortgage loans)

232

124

169

87.0%

(1)The amounts showed are not deducted from non-controlling interests. In 2021, the activity in Poland generated a

negative net income of 292 million Euros, of which also negative 146 million Euros attributable to the Bank.

(2)Corresponds to net income after income taxes from continuing operations. Net income of 2021 and 2020 does not

include the net income generated by SIM up to the date of disposal of 70% of the stake that the Group held in the

insurance company, nor the gain recognized with the aforementioned disposal. Income arising from discontinued

operations, in the amount of 13 million Euros in 2021 and 8 million Euros in 2020, is presented in the line "Income from

discontinued operations". The non-controlling interests related to the holdings held in Millennium bim and in the insurance

company, meanwhile disposed, are reflected in the line "Non-controlling interests".

(3)Corresponds to the proportion of the results of Banco Millennium Atlântico appropriated by the Group, considering the

equity method.

(4)Includes the net income of the operation in Cayman Islands, fully attributable to the Bank. In 2019, also includes net

income of the operation in Switzerland fully attributable to the Bank.

(5)Income arising from discontinued operations includes the net income of Banque Privée up to the date of its disposal (1

million Euros in 2021 and 7 million Euros in 2020 - restated), as well as the gain, in the amount of 51 million Euros,

generated with the sale of the participation. Additionally, income from discontinued operations also includes the gain

generated with the sale of 70% of the stake that the Group held in SIM, in the amount of 12 million Euros net of taxes and

before minority interests (of which 6 million Euros reflected in Millennium bim accounts) and the net income generated by

the insurance company (7 million Euros in 2021 and 8 million euros in 2020 - restated).

2021 REPORT & ACCOUNTS

52 |

NET INTEREST INCOME

Net interest income rose to 1,589 million Euros in

2021, 3.7% above the 1,532 million Euros of the

previous year, fuelled by the performance of both

the activity in Portugal and the international

activity.

NET INTEREST INCOME

Million euros

In the activity in Portugal, net interest income

was 3.2% above the 805 million Euros posted in

2020, totalling 831 million Euros at the end of

2021.

The favourable performance of net interest

income in the activity in Portugal was primarily

due to the fact that there was a significant

reduction in the cost of funding during 2021. The

positive impact arising from the additional

financing obtained from the European Central

Bank, through the participation in the new

targeted longer-term refinancing operation

(TLTRO III), was crucial to this change. In this

respect, the Bank's decision to increase its

participation in this operation, first to 7,550

million Euros in June 2020 and then to 8,150

million Euros in March 2021, together with

remuneration based on a more favourable

negative interest rate, aimed at encouraging

lending to the economy, allowed for a reduction

of 35 million Euros in the cost of funding,

compared to the amount recorded in 2020. Of

note is that these gains were partially offset by

the costs incurred by the Bank with the surplus

liquidity deposited at Banco de Portugal.

Furthermore, the evolution of the cost of funding,

in the activity in Portugal, also benefited from

the lower costs sustained with customer funds,

mainly reflecting the reduction in the

remuneration of the term deposits portfolio,

although there was also a decrease in the average

balance of remunerated deposits compared to

2020. Simultaneously, the costs incurred with the

issue of subordinated debt in the activity in

Portugal were also lower than in 2020, reflecting

the maturity of some issues during the last year.

On the other hand, the performance of net

interest income, in the activity in Portugal, was

limited by the reduction of return on assets,

namely by the lower income generated by the

customer loans portfolio and the securities

portfolio. The historically low levels at which

interest rates stood last year continued to

strongly penalise the income generated by the

performing loans portfolio, whose earnings in

2021 fell short of those recorded in the previous

year. It is worth noting, however, that this impact

was particularly visible in loans granted to

individuals, both in terms of personal loans and

mortgage loans, while the income generated by

loans to companies demonstrated a slight increase

compared to those that had been recorded in

2020. The favourable evolution of income

generated by loans to companies was possible

thanks to the increase in credit volumes, to which

largely contributed the loans granted to

companies under the credit lines guaranteed by

the Portuguese State, because of the COVID-19

pandemic. On the other hand, the reduction in

the volume of non-performing loans (NPE

portfolio) was reflected negatively in the

evolution of net interest income in the activity in

Portugal.

In turn, the lower income generated by the

securities portfolio was mostly due to the

performance of the Portuguese public debt

portfolio, although the other securities also

generated lower income than in 2020.

Although with a lesser impact, the higher costs

borne with debt issued and the lower income

from the net investment of liquidity surpluses

with credit institutions also negatively influenced

the evolution of net interest income on activity in

Portugal. Reference should be made to the fact

that the increase in costs borne with the debt

issued resulted, on one hand, from the execution

of a senior preferred issue, in the amount of 500

million Euros, foreseen in the Liquidity Plan for

the third quarter of 2021, but moved forward to

the first quarter, in order to benefit from the

prevailing market conditions, and on the other

hand, from a new issue of senior preferred debt

securities, also in the amount of 500 million

Euros, placed under the Bank's Euro Note

Programme, at the end of the third quarter of

2021, both issues aiming at compliance with the

requirements known as "MREL" (Minimum

Requirements for Own Funds and Eligible

Liabilities).

2021 REPORT & ACCOUNTS

|53

NET INTEREST INCOME

Activity in Portugal

Million euros

In the international activity, net interest income

reached 757 million Euros in 2021, being 4.3%

above the 726 million Euros of the previous year,

reflecting the performance of both the Polish

subsidiary and the subsidiary in Mozambique.

NET INTEREST INCOME

International activity

Million euros

In the Polish subsidiary, net interest income,

which had been heavily affected by the successive

cuts in reference interest rates imposed by the

Polish Central Bank, benefited in the last months

of 2021 from the reversal of this trend. Hence,

the changes that occurred in the reference

interest rates defined by the Polish Central Bank,

first from 0.10% to 0.50% in October 2021 and

then to 1.25% in November and to 1.75% in

December, together with the increase in the

volumes of the loans to customers portfolio

contributed decisively to the Polish subsidiary's

net interest income ending the year above the

amount obtained in 2020.

On the other hand, the favourable performance of

net interest income in the Mozambican operation

is mainly explained by the increase in the volume

of the public debt portfolio, but also by higher

implicit yields and lower costs borne with

customer funds.

In consolidated terms, the net interest margin

stood at 1.9% in 2021, slightly below the 2.0%

recorded in the previous year, mainly reflecting

the performance of the activity in Portugal, as in

the international activity the net interest margin

recorded an increase over the previous year.

In the activity in Portugal, the net interest margin

evolved from 1.6% in 2020 to 1.4% in 2021,

influenced, on the one hand, by the increase in

balance sheet volumes, namely by the increased

weight of the liquidity buffer, and on the other

hand, by the context of negative interest rates

that continued to be observed. Additionally, the

greater weight of products with lower rates in

credit production in the special context of the

pandemic and the loss of income associated with

the reduction of the NPE portfolio also

contributed to the decrease, though slight, in the

net interest income of the activity in Portugal. In

turn, the net interest margin on international

activity rose slightly, from 2.9% in 2020, to 3.1%

in 2021. Despite being pressured by the impact of

the sharp reduction of interest rates in Poland,

the net interest margin of international activity in

2021 already reflects the reversal of the trend of

reference interest rates determined by the Polish

Central Bank.

2021 REPORT & ACCOUNTS

54 |

AVERAGE BALANCES

Million euros

2021

2020

restated

2019

Average

Balance

Yield

Average

Balance

Yield

Average

Balance

Yield

INTEREST EARNING ASSETS

Deposits in credit institutions

6,116

0.3%

4,842

0.7%

4,033

1.0%

Financial assets

20,116

0.8%

17,341

1.1%

15,400

1.7%

Loans and advances to customers

55,045

2.7%

52,970

2.9%

50,674

3.2%

TOTAL INTEREST EARNING ASSETS

81,277

2.0%

75,154

2.3%

70,107

2.8%

Discontinued operations (1)

726

789

—

Non-interest earning assets

8,481

8,887

9,484

TOTAL ASSETS

90,484

84,829

79,590

INTEREST BEARING LIABILITIES

Amounts owed to credit institutions

9,110

-0.8%

8,164

(0.4%)

7,086

0.2%

Deposits and other resources from customers

66,705

0.1%

61,963

0.3%

58,209

0.5%

Debt issued and financial liabilities

3,523

0.8%

3,076

1.0%

3,271

1.2%

Subordinated debt

1,248

4.5%

1,449

4.8%

1,364

4.4%

TOTAL INTEREST BEARING LIABILITIES

80,586

0.1%

74,652

0.3%

69,930

0.6%

Discontinued operations (1)

761

835

—

Non-interest bearing liabilities

1,890

2,022

2,089

Shareholders' equity and Non-controlling

interests

7,247

7,319

7,571

TOTAL LIABILITIES, SHAREHOLDERS' EQUITY AND

NONCONTROLLING INTERESTS

90,484

84,829

79,590

NET INTEREST MARGIN (2)

1.9%

2.0%

2.2%

(1)Includes, in 2021 and in 2020, the activity of the Swiss subsidiary (adjusted from the inter group' movements) and from

Seguradora Internacional de Moçambique, S.A. ("SIM"), until the date of the respective disposals.

(2)Net interest income as a percentage of average interest earning assets.

Note: Average balance calculated based on monthly average of end of month balances, accumulated in the period. Interest

related to hedge derivatives were allocated, in 2021, 2020 and 2019, to the respective balance item.

The Group's interest earning assets in 2021 stood at 81,277 million Euros, compared to 75,154 million Euros in

2020. The recorded growth was driven by the evolution of loans to customers, which rose from 52,970 million

Euros in 2020 to 55,045 million Euros in 2021, the performance of financial assets, which stood at 20,116

million Euros in 2021 compared to 17,341 million Euros in 2020, and the rise in investments in credit

institutions, from 4,842 million Euros in 2020 to 6,116 million Euros in 2021. It is also important to note that

despite this generalised increase in the average balances of the main categories of assets, the respective

implicit rate showed a reduction compared to the previous year, reflecting the context of reference rates

prevailing in Portugal, Poland and Mozambique.

Non-interest earning assets, in turn, recorded a decrease from the 8,887 million Euros in 2020, totalling

8,481 million Euros in 2021.

2021 REPORT & ACCOUNTS

|55

In terms of average balance sheet structure, interest earning assets represented 89.8% of average net assets

in 2021, increasing their relative weight from 88.6% in the previous year. Although its relative weight in the

balance sheet structure fell from 62.4% in 2020 to 60.8% in 2021, loans to customers remained the main

aggregate in the interest-earning assets portfolio, representing 67.7% of it in 2021 (70.5% in 2020). By

contrast, the financial assets portfolio strengthened its relative weight in the balance sheet structure,

increasing from 20.4% in 2020 to 22.2% in 2021.

The increase in interest bearing liabilities mainly reflects the evolution of customer deposits, whose average

balance, in consolidated terms, evolved from 61,963 million Euros in 2020, to 66,705 million Euros in 2021,

primarily fuelled by the increase in deposits obtained in Portugal, but also benefiting from the growth in

international activity. Also contributing to the evolution of interest-bearing liabilities was the increase in the

average balance of deposits from credit institutions, which rose from 8,164 million Euros in 2020, to 9,110

million Euros in 2021, largely reflecting the additional funding obtained from the European Central Bank in

March 2021, under the targeted longer-term refinancing operation (TLTRO III).

The structure of average interest-bearing liabilities did not show significant changes in relation to the

previous year, with Customer deposits remaining the main financing and activity support instrument,

representing, in 2021, 82.8% of the balance of interest-bearing liabilities (83.0% in 2020). Deposits from

credit institutions, which include the additional funding obtained from the European Central Bank under the

targeted longer-term refinancing operation (TLTRO III), in turn represented 11.3% of the average balance of

interest-bearing liabilities in 2021 (10.9% in 2020), while the aggregate of debt securities issued, and

financial liabilities represented 4.4% on the same date (4.1% in 2020).

OTHER NET INCOME

Other net income5, which aggregates dividends from equity instruments, net commissions, net trading

income, other net operating income and equity accounted earnings, totalled 746 million Euros in 2021,

showing an increase of 2.9% compared to 725 million Euros in the previous year. In this evolution it is

important to highlight the favourable performance of the activity in Portugal, although it has been offset by

the decrease in the international activity.

In the activity in Portugal, other net income showed a 9.4% increase from the 532 million Euros accounted in

2020, rising to 582 million Euros in 2021. The increase, in the amount of 50 million Euros, was mainly due to

the positive dynamics of the commissions item, which stood 33 million Euros above the amount obtained in

the previous year, but also to net trading income and other net operating income, which showed increases of

14 million Euros and 7 million Euros, respectively, in the last year. Dividends from equity instruments, in

turn, proved to be 4 million Euros lower compared to the amount recorded in 2020, while equity accounted

earnings remained in line with the values recorded in the previous year.

In the international activity, other net income amounted to 164 million Euros in 2021, lower than the 193

million Euros obtained in the previous year. This evolution was largely influenced by the 68 million Euros

reduction in net trading income, whose performance was strongly influenced by the activity of the Polish

subsidiary, even though it was slightly offset by the increase registered in the subsidiary in Mozambique. At

the same time, the equity accounted earnings were also lower, by 11 million Euros, compared to the amount

recorded in 2020, in this case due to the lower appropriation of the results generated by Banco Millennium

Atlântico in Angola, insofar as they are strongly influenced by the impacts arising from the country's

economic situation. By contrast, other net income benefited, on the one hand, from the favourable evolution

of other net operating income, whose negative impact on the profit and loss account in 2021 proved to be 31

million Euros less than the previous year and, on the other hand, from the growth in net commissions of 18

million Euros, both developments determined by the performance of the Polish subsidiary, while there was

also an improvement, compared to the previous year, in the Mozambican operation, though of a smaller

dimension.

2021 REPORT & ACCOUNTS

56 |

5 In 2020, other net operating income includes the specific items considered by the Polish subsidiary, related to costs arising from the acquisition, merger

and integration of Euro Bank S.A., of an immaterial amount.

OTHER NET INCOME

Million euros

2021

2020

restated

2019

Chg. %

21/20

Dividends from equity instruments

-80.4%

Net commissions

728

677

703

7.6%

Net trading income

141

143

-38.5%

Other net operating income

(126)

(165)

(104)

23.3%

Equity accounted earnings

-15.9%

TOTAL

746

725

787

2.9%

of which:

Activity in Portugal

582

532

542

9.4%

International activity

164

193

245

-15.1%

DIVIDENDS FROM EQUITY INSTRUMENTS

Income from equity instruments, which incorporates dividends and income from equity shares received from

investments classified as financial assets at fair value through other comprehensive income and as financial

assets held for trading, evolved from 5 million Euros booked in 2020, to 1 million Euros at the end of 2021.

This evolution reflects the performance of income associated with investments that are part of the shares

portfolio of the activity in Portugal, immaterial in 2021, but, in the amount of 4 million Euros, in the previous

year.

NET COMMISSIONS

Net commissions include commissions related to

the banking business and commissions more

directly related to financial markets. During 2021,

some accounting reclassifications were made, in

order to improve the quality of the reported

information. The historical amounts, for the years

2020 and 2019, of the reclassified items,

considered for the purposes of this analysis, are

presented on a pro forma basis according to the

reclassifications made, in order to ensure its

comparability. Except for the impacts produced

by the classification of entities as discontinued

operations, within the scope of the sale

agreements entered into in 2021, as required by

IFRS 5, the total amount of net commissions

disclosed in previous periods remains unchanged.

In 2021, net commissions showed a favourable

evolution, by growing 7.6% from the 677 million

Euros recorded in 2020, amounting to 728 million

Euros at the end of 2021. This evolution mainly

reflects the progressive normalisation of

economic activity, but also the extinction of the

customer support measures that had been

implemented by Banco de Portugal during the

most critical periods of the pandemic. Net

commissions, as a whole, showed a favourable

performance both in the activity in Portugal and

in the international activity. In both cases,

banking commissions were higher than in the

previous year, with the growth of market-related

commissions in the activity in Portugal being

marginally offset by the lower contribution of the

international activity.

NET COMMISSIONS

Million euros

2021 REPORT & ACCOUNTS

|57

In consolidated terms, commissions related to the

banking business amounted to 615 million euros in

2021, standing 7.9% above the 570 million Euros

achieved in the previous year, driven by increases

of 6.5% and 11.5% in the activity in Portugal and

in the international activity, respectively. This

evolution was mainly due to the increase in

commissions generated by the cards and transfers

business, which grew by 23 million Euros (from

159 million Euros, to 182 million euros) compared

to the previous year and also by the performance

of commissions related to accounts management

and maintenance, which reached 149 million

Euros in 2021, 18 million Euros above the 131

million Euros recognised in 2020, reflecting, in

both cases, the good performance of the activity

in Portugal and the international activity.

Commissions related to credit and guarantees also

showed a favourable performance, both in the

activity in Portugal and in the international

activity, growing 7 million Euros in consolidated

terms (from 148 million Euros, to 155 million

Euros). Conversely, bancassurance commissions,

which incorporate the fees obtained from the

placement of insurance products through the

Bank’s distribution networks operating in Portugal

and Poland, were 2 million Euros lower than the

amount ascertained in 2020, reflecting the

reduction in the Polish subsidiary, to the extent

that the activity in Portugal saw a growth, albeit

modest, of this type of commissions.

Commissions related to financial markets, on the

other hand, amounted to 113 million Euros at the

end of 2021 in consolidated terms, showing a 5.5%

growth compared to 107 million Euros ascertained

in 2020, determined by the performance of the

activity in Portugal. This evolution results from

the growth in commissions associated with asset

management and distribution, which increased 13

million Euros in comparison to the previous year,

although it was partially absorbed by the

reduction of 7 million Euros in commissions

associated with securities.

In the activity in Portugal, net commissions grew

6.8% from 482 million Euros posted in 2020 rising

to 514 million Euros at the end of the current

year. As referred to above, this evolution reflects

the performance of both commissions related to

the banking business, which showed an increase

of 6.5%, and commissions related to financial

markets, which were 8.4% above the amount

recorded in 2020.

In 2021, commissions related to the banking

business, in the activity in Portugal, amounted to

432 million Euros, showing an increase of 26

million Euros from the 406 million Euros in the

previous year.

NET COMMISSIONS

Activity in Portugal

Million euros

Commissions related to cards and transfers were

the main drivers of this performance, in particular

commissions associated with transfers, which

mainly include the amounts charged for

transactions made with cards and corresponding

payment networks, bank transfers and the use

sale points (POS), with the level of transactions

gradually approaching a similar level to that prior

to the pandemic outbreak. The pricing revision

that took place last year also contributed to the

good performance of this type of commissions,

which overall grew by 14 million Euros compared

to the amount recognised in 2020. Although with

less expression, commissions directly related to

cards showed an inverse behaviour, standing 2

million Euros below the amount achieved in 2020,

to the extent that the increase in fees earned

from the acquiring activity was not sufficient to

offset the increase in incurred costs, as well as

the reduction of charged annuities and fees

associated with cash advance operations.

At the same time, the performance of

commissions related to the banking business in

the activity in Portugal benefited from the growth

in management and maintenance of account

commissions, which increased 8 million Euros

compared to the amount recognised in 2020,

reflecting, on the one hand, the attraction of new

customers and, on the other, a greater

commercial dynamic implemented in 2020,

aimed at encouraging customers to subscribe to

integrated solutions and service packages.

2021 REPORT & ACCOUNTS

58 |

Similarly, commissions associated with credit and

guarantees also contributed to the favourable

evolution of commissions related to the banking

business, in the activity in Portugal, by growing 3

million Euros compared to the previous year. This

evolution was driven by the growth in

commissions directly related to credit operations,

namely credit dossier fees and penalties for credit

early repayment, although there was a reduction

in commissions associated with the discounting of

effects and the values collection.

Bancassurance commissions remained practically

in line with the amounts achieved in the previous

year, showing only a slight increase.

On the other hand, market-related commissions,

in the activity in Portugal, evolved from 76

million Euros in 2020, to 82 million Euros at the

end of 2021. The 6 million Euros growth recorded

benefited from the performance of commissions

associated with asset management and

distribution, which stood 13 million Euros above

the amount recognised in 2020, mainly due to the

third-party investment fund distribution activity,

but also to the growth in portfolio management

fees. Inversely, commissions associated with

securities were 7 million Euros lower than the

amount ascertained in the previous year, mainly

penalised by the lower income generated by the

structuring, and setting up of transactions,

notwithstanding the evident growth in fees

associated with stock exchange transactions.

In the international activity, net commissions

showed a growth of 9.4% compared to the 195

million euros ascertained in 2020, totalling 213

million Euros at the end of 2021.

This evolution was determined by the 19 million

Euros growth in commissions related to the

banking business, which evolved from 164 million

Euros in 2020 to 183 million Euros in 2021, driven

by the performance of the Polish subsidiary, but

also benefiting from the increase verified in the

subsidiary in Mozambique, albeit on a smaller

scale.

NET COMMISSIONS

International activity

Million euros

In the Polish subsidiary, the growth in banking

business commissions resulted mainly from the

expansion of management and maintenance of

accounts fees, partly due to the pricing review

applied to deposit accounts. Commissions

associated with cards and transfers also

contributed to the favourable evolution of

commissions related to the banking business

which, like credit commissions, benefited from

the recovery in economic activity. In the opposite

direction, commissions from bancassurance

activity recorded a reduction compared to the

amount ascertained in 2020.

Commissions related to the financial markets in

the international activity remained stable in

relation to the values recognised in the previous

year, being 1.3% below the amount ascertained in

2020.

2021 REPORT & ACCOUNTS

|59

NET COMMISSIONS

Million euros

2021

2020

restated

2019

Chg. %

21/20

BANKING COMMISSIONS

Cards and transfers

182

159

172

14.2%

Credit and guarantees

155

148

159

4.7%

Bancassurance

116

118

119

-1.9%

Management and maintenance of accounts

149

131

123

13.4%

Other commissions

2.8%

SUBTOTAL

615

570

586

7.9%

MARKET RELATED COMMISSIONS

Securities

-16.3%

Asset management and distribution

21.0%

SUBTOTAL

113

107

117

5.5%

TOTAL NET COMMISSIONS

728

677

703

7.6%

of which:

Activity in Portugal

514

482

483

6.8%

International activity

213

195

220

9.4%

NET TRADING INCOME

Net trading income includes results from financial

operations at fair value through profit or loss,

results from foreign exchange, results from hedge

accounting operations, results from derecognition

of financial assets and financial liabilities

measured at amortized cost, results from

derecognition of financial assets measured at fair

value through other comprehensive income.

In 2021, net trading income amounted to 87

million Euros, significantly below the 141 million

Euros recorded in the previous year, penalised by

the performance of international activity, which

reduction was, however, partially offset by the

growth evidenced by the activity in Portugal.

NET TRADING INCOME

Million euros

In the activity in Portugal, net trading income

amounted to 76 million Euros at the end of 2021,

up 22.9% from 61 million euros posted in 2020.

This evolution was largely due to the fact that the

costs recognised with the revaluation of corporate

restructuring funds proved to be lower than the

72 million Euros recognised in 2020, amounting to

35 million Euros at the end of 2021. It should,

however, be noted that the amount recorded in

2020 included 65 million Euros recognised

following the incorporation of conservative

assumptions intended to reflect the adverse

context caused by the COVID-19 pandemic in the

underlying assets value. Additionally, it is also

worth mentioning the favourable evolution of the

costs borne with the sale of loans in the activity

in Portugal, to the extent that they stood at 4

million Euros in 2021, compared to 28 million

Euros accounted for in the previous year.

On the other hand, the evolution of net trading

income was penalised by the fact that, in 2020,

39 million Euros income was recognised, related

to the exchange rate hedging of the Group’s stake

in Poland, following the devaluation of the Polish

Zloty, which was not repeated in 2021.

2021 REPORT & ACCOUNTS

60 |

Additionally, although in 2021 the gains

recognised from Portuguese public debt securities

were set at 39 million Euros, which was 18 million

Euros less than the income recognised in 2020,

this evolution was, however, partially offset by

the higher gains recognised from the sale of other

securities, namely foreign public debt.

Regarding international activity, net trading

income was significantly below the 79 million

Euros booked in 2020, rising to 11 million Euros in

2021. This evolution was determined by the

performance of the Polish subsidiary, having been

slightly offset by the increase recorded in the

Mozambican operation.

In the Polish subsidiary, the increase in the costs

incurred with the conversion of mortgage loans

granted in Swiss francs, following the agreements

meanwhile signed with the customers holding

these loans, assumed particular importance,

which in 2021 penalised net trading income by 78

million Euros, compared to 11 million Euros that

had been recognised in 2020. Additionally, the

performance of net trading income in the Polish

subsidiary also reflects the lower income obtained

from the disposal of debt securities, mainly Polish

public debt.

On the contrary, this evolution was partially

offset by the impacts arising from the loan

portfolio mandatorily classified at fair value

through profit or loss, since in 2021 profit was

recognised, in the amount of 9 million Euros,

contrasting with the negative amount of 10

million Euros that had been recorded in the

previous year. It should be noted that, part of the

profit recognised in 2021 is related to exposures

measured at fair value through profit or loss, but

that during 2021 started to be recognised based

on the amortised cost criterion, with the same

amount having been recognised as impairments

for loans, thus producing a null impact on the

profit and loss account.

Finally, it should be noted that net trading

income recognised by the Polish subsidiary

include profit from the revaluation of Visa shares,

in the amount of 19 million Euros, similar impact

to what had been recognised in the previous year.

The favourable evolution of net trading income in

the subsidiary in Mozambique was determined by

the increase in income from foreign exchange

transactions with customers.

NET TRADING INCOME

Million euros

2021

2020

restated

2019

Chan. %

21/20

Net gains / (losses) from financial operations at fair value through profit

or loss

(0)

(17)

98.6%

Net gains / (losses) from foreign exchange

-80.2%

Net gains / (losses) from hedge accounting operations

(2)

(6)

>200%

Net gains / (losses) from derecognition of assets and financial liabilities

measured at amortised cost

(4)

(28)

(25)

86.8%

Net gains / (losses) from derecognition of financial assets measured at

fair value through other comprehensive income

100

-31.3%

TOTAL

141

143

-38.5%

of which:

Activity in Portugal

22.9%

International activity

-86.1%

2021 REPORT & ACCOUNTS

|61

OTHER NET OPERATING INCOME

Other net operating income includes other operating income, net of other operating costs, which includes,

inter alia, costs related to mandatory contributions and to deposit guarantee and resolution funds, both in

the activity in Portugal and in the international activity. In addition, other net operating income also

includes income from the insurance activity (only until 2019) and income from the sale of subsidiaries and

other assets.

Other net operating income6 showed a very favourable evolution from the negative 165 million Euros

ascertained in 2020, setting at 126 million Euros also negative at the end of 2021. This evolution, despite

mainly reflecting the favourable performance of the international activity, also benefited, although to a

lesser extent, from the positive performance of the activity in Portugal.

Other net operating income in the activity in Portugal evolved from a negative amount of 73 million Euros in

2020, to an also negative amount of 66 million Euros in 2021. This evolution was mainly due to the gains

recognised in 2021 from the divestment of non-current assets held for sale, which contrasted with the losses

generated in the previous year. On the other hand, the increase in costs borne with mandatory contributions

continues to penalise the performance of other net operating income in the activity in Portugal. In 2021, the

total amount of costs recognised with mandatory contributions amounted to 79 million Euros, which

compares with 72 million Euros ascertained in the previous year. With the exception of the additional

solidarity contribution to be applied on the banking sector, to finance the costs of the public response to the

crisis impact caused by the COVID-19 pandemic, which, despite having increased compared to the previous

year, remained at around 6 million Euros, and the supervisory fee charged by the ECB, which remained close

to 2 million Euros in both 2021 and 2020, all other contributions were higher than the amount borne in 2020.

Thus, the contribution cost to the Single Resolution Fund (SRF) increased from 19 million Euros in 2020 to 21

million Euros in the current year, while the contribution required for the national resolution fund rose from

15 million Euros to 17 million Euros in the last year. The contribution on the banking sector, meanwhile,

amounted to 33 million Euros in 2021, compared to 30 million euros posted in the previous year. The total

cost associated with mandatory contributions also includes the contribution to the deposits guarantee fund,

whose amount, in this context, seems immaterial. It should be noted that, in the activity in Portugal, of the

total amount of costs recognised with mandatory contributions in the current year, 56 million Euros refer to

contributions for national entities.

In the international activity, other net operating income6, in 2021, amounted to a negative amount of 60

million Euros, showing a very significant improvement over the also negative 92 million Euros recorded in the

previous year.

This evolution was determined by the contribution of the Polish subsidiary, which in 2021 incorporates the

income recognition, in the amount of 48 million Euros (8 million Euros in 2020), corresponding to the amount

receivable from a third party, as compensation for the costs incurred with the provisions booked to address

the legal risk implicit in foreign exchange mortgage loans, following the indemnity clauses and contractual

guarantees provided for in the acquisition contract of Euro Bank S.A. Inversely, in 2021, were recognised, in

this item, legal costs related to claims filed by Bank Millennium, mainly to claim the reimbursement of the

costs associated with the capital use, by the customers, during the period of the respective loans.

It should be noted that, following the conditions set out in the agreement for the acquisition of Euro Bank

S.A, the other net operating income accounted for by the Polish subsidiary in 2020 also included the

recognition of profit, in the amount of 11 million Euros, receivable from a third party, although in this case

related to the return of commissions to customers who repaid in advance their consumer credits, partially

mitigating the impact of the additional provisions set up for this purpose in the previous year.

On the other hand, contrary to what happened in the activity in Portugal, the evolution of other net

operating income in the Polish subsidiary benefited from the reduction of the costs borne with the mandatory

contributions to which the operation is subject, to the extent that they evolved from 100 million Euros in

2020, to 94 million Euros, in the current year. In this sense, we highlight the decrease in the contribution to

the deposit guarantee fund which amounted to 15 million Euros in 2021, compared to 24 million Euros

ascertained in 2020, and the contribution to the resolution fund which amounted to 11 million euros at the

end of the current year, compared to 13 million euros in the previous year. Inversely the special tax on the

Polish banking sector proved higher than the 63 million Euros accounted for in 2020, totalling 69 million Euros

at the end of 2021.

2021 REPORT & ACCOUNTS

62 |

6 In 2020, other net operating income includes the specific items considered by the Polish subsidiary, related to costs arising from the acquisition, merger

and integration of Euro Bank S.A., of an immaterial amount.

In the operation in Mozambique, although less material, there was also a favourable evolution of other net

operating income compared to 2020.

EQUITY ACCOUNTED EARNINGS

Equity accounted earnings from associates, include the results appropriated by the Group related to the

entities where, despite exercising some influence, it does not have control over their financial and operating

policies.

In 2021, the equity accounted earnings amounted to 57 million Euros, compared to 68 million Euros

ascertained in 2020, reflecting the performance of the international activity, to the extent that in the

activity in Portugal equity accounted earnings remained in line with the amount recorded in the previous

year.

Equity accounted earnings in the activity in Portugal were set at 58 million Euros at the end of 2021, but

despite remaining practically in line with the amount ascertained in 2020, they incorporate distinct

evolutions that offset each other. In this sense, it is important to note the increase in the income generated

by the stake in SIBS, although it was absorbed, almost entirely, by the lower contribution of the stake in

Millenniumbcp Ageas in 2021. The extraordinary positive impact, arising from the assessment of liabilities of

local insurance contracts based on assumptions consistent with those used by the parent company, in the

first half of 2020, largely justifies the lower contribution generated by Millenniumbcp Ageas in 2021

compared to the previous year. In turn, although on a smaller dimension, the income increase generated by

the stake in Banque BCP (France) was largely absorbed by the recorded fall in income generated by Unicre.

In the international activity, equity accounted earnings evolved from a positive amount of 9 million Euros

ascertained in 2020, to negative amount of 1 million Euros at the end of the current year, mainly punished by

the fact that in the previous year income of 6 million Euros was recognised with the reversal of the previous

annulment of gains on the sale of real estate by Banco Millennium Atlântico to entities of the Group. It

should be noted that this reversal was possible because the said real estate were classified, in 2020, as

investment real estate and were consequently subject to revaluation in that year. The negative evolution in

comparison with the previous year is also explained by the lower appropriation of the results generated by

Banco Millennium Atlântico in Angola, strongly influenced by the impacts resulting from the economic

situation the country is experiencing.

EQUITY ACCOUNTED EARNINGS

Million euros

2021

2020

restated

2019

Chg. %

21/20

Millenniumbcp Ageas Grupo Segurador, SGPS, S.A.

-13.8%

UNICRE - Instituição Financeira de Credito, S.A.

-19.1%

Banco Millennium Atlântico, S.A.

(1)

-114.7%

Banque BCP, S.A.S.

57.3%

SIBS, SGPS, S.A.

121.0%

Other

—

(1)

<-200%

TOTAL

-15.9%

2021 REPORT & ACCOUNTS

|63

OPERATING COSTS

Operating costs include staff costs, other

administrative costs and depreciation.

Excluding the effect of specific items7, operating

costs amounted to 1,025 million Euros in 2021,

showing a reduction of 1.8% relative to the 1,044

million Euros ascertained in the previous year.

This evolution reflects a disciplined management

of costs and the Group's continued focus on its

commitment to improve efficiency, particularly

visible in the activity in Portugal.

OPERATING COSTS

Million euros

In consolidated terms, operating costs, excluding

the effect of specific items, benefited mostly

from the savings achieved in staff costs, namely

in the activity in Portugal, while other

administrative costs remained at a similar level to

that recorded in 2020, and depreciations showed

a slight growth compared to the amount

ascertained in the previous year.

In the activity in Portugal, operating costs, not

considering the effect of specific items,

amounted to 602 million Euros at the end of 2021,

2.7% below the 619 million Euros ascertained in

the previous year. Specific items amounted to 91

million Euros in 2021 and 32 million Euros in 2020,

in both years mainly related to the costs

recognised with the headcount adjustment. It

should be noted that the specific items

recognised in 2021 incorporate the impact of a

provision, in the amount of 84 million Euros,

recognized following the headcount adjustments

identified as necessary under the Mobilising

2018/2021 strategic plan.

The favourable evolution of operating costs in the

activity in Portugal, excluding specific items, was

mainly due to savings in staff costs. Although with

less expression, other administrative costs were

also lower than in 2020, while depreciations, in

turn, recorded an increase compared to the

amount posted in the previous year.

OPERATING COSTS

Activity in Portugal

Million euros

In the international activity, operating costs,

excluding the effect of specific items (15 million

recognised by the Polish subsidiary in 2020,

related to costs with the acquisition, merger and

integration of Euro Bank S.A.), amounted to 423

million Euros at the end of 2021, slightly below

the 425 million Euros accounted for in 2020.

OPERATING COSTS

international activity

Million euros

2021 REPORT & ACCOUNTS

64 |

7 Negative impact of 91 million Euros in 2021, fully recognized as staff costs in the activity in Portugal, mainly related to the costs with headcount

adjustment, including a provision, in the amount of 84 million Euros. In 2020, the impact was also negative in the amount of 46 million Euros, of which 32

million Euros were recognized as staff costs in the activity in Portugal (related to headcount adjustment costs, compensation cost for temporary

remuneration cuts of employees and income arising from the agreement with a former director of the Bank), and 15 million Euros related to acquisition,

merger and integration of Euro Bank S.A., recognized by the Polish subsidiary (9 million Euros as staff costs, 5 million euros as other administrative costs

and 1 million Euros as depreciations).

Although remaining practically in line with the

amount posted in 2020, operating costs in the

international activity incorporate distinct

dynamics in their evolution, to the extent that

the favourable performance of the Polish

subsidiary was largely absorbed by the increase in

costs registered in the Mozambican operation.

The evolution of operating costs in the Polish

subsidiary was mainly due to the efficiency

improvement measures implemented by Bank

Millennium and the synergies obtained after the

merger with Euro Bank S.A., among which stands

out the significant reduction in the number of

employees and branches, with impact mainly in

staff costs, but also in depreciations and other

administrative costs, although in this case less

visible, since they were partially absorbed by the

increase in costs with legal advice to support

issues related to the foreign exchange mortgage

loan portfolio.

Operating costs, in turn, in the operation in

Mozambique were higher than in 2020, driven by

the increase in staff costs, other administrative

costs and depreciation, in both cases also

reflecting the effect of the exchange rate

evolution of the Metical against the euro.

In consolidated terms, the reduction in operating

costs, excluding specific items, together with the

increase in core income and net operating

revenues, led the cost to income ratio and the

cost to core income ratio of the Group to be

lower than the previous year (46.3% and 47.3%,

respectively), standing at 43.9% and 44.2%,

respectively.

In the activity in Portugal, excluding specific

items, the cost to income ratio and the cost to

core income ratio also showed a favourable

evolution in the last year, from 46.2% in 2020 to

42.6% in the current year and from 48.1% in the

previous year to 44.7% in 2021 respectively,

reflecting, on one hand, the reduction of

operating costs and, on the other hand, the

increase in core income and net operating

revenues.

The evolution of operating costs, excluding

specific items, together with the increase in core

income also enabled an improvement in the cost

to core income ratio in the international activity,

which evolved from 46.2% in 2020 to 43.6% in the

last year. Cost to income ratio in the

international activity, in turn, stood at 45.9% in

2021, very close to the 46.3% recorded in 2020.

OPERATING COSTS

Million euros

2021

2020

restated

2019

Chg. %

21/20

ACTIVITY IN PORTUGAL (1)

Staff costs

346

364

371

-5.1%

Other administrative costs

176

178

191

-1.1%

Depreciation

5.1%

602

619

631

-2.7%

INTERNATIONAL ACTIVITY (1)

Staff costs

218

220

257

-0.8%

Other administrative costs

148

146

156

0.9%

Depreciation

-3.4%

423

425

469

-0.6%

CONSOLIDATED (1)

Staff costs

564

584

628

-3.5%

Other administrative costs

324

325

347

-0.2%

Depreciation

137

135

125

1.4%

1,025

1,044

1,100

-1.8%

SPECIFIC ITEMS

95.2%

TOTAL

1,116

1,090

1,166

2.3%

(1) Excludes the impact of specific items previously mentioned.

2021 REPORT & ACCOUNTS

|65

STAFF COSTS

Staff costs, not considering the effect of specific

items, (91 million euros in 2021 and 41 million

euros in 2020), totalled 564 million euros at the

end of 2021, recording a reduction of 3.5% versus

the 584 million euros accounted in the previous

year, mostly due to the positive performance of

the activity in Portugal.

It is important to mention that the specific items

in 2021 were fully recognized in the activity in

Portugal, being especially related with costs

incurred with the headcount adjustment,

including mostly the impact of a provision, in the

amount of 84 million euros, recognized following

the headcount adjustments, considered necessary

within the context of the strategic plan Mobilising

2018/2021.

On the other hand, in 2020, besides the specific

items considered in the activity in Portugal,

mostly associated with costs recognised with the

headcount adjustments, were also considered the

costs with the acquisition, merger and integration

of Euro Bank S.A. recognized by the Polish

subsidiary.

In the activity in Portugal, staff costs amounted

to 346 million Euros in 2021, decreasing 5.1%

versus the 364 million Euros in 2020. This

performance does not consider the impact of

specific items, amounting to 91 million Euros in

2021, and 32 million Euros in 2020, in both years

mostly related with headcount adjustments.

Once again, it is important to mention that the

amount recognized in 2021 includes the impact of

the aforementioned provision, in the amount of

84 million Euros, booked within the context of the

adjustments in headcount carried out by the Bank

in 2021. The headcount adjustment was a

consequence of the assessment made to the

Bank’s needs versus the existing capacity, also

considering the adaptation of the models and

business processes to the new technologies.

Although this adjustment was initially planned to

take place in 2020, the Bank decided to postpone

it due to pandemic associated with COVID-19.

On the other hand, in 2020, apart from the costs

associated with the headcount adjustment,

specific items also include costs with the

compensation due for the temporary adjustment

of the employee’s remuneration and the positive

impact resulting from the agreement established

with a former director of the Bank.

The positive performance of staff costs in the

activity in Portugal, excluding the impact of

specific items, resulted mainly from the net

decrease in the number of employees, which

went from 7,013 employees on 31 December

2020, to 6,289 by the end of 2021, reflecting the

impact of the implementation of the above-

mentioned headcount adjustment plan.

In the international activity, staff costs showed a

slight reduction of 0.8% versus the 220 million

Euros recorded in 2020 and stood at 218 million

Euros by the end of 2021. These figures do not

consider the impact of specific items, amounting

to 9 million Euros, fully recognised in 2020 by the

Polish subsidiary and related with costs with the

acquisition, merger and integration of Euro Bank

S.A.

The performance of staff costs, excluding specific

items, in the international activity, was boosted

by the reduction recorded in the Polish subsidiary,

despite the fact that it was largely absorbed by

the increase that occurred in the subsidiary in

Mozambique.

The challenging context that the Polish subsidiary

has been facing, marked by a strong reduction in

interest rates that lasted until the end of the

third quarter of 2021 and by the implicit risks of

the portfolio of mortgage loans in Swiss Francs,

dictated the need to accelerate efficiency

improvement. In this sense, there was a

progressive reduction in the total number of

employees, from 7,645 employees (7,493 FTE -

full time equivalent) by the end of 2020, to 7,079

employees (6,942 FTE – full-time equivalent) on

31 December 2021, whose impact was decisive for

the staff costs reduction in the subsidiary and,

consequently, in the international activity.

In the operation in Mozambique, headcount went

down from 2,591 employees on 31 December

2020, to 2,496 employees on 31 December 2021.

Although there has been a reduction of 95

employees in staff, it should be noted that this

reduction was a consequence of the sale by BIM -

Banco Internacional de Moçambique, of 70% of the

share capital that the Group held in Seguradora

Internacional de Moçambique, S.A. (“SIM”),

becoming a minority shareholder with a stake of

around 22%.

2021 REPORT & ACCOUNTS

66 |

Within this context, it should be noted that, in

accordance with the requirements of IFRS 5, this

operation was classified as discontinued operation

and the respective staff costs are now recorded as

income from discontinued operations, as well as

the respective historical 2020 figures, in order to

ensure the comparability of information.

Excluding the 152 employees who, by the end of

2020 were part of the workforce of Seguradora

Internacional de Moçambique, S.A. (“SIM”), the

staff of the Mozambican subsidiary increased by

57 employees in 2021, a fact that together with

the effect of inflation, with additional payments

for employee’s health insurance and medical

expenses associated with COVID-19, resulted in a

higher total staff cost than in the previous year.

The staff of the international activity by the end

of December 2021 was composed by 9,579

employees, less 743 employees than the 10,322

employees recorded on the same date in 2020.

The reduction of 566 employees observed in Bank

Millennium, contributed significantly for this

significant reduction in the number of employees

in the international activity.

In addition, the headcount in the international

activity was also influenced by the net reduction

of 95 employees made by the subsidiary in

Mozambique, partially reflecting the impact of

the sale of Seguradora Internacional de

Moçambique, S.A. (“SIM”) (152 employees in

2020).

Furthermore, it should also be noted that,

following the sale of the share capital of Banque

Privée BCP (Suisse) S.A. to Union Bancaire Privée,

UBP SA, completed on 2 November 2021, the

number of employees allocated to the Swiss

subsidiary (82 employees by the end of 2020) also

played a role in the reduction of the number of

employees observed in the international activity.

EMPLOYEES

STAFF COSTS

Million euros

2021

2020

restated

2019

Chg. %

21/20

Salaries and remunerations

455

478

507

-4.7%

Social security charges and other staff costs

108

106

121

2.0%

TOTAL EXCLUDING SPECIFIC ITEMS

564

584

628

-3.5%

SPECIFIC ITEMS

121.6%

TOTAL

654

625

668

4.7%

Of which:

Activity in Portugal

436

396

411

10.3%

International activity

218

229

257

-4.9%

2021 REPORT & ACCOUNTS

|67

OTHER ADMINISTRATIVE COSTS

Other administrative costs totalled 324 million

Euros in 2021, being in line with the amount

posted in the previous year, excluding the specific

items recognised in 2020, in the amount of 5

million Euros, fully accounted by the Polish

subsidiary, relating to costs incurred with the

acquisition, merger and integration of the Euro

Bank S.A.

In spite that, in consolidated terms, other

administrative costs, excluding the impact of the

specific items mentioned, standing at a level

similar to that seen in 2020, it is important to

highlight the savings obtained in the activity in

Portugal, even if the same have been almost

entirely absorbed by the increase recorded by

international activity.

In the activity in Portugal, other administrative

costs totalled 176 million Euros by the end of

2021, evidencing a decline of 1.1% versus the

amount accounted in 2020.

The impacts of the pandemic COVID-19 continue

to strongly influence the evolution of other

administrative costs in both ways. As such, the

impacts from the implementation of the Bank’s

contingency plan, based on remote work and on

the suspension or postponement of certain

projects and travels, was mainly reflected in the

reduction of costs related to advisory services,

other supplies and services, information

technology, communications, consumables,

water, energy and fuels, maintenance and related

services and travel, hotel and representations.

On the other hand, the pandemic context led to a

greater activity in call centres, which contributed

mainly for the increase of costs associated with

outsourcing but also of those associated with

rents, namely the rental of software. In addition,

the gradual pick-up in activity in 2021 also had an

impact on the increase in certain types of costs,

in particular those associated with legal expenses,

advertising and other specialised services, which

were thus higher than the amount recognised in

the previous year.

Besides the impacts deriving from the pandemic,

the performance of other administrative costs in

the activity in Portugal was also influenced by the

Bank’s decision of maintaining a disciplined

management of costs, continuing to put into place

a series of thereto related measures, among

which we may point out the re-dimensioning of

the branch network that went from 478 branches

on 31 December 2020 to 434 by the end of 2021.

In the international activity, other administrative

costs stood at 148 million Euros by the end of

2021, being slightly above (0.9%) of the amount

recorded in the previous year, not considering the

impact of the specific items mentioned above.

The performance recorded by other

administrative costs in the international activity

was characterised by an increase in costs

recorded by the subsidiary in Mozambique,

although the same have been partially offset by

the savings achieved by the Polish subsidiary.

The performance of other administrative costs in

the subsidiary in Mozambique resulted mostly

from the increase in management fees, since the

same are linked with the earnings obtained by the

subsidiary that, in 2021 significantly exceeded the

ones achieved in the previous year. The

performance of the exchange rate of Metical

against the euro, in turn, also contributed

negatively to this performance.

Regarding the number of branches, the subsidiary

in Mozambique ended 2021 with 199 branches,

the same number it showed in the previous year.

On its turn, the Polish subsidiary benefited from

the restructuring measures underway which

enabled reaching a number of synergies resulting

from the merger with EuroBank S.A., among

which we point out the savings associated with

the optimisation of the branch network which

evolved from 702 branches on 31 December 2020

to 655 by the end of 2021, and also the savings

associated with IT services which have, however,

been partially absorbed by the increase in costs

with advisory services, namely legal advising

services to assist the Bank in issues related with

the foreign exchange mortgage loans portfolio.

BRANCHES

2021 REPORT & ACCOUNTS

68 |

OTHER ADMINISTRATIVE COSTS

Million euros

2021

2020

restated

2019

Chg. %

21/20

Water, electricity and fuel

-9.7%

Consumables

-24.1%

Rents

-4.6%

Communications

-16.6%

Travel, hotel and representation costs

-21.7%

Advertising

5.6%

Maintenance and related services

-7.9%

Credit cards and mortgage

6.8%

Advisory services

22.2%

Information technology services

-2.0%

Outsourcing

3.5%

Other specialised services

5.3%

Training costs

-6.2%

Insurance

4.2%

Legal expenses

51.4%

Transportation

-7.3%

Other supplies and services

-3.6%

TOTAL EXCLUDING SPECIFIC ITEMS

324

325

347

-0.2%

SPECIFIC ITEMS

–

-100.0%

TOTAL

324

330

373

-1.7%

of which:

Activity in Portugal

176

178

191

-1.1%

International activity

148

151

182

-2.4%

DEPRECIATIONS

Depreciations, excluding the specific items recognised in 2020 by the Polish subsidiary following the

acquisition of Euro Bank S.A., in the amount of 1million Euros, stood 1.4% above the 135 million euros posted

in 2020, totalling 137 million Euros by the end of 2021. These figures reflect essentially the performance of

the activity in Portugal, whose increase was partially offset by the decrease recorded in the international

activity.

In the activity in Portugal, depreciations went from 76 million Euros in 2020 to 80 million Euros by the end of

the current year, essentially reflecting the impact of the increase of investment in software carried out in

the last few years. This increase in the investment in software translates the Bank’s commitment with the

digital transformation process underway and the constant commitment to technological innovation, which

was crucial for the capacity to immediately respond to the challenges arising from the pandemic associated

with COVID-19. Thereon, it is also important to mention that customers increasingly value the Bank’s digital

capabilities, translated by the continued growth of the customer base, particularly mobile customers, and

the various awards and distinctions that the Bank has been receiving.

In the international activity, depreciation, excluding the specific items mentioned above, evidenced a

reduction of 3.4% versus the 59 million Euros recorded in 2020, totalling 57 million Euros in the current year.

This performance resulted mostly from the activity of the Polish subsidiary, reflecting, in part, the synergies

obtained following the integration of the Euro Bank S.A. by Bank Millennium, S.A. On the other hand, in

2021, depreciations in the subsidiary in Mozambique exceed the amount recognised in 2020, in part due to

the performance of the exchange rate of Metical against the euro.

2021 REPORT & ACCOUNTS

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LOANS IMPAIRMENT

Impairment of loans to customers includes impairment of financial assets at amortized cost for loans granted

to customers and for debt securities associated with credit operations, net of reversals and recoveries of

credit and interest.

The reconciliation of the impairment of financial assets at amortized cost presented in the consolidated

profit and loss account with the impairment of loans to customers considered for the purposes of this analysis

is presented as follows:

LOANS IMPAIRMENT (P&L)

Million euros

2021

2020

restated

2019

Impairment of financial assets at amortised cost (accounting P&L) (1)

353

513

390

Impairment of Loans and advances to credit institutions (at amortised cost) (2)

(1)

Impairment of financial assets at amortised cost not associated with credit operations (3)

Loans impairment considering management criteria (1)-(2)-(3)

349

510

390

148

151

182

Over the last year, loan impairment charges (net

of recoveries) evolved favourably both in the

activity in Portugal and in the international

activity, having presented, in consolidated terms,

a reduction of 31.6%, from 510 million Euros in

2020, to 349 million Euros in the current year.

This performance was strongly influenced by the

extraordinary reinforcement of impairments

recognised in 2020 to face the economic crisis

caused by the COVID-19 pandemic and its

underlying risks, affecting both Portugal and the

international activity, totalling 187 million Euros

in consolidated terms.

LOANS IMPAIRMENT (NET)

Million euros

In the activity in Portugal, loan impairment

charges (net of recoveries) amounted to 273

million Euros in 2021, standing 22.8% below the

354 million euros recognised in the previous year.

This reduction comes mostly from the fact that,

in 2020 extraordinary impairments were made, in

the amount of 153 million Euros, with the purpose

of dealing with the increase in risks associated

with the adverse and uncertain context that was

experienced at the time, as a result of the

pandemic associated with COVID-19. Hence, in

June 2020, the credit risk parameters underlying

the models to calculate collective impairment

were updated to evidence the new

macroeconomic scenario resulting from the

pandemic associated risks. The same were

afterwards revised by the end of the year to align

some macroeconomic variables with the

projections then disclosed by Banco de Portugal.

Altogether, the update of the macroeconomic

scenario implicit in the models for calculating

impairment for credit led to the booking of

additional impairments, in the amount of 55

million Euros in 2020. Furthermore, and within

the scope of the individual assessment of credit

customers, extraordinary impairments were also

booked to anticipate the expected effects of the

pandemic.

2021 REPORT & ACCOUNTS

70 |

At the same time, and to incorporate an

additional conservative approach and aiming at

complying with the recommendations of the

Supervisors, namely regarding the identification

and measurement of credit risk within the context

of the pandemic COVID-19, additional

impairments (overlays) were recognised in

relation to those estimated by the models in force

to calculate collective impairment, which

amounted to 58 million Euros in 2021 and to 27

million Euros in 2020. The exercise carried out

was based on an analysis of migrations to stage 2

and stage 3 of customers identified as being of

greater risk, with the most significant impact

occurring in the corporate segment.

We must also emphasize that, in 2021 and in 2020

impairments were recognized to meet the needs

of minimum coverage of losses for non-performing

exposures in order to promote greater alignment

of the equity situation of the Bank with the

prudential regulations in effect, namely with

Regulation (EU) 2019/630 of the European

Parliament and of the Council of April 17 of 2019

and with the expectations of the supervisory

entities regarding the need to reduce these

exposures in the balance sheet of the institutions,

avoiding future accumulation.

On the other hand, the evolution in loans

impairment in the activity in Portugal also

benefited from extraordinary and not expected

positive impacts, associated with the activity of

an individual customer, which led to lesser

impairment needs in 2021.

LOANS IMPAIRMENT (NET)

Activity in Portugal

Million euros

In the international activity, loan impairment

charges (net of recoveries) fell to less than half of

the 156 million Euros recognized in 2020, standing

at 76 million Euros at the end of 2021.

LOANS IMPAIRMENT (NET)

International activity

Million euros

The Polish subsidiary was the main responsible for

this evolution, possible thanks to the

improvement observed, both in the level of risk

implicit in the loans object of moratoriums, which

have expired in the meantime, and in the risk

underlying the remaining loan portfolio, both for

individual and corporate customers. At the same

time, loan impairment in the Polish subsidiary in

2021, benefited not only from the reversions

recognised resulting from the sale of portfolios of

non-performing loans but also from less needs for

provisioning due to the update of the

macroeconomic assumptions implicit in the

collective impairment models.

On the other hand, loan impairments recognized

in 2021 by the Polish operation include the

impairment associated to some exposures that

initially were part of the loan portfolio measured

at fair value through profit and loss which,

however, by the year’s end were part of the loan

portfolio at amortized cost.

It is also important to mention that the decrease

in impairment verified at the Polish subsidiary in

the last year was also the result of the

extraordinary reinforcement of impairments, in

the amount of 30 million Euros (of which 14

million Euros regard overlays), which had been

accounted in 2020 to deal with the implicit risk of

the COVID-19 pandemic, plus the impacts coming

from the implementation of a more conservative

definition of default for the exposures of the

retail segment.

2021 REPORT & ACCOUNTS

|71

In the Mozambican subsidiary there was also a

significant reduction in loans impairment which,

in 2021, was fixed at an immaterial amount.

Apart from the impact of additional impairments,

amounting to 5 million Euros, which had been

booked in 2020 to face the risks implicit in the

loan portfolio, arising from the context of the

COVID-19 pandemic, the evolution of loans

impairment in the subsidiary in Mozambique also

benefited from the reversion of impairment

associated with an individual customer due to the

agreement established between the parties

according to which the bank receives the real

estate property which acted as collateral. We

must also mention that, in this case, there was

simultaneously an increase in other impairments

and provisions through the reinforcement of

impairments for non-current assets held for sale.

The evolution of impairment charges (net of

recoveries) led to the cost of risk (net of

recoveries) recording a significant improvement

both in the activity in Portugal, and in the

international activity, enabling, in consolidated

terms, to place the cost of risk at 60 basis points,

considerably below the 92 basis points observed in

2020.

In the activity in Portugal, the cost of risk (net of

recoveries) went from 92 basis points in 2020, to

69 basis points in 2021. Moreover, in the

international activity, it improved from 91 basis

points to 41 basis points last year.

LOANS IMPAIRMENT (NET OF RECOVERIES)

Million euros

2021

2020

restated

2019

Chg. %

21/20

Loan impairment charges (net of reversions)

372

533

414

-30.2%

Credit recoveries

1.1%

TOTAL

349

510

390

-31.6%

COST OF RISK:

Impairment charges (net of recoveries) as a % of gross loans

60 bp

92 bp

72 bp

-32 bp

OTHER IMPAIRMENT AND PROVISIONS

Other impairment and provisions include (i) impairment, net of reversals, for loans and advances of credit

institutions classified at amortised cost; (ii) impairment for financial assets (classified at fair value through

other comprehensive income and at amortised cost not associated with credit operations); (iii) impairment for

other assets, namely for repossessed assets, investments in associates and goodwill of subsidiaries and (iv)

other provisions.

Other impairments and provisions totalled 712 million Euros in 2021, more than doubling the amount of 331

million euros recognized in 2020, strongly influenced by the reinforcement of the extraordinary provision,

booked by the Polish subsidiary to face the legal risk associated with foreign exchange mortgage loans.

Although with a lower magnitude, other impairments, and provisions in the activity in Portugal were also

higher than in 2020.

In 2021, other impairments and provisions in the activity in Portugal, reached 165 million Euros, versus the 119

million Euros recognised in the previous year. This evolution mainly reflects the increase, in the amount of 63

million Euros, of provisions booked for other risks, which, seeking to reflect an additional conservative

approach, incorporate generic amounts to prevent possible consequences of the pandemic crisis, namely in

the valuation of the Bank's assets. Although with less material impact, provisions for impairment for

guarantees and commitments increased 9 million Euros if compared with the previous year, mostly due to the

need to guarantee the minimum levels of coverage of non-performing exposures provided for in the

regulations in force. On the other hand, it is important to mention the lower level of impairment required by

non-current assets held for sale and by other financial assets, which stood at, respectively, 18 million Euros

and 8 million Euros below the amounts recorded in the previous year. We must emphasize that the evolution

of impairment for other financial assets was positively influenced by the aforementioned review of the credit

risk parameters of the collective impairment models carried out in 2020, which had contributed to an

additional reinforcement of impairments in that year.

2021 REPORT & ACCOUNTS

72 |

In the international activity, the evolution recorded by other impairments and provisions, from 213 million

Euros in 2020, to 547 million Euros in 2021 was determined, as already mentioned, by the contribution from

the Polish subsidiary, namely by the reinforcement of the extraordinary provision, booked to face the legal

risk associated with foreign exchange mortgage loans. Thus, following the negative trends in court decisions

and the increase in the number of new lawsuits, as well as the use of more conservative assumptions applied

in the risk assessment, the aforementioned provisions amounted to 345 million Euros above the 160 million

Euros recognised in 2020, totalling 505 million Euros in the current year. However, it is important to mention

that the impact of these provisions in 2021 was partially offset by the recognition of income, amounting to 48

million Euros (8 million Euros in 2020), reflected in the item other net operating income, corresponding to

the amount to be received from a third party, following the indemnity and contractual guarantees clauses

foreseen in the agreement established for the purchase of Euro Bank S.A. In addition, and although the

appeal request is still under assessment, in November 2021, the Polish subsidiary booked a provision in the

amount of 23 million Euros, intended to cover potential losses which may result from a dispute involving the

contracting of foreign exchange operations with a customer. We must stress that, in 2020, the Polish

subsidiary had booked additional provisions in the amount of 32 million Euros to face the refund of

commissions to customers who repaid their consumer credits in advance, following the decision made by the

Court of Justice of the European Union. This impact, similar to the provisions associated with foreign

exchange mortgage loans, was partially offset by the recognition of income, also reflected in other net

operating income, in the amount of 11 million Euros, corresponding to the amount to be received from a

third party, following the clauses part of the Euro Bank S.A. purchase agreement.

Although with less significance, we must also mention the evolution recorded by other impairments and

provisions in the subsidiary in Mozambique, an amount which was higher in 2021 versus the one recorded in

2020, mostly due to the recognition of a provision for the property of the former head office of BIM - Banco

Internacional de Moçambique, S.A.

Additionally, the evolution of other impairments and provisions in the international activity also reflects the

reinforcement of impairments recognized to cover the investment in the holding in Banco Millennium

Atlântico, in the amount of 10 million Euros (17 million Euros in 2020, including impairment for goodwill).

INCOME TAX

Income tax (current and deferred) totalled 204 million Euros in 2021, which compares to 132 million Euros

obtained in the same period of the previous year.

The recognized taxes include, in 2021, current tax of 81 million Euros (109 million Euros in 2020) and

deferred tax of 122 million Euros (24 million Euros in 2020).

Current tax expenses in 2021 were strongly influenced by provisions for legal risks related to the portfolio of

foreign exchange mortgage loans and mandatory contributions to the banking sector, both at the level of the

Polish subsidiary.

Deferred tax expenses in 2021 were influenced by provisions and mandatory contributions to the banking

sector, non-deductible for tax purposes, at the level of the activity in Portugal.

NON-CONTROLLING INTERESTS

Non-controlling interests are the part attributable to third parties of the net income of the subsidiary

companies consolidated under the full method in which the Group Banco Comercial Português does not hold,

directly or indirectly, the entirety of their share capital.

Non-controlling interests record mainly the income for the year attributable to third parties related to the

shareholdings in Bank Millennium in Poland (49.9%) and in Millennium bim in Mozambique (33.3%).

In 2021, non-controlling interests totalled a negative amount of 113 million Euros, which compares with a

positive amount of 25 million Euros in 2020. This evolution was mainly a result of the income for the year

attributable to third parties via the consolidation of the Polish subsidiary, which recorded a decline of 148

million Euros in that period (from a positive amount of 3 million Euros in 2020, to a negative amount of 146

million euros in 2021), reflecting the losses reported by Bank Millennium in 2021.

On the other hand, income for the year attributable to third parties via the consolidation of the subsidiary in

Mozambique in 2021, stood at 32 million Euros, 10 million Euros above the 22 million Euros recorded in 2020.

2021 REPORT & ACCOUNTS

|73

REVIEW OF THE BALANCE SHEET

Following the entrance into force of the IFRS 9 – Financial Instruments on January 1, 2018 and the

consequent impacts on the structure of the financial statements of Millennium bcp versus previous periods,

some indicators were defined based on concepts that translate the management criteria adopted by the

Group within the scope of preparation of financial information. The correspondence between the

management approaches and the accounting information is described in the glossary and throughout the

document, when applicable, especially the concepts related with loans to customers, balance sheet

customer funds and the securities portfolio.

BALANCE SHEET AS AT 31 DECEMBER

Million euros

2021

2020

2019

Chg. %

21/20

ASSETS

Cash and deposits at central banks and loans and advances to credit institutions (1)

8,158

5,566

5,487

46.6 %

Financial assets measured at amortised cost

Loans and advances to credit institutions

453

1,015

893

-55.4%

Loans and advances to customers

54,972

52,022

49,848

5.7%

Debt instruments

8,205

6,235

3,186

31.6%

Financial assets measured at fair value through profit or loss

Financial assets held for trading

931

1,031

878

-9.7%

Financial assets not held for trading mandatorily at fair value through profit or

loss

991

1,315

1,406

-24.7%

Financial assets designated at fair value through profit or loss

–

—

Financial assets measured at fair value through other comprehensive income

12,891

12,140

13,217

6.2%

Investments in associated companies

462

435

400

6.3%

Non-current assets held for sale

781

1,026

1,280

-24.0%

Other tangible assets, goodwill and intangible assets

857

887

972

-3.4%

Current and deferred tax assets

2,705

2,645

2,747

2.3%

Other (2)

1,497

1,396

1,298

7.3%

TOTAL ASSETS

92,905

85,715

81,643

8.4%

LIABILITIES

Financial liabilities measured at amortized cost

Resources from credit institutions

8,896

8,899

6,367

—%

Resources from customers

69,560

63,001

59,127

10.4%

Non subordinated debt securities issued

2,188

1,389

1,595

57.6%

Subordinated debt

1,395

1,405

1,578

-0.7%

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

231

279

344

-17.1%

Financial liabilities measured at fair value through profit or loss

1,582

1,599

3,201

-1.1%

Other (3)

1,990

1,757

2,051

13.3%

TOTAL LIABILITIES

85,843

78,329

74,262

9.6%

EQUITY

Share capital

4,725

Share premium

Other equity instruments

400

Treasury shares

–

(0)

100.0%

Reserves and retained earnings (4)

840

897

241

-6.4%

Net income for the period attributable to Bank's Shareholders

138

183

302

-24.6%

TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS

6,119

6,221

6,120

-1.6%

Non-controlling interests

943

1,165

1,262

-19.1%

TOTAL EQUITY

7,062

7,386

7,381

-4.4%

TOTAL LIABILITIES AND EQUITY

92,905

85,715

81,643

8.4%

(1)Includes Cash and deposits at Central Banks and Loans and advances to credit institutions.

(2)Includes Assets with repurchase agreement, Hedging derivatives, Investment property and Other assets.

(3)Includes Hedging derivatives, Provisions, Current and deferred income tax liabilities and Other liabilities.

(4)Includes Legal and statutory reserves and Reserves and retained earnings.

2021 REPORT & ACCOUNTS

74 |

The reconciliation between the management criteria defined and the accounting values published in the

consolidated financial statements are presented below.

Loans to customers (gross) includes loans to customers at amortized cost before impairment, the debt

securities at amortized cost associated with credit operations before impairment and loans to customers at

fair value through profit or loss before fair value adjustments. The amount of balance sheet impairment

considered for the purpose of calculating loans to customers (net) and the coverage ratio of the loan

portfolio includes the balance sheet impairment associated with loans to customers at amortised cost, the

balance sheet impairment related with debt securities at amortised cost associated with credit operations

and the fair value adjustments associated with loans to customers at fair value through profit or loss.

Loans to customers

Million euros

2021

2020

2019

Loans to customers at amortised cost (accounting Balance Sheet)

54,972

52,022

49,848

Debt instruments at amortised cost associated to credit operations

1,308

1,598

2,075

Balance sheet amount of loans to customers at fair value through profit or loss

354

352

Loan to customers (net) considering management criteria

56,360

53,975

52,275

Balance sheet impairment related to loans to customers at amortised cost

1,849

2,037

2,417

Balance sheet impairment associated with debt instruments at amortised cost

related to credit operations

Fair value adjustments related to loans to customers at fair value through profit or

loss

Loan to customers (gross) considering management criteria

58,231

56,048

54,724

2021 REPORT & ACCOUNTS

|75

Regarding deposits and other resources from customers, the Bank continued to use the approach previously

used for the item “Resources from customers and other loans”, aggregating resources from customers at

amortized cost and customer deposits at fair value through profit and loss (non-existent on 31 December

2021 since the remaining operations reached maturity during the first six months of the year). Balance sheet

customer funds include, apart from deposits and other resources from customers, debt securities placed with

customers either classified at amortized cost or designated at fair value through profit or loss.

Balance sheet customer funds

Million euros

2021

2020

2019

Financial liabilities at fair value through profit or loss (accounting Balance sheet)

(1)

1,582

1,599

3,201

Debt securities at fair value through profit or loss and certificates (2)

1,582

1,341

1,481

Customer deposits at fair value through profit or loss considering management

criteria (3) = (1) - (2)

—

259

1,720

Resources from customers at amortised cost (accounting Balance sheet) (4)

69,560

63,001

59,127

Deposits and other resources from customers considering management criteria

(5) = (3) + (4)

69,560

63,259

60,847

Non subordinated debt securities issued at amortised cost (accounting Balance

sheet) (6)

2,188

1,389

1,595

Debt securities at fair value through profit or loss and certificates (7)

1,582

1,341

1,481

Non subordinated debt securities placed with institucional customers (8)

2,155

1,225

1,316

Debt securities placed with customers considering management criteria

(9)=(6)+(7)-(8)

1,615

1,505

1,760

Balance sheet customer funds considering management criteria (10)=(5)+(9)

71,175

64,764

62,607

2021 REPORT & ACCOUNTS

76 |

The securities portfolio includes debt securities at amortised cost not associated with credit operations (net

of impairment), financial assets at fair value through profit or loss (excluding amounts related to credit

operations and trading derivatives), financial assets at fair value through other comprehensive income.

Securities portfolio

Million euros

2021

2020

2019

Debt instruments at amortised cost (accounting Balance sheet)

8,205

6,235

3,186

Debt instruments at amortised cost associated to credit operations net of impairment

1,308

1,598

2,075

Debt instruments at amortised cost considering management criteria (3) = (1) - (2)

6,897

4,637

1,111

Financial assets not held for trading mandatorily at fair value through profit or loss

(accounting Balance sheet) (4)

991

1,315

1,406

Balance sheet amount of loans to customers at fair value through profit or loss (5)

354

352

Financial assets not held for trading mandatorily at fair value through profit or loss

considering management criteria (6)=(4)-(5)

912

961

1,053

Financial assets held for trading (accounting Balance sheet) (7)

931

1,031

878

of which: trading derivatives (8)

431

544

620

Financial assets designated at fair value through profit or loss (accounting Balance

sheet) (9)

—

Financial assets at fair value through other comprehensive income (accounting Balance

sheet) (10)

12,891

12,140

13,217

Securities portfolio considering management criteria (11)=(3)+(6)+(7)-(8)+(9)+(10)

21,201

18,226

15,671

2021 was characterised by an increase in

Millennium bcp’s consolidated balance sheet, and

it should be highlighted, in terms of assets, the

growth of the portfolio of loans to customers, of

the securities portfolio and deposits with Central

Banks and, in terms of liabilities, the increase in

customer funds and in issues of non-subordinated

debt.

The structure of the consolidated balance sheet

was not significantly changed if compared with

2020. However, the dynamics of growth in

deposits, more accentuated than the one

observed in the customer loan portfolio, allowed

the reduction of the commercial gap and,

consequently, of the loans-to-deposits ratio

(measured by the ratio of net loans to customers

and deposits and other resources from customer,

considering stated values), that went from 85.3%

at the end of 2020, to 81.0% on 31 December

2021.

TOTAL ASSETS

Million euros

2021 REPORT & ACCOUNTS

|77

Millennium bcp’s consolidated balance sheet total

stood at 92,905 million Euros on 31 December

2021, showing a 8.4% increase in comparison with

the 85,715 million Euros accounted by the end of

2020. This increase was mostly a consequence of

the expansion of the activity in Portugal, also

benefiting, although to a lesser extent, from the

expansion of international activity.

The performance of the activity in Portugal

resulted in a 9.8% increase in total assets against

the 61,212 million Euros recorded on 31

December 2020, and stood at 67,216 million Euros

at the end of 2021. This evolution is justified, to a

large extent, by the growth of the securities

portfolio, in particular of the foreign public debt

portfolio, the customer loan portfolio and

deposits at Central Banks. On the other hand,

there was a decrease in non-current assets held

for sale, namely via the reduction of the portfolio

of real estate received in lieu of payment, and

also a decrease in the amounts placed with credit

institutions.

In the international activity, total assets stood at

25,689 million Euros on 31 December 2021,

showing a 4.8% increase in comparison with the

24,503 million Euros accounted at the end of

2020. This performance shows essentially the

contribution given by the subsidiary company in

Poland, mostly triggered by the performance of

the credit portfolio and also the one given by the

subsidiary in Mozambique although, in this

specific case, taking advantage from the

appreciation of the Metical versus the Euro. We

must stress that the evolution shown by the assets

of the international activity also includes, in

reverse, the impact of the deconsolidation of the

operation in Switzerland and of Seguradora

Internacional de Moçambique, S.A., following the

sale of these entities in 2021.

Total liabilities of the Group stood at 85,843

million Euros in 2021, up 9.6% comparing to the

78,329 million Euros recorded at the end of 2020,

determined essentially by the evolution of

deposits and other resources from customers, that

recorded an increase of 6,939 million Euros during

this period. The growth in deposits and other

resources from customers mostly translates the

positive performance of the activity in Portugal,

reaching 4,491 million Euros, mainly showing the

increase in individual’s savings, solidifying the

trend observed in the last years.

The increase in the issue of non-subordinated

debt at amortised cost, which went up from 1,389

million Euros at the end of 2020 to 2,188 million

Euros at the end of 2021 also contributed to the

growth of consolidated liabilities, resulting this

increase mostly from the issues made by

Millennium bcp in Portugal, especially from the

senior preferred debt issue made in the first

quarter of the year, in the amount of 500 million

Euros and also by the issue of debt in the form of

social senior preferred notes in the segment ESG

(Environmental, Social and Governance) made in

the last quarter of 2021, also in the amount of

500 million Euros, in both cases to comply with

minimum requirements for own funds and eligible

liabilities (“MREL” - Minimum Requirements for

Own Funds and Eligible Liabilities).

Moreover, and despite Millennium bcp in Portugal

having carried out a subordinated debt issue, in

the last quarter of the year, in the amount of 300

million Euros, also with the objective of

complying with the MREL, subordinated liabilities

recorded a reduction from 1,405 million Euros at

the end of 2020 to 1,395 million Euros at the end

of 2021, following the maturity of some issues in

the course of the year.

Equity, including non-controlling interests,

totalled 7,062 million Euros at the end of 2021,

below the 7,386 million Euros recorded at the end

of the previous year. Equity attributable to the

shareholders of the Bank also showed a slight

reduction, going from 6,221 million Euros at the

end of 2020 to 6,119 millions on 31 December

2021, since the positive impact of the net income

for the year, the actuarial deviations associated

with the pension fund and the consolidation

exchange differences were not, as a whole,

sufficient to offset the negative impact of the

reduction in the fair value reserve.

2021 REPORT & ACCOUNTS

78 |

LOANS TO CUSTOMERS

Millennium bcp's consolidated customer loan

portfolio 8(gross loans, that is, before impairment

and fair value adjustments) amounted to 58,231

million Euros at 31 December 2021, showing an

increase of 4.6% from 55,694 million Euros at the

end of the previous year, mostly due to the

performance of the activity in Portugal, but also

in the international activity.

LOANS AND ADVANCES TO CUSTOMERS (*)

Million euros

In the activity in Portugal, loans to customers

(gross) stood at 39,866 million Euros at 31

December 2021, 3.6% above the 38,473 million

Euros at the end of 2020. The net growth of the

portfolio incorporates, on the one hand, the

expansion of performing loans, which grew by

1,878 million Euros during 2021 and, on the other

hand, the reduction of non-performing exposures

(NPE) by 485 million Euros, from 2,363 million

Euros at 31 December, 2020 to 1,878 million Euros

at the end of 2021. Reference should be made to

the fact that the Bank has been successfully

implementing a strategy of divestment in NPEs, in

order to achieve the targets defined in the plan

approved for the reduction of this type of

exposure.

In international activity, there was also growth in

credit to customers1 (gross credit), which stood

at 18,365 million Euros at 31 December 2021,

6.6% higher than the 17,221 million Euros

registered at the end of 2020. This evolution

mainly reflects the expansion of the loan portfolio

of the subsidiary in Poland, but also the positive

contribution of the operation in Mozambique.

Although there has been a decline in credit

volumes of this subsidiary in local currency, its

contribution turned out to be positive due to the

appreciation of the Metical against the Euro.

2021 REPORT & ACCOUNTS

|79

8 Following the sale of the Swiss subsidiary in 2021, the respective historical values (354 million Euros in 2020 and 372 million Euros in 2019) are not being considered within the

scope of this analysis, in order to ensure comparability of information.

LOANS AND ADVANCES TO CUSTOMERS GROSS

Million euros

2021

2020

comparable

(1)

2019

comparable

(1)

Chg. %

21/20

INDIVIDUALS

Mortgage loans

28,072

26,363

25,894

6.5%

Personal loans

5,999

5,789

6,016

3.6%

34,071

32,152

31,910

6.0%

COMPANIES

Services

8,297

8,280

8,578

0.2%

Commerce

4,231

4,031

3,487

5.0%

Construction

1,766

1,796

1,702

-1.7%

Other

9,866

9,435

8,675

4.6%

24,160

23,542

22,442

2.6%

58,231

55,694

54,352

4.6%

Discontinued operations (1)

354

372

TOTAL

58,231

56,048

54,724

3.9%

(1) Following the sale of Banque Privée BCP in Switzerland in 2021, its historical figures related to 2020 and 2019 were included in a single

line called "Discontinued Operations" in order to ensure the comparability of information.

The structure of the consolidated (gross) loans to

customers portfolio maintained balanced patterns

of diversification, with the relative weight of

loans to individuals, in the total amount of the

portfolio, being established at 58.5% at 31

December 2021, which compares with 57.4% at

the end of 2020. On the other hand, the weight of

credit to companies stood at 41.5% at the end of

2021, compared to 42.6% on 31 December 2020.

Loans to individuals, at 31 December 2021

amounted to 34,071 million Euros, 6.0% above the

32,152 million Euros recorded at the end of the

previous year, simultaneously reflecting the

favourable evolution of both the activity in

Portugal and the international activity, which

presented growth rates of 5.0% and 7.5%,

respectively, compared to the same period in the

previous year.

In the activity in Portugal, loans to individuals

evolved from 19,528 million Euros existing on 31

December 2020 to 20,505 million Euros on the

same date in 2021, boosted above all by the

dynamics seen in mortgage loans, which grew by

5.3% compared to 31 December 2020, benefiting

from the acceleration of the new business

production. The temporary measures adopted in

response to the impact of the pandemic on

individuals' financial resilience were gradually

withdrawn throughout 2021. The suspension of

payments through moratoria, which had partly

contributed to the growth in mortgage credit in

2020, became less and less impactful over 2021 as

the moratoria

gradually came to an end. Noteworthy is the fact

that at the end of the third quarter of 2021 public

moratoria for most loans ended, while the

remaining ended at the end of the year.

The portfolio of loans to individuals in

international activity showed an increase from

12,624 million Euros in December 2020 to 13,566

million Euros at the end of 2021, this evolution

being mainly explained by the behaviour of

mortgage loans, which on 31 December 2021

reached 9,678 million Euros, as a result of an 8.7%

growth over the same period. It is important to

note that the contribution of Bank Millennium in

Poland was decisive for this evolution, since there

was an expansion of the mortgage loan portfolio

granted by the Polish subsidiary, even in a

context of progressive reduction of the mortgage

loan portfolio in foreign currency. In this context,

it should be mentioned that Bank Millennium's

mortgage loan portfolio in foreign currency,

mostly in Swiss francs, showed a relevant

reduction of 30.6% during the past year, dropping

from 3,149 million Euros at December 31, 2020 to

2,185 million Euros at the end of 2021. Of note, in

the first half of 2021, the Group has changed the

presentation of the provisions for individual

proceedings related to mortgage loans in Swiss

francs and has now allocated the provisions to

future legal risks and recognised them as a

reduction of the gross book value of loans for

which a reduction in future cash flows is expected

in accordance with IFRS 9. The mortgage loan

portfolio in foreign currency represented 18.9%

and 12.3% of the total loans recorded in Bank

Millennium's balance sheet and 5.6% and 3.8% of

2021 REPORT & ACCOUNTS

80 |

the Group's total loan portfolio at the end of 2020

and 2021, respectively.

It should be noted that the loan portfolio in

foreign currency before the aforementioned

provisions, which amounted to 96 million Euros

and 589 million Euros at December 31, 2020 and

2021, respectively, less the portion relating to

Euro Bank, S.A., whose risk is fully guaranteed by

a third party entity, under the scope of the

clauses provided for in the contract for the

acquisition of that entity, amounted to 3,026

million Euros at the end of 2020 and 2,609 million

Euros at the end of 2021, a reduction of 13.8%.

In consolidated terms, mortgage loans

represented 82.4% of loans to individuals, with

consumer loans representing 17.6%.

LOANS AND ADVANCES TO CUSTOMERS (*)

Million euros

On the other hand, consumer loans grew by 3.6%

in consolidated terms compared to the end of the

previous year, reaching 5,999 million Euros in

2021, recovering to levels close to those existing

in the pre-pandemic period. In this context, it is

important to emphasise the contribution of the

Polish subsidiary, in which the production of

consumer loans recovered significantly in 2021,

contributing decisively to the growth of the

Group's personal loan portfolio, despite the sales

of non-performing loans made by Bank Millennium

during the year.

Loans to companies totalled 24,160 million Euros

at 31 December 2021, representing an expansion

of 2.6% from 23,542 million Euros at the end of

2020, benefiting from the positive contributions

of both the activity in Portugal and the

international activity. Loans to companies in

Portugal grew by 2.2% compared to 18,945 million

Euros existing at 31 December 2020, standing at

19,361 million Euros at the end of 2021, boosted

largely by loans granted with a guarantee from

the Portuguese State and under the agreements

established with the European Investment Fund.

In this context, it is worth highlighting the Bank's

contribution in providing companies with lines of

credit that the Government has launched to deal

with the impacts caused by the pandemic

associated with COVID-19, thus reinforcing

Millennium bcp's support role to Portuguese

businesses. It should be stressed that the growth

in loans to companies, in net terms, was possible

even in a context of pursuing the strategy of

divesting in non-performing exposures.

Loans to companies in the international activity

recorded a growth of 4.4% when compared to the

existing 4,597 million Euros at 31 December 2020,

reaching 4,799 million Euros at the end of 2021,

benefiting from the performance of the Polish

subsidiary, to the extent that, after a period of

slowdown in the granting of loans due to the

effects of the COVID-19 pandemic, 2021

witnessed a period of recovery in the activity of

companies, and consequently an increase in the

use of bank loans.

2021 REPORT & ACCOUNTS

|81

LOANS AND ADVANCES TO CUSTOMERS GROSS

Million euros

2021

2020

comparable

(1)

2019

comparable

(1)

Chg. % 21/20

MORTGAGE LOANS

Activity in Portugal

18,394

17,462

17,281

5.3%

International Activity

9,678

8,901

8,612

8.7%

28,072

26,363

25,894

6.5%

PERSONAL LOANS

Activity in Portugal

2,111

2,065

2,118

2.2%

International Activity

3,888

3,723

3,898

4.4%

5,999

5,789

6,016

3.6%

COMPANIES

Activity in Portugal

19,361

18,945

17,316

2.2%

International Activity

4,799

4,597

5,127

4.4%

24,160

23,542

22,442

2.6%

LOANS AND ADVANCES TO CUSTOMERS

Activity in Portugal

39,866

38,473

36,715

3.6%

International Activity

18,365

17,221

17,637

6.6%

58,231

55,694

54,352

4.6%

Discontinued operations (1)

354

372

TOTAL

58,231

56,048

54,724

3.9%

(1) Following the sale of Banque Privée BCP in Switzerland in 2021, its historical figures related to 2020 and 2019 were included in a single

line called "Discontinued Operations" in order to ensure the comparability of information.

The focus on selectivity and monitoring of credit

risk control processes and the initiatives

undertaken by commercial areas and credit

recovery areas, aiming at reducing the value of

loans in default, have improved the quality of the

credit portfolio over recent years.

The quality of the loan portfolio continues to be

one of the Group's priorities, focusing on the

continuous improvement of the risk control

environment and on the continuous monitoring of

the risk levels incurred, whilst ensuring full

compliance with regulatory and supervisory

requirements and keeping the internal regulatory

structure suitable for risk control and

management up to date.

With the emergence of the pandemic associated

with COVID-19, the Bank implemented an action

plan to identify and measure credit risk, adopting

operational measures to appropriately address the

impacts arising from the pandemic outbreak. To

this end, the development and strengthening of

the model for monitoring Customers with the aim

of responding appropriately to these impacts,

namely the end of the support measures for

companies and individuals promoted by the State,

should be emphasised. The approach defined by

the Bank in this context involved the creation of

new areas/task forces to evaluate and monitor

Customers' credit exposures and to define and

implement strategies appropriate to each specific

situation. The monitoring plan is underpinned by

the segmentation of the Bank's total loan

portfolio, with allocation of the Customers

selected for monitoring to the different areas

created in accordance with criteria approved by

the Executive Committee, ensuring specific

reports, including reports to the Supervisory

Entities and management bodies. At the same

time, the scope of the Credit and Non-Performing

Assets Monitoring Commission was extended to

monitor the credit portfolio, with special focus on

the impacts arising from the pandemic.

2021 REPORT & ACCOUNTS

82 |

In this context, Overdue loans by more than 90

days showed a decrease of 26.8% compared to the

1,297 million Euros accounted for at the end of

2020, amounting to 949 million Euros on 31

December, 2021. The total volume of overdue

loans also recorded a reduction of 24.0% from the

1,420 million Euros booked at 31 December 2020

to 1,080 million Euros on the same date in 2021,

by benefiting from the evolution seen in the

activity in Portugal, where there was a reduction

of 327 million Euros in total overdue loans to 605

million Euros at the end of 2021, compared to 933

million Euros recorded at the end of 2020.

The NPE stock, in consolidated terms, decreased

to 2,752 million Euros at 31 December 2021,

showing a reduction of 543 million Euros

compared to the end of 2020. In the activity in

Portugal, the stock of NPE totalled 1,878 million

Euros at the end of 2021, with an equally

expressive reduction of 485 million Euros

observed in the same period.

The improvement in credit quality is evidenced by

the favourable evolution of the respective

indicators, namely the overdue loan ratio for

more than 90 days over total loans to customers,

which rose from 2.3% on December 31, 2020 to

1.6% on December 31, 2021, and the ratios of NPL

for more than 90 days and NPE as a percentage of

the total loan portfolio, which dropped from 3.2%

and 5.9% at the end of 2020 to 2.1% and 4.7% on

December 31, 2021 respectively, essentially

reflecting the performance of the credit portfolio

in Portugal.

At the same time, coverage levels of the various

loan aggregates presented also showed a positive

progression, and it should be highlighted the

reinforcement of NPE impairment coverage which

grew from 62.9% on December 31, 2020 to 68.0%

at the end of 2021. This evolution is explained by

the level of provisioning made in the activity in

Portugal, where the coverage of NPE by

impairments increased about 6 percentage points,

standing at 68.5% at 31 December 2021,

compared to 63.0% at the end of the previous

year. Coverage of NPL for more than 90 days, in

consolidated terms, also evolved very favourably,

having increased by about 34 percentage points

compared to 2020. The coverage ratio of overdue

loans by more than 90 days by impairments, on a

consolidated basis, stood at 197.0% at 31

December 2021, compared to a ratio of 159.8% on

the same date in 2020 (in Portugal and for the

same dates, this ratio was 219.5% and 162.0%,

respectively).

Lastly, it is also important to mention the

improvement in the degree of coverage of the

foreign currency mortgage loan portfolio granted

by Bank Millennium in Poland. Considering the

total amount of this portfolio, that is, the total

amount of loans granted before deducting the

respective amount arising from the provisions

recorded directly through the reduction of the

gross book value of loans, but deducting the total

amount of the exposure originated by Euro Bank,

S.A. 3,026 million Euros and 2,609 million Euros at

the end of 2020 and 2021, respectively) and the

total amount of provisions booked (203 million

Euros and 672 million Euros including both the

provisions booked directly through the reduction

of the value of the asset and the provisions shown

under liabilities) the degree of coverage of the

mortgage loan portfolio in foreign currency

showed considerable growth from 6.7% at 31

December 2020 to 25.7% at 31 December 2021.

2021 REPORT & ACCOUNTS

|83

CREDIT QUALITY INDICATORS

Group

Activity in Portugal

Dec.21

Dec.20

Dec.19

Chg. %

21/20

Dec.21

Dec.20

Dec.19

Chg. %

21/20

STOCK (M€)

Loans to customers (gross)

58,231

56,048

54,724

3.9%

39,866

38,473

36,715

3.6%

Overdue loans > 90 days

949

1,297

1,486

-26.8%

586

918

1,088

-36.2%

Overdue loans

1,080

1,420

1,605

-24.0%

605

933

1,117

-35.1%

Restructured loans

2,564

2,661

3,097

-3.7%

2,069

2,174

2,529

-4.9%

Non-performing loans (NPL) > 90 days

1,237

1,766

2,260

-30.0%

776

1,255

1,688

-38.2%

Non-performing exposures (NPE)

2,752

3,295

4,206

-16.5%

1,878

2,363

3,246

-20.5%

Loans impairment (Balance sheet)

1,871

2,073

2,449

-9.8%

1,286

1,488

1,877

-13.6%

RATIOS AS A PERCENTAGE OF LOANS TO CUSTOMERS

Overdue loans > 90 days / Loans to customers (gross)

1.6%

2.3%

2.7%

1.5%

2.4%

3.0%

Overdue loans / Loans to customers (gross)

1.9%

2.5%

2.9%

1.5%

2.4%

3.0%

Restructured loans / Loans to customers (gross)

4.4%

4.7%

5.7%

5.2%

5.7%

6.9%

Non-performing loans (NPL) > 90 days / Loans to customers

(gross)

2.1%

3.2%

4.1%

1.9%

3.3%

4.6%

Non-performing exposures (NPE) / Loans to customers (gross)

4.7%

5.9%

7.7%

4.7%

6.1%

8.8%

COVERAGE BY IMPAIRMENTS

Coverage of overdue loans > 90 days

197.0%

159.8%

164.8%

219.5%

162.0%

172.5%

Coverage of overdue loans

173.3%

146.0%

152.6%

212.6%

159.6%

168.1%

Coverage of Non-performing loans (NPL) > 90 dias

151.2%

117.4%

108.4%

165.8%

118.6%

111.2%

Coverage of Non-performing exposures (NPE)

68.0%

62.9%

58.2%

68.5%

63.0%

57.8%

EBA

NPE ratio (includes debt securities and off-balance exposures)

3.2%

4.0%

5.3%

3.1%

4.2%

6.1%

Note: NPE include loans to customers only, as defined in the glossary.

2021 REPORT & ACCOUNTS

84 |

SUPPORT TO THE PORTUGUESE ECONOMY IN THE CONTEXT OF THE COVID-19

PANDEMIC

In the context of the pandemic brought about by COVID-19, the Portuguese government, like its European

counterparts, decreed measures to support the economy in order to mitigate the adverse impacts on families

and companies arising from the need for more or less prolonged and intermittent lockdowns in time, which

limit the activity of the Portuguese business fabric and the movement of people in national territory.

Therefore, lines of support were created for companies so that they could access credit on more favourable

conditions than those practised to date by the Portuguese banking system. At the same time, public and

private moratoria were also established with the aim of suspending the payment of interest and/or principal

(depending on the nature of the moratorium applicable in each case and point in time) on credit contracts

granted to both individuals and companies.

In this context, Millennium bcp took on its role of protecting families and companies early on, by providing

support to the national economy, thus ensuring the maintenance of its solvency situation until the

normalisation of the national economic activity, with the main emphasis on the provision of these lines of

credit to the Portuguese business fabric.

As at 31 December 2021, the total amount of (gross) credit granted by the Bank under the COVID-19 lines

guaranteed by the Portuguese State amounted to 2,577 million Euros, which represents a growth of 13.9%

compared to the amount of 2,262 million Euros that, the Bank had granted under these lines at the end of

2020. It is worth noting that the credit lines, mostly granted during 2020, were mainly made available to

small and medium-sized Portuguese companies, having supported more than 18 thousand customers. At the

end of 2021 these exposures represented about 6.5% of the total credit portfolio related to the activity in

Portugal.

During the years 2020 and 2021, the Bank suspended the payment of interest and/or principal on credit

operations covered by public and private initiative moratoria to more than 80,000 customers.

Note: Excludes the extensions of the grace periods of principal and extension of maturity in credit operations

that have benefited from guarantees provided by Mutual Guarantee Companies or the Mutual Counter

Guarantee Fund, within the scope of Decree-Law 22C/2021, of 22 March.

Loans to customers subject to moratorium showed a downward trend throughout 2021 until their complete

extinction at the end of the year.

Following the reactivation promoted by the European Banking Authority on 2 December 2020 and the

publication of Decree-Law no. 107/2020 of 31 December 2020 as a response to the deterioration of the

pandemic crisis situation associated with COVID-19 there were, during the first quarter of 2021, new

applications to the moratorium regime by the Bank's customers. The new framework allowed access to new

moratoria for a period of up to nine months starting from the date of application (deducted from any

moratorium period previously granted), maintaining the conditions and characteristics of the moratorium

regime in force, with the adaptations provided for in the new diploma, namely the application deadline and

the term of the moratorium.

Simultaneously, the first quarter of 2021 witnessed a significant reduction in moratoria, particularly in the

Private moratorium, largely influenced by the end of the mortgage moratorium, which mainly originated a

decrease in the value of exposures subject to moratoria in the Individuals segment.

At the end of the third quarter of 2021 there was once again a substantial reduction in the total amount of

credit in a moratorium situation following the end of the state moratorium provided for in Decree Law no.

10-J/2020, of March 26 and subsequent amendments.

In turn, the last quarter of the year saw the maturity of all the remaining moratoria corresponding to the

applications that, as mentioned above, had taken place in the first quarter of 2021.

2021 REPORT & ACCOUNTS

|85

Regarding the quality of the loan portfolio previously subject to moratorium, which at December 31, 2021

amounted to 8,208 million Euros (expired moratoria), it should be noted that 90.2% of this exposure

corresponded to performing credit. Consequently, only 9.8% concerned non-performing exposures (classified

as stage 3), which compares with a percentage of non-performing exposures of 4.79% for the total portfolio.

It should be noted that, under the scope of Decree-Law no. 22C/2021, of March 22, extensions were granted

to the grace periods and maturity extension in credit operations that benefited from guarantees provided by

Mutual Guarantee Societies or the Mutual Counter-Guarantee Fund. The banking supervision and regulation

entities considered such extensions to be a moratorium on such exposures. Thus, the amount of exposure

that in December 31, 2021 results from this understanding amounts to 1,222 million Euros.

2021 REPORT & ACCOUNTS

86 |

9 NPE ratio, measured by the ratio between non performing exposures (only exposures included in the aggregate of loans to customers) and total (gross) loans to customers.

CUSTOMER FUNDS

On December 31, 2021, total customer funds10

amounted to 90,097 million Euros, showing a

favourable evolution, increasing 9.5% from the

82,306 million Euros obtained on the same date of

the previous year.

This increase, of 7,791 million Euros compared

with the same period of the previous year, was

possible thanks to the strong business

performance in Portugal, which grew by 5,304

million Euros, but also to the contribution of

international business, which grew by 2,487

million Euros. The evolution of total customer

funds, in consolidated terms, reflects the

favourable evolution of most items, with special

reference to the increase in balance sheet

customer funds and more specifically deposits and

other resources from customers, which grew by

6,939 million Euros, compared to the amount at

December 31, 2020.

Off-balance sheet customer funds amounted to

18,922 million Euros at December 31, 2021,

showing a favourable evolution by increasing 4.1%

compared to the 18,180 million Euros obtained on

the same date of the previous year, benefiting

from an increase in assets under management and

assets placed with customers of 22.5% and 22.6%,

respectively, year-on-year.

TOTAL CUSTOMER FUNDS (*)

Million euros

2021 REPORT & ACCOUNTS

|87

10 Following the sale of the Swiss subsidiary in 2021, the respective historical values (2,186 million Euros in 2020 and 1,984 million Euros in 2019) are not being considered within

the scope of this analysis, in order to ensure comparability of information.

TOTAL CUSTOMER FUNDS

Million euros

2021

2020

comparable

(1)

2019

comparable

(1)

Chg. %

21/20

BALANCE SHEET CUSTOMER FUNDS

Deposits and other resources from customers

69,560

62,621

60,250

11.1%

Debt securities placed with customers

1,615

1,505

1,760

7.3%

71,175

64,125

62,010

11.0%

OFF BALANCE SHEET CUSTOMER FUNDS

Assets under management

5,773

4,712

4,459

22.5%

Assets placed with customers

6,486

5,291

4,212

22.6%

Insurance products (savings and investment)

6,663

8,177

9,011

-18.5%

18,922

18,180

17,682

4.1%

Discontinued operations (1)

2,186

1,984

TOTAL

90,097

84,492

81,675

6.6%

(1) Following the sale of Banque Privée BCP in Switzerland in 2021, its historical figures related to 2020 and 2019 were included in a single

line called "Discontinued Operations" in order to ensure the comparibility of information. From the total amount of customer funds relating

to Banque Privée BCP, which amounted to 2,186 million euros as of 31 December 2020 and 1,984 million euros as of 31 December 2019, 638

million euros relates to balance sheet (539 million euros in 2019) and 1,548 million euros to off-balance sheet customer funds (1,387 million

euros in 2019)

In the activity in Portugal, total customer funds

also benefited from the favourable evolution

observed in most items, reaching 66,290 million

Euros on December 31, 2021, compared to 60,987

million Euros on the same date of the previous

year, with a special reference to the 4,491 million

Euros increase in deposits and other resources

from customers over the same period.

In the international activity10, total customer

funds went up 11.7% from 21,319 million Euros on

December 31, 2020, rising to 23,806 million Euros

at the end of 2021.

The Group’s balance sheet customer funds, which

comprise deposits and other customer resources

and debts to retail bonds, amounted to 71,175

million Euros on December 31, 2021, showing an

increase of 11.0% compared to 64,125 million

Euros at the end of the previous year, mainly

driven by the increase in deposits and other

resources from customers which grew by 6,939

million Euros compared to the previous year. More

than half of this growth is explained by the

performance of the activity in Portugal, whose

deposits and other resources from customers grew

by 4,491 million Euros during 20021, with the

remaining 2,448 million Euros coming from the

evolution, also positive, observed in the

international activity.

On 31 December 31, 2021, balance sheet total

customer funds represented 79.0% of total customer

funds, with deposits and other resources from

customers representing 77% of total customer funds.

2021 REPORT & ACCOUNTS

88 |

Deposits and other resources from customers,

showed an increase of 11.1% from 62,621 million

Euros at December 31, 2020, by totalling 69,560

million Euros by the end of 2021, confirming their

weight in the asset financing structure over the

last few years. The increase of 6,939 million Euros

in relation to the amount obtained in December

2020, resulted from the significant growth in the

activity in Portugal, whose increase of 4,491

million Euros, reflects, on one hand, the lower

volume of household spending during the

confinement period and, on the other, the savings

motivated, either by the natural feeling of

insecurity triggered by the crisis, or with the aim

of future use of the funds saved. In the

international activity, in December 2021, the

amount of deposits and other resources from

customers stood at 21,848 million Euros,

compared to 19,400 million Euros in the same

period of the previous year, the evolution having

been, for the most part, justified by the

acquisition of new funds made by the Polish

operation, especially regarding individual

customers' deposits.

Debt securities placed with customers, which

correspond to the Group’s issues of debt

securities subscribed by clients, recorded an

increase of 7.3% compared to the end of 2020,

standing at 1,615 million Euros on December 31,

2021. This growth is essentially justified by the

evolution seen in the activity in Portugal, whose

retail debt securities evolved from 1,437 million

Euros at the end of 2020 to 1,606 million Euros by

the end of 2021, largely due to the increase in the

portfolio of certificates issued by the Bank.

BALANCE SHEET CUSTOMER FUNDS (*)

Million euros

Off balance sheet customer funds, which include

assets under management, assets placed with

customers and savings and investment insurances

totalled 18,922 million Euros at the end of

December 2021, up 4.1% from 18,180 million

Euros on the same date in the previous year. The

most significant increase resulted from activity in

Portugal, whose off-balance sheet funds evolved

from 16,329 million Euros on December 31, 2020

to 16,972 million Euros at the end of 2021,

although international activity also recorded a

growth of 5.3%, which after the disposal of the

Swiss operation, now only has the contribution of

the Polish subsidiary.

2021 REPORT & ACCOUNTS

|89

OFF BALANCE SHEET CUSTOMER FUNDS (*)

Million euros

Assets under management, which result from the

provision of the service of managing portfolios of

client assets under existing agreements for their

placement and administration, stood at 5,773

million Euros on December 31, 2021, up 22.5%

from 4,712 million Euros at the end of 2020, due

to the performance of both the activity in

Portugal and the international activity, where the

amount of assets under management rose 24.8%

and 14.1%, respectively, largely driven by the

appreciation of the assets in the portfolio.

Assets placed with customers, which in turn

correspond to the amounts held by clients within

the scope of the placement of third-party

products that contribute to the recognition of

fees, also evolved favourably in 2021, having

recorded a growth of 22.6% compared to the

5,291 million Euros recorded on December 31,

2020, amounting to 6,486 million Euros. The

increase of 1,198 million Euros recorded by the

activity in Portugal was the main responsible for

the evolution observed in consolidated terms,

having resulted essentially from the dynamism

observed during the year in the distribution of

third party investment funds.

Savings and investment insurance stood a 6,663

million Euros on December 31, 2021, down 18.5%

from 8,177 million Euros on the same date the

previous year, with activity in Portugal

contributing with 1,473 million Euros less to this

evolution.

TOTAL CUSTOMER FUNDS

Million euros

2021

2020

comparable

(1)

2019

comparable

(1)

Chg. %

21/20

BALANCE SHEET TOTAL CUSTOMER FUNDS

Activity in Portugal

49,319

44,658

41,016

10.4%

International Activity

21,856

19,467

20,993

12.3%

71,175

64,125

62,010

11.0%

OFF BALANCE SHEET CUSTOMER FUNDS

Activity in Portugal

16,972

16,329

15,751

3.9%

International Activity

1,950

1,852

1,931

5.3%

18,922

18,180

17,682

4.1%

TOTAL CUSTOMER FUNDS

Activity in Portugal

66,290

60,987

56,767

8.7%

International Activity

23,806

21,319

22,924

11.7%

Discontinued operations (1)

2,186

1,984

TOTAL

90,097

84,492

81,675

6.6%

(1) Following the sale of Banque Privée BCP in Switzerland in 2021, its historical figures related to 2020 and 2019 were included in a single line

called "Discontinued Operations" in order to ensure the comparibility of information. From the total amount of customer funds relating to Banque

Privée BCP, which amounted to 2,186 million euros as of 31 December 2020 and 1,984 million euros as of 31 December 2019, 638 million euros

relates to balance sheet (539 million euros in 2019) and 1,548 million euros to off-balance sheet customer funds (1,387 million euros in 2019)

2021 REPORT & ACCOUNTS

90 |

NON-CURRENT ASSETS HELD FOR SALE

Non-current assets held for sale recorded a decrease of 24.0% on 31 December 2021 compared to the same

period last year, amounting to 781 million Euros at the end of the year. It should be noted that all asset

categories showed a reduction in value compared to the existing position at the end of 2020, with special

emphasis on real estate, which at 31 December 2020 amounted to 978 million Euros, while on the same date

in 2021 totalled 748 million Euros (amounts net of impairments recorded), reflecting the Bank's effort in

pursuing the strategy of divestment in this type of non-productive assets.

Other assets (which include, mainly, equipment and financial assets), have a minor weight in the overall

calculation of this item, having recorded a decrease of 33.0% compared to December 31, 2020.

NON-CURRENT ASSETS HELD FOR SALE

Million euros

2021

2020

2019

Chg. %

21/20

REAL ESTATE

Arising from recovered loans

503

702

881

-28.4%

From investment funds and real estate companies

229

257

317

-11.1%

For own use

-13.4%

748

978

1,222

-23.5%

OTHER ASSETS

Equipment

-38.0%

Other assets

-25.9%

-33.0%

TOTAL

781

1,026

1,280

-24.0%

2021 REPORT & ACCOUNTS

|91

SECURITIES PORTFOLIO

The securities portfolio, as defined above, stood at 21,201 million Euros on December 31, 2021, showing an

increase compared with 18,226 million Euros recorded on the same date of the previous year, now

representing 22.8% of total assets compared to 21.3% at the end of 2020.

In this evolution, the increase of 2,632 million Euros in the portfolio of public debt securities held by the

Group should be highlighted, which saw its value increase from 15,072 million Euros at the end of 2020 to

17,704 million Euros on December 31, 2021, although its weight in the portfolio total amount remained

globally in line with the previous year (83.5% and 82.7% at the end of 2021 and 2020, respectively).

The performance of the Group’s securities portfolio was determined by the growth of 2,808 million Euros in

the portfolio allocated to activity in Portugal, whose balance sheet stood at 16,128 million Euros at the end

of 2021 compared with 13,320 million Euros on December 31, 2020. This growth resulted, to a large extent,

from the reinforcement of investment in foreign sovereign debt, namely French, Belgian and Irish public

debt, simultaneously allowing the placement of the existing liquidity surplus and the reinforcement of

eligible assets.

The securities portfolio allocated to international activity also stood at a higher level than at the end of

2020, having evolved from 4,906 million Euros on that date to 5,072 million Euros on December 31, 2021.

This evolution was determined by the increase in the securities portfolio of the subsidiary in Mozambique,

although it was partially absorbed by the observed reduction in the subsidiary in Poland, reflecting the

divestment in Polish sovereign debt in the last year. It should also be noted that this evolution is influenced

by the impact of the sale of the Swiss subsidiary that took place at the end of 2021, whose securities

portfolio amounted to 60 million Euros on December 31, 2020.

SECURITIES PORTFOLIO

Million euros

2021

2020

2019

Chg. %

21/20

Financial assets measured at amortised cost (1)

6,897

4,637

1,111

48.7%

Financial assets measured at fair value through profit or loss (2)

1,413

1,449

1,343

-2.5%

Financial assets measured at fair value through other comprehensive

income

12,891

12,140

13,217

6.2%

TOTAL

21,201

18,226

15,671

16.3%

of which:

Activity in Portugal

16,128

13,320

9,482

21.1%

International activity

5,072

4,906

6,189

3.4%

(1)Corresponds to debt instruments not associated to credit operations.

(2)Excluding the amounts related to loans to customers and trading derivatives.

2021 REPORT & ACCOUNTS

92 |

LOANS AND AMOUNTS OWED TO CREDIT INSTITUTIONS

Resources from other credit institutions, net of cash and loans and advances to other credit institutions,

totalled 8,081 million Euros at the end of 2021 compared to 7,621 million Euros on December 31, 2020. This

evolution mainly incorporates the impact of the additional funding, in the amount of 600 million euros,

obtained from the European Central Bank in March 2021.

Following the ECB’s decision to extend the use of the targeted longer-term refinancing operation III (TLTRO

III) to 55% of eligible loans, BCP extended its medium-long term funding component in the first quarter of

2021 through an additional underwriting of 600 million Euros, in addition to the 7,550 million Euros taken in

June 2020, thus raising to 8,150 million Euros the total gross amount taken in that instrument.

OTHER ASSET ITEMS

The other asset items, which comprise hedging and trading derivatives, investments in associates,

investment properties, other tangible assets, goodwill and intangible assets, current and deferred tax assets

and other assets, stood at 5,952 million Euros on 31 December, 2021, representing 6.4% of total consolidated

assets, and by the end of 2020, other asset items represented 6.9% of total consolidated assets, totalling

5,907 million Euros.

EQUITY

On 31 December, 2021, total equity (including non-controlling interests) amounted to 7,062 million Euros,

324 million Euros below the equity of 7,386 million Euros existing at the end of the previous year.

The reduction in the Group’s net worth, including non-controlling interests, results from the combined effect

of the reduction in equity attributable to the Bank’s shareholders, which evolved from 6,221 million Euros at

the end of December 2020 to 6,119 million Euros on 31 December, 2021 and the decrease in non-controlling

interests, from 1,165 million Euros at the end of the previous year to 943 million Euros in 2021, herein

motivated by the reduction in the net position of the subsidiary in Poland, justified on one hand by the losses

generated in the year and, on the other, by the reduction in fair value reserves.

The decrease in equity attributable to the Bank’s shareholders resulted mainly from the negative impact of

the fair value reserve, which decreased by 400 million Euros, net of taxes and interest from coupons of the

Additional Tier 1 instruments, which amounted to 37 million Euros. Conversely, the capital attributable to

the Bank’s shareholders benefited from the integration of the net profit for the year which totalled 138

million Euros, the positive actuarial deviations associated to the pension fund which amounted to 128 million

Euros after tax and the positive exchange rate consolidation differences, totalling 78 million Euros, which

resulted mainly from the appreciation of the Metical against the Euro and also of the Kwanza.

2021 REPORT & ACCOUNTS

|93

Business Areas

Activity per Segments

Millennium bcp conducts a wide range of banking activities and financial services in Portugal and abroad, with

special focus on Retail Banking, Companies Banking and Private Banking business.

BUSINESS SEGMENT

PERIMETER

Retail Banking

Retail Network of Millennium bcp (Portugal)

Retail Recovery Division

Banco ActivoBank

Companies, Corporate & Investment Banking

Companies and Corporate Network of Millennium bcp (Portugal)

Specialised Recovery Division

Interfundos

Large Corporate Network of Millennium bcp (Portugal)

Specialised Monitoring Division

Investment Banking

Trade Finance Department (*)

Private Banking

Private Banking Network of Millennium bcp (Portugal)

Millennium Banque Privée (Switzerland) (**)

Millennium bcp Bank & Trust (Cayman Islands) (**)

Foreign Business

Bank Millennium (Poland)

BIM - Banco Internacional de Moçambique

Banco Millennium Atlântico (***)

Millennium Banque Privée (Switzerland) (**)

Millennium bcp Bank & Trust (Cayman Islands) (**)

Other

Comprises the activity carried out by Banco Comercial Português,

S.A. not included in the commercial business in Portugal which

corresponds to the segments identified above, including the activity

carried out by Macao branch. Also includes all other business and

unallocated values in particular centralized management of

financial investments, corporate activities and insurance activity.

(*) From Marketing Division for Corporate, Business and Institutional since last quarter of 2021.

(**) For the purposes of business segments, Millennium Banque Privée (Switzerland) and Millennium bcp Bank & Trust (Cayman Islands) are included in the Private Banking

segment. In terms of geographic segments, both operations are considered Foreign Business. It should be noted that, following the sale of the operation in Switzerland on 2

November 2021, the subsidiary's current net income for the years 2021 and 2020, as well as the capital gain generated with the sale of the entire shareholding in Banque

Privée BCP (Suisse), S.A., is reflected as income from discontinued and discontinuing operations, as provided for in IFRS 5.

(***) Consolidated by the equity method.

The figures reported for each segment resulted

from aggregating the subsidiaries and business units

integrated in each segment. For the business units

in Portugal, the aggregation process reflects the

impact from capital allocation and balancing

process in the balance sheet and income statement,

based on average figures. The balance sheet

headings for each business unit and Portuguese

subsidiaries were re-calculated, considering the

replacement of the equity book values by the

amounts assigned through the allocation process,

based on the regulatory solvency criteria.

Thus, as the process of capital allocation complies

with the regulatory criteria of solvency in force, the

risk weighted assets, and consequently the capital

allocated to the business segments, are determined

in accordance with the Basel III framework,

pursuant to the CRD IV/CRR. The capital allocated

to each segment resulted from the application of a

target capital ratio to the risks managed by each

segment, reflecting the application of the Basel III

methodology previously referred. Each operation is

balanced through internal transfers of funds, with

impact on the net interest income and income

taxes of each segment, hence with no impact on

consolidated accounts.

Each segment’s income includes the non-controlling

interests, when applicable. Therefore, the values of

net income presented incorporate the individual

net income of the business units, regardless of the

percentage stake held by the Group, and the

impacts of the transfers of funds described above.

Operating costs related to the business segments do

not include headcount adjustment costs and other

costs considered as specific items recorded in 2021

and 2020, respectively.

The information presented below for the

individually more relevant business areas in

2021 REPORT & ACCOUNTS

94 |

Portugal and aggregately for the international

activity was based on the financial statements

prepared in accordance with IFRS and on the

organization of the Group's business areas as at 31

December 2021. In this context, it should be noted

that, following the agreement concluded on 29

June 2021 with Union Bancaire Privée, UBP SA

regarding the sale of the entire share capital of

Banque Privée BCP (Suisse) S.A., the contribution of

this subsidiary to the net income of the Foreign

Business segment is reflected as income from

discontinued operations, and the historical

information has been restated in order to ensure its

comparability, as provided for in IFRS 5. Banque

Privée BCP (Suisse) S.A. ceased to be part of the

BCP Group on 2 November 2021, the date on which

the sale of this subsidiary was completed. In this

context, income from discontinued or discontinued

operations also reflect the capital gain from the

sale of the operation. It should also be noted that

on 29 December 2021, BIM – Banco Internacional de

Moçambique, S.A. also formalized the sale to

Fidelidade of shares representing 70% of the share

capital and voting rights of Seguradora

Internacional de Moçambique, S.A., with BIM

maintaining approximately 22% of its share capital.

The contribution of this subsidiary to the net

income of the Foreign Business segment is also

presented as income from discontinued or

discontinued operations for the periods

corresponding to the years 2021 and 2020, as

required by IFRS 5. The presentation of assets and

liabilities of Banque Privée BCP (Suisse) S.A. and

Seguradora Internacional de Moçambique. S.A.

referring to previous periods remained unchanged

when compared to the criteria considered in the

preparation of the consolidated financial

statements previously disclosed.

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RETAIL

Mass Market

In an environment still very constrained by the

COVID 19 Pandemic, the Bank accelerated during

2021 a very strong strategy to increase the digital

engagement of Customers with the Bank, through

actions to collect/update e-mails, subscription to

the digital statement and activation/use of digital

channels, especially the Millennium app.

As a result of this action, the Bank was able to

reach the historic milestone of 81% of active

current accounts with extracts in digital format

and 43% of Customers using the app.

Also from the point of view of organizing the

Branch Network, the Bank leveraged the new Mass

Market distribution model implemented in 2020,

with approximately 50% of the Customers in the

Mass Segment proactively managed remotely, and

reached a historic milestone of 85% of Individual

deposits and 57% of corporate deposits made

through automatic channels.

From a commercial point of view, the bank

focused heavily in 2021 on increasing first-Bank

relationships, either through targeted marketing

actions aimed at increasing average Customer

involvement (upgrade, upselling and reactivation

of Customers), or through wage domiciliation

actions.

Given the importance of salary domiciliation for

establishing relationships with the 1st Bank,

constant salary domiciliation campaigns were

launched throughout the year, and at the same

time, the protocol offer with companies (Mais

Colaborador Plan) aimed at Employees of Business

Customers was redoubled. from the bank:

•access to an Integrated Solution of Banking

Products and Services at special price

conditions;

•promotional advantages in Mortgage, Personal

and Car Loans with discounts on spreads and

commissions;

•special discounts on insurance: Médis, Homin

(Multirisk insurance) and Yolo (Life insurance).

An action was also implemented to attract new

Customers, through a campaign with high

visibility, which allowed the Bank to grow in

Customers in the A/B segment (high and medium

high), younger and more digital.

Prestige

The Bank innovated in investment services,

successfully launching the Personalized Investment

service, exclusively for Prestige Customers, which

allows for punctual advisory based on the investor

profile and objective (Retirement and Investment)

through an innovative Customer experience with

omnichannel subscription, reinforcing the segment's

innovative positioning and continuous improvement

of customer-centric journeys.

This service, which also made it possible to

reinforce the focus on training and certification of

Investment Managers, already contributes more

than 1/3 to the volume of investments subscribed

by managed Prestige Customers in 2021, with an

accumulated subscription rate of 80%. Several

multi-channel actions (Email Marketing, Paid Media,

Owned Media) allowed increasing the awareness of

Customers for the service in light of the campaign

“The Personal Trainer of your Investments”.

In Remote Customer Management, the Bank

relaunched the “Prestige Direct” service, aimed at

Prestige Digital Customers, which allows for

dedicated remote management over extended

hours (9:00 am to 7:00 pm) with a competitive

value proposition, transforming its offer,

omnichannel subscription processes, systematic and

specialized and extended commercial structure.

20% of Prestige Customers are managed in Prestige

Direct, which now has 16 Remote Management

Branches and new Integrated Solutions (Start &

Family) with an offer adapted to the needs of these

Customers.

The Bank increased its Customer base through

actions to attract, retain loyalty and upgrades,

reinforcing its positioning as 1st Bank (+5%

Customers with salary/retirement domiciled)

through campaigns aimed at potential Customers

and promotion of protocols with Customer

Companies (Plano Mais Colaborador).

The Bank significantly increased the portfolio of

core investment products and Mortgage Loans in

this segment, contributing to 55% of the volume of

Mortgage Loans contracted in 2021.

The Bank maintained its continuous focus on

improving the Customer experience and on training

in commercial and service techniques, with a

positive impact on the NPS Manager, which reached

historic highs.

The continuous improvement of the Mobile

experience and activation through the Network

allowed an increase of 17% in active Prestige

Customers in the Millennium app.

2021 REPORT & ACCOUNTS

96 |

Portuguese Diaspora & Foreigners

The Bank continued to pursue a strategy of high

proximity to Customers residing abroad,

leveraging all the contact channels available for

this segment: the Millennium branches in Portugal

with regular proactive contact, the contact

centre with specialized service lines, the

representation in Switzerland, London, Brazil and

South Africa, and the digital channels that allow

daily interaction between the Customer and the

Bank, which in 2021 were leveraged with the

“More Digital. More Portuguese” Campaign.

Within the scope of this campaign, Millennium

bcp, as a Portuguese Language Promotion

Company, donated 30,000 euros to the Camões

Institute to promote the teaching of Portuguese

Language abroad.

In the context of a pandemic, the Bank

implemented an alternative model to Arraial

Millennium. Customers from the Portuguese

Diaspora received a basket of traditional

Portuguese products, so that in the comfort of

their homes they could live the tradition of

Portuguese popular festivals with the Millennium

bcp stamp.

Several events were also held throughout the year

for direct contact with Customers and potential

Customers: i) “Welcoming Talks”, webinars aimed

at foreigners wishing to invest or settle in

Portugal, reinforcing Millennium’s position as the

Foreigners’ Partner Bank in Portugal; ii) sessions

dedicated to current residents in the United

Kingdom, South Africa and Switzerland, to present

the Bank's value proposition; iii) event

“Destination: Portugal”, held by the

Representative Office of Geneva (Switzerland)

and by Ludal Conseils, aimed at Portuguese and

foreigners wishing to return, invest or settle in

Portugal.

Business

The year 2021 was marked by the signing of the

largest contract ever in Portugal with the

European Investment Fund (EIF), with 2,850

million euros to support investment by

companies.

the Bank increased loans to Businesses by more

than 20% compared to 2020, a value close to

1,000 million euros.

Despite the first half being marked by numerous

contingencies in the context of the pandemic –

COVID19, the focus was maintained on attracting

new Customers, ensuring the growth of the

Business Customer base with the support of the

new available credit lines.

The extension of the grace period for capital and

maturity of credit operations contracted under

publicly guaranteed credit lines was

implemented.

Throughout 2021, the Bank monitored the end of

the moratorium period and no relevant impact on

credit performance was recorded.

Millennium bcp is positioned to be the Leader

Bank of PME Líder for the 4th consecutive year,

supporting more than 4,000 Companies in

obtaining the PME Líder status. In 2021, PME Líder

2020 celebrated the campaign dedicated with the

motto “Giants in Dedication”, which intended to

make the parallel between a Small and Medium

Enterprise and the concept of Giant. The idea of

the campaign was to demonstrate that, despite

its size, an SME can be a Giant in Dedication,

Overcoming, Ambition and Innovation.

Millennium bcp joined COTEC as a partner bank in

the launch of the first edition of the COTEC

Innovative Statute, having won a share of around

40% in the applications, thus conferring leadership

and strengthening the Bank's positioning in

supporting Innovative Companies.

Highlight for the implementation of the training

program “The One”, in partnership with the

Millennium Banking Academy, designed for the

Business Teams, based on the reinforcement of

behavioral skills and the improvement of

technical skills in core areas that each employee

can choose according to their role. of your needs.

This reinforcement of skills, which culminated in

the certification of Business Managers, aims to

establish leadership in this segment.

2021 REPORT & ACCOUNTS

|97

Products

Loans to individuals

Throughout the year, the Bank maintained its focus on

Credit to Individuals, providing a variety of solutions

adjusted to the needs of Customers, in order to

support them in the implementation of their projects.

In Loans to Individuals, the following stand out:

•Continuation of the commitment and promotion

of Digital Channels (app and website);

•As part of the Sustainability policy, two new

products were launched to finance renewable

energy production equipment and energy

efficiency solutions;

•In support of the training of young people,

through the sale of University Credit with

Mutual Guarantee.

In Mortgage loans, the following stand out:

•The provision of attractive and advantageous

Solutions, in order to increase the capture of

Customer operations with greater potential for

profitability.

•Continued strong focus on loans for young

people, with an offer geared towards this

Customer segment;

•Maintenance of the “Other Credit Institutions

Transfers” Campaign, with very attractive

conditions for Customers wishing to transfer

loans to Millennium bcp;

•Renewal of the “Home Exchange Solution”, for

Customers who are in the process of moving

house;

•Continuous improvement of digital tools, aiming

at innovation, simplification, agility and speed

of processes.

Investment solutions

•Given the current environment of negative

interest rates, the Retail Network focused its

commercial dynamics on the presentation of

investment solutions suited to the profile of

each Customer, namely through products for the

diversification of financial assets, such as

Investment Funds and Financial Insurance.

•At the same time, the Bank maintained its

concern to help Customers plan their future,

namely through Retirement solutions based on a

varied offer of PPR Funds and Insurance.

•In order to ensure a uniform approach to

investment, the Personalized Investment service

was launched. This service allows for a

simplified subscription to various investment

products and retirement planning focused on

the clients' life goals.

•As a complement to the allocation products, a

new offer of passively managed Allocation

Strategy Certificates was launched.

Integrated Solutions

•Launch of a new integrated solution of banking

products and services exclusively for digital

lovers, accompanied on the Prestige Direct

platform - Pestige Start and Prestige Family -

innovative in the market and with differentiated

pricing depending on age, number of current

account holders and the Customer's financial

involvement with the Bank.

•Reinforcement of the insurance offer in “Family

Benefits” for Customers with Integrated

Solutions, clearly the strongest and most

complete family benefits program in our

banking system, providing customers and their

immediate family with special pricing on credit

products , insurance and integrated solutions.

•Availability of the main integrated solutions via

“pending operations” allowing the closing of the

operation by the Customer on our digital

channels.

•Launch of a strong campaign supported by a

raffle of 15 electric scooters promoting the

business and reinforcing Millennium's ecological

footprint.

•Throughout the year, our digital lovers

Customers were rewarded with special pricing

on the website and Employee Customers of

companies with protocol at Millennium bcp.

ActivoBank

•In 2021, ActivoBank maintained its commitment

to the continuous growth of the business based

on two fronts: growth of its Customer base,

focusing on the continuous attractiveness of the

brand and growth in the market, and

development of the relationship with the

current Customer base with the objective of

growth in the level of loyalty from a first-bank

point of view.

•ActivoBank was recognized as Consumer Choice,

in the Digital Banking category; with the Five

Stars Award, in the Digital Banking category;

Best Mobile Banking App and Best Consumer

Digital Bank by World Finance. These awards

materialize the bank's strategy of investing in

service quality, innovation and digital service

and are the result of consumers' trust in the

brand.

•ActivoBank maintained part of the

communication action focused on Financial

Literacy in line with the brand's values of

simplifying banking concepts and greater

inclusion of all at a financial level. It ensured a

set of contents, which were made available on

2021 REPORT & ACCOUNTS

98 |

ActivoBank's digital communication channels –

Facebook, Youtube, Instagram, LinkedIn and

TikTok. On the TikTok network, ActivoBank was

the first Portuguese bank to create content on

this social network in an infotainment logic.

These contents were published in the following

formats: Investment conferences (About

Investments), webcasts or informative videos

and images. A partnership was also established

with Cofina, in which investment financial

literacy content was developed for Branded

Content publications.

•From the point of view of communication, the

brand rebranding project was implemented,

which embodies a new market positioning with

the target segment and adjustment of the

brand's original elements, allowing to maintain

the brand's identity and respond to use in an

increasingly digital.

•Within the scope of developing the relationship

with the current Customer base, a new

Customer Relationship Management strategy

was applied with the technological

implementation of new integrated actions for

contacting Customers on the different business

fronts and within the framework of the

Customer's preferred channels.

•The ongoing digital marketing account opening

campaign initiatives contributed to the

sustained growth of the Customer base,

directing business leads to the digital account

opening process via app and website.

•The institutional campaign with Influencer

Mariana Cabral “Bumba na Fofinha”, with the

objective of attracting Affluent and Pre-Affluent

Clients and Salaries. The Campaign highlighted

the advantages of being an ActivoBank Customer

and had as a non-financial offer a voucher of

100 euros at Discovery Hotel Management (DHM)

Group Hotels for new domiciles with a salary

equal to or greater than 1,250 euros.

•Several campaigns for loans to individuals and

housing were carried out in fully digital media,

reinforcing the characteristics of the products

such as the competitive rate on personal loans

and the campaign to reduce instalments by up

to 30% in housing loans. A campaign was also

developed in partnership with the company

Vorwerk, within the scope of the home loan

offer, aimed at operations worth more than 150

thousand euros with the offer of Thermomix

equipment.

•In terms of credit, we highlight the launch of

training credit, with a competitive rate, exempt

from commission for opening credit and where

during studies, only interest is charged. This

product is intended to support the strategy of

attracting young digital customers, ensuring

contact with the bank even during the academic

phase.

•In order to support our Customers' more

ecological choices, creating sustainable living

habits, in their homes and on their journeys,

two new products were launched: the +Energy

Credit for financing equipment for the

production and storage of energy from

renewable sources and the EcoActivo Credit for

items or equipment that, while not producing

energy, are characterized by their efficiency

and/or energy rating.

•The bank reinforced its insurance placement

strategy with the development of an insurance

hub through the ActivoBank app, materialized

by the launch of Médis and Médis Dental

insurances in the app with the offer of the 1st

monthly subscription fee through the app;

•Within the scope of investments, the launch of

the ActivoBank advising service stands out, an

investment support service that combines the

needs and objectives of Customers with their

investment profile to find the appropriate

investment or retirement solution for each

Customer. This service includes investment

funds, financial insurance and certificates sold

by ActivoBank;

•The sale of certificates was also launched

through the ActivoBank app, making it possible,

with a single stock exchange transaction, to

access the global bond and stock markets

through the new family of Allocation Strategy

Certificates. These Certificates replicate the

behavior of two world reference indices of

bonds and shares in pre-defined proportions,

deducted from the Management Cost and with

half-yearly rebalancing.

•In terms of investment products at ActivoBank

in 2021, 26% of the assets under management

for sale correspond to Investment Funds that

respect social and environmental aspects, which

represents more than 6x the amount recorded in

the previous year.

•In 2021, the attraction reached around 48

thousand Customers and the growth of Accounts

that allowed reaching a base of approximately

400 thousand Customers.

•Diversification levels grew by 24% in the global

portfolio, with 31% growth in investment funds

and 125% in certificates as a result of the

digitalization process of subscription via the

ActivoBank app.

•ActivoBank's net income in 2021 stood at 13.5

million euros, which represents an increase of

13.2% compared to the net income for 2020.

2021 REPORT & ACCOUNTS

|99

Microcredit

Although the number of new companies created in

Portugal in 2021 (41,656) showed a growth of 9.6%

compared to 2020 (37,586), the pre-pandemic

entrepreneurial dynamics (49,175 in 2019) have

not yet resumed. Thus, COVID-19 and the

respective pandemic continued to determine the

evolution of the economy in Portugal and,

consequently, the search for instruments to

support the creation of new businesses, such as

Microcredit. On the other hand, State

employment protection measures preserved many

jobs, preventing a substantial increase in the

number of unemployed, the main recipients of

this credit instrument.

In this context, Millennium bcp was able to

finance 74 new Microcredit operations during

2021. These operations totalled 1,170 thousand

euros in credit and contributed to the creation of

161 new jobs.

The work of dissemination of Microcredit is based

on a strong and consistent relationship with

institutional partners that, spread across the

country, have direct contact with the target

audience of this instrument (unemployed,

immigrants, young people at the end of their

training, etc.). Despite the limitations still

imposed by the pandemic, the relationship with

these partners was resumed throughout the year

and in this way the following initiatives were

carried out to promote entrepreneurship and

dissemination of Microcredit:

•132 meetings (face-to-face or telematics) to

monitor the relationship with existing partners;

•85 meetings (face-to-face or telematics) for the

presentation of Microcredit to potential

institutional partners;

•18 new cooperation agreements (5 social

economy entities; 4 municipalities; 4

consultants; 5 associations);

•21 Microcredit training and dissemination

sessions reached 654 people (unemployed, in

training courses or finalists in vocational

education);

•10 presences in initiatives of institutional

partners.

2021 REPORT & ACCOUNTS

100 |

Million euros

RETAIL BANKING in Portugal

31 Dec. 21

31 Dec. 20

Chg. 21/20

PROFIT AND LOSS ACCOUNT

Net interest income

448

490

-8.6%

Other net income

429

391

9.5%

877

881

-0.5%

Operating costs

462

476

-2.9%

Impairment and provision

-23.7%

Income before tax

339

306

10.6%

Income taxes

106

13.3%

Income after tax

233

213

9.4%

SUMMARY OF INDICATORS

Allocated capital

1,210

1,234

-2.0%

Return on allocated capital

19.3%

17.3%

Risk weighted assets

10,233

9,947

2.9%

Cost to income ratio

52.7%

54.0%

Loans to Customers (net of impairment charges)

25,011

23,493

6.5%

Balance sheet Customer funds

36,813

33,080

11.3%

Notes:

Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance.

Income

As at 31 December 2021, income after tax from

Retail Banking segment of Millennium bcp in

Portugal totalled Euros 233 million, showing a 9.4%

increase compared to Euros 213 million in 2020,

reflecting a lower level of impairment recorded in

2021. Regarding the evolution of the main income

statement headings, the following aspects should

be highlighted:

•Net interest income reached Euros 448 million as

at 31 December 2021, reducing 8.6% compared to

the previous year (Euros 490 million), mainly

influenced by lower income arising from the

internal placements of the excess liquidity, but

also due to lower income arising from the loan

portfolio, whose performance remained

constrained by the context of negative interest

rates.

•Other net income reached Euros 429 million as at

31 December 2021, showing an increase of 9.5%

compared to the amount attained in the previous

year. This evolution mainly reflects the positive

performance of commissions, whose improvement

is visible across almost all of its types, as a result

not only from the increase in transactions to pre-

pandemic levels, but also from the commercial

initiatives implemented by the Bank. Regarding to

market-related commissions, it should be

highlighted the commissions associated with the

placement of third-party investment funds, which

showed a significant growth compared to previous

year.

•Operating costs dropped of 2.9% from the

amounts recognized in 2020, reflecting mainly the

decrease in staff costs due to the progressive

reduction in the number of employees, but also,

although to a lesser extent, by savings in other

administrative costs, considering that some type

of costs were only positively impacted by the

generalized reduction in the activity observed

during the COVID-19 pandemic from the end of

the first quarter of 2020.

•Impairment charges amounted to Euros 76 million

by the end of December 2021, decreasing 23.7%

compared to the amount of Euros 99 million

recorded in the previous year. It should be noted

that the impairments levels in 2020, reflect

mainly the impact of the downgrade of the credit

risk parameters considered in the impairment

calculation model, which had been updated in

order to incorporate a macroeconomic scenario

consistent with the adverse context caused by the

COVID-19 pandemic.

•In December 2021, loans to customers (net)

totalled Euros 25,011 million, 6.5% up from the

position at the end of December 2020 (Euros

23,493 million), while balance sheet customer

funds increased by 11.3% in the same period,

amounting to Euros 36,813 million by the end of

December 2021 (Euros 33,080 million at the end

of the previous year), mainly explained by the

increase in customer deposits.

2021 REPORT & ACCOUNTS

|101

COMPANIES, CORPORATE &

INVESTMENT BANKING

Companies and Corporate

The year 2021 was also marked by adversity. The

provision of financial aid remained an absolute

priority, guaranteeing the necessary support to

Portuguese Entrepreneurs and Companies.

With an expanded offer, the reinforcement of

lines and the signing of new agreements,

Millennium bcp is the leader in Corporate Credit:

•In 2021, Millennium bcp's cooperation with the

EIB/FEI Group intensified quite significantly,

with operations in the context of supporting

companies affected by the economic crisis

caused by the COVID-19 pandemic.

•FEI EGF contracts were signed, for a total

portfolio amount of around 2,850 million euros.

This operation, which was the largest in Europe

with a commercial bank, allowed Millennium

bcp to grant credit to SMEs under preferential

conditions, ensuring that companies in Portugal

had access to credit lines, to mitigate the

impacts of the pandemic crisis and allowing

them to maintain the respective growth and

development plans in the medium and long

term.

•An EGF EIB contract was also signed for a loan

portfolio of 400 million euros, covering almost

all economic sectors to support post-pandemic

recovery and which will allow acting within the

scope of the new PRR supporting Companies,

Corporates and Large Corporate.

•Millennium bcp continued to expand its

relevance and criticality in the business market

in Portugal, reaching a credit market share of

19.0% in Non-Financial Companies, a credit

market share of 19.8% in SMEs and a share of

credit market at Exporters of 21.6% (Bank of

Portugal);

•Millennium bcp continued to reinforce its

indicators of Proximity, Partnership,

Recommendation with Business Customers,

reaching the best indicators of the decade of

Customer Satisfaction (more than 85 points out

of 100) in the evaluation of the Satisfaction

Management System;

•19% market share in the SNGM (National Mutual

Guarantee System) which corresponds to more

than 118 million euros of guarantees a total of

more than 900 operations (as of September

2021).

•Portugal 2020: As part of the support to

companies with applications and investment

projects approved under the Portugal 2020

Programme, new financing was granted in a

total of more than 175 million euros and a

market share in COMPETE of 45% was recorded

in the notices of the System of Incentives for

Productive Innovation.

•Recovery and Resilience Plan: Monitoring and

preparation of the investment support plan with

Community Funds over the next decade, with

the implementation of several initiatives,

highlighting the creation of 11 Sectoral

Snapshots of the PRR whose objective is to

disseminate information in a simplified way and

measures with customers

•Also in the same context, the web talks ‘Lets

go, Portugal!’ were promoted, aimed at

reflecting on the main pillars of the Recovery

and Resilience Plan (PRR).

•Financial Instrument for Urban Rehabilitation

and Revitalization (IFRRU): crucial focus on

financial support to operations totalling more

than 33 million euros of investment in the

rehabilitation, sustainability and energy

efficiency of buildings.

•Negotiation and conclusion of a Partnership

Agreement with the Portuguese Industrial

Association (AIP) – Chamber of Commerce and

Industry, providing a set of Guarantee Lines and

other financial instruments for its members,

with a view to implementing the 'Portugal 2020'

program 'Horizon 2020' and the new Multi annual

Financial Framework for 'Portugal 2030'.

•Market leadership in Factoring & Confirming,

according to ALF - Associação de Leasing e

Factoring, with a market share of 24% (data for

June 2021).

•Market leadership in Confirming, according to

ALF - Associação de Leasing e Factoring, with a

market share of 35% (data for June 2021).

•Growth of +37% in the contracting of online

Factoring & Confirming operations, with an end-

to-end digital simulation and contracting

process, with an average credit balance of more

than 7 million euros.

•Millennium bcp was named, for the fourth

consecutive year, as the Main Bank of

Companies in Portugal, according to the BFIN

2021 study carried out by DATA E, where it

leads with a share of 19.6% in the various

dimensions of companies (Micro-companies,

SMEs and Large Companies). As the main bank,

Millennium bcp leads in the Industry,

Construction and Commerce sectors, also

leading the satisfaction and leadership indices

as the main bank of companies that have

resorted to and or applied for Covid support

lines (financing and moratoriums). Regarding

the image it conveys, Millennium bcp is elected

as the Bank with the “most suitable products for

Companies”, “globally more efficient”,

“globally better for Companies” and “closest to

its Customers”. Dedication, Overcoming,

Ambition and Innovation of all SMEs and the

2021 REPORT & ACCOUNTS

102 |

Bank's leadership in the PME Líder 2020, for the

3rd consecutive year, the campaign “Gigantes

na Dedication” was launched.

•Millennium bcp joined COTEC from the outset

for the public recognition of national companies

that, due to their innovation performance, are

an example of creating value for the country. In

this 1st edition of the COTEC 2021 Innovative

Statute, Millennium was the Bank that

supported more Companies to achieve this

Statute, with a share of 42% and a total of 104

Statutes.

•In terms of the reputation of Corporate

Communication, Millennium bcp is the leader in

Brandscore with 44% of awareness in the quality

of Corporate Communication with Customers.

•In order to support Corporate Customers and

Individual Entrepreneurs (ENI) with financial

difficulties that prevent them from meeting

their credit responsibilities, the Bank has

designed a set of Financial Monitoring Solutions,

reinforcing the possibilities of debt restructuring

and/or refinancing.

•These solutions were particularly important for

Customers who showed difficulties in complying

with debt services in the context of the

pandemic, namely for the most needy

Customers at the end of the Moratoriums. In this

context, the Bank resorted to financial

instruments from national and European

entities, namely guarantee lines.

•During the first quarter of the year, additional

State support, which allowed new adhesions to

the moratoriums and the extension of the

suspension period, allowed support to more

than 390 Customers with the implementation of

466 new requests for Business moratoriums, in a

total of 143 million euros of credit.

•The extension of the grace period, capital and

maturity, of credit operations contracted under

publicly guaranteed credit lines, allowed

support to around 9,250 Business Customers, in

a total of 9,789 Operations.

Proximity to the Primary Sector

With a team specialized and dedicated to the

business of the agriculture-food and agroforestry

sectors, the Bank deepened, during this period,

its commitment to proximity to Entrepreneurs,

attentive to the challenges and the universe of

their financial needs, highlighting:

•Renewal, with a reinforcement of 20 million

euros, of the Credit Line for Support to the

Fishing Sector - 2020, filed with IFAP, for

financing the treasury of natural or legal

persons active in the fishing, aquaculture,

processing industry and marketing of fishery

products, affected by the COVID-19 pandemic.

•Promotion of the IFAP Short Term Line of

Credit, with a subsidized interest rate, for

financial support to entrepreneurs and farms.

•Launch and promotion of the commercial

campaign to anticipate the 2021 Single Order

Aids (PU-2021), with promotional actions.

•Negotiation and conclusion of a Partnership

Agreement with the Confederação dos

Agricultores de Portugal (CAP), providing a set

of guarantee lines for its members.

Investment banking

•In Corporate Finance, the Bank participated in

several projects in Portugal and in international

markets, providing financial advice to its

Customers and to the Bank itself in various

projects, involving researching, developing and

completing M&A operations, valuation of

companies, corporate restructuring and

reorganization processes, as well as research

and economic-financial analysis of projects. In

Mergers & Acquisitions, the assistance to Staples

Solutions BV in the sale of its business in

Portugal and the financial advisory to

Millennium bim in the sale of a 70% stake in

Seguradora Internacional de Moçambique to

Fidelidade should be emphasized.

•In terms of Project Finance, we highlight the

closing of the debt refinancing of: (i) a biomass

power plant with a 11 MW installed capacity, (ii)

one wind park with a 8 MW installed capacity

and (iii) a solar PV park located in Spain with a

50 MWp installed capacity, as well as the

financing of the construction and operation of

two solar PV parks with 11.6 and 17.4 MWp

installed capacity, both under merchant risk.

•In what regards Structured Finance, we highlight

the analysis, structuring and negotiation of new

financing operations in Portugal in diverse

segments, namely mining, agribusiness,

metallurgic, utilities, energy, coatings/paints,

transports and logistics, retail and distribution,

pharma, leisure, hotels and tourism. Despite

2021’s economic framework, it is particularly

noteworthy the successfully closing of financing

to Sodim, connected with the public tender

offer of Semapa, the participation in the

international syndicated loan to Sociedade

Francisco Manuel dos Santos, the financing of

the cruise ship fleet belonging to Mystic Invest

Group and the financing of ATPS SGPS to

participate on Ibersol equity capital increase,

among others.

•In the debt capital markets, we note the joint

lead of the €750 million green hybrid bond

issued by EDP, and the joint lead of REN’s €300

million inaugural green bond issue and of €435

million euro bond issued by the Autonomous

Region of Azores. In the equity segment, we

highlight the participation of Millennium

investment banking in the structuring and

2021 REPORT & ACCOUNTS

|103

organization of the general and voluntary tender

offer for the acquisition of Semapa shares,

launched by its majority shareholder Sodim,

SGPS, as well as the rights issue of Ibersol,

SGPS.

2021 REPORT & ACCOUNTS

104 |

2021 REPORT & ACCOUNTS

|105

Real estate business

Main lines of action during 2021:

•Management of available-for-sale properties - the

Bank achieved its objectives of reducing the

portfolio of available-for-sale assets, even in an

atypical year, either due to the pandemic and all

its impact generated on the business, or due to

the greater difficulty in carrying out operations

with foreign capital in view of existing

contingencies. Therefore, there was a need to

adapt strategies to the new reality and several

promotional initiatives were implemented, some

innovative, using digital and online platforms,

being closer to potential interested parties,

conveying all the support in decision-making as

well as confidence to the market and your agents.

•Management of properties not available for sale -

the physical, legal and administrative

regularization focused on the oldest assets,

complemented by the change in procedures for

the reception of properties and their follow-up,

made it possible to shorten the permanence

periods and exceed the objectives outlined in

passing of these properties for sale.

•Management of Investments controlled by the

Bank in Entities that manage real estate risk,

Funds and Companies in a divestment strategy

with preservation of value.

Interfundos

•As at 31 December 2021, Interfundos had twenty-

five (25) Real Estate Investment Undertakings

(Real Estate Investment Funds and Fixed Capital

Real Estate Investment Companies) under

management, corresponding to 1,181 million

euros of net assets under management, which

compares with 1,270 million euros recorded in the

same period of 2020, showing a 7% decrease in

the volume of managed assets compared to the

same period of the previous year. Interfundos had

market share of 11.2% in the Real Estate

Investment Undertakings.

•Interfundos pursued its strategy of strengthening

the financial sustainability of Real Estate

Investment Undertakings and creating liquidity

conditions for Participants and Shareholders, a

situation evidenced by the completion of capital

increase operations in four Real Estate Investment

Funds (Imotur, Monumental Residence, Sand

Capital and Imocott) and capital reduction in

seven Real Estate Investment Funds (Fundial,

Gestimo, Imosotto, Imorenda, Renda Predial, I

Marope and Fimmo).

•Following the deliberations of the respective

Participants, Interfundos extended the duration of

three Real Estate Investment Funds with a fixed

duration (Imoal, TDF and Imopromoção).

•Interfundos also liquidated three Real Estate

Investment Funds (DP Invest, Stone Capital and

Gestimo) and transferred the management of a

Real Estate Investment Fund (Multiusos Oriente).

•In 2021, global sales amounted to 91 million

euros, corresponding to a total of 178 properties.

•Interfundos' net income in 2021 amounted to

2,531 thousand euros, which corresponds to a

decrease of 27.5% compared to the value

recorded in the same period last year (3,492

thousand euros). This performance is mainly

attributable to the unfavorable evolution of the

results from services and commissions, resulting

from the 89 million euros reduction in assets

under management and the reinforcement of the

provision for taxes.

•Net commissions registered a decrease of 5.2%

justified by the decrease of 5.1% in commissions

received, fundamentally explained by the

reduction of assets under management resulting,

namely, from capital reduction operations in

seven Real Estate Investment Funds, from the

settlement of three Real Estate Investment Funds

and the transfer of a Real Estate Investment

Fund.

•Operating costs increased by 1%, as a result of a

slight increase in Personnel Costs and a reduction

in Other Income, partially offset by reductions in

FST's, Amortization and Other Costs. As a result of

this situation, the efficiency ratio increased from

41.1% to 43.4%.

Financial Institutions Group

The second year of the pandemic saw the gradual

recovery of international trade and the resumption

of growth in the main economies and markets with

which Portugal relates. It was, therefore, a

framework with increased opportunities for

correspondence banking, through trade finance

activity and agile and efficient solutions for cross-

border payments. The challenges of this period also

made evident the advantages of being a reference

bank in the negotiation of financial products and

instruments with multilateral lines.

Trade finance: Strong dynamism of this business

line in response to the needs of companies with

international business, in a context of

reorganization of distribution chains and emergence

of new opportunities in foreign markets. Close

monitoring with national exporting companies

allowed for a timely response and in competitive

conditions for different jurisdictions and currencies,

both through trade finance instruments and through

the continuous improvement of cross-border

payment systems.

Custody: The institutional custody activity

remained a reference service in the national

market and with increasing importance in its

different segments, including the provision of

depository banking services to venture capital fund

management companies. The performance of this

2021 REPORT & ACCOUNTS

106 |

area results from a value proposition based on a

flexible service model, with monitoring and tailor-

made offer along with very competitive conditions.

Multilateral lines: Highlight for the signing of the

largest guarantee contracts ever in Portugal with

the EIF: 2,827 million euros, corresponding to a first

agreement of 1,177 and a subsequent one of 1,650

million euros. With the FEI EGF Line (Pan-European

Guarantee Fund), instruments to support small and

medium-sized companies in response to the

pandemic were thus substantially reinforced, with

extended deadlines and very competitive financial

conditions. At the end of the year, a portfolio

guarantee was contracted with the EIB, covering

50% of the risk of a credit portfolio in the global

amount of 400 million euros (corresponding,

therefore, to 200 million euros guarantee). This

Line is intended to finance loans granted by the

Bank to MidCap companies and Large Companies in

the various sectors of the economy (agriculture,

industry, services), with a view to expanding the

EGF offer to all Customer segments. These various

contracts join the portfolio of other instruments

previously negotiated with the EIB/FEI group,

covering various sectors and segments of national

companies.

2021 REPORT & ACCOUNTS

|107

Million euros

COMPANIES, CORPORATE & INVESTMENT BANKING in Portugal

31 Dec. 21

31 Dec. 20

Chg. 21/20

PROFIT AND LOSS ACCOUNT

Net interest income

259

254

2.0%

Other net income

146

137

6.5%

405

391

3.6%

Operating costs

121

122

-1.2%

Impairment and provision

151

268

-43.5%

Income before tax

133

Income taxes

(1)

Income after tax

SUMMARY OF INDICATORS

Allocated capital

1,243

1,272

-2.3%

Return on allocated capital

7.3%

0.2%

Risk weighted assets

10,653

10,784

-1.2%

Cost to income ratio

29.9%

31.3%

Loans to Customers (net of impairment charges)

12,077

11,990

0.7%

Balance sheet Customer funds

9,289

8,605

7.9%

Notes:

Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance.

Income

Companies, Corporate and Investment Banking

segment in Portugal reached an income after tax of

Euros 91 million in December 2021, compared to a

gain of Euros 2 million presented in 2020. Despite

the favourable performance of this segment, net

income achieved remains constrained by the

progressive implementation of non-performing

exposures reduction plan, with an impact on the

volumes of the loan portfolio and on its levels of

impairment charges. In 2021 the performance of

this segment is explained by the following changes:

•Net interest income stood at Euros 259 million

as at 31 December 2021, 2.0% above the amount

attained in the previous year (Euros 254

million). The reduction in the cost of internal

funding and also in the interest rates of term

deposits contributed favourably to the net

interest income evolution, which ended up

being partially offset by lower income arising

from the loan portfolio, as a consequence of the

lower level of average interest rates. It should

be noted that, despite the growth of the credit

portfolio with the loans granted under the

credit lines backed by the Portuguese

Government and under the agreements with the

European Investment Fund, the margin of the

credit portfolio continues to be under pressure

by the current macroeconomic context

characterized by a persistent low interest rate

scenario.

•Other net income reached Euros 146 million in

December 2021, being 6.5% higher compared to

the amount achieved in December 2020, which

is mainly explained by the positive impact on

net fees and commissions.

•Operating costs totalled Euros 121 million by the

end of December 2021, 1.2% down from the

overall amount of costs recorded in the same

period of the previous year. This decrease is

mainly driven by lower staff costs, largely

reflecting the reduction in the average number

of employees.

•Impairments showed a 43.5% drop, decreasing

from Euros 268 million in December 2020 to

Euros 151 million in December 2021. This

favourable evolution reflects, on one hand, the

extraordinary reinforcement of impairments

that had been carried out in 2020, following the

context of the economic crisis caused by the

COVID-19 pandemic and, on the other hand, the

non-recurrent positive impact associated with

the activity of a single name exposure that led

to lower impairment needs in 2021.

•As at December 2021, loans to customers (net)

totalled Euros 12,077 million, increasing 0.7%

2021 REPORT & ACCOUNTS

108 |

from the position in December 2020 (Euros

11,990 million), reflecting, on one hand, the

Bank's positive performance in granting credit

under the credit lines guaranteed by the

Portuguese State and the agreements

established with the European Investment Fund

and, on the other hand, the impact of reduction

of the non-performing exposures. Balance sheet

customer funds reached Euros 9,289 million,

7.9% above the amount recorded in December

2020, in particular through the expansion of the

client’s deposits base.

PRIVATE BANKING

2021 was for Millennium Private Banking a year of:

•consolidation of the Customer base growth

process, to which the action developed by the

Non-Residents and Attracting Department with

non-national Customers with an address in

Portugal and cross-referencing actions

contributed strongly;

•strong growth and increasing diversification of

our Customers' assets, not unrelated to the

remarkable levels of Customer satisfaction and

confidence with the services provided;

•performance of the Portfolio Management

service providing considerable returns to our

Clients;

•continuous and remarkable growth in the

number of active Customers with an app

installed, in the number of Millennium Site

users, subscribers to the digital statement and

in the number and volume of transactions

carried out through digital channels.

Investment was made in cross selling,

diversification and the intelligent management of

the stock of deposits as well as in improving the

quality of the service provided to execution

customers by reinforcing the commercial network's

short-term view of the markets, without ever

bleaching the culture of proximity between Private

Bankers and Customers. Constant monitoring of

Customers' assets was ensured, always keeping

Customers informed about the impacts of the

pandemic, with events that were mostly non-face-

to-face possible.

Within the scope of the measures identified within

the scope of the Private 2.0 Project, it should be

noted that all the targets set for the 2021 forecasts

were exceeded and that this year the investment in

paperless processes was reinforced, the focus on

the digital account maintenance process and the

implementation new measures to systematize the

commercial network and the business.

2021 was also the year in which Millennium bcp was

elected “Best Private Bank” in Portugal by The

Banker and PWM magazines, Financial Times

publications specialized in financial services. This

award, which the Bank receives for the fourth time

in six years, comes within the scope of the “Global

Private Banking Awards 2021” and reflects the

success of Millennium bcp's Private Banking

operation, based on a consolidated business model

and with an impact on the results achieved. by the

Bank.

2021 REPORT & ACCOUNTS

|109

Million euros

PRIVATE BANKING in Portugal

31 Dec. 21

31 Dec. 20

Chg. 21/20

PROFIT AND LOSS ACCOUNT

Net interest income

-63.4%

Other net income

30.1%

1.7%

Operating costs

-7.5%

Impairment and provision

(3)

Income before tax

49.3%

Income taxes

49.3%

Income after tax

49.3%

SUMMARY OF INDICATORS

Allocated capital

6.5%

Return on allocated capital

21.4%

15.2%

Risk weighted assets

667

642

4.0%

Cost to income ratio

47.1%

51.8%

Loans to Customers (net of impairment charges)

344

276

24.8%

Balance sheet Customer funds

2,721

2,569

5.9%

Notes: Allocated capital, Loans to customers (net of recoveries) and Balance sheet Customer funds figures based on average balance.

Income

Income after tax from Private Banking business in

Portugal, computed according to the geographic

segmentation perspective, totalled Euros 17 million in

December 2021, showing an increase of 49.3%

compared to the net profit reached in 2020 (Euros 11

million), mainly due to the favourable evolution of

impairment and operating costs. Considering the

performance of the main items of the income

statement, the relevant situations are highlighted as

follows:

•Net operating revenues stood at Euros 40 million

in December 2021, 1.7% up from the previous year

(Euros 40 million), as the growth observed in

other net income has exceeded the unfavourable

performance of net interest income. Net interest

income totalled Euros 4 million in December

2021, comparing to Euros 12 million reached in

December 2020, penalized by lower income

arising from the internal placements of the excess

liquidity, despite lower costs incurred with term

deposits. Other net income amounted to Euros 30

million in December 2021, reflecting an increase

of 30.1% compared to the previous year, mainly

driven by higher commissions from asset

management activity and from exchange and

brokerage transactions, but also by the increase

in commissions linked to distribution of third-

party investment funds.

•Operating costs amounted to Euros 19 million in

December 2021, below the operating costs

recorded in 2020 (Euros 20 million), reflecting the

decreasing trend verified in the staff costs.

•Impairments impacted positively the profit and

loss account, with reversals reaching Euros 3

million in 2021, while in the previous year,

impairment charges amounting to Euros 4 million

had been recorded.

•Loans to customers (net) amounted to Euros 344

million by the end of December 2021, showing an

increase of 24.8% compared to figures accounted

in the previous year (Euros 276 million), while

balance sheet customer funds grew 5.9% during

the same period, from Euros 2,569 million in

December 2020 to Euros 2,721 million in

December 2021, mainly due to the increase in

customer deposits.

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FOREIGN BUSINESS AND OTHERS

Poland

•Adjusted net income increased by 44.5%,

despite the 0.11 p.p. decline in 3-month WIBOR.

•Net income of -291.9 million euros, influenced

by provisions of 456.3 million euros for legal

risks associated with CHF credits.

•Banking income influenced by results from

financial operations arising from out-of-court

mortgage credit agreements in CHF.

•Continuation of the implementation of measures

to optimize the workforce and geographic

coverage: reduction of 551 Employees and 47

branches.

•Increases of 11.3% in customer funds and 5.8% in

the loan portfolio demonstrate the strength of

the franchise.

•NPL ratio>90d represented 2.2% of total credit

in December 2021 (2.7% in December 2020).

•Coverage of NPL>90d by provisions stood at

135% (122% in December 2020).

•Cost of risk of 37bp, compared to 83bp in 2020,

which included Covid-19 provisions.

•CET1 ratio of 14.0% and total capital ratio of

17.1%.

Mozambique

•Net income of 82.3 million in 2021, influenced

by the sale of the stake in Seguradora

Internacional Moçambique.

•Customer funds reduced by 0.7%; loan portfolio

is reduced by 5.0%

•NPL>90d ratio of 10.8% in December 2021, with

coverage of 77% on the same date.

•Risk cost of 72 b.p. in 2021 (503 bp in 2020).

•Capital ratio of 44.8%.

Macao11

•Net income of 13.1 million euros in 2021, 64%

higher than in 2020, due to a reduction in credit

impairment (-54 bp), given the regulatory

impairment of the previous year attributed to

credit granted to a corporate customer, as well

as the increase in net operating income, namely

through the increase in net interest income,

essentially due to the higher average volume of

loans to customers, together with a lower cost

of financing, which was only partially offset by

lower commissions and lower foreign exchange

earnings. The increase in operating income was

partially offset by the increase in operating

costs, essentially due to personnel costs.

•The branch's performance as a support platform

for the business of Portuguese companies in

Macau and mainland China.

•Trade finance operations to support Portuguese

companies with exports to and/or imports from

China.

•Acquisition of trading companies with

international trade operations with China.

•Attracting Chinese Customers wishing to invest

in Portugal, either individually or at a corporate

level.

•Promotion of contacts between Millennium bcp's

investment banking area and Chinese companies

in the search for investment solutions in

Portuguese-speaking countries.

Cayman Islands

•Net income of 1.1 million euros in 2021, -30%

versus 2020.

•Continuation of the process of reduction of

commercial activity, translated into the

reduction of core revenues, notwithstanding the

reduction in operating costs.

2021 REPORT & ACCOUNTS

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11 For the purpose of the computation of the net income generated by business segments, Macao activity is included in the "Other" segment, since it is

carried out through a branch.

Million euros

FOREIGN BUSINESS

31 Dec. 21

31 Dec. 20

Chg. 21/20

PROFIT AND LOSS ACCOUNT

Net interest income

757

726

4.3%

Other net income (*)

164

193

-15.1%

921

919

0.2%

Operating costs

423

440

-3.9%

Impairment and provision

622

369

68.9%

Income before tax

(124)

110

Income taxes

82.6%

Income after tax from continuing operations

(219)

Income from discontinued operations

>200%

Income after income tax

(148)

SUMMARY OF INDICATORS

Allocated capital (**)

2,771

2,939

-5.7%

Return on allocated capital

-5.3%

2.5%

Risk weighted assets

16,646

16,114

3.3%

Cost to income ratio

45.9%

47.9%

Loans to Customers (net of impairment charges)

17,780

16,990

4.7%

Balance sheet Customer funds

21,856

20,106

8.7%

(*) Includes equity accounted earnings related to the investment in Banco Millennium Atlântico.

(**) Allocated capital figures based on average balance.

Income

Income after tax from Foreign Business, computed

in accordance with the geographic perspective,

posted losses of Euros 148 million in December

2021, reversing the last year’s performance, when a

profit of Euros 74 million was achieved by the end

of December 2020. This evolution is mostly

explained by the substantial amount of impairment

and provisions charged in 2021.

Considering the different items of the income

statement, the performance of Foreign Business can

be analysed as follows:

•Net interest income stood at Euros 757 million

in December 2021, which compares to Euros 726

million achieved in December 2020. Excluding

the impact arising from the foreign exchange

effects, it would have increased 5.8%, reflecting

the favourable performance of the Group's main

subsidiaries. The net interest income in the

Polish subsidiary, which had been heavily

penalized by the successive cuts in the

reference interest rates imposed by the Polish

Central Bank, benefited, in the last months of

2021, from the reversal of this trend. The

positive performance of the net interest income

in the Mozambican operation is mainly justified

by the increase in the public debt portfolio

volumes.

•Other net income decreased by 15.1% compared

to the previous year. Excluding foreign exchange

effects, other net income would have dropped

13.6%, reflecting mainly the performance of the

Polish subsidiary, in particular the impact of the

costs arising from the agreements concluded

with its clients, in order to convert the credits

to local currency or their early repayment,

mainly recorded as net trading income.

Conversely, the performance of net fees and

commissions and other net operating income,

reflecting, in this case, lower costs with

mandatory contributions, mitigate, in part, the

abovementioned negative impacts. Additionally,

the lower appropriation of the results generated

by Banco Millennium Atlântico in Angola,

strongly constrained by the impacts arising from

the country's economic situation, also

contributed negatively to the evolution of this

item. In this context, the positive performance

of the Mozambican subsidiary should be

highlighted, with emphasis on the growth

2021 REPORT & ACCOUNTS

112 |

presented by banking commissions and higher

gains arising from foreign exchange transactions

carried out with customers.

•Operating costs amounted to Euros 423 million

as at 31 December 2021, 3.9% down from

December 2020. Excluding foreign exchange

effects, operating costs would have dropped

2.5%, mostly influenced by the evolution of the

subsidiary in Poland, which reflects the

efficiency improvement measures implemented

by Bank Millennium and the synergies obtained

after the merger with Euro Bank SA, since the

operating costs in the Mozambican operation

were higher than the amount achieved in the

previous year.

•Impairment and provision charges at the end of

December of 2021 presented a substantial

increase compared to figures reported in the

same period of 2020, reflecting mainly the

additional extraordinary provisions for legal

proceedings related to mortgage loans granted

in Swiss francs, booked by the Polish subsidiary,

amounting to Euros 505 million (Euros 160

million in the same period of 2020). Credit

impairment showed a favourable evolution

against the full year of 2020, which had

included the impact of additional provisions

related to risks from COVID-19 pandemic,

recorded both by the Polish and Mozambican

subsidiaries.

•Results from discontinued or discontinued

operations include the net income generated by

the current activity of Banque Privée BCP

(Suisse) SA, and Seguradora Internacional de

Moçambique, S.A., in the amounts of Euros 7

million and Euro 1 million as at 31 December

2021, respectively (Euros 7 million and Euros 8

million as at 31 December 2020, respectively)

until the date on which the respective

transactions were carried out. Additionally, in

2021 the results from discontinued or

discontinued operations also include the gains

recognized following the completion of the sale

agreements, which amounted to Euros 51

million in the case of the sale of the subsidiary

in Switzerland and Euros 12 million in the case

of the sale of the insurance company in

Mozambique.

•Loans to customers (net) stood at Euros 17,780

million at the end of December 2021, above the

amount attained as at 31 December 2020 (Euros

16,990 million). Excluding foreign exchange

effects, the loan portfolio increased 4.4%,

benefiting from the growth achieved by the

Polish subsidiary, overcoming the impact

produced by the deconsolidation of the

subsidiary in Switzerland. The Foreign business’

balance sheet customer funds increased 8.7%

from Euros 20,106 million reported as at 31

December 2020 to Euros 21,856 million as at 31

December 2021. Excluding the foreign exchange

effects, balance sheet customer funds increased

7,2%, mainly driven by the performance of the

subsidiary in Poland, overcoming the impact

arising from the deconsolidation of the

subsidiary in Switzerland.

BANCASSURANCE BUSINESS

Sale of Insurance through the banking

channel

During 2021, continuity was given to the strategic

objectives defined and projects in progress, which

made it possible to provide a distinctive service to

the Customer and to strengthen the partnership in

the sale of insurance through the banking channel

(Bancassurance), with the following highlights:

•Launch of the “Bancassurance Next Level”

program, involving teams from the Bank and

the Insurance Company, with a focus on

innovation and disruptive transformation of

processes;

•Reinforcement of presence in digital

channels by expanding the range of products

available on the app (Médis and Yolo) and

the possibility of confirming the purchase of

financial products in the app and on the

website (“Pending Operations”);

•For the corporate segment, optimization of

insurance sales processes and development

of new approaches for remote sales;

•Launch of campaigns in various products, for

Individual and Corporate Customers, with

price advantages and offers for Customers;

•At Médis, we highlight the i) reinforcement

of primary care and protection for the young

segment with the launch of the Médis Baby

Program, a new option with an Outpatient

Clinic and Médis Assistant Physician with

better access, and the Reinforcement of

Protection in Oncology with the launch of 1st

Campaign for the early detection of

Colorectal Cancer and the Campaign “It will

never be easier, but with Médis it is less

difficult”; ii) strong commitment to Health

Promotion and Literacy, with the Healthy

Company Programs and the Vaccination

Campaign; iii) development of the “Clínicas

Médis” dental care network with the opening

of two new clinics, in Vila Nova de Gaia and

in Oeiras, and the provision of a clinical

analysis service at Clínica das Amoreiras.

COVID-19

The year 2021 continued to be marked by its

transversal impact on society as a whole. Protection

2021 REPORT & ACCOUNTS

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in the different lines of business is a fundamental

security factor for our Customers, examples being:

•Life insurance, which guarantees situations

of death and disability due to COVID-19;

•Work accident insurance, which covers

telecommuting;

•Payment Protection Plan Insurance, which

guarantees coverage in the event of illness

caused by the COVID-19 infection;

•Médis Health Insurance, in which Médis as a

Personal Health Service® continued to invest

in a series of measures to support and

protect the health of its Customers, namely

the availability of the Medical Online

service, the service of delivery of medicines

at home, the COVID-19 symptom assessor

and cost-sharing of diagnostic tests;

•Insurance moratoriums: extension of the

flexibility of the payment of insurance

premiums.

2021 REPORT & ACCOUNTS

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Strategic Plan 2021-2024

The Strategic Cycle we’re about to launch reflects our determination to accelerate

Millennium’s development so that it’s in a strong position for the future, ready to

face and overcome the challenges that are shaping both the macro-economic

environment and the competitive landscape for banking.

Successfully executing on the priorities and key

levers of Millennium’s previous Strategic Plan Cycle

was crucial for setting the bank on a solid

normalization path by significantly reducing its

legacy exposures. It also laid important foundations

for the future by a substantial acceleration in the

Bank’s level of digitization.

This trajectory was particularly influenced by

developments in Portugal (a 40% reduction of NPEs

compared to 2018 and mobile customers up by 48%

in 2020) where the bank managed to recover its

volume growth trend (~5% p.a. growth in lending

and deposits over 2018-20) and increase its share of

revenues (+0.6pp in 2018-20) in an environment of

margin compression and continued low interest

rates.

This progress was impacted by the pandemic which

has, inter alia, raised credit risk levels. In Poland,

moreover, despite a positive operational

performance and the swift integration of EuroBank,

the bottom-line result was hindered by negative

developments in FX mortgages (despite the bank

having stopped writing new FX mortgages in 2008).

Going forward, the bank faces an environment of

economic turmoil, with the prospects of recovery

on the immediate horizon promising growth

opportunities but with associated risks of

continued low interest rates and thus an inherent

challenge to profitability. Greater customer

expectations, more digital and e-commerce

activity, the increasing threat of tech platforms and

digital attackers and the overriding requirement of

sustainability will together present significant

challenges but also major opportunities.

The Bank’s profitability performance is also

constrained by legislative developments in Portugal

in relation to contributions to the National

Resolution Fund and limitations regarding fair

commissions and fees.

In this context, it’s necessary to update our

strategic plan, and for the moment focus more on

Portugal. This update is designed to preserve

relevant priorities from the previous cycle, build on

what’s already been achieved and add new

elements that respond to this new environment.

The new plan targets Millennium with achieving

robust profitability and balance sheet positions and

managing the impact of the pandemic while

accelerating its competitive differentiation in

efficiency and customer engagement levels,

supported by targeted human touch and new

mobile/digital solutions and business models,

enabled by a highly skilled and effective talent

base, while at the same time addressing societal

sustainability challenges with a focus on climate

change risks and the opportunities that may unfold

in mitigating them.

The main strategic priorities for Millennium in

Portugal have been set out for this new Cycle,

preserving a balance between continuity and bolder

moves to reinforce its competitive edge and

innovation:

Serving the financial and protection needs of

customers with personalized solutions which

combine targeted human touch with a leading

mobile platform: aiming to expand relevance and

develop high engagement relationships that

empower our customers in their financial lives.

This priority is about serving customers in meeting

all of those profitable retail needs in which

Millennium holds a leadership position: investment

management, bancassurance and personal lending

solutions.

Being a trusted partner for corporate recovery and

transformation: supporting customers’ pursuit of

opportunities driven by EU funding to the economy

(PRR, PT 2030), while enabling solutions fit for a

more digitized, competitive and export-oriented

corporate landscape.

Capital and risk resilience: reinforcing our balance

sheet and ensuring readiness for the post-pandemic

world, strengthening both our risk and capital

management practices.

Best in class efficiency: realizing cost savings

enabled by productivity gains already achieved

in the previous Cycle by several transformational

changes including the full exploitation of mobile

and automated capabilities, increased efficiency in

the branch network and tech and data-driven

process reengineering and automation.

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Data and technology edge: focusing efforts on

the implementation of our next-generation data

platform while scaling advanced analytics models

to gain differentiating mass personalization

capabilities, intelligent automation and informed

and agile business and regulatory management. In

parallel, the Bank will expand the deployment of its

new technology foundations by advancing its cloud

platform, using modular IT building blocks

augmented by the digital experience platform and

new cybersecurity solutions, designed to deliver

agility and speed to market, scale, resilience and

cost efficiency.

Capability building and talent renewal: reinforcing

Millennium’s ability to attract, develop and retain

the best talent to embrace modern challenges in

critical domains and adapt working practices to

reflect the new paradigm while promoting an equal-

opportunity environment.

Sustainability-driven: adapting our business model

to increase differentiation towards the

community’s and our customers’ rising expectations

of sustainability while capturing associated business

opportunities as well as addressing regulatory

demands.

Finally, Millennium’s innovation efforts will enable

the bank to explore broader opportunities, going

beyond traditional banking, not only in order to go

on delivering a superior customer experience but

also to support our income growth and cost-

containment goals.

The execution of these priorities for Portugal will

be combined with ongoing efforts to explore

prudently the full growth potential of our

international operations, continuously looking for

ways to optimize their footprint.

This will enable Millennium to deliver against a set

of bold targets for 2024. The Group aspires to

improve C/I (to ~40% in 2024) and profitability

(aiming at a ROE of ~10%). In parallel, Millennium

will focus on risk management, aiming to

significantly lower the cost of risk (to ~50 bps) and

the NPE ratio (to ~4%), while keeping a prudent CET

1 ratio (>12.5%).

Additionally, there will be continued investment in

increasing our mobile penetration (from 48% to

more than 65%) and maintaining our leading digital

customer satisfaction (#1 in digital NPS).

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Targets for 2024

The new Strategic Plan Cycle aims to speed up Millennium’s transition to a position of

strength and readiness for the future in Portugal, notwithstanding the risks that shape

the macro-economic environment and the competitive landscape.

Our aspiration can be synthesised as:

i) Achieving robust profitability and a strong

balance sheet position, managing the impact of the

pandemic

ii) accelerating our competitive differentiation in

efficiency and customer engagement, supported by

targeted human touch and mobile/ digital solutions

and business models, enabled by our highly skilled

and effective talent base

iii) addressing societal sustainability challenges

focusing on climate change risks and the associated

unfolding opportunities

In our international business we will continue the

journey we started in 2018, adjusting for recent

developments. In Poland, where we are

implementing a resilience plan to address CHF

mortgage exposures, we expect to restore the ROE

by 2024 while reducing the cost of risk and

impairments and provisions. In Mozambique, we

will continue to adapt our business model to

better serve evolving customer needs while

maintaining a strong focus on profitability,

efficiency and risk control.

The successful execution of our strategic priorities

will reinforce our franchise position and business

model sustainability.

By 2024, the Group’s bold ambition is to improve C/

I to ~40% and to grow ROE profitably to

~10%. In parallel, Millennium will focus on risk

management, significantly reducing the cost of risk

(to ~50 bps) and its NPE ratio (to ~4%) while

keeping an prudent objective for the CET 1 ratio

(>12.5%). Finally, there will be a continued

investment around rising levels of mobile

penetration (from 48 to >65%) and a focus on

delivering leading digital customer satisfaction.

Millennium aims to create lasting value for all of its

stakeholders. Starting with our shareholders and

employees, we are targeting total value added in

the order of €4bn, while nurturing a meritocratic

environment that recognises performance and

invests in building digital literacy (for 80-90% of

employees). For our customers and community, we

will provide ~€14bn in funding to help expand their

horizons by financing their needs, ~€2bn to promote

green investment and ~€1bn on the continued

relationships with our suppliers.

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Ambitious goals aligned with strategic priorities — Group level

9M 2021

2024

C/I ratio

48%

(44% excluding non-usual costs)

~40%

Cost of risk

60 bp

(66 bp excluding one-off

reversals)

~50 bps

ROE

2.4%

~10%

CET1 ratio

11.7%

>12.5%

NPE ratio

4.7%

~4%

Share of mobile customers

56%

>65%

Growth of high engagement

customers* (vs. 2020)

+4%

+12%

Average ESG rating**

70%

>80%

*Active Customers with card transactions in the previous 90 days or funds > €100 (>MZM 1,000 in Mozambique)

**Average of Top 3 indices (DJSI, CDP and MSCI) | NPE include loans to Customers only.

2021 REPORT & ACCOUNTS

118 |

Risk and Outlook

2021 REPORT & ACCOUNTS

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Internal Control System

The internal control system governance model encompasses the organizational structure, the lines of

reporting and levels of authority, the set of lines of responsibilities and processes, that result from the

applicable laws and regulations, as well as the Bank’s by-laws and internal regulations, to ensure a prudent

and effective management of the Bank and adequate checks and balances.

The governance model promotes a conduct and risk culture across all the areas of the Bank, which is

materialized in an overarching set of principles, strategies, policies, systems and functions.

The Board of Directors promotes a strong governance and internal control culture, embedded in all levels of

the organization, and based on high standards of ethical behaviour, with rules established in the Code of

Conduct, available in the Bank’s site.

The Board of Directors provides the Bank’s governance, guidance and oversight and sets the broad strategies

and major policies of the organization, approves the overall organizational structure, and has the ultimate

responsibility for ensuring that adequate governance and internal controls system are established and

maintained, being supported in this function by the Audit Committee.

The Audit Committee plays a central role in the development of a governance culture and an internal control

system with a direct relation with the Board of Directors, the Bank’s internal control units and the external

auditors.

The current management of the Bank is delegated in the Executive Committee. This Committee established

different specialized commissions, with the participation of two or more Executive Directors, and first line

Managers who directly report to them.

The organizational structure of the Group is based on the principle of the segregation of functions between

the business units and internal control functions, aiming that any situations of potential conflict of interests

are identified in advance, minimized and subject to careful and independent monitoring.

The internal control system includes a set of principles, strategies, policies, systems, processes, rules, and

procedures established in the Group aimed at ensuring:

•Efficient and profitable performance of the activity, in the medium and long-term, ensuring the effective

use of the assets and resources, the business continuity and survival of the Group, namely through an

adequate management and control of the activity risks, through a prudent and correct assessment of

assets and liabilities, as well as through the implementation of mechanisms for prevention and protection

against errors and fraud.

•The existence of financial and managerial information, which is complete, pertinent, reliable, and

timely, to support decision-making and control processes, both at an internal and external level.

•Observance of the applicable legal and regulatory provisions issued by the Supervision Authorities,

including those relative to the prevention of money laundering and financing of terrorism, as well as

professional and ethical codes of conduct, standards and practices, internal and statutory rules,

guidelines of the Basel Banking Supervisory Committee and European Banking Authority (EBA), so as to

preserve the image and reputation of the institution before its Customers, Shareholders, Employees and

Supervisors.

•An effective Risk Management Function (RMF) with well-defined processes to identify, manage, monitor,

and report the risks that the Group is exposed.

•A Compliance Function ensuring the alignment with legal, regulatory, and statutory requirements, and

with internal rules, including rules of conduct and relationship with Clients, Investors, Supervisors’

Entities, and others, which rules are established in a Code of Conduct.

•An Internal Audit Function ensuring the effectiveness and consistency of the internal control processes

and mechanisms.

•The alignment of subsidiaries operating model with the organizational and managerial principles defined

by the Bank, as the consolidating Entity.

•The adoption of sound sustainability principles, namely regarding Environmental, Social and Governance

(ESG) factors, and its coherence with the Group’s activity.

•The good image and reputation of the Bank towards its stakeholders.

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To achieve these objectives, the internal control system is based on the compliance function, the risk

management function and internal audit function. The Heads of these three divisions are appointed by the

Bank's Board of Directors, by proposal of the Committee for Nominations and Remunerations, after an opinion

from the Audit Committee and of the Committee for Risk Assessment.

The internal control system is based on:

•A control environment supported by high integrity and honesty standards, promoting a strict compliance

with the laws and regulations, by the effective enforcement of a ‘check and balance’ system, including

adequate segregation of duties, with the objective of preventing conflicts of interest, and by process

based operational management models and control activities, that allow for clear identification of the

implemented controls and the assessment of their efficiency.

•A solid risk management system, aimed at the identification, evaluation, follow-up, and control of all

risks which might influence the Group's activities.

•An efficient information and communication system, designed to guarantee the collection, processing and

transmission of relevant, encompassing, and consistent data, within a timeframe and manner that allows

for an effective and timely management and control of the institution's activity and risks.

•An effective monitoring and correction process, implemented with a view to ensuring the adequacy and

effectiveness of the actual internal control system over time, to immediately identify any flaws (defined

as the group of existing, potential, or real defects, or opportunities for the introduction of improvements

that will strengthen the internal control system), and ensuring the triggering of corrective action.

•Strict compliance with all the legal and regulatory provisions by the Group's Employees in general, and by

the people who hold senior or managerial positions, including members of the management bodies.

•A governance model that defines that the business areas are responsible for risk taking, ensuring the

effective monitoring, control and management of the risks assumed, and supporting the independent

review of the risk levels incurred as compliant with the Risk Appetite Framework.

The internal control system is consistently applied across all Group entities, supported on group codes issued

by BCP defining global policies, principles, and rules, considering, and complying with local, legal or

regulatory requirements of the countries where operations are based.

Three lines of defense model

The Bank’s internal control system is based on the “Three Lines of Defense Model”, aiming to ensure:

•A clear accountability of the business areas for the respective assumption of risks.

•The effective monitoring, control and management of the risks assumed.

•An independent evaluation, to be reported to the Board of Directors and to the Executive Committee, of

the levels of risk assumed, their compliance with the Risk Appetite Framework and the effectiveness of

the established internal control systems.

The business lines, as the first line of defense, take risks and are responsible for their operational

management directly and on a permanent basis. For that purpose, business lines have appropriate processes

and controls in place that aim to ensure that risks are identified, analysed, measured, monitored, managed,

reported and kept within the limits of the institution’s risk appetite and that the business activities comply

with the external and internal requirements.

The risk management function and the compliance function form the second line of defense.

The risk management function facilitates the implementation of a sound risk management framework

throughout the institution and has responsibility for further identifying, monitoring, analyzing, measuring,

managing, and reporting on risks and forming a holistic view on all risks on an individual and consolidated

basis. It challenges and assists in the implementation of risk management measures by the business lines to

ensure that the process and controls in place at the first line of defense are properly designed and are

effective.

The compliance function monitors the Bank’s compliance with legal, regulatory, and internal policies

requirements, including the reputational protection of the Bank, comprising, among others, the prevention

of financial crime activities. It provides advice on compliance matters to the management body and

establishes policies and processes to manage compliance risks and to ensure an overall compliance culture

within the Bank.

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Both the risk management function and the compliance function intervene to ensure the improvement and

strengthening of internal control and risk management systems interacting with the first line of defense

whenever necessary.

The internal audit function, as the third line of defense, conducts risk-based audits and reviews the internal

governance arrangements, processes, and mechanisms to ascertain that they are sound and effective,

implemented and consistently applied, to assess the suitability and efficiency of the organizational culture,

of the risk management process, of the internal control system and of the governance models in place. The

internal audit function performs its tasks fully independently of the other lines of defense.

Internal Control subsystems

The internal control system includes the following subsystems: the risk management system, the information

and reporting system and the internal control monitoring system.

Risk management system

The risk management system corresponds to the set of integrated and permanent processes which enable the

identification, assessment, monitoring and control of all risks, to which the Group's institutions are exposed,

in order to keep them at levels that are predefined by the management and Supervisory Bodies, and takes

into consideration the BCP risk taxonomy which includes the risks identified by the Regulatory and

Supervisory Authorities, as well as all other risks which, in view of the specific situation of the Group's

institutions, could become materially relevant. The Risk Office is responsible for keeping the BCP risks

taxonomy updated as well as for promoting and conducting the regular risk identification process in the

Group.

The risk management system takes into consideration the credit risk, market risk, interest rate risk, foreign

exchange rate risk, liquidity risk, compliance risk, operational risk, information technology risk, strategy risk

and reputation risk, as well as all other risks that, in view of the institution’s specific situation, may prove

material for its feasibility and sustainability. Environmental and social aspects are included in the assessment

of these risks, once they are considered risk drivers that are transversal to all risk types.

The risk management system ensures the segregation between the risk management function and the risk-

generating business activities, respectively the second and first lines of defense. The internal audit, as third

line of defense, ensures independent analysis concerning the risk activity of the first and second lines. The

credit analysis and granting process ensure the segregation and independence between the credit analysis

and rating structures and the business origination units.

The risk management system ensures timely reaction to changing circumstances and conditions that

engenders new risks and change the risk profile of the Bank.

Management information and reporting system

The management information and reporting system ensures the existence of information, which is

substantive, up-to-date, understandable, consistent, timely and reliable, to enable an overall and

encompassing view of the financial situation, the development of the business, the achievement of the

defined strategy and objectives, the risk profile of the Group and the behaviour and prospective evolution of

relevant markets and risks.

The output of the system is an information flow enabling the management with a global and comprehensive

view on the Group’s financial standing, non-financial information and risk data on the compliance with the

obligations assumed before third parties, legal and regulatory, and the regular monitoring of the activity, the

implementation of the defined strategy and objectives so as to support decision-making processes, and also

on the Group’s overall risk profile, in aggregate terms and detailed by risk; and the performance, evolution

and risk profile of the market(s) in which the Group operates.

For this purpose, each entity of the Group develops, implements, and maintains formal processes for

obtaining and processing information that is appropriate to the respective size, nature and complexity of the

activity carried out, developing communication processes and reporting lines that ensure an adequate and

swift transmission of relevant information to the due intervenient, both internal and external. An adequate

organizational structure promotes the necessary data flow between the relevant parties in a process and

ensures the necessary confidentiality in information flows.

The financial information process is supported by the accounting and management support systems which

record, classify, associate and archive, in a timely, systematic, reliable, complete, and consistent manner,

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all the operations carried out by the Bank and its subsidiaries, in accordance with the rulings and policies

issued by the Board of Directors and the Executive Committee.

Clear duties and responsibilities are set for each organizational unit in the information and communication

processes and in the decision-making process.

Planning process

The Group planning process defines a long run sustainable strategy, compatible with the corporate vision and

previously established goals, with its market positioning, approved risk profile and with the implemented

internal control system.

The planning process is based on properly grounded assumptions, subject to sensitivity analysis and on

reliable and understandable information. As a result, clear, precise, and sustainable objectives are defined

for the global activity and for each business area, including the products, activities, systems and processes of

the Group and the human and material resources, namely the adequate levels of capital and liquidity,

necessary to fulfill the defined strategy are identified.

The planning process complies with the Risk Policy of the Group, as per the Risk Appetite Framework,

ensuring that the profitability levels are aligned with the risks involved.

The Group’s planning process includes the preparation of the annual and three-year budget, the verification

of the sufficiency of capital and liquidity (ICAAP e ILAAP), the execution of stress tests within the internal or

supervision scope, the preparation of the Funding and Capital Plan and of the Recovery Plan, the activities

deriving from the resolution planning and remaining initiatives that, at each moment, are required to be

implemented to comply with the requirements issued by the Supervision Authorities.

The Chief Financial Officer and Chief Risk Officer of the BCP, are responsible for the different elements of

the Group’s planning process, together with the Chief Financial Officers of the main subsidiaries.

The Group’s strategy is communicated, by the adequate means and detail, to all the Employees of the Bank.

Monitoring process

The monitoring and correcting system includes all the control and assessment actions to ensure the

permanent effectiveness and adequacy of the internal control system, namely, through the identification of

deficiencies in the system - in terms of its design, implementation and/or use.

This process is continuously executed and complemented by independent, periodical and or extraordinary

evaluations made by the Internal Audit.

The frequency of the control and assessment actions depend on the nature and magnitude of the risks

inherent to the activity carried out and the effectiveness of the associated specific controls.

All internal control of deficiencies and events of non-compliance are duly recorded in a deficiencies data

base at Group level, documented, and reported to the appropriate management levels to enable the

adoption of correction measures in line with the respective remediation plan. Processes for the follow-up

and validation of the measures implemented are established with clear deadlines according to the inherent

risk level.

Internal control system governance

The internal control system is supported by a governance model that defines the responsibilities for the

assumption of risks by the Business Areas, and ensures an effective follow-up, control and management of

the risks assumed, and an independent evaluation of the risk levels assumed as per the Risk Appetite

Framework.

The key pillars of the governance model implemented in the Bank are:

•Clear, transparent, and understandable rules are set and communicated to all employees to enable

supporting the development of the activity while ensuring an adequate broad and effective internal

control system.

•Coherent, clear, and objective definition of the competences and responsibilities of each structure unit

and/or function, reporting lines and authority levels, information flows, are communicate across the

organization, including an appropriate segregation of potentially conflicting functions or duties, also

ensure that any potential conflict of interests is identified in advance, minimized and subject to an

independent and careful monitoring.

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•Sufficient and appropriate material and human resources are provided at all levels of the organization for

the execution of the responsibilities, activities, and tasks inherent to the internal control system.

•Physical and functional segregation of the business activities and the respective operational and control

services, avoiding possible conflict of interests through ensure robust control activities, including regular

reviews, physical controls, authorization, verification, and reconciliation.

The Risk Office's activity is essentially focused on ensuring the effective application of the Group's risk

management system, namely, by developing, proposing, implementing, and controlling the use of a set of

assessment methodologies and metrics, that allow for a correct assessment of the risks incurred and arising

from the Group's activities, which are documented by internal rules and regulations. It is also responsible for

promoting and coordinating the policies and rules applicable to risk management and control at all entities of

the Group, with the responsibility of ensuring the global monitoring of risk and the alignment of concepts,

practices, and objectives on a consolidated basis. Under this framework, the Risk Office has access to all the

sources of information of the Group entities that are necessary for the exercise of the identification,

measurement, limitation, monitoring, mitigation and reporting of the various types of risk at consolidated

level.

The activity of the Compliance Office is transversal to all Institutions of the Group, in terms of applicable

compliance policies, with observance of the legal specificities of each jurisdiction. The Compliance Office

has access to the preventive information systems on money laundering and terrorism financing adopted by

the different entities of the Group, being equally informed and giving an opinion on all changes to the IT

alert systems and the processes for identifying Customers and communication of irregular cases verified in

the Group's entities, within the scope of the control of money laundering and terrorism financing, in order to

promote an alignment of systems, methodologies and criteria with those used by BCP.

The Accounting Division and the Studies, Planning and ALM Division receive and centralize the financial

information of all subsidiaries.

The corporate areas of the Bank, namely the Research, Planning and ALM Division, Accounting and

Consolidation Division, the Treasury, Markets and International Division, the Compliance Office, the Risk

Office, and the Audit Division ensure the existence of the procedures necessary to obtain all relevant

information for the consolidation, accounting and financial information and remaining elements supporting

the management, as well as the supervision and control of the risks at Group’s level. These procedures

include:

•The definition of the contents, the terms, and the format of the information to be reported by the

companies included in the consolidation perimeter of the parent-company, in accordance with the

accounting policies and guidelines defined by the management body, as well as the dates when the

reporting is required.

•The identification and control of the intra-Group operations.

•Assurance that the relevant accounting and financial information is consistent between the different

subsidiaries, so that it is possible to measure and monitor the evolution and profitability shown by each

business, verify the compliance with the objectives that have been established, as well as evaluate and

control the risks incurred by each entity, both in absolute and relative terms.

•Timely communication of extraordinary events which are relevant in terms of risk for the subsidiary or for

the Group.

•A financial information and reporting system that is supported by adequate contingency arrangements.

•Validating and monitoring the implementation of the corrective measures to resolve internal control

deficiencies that have a material potential impact.

The Audit Department is responsible for an on-site control function of the internal system, exercising this

function transversally on a permanent and independent basis, assessing, always and pursuant to the

established plan, the adequacy and effectiveness of the different components of the internal control system,

issuing recommendations based on the outcome of those assessments. The Audit Division is informed of the

conclusions of the inspection and internal audit actions carried out in each entity of the Group, especially

from those that assess the effectiveness and integrity of the entity's internal control system.

Common principles across the Group

To foster Group coherence, and keeping up with local laws and regulations, internal control system’s

organizational models similar to that of the Bank are established in the Group’s subsidiaries, by anticipating

the existence of an Audit Committee and a Risk Assessment Committee, or equivalent bodies. The local

Supervisory Bodies have, in what the internal control system of each entity is concerned, the mission to

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verify its quality, integrity and effectiveness, as well as to evaluate its coherence and adherence with the

internal control system of BCP and the Group.

The Bank’s governance model and internal control system is extended to all subsidiaries, in a way which is

compatible with their nature, complexity and business model, ensuring the maximum possible level of

coherence and alignment:

•The CRO of BCP is responsible for coordinating the risk management system at Group’s level through the

Risk Officers and the Compliance Officers of each subsidiary.

•The CFO of BCP is responsible for coordinating the financial and accounting information system as well as

for the planning process at Group’s level.

•There is always at least an Executive Board member of BCP representing the parent company in each

subsidiary’s Board of Directors, being responsible for monitoring the overall performance of the entity.

•Notwithstanding, to ensure the maximum consistency of the criteria, methods, processes, and models

used in all subsidiaries, the CRO of BCP is appointed as a non-executive director of the subsidiary’s

management body, with supervision functions, being also designated for the subsidiaries’ Audit

Committee and Risk Assessment Committee when these governance bodies exist.

The Bank, as the Group's parent company, ensure that all subsidiaries implement internal control systems

that are coherent with each other, proportionate to the risks undertaken and with the local regulations and

legislation in force.

Whistleblowing

The Group has in place and maintains a Whistleblowing Policy and procedures, which are available for staff

or any person regardless of their relationship with any entity of the Group to report potential or actual

breaches of regulatory or internal requirements, through specific, independent, and autonomous channels.

The Whistleblowing Policy covers eventual or potential irregularities, the acts and omissions, both with

malicious intent or negligence, related with management, accounting organization, internal supervision or

serious evidence of breaches of duties that, in a serious manner, are susceptible namely of infringe the law,

articles of association, the regulations and other rules in effect, endanger, directly or indirectly, the assets

of the Customers, of the Bank and of the Shareholders or cause reputational damage to Bank.

The Whistleblowing procedures ensure, among others the protection of the identity and personal data of

both the person who reports the breach and the natural person who is allegedly responsible for the breach,

through which the Entity shall adopt the highest form of anonymity legally available and that the person

reporting the breach is appropriately protected from any negative impact (e.g. retaliation, discrimination or

other types of unfair treatment). Any information about irregularities provided through the whistleblowing

procedures is analyzed by the Audit Committee, supported by the Compliance Office and the Audit Division,

ensuring that the potential or actual breaches raised are assessed and escalated, including as appropriate to

the relevant competent authorities.

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Main Risks and Uncertainties

Risk

Souces of Risk

Level of Risk

Trend

Interactions/Mitigations

Regulatory and

legal

▪General increase in regulatory

complexity

▪Adaptation to the regulatory

framework associated to ESG objectives

▪Potential increase in calendar

provisioning requirements and level of

conservatism of models, derived from

EBA guidelines

▪Need for greater sophistication in AML

models to ensure adequate prevention

Medium

▪Culture of compliance and anticipation

of capital requirements

▪Rigorous and efficient management of

capital and its implications on the

business model

Sovereign

▪High public deficit and high weight of

debt in GDP

▪Less capacity to implement budget and

fiscal stimulus

▪Exposure to Portuguese, Polish and

Mozambican sovereign debt

High

▪Uncertainty about timing of ECB

monetary policy normalization

▪Volatility in capital markets

▪Increase in funding costs and

implementation of contingency

measures at European and national

level

Credit

▪Increase in corporate debt ratios,

namely due to the impacts of Covid-19

and the disruption of logistics chains

▪NPA stock still high in the corporate

segment

▪Risk of execution of NPA reduction

plans

▪Political/military tensions Russia/

Ukraine and the possibility of

stagflation in Europe in addition to

constraints in global distribution

chains, leading to a shortage of some

goods and products necessary for

economic development, leading to a

general increase in import prices

▪Credit risk spreads impacted by the

strong competition environment due to

excess liquidity in the market

▪Impact of ESG risk drivers on the

valuation of the loan portfolio

High

▪Positive track record in executing the

NPA reduction plan

▪Additional support to the economy

through the Recovery and Resilience

Plan (PRR)

▪Higher level of collateralization of

credit exposures to companies (namely

with state guarantees)

▪Enhancement of the loan origination

and monitoring structure

▪Incorporation of ESG risk drivers into

credit policies

▪Relatively low volume of exposures to

sectors exposed to high transition risks

Operational

▪Rising cyber threats looking to take

advantage of remote work and

importance of digital channels

▪Growing number of digital Customers

and increase in internet and mobile

transactions requiring the maintenance

of a high level of availability of the ICT

system (Information and

Communication Technologies)

▪Increase in information needs implying

greater demand in the management

and control of data quality

▪Implications of the acceleration of

automation, integration and

digitalization of processes, on

operational resilience the banking

sector

Medium

▪Continuous monitoring of the alignment

of technological development plan

with the business strategy

▪Enhancing of skills awareness and

resilience against cyber risks

▪Promotion of a strong internal control

culture

▪Implementation of a comprehensive

technology renewal program

▪Implementation of a data protection

accountability framework

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Risk

Souces of Risk

Level of Risk

Trend

Interactions/Mitigations

Market

▪Volatility in capital markets

▪Uncertainty regarding the timing of

monetary policy adjustment in the

eurozone

▪Uncertainty regarding geo-political

implications

Low

▪Limited exposure to trading portfolios

Liquidity and

Funding

▪Widening of spreads and reduced

liquidity in WSF debt markets as a

result of increased volatility in

financial markets and factors intrinsic

to BCP

▪Structural excess of liquidity arising

from the Bank's business model

▪Need to comply with MREL

requirements

Low

▪On-balance sheet Customer funds

decisive in the funding structure

▪Significant growth in the level of

savings from households and companies

due to the pandemic and periods of

confinement with repercussions on

total Customer funds

Litigation

associated with

the CHF loan

portfolio in

Poland

▪Increasing in the number of open court

cases

▪Growing share of cases with court

decisions against the Polish banks

▪Risks related to verdicts issued by

Polish courts in lawsuits against Bank

Millennium

High

▪Decrease of the overall CHF loan

portfolio

▪increase of coverage by provisions of

the CHF loan portfolio

▪Increase of out of court settlements

with debtors with mortgage loans in

CHF

Pension Fund

▪Effect of changes in interest rates and

wages on liabilities

▪Effect of asset value on portfolios

Medium

▪Integrated management of assets and

liabilities in order to obtain an

adequate balance between risk and

return

Real estate and

other

investments

▪Still relevant portfolio of foreclosed

real estate and other assets

▪Uncertainty regarding the development

of real estate activity

▪Uncertainty related with market and

regulatory trends in terms of

environmental awareness

▪Risks related to the Bank's collaterals

and properties

Medium

▪Positive track record in reducing the

portfolio of foreclosed assets

▪Expected low level of new entries of

foreclosed assets

▪Positive outlook regarding the evolution

of the Portuguese real estate market

▪Impact of insurance policies in the

mitigation of real estate assets

▪Reduction of exposure to Restructuring

Funds according to divestment plans

Recurring

profitability/

Business Model

▪Implications of the level of interest

rates on net interest income

▪Regulatory limitations on fees and

commissions

▪Impact of economic deterioration on

asset value and recurrent cost of risk

▪Wholesale funding cost, including ECB

funding (TLTRO)

▪Inflationary pressures on operating

costs

▪New global players and competition

from Big Techs

Low

▪Strict management of net interest

income

▪Strict cost structure control

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Risk management

Framework

Risk appetite

The BCP Group carries out its business activities in a controlled, prudent and sustainable manner, always

based on the adequacy and compatibility between the objectives set for the business and the levels of

risk tolerance defined in terms of sustainability and profitability, in the long-term.

Thus, the Group establishes and implements controls and limits on the material risks to which its

activities are subject, based on its “Risk Appetite Statement” (RAS) which concurs, in a relevant way, for

a standing of prudence and sustainability of the business, in view of its profitability, as well as of the

satisfaction of the different stakeholders: Shareholders, Customers and Employees.

The Group RAS is composed by a broad set of indicators that are considered of primary importance and

representative of risks assessed as "material", within the formal risks’ identification and quantification

process, carried out at least once a year. The RAS metrics are grouped in five blocs covering solvency,

funding, profitability, reputation and franchise and also sustainability risks.

For each of the indicators concerned, two levels of limitation are established: an 'alert level', up to which

the level of risk represented is still acceptable but from which corrective measures must be taken

immediately (in order to that the level of risk regained to an comfortable level) and a 'level of breach’,

which requires immediate measures with significant impact, aimed at correcting a risk situation

considered unacceptable.

Stemming from the RAS indicators, other lower-level indicators (and respective limits) are established,

with a higher level of granularity, ensuring a more detailed monitoring, appropriate for a day-to-day

approach to the risks’ control of business processes, based on specialized metrics and with a marked

technical nature. All risk limits are approved by the competent Governance bodies defined in the internal

and are periodically reviewed and updated.

For the main geographies in which the Group operates, specific risk appetite indicators (“individual” RAS)

are also established. Thus, the definition of RAS involves indicators for Portugal, Poland and Mozambique,

some of which are part of the Corporate RAS, which is a set of obligatory metrics for all geographies (but

with appropriate limits for each of the operations and structure in question), disaggregating the Group’s

risk appetite into the local geographies risk appetite. Besides the Corporate RAS metrics, local RAS

include other metrics aiming to measure idiosyncratic risks in each geography.

Risk strategy

The above definition of RAS - as the primary set of indicators that render and materialize the risk

appetite - is one of the guiding vectors of the Group's "Risk Strategy", which is approved by the Board of

Directors, by proposal of the Committee for Risk Assessment. Based on the RAS, several lines of action are

established, to be developed by different organizational units of the Group, to address the mitigation or

control of the risks classified as material within the risks’ identification and assessment process. These

lines of action formally constitute the Group's Risk Strategy. Hence, the RAS and the Risk Strategy are

inseparable and central elements of the Group's risk management, both aiming to control and mitigate

risks classified within the risks’ identification process.

Integration between the business and risk management

The risk appetite structure - which includes the identification of material risks, the RAS and the Risk

Strategy and is reviewed at least once a year or whenever the risks´ monitoring so advises (e.g.

conclusion that there are new material risks) - provides a reference framework for the permanent

monitoring of risks affecting the business and business support activities developed, for the monitoring of

the variables, indicators and limits that are derived from RAS. Therefore, the permanent follow-up based

on this structure is the result of a strong link between the risk management framework thus defined the

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methods and indicators applicable to the activities carried out, this link being essential for the

performance of the Group's risk management.

In addition, there is an interaction between the definition of the Group's risk appetite structure and its

business objectives, represented in the business planning and budgeting. Thus, the risk appetite structure

conditions the definition of the business objectives, since the business plan as to respect the risk limits

established by the Board of Directors.

In its turn, the business objectives and risk appetite structures are the foundations for all activities and

lines of business carried out, also setting out the global controls on the Group's strength, such as the

stress tests and the internal processes to assess capital (ICAAP) and liquidity adequacy (ILAAP) as well as

the recovery plan and the activities in the scope of the resolution planning.

The following figure summarizes the relationships described above, providing a graphic representation of

the integration of risk management within the scope of the business developed by the BCP Group.

1Internal Capital Adequacy Assessment Process

2Internal Liquidity Adequacy Assessment Process

3Recovery and Resolution Planning

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Risk management Governance

The following figure illustrates the process of risk management’s Governance, as at December 31, 2021,

exerted through various organizational bodies and units with specific responsibilities in risk management

or internal supervision:

The composition, capacities and responsibilities of the management and control bodies that intervene in the

risk management governance are the following:

Board of Directors

The ultimate body of the BCP Group's risk management structure is the Board of Directors, which, within

the scope of the functions assigned to it by the Bank's statutes, has the leading role in the risk

management and control structure. The Board of Directors is responsible for defining the Group's global

strategic guidelines and objectives, the profile and risk appetite, promoting the risk culture and risk

strategy, reserving for itself the approval of group codes that establish policies, principles, rules and risk

limits. The Board of Directors monitors the evolution of metrics and risk indicators translated into the RAS

(including the approval of remediation measures in case of breaches to the limits) approves the

conclusions of the ICAAP and ILAAP processes and the performance of the Internal Control System.

Risk Assessment Committee

The Risk Assessment Committee, appointed by the BoD, is composed by three to five non-executive

Directors and has, among others, the following capacities:

•Evaluate the integrity and adequacy of the Risk Management function.

•Advising the BoD on risk appetite and risk strategy, accompanying and intervening in the definition

and review of the Group's Risk Appetite Framework and providing an opinion on its adequacy to the

BoD.

•Monitoring the evolution of the RAS metrics, verifying their alignment with the defined thresholds and

levels and monitoring the action plans designed to ensure compliance with the established risk limits.

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•Advising the BoD on the policies regarding the risks’ identification, management and control within

the Group, monitoring the global risk levels in order to ensure that those are compatible with the

goals, the available financial resources and the approved strategies for the development of the

Group’s activities.

•Oversee the implementation of the strategies for capital and liquidity management as well as for all

other relevant risks to the Group, such as market, credit, operational (including legal, IT and

compliance), and reputational risks, in order to assess their adequacy against the approved risk

appetite and strategy.

•Monitoring the capital and liquidity planning processes (ICAAP and ILAAP), providing an opinion to the

BoD concerning the respective conclusions, as well as analyzing and approving the conclusions of the

regular follow-up on these processes.

•Monitoring and intervening in the Recovery Plan review, providing an opinion to the BoD on the

respective adequacy.

Within the resolution planning, the Committee for Risk Assessment approves its annual work plan and

monitors its execution.

The Risk Officer functionally reports to this Committee and participates in its meetings, presenting the

evolution of the key risk metrics and indicators, as well as all incidences, changes and evolutions relative

to the RMSS.

Audit Committee

The BoD’s Audit Committee is elected by the Shareholders’ General Meeting and is composed by three to

five non-executive Directors, mainly independent. Within the competences of this Committee, this

Committee has global corporate supervising capabilities - e.g. in what concerns financial information,

namely risk levels follow-up - as well as those that are attributed within the Internal Control System,

namely:

•Overseeing the management activity of the Bank;

•Monitoring the suitability and effectiveness of the Bank's organizational culture, governance models

and internal control and risk management systems;

•Monitoring the accounting policies and processes adopted by the Bank, the financial reporting process

and submit recommendations aimed at ensuring its integrity;

•Overseeing the performance of the Compliance and Internal Audit functions;

•Supervising and controlling the effectiveness of the risk management system, in conjunction with the

Risk Assessment Committee; as well as the internal control system in its different aspects and also the

internal audit system itself;

•Issuing an opinion in relation to operations of acquisition of goods and services and involving related

parties, aiming to avoid conflicts of interests;

•Analyzing the information is received through the whistleblowing mechanism as well as the clients

claims.

•Monitor the activity of the External Auditor and periodically assess its independence and objectivity in

the exercise of its activity.

The Audit Committee holds regular meetings with the Heads of the Audit Division, the Risk Office and the

Compliance Office.

The Compliance Officer participates in the meetings of this Committee, presenting the evolution of the

monitoring of compliance and compliance risks, as well as all developments and interactions with

regulation/supervision in terms of regulatory compliance.

The Risk Officer participates in this Committee’s regular meetings, reporting on the evolution of the main

indicators and metrics concerning risks and credit impairment, as well as on the implementation status of

the recommendations that concern the risk management system, issued within the scope of internal

control or by the supervisory/regulatory authorities.

The Head of Audit Division reports regularly to the Audit Committee on interactions and the status of the

recommendations of the prudential supervision entities, as well as on the audits carried out on the Bank's

processes.

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Committee for Corporate Governance, Ethics and Professional Conduct

This Committee, appointed by the Board of Directors, is composed of a minimum of three and a maximum

of five non-executive directors.

Amongst other that may be delegated by the Board of Directors, the competences of the Committee for

Corporate Governance, Ethics and Professional Conduct include:

•Recommend the adoption by the Board of Directors of policies, that observe the ethical and

professional conduct principles and best corporate governance practices.

•Support the Board of Directors and its Committees in the evaluation of the systems that identify and

solve conflicts of interest.

•Assess the compliance function, analyzing the procedures in place and the identified non-

compliances.

•Issue opinions addressed to the Board of Directors on the Code of Conduct and on other documents

defining business ethical principles.

•Every time it deems necessary, submit to the Board of Directors a report on the evaluation and

monitoring of the structure, ethical and professional conduct principles and corporate governance

practices of the Bank and on the company's compliance with the legal, regulatory and supervisory

requirements on these issues.

•Issue an opinion for the Board of Directors on the Annual Corporate Governance Report.

•Issue an opinion on the Annual Sustainability Report, concerning issues for which it is responsible.

•Time it deems necessary, submit to the Board of Directors a proposal on the guidelines for the

Company's policies, based on a culture identified with the ethical and professional conduct principles

targeted at contributing for the pursuit of social responsibility and sustainability goals. Proposing,

particularly, guidelines for the social responsibility and sustainability policies of the Company,

including, among other, the values and principles for safeguarding the interests of the shareholders,

investors and of those interested in the institution and also principles of social charity and

environmental protection.

•Issue an opinion or resolve on the Group Codes and respective annexes whenever this competence has

been delegated to it by the BoD.

Committee for Nominations and Remunerations

This Committee, appointed by the Board of Directors, is composed of a minimum of three and a maximum

of five non-executive directors.

The BoD delegates in the Committee for Nominations and Remunerations the monitoring on issues related

with human resources, assessment and composition of the Board of Directors and of its Committees,

reviewing the Remuneration Policies of the Directors and Employees, including the Key Function Holders

(KFH), and monitoring their respective implementation, in accordance with the powers conferred to it by

the law and its own Regulations.

Other functions of this Committee:

•Monitor the existence of specific policies related with selection and recruitment, evaluation of

performance, promotion and career management, training, and development of competences.

•Elaborate and report to the BoD recommendations on the candidates to members of the Governance

and Supervisory bodies of the Bank, ensuring the Fit & Proper assessment process.

•Issue an opinion to the BoD on the Selection, Assessment and Succession policies for members of the

Governance and Supervisory bodies and responsible for control functions.

•Prepare and maintain a succession plan for members of the Board of Directors and KFH.

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Executive Committee

The Executive Committee is responsible for the daily management of the Bank aiming to pursue the

corporate objectives within the risk limits approved and defined by the Board of Directors. Particularly

regarding the risk management function, the Executive Committee is responsible for:

•Implement the Bank's general business strategy and main policies, considering the Bank's long-term

financial interests and solvency.

•Implement the global risk strategy approved by the BoD and ensure that management devotes

sufficient time to risk issues.

•Ensuring an adequate and effective internal governance model and an internal control framework,

including a clear organizational structure and independent internal risk management functions.

•Promote the risk culture across the BCP Group, addressing risk awareness and appropriate risk-taking

behavior.

•Promote a corporate culture and values that foster the ethical and responsible behavior of employees.

•Promote the development, implementation and maintenance of formal processes for obtaining,

producing and processing substantive information, appropriate to the size, nature, scope and

complexity of the activities carried out, as well as to the institution's risk appetite, which ensure its

reliability, integrity, consistency, integrity, validity, timeliness, accessibility and granularity.

The Executive Committee is supported, to carry out its responsibilities, by several management

commissions in a wide range of dimensions: Business Activity; Credit Decisions; Risk and Compliance

Management; Planning, Costs and Investments; Capital Structure and Liquidity Management; Human

Resources Management; Information Technology Security and Data Integrity and Protection. These

management commissions can benefit from the presence of one or more internal control function units

(Risk Office, Compliance Office and Internal Audit) which ensures timely detection of any potential

internal control deficiencies.

The Executive Committee delegates in the Risk Commission, the Compliance and Operations Risk

Commission (CORC) and the Security, Data Quality and Data Protection Commission, the mission of

monitoring the risks the Group is exposed to as well as the deficiencies identified regarding the internal

control system. These commissions are also responsible for monitoring the adoption of corrective

measures and the overall progress of open recommendations. Furthermore, the CORC may also evaluate

and propose improvements to be introduced to the internal control system.

Risk Commission

This Commission is appointed by the EC and has the responsibility for defining, at an executive level, the

framework and the risk management policies and instruments within the Group, establishing the

respective principles, rules, limits and practices for the Group Entities, considering the defined risk

thresholds.

The Risk Commission monitors the overall levels of credit, market, liquidity and operational risk, as well

as all other risks considered materially relevant for the Group, ensuring that the risk levels are

compatible with the goals, available financial resources and strategies that have been approved for the

development of the Group's activity. This Commission also validates the compliance of risk management

with all the applicable laws and regulations.

The Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the Chief Risk Officer (CRO),

and , optionally, any other Executive Director.

Other members of the Commission are the Risk Officer, the Compliance Officer and the Heads of the

following Divisions: Treasury, Markets and International (DTMI), Credit (DCR), Rating (DRAT), Economic

Studies, Sustainability and Cryptoassets (DESC) Models Monitoring and Validation Office (GAVM) and

Regulatory and Supervision Monitoring Office (GARS). The Head of the Audit Division (DAU) is a

permanently invited member of the Risk Commission, without voting rights.

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Validation and Monitoring of Models Sub-commission

The Models Monitoring and Validation Sub-Commission monitors the performance and confirms the

validity of the rating systems and models used by the Bank within the scope of its risk management

functions (e.g. PD, LGD, CCF, market risk and ICAAP) and informs the Risk Commission on their adequacy.

Moreover, it presents the model’s risk management results and suggests improvement measures to

increase the model’s performance and adequacy.

The CRO is the chairmen of the Sub-commission and other member are the Risk Officer, the head of the

GAVM, of DCR, DRAT and os Treasury, Markets and International Division (DTMI), as well as the several

Model Owners, responsible for developing and monitoring the risk models of the Bank.

Security, Quality and Data Protection Commission

This Commission is appointed by the EC and has the following capacities and responsibilities:

•Definition of guidelines and approval of the management policies for IT systems, data management

and quality, physical security, business continuity and data protection.

•Regular review of the emerging threats and most relevant trends in terms of data security and

information technologies, with a particular focus upon cyber-security.

•Analysis of the periodical security incident’s reports (regarding systems/data and physical),

identifying the appropriate remediation and improvement measures.

•Follow-up of initiatives and projects in the area of systems/data security, physical security and data

protection and monitoring of the respective performance metrics.

•Approval of the annual plans for the exercises of security assessment, Disaster Recovery Plan (DRP)

and business continuity, and their respective quantitative/qualitative evaluation.

The Commission members are the CRO, the COO and the CRetO. Any other members of the EC may

participate in the Commission’s meetings, if they deem convenient to do so. The Heads of the following

Divisions are also members of this Commission: COFF, ROFF, Information and Technology (DIT), Segments

and Network Support (DSAR), and IT Security (DSI), Operations (DO), Logistics and Procurement (DCM)

and . The head of the Physical Security and Business Continuity Department (DSFCN), the Data Protection

Officer (DPO) and the Chief Data Officer (CDO) are also permanent members of this Commission, along

with the Head of DAU (the latter, without voting rights).

Credit and Non-Performing Assets Monitoring Commission

This Commission is appointed by the EC and has the responsibility of monitoring the evolution of credit

risk, under various aspects:

•Monitoring of the evolution of the credit exposure and the credit underwriting process.

•Monitoring the evolution of the credit portfolio’s quality and of the main performance and risk

indicators.

•Monitor the results achieved by the credit monitoring systems.

•Follow-up the counterparty risk and the largest exposures concentration risk.

•Monitoring the impairment evolution and the main cases of individual analysis.

•Assessment of the recovery procedures performance.

•Monitoring the divestment in the foreclosed assets portfolio.

•Follow-up the execution of the operational plans to be developed within the scope of credit at risk

and reduction of certain asset classes.

The CEO, the CRO, the CRetO and the COO are members of this Commission, as well as, optionally, the

CFO. Any other executive Directors may participate in this body’s meetings if they deem convenient to do

so. The Heads of the following Divisions are also members of this Commission: Risk Office (ROFF), DCR,

DRAT, Specialized Monitoring (DAE), Retail Recovery (DRR), Specialized Recovery (DRE), Legal Advisory

and Litigation (DAJC), Management Information (DIG), Specialized and Real-Estate Credit (DCEI),

Corporate and Business Marketing (DMEN) and Retail Marketing (DMR) . The Head of DAU is a permanently

invited member of the Risk Commission, without voting rights.

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Pension Funds Risk Monitoring Commission

This Commission is appointed by the EC and has the following competences:

•Assessing the performance and risk of the Group’s Pension Funds in Portugal;

•Establishing, for these, the appropriate investment policies and hedging strategies.

The Commission members are the CEO, the CFO, the CRO. Any other members of the EC may participate

in the Commission’s meetings, if they deem convenient to do so. The other Commission’s members are

the Heads of the following Divisions: ROFF, Research, Planning and ALM (DEPALM), Wealth Management

(DWM) and Human Resources (DRH). Representatives of the Pension Funds management entity and of

Ocidental Pensões also participate in the Commission’s meetings, by invitation and without voting rights.

Compliance and Operational Risks Commission

This Commission is appointed by the EC and has the following capacities and responsibilities, to ensure

that the Bank's activity contributes to an adequate culture of risk and internal control:

•Monitoring of the Bank’s activities, as well of those of the other Group entities, regularly coordinating

and managing the policies and the duties of the Bank and its branches/subsidiaries, in order to ensure

the compliance with the legal and internal rulings, the alignment of Group strategies and the

definition of priorities in Compliance matters;

•Monitoring of the exposures to operational risks, as well as the implementation status and the

effectiveness of the risks mitigation measures and of those that aim at the reinforcement of the

internal control environment;

•Monitoring of the operational risks management framework, which encompasses the management of

IT and the Outsourcing risks;

•Follow-up of the management and improvement of the Bank’s processes, in order to monitor and

reduce the level of exposure to compliance and operational risks.

The Commission members are the CEO, the COO and the CRO. Any other members of the EC may

participate in the Commission’s meetings, if they deem convenient to do so. The ActivoBank CEO and the

Heads of the following Divisions are also members of the Commission: COFF, ROFF, IT (DIT), Operations

(DO), Segments and Network Support (DSAR). The Head of DAU, the AML12 Officer and the managers

responsible for the COFF areas that deal with the matters under discussion are also permanently invited

members of this Commission, without voting rights.

Corporate Risk Monitoring Commission

This Commission is appointed by the EC and has the following duties and responsibilities:

•Monitor the evolution recorded by the main performing corporate Clients credit exposures,

particularly assessing the implications from the COVID-19 pandemic versus the specific risk factors of

each client (sector of activity, prior COVID-19 financial standing, cost structure, etc.), issuing opinions

regarding the credit strategy to adopt.

•Follow-up the counterparty risk and the largest exposures concentration risk.

The members of this committee are: the CEO, CRO, CCorpO and CRetO. Any other members of the EC

may participate in the meetings of this Committee, whenever they consider it convenient to do so.

Members of this Committee are also primarily responsible for the following directorates: ROFF, DRE, DCR,

DRAT and DMEN.

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12 Anti-money laundering.

CALCO

The CALCO - also referred to as the Capital, Assets and Liabilities Management Commission - is

responsible for the management of the Group's overall capital, for assets and liabilities management and

for the definition of liquidity management strategies at a consolidated level. Specifically, the CALCO is

responsible for the structural management of interest rate and liquidity risks, including, among others,

the following aspects:

•Establishment of management guidelines for assets, liabilities and off-balance sheet items at

consolidated level.

•Definition of the capital allocation and risk premium policies.

•Definition of transfer pricing policy, in particular with regard to liquidity premiums.

•Monitoring of the capital and liquidity indicators, of the Recovery Plan indicators and of the execution

of the Liquidity Plan.

•Definition of policies and strategies to access wholesale funding markets and definition of the liquidity

buffer composition.

•Definition of the investment policy of the Investment Portfolio and monitoring of its performance.

•Definition of the strategy and positioning within the scope of the interest rate risk and structural FX

risk management, as well as of the respective policies and limits, taking into account the market

conditions at any given moment.

The Group CALCO meets every month and is composed of the following executive Directors: CEO , CFO,

CRO and, optionally any other Executive Director. The other members of the Group CALCO are the Risk

Officer, the Chief Economist and the Heads of DEPALM, DIG, DTMI, DWM, DMEN and DMR, the responsible

for the ALM Department of DEPALM.

At Subsidiary Companies Level, the local Credit Commission, CALCO, Risk Control Commission and AML/

CTF Commission replicate the roles of equivalent commissions at Bcp level.

Credit Commission

This Commission is appointed by the EC and its functions are to assess and decide on credit granting to

Customers of Banco Comercial Português, in accordance with the competences established by internal

regulation (‘Credit Granting, Monitoring and Recovery’). This commission may also issue advisory opinions

on credit proposals from the subsidiary companies of the Group entities.

The members of this Commission are the CEO, the CCorpO, and the CRO (the former only with veto

rights). Any other Executive Director may, whenever he/she sees fit, participate in the Commission.

Other members are the Heads of the following Divisions: DCR, DAJC, DRAT, Companies Network

Coordination (North/South), Large Corporates, as well as Level 3 credit managers and, depending on the

proposals to be decided upon, the coordination managers of other proposing areas (e.g., Private Banking,

Retail, DRR) or members of the subsidiaries’ Credit Commissions. The Company’s Secretary, the Risk

Officer and the Compliance Officer are permanently invited members of this Commission, without voting

rights. Other Group Employees may also be invited to participate (without voting rights), if they are

relevant for the matters under discussion.

Risk Office

The Risk Office (ROFF) is the structure unit responsible for the risk control function at Group level,

promoting the overall alignment of concepts and procedures concerning risk monitoring and assessment.

The ROFF is responsible for informing the Executive Committee, the Committee for Risks Assessment, and

the Risk Commission on the general risk level, for proposing measures to improve the control environment

and for the implementation of controls which assure compliance with the approved limits. The ROFF has

the following functions:

•Supporting the establishment of risk management policies and methodologies for the identification,

measurement, limitation, monitoring, mitigation and reporting of the different types of risk.

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•Promoting the revision of the Group’s Risk Appetite and the risk identification process.

•Issuing opinions related with the compatibility of the risk management decisions considering the

approved RAS limits.

•Participate in the definition of the risk strategy and decisions related with risk management.

•Issuing opinions on the assumption of significant risks by the Bank and its subsidiaries, ensuring they

are properly identified and adequately assessed.

•Coordinating the NPA (non-performing assets) Reduction Plan and of the ICAAP and ILAAP processes.

•Ensuring the existence of a body of rules and procedures, of an effective IT platform and of a

database for the robust and complete management of risk.

•Controlling, on an ongoing basis, the evolution of the different risks and compliance with the

applicable policies, regulations, and limits.

•Participating in the Internal Control System.

•Preparing information relative to risk management for internal and market disclosure.

•Supporting the works of the following Commissions: Risk, NPA Monitoring, Pension Funds Risk

Monitoring, Compliance and Operational Risk.

The Risk Officer is appointed by the BoD, and reports to the CRO of the Group.

Compliance Office

The Compliance Office (COFF) is part of its organizational structure, construed upon “3 lines of defence

model”. It ensures the compliance function assigned to the “second line of defence”, which includes

control and regulatory compliance activities, analysing and advising the corporate bodies and the various

Divisions of the Bank prior to the making of decisions that may involve the assumption of specific risks

which are monitored by the compliance function.

Furthermore, the COFF has also the mission to:

•Verify if the respective regulatory requirements are complied with, as well as the ethical values of the

organization, fulfilling all the attributions that are legally conferred on it, ensuring the existence of a

culture of internal control, thus contributing to the mitigation of the risk of attribution to the Group

Entities of sanctions or significant assets or reputation damages.

•Promoting the preparation, approval, application, verification of compliance and periodic updating of

the Code of Conduct.

•Ensure compliance with the regulatory framework on the prevention and fight against money

laundering and terrorism financing (hereinafter “AML/CTF”).

•Participate in the definition of policies and procedures related with Conflicts of Interest and

transactions with Related Parties, following-up their implementation and effective application.

•Ensure the management and controls adequacy of the whistleblowing process.

•Provide support to the International Entities in the development of their activities, seeking to

normalise their action principles, systems and processes, in compliance with local regulatory

specifications.

The Compliance Officer is appointed by the BoD, reports hierarchically to the EC and, functionally, to the

Audit Committee, exercising his/her functions in an independent, permanent and effective manner,

defining the policies, guidelines and tools that are appropriate for a proactive and preventive risks’

assessment.

As a second line of defence structure responsible for compliance risk, for the risks associated with money

laundering and the financing of terrorism, with conduct and market abuse, with conflict of interests and

for other risks of an operational nature, the COFF issues decisions, with binding force for its recipients,

aiming at the legal and regulatory compliance of the various business and business support areas.

The functions attributed to the COFF are exercised in accordance with the law or with other applicable

normative source, as well as by the Bank’s corporate bodies, and the performance of the Compliance

Office should be based on a risk approach, at the level of the business, Customers and transactions,

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allowing the identification, assessment, monitoring and control of compliance risks that may influence

the strategy, reputation and objectives defined for the Bank.

Within the scope of opinions and the associated analyses produced at request of several Group areas and

Divisions, the COFF:

•Identifies and evaluates the various types of risks – either concerning in what refers to products and

services approval process, corporate processes and conflicts of interest;

•Issues proposals for the correction of processes and risks mitigation;

•Permanently analyses the general supervisory environment and, in general, provides specialised

support in matters of control and regulatory compliance.

Within the scope of its specific functions, the COFF also ensures an assessment and intervention in what

concerns:

•The control and monitoring of compliance risks;

•The Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT);

•The mitigation of reputation risk at all Group entities, aiming at the alignment of concepts, practices

and goals in these matters.

In compliance with the Principle of Coherence of the Group's internal control, the 1st responsible for the

Compliance Officer of BCP is also responsible for the follow-up and monitoring of the compliance

activities and Policies at Group level, highlighting the follow-up and monitoring of the AML/CFT risk

through the International AML/CFT Committees, with the participation of the management and

Compliance Bodies of the local units.

The COFF is also responsible for coordinating the process of structuring, drafting and approving the

annual self-assessment reports on the effectiveness of the organisational culture and the governance and

internal control systems, both individual and consolidated, and on the ML/FT prevention system to be

submitted to the Bank of Portugal and the Securities Market Commission, under the terms of the

respective Notices and Regulations, and as well for the preparation and submission of reports to the

management body, at least once a year, identifying the compliance flaws verified and the

recommendations issued for their correction.

The COFF fosters, intervenes and actively participates in the training policy of Employees, namely,

through training actions in Compliance, for the entire universe of the Group, maintaining a large

knowledge repository for matters of its competence, namely, in what concerns the AML/CFT.

Audit Division

The Audit Department (DAU) provides functions of the third line of defense, under the scope called

"Model of the 3 lines of defense" and is responsible for assessing the adequacy and effectiveness of the

risk management process, the internal control system and the governance models. DAU performs its

function on a permanent and independent basis and in accordance with the internationally accepted

principles and best practices of internal auditing, carrying out internal audit inspections to assess the

systems and processes of internal control and risk management which can give rise to recommendations

aimed at to improve its efficiency and effectiveness.

The main functions of the DAU in the scope of risk management are to ensure that:

•The Risks are properly identified and managed and that the controls implemented are correct,

adequate and proportional to the Bank's risks.

•The Bank's internal capital assessment system is adequate in terms of the risk exposure level.

•Transactions are recorded correctly in the systems of the Bank, and the operational and financial

information is true, appropriate, material, accurate, reliable and timely.

•The Employees perform their duties in accordance with internal policies, codes of conduct, rules and

procedures and with the legislation and other applicable regulations.

•The goods and services necessary for the Bank's activity are purchased economically, are used

efficiently and are properly protected.

•The Legal and regulatory provisions with a significant impact on the organization are recognized,

properly assimilated, and integrated into the operational processes.

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•The Bank's governance model is adequate, effective, and efficient.

The Head of DAU reports to the Chairman of the Board of Directors and is responsible for the general

supervision and coordination of the internal audit activities of the BCP Group subsidiaries and attends the

meetings of the Audit Committee of the subsidiaries of the BCP Group.

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Main developments and accomplishments in 2021

In 2021, the Risk Management Function maintained focused on the continuous improvement of the Group's

risk control environment, and on the permanent monitoring of the risk levels incurred in relation to the

RAS tolerance limits, ensuring, at the same time, full compliance with regulatory and supervisory

requirements and updating the internal regulations structure that is appropriate for risk management and

control.

The most relevant activities developed during 2021 were, synthetically, as follows:

•Continuous improvement of the internal governance model, management, measurement and risk

control at Group level, with special focus on strengthening credit risk monitoring;

•Implementation of an action plan for identifying and measuring credit risk in the context of the

COVID-19 pandemic including operational measures to adequately respond to the impacts arising from

the pandemic outbreak::

•Development and deepening of the customer follow-up model in the pandemic context aiming to

adequately respond to its impacts, namely to the end of the State support measures for companies

and individuals . The approach defined by the Bank in this context involved setting up Task Forces

to assess and monitor customer credit exposures and define and implement strategies suited to

each specific case, which implied the segmentation of the entire Bank's loan portfolio, with the

allocation of selected customers for follow-up to the different created areas for this purpose.

•Extension of the scope of the Credit and Non-Productive Assets Monitoring Committee to monitor

the credit portfolio;

•Ensure dedicated reports for monitoring the credit portfolio in pandemic context;

•Focus on improving the effectiveness of the internal control system;

•Monitoring the compliance level with risk limits, in particular the RAS, at the level of the Group and

the main geographies;

•Reinforcement of the supervision and support for the BCP Group's subsidiaries, implementing a daily

reporting system of the main risk indicators in all geographies;

•Completion of the ICAAP and ILAAP annual reports, and their ongoing monitoring ensuring the Group's

capital adequacy and liquidity on a continuous basis, and participation in other Bank planning

processes such as the Strategic Plan, Funding and Capital Plan and Recovery and Resolution Plan;

•Organization of the annual risk identification process (Risk Identification Process, “RIP”) at the Group

level and conclusion of the risk appetite and risk strategy revision processes for 2022;

•Implementation of the provisions and reporting system for backstop provisioning for non-performing

operations;

•Update of the goals of the NPA/NPE reduction plan for the period 2021-2023;

•Continuation of the implementation of the EBA guidelines on credit origination and monitoring;

•Pursuit of the sustainability master plan for integration of ESG issues into the Bank's risk management

framework and monitoring its implementation within the scope of the Bank's RAS;

•Continued redevelopment of the internal IRB models, reflecting the new definition of default and the

ECB and EBA guidelines regarding the estimation of PD and LGD models, with submission to the ECB

for approval of the respective applications for material changes;

•Continuous improvement of the liquidity and funding risk management and control systems at the

Group level, including the annual review of the internal liquidity stress test framework and the

improvement of the liquidity risk management framework at Banco Internacional de Moçambique and

in the Bank Millennium in Poland, carrying out monthly liquidity stress tests and building a liquidity

management framework in the context of resolution planning;

•Completion of the project for the revision of interest rate risk in the banking book's monitoring and

control framework in line with the most regulatory guidelines in this area;

•Participation in the EBA stress testing exercise with reference to December 2020, covering prospective

scenarios (baseline and adverse) for the period 2021-2023;

•Preparation of the ECB climate stress test exercise (to be held in the 1st half of 2022);

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•Provision of the requirements for the integrated report to the Single Resolution Board, scheduled to

start in 2023;

•Reinforcement of market risk monitoring and control processes and continuation of the FRTB

implementation project - Fundamental Review of the Trading Book;

•Continuous improvement of the quality of the data supporting the Group's risk management decisions,

and in the upgrade of the Risk Office’s technological platform;

•Conducting the annual exercise of operational risks’ self-assessment, with the presentation of the

results and conclusions to the management bodies;

•Execution of the Scenario Analysis exercise within the scope of operational risk (estimation of losses

for events with very low probability and high impact) and global update and review of the internal

statistical model for estimating maximum annual operational losses;

•Continued monitoring of outsourcing risk in conjunction with the respective contract managers;

•Monitoring of several Supervisory Entities' On-Site Inspections.

In 2021, the compliance function maintained its focus on the continuous improvement of the Group's

compliance risk control environment, ensuring, full fulfillment with regulatory and supervisory

requirements and updating the internal regulations structure that is appropriate for compliance risk

management and control.

The most relevant activities and initiatives developed during 2021 were, as follows:

•In the context of AML/CFT, the compliance action, based on a risk-based approach, included

operations filtering, a process that ensured compliance with sanctions and embargoes regimes

enacted by the competent national and supranational authorities, their monitoring, aiming to detect

and prevent potentially irregular situations, but also the substantive and formal pre-validation process

of opening and maintaining entities and accounts and credit operations. This functional perimeter,

based on dedicated technological solutions, also envisage the definition and management of risk

models based on the evolution of the various variables competing for the establishment of scorings to

be applied to operations. Also noteworthy is the development of new, more efficient solutions, based

on automation processes for the analysis of risk factors inherent to new account openings and

transaction screening.

•Launch, on the Millenniumbcp and ActivoBank Apps, of a process that facilitates the collection and

updating of Customers' personal information, namely the information defined in the regulatory

framework.

•In relation to the onboarding AML/CFT risk, it is important to highlight the strengthening of control

over segments and jurisdictions involved in business relations.

•Reinforcement and specialization continuation of the COFF teams within the scope of AML/CFT in its

various dimension.

•Updating the Anti-Money Laundering and Counter Financing of Terrorism Policy, mainly with the aim

of formalising the implementation of the EBA Guidelines AML/CFT risk assessment and due diligence

measures (EBA/GL/2021/02).

•Reinforcement and specialization continuation of the COFF teams within the scope of AML/CFT in its

various dimensions.

•Issuance of the 2020 Anti-Money Laundering and Terrorism Financing Report to the Supervisory

Entities.

•Maintenance and optimization of work processes so that they can adequately respond to the

operational challenges posed by the COVID 19 pandemic continued, ensuring the scrutiny and decision

on Customer operations service level, as well as all internal controls and other functions of the COFF’s

responsibility.

•Following the publication, on July, 15 2020, by Banco de Portugal, of Notice 3/2020 (Notice), referring

to the adequacy and effectiveness of the organizational culture, governance and internal control

systems, which has a significant impact on issues directly related to compliance risks, the COFF

prepared a plan of initiatives with the objective of aligning the organization and internal practices

with the Notice, ensuring full compliance with all requirements. Of the initiatives undertaken in the

first half of 2021, we highlight:

•Changes of the management and supervisory bodies and delegated committees internal

regulations;

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•Group's Code of Conduct update, highlighting changes, among others, on topics such as personal

data protection, gifts, conflict of interests and irregularities reports, and a new section dedicated

to non-discrimination and prohibition of harassment was introduced;

•Code of Conduct training, applicable to all Employees and Outsourcers, with a completeness level

around 100%;

•Issue, in February and December, of the two annual self-assessment reports on the effectiveness

of the organizational culture, governance and internal control systems, for Banco de Portugal

(covering both the Group and its various Companies) and for CMVM (only Portugal);

•Updating the internal regulations related with Notice themes, from which we highlight the cases of

the governance and internal control system, the Policy for the Prevention and Management of

Conflicts of Interest, fit and proper assessment and succession planning for members of the

management bodies and other key function holders and the whistleblowing communication policy,

which includes updating the communication process resulting from the implementation of a new

channel that ensures the source's anonymity;

•Training session, by telematic means, dedicated to the impact of the Notice on the Bank's

governance, culture and internal control issues, directed mainly at the second and third line of

defence functions;

•Updating of the regulations governing the competencies and functions of the COFF;

•Code of Conduct training, applicable to all Employees and Outsourcers, with a completeness level

above 90%;

•Within the scope of internal communication, the following important initiatives should be

highlighted: in compliance with Article 63 of the Notice, regarding the systematization of

information, the COFF has ensured that the information on the matters set out in the Annex to the

Notice was made available in an integrated and up-to-date manner, in a format accessible to all

employees, as well as communication initiatives, on the Bank's internal portal, about the Notice

importance and the nature of its main issues.

•Execution of the Communication Plan dedicated to the 1st lines of defence with the most important

aspects to be taken into account both in terms of the risk of financial crime and in other risks of

compliance and regulatory compliance.

•Controls strengthening regarding the risk of market abuse.

•Controls strengthening on regulatory requirements compliance regarding advertising campaigns.

•With regard to the Group's activities, the strengthening of the risks monitoring of the various

operations remains a priority, ensuring the monitoring of the AML/CFT risk through the International

AML/CFT Committees, with the participation of management bodies and compliance function of the

International Entities, aiming to assess and monitor the specific compliance risk factors of each

geography, as well as the existing business segments in each operation.

•Development of joint COFF projects with teams of subsidiaries and branches abroad in order to

analyse and improve the effectiveness of existing controls for mitigating the main risks in the area of

AML/CFT.

•With regard to training, there was also a significant reinforcement of actions in compliance matters in

the first half, with special emphasis, in addition to the above-mentioned Code of Conduct, to the new

AML/CFT training, already considering the changes arising from the entry into force of Law No.

58/2020.

Credit risk

The materialisation of this risk arises from the losses occurred in the loan portfolio, due to the incapacity

of borrowers (or their guarantors, when applicable), issuers of securities or contractual counterparts to

comply with their credit obligations.

The control and mitigation of this risk are carried out through a solid and reliable structure of risk

analysis and assessment, based on internal rating systems suited to the different business segments,

through a model for the early detection of potential default of the portfolio, through processes regarding

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the management and follow-up of the collateral value and through structural units that are exclusively

dedicated to credit recovery, for non-performing situations.

Evolution and breakdown of the loan portfolio

The next table presents the evolution of the Group’s portfolio subject to credit risk and counterparty

credit risk between December 31, 2020 and December 31, 2021, in terms of EAD (Exposure at Default)*,

in the three main geographies where the Group operates (Portugal, Poland and Mozambique), which

represented almost the total Group’s EAD by December 31, 2021.

(million euros)

Geography

Dec 21

Dec 20

Change

Amount

Portugal

65,881

59,708

6,173

10,3%

Poland (1)

23,281

22,148

1,133

5,1%

Mozambique

2,377

1,869

507

27,1%

TOTAL

91,539

83,726

7,813

9,3%

* Without impairment deduction to the exposures treated prudentially under the Standardized Approach (STD) and including all risk

classes (i.e. besides credit to Customers, debt positions from Sovereign entities and Institutions are included).

(1) Includes the adjustment to the balances of 2020 made in Bank Millennium regarding mortgage loans linked to Swiss francs (transfer

from the liability item "Provisions" to the asset item "Loans and advances to customers”, adjustment that reflects an adjustment to the

fair value of loans and advances to customers).

Considering the position on December 31, 2020 as a basis for comparison, the Group's loan portfolio,

measured in euros (EUR), recorded a growth of 9.3% during 2021, identical to that seen in 2020 (also

+9.3%). The evolution is explained by an increase in all geographies.

The increase in Portugal is explained, on the one hand, by the increase in the credit portfolio in the

different segments, particularly in residential loans and, on the other, by the exposure to Banks and

Sovereigns, which increased by approximately 4.9 billion euros, particularly the position in Portuguese

government public debt and deposits at the Bank of Portugal, which grew 2.3 billion euros. It should be

noted that this evolution was made in a context of a 485 million euros reduction in the NPE portfolio.

In the Polish loan portfolio, there was an increase of 5.1%, measured in euros, explained, almost entirely,

by the increase in credit exposure to Corporates and Retail, which amounted to approximately € 1 billion.

Likewise, with respect to Mozambique, there was a 27.1% increase in the loan portfolio, measured in

EUR, mainly related to the increase in exposure to Banks and Sovereigns in the total of € 363 million.

Regarding the composition of the portfolio by risk classes, it is illustrated by the following graphs,

representative of the portfolio structure on December 31, 2021:

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In what concerns the structure of portfolios by counterparty segment, in Portugal the most significant

portion continues to be assumed by the retail segment with 38% of the total, with 29% relating to

exposures that benefit from mortgage. Corporate segment represents a weight of around 29.6%, slightly

lower than at the end of 2020, with emphasis on the growth of the weight of the Banks and Sovereigns

segment, which registered an increase in its representativeness to a level close to 32.5 %, coming from a

weight of 27.9% on December 31, 2020.

In Poland, we highlight the retail segment, with a weight of 62.3%, maintaining the weight of the

exposures collateralized by mortgage guarantee at 31.7%, a slight reduction in the representativity of the

Corporate segment and the Banks and Sovereigns component, ending the year 2021 with weightings of

17.8% and 19.8%, respectively.

In Mozambique, the structure remained stable, with emphasis on the relevance of the weight of the Banks

and Sovereigns segment, which increased to 82.9% of the portfolio. The corporate and retail segments

assumed a representation of 10.4% and 6.7%, respectively.

Since the beginning of the year 2020, the occurrence of the pandemic outbreak COVID-19 should be

noted. In order to reflect the extent of exposure in Portugal to the sectors considered most sensitive to

the effects of this pandemic, the following table shows the six sectors of activity considered as most

vulnerable, which represent 5.8% of total domestic exposure.

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(million euros)

Sector

Exposure

Accommodation

1,227

Food services

351

Collective passenger

transport

151

Rent-a-Car

Travel Agencies

Arts, leisure,

entertainment and

organization of events

347

Total

2,224

% of Total

5.8%

Probability of Default (PD) and Loss Given Default (LGD)

The main parameters for credit risk assessment, used in the calculation of Risk Weighted Assets (RWA)

within the scope of the Internal Ratings Based method (IRB) - the Probability of Default (PD) and the Loss

Given Default (LGD) – assigned to the portfolio’s credit operations, have been registering a continuous

positive evolution, reflecting a clear trend of improvement in the portfolio’s quality.

The following graph illustrates the distribution of the portfolio amounts, in terms of Exposure at Default

(EAD) by the risk grades (internal ratings) attributed to the holders of credit positions in Portugal and

Poland, on December 31, 2021. These risk grades (RG) are defined on an internal scale, transversal to the

Group (the Rating Master Scale), with 15 grades, corresponding to different levels of debtors' PD. Risk

grades 13 to 15 are called “procedural” and correspond to problematic credit; RG 15 corresponds to the

Default status.

As shown in the chart above, the weight of the EAD corresponding to medium and higher quality risk

grades, for the two geographies, represented 80.9% of total EAD on December 31, 2021, with a slightly

different structure in the two geographies, with a higher weight of risk grades between 1 and 6 in the

case of Poland, where there was an increase in this range of risk grades, while in Portugal the structure

remained relatively stable. These weightings compare with year-on-year weights of 80.7%, 76.8% and

73.6% at the end of 2020, 2019, and 2018, respectively, reflecting a consistent favorable evolution,

although with a slower pace of the favorable evolution in 2021, well by the effect of the pandemic on the

risk grade classification of the business segment.

Regarding the weight of exposure in the two main geographies in what concerns customers with

procedural risk grades (without access to new credit), it reached 4.8% on December 31, 2021, maintaining

the downward trend that had already been seen in previous years: 5.9% (2020), 7.8% (2019), 11.3% (2018)

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and 14.8% (2017). In Portugal, the trend towards a more accelerated reduction in exposure to Clients with

procedural risk grade has also continued: 4.7% (2021), 6.1 % (2020), 8.8% (2019), 12.8% (2018) and 17.1

(2017).

Regarding the LGD parameters, representative of the expected losses in the case of Default and which, to

a good extent, reflect not only the efficiency of credit recovery for the different types of credit

segments/products, but also the collateralization levels of the loan operations, the following table shows

their respective average values (weighted by EAD) at the end of 2021 and 2020:

Mortgages

SME Retail

Retail (other)

Real Estate

Promotion

SME

Corporate

GLOBAL

AVERAGE

2021

16,2%

32,1%

34,6%

35,5%

46,3%

34,4%

26,6%

2020

16,1%

32,0%

32,6%

37,2%

47,3%

34,5%

27,2%

Thus, in 2021, LGD parameters in Portugal show values close to those at the end of 2020, improving

slightly overall in the business segments.

Main credit risk indicators

The following chart presents the quarterly evolution of the main credit risk indicators, between

31/12/2020 and December 31, 2021, for the Group and the portfolios of Portugal, Poland and

Mozambique:

Dec-21

Sep-21

Jun-21

Mar-21

Dec-20

CONSOLIDATED

NPE/Gross credit

4,7%

4,9%

5,2%

5,5%

5,9%

NPL > 90 days / Gross credit

1,6%

1,7%

1,9%

2,1%

2,3%

Past due credit / Gross credit

1,9%

2,2%

2,3%

2,5%

Impairment / Gross credit

3,2%

3,3%

3,5%

3,6%

3,7%

PORTUGAL

NPE/Gross credit

4,7%

4,8%

5,3%

5,7%

6,1%

NPL > 90 days / Gross credit

1,5%

1,6%

1,9%

2,1%

2,4%

Past due credit / Gross credit

1,5%

1,6%

1,9%

2,2%

2,4%

Impairment / Gross credit

3,2%

3,3%

3,6%

3,7%

3,9%

POLAND

NPE/Gross credit

4,4%

4,6%

4,7%

4,8%

5,0%

NPL > 90 days / Gross credit

1,8%

1,9%

2,0%

2,1%

Past due credit / Gross credit

2,4%

2,5%

2,6%

2,7%

Impairment / Gross credit

3,0%

3,1%

3,3%

MOZAMBIQUE

NPE/Gross credit

15,9%

15,4%

14,1%

16,4%

16,9%

NPL > 90 days / Gross credit

8,0%

7,3%

6,4%

6,7%

6,2%

Past due credit / Gross credit

8,1%

7,4%

6,7%

6,8%

6,3%

Impairment / Gross credit

8,3%

8,4%

7,2%

8,1%

7,4%

Gross credit = Direct credit to clients, including credit operations represented by securities, before impairment and fair value

adjustments.

Despite the negative impacts resulting from the pandemic outbreak COVID-19, the evolution of credit risk

indicators during 2021 was favorable at the consolidated level, in Portugal and in Poland; however, a

slight deterioration of past due credit ratios in Mozambique should be noted. Overall, the evolution is

positive as evidenced in the 'NPE/Gross Credit' ratio with a reduction of 1.2 percentage points at the

consolidated level and 1.4 percentage points in Portugal. The same favorable evolution can be seen in the

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ratio of Past due credits and 90 Day past due credits to Gross credit at the domestic and consolidated

levels.

The dynamics of these ratios is the result of a positive effect which results not only from the continued

effort pursued over the last few years to reduce loans classified as non-performing and past due, but also

from the growth in Gross Credit, as presented above. It should, in any event, be noted that this increase

in the portfolio continues to be based on prudent credit concession criteria, with the aim of preserving

the quality of the portfolio over the long term.

It should also be noted that between the end of 2020 and the end of 2021 the consolidated 'Impairment/

Gross credit' ratio was reduced to a lower extent than the 'NPE/Gross Credit' ratio (0.5 vs. 1.2 percentage

points), which reflects the conservative provisioning policy.

Similarly to what happened in Portugal and at the consolidated level, in Poland there was a decrease in

risk indicators, which was 0.6 percentage points in the 'NPE/Gross Credit' ratio and 0.3 percentage points

in the Past due credit/Gross Credit' ratio.

Reflecting the persistence of a less favorable economic and financial environment, the operation in

Mozambique, despite an improvement in the 'NPE/Gross Credit' ratio by 1 percentage point, registered a

degradation of the remaining credit risk indicators during the year 2021, in result of a prudent policy of

granting new credits.

NPA Reduction Plan

The implementation of the Group's NPA Reduction Plan remained a priority throughout 2021, in its two

aspects - problematic loans (NPE-non performing exposures) and assets received as repayment of loans

(FA-foreclosed assets) - focusing mainly on the NPE loan and FA property portfolios held for sale, in

Portugal.

The NPA Reduction Plan is framed by a specific governance model and a robust management framework,

based on specialized credit recovery areas and systematized recovery strategies - both resulting from

automatic analysis and decision models (for Retail) and based on the relationship of the recovery

managers with their corporate clients, with tailor-made solutions. In order to respond to the challenges

posed by the COVID-19 pandemic, the Bank has been developing and strengthening the methodologies and

installed capacity of the monitoring and recovery areas, in order to ensure an adequate monitoring of the

potentially more impacted exposures.

The FA management is based on a specialised structure, privileging circuits and procedures oriented

towards the speed of the reception-preparation-sale cycle and the enhancement of the properties’

values, in order to facilitate the sale of these assets.

The NPA Reduction Plan also benefits from a technological environment supported by specific IT

infrastructures for activities related to credit recovery, NPE reduction and FA management, with its

monitoring being reinforced by the NPA Reduction Operational Plan, in which initiatives are defined to

accelerate, maximize efficiency and ensure greater focus on recovery or disposal processes (both of

loans and real estate properties), distributed over the various stages of the recovery and NPA reduction

processes: prevention, collection, recovery, enforcement, insolvency and, finally, the receipt, possession

and handling of FA and respective sales.

The fulfillment of the reduction targets of each area involved in the reduction of NPA is measured

monthly, both in terms of management information for the respective dedicated structures, as well as for

the specific focused activities and initiatives defined in the Operational Plan mentioned above, with

reporting to senior management, namely to the NPA Monitoring Committee.

The NPA Reduction Plan has consistently recorded very positive results over the past few years, not

interrupted despite pandemic outbreak.

The following table presents the evolution of NPE volumes between December 31, 2020 and December 31,

2021, for the Group and for Portugal:

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(Million euros)

Dec 21

Sep 21

Jun 21

Mar 21

Dec 20

CONSOLIDATED

2,752

2,832

3,003

3,100

3,295

Change YoY

-543

-911

PORTUGAL

1,878

1,931

2,095

2,193

2,363

Change YoY

-485

-883

Note: Does not include the adjustment to the balances of 2020 made in Millennium Bank and related to mortgage loans indexed to Swiss

francs (transferred from the liability item “Provisions” to the asset item “Loans and advances to costumers”).

Comparing the size in value of the Customers classified as NPE at the end of 2021 with that at the end of

2020, there is a very positive evolution, with a reduction of 543 million euros at the consolidated level

and 485 million euros in the activity in Portugal, corresponding to a relative contraction of 16.5% and

20.5%, respectively. This result reflects the maintenance of the successful path taken over the last few

years in identifying and implementing solutions that enable the reduction of these non-productive assets,

even in an adverse context.

It should be noted that the evolution described above was consistent with expressive values in all

quarters of the year.

The following graph shows the main drivers that explain the reduction of NPE in Portugal during the year

2021 where it is possible to highlight the contribution of credit sales, which amounted to a gross value of

294 million euros. Write-offs amounted to 274 million euros, and the combined effect of other sources of

NPE reduction and new entries had an upward impact of 82 million euros.

On the other hand, the consistent growth in the coverage of the NPE portfolio by impairment, collateral

and Expected Loss Gap, both at a consolidated level and in Portugal, should be highlighted. The following

chart, which refers to domestic evolution, shows an increase of ten percentage points in the coverage

level, reaching 130% by the end of 2021, with an increase in the coverage by collateral to 62% and an

increase to 68% of the impairment component.

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The trend observed in 2021 with regard to the balance sheet assets resulting from credits repayment

(foreclosed assets) was favourable, as shown in the following table, which presents the evolution of the

total stock of Foreclosed Assets and the breakdown by type of assets, as well as the aggregate value of

assets of this nature of the subsidiaries abroad (amounts before impairment):

(Million euros)

Dec-21

Dec-20

Dec-19

Dec-18

Real estate properties

565

809

1,020

1,474

Real estate Funds and companies

205

246

306

330

Other assets (non-Real estate)

156

SUB-TOTAL - Portugal

851

1,146

1,413

1,960

Other geographies Foreclosed Assets

GROUP TOTAL

916

1,186

1,465

2,019

Despite the more adverse context in the real estate sector for carrying out divestment operations of

assets of this nature, in 2021 there was a reduction of 22,8% in the Foreclosed portfolio in relation to the

position at the end of 2020, corresponding to an amount of 295 million euros, explained mainly by the

Real Estate component in Portugal, which amounted to 244 million.

During 2021, the Bank continued its efforts to reduce the foreclosed assets, in particular real estate

received as payment. This year it was possible to reduce its stock by 295 million euros, based on a

remarkable commercial sales dynamic and a significant reduction in the entries of this type of assets.

This reduction in inflows is explained, on the one hand, by the reduction in the size of the NPE loan

portfolio and, on the other, by the operation of judicial sale instruments to third parties. The received

assets, amounting 37 million euros, are essentially composed of residential and commercial properties

with good liquidity in the real estate market.

It should also be noted the reduction in volume of properties still being prepared to be sold, to 145

million euros, at the end of 2021.

Credit concentration risk

The following chart presents the weights, in total exposure, of the Group’s 20 largest performing

exposures (non-NPE), as at December 31, 2021, in terms of EAD and using the concept of “Groups of

Clients/Corporate Groups”, excluding the risk classes of “Banks and Sovereigns”:

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Dec 21

Dec-20

Client Groups

Exposure weight in total (EAD)

Client group 1

0,7%

0,8%

Client group 2

0,5%

0,6%

Client group 3

0,4%

0,5%

Client group 4

0,4%

0,5%

Client group 5

0,4%

Client group 6

0,4%

Client group 7

0,3%

0,4%

Client group 8

0,3%

Client group 9

0,3%

Client group 10

0,3%

Client group 11

0,3%

Client group 12

0,3%

Client group 13

0,2%

0,3%

Client group 14

0,2%

0,3%

Client group 15

0,2%

Client group 16

0,2%

Client group 17

0,2%

Client group 18

0,2%

Client group 19

0,2%

Client group 20

0,1%

0,2%

Total

6,1%

6,9%

Globally, this set of 20 largest ‘non-NPE’ exposures accounted for 6.1% of total EAD as of December 31,

2021, which compares with a global weight of 6.9% by the end of 2020. Hence, in terms of EAD, there was

a reduction of credit concentration on the 20 largest performing exposures.

It should be noted that, in addition to the compliance with the regulatory limits relative to Large

Exposures, the Group has specific goals defined for the control of credit concentration, materialised into

RAS metrics. Besides, metrics for specific concentration types are monitored regularly: single-name, by

sectors of activity, by country, for Institutions and for Sovereign risks.

In the case of the single-name concentration, the limits are only defined for performing Clients, since the

NPE are covered by the NPA Reduction Plan. For Clients with exposure above the established limit excess,

specific reduction plans are drawn-up.

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Operational risk

Operational risk materializes in the occurrence of losses resulting from failures or inadequacies of

internal processes, systems or people, or resulting from external events.

In the management of this type of risk, the Group adopts duly documented principles and practices,

promoting the continued improvement of the control environment. This framework has a variety of

features, such as: functions segregation, definitions for lines of responsibility and respective

authorisations’ levels, tolerance limits for exposure to risks, appropriate internal regulations’ framework

(including ethical codes and codes of conduct), risks self-assessment (RSA) exercises, key risk indicators

(KRI), access controls (physical and logical), reconciliation activities, exception reports, loss events data

capture, a structured process for new products and services approval, contingency plans, contracting of

insurance (for the total or partial transfer of risk), follow-up of the Bank’s outsourcing contracts and

internal training on processes, products and systems.

The operational risk management framework encompasses the three relevant Group geographies –

Portugal, Poland and Mozambique – and the operational risk management system adopts the 3 lines of

defence model, based on an end-to-end processes' structure. Each geography defines its own processes'

structure, which is regularly reviewed/updated. This approach, transversal to the functional units of the

organisational structure, is appropriate for the perception of risks and to implement the corrective

measures for their mitigation. Furthermore, this processes’ structures also support other initiatives, such

as the actions to improve operating efficiency and the management of business continuity.

The responsibility for the day-to-day management of operational risk lies with the 1st line of defence,

with special relevance of the operations’ areas and the process owners (seconded by process managers),

whose mission - beyond the management of their processes’ effectiveness and efficiency - is to

characterise the operational losses captured under their processes, to monitor the respective KRI, to

perform the RSA exercises, as well as to identify and implement appropriate actions to mitigate

operational risk exposures, thus contributing to the strengthening of control mechanisms and the

improvement of the internal control environment.

Operational Risks Self-assessement (RSA)

The RSA exercises are based on workshops, attended by the Risk Office and with the participation of the

process owners (and process managers), or performed through answers to questionnaires sent to the

process owners, for a review of previous RSA results, according to predefined updating criteria.

The aim of the RSA exercises is to promote the identification and mitigation (or elimination) of risks,

either actual or potential, in each process, through the assessment of each of the 20 subtypes of

operational risk considered. These assessments are positioned in a risk tolerance matrix, considering the

‘worst-case event’ that might occur in each process, for three different scenarios: Inherent Risk (without

considering the existing/implemented controls ), Residual Risk (considering the existing/implemented

controls) and Target Risk (the desirable risk level). These exercises are typically carried out in the second

half of each year.

The 2021 RSA exercise for operational risk processes incorporated:

•Qualitatively, the results of the ICT risks RSA computed in the beginning of the year, as input

information to process owners, regarding 3 of the 20 risks assessed. The ICT risks RSA was made over

155 critical technological assets – hardware, software and communication lines and infrastructures –

under 3 evaluation dimensions: availability/integrity/data confidentiality;

•The input stemming from the CORPE (Compliance and Operational Risk Process Evaluation) factors,

which introduce and highlight operational risk components that result from the compliance and

internal control status of the processes.

The results from the 2021 exercise are presented in the following charts, in terms of the average score

for each of the 20 risk subtypes considered for the set of process in each geography, in which the outer

line represents a score of 2.5 in a scale from 1 (lowest exposure) to 5 (highest exposure):

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R1 Internal fraud and theft

R11 Monitoring and reporting errors

R2 Execution of unauthorised transactions

R12 Customer related errors

R3 Employee relations

R13 Products or services flaws/errors

R4 Breach of work health & safety regulations

R14 External fraud and theft

R5 Discrimination over Employees

R15 Property and disasters risks

R6 Loss of key staff

R16 Regulatory and tax risks

R7 Hardware and Software

R17 Inappropriate market and business practices

R8 Communications infrastructure

R18 Project risks

R9 Systems security

R19 Outsourcing related problems

R10 Transaction, capture, execution & maintenance

R20 Other third parties’ related problems

Hence, the risk levels resulting from the operational processes risks’ self-assessment remained at

moderate levels in 2021, for Portugal, Poland and Mozambique.

Operational losses capture

The operational losses data capture (i.e. the identification, registration and typification) of operational

losses and of the originating events aims at the strengthening of the awareness to this risk and to provide

relevant information for process owners to incorporate within their process management. As such, it is an

important instrument to assess risk exposures as well as for a generic validation of the RSA results.

The detection and reporting of operational losses is a responsibility of all Employees of the Group, the

process owners playing a crucial role in the promotion of these procedures within the context of the

processes for which they are responsible.

The identified events in which the losses, effective or potential, exceed the defined materiality limits

(for each geographical area) are characterised by the process owners and process managers of processes

to which the losses are related, including the description of the respective cause-effect and, when

applicable, the valuation of the loss and the description of the improvement action identified to mitigate

the risk (based on the analysis of the loss cause). For losses of amounts exceeding certain thresholds,

“Lessons Learned” reports are presented to and discussed by the specialised governing body for

operational risk (the EC’s Compliance and Operational Risks Commission).

The following graphs present the profile of the losses captured in the respective database in 2021:

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As shown in the distribution of loss events by cause (in loss amounts), the process risks and the external

risks assumed a marked predominance in the set of losses recorded in 2021, representing around 94% of

the global amount of losses. This resulted, mainly, from a large loss event related to a litigation situation

regarding an FX markets’ product that was discontinued a few years ago. The weight of the external risks

is due, essentially, to external frauds.

In what concerns the distribution of losses by class of amount (in number of losses), there was no change

in the typical profile of the distribution of operating losses. Regarding the distribution of losses by

banking business line, there was an expected concentration in the Trading and Sales segment, due to the

the referred large loss event.

Key risk indicators (KRI)

KRI provide alerts concerning changes in the profile of the operational risks or in the effectiveness of

controls, thus enabling to identify the need to introduce corrective actions within the processes, in order

to prevent potential risks from materialising into losses. These indicators currently encompass all

processes in the main Group operations (Portugal, Poland and Mozambique).

Processes management also uses Key Performance Indicators (KPI) and Key Control Indicators (KCI), the

monitoring of which, even if oriented towards the assessment of operative efficiency, also contributes for

the detection of risks.

Business continuity management

Within the scope of Business Continuity Management, 2021 brought the consolidation of the response to

the challenges imposed by the COVID-19 pandemic, namely, regarding the implementation of

governmental and health authorities determinations and guidelines. Hence, a highlight should be made on

the continuity of priority efforts with regards to safeguarding the health and well-being of the Group's

employees, as well as in preserving the full operational continuity of the services provided and the

products made available to clients.

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Thus, in Portugal, Poland and Mozambique, teleworking and rotation working on the premises were

maintained, with preservation of physical distance. It should be noted that, despite these changes to

working processes, there was no degradation of services to clients.

Also, the emergency responses, prevention and safety measures in the workplace were maintained, such

as, for example:

•Placement of affected Employees in isolation spaces or prophylactic teleworking for Employees with

contact with infected people;

•Internal channels of specific information for the dissemination of prevention measures (behaviours to

be observed), distribution of protective equipment (gloves, masks, disinfectants), reinforcement of

cleaning routines;

•Segregation of some critical teams, involving the movement of Employees to alternative spaces

intended for business recovery, to guarantee the recommended social distance.

In Portugal, the Business Continuity maintenance program provided an updating of the analysis of the

criticality of operational processes, the monitoring of the continuity plans of the Bank's service providers

and suppliers and the establishment of new recovery and solutions based on the experience and learning

of the last two years. In Poland, continuity plans were implemented and tested for the mortgage bank

recently created in that country, also benefitting from the experience recently acquired in what concerns

teleworking.

Insurance contracting

The contracting of insurance for risks related to assets, persons or third-party liability is another

important instrument in the management of operational risk, where the objective is the transfer - total

or partial - of risks.

The proposals for the contracting of new insurance are submitted by the process owners under their

respective duties for the management of the operational risk inherent to their processes, or are

presented by the head of area or organic unit, and then analysed by the Compliance and Operational

Risks Commission and approved by the EC.

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Legal, Compliance, Conduct and Financial Crime risks

In carrying out its Banking activity, Banco Comercial Português is governed by operating principles and

rules that ensure a good conduct, following the best international practices and adopting the appropriate

measures in terms of preventing compliance and conduct risks. Pursuing the objective of permanently

adapt its internal practices to the best market practices, to the evolution of Banking activity, and to

society as a whole, the Bank regularly reviews its internal regulations and procedures to safeguard that

the conduct of its Employees is always guided by highest ethical principles, of satisfaction and protection

of the interests of the client and the Bank, in the pursuit of sustainable profitability. The Compliance

Office strengthened the monitoring of the Bank’s activity and internal conduct, by implementing a system

for monitoring potential situations of conflicts of interest, covering various aspects of this issue such as

operations with related parties, credit operations, development of extra-professional activities and the

receipt of gifts by Employees.

To comply with the relevant legal and regulatory norms related with Anti Money Laundering and Counter

Terrorism Financing (AML/CFT), as well as to safeguard the compliance with best international practices

on this matter, the Bank has a set of policies, procedures and systems that ensure an effective control of

the financial crime risk prevention, also ensuring an operational model that allows the Bank to identify,

assess and mitigate the potential risks inherent to the activity of its Clients, non-Clients and business

relationships established with one or the other.

The impact and relevance of this risk in the Banking activity developed, compels the Bank to address this

risk in multiple dimensions and on a continuous basis, whether in the establishment of new business

relationships or in the continuous evaluation of an already established business relationship. Through a

risk-based approach (RBA) for the assessment and monitoring of its business relationships or occasional

transactions execution, the Bank complies with all the required duties enshrined in Law no. 83/2017, of

18 of August, like for example, due diligence, abstention, refusal or reporting.

For an effective and efficient AML/CFT activity, the Bank defines a set of policies and procedures that

are supported by a wide range of information systems, of which it is worth highlighting:

•Business Relations monitoring and alerts system;

•Financial transactions monitoring system;

•Entity filtering system;

•New Business relationships validation system;

•External information platforms.

Pursuing the continuous improvement of the internal control processes, these risks’ management system

was enhanced along 2021, to enable the Bank to respond adequately to the demands of the future

Banking business with origin in market dynamics changes and regulation evolution. From the set of

initiatives, it is worth mentioning the following:

•Launch of a set of actions with the aim of ensuring compliance with Bank of Portugal Notice 3/2020,

regarding the adequacy and effectiveness of the corporate culture and governance and internal

control systems.

•Reinforcement continuation of resources and expertise of the operational AML/CFT model.

•In relation to the onboarding AML/CFT risk, it is important to highlight the strengthening of control

over segments and jurisdictions involved in business relations.

•Launch, on the Millenniumbcp and ActivoBank Apps, of a process that facilitates the collection and

updating of Customers' personal information, namely the information defined in the regulatory

framework.

•Strengthening of the AML/CFT risk monitoring models for the Group's subsidiaries and branches, with

the enrichment of risk indicators information arising from them.

•Strengthening of the internal communication strategy, with regular actions to the Bank's 1st Line of

Defense, with innovative solutions, which include the regular participation of its Employees and on a

wide spectrum of compliance and conduct risks.

•Provision, within the scope of Notice 3/2020 of the Bank of Portugal, in an integrated and updated

manner, of information relating to the matters provided for in its Annex, in a format accessible to all

employees, including information about the Bank such as its shareholder, organisational and

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governance structure, its internal control system, its key function holders, the characterisation of its

business, its Code of Conduct, among others.

•Update of the whistleblowing communication process as a result of the implementation of a new

channel that ensures the source's anonymity.

•Strengthening the monitoring process of compliance with regulatory requirements in relation to

advertising campaigns other Bank’s behavioural matters.

•Foster a culture of rigor, ethics and good conduct, either through updating the Code of Conduct, in

which new matters and requirements were introduced, or through training and specific internal

communication.

•Update of regulations such as those on governance and the internal control system, the policy for the

prevention and management of conflicts of interest, the fit and proper assessment and succession

planning for members of the management bodies and other key function holders and the policy for

communicating irregularities.

Market risks

Market risks consist of the potential losses that might occur in a given portfolio as a result of changes in

interest or exchange rates and/or in the prices of the different financial instruments of the portfolio,

considering not only the correlations that exist between those instruments but also their volatility.

For purposes of profitability analysis and market risks quantification and control, the following

management areas are defined for each entity of the Group:

•Trading - Management of positions whose objective is the achievement of short-term gains, through

sale or revaluation. These positions are actively managed, tradable without restriction and may be

valued frequently and accurately. The positions in question include securities and derivatives of sales

activities;

•Funding - Management of institutional funding (wholesale funding) and money market positions;

•Investment - Management of all the positions in securities to be held to maturity (or for a longer

period) or positions which are not tradable on liquid markets;

•Commercial - Management of positions arising from commercial activity with Customers;

•Structural - Management of balance sheet items or operations which, due to their nature, are not

directly related to any of the management areas referred to above; and

•ALM - Assets and Liabilities Management.

The definition of these areas allows for an effective management separation of the trading and banking

books, as well as for the correct allocation of each operation to the most suitable management area,

according to its respective context and strategy.

In order to ensure that the risk levels incurred in the different portfolios of the Group comply with the

predefined levels of tolerance to risk, various market risks limits are established, at least yearly, being

applicable to all portfolios of the risk management areas over which the risks are incident. These limits

are monitored daily (or intra-daily, in the case of financial markets) by the Risk Office.

Stop Loss limits are also defined for the financial markets’ areas, based on multiples of the risk limits

defined for those areas, aimed at limiting the maximum losses that might occur. When these limits are

reached, a review of the strategy and of the assumptions relative to the management of the positions in

question is mandatory.

Trading Book market risks13

The Group uses an integrated market risk measurement that allows for the monitoring of all risk subtypes

that are considered relevant. This measurement includes the assessment of the following types of risk:

general risk, specific risk, non-linear risk and commodity risk. Each risk subtype is measured individually

using an appropriate risk model and the integrated measurement is built from the measurements of each

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13 Positions assigned to the Trading Management Area (not specifically included in the accounting trading book).

subtype without considering any kind of diversification between the four subtypes (worst-case scenario

approach).

For the daily measurement of general market risk (relative to interest rate risk, exchange rate risk,

equity risk and price risk of credit default swaps) a VaR (value-at-risk) model is used, considering a time

horizon of 10 business days and a significance level of 99%.

For non-linear risk, an internally developed methodology is applied, replicating the effect that the main

non-linear elements of options might have in P&L results of the different portfolios in which these are

included, similarly to what is considered by the VaR methodology, using the same time horizon and

significance level.

Specific and commodity risks are measured through standard methodologies defined in the applicable

regulations, with an appropriate change of the time horizon considered.

The table below presents the amounts at risk for the Trading Book, in December 31, 2020 and December

31, 2021, as measured by the methodologies referred to above:

(Thousand euros)

Dec 21

Dec 20

GENERIC RISK (VaR)

1,533

3,863

Interest rate risk

1,432

3,770

FX risk

469

341

Equity risk

274

318

Diversification effects

(642)

(567)

SPECIFIC RISK

NON-LINEAR RISK

COMMODITIES RISK

—

GLOBAL RISK

1,568

3,882

VaR model monitoring and validation

In order to check the appropriateness of the internal VaR model for the assessment of the risks involved

in the positions held, several validations are conducted over time, of different scopes and frequency,

which include back testing, the estimation of the effects of diversification and the analysis of the

comprehensiveness of the risk factors.

The VaR model’s hypothetical backtesting exercise for the Portugal’s Trading Book, during 2021, resulted

in nil negative excesses (and nil positive) over the results predicted by the model in 259 days of

observation. Hence, in terms of the frequency of excesses verified, the back-testing results validate the

model as appropriate for measuring the risk at stake.

Trading Book Stress Tests

As a complement to the VaR assessment, the Group continuously tests a broad range of stress scenarios,

analysing the respective results with a view to identifying risk concentrations that have not been

captured by the VaR model.

The results of these tests on the Group's Trading Book, as at December 31, 2021, in terms of impacts over

this portfolio’s results, were the following:

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(Thousand euros)

Negative impact scenario

Impact

STANDARD SCENARIOS

Parallel shift of the yield curve by +/- 100 b.p.

+ 100 b.p.

-7,980

Change in the slope of the yield curve (for maturities from 2 to

10 years) up to +/- 25 b.p.

+ 25 b.p.

-1,554

4 combinations of the previous 2 scenarios

+ 100 b.p. & + 25 b.p.

-9,367

+ 100 b.p. & - 25 b.p.

-6,555

Variation in the main stock market indices by +/- 30%

+30%

-680

Variation in foreign exchange rates (against the euro) by +/-

10% for the main currencies and by +/- 25% for other currencies

-10%, -25%

-1,679

Variation in swap spreads by +/- 20 b.p.

- 20 b.p.

-493

NON-STANDARD SCENARIOS

Widening/narrowing of the bid-ask spread

Widening

-79

Significant vertices (1)

VaR w/o diversification

-1,391

VaR w/ diversification

-743

Historical scenarios (2)

May 7, 2010

-937

July 18, 2011

-1,533

(1) Scenarios in which the more adverse variations of the last seven years, relative to the portfolio's five most significant risk factors for

VaR, are applied to the current portfolio.

(2) Scenarios in which past extreme markets variations are applied to the current portfolio; in this case, the significant dates refer to the

Eurozone Sovereign Debt crisis (from 2010 onward)

These results show that the exposure of the Group’s trading book to the different risk factors considered

remains relatively limited and that the main adverse scenario to be taken into account refers to a general

increase in interest rates, especially when accompanied by an increase in the slope of the yield curve

(the case of a higher increase in longer terms than in shorter terms). In what concerns the non-standard

scenarios, the main loss case refers to the variations occurred as at 18 July 2011 when applied over the

current portfolio.

Interest rate risk in the Banking Book

The interest rate risk arising from the Banking Book operations is assessed by the Bank in two

complementary ways: the portfolio’s economic value method (EVE) and the financial margin sensitivity

method (NII), through a risk sensitivity analysis carried out every month, for the universe of operations

included in the consolidated balance sheet of the Group, broken down by the currency of exposure.

Variations of market interest rates influence the Group's net interest income and the economic value of

the Group, both in the short term – affecting the Bank’s NII – and in the medium/long term, affecting the

balance sheet economic value (EVE method).

The main risk factors arise from the repricing mismatch of the portfolio positions (gap risk) which may

cause direct or indirect financial losses in the Banking Book, due to changes in interest rates that have

different impacts over assets and liabilities’ classes, making the Bank vulnerable to variations of the yield

curve. In turn, the changes in interest rates may alter the behaviour profile of Clients, inducing pre-

payments/withdrawals in assets and liabilities, including the exercise of options’ rights incorporated in

the products’ design (behavioural and optional risk). Additionally, although with less impact, there is the

risk of unequal variations in different reference rates with the same repricing period (basis risk).

In order to identify the exposure of the Group's Banking book to these risks, the monitoring of the interest

rate risk takes into consideration the financial characteristics of each of the relevant contracts, with the

respective expected cash-flows (principal and interest, without the spread component but including cost

components for liquidity, capital, operations and other) being projected according to the repricing dates,

thus calculating the impact on economic value resulting from alternative scenarios of change of market

interest rate curves. The impacts stemming from the Clients’ behaviour are also considered, in particular,

for the products for which this is especially relevant – namely, for products without defined term

(checking accounts, revolving credit) – as well as the impacts resulting from changes in contractual cash

flows (credits prepayments) and impacts of any potential prepayments on credits with defined maturity.

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The result of this analysis for a +100 b.p. change in the level of the Euro interest rates (for all maturities,

i.e. assuming a parallel shift of the yield curve), in the Banking Book portfolio as at December 31, 2021

consists of a positive impact on the balance sheet’s economic value of around 100.7 million euros. On the

other hand, the impact of a generalized drop in Euro rates of -100 b.p. and considering a floor of 0% for

the cash flows discount rate, would be around -52 million euros.

Complementing the previous approach, the Bank calculates monthly the impact on net interest margin

projected for the following 12 months, due to changes in market interest rates (NII method). For this

purpose, all assets, liabilities and off-balance products that generate interest are considered and the

calculation of interest cash flows is performed based on the repricing and amortization characteristics of

the products and on yield curves for 12 months. This exercise assumes a static balance for 12 months in

which, for each amortization, an exposure with the same features of original maturity and price is

generated. To capture the net interest margin sensitivity, several simulations are processed,

corresponding to 10 different scenarios of the market’s interest rates evolution.

Considering a variation in market interest rates combined with the scenario for the coefficients that

transmit the market variations over the deposit´s rates and other interest-generating liabilities ('betas'),

the evolution of the sensitivity of the net interest margin is assessed. Hence, for a variation in interest

rates of +100 b.p. on December 31, 2021, on a consolidated basis, the net interest income would increase

by around 175 million euros, with the sensitivity to a decrease of 100 b.p. of about -115 million euros.

FX and equity risks of the Banking Book

The exchange rate risk of the Banking book is transferred internally to the Trading area, in accordance

with the risk specialisation model followed by the Group for the management of the exchange rate risk of

the Balance Sheet. The exposures subject to exchange rate risk that are not included in this transfer – the

financial holdings in subsidiaries, in foreign currency - are hedged on a case-by-case basis through market

operations, taking into consideration the defined policy and the conditions and availability of

instruments.

As at December 31, 2020, the Group’s holdings in convertible foreign currency were fully hedged. On a

consolidated basis, these hedges are identified, in accounting terms, as ‘Net investment hedges’, in

accordance with the IFRS nomenclature. On an individual basis, hedge accounting is also carried out,

through a ‘Fair Value Hedge’ methodology, I this case.

Excluding the financial holdings from the participations in the foreign subsidiaries, the exposure to FX risk

is quite limited, corresponding to 0.34 million euros in terms of VaR, as at December 31, 2020.

Regarding equity risk, the Group maintains a set of small size and low risk equity positions, essentially in

the investment portfolio, which are not held for trading purposes. The management of these positions is

carried out by a specific area of the Group, with the respective risk being controlled on a daily basis,

through the indicators and limits defined for market risks’ control.

Liquidity risk

Liquidity risk consists of the Group's potential inability to meet its financing repayment obligations

without incurring significant losses, either due to onerous financing conditions (funding risk) or by selling

assets at lower than market values (risk of market liquidity).

The Consolidated Liquidity Plan, which forms an integral part of the annual budgeting process and is

formulated at the level of the Group and for the main subsidiaries, includes the projection of the

wholesale funding structure, including the use of market financing, and also the forecast of the internal

and regulatory liquidity indicators, ensuring its compliance with the regulatory and internally defined

requirements. The preparation of this plan is coordinated by the Group Treasurer, and its execution is

continuously monitored throughout the year, with the respective revision being carried out whenever

necessary.

The year 2021 showed a very significant growth in the deposit bases of the Group's operations in Portugal

and Poland, mainly supported by growth in the retail segment, continuing the trend that began to take

shape soon after the outbreak of the COVID-19 crisis in March 2020.

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After the ECB's decision to extend the use of the Targeted Longer-Term Refinancing Operation III (LTRO

III, “T LTRO III” in the English abbreviation) to 55% of eligible loans, BCP reinforced its medium-long-term

financing component in the first quarter of 2021 through an additional borrowing of 600 million euros, in

addition to the 7,550 million euros taken in June 2020, thus bringing the total gross amount taken in that

instrument to 8,150 million euros.

Within the scope of its Strategic Plan 2021-24, in order to comply with the requirements known as

“MREL” (Minimum Requirements for Own Funds and Eligible Liabilities), BCP took advantage from market

conditions prevailing during the first quarter of 2021 to anticipate the execution of a senior preferred

issue in the amount of 500 million euros, foreseen in that plan for the third quarter of 2021.

At the end of the third quarter, BCP returned to the market, under its Euro Note Program, placing an

inaugural issue of 500 million euros by a Portuguese issuer of senior preferred social debt securities in the

ESG (Environmental, Social and Governance) segment), focusing in this case on the social component.

Thus, under the terms of its Green, Social and Sustainability Bond Framework, the net proceeds from the

issuance are primarily intended for the financing and/or refinancing of loans granted by the Bank under

the COVID-19 lines, constituting a demonstration of the commitment assumed by the Bank in supporting

the economy, specifically in financing micro, small and medium-sized enterprises most affected by the

recent pandemic context. The issuance has a term of 6.5 years, with an option for early repayment by

the Bank at the end of 5.5 years, and involved a diverse set of European institutional investors, many of

whom are committed to ESG investments.

Also in line with the strategy of continuously optimizing its capital structure, strengthening its own funds

and its base of eligible liabilities to meet the “MREL” requirements, the Bank issued in November

subordinated debt in the amount of 300 million euros, eligible as Tier 2 own funds, with a maximum term

of 10.5 years and with the option of early repayment by the bank at any time in the six months following

the end of the 5th year.

The liquidity generated by the operations described above, in addition to that resulting from the

sustained reduction in the commercial gap in Portugal, mainly due to the growth in deposits from retail

customers, continued to be applied to support the real economy and also, given its materiality, to

reinforce by 2.8 billion euros in the public debt securities in Portugal and an increase of 2.1 billion euros

(to 6.4 billion euros) in reserves deposited with the Bank of Portugal.

The following table illustrates the WSF structure (net) as of December 31, 2020 and December 31, 2021,

in terms of the relative weight of each of the instruments used:

Dec 21

Dec 20

Change in weight

Money Market

3.5%

6.0%

-2.5%

ECB

28.0%

48.1%

-20.1%

Private Placements

0.0%

REPOS

0.0%

0.6%

-0.6%

Loan Agreements

7.4%

8.2%

-0.8%

EMTN

16.2%

0.8%

15.4%

Covered Bonds

16.2%

14.6%

1.5%

Subordinated Debt

28.8%

21.6%

7.1%

Total

100.0%

The financing decisions described above resulted in increases in the weight of EMTN (senior preferred),

from 0.8% to 16.2%, and subordinated debt, from 21.8% to 28.8%, offset by a reduction in the ECB's net

funding, from 48.1% to 28,0%, among other minor variations.

Focused mainly on sovereign debt portfolios, placements in securities contributed to an increase of 3.0

billion euros in the balance of eligible assets (after haircuts) available for discount at the ECB, to 25.5

billion euros. Taking in account that net funding with the ECB, in the same period, fell by 1.6 billion

euros, to 1.7 billion euros, the discountable liquidity buffer with the ECB increased by 4.6 billion euros,

to 23.8 billion euros, as shown in the chart:

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The ECB's response to the COVID-19 crisis involved, in addition to providing additional liquidity to the

banking system through the creation of the aforementioned LTRO III, a transversal reduction of haircuts

applicable to all types of assets eligible for discount, in the case of portfolios of credit rights on a

permanent basis. Unless otherwise decided by that entity, the temporary measures should be in force

until June 30, 2022, and their reversal is not expected to have material consequences on the size of the

buffer held by the BCP with the ECB, given its current magnitude.

Throughout 2021, the liquidity positions of Bank Millennium (Poland) and Bim (Mozambique), the two

main subsidiaries of BCP, continued to show their robustness, mainly through the reinforcement of retail

deposits, allowing their liquidity buffers at the respective central banks to remain at a high level. As a

result, both have globally positioned themselves in the comfort zone of the liquidity risk indicators

adopted across the Group, as well as in all regulatory indicators.

The Group's counterbalancing capacity is defined by the ability to generate additional liquidity in the

short term to deal with possible situations of financial stress. The measures for its reinforcement are

described in the Recovery Plan which, as at 31 December 2021, had a total estimated value for Portugal

of 2.3 billion euros, with the following origins: sale of corporate bonds, securitization of a portfolio

consumer credit and own issuance of mortgage bonds to be mobilized for the ECB's monetary policy pool.

In consolidated terms, the refinancing risk of medium to long-term instruments will remain at very low

levels in the coming years. Excluding the LTRO III refinancing, the annual amount to be refinanced over

the next five years will only reach 1.0 billion euros in 2022, with the payment of a mortgage bond issue at

that exact amount. Even in this case, the collateral released after repayment will be integrated into the

cash-discountable liquidity buffer at the ECB, without significant loss of liquidity.

The conclusions of the ILAAP process reiterate the adequacy of the liquidity and risk management process

in force in the Group to meet its commitments, as well as the compliance of its practices with the

requirements defined by the supervision.

Liquidity risk control

The Group controls its liquidity profile from a structural and short-term perspective through regular

monitoring of a set of internal and regulatory indicators, with identification of the factors underlying the

variations that occur.

The Liquidity Coverage Ratio (LCR), on a consolidated basis, stood at 269% at the end of December 2021,

comfortably above the minimum requirement of 100%, supported by a solid highly liquid assets portfolio.

The Liquidity Coverage Ratio stood significantly above the one on the same date of the previous year

(230%) which already reflected a high coverage level.

Consistently with the BCBS' stable funding standard came into effect in June 2021 the minimum

regulatory requirement of 100% for the NSFR (Article 428 of Regulation (EU) 2019/876). The Group

reinforced its stable funding base, characterized by the large share of customer deposits in the funding

structure, supplemented by collateralized financing and medium and long-term instruments, which

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enabled the stable financing ratio (Net Stable Funding Ratio or NSFR) as at December 31, 2021 to stand at

150% (140% as at December 31, 2020).

Pension Fund risk

This risk arises from the potential devaluation of the assets of the Fund associated with the Defined

Benefit Plan or from the reduction of its expected returns as well as from actuarial differences that may

occur from the evolution of demographical factors, in relation to the actuarial assumptions considered.

Confronted with such scenarios, the Group may have to make unplanned contributions in order to

maintain the benefits defined by the Fund. The responsibility for the regular monitoring of this risk and

the follow-up of its management lie with the Pension Funds Risk Monitoring Commission.

In 2021 the BCP Group Pension Fund had a net performance in commissions of 1.92%.

The Share Stock portfolio made a positive contribution to this performance, namely in the European

components, where there was a 10% appreciation and international components with an appreciation

above 20%.

It is also worth mentioning the total sale, at the end of the year, of the position in Achmea and its

replacement by exposure to the European index.

In terms of allocation to equities, it should be noted that the fund started from a very conservative base

at the beginning of the year, having proceeded to the repositioning of the fund to an over-exposure

position during the 1st quarter, a position that was maintained throughout the year with a preference for

European and North American markets.

The Real Estate investment portfolio made a positive contribution to the overall performance, registering

an increase of 4%.

The Bonds portfolio recorded a negative performance, both in fixed and variable rates, as a result of the

increase in yields throughout the year, despite the tactical positioning of maintaining a less duration

when compared to the respective benchmark. It is also worth noting the preference for the periphery in

the context of Public Debt, which was replaced in the second half of the year by an increase in exposure

to core and semi-core markets.

The evolution of market interest rates in 2021 led to the need to update the discount rate to clear the

Fund's liabilities. Thus, the current discount rate was changed from 1.05% in December 31, 2020, to

1.45% on June 30, 2021 and to 1.35% on December 31, 2021. On that date, the coverage of the pension

fund's liabilities had an excess of around 228 million euros.

Models validation and monitoring

This function is ensured by the Models Monitoring and Validation Office (GAVM), reporting to the Chief

Risk Officer.

GAVM acts as the second line of defence, within the scope of model risk management framework,

functionally independent from the areas that are responsible for the models (model owners and

developers) and from the Internal Audit Division. Hence, an adequate functions’ segregation is assured.

Its mission consists in monitor and validate risk quantification methodologies and internal models used in

BCP and other Group entities in Portugal, as well as to independently ensure the assessment of the

quality and adequacy of the risk management framework in what concerns internal models, metrics and

completeness of the associated data, according to the Model Risk Management (MRM) framework.

GAVM’s scope of action encompasses, inter alia, the validation of the methodologies and internal models

for credit risk (including Probability of Default (PD), Loss given Default (LGD), Credit Conversion Factors

(CCF) and Expected Credit Loss (ECL) models), market risk (in the trading book), interest rate risk in the

banking book and for the risks included in the ICAAP, as well as the regular monitoring of their

performance and evolution. The results of the monitoring and validation exercises are reported to the

Models Monitoring and Validation Sub-Commission and to the Risk Commission. Additionally, GAVM

participates in the Risk Assessment Committee (CAvR) to report the unit’s activity.

Besides the activities directly related with the monitoring and validation of models, in terms of their

performance and quality, GAVM is responsible for the coordination of the model risk management (MRM)

activities, including the maintenance of a complete repository of the models used by the Bank and its

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permanent monitoring and updating through the use of a model management and risk assessment tool

implemented at the Bank to support the MRM framework.

In 2021, several actions were carried out to monitor and validate the internal models in use by the Bank,

including the regulatory report of the templates on the validation results of the credit risk internal

models, according to the ECB instructions “Instructions for reporting the validation results of internal

models”. These actions aim, inter alia, to reinforce the confidence in the models, to monitor their

performance and evolution, verifying their business adequacy and their compliance with applicable

regulatory requirements and best practices, as well as to reinforce the identification and adaptability to

changes in their predictive quality.

Within the scope of models’ validation, a highlight is made to the initial validation’s exercises performed

in 2021 of the new credit risk internal models concerning the PD models for the Retail, Corporate and

Real Estate Promotion segments, and the LGD models applicable to the Retail and Corporate segments,

whose model’s material changes’ applications were submitted to the European Central Bank (ECB) in the

last quarter of 2021. The subsequent validations regarding the credit risk internal models in production

concerning the PD models for the Retail, Corporate and Real Estate Promotion segments, the Slotting

Criteria model applied to Project Finance and the LGD models applicable to Retail and Corporate

segments were also performed. It is noteworthy the validation made to the CCF model applicable to the

Retail and Corporate segments, the validation’s exercises performed to the internal market risk model

and the validation activities performed within the scope of the ICAAP risk’s quantification.

GAVM has the responsibility to maintain a robust and documented validation process for internal risk

methodologies and models, in line with current regulations. For this, it develops and applies validation

procedures and methodologies capable of ensuring proper model assessments and the alignment with the

applicable regulatory requirements, by reinforcing (i) the scope of validation exercises, (ii) the depth of

analysis and (iii) the transparency and auditability of the work performed.

As part of the model’s monitoring activities, GAVM also ensured, among others, the quarterly report to

the Risk Commission regarding the performance and quality of the internal models used under the IRB and

IMA approaches for, respectively, credit and market risk, as well as the reporting of the 2021 regulatory

Credit Risk Benchmarking exercise promoted by EBA.

Recovery Plan

Complying with the applicable law - Directive 2014/59/EU and its transposition to the Regime Geral das

Instituições de Crédito e Sociedades Financeiras (RGICSF) through Decree-Law 23-A/2015, from the 26th

of March – the Group annually revises the Recovery Plan for its business and activities, in which a large

set of key indicators are defined; these are permanently monitored, allowing for immediate management

action whenever there are deviations that exceed pre-defined thresholds (also defined in the Plan), the

report of which, to the Group’s management and Supervision Bodies, is mandatory.

From the strategic analysis and the establishment of possible scenarios for the business evolution and the

external environment and from the modelling of all appropriate variables, metrics and scenarios

considered, the business evolution is permanently monitored within the scope of the Recovery Plan and

its respective indicators.

The priorities, responsibilities and specific measures to be taken in a capital and/or liquidity contingency

situation are defined by the Recovery Plan, which complements the Early Warning Signals (EWS) system,

for the anticipation of the occurrence of possible crises, namely, of liquidity. Simultaneously, the

Recovery Plan contains a ‘playbook’, intended to provide key information for rapid decision-making in a

crisis.

The Recovery Plan includes components of Bank Millennium’s Recovery Plan (Poland) and information

from Millennium bim’s Recovery Plan (Mozambique). It is aligned with the definition of the business

continuity framework and its respective plans (see the Operation Risk section), the Communication Plan –

towards the market and stakeholders (in contingency situations) and the results from the capital and/or

liquidity adequacy assessment processes already mentioned (ICAAP e ILAAP).

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Ratings assigned to BCP

During 2021, there was a recovery in Portugal,

although pre-COVID-19 pandemic levels have not

yet been reached. The measures implemented to

contain the spread of the pandemic and lessen

the economic and social impacts were globally

successful. GDP recorded an acceleration of

growth to 4.9% in 2021, year on year. There was a

recovery in terms of the external position and

budgetary position, with a budget deficit of 4.3%

of GDP being expected in 2021. Additionally, the

Portuguese economy continues to record a level

of public debt as a percentage of GDP above

average of the Eurozone.

Noteworthy is the stability of public debt

sustainability, recognized through the

maintenance of the Portuguese Republic's rating

and Outlook by three rating agencies and by the

rating upgrade in September 2021 by a rating

agency: Moody's from Baa3 to Baa2.

Portuguese banks continued to develop their

activity in a challenging context during 2021, with

the ECB keeping interest rates at historically low

levels, despite the fact that at the end of the

year there was a resurgence of inflationary

pressures and there are signs that it may not be a

cyclical phenomenon. This environment

conditions the evolution of net interest income in

Portugal. However, and in some cases, the

negative impact on the margin was offset by long-

term refinancing operations (TLTRO III) by the

ECB, trading gains and the continued reduction in

operating costs.

It is also worth noting the progress achieved in

recent years in improving the quality of

Portuguese banks' assets - through the reduction

of NPE -, as well as the reinforcement of capital

and liquidity, allowing favourable perspectives

regarding the performance of the Portuguese

banking sector even in a challenging context.

Despite the reduction of problem assets on the

part of Portuguese banks, these still have high

values on their balance sheets, remaining,

alongside profitability and capitalization levels,

one of the main concerns of rating agencies.

In 2021, some rating agencies took rating actions

on BCP:

On September 21, 2021, Moody's upgraded BCP's

deposit rating from Baa3/Prime-3 to Baa2/

Prime-2. This rating action was prompted by the

upgrade of Portugal's public debt rating to Baa2

from Baa3 on 17 September 2021.

On October 11, Fitch Ratings revised the Outlook

for BCP's long-term issuer rating (IDR) from

Negative to Stable and affirmed the long-term

issuer rating (IDR) at "BB" and the viability rating

(VR ) in "bb".

These actions by the Rating agencies reflect the

persistence of some risks, such as the legal risk

associated with the loan portfolio denominated in

CHF in Poland, the still high stock of NPEs (some

uncertainty regarding the evolution of the

defaults) and the moderate levels, in relative

terms, of capitalization levels.

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Moody’s

Standard & Poor's

Baseline Credit Assessment

ba2

Stand-alone credit profile(SACP)

Adjusted Baseline Credit Assessment

Ba2

Counterparty Risk Assessment LT/ ST

Baa2(cr)/ P-2(cr)

Resolution Counterparty Credit Rating LT/ ST

BBB-/A-3

Counterparty Risk LT / ST

Baa2/P-2

Issuer Credit Rating LT/ ST

BB/B

Deposits LT / ST

Baa2/ P-2

Senior Debt

Ba1 /NP

Senior Non Preferred

B+

Senior Non Preferred

Ba3

Outlook

Stable

Outlook deposits / senior

Stable

Subordinated Debt - MTN

(P)Ba3

Subordinated Debt

Ba3

Additional Tier 1

CCC+

Additional Tier 1

B2(hyb)

Other Short Term Debt

P(NP)

Covered Bonds

Aa2

Rating Actions

On September 21, 2021, Moody's upgraded BCP's deposit rating

from Baa3/Prime-3 to Baa2/Prime-2. This rating action was

prompted by the upgrade of Portugal's public debt rating to Baa2

from Baa3 on 17 September 2021.

Fitch Ratings

DBRS

Viability Rating

Intrinsic Assessment(IA)

BBB(Iow)

Support

Critical obligations

BBB (high) / R-1 (low)

Support Floor

No Floor

Deposits LT/ ST

BB+/B

Deposits LT/ST

BBB/R-2 (high)

Senior Debt LT/ST

BB/B

Senior Debt LT/ ST

BBB (low)/ R-2 (middle)

Senior Non Preferred

BB-

Senior Non Preferred

BB (high)

Outlook

Stable

Trend

Negative

Subordinated Debt Lower Tier 2

B+

Dated Subordinated Notes

Additional Tier 1

B-

Additional Tier 1

Covered Bonds

BBB+

Covered Bonds

Rating Actions

On October 11, 2021, Fitch Ratings revised the Outlook for BCP's

long-term issuer rating (IDR) from Negative to Stable and affirmed

the long-term issuer rating (IDR) at "BB" and the viability rating

(VR ) in "bb".

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Capital

The estimated CET1 ratio as at 31 December 2021 stood at 11.7%, compared to the 12.2%, reported in the same

period of 2020, both phased-in and fully implemented and above the minimum ratios defined on the scope of SREP

(Supervisory Review and Evaluation Process) for the year 2021 (CET1 8.828%, T1 10.750% and Total 13.313%).

The evolution of capital ratios in the period was significantly impacted by the increase in provisioning for legal

risks associated with foreign currency loans of Bank Millennium in Poland, as well as by changes in the recognition

of non-controlling interests in own funds, partially offset by the good performance of the activity in Portugal.

Therefore, the CET1 ratio decreased from the figure presented in the same period of 2020, standing below the

bank's medium-term goals, without jeopardizing the prospect of convergence towards such goals.

SOLVABILITY RATIOS

(Euro million)

31 Dec. 21

31 Dec. 20

31 Dec. 21

31 Dec. 20

PHASED-IN

FULLY IMPLEMENTED

OWN FUNDS

Common Equity Tier 1 (CET1)

5,373

5,657

5,375

5,651

Tier 1

5,882

6,194

5,884

6,187

TOTAL CAPITAL

7,213

7,212

7,247

7,213

RISK WEIGHTED ASSETS

45,933

46,413

45,863

46,322

CAPITAL RATIOS (*)

CET1

11.7%

12.2%

11.7%

12.2%

Tier 1

12.8%

13.3%

12.8%

13.4%

Total

15.7%

15.5%

15.8%

15.6%

(*) Includes the cumulative net income recorded in each period.

2021 REPORT & ACCOUNTS

166 |

Pension Fund

The liabilities assumed by the Group Banco Comercial Português with pensions on retirement and other benefits

are related with the payment to Employees of pensions on retirement, permanent disability pensions and widow

and orphan benefits.

As at 31 December 2021, the Group’s liabilities stood at 3,498 million Euros, comparing to 3,658 million Euros at

the end of previous year. The Pension Fund’s assets which are financing the above mentioned liabilities reached

3,700 million Euros by the end of 2021 (3,751 million Euros as at 31 December 2020).

As at 31 December 2021 and 31 December 2020, the main asset categories in the Pension Fund’s portfolio

presented the following distribution:

STRUCTURE OF THE PENSION FUND’S ASSETS AS AT 31 DECEMBER 2021

(xx%) Proportion as at 31 December 2020

As at 31 December of 2021, the structure of the Pension Fund's asset portfolio shows, when compared to the end

of previous year, a reduction in the bonds and other fixed income securities category, in contrast to the increase

verified in exposure to participation units in investment funds. It is worth to highlight that in December 2021, the

Pension Fund sold a 2.73% stake in the Dutch unlisted insurance group "Achmea BV", whose valuation amounted to

104 million Euros as at 31 December 2020.

The actuarial assumptions considered by the Group for calculating the liabilities with pension obligations were

based on market indicators, particularly long-term debt yield of Euro Zone issuers considered to be at good risk, as

well as the demographic characteristics of its employees. The main actuarial assumptions used to determine the

Pension Fund’s liabilities for the year ended in 2020 and 2021 are shown below:

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ASSUMPTIONS

31 Dec. 21

31 Dec. 20

31 Dec. 19

Discount rate

1.35%

1.05%

1.49%

Increase in future compensation levels (a)

0.75%

Rate of pensions increase (a)

0.50%

Projected rate of return on fund's assets

1.35%

1.05%

1.40%

Mortality tables

Men

TV 88/90

Women (b)

TV 88/90 - 3 years

Disability rate

Not applicable

Turnover rate

Not applicable

Normal retirement age (c)

66 years and 5 months

66 years and 4 months

Total salary growth rate for Social Security purposes

1.75%

Revaluation rate of wages / pensions of Social

Security

1.00%

(a) This rate refers to the growth for the years following the reporting year. For 2021, an update of the salary table was

incorporated, consistent with the proposal that the Group intends to make to the Bank's employees representative trade unions,

in the context of the ongoing salary negotiations.

(b) The mortality table considered for women corresponds to TV 88/90 adjusted in less than 3 years (which implies an increase

in hope life expectancy compared to that which would be considered in relation to their effective age).

(c) Retirement age is variable. The normal retirement age increases one month for each civil year and cannot be higher than the

normal retirement age in force in the General Social Security Regime (RGSS). The normal retirement age in the RGSS is variable

and depends on the evolution of the average life expectancy at 65 years of age. For 2021, the retirement age is 66 years and 6

months, for 2022 it is 66 years and 7 months. For 2023, due to the evolution of the average life expectancy at 65 years in

Portugal and, consequently, the reduction of the normal retirement age in RGSS, the estimate of the normal retirement age was

reduced to 66 years and 4 months. For the projection of life expectancy’s increment it was considered an increase of one year in

every 10 years, with the maximum retirement age being set at 67 years and 2 months.

The actuarial differences recorded at the end of the year 2021 were positive by 135 million Euros, before taxes

(negative in 89 million Euros, before taxes, as at 31 December 2020) and include 167 million Euros of actuarial

gains as a consequence of the increase in the discount rate from 1.05% as at 31 December 2020 to 1.35% as at 31

December 2021. The actuarial deviations recognised in 2021 also incorporate 25 million Euros of positive financial

deviations related to the pension fund’s return, in particular referring to the gap between the expected income

and the effective income of the Pension Fund, whose positive return rate of 1.92% exceeded the expected annual

rate of return considered in the actuarial assumptions (1.05% in the first half of 2021 and 1.45% in the second

half). Finally, negative deviations of 58 million Euros were also recorded as a result of differences between

expected and actual liabilities.

The main indicators of the Pension Fund over the last three financial years are as follows:

MAIN INDICATORS

31 Dec. 21

31 Dec. 20

31 Dec. 19

Liabilities with pensions

3,498

3,658

3,490

Minimum level of liabilities to cover*

3,445

3,596

3,431

Value of the Pension Fund

3,700

3,751

3,501

Coverage rate

105,8%

102,5%

100,3%

Coverage rate of the minimum level of liabilities*

107,4%

104,3%

102,0%

Return on Pension Fund

1,9%

5,8%

8,1%

Actuarial (gains) and losses

(135)

285

* According to the Bank of Portugal requirements (assuming the application of the minimum requirement to all Group companies)

As of 31 December 2021, the Group’s responsibilities showed a 105.8% coverage level, being funded at a higher

level than the minimum set by Banco de Portugal.

It should also be noted that in 2021, negotiations continued with all the unions subscribing to the Group's

Collective Labour Agreements, for the conclusion of the full review of the respective clauses, negotiations which

are still ongoing.

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168 |

Regarding the 2021 update of the Salary Tables and other pecuniary expression clauses of the Collective Labour

Agreements under negotiation, the Bank received on 17 February 2021 a proposal from SNQTB – Sindicato Nacional

dos Quadros e Técnicos Bancários, SIB – Sindicato Independente da Banca and SBN – Sindicato dos Trabalhadores do

Sector Financeiro de Portugal and on 30 March 2021 a proposal from Mais Sindicato do Sector Financeiro and SBC –

Sindicato Bancários do Centro, for which the Bank has not formally presented any counter-offer to date.

2021 REPORT & ACCOUNTS

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Information on trends

Framework

The year 2021 was marked by the recovery of

economic activity, with GDP growing by 4.9% year-

on-year. The unemployment rate remained at low

levels. There was also a recovery in terms of the

external position and budgetary position, with a

budget deficit of 4.3% of GDP expected in 2021.

Despite the crisis caused by the COVID-19

pandemic, Portuguese banks continued to improve

asset quality, liquidity and capitalization levels and

have more efficient cost structures.

At the European level, with a view to accelerating

economic recovery, an extraordinary package of

European funds (NextGeneration EU) was approved

in July, totalling 750 billion euros, distributed

between grants and loans, which will run between

2021 and 2023 and which will be financed through

the issuance of European debt.

In February 2022, Russia invaded Ukraine. A further

escalation of the Russia-Ukraine conflict would

jeopardize Europe's economic recovery. High

geopolitical risks are unequivocally negative for

economic activity and generate an inflationary

environment. The magnitude of the effects will

depend on the duration and severity of the crisis.

Impact on the Group's activity

The current economic and social context presented,

in 2021, a set of challenges for the development of

the Bank's activity.

Notwithstanding the recent trend of maintaining

interest rate levels at historically low values - in

many cases, negative values - a growth in the

Group's net interest income is projected in 2022. In

Portugal, net interest income growth will continue

to be progressively impacted by the reduced

positive impact of TLTRO III, which should be offset

by the expected growth in volumes, with special

emphasis on new mortgage credit production. There

is also some expectation regarding the ECB's

reaction, should the inflationary environment

persist.

In the international activity, with a special focus on

the Polish operation, the rise in the reference

rates, which took place at the end of 2021 and

which should continue in 2022, together with the

strong growth of new mortgage credit production,

should be the main guideline for the growth of the

net interest income of Bank Millennium, in 2022.

Commissioning levels have been subject, in recent

years, to strong regulatory limitations, particularly

in the Portuguese operation, creating a constraint

on their contribution to the Group's profitability.

However, there was a review of the pricing of

commissions in some Portuguese banks, with

implications in 2022. The Bank has promoted the

transfer of Customer resources from on-Balance

Sheet to off-Balance Sheet, offering more

profitable alternatives of remuneration for savings

of Customers. The Bank has also focused on the

development and improvement of digital solutions

to increase/improve the offer of services related to

the financial markets. However, bank commissions

should also have a relevant performance in view of

the expected increase in the volumes of credit

granted. An increase in commissions in the Group is

expected for 2022, both in the activity in Portugal

and in the international activity.

The optimization of efficiency levels and the

consolidation of the Bank's position as one of the

most efficient in the Euro Zone are priorities that

will continue to shape the Bank's activity in the

future. In the same context, the digitalization

process that has been implemented, both in terms

of the Group's operations and the services provided

to Customers, will continue to be a priority in the

Group's strategy.

The cost of risk, one of the most relevant indicators

in the current context of the economic crisis caused

by the pandemic, should progressively converge to

the objective level of the Strategic Plan 2021-2024,

50 p.b.

Significantly reducing exposure to problem loans

has been one of the Group's main priorities.

However, with the end of the moratoriums, the

pace of implementation of this reduction should

moderate.

The implementation of public and private support

measures, with special emphasis on credit

moratoriums, had as main objectives to protect

Customers from the economic impacts caused by

the pandemic and the financial sector in the face of

a possible increase in exposure to NPE. Taking into

account the duration of the support granted, until

the end of December 2021, there was a migration

of some of these loans to stage 3. The loans in

arrears in stage 3 were situated at a level close to

twice the NPE ratio at the end of December 2021.

However, taking into account the rate of NPE

reduction presented by the Group recently, as well

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170 |

as the projections of net inflows, it is expected that

the new inflows will be offset by NPE sales and

write-offs.

The Group's commercial activity volumes are

expected to grow significantly in 2022, despite the

expectation that growth will be lower than nominal

GDP growth. It should be noted that the Strategic

Plan aims to increase the stock of loans to

individuals and the stock of loans to companies by 3

billion euros, in both cases, by the end of 2024.

MREL

On December 14, 2021, Banco Comercial

Português, S.A. was notified by Banco de Portugal,

as the national resolution authority, about the

establishment of its minimum requirement for own

funds and eligible liabilities ("MREL" or "Minimum

Requirement for own funds and Eligible Liabilities")

as decided by the Single Resolution Board. The

resolution strategy applied continues to be that of

a multiple point of entry ("MPE"), with three

different BCP Group resolution groups (in addition

to the BCP resolution group, the resolution groups

corresponding to (i) Bank Millennium, S.A. and its

subsidiaries and (ii) Banco Internacional de

Moçambique S.A. and its subsidiaries). The MREL

requirements to be met by BCP, on a consolidated

basis (taking as reference BCP’s resolution group,

which is composed of the Bank, Banco ActivoBank,

S.A. and all the subsidiary companies of BCP apart

from Bank Millennium S.A. and Banco Internacional

de Moçambique and their respective subsidiaries),

is of:

•23.79% of the total risk exposure amount

("TREA") (to which adds further a combined

buffer requirement ("CBR") of 3.5%, thus

corresponding to total requirements of 27.29%);

and

•7.23% of the leverage ratio exposure measure

("LRE").

The Bank's compliance with these requirements

must be ensured by 1 January 2024, with an

interim target set at 1 January 2022, by which BCP

must comply with a requirement of:

•18.17% of TREA (to which adds a further 3.25%

CBR requirement, thus corresponding to a total

requirements of 21.42%); and

•7.23% of the LRE.

No subordination requirements have been applied

to the Bank.

In accordance with the regulations in force, MREL

requirements must be updated or reconfirmed

annually, and therefore these targets replace

those previously set.

The MREL requirements, now communicated to the

BCP resolution group described above, are in line

with the 2021-24 Strategic Plan and are consistent

with its ongoing funding plan, and based on the

information available to date, the compliance with

the respective MREL requirements established for

January 1, 2022, both as a percentage of the TREA

(also including the applicable CBR) and as a

percentage of the LRE, are already ensured,

considering the senior preferred debt and

subordinated debt (Tier 2) issues carried out in

2021.

In November 2021, the Bank Millennium Group

received a joint decision of the Single Resolution

Board and the Bank Guarantee Fund, obliging the

Bank to meet the minimum requirements for own

funds and eligible liabilities (MREL). Pursuant to

this decision, the Group is required to meet the

minimum MREL requirement of 21.41% of the total

risk exposure amount ("TREA") and the MREL

requirement of 5.91%, calculated as a percentage

of the total exposure measure ("LRE"), by

December 31, 2023.

The decision also sets out a gradual path towards

reaching the minimum requirements. Their level

will be updated annually.

In connection with the above decision, in January

2022, the Supervisory Board of the Bank approved

the Eurobond Issue Program with a total nominal

value of no more than 3 billion euros.

Events that may impact foreign

currency-indexed mortgage loans legal

risk and related provision

Regarding mortgage loans indexed to Swiss francs

(CHF) granted by Bank Millennium, there are risks

related to verdicts issued by Polish courts in

lawsuits against banks (including Bank Millennium)

raised by borrowers of FX-indexed mortgage loans,

as well as risks related with the possible

application of a sector-wide solution, i.e. a

solution applied to all contracts (Swiss Franc-

denominated/indexed mortgage loans) in the

Polish financial sector. The Polish Financial

Supervisory Authority suggested a possible sector-

wide solution in December 2020, which has, since

then, been under consideration by Polish banks.

On 29 January 2021, a set of questions was

published addressed by the First President of the

Supreme Court to the Civil Chamber of the

Supreme Court, which may have important

consequences in terms of clarifications of relevant

aspects of the court rulings and their

consequences. The Civil Chamber of the Supreme

Court was requested to respond to certain

2021 REPORT & ACCOUNTS

|171

requirements related to FX-indexed mortgage

agreements: (i) is it permissible to replace -

through legal or customary provisions - the abusive

provisions of an agreement which refer to FX

exchange rate determination; moreover, (ii) in

case of the impossibility of determining the

exchange rate of a foreign currency in the

indexed/denominated loan agreement - is it

possible to keep the agreement in force in its

remaining scope; as well as, (iii) if, in case of

invalidity of the CHF loan agreement, the theory of

equity would be applicable (i.e., does a single

claim arise which is equal to the difference

between value of claims of bank and the

customer), or the theory of two conditions

(separate claims for the bank and for the client

that should be dealt with separately). The

Supreme Court was also requested to comment on

(iv) the determination of the moment from which

the limitation period should start counting in case

of a claim being filed by a lending bank for

repayment of borrowed amounts and, (v) whether

banks and consumers may receive remuneration on

their pecuniary claims on the other party arising

from the contract.

On 11 May, the Civil Chamber of the Supreme

Court requested opinions on Swiss franc mortgage

loans from five institutions, including the National

Bank of Poland, the Polish Financial Supervision

Authority, the Commissioner for Human Rights, the

Children's Rights Ombudsman and the Financial

Ombudsman.

The positions of the Commissioner for Human

Rights, the Children's Rights Ombudsman and the

Financial Ombudsman are in general favourable to

consumers, while the National Bank of Poland and

the Polish Financial Supervision Authority present a

more balanced position, including fair principles of

treatment of FX mortgage borrowers vis-à-vis PLN

mortgage borrowers, as well as balanced economic

aspects regarding solutions for the problem that

could be considered by the Supreme Court.

In the meeting of the Supreme Court that took

place on 2 September 2021, the Court did not

address the answers to the submitted questions

and no new meeting date is known. Bank

Millennium will assess in due time the implications

of the decisions of the Supreme Court on the level

of provisions for the legal risk.

In August 2021, CJEU was asked for a preliminary

ruling (C-520/21) whether, in the event that a loan

agreement concluded by a bank and a consumer is

deemed invalid from the beginning due to unfair

contract terms, the parties, in addition to the

reimbursement of the money paid in contracts

(bank - loan capital, consumer - instalments, fees,

commissions and insurance premiums) and

statutory interest for delay from the moment of

calling for payment, may also claim any other

benefits, including receivables in particular,

remuneration, compensation, reimbursement of

costs or valorization of the performance.

Notwithstanding the above, there are a number of

questions addressed by Polish courts to the

European Court of Justice which may be relevant

for the outcome of the court disputes in Poland.

The subject matter questions relate, in particular,

to:

- the possibility of replacing an abusive contractual

clause with a dispositive law provision;

- the limitation period of consumer claims

concerning reimbursement of benefits made as

performance of an agreement which has been

declared to be invalid;

- the possibility of declaration by the Court of

abusive nature of only part of a contractual

provision.

With the scope of settlements between Bank

Millennium and borrower following the loan

agreement being declared invalid is also connected

the legal issue related with the seven-person

composition of the Supreme Court (case sign: III

CZP 54/21). The date of case review has not been

specified yet.

The Supreme Court was also presented with the

issue of whether the loan agreement is a mutual

agreement in the light of the regulations

concerning retention right.

On 8 December 2020, Mr. Jacek Jastrzębski, the

Chairman of the Polish Financial Supervision

Authority (PFSA), proposed a sectoral solution to

address the sector risks related to FX-indexed

mortgages. The solution would consist in banks

offering to their clients a possibility of concluding

liability settlement agreements based on which a

client would conclude with the bank a settlement

as if the loan had been, from the very beginning, a

PLN-indexed loan, bearing interest at an

appropriate WIBOR rate, increased by the margin

historically employed for such loans.

Following that public announcement, the idea has

been the subject of consultations between banks

under the auspices of the PFSA and Polish Bank

Association. Banks are assessing the conditions

under which such a solution could be implemented

and the consequent impacts.

In the view of Bank Millennium’s Management

Board, important aspects to be taken into

consideration when deciding on potential

implementation of such program are: a) the

favourable opinion or, at least, non-objection from

important public institutions; b) support from the

National Bank of Poland (NBP) for the

implementation; c) level of legal certainty of the

settlement agreements to be signed with the

2021 REPORT & ACCOUNTS

172 |

borrowers; d) level of the financial impact on a

pre- and after tax basis; and e) capital

consequences, including regulatory adjustments in

the level of capital requirements associated with

FX-indexed mortgage loans.

Based on current information, some of the above

mentioned aspects are not likely to be fully

clarified and/or achieved.

At the time of publishing the Group’s Consolidated

Report, neither its Management Board nor any

other corporate body of Bank Millennium or of the

Bank has taken any decision regarding the

implementation of such a program. For this reason,

the potential effects of this matter were not

reflected in the determination of the provision. If,

or when, a recommendation regarding the program

is be ready, Bank Millennium’s Management Board

will submit it to the Supervisory Board and General

Shareholders’ meeting, taking into consideration

the relevance of such decision and its implications.

Bank Millennium conducted a survey among its

customers, in cooperation with an external

reputed company, regarding the willingness to

accept settlement in the terms of the sector

solution put forward by the Chairman of KNF. 49%

of clients enquired were preliminarily interested in

benefiting from the proposal, while 25% were not

able to clearly express their opinion and 26% would

not take such offer.

According to current calculations, implementation

of a solution whereby loans would be voluntarily

converted to PLN as if they had been a PLN loan

from the very beginning, bearing interest at an

appropriate WIBOR rate, increased by the margin

historically employed for such loans, could imply

provisions for the losses resulting from conversion

of such loans (if all the then existing portfolio

would be converted) with a pre-tax impact

between PLN 4,390 million (Euros 957.70 million)

to PLN 4,848 million (Euros 1,057.61 million) (non-

audited data). The impacts can significantly

change in case of variation of the exchange rate

and other various assumptions. Impacts on capital

could be partially absorbed and mitigated by the

combination of the existing surplus of capital over

the current minimum requirements, the reduction

of risk-weighted assets and the decrease or

elimination of the Pillar 2 buffer.

Due to the complexity and uncertainty regarding

the final verdict of these lawsuits, as well as the

possible implementation of the solution suggested

by the Chairman of KNF, as well as the uncertainty

of the awaited Supreme Court or European Court

of Justice decisions, it is difficult to accurately

estimate the potential impacts of such outcomes

and their influence on the date of publication of

the Group’s financial statements.

Resolution Fund

According to a statement issued by the Resolution

Fund on 2 November 2021, the final judgment of

the Arbitration Court constituted within the

International Chamber of Commerce of Paris was

favourable to the Resolution Fund regarding the

transitional regime of the introduction of IFRS 9.

The value of the dispute at the time of the

judgment amounted to 169 million euros, an

amount that the Resolution Fund would have had

to pay to Novo Banco had the Arbitration Court’s

judgment not been in its favour.

According to Novo Banco’s statement disclosed on

3 November 2021, “Novo Banco is reviewing” the

Arbitration Court’s decision.

In accordance with Novo Banco’s 1st Half 2021

report, “In the financial year of 2020, the caption

reserves registered in the responsibility of the

Resolution Fund amounting to Euros 598.312

thousand relating to the Contingent Capital

Agreement. The amount is accounted for under

other reserves and it results at each balance sheet

date of the incurred losses and of the regulatory

ratios in force at the moment of its

determination. In June 2021, regarding the year

2020, the amount of Euros 317.013 thousand was

paid. The difference results from divergences

between Novo Banco and the Resolution Fund

regarding (i) the provision for discontinued

operations in Spain, (ii) valuation of participation

units and (iii) interest rate risk hedge accounting

policy, leading to a limitation on immediate

access to this amount, which despite being

recorded as receivables, the bank deducted at 30

June 2021 the amount of 277.442 thousand from

the calculation of regulatory capital. Novo Banco

considers the amount of 277.442 thousand as due

under the Contingent Capitalization Mechanism

and the legal and contractual mechanisms at its

disposal are being triggered in order to ensure

their receipt. Additionally, it was also deducted

the amount of variable remuneration to the

Executive Board of Directors related to the year-

end of 2019 and 2020 (Euros 3.857 thousand)”.

Novo Banco adhered to the Special Regime

applicable to Deferred Tax Assets under Law No.

61/2014, of 26 August, according to which if the

Resolution Fund does not exercise its right to

acquire the conversion rights attributed to the

State, the State may become Novo Banco’s

shareholder. According to the Resolution Fund’s

2020 annual report, under the terms of the Sale

and Subscription Agreement of 75% of the share

capital of Novo Banco with Lone Star on 17

October 2017, the effect of the dilution associated

with the Special Regime applicable to deferred tax

assets shall exclusively affect the Resolution

Fund’s stake.

Novo Banco informed on 15 December 2021,

through announcement to CMVM, a capital increase

2021 REPORT & ACCOUNTS

|173

arising from the conversion of conversion rights

relating to 2015 fiscal year, which were issued

under the special regime applicable to deferred

tax assets (4). This capital increase of Novo Banco

was done with the incorporation of reserves in the

amount of Euros 154,907,314 through the issuance

of 154,907,314 new shares representing 1.56% of

its share capital and which were attributed to the

Portuguese State in accordance with the

mentioned regime. With this capital increase and

as per agreement between the Resolution Fund

and the shareholder Lone Star in the context of

the sale of the 75% share capital of Novo Banco,

only the Resolution Fund will be diluted. According

to Novo Banco’s website, the new shareholding

structure is: Nani Holdings S.G.P.S, S.A 75%, Fundo

de Resolução 2.44% and Direção-Geral do Tesouro

e Finanças 1.56%.

On 30 September 2021, Novo Banco was held by

Lone Star and Resolution Fund, corresponding,

respectively, to 75% and 25% of the share capital.

Following the above-mentioned capital increase,

the State now holds 1.56%, Lone Star does not see

its position diluted (75%) and the Resolution Fund

sees its position reduced.

Regarding the tax credits relating to the periods of

2015 (whose conversion rights were exercised),

2016 and 2017, it was estimated that the State will

hold, according to the 2020 Annual Report of the

Resolution Fund, a number of ordinary shares

representing a cumulative percentage of 5.69% of

the share capital of Novo Banco, with the

consequent dilution of the stake held by the

Resolution Fund. The direct effect of this dilution

is estimated at 1.4 p.p., plus the indirect effects

described below.

Also, according to the 2020 Resolution Fund's

Annual Report, "the processes of conversion of

deferred tax assets into tax credits are in

progress, with reference to the periods of 2018,

2019 and 2020. The effect of this additional

dilution may correspond to 10.6 p.p., in addition

to the aggregate reduction of 5.7 p.p. already

mentioned. In view of the above, and although an

agreement was signed on 31 May 2021 clarifying

the necessary procedures for the shareholding

held by Nani Holdings in Novo Banco not to be

reduced due to the capital increase resulting from

the conversion of the conversion rights held by the

State, at the current date the conditions are not

yet met for a decision to be taken regarding the

exercise of the option right, nor is there available

information to reliably estimate the financial

effect arising from the contractual liability

assumed by the Resolution Fund, in the context of

the sale transaction of Novo Banco, in October

2017, to ensure the maintenance of Lone Star's

percentage interest in Novo Banco".On 3 May 2021,

the Resolution Fund announced that the audit

report conducted by the Court of Auditors

(“Tribunal de Contas”) - following the request of

the Portuguese parliament of October 2020 to the

operations and management of Novo Banco that

were at the origin and led to the need to transfer

funds from the Resolution Fund to Novo Banco -

was released. The Court of Auditors concluded that

the public financing of Novo Banco through the

CCA contributed to the stability of the financial

system, particularly as it avoided the bank’s

liquidation and reduced systemic risk. According to

the Resolution Fund, the audit does not identify

any impediment to the fulfilment of commitments

and contracts arising from BES’s resolution

process, initiated in August 2014.~

On 3 May 2021, the Resolution Fund announced

that the audit report conducted by the Court of

Auditors (“Tribunal de Contas”) - following the

request of the Portuguese parliament of October

2020 to the operations and management of Novo

Banco that were at the origin and led to the need

to transfer funds from the Resolution Fund to Novo

Banco - was released. The Court of Auditors

concluded that the public financing of Novo Banco

through the CCA contributed to the stability of the

financial system, particularly as it avoided the

bank’s liquidation and reduced systemic risk.

According to the Resolution Fund, the audit does

not identify any impediment to the fulfilment of

commitments and contracts arising from BES’s

resolution process, initiated in August 2014.

As published by Resolution no. 63-A/2021 of 27

May 2021 of the Council of Ministers, a number of

national financial institutions offered to finance

the Resolution Fund, under conditions considered

as appropriate by it, increasing up to Euros 475

million the direct financing of banks to the

Resolution Fund and waiving a State loan to the

Resolution Fund. The funding costs of the

Resolution Fund (from the State and from banks)

will continue to be exclusively borne by periodic

revenues, corresponding to the contributions paid

by the banking sector. The payment obligations

arising from this loan benefit from a pari passu

treatment with the payment obligations of the

loans signed with the State on 7 August 2014 and

31 December 2015 and with the Portuguese credit

institutions on 28 August 2014.

According to Novo Banco’s 2021 earnings press

release, the amount of compensation to be

requested by Novo Banco with reference to 2021 is

Euros 209.2 million, took into account the losses

incurred in the assets covered by the CCA, as well

as the minimum capital condition applicable at the

end of the same year under the CCA.

2021 REPORT & ACCOUNTS

174 |

Non-financial information

The BCP Group pursues dynamic strategies adapted to the new challenges imposed by the several interested

parties with which it establishes relations. The main objective of the adopted sustainability policies, which foster

a culture of Social Responsibility, has been to positively influence the organization's long-term value proposition,

in balance with the well-being of people, the company and the communities in which it operates. and with the

preservation of natural resources, the climate and the environment.

Within this context, it is possible to divide the Bank's intervention into three major areas of intervention:

•Environment – implementation of measures that foster a fair and inclusive transition into a zero-carbon

economic development model, including the incorporation of the environmental component in the Bank’s risk

models and in the offer of products and services;

•Social – involvement with both the external and the internal communities;

•Corporate Governance - integration of the principles of sustainability in the Bank’s decision-making processes.

Therefore, as an integral part of its business model, Millennium bcp takes on the commitment to create social

value by developing actions to - and with - the various stakeholder groups with the goal of directly and indirectly

contribute to the economic and social development of the countries in which it operates.

Throughout the Bank's Sustainability journey, several external commitments have been made, of which the

following stand out:

•Adherence to the 10 Principles of the United Nations Global Compact and recognition of the importance of the

Sustainable Development Goals (SDGs) and the United Nations 2030 Agenda;

•“Letter of Commitment for Sustainable Financing in Portugal”, an aspirational document produced within the

scope of the “Reflection Group for Sustainable Financing in Portugal” promoted by the Ministries of the

Environment, Finance and Economy, which seek to highlight the importance of integrating environmental risks,

social and governance in decision-making and risk management in the financial sector;

•“Commitment to Lisbon European Green Capital”, promoted by CML, which brings together more than 200

entities with a presence in the city, including companies, schools and institutions, in a commitment to climate

action and towards sustainability that fosters a collective dynamic that allows fulfilling the targets defined by

the Paris Agreement and accelerating the path towards carbon neutrality;

•“CEO's Guide to Human Rights”, an initiative of the World Business Council for Sustainable Development (WBCSD)

and the Business Council for Sustainable Development (BCSD Portugal). The Guide incorporates reference

policies and practices and aims to contribute to the implementation and promotion of human rights in

organizations and their value chains;

•“Statement from Business Leaders for Renewed Global Cooperation” of the United Nations Global Compact, an

international declaration that aims to demonstrate the commitment to ethical leadership, based on good

governance practices, materialized through values, strategy, policies, operations and relations of proximity and

involvement with all Stakeholders;

•“Women’s Empowerment Principles” from the United Nations Global Compact, an important international

platform for the promotion of gender equality that demonstrates our long-term vision and the will to integrate –

and promote – a collective dynamic based on cooperation and trust.

The orientation of the BCP Group's activities in these matters is reflected in Corporate Policies and Principles

applicable to the various areas of activity and business (available at https://ind.millenniumbcp.pt/pt/

Institucional/sustentabilidade/Pages/cod_internos. aspx) and is implemented in the Sustainability Master Plan

(SMP), through which we intend to respond to the expectations, ambitions and needs of the Bank's Stakeholders

and contribute to sustainable development.

The SMP 2019/2021, a multi-annual plan structured around selected dimensions to respond to the themes

contained in the Bank's materiality matrix and under which we have successfully implemented a large number of

initiatives and concrete actions, contemplated the following lines of action:

2021 REPORT & ACCOUNTS

|175

Dimension

Line of action

Governance Model of Sustainability

and Corporate Policies

Implement a governance model for the Sustainability Area that allows for multidisciplinary

and transversal action across the organization, including, whenever justified, international

operations

Review and update the Group's corporate policies

Review evaluation and compensation policies

Training on Sustainability

e-Learning Course on Sustainability (and Sustainable Finance)

Brand and reputation management

Strengthen Millennium bcp's positioning in the sustainability indexes

Adhere to sustainability principles and commitments

Define BCP's positioning in relation to the SDGs

Integrate sustainability into corporate events

Strengthen the communication and dissemination of Microcredit

Improve sustainability reporting and communication

Risk management, ethics and

conduct

Foster a culture of compliance and rigorous risk management

Ensure integration of environmental and social risks in the risk analysis process

Information security and data

protection

Ensure management and information of Employees

Service quality and customer

satisfaction

Optimize satisfaction levels

Foster a culture of continuous improvement

Creating a Customer Charter

Responsible supplier management

Formalize compliance with social and environmental requirements in the relationship with

Suppliers

Innovation

Foster a culture of innovation

Sustainable financing policies and

regulation

Monitor the development of the European Commission's Sustainable Finance Action Plan

Transparency of information

provided to customers about

products and services

Integrate sustainability aspects of proposed investments into communication with Clients

Risk management

Integrate ESG risks into risk management procedures

Sensitize Company Customers, from sectors of activity with greater exposure to risks and

environmental regulations, to the issue of climate change

Identify and classify Corporate Customers with greater social and environmental risks

Offering inclusive and sustainable

products

Promote and launch products and services that respect social responsibility principles and

respond to new environmental challenges

Develop an offer of “ESG” products that promote the transition of the economy to a

sustainable model

Accessibilities

Improve the implementation of differentiated hours for customer service

Improve digital accessibility for customers

Talent attraction and retention

Supporting the adoption of healthy lifestyles

Reinforce the mechanisms of proximity between Employees and top management

Promoting work-family balance

Volunteering

Develop and approve a Volunteering Policy

Develop volunteer program

Conscious Business Project

Promote a more conscious, sustainable, flexible and innovative organization

Human rights

Analyze and communicate position on human rights risk management

financial literacy

Financial Literacy Program

Implement social and/or environmental awareness actions across the Group

2021 REPORT & ACCOUNTS

176 |

Community investment

Develop campaigns in partnership with NGOs / IPSSs in the context of sustainable

development

Strengthen association with the Millennium bcp Foundation

Reinforce and systematize partnerships with entities that encourage and develop

Entrepreneurship among local communities

Develop social responsibility actions

Measure community impact

Climate change, energy efficiency

and alternative energies

Contribute to limiting global warming to 2ºC (Paris Agreement)

Environmental performance

Minimize environmental impact of operations

The implementation of the SMP has made it possible to improve the Bank's performance with regard to the main

sustainability axes, in particular:

Economic / Governance

Social

Environmental

total number of customers

6,812 thousand. vs. 6,667 thousand. in

2020

% of payments to local suppliers

92.3% vs. 92.2% in 2020

Total number of employees

16,020 vs. 17,335 in 2020

Training (Hours)

726,400 vs. 685,847 in 2020

27,057 tCO 2 emitted

vs. 31,018 in 2020

45,883 MWh of electricity consumed vs.

59,214 in 2020

In order to promote transparency in communication with our Stakeholders, assess the evolution of our performance and

communicate this assessment carried out by recognized entities, we respond to several specialized indices:

Scope

Index

2021 Performance

2020 performance

BCP Group

MSCI

BCP Group

DJSI

64%

↓

69%

BCP Group

Carbon Disclosure Project

↓

THE-

BCP Group

Bloomberg Gender-Equality Index

81%

↑

78%

BCP Group

Vigeo Eiris

49% (88%

disclosure)

↑

47% (86%)

BCP Group

Gaia Rating

78%

↑

76%

In 2021, the BCP Group remained in 'The Sustainability Yearbook', a reference publication in the area of Sustainability

published by Standard & Poor's based on information collected in the responses given to the 'Dow Jones Sustainability

Indices' (DJSI).

In the new Strategic Plan Cycle – Excelling 24 -, Millennium bcp will continue to seek to explore business opportunities

related to sustainability, as well as manage the physical and transition risks of its portfolio to assert itself as a

reference in the market. Millennium will innovate in its own products with a green and social rating aimed at all

business segments.

Detailed information and indicators on the BCP Group’s Sustainability performance are available, in an aggregated view

and by geography, in the 2021 Sustainability Report, at https://ind.millenniumbcp.pt/pt/Institucional/

sustentabilidade/Pages/ annual_reports.aspx.

2021 REPORT & ACCOUNTS

|177

Correspondence table between the Management Report and Decree-Law 89/2017

DL no. 89/207 of July 28

Chapter/Section

Pages

Article 3 (Referred to No. 2 of Article 508-G of the CSC)

The non-financial statement must contain enough information for an understanding of the evolution, performance, position and impact of its activities,

referring, at a minimum, to environmental, social and worker-related issues, equality between women and men, the non-discrimination, respect for human

rights, combating corruption and attempted bribery, including:

a) Brief description of the

company's business

model

RS 21 | Value creation

RS 21 | Introduction > Governance Model

R&C 21 | Business model

37-41

b) Description of the

policies followed by the

company in relation to

these matters, including

the due diligence

processes applied

c) Results of these

policies

ENVIRONMENTAL:

RS 21 | Introduction > Appointments

21-23

RS 21 | Introduction > Social and Environmental Risk management

24-25

RS 21 | Environmental responsibility

120-141

RS 21 |Task Force on Climate-related Financial Disclosures (TCFD)

142-146

SOCIAL AND RELATED TO WORKERS:

RS 21 | Introduction > Social and Environmental Risk management

24-25

RS 21 | Economic Responsibility > Employees

45-58

RS 21 | Social Responsibility > Benefits to Employees

109-114

EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION:

RS 21 | Introduction > Appointments

21-23

RS 21 | Economic Responsibility

37-41

RS 21 | Economic Responsibility > Employees

45-58

HUMAN RIGHTS:

RS 21 | Introduction > Appointments

21-23

RS 21 | Social Responsibility > Human Rights

116-117

FIGHTING CORRUPTION AND BRIBERY ATTEMPTS:

RS 21 | Economic Responsibility > Ethics and Professional Conduct

58-65

d) Main risks associated

with these issues, linked

to the company's

activities, including,

where relevant and

proportionate, its

business relationships,

its products or services

likely to have negative

impacts in these areas

and the way in which

those risks are managed

by the company

ENVIRONMENTAL:

RS 21 | Introduction > Social and Environmental Risk management

24-25

RS 21 | TCFD

142-146

SOCIAL AND RELATED TO WORKERS:

RS 21 | Introduction > Social and Environmental Risk management

24-25

RS 21 | Economic Responsibility > Employees

45-58

EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION:

RS 21 | Economic Responsibility > Employees

45-58

HUMAN RIGHTS:

RS 21 | Social Responsibility > Human Rights

116-117

UNGP Table - UN Guiding Principles Reporting Framework

166-168

FIGHTING CORRUPTION AND BRIBERY ATTEMPTS:

RS 21 | Introduction > Social and Environmental Risk management

24-25

RS 21 | Economic Responsibility > Ethics and Professional Conduct

58-65

2021 REPORT & ACCOUNTS

178 |

e) Key performance

indicators relevant to

your specific activity

ENVIRONMENTAL:

RS 21 | Environmental Responsibility

120-141

RS 21 | TCFD

142-146

SOCIAL AND RELATED TO WORKERS:

RS 21 | Economic Responsibility > Employees

45-58

RS 21 | Social Responsibility > Benefits to Employees

109-114

EQUALITY BETWEEN WOMEN AND MEN AND NON-DISCRIMINATION:

RS 21 | Economic Responsibility > Employees

45-58

HUMAN RIGHTS:

RS 21 | Social Responsibility > Human Rights

116-117

FIGHTING CORRUPTION AND BRIBERY ATTEMPTS:

RS 21 | Economic Responsibility > Ethics and Professional Conduct

58-65

Article 4 (Referred to

Article 245- No. 1 r) and

No. 2 of the CVM)

Description of the diversity

policy applied by the company

in relation to its management

and supervisory bodies,

namely, in terms of age, sex,

qualifications and professional

background, the objectives of

this diversity policy, the way in

which it was applied and the

results in the period of

reference.

RS 21 | Economic Responsibility > Employees

45-47

Corporate Governance Report 2021 | Diversity Policy of Governing Bodies

Corporate Governance Report 2021 | Appointments and Remuneration Committee

755

761

2021 REPORT & ACCOUNTS

|179

Consolidated financial statements

BANCO COMERCIAL PORTUGUÊS

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2021 AND 2020

(Thousands of euros)

2021

2020 (restated)

Interest and similar income

1,709,124

1,805,760

Interest expense and similar charges

(120,523)

(274,095)

NET INTEREST INCOME

1,588,601

1,531,665

Dividends from equity instruments

938

4,775

Net fees and commissions income

727,723

676,556

Net gains / (losses) from financial operations at fair value through profit or loss

(247)

(17,336)

Net gains / (losses) from foreign exchange

17,494

88,319

Net gains / (losses) from hedge accounting operations

4,286

(2,322)

Net gains / (losses) from derecognition of assets and financial liabilities at amortised cost

(3,717)

(28,081)

Net gains / (losses) from derecognition of financial assets at fair value through other

comprehensive income

68,722

100,063

Other operating income / (losses)

(128,905)

(158,261)

TOTAL OPERATING INCOME

2,274,895

2,195,378

Staff costs

654,270

624,780

Other administrative costs

324,172

329,823

Amortisations and depreciations

137,156

135,800

TOTAL OPERATING EXPENSES

1,115,598

1,090,403

NET OPERATING INCOME BEFORE PROVISIONS AND IMPAIRMENTS

1,159,297

1,104,975

Impairment of financial assets at amortised cost

(352,833)

(513,406)

Impairment of financial assets at fair value through other comprehensive income

(4,626)

(10,360)

Impairment of other assets

(60,882)

(79,290)

Other provisions

(642,726)

(238,292)

NET OPERATING INCOME

98,230

263,627

Share of profit of associates under the equity method

56,937

67,695

Gains / (losses) arising from sales of subsidiaries and other assets

2,570

(6,387)

NET INCOME BEFORE INCOME TAXES

157,737

324,935

Income taxes

Current

(81,353)

(108,520)

Deferred

(122,273)

(23,570)

NET INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS

(45,889)

192,845

Income arising from discontinued or discontinuing operations

70,881

15,520

NET INCOME AFTER INCOME TAXES

24,992

208,365

Net income for the year attributable to:

Bank's Shareholders

138,082

183,012

Non-controlling interests

(113,090)

25,353

NET INCOME FOR THE YEAR

24,992

208,365

Earnings per share (in Euros)

Basic

0.007

0.010

Diluted

0.007

0.010

The balances for 2020 were restated under the changes in accounting policies and in the classification of Banque Privée BCP (Suisse), S.A. and Seguradora

Internacional de Moçambique, S.A. as discontinuing operations, as detailed in note 59.

2021 REPORT & ACCOUNTS

180 |

BANCO COMERCIAL PORTUGUÊS

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2021 AND 2020

(Thousands of euros)

2021

2020 (restated)

ASSETS

Cash and deposits at Central Banks

7,796,299

5,303,864

Loans and advances to credit institutions repayable on demand

361,786

262,395

Financial assets at amortised cost

Loans and advances to credit institutions

453,213

1,015,087

Loans and advances to customers

54,972,401

52,022,357

Debt securities

8,205,196

6,234,545

Financial assets at fair value through profit or loss

Financial assets held for trading

931,485

1,031,201

Financial assets not held for trading mandatorily at fair value through profit or loss

990,938

1,315,467

Financial assets at fair value through other comprehensive income

12,890,988

12,140,392

Hedging derivatives

109,059

91,249

Investments in associated companies

462,338

434,959

Non-current assets held for sale

780,514

1,026,481

Investment property

2,870

7,909

Other tangible assets

600,721

640,825

Goodwill and intangible assets

256,213

245,954

Current tax assets

17,283

11,676

Deferred tax assets

2,688,216

2,633,790

Other assets

1,385,292

1,296,812

TOTAL ASSETS

92,904,812

85,714,963

LIABILITIES

Financial liabilities at amortised cost

Resources from credit institutions

8,896,074

8,898,759

Resources from customers

69,560,227

63,000,829

Non subordinated debt securities issued

2,188,363

1,388,849

Subordinated debt

1,394,780

1,405,172

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

231,241

278,851

Financial liabilities at fair value through profit or loss

1,581,778

1,599,405

Hedging derivatives

377,206

285,766

Provisions

458,744

345,341

Current tax liabilities

20,427

14,827

Deferred tax liabilities

16,932

7,242

Other liabilities

1,116,983

1,103,652

TOTAL LIABILITIES

85,842,755

78,328,693

EQUITY

Share capital

4,725,000

Share premium

16,471

Other equity instruments

400,000

Legal and statutory reserves

259,528

254,464

Treasury shares

—

(40)

Reserves and retained earnings

580,304

642,397

Net income for the year attributable to Bank's Shareholders

138,082

183,012

TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS

6,119,385

6,221,304

Non-controlling interests

942,672

1,164,966

TOTAL EQUITY

7,062,057

7,386,270

TOTAL LIABILITIES AND EQUITY

92,904,812

85,714,963

The balances for the year 2020 were restated under the changes occurred in accounting policies described in note 59.

2021 REPORT & ACCOUNTS

|181

Alternative performance measures

The BCP Group prepares financial information in accordance with International Financial Reporting Standards

(IFRS) endorsed by European Union. As a complement to that information, the BCP Group uses a set of

alternative performance measures that allow monitoring the evolution of its activity over the time. Following

the guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority

(ESMA) on October 2015 (ESMA/2015/1415), the BCP Group presents some indicators related to the

assessment of profitability and efficiency and the quality of the credit portfolio, among others, which are

intended to facilitate comprehension of the evolution of the economic and financial position of the Group.

The information presented in this context does not, under any circumstance, replace the financial

information prepared in accordance with IFRS. It should also be noted that the definitions and concepts used

by the BCP Group for the calculation of these indicators may differ from those used by other entities in the

determination of other similar measures and may therefore not be directly comparable. In accordance with

the aforementioned guidelines, in addition to the alternative performance measures, detailed below,

additional information is presented throughout this document, in the respective chapters, that reconciles the

accounting figures presented in the consolidated financial statements prepared in accordance with IFRS and

financial information reflecting the management criteria adopted by the BCP Group. These indicators and

their components are also described in more detail in the glossary.

1)Loans to customers (net) / Balance sheet customer funds

Relevance of the indicator: the loans-to-deposits ratio is an indicator of liquidity that allows the evaluation

of the Group's retail funding structure.

Euro million

31 Dec. 21

31 Dec. 20

restated

31 Dec. 19

Loans to customers (net) (1)

56,360

53,975

52,275

Balance sheet customer funds (2)

71,175

64,764

62,607

(1) / (2)

79.2%

83.3%

83.5%

2)Return on average assets (ROA)

Relevance of the indicator: allows measurement of the capacity of the Group to generate results with the

volume of available assets.

Euro million

2021

2020

restated

2019

Net income (1)

138

183

302

Non-controlling interests (2)

(113)

Average total assets (3)

90,484

84,829

79,590

[(1) + (2), annualised] / (3)

0.0%

0.2%

0.5%

2021 REPORT & ACCOUNTS

182 |

3)Return on average equity (ROE)

Relevance of the indicator: allows assessment of the capacity of the Group to remunerate its shareholders,

assessing the level of profitability generated by the funds invested by the shareholders in the Group.

Euro million

2021

2020

restated

2019

Net income (1)

138

183

302

Average equity (2)

5,847

5,840

5,970

[(1), annualised] / (2)

2.4%

3.1%

5.1%

4)Cost to income

Relevance of the indicator: it allows for the monitoring of the level of efficiency of the Group (excluding

specific items), evaluating the volume of operating costs to generate net operating revenues.

Euro million

2021

2020

restated

2019

Operating costs (1)

1,116

1,090

1,166

of which: specific items (2)

Net operating revenues (3)*

2,334

2,257

2,336

[(1) - (2)] / (3)

43.9%

46.3%

47.1%

* Excludes the specific items, related to costs with the acquisition, merger and integration of Euro Bank S.A., recognized in the Polish

subsidiary (1 million euros in 2019 and an immaterial amount in 2020 and 2021).

5)Cost of risk, net of recoveries (expressed in basis points, annualised)

Relevance of the indicator: allows assessment of the quality of the loan portfolio by evaluating the ratio

between impairment charges recognised in the period (net of reversals and recoveries of credit and interest)

and the stock of loans to customers at the end of that period.

Euro million

2021

2020

restated

2019

Loans to customers at amortised cost, before impairment (1)

58,137

55,668

54,352

Loan impairment charges (net of recoveries) (2)

349

510

390

[(2), annualised] / (1)

6)Non-performing exposures (NPE) / Loans to customers (gross)

Relevance of the indicator: allows the assessment of the level of credit risk to which the Group is exposed

based on the proportion of the NPE loan portfolio in the loans-to-customers portfolio (gross).

Euro million

31 Dec. 21

31 Dec. 20

restated

31 Dec. 19

Non-Performing Exposures (1)

2,752

3,295

4,206

Loans to customers (gross) (2)

58,231

56,048

54,724

(1) / (2)

4.7%

5.9%

7.7%

2021 REPORT & ACCOUNTS

|183

7)Coverage of non-performing exposures (NPE) by balance sheet impairment

Relevance of the indicator: it allows the assessment of the level of coverage of the NPE portfolio by balance

sheet impairment.

Euro million

31 Dec. 21

31 Dec. 20

restated

31 Dec. 19

Non-Performing Exposures (1)

2,752

3,295

4,206

Loans impairments (balance sheet) (2)

1,871

2,073

2,449

(2) / (1)

68.0%

62.9%

58.2%

2021 REPORT & ACCOUNTS

184 |

Application of Results

Taking into consideration:

A.The provisions of the law and of the articles of association concerning the legal reserve;

B.The dividends policy of Banco Comercial Português (BCP);

C.The alteration introduced in the Work Collective Agreement, published on 29 March 2014 on the no

Bulletin of Work and Employment nr. 12 which enabled the Employees of Group Banco Comercial

Português in Portugal, in the period of time comprised between June 2014 and June 2017, to accept a

temporary reduction in their remuneration. This reduction was done with the purpose of rendering the

Bank’s recovery process feasible and contribute for the compliance with the requirements imposed to the

Bank to be able to benefit from State Aid;

D.That the said alteration to the Work Collective Agreement presumed that the Board of Directors, in the

years following the end of the State aid, if there were earnings for such, would present to the General

Meeting of Shareholders a proposal for the distribution of earnings to Employees that, at the end of the

years, would enable the delivery of an accumulated global amount, at least, equal to the total amount

which the Employees did not receive during the period while the temporary reduction in their

remuneration was in effect;

E.That BCP completed the payment of the State aid, plus respective interests, in February 2017 and the

General Meetings of Shareholders held on 22 May 2019 and on 20 May 2020 approved the allocation of a

portion of the earnings of the financial years to be distributed to the Employees;

F.That, according to the financial statements to be submitted to the approval of the Shareholders, in the

2021 financial year Banco Comercial Português recorded consolidated net earnings amounting to €

138,082,212.58 and individual net earnings amounting to €90,060,487.24;

G.That the approval of any compensation for the Employees against the income statement, as well as the

estimation of the respective amount, pertains exclusively to the General Meeting of Shareholders,

H.That the Dividends Policy approved by this General Meeting of Shareholders on 20 May 2021 sets as its

Guidelines:

a) The promotion of conditions for the sustainable observance of the capital ratios at any moment

applicable to the Bank, as well as the remaining applicable legal requirements, including the

limitations that are applicable at any moment, resulting from the calculation of the maximum

amount to be distributed;

b) The retention of own funds that enable to promote coherence with the Risk Appetite Statement

(RAS) and with the results of the internal capital adequacy assessment process (ICAAP);

c) The safeguard of an appropriate safety margin on the values established by the regulator within the

scope of its assessment and evaluation on the adequacy of strategies, processes, capital and

liquidity that are appropriate to the risks to which the Bank is or might be exposed to (SREP);

I.That, reiterating its intention to comply with the Bank’s dividends policy, the Board of Directors cannot

fail to consider the potential impacts and uncertainties associated with the current pandemic situation

and geopolitical international crisis and respective impacts on the economy in general, that advise

extreme caution in the proposal for the appropriation of income, caution also recommended by the

Supervisory Authorities,

2021 REPORT & ACCOUNTS

|185

The Board of Directors

Proposes:

In accordance with article 66 (5) (f) and for purposes of article 376 (1) (b) of the Companies Code, and article 54

of the Bank’s articles of association, we propose the following application of year-end results amounting to €

90,060,487.24, euros:

a) For the reinforcement of legal reserve, € 9,006,048.73;

b) For attribution of dividends, € 13,602,590.96

c) For distribution to the employees € 5,692,000.00;

d) € 61,759,847.55, that is, the remaining, to Retained Earnings.

Considering that the global amount € 13,602,590.96 foreseen in number one as dividends was estimated based on

a unit dividend per share issued (in the case, € 0.0009 per share) and the fact that it is not possible to make an

accurate determination the number of own shares in the portfolio on the date the dividends are paid, we do

hereby propose, in case of approval of the proposed allocation of dividends, the adoption of a resolution setting

forth the following:

a) The payment to each share of the unit dividend of € 0.0009, the rational supporting the proposal;

b) The non-payment, placing it in Retained Earnings, of the unit quantitative corresponding to the shares that, on

the first day of the dividend payment period, belong to the Company.

III

We do hereby propose that, pursuant to the approval regarding the distribution of the global amount of €

5,692,000.00 foreseen in number one of paragraph c), it is resolved that the determination of the specific amount

to attribute to each employee be established by the Executive Committee and paid together with the

remuneration corresponding to June 2022.

THE BOARD OF DIRECTORS

Lisbon, 28 March 2022

2021 REPORT & ACCOUNTS

186 |

Glossary

Assets placed with customers – amounts held by customers in the context of the placement of third-party

products that contribute to the recognition of commissions.

Balance sheet customer funds – deposits and other resources from customers and debt securities placed

with customers.

Business Volumes - corresponds to the sum of total customer funds and loans to customers (gross).

Commercial gap – loans to customers (gross) minus on-balance sheet customer funds.

Core income - net interest income plus net fees and commissions income.

Core net income - net interest income plus net fees and commissions income deducted from operating costs.

Cost of risk, net (expressed in basis points) - ratio of loans impairment (P&L) accounted in the period to

loans to customers at amortised cost and debt instruments at amortised cost related to credit operations

before impairment at the end of the period.

Cost to core income - operating costs divided by core income.

Cost to income – operating costs divided by net operating revenues.

Coverage of non-performing exposures by impairments – loans impairments (balance sheet) divided by the

stock of NPE.

Coverage of non-performing loans by impairments – loans impairments (balance sheet) divided by the stock

of NPL.

Coverage of overdue loans by impairments - loans impairments (balance sheet) divided by overdue loans.

Coverage of overdue loans by more than 90 days by impairments - loans impairments (balance sheet)

divided by overdue loans by more than 90 days.

Debt instruments – non-subordinated debt instruments at amortised cost and financial liabilities measured at

fair value through profit or loss (debt securities and certificates).

Debt securities placed with customers - debt securities issued by the Bank and placed with customers.

Deposits and other resources from customers – resources from customers at amortised cost and customer

deposits at fair value through profit or loss.

Dividends from equity instruments - dividends received from investments classified as financial assets at

fair value through other comprehensive income, from financial assets held for trading and, until 2017, from

financial assets available for sale.

Equity accounted earnings - results appropriated by the Group related to the consolidation of entities

where, despite having some influence, the Group does not control the financial and operational policies.

Insurance products – includes unit linked saving products and retirement saving plans (“PPR”, “PPE” and

“PPR/E”).

Loans impairment (balance sheet) – balance sheet impairment related to loans to customers at amortised

cost, balance sheet impairment associated with debt instruments at amortised cost related to credit

operations and fair value adjustments related to loans to customers at fair value through profit or loss.

Loans impairment (P&L) – impairment (net of reversals and net of recoveries - principal and accrual) of

financial assets at amortised cost for loans to customers and for debt instruments related to credit

operations.

Loans to customers (gross) – loans to customers at amortised cost before impairment, debt instruments at

amortised cost associated to credit operations before impairment and loans to customers at fair value

through profit or loss before fair value adjustments.

Loans to customers (net) - loans to customers at amortised cost net of impairment, debt instruments at

amortised cost associated to credit operations net of impairment and balance sheet amount of loans to

customers at fair value through profit or loss.

Loan to Deposits ratio (LTD) – loans to customers (net) divided by deposits and other resources from

customers.

2021 REPORT & ACCOUNTS

|187

Loan to value ratio (LTV) – mortgage amount divided by the appraised value of property.

Net commissions - net fees and commissions income.

Net interest margin (NIM) - net interest income for the period as a percentage of average interest earning

assets.

Net operating revenues - net interest income, dividends from equity instruments, net commissions, net

trading income, other net operating income and equity accounted earnings.

Net trading income – results from financial operations at fair value through profit or loss, results from

foreign exchange, results from hedge accounting operations, results from derecognition of financial assets

and financial liabilities measured at amortised cost, results from derecognition of financial assets measured

at fair value through other comprehensive and results from financial assets available for sale (until 2017).

Non-performing exposures (NPE) – non-performing loans and advances to customers (loans to customers at

amortised cost and loans to customers at fair value through profit or loss) more than 90 days past-due or

unlikely to be paid without collateral realisation, if they recognised as defaulted or impaired.

Non-performing loans (NPL) – overdue loans (loans to customers at amortised cost, debt instruments at

amortised cost associated to credit operations and loans to customers at fair value through profit or loss)

more than 90 days past due including the non-overdue remaining principal of loans, i.e. portion in arrears,

plus non-overdue remaining principal.

Off-balance sheet customer funds – assets under management, assets placed with customers and insurance

products (savings and investment) subscribed by customers.

Operating costs - staff costs, other administrative costs and depreciation.

Other impairment and provisions – impairment (net of reversals) for loans and advances of credit

institutions classified at amortised cost, impairment for financial assets (classified at fair value through other

comprehensive income, at amortised cost not associated with credit operations and available for sale, in the

latter case until 2017), impairment for other assets, namely assets received as payment in kind, investments

in associated companies and goodwill of subsidiaries and other provisions.

Other net income – dividends from equity instruments, net commissions, net trading income, other net

operating income and equity accounted earnings.

Other net operating income – net gains from insurance activity (only until 2019), other operating income/

(loss) and gains/(losses) arising from sales of subsidiaries and other assets.

Overdue loans – total outstanding amount of past due loans to customers (loans to customers at amortised

cost, debt instruments at amortised cost associated to credit operations and loans to customers at fair value

through profit or loss), including principal and interests.

Overdue loans by more than 90 days – total outstanding amount of past due loans to customers by more

than 90 days (loans to customers at amortised cost, debt instruments at amortised cost associated to credit

operations and loans to customers at fair value through profit or loss), including principal and interests.

Performing loans - loans to customers (gross) deducted from Non-performing exposures (NPE).

Resources from credit institutions – resources and other financing from Central Banks and resources from

other credit institutions.

Return on average assets (Instruction from the Bank of Portugal no. 16/2004) – net income (before tax)

divided by the average total assets (weighted average of the average of monthly net assets in the period).

Return on average assets (ROA) – net income (before minority interests) divided by the average total assets

(weighted average of the average of monthly net assets in the period).

Return on equity (Instruction from the Bank of Portugal no. 16/2004) – net income (before tax) divided by

the average attributable equity + non-controlling interests (weighted average of the average of monthly

equity in the period).

Return on equity (ROE) – net income (after minority interests) divided by the average attributable equity,

deducted from preference shares and other capital instruments (weighted average of the average of monthly

equity in the period).

Securities portfolio - debt instruments at amortised cost not associated with credit operations (net of

impairment), financial assets at fair value through profit or loss (excluding the ones related to loans to

customers and trading derivatives), financial assets at fair value through other comprehensive income, assets

with repurchase agreement, financial assets available for sale and financial assets held to maturity (in the

latter two cases until 2017).

2021 REPORT & ACCOUNTS

188 |

Spread - increase (in percentage points) to the index used by the Bank in loans granting or fund raising.

Total customer funds - balance sheet customer funds and off-balance sheet customer funds.

2021 REPORT & ACCOUNTS

|189

Accounts and Notes to the

Consolidated Accounts

2021 REPORT & ACCOUNTS

190 |

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2021 AND 2020

(Thousands of euros)

Notes

2021

2020

(restated)

Interest and similar income

1,709,124

1,805,760

Interest expense and similar charges

(120,523)

(274,095)

NET INTEREST INCOME

1,588,601

1,531,665

Dividends from equity instruments

938

4,775

Net fees and commissions income

727,723

676,556

Net gains/(losses) from financial operations at fair value through profit or loss

(247)

(17,336)

Net gains/(losses) from foreign exchange

17,494

88,319

Net gains/(losses) from hedge accounting operations

4,286

(2,322)

Net gains/(losses) from derecognition of financial assets and liabilities

at amortised cost

(3,717)

(28,081)

Net gains/(losses) from derecognition of financial assets at fair value

through other comprehensive income

68,722

100,063

Other operating income / (losses)

(128,905)

(158,261)

TOTAL OPERATING INCOME

2,274,895

2,195,378

Staff costs

654,270

624,780

Other administrative costs

324,172

329,823

Amortisations and depreciations

137,156

135,800

TOTAL OPERATING EXPENSES

1,115,598

1,090,403

NET OPERATING INCOME BEFORE PROVISIONS AND IMPAIRMENTS

1,159,297

1,104,975

Impairment of financial assets at amortised cost

(352,833)

(513,406)

Impairment of financial assets at fair value through other comprehensive income

(4,626)

(10,360)

Impairment of other assets

(60,882)

(79,290)

Other provisions

(642,726)

(238,292)

NET OPERATING INCOME

98,230

263,627

Share of profit of associates under the equity method

56,937

67,695

Gains/(losses) arising from sales of subsidiaries and other assets

2,570

(6,387)

NET INCOME BEFORE INCOME TAXES

157,737

324,935

Income taxes

Current

(81,353)

(108,520)

Deferred

(122,273)

(23,570)

NET INCOME AFTER INCOME TAXES FROM CONTINUING OPERATIONS

(45,889)

192,845

Income arising from discontinued or discontinuing operations

70,881

15,520

NET INCOME AFTER INCOME TAXES

24,992

208,365

Net income for the year attributable to:

Bank's Shareholders

138,082

183,012

Non-controlling interests

(113,090)

25,353

NET INCOME FOR THE YEAR

24,992

208,365

Earnings per share (in Euros)

Basic

0.007

0.010

Diluted

0.007

0.010

The balances for 2020 were restated under the changes in accounting policies and in the classification of Banque Privée BCP (Suisse),

S.A. and Seguradora Internacional de Moçambique, S.A. as discontinuing operations, as detailed in note 59.

CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

2021 REPORT & ACCOUNTS

|191

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED 31 DECEMBER 2021 AND 2020

(Thousands of euros)

2021

Attributable to

Continuing

operations

Discontinued

operations

Total

Bank's

Shareholders

Non-

controlling

interests

NET INCOME FOR THE YEAR

(45,889)

70,881

24,992

138,082

(113,090)

ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME

STATEMENT (NOTE 43)

Debt instruments at fair value through other comprehensive

income

Gains / (losses) for the year

(235,067)

—

(235,067)

(129,584)

(105,483)

Reclassification of (gains) / losses to profit or loss (note 5)

(68,722)

—

(68,722)

(67,312)

(1,410)

Cash flows hedging

Gains / (losses) for the year

(402,269)

—

(402,269)

(365,881)

(36,388)

Other comprehensive income from investments in associates

and others

(2,723)

—

(2,723)

(2,717)

(6)

Exchange differences arising on consolidation

111,698

(2,129)

109,569

78,410

31,159

IAS 29 application

Effect on equity of Banco Millennium Atlântico, S.A.

(1,040)

—

(1,040)

—

Fiscal impact

185,425

—

185,425

158,263

27,162

(412,698)

(2,129)

(414,827)

(329,861)

(84,966)

ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME

STATEMENT

Equity instruments at fair value through other

comprehensive income

Gains / (losses) for the year (note 43)

1,073

1,158

1,231

(73)

Changes in own credit risk of financial liabilities at fair

value through profit or loss (note 43)

(348)

—

(348)

—

Actuarial gains / (losses) for the year

BCP Group Pension Fund (note 50)

135,285

—

135,285

—

Pension Funds of foreign subsidiaries and associated

companies

(697)

—

(697)

(1,123)

426

Fiscal impact

(7,287)

—

(7,287)

(7,256)

(31)

128,026

128,111

127,789

322

Other comprehensive income / (loss) for the year

(284,672)

(2,044)

(286,716)

(202,072)

(84,644)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(330,561)

68,837

(261,724)

(63,990)

(197,734)

CHIEF ACCOUNTANTTHE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

2021 REPORT & ACCOUNTS

192 |

(Thousands of euros)

2020 (restated)

Attributable to

Continuing

operations

Discontinued

operations

Total

Bank's

Shareholders

Non-

controlling

interests

NET INCOME FOR THE YEAR

192,845

15,520

208,365

183,012

25,353

ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME

STATEMENT (NOTE 43)

Debt instruments at fair value through other comprehensive

income

Gains / (losses) for the year

245,538

(2)

245,536

212,166

33,370

Reclassification of (gains) / losses to profit or loss (note 5)

(100,063)

—

(100,063)

(85,423)

(14,640)

Cash flows hedging

Gains / (losses) for the year

110,583

—

110,583

112,157

(1,574)

Other comprehensive income from investments in associates

and others

13,452

—

13,452

13,480

(28)

Exchange differences arising on consolidation

(256,819)

332

(256,487)

(145,504)

(110,983)

IAS 29 application

Effect on equity of Banco Millennium Atlântico, S.A.

(1,202)

—

(1,202)

—

Fiscal impact

(76,487)

—

(76,487)

(73,238)

(3,249)

(64,998)

330

(64,668)

32,436

(97,104)

ITEMS THAT WILL NOT BE RECLASSIFIED TO THE INCOME

STATEMENT

Equity instruments at fair value through other

comprehensive income

Gains / (losses) for the year (note 43)

(9,879)

(186)

(10,065)

(9,794)

(271)

Changes in own credit risk of financial liabilities at fair

value through profit or loss (note 43)

461

—

461

—

Actuarial gains / (losses) for the year

BCP Group Pensions Fund (note 50)

(88,645)

—

(88,645)

—

Pension Funds of foreign subsidiaries and associated

companies

(2,063)

(1,547)

(3,610)

(3,436)

(174)

Fiscal impact

24,918

25,009

24,909

100

(75,208)

(1,642)

(76,850)

(76,505)

(345)

Other comprehensive income / (loss) for the year

(140,206)

(1,312)

(141,518)

(44,069)

(97,449)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

52,639

14,208

66,847

138,943

(72,096)

The balances for 2020 were restated under the changes in accounting policies and in the classification of Banque Privée BCP (Suisse),

S.A. and Seguradora Internacional de Moçambique, S.A. as discontinuing operations, as detailed in note 59.

CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

2021 REPORT & ACCOUNTS

|193

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2021 AND 2020

(Thousands of euros)

Notes

2021

2020

(restated)

ASSETS

Cash and deposits at Central Banks

7,796,299

5,303,864

Loans and advances to credit institutions repayable on demand

361,786

262,395

Financial assets at amortised cost

Loans and advances to credit institutions

453,213

1,015,087

Loans and advances to customers

54,972,401

52,022,357

Debt securities

8,205,196

6,234,545

Financial assets at fair value through profit or loss

Financial assets held for trading

931,485

1,031,201

Financial assets not held for trading mandatorily at fair value through profit or loss

990,938

1,315,467

Financial assets at fair value through other comprehensive income

12,890,988

12,140,392

Hedging derivatives

109,059

91,249

Investments in associated companies

462,338

434,959

Non-current assets held for sale

780,514

1,026,481

Investment property

2,870

7,909

Other tangible assets

600,721

640,825

Goodwill and intangible assets

256,213

245,954

Current tax assets

17,283

11,676

Deferred tax assets

2,688,216

2,633,790

Other assets

1,385,292

1,296,812

TOTAL ASSETS

92,904,812

85,714,963

LIABILITIES

Financial liabilities at amortised cost

Resources from credit institutions

8,896,074

8,898,759

Resources from customers

69,560,227

63,000,829

Non subordinated debt securities issued

2,188,363

1,388,849

Subordinated debt

1,394,780

1,405,172

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

231,241

278,851

Financial liabilities at fair value through profit or loss

1,581,778

1,599,405

Hedging derivatives

377,206

285,766

Provisions

458,744

345,341

Current tax liabilities

20,427

14,827

Deferred tax liabilities

16,932

7,242

Other liabilities

1,116,983

1,103,652

TOTAL LIABILITIES

85,842,755

78,328,693

EQUITY

Share capital

4,725,000

Share premium

16,471

Other equity instruments

400,000

Legal and statutory reserves

259,528

254,464

Treasury shares

—

(40)

Reserves and retained earnings

580,304

642,397

Net income for the year attributable to Bank's Shareholders

138,082

183,012

TOTAL EQUITY ATTRIBUTABLE TO BANK'S SHAREHOLDERS

6,119,385

6,221,304

Non-controlling interests

942,672

1,164,966

TOTAL EQUITY

7,062,057

7,386,270

TOTAL LIABILITIES AND EQUITY

92,904,812

85,714,963

The balances for the year 2020 were restated under the changes occurred in accounting policies described in note 59.

CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

2021 REPORT & ACCOUNTS

194 |

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31

DECEMBER 2021 AND 2020

(Thousands of euros)

2021

2020 (restated)

CASH FLOWS ARISING FROM OPERATING ACTIVITIES

Interests received

1,610,633

1,541,781

Commissions received

925,786

877,504

Fees received from services rendered

110,095

70,625

Interests paid

(182,934)

(248,487)

Commissions paid

(145,957)

(157,022)

Recoveries on loans previously written off

22,938

22,680

Net earned insurance premiums

20,975

16,386

Claims incurred of insurance activity

(7,827)

(6,053)

Payments (cash) to suppliers and employees (*)

(1,250,979)

(1,229,338)

Income taxes (paid) / received

(61,834)

(89,589)

1,040,896

798,487

Decrease / (increase) in operating assets:

Receivables from / (Loans and advances to) credit institutions

204,997

169,528

Deposits held with purpose of monetary control

190,049

(291,669)

Loans and advances to customers receivable / (granted)

(4,192,195)

(4,080,970)

Short term trading securities

45,161

(175,522)

Increase / (decrease) in operating liabilities:

Loans and advances to credit institutions repayable on demand

(42,783)

(12,437)

Deposits from credit institutions with agreed maturity date

94,089

2,560,161

Loans and advances to customers repayable on demand

6,589,819

7,077,726

Deposits from customers with agreed maturity date

481,649

(2,992,767)

4,411,682

3,052,537

CASH FLOWS ARISING FROM INVESTING ACTIVITIES

Assignment of investments in subsidiaries and associates which results in loss of control (**)

4,809

Acquisition of investments in subsidiaries

(2,252)

—

Dividends received

16,651

11,891

Interest income from financial assets at fair value through other comprehensive income and at amortised cost

199,303

183,763

Sale of financial assets at fair value through other comprehensive income and at amortised cost

6,552,698

19,346,529

Acquisition of financial assets at fair value through other comprehensive income and at amortised cost

(58,763,208)

(39,893,571)

Maturity of financial assets at fair value through other comprehensive income and at amortised cost

49,315,510

17,992,857

Acquisition of tangible and intangible assets

(80,464)

(78,739)

Sale of tangible and intangible assets

13,614

11,276

Decrease / (increase) in other sundry assets

44,657

348,594

(2,698,682)

(2,077,380)

CASH FLOWS ARISING FROM FINANCING ACTIVITIES

Issuance of subordinated debt

300,000

—

Reimbursement of subordinated debt

(305,368)

(165,017)

Issuance of debt securities

998,439

—

Reimbursement of debt securities

(246,018)

(271,849)

Issuance of commercial paper and other securities

105,708

22,694

Reimbursement of commercial paper and other securities

(26,074)

(239,116)

Dividends paid to non-controlling interests

(17,516)

(22,974)

Interest paid of the issue of Perpetual Subordinated Bonds (Additional Tier 1)

(37,000)

Increase / (decrease) in other sundry liabilities and non-controlling interests (***)

(2,914)

73,443

769,257

(639,819)

Exchange differences effect on cash and equivalents

109,569

(256,487)

Net changes in cash and equivalents

2,591,826

78,851

Cash (note 18)

579,997

636,048

Deposits at Central Banks (note 18)

4,723,867

4,530,503

Loans and advances to credit institutions repayable on demand (note 19)

262,395

320,857

CASH AND EQUIVALENTS AT THE BEGINNING OF THE YEAR

5,566,259

5,487,408

Cash (note 18)

601,772

579,997

Deposits at Central Banks (note 18)

7,194,527

4,723,867

Loans and advances to credit institutions repayable on demand (note 19)

361,786

262,395

CASH AND EQUIVALENTS AT THE END OF THE YEAR

8,158,085

5,566,259

(*) In 2021, this balance includes the amount of Euros 581,000 (2020: Euros 2,077,000) related to short-term lease contracts and the amount of Euros

2,564,000 (2020: Euros 2,054,000) related to lease contracts of low value assets.

(**) As Banco Privée BCP (Suisse) S.A. and Seguradora Internacional de Moçambique, S.A. are now considered discontinued operations, the respective

amounts, net of intra-group operations, were incorporated into cash flows arising from investing operations.

(***) In 2021, this balance includes the amount of Euros 58,206,000 (2020: Euros 59,161,000) corresponding to payments of lease liabilities’ shares of

capital.

CHIEF ACCOUNTANTTHE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

2021 REPORT & ACCOUNTS

|195

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2021 AND 2020

(Thousands of euros)

capital

premium

Other

equity

instruments

Legal and

statutory

reserves

Treasury

Reserves

and

retained

earnings

Net income

for the year

attributable

to Bank's

Shareholders

Equity

attributable

to Bank's

Shareholders

Non- -

controlling

interests

(note 44)

Total

equity

BALANCE AS AT 31 DECEMBER 2019

4,725,000

16,471

400,000

240,535

(102)

435,823

302,003

6,119,730

1,261,524

7,381,254

Net income for the year

—

183,012

25,353

208,365

Other comprehensive income

—

(44,069)

—

(44,069)

(97,449)

(141,518)

TOTAL COMPREHENSIVE INCOME

—

(44,069)

183,012

138,943

(72,096)

66,847

Results application

Legal reserve

—

13,929

—

(13,929)

—

Transfers for reserves and retained

earnings

—

302,003

(302,003)

—

Interests of perpetual subordinated

bonds (Additional Tier 1)

—

(37,000)

—

(37,000)

—

(37,000)

Reversal of deferred tax assets

related with expenses with the

capital increase

—

(96)

—

(96)

—

(96)

Acquisition of subsidiaries

—

(1,080)

Dividends (a)

—

(22,974)

Treasury shares

—

Other reserves

—

(335)

—

(335)

(408)

(743)

BALANCE AS AT 31 DECEMBER 2020

4,725,000

16,471

400,000

254,464

(40)

642,397

183,012

6,221,304

1,164,966

7,386,270

Net income for the year

—

138,082

(113,090)

24,992

Other comprehensive income

—

(202,072)

—

(202,072)

(84,644)

(286,716)

TOTAL COMPREHENSIVE INCOME

—

(202,072)

138,082

(63,990)

(197,734)

(261,724)

Results application

Legal reserve (note 41)

—

5,064

—

(5,064)

—

Transfers for reserves and retained

earnings

—

183,012

(183,012)

—

Interests of perpetual subordinated

bonds (Additional Tier 1)

—

(37,000)

—

(37,000)

—

(37,000)

Acquisition of subsidiaries

—

(1,906)

Sale and loss of control of

subsidiaries

—

(4,556)

Dividends (a)

—

(17,516)

Treasury shares (note 42)

—

Other reserves (note 43)

—

(969)

—

(969)

(582)

(1,551)

BALANCE AS AT 31 DECEMBER 2021

4,725,000

16,471

400,000

259,528

—

580,304

138,082

6,119,385

942,672

7,062,057

(a) Dividends of BIM - Banco Internacional de Moçambique, S.A. and Seguradora Internacional de Moçambique, S.A.

CHIEF ACCOUNTANT THE EXECUTIVE COMMITTEE

See accompanying notes to the consolidated financial statements.

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1.Accounting policies

A.Basis of presentation

Banco Comercial Português, S.A. Sociedade Aberta (the ‘Bank’) is a private capital bank, established in Portugal in

1985. It started operating on 5 May 1986, and these consolidated financial statements reflect the results of the

operations of the Bank and all its subsidiaries (together referred to as the ‘Group’) and the Group’s interest in

associates, for the years ended on 31 December 2021 and 2020.

In accordance with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002, and

Bank of Portugal Notice no. 5/2015 (which revoked Bank of Portugal Notice no. 1/2005), the Group’s consolidated

financial statements are required to be prepared, since 2005, in accordance with International Financial Reporting

Standards (IFRS) as endorsed by the European Union (EU). IFRS comprise accounting standards issued by the

International Accounting Standards Board (IASB), as well as interpretations issued by the International Financial

Reporting Interpretations Committee (IFRIC) and its predecessor bodies. The consolidated financial statements and the

accompanying notes were approved on 28 March 2022 by the Bank's Board of Directors and are presented in thousands

of euros, rounded to the nearest thousand.

All the references in this document related to any normative always report to the respective current version.

The consolidated financial statements for the year ended on 31 December 2021 were prepared for the purpose of

recognition and measurement, in accordance with the IFRS approved by the EU that are effective on that date.

These consolidated financial statements are a translation of the financial statements originally issued in Portuguese. In

the event of discrepancies, the Portuguese version prevails.

A1.Comparative information

The Group has adopted IFRS and interpretations mandatory for accounting periods beginning on or after 1 January 2021.

The accounting policies were applied consistently to all entities of the Group and are consistent with those used in the

preparation of the financial statements of the previous period.

However, according to the described in note 48, under the agreement entered between Banco Comercial Português,

S.A. and Union Bancaire Privée, UBP SA regarding the sale of the entire share capital of the subsidiary Banque Privée

BCP (Suisse) S.A. and, in accordance with the provisions of IFRS 5, this operation was considered as discontinuing in

June 2021. The sale has been completed on 2 November 2021. Thus, with reference to 31 December 2020, the total

assets and liabilities of this subsidiary are reflected in the consolidated balance sheet in the respective lines, while the

income and expenses for the financial years ended on 31 December 2021 and 2020 are presented in a single line

denominated "Income arising from discontinued and discontinuing operations". The financial statement for 2020, that

have been incorporated in this caption is detailed in note 59.

Additionally, as referred in note 48, the Group, through its subsidiary BIM - Banco Internacional de Moçambique, S.A.,

sold 70% of the investment held in Seguradora Internacional de Moçambique, S.A., now holding a minority stake of 22%.

In accordance with the provisions of IFRS 5, this operation was considered as discontinuing in December 2021 and the

impact on results is presented in a separate line of the income statement denominated "Income/(loss) arising from

discontinued or discontinuing operations". The 2020 financial statement of Seguradora Internacional de Moçambique,

S.A. that has been incorporated are detailed in note 59. As regards the entity's assets and liabilities, they are no longer

included in the consolidated balance sheet in the respective lines, and the entity is now consolidated under the equity

method.

To ensure the comparability of information, the Group has made the appropriate adjustments to the comparable data

in the 2020's consolidated income statement for the two entities, as detailed in note 59.

In the first semester of 2021, the Group changed the presentation of provisions for individual court cases related to CHF

mortgage loans. Commencing from the first quarter of 2021, the Group allocates the portfolio provisions for future

legal issues and recognizes it as a reduction of the gross carrying amount of loans for which a decrease in future cash

flows is expected in accordance with IFRS 9 "Financial Instruments". Considering that, as in the case of the portfolio

provisions, a decrease in cash flows is also expected in the case of exposures subject to individual litigations, the

Group, starting from 30 June 2021, increased the scope of the allocated provisions by provisions for individual

litigations (previously provisions for individual litigations used to be recognized in accordance with IAS 37 "Provisions,

Contingent Liabilities and Contingent Assets" as provisions for pending legal issues). As a result of the above change, the

solution in line with IAS 37 will be continued only with regard to disputes relating to already repaid receivables not

included in the Group's balance sheet.

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The Group also changed the presentation of interest on derivatives not associated with strategies of formal hedge

accounting. Bearing in mind that these instruments, although they are included in the trading book, are mainly

concluded in order to establish economic hedging against the risk of other financial assets or liabilities, the Group, from

the first semester of 2021, presents the interest in the Income statement as part of the "Net interest income", while

previously this interest was included in the item “Results on financial assets and liabilities held for trading".

To ensure comparability, the Group has made appropriate adjustments to the comparable data in 2020's consolidated

balance sheet and in the consolidated income statement, as detailed in note 59.

The Group's financial statements were prepared under the going concern assumption, the accrual-based accounting

regime and under the historical cost convention, as modified by the application of fair value for derivative financial

instruments, financial assets and liabilities at fair value through profit or loss and financial assets at fair value through

other comprehensive income. Financial assets and liabilities that are covered under hedge accounting are stated at fair

value in respect of the risk that is being hedged, if applicable. Other financial assets and liabilities and non-financial

assets and liabilities are stated at amortised cost or historical cost. Non-current assets and disposal groups held for sale

are stated at the lower of carrying amount or fair value less costs to sell. The liability for defined benefit obligations is

recognised as the present value of the past liabilities with pensions net of the value of the fund's assets.

The preparation of the financial statements in accordance with IFRS requires the Board of Directors, under advice of

the Executive Committee, to make judgments, estimations and assumptions that affect the application of the

accounting policies and reported amounts of assets, liabilities, income and expenses. The estimations and associated

assumptions are based on historical experience and other factors that are believed to be reasonable under the

circumstances and form the basis for making the judgments about the carrying values of assets and liabilities that are

not readily apparent from other sources. Actual results may differ from these estimations. The issues involving a higher

degree of judgment or complexity or for which assumptions and estimations are significant are presented in note 1.Y.

B.Basis of consolidation

As from 1 January 2010, the Group began to apply IFRS 3 (revised) for the accounting of business combinations. The

changes in the accounting policies resulting from the application of IFRS 3 (revised) are applied prospectively.

The consolidated financial statements now presented reflect the assets, liabilities, income and expenses of the Bank

and its subsidiaries (the Group), and the results attributable to the Group financial investments in associates.

B1.Investments in subsidiaries

Subsidiaries are entities controlled by the Group (including structure entities and investment funds). The Group controls

an entity when it holds the power to direct the relevant activities of the entity, and when it is exposed, or has rights,

to variable returns from its involvement with the entity and is able to take possession of these results through the

power it holds over the relevant activities of that entity (de facto control). The financial statements of subsidiaries are

included in the consolidated financial statements from the date on which control commences until the date on which

control ceases.

Accumulated losses are attributed to non-controlling interests in the respective proportion, implying that the Group can

recognise negative non-controlling interests.

On a step acquisition process resulting in the acquisition of control, the revaluation of any participation previously

acquired is recorded against the profit and loss account when goodwill is calculated. On a partial disposal resulting in

loss of control over a subsidiary, any participation retained is revalued at market value on the sale date and the gain or

loss resulting from this revaluation is booked against the income statement.

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B2.Investments in associates

Investments in associated companies are registered by the equity method from the date that the Group acquires

significant influence until the date it ceases to exist. Associates are those entities in which the Group has significant

influence but not control over the financial and operating policy decisions of the investee. It is assumed that the Group

has significant influence when it holds, directly or indirectly, more than 20% or of the voting rights of the investee. If

the Group holds, directly or indirectly, less than 20% of the voting rights of the investee, it is presumed that the Group

does not have significant influence, unless such influence can be clearly demonstrated.

The existence of significant influence by the Group is usually evidenced in one or more of the following ways:

-representation on the Board of Directors or equivalent governing body of the investee;

-participation in policy-making processes, including participation in decisions about dividends or other distributions;

-material transactions between the Group and the investee;

-interchange of the management team;

-provision of essential technical information.

The consolidated financial statements include the part that is attributable to the Group of the total reserves and

results of associated companies accounted on an equity basis. When the Group’s share of losses exceeds its interest in

the associate, the carrying amount is reduced to zero and recognition of further losses is discontinued, with exception

of the part in which the Group incurs in a legal obligation to assume these losses on behalf of an associate.

B3.Goodwill

Business combinations are accounted under the purchase method. The acquisition cost corresponds to the fair value,

determined at the acquisition date, of the assets given and liabilities incurred or assumed. Costs directly attributable

to the acquisition of a subsidiary are recorded directly in the income statement.

Positive goodwill arising from acquisitions is recognised as an asset carried at acquisition cost and is not subject to

amortisation, however, it is subject to impairment tests. Goodwill arising from the acquisition of subsidiaries and

associates is defined as the difference between the cost of acquisition and the total or corresponding share of the fair

value of the net assets and contingent liabilities acquired, depending on the option taken.

Negative goodwill arising from an acquisition is recognised directly in the income statement of the period in which the

business combination occurs.

Goodwill is not adjusted due to changes in the initial estimation of the contingent purchase price, being the difference

recorded in the income statement or in equity, when applicable.

According to IFRS 3 – Business combinations, if the initial accounting of a business combination is not concluded until

the end of the first financial reporting period in which the combination occurs, it is recorded at the respective

provisional values. These provisional values can be adjusted over the measurement period, which can’t exceed a year

since the acquisition date. Over this period, the Group should retrospectively adjust the amounts recognised previously

on the acquisition date, to reflect newly obtained information about facts and circumstances that existed at the

acquisition date and that, if they were known by then, would have impacted the measurement of the amounts

recognised at that date.

During this period, the Group should also recognise additional assets and liabilities in the case of obtaining new

information about facts and circumstances that existed at the acquisition date and that, if they were known by then,

would have resulted in the recognition of that assets and liabilities at that time.

The recoverable amount of the goodwill registered in the Group's asset is assessed annually in the preparation of the

accounts with reference to the end of the year or whenever there are indications of eventual loss of value. Impairment

losses are recognised in the income statement. The recoverable amount is determined based on the higher of the asset

value in use and the market value after deducting selling costs, calculated using valuation methodologies supported by

discounted cash flow techniques, considering market conditions, the time value of money and the business risks.

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B4.Purchases and dilution of non-controlling interests

The acquisition of non-controlling interests that do not impact the control position of a subsidiary is accounted as a

transaction with shareholders and, therefore, no additional goodwill resulting from this transaction is recognised. The

difference between the acquisition cost and the fair value of non-controlling interests acquired is recognised directly in

reserves. On this basis, the gains and losses resulting from the sale of controlling interests that do not impact the

control position of a subsidiary are always recognised against reserves.

B5.Loss of control

The gains and losses resulting from the dilution or sale of a financial position in a subsidiary, with loss of control, are

recognised by the Group in the income statement.

B6.Investments in foreign subsidiaries and associates

The financial statements of foreign subsidiaries and associates of the Group are prepared in their functional currency,

defined as the currency of the primary economic environment in which they operate or the currency in which the

subsidiaries obtain their income or finance their activity. In the consolidation process, assets and liabilities, including

goodwill, of foreign subsidiaries are converted into euros at the official exchange rate on the balance sheet date.

Regarding the investments in foreign operations that are consolidated under the full consolidation or equity methods,

exchange differences, between the conversion to euros of the equity at the beginning of the year and its value in euros

at the exchange rate on the balance sheet date in which the consolidated accounts are reported, are recognised against

“Reserves - exchange differences”. The changes in fair value resulting from instruments that are designated and

qualified as hedging instruments related to foreign operations are recorded in equity under "Reserves and retained

earnings". Whenever the hedge is not fully effective, the ineffective portion is accounted against profit and loss of the

year.

The income and expenses of these subsidiaries are converted to euros at an approximate rate of the rates on the dates

of the transactions, using a monthly average considering the initial and final exchange rates of each month. Exchange

differences from the conversion to euros of the profits and losses for the reporting period, arising from the difference

between the exchange rate used in the income statement and the exchange rate prevailing at the balance sheet date,

are recognised in "Reserves and retained earnings - exchange differences resulting from the consolidation of Group's

companies". The exchange rates used by the Group are detailed in note 54.

On disposal of investments in foreign subsidiaries for which there is loss of control, exchange differences related to the

investment in the foreign operation and to the associated hedge transaction previously recognised in reserves are

transferred to profit and loss, as part of the gains or loss arising from the disposal.

The Group applies IAS 29 – Financial reporting in hyperinflationary economies in financial statements of entities that

present accounts in functional currency of an economy that has hyperinflation.

In applying this policy, non-monetary assets and liabilities are adjusted based on the price index from the date of

acquisition or the date of the last revaluation until 31 December 2021. The restated values of assets are reduced by the

amount that exceeds their recoverable amount, in accordance with the applicable IFRS.

Equity components are also updated considering the price index from the beginning of the period or date of the

contribution, if it is earlier.

When the classification as a hyperinflationary economy is applied to associated companies, its effects are included in

the Group's financial statements by applying the equity method of accounting on the financial statements restated in

accordance with the requirements of IAS 29. The effects of the application of IAS 29 with impact on capital items are

recognised against the item "Reserves and retained earnings".

In accordance with the requirements provided in IAS 29, Angola was considered as a hyperinflationary economy until 31

December 2018. This classification is no longer applicable as of 1 January 2019.

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B7.Transactions eliminated on consolidation

The balances and transactions between Group's companies, as well as any unrealised gains and losses arising from these

transactions, are eliminated in the preparation of the consolidated financial statements. Unrealised gains and losses

arising from transactions with associates and jointly controlled entities are eliminated in the proportion of the Group's

investment in these entities.

C.Financial instruments (IFRS 9)

C1.Financial assets

C1.1.Classification, initial recognition and subsequent measurement

At the initial recognition, financial assets are classified into one of the following categories:

–“Financial assets at amortised cost”;

–“Financial assets at fair value through other comprehensive income”; or,

–“Financial assets at fair value through profit or loss”.

The classification is made taking into consideration the following aspects:

–the Group's business model for the management of the financial asset; and,

–the characteristics of the contractual cash flows of the financial asset.

Business Model Evaluation

With reference to 1 January 2018, the Group carried out an evaluation of the business model in which the financial

instruments are held at portfolio level, since this approach reflects how assets are managed and how that information

is made available to management bodies. The information considered in this evaluation included:

–the policies and purposes established for the portfolio and the practical operability of these policies, including how

the management strategy focuses on receiving contractual interest, maintaining a certain interest rate profile,

adjusting the duration of financial assets to the duration of liabilities that finance these assets or on the realization

of cash flows through the sale of the assets;

–how the performance of the portfolio is evaluated and reported to the Group's management bodies;

–the evaluation of the risks that affect the performance of the business model (and of the financial assets held under

this business model) and the way these risks are managed;

–the remuneration of business managers, i.e., in what way the compensation depends on the fair value of the assets

under management or on contractual cash flows received; and,

–the frequency, volume and sales periodicity in previous periods, the reasons for these sales and the expectations

about future sales. However, sales information should not be considered individually, but as part of an overall

assessment of how the Group establishes financial asset management objectives and how cash flows are obtained.

Financial assets held for trading and financial assets managed and evaluated at fair value by option are measured at

fair value through profit or loss because they are not held either for the collection of contractual cash flows (HTC), nor

for the collection of cash flows and sale of these financial assets (HTC and Sell).

Evaluation if the contractual cash flows correspond to Solely Payments of Principal and Interest (SPPI)

For the purposes of this assessment, "principal" is defined as the fair value of the financial asset at initial recognition.

"Interest" is defined as the counterparty for the time value of money, for the credit risk associated with the amount

owed over a given period of time and for other risks and costs associated with the activity (e.g., liquidity risk and

administrative costs), as well as for a profit margin.

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In the evaluation of the financial instruments in which contractual cash flows refer exclusively to the receipt of

principal and interest, the Group considered the original contractual terms of the instrument. This evaluation included

the analysis of the existence of situations in which the contractual terms can modify the periodicity and the amount of

the cash flows so that they do not fulfil the SPPI condition. In the evaluation process, the Group considered:

–contingent events that may change the periodicity and the amount of the cash flows;

–characteristics that result in leverage;

–terms of prepayment and extension of maturity;

–terms that may limit the right of the Group to claim cash flows in relation to specific assets (e.g., contracts with

terms that prevent access to assets in case of default – non-recourse asset); and,

–characteristics that may change the time value of money.

In addition, an advance payment is consistent with the SPPI criterion if:

–the financial asset is acquired or originated with a premium or discount in relation to the contractual nominal value;

–the prepayment represents substantially the nominal amount of the contract plus accrued contractual interest, but

not paid (may include reasonable compensation for prepayment); and,

–the prepaid fair value is insignificant at initial recognition.

C1.1.1.Financial assets at amortised cost

Classification

A financial asset is classified under the category "Financial assets at amortised cost" if both of the following conditions

are met:

–the financial asset is held within a business model whose objective is to hold financial assets in order to collect their

contractual cash flows; and,

–its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal

amount outstanding (SPPI).

The "Financial assets at amortised cost" category includes loans and advances to credit institutions, loans and advances

to customers and debt instruments managed based on a business model whose purpose is to receive their contractual

cash flows (government bonds, bonds issued by companies and commercial paper).

Initial recognition and subsequent measurement

Loans and advances to credit institutions and loans and advances to customers are recognised at the date the funds are

made available to the counterparty (settlement date). Debt instruments are recognised on the trade date, that is, on

the date the Group accepts to acquire them.

Financial assets at amortised cost are initially recognised at fair value plus transaction costs and are subsequently

measured at amortised cost. In addition, they are subject, at their initial recognition, to the measurement of

impairment losses for expected credit losses (note C1.5), which are recognised in "'Impairment of financial assets

measured at amortised cost".

Interest of financial assets at amortised cost is recognised under "Interest and similar income", based on the effective

interest rate method and in accordance with the criteria described in note C3.

Gains or losses generated at the time of derecognition are registered in "Gains/(losses) with derecognition of financial

assets and liabilities at amortised cost".

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C1.1.2.Financial assets at fair value through other comprehensive income

Classification

A financial asset is classified under the category of "Financial assets at fair value through other comprehensive income"

if both of the following conditions are met:

–the financial asset is held within a business model whose objective is both to collect its contractual cash flows and

to sell this financial asset; and,

–its contractual cash flows occur on specific dates and are solely payments of principal and interest on the principal

amount outstanding (SPPI).

In addition, at the initial recognition of an equity instrument that is not held for trading, nor a contingent retribution

recognised by an acquirer in a business combination to which IFRS 3 applies, the Group may irrevocably choose to

classify it in the category of "Financial assets at fair value through other comprehensive income" (FVOCI). This option is

exercised on a case-by-case basis and is only available for financial instruments that comply with the definition of

equity instruments provided in IAS 32 and cannot be used for financial instruments whose classification as an equity

instrument under the scope of the issuer is made under the exceptions provided in paragraphs 16A to 16D of IAS 32.

Initial recognition and subsequent measurement

Debt instruments at fair value through other comprehensive income are initially recognised at fair value plus

transaction costs and are subsequently measured at fair value. Changes in the fair value of these financial assets are

recognised against other comprehensive income and, at the time of their disposal, the respective gains or losses

accumulated in other comprehensive income are reclassified to a specific income statement item designated "Gains or

losses on derecognition of financial assets at fair value through other comprehensive income”.

Debt instruments at fair value through other comprehensive income are also subject, from their initial recognition, to

the measurement of impairment losses for expected credit losses (note C1.5). Impairment losses are recognised in the

income statement under "Impairment of financial assets at fair value through other comprehensive income", against

“Other comprehensive income”, and do not reduce the carrying amount of the financial asset in the balance sheet.

Interest, premiums or discounts on financial assets at fair value through other comprehensive income are recognised in

"Interest and similar income", based on the effective interest rate method and in accordance with the criteria described

in note C3.

Equity instruments at fair value through other comprehensive income are initially recognised at fair value plus

transaction costs and are subsequently measured at fair value. The changes in the fair value of these financial assets

are recognised against “Other comprehensive income”. Dividends are recognised in the income statement when the

right to receive them is attributed.

Impairment is not recognised for equity instruments at fair value through other comprehensive income, and the

respective accumulated gains or losses recognised in “Fair value changes” are transferred to “Retained earnings” at the

time of their derecognition.

C1.1.3.Financial assets at fair value through profit or loss

Classification

A financial asset is classified in the category "Financial assets at fair value through profit and loss" if the business model

defined by the Group for its management or the characteristics of its contractual cash flows do not meet the conditions

described above to be measured at amortised cost or at fair value through other comprehensive income (FVOCI).

In addition, the Group may irrevocably designate a financial asset at fair value through profit or loss that meets the

criteria to be measured at amortised cost or at FVOCI at the time of its initial recognition if this eliminates or

significantly reduces an inconsistency in measurement or recognition (accounting mismatch), that will otherwise arise

from measuring assets or liabilities or recognising their gains and losses in different bases.

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The Group classified "Financial assets at fair value through profit and loss" in the following items:

a)“Financial assets held for trading”

These financial assets are acquired with the purpose of short-term selling; at the initial recognition, they are part of a

portfolio of identified financial instruments and for which there is evidence of profit-taking in the short-term; or they

can be defined as derivatives (except for hedging derivatives).

b)“Financial assets not held for trading mandatorily at fair value through profit or loss”

This item classifies debt instruments whose contractual cash flows do not correspond only to repayments of principal

and interest on the principal amount outstanding (SPPI).

c)“Financial assets designated at fair value through profit or loss”

This item includes the financial assets that the Group has chosen to designate at fair value through profit or loss to

eliminate accounting mismatch.

Initial recognition and subsequent measurement

Considering that the transactions carried out by the Group in the normal course of its business are in market conditions,

financial assets at fair value through profit or loss are initially recognised at their fair value, with the costs or income

associated with the transactions recognised in profit and loss at the initial moment. Subsequent changes in the fair

value of these assets are recognised in profit and loss.

The accrual of interest and of the premium/discount (when applicable) is recognised in "Net interest income", based on

the effective interest rate of each transaction, except the accrual of interest from trading derivatives that are

recognised in “Net gains/(losses) from financial operations at fair value through profit or loss”. Dividends are

recognised in profit and loss when the right to receive them is attributed.

Trading derivatives with a positive fair value are included in the item "Financial assets held for trading", while trading

derivatives with negative fair value are included in "Financial liabilities held for trading".

C1.2.Reclassification between categories of financial assets

Financial assets should be reclassified into other categories only if the business model used in their management has

changed. In this case, all financial assets affected must be reclassified.

The reclassification must be applied prospectively from the date of reclassification and any gains, losses (including the

ones related to impairment) or interest previously recognised should not be restated.

The reclassification of investments in equity instruments measured at fair value through other comprehensive income is

not allowed, nor of financial instruments designated at fair value through profit or loss.

C1.3.Modification and derecognition of financial assets

General principles

i)The Group shall derecognise a financial asset when, and only when:

–the contractual rights to the cash flows from the financial asset expire; or,

–it transfers the financial asset as set out in notes ii) and iii) below and the transfer qualifies for derecognition in

accordance with note iv).

ii)The Group transfers a financial asset if, and only if, it either:

–transfers the contractual rights to receive the cash flows of the financial asset; or,

–retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to

pay the cash flows to one or more recipients in an arrangement that meets the conditions presented in note iii).

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iii)When the Group retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but

assumes a contractual obligation to pay these cash flows to one or more entities (the 'eventual recipients'), the

Group shall treat the transaction as a transfer of a financial asset if all the following three conditions are met:

–the Group does not have any obligation to pay amounts to the eventual recipients, unless it collects equivalent

amounts from the original asset. Short-term advances with the right of full recovery of the amount lent, plus

accrued interest at market rates, do not violate this condition;

–the Group is contractually prohibited from selling or pledging the original asset other than as a security to the

eventual recipients due its obligation to pay them cash flows; and,

–the Group has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material

delay. In addition, it is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents

(as defined in IAS 7 – Statement of Cash Flows) during the short settlement period from the collection date until the

date of required remittance to the eventual recipients, and interest earned on such investments is passed to the

eventual recipients.

iv) When the Group transfers a financial asset (see note ii) above), it shall evaluate the extent to which it retains the

risks and benefits arising from owning the financial asset. In this case:

–if the Group transfers substantially all the risks and benefits arising from owning the financial asset, it shall

derecognise the financial asset and recognise separately any rights and obligations created or retained in the

transfer, as assets or liabilities;

–if the Group retains substantially all the risks and benefits arising from owning the financial asset, it shall continue

to recognise the financial asset;

–if the Group neither transfers nor retains substantially all the risks and benefits arising from owning the financial

asset, it shall determine whether it retained control of the financial asset. In this case:

a)if the Group did not retain control, it shall derecognise the financial asset and recognise separately, as assets or

liabilities, any rights and obligations created or retained in the transfer;

b)if the Group retained control, it shall continue to recognise the financial asset to the extent of its continued

involvement in the financial asset.

v) The transfer of risks and benefits (see prior note) is evaluated by comparing the Group’s exposure, before and after

the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset.

vi) The question of whether the Group retained or not control (see note iv) above) over the transferred asset depends

on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety

to an unrelated third party and can exercise that ability unilaterally without needing to impose additional

restrictions on the transfer, the entity did not retain control. In all other cases, the entity retained control.

Derecognition criteria

In the context of the general principles listed in the previous section, and considering that contract modification

processes may lead, in some circumstances, to the derecognition of the original financial assets and recognition of new

ones (subject to POCI identification), the purpose of this section is to set the criteria and circumstances that may lead

to the derecognition of a financial asset.

The Group considers that a modification in the terms and conditions of a credit exposure will result in derecognition of

the transaction and in recognition of a new transaction when the modification translates into at least one of the

following conditions:

–creation of a new exposure that results from a debt consolidation, without any of the derecognised instruments

having a nominal amount higher than 90% of the nominal amount of the new instrument;

–double extension of residual maturity, provided that the extension is not shorter than 3 years compared to the

residual maturity in the moment of modification;

–increase of on-balance exposure by more than 10% compared to the nominal amount (refers to the last approved

amount on the operation subject to modification);

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–change in qualitative features, namely:

a)change of currency, unless the exchange rate between the old and the new currency is pegged or managed within

limits restricted by law or the relevant monetary authorities;

b)exclusion or addition of a substantial equity conversion feature to a debt instrument, unless it is not reasonably

possible that it will be exercised over its term;

c)transfer of the instrument’s credit risk to another borrower, or a significant change in the structure of borrowers

within the instrument.

Loans written-off

The Group writes off a loan when it does not have reasonable expectations of recovering a financial asset in its entirety

or partially. This registration occurs after all the recovery actions developed by the Group prove to be fruitless. Loans

written-off are recognised in off-balance sheet accounts.

C1.4.Purchased or originated credit-impaired assets

Purchased or originated credit-impaired (POCI) assets are assets that present objective evidence of credit impairment

in the moment of their initial recognition. An asset is credit-impaired if one or more events have occurred with a

negative impact on the estimated future cash flows of the asset.

The two events that lead to the origin of a POCI exposure are presented as follows:

–financial assets arising from a recovery process, where there have been changes to the terms and conditions of the

original agreement, which presented objective evidence of impairment that resulted in its derecognition (note C1.3)

and recognition of a new contract that reflects the credit losses incurred;

–financial assets acquired with a significant discount, where the existence of a significant discount reflects credit

losses incurred at the time of their initial recognition.

At initial recognition, POCI assets do not carry an impairment allowance. Instead, lifetime expected credit losses (ECL)

are incorporated into the calculation of the effective interest rate (EIR). Consequently, at initial recognition, the gross

book value of POCI (initial balance) is accounted for at fair value and it's equal to the net book value before being

recognised as POCI (difference between the initial balance and the total discounted cash flows).

C1.5.Impairment losses

C1.5.1.Financial instruments subject to impairment losses recognition

The Group recognises impairment losses for expected credit losses on financial instruments recognised in the following

accounting items:

C1.5.1.1.Financial assets at amortised cost

Impairment losses on financial assets at amortised cost reduce the balance sheet value of these financial assets against

the item "Impairment of financial assets at amortised cost" (in the income statement).

C1.5.1.2.Debt instruments at fair value through other comprehensive income

Impairment losses for debt instruments at fair value through other comprehensive income are recognised in the income

statement under "Impairment of financial assets at fair value through other comprehensive income", against other

comprehensive income (they do not reduce the balance sheet amount of these financial assets).

C1.5.1.3.Credit commitments, documentary credits and financial guarantees

Impairment losses associated with credit commitments, documentary credits and financial guarantees are recognised in

liabilities, under the balance "Provisions for guarantees and other commitments", against "Other provisions" (in the

income statement).

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C1.5.2.Classification of financial instruments by stages

Changes in credit risk since the initial recognition

Stage 1

Stage 2

Stage 3

Classification criterion

Initial recognition

Significant increase in credit

risk since initial recognition

Impaired

Impairment losses

12-month expected credit

losses

Lifetime expected credit losses

The Group determines the expected credit losses of each operation as a result of the deterioration of credit risk since

its initial recognition. For this purpose, operations are classified into one of the following three stages:

–Stage 1: the operations in which there is no significant increase in credit risk since its initial recognition are

classified in this stage. Impairment losses associated with operations classified in this stage correspond to expected

credit losses resulting from a default event that may occur within 12 months after the reporting date (12-month

expected credit losses);

–Stage 2: the operations in which there is a significant increase in credit risk since its initial recognition (note C1.5.3)

but are not impaired (note C1.5.4) are classified in this stage. Impairment losses associated with operations

classified in this stage correspond to the expected credit losses resulting from default events that may occur over

the expected residual life of the operations (lifetime expected credit losses);

–Stage 3: impaired operations are classified in this stage. Impairment losses associated with operations classified at

this stage correspond to lifetime expected credit losses.

C1.5.3.Significant increase in credit risk (SICR)

Significant increase in credit risk (SICR) is determined according to a set of mostly quantitative, but also qualitative

criteria. These criteria are mainly based on the risk grades of customers, according to the Bank's Rating Master Scale,

and on its evolution, in order to detect significant increases in Probability of Default (PD), complemented by other

information regarding the customers’ behavior towards the financial system.

C1.5.4.Definition of financial assets in default and impaired

All customers who meet at least one of the following conditions are marked as default and, consequently, in NPE:

a) Delay over 90 days of material payment:

- Amounts of principal, interest or fees not paid on the due date that, cumulatively, represent:

i) more than Euros 100 (retail) or more than Euros 500 (non-retail); and,

ii) more than 1% of the total debt (direct liabilities).

After these two conditions are met, the counting of days of delay begins: if more than 90 consecutive days in which the

customer is in this situation have been counted, it is classified as default (or GR15).

The existence of a material payment delay gives rise to the default setting (GR15) of all holders of the operation (or

operations).

b) Signs of low probability of payment:

i.Credit restructuring due to financial difficulties with loss of value;

ii.Delay after restructuring due to financial difficulties;

iii.Recurrence of restructuring due to financial difficulties;

iv.Credit with signs of impairment (or stage 3 of IFRS 9);

v.Insolvency or equivalent proceedings;

vi.Litigation;

vii.Guarantees of operations in default;

viii.Credit sales with losses;

ix.Credit fraud;

x.Unpaid credit status;

xi.Breach of covenants in a credit agreement;

xii.Spread of default in an economic group;

xiii.Cross default in BCP Group.

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C1.5.5.Estimates of expected credit losses - Individual analysis

1.Customers who are in one of the following conditions are subject to individual analysis:

Customers in default

Customers in litigation or insolvency, if the total exposure of the group members in these situations exceeds

Euros 1 million

Customers integrated into groups with an exposure over Euros 5 million, if they have a risk grade 15

Groups or customers

who are not in

default

Other customers belonging to groups in the above conditions

Groups or customers with an exposure over Euros 5 million, if a group member has a risk grade 14

Groups or customers with an exposure over Euros 5 million, if a member of the group has a restructured loan

and a risk grade 13

Groups or customers with an exposure over Euros 10 million, if at least one member of the group is in stage 2

Groups or customers not included in the preceding paragraphs, whose exposure exceeds Euros 25 million

2. Regardless of the criteria described in the previous point, the individual analysis is only performed for customers

with a credit exposure over Euros 500,000, while customers with exposure below this limit are not considered for

the purpose of determining the exposure referred to in the previous point.

3.Other customers that do not meet the criteria defined in 1 will also be subject to individual analysis, if under the

following conditions:

–they have impairment as a result of the latest individual analysis;

–according to recent information, they show a significant deterioration in risk levels; or,

–are a Special Purpose Vehicle (SPV).

4.The individual analysis includes the following procedures:

–for customers that are not in default, the analysis of financial difficulties indicators to determine whether the

customer has objective signs of impairment, or whether it should be classified in stage 2 given the occurrence of a

significant increase in credit risk, considering for this purpose a set of predetermined signs;

–for customers in default or for which the previous analysis has allowed to conclude that the customer has objective

signs of impairment, determination of the loss.

5.The individual analysis is the responsibility of the departments in charge of customer management and of the Credit

Department, the latter in respect to the customers managed by the Commercial Networks.

The assessment of existence of impairment losses in individual terms is determined through an analysis of the total

credit exposure on a case-by-case basis. For each loan considered individually significant, the Group assessed, at each

balance sheet date, the existence of objective evidence of impairment. In the assessment of impairment losses in

individual terms, the following factors were considered:

–total exposure of each customer towards the Group and the existence of overdue loans;

–viability of the customer’s business and its capacity to generate enough cash flows to service debt obligations in the

future;

–the existence, nature and estimated value of the collaterals associated to each loan;

–significant deterioration of the customer's rating;

–the customer’s available assets in liquidation or insolvency situations;

–the existence of preferential creditors;

–the amount and expected recovery term.

6.Each of the units referred to in the previous point is responsible for assigning an expectation and a recovery period

to exposures relating to customers subject to individual analysis, which must be transmitted to the Risk Office as

part of the regular process of collecting information, accompanied by detailed justification of the proposed

impairment.

7.The expected recovery shall be represented by a recovery rate of the total outstanding exposure, which may be a

weighted rate considering the different recovery prospects for each part of the customer's liabilities.

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8.The recovery estimation referred to in the previous point should be influenced by future prospects (forward-

looking), contemplating not only a more expected scenario but also alternative scenarios (an unbiased and

probability-weighted amount). The application and weighting of the scenarios should be carried out both in a

global perspective and in an individualized perspective, the latter when cases that, due to their specificity, have a

high degree of uncertainty regarding the expected recovery estimation are identified.

9.The macroeconomic adjustment set out in point 8 should be analysed annually and weighted according to the type

of recovery strategy associated with the exposure under analysis:

–for Going Concern strategies (i.e., the estimation is based on the cash flows of the business), the possibility of

applying the 2 additional macroeconomic scenarios (optimistic and pessimistic) should be analysed in a global way,

to ascertain if there is the risk of a skewed view of the expected losses from the consideration of only one scenario;

–for Gone Concern strategies (i.e., the recovery estimation is based on the realization of the collateral), the impact

of the macroeconomic scenario on collaterals should be analysed, for example, to what extent the projected real

estate index indicates significant changes ahead for the current valuation values.

10.It is the responsibility of the units referred to in point 5 to consider in their projection macroeconomic expectations

that may influence the recoverability of the debt.

11.For the purposes of the preceding paragraphs, the Studies, Planning and ALM Department shall disclose the

macroeconomic data that allow the estimations to be made.

12.The decision to consider global impacts related to the going and gone concern scenarios should be made by the Risk

Committee, as proposed by the Risk Office.

13.For specific cases with a high degree of uncertainty, the allocation of alternative scenarios should be considered

casuistically. Examples of recovery situations with a degree of uncertainty include:

–recovery of collateral in geographies in which the Bank has no relevant recovery experience;

–recovery of debt related to geographies in which there is strong political instability;

–recovery of non-real estate collateral for which there is no evidence of market liquidity;

–recovery of related collateral or government guarantees in a currency other than the country's own;

–recovery of debt related to debtors for whom there is a strong negative public exposure.

14. The Risk Office is responsible for reviewing the information collected and for clarifying all identified

inconsistencies, as well as for the final decision on the customer's impairment.

15.Customers that have objective signs of impairment, but an individual impairment amount is equal to zero, are

included in the collective analysis, assuming a PD 12 months equivalent to the risk grade of the customer.

16.The individual impairment analysis must be carried out at least annually. In case significant signs of deterioration or

improvement in the customer’s economic and financial situation are detected, as well as the macroeconomic

conditions affecting the customer's ability to accomplish debt, it is the responsibility of the Risk Office to promote

the review of the expected impairment of this customer.

C1.5.6.Estimates of expected credit losses - Collective analysis

Transactions that are not subject to an individual impairment analysis are grouped considering their risk characteristics

and subject to a collective impairment analysis. The Group's credit portfolio is divided by internal risk grades and

according to the following segments:

a)Segments with a reduced history of defaults, designated ‘low default’: Large corporate exposures, Project finance,

Institutions (banks/financial institutions) and Sovereigns;

b)Segments not ‘low default’: - Retail: Mortgages; Overdrafts; Credit cards; Small and medium enterprises - Retail

(‘SME Retail’); and Others - Corporate: Small and medium enterprises - Corporate (‘Large SME’); and Real Estate.

The Group performs statistical tests in order to prove the homogeneity of the segments mentioned above, with a

minimum period of one year.

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Expected credit losses are estimates of credit losses that are determined as follows:

–financial assets with no signs of impairment at the reporting date: the present value of the difference between the

contractual cash flows and the cash flows that the Group expects to receive;

–financial assets with impairment at the reporting date: the difference between the gross book value and the present

value of the estimated cash flows;

–unused credit commitments: the present value of the difference between the resulting contractual cash flows if the

commitment is made and the cash flows that the Group expects to receive;

–financial guarantees: the current value of the expected repayments less the amounts that the Group expects to

recover.

The main inputs used to measure ECLs on a collective basis should include the following variables:

–Probability of Default – PD;

–Loss Given Default – LGD; and,

–Exposure at Default – EAD.

These parameters are obtained through internal statistical models and other relevant historical data, considering the

already existing regulatory models adapted to the requirements of IFRS 9.

PDs are estimated based on a certain historical period and will be calculated based on statistical models. These models

are based on internal data including both quantitative and qualitative factors. If there is a change in the risk of the

counterparty or exposure, the estimate of the associated PD will also vary. The PDs will be calculated considering the

contractual maturities of exposures.

The risk grades are a highly relevant input for determining the PD associated with each exposure.

The Group collects performance and default indicators about their credit risk exposures with analysis by types of

customers and products.

LGD is the magnitude of the loss that is expected to occur if an exposure goes into default. The Group estimates the

LGD parameters based on the historical recovery rates after entry into counterparty defaults. The LGD models consider

the associated collaterals, the counterparty activity sector, the default time, as well as the recovery costs. In the case

of contracts secured by real estate, it is expected that the LTV (loan-to-value) ratios are a parameter of high relevance

in the determination of LGD.

The EAD represents the expected exposure if the exposure and/or customer defaults. The Group obtains the EAD values

from the counterparty's current exposure and potential changes to its current value as a result of the contractual

conditions, including amortisations and prepayments. For commitments and financial guarantees, the value of the EAD

will consider both the amount of credit used and the expectation of future potential value that may be used in

accordance with the agreement.

As described above, with the exception of financial assets that consider a 12-month PD as they do not present a

significant increase in credit risk, the Group will calculate the ECL value considering the risk of default during the

maximum contractual maturity period of the contract, even if, for the purpose of risk management, it is considered to

be a longer period. The maximum contractual period shall be considered as the period up to the date on which the

Group has the right to require payment or end the commitment or guarantee.

The Group adopted as a residual term criterion for renewable operations, when in stage 2, a term of 5 years. This term

was determined based on the behavioural models of this type of product applied by the Bank in the liquidity risk and

interest rate (ALM) analysis. According to these models, the maximum period of repayment of these operations is the 5

years considered conservatively in the scope of the calculation of credit impairment.

The Group uses models to forecast the evolution of the most relevant parameters for the expected credit losses,

namely probability of default, which incorporate forward-looking information. This incorporation of forward-looking

information is carried out in the relevant elements considered for the calculation of expected credit losses (ECL).

The PD point-in-time (PDpit) considered for the determination of the probability of performing exposures at the

reference date becoming defaulted exposures considers the expected values (in each scenario considered in the ECL

calculation) for a set of macroeconomic variables. These relationships were developed specifically based on the Bank's

historical information on the behaviour of this parameter (PDpit) in different economic scenarios and differ by customer

segment and risk grade.

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C2.Financial liabilities

C2.1.Classification, initial recognition and subsequent measurement

At initial recognition, financial liabilities are classified in one of the following categories:

–“Financial liabilities at amortised cost”;

–“Financial liabilities at fair value through profit or loss”.

C2.1.1.Financial liabilities at fair value through profit or loss

Classification

Financial liabilities classified under "Financial liabilities at fair value through profit or loss" include:

a)“Financial liabilities held for trading”

In this balance the issued liabilities are classified with the purpose of repurchasing in the near term, those that form

part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a

recent actual pattern of short-term profit-taking; or is a derivative (except for a derivative classified as hedging

instrument).

b)“Financial liabilities designated at fair value through profit or loss”

The Group may irrevocably assign a financial liability at fair value through profit or loss at the time of its initial

recognition if at least one of the following conditions is met:

–the financial liability is managed, evaluated and reported internally at its fair value; or,

–the designation eliminates or significantly reduces the accounting mismatch of transactions.

Initial recognition and subsequent measurement

Considering that the transactions carried out by the Group in the normal course of its business are made in market

conditions, financial liabilities at fair value through profit or loss are initially recognised at fair value with the costs or

income associated with the transactions recognised in profit or loss at the initial moment.

Subsequent changes in the fair value of these financial liabilities are recognised as follows:

–the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of

that liability shall be presented in other comprehensive income;

–the remaining amount of change in the fair value of the liability shall be presented in profit or loss.

The accrual of interest and the premium/discount (when applicable) is recognised in "Interest expense and similar

charges" based on the effective interest rate of each transaction.

C2.1.2.Financial guarantees

If they are not designated at fair value through profit or loss at the time of initial recognition, the financial guarantee

contracts are subsequently measured at the highest of the following amounts:

–the provision for losses determined according to the criteria described in note C1.5;

–the amount initially recognised deducted, when appropriate, from the accumulated amount of income recognised

according to IFRS 15 - Revenue from contracts with customers.

Financial guarantee contracts that are not designated at fair value through profit or loss are presented under

"Provisions".

C2.1.3.Financial liabilities at amortised cost

Classification

Financial liabilities that were not classified at fair value through profit or loss, or correspond to financial guarantee

contracts, are measured at amortised cost.

The category "Financial assets at amortised cost" includes resources from credit institutions and from customers, as

well as subordinated and non-subordinated debt securities.

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Initial recognition and subsequent measurement

Financial liabilities at amortised cost are initially recognised at fair value plus transaction costs and are subsequently

measured at amortised cost. Interest on financial liabilities at amortised cost are recognised in "Interest expense and

similar charges", based on the effective interest rate method.

C2.2.Reclassification between categories of financial liabilities

Reclassifications of financial liabilities are not allowed.

C2.3.Derecognition of financial liabilities

The Group derecognises financial liabilities when these are cancelled or extinct.

C3.Interest recognition

Income and expense related to interest from financial instruments measured at amortised cost are recognised in

"Interest and similar income" and "Interest expense and similar charges" (net interest income) through the effective

interest rate method. Interest related to financial assets at fair value through other comprehensive income is also

recognised in net interest income.

The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected

life of the financial instrument (or, when appropriate, for a shorter period), to the net carrying amount of the financial

asset or financial liability.

For calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of

the financial instrument (e.g., early payment options) but without considering future impairment losses. The

calculation includes all fees paid or received considered as included in the effective interest rate, transaction costs and

all other premiums or discounts directly related to the transaction, except for assets and liabilities at fair value through

profit and loss.

Interest income recognised in income associated with contracts classified in stage 1 or 2 are determined by applying the

effective interest rate for each contract on its gross book value. The gross balance of a contract is its amortised cost,

before deducting the respective impairment. For financial assets included in stage 3, interest is recognised in the

income statement based on its net book value (less impairment). The interest recognition is always made in a

prospective way, i.e., for financial assets entering stage 3, interest is recognised at the amortised cost (net of

impairment) in subsequent periods.

For purchased or originated credit-impaired assets (POCI), the effective interest rate reflects the expected credit losses

in determining the expected future cash flows receivable from the financial asset.

C4.Hedge accounting

As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements in accordance with IAS

39.

The Group designates derivatives and other financial instruments to hedge its exposure to interest rate and foreign

exchange risk, resulting from financing and investment activities. Derivatives that do not qualify for hedge accounting

are accounted for as trading instruments.

Derivative hedging instruments are stated at fair value and gains and losses on revaluation are recognised in accordance

with the hedge accounting model adopted by the Group. A hedge relationship exists when:

–at the inception of the hedge there is formal documentation of the hedge;

–the hedge is expected to be highly effective;

–the effectiveness of the hedge can be reliably measured;

–the hedge is valuable in a continuous basis and highly effective throughout the reporting period; and,

–for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in

cash flows that could ultimately affect profit or loss.

When a derivative financial instrument is used to hedge foreign exchange variations arising from monetary assets or

liabilities, no hedge accounting model is applied. Any gain or loss associated to the derivative is recognised through

profit and loss, as well as changes in currency risk of the monetary items.

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C4.1.Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedge instruments are recognised

in profit and loss, together with changes in the fair value attributable to the hedged risk of the asset or liability or

group of assets and liabilities. If the hedge relationship no longer meets the criteria for hedge accounting, the

cumulative gains and losses due to variations of hedged risk linked to the hedge item recognised until the

discontinuance of the hedge accounting are amortised through profit and loss over the residual term of the hedged

item.

C4.2.Cash flow hedge

In a hedge relationship, the effective portion of changes in fair value of derivatives that are designated and qualify as

cash flow hedges are recognised in equity - cash flow hedge reserves in the effective part of the hedge relations. Any

gain or loss relating to the ineffective portion of the hedge is immediately recognised in profit and loss when occurred.

Amounts accumulated in equity are reclassified to profit and loss in the periods in which the hedged item will affect

profit or loss.

In case of hedging variability of cash flows, when the hedge instrument expires or is disposed or when the hedging

relationship no longer meets the criteria for hedge accounting, or when the hedge relation is revoked, the hedge

relationship is discontinued on a prospective basis. Therefore, the fair value changes of the derivative accumulated in

equity until the date of the discontinued hedge accounting can be:

–deferred over the residual period of the hedged instrument; or,

–recognised immediately in results, if the hedged instrument is extinguished.

In the case of a discontinued hedge of a forecast transaction, the change in fair value of the derivative recognised in

equity at that time remains in equity until the forecasted transaction is ultimately recognised in the income statement.

When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is

immediately transferred to profit and loss.

C4.3.Hedge effectiveness

For a hedge relationship to be classified as such according to IAS 39, effectiveness must be demonstrated. As such, the

Group performs prospective tests at the beginning date of the initial hedge, if applicable, and retrospective tests in

order to demonstrate at each reporting period the effectiveness of the hedging relationships, demonstrating that the

variations in fair value of the hedging instrument are hedged by the fair value variations of the hedged item in the

portion assigned to the risk covered. Any ineffectiveness is recognised immediately in profit and loss when incurred.

C4.4.Hedge of a net investment in a foreign operation

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any exchange gain or

loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss

relating to the ineffective portion is immediately recognised in profit and loss. Gains and losses accumulated in equity

related to the investment in a foreign operation and to the associated hedge operation are recognised in equity and

transferred to profit and loss, on the disposal of the foreign operation as part of the gain or loss from the disposal.

C5.Embedded Derivatives

An embedded derivative is a component of a hybrid agreement, which also includes a non-derived host instrument.

If the main instrument included in the hybrid contract is considered a financial asset, the classification and

measurement of the entire hybrid contract is carried out in accordance with the criteria described in note C1.1.3.

Derivatives embedded in contracts that are not considered financial assets are treated separately whenever the

economic risks and benefits of the derivative are not related to those of the main instrument, since the hybrid

instrument is not initially recognised at fair value through profit or loss. Embedded derivatives are recorded at fair

value with subsequent fair value changes recorded in profit or loss for the period and presented in the trading

derivatives portfolio.

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D.Securitization operations

D1.Traditional securitizations

The Group has three residential mortgage credit securitization operations (Magellan Mortgages no.1, no.3 and no.4),

portfolios which were derecognised from the Bank’s individual balance sheet, as the residual portions of the referred

operations were sold to institutional investors and, consequently, their risks and benefits were substantially

transferred.

By purchasing a part of the most subordinated residual portion, the Group maintained control of the assets and

liabilities of Magellan Mortgages no.3, with this Special Purpose Entity (SPE) being consolidated in the Group’s financial

statements, in accordance with the accounting policy referred to in note 1.B.

The three operations are traditional securitizations, where each mortgage loan portfolio was sold to a Portuguese Loan

Titularization Fund, which has financed this purchase through the sale of titularization units to a SPE with office in

Ireland. At the same time, this SPE issued and sold in capital markets a group of different portions of bonds.

As at 31 December 2021, the Group has three residential mortgage credit securitization operations (Magellan Mortgages

no.1, no.3 and no.4).

D2.Synthetic securitizations

Currently, the Group has two synthetic securitization operations.

Caravela SME no.3, which started on 28 June 2013, has a medium and long-term loan portfolio of current accounts and

authorized overdrafts granted by BCP, mainly to small and medium-sized companies.

Caravela SME no.4 is a similar operation, initiated on 5 June 2014, whose portfolio contains car, real estate and

equipment leasing granted between the Bank and a group of clients that belong to the same segment (small and

medium-sized companies).

In both operations, the Bank contracted a Credit Default Swap (CDS) from a Special Purpose Vehicle (SPV), buying, this

way, protection for the total portfolio. In both cases, the synthetic securitizations, the same CDS, the risk of the

respective portfolios were divided in 3 classes: senior, mezzanine and equity. The mezzanine and part of the equity

(20%) were placed in the market through an SPV, and the subscription by investors of Credit Linked Notes (CLNs). The

Group retained the senior risk and part of the equity remaining (80%). The product of the CLNs issue was invested by

the SPV in a deposit which totally collateralizes the responsibilities in the presence of the Group, in accordance with

the CDS.

E.Equity instruments

A financial instrument is an equity instrument only if: i) the instrument includes no contractual obligation to deliver

cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another

entity under conditions that are potentially unfavourable to the entity; and, ii) the instrument will or may be settled in

the issuer's own equity instruments, it is either a non-derivative that includes no contractual obligation for the issuer to

deliver a variable number of its own equity instruments or a derivative that will be settled only by the issuer

exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments.

An equity instrument, independently from its legal form, evidences a residual interest in the assets of an entity after

deducting all of its liabilities.

Transaction costs directly attributable to an equity instrument issuance are recognised in equity as a deduction to the

amount issued. Amounts paid or received related to sales or acquisitions of equity instruments are recognised in equity,

net of transaction costs.

Preference shares issued by the Group are considered as an equity instrument when redemption of the shares is solely

at the discretion of the Group and dividends are paid at the discretion of the Group.

Income from equity instruments (dividends) are recognised when the obligation to pay is established and are deducted

to equity.

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F.Securities borrowing and repurchase agreement transactions

F1.Securities borrowing

Securities lent under securities lending arrangements continue to be recognised in the balance sheet and are measured

in accordance with the applicable accounting policy. Cash collateral received in respect of securities lent is recognised

as a financial liability. Securities borrowed under securities borrowing agreements are not recognised. Cash collateral

placements in respect of securities borrowed are recognised under loans and advances to either banks or customers.

Income and expenses arising from the securities borrowing and lending business are recognised on an accrual basis over

the period of the transactions and are included in interest income or expense (net interest income).

F2.Repurchase agreements

The Group performs acquisition/sale of securities under reselling/repurchase agreements of securities substantially

equivalent in a future date at a predetermined price ('repos'/'reverse repos'). The securities related to reselling

agreements in a future date are not recognised in the balance sheet. The amounts paid are recognised in loans and

advances to customers or loans and advances to credit institutions. The receivables are collateralised by the related

securities. Securities sold through repurchase agreements continue to be recognised in the balance sheet and are

revaluated in accordance with the applicable accounting policy. The amounts received from the proceeds of these

securities are considered as deposits from customers and deposits from credit institutions. The difference between the

acquisition/sale and reselling/repurchase conditions is recognised on an accrual basis over the period of the transaction

and is included in interest income or expenses.

G.Non-current assets held for sale and Discontinued or discontinuing operations

Non-current assets, groups of non-current assets held for sale (groups of assets together with related liabilities that

include at least a non-current asset) and discontinued operations are classified as held for sale when the intention is

to sell the referred assets and liabilities and when the referred assets or group of assets are available for immediate

sale, subject to the terms of sale usually applicable to these types of assets, and its sale is highly probable, in

accordance with IFRS 5. For the sale to be considered highly probable, the Group must be committed to a plan to sell

the asset (or disposal group) and must have initiated an active program to locate a buyer and complete the plan. In

addition, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its

current fair value. Furthermore, it should be expected that the sale qualifies for recognition as a completed sale within

one year from the date of classification, except as permitted by paragraph 9 of IFRS 5, and that the Group remains

committed to the asset sales plan and the delay is caused by events or circumstances beyond its control.

The Group also classifies as non-current assets held for sale those non-current assets or groups of assets acquired

exclusively with a view to its subsequent disposal, which are available for immediate sale and its sale is highly

probable. Immediately before classification as held for sale, the measurement of the non-current assets or all assets

and liabilities in a disposal group, is performed in accordance with the applicable IFRS. After their reclassification,

these assets or disposal groups are measured at the lower of their cost and fair value less costs to sell.

Discontinued operations and the subsidiaries acquired exclusively with the purpose to sell in the short-term are

consolidated until the moment of their sale.

G1.Non-operating real estate (INAE)

The Group also classifies as non-current assets held for sale the non-operating real estate (INAE), which include

properties acquired by the Group as a result of the resolution of customer credit processes, as well as own properties

that are no longer used by the Group's services.

Properties held by real estate companies and real estate investment funds, which are part of the Group's consolidation

perimeter, whose capital or units acquired by the Group as a result of the recovery loans are treated as INAE.

At the time of acquisition, real estate classified as INAE is recognised at the lower of the value of the loans existing on

the date on which the recovery occurs, or the judicial decision is formalised, and the fair value of the property, net of

estimated costs for sale. Subsequent measurement of INAE is made at the lower of their book value and the

corresponding fair value, net of the estimated costs for their sale and are not subject to amortisation. Impairment

losses are recorded in the results of the period in which they arise.

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The fair value is determined based on the market value, which is determined based on the expected sales price

obtained through periodic evaluations made by expert external evaluators accredited to the Comissão do Mercado de

Valores Mobiliários (CMVM).

The principles used to determine the net fair value of selling costs of a property apply, whenever possible, to real

estate similar to INAE held by Real Estate Companies and Real Estate Investment Funds for the purpose of consolidating

Group accounts.

Whenever the net fair value of the selling costs calculated for an INAE is less than the amount by which the same is

recognised in the Group's balance sheet, an impairment loss is recorded in the amount of the decrease in value

ascertained. Impairment losses are recorded against income for the year.

If the net fair value of the selling costs of an INAE, after recognition of impairment, indicates a gain, the Group may

reflect that gain up to the maximum of the impairment that has been recorded on that property.

H.Lease transactions (IFRS 16)

This standard establishes the requirements regarding the scope, classification/recognition and measurement of leases:

–from the lessor's perspective, leases will continue to be classified as finance leases or operating leases;

–from the lessee’s perspective, the standard defines a single model of accounting for lease contracts, which results

in the recognition of a right-of-use asset and a lease liability for all leases, except for those which the lease term

ends within 12 months or for those which the underlying asset is of low-value and, in these cases, the lessee may

opt for the exemption from recognition under IFRS 16 and shall recognise the lease payments associated with these

leases as an expense.

The Group chose not to apply this standard to short-term lease contracts, i.e. contracts with a term shorter than or

equal to one year, and to lease contracts in which the underlying asset’s value is below Euros 5,000. Additionally, this

standard was not applied to leases of intangible assets.

Lease definition

The lease definition focuses on the control of the identified asset, establishing that a contract constitutes or contains a

lease if it carries the right to control the use of an identified asset, i.e., the right to obtain substantially all the

economic benefits of using it, and the right to choose how to use the identified asset over a period in exchange of a

payment.

Impacts from the lessee’s perspective

The Group recognises for all leases, except for those with a term under 12 months or for leases of low-value assets:

–a right-of-use asset initially measured at cost must consider the Net Present Value (NPV) of the lease liability plus

the value of payments made (fixed and/or variable), deducted from any lease incentives received, penalties for

terminating the lease (if reasonably certain), as well as any cost estimates to be supported by the lessee with the

dismantling and removal of the underlying asset and/or with the recovery of its location. Subsequently, it will be

measured according to the cost model (subject to depreciations/amortisations and impairment tests);

–a lease liability initially recorded at the present value of the remaining lease payments (NPV), which includes:

–fixed payments deducted from any lease incentives receivable;

–variable lease payments that depend on a rate or an index, initially measured considering the rate or index as at

the commencement date;

–amounts expected to be paid by the lessee under residual values guarantees;

–the exercise price of a purchase option, if the lessee is reasonably certain to exercise that option;

–payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to end

the lease.

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Since it is not possible to easily determine the implicit interest rate in the lease (paragraph 26 of IFRS 16), lease

payments are discounted according to the lessee’s incremental borrowing rate, which embodies the risk-free rate curve

(swap curve) plus the Group’s spread of risk, applied over the weighted average term of each lease contract. For term

contracts, that date is considered as the end of lease date, while for contracts without term, or with renewable terms,

it is assessed using the date in which the contract is enforceable, as well as eventual economic penalties associated

with the lease contract. In the evaluation of enforceability, the particular clauses of the contracts are considered, as

well as the current law on Urban Leases.

Subsequently, lease payments are measured as follows:

–by increasing their carrying amount to reflect interest;

–by reducing their carrying amount to reflect lease payments;

–carrying amount shall be remeasured to reflect any leases’ revaluations or changes, as well as to reflect the review

of in -substance fixed payments and the review of the lease term.

The Group remeasures the lease liability (and makes a corresponding adjustment to the right-of-use asset) whenever:

–the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case

the lease liability is remeasured by discounting the revised lease payments using the revised discount rate;

–the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed

residual value, in which cases the liability is remeasured by discounting the revised lease payments using the initial

discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a

revised discount rate is used;

–a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the

lease liability is remeasured by discounting the revised lease payments using the revised discount rate.

The Group did not make any adjustment during the periods presented.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If the

lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to

exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

The depreciation starts at the commencement date of the lease.

The implementation of this standard implies changes in the Group’s financial statements, namely:

–in the consolidated income statement:

(i)recording in “Interest Income” the interest expenses related to lease liabilities;

(ii)recording in “Other administrative costs” the amounts related to short-term lease contracts and to lease

contracts of low-value assets; and,

(iii)recording in “Amortisations and depreciations” the depreciation expenses related to right-to-use assets.

–in the consolidated balance sheet:

(i)recording in “Financial assets at amortised cost – Loans and advances to customers” the recognition of financial

assets related to sublease operations measured accordingly to IFRS 9;

(ii)recording in “Other tangible assets” the recognition of right-to-use assets; and,

(iii)recording in “Other liabilities” the amount of recognised lease liabilities.

–in the consolidated statement of cash flows, the balance “Cash flows arising from operating activities – Payments

(cash) to suppliers and employees” includes amounts related to short-term lease contracts and to lease contracts of

low-value assets, and the balance “Cash flows arising from financing activities - Decrease in other sundry liabilities

and non-controlling interests” includes amounts related to payments of lease liabilities’ capital portions, as detailed

in the consolidated statement of cash flows.

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Impact from the lessor’s perspective

In accordance with IFRS 16, paragraph 62, lessors shall classify leases as finance or operational leases.

A lease is classified as a finance lease if it transfers substantially all the risks and rewards inherent to ownership of an

underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards

inherent to ownership of an underlying asset.

Subleases

A sublease implies that the lessee establishes a lease contract with a third party, which acts as an intermediary, and

the lease contract with the original lessor is kept in force.

IFRS 16 – Leases requires that the lessor evaluates subleases regarding right-to-use and not regarding the underlying

asset.

The sublease’s lessor, simultaneously lessee regarding the original lease, shall recognise an asset in the financial

statement – a right-to-use related to the initial lease (if the lease is classified as operating) or a financial asset,

measured according to IFRS 9, related to the sublease (if the lease is classified as financing).

In case the primary lease is short-term, then the sublease should be classified as an operating lease.

Impact of the pandemic caused by COVID-19 virus

On 12 October 2020, the European Union published an amendment to IFRS 16, associated with income concessions

related to COVID-19. This amendment allows tenants, as a practical expedient, to have the possibility to choose not to

consider a rent concession that occurs as a direct consequence of the COVID-19 pandemic as a modification of the

lease. A lessee who uses this option must account for any concession that occurs at the rent level in the same way that

he would do it under IFRS 16 – Leases, if this change did not constitute a modification of the lease. This amendment

does not affect lessors.

Within the scope of the sublease, the Bank carried out the analysis of the respective contracts.

I.Recognition of income from services and commissions

In accordance with IFRS 15, the Bank recognizes revenue associated with services and commissions when (or as) a

performance obligation is satisfied when transferring a service, based on the transaction price associated with this

performance obligation. In this context, the Bank takes the following steps to recognize revenue associated with

services and commissions:

- Recognition (satisfaction of the performance obligation): (i) identification of the contract associated with the service

provided and whether it should be covered by IFRS 15; (ii) identification of performance obligations associated with

each contract; (iii) definition of the criteria for the fulfillment of performance obligations, also taking into account the

contractual terms established with the counterparty. According to this definition, a service is transferred when the

customer obtains the benefits and control associated with the service provided. In this context, the Bank also identifies

whether performance obligations are met over time (“over time”) or at an exact moment (“point in time”), with

revenue being recognized accordingly.

- Measurement (price to be recognized associated with each performance obligation): (i) determine the transaction

price associated with the service provided, considering the contractual terms established with the counterparty and its

usual commercial practices. The transaction price is the amount of consideration to which the Bank expects to be

entitled in exchange for transferring promised services to the customer, excluding amounts collected on behalf of third

parties. The Bank includes in the transaction price part or all of the estimated amount of the variable consideration

associated with a performance obligation, only to the extent that it is highly probable that a significant reversal in the

amount of the accrued revenue recognized will not occur when the uncertainty associated with that variable

consideration is subsequently resolved; and (ii) allocate the transaction price to each of the performance obligations

identified under the contract established with the customer.

It should be noted that when services or commissions are an integral part of the effective interest rate of a financial

instrument, income resulting from services and commissions is recorded in net interest income (Note C.3).

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J.Net gains/(losses) from financial operations at fair value through profit or loss, Net gains/

(losses) from foreign exchange, Net gains/(losses) from hedge accounting, Net gains/

(losses) from derecognition of assets and liabilities at amortised cost and Net gains/(losses)

from derecognition of financial assets at fair value through other comprehensive income

These balances include gains and losses arising from financial assets and liabilities at fair value through profit and loss,

i.e., fair value changes and interest on trading derivatives and embedded derivatives, as well as the corresponding

dividends received. This balance also includes the gains and losses arising from the sale of financial assets at fair value

through other comprehensive income and financial assets and financial liabilities at amortised cost. The changes in fair

value of hedging derivatives and hedged items, when fair value hedge is applicable, are also recognised in this balance,

as well as the net gains or losses from foreign exchange.

K.Fiduciary activities

Assets held in the scope of fiduciary activities are not recognised in the Group’s consolidated financial statements. Fees

and commissions arising from this activity are recognised in the income statement in the period in which they occur.

L.Other tangible assets

Other tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses. Subsequent

costs are recognised as a separate asset only when it is probable that future economic benefits will result for the

Group. All other repairs and maintenance expenses are charged to the income statement during the financial period in

which they are incurred, under the principle of accrual-based accounting.

Depreciation is calculated on a straight-line basis, over the following periods which correspond to their estimated

useful life:

Number of years

Buildings

Expenditure on freehold and leasehold buildings

Equipment

4 to 12

Other tangible assets

Whenever there is an indication that a fixed tangible asset might be impaired, its recoverable amount is estimated and

an impairment loss shall be recognised if the net value of the asset exceeds its recoverable amount. The recoverable

amount is determined as the highest between the fair value less costs to sell and its value in use calculated based on

the present value of future cash flows estimated to be obtained from the continued use of the asset and its sale at the

end of the useful life. The impairment losses of the fixed tangible assets are recognised in the income statement of the

period.

M.Investment property

Real estate properties owned by the Group are recognised as ‘Investment properties’ considering that the main

objective of these buildings is their capital appreciation on a long-term basis and not their sale in a short-term period,

nor their maintenance for own use.

These investments are initially recognised at their acquisition cost, including transaction costs, and subsequently

revaluated at their fair value. The fair value of the investment property should reflect the market conditions at the

balance sheet date. Changes in fair value are recognised in the income statement, as "Other operating income/

(losses)" (note 6).

The experts responsible for the valuation of the assets are properly certified for that purpose, being registered in

CMVM.

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N.Intangible assets

N1.Research and development expenditure

The Group does not capitalise any research and development costs. All expenses are recognised as costs in the period in

which they occur.

N2.Software

The Group recognises as intangible assets the costs associated to software acquired from external entities and

depreciates them on a straight-line basis by an estimated lifetime of 6 years. The Group does not capitalise internal

costs arising from software development.

O.Cash and cash equivalents

For the purposes of the cash flow statement, the item “Cash and cash equivalents” comprises balances with less than

three months maturity from the balance sheet date, where the items "Cash and deposits at Central Banks" and "Loans

and advances to credit institutions" are included.

P.Offsetting

Financial assets and liabilities are offset and recognised at their net book value when: i) the Group has a legal right to

offset the amounts recognised and transactions can be settled at their net value; and, ii) the Group intends to settle on

a net basis or realize the asset and settle the liability simultaneously. Considering the current operations of the Group,

no compensation of material amount is made. In case of reclassification of comparative amounts, the provisions of IAS

1.41 are disclosed: i) the nature of the reclassification; ii) the amount of each item (or class of items) reclassified; and,

iii) the reason for the reclassification.

Q.Foreign currency transactions

Transactions in foreign currencies are converted into the respective functional currency of the operation at the foreign

exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are

converted into the respective functional currency of the operation at the foreign exchange rate on the reporting date.

Foreign exchange differences arising from conversion are recognised in the income statement. Non-monetary assets and

liabilities denominated in foreign currencies, which are stated at historical cost, are converted into the respective

functional currency of the operation at the foreign exchange rate on the date of the transaction. Non-monetary assets

and liabilities denominated in foreign currencies that are stated at fair value are converted into the respective

functional currency of the operation at the foreign exchange rate on the date that the fair value was determined

against profit and loss, except for financial assets at fair value through other comprehensive income, for which the

difference is recognised against equity.

R.Employee benefits

R1.Defined benefit plans

The Group has the responsibility to pay its employees' retirement pensions, invalidity pensions and survivor’s pensions,

in accordance with the terms of the two collective labour agreements approved. These benefits are provided for in the

pension plans ‘Plano ACT’ and ‘Plano ACTQ’ of the Banco Comercial Português Group Pension Fund.

Following the publication of Decree-Law no. 54/2009, of 2 March, banking entities are obligatorily enrolling new

employees in the General Social Security System (RGSS). These employees have the RGSS as their basic retirement

scheme, and do not have any benefits under the ACT (base plan). In the scope of its management and human resources,

the Group had already adopted as a rule the inclusion of new employees in the RGSS since July 2005. However, until

the transposition into the ACT of the alterations resulting from the referred Decree-Law no. 54/2009, all employees

were covered by the provisions of the social security chapter of the ACT, and for employees who were already

registered with the RGSS, the ACT benefit worked as a complement to the RGSS. As of 1 July 2009, in accordance with

the ACT, all new employees only have the RGSS as their basic social security scheme.

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Until 2011, in addition to the benefits provided for in the two plans above-mentioned, the Group had assumed the

responsibility, if certain conditions were verified in each year, of assigning retirement supplements to the Group's

employees hired up to 21 September 2006 (Complementary Plan). The Group, at the end of 2012, determined the

extinction (cut) of the old-age benefit of the Complementary Plan. On 14 December 2012, Instituto de Seguros de

Portugal (ISP) formally approved this change to the Group’s benefit plan, effective from 1 January 2012. The plan was

cut, and employees were given individual acquired rights. On that date, the Group also proceeded to the settlement of

the respective liability.

From 1 January 2011, Bank employees were integrated in the General Social Security Scheme which now covers their

maternity, paternity, adoption and pension benefits. However, the banks remain liable for benefits that concern

illness, disability and life insurance (Decree-Law no. 1-A/2011, of 3 January).

The contributory rate is 26.6% divided between 23.6% supported by the employer and 3% supported by the employee,

replacing the Banking Social Healthcare System which was extinguished by the decree law referred above. As a

consequence of this amendment the capability to receive pensions by the actual employees are covered by the General

Social Security Scheme regime, considering the service period between 1 January 2011 and the retirement age. The

banks support the remaining difference for the total pension assured in the Collective Labour Agreement (ACT).

This integration has led to a decrease in the present value of the total benefits reported to the retirement age to be

borne by the Pension Fund, and this effect is to be recorded in accordance with the Projected Unit Credit during the

average lifetime of the pension until the normal retirement age is reached. The calculation of the liability for pensions

carried out periodically by the actuary considers this effect and is calculated considering the actuarial assumptions in

force, ensuring that the liabilities calculated with reference to 31 December 2010, not considering the effect of the

integration of bank employees into the General Social Security Scheme are fully covered and deducted from the amount

of the effect recognised until the date. The component of this effect for the year is recognised under the heading

"Current service costs".

Following the approval by the Government of the Decree-Law no. 127/2011, which was published on 31 December, an

agreement was established between the Government, the Portuguese Banking Association and the Banking Labour

Unions in order to transfer, to the Social Security, the liabilities related to pensions currently being paid to pensioners

and retirees, as at 31 December 2011.

This agreement established that the responsibilities to be transferred related to the pensions in payment as at 31

December 2011 at fixed amounts (discount rate 0%) in the component established in the IRCT - Instrument of Collective

Regulation of Work of the retirees and pensioners. The responsibilities related to the increase in pensions as well as any

other complements, namely, contributions to the Health System (SAMS), death benefit and death before retirement

benefit continued to be under the responsibility of the Financial Institutions.

At the end of December 2016, a revision of the ACT was reached between the BCP Group and two federations of the

unions that represent the Group's employees, which introduced changes in the Social Security clause and consequently

in the pension plan financed by the BCP Group Pension Fund. The new ACT was published by the Ministry of Labour in

the Bulletin of Labour and Employment on 15 February 2017 and the effects were recorded in the financial statements

of 31 December 2016, for employees associated with these two unions.

The negotiation with Sindicato dos Bancários do Norte (SBN), which was also involved in the negotiations of the new

ACT, was concluded in April 2017 with the publication of the Bulletin of Labour and Employment, with the effects of

this new ACT recorded in the financial statements as at 31 December 2017, for employees associates of SBN.

The most relevant changes in the ACT were the change in the retirement age (presumed disability) from 65 years to 66

years and two months in 2016 and the subsequent update of an additional month in each year, which cannot, in any

case, be higher than the one in force at any moment in the General Regime of Social Security, the change in the

formula for determining the employer's contribution to SAMS and, lastly, the introduction of a new benefit called the

End of Career Premium, which replaces the Seniority Premium.

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These changes were framed by the Group as a change to the pension plan under the terms of IAS 19, as such had an

impact on the present value of the liabilities with services rendered and were recognised in the income statement for

the year under "Staff costs".

In 2017, after the authorization of the Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF - Portuguese

Insurance and Pension Funds Supervision Authority), the BCP Group's pension fund agreement was amended. The main

purpose of the process was to incorporate into the pension fund the changes introduced in the Group's ACT in terms of

retirement benefits, as well as to transfer to the pension fund the responsibilities that were directly chargeable to the

company (extra-fund liabilities). The pension fund has a part exclusively for the financing of these liabilities which, in

the scope of the fund, is called Additional Complement. The End of Career Premium also became the responsibility of

the pension fund under the basic pension plan.

The Group’s net obligation in respect of pension plans (defined benefit pensions plan) is calculated on a half year basis

at 31 December and 30 June of each year, and whenever there are significant market fluctuations or significant specific

events, such as changes in the plan, curtailments or settlements since the last estimation. The responsibilities with past

service are calculated using the Projected Unit Credit method and actuarial assumptions considered adequate.

Pension liabilities are calculated by the responsible actuary, who is certified by the ASF.

The Group’s net obligation in respect of defined benefit pension plans and other benefits is calculated separately for

each plan by estimating the amount of future benefit that employees have earned in return for their service in the

current and prior periods. The benefit is discounted in order to determine its present value, using a discount rate

determined by reference to interest rates of high- quality corporate bonds that have maturity dates approximating the

terms of the Group’s obligations. The net obligations are determined after the deduction of the fair value of the

Pension Plan's assets.

The income/cost of interest with the pension plan is calculated by the Group, multiplying the net asset/liability with

retirement pension (liabilities less the fair value of the plan's assets) by the discount rate used in the determination of

the retirement pension liabilities. On this basis, the income/cost net of interest includes the interest costs associated

with retirement pension liabilities and the expected return of the plan's assets, both measured based on the discount

rate used to calculate the liabilities.

Gains and losses from the re-measurement, namely (i) actuarial gains and losses resulting from differences between

actuarial assumptions used and the amounts actually observed (experienced gains and losses) and changes in actuarial

assumptions and (ii) gains and losses arising from the difference between the expected return of the plan's assets and

the amounts obtained, are recognised against equity under "Other comprehensive income".

The Group recognises in its income statement a net total amount that comprises (i) the current service cost, (ii) the

income/cost net of interest with the pension plan, (iii) the effect of early retirement, (iv) past service costs and, (v)

the effects of any settlement or curtailment occurred during the period. The net income/cost with the pension plan is

recognised as interest and similar income or interest expense and similar costs depending on their nature. The costs of

early retirements correspond to the increase in liabilities due to the employee's retirement before reaching the age of

retirement.

Employee benefits, other than pension plans, namely post-retirement health care benefits and benefits for the spouse

and descendants for death before retirement are also included in the benefit plan calculation.

The contributions to the funds are made annually by each company of the Group, according to a specific contribution

plan that ensures the solvency of the fund. In the end of each year, according to Bank of Portugal Notice no. 12/2001,

the minimum level required for the responsibilities funding must be 100% regarding pension payments and 95%

regarding past services of active employees.

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R2.Revision of the salary tables for employees in service and pensions in payment

In 2021, negotiations continued with all the unions subscribing to the Group's Collective Labour Agreements, for the

conclusion of the full review of the respective clauses, negotiations which are still ongoing.

R3.Defined contribution plan

For the defined contribution plans, the responsibilities related to the benefits attributed to the Group's employees are

recognised as expenses when incurred.

As at 31 December 2021, the Group has two defined contribution plans. One plan covers employees who were hired

before 1 July 2009. For this plan, called non-contributory, Group's contributions will be made annually and equal to 1%

of the annual remuneration paid to employees in the previous year. Contributions shall only be made if the following

requirements are met: (i) the Bank's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage

points, and (ii) distributable profits or reserves exist in the accounts of Banco Comercial Português.

The other plan covers employees who have been hired after 1 July 2009. For this plan, designated contributory,

monthly contributions will be made equal to 1.5% of the monthly remuneration received by employees in the current

month, either by themselves or by the Group and employees. This contribution has a mandatory character and is

defined in the Collective Labour Agreement of the BCP Group and does not have a performance criterion.

R4.Variable remuneration paid to employees

The remuneration policy for employees includes an annual variable remuneration system for employees not covered by

commercial incentive systems, based on the performance assessment of each employee, in accordance with

quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and of the annual fixed

remuneration of reference for the role performed, and provided that the Bank's minimum level of performance, as

measured by a set of quantitative indicators, is met, the amount of the variable remuneration to be attributed to each

employee is determined.

The Executive Committee is responsible, under the terms defined in the remuneration policy, for setting the respective

allocation criteria for each employee, whenever it is attributed. The variable remuneration attributed to employees is

recorded against the income statement in the period to which it relates.

R5.Share-based compensation plan

As at 31 December 2021, a variable compensation plan with BCP shares is in force for the members of the Executive

Committee and for the employees considered Key Function Holders (includes Key Management Members), resulting from

the Remuneration Policies for the members of the management and supervisory bodies and for the employees,

approved for the financial year of 2021 and following years, with the changes that may be approved in each financial

year, namely by the General Shareholders’ Meeting regarding the Remuneration Policy for the members of the

management and supervisory bodies, and by the Board of Directors regarding the Remuneration Policy for Employees.

Key Function Holders include Key Management Members, which are the first line directors who report directly to the

Board of Directors and the remaining employees whose professional activities have a significant impact on the Bank's

risk profile.

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As defined in the Remuneration Policy for the members of the management and supervisory bodies, an annual variable

remuneration system is foreseen, for which an assessment of the performance of each member of the Executive

Committee is carried out on an annual basis based on quantitative and qualitative criteria. According to this assessment

and the annual fixed remuneration, and provided that the Bank's minimum level of performance as measured by a set

of quantitative indicators is met, the amount of the variable remuneration to be attributed to each member of the

Executive Committee is determined. The payment of the amount of the variable remuneration attributed is subject to a

deferral period of 5 years for 40% of its value, being 60% of its value paid in the year following the financial year in

question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50% in BCP shares.

The number of BCP shares attributed results from their valuation at a price defined in accordance with the approved

Remuneration Policy.

The Remuneration Policy for Employees foresees an annual variable remuneration system for Employees not covered by

Commercial Incentives Systems, based on the performance assessment of each employee, in accordance with

quantitative and qualitative criteria, that is carried out annually. As a result of this assessment and the fixed reference

remuneration for the function performed, and provided that the Bank's minimum level of performance in a set of

quantitative indicators is met, the value of the variable remuneration to be attributed to each Employee is determined.

For Employees considered as Key Function Holders, the payment of the amount of the variable remuneration attributed

is subject to a deferral period of 5 years for 40% of its value, with 60% of its value paid in the year following the

financial year in question. The amounts related to the non-deferred and deferred portion are paid 50% in cash and 50%

in BCP shares. The number of BCP shares attributed and to be attributed results from their valuation at a price defined

in accordance with the approved Remuneration Policy.

Employees considered as Key Function Holders are not covered by Commercial Incentives Systems.

For the remaining Employees not covered by Commercial Incentive Systems, the payment of the variable remuneration

amount awarded is fully paid in cash in the following year to which it relates.

As foreseen in the approved Remuneration Policy and in the applicable legislation, the amounts of variable

remuneration attributed to the members of the Executive Committee and to the Employees considered as Key Function

Holders are subject to reduction and reversal mechanisms, to be applied in case of verification of extremely significant

events, duly identified, in which the people covered have had a direct participation.

For the members of the Executive Committee, a long-term variable remuneration system is also foreseen, through

which these members may receive variable remuneration fully paid in BCP shares after the end of the assessment

period, from 1 January 2018 until 31 December 2021, i.e., in 2022, provided that a certain level of performance is

achieved in a set of long-term objectives. The amount of the long-term variable remuneration attributed is subject to a

deferral period of 3 years for 40% of its value, being 60% of its value paid in the year following the assessment period to

which it relates. The number of BCP shares attributed results from their valuation at a price defined in accordance with

the approved Remuneration Policy.

All the shares attributed to the members of the Executive Committee and to the Key Function Holders, within the scope

of the payment of variable remuneration, including long-term, are subject to a retention period of 1 year after their

payment.

The total variable remuneration to be attributed, each year, to each member of the Executive Committee and to each

Employee considered as Key Function Holders, regarding the proportion between its amount and the annual fixed

remuneration, is limited to the limits provided in the respective Remuneration Policy.

S.Income taxes

The Group is subject to income tax in several jurisdictions. The Bank is subject, in individual terms, to the regime

established by the Corporate Income Tax Code (CIRC), the Special Regime applicable to Deferred Tax Assets approved

by Law no. 61/2014 of 26 August, to which it adhered, and individual legislation. Additionally, deferred taxes relating

to tax losses and to temporary differences between the accounting net income and the net income accepted by the Tax

Authorities for Income Taxes calculation are accounted for, whenever there is a reasonable probability that these taxes

will be paid or recovered in the future.

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Income tax registered in net income for the year comprises current and deferred tax effects. Income tax is recognised

in the income statement, except when related to items recognised directly in equity, which implies its recognition in

equity. Deferred taxes arising from the revaluation of financial assets at fair value through other comprehensive income

and cash flow hedging derivatives are recognised in shareholders’ equity and are recognised after in the income

statement at the moment the profit and loss that originated the deferred taxes are recognised.

Current tax is the value that determines the taxable income for the year, using tax rates enacted or substantively

enacted by authorities at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred taxes are calculated in accordance with the liability method based on the balance sheet, considering

temporary differences, between the carrying amounts of assets and liabilities and the amounts used for taxation

purposes using the tax rates approved or substantially approved at balance sheet date and that is expected to be

applied when the temporary difference is reversed.

Deferred tax liabilities are recognised for all taxable temporary differences except for non-deductible goodwill for tax

purposes, differences arising from initial recognition of assets and liabilities that affect neither accounting nor taxable

profit and differences relating to investments in subsidiaries to the extent that probably they will not reverse in the

foreseeable future.

The item “Deferred tax assets” includes amounts associated with credit impairments not accepted for tax purposes

whose credits have been written-off, according to the expectation that the use of such impairments will be deductible

for the purposes of determining taxable income for the tax periods in which the legal conditions required for their tax

deductibility are met.

Deferred tax assets are recognised when it is probable that there will be future taxable profits that absorb the

deductible temporary differences for tax purposes (including reportable tax losses).

The Group, as established in IAS 12, paragraph 74, compensates the deferred tax assets and liabilities if, and only if: (i)

it has a legally enforceable right to offset current tax assets and current tax liabilities; and, (ii) the deferred tax assets

and the deferred tax liabilities relate to income taxes released by the same Tax Authority on either the same taxable

entity, or different taxable entities that intend to settle current tax liabilities and assets on a net basis or to realize the

assets and settle the liabilities simultaneously, in each future period in which deferred tax liabilities or assets are

expected to be settled or recovered.

The Group complies with the guidelines of IFRIC 23 – Uncertainty over Income Tax Treatments on the determination of

taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty

regarding the income tax treatment, not having occurred any material impact on the Bank’s financial statements

resulting from its application.

In 2016, the Bank adhered to the Special Tax Regime for Groups of Companies (RETGS) for the purposes of IRC taxation,

with BCP being the dominant entity. In the financial years of 2021 and 2020, RETGS application was maintained. In

2021, Millennium bcp Participações Sociais – Sociedade Unipessoal, Lda. and BCP África, SGPS, Lda., were included in

the group of companies covered by this regime, being now covered by the general IRC regime.

T.Segmental reporting

The Group adopted IFRS 8 – Operating Segments for the purpose of disclosing financial information by operating and

geographic segments. A business segment is a Group's component: (i) which develops business activities that can obtain

revenues or expenses; (ii) whose operating results are regularly reviewed by the management with the aim of taking

decisions about allocating resources to the segment and assess its performance; and, (iii) for which separate financial

information is available.

The Group controls its activity through the following major operating segments:

Portugal activity:

–Retail Banking, also including ActivoBank;

–Companies, Corporate and Investment Banking;

–Private Banking;

–Other.

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The Other segment (Portugal activity) includes activities that are not allocated to remaining segments, namely

centralized management of financial investments, corporate activities and insurance activity.

Foreign activity:

–Poland;

–Mozambique;

–Other.

The "Other" segment (foreign activity) includes the activity developed by subsidiaries in Switzerland and Cayman Islands

and also the contribution of the participation in an associate in Angola. It should be noted that, following the

agreement signed for the sale of the operation in Switzerland, concluded on 2 November 2021, the subsidiary's current

net income for the years 2021 and 2020, as well as the capital gain generated with the sale of the entire shareholding

in Banque Privée BCP, is reflected as income from discontinued and discontinuing operations, as provided for in IFRS 5.

U.Provisions, Contingent liabilities and Contingent assets

U1.Provisions

Provisions are recognised when (i) the Group has a present obligation (legal or resulting from past practices or

published policies that imply the recognition of certain responsibilities); (ii) it is probable that a payment will be

required to settle; and, (iii) a reliable estimation can be made of the amount of the obligation.

Additionally, when fundamental reorganizations occur that have a material effect on the nature and focus of the

company's operations, and the criteria for recognition of provisions referred to above are met, provisions are

recognized for restructuring costs.

The measurement of provisions considers the principles set in IAS 37 regarding the best estimate of the expected cost,

the most likely result of current actions and considering the risks and uncertainties inherent to the process result. On

the cases that the discount effect is material, provision corresponds to the actual value of the expected future

payments, discounted at a rate that considers the associated risk of the obligation.

Provisions are reviewed at each balance sheet date and adjusted to reflect the best estimate, being reverted through

profit and loss in the proportion of the payments that are not probable.

Provisions are derecognised through their use in the obligations for which they were initially created, or in the case

that these obligations cease to exist.

U2.Contingent assets

Contingent assets are not recognised in the financial statements and are disclosed when a future economic inflow of

resources is probable.

U3.Contingent liabilities

Contingent liabilities are not recognised in the financial statements, being framed under IAS 37 whenever the possibility

of an outflow of resources regarding economic benefits is not remote. The Group registers a contingent liability when:

i)it is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence

or non- occurrence of one or more uncertain future events that are not wholly within the control of the Group; or,

ii)it is a present obligation that arises from past events but is not recognised because:

a)it is not probable that an outflow of resources embodying economic benefits will be required to settle the

obligation; or,

b)the amount of the obligation cannot be measured with sufficient reliability.

The contingent liabilities identified are subject to disclosure, unless the possibility of an outflow of resources

incorporating economic benefits is remote.

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V.Earnings per share

Basic earnings per share are calculated by dividing net income attributable to shareholders of the Group by the

weighted average number of ordinary shares outstanding, excluding the average number of ordinary shares purchased

by the Group and held as treasury shares.

For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to consider

conversion of all dilutive potential ordinary shares. Potential or contingent share issues are treated as dilutive when

their conversion to shares would decrease net earnings per share. If the earnings per share are changed as a result of an

issue with premium or discount or other event that changed the potential number of ordinary shares or as a result of

changes in the accounting policies, the earnings per share for all presented periods should be adjusted retrospectively.

W.Insurance contracts

W1.Classification

The Group issues contracts that contain insurance risk, financial risk or a combination of both insurance and financial

risk. A contract, under which the Group accepts significant insurance risk from another party, by agreeing to

compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract.

A contract issued by the Group without significant insurance risk, but on which financial risk is transferred with

discretionary participating features is classified as an investment contract recognised and measured in accordance with

the accounting policies applicable to insurance contracts. A contract issued by the Group that transfers only financial

risk, without discretionary participating features, is accounted for as a financial instrument.

W2.Recognition and measurement

Premiums of life insurance and investment contracts with discretionary participating features, which are considered as

long-term contracts are recognised as income when due from the policyholders. The benefits and other costs are

recognised concurrently with the recognition of income over the life of the contracts. This specialization is achieved

through the establishment of provisions/liabilities of insurance contracts and investment contracts with discretionary

participating features.

The responsibilities correspond to the present value of future benefits payable, net of administrative expenses directly

associated with the contracts, less the theoretical premiums that would be required to comply with the established

benefits and related expenses. The liabilities are determined based on assumptions of mortality, costs of management

or investment at the valuation date.

For contracts where the payment period is significantly shorter than the period of benefit, premiums are deferred and

recognised as income in proportion to the duration period of risk coverage. Regarding short-term contracts, including

contracts of non-life insurance, premiums are recorded at the time of issue. The award is recognised as income

acquired on a pro-rata basis during the term of the contract. The provision for unearned premiums represents the

amount of issued premiums on risks not occurred.

W3.Premiums

Issued gross premiums are recognised for as income in the period to which they respect independently from the

moment of payment or receivable, in accordance with the accrual accounting principle. Reinsurance premiums ceded

are accounted for as expense in the period to which they respect in the same way as gross premiums written.

W4.Provision for unearned premiums from direct insurance and reinsurance premiums ceded

The provision for unearned gross premiums is based on the evaluation of the premiums written before the end of the

year but for which the risk period continues after the year end. This provision is calculated using the pro-rata temporis

method applied to each contract in force.

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W5.Liability adequacy test

At each reporting date, the Group evaluates the adequacy of liabilities arising from insurance contracts and investment

contracts with discretionary participating features. The evaluation of the adequacy of responsibilities is made based on

the projection of future cash flows associated with each contract, discounted at market interest rate without risk. This

evaluation is done product by product or aggregate of products when the risks are similar or managed jointly. Any

deficiency, if exists, is recorded in the Group's results as determined.

X.Insurance or reinsurance intermediation services

Banco Comercial Português and Banco ActivoBank are entities authorized by Autoridade de Supervisão de Seguros e

Fundos de Pensões (ASF) for the practice of insurance intermediation in the category of Linked Insurance Broker, in

accordance with Article 8, paragraph a), subparagraph i) of Decree-Law no. 144/2006, of 31 July, carrying out

insurance intermediation activities in life and non-life segments.

Within the scope of insurance intermediation services, these banks perform the sale of insurance contracts. As

compensation for insurance intermediation services, they receive commissions for arranging insurance contracts and

investment contracts, which are defined in agreements/protocols established with the Insurance Companies.

Commissions received for insurance intermediation are recognised in accordance with the accrual accounting principle,

so the commissions whose receipt occurs at a different time from the period to which they refer are recognised as an

amount receivable under the item "Other assets". Commissions received for insurance mediation services are recognized

in accordance with the policy described in note I above.

Y.Accounting estimates and judgments in applying accounting policies

IFRS set forth a range of accounting treatments that require the Board of Directors, under advice of the Executive

Committee, to apply judgments and to make estimations when deciding which treatment is the most appropriate.

These estimates were made considering the best information available at the date of preparation of the consolidated

financial statements, considering the context of uncertainty that results from the impact of COVID-19 in the current

economic scope. The most significant of these accounting estimates and judgments used when applying accounting

principles are discussed in this section in order to improve understanding of how they affect the Group’s reported

results and related disclosure.

Considering that in some cases there are several alternatives to the accounting treatment chosen by the Board of

Directors, under advice of the Executive Committee, the Group’s reported results would differ if a different treatment

was chosen. The Executive Committee believes that the choices made are appropriate and that the financial

statements present the Group’s financial position and results fairly in all material relevant aspects.

The alternative outcomes discussed below are presented solely to assist the reader in understanding the financial

statements and are not intended to suggest that other alternatives or estimations would be more appropriate.

Y1.Entities included in the consolidation perimeter

For the purposes of determining entities to include in the consolidation perimeter, the Group assesses whether it is

exposed to, or has rights to, the variable returns from its involvement with the entity and if it is able to take possession

of these results through the power it holds (de facto control). The decision if an entity needs to be consolidated by the

Group requires the use of judgment, estimations and assumptions to determine at what extent the Group is exposed to

the variable returns and its ability to use its power to affect these returns. Different estimations and assumptions could

lead the Group to a different scope of consolidation perimeter with a direct impact in consolidated income.

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Y2.Goodwill impairment

The recoverable amount of the goodwill recorded in the Group's assets is assessed annually in the preparation of

accounts with reference to the end of the year or whenever there are indications of eventual loss of value. For this

purpose, the carrying amount of the business units of the Group for which goodwill has been recognised is compared

with the respective recoverable amount. A goodwill impairment loss is recognised when the carrying amount of the

business unit exceeds the respective recoverable amount.

In the absence of an available market value, the recoverable amount is determined using cash flows predictions,

applying a discount rate that includes a risk premium appropriated to the business unit being tested. Determining the

cash flows to discount and the discount rate, involves judgment.

Y3.Income taxes

Interpretations and estimations were required to determine the total amount of income taxes in each of the

jurisdictions where the Group operates. There are many transactions and calculations for which the tax determination

is uncertain during the ordinary course of business. Different interpretations and estimations could result in a different

level of income taxes, current and deferred, recognised in the year.

This aspect assumes greater relevance for the purposes of the analysis of the recoverability of deferred taxes, in which

the Group considers projections of future taxable income based on a set of assumptions, including the estimate of

income before tax, adjustments to taxable income, evolution of tax legislation and its interpretation. Thus, the

recoverability of deferred tax assets depends on the implementation of the Bank's Board of Directors strategy, namely

the ability to generate the estimated taxable income, the evolution of tax law and its interpretation.

Regarding activity in Portugal, the regulatory decrees no. 5/2016, of 18 November, no. 11/2017, of 28 December, and

no. 13/2018, of 28 December, established the maximum limits for impairment losses and other value adjustments for

specific credit risk deductible for the purposes of calculating taxable income under IRC in 2016, 2017 and 2018,

respectively. These regulatory decrees establish that Bank of Portugal Notice no. 3/95 (Notice that was relevant for

determining credit provisions in the financial statements presented in NCA) must be considered for the purposes of

determining the maximum limits of impairment losses accepted for tax purposes in 2016, 2017 and 2018, respectively.

Law no. 98/2019, of 4 September, establishes the tax regime of credit impairment and of provisions for guarantees for

the tax periods beginning on or after 1 January 2019, predicting the approximation between accounting and tax rules

for purposes of deductibility of expenses related to the increase of credit impairments. Until the end of 2023, the rules

prevailing until 2018 will continue to be applied, except if the option of applying the new regime is exercised earlier.

Regardless of the option mentioned above, the application of the new regime will be mandatory in the financial years

of 2022 and/or 2023 in the following circumstances:

- in the financial year of 2022, if, as of 1 January 2022, the Bank distributes dividends related to that financial year or

acquires its own shares, without having occurred a reduction in deferred tax assets covered by the Special Regime of at

least 10% compared to the amount recognised on 31 December 2018;

- in the financial year of 2023, if, as of 1 January 2023, the Bank distributes dividends related to that financial year or

acquires its own shares, without having occurred a reduction in deferred tax assets covered by the Special Regime of at

least 20% compared to the amount recognised on 31 December 2018.

In the calculation of 2020’s taxable income and in the estimation of 2021's taxable income, it was considered the

maintenance of the tax rules in force until 2018, since the option of applying the new regime was not exercised.

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Following changes provided for in Law no. 27-A/2020, of 24 July, within the scope of the Supplementary Budget for

2020, the period for reporting tax losses in Portugal is now 14 years for losses occurred in 2014, 2015 and 2016 and 7

years for tax losses occurred in 2017, 2018 and 2019; tax losses occurred in the years of 2020 and 2021 have a reporting

period of 12 years, which can be deducted up to 2032 and 2033, respectively. The limit for deducting tax losses

increases from 70% to 80% when the difference results from the deduction of tax losses recorded in the tax periods of

2020 and 2021.

In the projections of future taxable income, namely for the analysis of the recoverability of deferred tax assets carried

out with reference to 31 December 2021, it was considered the approximation between accounting and tax rules as

foreseen by Law no. 98/2019, of 4 September, resulting from not exercising earlier its application over the adaptation

period of 5 years provided by the referred law, as well as the changes regarding the use of tax losses foreseen in the

referred Law no. 27-A/2020, of 24 July.

The taxable income or tax loss determined by the Bank or its subsidiaries that reside in Portugal can be corrected by

the Portuguese Tax Authority in the period of four years, except if any deduction was made or if tax credit was used, in

which the limitation period corresponds to the same of exercising of that right. The Bank recorded provisions or

deferred tax liabilities in the amount that finds appropriate to face the tax amendments or the tax losses of which was

object, as well as the contingencies regarding exercises not yet revised by the Tax Authority.

Y4.Non-current assets held for sale (real estate) valuation

The valuation of these assets, and consequently the impairment losses, is supported by evaluations carried out by

external experts, which incorporate several assumptions, namely the selling price per square meter, discount rate,

better use of the real estate and expectations regarding the development of real estate projects, as applicable, and

also considers the Bank's historical experience in the commercialization of real estate, its perspectives on the evolution

of the real estate market and the intentions of the management body regarding the commercialization of these assets.

The assumptions used in the valuations of these assets have an impact on their valuation and consequently on the

determination of impairment.

The haircut estimates applied in determining the fair value of these properties were adjusted in the case of commercial

properties and lands. In part, this change stems from the impact on sales prices of the current pandemic situation of

COVID-19.

Y5.Pension and other employees’ benefits

Determining pension liabilities requires the use of assumptions and estimations, including the use of actuarial

projections, estimated returns on investment, and other factors, such as discount rate, pensions and salary growth

rates, mortality tables, that could impact the cost and liability of the pension plan.

As defined by IAS 19, the discount rate used to update the responsibilities of the Bank's pension fund is based on an

analysis performed over the market yields regarding a bond issues universe – that the Group considers to have high

quality (low risk), different maturities (appropriate to the period of liquidation of the fund's liabilities) and

denominated in euros - related to a diverse and representative range of issuers.

Y6.Financial instruments – IFRS 9

Y6.1.Classification and measurement

The classification and measurement of financial assets depends on the results of the SPPI test (analysis of the

characteristics of the contractual cash flows to determine if they correspond only to payments of principal and interest

on the outstanding capital) and the testing of the business model.

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The Group determines the business model at a level that reflects how financial asset groups are managed together to

achieve a specific business objective. This evaluation requires judgment, since the following aspects, among others,

must be considered: the way in which the performance of assets is evaluated; the risks that affect the performance of

the assets and the way these risks are managed; and how asset managers are rewarded.

The Group monitors the financial assets measured at amortised cost and at fair value through other comprehensive

income that are derecognised prior to their maturity to understand the underlying reasons for their disposal and to

determine whether they are consistent with the purpose of the business model defined for these assets. This monitoring

is part of a process of continuous evaluation by the Group of the business model of the financial assets that remain in

the portfolio, to determine if it is adequate and, if it is not, if there was a change in the business model and,

consequently, a prospective classification change of these financial assets.

Y6.2.Impairment losses on financial assets at amortised cost and debt instruments at fair value through

other comprehensive income

The determination of impairment losses on financial instruments involves judgments and estimations regarding, among

others, the following:

Significant increase in credit risk:

Impairment losses correspond to the expected losses on a 12-month for the assets in Stage 1 and the expected losses

considering the probability of a default event occurring at some point up to the maturity date of the instrument

financial assets for assets in Stages 2 and 3. An asset is classified in Stage 2 whenever there is a significant increase in

its credit risk since its initial recognition. In assessing the existence of a significant increase in credit risk, the Group

considers qualitative and quantitative information, reasonable and sustainable.

In order to comply with the Supervisors' guidelines, namely with regard to the identification and measurement of credit

risk in the context of the COVID-19 pandemic, the Bank proceeded to record additional impairments in relation to the

current models of collective impairment calculation (overlays).

The exercise carried out was based on an analysis of migrations from customers identified as having the highest risk for

Stage 2 and Stage 3, with the greatest impact on the corporate segment.

Definition of groups of assets with common credit risk characteristics:

When expected credit losses are measured on a collective basis, the financial instruments are grouped based on

common risk characteristics. The Group monitors the adequacy of credit risk characteristics on a regular basis to assess

whether it maintains its similarity. This procedure is necessary to ensure that, in the event of a change in the credit

risk characteristics, the asset segmentation is reviewed. This review may result in the creation of new portfolios or in

transferring assets to existing portfolios that better reflect their credit risk characteristics.

Definition of the number and relative weight of prospective information for each type of product/market and

determination of relevant prospective information:

In estimating expected credit losses, the Group uses reasonable and sustainable forecasting information that is based

on assumptions about the future evolution of different economic drivers and how each of the drivers impacts the

remaining drivers.

Probability of default:

The probability of default represents a determining factor in the measurement of expected credit losses and

corresponds to an estimation of the probability of default in a given period, which is calculated based on historical

data, assumptions and expectations about future conditions.

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Loss given default:

It corresponds to a loss estimation in a default scenario. It is based on the difference between the contractual cash

flows and those that the Bank expects to receive, through the cash flows generated by the customers' business or credit

collaterals. The estimation of loss given default is based on, among other aspects, the different recovery scenarios,

historical information, the costs involved in the recovery process and the estimation of the valuation of collaterals

associated with credit operations.

Y6.3.Fair value of derivative financial instruments

Fair values are based on listed market prices if available, otherwise fair value is determined either by dealer price

quotations (either for that transaction or for similar instruments traded) or by pricing models, based on net present

value of estimated future cash flows which considers the market conditions for the underlying instruments, time value,

yield curve and volatility factors. These pricing models may require assumptions or judgments in estimating their fair

values. Consequently, the use of a different model or of different assumptions or judgments in applying a particular

model could result in different results from the ones reported.

Due to market stress conditions, the Bank needed to reallocate the risk limits, especially in the sensitivity limit of the

trading portfolio and to review the stress-test scenarios and their methodologies.

In the context of the COVID-19 pandemic, the calculation of fair value adjustments was revised considering liquidity

discounts, the costs of closing positions (widening the buy and sell spread), credit risk, spreads of financing and

increased volatility.

Y7. Provisions for risk associated with mortgage loans indexed to the Swiss franc

The Group creates provisions for legal contingencies related to mortgage loans indexed to the Swiss franc granted by

Bank Millennium, S.A.

The assumptions used by the Bank are essentially based on historical observations and will have to be updated in

subsequent periods, which may have a relevant impact on the provision’s estimation. The methodology developed by

the Bank is based on the following parameters: (i) the number of current (including class actions) and potential future

court cases that will appear within a specified time horizon; (ii) the amount of the Bank’s potential loss in the event of

a specific court judgment (three negative judgment scenarios were taken into account); (iii) the probability of

obtaining a specific court verdict calculated on the basis of statistics of judgments of the banking sector in Poland and

legal opinions obtained; (iv) in the case of a loan agreement invalidity scenario, the Bank Millennium's loss is calculated

taking into account the assignment of a minimum probability of receiving the settlement of a remuneration for the cost

of use of capital; and (v) amicable settlement with clients in or out of court.

The evolution of responsibilities with legal contingencies related to mortgage loans indexed to the swiss franc and the

amount of the Bank’s actual losses depend, namely, on the number of ongoing and potential lawsuits, as well as on the

final court decisions about each case and amicable settlement with clients.

Z. Subsequent events

The Group analyses events occurred after the balance sheet date, i.e., favourable and/or unfavourable events that

occur between the balance sheet date and the date the financial statements were authorized for issue. In this context,

two types of events can be identified:

i)those that provide evidence of conditions that existed at the balance sheet date (events after the balance sheet

date that give rise to adjustments); and,

ii)those that are indicative of the conditions that arose after the balance sheet date (events after the balance sheet

date that do not give rise to adjustments).

Events occurred after the date of the financial statements that are not considered as adjustable events, if significant,

are disclosed in the notes to the consolidated financial statements.

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2.Net interest income

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Interest and similar income

Interest on loans and advances to credit institutions repayable on demand

(5,911)

277

Interest on financial assets at amortised cost

Loans and advances to credit institutions

27,399

31,803

Loans and advances to customers

1,411,595

1,448,219

Debt securities

131,080

113,654

Interest on financial assets at fair value through profit or loss

Financial assets held for trading

1,482

10,721

Financial assets not held for trading mandatorily at fair value through profit or loss

12,181

15,817

Financial assets designated at fair value through profit or loss

—

569

Interest on financial assets at fair value through other comprehensive income

74,020

120,257

Interest on hedging derivatives

53,023

60,526

Interest on other assets

4,255

3,917

1,709,124

1,805,760

Interest expense and similar charges

Interest on financial liabilities at amortised cost

Resources from credit institutions

74,549

33,137

Resources from customers

(89,781)

(186,216)

Non subordinated debt securities issued

(19,929)

(16,014)

Subordinated debt

(57,663)

(70,154)

Interest on financial liabilities at fair value through profit or loss

Financial liabilities held for trading

Derivatives associated to financial instruments at fair value through profit or loss

163

(771)

Financial liabilities at fair value through profit or loss

Resources from customers

(1,542)

(3,058)

Non subordinated debt securities issued

(1,228)

(1,937)

Interest on hedging derivatives

(17,321)

(20,558)

Interest on leasing

(5,500)

(6,022)

Interest on other liabilities

(2,271)

(2,502)

(120,523)

(274,095)

1,588,601

1,531,665

The balance Interest on loans and advances to credit institutions repayable on demand has accounted for, in 2021,

negative interest of Euros 6,737,000 (2020: Euros 1,017,000) associated with demand deposits with the Bank of

Portugal.

The balance Interest on financial assets at amortised cost - Loans and advances to customers includes the amount of

Euros 18,008,000 (2020: Euros 29,766,000) related to commissions and other gains accounted for under the effective

interest method, as referred in the accounting policy described in note 1 C3. The balance also includes the amount of

Euros 58,881,000 (2020: Euros 69,030,000) related to interest income arising from customers classified in stage 3.

The balances Interest on financial assets at amortised cost - Loans and advances to customers and Debt securities

include the amounts of Euros 25,935,000 (2020: Euros 34,335,000), as referred in note 21 and Euros 47,000 (2020: Euros

54,000), as referred in note 22, related to the adjustment on interest on loans to customers classified in stage 3, under

the scope of application of IFRS 9.

The balances Interest on non-subordinated debt securities issued and Interest on subordinated debt include the amount

of Euros 2,669,000 and Euros 5,356,000, respectively (2020: Euros 3,563,000 and Euros 7,077,000, respectively) related

to commissions and other costs accounted for under the effective interest method, as referred in the accounting policy

described in note 1 C3.

2021 REPORT & ACCOUNTS

| 233

According to note 32, the balance Interest expense and similar charges - Interest on financial liabilities at amortised

cost - Resources from credit institutions has recorded in 2021 a negative cost of Euros 81,266,000 (2020: a negative cost

of Euros 40,057,000) associated with the TLTRO III operation.

The balance Interest on leasing refers to the interest cost related to the leasing liabilities recognised under IFRS 16, as

referred in accounting policy described 1 H.

3.Dividends from equity instruments

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Dividends from financial assets held for trading

Dividends from financial assets through other comprehensive income

932

4,771

938

4,775

The balances Dividends from financial assets through other comprehensive income include dividends and income from

investment fund units received during the year.

4.Net fees and commissions income

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Fees and commissions received

Banking services provided

442,638

400,874

Management and maintenance of accounts

149,847

135,508

Bancassurance

119,395

122,017

Securities operations

67,192

69,915

Guarantees granted

44,171

47,467

Commitments to third parties

5,307

4,463

Fiduciary and trust activities

—

Other commissions

46,714

43,330

875,264

823,610

Fees and commissions paid

Banking services provided by third parties

(112,001)

(111,589)

Securities operations

(8,514)

(7,891)

Guarantees received

(1,954)

(3,548)

Other commissions

(25,072)

(24,026)

(147,541)

(147,054)

727,723

676,556

2021 REPORT & ACCOUNTS

234 |

5.Net gains / (losses) on financial operations

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Net gains / (losses) from financial operations at fair value through profit or loss

Net gains / (losses) from financial assets held for trading

198,287

44,305

Net gains / (losses) from financial assets not held for trading mandatorily at fair value

through profit or loss

(6,478)

(62,528)

Net gains / (losses) from financial assets and liabilities designated at fair value

through profit or loss

(192,056)

887

(247)

(17,336)

Net gains / (losses) from foreign exchange

17,494

88,319

Net gains / (losses) from hedge accounting

4,286

(2,322)

Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost

(3,717)

(28,081)

Net gains / (losses) from derecognition of financial assets at fair value

through other comprehensive income

68,722

100,063

86,538

140,643

The balances Net gains / (losses) from financial operations at fair value through profit or loss is comprised of:

(Thousands of euros)

2021

2020

(restated)

Net gains / (losses) from financial assets held for trading

Gains

Debt securities portfolio

14,990

16,948

Equity instruments

696

Derivative financial instruments

320,154

387,414

Other operations

1,498

1,837

336,644

406,895

Losses

Debt securities portfolio

(14,604)

(9,650)

Equity instruments

(628)

(2,275)

Derivative financial instruments

(122,133)

(349,652)

Other operations

(992)

(1,013)

(138,357)

(362,590)

198,287

44,305

Net gains / (losses) from financial assets not held for trading

mandatorily at fair value through profit or loss

Gains

Loans and advances to customers

37,639

28,791

Debt securities portfolio

20,269

7,365

Equity instruments

1,642

30,101

59,550

66,257

Losses

Loans and advances to customers

(28,897)

(38,421)

Debt securities portfolio

(37,131)

(90,364)

(66,028)

(128,785)

(6,478)

(62,528)

(continues)

2021 REPORT & ACCOUNTS

| 235

(continuation)

(Thousands of euros)

2021

2020

(restated)

Net gains / (losses) from financial assets and liabilities designated at fair value through profit or loss

Gains

Resources from customers

176

747

Debt securities issued

Certificates and structured securities issued

—

68,289

Other debt securities issued

3,697

612

3,873

69,648

Losses

Debt securities portfolio

—

(874)

Resources from customers

—

(114)

Debt securities issued

Certificates and structured securities issued

(193,488)

(66,977)

Other debt securities issued

(2,441)

(796)

(195,929)

(68,761)

(192,056)

887

In the balances Net gains / (losses) from financial assets and liabilities designated at fair value through profit or loss -

Gains/(Losses) - Certificates and structured securities issued are recorded the valuations and devaluations of

certificates issued by the Bank. These liabilities are covered by futures, which valuation and devaluation are recorded

in Net gains / (losses) from financial assets held for trading - Profits/(Losses) - Derivative financial instruments.

The balances Net gains / (losses) from foreign exchange, Net gains / (losses) from hedge accounting and Net gains /

(losses) from derecognition of financial assets and liabilities at amortised cost, are presented as follows:

(Thousands of euros)

2021

2020

(restated)

Net gains / (losses) from foreign exchange

Gains

1,796,161

2,099,728

Losses

(1,778,667)

(2,011,409)

17,494

88,319

Net gains / (losses) from hedge accounting

Gains

Hedging derivatives

250,207

24,458

Hedged items

10,684

67,547

260,891

92,005

Losses

Hedging derivatives

(105,124)

(82,137)

Hedged items

(151,481)

(12,190)

(256,605)

(94,327)

4,286

(2,322)

Net gains / (losses) from derecognition of financial assets and liabilities at amortised cost

Gains

Credit sales

828

6,102

Debt securities issued

638

3,470

Others

300

267

1,766

9,839

Losses

Credit sales

(4,384)

(34,335)

Debt securities issued

(151)

(2,622)

Others

(948)

(963)

(5,483)

(37,920)

(3,717)

(28,081)

2021 REPORT & ACCOUNTS

236 |

The balance Net gains / (losses) from derecognition of financial assets at fair value through other comprehensive

income is comprised of:

(Thousands of euros)

2021

2020

(restated)

Net gains / (losses) from derecognition of financial assets at fair value

through other comprehensive income

Debt securities portfolio

Gains

73,225

135,055

Losses

(4,503)

(34,992)

68,722

100,063

The balance Net gains / (losses) arising from financial assets at fair value through other comprehensive income - Debt

securities portfolio - Gains includes the amount of Euros 38,895,000 (2020: Euros 88,835,000) related to gains resulting

from the sale of Portuguese Treasury bonds.

The balance Net gains / (losses) from hedge accounting includes a net gain of Euros 4,748,000 (2020: Euros 5,266,000)

as a result of the sale of financial assets at fair value through other comprehensive income subject to hedge

accounting, which are offset in the balance Net gains / (losses) from derecognition of financial assets at fair value

through other comprehensive income.

6.Other operating income / (losses)

The amount of this account is comprised of

(Thousands of euros)

2021

2020

(restated)

Operating income

Gains on leasing operations

5,764

3,489

Income from services provided

29,290

24,328

Rents

3,679

3,675

Sales of cheques and others

9,838

9,291

Other operating income

61,831

31,763

110,402

72,546

Operating costs

Donations and contributions

(4,576)

(4,510)

Contribution over the banking sector

(39,286)

(35,416)

Contributions for Resolution Funds

(27,615)

(28,207)

Contribution for the Single Resolution Fund

(20,886)

(19,394)

Contributions to Deposit Guarantee Fund

(15,398)

(24,585)

Tax for the Polish banking sector

(68,520)

(62,630)

Taxes

(15,585)

(18,070)

Losses on financial leasing operations

(84)

(371)

Other operating costs

(47,357)

(37,624)

(239,307)

(230,807)

(128,905)

(158,261)

2021 REPORT & ACCOUNTS

| 237

The balance Contribution over the banking sector in Portugal is estimated according to the terms of the Decree-Law no.

55-A/2010. The determination of the amount payable is based on: (i) the annual average liabilities deducted by core

capital (Tier 1) and supplementary capital (Tier 2) and deposits covered by the Deposit Guarantee Fund, and (ii)

notional amount of derivatives.

The balance Contributions for Resolution Funds includes the periodic contributions that must be paid to the Portuguese

Fund, as stipulated in Decree-Law No 24/2013. The periodic contributions are determined by a base rate, established

by the Bank of Portugal through regulatory instruments, to be applied in each year and which may be adjusted to the

credit institution’s risk profile based on the objective incidence of those contributions. The period contributions affect

the liabilities of the credit institutions members of the Fund, as per the article 10 of the referred Decree-Law,

deducted from the liability elements that are part of the core capital and supplementary and from the deposits covered

by the Deposit Guarantee Fund.

The balance Contributions for Resolution Funds also includes the mandatory contributions made by Bank Millennium,

S.A to the Bank Guarantee Fund in Poland. The current principles of financing the deposit guarantee system and

resolution in Poland, as defined in the Act of 10 June 2016 on the Bank Guarantee Fund, deposit guarantee system and

forced restructuring, and are effective from 2017.

The method of calculating contributions regarding the resolution fund of banks in Poland was defined in the Delegated

Regulation of the European Commission No. 2015/63 (amended by regulation 2016/1434), which applies directly to all

European Union countries. The contribution for a given year from each entity is calculated by BFG in accordance with

this regulation and the entity is notified by 1 May, each year.

The balance Contribution to the Single Resolution Fund (‘SRF’) corresponds to the Bank’s annual ex-ante contribution to

support the application of resolution measures at EU level. The SRF has been established by Regulation (EU) No

806/2014 (the “SRM Regulation”). The SRF is financed from ex-ante contributions paid annually at individual level by all

credit institutions within the Banking Union. Contributions to the SRF consider the annual target level as well as the

size and the risk profile of institutions.

In calculating the ex-ante contributions, the SRF applies the methodology as set out in the Commission Delegated

Regulation (EU) No 2015/63 and European Parliament and of the Council Regulation (EU) No 806/2014. The annual

contribution to the Fund is based on the institution's liabilities excluding own funds and covered deposits considering

adjustments due to derivatives and intra group liabilities and on a risk factor adjustment that depends on the risk

profile of the institution.

In accordance with Article 67(4) of SRM Regulation and in accordance with the Intergovernmental Agreement on the

transfer and mutualisation of contributions to the SRF, the ex-ante contributions are collected by national resolution

authorities and transferred to the SRF by 30 June of each year.

The Group delivered, in 2021, the amount of Euros 20,886,000 to the Single Resolution Fund (2020: Euros 19,394,000).

The total value of the contribution attributable to the Group amounted to Euros 24,563,000 (2020: Euros 22,808,000)

and the Group opted to constitute an irrevocable commitment, through the constitution of a bailment for this purpose,

in the amount of Euros 3,677,000 (2020: Euros 3,414,000), not having this component been recognised as a cost, as

defined by the Single Resolution Council in accordance with the methodology set out in Delegated Regulation (EU) No

2015/63 of the Commission of 21 October 2014 and with the conditions laid down in the Implementing Regulation (EU)

2015/81 of the Council of 19 December 2014. As at 31 December 2021, the total amount of irrevocable commitments

constituted is Euros 20,953,000 (31 December 2020: Euros 17,276,000), registered in Other assets - Deposit account

applications (note 31).

2021 REPORT & ACCOUNTS

238 |

7.Staff costs

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Remunerations

455,246

484,818

Mandatory social security charges

Post-employment benefits (note 50)

Service cost

(14,466)

(15,235)

Net interest cost / (income) in the liability coverage balance

4,428

6,299

Cost with early retirement programs

36,583

11,799

Amount transferred to the Fund resulting from acquired rights

unassigned related to the Complementary Plan

(586)

(426)

25,959

2,437

Other mandatory social security charges

73,183

108,625

99,142

111,062

Voluntary social security charges

11,195

11,994

Other staff costs

88,687

16,906

654,270

624,780

In 2021, there was no distribution of profits to Bank's employees. In 2020, the balance Remunerations included the

amount of Euros 5,281,000 related to the distribution of profits to Bank's employees.

In 2021, the Group accounted for in Other staff costs, the amount of Euros 84,152,000, corresponding to restructuring

costs, within the scope of the staff reduction process carried out in 2021 (note 38). This amount includes Euros

36,583,000 related with the impact in post-employment liabilities arising from early retirement programs and

terminations by mutual agreement, carried out under the context of this process (note 50).

The balance Other staff costs includes severance payments in the amount of Euros 4,219,000 (2020: Euros 19,992,000),

of which the highest amounts to Euros 886,000 (2020: Euros 504,000).

The average number of employees by professional category, at service in the Group, is analysed as follows by category:

2021

2020

Portugal

Top Management

882

963

Intermediary Management

1,508

1,596

Specific/Technical functions

2,976

3,059

Other functions

1,398

1,535

6,764

7,153

Abroad

9,809

10,775

16,573

17,928

2021 REPORT & ACCOUNTS

| 239

Remunerations

In compliance with the provisions of Article 47 of Banco de Portugal Notice no. 3/2020, quantitative information is

disclosed regarding the remuneration paid to different categories of members of governing bodies and categories of

employees provided for in Article 115 C no. 2 of the RGICS, as well as the information provided for in Article 450 g) to i)

of Regulation (EU) 2019/876 of the European Parliament and of the Council.

A. BCP Board of Directors

The fixed remuneration and social charges paid to members of the Board of Directors of Banco Comercial Português,

S.A. are analysed as follows:

(Thousands of euros)

Board of Directors

Executive Committee

Non-executive directors

2021

2020

2021

2020

Fixed remuneration

3,055

1,915

1,910

Variable remuneration

Pecuniary

246

—

172

—

Deferred

138

129

—

Supplementary retirement pension

611

138

Post-employment benefits

(1)

—

Other mandatory social security charges

733

457

455

4,954

4,532

2,510

2,503

Number of beneficiaries

Considering that the remuneration of members of the Executive Committee and Directors, with an exclusivity contract,

intends to compensate the functions that are performed in the Bank and in all other functions performed in subsidiaries

or governing bodies for which they have been designated by indication or in representation of the Bank, in the latter

case, the net amount of the remuneration annually received by each member of the Executive Committee will be

deducted from the fixed annual remuneration attributed by the Bank, ensuring that the effective payable amount

corresponds to the one approved by the Remuneration and Welfare Board.

In 2021, the amount of remuneration paid to the Board of Directors includes Euros 141,000 (2020: Euros 142,000), of

which Euros 108,000 (2020: Euros 108,000) were paid to the Executive Committee, that were supported by subsidiaries

or companies whose governing bodies represent the Group's interests.

In 2021, it was assigned variable remuneration in accordance with the remuneration policies for the members of the

management and supervisory bodies and for employees, approved for 2020, as described in accounting policies 1 R4 and

1 R5.

In 2021, the 2019 deferred variable remuneration paid to the Executive Committee relates to the 2018 financial year

and it includes the amount of Euros 89,000 (2020: Euros 89,000) and 347,432 BCP shares in the amount of Euros 49,000

(2020: Euros 40,000).

In 2021, the deferred variable remuneration attributed to the Executive Committee related to 2020, is Euros 164,000 in

cash and 807,882 BCP shares.

In 2020, the variable remuneration attributed to the Executive Committee regarding the financial year of 2019

amounted to Euros 1,232,000. By CRP’s deliberation, the payment was postponed to the year in which the payment of

dividends to shareholders is resumed.

During 2021 and 2020, no severance payments were paid to members of the Board of Directors.

2021 REPORT & ACCOUNTS

240 |

B. Key Function Holders (KFH)

In 2021, the remunerations and social security charges supported with the Group's Key Function Holders are, detailed

by segment, as follows:

(Thousands of euros)

2021

Retail

Corporate

Private

Banking

Control

functions

Others

Total

Fixed remuneration

1,188

2,873

450

2,100

4,513

11,124

Variable remuneration

Pecuniary

119

256

153

Deferred

179

Post-employment benefits

(76)

(20)

(78)

(214)

(375)

Other mandatory social security charges

292

741

109

530

1,116

2,788

1,483

3,701

588

2,653

5,700

14,125

Number of beneficiaries

As described in accounting policies 1.R4 and 1.R5, during 2021, the 85 Key Function Holders were awarded variable

remuneration arising from the application of the Remuneration Policies for Employees, approved for the financial year

2020, which will be deferred over a period of 5 years, in the amount of Euros 229,000.

In 2021, deferred variable remuneration was paid to KFH deferred from 2020 and 2019, corresponding in cash to Euros

42,000 and shares in the amount of Euros 137,000.

In 2021, severance payments were paid to 3 KFH in the amount of Euros 1,327,000 of which the highest amounts to

Euros 886,000.

In 2020, the remunerations and social security charges supported with the Group's Key Function Holders are, detailed

by segment, as follows:

2020

Retail

Corporate

Private

Banking

Control

functions

Others

Total

Fixed remuneration

1,280

3,078

450

1,958

4,433

11,199

Variable remuneration

Pecuniary

254

502

183

Deferred

Post-employment benefits

(63)

(21)

(64)

(171)

(306)

Other mandatory social security charges

317

676

109

489

1,109

2,700

1,645

3,870

593

2,498

5,765

14,371

Number of beneficiaries

(Thousands of euros)

2021 REPORT & ACCOUNTS

| 241

As described in accounting policies 1 R4 and 1 R5, during 2020, the 91 Key Function Holders were awarded variable

remuneration resulting from the application of the Remuneration Policies for Employees, approved for the financial

year 2019, which will be deferred over a period of 5 years, in the amount of Euros 646,000.

In 2020, variable remunerations were paid in shares to KFH, deferred from 2019, in the amount of Euros 93,000.

In 2020, severance payments were paid to 6 KFH in the amount of Euros 1,992,000 of which the highest amounts to

Euros 504,000.

In 2021 and 2020, the remunerations and social security charges supported with the Group's Key Function Holders,

discriminated by Key management members and by members whose professional activities have significant impact in

the risk profile of the Bank (Other KFH), are as follows:

(Thousands of euros)

Key Function Holders

Key management members

Other KFH

Total

2021

2020

2021

2020

2021

2020

Fixed remuneration

7,431

7,786

3,693

3,413

11,124

11,199

Variable remuneration

Pecuniary

170

366

136

256

502

111

144

153

183

Deferred

169

179

Post-employment benefits

(202)

(154)

(173)

(152)

(375)

(306)

Other mandatory social security

charges

1,840

1,866

948

834

2,788

2,700

9,519

10,094

4,606

4,277

14,125

14,371

Number of beneficiaries

During 2021, deferred variable remuneration for the year 2020 was paid in cash to Key management members, Euros

39,000, as well as shares from the years 2020 and 2019 corresponding to Euros 130,000, and it was paid to other KFH,

deferred from 2020, the value of Euros 3,000 in cash and shares from the years 2020 and 2019 corresponding to Euros

7,000.

In 2020, the variable remuneration deferred paid refers to shares from 2019.

In 2021, with reference to the financial year of 2020, Key management members were awarded variable remuneration

deferred over 5 years in the amount of Euros 212,000, and to other KFH it was awarded the amount of Euros 17,000.

In 2020, with reference to the financial year of 2019, Key management members were awarded variable remuneration

deferred over 5 years in the amount of Euros 547,000, and to other KFH it was awarded the amount of Euros 89,000.

In 2021 and 2020, the Group does not have key function holders with remunerations exceeding Euros 1 million.

2021 REPORT & ACCOUNTS

242 |

8.Other administrative costs

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Water, electricity and fuel

12,611

13,968

Credit cards and mortgage

8,035

8,231

Communications

21,544

25,840

Maintenance and related services

14,965

16,276

Legal expenses

4,535

2,996

Travel, hotel and representation costs

2,754

3,518

Advisory services

27,101

22,185

Training costs

1,239

1,321

Information technology services

43,631

45,028

Consumables

6,450

8,505

Outsourcing and independent labour

77,451

74,858

Advertising

24,345

23,048

Rents and leases

20,139

24,901

Insurance

4,875

4,679

Transportation

8,207

8,855

Other specialised services

27,591

26,207

Other supplies and services

18,699

19,407

324,172

329,823

The balance Rents and leases includes the amount of Euros 581,000 (2020: Euros 2,077,000) related to short-term lease

contracts and the amount of Euros 2,564,000 (2020: Euros 2,504,000) related to lease contracts of low-value assets, as

described in the accounting policy 1 H.

The balance Other specialised services includes fees for services rendered by the Statutory Auditor of the Group,

currently in functions, and by companies in its network as part of its statutory audit functions, as well as other services,

is analysed as follows:

(Thousands of euros)

2021

2020

Auditing services

Legal certification

2,947

2,880

Other assurance services

1,269

1,124

Other services

594

129

4,810

4,133

2021 REPORT & ACCOUNTS

| 243

9.Amortisations and depreciations

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Amortisations of intangible assets (note 29):

Software

34,173

28,847

Other intangible assets

4,011

3,236

38,184

32,083

Depreciations of other tangible assets (note 28):

Properties

14,945

15,840

Equipment

Computers

16,606

17,582

Security equipment

864

983

Installations

2,726

2,699

Machinery

1,294

1,166

Furniture

2,781

2,906

Motor vehicles

4,353

4,502

Other equipment

1,497

1,461

Right-of-use

Real estate

53,799

56,360

Vehicles and equipment

107

218

98,972

103,717

137,156

135,800

2021 REPORT & ACCOUNTS

244 |

10.Impairment of financial assets at amortised cost

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Loans and advances to credit institutions (note 20)

Charge for the year

911

Reversals for the year

(27)

(65)

884

(64)

Loans and advances to customers (note 21)

Charge for the year

861,212

1,102,851

Reversals for the year

(487,084)

(576,588)

Recoveries of loans and interest charged-off

(22,938)

(22,680)

351,190

503,583

Debt securities (note 22)

Associated to credit operations

Charge for the year

244

6,292

Reversals for the year

(2,533)

—

(2,289)

6,292

Not associated to credit operations

Charge for the year

4,874

4,075

Reversals for the year

(1,826)

(480)

3,048

3,595

759

9,887

352,833

513,406

11.Impairment of financial assets at fair value through other comprehensive

income

The detail of this balance is comprised of:

(Thousands of euros)

2021

2020

(restated)

Impairment of financial assets at fair value through other comprehensive income (note 23)

Charge for the year

4,784

11,485

Reversals for the year

(158)

(1,125)

4,626

10,360

2021 REPORT & ACCOUNTS

| 245

12.Impairment of other assets

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Impairment of investments in associated companies (note 25)

Charge for the year

—

4,735

Impairment of non-current assets held for sale (note 26)

Charge for the year

56,863

77,769

Reversals for the year

(3,683)

(11,059)

53,180

66,710

Impairment of goodwill of subsidiaries (note 29)

Charge for the year

347

180

Impairment of other assets (note 31)

Charge for the year

16,618

17,184

Reversals for the year

(9,263)

(9,519)

7,355

7,665

60,882

79,290

13.Other provisions

This balance is comprised of:

(Thousands of euros)

2021

2020

(restated)

Provision for guarantees and other commitments (note 38)

Charge for the year

44,414

43,204

Reversals for the year

(36,278)

(39,986)

8,136

3,218

Other provisions for liabilities and charges (note 38)

Charge for the year

651,156

238,181

Reversals for the year

(16,566)

(3,107)

634,590

235,074

642,726

238,292

The balance Other provisions for liabilities and charges - Charge for the year refers essentially to provisions for legal

risk accounted for by Bank Millennium, related to foreign currency-indexed mortgage loans, as described in note 57.

2021 REPORT & ACCOUNTS

246 |

14.Share of profit / (loss) of associates under the equity method

The main contributions of the investments accounted for under the equity method are analysed as follows:

(Thousands of euros)

2021

2020

(restated)

Banco Millennium Atlântico, S.A. (note 25)

Appropriation relating to the current year

2,629

7,300

Appropriation relating to the previous year

(1,621)

(27)

Annulment of the gains arising from properties sold to Group entities

—

6,067

Effect of the application of IAS 29:

Amortization of the effect calculated until 31 December 2018 (*)

(2,388)

(3,943)

(1,380)

9,397

Banque BCP, S.A.S.

3,979

2,529

Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.

38,218

44,344

SIBS, S.G.P.S, S.A.

11,396

5,156

Unicre - Instituição Financeira de Crédito, S.A.

5,028

6,218

Other companies

(304)

58,317

58,298

56,937

67,695

(*) Based on the requirements of IAS 29, Angola was considered as a high inflation economy until 31 December 2018, for the purposes

of presentation of consolidated financial statements, as described in accounting policy 1 B6. This classification is no longer applied

since 1 January 2019.

15.Gains/(losses) arising from sales of subsidiaries and other assets

This balance is comprised of:

(Thousands of euros)

2021

2020

(restated)

Gains/(Losses) arising on sale of investments

200

(3)

Gains /(Losses) arising on sale of other assets

2,370

(6,384)

2,570

(6,387)

The balance Other assets includes gains arising from the sale of assets held by the Group and classified as non-current

assets held for sale, which corresponds to a gain of Euros 4,719,000 (2020: loss of Euros 3,458,000).

2021 REPORT & ACCOUNTS

| 247

16.Income arising from discontinued or discontinuing operations

The amount of this account is comprised of:

(Thousands of euros)

2021

2020

(restated)

Banque Privée BCP (Suisse) S.A.

Net income before taxes

1,424

8,291

Taxes on net income

(223)

(1,202)

Gains arising on disposal of 100% investment held

51,093

—

52,294

7,089

Seguradora Internacional de Moçambique, S.A.

Net income before taxes

9,303

11,783

Taxes on net income

(2,515)

(3,352)

Gains arising on disposal of investment held (70%)

23,736

—

Tax on gains arising on disposal

(11,937)

—

18,587

8,431

70,881

15,520

According to the described in note 48, under the agreement entered between Banco Comercial Português, S.A. and

Union Bancaire Privée, UBP SA regarding the sale of the entire share capital of Banque Privée BCP (Suisse) S.A. and in

accordance with the provisions of IFRS 5, this operation was considered as discontinued in June 2021, and the impact

on results presented in a separate line of the income statement named "Income / (loss) arising from discontinued or

discontinuing operations". The disposal was completed at the beginning of November 2021 and generated a consolidated

gain of Euros 51,093,000.

The purchase price received may be adjusted positively or negatively in the future, according to typical adjustments in

these kind of transactions, including the variation of the equity in the completion date, and the ones that may result

from the variation of stocks and/or flows of assets under management, in pre-determined dates and specified

portfolios.

By the end of 2021, the Group, through its subsidiary BIM - Banco Internacional de Moçambique, S.A., sold 70% of the

investment held in Seguradora Internacional de Moçambique, S.A., becoming to hold a minority stake of 22%. This

operation generated a consolidated gain of Euros 23,736,000. In accordance with the provisions of IFRS 5, this operation

was considered as discontinued and the impact on results presented in a separate line of the income statement named

"Income / (loss) arising from discontinued or discontinuing operations".

Possible contingencies are reflected in the sales price received, therefore, this may be adjusted positively or negatively

in the future, according to typical adjustments in these kind of transactions, including the variation of the value and/or

flows of assets under management, in pre-determined dates and for specified assets.

The financial statements of Banque Privée BCP (Suisse) S.A. and of Seguradora Internacional de Moçambique, S.A. that

have been incorporated in this balance, are detailed in note 59.

2021 REPORT & ACCOUNTS

248 |

17.Earnings per share

The earnings per share are calculated as follows:

(Thousands of euros)

2021

2020

(restated)

Continuing operations

Net income after income taxes from continuing operations

(45,889)

192,845

Non-controlling interests

113,633

(24,680)

Appropriated net income

67,744

168,165

Interests of the perpetual subordinated bonds (Additional Tier 1) (note 40)

(37,000)

Adjusted net income

30,744

131,165

Discontinued or discontinuing operations (note 16)

Net income

70,881

15,520

Non-controlling interests

(543)

(673)

Appropriated net income

70,338

14,847

Adjusted net income

101,082

146,012

Average number of shares

15,113,989,952

Basic earnings per share (Euros):

from continuing operations

0.002

0.009

from discontinued or discontinuing operations

0.005

0.001

0.007

0.010

Diluted earnings per share (Euros):

from continuing operations

0.002

0.009

from discontinued or discontinuing operations

0.005

0.001

0.007

0.010

The Bank's share capital amounts to Euros 4,725,000,000 and is represented by 15,113,989,952 nominative book-entry

shares without nominal value, fully subscribed and paid up.

There were not identified another dilution effects of the earnings per share as at 31 December 2021 and 2020, so the

diluted result is equivalent to the basic result.

2021 REPORT & ACCOUNTS

| 249

18.Cash and deposits at Central Banks

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Cash

601,772

579,997

Central Banks

Bank of Portugal

6,418,682

4,296,161

Central Banks abroad

775,845

427,706

7,796,299

5,303,864

The balance Central Banks includes deposits at Central Banks of the countries where the Group operates to satisfy the

legal requirements to maintain a cash reserve calculated based on the value of deposits and other effective liabilities.

According to the European Central Bank System for Euro Zone, the cash reserve requirements establishes the

maintenance of a deposit with the Central Bank equivalent to 1% of the average value of deposits and other liabilities,

during each reserve requirement period. The rate is different for countries outside the Euro Zone.

In addition, from the reserve counting period started on 30 October 2019, the ECB introduced the tiering regime, in

which the balance with the Central Bank in excess of the minimum cash reserves, up to an estimated maximum of 6

times of the reserves, is remunerated at the central bank's lending rate instead of the deposit rate.

19.Loans and advances to credit institutions repayable on demand

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Credit institutions in Portugal

24,301

10,288

Credit institutions abroad

278,860

182,976

Amounts due for collection

58,625

69,131

361,786

262,395

The balance Amounts due for collection represents essentially cheques due for collection on other financial institutions.

These balances were settled in the first days of the following month.

2021 REPORT & ACCOUNTS

250 |

20.Loans and advances to credit institutions

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Loans and advances to Central Banks abroad

101,620

291,669

Loans and advances to credit institutions in Portugal

Loans

18,240

30,942

Term deposits to collateralise CIRS and IRS operations (*)

—

2,850

Other

811

18,255

34,603

Loans and advances to credit institutions abroad

Term deposits

176,642

383,874

Loans

—

Term deposits to collateralise CIRS and IRS operations (*)

137,385

276,722

Other

20,498

28,426

334,525

689,117

454,400

1,015,389

Overdue loans - Over 90 days

—

454,400

1,015,391

Impairment

(1,187)

(304)

453,213

1,015,087

(*) Under the scope of derivative financial instruments operations (IRS and CIRS) with institutional counterparties, and as defined in

the respective contracts ("Cash collateral"), these deposits are held by the counterparties and are given as collateral of the

referred operations (IRS and CIRS), whose revaluation is negative for the Group.

This balance analysed by the period to maturity, before impairment, is as follows:

(Thousands of euros)

2021

2020

Up to 3 months

428,202

987,553

3 to 6 months

9,723

10,734

6 to 12 months

7,164

3,317

1 to 5 years

9,311

13,787

454,400

1,015,391

The changes occurred in impairment of Loans and advances to credit institutions are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

304

368

Transfers

(1)

—

Impairment charge for the year (note 10)

911

Reversals for the year (note 10)

(27)

(65)

Balance at the end of the year

1,187

304

2021 REPORT & ACCOUNTS

| 251

21.Loans and advances to customers

The analysis of loans and advances to customers, by type of credit, is as follows:

(Thousands of euros)

2021

2020

(restated)

Mortgage loans

28,544,360

26,729,157

Loans

18,298,171

17,113,707

Finance leases

4,155,758

3,921,747

Factoring operations

2,725,080

2,566,220

Current account credits

817,440

1,255,304

Overdrafts

1,073,654

885,449

Discounted bills

143,109

189,259

55,757,572

52,660,843

Overdue loans - less than 90 days

127,928

118,767

Overdue loans - Over 90 days

936,185

1,279,269

56,821,685

54,058,879

Loans impairment

(1,849,284)

(2,036,522)

54,972,401

52,022,357

The balance Loans and advances to customers, as at 31 December 2021, is analysed as follows:

(Thousands of euros)

2021

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

Public sector

635,424

—

635,424

(1,681)

633,743

Asset-backed loans

32,425,246

528,636

32,953,882

(839,830)

32,114,052

Other guaranteed loans

6,182,245

99,957

6,282,202

(226,767)

6,055,435

Unsecured loans

7,423,516

347,056

7,770,572

(541,446)

7,229,126

Foreign loans

2,210,303

8,497

2,218,800

(30,443)

2,188,357

Factoring operations

2,725,080

11,304

2,736,384

(41,967)

2,694,417

Finance leases

4,155,758

68,663

4,224,421

(167,150)

4,057,271

55,757,572

1,064,113

56,821,685

(1,849,284)

54,972,401

The balances Asset-backed loans and Other guaranteed loans follow the subsequent types of guarantees considered:

–Asset-backed loans: Financial collaterals, physical collaterals (movable or immovable) and amounts receivable (income

consignment);

–Credit with other guarantees: First-demand guarantees issued by banks or other entities and personal guarantees.

2021 REPORT & ACCOUNTS

252 |

The balance Loans and advances to customers, as at 31 December 2020, is analysed as follows:

(Thousands of euros)

2020 (restated)

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

Public sector

532,580

532,581

(1,939)

530,642

Asset-backed loans

30,291,474

607,836

30,899,310

(969,019)

29,930,291

Other guaranteed loans

5,527,794

149,256

5,677,050

(250,277)

5,426,773

Unsecured loans

7,317,673

405,931

7,723,604

(487,609)

7,235,995

Foreign loans

2,503,355

125,743

2,629,098

(127,900)

2,501,198

Factoring operations

2,566,220

22,587

2,588,807

(53,145)

2,535,662

Finance leases

3,921,747

86,682

4,008,429

(146,633)

3,861,796

52,660,843

1,398,036

54,058,879

(2,036,522)

52,022,357

As at 31 December 2021, the balance Loans and advances to customers includes the amount of Euros 11,896,688,000

(31 December 2020: Euros 11,692,831,000) regarding mortgage loans assigned to the cover pool backing the Group’s

covered bond programme issuances.

As part of the liquidity risk management, the Group holds a pool of eligible assets that can serve as collateral in funding

operations with the European Central Bank and other Central Banks in countries where the Group operates, which

include loans and advances to customers.

As referred in note 51, the Group provides loans and/or guarantees to qualifying shareholders holding individually or

together with their affiliates, 2% or more of the share capital identified in the Board of Directors report and in note 40.

As at 31 December 2021, the Group granted credit to qualifying shareholders and entities controlled by them, in the

amount of Euros 152,056,000 (31 December 2020: Euros 79,993,000), as referred in note 51 a). The amount of

impairment recognised for these contracts amounts to Euros 3,140,000 (31 December 2020: Euros 526,000).

The conclusion of business between the Company and holders of qualifying holdings or individuals or legal entities

related to them in accordance with the provisions of article 33.º, n.º 3 of Notice 3/2020 of Bank of Portugal, regardless

of the amount, is always subject of consideration and deliberation by the Board of Directors, after obtaining a prior

opinion from the Audit Committee, and by proposal of the Executive Committee, which in turn deliberates under

proposal from the Credit Committee, after obtaining an analysis and opinion from the Compliance Office, which

pronounces regarding the compliance of the proposed operations with internal regulations, legal and regulatory

provisions and other conditions that may apply to them, and the Risk Office, which evaluates and issues an opinion on

the risks inherent to the operation.

As at 31 December 2021, the balance Finance leases includes the amount of Euros 6,938,000 (31 December 2020: Euros

8,087,000) relative to sublease operations, as referred in accounting policy 1 H.

The analysis of the outstanding amount of financial lease contracts, by type of client, is presented as follows:

(Thousands of euros)

2021

2020

Individuals

Home

48,249

51,474

Consumer

31,359

31,597

Others

83,744

89,029

163,352

172,100

Companies

Equipment

1,889,697

1,760,496

Real estate

2,102,709

1,989,151

3,992,406

3,749,647

4,155,758

3,921,747

2021 REPORT & ACCOUNTS

| 253

The analysis of loans and advances to customers, as at 31 December 2021, by sector of activity, is as follows:

(Thousands of euros)

2021

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

% Gross

amount

Agriculture and forestry

444,936

6,142

451,078

(10,512)

440,566

0.79%

Fisheries

38,039

1,148

39,187

(2,747)

36,440

0.07%

Mining

87,811

1,943

89,754

(2,035)

87,719

0.16%

Food, beverage and tobacco

806,228

8,326

814,554

(21,917)

792,637

1.43%

Textiles

528,010

9,436

537,446

(16,791)

520,655

0.95%

Wood and cork

274,385

5,520

279,905

(10,308)

269,597

0.49%

Paper, printing and publishing

189,495

605

190,100

(3,781)

186,319

0.34%

Chemicals

841,454

25,028

866,482

(42,870)

823,612

1.53%

Machinery, equipment and basic

metallurgical

1,568,322

30,550

1,598,872

(54,491)

1,544,381

2.81%

Electricity and gas

237,037

837

237,874

(2,506)

235,368

0.42%

Water

223,210

352

223,562

(19,305)

204,257

0.39%

Construction

1,715,141

36,691

1,751,832

(119,383)

1,632,449

3.08%

Retail business

1,772,527

27,490

1,800,017

(49,607)

1,750,410

3.17%

Wholesale business

2,319,324

34,827

2,354,151

(82,221)

2,271,930

4.14%

Restaurants and hotels

1,669,080

16,810

1,685,890

(86,859)

1,599,031

2.97%

Transports

1,349,930

13,804

1,363,734

(25,894)

1,337,840

2.40%

Post offices

18,695

208

18,903

(459)

18,444

0.03%

Telecommunications

437,097

1,773

438,870

(12,164)

426,706

0.77%

Services

Financial intermediation

1,886,333

65,780

1,952,113

(118,878)

1,833,235

3.44%

Real estate activities

1,868,624

11,680

1,880,304

(43,825)

1,836,479

3.31%

Consulting, scientific and technical

activities

879,296

5,301

884,597

(60,343)

824,254

1.56%

Administrative and support services

activities

588,528

6,725

595,253

(59,734)

535,519

1.05%

Public sector

903,437

—

903,437

(2,848)

900,589

1.59%

Education

151,152

1,002

152,154

(13,229)

138,925

0.27%

Health and collective service activities

401,740

1,306

403,046

(15,716)

387,330

0.71%

Artistic, sports and recreational

activities

347,660

42,689

390,349

(104,228)

286,121

0.69%

Other services

229,001

242,691

471,692

(290,089)

181,603

0.83%

Consumer loans

5,599,131

305,938

5,905,069

(390,894)

5,514,175

10.39%

Mortgage credit

27,920,953

151,456

28,072,409

(172,588)

27,899,821

49.40%

Other domestic activities

1,080

707

1,787

(107)

1,680

0.00%

Other international activities

459,916

7,348

467,264

(12,955)

454,309

0.82%

55,757,572

1,064,113

56,821,685

(1,849,284)

54,972,401

100%

2021 REPORT & ACCOUNTS

254 |

The analysis of loans and advances to customers, as at 31 December 2020, by sector of activity, is as follows:

(Thousands of euros)

2020 (restated)

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

% Gross

amount

Agriculture and forestry

400,801

10,745

411,546

(10,026)

401,520

0.76%

Fisheries

32,684

32,721

(471)

32,250

0.06%

Mining

67,358

3,183

70,541

(2,347)

68,194

0.13%

Food, beverage and tobacco

802,531

11,533

814,064

(25,204)

788,860

1.51%

Textiles

464,250

11,553

475,803

(25,476)

450,327

0.88%

Wood and cork

254,338

7,064

261,402

(10,152)

251,250

0.48%

Paper, printing and publishing

188,993

1,290

190,283

(14,802)

175,481

0.35%

Chemicals

757,863

26,590

784,453

(36,147)

748,306

1.45%

Machinery, equipment and basic

metallurgical

1,353,637

37,250

1,390,887

(52,218)

1,338,669

2.57%

Electricity and gas

315,464

218

315,682

(1,899)

313,783

0.58%

Water

229,535

590

230,125

(17,167)

212,958

0.43%

Construction

1,688,915

89,560

1,778,475

(139,292)

1,639,183

3.29%

Retail business

1,698,861

35,419

1,734,280

(50,156)

1,684,124

3.21%

Wholesale business

2,123,122

52,981

2,176,103

(99,976)

2,076,127

4.03%

Restaurants and hotels

1,367,548

41,264

1,408,812

(72,474)

1,336,338

2.61%

Transports

1,188,061

29,432

1,217,493

(46,022)

1,171,471

2.25%

Post offices

20,311

338

20,649

(490)

20,159

0.04%

Telecommunications

485,910

4,710

490,620

(20,206)

470,414

0.91%

Services

Financial intermediation

1,643,196

86,865

1,730,061

(192,376)

1,537,685

3.20%

Real estate activities

1,829,513

18,684

1,848,197

(85,187)

1,763,010

3.42%

Consulting, scientific and technical

activities

937,548

36,415

973,963

(81,482)

892,481

1.80%

Administrative and support services

activities

599,543

13,112

612,655

(72,693)

539,962

1.13%

Public sector

994,296

994,297

(3,643)

990,654

1.84%

Education

142,028

1,718

143,746

(7,016)

136,730

0.27%

Health and collective service activities

365,092

1,215

366,307

(9,643)

356,664

0.68%

Artistic, sports and recreational

activities

365,929

11,030

376,959

(102,056)

274,903

0.70%

Other services

226,772

243,426

470,198

(180,430)

289,768

0.87%

Consumer loans

5,075,357

336,475

5,411,832

(368,720)

5,043,112

10.01%

Mortgage credit

26,189,158

173,835

26,362,993

(188,524)

26,174,469

48.77%

Other domestic activities

1,020

620

1,640

(21,211)

(19,571)

0.00%

Other international activities

851,209

110,883

962,092

(99,016)

863,076

1.78%

52,660,843

1,398,036

54,058,879

(2,036,522)

52,022,357

100%

2021 REPORT & ACCOUNTS

| 255

The analysis of loans and advances to customers, by maturity and by sector of activity, as at 31 December 2021, is as

follows:

(Thousands of euros)

2021

Outstanding loans

Due within

1 year

1 year to

5 years

Over 5

years

Total

Outstanding

Overdue

loans

Total

Agriculture and forestry

105,704

161,400

177,832

444,936

6,142

451,078

Fisheries

5,753

14,677

17,609

38,039

1,148

39,187

Mining

16,303

58,651

12,857

87,811

1,943

89,754

Food, beverage and tobacco

359,259

332,183

114,786

806,228

8,326

814,554

Textiles

137,952

277,945

112,113

528,010

9,436

537,446

Wood and cork

99,291

131,284

43,810

274,385

5,520

279,905

Paper, printing and publishing

75,064

74,969

39,462

189,495

605

190,100

Chemicals

267,511

412,437

161,506

841,454

25,028

866,482

Machinery, equipment and basic

metallurgical

521,463

759,272

287,587

1,568,322

30,550

1,598,872

Electricity and gas

48,354

66,317

122,366

237,037

837

237,874

Water

31,754

57,684

133,772

223,210

352

223,562

Construction

510,600

742,757

461,784

1,715,141

36,691

1,751,832

Retail business

668,955

756,484

347,088

1,772,527

27,490

1,800,017

Wholesale business

914,425

1,082,909

321,990

2,319,324

34,827

2,354,151

Restaurants and hotels

88,460

512,541

1,068,079

1,669,080

16,810

1,685,890

Transports

292,026

692,834

365,070

1,349,930

13,804

1,363,734

Post offices

11,885

5,976

834

18,695

208

18,903

Telecommunications

87,200

273,315

76,582

437,097

1,773

438,870

Services

—

Financial intermediation

213,955

401,976

1,270,402

1,886,333

65,780

1,952,113

Real estate activities

316,696

819,454

732,474

1,868,624

11,680

1,880,304

Consulting, scientific and technical

activities

174,787

312,648

391,861

879,296

5,301

884,597

Administrative and support services

activities

146,087

272,501

169,940

588,528

6,725

595,253

Public sector

78,613

349,831

474,993

903,437

—

903,437

Education

29,090

50,130

71,932

151,152

1,002

152,154

Health and collective service activities

67,409

166,250

168,081

401,740

1,306

403,046

Artistic, sports and recreational

activities

48,141

54,849

244,670

347,660

42,689

390,349

Other services

75,324

83,111

70,566

229,001

242,691

471,692

Consumer loans

1,772,975

2,675,033

1,151,123

5,599,131

305,938

5,905,069

Mortgage credit

483,741

2,017,730

25,419,482

27,920,953

151,456

28,072,409

Other domestic activities

250

402

428

1,080

707

1,787

Other international activities

215,105

98,822

145,989

459,916

7,348

467,264

7,864,132

13,716,372

34,177,068

55,757,572

1,064,113

56,821,685

2021 REPORT & ACCOUNTS

256 |

The analysis of loans and advances to customers, by maturity and by sector of activity, as at 31 December 2020, is as

follows:

(Thousands of euros)

2020 (restated)

Outstanding loans

Due within

1 year

1 year to

5 years

Over 5

years

Total

Outstanding

Overdue

loans

Total

Agriculture and forestry

102,280

102,792

195,729

400,801

10,745

411,546

Fisheries

3,750

5,678

23,256

32,684

32,721

Mining

24,192

23,571

19,595

67,358

3,183

70,541

Food, beverage and tobacco

383,195

221,961

197,375

802,531

11,533

814,064

Textiles

129,444

162,194

172,612

464,250

11,553

475,803

Wood and cork

101,500

89,136

63,702

254,338

7,064

261,402

Paper, printing and publishing

69,584

56,740

62,669

188,993

1,290

190,283

Chemicals

236,584

300,728

220,551

757,863

26,590

784,453

Machinery, equipment and basic

metallurgical

466,527

458,216

428,894

1,353,637

37,250

1,390,887

Electricity and gas

56,373

142,510

116,581

315,464

218

315,682

Water

35,318

29,729

164,488

229,535

590

230,125

Construction

478,578

553,152

657,185

1,688,915

89,560

1,778,475

Retail business

658,271

466,276

574,314

1,698,861

35,419

1,734,280

Wholesale business

848,179

710,687

564,256

2,123,122

52,981

2,176,103

Restaurants and hotels

92,367

333,227

941,954

1,367,548

41,264

1,408,812

Transports

282,494

473,937

431,630

1,188,061

29,432

1,217,493

Post offices

13,600

3,939

2,772

20,311

338

20,649

Telecommunications

92,905

287,971

105,034

485,910

4,710

490,620

Services

Financial intermediation

222,365

419,815

1,001,016

1,643,196

86,865

1,730,061

Real estate activities

296,627

689,530

843,356

1,829,513

18,684

1,848,197

Consulting, scientific and technical

activities

174,517

254,820

508,211

937,548

36,415

973,963

Administrative and support services

activities

165,749

240,197

193,597

599,543

13,112

612,655

Public sector

126,479

466,052

401,765

994,296

994,297

Education

27,503

30,729

83,796

142,028

1,718

143,746

Health and collective service activities

110,963

97,641

156,488

365,092

1,215

366,307

Artistic, sports and recreational

activities

36,481

49,020

280,428

365,929

11,030

376,959

Other services

89,985

58,903

77,884

226,772

243,426

470,198

Consumer loans

1,421,642

2,510,015

1,143,700

5,075,357

336,475

5,411,832

Mortgage credit

507,696

1,896,305

23,785,157

26,189,158

173,835

26,362,993

Other domestic activities

147

397

476

1,020

620

1,640

Other international activities

610,448

149,392

91,369

851,209

110,883

962,092

7,865,743

11,285,260

33,509,840

52,660,843

1,398,036

54,058,879

2021 REPORT & ACCOUNTS

| 257

The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2021, is as

follows:

(Thousands of euros)

2021

Outstanding loans

Due within

1 year

1 year to

5 years

Over

5 years

Total

Outstanding

Overdue

loans

Total

Public sector

24,756

28,028

582,640

635,424

—

635,424

Asset-backed loans

1,638,995

3,843,990

26,942,261

32,425,246

528,636

32,953,882

Other guaranteed loans

811,185

3,992,200

1,378,860

6,182,245

99,957

6,282,202

Unsecured loans

2,480,837

3,515,890

1,426,789

7,423,516

347,056

7,770,572

Foreign loans

129,608

377,963

1,702,732

2,210,303

8,497

2,218,800

Factoring operations

2,217,684

507,242

154

2,725,080

11,304

2,736,384

Finance leases

561,067

1,451,059

2,143,632

4,155,758

68,663

4,224,421

7,864,132

13,716,372

34,177,068

55,757,572

1,064,113

56,821,685

The analysis of loans and advances to customers, by type of credit and by maturity, as at 31 December 2020, is as

follows:

(Thousands of euros)

2020 (restated)

Outstanding loans

Due within

1 year

1 year to

5 years

Over

5 years

Total

Outstanding

Overdue

loans

Total

Public sector

78,126

46,137

408,317

532,580

532,581

Asset-backed loans

1,568,727

3,714,927

25,007,820

30,291,474

607,836

30,899,310

Other guaranteed loans

925,200

1,974,560

2,628,034

5,527,794

149,256

5,677,050

Unsecured loans

2,174,203

3,258,860

1,884,610

7,317,673

405,931

7,723,604

Foreign loans

588,707

363,724

1,550,924

2,503,355

125,743

2,629,098

Factoring operations

1,991,345

574,372

503

2,566,220

22,587

2,588,807

Finance leases

539,435

1,352,680

2,029,632

3,921,747

86,682

4,008,429

7,865,743

11,285,260

33,509,840

52,660,843

1,398,036

54,058,879

The item total credit portfolio, which includes further than loans and advances to customers, the guarantees granted,

split by stage according with IFRS 9, is analysed as follows:

(Thousands of euros)

2021

2020

(restated)

Total credit

61,242,738

58,561,359

Stage 1

Gross amount

49,420,935

46,907,124

Impairment

(209,484)

(171,091)

49,211,451

46,736,033

Stage 2

Gross amount

8,733,104

8,016,640

Impairment

(285,290)

(240,207)

8,447,814

7,776,433

Stage 3

Gross amount

3,088,699

3,637,595

Impairment

(1,439,493)

(1,704,124)

1,649,206

1,933,471

Adjustment to the gross value (*)

—

(98,458)

59,308,471

56,347,479

(*) Adjustment made in Bank Millennium regarding mortgage loans linked to Swiss francs (transfer from the liability item "Provisions" to

the asset item "Loans and advances to customers”).

2021 REPORT & ACCOUNTS

258 |

The total credit portfolio includes loans and advances to customers in the amount of Euros 56,821,685,000 (31

December 2020: Euros 54,058,879,000) and guarantees granted and commitments to third parties (note 45) in the

amount of Euros 4,421,053,000 (31 December 2020: Euros 4,404,022,000).

The items of Impairment were determined in accordance with the accounting policy described in note 1 C1.5, including

the provision for Guarantees and other commitments to third parties, associated with guarantees granted (note 38), in

the amount of Euros 84,993,000 (31 December 2020: Euros 78,900,000).

The analysis of the exposure covered by collaterals associated with loans and advances to customers' portfolio, by stage

according with IFRS 9, considering the collaterals' fair value, is as follows:

(Thousands of euros)

2021

2020

Stage 1

Securities and other financial assets

1,253,189

1,433,956

Residential real estate

23,489,794

21,495,826

Other real estate

3,182,387

3,374,091

Other guarantees

6,961,806

6,235,972

34,887,176

32,539,845

Stage 2

Securities and other financial assets

268,388

243,411

Residential real estate

2,645,791

2,484,267

Other real estate

1,551,993

1,207,376

Other guarantees

1,715,619

1,464,912

6,181,791

5,399,966

Stage 3

Securities and other financial assets

71,291

117,829

Residential real estate

540,907

667,030

Other real estate

578,807

566,166

Other guarantees

404,485

405,359

1,595,490

1,756,384

42,664,457

39,696,195

The balance Other guarantees include first-demand guarantees issued by the Bank and other entities, with an internal

risk rating of 7 or better; personal guarantees, when the guarantors are classified with internal risk grade 7 or better.

This balance also includes pledges, assets subject to financial leasing operations and personal guarantees, among

others.

Considering the policy of risk management of the Group (note 54), the amounts presented do not include the fair value

of the personal guarantees provided by clients with lower risk rating. When considered, the fair value of the personal

guarantees corresponds to the guaranteed amount.

The Group is applying physical collaterals and financial guarantees as instruments to mitigate the credit risk. The

physical collaterals are mainly mortgages on residential buildings for the mortgage portfolio and other mortgages on

other types of buildings related to other types of loans. To reflect the market value, these collaterals are regularly

reviewed based on independent and certified valuation entities or through the application of revaluation coefficients

that reflect the market trends for each specific type of building and geographical area. The financial guarantees are

reviewed based on the market value of the respective assets, when available, with the subsequent application of

haircuts that reflect the volatility of their prices. Considering the current real estate and financial markets conditions,

the Group continued to negotiate additional physical and financial collaterals with its customers.

2021 REPORT & ACCOUNTS

| 259

The loan to customers' portfolio includes contracts that resulted in a formal restructuring with the customers and the

consequent establishment of a new funding to replace the previous. The restructuring may include in a reinforce of

guarantees, liquidation of part of the credit as well as changes in the payment plan and/or in interest rate. The

analysis of the restructured loans, by sector of activity, is as follows:

(Thousands of euros)

2021

2020

Restructured

loans

Impairment

Net amount

Restructured

loans

Impairment

Net amount

Agriculture and forestry

12,408

(2,838)

9,570

20,927

(4,045)

16,882

Fisheries

3,705

(1,568)

2,137

123

(41)

Mining

10,360

(275)

10,085

2,149

(337)

1,812

Food, beverage and tobacco

26,556

(7,468)

19,088

26,403

(8,238)

18,165

Textiles

14,877

(4,336)

10,541

16,297

(6,333)

9,964

Wood and cork

7,030

(1,034)

5,996

6,732

(1,412)

5,320

Paper, printing and publishing

6,911

(1,825)

5,086

16,006

(12,296)

3,710

Chemicals

27,056

(8,744)

18,312

21,960

(8,843)

13,117

Machinery, equipment and basic

metallurgical

79,015

(16,826)

62,189

60,584

(12,710)

47,874

Electricity and gas

603

(113)

490

396

(31)

365

Water

14,812

(9,673)

5,139

49,711

(13,689)

36,022

Construction

183,645

(74,672)

108,973

237,988

(83,589)

154,399

Retail business

42,916

(13,218)

29,698

46,592

(16,983)

29,609

Wholesale business

86,149

(14,276)

71,873

91,949

(18,459)

73,490

Restaurants and hotels

130,031

(17,508)

112,523

76,538

(13,968)

62,570

Transports

9,945

(2,001)

7,944

13,327

(3,109)

10,218

Post offices

149

(56)

198

(97)

101

Telecommunications

28,566

(5,225)

23,341

15,406

(11,071)

4,335

Services

Financial intermediation

144,402

(76,108)

68,294

156,677

(85,960)

70,717

Real estate activities

96,019

(15,212)

80,807

125,807

(44,921)

80,886

Consulting, scientific and technical

activities

205,449

(33,369)

172,080

264,177

(63,332)

200,845

Administrative and support services

activities

72,439

(45,569)

26,870

86,532

(59,016)

27,516

Public sector

58,940

(307)

58,633

50,120

(1,113)

49,007

Education

20,357

(10,415)

9,942

19,825

(4,775)

15,050

Health and collective service

activities

29,690

(7,853)

21,837

25,388

(4,970)

20,418

Artistic, sports and recreational

activities

166,973

(91,547)

75,426

152,110

(73,126)

78,984

Other services

249,210

(176,099)

73,111

255,108

(176,808)

78,300

Consumer loans

273,902

(93,134)

180,768

274,548

(82,768)

191,780

Mortgage credit

555,922

(55,970)

499,952

518,666

(54,732)

463,934

Other domestic activities

(26)

(1)

Other international activities

5,910

(5,169)

741

32,677

(26,061)

6,616

2,563,995

(792,434)

1,771,561

2,664,944

(892,834)

1,772,110

The variation occurred in "Construction" and "Restaurants and hotels" sectors refers, mainly, to changes in one client's

activity code.

2021 REPORT & ACCOUNTS

260 |

The breakdown of the restructured loans as at 31 December 2021, by restructuring measure, is as follows:

(Thousands of euros)

2021

Number of

operations

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

Extension of the repayment term

39,767

614,627

76,723

691,350

(149,925)

541,425

Introduction of the grace period for

capital and / or interest

6,303

459,222

352,001

811,223

(352,912)

458,311

Interest rate reduction

4,949

248,877

11,085

259,962

(130,692)

129,270

Payment plan change

9,826

287,763

7,813

295,576

(28,135)

267,441

Debt relief

289

1,630

5,692

7,322

(5,055)

2,267

Debt-asset swaps

441

1,270

1,711

(1,318)

393

Other restructured loans

10,263

425,088

71,763

496,851

(124,397)

372,454

71,404

2,037,648

526,347

2,563,995

(792,434)

1,771,561

The breakdown of the restructured loans as at 31 December 2020, by restructuring measure, is as follows:

(Thousands of euros)

2020

Number of

operations

Outstanding

loans

Overdue

loans

Gross

amount

Impairment

Net

amount

Extension of the repayment term

42,480

516,649

84,849

601,498

(132,947)

468,551

Introduction of the grace period for

capital and / or interest

5,896

523,953

361,783

885,736

(432,888)

452,848

Interest rate reduction

5,442

289,493

16,990

306,483

(121,153)

185,330

Payment plan change

7,030

153,126

16,064

169,190

(26,245)

142,945

Debt relief

312

3,016

6,821

9,837

(5,657)

4,180

Debt-asset swaps

26,032

26,242

52,274

(18,963)

33,311

Other restructured loans

14,778

512,373

127,553

639,926

(154,981)

484,945

75,953

2,024,642

640,302

2,664,944

(892,834)

1,772,110

The restructured loans are subject to an impairment analysis resulting from the revaluation of expectation to meet new

cash flows inherent to the new contract terms and considering new collaterals.

The Group has implemented a process for marking operations restructured due to clients' financial difficulties. This

marking is part of the credit analysis process, being in charge of the respective decision-making bodies, according to

the corresponding competencies, established in the regulations in force.

The information on operations restructured due to financial difficulties is available in the Group's information systems,

having a relevant role in the processes of credit analysis, in the marking of customers in default and in the process of

determining impairment. In particular:

- there are several default triggers related to restructuring due to financial difficulties (restructuring with loss of value,

recidivism of restructuring, default on customers with restructured operations);

- in the process of individual impairment analysis, in addition to the existence of operations restructured due to

financial difficulties, is a reason for customer selection, the loss inherent to the change in the conditions resulting from

the restructuring is determined.

2021 REPORT & ACCOUNTS

| 261

The demarcation of an operation can only take place at least 2 years after the date of marking, provided that a set of

conditions exist that allow to conclude by the improvement of the financial condition of the client. In the case of

credits marked as Non-Performing Exposure (NPE), this 2-year period will only start on the date of classification of the

credit as performing.

The definition of Non-Performing Loans for more than 90 days (NPL > 90) incorporates total credit (past due +

outstanding) associated with past due operations for more than 90 days. As at 31 December 2021, the amount

calculated is Euros 1,236,979,000 (31 December 2020: Euros 1,766,328,000).

All customers who check at least one of the following conditions are marked in default and therefore in Non-Performing

Exposure (NPE):

- Material payment delay of more than 90 days in the amounts of principal, interest or unpaid commissions on the due

date that, cumulatively, represent: more than 100 euros (retail) or more than 500 euros (non-retail); and more than 1%

of the total debt (direct liabilities).

- Indications of low probability of payment:

a) Credit restructuring due to financial difficulties with loss of value; b) Delay after restructuring due to financial

difficulties; c) Recurrence of restructuring due to financial difficulties; d) Credit with signs of impairment (or Stage 3 of

IFRS 9); e) Insolvency or equivalent process; f) Litigation; g) Guarantees of operations in default; h) Loss of credit sales;

i) Credit fraud; j) Unpaid credit status; k) Breach of covenants in a credit agreement; l) Contagion of default in an

economic group; m) Cross default in the BCP Group.

As at 31 December 2021, the NPE amounts to Euros 2,752,439,000 (31 December 2020: Euros 3,295,271,000).

The changes occurred in Loans impairment are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

2,036,522

2,417,022

Charge for the year in net income interest (note 2)

25,935

34,335

Transfers resulting from changes in the Group's structure

(375)

(8)

Other transfers

4,778

7,097

Impairment charge for the year (note 10)

861,212

1,102,851

Reversals for the year (note 10)

(487,084)

(576,588)

Loans charged-off

Write-offs

(372,710)

(263,409)

Credit assignments

(227,470)

(635,724)

Exchange rate differences

8,476

(49,054)

Balance at the end of the year

1,849,284

2,036,522

As at 31 December 2020, the balance Transfers included the amount of Euros 14,885,000 related to provisions for

guarantees and other commitments, which were transferred to Loans impairment due to the fact that the guarantees

granted were converted into loans and advances to customers.

This balance also included in 2020, the transfer of Loans impairments to impairment of other assets, in the amount of

Euros 16,858,000 (note 31).

According to note 38, regarding the proceedings related to foreign currency-indexed mortgage loans, Bank Millennium

wrote-off the amount of Euros 636,309,000 from the gross carrying amount of loans portfolio (31 December 2020: Euros

194,012,000), of which Euros 443,296,000 were written-off in 2021.

2021 REPORT & ACCOUNTS

262 |

The analysis of Write-offs, by sector of activity, is as follows:

(Thousands of euros)

2021

2020

(restated)

Agriculture and forestry

1,729

443

Fisheries

—

Mining

111

Food, beverage and tobacco

2,009

9,078

Textiles

1,207

3,877

Wood and cork

294

241

Paper, printing and publishing

1,701

229

Chemicals

1,403

1,295

Machinery, equipment and basic metallurgical

7,404

3,718

Electricity and gas

Water

166

214

Construction

9,697

20,214

Retail business

5,118

6,321

Wholesale business

15,373

8,868

Restaurants and hotels

27,445

16,784

Transports

9,168

4,748

Post offices

131

Telecommunications

321

564

Services

Financial intermediation

36,474

7,125

Real estate activities

41,988

36,580

Consulting, scientific and technical activities

5,782

20,796

Administrative and support services activities

18,147

4,810

Public sector

—

Education

213

122

Health and collective service activities

194

611

Artistic, sports and recreational activities

429

(3,356)

Other services

606

63,213

Consumer loans

54,376

47,297

Mortgage credit

3,583

4,572

Other domestic activities

23,658

200

Other international activities

104,013

4,617

372,710

263,409

According with the accounting policy described in note 1 C1.3, the Group writes off a loan when it does not have

reasonable expectations of recovering a financial asset in its entirety or partially. This registration occurs after all the

recovery actions developed by the Group prove to be fruitless. Loans written-off are recognised in off-balance sheet

accounts.

The analysis of Write-offs, by type of credit, is as follows:

(Thousands of euros)

2021

2020

(restated)

Asset-backed loans

15,793

6,011

Other guaranteed loans

3,946

71,337

Unsecured loans

225,410

151,114

Foreign loans

103,452

—

Factoring operations

3,300

677

Finance leases

20,809

34,270

372,710

263,409

2021 REPORT & ACCOUNTS

| 263

The analysis of recovered loans and interest occurred during 2021 and 2020, by sector of activity, is as follows:

(Thousands of euros)

2021

2020

Agriculture and forestry

159

274

Mining

Food, beverage and tobacco

Textiles

245

Wood and cork

Paper, printing and publishing

—

Chemicals

673

435

Machinery, equipment and basic metallurgical

1,216

Electricity and gas

—

Water

Construction

1,591

2,322

Retail business

1,016

647

Wholesale business

811

529

Restaurants and hotels

121

175

Transports

137

451

Post offices

Telecommunications

Services

Financial intermediation

143

1,096

Real estate activities

146

Consulting, scientific and technical activities

1,372

Administrative and support services activities

931

Education

Health and collective service activities

Artistic, sports and recreational activities

Other services

212

Consumer loans

13,185

14,519

Mortgage credit

832

278

Other domestic activities

1,198

Other international activities

165

22,938

22,680

The analysis of recovered loans and interest occurred during 2021 and 2020, by type of credit, is as follows:

(Thousands of euros)

2021

2020

Asset-backed loans

818

322

Other guaranteed loans

1,547

4,020

Unsecured loans

18,089

16,781

Foreign loans

1,210

919

Factoring operations

Finance leases

1,252

594

22,938

22,680

2021 REPORT & ACCOUNTS

264 |

The balance Loans and advances to customers includes the effect of traditional securitization transactions made

through Special Purpose Entities (SPEs) consolidated following the application of IFRS 10, in accordance with accounting

policy 1 B and synthetic securitization. The characterization of these operations is described in note 1 D.

Traditional securitizations

Securitization transactions engaged by the Group and still ongoing, refer to mortgage loans portfolios and are set

through securitization funds and special purpose entities (SPEs). As referred in accounting policy 1 B, when the

substance of the relationships with the referred SPEs indicates that the Group holds control of its activities, those are

consolidated by the full method.

Magellan Mortgages No. 3

On 24 June 2005, the Bank transferred, through securitization funds, an owned mortgage loans portfolio to the SPE

“Magellan Mortgages No. 3 PLC”. Considering that, by having acquired part of the subordinated tranche of the bonds

issued by that SPE, the Bank holds the control of the referred assets, the SPE is consolidated in the Group’s Financial

Statements, as established in the accounting policy 1.B. As at 31 December 2021, the SPE's credit portfolio associated

with this operation amounts to Euros 215,259,000 (31 December 2020: Euros 242,670,000) and bonds issued with

different subordination levels amount to Euros 161,267,000 (this amount excludes bonds hold by the Group in the

amount of Euros 72,580,000) and the most subordinated tranche amounts to Euros 44,000 (this amount excludes bonds

already acquired by the Group in the amount Euros 206,000).

Synthetic securitizations

The Group has two operations in progress which form structures of synthetic securitization.

Caravela SME No. 3

Caravela SME No.3, supports an operation started on 28 June 2013, based on a medium and long term loans portfolio of

current accounts and authorized overdrafts granted by Bank, mainly to small and medium companies. The legal

maturity date of the operation is 25 March of 2036 and the operation amounts to Euros 395,657,000 as at 31 December

2021 (31 December 2020: Euros 547,549,000). The fair value of the relative Credit Default Swap (CDS) is recorded as a

positive amount of Euros 189,182,000 and the registered cost in 2021 amounts to Euros 2,922,000.

Caravela SME No. 4

Caravela SME No.4 is a similar operation, initiated on 5 June 2014, which portfolio contains car, real estate and

equipment leasing granted between the Bank and a group of clients that belong to the same segment (small and

medium companies). The legal maturity date is 21 September of 2043 and, as at 31 December 2021, the operation

amounts to Euros 627,053,000 (31 December 2020: Euros 731,733,000). The fair value of the relative CDS is recorded as

a positive amount of Euros 63,246,000 and their registered cost in 2021 amounts to Euros 964,000.

In both operations, the Bank hired a CDS with a Special Purpose Vehicle (SPV), buying by this way the protection for

part of the credit risk inherent to the referenced portfolio. Both cases, the synthetic securitizations, the same CDS, the

risk of the respective portfolios were divided in 3 classes: senior, mezzanine and equity. The total of mezzanine and

part of the equity (20%) were placed in the market through an SPE, and the subscription by investors, the Credit Linked

Notes (CLN). The Bank retained the senior risk and part of the equity remaining (80%). In both structures, the

correspondent product of the CLN issue was invested by the referred SPE the constitution of a deposit that

collateralizes, in full, their responsibilities towards its creditors under the operation, including the Bank under the CDS

context.

These operations involve the Bank's to reduce the risk-weighted assets associated with the credit portfolios supporting

the operations, but it did not transfer to third parties most of the rights and obligations arising from the credits

included in them, thus not meeting the derecognition criteria in the accounting policy presented in note 1.C1.3.

2021 REPORT & ACCOUNTS

| 265

22.Debt securities

The balance Debt securities is analysed as follows:

(Thousands of euros)

2021

2020

Debt securities held associated with credit operations

Portuguese issuers

Bonds

197,723

214,421

Commercial paper

1,074,715

1,334,236

Foreign issuers

Bonds

—

30,398

Commercial paper

42,920

28,160

1,315,358

1,607,215

Overdue securities - over 90 days

1,761

1,315,398

1,608,976

Impairment

(7,059)

(11,021)

1,308,339

1,597,955

Debt securities held not associated with credit operations

Bonds issued by public entities

Portuguese issuers (*)

3,781,480

3,758,016

Foreign issuers

2,438,017

378,285

Bonds issued by other entities

Portuguese issuers

59,816

178,405

Foreign issuers

33,706

100,833

Treasury bills (Public Issuers and Central Banks)

Foreign issuers

592,581

226,383

6,905,600

4,641,922

Impairment

(8,743)

(5,332)

6,896,857

4,636,590

8,205,196

6,234,545

(*) Includes the amount of Euros 17,349,000 (31 December 2020: Euros 28,794,000) related to adjustments resulting from the

application of fair value hedge accounting.

In 2020, under the terms of IFRS 9, the Bank took the decision to establish, the balance Debt securities held not

associated with credit operations - Bonds issued by Portuguese public issuers, a portfolio of securities whose business

model seeks to receive the respective income until maturity, that is, of a portfolio Held to Collect, whose value as at

31 December 2021 amounts to Euros 3,511,350,000 (31 December 2020: Euros 3,544,918,000).

The balance Debt securities held not associated with credit operations - Bonds issued by other Portuguese entities

includes the amount of Euros 39,519,000 (31 December 2020: Euros 139,085,000) related to public sector companies.

2021 REPORT & ACCOUNTS

266 |

The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2021 is as follows:

(Thousands of euros)

2021

Up to

3 months

3 months to

1 year

1 year to

5 years

Over 5

years

Overdue

Total

Debt securities held associated

with credit operations

Portuguese issuers

Bonds

—

5,542

192,181

—

197,723

Commercial paper

794,596

280,119

—

1,074,755

Foreign issuers

Commercial paper

6,426

36,494

—

42,920

801,022

316,613

5,542

192,181

1,315,398

Debt securities held not associated

with credit operations

Public entities

Portuguese issuers

—

99,898

883,952

2,797,630

—

3,781,480

Foreign issuers

4,659

40,048

288,741

2,104,569

—

2,438,017

Other entities

Portuguese issuers

—

13,691

46,125

—

59,816

Foreign issuers

—

33,706

—

33,706

Treasury bills (Public Issuers and Central

Banks)

Foreign issuers

143,081

449,500

—

592,581

147,740

589,446

1,186,384

4,982,030

—

6,905,600

948,762

906,059

1,191,926

5,174,211

8,220,998

The analysis of the balance Debt securities before impairment, by maturity, as at 31 December 2020 is as follows:

(Thousands of euros)

2020

Up to

3 months

3 months to

1 year

1 year to

5 years

Over 5

years

Overdue

Total

Debt securities held associated

with credit operations

Portuguese issuers

Bonds

—

7,069

207,352

—

214,421

Commercial paper

970,522

362,714

1,000

—

1,761

1,335,997

Foreign issuers

Bonds

—

10,222

—

20,176

—

30,398

Commercial paper

19,532

8,628

—

28,160

990,054

381,564

8,069

227,528

1,761

1,608,976

Debt securities held not associated

with credit operations

Public entities

Portuguese issuers

—

873,998

2,884,018

—

3,758,016

Foreign issuers

6,950

52,927

231,061

87,347

—

378,285

Other entities

Portuguese issuers

25,628

—

113,351

39,426

—

178,405

Foreign issuers

—

59,595

41,238

—

100,833

Treasury bills (Public Issuers and Central

Banks)

Foreign issuers

136,266

90,117

—

226,383

168,844

143,044

1,278,005

3,052,029

—

4,641,922

1,158,898

524,608

1,286,074

3,279,557

1,761

6,250,898

2021 REPORT & ACCOUNTS

| 267

The analysis of debt securities portfolio, net of impairment, by sector of activity, is analysed as follows:

(Thousands of euros)

2021

2020

Debt securities held associated with credit operations

Agriculture and forestry

4,733

4,877

Mining

13,736

27,646

Food, beverage and tobacco

63,815

85,174

Textiles

57,140

61,725

Wood and cork

12,103

6,438

Paper, printing and publishing

7,184

9,295

Chemicals

77,930

105,146

Machinery, equipment and basic metallurgical

48,453

54,108

Electricity and gas

172,325

198,291

Water

8,891

12,417

Construction

13,876

16,650

Retail business

13,601

48,377

Wholesale business

62,450

70,625

Restaurants and hotels

4,119

9,394

Transports

37,731

62,811

Telecommunications

6,559

5,572

Services

Financial intermediation

54,300

88,292

Real estate activities

40,150

28,139

Consulting, scientific and technical activities

541,187

616,512

Administrative and support services activities

10,706

10,754

Artistic, sports and recreational activities

9,868

12,455

Other services

4,562

5,055

Other international activities

42,920

58,202

1,308,339

1,597,955

Debt securities held not associated with credit operations

Chemicals

—

25,578

Electricity and Gas

6,573

3,589

Water

39,478

39,394

Retailing

—

5,566

Transports (*)

—

99,504

Services

Financial intermediation

626,287

317,847

Consulting, scientific and technical activities

13,511

13,483

685,849

504,961

Government and Public securities

6,211,008

4,131,629

6,896,857

4,636,590

8,205,196

6,234,545

(*) Corresponds to securities from public sector companies

2021 REPORT & ACCOUNTS

268 |

The changes occurred in impairment of debt securities are analysed as follows:

(Thousands of euros)

2021

2020

Debt securities held associated with credit operations

Balance on 1 January

11,021

12,431

Charge for the year in net income interest (note 2)

Transfers

—

(7,756)

Charge for the year (note 10)

244

6,292

Reversals for the year (note 10)

(2,533)

—

Loans charged-off

(1,721)

—

Exchange rate differences

—

Balance at the end of the year

7,059

11,021

Debt securities held not associated with credit operations

Balance on 1 January

5,332

2,100

Transfers resulting from changes in the Group's structure

(Seguradora Internacional de Moçambique, S.A.)

(15)

Other transfers

(13)

(57)

Charge for the year (note 10)

4,874

4,075

Reversals for the year (note 10)

(1,826)

(480)

Exchange rate differences

391

(320)

Balance at the end of the year

8,743

5,332

23.Financial assets at fair value through profit or loss and financial assets at fair

value through other comprehensive income

The balances Financial assets at fair value through profit or loss and Financial assets at fair value through other

comprehensive income are analysed as follows:

(Thousands of euros)

2021

2020

Financial assets at fair value through profit or loss

Financial assets held for trading

Debt instruments

452,105

486,276

Equity instruments

48,879

1,318

Trading derivatives

430,501

543,607

931,485

1,031,201

Financial assets not held for trading mandatorily at fair value through profit or loss

Loans and advances to customers at fair value

79,189

354,309

Debt instruments

881,556

917,132

Equity instruments

30,193

44,026

990,938

1,315,467

Financial assets at fair value through other comprehensive income

Debt instruments

12,856,165

12,107,431

Equity instruments

34,823

32,961

12,890,988

12,140,392

14,813,411

14,487,060

2021 REPORT & ACCOUNTS

| 269

The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair

value) and Financial assets at fair value through other comprehensive income, net of impairment, by type of asset, as

at 31 December 2021, is analysed as follows:

(Thousands of euros)

2021

At fair value through profit or loss

Held for

trading

Not held for

trading

mandatorily at

fair value

through profit

or loss

At fair value

through other

comprehensive

income

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

10,317

—

3,798,776

3,809,093

Foreign issuers

18,857

—

6,736,241

6,755,098

Bonds issued by other entities

Portuguese issuers

1,716

16,734

742,554

761,004

Foreign issuers

1,073

—

1,011,740

1,012,813

Treasury bills (Public Issuers and Central Banks)

Portuguese issuers

420,142

—

6,027

426,169

Foreign issuers

—

560,827

Shares of foreign companies (a)

—

35,185

—

35,185

Investment fund units (b)

—

829,637

—

829,637

452,105

881,556

12,856,165

14,189,826

Equity instruments

Portuguese companies

—

17,275

Foreign companies

30,193

17,548

47,773

Other securities

48,847

—

48,847

48,879

30,193

34,823

113,895

Trading derivatives

430,501

—

430,501

931,485

911,749

12,890,988

14,734,222

Level 1

499,147

—

12,463,415

12,962,562

Level 2

169,181

—

303,629

472,810

Level 3

263,157

911,749

123,944

1,298,850

(a)Under IFRS 9 these shares were considered as debt instruments because they do not fall within the definition of SPPI.

(b)Under IFRS 9 these participation units were considered as debt instruments because they do not fall within the definition of

equity instruments.

The portfolios are recorded at fair value in accordance with the accounting policy described in note 1 C. As referred in

IFRS 13, financial instruments are measured according to the levels of valuation described in note 49.

The balances Financial assets held for trading include bonds issued with different levels of subordination associated

with the traditional securitization transactions Magellan Mortgages No. 4, referred in note 1 D, in the amount of Euros

87,000 (31 December 2020: Euros 96,000).

2021 REPORT & ACCOUNTS

270 |

The balance Financial assets at fair value through other comprehensive income - Bonds issued by other entities -

Portuguese issuers includes the amount of Euros 165,967,000 (31 December 2020: Euros 318,856,000) related to public

sector companies.

The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair

value) and Financial assets at fair value through other comprehensive income, net of impairment, by type of asset, as

at 31 December 2020, is analysed as follows:

(Thousands of euros)

2020

At fair value through profit or loss

Held for

trading

Not held for

trading

mandatorily at

fair value through

profit or loss

At fair value

through other

comprehensive

income

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

101

—

3,602,910

3,603,011

Foreign issuers

59,078

—

6,893,507

6,952,585

Bonds issued by other entities

Portuguese issuers

6,539

16,778

900,019

923,336

Foreign issuers

42,609

—

654,981

697,590

Treasury bills (Public Issuers and Central Banks)

Portuguese issuers

377,949

—

6,014

383,963

Foreign issuers

—

50,000

Shares of foreign companies (a)

—

17,952

—

17,952

Investment fund units (b)

—

882,402

—

882,402

486,276

917,132

12,107,431

13,510,839

Equity instruments

Portuguese companies

438

—

16,522

16,960

Foreign companies

44,026

16,437

60,517

Investment fund units

—

Other securities

826

—

826

1,318

44,026

32,961

78,305

Trading derivatives

543,607

—

543,607

1,031,201

961,158

12,140,392

14,132,751

Level 1

481,107

—

11,764,197

12,245,304

Level 2

258,821

—

215,818

474,639

Level 3

291,273

961,158

160,377

1,412,808

(a)Under IFRS 9, these shares were considered as debt instruments because they do not fall within the definition of SPPI.

(b)Under IFRS 9, these participation units were considered as debt instruments because they do not fall within the definition of

equity instruments.

2021 REPORT & ACCOUNTS

| 271

On balance sheet, the changes occurred during the 2021 and 2020, for impairment of financial assets at fair value

through other comprehensive, are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

1,097

1,177

Transfers to fair value changes (note 43)

(4,626)

(10,360)

Impairment through profit and loss (note 11)

4,784

11,485

Reversals through profit and loss (note 11)

(158)

(1,125)

Exchange rate differences

(5)

(80)

Balance at the end of the year

1,092

1,097

As at 31 December 2021, the accumulated impairment related to credit risk associated with the financial assets at fair

value through other comprehensive income amounts to Euros 18,496,000 and is recognised against Fair value reserves

(31 December 2020: Euros 13,823,000).

The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2021, is analysed

as follows:

(Thousands of euros)

2021

Amortised cost

(a)

Fair value hedge

adjustments

(note 43)

Fair value

adjustments

(note 43)

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

3,780,832

(23,435)

41,379

3,798,776

Foreign issuers

6,811,530

(21,427)

(53,862)

6,736,241

Bonds issued by other entities

Portuguese issuers

727,477

4,799

10,278

742,554

Foreign issuers

1,001,729

(1,051)

11,062

1,011,740

Treasury bills (Public Issuers and Central Banks)

Portuguese issuers

6,026

—

6,027

Foreign issuers

560,989

—

(162)

560,827

12,888,583

(41,114)

8,696

12,856,165

Equity instruments

Portuguese companies

37,069

—

(19,794)

17,275

Foreign companies

27,996

—

(10,448)

17,548

65,065

—

(30,242)

34,823

12,953,648

(41,114)

(21,546)

12,890,988

(a)Include interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other

comprehensive income, as provided by IFRS 9, and according to the requirements defined in the accounting policy 1 C1.5.1.2.

2021 REPORT & ACCOUNTS

272 |

The portfolio of financial assets at fair value through other comprehensive income, as at 31 December 2020, is analysed

as follows:

(Thousands of euros)

2020

Amortised cost

(a)

Fair value hedge

adjustments

(note 43)

Fair value

adjustments

(note 43)

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

3,498,321

13,982

90,607

3,602,910

Foreign issuers

6,809,372

1,558

82,577

6,893,507

Bonds issued by other entities

Portuguese issuers

860,370

20,130

19,519

900,019

Foreign issuers

626,990

15,179

12,812

654,981

Treasury bills (Public Issuers and Central Banks)

Portuguese issuers

6,010

—

6,014

Foreign issuers

49,927

—

50,000

11,850,990

50,849

205,592

12,107,431

Equity instruments

Portuguese companies

43,407

—

(26,885)

16,522

Foreign companies

27,919

—

(11,482)

16,437

Investment fund units

—

71,327

—

(38,366)

32,961

11,922,317

50,849

167,226

12,140,392

(a)Include interest accrued and accumulated impairment for debt securities classified as financial assets at fair value through other

comprehensive income, as provided by IFRS 9, and according to the requirements defined in the accounting policy 1 C1.5.1.2.

The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair

value) and Financial assets at fair value through other comprehensive, net of impairment, as at 31 December 2021, by

valuation levels, is analysed as follows:

(Thousands of euros)

2021

Level 1

Level 2

Level 3

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

3,690,781

118,312

—

3,809,093

Foreign issuers

6,745,963

—

9,135

6,755,098

Bonds issued by other entities

Portuguese issuers

609,859

58,480

92,665

761,004

Foreign issuers

936,559

76,254

—

1,012,813

Treasury bills and other Government bonds

Portuguese issuers

426,169

—

426,169

Foreign issuers

502,524

50,670

7,633

560,827

Shares of foreign companies

—

35,185

Investment fund units

—

829,637

12,911,855

303,716

974,255

14,189,826

Equity instruments

Portuguese companies

1,964

—

15,311

17,275

Foreign companies

—

47,741

47,773

Other securities

48,711

—

136

48,847

50,707

—

63,188

113,895

Trading derivatives

—

169,094

261,407

430,501

12,962,562

472,810

1,298,850

14,734,222

2021 REPORT & ACCOUNTS

| 273

The portfolio of Financial assets at fair value through profit or loss (excluding Loans and advances to customers at fair

value) and Financial assets at fair value through other comprehensive, net of impairment, as at 31 December 2020, by

valuation levels, is analysed as follows:

(Thousands of euros)

2020

Level 1

Level 2

Level 3

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

3,519,244

83,767

—

3,603,011

Foreign issuers

6,944,659

—

7,926

6,952,585

Bonds issued by other entities

Portuguese issuers

738,576

82,151

102,609

923,336

Foreign issuers

654,754

—

42,836

697,590

Treasury bills and other Government bonds

Portuguese issuers

383,963

—

383,963

Foreign issuers

—

50,000

—

50,000

Shares of foreign companies

—

17,952

Investment fund units

—

882,402

12,241,196

215,918

1,053,725

13,510,839

Equity instruments

Portuguese companies

3,476

—

13,484

16,960

Foreign companies

—

60,463

60,517

Investment fund units

—

Other securities

357

—

469

826

3,887

—

74,418

78,305

Trading derivatives

221

258,721

284,665

543,607

12,245,304

474,639

1,412,808

14,132,751

As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 49.

The balance Debt instruments - Investment fund units classified as level 3 includes units in restructuring funds (note 47)

in the amount of Euros 786,801,000 (31 December 2020: Euros 827,976,000) which book value resulted from the last

disclosure of the Net Asset Value (NAV) determined by the Management Company, which corresponds to the NAV with

reference to that date, after considering the effects of the last audited accounts for the respective funds. These funds

have a diverse set of assets and liabilities, valued in their respective accounts at fair value through internal

methodologies used by the management company.

In 2021, the instruments classified as level 3 have associated net losses not performed in the amount of Euros

16,209,000 (2020: losses Euros 16,895,000) recorded in Other comprehensive income. The amount of impairment

created for these securities amounts to Euros 1,092,000 (2020: Euros 1,097,000).

2021 REPORT & ACCOUNTS

274 |

The analysis of Financial assets at fair value through profit or loss (excluding loans and advances at fair value and

trading derivatives) and Financial assets at fair value through other comprehensive, by residual maturity, as at 31

December 2021, is as follows:

(Thousands of euros)

2021

Up to 3

months

3 months to 1

year

1 year to 5

years

Over

5 years

Undetermined

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

—

32,301

1,370,717

2,406,075

—

3,809,093

Foreign issuers

—

1,067,698

4,285,163

1,402,237

—

6,755,098

Bonds issued by other entities

Portuguese issuers

40,017

203

588,298

132,486

—

761,004

Foreign issuers

—

389,622

623,191

—

1,012,813

Treasury bills and other

Government bonds

Portuguese issuers

270,511

155,658

—

426,169

Foreign issuers

20,411

540,416

—

560,827

Shares of foreign companies

—

35,185

Investment fund units

—

284,865

539,067

5,705

829,637

330,939

1,796,276

6,918,665

5,103,056

40,890

14,189,826

Equity instruments

Companies' shares

Portuguese companies

—

17,275

Foreign companies

—

47,773

Other securities

—

48,847

—

113,895

330,939

1,796,276

6,918,665

5,103,056

154,785

14,303,721

2021 REPORT & ACCOUNTS

| 275

The analysis of Financial assets at fair value through profit or loss (excluding loans and advances at fair value and

trading derivatives) and Financial assets at fair value through other comprehensive, by residual maturity, as at 31

December 2020, is as follows:

(Thousands of euros)

2020

Up to 3

months

3 months to 1

year

1 year to 5

years

Over

5 years

Undetermined

Total

Debt instruments

Bonds issued by public entities

Portuguese issuers

—

19,395

497,250

3,086,366

—

3,603,011

Foreign issuers

4,258

253,699

5,161,999

1,532,629

—

6,952,585

Bonds issued by other entities

Portuguese issuers

54,305

35,736

416,845

416,450

—

923,336

Foreign issuers

44,345

59,434

178,215

415,596

—

697,590

Treasury bills and other

Government bonds

Portuguese issuers

166,330

217,633

—

383,963

Foreign issuers

15,775

34,225

—

50,000

Shares of foreign companies

—

17,952

Investment fund units

1,160

—

127,236

747,692

6,314

882,402

286,173

620,122

6,381,545

6,198,733

24,266

13,510,839

Equity instruments

Companies' shares

Portuguese companies

—

16,960

Foreign companies

—

60,517

Investment fund units

—

Other securities

—

826

—

78,305

286,173

620,122

6,381,545

6,198,733

102,571

13,589,144

The balance Financial assets not held for trading mandatorily at fair value through profit or loss - Loans to customers at

fair value is analysed as follows:

(Thousands of euros)

2021

2020

Public sector

—

Unsecured loans

74,248

347,188

74,248

347,213

Overdue loans - less than 90 days

1,626

2,133

Overdue loans - Over 90 days

3,315

4,963

79,189

354,309

The balance Loans to customers at fair value correspond essentially to consumer loans. This balance is analysed, by

remaining period, as follows:

(Thousands of euros)

2021

2020

Up to 3 months

6,083

45,479

3 months to 1 year

30,028

152,197

1 to 5 years

38,137

149,533

Over 5 years

—

Undetermined

4,941

7,096

79,189

354,309

2021 REPORT & ACCOUNTS

276 |

The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair

value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of

activity, as at 31 December 2021, is as follows:

(Thousands of euros)

2021

Bonds and

Treasury bills

Other Financial

Assets

Total

Fisheries

1,513

—

1,513

Mining

—

Paper, printing and publishing

47,865

—

47,866

Chemicals

—

Machinery, equipment and basic metallurgical

—

Electricity and gas

43,805

—

43,805

Water

10,241

—

10,241

Construction

21,155

20,423

41,580

Retail business

42,322

—

42,325

Wholesale business

39,161

8,087

—

47,248

Restaurants and hotels

—

1,330

—

1,330

Transports

77,463

—

77,463

Telecommunications

42,854

4,285

—

47,139

Services

Financial intermediation (*)

1,016,537

72,308

839,714

1,928,559

Real estate activities

—

13,588

Consulting, scientific and technical activities

455,409

103

—

455,512

Administrative and support services activities

12,220

7,981

—

20,201

Public sector

—

136

Artistic, sports and recreational activities

16,683

—

16,683

Other services

4,893

6,118

4,623

15,634

1,832,121

100,233

878,484

2,810,838

Government and Public securities

11,492,883

—

11,492,883

13,325,004

100,233

878,484

14,303,721

(*) The balance Other financial assets includes restructuring funds in the amount of Euros 786,801,000, which are classified in the

sector of activity Services - Financial intermediation but the core segment is disclosed in note 47.

2021 REPORT & ACCOUNTS

| 277

The analysis of Financial assets at fair value through profit or loss (excluding loans and advances to customers at fair

value and trading derivatives) and Financial assets at fair value through other comprehensive income, by sector of

activity, as at 31 December 2020, is as follows:

(Thousands of euros)

2020

Bonds and

Treasury bills

Other Financial

Assets

Total

Fisheries

1,639

—

1,639

Mining

—

Paper, printing and publishing

54,207

—

54,209

Chemicals

—

Machinery, equipment and basic metallurgical

4,062

448

—

4,510

Electricity and gas

16,239

—

16,239

Water

7,136

—

7,136

Construction

17,730

18,865

36,600

Retail business

—

Wholesale business

53,355

—

53,355

Restaurants and hotels

—

871

—

871

Transports

222,982

—

222,982

Telecommunications

—

2,771

—

2,771

Services

Financial intermediation (*)

777,184

75,167

842,279

1,694,630

Real estate activities

—

15,528

Consulting, scientific and technical activities

446,502

138

—

446,640

Administrative and support services activities

10,370

9,404

—

19,774

Public sector

42,836

—

469

43,305

Artistic, sports and recreational activities

16,683

—

16,683

Other services

6,607

6,089

12,697

1,670,926

95,429

883,230

2,649,585

Government and Public securities

10,939,559

—

10,939,559

12,610,485

95,429

883,230

13,589,144

(*) The balance Other financial assets includes restructuring funds in the amount of Euros 827,976,000, which are classified in the

sector of activity Services - Financial intermediation but the core segment is disclosed in note 47.

2021 REPORT & ACCOUNTS

278 |

The analysis of trading derivatives, by maturity, as at 31 December 2021, is as follows:

(Thousands of euros)

2021

Notional (remaining term)

Fair value

Up to

3 months

3 months to

1 year

Over 1

year

Total

Assets

Liabilities

(note 36)

Interest rate derivatives:

OTC Market:

Forward rate agreement

—

87,262

—

87,262

—

Interest rate swaps

139,913

144,247

4,304,339

4,588,499

153,276

195,144

Interest rate options (purchase)

—

115,915

207,387

323,302

1,334

—

Interest rate options (sale)

—

32,498

207,387

239,885

—

1,345

139,913

379,922

4,719,113

5,238,948

154,610

196,489

Stock Exchange transactions:

Interest rate futures

—

51,800

—

Currency derivatives:

OTC Market:

Forward exchange contract

247,215

207,726

24,403

479,344

4,707

2,186

Currency swaps

2,264,298

176,260

30,391

2,470,949

10,197

20,159

2,511,513

383,986

54,794

2,950,293

14,904

22,345

Shares/indexes derivatives:

OTC Market:

Shares/indexes swaps

16,670

19,560

606,000

642,230

2,191

2,284

Shares/indexes options (sale)

168,901

—

19,902

188,803

—

185,571

19,560

625,902

831,033

2,191

2,284

Stock exchange transactions:

Shares futures

—

890,922

Shares/indexes options (purchase)

15,831

32,697

124,239

172,767

6,328

—

Shares/indexes options (sale)

619

1,192

2,037

3,848

—

133

16,450

33,889

1,017,198

1,067,537

6,328

133

Commodity derivatives:

Stock Exchange transactions:

Commodities futures

—

Credit derivatives:

OTC Market:

Credit default swaps (CDS)

—

268,745

252,468

—

Other credit derivatives (sale)

—

85,164

—

353,909

252,468

—

Total derivatives traded in:

OTC Market

2,836,997

783,468

5,753,718

9,374,183

424,173

221,118

Stock Exchange

16,450

33,889

1,068,999

1,119,338

6,328

133

Embedded derivatives

—

6,365

2,853,447

817,357

6,822,717

10,493,521

430,501

227,616

2021 REPORT & ACCOUNTS

| 279

The analysis of trading derivatives, by maturity, as at 31 December 2020, is as follows:

(Thousands of euros)

2020

Notional (remaining term)

Fair value

Up to

3 months

3 months to

1 year

Over 1

year

Total

Assets

Liabilities

(note 36)

Interest rate derivatives:

OTC Market:

Forward rate agreement

—

175,427

—

175,427

—

Interest rate swaps

480,392

1,272,413

4,862,575

6,615,380

225,530

235,325

Interest rate options (purchase)

2,959

92,213

201,003

296,175

—

Interest rate options (sale)

—

8,796

200,939

209,735

—

483,351

1,548,849

5,264,517

7,296,717

225,587

235,383

Stock Exchange transactions:

Interest rate futures

6,375

—

1,360,300

1,366,675

—

Currency derivatives:

OTC Market:

Forward exchange contract

273,786

312,557

48,039

634,382

10,202

6,078

Currency swaps

2,110,964

405,011

23,614

2,539,589

22,341

18,096

2,384,750

717,568

71,653

3,173,971

32,543

24,174

Shares/indexes derivatives:

OTC Market:

Shares/indexes swaps

115,135

204,134

680,815

1,000,084

2,691

562

Shares/indexes options (sale)

299,859

—

18,401

318,260

—

Others shares/indexes options (purchase)

16,864

—

16,864

16,589

—

Others shares/indexes options (sale)

16,864

—

16,864

—

448,722

204,134

699,216

1,352,072

19,280

562

Stock exchange transactions:

Shares futures

—

667,738

—

Shares/indexes options (purchase)

90,378

157,188

107,114

354,680

4,467

—

Shares/indexes options (sale)

11,096

17,040

8,541

36,677

—

101

101,474

174,228

783,393

1,059,095

4,467

101

Commodity derivatives:

Stock Exchange transactions:

Commodities futures

—

Credit derivatives:

OTC Market:

Credit default swaps (CDS)

—

275,720

261,730

—

Other credit derivatives (sale)

81,523

—

81,523

—

81,523

—

275,720

357,243

261,730

—

Total derivatives traded in:

OTC Market

3,398,346

2,470,551

6,311,106

12,180,003

539,140

260,119

Stock Exchange

107,849

174,228

2,143,694

2,425,771

4,467

101

Embedded derivatives

—

4,426

3,506,195

2,644,779

8,454,800

14,605,774

543,607

264,646

2021 REPORT & ACCOUNTS

280 |

24.Hedging derivatives

This balance is analysed, by hedging instruments, as follows:

(Thousands of euros)

2021

2020

Assets

Liabilities

Assets

Liabilities

Swaps

109,059

377,206

91,249

285,766

Hedging derivatives are measured in accordance with internal valuation techniques considering observable market

inputs and, when not available, on information prepared by the Group by extrapolation of market data. In accordance

with the hierarchy of the valuation sources, as referred in IFRS 13, these derivatives are classified in level 2. The Group

resources to derivatives to hedge interest and exchange rate exposure risks. The accounting method depends on the

nature of the hedged risk, namely if the Group is exposed to fair value changes, variability in cash flows or highly

probable forecast transactions.

As allowed by IFRS 9, the Group opted to continue to apply the hedge accounting requirements in accordance with IAS

39, using mainly interest rate and exchange rate derivatives. The fair value hedge model is adopted for debt securities,

loans granted at fixed rate and money market loans and deposits, securities and combined hedge of variable rate

financial assets and fixed rate financial liabilities. The cash flows hedge model is adopted for future transactions in

foreign currency to cover dynamic changes in cash flows from loans granted and variable rate deposits in foreign

currency and foreign currency mortgage loans.

During 2021, the relationships that follow the fair value hedge model recorded ineffectiveness of a negative amount of

Euros 12,521,000 (31 December 2020: positive amount of Euros 1,732,000) and the hedging relationships that follow the

cash flows model recorded ineffectiveness of a negative amount of Euros 806,000 (31 December 2020: negative amount

of Euros 2,042,000).

During 2021, there were made reclassifications from results to fair value reserves, related to cash flow hedge

relationships, in a positive amount of Euros 68,038,000 (31 December 2020: positive amount of Euros 72,606,000). The

accumulated adjustment on financial risks covered performed on the assets and liabilities which includes hedged items

is detailed in note 54.

The analysis of hedging derivatives portfolio, by maturity, as at 31 December 2021, is as follows:

(Thousands of euros)

2021

Notional (remaining period)

Fair value

Up to

3 months

3 months to

1 year

Over 1 year

Total

Assets

Liabilities

Fair value hedging derivatives related to

interest rate risk changes

OTC Market

Interest rate swaps

342,503

1,076,631

14,045,852

15,464,986

74,261

28,509

Fair value hedging derivatives related to

currency risk changes

OTC Market

Currency and interest rate swap (CIRS)

171,466

175,863

—

347,329

12,043

121

Cash flow hedging derivatives related to

interest rate risk changes

OTC Market

Interest rate swaps

—

174,524

15,607,245

15,781,769

19,617

283,335

Cash flow hedging derivatives related to

currency risk changes

OTC Market

Currency and interest rate swap (CIRS)

210,017

160,365

1,321,143

1,691,525

3,138

65,008

Hedging derivatives related to net

investment in foreign entities

OTC Market

Currency and interest rate swap

153,427

—

153,427

—

233

Total derivatives traded by

OTC Market

877,413

1,587,383

30,974,240

33,439,036

109,059

377,206

2021 REPORT & ACCOUNTS

| 281

The analysis of hedging derivatives portfolio, by maturity, as at 31 December 2020, is as follows:

(Thousands of euros)

2020

Notional (remaining period)

Fair value

Up to

3 months

3 months to

1 year

Over 1 year

Total

Assets

Liabilities

Fair value hedging derivatives related to

interest rate risk changes

OTC Market

Interest rate swaps

196,734

608,023

5,598,796

6,403,553

5,396

97,342

Stock Exchange transactions

Interest rate futures

—

197,400

—

Fair value hedging derivatives related to

currency risk changes

OTC Market

Currency and interest rate swap (CIRS)

162,661

273,418

—

436,079

26,365

Cash flow hedging derivatives related to

interest rate risk changes

OTC Market

Interest rate swaps

—

109,642

11,667,681

11,777,323

69,275

10,020

Cash flow hedging derivatives related to

currency risk changes

OTC Market

Currency swaps

274,584

—

274,584

—

6,385

Currency and interest rate swap (CIRS)

442,564

610,622

2,225,527

3,278,713

4,779

143,465

717,148

610,622

2,225,527

3,553,297

4,779

149,850

Hedging derivatives related to net

investment in foreign entities

OTC Market

Currency and interest rate swap

574,266

—

574,266

11,765

2,189

Total derivatives traded by

OTC Market

1,650,809

1,601,705

19,492,004

22,744,518

91,249

285,766

Stock Exchange transactions

—

197,400

—

25.Investments in associated companies

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Portuguese credit institutions

40,581

40,114

Foreign credit institutions

165,393

139,095

Other Portuguese companies

308,937

287,285

Other foreign companies

25,695

21,024

540,606

487,518

Impairment

(78,268)

(52,559)

462,338

434,959

2021 REPORT & ACCOUNTS

282 |

The balance Investments in associated companies, as at 31 December 2021, is analysed as follows:

(Thousands of euros)

2021

Ownership on

equity

Goodwill

Impairment of

investments in

associated companies

Total

Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.

261,446

—

261,446

Banco Millennium Atlântico, S.A.

65,716

54,744

(60,257)

60,203

Banque BCP, S.A.S.

44,933

—

44,933

SIBS, S.G.P.S, S.A.

47,142

—

47,142

Seguradora Internacional de Moçambique, S.A.

7,137

547

—

7,684

Unicre - Instituição Financeira de Crédito, S.A.

33,146

7,435

—

40,581

Webspectator Corporation

—

18,011

(18,011)

—

Others

349

—

349

459,869

80,737

(78,268)

462,338

These investments correspond to unquoted companies. According to the accounting policy described in note 1 B, these

investments are measured at the equity method.

During 2021, the Group sold its participation in Cold River's Homestead, S.A.

As referred in note 48, the Group formalized the sale of shares representing 70% of the share capital of Seguradora

Internacional de Moçambique, S.A., maintaining approximately 22% of its share capital starting to be considered as an

associated company.

The balance Investments in associated companies, as at 31 December 2020, is analysed as follows:

(Thousands of euros)

2020

Ownership on

equity

Goodwill

Impairment of

investments in

associated companies

Total

Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.

228,956

—

228,956

Banco Millennium Atlântico, S.A.

53,257

43,255

(29,991)

66,521

Banque BCP, S.A.S.

42,583

—

42,583

Cold River's Homestead, S.A.

19,087

—

(4,557)

14,530

SIBS, S.G.P.S, S.A.

38,881

—

38,881

Unicre - Instituição Financeira de Crédito, S.A.

32,679

7,435

—

40,114

Webspectator Corporation

18,011

(18,011)

Others

3,288

—

3,288

418,817

68,701

(52,559)

434,959

The Group's companies included in the consolidation perimeter are presented in note 60, as well as the main indicators

of the most relevant ones.

The movements occurred in Impairment of investments in associated companies are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

52,559

60,773

Transfers from Other provisions (Banco Millennium Atlântico, S.A.) (note 38)

22,300

—

Sale Cold River's Homestead, S.A.

(4,557)

—

Impairment charge for the year (note 12)

—

4,735

Exchange rate differences

7,966

(12,949)

Balance at the end of the year

78,268

52,559

2021 REPORT & ACCOUNTS

| 283

In accordance with the requirements of IFRS 12 and considering their relevance, the movements occurred in the

investment held in Banco Millennium Atlântico, S.A., is analysed as follows:

(Thousands of euros)

2021

2020

Ownership held by BCP on equity of the associated company as at 1 January

66,521

93,044

Application of IAS 29 for the year:

Net non-monetary assets of the BMA

Effect of exchange rate variations (note 43)

3,332

(7,676)

Amortization of the effect of IAS 29 application calculated as at 31 December 2018 (note 14)

(2,388)

(3,944)

Goodwill of the merger operation of the BMA

Effect of exchange rate variations (note 43)

3,593

(6,476)

Transfers from Other provisions (note 38)

(22,300)

—

Impairment of investments in associated companies

—

(3,826)

Appropriation of the net income of the associated companies (note 14)

2,629

7,300

Appropriation of the net income of previous years (note 14)

(1,621)

(27)

Annulment of the gains arising from properties sold to Group entities (note 14)

—

6,067

Other comprehensive income attributable to BCP

(114)

Exchange differences

Effect on BMA's equity

13,962

(23,436)

Goodwill associated with investment in BMA

4,373

(7,881)

Impairment of investments in associated companies (note 43)

(7,966)

12,950

Annulment of the gains arising from the sale of properties to Group entities

—

540

Investment held at the end of the year

60,203

66,521

The following table presents the financial statements of Banco Millennium Atlântico, S.A, prepared in accordance with

IFRS, modified by the consolidation adjustments:

(Thousands of euros)

2021

2020

Net profit for the year

11,563

32,107

Comprehensive income

299

(501)

Total comprehensive income attributable to Shareholders of the associated company

11,862

31,606

Application of IAS 29 (*)

(10,504)

(17,346)

Attributable to Shareholders of the associated companies adjusted to BCP GAAP

1,358

14,260

Attributable to the BCP Group

309

3,242

Balance sheet

Financial assets

2,398,934

1,918,456

Non-financial assets

313,203

299,883

Financial liabilities

(2,449,107)

(1,951,208)

Non-financial liabilities

33,362

(36,886)

Attributable to Shareholders of the associated companies

296,392

230,245

Application of IAS 29 (*)

66,504

62,351

Attributable to Shareholders of the associated companies adjusted to BCP GAAP

362,896

292,596

Attributable to the BCP Group

82,503

66,521

Goodwill of the merge

37,957

29,991

Impairment of investments in associated companies

(60,257)

(29,991)

Attributable to the BCP Group adjusted of consolidation items

60,203

66,521

(*) The impact of the IAS 29 adoption was calculated from the date of the merger (April 2016).

2021 REPORT & ACCOUNTS

284 |

The amounts presented do not include adjustments arising from the application of IAS 29. Based on the requirements of

IAS 29, Angola was considered a hyperinflationary economy until 31 December 2018, for the purpose of presenting the

consolidated financial statements, as described in accounting policy 1 B6. This classification ceased to be applied on 1

January 2019.

In accordance with the requirements of IFRS 12 and considering their relevance, the movements occurred in the

investment held in Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., is analysed as follows:

(Thousands of euros)

2021

2020

Ownership held by BCP on equity of the associated company as at 1 January

228,956

174,348

Appropriation of the net income of the associated company (note 14) (*)

38,218

44,344

Other comprehensive income attributable to BCP

(5,728)

10,264

Investment held at the end of the year

261,446

228,956

(*) Includes adjustments according to BCP GAAP.

The following table presents the financial statements of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A.,

prepared in accordance with IFRS, modified by the consolidation adjustments:

(Thousands of euros)

2021

2020

Net profit for the year

69,900

81,248

Comprehensive income

(11,690)

20,947

Total comprehensive income attributable to Shareholders of the associated company

58,210

102,195

Adjustments of intra-group transactions (reverse of the VOBA annual amortisation (*)

8,096

9,250

Attributable to Shareholders of the associated company adjusted to BCP GAAP

66,306

111,445

Attributable to the BCP Group

32,490

54,608

Balance sheet

Financial assets

10,263,904

10,928,566

Non-financial assets

429,543

424,353

Financial liabilities

(9,810,182)

(10,466,340)

Non-financial liabilities

(62,344)

(124,020)

Total equity

820,921

762,559

Attributable to non-controlling interests

11,718

11,567

Attributable to Shareholders of the associated companies

809,203

750,992

Adjustments of intra-group transactions (reverse of the VOBA annual amortisation (*))

355,263

347,167

Attributable to Shareholders of the associated company adjusted to BCP GAAP

1,164,466

1,098,159

Attributable to the BCP Group

570,588

538,098

Reverse of the initial gain in 2004 allocated to the BCP Group

(309,142)

Attributable to the BCP Group adjusted of consolidation items

261,446

228,956

(*) VOBA corresponds to the estimated current value of the future cash flows of the contracts in force at the date of acquisition. The

value of the acquired business (VOBA) is recognised in the consolidated accounts of Millenniumbcp Ageas Grupo Segurador, S.G.P.S.,

S.A. as intangible assets and is amortised over the period of recognition of the income associated with the policies acquired.

2021 REPORT & ACCOUNTS

| 285

The Group owns 49% of Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A., being accounted as investment in an

associate under the equity method.

According to IFRS 4, there is the possibility to differ the application of IFRS 9 to insurance entities, i.e. although IFRS 9

entered into force on 1 January 2018, the insurance companies can choose for the temporary exemption until 31

December 2022.

The Group chose for the temporary exemption until 31 December 2022, following the approach of Millenniumbcp Ageas,

and as far it fulfils the requirements to be accomplish with the temporary exemption until 31 December 2022 which

are:

- The entity didn’t adopt previously the IFRS 9;

- The liabilities measured according IFRS 4 are significant;

- The weight of IFRS4 liabilities in total liabilities of entity is more than 90%;

- Non-related activities with insurance activity isn’t significant.

This exception and based on paragraph 20P b) and 20Oa) of IFRS 4, allows the Group to apply IFRS 9 in its consolidated

accounts and to have Millenniumbcp Ageas not applying IFRS 9 in its individual accounts (which are integrated into the

consolidated accounts using the equity method).

Regarding to the evaluation of the impacts arising from the adoption of IFRS 9, the Ageas Group Portugal has a project

in progress to determine the impacts of adopting IFRS 9. Based on the evaluation made on this date, the total impact of

IFRS 9, as at 31 December 2021, net of Participation of Benefits (PB) and net of Tax (29%) in consolidation in BCP Group

is a positive amount of Euros 646,000 (2020: positive amount of Euros 461,000).

26.Non-current assets held for sale

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Gross value

Impairment

Net value

Gross value

Impairment

Net value

Real estate

Assets arising from recovered loans

630,082

(127,218)

502,864

848,277

(146,372)

701,905

Assets belong to investments funds and

real estate companies

279,071

(50,481)

228,590

309,547

(52,465)

257,082

Assets for own use (closed branches)

22,800

(5,939)

16,861

26,122

(6,654)

19,468

Equipment and other

24,421

(7,076)

17,345

38,131

(10,158)

27,973

Other assets

14,854

—

14,854

20,053

—

20,053

971,228

(190,714)

780,514

1,242,130

(215,649)

1,026,481

The assets included in this balance are accounted for in accordance with the accounting policy described in note 1 G.

The balance Real estate - Assets arising from recovered loans includes, essentially, real estate resulted from process of

recovered loans or judicial auction being accounted for at the time the Group assumes control of the asset, which is

usually associated with the transfer of their legal ownership. Additional information on these assets is presented in note

54.

2021 REPORT & ACCOUNTS

286 |

The Group has a strategy for sale these assets, consistent with the characteristic of each asset as well as with the

breakdown of underlying valuations. However, considering the formal constraints, it was not possible in all instances to

conclude the sales in the expected time. The sale strategy is based in an active search of buyers, with the Group having

a website where advertises these properties and through partnerships with the mediation of companies having more

ability for the product that each time the Group has for sale. Prices are periodically reviewed and adjusted for

continuous adaptation to the market. The Group requests, regularly, to the European Central Bank, the extension of

the period of holding these properties.

This balance includes properties for which the Group has already entered into sales contracts in the amount of Euros

62,181,000 (31 December 2020: Euros 27,367,000, of which Euros 167,000 were related to properties held by

investment funds). The impairment associated with all contracts entered into is Euros 14,651,000 (31 December 2020:

Euros 10,140,000, of which Euros 52,000 were related to properties held by investment funds) and was calculated

considering the value of the respective contracts.

The changes occurred in Impairment of non-current assets held for sale are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

215,649

263,891

Transfers

(2,135)

779

Charge for the year (note 12)

56,863

78,355

Reversals for the year (note 12)

(3,684)

(11,645)

Amounts charged-off

(77,610)

(113,941)

Exchange rate differences

1,631

(1,790)

Balance at the end of the year

190,714

215,649

27.Investment property

As at 31 December 2021, the balance Investment property corresponds to real estate evaluated in accordance with the

accounting policy presented in note 1 N, based on independent assessments and compliance with legal requirements.

The rents received related to these assets amounted to Euros 277,000 (31 December 2020: Euros 391,000), and the

maintenance expenses related to rented or not rented real estate, amount to Euros 73,000 (31 December 2020: Euros

188,000).

The changes occurred in this balance are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

7,909

13,291

Transfers from / (to) non-current assets held for sale

—

(1,225)

Revaluations

(1,108)

115

Disposals

(3,931)

(4,272)

Balance at the end of the year

2,870

7,909

2021 REPORT & ACCOUNTS

| 287

28.Other tangible assets

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Real estate

708,803

725,639

Equipment

Computer equipment

337,457

330,853

Security equipment

67,542

69,812

Interior installations

148,532

144,693

Machinery

49,455

49,452

Furniture

84,923

84,962

Motor vehicles

29,703

29,448

Other equipment

30,711

30,886

Right of use

Real estate

352,346

334,608

Vehicles and equipment

505

929

Work in progress

20,656

18,021

Other tangible assets

248

1,830,671

1,819,551

Accumulated depreciation

Relative to the current year (note 9)

(98,972)

(103,717)

Relative to the previous years

(1,130,978)

(1,075,009)

(1,229,950)

(1,178,726)

600,721

640,825

The balance Real Estate includes the amount of Euros 113,850,000 (31 December 2020: Euros 118,532,000) related to

real estate held by the Group's real estate investment funds.

The balance Right-of-use essentially corresponds to real estate (branches and central buildings) and to a residual

number of vehicles, which are amortized according to the lease term of each contract, as described in the accounting

policy 1 H.

2021 REPORT & ACCOUNTS

288 |

The changes occurred in Other tangible assets during 2021 are analysed as follows:

(Thousands of euros)

2021

Balance on 1

January

Acquisitions

/ Charge

Disposals

/ Charged-off

Transfers

Exchange

differences

Balance on

31 December

Real estate

725,639

990

(29,510)

(2,200)

13,884

708,803

Equipment:

Computer equipment

330,853

7,011

(12,828)

5,915

6,506

337,457

Security equipment

69,812

403

(3,413)

(136)

876

67,542

Interior installations

144,693

1,275

(1,243)

1,446

2,361

148,532

Machinery

49,452

369

(1,670)

984

320

49,455

Furniture

84,962

448

(2,097)

534

1,076

84,923

Motor vehicles

29,448

4,375

(6,087)

432

1,535

29,703

Other equipment

30,886

(1,168)

1,045

(70)

30,711

Right of use

Real estate

334,608

35,024

(19,979)

—

2,693

352,346

Vehicles and equipment

929

(436)

—

(2)

505

Work in progress

18,021

15,792

(128)

(13,860)

831

20,656

Other tangible assets

248

(252)

—

1,819,551

65,721

(78,811)

(5,840)

30,050

1,830,671

Accumulated depreciation

Real estate

(431,312)

(14,945)

18,823

2,589

(3,811)

(428,656)

Equipment:

Computer equipment

(291,414)

(16,606)

12,505

(34)

(5,011)

(300,560)

Security equipment

(65,662)

(864)

3,413

136

(746)

(63,723)

Interior installations

(128,864)

(2,726)

1,041

155

(1,503)

(131,897)

Machinery

(41,333)

(1,294)

1,425

(253)

(226)

(41,681)

Furniture

(77,162)

(2,781)

1,958

376

(735)

(78,344)

Motor vehicles

(17,215)

(4,353)

4,850

(20)

(1,005)

(17,743)

Other equipment

(23,586)

(1,497)

1,073

179

(23,811)

Right of use

Real estate

(101,475)

(53,799)

13,302

—

(1,024)

(142,996)

Vehicles and equipment

(668)

(107)

272

—

(501)

Other tangible assets

(35)

—

(4)

(38)

(1,178,726)

(98,972)

58,663

3,128

(14,043)

(1,229,950)

640,825

(33,251)

(20,148)

(2,712)

16,007

600,721

2021 REPORT & ACCOUNTS

| 289

The changes occurred in Other tangible assets during 2020 are analysed as follows:

(Thousands of euros)

2020

Balance on 1

January

Acquisitions

/ Charge

Disposals

/ Charged-off

Transfers

Exchange

differences

Balance on

31 December

Real estate

762,085

2,442

(18,257)

2,415

(23,046)

725,639

Equipment:

Computer equipment

330,524

11,871

(7,096)

5,331

(9,777)

330,853

Security equipment

71,268

294

(686)

—

(1,064)

69,812

Interior installations

145,298

929

(1,449)

2,767

(2,852)

144,693

Machinery

48,466

706

(465)

2,803

(2,058)

49,452

Furniture

85,951

898

(747)

195

(1,335)

84,962

Motor vehicles

31,820

3,036

(2,978)

—

(2,430)

29,448

Other equipment

32,072

(386)

1,255

(2,064)

30,886

Right of use

Real estate

329,604

26,418

(10,127)

118

(11,405)

334,608

Vehicles and equipment

958

—

(30)

929

Work in progress

20,833

14,032

(37)

(14,938)

(1,869)

18,021

Other tangible assets

296

(1)

—

(64)

248

1,859,175

60,653

(42,229)

(54)

(57,994)

1,819,551

Accumulated depreciation

Real estate

(434,959)

(16,103)

10,719

8,953

(431,312)

Equipment:

Computer equipment

(287,185)

(17,642)

6,468

(51)

6,996

(291,414)

Security equipment

(66,236)

(983)

686

—

871

(65,662)

Interior installations

(129,157)

(2,708)

1,275

—

1,726

(128,864)

Machinery

(41,233)

(1,238)

303

(781)

1,616

(41,333)

Furniture

(76,517)

(2,936)

676

774

841

(77,162)

Motor vehicles

(16,616)

(4,644)

2,575

(8)

1,478

(17,215)

Other equipment

(24,001)

(1,478)

359

(10)

1,544

(23,586)

Right of use

Real estate

(53,428)

(56,761)

5,812

(14)

2,916

(101,475)

Vehicles and equipment

(365)

(320)

—

(668)

Other tangible assets

(36)

—

(35)

(1,129,733)

(104,813)

28,874

(12)

26,958

(1,178,726)

729,442

(44,160)

(13,355)

(66)

(31,036)

640,825

2021 REPORT & ACCOUNTS

290 |

29.Goodwill and intangible assets

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Goodwill - Differences arising on consolidation

Bank Millennium, S.A. (Poland)

104,843

105,385

Euro Bank, S.A. (Poland)

41,913

42,130

Others

12,675

14,260

159,431

161,775

Impairment

Others

(11,931)

(13,573)

147,500

148,202

Intangible assets

Software

234,192

201,918

Other intangible assets

70,823

67,777

305,015

269,695

Accumulated amortisation

Charge for the year (note 9)

(38,184)

(32,083)

Charge for the previous years

(158,118)

(139,860)

(196,302)

(171,943)

108,713

97,752

256,213

245,954

According to the accounting policy described in note 1 B, the recoverable amount of the Goodwill is annually assessed

in the second semester of each year or whenever there are indications of eventual loss of value. In accordance with IAS

36 the recoverable amount of goodwill resulting from the consolidation of the subsidiaries, should be the greater

between its value in use (the present value of the future cash flows expected from its use) and its fair value less costs

to sell. Based on these criteria, the Group made in 2021, valuations of their investments for which there is goodwill

recognised considering among other factors:

(i) an estimate of future cash flows generated by each cash generating unit;

(ii) an expectation of potential changes in the amounts and timing of cash flows;

(iii) the time value of money;

(iv) a risk premium associated with the uncertainty by holding the asset; and

(v) other factors associated with the current situation of financial markets.

The valuations are based on reasonable and sustainable assumptions representing the best estimate of the Executive

Committee on the economic conditions that affect each subsidiary, the budgets and the latest projections approved for

those subsidiaries and their extrapolation to future periods. The assumptions made for these valuations might vary with

the change in economic conditions and in the market.

During 2021, there were no factors pointing to the deterioration of the value of those financial participations that could

lead to impairment charges in respect of goodwill, nor to the improvement of the value of those financial participations

that could lead to a reversion of previously booked impairments to the goodwill.

2021 REPORT & ACCOUNTS

| 291

Bank Millennium, S.A. (Poland)

The estimated cash flows of the business were projected based on current operating results and assuming the business

plan and projections approved at the end of 2021 by the Executive Committee up to 2026. After that date, a perpetuity

was considered based on the average long-term expected adjusted rate of return for this activity in the Polish market.

Additionally, the market performance of Bank Millennium, S.A. in the Polish capital market was taken into

consideration and the direct percentage of shareholding. Based on this analysis and the expectations of future

development, the Group concluded that there is no need for impairment charges related to the goodwill of this

participation.

The above-mentioned business plan of Bank Millennium, S.A. comprises a five-year period, from 2022 to 2026,

considering, along this period, an estimated compound annual growth rate of 7.0% (6.2% in 2020) for Total Assets and of

19.6% (8.4% in 2020) for Total Equity, while considering a ROE evolution from -8.0% by the end of 2022 to 17.6% by the

end of 2026 and 12.5% in perpetuity vs. an estimated evolution of 2.9% by the end of 2021 to 9.2% by the end of 2025

and 11.0% in perpetuity considered in 2020. The exchange rate EUR/PLN considered was 4.5839 as at December 2021

(4.5603 as at 31 December 2020). It is worth mentioning that the economic activity in Poland has recovered to pre-

pandemic levels during 2021, which was already visible in Bank Millennium, S.A., whose credit production in 2021

surpassed 2019 levels.

The Cost of Equity considered was 11.000% for the period 2022 to 2026 and in perpetuity, whereas 2020 exercise

considered a Cost of Equity of 8.875% for the period 2021 to 2025 and in perpetuity, and, in both years, a discretionary

factor was considered to accommodate the uncertainty regarding the legal risk associated with the mortgage loan

portfolio in foreign currency to the PLN. The annual growth rate in perpetuity (g) was 2.88% (2.37% in 2020).

Together with the business plans, other main assumptions considered for the impairment test were:

2021

2020

2019

Discount rate

11%

8.875%

8.565%

Growth rate (g)

2.88%

2.37%

2.8%

RoE steady state

12.5%

11%

10.5%

Given the degree of uncertainty of these assumptions, and in order to validate whether the recoverable amount of

goodwill resulting from the consolidation of Bank Millennium, S.A., corresponding to the higher of its value in use or its

fair value less costs to sell, equals to or exceeds the registered goodwill, the Group performs a sensitivity analysis using

reasonable changes in the key assumptions whose volatility are perceived to possibly have a greater impact in

determining the present value of the estimated cash flows. Below, in a simplified way, is shown the increase/decrease

amount of the estimated value for 100% of Bank Millennium, S.A., that results from a reasonable variation (+/- 50 basis

points) of each of the key assumptions considered as at 31 December 2021.

Sensitivity analysis for main assumptions

(million euros)

Impact increase of 50 bps

Impact decrease of 50 bps

Discount rate

(178)

203

Growth rate (g)

(39)

RoE steady state

106

(106)

Based on this analysis, the Group also concluded that there is no need for impairment charges related to the goodwill

of this participation.

2021 REPORT & ACCOUNTS

292 |

The changes occurred in Goodwill and intangible assets, during 2021, are analysed as follows:

(Thousands of euros)

2021

Balance on

1 January

Acquisitions

/ Charge

Disposals

/ Charged-off

Transfers

Exchange

differences

Balance on

31 December

Goodwill - Differences

arising on consolidation

161,775

347

(3,558)

—

867

159,431

Goodwill impairment

(13,573)

(347)

1,989

—

(11,931)

148,202

—

(1,569)

—

867

147,500

Intangible assets

Software

201,918

49,781

(17,616)

(3,826)

3,935

234,192

Other intangible assets

67,777

—

(341)

3,746

(359)

70,823

269,695

49,781

(17,957)

(80)

3,576

305,015

Accumulated depreciation

Software

(115,427)

(34,173)

15,543

(2,360)

(136,360)

Other intangible assets

(56,516)

(4,011)

341

(57)

301

(59,942)

(171,943)

(38,184)

15,884

—

(2,059)

(196,302)

97,752

11,597

(2,073)

(80)

1,517

108,713

245,954

11,597

(3,642)

(80)

2,384

256,213

The changes occurred in Goodwill and intangible assets during 2020 are analysed as follows:

(Thousands of euros)

2020

Balance on

1 January

Acquisitions

/ Charge

Disposals

/ Charged-off

Transfers

Exchange

differences

Balance on

31 December

Goodwill - Differences

arising on consolidation

165,904

180

(444)

—

(3,865)

161,775

Goodwill impairment

(13,837)

(180)

444

—

(13,573)

152,067

—

(3,865)

148,202

Intangible assets

Software

189,031

44,505

(15,102)

(5,362)

(11,154)

201,918

Other intangible assets

67,214

—

5,226

(4,663)

67,777

256,245

44,505

(15,102)

(136)

(15,817)

269,695

Accumulated depreciation

Software

(108,690)

(29,100)

14,951

221

7,191

(115,427)

Other intangible assets

(56,992)

(3,236)

—

(221)

3,933

(56,516)

(165,682)

(32,336)

14,951

—

11,124

(171,943)

90,563

12,169

(151)

(136)

(4,693)

97,752

242,630

12,169

(151)

(136)

(8,558)

245,954

2021 REPORT & ACCOUNTS

| 293

30.Income tax

The deferred income tax assets and liabilities are analysed as follows:

(Thousands of euros)

2021

2020

Assets

Liabilities

Net

Assets

Liabilities

Net

Deferred taxes not depending on the future

profits (a)

Impairment losses (b)

983,177

—

983,177

—

983,177

Employee benefits

835,619

—

835,619

836,909

—

836,909

1,818,796

—

1,818,796

1,820,086

—

1,820,086

Deferred taxes depending on the future profits

Impairment losses (b)

601,925

(50,303)

551,622

723,864

(50,303)

673,561

Tax losses carried forward

187,475

—

187,475

176,885

—

176,885

Employee benefits

55,274

(6,918)

48,356

55,268

(542)

54,726

Financial assets at fair value through other

comprehensive income

125,907

(104,865)

21,042

38,000

(189,359)

(151,359)

Derivatives

—

(4,923)

—

(4,451)

Intangible assets

1,639

—

1,639

—

Other tangible assets

8,835

(4,037)

4,798

10,992

(4,081)

6,911

Others

123,468

(80,989)

42,479

113,238

(63,098)

50,140

1,104,523

(252,035)

852,488

1,118,296

(311,834)

806,462

Total deferred taxes

2,923,319

(252,035)

2,671,284

2,938,382

(311,834)

2,626,548

Offset between deferred tax assets and deferred

tax liabilities

(235,103)

235,103

—

(304,592)

304,592

—

Net deferred taxes

2,688,216

(16,932)

2,671,284

2,633,790

(7,242)

2,626,548

(a) Special Regime applicable to deferred tax assets

(b) The amounts of 2021 and 2020 include deferred tax assets related with credit impairments non-accepted fiscally of which credits

were written-off, according to the expectation that the use of such impairments will be deductible for the purposes of determining

taxable income for the tax periods in which the legal conditions required for their tax deductibility are met.

As at 31 December 2021, the balance deferred tax assets amounts to Euros 2,688,216,000, of which Euros 2,503,077,000

are related to the Bank's activity. The deferred tax assets related to the Bank's activity includes a net amount of Euros

684,312,000 that depends of the existence of future profitable profits (deferred tax assets not eligible under the

special regime applicable to deferred tax assets, approved by Law No. 61/2014, of 26 August), including:

- Euros 429,133,000 related to impairment losses; and

- Euros 162,400,000 resulting from tax losses carried forward from 2016 and 2020, which, considering the changes

established in Law no. 27-A/2020, of 24 July, within the scope of the Supplementary Budget for 2020, may be used until

2030 and 2032, respectively.

2021 REPORT & ACCOUNTS

294 |

Special regime applicable to deferred tax assets

The Extraordinary General Meeting of the Bank that took place on 15 October 2014 approved the Bank's accession to the

Special Regime approved by Law No. 61/2014, of 26 August, applicable to deferred tax assets that resulted from not

deduction of expenses and negative equity variations with impairment losses on credits and post-employment or long-

term employee benefits.

The special regime is applicable to those expenses and negative equity variations recorded in tax periods beginning on

or after 1 January 2015, as well as to deferred tax assets recorded in the annual accounts for the last tax period prior

to that date and to part of expenses and negative equity variations associated with them. Pursuant to Law No. 23/2016,

of 19 August, this special regime is not applicable to expenses and negative equity variations with impairment losses on

credits and with post-employment or long-term employee benefits recorded in the period's taxation commencing on or

after 1 January 2016, nor to deferred tax assets to these associates.

The special regime applicable to deferred tax assets provides for an optional framework and with the possibility of

subsequent waiver, under which:

- Expenses and negative equity variations with impairment losses on credits and with post-employment or long-term

employee benefits covered by it are deducted, under the terms and conditions set out in the IRC Code and in relevant

separate tax legislation, until the competition taxable profit for the tax period determined before these deductions.

Expenses and negative equity variations not deducted as a result of applying this limit are deducted in subsequent tax

periods, with the same limit. In the BCP Group, deferred tax assets associated with expenses and negative equity

variations under these conditions amount to Euros 1,569,265,000 (31 December 2020: Euros 1,471,614,000).

- In certain situations (those with negative net results in annual individual accounts or liquidation by voluntary

dissolution, insolvency decreed by court or revocation of the respective authorization), deferred tax assets covered by

the Special Regime are converted into tax credits, in part or in wholeness. In situations of negative net income, the

conversion is made according to the proportion between the amount of the negative net income for the period and the

total of equity capital, and a special reserve corresponding to 110% of the tax credit must be constituted and,

simultaneously, conversion rights attributable to the State of equivalent value, rights that can be acquired by the

shareholders upon payment to the State of the same value. Tax credits may be offset against tax debts of the

beneficiaries (or an entity based in Portugal within the same prudential consolidation perimeter or included in the same

group of entities for which are applied the Special Tax Regime for Groups of Companies) or reimbursed by the State.

Pursuant to the regime described, the recovery of deferred tax assets covered by the optional regime approved by Law

No. 61/2014, of 26 August, is not dependent on future profits.

The above-mentioned legal framework was densified by Ordinance no. 259/2016, of 4 October, about the control and

use of tax credits, and by the Ordinance No. 293-A/2016, of 18 November, which establishes the conditions and

procedures for the acquisition by the shareholders of the referred rights of the State. Law No. 98/2019, of 4

September, establishes a deadline for the acquisition of the referred rights of the State by the shareholders, after

which the Management Board of the issuing bank is obliged to promote the record of the capital increase by the amount

resulting from the exercise of the conversion rights. According to this legislation, among other aspects, these rights are

subject to a right of acquisition by the shareholders on the date of creation of the rights of the State, exercisable in

periods that will be established by the Board of Directors until 3 years after the confirmation date of the conversion of

the deferred tax asset into tax credit by the Portuguese Tax and Customs Authority. The issuing entity shall deposit in

favour of the State the amount of the price corresponding to all the rights issued, within 3 months beginning from the

confirmation date of the conversion of the deferred tax asset into tax credit. Such deposit shall be redeemed when and

to the extent that the rights of the State are acquired by the shareholders or exercised by the State.

Deferred taxes are calculated based on the tax rates expected to be in force when the temporary differences are

reversed, which correspond to the approved rates or substantially approved at the balance sheet date. The deferred

tax assets and liabilities are presented on a net basis whenever, in accordance with applicable law, current tax assets

and current tax liabilities can be offset with each other and when the deferred taxes are related to the same tax.

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The current tax rate for Banco Comercial Português, S.A. is analysed as follows:

2021

2020

Income tax

21%

Municipal surtax rate (on taxable net income)

1.5%

State tax rate (on taxable net income)

More than 1,500,000 to 7,500,000

From more than 7,500,000 to 35,000,000

More than 35,000,000

The deferred tax rate related to the Bank’s tax losses is 21%, in 2021 and 2020.

The average deferred tax rate associated with temporary differences of Banco Comercial Português, S.A. is 31.3%. The

income tax rate in the other main countries where the Group operates is 19% in Poland, 32% in Mozambique and 0%

(exemption) in the Cayman Islands.

In accordance with the amendments provided for in Law No. 27-A/2020, of 24 July, under the Supplementary Budget

for 2020, the reporting period for tax losses in Portugal, is now 14 years for the losses of 2014, 2015 and 2016 and 7

years for the tax losses of 2017, 2018 and 2019. The tax losses calculated in 2020 and 2021 have a reporting period of

12 years, which may be deducted until 2032 and 2033 respectively. The limit for the deduction of tax losses is increased

from 70% to 80%, when the difference results from the deduction of tax losses determined in the tax periods of 2020

and 2021.

The reporting term for tax losses carried forward in Poland and in Mozambique it is 5 years.

Banco Comercial Português, S.A. applies the Special Tax Regime for Groups of Companies (RETGS) since 2016 for

taxation purposes under IRC, in which it’s the dominant company.

The balance of Deferred tax assets not depending on the future profits (covered by the regime approved by Law no.

61/2014, of 26 August) includes the amounts of Euros 210,686,000 and Euros 4,020,000 recorded in 2015 and 2016,

respectively, related to expenses and negative equity variations with post-employment or long-term employee benefits

and to impairment losses in loans accounted until 31 December 2014.

The deferred income tax assets associated to tax losses, by expiry date, are presented as follows:

(Thousands of euros)

Expiry date

2021

2020

2021-2026

25,052

29,043

2030

104,000

2033

58,423

43,842

187,475

176,885

Following the publication of the Notice of Bank of Portugal No. 5/2015, the entities that presented their financial

statements in Adjusted Accounting Standards issued by the Bank of Portugal (NCA), since 1 January 2016 began to apply

the International Financial Reporting Standards as adopted in the European Union, including, among others, the Bank's

individual financial statements.

As a result of this change, in the Bank's individual financial statements, the loans portfolio, guarantees provided and

other operations of a similar nature became subject to impairment losses calculated in accordance with the

requirements of International Accounting Standards (IAS 39 until 31 December 2017 and IFRS 9 since 1 January 2018),

replacing the registration of provisions for specific risk, for general credit risks and for country risk, in accordance with

Bank of Portugal’s Notice No. 3/95.

The Regulatory Decrees No. 5/2016, of 18 November, No. 11/2017, of 28 December, and No. 13/2018, of 28 December,

established the maximum limits of impairment losses and other corrections of value for specific credit risk that are

deductible for the purpose of calculating the taxable profit under IRC in 2016, 2017 and 2018, respectively. These

Decrees declare that Bank of Portugal Notice No. 3/95 (Notice that was relevant for determining provisions for credit in

the financial statements presented on an NCA basis) should be considered for the purpose of calculating the maximum

limits of impairment losses accepted for tax purposes in 2016, 2017 and 2018, respectively.

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Law No. 98/2019, of 4 September, establishes the tax regime of credit impairment and of provisions for guarantees for

the tax periods beginning on or after 1 January 2019, predicting the approximation between accounting and tax rules

for purposes of deductibility of expenses related to the increase of credit impairments. Until the end of 2023, the rules

prevailing until 2018 will continue to be applied, except if the option of applying the new regime is exercised earlier.

Regardless the previously referred option, the new regime’s application will be mandatory in the financial years of 2022

and/or 2023 in the following circumstances:

- In the financial year of 2022, if, since 1 January 2022, the Bank distributes dividends regarding that financial year or

acquires own shares, without occurring a decrease of the deferred tax assets covered by the Special Regime in, at

least, 10% comparatively to the amount recorded on 31 December 2018;

- In the financial year of 2023, if, since 1 January 2023, the Bank distributes dividends regarding that financial year or

acquires own shares, without occurring a decrease of the deferred tax assets covered by the Special Regime in, at

least, 20% comparatively to the amount recorded on 31 December 2018.

In the calculation of the taxable income for the year 2020 and in the estimation of taxable income by reference to 31

December 2021 it was considered the maintenance of the tax rules in force until 2018, since the option for the

application of the new regime was not exercised.

The Group complies with the guidelines of IFRIC 23 - Uncertainty over Income Tax Treatments on the determination of

taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of uncertainty

regarding the income tax treatment, not having occurred material impact on the financial statements resulting from its

application.

Analysis of the recoverability of deferred tax assets

In accordance with the accounting policy 1 Y.3 and with the requirements of IAS 12, the deferred tax assets were

recognised based on the Group's expectation of their recoverability. The recoverability of deferred taxes depends on

the implementation of the strategy of the Bank's Board of Directors, namely the generation of estimated taxable

income and its interpretation of tax legislation. Any changes in the assumptions used in estimating future profits or tax

legislation may have material impacts on deferred tax assets.

The assessment of the recoverability of deferred tax assets was carried based on the respective estimated financial

statements, prepared under the budgetary process for 2022 and new strategic plan 2021-2024 approved by the

governing bodies, which support the expected future taxable income, considering the macroeconomic and competitive

environment then analysed.

To estimate taxable net income for the periods of 2022 to 2033, the following main assumptions were considered:

- It was considered the approximation between accounting and tax rules predicted by Law No. 98/2019, of 4

September, assuming the Group will not exercise its application earlier over the adaptation period of 5 years that the

referred Law predicts. In the application of these rules, the following assumptions were considered, in general terms:

a) non-deductible expenses related to increase of credit impairments for the years between 2022 to 2023 were

estimated based on the average percentage of non-deducted amounts for tax purposes in the last accounting years

between 2016 to 2021, compared to the amounts of net impairment increases recorded in these years;

b) the expenses with credit impairment’s increases beginning in 2024 were considered deductible for tax purposes

according to the new fiscal regime;

c) impairment reversals not accepted for tax purposes were estimated based on the Reduction Plan of Non-Performing

Assets 2021-2023 submitted to the supervisory authority in March 2021, and also on the average reversal percentage

observed in the last years of 2016 to 2021;

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d) the referred average percentages were calculated separately, according to the presence or not of a mortgage

security, the eligibility for the special regime applicable to deferred tax assets and according to the clients’ rating as

Non-Performing Exposures.

-The deductions related to impairment of financial assets were projected based on the destination (sale or settlement)

and the estimated date of the respective operations;

- Reversals of impairment of non-financial assets not accepted for tax purposes were projected considering the

expected periods of disinvestment in certain real estate. For the remaining assets without a forecasted term for

disinvestment, the reversals were estimated based on the average percentage of reversal observed in the years from

2016 to 2021. Non-deductible expenses related to the reinforcement of impairment of non-financial assets were

estimated on the basis of the average percentage of amounts not deducted for tax purposes in the years from 2016 to

2021, compared to the amounts of reinforcements net of impairment recorded in those years.

- The deductions related to employee benefits were projected based on their estimated payments or deduction plans,

in accordance with information provided by the actuary of the pension fund.

- The realization of changes in the fair value of real estate investment funds was projected based on the information

available in the management agreements of the funds in question for the period expected for the respective

liquidation.

The projections prepared within the framework of the budget process for 2022 incorporate the priorities arising from

the Strategic Plan 2021-2024. This new strategic plan essentially maintained the priorities established in the previous

plan, adapting them to the macroeconomic, competitive and legal/regulatory framework resulting from the pandemic

and incorporating responses to the current challenges faced by the Bank. The pandemic and the economic crisis

conditioned banking activity and had an impact on credit portfolios and other assets, with an immediate impact on

profitability. This way, projections assume, alongside the projected economic recovery, a convergence towards the

medium/long-term metrics and trends consistent with the commercial positioning and the coveted capture of efficiency

gains, established in the revision of the strategic plan approved by the corporate bodies, emphasizing the following:

- improvement in the net margin, reflecting an effort to increase credit, favouring certain segments, the focus on off-

balance sheet resources while interest rates remain negative and the effect of the normalization of those rates, such as

results from the market interest rate curve subject to the projections;

- increase in commission income based on efficient and judicious management of commissioning and pricing, and,

regarding the Individuals segment, the growth of off-balance sheet products;

- normalization of the cost of risk to levels aligned with the current activity of the Bank and reduction of negative

impacts produced by the devaluation or sale of non-current assets, with the progressive reduction of the historical NPE,

foreclosed assets and corporate restructuring funds;

- capturing efficiency gains enhanced by digitalization, reflected in the control of operating costs, after the staff

reduction carried out in 2021.

The conclusion of the analysis of the recoverability of the deferred tax assets recognized as at 31 December 2021 is

that the total recognized deferred tax assets are recoverable.

In accordance with these assessments, the amount of unrecognised deferred tax related to tax losses, by expiry year, is

as follows:

(Thousands of euros)

Tax losses carried forward

2021

2020

2024-2025

107,429

111,985

2026

42,666

40,214

2027-2029

162,683

161,685

2030 and following

486,237

288,855

799,015

602,739

The increase verified in the period of 2030 and following is mainly due to the liquidations of subsidiaries that took place

in 2021.

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298 |

The impact of income taxes in Net income and in other balances of Group's equity, as at 31 December 2021, is analysed

as follows:

(Thousands of euros)

2021

Net income for

the year

Reserves

Exchange

differences

Discontinued

operations (b)

Deferred taxes Deferred taxes not depending on the

future profits

Employee benefits

(1,288)

(2)

—

Deferred taxes depending on the future profits

Impairment losses

(121,002)

—

(937)

—

Tax losses carried forward (a) (c)

15,567

3,353

3,607

(11,937)

Employee benefits

4,774

(10,218)

(283)

(643)

Financial assets at fair value through other

comprehensive income

—

184,667

(12,286)

Derivatives

—

(472)

—

Intangible assets

(382)

1,972

—

Other tangible assets

(174)

(1,939)

—

Others

(19,768)

332

11,802

(27)

(120,985)

178,134

1,464

(12,587)

(122,273)

178,132

1,464

(12,587)

Current taxes

Current year

(81,689)

—

(3,233)

Correction of previous years

336

—

(81,353)

—

(3,233)

(203,626)

178,138

1,464

(15,820)

(a)The amount recorded in reserves refers to the deferred tax on the part of tax loss arising from the deduction of negative equity

variations recorded in reserves that contribute to the calculation of taxable income.

(b)Relates to Banque Privée BCP (Suisse), S.A. and Seguradora Internacional de Moçambique, S.A.

(c)The amount accounted for in Discontinuing operations corresponds to the current taxes that would have affected, autonomously,

the gain arising from the sale of Seguradora Internacional de Moçambique, S.A.

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The impact of income taxes in Net income and in other balances of Group's equity, as at 31 December 2020, is analysed

as follows:

(Thousands of euros)

2020 (restated)

Net income for

the year

Reserves

Exchange

differences

Discontinuing

operations (b)

Deferred taxes Deferred taxes not depending

on the future profits

Employee benefits

—

(2)

—

(2)

—

Deferred taxes depending on the future profits

Impairment losses

(91,910)

—

(7,048)

—

Tax losses carried forward (a)

42,207

18,198

(3,815)

—

Employee benefits

4,019

3,076

466

Financial assets at fair value through other

comprehensive income

—

(73,369)

2,734

—

Derivatives

—

1,189

—

Intangible assets

631

—

Other tangible assets

(14)

—

(103)

—

Others

21,497

(10)

(1,109)

243

(23,570)

(52,105)

(7,654)

300

(23,570)

(52,107)

(7,654)

300

Current taxes

Current year

(105,053)

442

—

(4,763)

Correction of previous years

(3,467)

—

(108,520)

442

—

(4,763)

(132,090)

(51,665)

(7,654)

(4,463)

(a)The amount recorded in reserves refers to the deferred tax on the part of tax loss arising from the deduction of negative equity

variations recorded in reserves that contribute to the calculation of taxable income.

(b)Relates to Banque Privée BCP (Suisse), S.A. and Seguradora Internacional de Moçambique, S.A.

The reconciliation between the nominal tax rate and the effective tax rate is analysed as follows:

(Thousands of euros)

2021

2020

(restated)

Net income / (loss) before income taxes

157,737

324,935

Current tax rate (%)

31.5%

Expected tax

(49,687)

(102,355)

Non-deductible impairment and provisions (a)

(100,417)

(23,966)

Mandatory contributions to the banking sector (b)

(30,400)

(30,183)

Results of companies accounted by the equity method

17,935

21,324

Tax benefits

16,128

12,963

Interests on other equity instruments (c)

11,655

Effect of the tax rate difference

(36,017)

(12,802)

Effect of recognition/derecognition net of deferred taxes

(23,400)

(3,010)

Non-deductible costs and other corrections

(2,988)

(3,832)

Correction of previous years

(5,410)

(787)

Autonomous tax

(1,025)

(1,097)

Total

(203,626)

(132,090)

Effective rate (%)

129.1%

40.7%

(a) In 2021 includes the negative amount of Euros 85,956,000 (2020: negative Euros 17,051,000) related to the impact of the non-

deductibility for tax purposes of the provisions related to legal risks associated with the mortgage loans portfolio granted in foreign

currency by the Polish subsidiary.

(b) Refers to mandatory contributions to the banking sector in Portugal and in Poland.

(c) Relates to the impact of the deduction for taxable income purposes of interest paid in respect of perpetual bonds representing

subordinated debt issued in 2019.

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300 |

31.Other assets

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Deposit account applications

396,638

324,501

Associated companies

162

425

Subsidies receivables

15,656

9,750

Prepaid expenses

23,157

24,186

Debtors for futures and options transactions

138,688

281,991

Insurance activity

—

5,355

Debtors

Residents

Prosecution cases / agreements with the Bank

13,037

14,023

SIBS

3,490

4,832

Receivables from real estate, transfers of assets and other securities

109,509

105,003

Others

23,569

18,579

Non-residents

51,909

96,346

Dividends to receive

—

4,672

Interest and other amounts receivable

69,354

64,320

Amounts receivable on trading activity

32,303

498

Gold and other precious metals

3,851

3,743

Other recoverable tax

11,696

16,393

Artistic patrimony

28,818

28,817

Capital supplementary contributions

165

Reinsurance technical provision

—

21,071

Obligations with post-employment benefits (note 50)

202,366

93,041

Capital supplies

244,991

239,735

Amounts due for collection

81,082

74,119

Amounts due from customers

29,020

21,278

Sundry assets

166,030

109,311

1,645,491

1,562,154

Impairment of other assets

(260,199)

(265,342)

1,385,292

1,296,812

As referred in note 47, as at 31 December 2021, the item Capital supplies includes the amount of Euros 237,671,000 (31

December 2020: Euros 232,421,000) arising from the transfers of assets to Specialized recovery funds which have

impairment in the same amount.

The balance Deposit account applications includes the amount of Euros 348,559,000 (31 December 2020: Euros

286,315,000) on the Clearing houses / Clearing derivatives.

The balance Amounts receivable on trading activity includes amounts receivable within 3 business days of stock

exchange operations.

Considering the nature of these transactions and the age of the amounts of these items, the Group's procedure is to

periodically assess the collectability of these amounts and whenever impairment is identified, an impairment loss is

registered in the income statement.

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The changes occurred in Impairment of other assets are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

265,342

247,916

Transfers resulting from changes in the Group's structure (SIM - Seguradora

Internacional de Moçambique)

(375)

(117)

Other transfers

536

15,464

Charge for the year (note 12)

16,618

17,183

Reversals for the year (note 12)

(9,263)

(9,518)

Amounts charged-off

(12,717)

(5,381)

Exchange rate differences

(205)

Balance at the end of the year

260,199

265,342

32.Resources from credit institutions

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Non-interest

bearing

Interest

bearing

Total

Non-interest

bearing

Interest

bearing

Total

Resources and other financing from

Central Banks

Bank of Portugal

—

8,028,747

—

7,510,013

Central Banks abroad

—

82,155

—

94,713

—

8,110,902

—

7,604,726

Resources from credit institutions in

Portugal

Sight deposits

96,654

—

96,654

97,151

—

97,151

Term Deposits

—

64,217

—

313,560

CIRS and IRS operations collateralised by

deposits (*)

—

1,620

—

120

Other resources

—

229

96,654

65,838

162,492

97,151

313,909

411,060

Resources from credit institutions

abroad

Sight deposits

108,247

—

108,247

110,625

—

110,625

Term Deposits

—

89,053

—

216,818

Loans obtained

—

399,678

—

467,353

CIRS and IRS operations collateralised by

deposits (*)

19,998

—

19,998

25,211

—

25,211

Sales operations with repurchase

agreement

—

54,507

Other resources

—

5,704

—

8,459

128,245

494,435

622,680

135,836

747,137

882,973

224,899

8,671,175

8,896,074

232,987

8,665,772

8,898,759

(*)Under the scope of transactions involving derivative financial instruments (IRS and CIRS) with institutional counterparties, and in

accordance with the terms of their respective agreements ("Cash collateral"). These deposits are held by the Group and are

reported as collateral for the referred operations (IRS and CIRS), whose revaluation is positive.

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302 |

Considering the characteristics of the financing and the nature of the respective lender, the Group accounts for the

TLTRO III operation under IFRS9. The Group considers that the operation constitutes variable rate financing, indexed to

variable rates administratively fixed by the ECB. Specifically, for the period between 24 June 2020, the date of

disbursement of financing funds in progress at 31 December 2020, and 23 June 2021, the Group considers that, with a

high degree of probability, it will fulfil the conditions required for application to the financing an interest rate

corresponding to the average Deposity Rate Facility in effect in the period minus 0.50%, with a maximum of -1%. As a

consequence, it recognizes in the financial statements, for the referred interest counting period, the rate of -1%. As at

31 December 2021, the balance Resources and other financing from Central Banks – Bank of Portugal includes a

financing associated with this program in the amount of Euros 8,150,070,000 (31 December 2020: Euros 7,550,070,000).

The balance Resources from credit institutions - Resources from credit institutions abroad - Sales operations with

repurchase agreement, corresponds to repo operations carried out in the money market and is a tool for the Bank's

treasury management.

This balance is analysed, by remaining period, as follows:

(Thousands of euros)

2021

2020

Up to 3 months

316,096

622,107

3 to 6 months

21,173

162,304

6 to 12 months

54,863

100,178

1 to 5 periods

8,503,029

7,954,170

Over 5 years

913

60,000

8,896,074

8,898,759

33.Resources from customers and other loans

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Non-interest

bearing

Interest

bearing

Total

Non-interest

bearing

Interest

bearing

Total

Deposits from customers

Repayable on demand

48,771,241

176,561

48,947,802

42,712,179

382,188

43,094,367

Term deposits

—

14,241,514

—

14,186,698

Saving accounts

—

5,912,193

—

5,278,672

Treasury bills and other assets

sold under repurchase agreement

—

28,718

—

15,890

Cheques and orders to pay

369,802

—

369,802

364,994

—

364,994

Other

—

60,198

—

60,208

49,141,043

20,419,184

69,560,227

43,077,173

19,923,656

63,000,829

In the terms of the Law, the Deposit Guarantee Fund was established to guarantee the reimbursement of funds

deposited in Credit Institutions. The criteria to calculate the annual contributions to the Portuguese fund are defined in

the Regulation no. 11/94 of the Bank of Portugal.

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| 303

This balance is analysed, by remaining period until the next operation renewal date, as follows:

(Thousands of euros)

2021

2020

Deposits repayable on demand

48,947,802

43,094,367

Term deposits and saving accounts

Up to 3 months

10,785,617

10,044,353

3 to 6 months

5,999,221

5,743,715

6 to 12 months

2,784,000

3,175,837

1 to 5 years

584,717

501,248

Over 5 years

152

217

20,153,707

19,465,370

Treasury bills and other assets sold under repurchase agreement

Up to 3 months

28,718

15,890

Cheques and orders to pay

Up to 3 months

369,802

364,994

Other

Up to 3 months

198

208

Over 5 years

60,000

60,198

60,208

69,560,227

63,000,829

34.Non subordinated debt securities issued

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Bonds

10,606

126,953

Covered bonds

999,333

997,765

Medium term notes (MTNs)

1,017,285

91,811

Securitisations

149,637

167,801

2,176,861

1,384,330

Accruals

11,502

4,519

2,188,363

1,388,849

As described in note 48, Banco Comercial Português, S.A. proceed with two issues, one of senior preferred debt

securities and the second of social senior preferred debt securities, under its Euro Note Programme.

The first issue occurred in February 2021, in the amount of Euros 500 million, has a tenor of 6 years, with the option of

early redemption by the Bank at the end of year 5, an issue price of 99.879% and an annual interest rate of 1.125%

during the first 5 years (corresponding to a spread of 1.55% over the 5-year mid-swap rate). The annual interest rate for

the 6th year was set at 3-month Euribor plus a 1.55% spread.

The second issue occurred in October 2021, in the amount of Euros 500 million, has a tenor of 6.5 years, with an option

for early redemption by the Bank at the end of 5.5 years, an issue price of 99.527% and an interest rate of 1.75% per

year for the first 5.5 years. From the 5th year and a half, the interest rate will result from the sum of the 3-month

Euribor with a spread of 2.00%.

2021 REPORT & ACCOUNTS

304 |

The characteristics of the bonds issued by the Group, as at 31 December 2021 are analysed as follows:

(Thousands of euros)

Issue

date

Maturity

date

Interest rate

Nominal

value

Book

value

Banco Comercial Português

BCP Cln Brisa Feb 2023 Epvm Sr 23

February, 2015

February, 2023

Fixed rate 2.65% -

underlying asset

Brisa 022023

2,000

Covered Bonds Sr 9

May, 2017

May, 2022

Fixed rate 0,75%

1,000,000

999,333

Bcp Rend Min Cb Multi Set Iii19 Eur Smtn Sr 36

March, 2019

March, 2022

Indexed to portfolio of 3

3,000

Bcp Euro Sectores Retorno Garantido Iv Smtn 37

May, 2019

May, 2022

Indexed to portfolio of 3

indexes

3,960

Bcp Ações Euro Zona Ret Min V19 Smtn 39

May, 2019

May, 2022

Indexed to portfolio of 3

2,480

Bcp Rend Min Euro Setores Vi Smtn Sr 41

June, 2019

June, 2022

Indexed to portfolio of 3

indexes

3,150

Bcp Eur Cabaz Ações Ret MinVii 19 Eur Smtn Sr

July, 2019

August, 2022

Indexed to portfolio of 3

2,220

2,214

Bcp Cabaz Ações America Ret Min Out22 Smtn 45

October, 2019

October, 2022

Indexed to portfolio of 3

1,610

Bcp Cabaz Ações Euro Retorno Min.Xii19 Smtn 46

December,

2019

December, 2022

Indexed to portfolio of 3

6,210

6,140

Bcp 6NC5 Senior Preferred NG - mtn 856

February, 2021

February, 2027

Fixed rate 1.125%year until

Feb-26 /after Euribor 3M +

Variable rate 1.55%

500,000

498,495

Bcp 1.75% 6.5Nc5.5 Social Senior Preferred

Notes - mtn 857

October, 2021

April, 2028

Fixed rate 1.75% per year

until Apr-27/after + Euribor

3M+ 2%

500,000

495,936

BCP Finance Bank

BCP Fin.Bank - EUR 10 M

March, 2004

March, 2024

Fixed rate 5.01%

300

Magellan Mortgages n.º 3

Mbs Magellan Mortgages S 3 Cl.A

June, 2005

May, 2058

Euribor 3M + 0.26%

159,170

147,691

Mbs Magellan Mortgages S.3 Cl.B

June, 2005

May, 2058

Euribor 3M + 0.38%

821

762

Mbs Magellan Mortgages S. 3 Cl.C

June, 2005

May, 2058

Euribor 3M + 0.58%

1,276

1,184

Bank Millennium

Millennium Leasing - G13

May, 2019

May, 2022

Wibor 3m + 80 bp

8,606

2,176,861

Accrual

11,502

2,188,363

This balance as at 31 December 2021, excluding accruals, is analysed by the remaining period, as follows:

(Thousands of euros)

2021

Up to 3

months

3 months to 6

months

6 months to 1

year

1 year to 5

years

Over

5 years

Total

Bonds

—

8,606

—

2,000

—

10,606

Covered bonds

—

999,333

—

999,333

MTNs

3,000

9,590

9,964

300

994,431

1,017,285

Securitisations

—

149,637

3,000

1,017,529

9,964

2,300

1,144,068

2,176,861

2021 REPORT & ACCOUNTS

| 305

This balance as at 31 December 2020, excluding accruals, is analysed by the remaining period, as follows:

(Thousands of euros)

2020

Up to 3

months

3 months to 6

months

6 months to 1

year

1 year to 5

years

Over

5 years

Total

Bonds

29,683

27,137

59,438

10,695

—

126,953

Covered bonds

—

997,765

—

997,765

MTNs

36,377

32,520

—

22,914

—

91,811

Securitisations

—

167,801

66,060

59,657

59,438

1,031,374

167,801

1,384,330

35.Subordinated debt

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Bonds

Non-Perpetual

1,376,582

1,385,218

Accruals

18,198

19,954

1,394,780

1,405,172

As at 31 December 2021, the subordinated debt issues are analysed as follows:

(Thousands of euros)

Issue

date

Maturity

date

Interest

rate

Nominal

value

Book

value

Own funds

value (*)

Non-Perpetual Bonds

Banco Comercial Português

Bcp Fix Rate Reset Sub Notes-Emtn 854

December, 2017

December, 2027

See reference (i)

300,000

299,527

300,000

Bcp Subord Fix Rate Note Projeto Tagus Mtn 855

September, 2019

March, 2030

See reference (ii)

450,000

445,098

450,000

BCP Tier 2 Subord Callable Notes Due May 2032

- MTN 858

November, 2021

May, 2032

See reference (iii)

300,000

298,136

300,000

Bank Millennium Group

Bank Millennium - BKMO_071227R

December, 2017

December, 2027

Wibor 6M 1.79% +

2.30%

152,708

60,310

Bank Millennium - BKMO_300129W

January, 2019

January, 2029

Wibor 6M 1.79% +

2.30%

181,069

71,510

Magellan No. 3

Magellan No. 3 Series 3 Class F

June, 2005

May, 2058

—

1,376,582

1,181,820

Accruals

18,198

—

1,394,780

1,181,820

(*) Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR.

References - Interest rate:

(i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%;

(ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5-year mid-swap rate, for

the remaining 5 years will be applied over the mid-swap rate in force at the beginning of that period).

(iii) Interest rate of 4%, per annum, during the first 5 years and 6 months (corresponding to a spread of 4.065% over the average of the

mid-swap rates of 5 and 6 years). At the end of the first 5 years and 6 months the interest rate will be reset to maturity based on the

5 year mid swaps rate prevailing at that time plus the Spread.

2021 REPORT & ACCOUNTS

306 |

As described in note 48, BCP proceed in 2021 with the issue of subordinated notes under its Euro Note Programme that

are expected to be eligible as Tier 2 own funds.

The issue will be in the aggregate amount of Euros 300 million, with a tenor of 10.5 years and the option of early

redemption by the Bank at any time during the six months between year 5 and year 5.5, a fixed annual interest rate of

4% during the first 5.5 years (corresponding to a spread of 4.065% (the “Spread”) over the 5-6 year mid-swap rate).

From year 5.5 to maturity the interest rate will be determined on the basis of the then applicable 5-year mid-swap rate

plus the Spread.

As at 31 December 2020, the subordinated debt issues are analysed as follows:

(Thousands of euros)

Issue

date

Maturity

date

Interest

rate

Nominal

value

Book

value

Own funds

value (*)

Non-Perpetual Bonds

Banco Comercial Português

Bcp Ob Sub Mar 2021 - Emtn 804

March, 2011

March, 2021

Euribor 3M+3.75%

114,000

5,573

Bcp Ob Sub Apr 2021 - Emtn 809

April, 2011

April, 2021

Euribor 3M+3.75%

64,100

3,241

Bcp Ob Sub 3S Apr 2021 - Emtn 812

April, 2011

April, 2021

Euribor 3M+3.75%

35,000

2,158

Bcp Fix Rate Reset Sub Notes-Emtn 854

December, 2017

December, 2027

See reference (i)

300,000

299,016

300,000

Bcp Subord Fix Rate Note Projeto Tagus Mtn 855

September, 2019

March, 2030

See reference (ii)

450,000

449,688

450,000

Bank Millennium Group

Bank Millennium - BKMO_071227R

December, 2017

December, 2027

Wibor 6M 1.79% +

2.30%

153,499

59,160

Bank Millennium - BKMO_300129W

January, 2019

January, 2029

Wibor 6M 1.79% +

2.30%

182,006

182,005

70,147

BCP Finance Bank

BCP Fin Bank Ltd EMTN - 828

October, 2011

October, 2021

Fixed rate 13%

92,268

87,866

4,517

Magellan No. 3

Magellan No. 3 Series 3 Class F

June, 2005

May, 2058

—

1,385,218

894,796

Accruals

19,954

—

1,405,172

894,796

(*) Amount of subordinated loans, eligible as Level 2 own funds, in accordance with Articles 62 a), 63 to 65, 66 a) and 67 of the CRR.

References - Interest rate:

(i) up to the 5th year fixed rate 4.5%; 6th year and following: mid-swap rate in force at the beginning of this period + 4.267%;

(ii) Annual interest rate of 3.871% during the first 5.5 years (corresponding to a spread of 4.231% over the 5.5-year mid-swap rate, for

the remaining 5 years will be applied over the mid-swap rate in force at the beginning of that period).

The analysis of the subordinated debt by remaining period, is as follows:

(Thousands of euros)

2021

2020

Up to 3 months

—

114,000

3 to 6 months

—

99,100

Up to 1 year

—

87,866

Over 5 years

1,376,582

1,084,252

1,376,582

1,385,218

Accruals

18,198

19,954

1,394,780

1,405,172

2021 REPORT & ACCOUNTS

| 307

36.Financial liabilities held for trading

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Short selling securities

3,625

14,205

Trading derivatives (note 23)

Swaps

217,587

253,983

Options

1,478

159

Embedded derivatives

6,365

4,426

Forwards

2,186

6,078

227,616

264,646

231,241

278,851

Level 1

—

218

Level 2

221,040

257,275

Level 3

10,201

21,358

As referred in IFRS 13, financial instruments are measured according to the levels of valuation described in note 49.

The balance Financial liabilities held for trading includes, as at 31 December 2021, the embedded derivatives valuation

separated from the host contracts in accordance with the accounting policy presented in note 1C.5. in the amount of

Euros 6,365,000 (31 December 2020: Euros 4,426,000). This note should be analysed together with note 23.

37.Financial liabilities designated at fair value through profit or loss

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Deposits from customers

—

258,528

Certificates

961,730

678,860

Debt securities at fair value through profit and loss

Medium term notes (MTNs)

620,048

662,016

Accruals

—

620,048

662,017

1,581,778

1,599,405

2021 REPORT & ACCOUNTS

308 |

As at 31 December 2021, the analysis of Debt securities at fair value through profit and loss, is as follows:

(Thousands of euros)

Issue

date

Maturity

date

Interest rate

Nominal

value

Book

value

Banco Comercial Português:

Millennium Cabaz 3 Ações-Smtn Sr13

June, 2018

June, 2023

Indexed to portfolio of 3

83,394

82,767

Bcp Tit Div Millenn Cabaz 3Acoes-Smtn Sr20

September, 2018

September, 2023

Indexed to portfolio of 3

28,707

28,458

Bcp Tit Divida MillennCabaz 3 Ações-Smtn 25

December, 2018

December, 2023

Indexed to portfolio of 3

94,908

95,611

Bcp Rend Ações Europ Cupão Min Autoc Smtn Sr 32

February, 2019

February, 2022

Indexed to portfolio of 3

8,040

8,167

Bcp Cabaz 3 Ações Fevereiro 2024 - Smtn Sr 31

February, 2019

February, 2024

Indexed to portfolio of 3

73,620

73,476

Bcp Ações Europa Rend Min Aut Iii19 Smtn 34

March, 2019

March, 2022

Indexed to portfolio of 3

5,630

5,614

Bcp Tit Div Mill Cabaz 3 Ações 8Abr24 Smtn Sr 35

April, 2019

April, 2024

Indexed to portfolio of 3

67,285

66,961

Bcp Tit Div Mill Cabaz 4 Ações Smtn Sr 38

June, 2019

June, 2024

Indexed to portfolio of 4

84,000

85,198

Bcp Tit Div Millennium Cabaz 5 Ac Smtn 42

July, 2019

July, 2024

Indexed to portfolio of 5

77,531

77,763

Bcp Tit Div Millennium Cabaz 5 Ac Smtn 44

December, 2019

December, 2024

Indexed to portfolio of 5

96,555

96,033

620,048

As at 31 December 2021, the analysis of Debt securities at fair value through profit and loss, is as follows:

(Thousands of euros)

2021

Up to

3 months

3 months to

6 months

6 months to

1 year

1 year to

5 years

Over 5

years

Total

Certificates

—

961,730

Debt securities at fair value

through profit and loss

MTNs

13,781

—

606,267

—

620,048

13,781

—

606,267

961,730

1,581,778

As at 31 December 2020, the analysis of this balance, by remaining period, is as follows:

(Thousands of euros)

2020

Up to

3 months

3 months to

6 months

6 months to

1 year

1 year to

5 years

Over 5

years

Total

Deposits from customers

96,517

158,123

2,660

1,228

—

258,528

Certificates

—

678,860

Debt securities at fair value

through profit and loss

MTNs

1,933

4,879

7,790

647,414

—

662,016

98,450

163,002

10,450

648,642

678,860

1,599,404

2021 REPORT & ACCOUNTS

| 309

38.Provisions

This balance is analysed as follows:

(Thousands of euros)

2021

2020

(restated)

Provision for guarantees and other commitments (note 21)

110,649

103,830

Technical provisions for the insurance activity - For direct insurance and reinsurance accepted:

Unearned premiums

—

5,774

Life insurance

—

2,020

For participation in profit and loss

—

104

Other technical provisions

—

25,922

Other provisions for liabilities and charges

348,095

207,691

458,744

345,341

Changes in Provisions for guarantees and other commitments are analysed as follows:

(Thousands of euros)

2021

2020

Balance on 1 January

103,830

116,560

Other transfers (note 21)

(1,651)

(14,885)

Charge for the year (note 13)

44,414

43,204

Reversals for the year (note 13)

(36,278)

(39,986)

Exchange rate differences

334

(1,063)

Balance at the end of the year

110,649

103,830

As at 31 December 2020, the balance Other transfers included the amount of Euros 14,885,000 corresponding to

provisions for guarantees and other commitments, which was transferred to impairment for credit risks due the

conversion of guarantees granted into loans and advances to customers.

Changes in Other provisions for liabilities and charges are analysed as follows:

(Thousands of euros)

2021

2020

(restated)

Balance on 1 January

207,691

140,777

Transfers resulting from changes in the Group's structure

(30)

(50)

Transfers to Impairment of investments in associates (Banco Millennium Atlântico, S.A.) (note 25)

(22,300)

—

Other transfers

4,596

Charge of the year for restructuring costs (note 7)

84,152

—

Charge for the year (note 13)

651,156

238,181

Reversals for the year (note 13)

(16,566)

(3,107)

Amounts charged-off

(135,506)

(19,750)

Allocation to loan's portfolio (note 21)

(443,296)

(147,245)

Exchange rate differences

18,198

(1,156)

Balance at the end of the year

348,095

207,691

2021 REPORT & ACCOUNTS

310 |

The Other provisions for liabilities and charges were based on the probability of occurrence of certain contingencies

related to risks inherent to the Group's activity, being reviewed at each reporting date in order to reflect the best

estimate of the amount and respective probability of payment.

This balance includes provisions for lawsuits, frauds and tax contingencies. As at 31 December 2021, the provisions

constituted to cover tax contingencies totalled Euros 37,524,000 (31 December 2020: Euros 62,720,000) and are

associated, essentially, to contingencies related to VAT and Stamp Duty.

As at 31 December 2020 this balance also included provisions for contingencies in the sale of Millennium Bank (Greece)

in the amount of Euros 23,507,000. During the first semester of 2021, a final indemnity agreement was reached

regarding a compensation payable to Piraeus Bank, S.A. (Greece), resulting in a payment of Euros 9,045,000 (including

expenses), with the remaining amount of Euros 14,462,000 being reverted in results.

There are provisions for liabilities and charges recorded for ongoing sale processes of corporate restructuring funds.

In 2021, the Bank's Board of Directors approved in April the employee reduction plan. The decision was taken based on

a thorough analysis of needs and existing capacity, considering the specifics of the Bank, the changes in behaviour and

needs of customers, the impact of new technologies on business models and processes, as well as the developments

that are expected for the Bank.

The implementation of this plan started in mid-June 2021, having been contacted throughout the 3rd quarter all

employees covered by the program, which included early retirements and terminations. For diverse reasons, the

effective departure of some Employees was agreed for dates during the first half of 2022.

In view of the initiatives that had already been developed on 30 June 2021, the Bank considered that the requirements

defined in IAS 37 - Provisions, Contingent Liabilities and Contingent Assets for the recognition of restructuring costs in

its accounts for the first half of 2021 were met. Thus, during the first semester of 2021, was recorded in personnel

costs, a provision for restructuring costs in the amount of Euros 81,373,000, which was reinforced in December in the

amount of Euros 2,779,000, which makes a total of Euros 84,152,000 in 2021 (note 7). As at 31 December 2021, the

balance of the provision for restructuring costs amounts to Euros 4,692,000 (Euros 84,152,000 reflected in balance

Charge of the year for restructuring cost and Euros 79,460,000 in balance Amounts charged-off), of which Euros

2,297,000 refer to agreements already concluded with some employees whose effective departures will occur during

the first half of 2022 and Euros 2,395,000 refer to future costs with the health protection of former Employees, who

left the Bank as part of the employees reduction process developed in 2021.

Provisions for legal risk related to foreign currency-indexed mortgage loans in Bank Millennium (Poland)

As at 31 December 2021, the Loans and advances to customers portfolio in CHF has a gross amount of Euros

2,817,504,000 (31 December 2020: Euros 3,047,083,000).

As described in note 57, as at 31 December 2021, the provisions estimated by Bank Millennium to address the legal risk

related to foreign currency-indexed mortgage loans amount to Euros 727,026,000 (PLN 3,332,614,000), of which Euros

636,309,000 (PLN 2,916,778,000) are presented under assets, as a deduction from the gross amount of the loan

portfolio in CHF (note 21) and Euros 90,716,000 (PLN 415,835,000) are presented under Provisions.

With reference to 31 December 2020, the provisions estimated by Bank Millennium to address the legal risk related to

foreign currency-indexed mortgage loans amounted to Euros 210,522,000 (PLN 960,046,000), of which Euros 16,510,000

(PLN 75,291,000) were accounted for in Provisions and Euros 194,012,000 (PLN 884,755,000) were deducted to the gross

amount of the loan portfolio in CHF (note 21). As described in note 59, this amount includes Euros 51,691,000 (PLN

435,755,000) resulting from the changes occurred in accounting policies from IAS 37 to IFRS 9. Under this scope, the

Balance on 1 January 2020 was restated in Euros 50,160,000 (PLN 213,271,000).

The variation in the level of provisions or concrete losses will depend on the final court decisions about each case and

on the number of court cases.

2021 REPORT & ACCOUNTS

| 311

39.Other liabilities

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Interests and other amounts payable

148,522

142,747

Operations to be settled - foreign, transfers and deposits

134,996

94,594

Credit insurance received and to accrued

72,075

79,322

Holidays, subsidies and other remuneration payable

51,841

54,645

Transactions on securities to be settled

39,979

51,158

Public sector

35,460

32,292

Creditors

Rents to pay

211,345

238,868

Deposit account and other applications

58,390

38,701

Suppliers

39,350

31,718

From factoring operations

32,113

40,045

For futures and options transactions

14,356

6,852

Liabilities not covered by the Group Pension Fund - amounts payable by the Group

6,389

14,481

Associated companies

106

For direct insurance and reinsurance operations

—

12,636

Other creditors

Residents

27,107

30,691

Non-residents

60,394

55,953

Deferred income

9,543

8,593

Other administrative costs payable

4,133

4,438

Other sundry liabilities

170,884

165,820

1,116,983

1,103,652

The balance Liabilities not covered by the Group Pension Fund - amounts payable by the Group includes the amount of

Euros 4,143,000 (31 December 2020: Euros 4,153,000) related to the actual value of benefits attributed associated with

mortgage loans to employees, retirees and former employees.

The balance Amounts payable on trading activity includes amounts payable within 3 business days of stock exchange

operations.

The Group has several operating leases for properties, being registered in the item Rents to pay the amount of lease

liabilities recognised under IFRS 16, as described in the accounting policy 1 H. The analysis of this balance, by maturity,

is as follows:

(Thousands of euros)

2021

2020

Until 1 year

22,250

25,305

1 to 5 years

82,181

92,175

Over 5 years

114,296

130,552

218,727

248,032

Accrued costs recognised in Net interest income

(7,382)

(9,164)

211,345

238,868

2021 REPORT & ACCOUNTS

312 |

40.Share capital, Preference shares and Other equity instruments

As at 31 December 2021, the Bank's share capital amounts to Euros 4,725,000,000 and is represented by 15,113,989,952

nominative book-entry shares without nominal value, fully subscribed and paid up.

As at 31 December 2021, the Share premium amounts to Euros 16,470,667.11, corresponding to the difference between

the issue price (Euros 0.0834 per share) and the issue value (Euros 0.08 per share) determined under the scope of the

Exchange Offer occurred in June 2015.

As at 31 December 2021, the Other equity instruments amounts to Euros 400,000,000 and corresponds to 2,000

subordinated perpetual bonds (Additional Tier 1), issued on 31 January 2019, with a nominal value of Euros 200,000

each. This issue was classified as an equity instrument in accordance with the specific rules of IAS 32 and accounting

policy 1E. This operation without fixed term has the option of early repayment by the Bank as from the end of the 5th

year, and an annual interest rate of 9.25% during the first 5 years. As an instrument classified as AT1, the corresponding

interest payment is decided by the Bank at its discretion and is still subject to compliance with a set of conditions,

including compliance with the combined requirement of capital reserve and the existence of Distributable Funds in

sufficient amount. The payment of interest may also be cancelled by imposition of the competent authorities.

As at 31 December 2021, the shareholders who individually or jointly hold 2% or more of the capital of the Bank, are

the following:

Shareholder

number

of shares

% share

capital

% voting

rights

Fosun Group - Chiado (Luxembourg) S.a.r.l. held by Fosun International Holdings Ltd

4,525,940,191

29.95%

Sonangol - Sociedade Nacional de Combustíveis de Angola, EP, directly

2,946,353,914

19.49%

BlackRock, Inc. (*)

404,590,600

2.68%

EDP Pension Fund (**)

311,616,144

2.06%

Total Qualified Shareholdings

8,188,500,849

54.18%

(*) In accordance with the announcement on 30 April 2021 (last information available).

(**) Allocation in accordance with Art. 20 (1.f) of the Portuguese Securities Code.

41.Legal and statutory reserves

Under the Portuguese legislation, the Bank is required to annually set-up a legal reserve equal to a minimum of 10% of

annual profits until the reserve equals the share capital, or until the sum of the free reserves constituted and the

retained earnings, if higher. Such reserve is not normally distributable. In accordance with the proposal for the

appropriation of net income for the 2020 financial year approved at the General Shareholders' Meeting held on 20 May

2021, the Bank increased its legal reserves in the amount of Euros 5,064,000. Thus, as at 31 December 2021 the Legal

Reserves amount to Euros 259,528,000 (31 December 2020: Euros 254,464,000).

In accordance with the current Portuguese legislation, the Group companies must set-up annually a reserve with a

minimum percentage between 5 and 20% of their net annual profits depending on the nature of their economic activity

and are recognised in Other reserves and retained earnings in the Bank's consolidated financial statements (note 43).

42.Treasury shares

This balance is analysed as follows:

2020

Net book value

(Euros '000)

Number of

securities

Average book

value (Euros)

Banco Comercial Português, S.A. shares

323,738

0.12

2021 REPORT & ACCOUNTS

| 313

As at 31 December 2021, Banco Comercial Português, S.A. does not hold treasury shares and did not purchase or sold

own shares during the period. However, as at 31 December 2020, this balance included 323,738 shares owned by

clients. Considering that, for some of these clients there is evidence of impairment, the shares of the Bank owned by

these clients were considered as treasury shares, and, in accordance with the accounting policies, deducted to equity.

The own shares held by the companies included in the consolidation perimeter are within the limits established by the

Bank's by-laws and by the Commercial Companies Code.

As at 31 December 2021, regarding treasury shares owned by associated companies of the BCP Group, Millenniumbcp

Ageas Grupo Segurador, S.G.P.S., S.A. owns 142,601,002 BCP shares in the amount Euros 20,078,000 (31 December

2020: Euros 17,568,000), according to note 51.

43.Reserves and retained earnings

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Fair value changes - Gross amount

Financial assets at fair value through other comprehensive income (note 23)

Debt instruments (*)

8,696

205,592

Equity instruments

(30,242)

(38,366)

Of associated companies and other changes

39,968

42,685

Cash-flow hedge

(100,394)

265,487

From financial liabilities designated at fair value through profit or loss related to changes in own

credit risk

245

593

(81,727)

475,991

Fair value changes - Tax

Financial assets at fair value through other comprehensive income

Debt instruments

(12,426)

(60,662)

Equity instruments

6,055

6,581

Cash-flow hedge

26,330

(83,698)

From financial liabilities designated at fair value through profit or loss related to changes in own

credit risk

(77)

(186)

19,882

(137,965)

(61,845)

338,026

Exchange differences arising on consolidation

Bank Millennium, S.A.

(76,542)

(70,614)

BIM - Banco International de Moçambique, S.A.

(162,561)

(229,851)

Banco Millennium Atlântico, S.A.

(155,310)

(172,450)

Others

2,311

2,403

(392,102)

(470,512)

Application of IAS 29

Effect on equity of Banco Millennium Atlântico, S.A.

36,571

37,611

Others

(3,965)

32,606

33,646

Other reserves and retained earnings

1,001,645

741,237

580,304

642,397

(*) Includes the effects arising from the application of hedge accounting.

2021 REPORT & ACCOUNTS

314 |

The fair value changes correspond to the accumulated changes of the Financial assets at fair value through other

comprehensive income and Cash flow hedge, in accordance with the accounting policy presented in note 1 C.

During 2021, the changes occurred in Fair value changes - Gross amount, excluding the effect of hedge accounting and

changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as

follows:

(Thousands of euros)

2021

Balance as at

1 January

Fair value

changes

Fair value

hedge

adjustment

Impairment in

profit or loss

Disposals

Balance as at

31 December

Financial assets at fair value through

other comprehensive income (nota 23)

Debt instruments

Debt securities - Portuguese public

issuers

90,611

(49,191)

37,417

920

(38,377)

41,380

Others

114,981

(176,982)

54,546

3,706

(28,935)

(32,684)

205,592

(226,173)

91,963

4,626

(67,312)

8,696

Equity instruments

(38,366)

1,231

—

6,893

(30,242)

Associated companies and others

Millenniumbcp Ageas

36,560

(6,232)

—

30,328

Others

6,125

3,515

—

9,640

42,685

(2,717)

—

39,968

209,911

(227,659)

91,963

4,626

(60,419)

18,422

The changes occurred, during 2020, in Fair value changes - Gross amount, excluding the effect of hedge accounting and

changes in own credit risk associated with financial liabilities at fair value through profit or loss, are analysed as

follows:

(Thousands of euros)

2020

Balance as at

1 January

Fair value

changes

Fair value

hedge

adjustment

Impairment in

profit or loss

Disposals

Balance as at

31 December

Financial assets at fair value through

other comprehensive income (nota 23)

Debt instruments

Debt securities - Portuguese public

issuers

39,110

26,390

79,604

1,824

(56,317)

90,611

Others

39,739

109,522

(13,710)

8,536

(29,106)

114,981

78,849

135,912

65,894

10,360

(85,423)

205,592

Equity instruments

(33,913)

(9,794)

—

5,341

(38,366)

Associated companies and others

Millenniumbcp Ageas

26,268

10,292

—

36,560

Others

2,937

3,188

—

6,125

29,205

13,480

—

42,685

74,141

139,598

65,894

10,360

(80,082)

209,911

The item Disposals refers to the derecognition of debt securities and equity instruments at fair value through other

comprehensive income.

2021 REPORT & ACCOUNTS

| 315

44.Non-controlling interests

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Fair value changes

Debt instruments

(77,625)

29,268

Equity instruments

2,993

3,066

Cash-flow hedge

(41,248)

(4,860)

Other

(115,876)

27,484

Deferred taxes

Debt instruments

14,704

(5,543)

Equity instruments

(568)

(588)

Cash-flow hedge

7,837

923

21,973

(5,208)

(93,903)

22,276

Exchange differences arising on consolidation

(181,738)

(212,897)

Actuarial losses (net of taxes)

435

Other reserves and retained earnings

1,217,878

1,355,528

942,672

1,164,966

The balance Non-controlling interests is analysed as follows:

(Thousands of euros)

Balance Sheet

Income Statement

2021

2020

2021

2020

Continuing operations

Bank Millennium Group

729,040

994,741

(145,672)

2,554

BIM - Banco International de Moçambique Group

186,578

136,514

31,837

22,262

Other subsidiaries

27,054

30,635

202

(136)

942,672

1,161,890

(113,633)

24,680

Discontinued or discontinuing operations

BIM - Banco International de Moçambique Group (*)

—

3,076

543

673

942,672

1,164,966

(113,090)

25,353

(*) Corresponds to the non-controlling interests of SIM - Seguradora International de Moçambique, S.A.R.L., entity considered a

discontinued operation in December 2021.

2021 REPORT & ACCOUNTS

316 |

The following table presents a summary of financial information for the main subsidiaries included in this balance,

prepared in accordance with IFRS. The information is presented before inter-company eliminations:

(Thousands of euros)

Bank Millennium Group

BIM - Banco International

de Moçambique Group

2021

2020

(restated)

2021

2020

Net profit for the year

(291,927)

5,119

95,566

66,823

Net profit for the year attributable to the shareholders

(146,255)

2,565

63,729

44,561

Net profit for the year attributable to non-controlling interests

(145,672)

2,554

31,837

22,262

Other comprehensive income attributable to the shareholders

(120,143)

(57,098)

67,178

(79,451)

Other comprehensive income attributable to non-controlling interests

(119,663)

(56,871)

34,215

(39,668)

Total comprehensive income

(531,733)

(108,850)

196,959

(52,296)

Balance sheet

Financial assets

22,101,264

20,869,151

2,339,401

1,854,623

Non-financial assets

568,059

472,161

187,306

179,755

Financial liabilities

(20,581,439)

(18,819,580)

(1,900,844)

(1,529,173)

Non-financial liabilities

(626,847)

(528,228)

(66,959)

(93,270)

Equity

1,461,037

1,993,504

558,904

411,935

Equity attributed to the shareholders

731,997

998,763

372,708

274,701

Equity attributed to the non-controlling interests

729,040

994,741

186,196

137,234

Cash flows arising from:

operating activities

608,072

(688,025)

90,046

49,472

investing activities

(121,421)

446,415

57,945

(13,170)

financing activities

(97,068)

(233,436)

(85,563)

(23,464)

Net increase / (decrease) in cash and equivalents

389,583

(475,046)

62,428

12,838

Dividends paid during the year:

attributed to the shareholders

—

31,744

44,965

attributed to the non-controlling interests

—

15,859

22,463

—

47,603

67,428

2021 REPORT & ACCOUNTS

| 317

45.Guarantees and other commitments

This balance is analysed as follows:

(Thousands of euros)

2021

2020

Guarantees granted

Guarantees

3,957,973

3,958,676

Stand-by letter of credit

58,536

56,990

Open documentary credits

268,399

251,221

Bails and indemnities

136,145

137,135

4,421,053

4,404,022

Commitments to third parties

Irrevocable commitments

Term deposits contracts

8,760

—

Irrevocable credit lines

4,762,539

4,955,454

Securities subscription

70,017

75,362

Other irrevocable commitments

125,112

117,175

Revocable commitments

Revocable credit lines

5,437,681

5,327,914

Bank overdraft facilities

1,063,309

982,992

Other revocable commitments

133,354

170,206

11,600,772

11,629,103

Guarantees received

29,361,511

27,133,779

Commitments from third parties

13,567,068

12,947,778

Securities and other items held for safekeeping

80,154,791

78,055,537

Securities and other items held under custody by the Securities Depository Authority

92,350,151

83,866,357

Other off-balance sheet accounts

129,608,603

125,337,843

The guarantees granted by the Group may be related to loans transactions, where the Group grants a guarantee in

connection with a loan granted to a client by a third entity. According to its specific characteristics it is expected that

some of these guarantees expire without being executed and therefore these transactions do not necessarily represent

a cash-outflow. The estimated liabilities are recorded under provisions (note 38).

Stand-by letters and open documentary credits aim to ensure the payment to third parties from commercial deals with

foreign entities and therefore financing the shipment of the goods. Therefore, the credit risk of these transactions is

limited since they are collateralised by the shipped goods and are generally short-term operations.

Irrevocable commitments are non-used parts of credit facilities granted to corporate or retail customers. Many of these

transactions have a fixed term and a variable interest rate and therefore the credit and interest rate risk are limited.

The financial instruments accounted as Guarantees and other commitments are subject to the same approval and

control procedures applied to the credit portfolio, namely regarding the analysis of objective evidence of impairment,

as described in the accounting policy in note 1.C. The maximum credit exposure is represented by the nominal value

that could be lost related to guarantees and commitments undertaken by the Group in the event of default by the

respective counterparties, without considering potential recoveries or collaterals.

2021 REPORT & ACCOUNTS

318 |

46.Assets under management and custody

In accordance with the no. 4 of the 29th article of Decree-Law 252/2003 of 17 October, which regulates collective

investment organisms, the funds managing companies together with the custodian Bank of the Funds, are jointly

responsible to all the funds investors, for the compliance of all legal obligations arising from the applicable Portuguese

legislation and in accordance with the regulations of the funds. The total value of the funds managed by the Group

companies is analysed as follows:

(Thousands of euros)

2021

2020

Banco Comercial Português, S.A. (*)

3,866,341

2,901,172

Banque Privée BCP (Suisse) S.A.

—

1,422,503

Interfundos Gestão de Fundos de Investimento Imobiliários, S.A.

763,075

809,501

Millennium TFI S.A.

1,143,117

1,001,679

5,772,533

6,134,855

(*) Corresponds to the assets portfolio that are currently monitored and controlled by the business area as being managed by the Bank.

The Group provides custody, trustee, corporate administration, investment management and advisory services to third

parties, which involve the Group making allocation and purchase and sale decisions in relation to a wide range of

financial instruments. For certain services are set objectives and levels of return for assets under management and

custody. There is no capital or profitability guaranteed by the Bank in these assets. Those assets held in a fiduciary

capacity are not included in the financial statements.

The assets under management and custody are analysed as follows:

(Thousands of euros)

2021

2020

Assets under deposit

74,410,897

70,143,736

Wealth management

3,866,341

3,325,516

Investment funds

1,906,192

2,809,339

80,183,430

76,278,591

47.Transfers of assets

The Group performed a set of transactions of sale of financial assets (namely loans and advances to customers) for

Funds specialized in the recovery of loans. These funds take the responsibility for management of the borrower

companies or assets received as collateral with the objective of ensuring a pro-active management through the

implementation of plans to explore/increase the value of the companies/assets.

The specialized funds in credit recovery that acquired the financial assets are closed funds, in which the holders of the

participation units have no possibility to request the reimbursement of its participation units throughout the useful life

of the Fund. These participation units are held by several banks, which are the sellers of the loans, in percentages that

vary through the useful life of the Funds, ensuring however that, separately, none of the banks hold more than 50% of

the capital of the Fund.

The Funds have a specific management structure (General Partner), fully independent from the assignor banks and that

is selected on the date of establishment of the Fund. The management structure of the Fund has as main

responsibilities to: (i) determine the objective of the Fund and (ii) administrate and manage exclusively the Fund,

determining the objectives and investment policy and the conduct in management and business of the Fund. The

management structure is remunerated through management commissions charged to the Funds.

These funds (in which the Group holds minority positions) establish companies in order to acquire the loans to the

banks, which are financed through the issuance of senior and junior securities. The value of the senior securities fully

subscribed by the Funds that hold the share capital match the fair value of the asset sold, determined in accordance

with a negotiation based on valuations performed by both parties.

2021 REPORT & ACCOUNTS

| 319

The value of the junior securities is equivalent to the difference between the fair value that was based on the valuation

of the senior security and the value of the transferred receivables. These junior securities, being subscribed by the

Group, will entitle the Group to a contingent positive value if the value of the assets transferred exceeds the amount of

the senior tranches plus the remuneration on them. Thus, considering these junior assets reflect a difference between

the valuations of the assets sold based on the appraisals performed by independent entities and the negotiation

between the parties, the Group performs the constitution of impairment losses for all of them.

Therefore, as a result of the transfer of assets occurred operations, the Group subscribed:

- Senior securities (participation units) of the funds, for which the cash-flows arise mainly from a set of assets

transferred from the participant banks. These securities are booked in Financial assets not held for trading mandatorily

at fair value through profit or loss portfolio and are accounted for at fair value based on the last available Net assets

value (NAV), as disclosed by the Management companies and audited at year end, still being analysed by the Bank;

- Junior securities (with higher subordination degree) issued by the Portuguese law companies held by the funds and

which are fully provided to reflect the best estimate of impairment of the financial assets transferred.

Within this context, not withholding control but maintaining an exposure to certain risks and rewards, the Group, in

accordance with IFRS 9 3.2 performed an analysis of the exposure to the variability of risks and rewards in the assets

transferred, before and after the transaction, having concluded that it does not hold substantially all the risks and

rewards. Considering that it does not hold control and does not exercise significant influence on the funds or

companies' management, the Group performed, under the scope of IAS IFRS 9 3.2, the derecognition of the assets

transferred and the recognition of the assets received.

The results are calculated on the date of transfer of the assets. During 2021 and 2020, no credits were sold to corporate

restructuring funds.

The amounts accumulated as at 31 December 2021 and 2020, related to these operations, are analysed as follows:

(Thousands of euros)

Assets

transferred

Net assets

transferred

Received

value

Net gains

/ (losses)

Fundo Recuperação Turismo FCR (a)

304,400

268,318

294,883

26,565

Fundo Reestruturação Empresarial FCR (b)

84,112

82,566

83,212

646

FLIT-PTREL (c)

577,803

399,900

383,821

(16,079)

Fundo Recuperação FCR (b)

343,266

243,062

232,267

(10,795)

Fundo Aquarius FCR (c)

132,635

124,723

132,635

7,912

Discovery Real Estate Fund (c)

211,388

152,155

138,187

(13,968)

Fundo Vega FCR (d)

113,665

113,653

109,599

(4,054)

1,767,269

1,384,377

1,374,604

(9,773)

The activity segments are as follows: a) Tourism; b) Diversified; c) Real estate and tourism; and d) Property.

2021 REPORT & ACCOUNTS

320 |

As at 31 December 2021, the assets received under the scope of these operations are comprised of:

(Thousands of euros)

2021

Senior securities

Junior securities

Participation

units

(note 23)

Capital

supplies

(note 31)

Capital

supplementary

contributions

Total

Fundo Recuperação Turismo FCR

Gross value

278,385

33,598

—

311,983

Impairment and other fair value adjustments

(92,482)

(33,598)

—

(126,080)

185,903

—

185,903

Fundo Reestruturação Empresarial FCR

Gross value

60,963

—

33,280

94,243

Impairment and other fair value adjustments

(36,415)

—

(33,280)

(69,695)

24,548

—

24,548

FLIT-PTREL

Gross value

250,662

38,154

—

288,816

Impairment and other fair value adjustments

(31,492)

(38,154)

—

(69,646)

219,170

—

219,170

Fundo Recuperação FCR

Gross value

188,771

82,617

—

271,388

Impairment and other fair value adjustments

(125,941)

(82,617)

—

(208,558)

62,830

—

62,830

Fundo Aquarius FCR

Gross value

120,162

—

120,162

Impairment and other fair value adjustments

(16,497)

—

(16,497)

103,665

—

103,665

Discovery Real Estate Fund

Gross value

157,716

—

157,716

Impairment and other fair value adjustments

(8,244)

—

(8,244)

149,472

—

149,472

Fundo Vega FCR

Gross value

48,454

83,302

—

131,756

Impairment and other fair value adjustments

(7,241)

(83,302)

—

(90,543)

41,213

—

41,213

Total Gross value

1,105,113

237,671

33,280

1,376,064

Total impairment and other fair value adjustments

(318,312)

(237,671)

(33,280)

(589,263)

786,801

—

786,801

The supplementary capital contributions were initially recorded for the amount of Euros 33,280,000 and it was made a

negative fair value adjustment of the same amount.

The book value of these assets resulted from the last communication by the respective Management Company relating

the Global Net Asset Value (NAV) of the Fund which, as at 31 December 2021, corresponds to the NAV estimated with

reference to that date.

The following aspects should also be mentioned, among others: (i) for 3 funds the latest Audit Reports available (for 2

funds with reference to 31 December 2021 and for 1 fund with reference to 30 June 2021) do not include neither

reserves or emphasis; (ii) for 2 funds whose latest Limited Audit Reports available (with reference to 30 June 2021) and

the latest Audit Reports available (with reference to 31 December 2020) do not include reserves but includes an

emphasis related to the impacts and uncertainties of COVID-19 (for 1 fund); (iii) for 2 funds the latest Audit Reports

available (with reference to 31 December 2020) do not include reserves but includes an emphasis related to the

impacts and uncertainties of COVID-19 (for 1 fund); (iv) the funds are subject to supervision by the competent

authorities.

2021 REPORT & ACCOUNTS

| 321

As a result of updating the estimates of the NAV as at 31 December 2021, the Group recognised a negative impact of

Euros 34,791,000 under the balance Gains/(losses) in financial operations at fair value through profit or loss.

There is currently ongoing a sale process of funds/assets managed by ECS Capital (FLIT-PTREL, FRT and three assets/

property of FR). Following the receipt of two binding proposals, in October, negotiations are currently underway with

the selected investor regarding the final terms of the potential transaction and respective contractual documentation,

with no decision being taken by the Bank at this date as to its conclusion. In parallel, the Discovery Fund is being sold,

and no binding proposals have been received to the date.

As at 31 December 2020, the assets received under the scope of these operations are comprised of:

(Thousands of euros)

2020

Senior securities

Junior securities

Participation

units

(note 23)

Capital

supplies

(note 31)

Capital

supplementary

contributions

Total

Fundo Recuperação Turismo FCR

Gross value

277,351

33,134

—

310,485

Impairment and other fair value adjustments

(89,962)

(33,134)

—

(123,096)

187,389

—

187,389

Fundo Reestruturação Empresarial FCR

Gross value

65,609

—

33,280

98,889

Impairment and other fair value adjustments

(40,396)

—

(33,280)

(73,676)

25,213

—

25,213

FLIT-PTREL

Gross value

249,007

38,154

—

287,161

Impairment and other fair value adjustments

(24,898)

(38,154)

—

(63,052)

224,109

—

224,109

Fundo Recuperação FCR

Gross value

188,262

80,696

—

268,958

Impairment and other fair value adjustments

(106,978)

(80,696)

—

(187,674)

81,284

—

81,284

Fundo Aquarius FCR

Gross value

127,138

—

127,138

Impairment and other fair value adjustments

(11,012)

—

(11,012)

116,126

—

116,126

Discovery Real Estate Fund

Gross value

157,057

—

157,057

Impairment and other fair value adjustments

(4,193)

—

(4,193)

152,864

—

152,864

Fundo Vega FCR

Gross value

48,075

80,437

—

128,512

Impairment and other fair value adjustments

(7,084)

(80,437)

—

(87,521)

40,991

—

40,991

Total Gross value

1,112,499

232,421

33,280

1,378,200

Total impairment and other fair value adjustments

(284,523)

(232,421)

(33,280)

(550,224)

827,976

—

827,976

The supplementary capital contributions were initially recorded for the amount of Euros 33,280,000 and it was made a

negative fair value adjustment of the same amount.

2021 REPORT & ACCOUNTS

322 |

The book value of these assets resulted from the last communication by the respective Management Company relating

the Global Net Asset Value (NAV) of the Fund which, as at 31 December 2020, corresponds to the estimated NAV with

reference to that date. In addition, the valuation of these funds includes, among others, the following aspects: (i) these

are funds whose latest Limited Audit Reports available (with reference to 30 June 2020 for 5 funds), includes a related

emphasis such as the impacts and uncertainties of COVID-19 (for 4 funds), a limitation reserve whose potential negative

impact was considered in the valuation reflected in the consolidated accounts as of 31 December 2020 and to 30 June

2020 and the latest Audit reports available with reference to 31 December 2019 for 2 funds, which include an emphasis

related to COVID-19 impacts and uncertainties (for 1 fund) and without reservations; (ii) the funds are subject to

supervision by the competent authorities. Additionally, the Group has no intention to sell these assets for a lower value

than the respective NAV.

As a result of updating the estimates of the NAV as at 31 December 2020, the Group recognised a negative impact of

Euros 72,370,000 under the balance Gains/(losses) in financial operations at fair value through profit or loss.

The detail of the commitments of subscribed and unpaid capital for each of the corporate restructuring funds is

analysed as follows:

(Thousands of euros)

2021

2020

Corporate restructuring funds

Subscribed

capital

Capital

realized

Subscribed and

unpaid capital

Subscribed

capital

Capital

realized

Subscribed and

unpaid capital

Fundo Recuperação Turismo FCR

292,000

278,385

13,615

292,000

277,351

14,649

Fundo Reestruturação Empresarial FCR

51,212

46,486

4,726

55,115

50,028

5,087

FLIT-PTREL

244,337

—

242,889

—

Fundo Recuperação FCR

206,805

188,771

18,034

206,805

188,262

18,543

Fundo Aquarius FCR

134,801

120,162

14,639

142,627

127,138

15,489

Discovery Real Estate Fund

158,991

—

158,214

—

Fundo Vega FCR

49,616

46,968

2,648

49,616

46,601

3,015

1,137,762

1,084,100

53,662

1,147,266

1,090,483

56,783

In 31 December 2021, there are also additional subscription commitments for the funds FLIT-PTREL and Discovery, in

the amount of Euros 15,248,000 and Euros 1,107,000, respectively (31 December 2020: Euros 16,696,000 and Euros

1,884,000, respectively).

Additionally, are booked in Loans and advances to customer’s portfolio and in balances Guarantees granted and

Irrevocable credit lines, the following exposures and respective impairment, in relation to entities controlled by these

funds:

(Thousands of euros)

Items

2021

2020

Loans and advances to customers

110,786

146,252

Guarantees granted and irrevocable credit lines

41,244

40,792

Gross exposure

152,030

187,044

Impairment

(22,445)

(55,227)

Net exposure

129,585

131,817

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48. Relevant events occurred during 2021

Partnership for the insurance market in Mozambique and the sale of a shareholding in

Seguradora Internacional Moçambique, S.A.

As at 31 December 2021, BIM – Banco Internacional de Moçambique, SA (a bank incorporated under Mozambican law in

which BCP indirectly holds a stake of 66.69%) (“BIM”) formalized the entry into force of a long-term agreement with

Fidelidade – Companhia de Seguros, SA (“Fidelidade”), with a view to strengthening capabilities and expanding the

offer of insurance through the banking channel (bancassurance) in Mozambique.

Under this partnership, the possibility of which was provided for in the memorandum of understanding signed between

BCP and the Fosun Group in November 2016, BIM and Fidelidade also formalized the sale by BIM to Fidelidade of shares

representing 70% of the share capital and voting rights of Seguradora Internacional de Moçambique, SA (“SIM”), with

BIM maintaining approximately 22% of its share capital. BIM and Fidelidade also agreed call and put options with a view

to enabling Fidelidade to acquire additional shares, and BIM's shareholding, as a result of these options, may be

reduced to 9.9% of SIM's capital.

Under the long-term exclusive distribution agreement, BIM will promote the distribution of SIM insurance through the

banking channel, continuing to provide its customers with a wide range of competitive insurance products, which is

reinforced by the partnership with Fidelidade, an Insurance Group of reference.

Issue of subordinated notes

On 10 November 2021, Banco Comercial Português, S.A. (“BCP”) set the terms of a new issue of subordinated notes (the

“Notes”) under its Euro Note Programme. The Notes are expected to be eligible as Tier 2 own funds.

The issue will be in the aggregate amount of Euros 300 million, with a tenor of 10.5 years and the option of early

redemption by the Bank at any time during the six months between year 5 and year 5.5, a fixed annual interest rate of

4% during the first 5.5 years (corresponding to a spread of 4.065% (the “Spread”) over the 5-6 year mid-swap rate).

From year 5.5 to maturity the interest rate will be determined on the basis of the then applicable 5-year mid-swap rate

plus the Spread.

The Notes were placed with a very diversified group of European institutional investors.

The issue is part of BCP’s strategy of continuing optimization of its capital structure, reinforcement of own funds and

MREL (Minimum Requirements for Own Funds and Eligible Liabilities) eligible liabilities, as well as regularly accessing

the international capital markets.

Completion of the sale of Banque Privée BCP (Suisse) SA

Banco Comercial Português, S.A. (“BCP”) entered on 29 June 2021 into an agreement with Union Bancaire Privée, UBP

SA regarding the sale of the entire share capital of Banque Privée BCP (Suisse) SA (“Banque Privée”).

On 2 November 2021, the sale of the entire share capital of Banque Privée to Union Bancaire Privée, UBP SA has been

completed after obtaining the non-opposition by the competent local supervisory authorities and the satisfaction of the

remaining relevant conditions.

The amount received for the sale of Banque Privée’s share capital is CHF 113,210,965 reflecting the distribution of

dividends and the share capital reduction that have occurred in the meantime. Considering this amount, the transaction

has a (positive) impact on the consolidated results for the current year, on a pro forma basis as at 30 September 2021,

of approximately Euros 46 million and a positive impact on the consolidated CET1 ratio of 15 basis points and on total

capital of 17 basis points, confirming the amounts previously announced. The final price is still subject to adjustments

arising from the evolution of assets under management and the activity of Banque Privée BCP (Suisse) SA.

The sale of Banque Privée allows BCP Group to pursue its strategy of focusing resources and management on core

geographies, enhancing their development and thus creating value for stakeholders.

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Inaugural issue of social senior preferred notes

As at 29 September 2021, Banco Comercial Português, SA (“Millennium bcp” or “Bank”) has set the conditions for an

issue of social senior preferred debt securities under its Euro Note Programme, the first of this type to be carried out by

a Portuguese issuer.

The issue, in the amount of Euros 500 million, will have a tenor of 6.5 years, with an option for early redemption by the

Bank at the end of 5.5 years, an issue price of 99.527% and an interest rate of 1.75% per year for the first 5.5 years.

From the 5th year and a half, the interest rate will result from the sum of the 3-month Euribor with a spread of 2.00%

("Issue").

This will be the first issue carried out by the Bank in the ESG (Environmental, Social and Governance) segment, focusing

on the social component. Thus, an amount equivalent to the net proceeds of the Issue will be applied as a priority to

the financing and/or refinancing of loans granted by the Bank under the COVID-19 lines, under the terms of the Bank's

Green, Social and Sustainability Bond Framework, representing a clear demonstration of the commitment assumed by

Millennium bcp in supporting the economy, in particular in financing the micro and, small and medium-sized companies

most affected by the recent pandemic context.

The issue is part of the funding plan defined by the Bank within the scope of its Strategic Plan 2021-2024, specifically

aimed at meeting the MREL requirements (Minimum Requirements for Own Funds and Eligible Liabilities) and the

strategy of strengthening its presence in capital markets and broadening its investor base.

The transaction, which followed a successful roadshow, was placed with a very diversified group of European

institutional investors, many of which are dedicated to ESG investments, which indicates, on one hand, the market's

confidence in the Bank and, on the other, recognition of Millennium bcp's commitments in terms of sustainable

financing.

Notification by Banco de Portugal of its MREL requirements

Banco Comercial Português, S.A. ("BCP" or the "Bank") informs that it has been notified by Banco de Portugal, as the

national resolution authority, about the establishment of its minimum requirement for own funds and eligible liabilities

("MREL" or "Minimum Requirement for own funds and Eligible Liabilities") as decided by the Single Resolution Board.

MREL requirements aim to ensure that banks are provided with sufficient own funds and eligible liabilities to guarantee

their capacity to absorb losses and recapitalise in adverse scenarios, thus ensuring the continuity of their activity.

The resolution strategy applied continues to be that of a multiple point of entry ("MPE"), with three different BCP

Group resolution groups (in addition to the BCP resolution group, the resolution groups corresponding to (i) Bank

Millennium, S.A. and its subsidiaries and (ii) Banco Internacional de Moçambique S.A. and its subsidiaries).

The MREL requirements to be met by BCP, on a consolidated basis (taking as reference BCP’s resolution group, which is

composed of the Bank, Banco ActivoBank, S.A. and all the subsidiary companies of BCP apart from Bank Millennium S.A.

and Banco Internacional de Moçambique and their respective subsidiaries), from 1 January 2024 is of:

a.23.79% of the total risk exposure amount ("TREA") (to which adds further a combined buffer requirement

("CBR") of 3.5%, thus corresponding to total requirements of 27.29%); and

b.7.23% of the leverage ratio exposure measure ("LRE").

The Bank's compliance with these requirements must be ensured by 1 January 2024, with an interim target set at 1

January 2022, by which BCP must comply with a requirement of:

a.18.17% of TREA (to which adds a further 3.25% CBR requirement, thus corresponding to a total requirements of

21.42%); and

b.7.23% of the LRE.

No subordination requirements have been applied to the Bank.

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In accordance with the regulations in force, MREL requirements must be updated or reconfirmed annually, and

therefore these targets replace those previously set.

The MREL requirements, now communicated to the BCP resolution group described above, are in line with the 2021-24

Strategic Plan and are consistent with its ongoing funding plan, and based on the information available to date, the

compliance with the respective MREL requirements established for January 1, 2022, both as a percentage of the TREA

(also including the applicable CBR) and as a percentage of the LRE, are already ensured, considering the senior

preferred debt and subordinated debt (Tier 2) issues carried out in 2021.

2021 EU-Wide Stress Test Results

Banco Comercial Português, S.A. ("BCP") was subject to the 2021 EU-wide stress test conducted by the European

Banking Authority (EBA), in cooperation with the Bank of Portugal, the European Central Bank (ECB), and the European

Systemic Risk Board (ESRB).

BCP notes the announcements made today by the EBA on the EU-wide stress test and fully acknowledges the outcomes

of this exercise, comprising 50 banks that together represent around 70% of total banking assets in the European Union.

The 2021 EU-wide stress test does not contain a pass-fail threshold and instead is designed to be used as an important

source of information for the purposes of the SREP. The results will assist competent authorities in assessing BCP ability

to meet applicable prudential requirements under stressed scenarios.

The adverse stress test scenario was set by the ECB/ESRB and covers a three-year time horizon (2021-2023). The stress

test has been carried out applying a static balance sheet assumption as of December 2020, and therefore does not take

into account future business strategies and management actions and do not represent a forecast of BCP profits.

Detailed information on the results of BCP in the stress test is available on the EBA website (www.wba.europa.eu).

Considering the results of BCP, in the stress test, it should be highlighted the following:

–the application of the adverse scenario resulted in a reduction of 406 b.p. in the fully loaded CET1 capital ratio at

the end of 2023 versus the data as at December 2020 (which compares with an average reduction of 485 b.p. in the

universe of 50 banks submitted to this exercise);

–the application of the base scenario resulted in an increase of 163 b.p. in the fully loaded CET1 capital ratio at the

end of 2023 versus the data as at December 2020 (which compares with an increase of 78 b.p. in the universe of 50

banks submitted to this exercise).

Upgrade of deposits ratings by Moody’s to Baa2/Prime-2

Moody’s rating agency upgraded in one-notch BCP's deposits ratings from Baa3/Prime-3 to Baa2/Prime-2, driven by the

higher rating uplift for the deposits, stemming from the upgrade of Portugal’s sovereign bond rating. This upgrade and

the affirmation of the senior unsecured debt ratings of Ba1 reflect the reaffirmation of BCP’ BCA (Baseline Credit

Assessment) and Adjusted BCA, Moody's Advanced LGF (Loss Given Failure) analysis and unchanged moderate

government support assumptions for BCP.

The outlook on BCP's long-term deposit and senior unsecured debt ratings remains stable, reflecting Moody's view that

the bank's creditworthiness will be steady over the outlook horizon.

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Resolutions of the Annual General Meeting

Banco Comercial Português, S.A. held as at 20 May 2021, the Annual General Shareholders' Meeting, by exclusively

electronic means, with the participation of Shareholders holding 64.88% of the respective share capital, with the

following deliberations:

Item One – Approval of the management report, the individual and consolidated annual report, balance sheet and

financial statements of 2020, including the Corporate Governance Report;

Item Two – Approval of the proposal for the appropriation of profit regarding the 2020 financial year;

Item Three – Approval of a vote of trust and praise addressed to the Board of Directors, including to the Executive

Committee and to the Audit Committee and each one of their members, as well as to the Chartered Accountant and its

representative;

Item Four – Approval of the Dividend Policy;

Item Five – Approval of the remuneration policy of Members of Management and Supervisory Bodies;

Item Six – Approval of the policy for the selection and appointment of the statutory auditor or Audit Firm and well as

for the engagement of non-audit services that are not prohibited under the terms of the applicable legislation;

Item Seven – Re-appointment of Deloitte & Associados – Sociedade de Revisores Oficiais de Contas, S.A., as the Single

Auditor, that selected Mr. Paulo Alexandre de Sá Fernandes, ROC nr. 1456, to represent it, and of Mr. Jorge Carlos

Batalha Duarte Catulo, ROC nr. 992, as his alternate, during the triennial 2021/2023;

Item Eight – Re-appointment of Deloitte & Associados - Sociedade de Revisores Oficiais de Contas, S.A., to perform

functions of External in the triennial 2021/2023;

Item Nine – Approval of the renewal of the authorisation granted by Article 5 (1) of the Bank's Articles of Association;

Item Ten – Approval of the maintenance of the voting limitations foreseen in articles 25 and 26 of the Banks’s Articles

of Association;

Item Eleven – Approval of the acquisition and sale of own shares and bonds.

Amendments of terms of the Covered Bonds

On 23 March 2021, Banco Comercial Português, S.A. changed the conditions of the Covered Bonds with the ISIN

PTBIPGOE0061, having changed the maturity date from 18 May 2021 to 18 October 2024 and the extended maturity date

from 18 May 2022 to 18 October 2025. Regarding the Covered Bonds with the ISIN PTBCSFOE0024, the maturity date was

changed from 29 July 2021 to 29 October 2025 and the extended maturity date from 29 July 2022 to 29 October 2026.

Issue of senior preferred debt securities

On 5 February 2021, Banco Comercial Português, S.A. (Bank) has fixed the terms for a new issue of senior preferred

debt securities, under its Euro Note Programme. The issue, in the amount of Euros 500 million, will have a tenor of 6

years, with the option of early redemption by the Bank at the end of year 5, an issue price of 99.879% and an annual

interest rate of 1.125% during the first 5 years (corresponding to a spread of 1.55% over the 5-year mid-swap rate). The

annual interest rate for the 6th year was set at 3-month Euribor plus a 1.55% spread. The transaction was placed with a

very diversified group of European institutional investors.

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49.Fair value

Fair value is based on market prices, whenever these are available. If market prices are not available, as occurs

regarding many products sold to clients, fair value is estimated through internal models based on cash-flow discounting

techniques. Cash-flows for the different instruments sold are calculated according to its financial characteristics and

the discount rates used include both the market interest rate curve and the current conditions of the Bank's pricing

policy.

Thus, the fair value obtained is influenced by the parameters used in the evaluation model that have some degree of

judgment and reflects exclusively the value attributed to different financial instruments. However, it does not consider

prospective factors, as the future business evolution. Therefore, the values presented cannot be understood as an

estimate of the economic value of the Bank.

The main methods and assumptions used in estimating the fair value for the financial assets and financial liabilities are

presented as follows:

Cash and deposits at Central Banks and Loans and advances to credit institutions repayable on

demand

Considering the short term of these financial instruments, the amount in the balance sheet is a reasonable estimate of

its fair value.

Loans and advances to credit institutions, Deposits from credit institutions and Assets with

repurchase agreements

The fair value of these financial instruments is calculated discounting the expected principal and interest future cash

flows for these instruments, considering that the payments of the instalments occur in the contractually defined dates.

This update is made based on the prevailing market rate for the term of each cash flow plus the average spread of the

production of the most recent 3 months of the same. For the elements with signs of impairment, the net impairment of

these operations is considered as a reasonable estimate of their fair value, considering the economic valuation that is

realized in the determination of this impairment.

For resources from Central Banks, it was considered that the book value is a reasonable estimate of its fair value, given

the nature of operations and the associated short-term. The rate of return of funding with the European Central Bank is

-1% (ECB deposit rate - 50 bp) as at 31 December 2021 and 2020.

For the remaining loans and advances and deposits, the discount rate used reflects the current conditions applied by

the Bank on identical instruments for each of the different residual maturities (rates from the monetary market or from

the interest rate swap market).

Loans and advances to customers without defined maturity date

Considering the short maturity of these financial instruments, the conditions of the portfolio are similar to conditions

used at the date of the report. Therefore, the amount in the balance sheet is a reasonable estimate of its fair value.

Loans and advances to customers with defined maturity date

The fair value of these instruments is calculated by discounting the expected principal and interest future cash flows

for these instruments, considering that the payments of the instalments occur in the contractually defined dates. For

loans with signs of impairment, the net impairment of these operations is considered as a reasonable estimate of their

fair value, considering the economic valuation that is realized in the determination of this impairment.

The discount rate used is the one that reflects the current rates of the Bank for each of the homogeneous classes of this

type of instruments and with similar residual maturity. The discount rate includes the market rates for the residual

maturity date (rates from the monetary market or from the interest rate swap market) and the spread used at the date

of the report, which was calculated from the average production of the three most recent months compared to the

reporting date.

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328 |

Resources from customers and other loans

The fair value of these financial instruments is calculated by discounting the expected principal and interest future

cash flows for the referred instruments, considering that payments occur in the contractually defined dates. The

discount rate used reflects the current conditions applied by the Bank in similar instruments with a similar maturity.

The discount rate includes the market rates of the residual maturity date (rates of monetary market or the interest

rate swap market, at the end of the period) and the actual spread of the Bank. This was calculated from the average

production of the three most recent months compared to the reporting date.

The average discount rates for Loans and advances to credit institutions, Loans and advances to customers, Resources

from credit institutions and Resources from customers are analysed as follows:

Loans and advances to

credit institutions

Loans and advances to

customers

Resources from credit

institutions

Resources from customers

2021

2020

2021

2020

2021

2020

2021

2020

EUR

0.26%

0.53%

2.27%

1.84%

0.38%

0.17%

-0.21%

-0.17%

AOA

23.15%

n.a.

AUD

n.a.

0.42%

0.29%

CAD

n.a.

0.88%

0.59%

CHF

n.a.

2.47%

2.20%

n.a.

-0.32%

-0.37%

CNY

n.a.

2.19%

2.35%

DKK

n.a.

-0.20%

-0.12%

GBP

n.a.

3.19%

n.a.

0.47%

0.22%

HKD

n.a.

0.80%

0.43%

n.a.

0.02%

0.07%

MOP

n.a.

1.19%

0.37%

n.a.

0.28%

0.43%

MZN

14.78%

11.36%

17.96%

11.48%

n.a.

11.25%

6.39%

NOK

n.a.

1.33%

0.79%

PLN

2.11%

-0.13%

7.24%

4.51%

3.71%

0.10%

2.43%

0.10%

SEK

n.a.

0.29%

USD

0.60%

0.68%

2.70%

1.40%

0.41%

0.58%

-0.11%

0.05%

ZAR

7.24%

6.77%

n.a.

9.55%

n.a.

3.11%

1.79%

Financial assets and liabilities measured at fair value through profit or loss (except

derivatives), financial assets at fair value through other comprehensive income

These financial instruments are accounted for at fair value. Fair value is based on market prices ("Bid-price"), whenever

these are available. If market prices are not available, fair value is estimated through numerical models based on cash-

flow discounting techniques, using the market interest rate curve adjusted for factors associated, predominantly credit

risk and liquidity risk, determined in accordance with the market conditions and time frame.

Market interest rates are determined based on information released by the suppliers of financial content - Reuters and

Bloomberg - more specifically because of prices of interest rate swaps. The values for the very short-term rates are

obtained from similar sources but regarding interbank money market. The interest rate curve obtained is calibrated

with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are determined

by appropriate interpolation methods. The same interest rate curves are used in the projection of the non-

deterministic cash flows such as indexes.

When optionality is involved, the standard templates (Black-Scholes, Black, Ho and others) are used considering the

volatility areas applicable. Whenever there are no references in the market of sufficient quality or that the available

models do not fully apply to meet the characteristics of the financial instrument, specific quotations supplied by an

external entity are applied, typically a counterparty of the business.

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Financial assets measured at amortised cost - Debt securities

These financial instruments are accounted at amortised cost net of impairment. Fair value is based on market prices,

whenever these are available. If market prices are not available, fair value is estimated through numerical models

based on cash-flow discounting techniques, using the market interest rate curve adjusted for factors associated,

predominantly credit risk and liquidity risk, determined in accordance with the market conditions and time frame.

Hedging and trading derivatives

All derivatives are recorded at fair value. In case of derivative contracts that are quoted in organised markets their

market prices are used. As for derivatives traded "Over-the-counter", it is applied methods based on numerical cash-

flow discounting techniques and models for assessment of options considering variables of the market, particularly the

interest rates on the instruments in question, and where necessary, their volatilities.

Interest rates are determined based on information disseminated by the suppliers of financial content - Reuters and

Bloomberg - more specifically those resulting from prices of interest rate swaps. The values for the very short-term

rates are obtained from a similar source but regarding interbank money market. The interest rate curve obtained is

calibrated with the values of interest rate short-term futures. Interest rates for specific periods of the cash flows are

determined by appropriate interpolation methods. The interest rate curves are used in the projection of the non-

deterministic cash flows such as indexes.

Debt securities non subordinated issued and subordinated debt

For these financial instruments the fair value was calculated for components for which fair value is not yet reflected in

the balance sheet. Fixed rate remunerated instruments for which the Group adopts "hedge-accounting", the fair value

related to the interest rate risk is already recognised. For the fair value calculation, other components of risk were

considered, in addition to the interest rate risk already recorded, when applicable. The fair value is based on market

prices, whenever these are available. If market prices are not available, fair value is estimated through numerical

models based on cash-flow discounting techniques, using the market interest rate curve adjusted by associated factors,

predominantly credit risk and trading margin, the latter only in the case of issues placed on non-institutional customers

of the Group.

As original reference, the Group applies the curves resulting from the market interest rate swaps for each specific

currency. The credit risk (credit spread) is represented by an excess from the curve of interest rate swaps established

specifically for each term and class of instruments based on the market prices on equivalent instruments.

For own issued debts placed among non-institutional customers of the Group, one more differential was added

(commercial spread), which represents the margin between the financing cost in the institutional market and the cost

obtained by distributing the respective instrument in the owned commercial network.

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330 |

The average of the reference rates of the yield curve obtained from the market prices of the different currencies used

in the determination of the fair value of the issues is analysed as follows:

2021

2020

EUR

PLN

EUR

PLN

Placed in the institutional market

Subordinated

4.80%

—

5.53%

0.14%

Senior

2.33%

—

1.57%

—

Covered bonds

-0.08%

—

-0.03%

—

Placed in retail

Subordinated

—

1.9%

—

Senior and collateralised

0.12%

3.63%

-0.10%

0.84%

For debt securities, the fair value calculation focused on all the components of these instruments, as a result the

difference determined is a positive amount of Euros 11,616,000 (31 December 2020: a positive amount of Euros

20,513,000) and includes a payable amount of Euros 6,365,000 (31 December 2020: a payable amount of Euros

4,426,000) which reflects the fair value of embedded derivatives and are recorded in financial assets and liabilities held

for trading (note 23 and 36).

The following table presents the interest rates used in the definition of the interest rate curves of main currencies,

namely EUR, USD, GBP and PLN used to determine the fair value of the financial assets and liabilities of the Group:

2021

2020

EUR

USD

GBP

PLN

EUR

USD

GBP

PLN

1 day

-0.59%

0.11%

0.19%

1.99%

-0.55%

0.33%

0.09%

0.04%

7 days

-0.59%

0.14%

0.21%

1.99%

-0.54%

0.34%

0.09%

0.04%

1 month

-0.56%

0.14%

0.25%

2.13%

-0.54%

0.31%

0.11%

0.10%

2 months

-0.56%

0.16%

0.32%

2.28%

-0.53%

0.30%

0.11%

0.10%

3 months

-0.56%

0.21%

0.38%

2.44%

-0.52%

0.30%

0.12%

0.11%

6 months

-0.54%

0.33%

0.56%

2.74%

-0.49%

0.32%

0.15%

9 months

-0.51%

0.47%

0.76%

2.89%

-0.47%

0.34%

0.17%

0.15%

1 year

-0.49%

0.52%

0.89%

3.71%

-0.52%

0.19%

0.18%

0.14%

2 years

-0.3%

0.92%

1.2%

3.93%

-0.52%

0.20%

0.03%

0.21%

3 years

-0.15%

1.15%

1.3%

3.88%

-0.51%

0.24%

0.09%

0.32%

5 years

0.02%

1.34%

1.29%

3.74%

-0.46%

0.43%

0.19%

0.61%

7 years

0.13%

1.45%

1.24%

3.63%

-0.38%

0.65%

0.28%

0.83%

10 years

0.3%

1.56%

1.21%

3.54%

-0.27%

0.92%

0.40%

1.09%

15 years

0.49%

1.68%

1.18%

3.74%

-0.07%

1.18%

0.52%

1.47%

20 years

0.55%

1.74%

1.15%

3.86%

0.01%

1.31%

0.57%

1.57%

30 years

0.48%

1.72%

1.1%

3.86%

-0.03%

1.40%

0.57%

1.57%

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| 331

The following table shows the fair value of financial assets and liabilities of the Group, as at 31 December 2021:

(Thousands of euros)

2021

Fair value

through profit

or loss

Fair value

through other

comprehensive

income

Amortised

cost

Book value

Fair value

Assets

Cash and deposits at Central Banks

—

7,796,299

Loans and advances to credit institutions repayable

on demand

—

361,786

Financial assets at amortised cost

Loans and advances to credit institutions

—

453,213

411,867

Loans and advances to customers (i)

—

54,972,401

54,310,839

Debt securities

—

8,205,196

8,245,752

Financial assets at fair value through profit or loss

Financial assets held for trading

931,485

—

931,485

Financial assets not held for trading mandatorily

at fair value through profit or loss

990,938

—

990,938

Financial assets at fair value through

other comprehensive income

—

12,890,988

—

12,890,988

Hedging derivatives (ii)

109,059

—

109,059

2,031,482

12,890,988

71,788,895

86,711,365

86,049,013

Liabilities

Financial liabilities at amortised cost

Resources from credit institutions

—

8,896,074

8,897,337

Resources from customers (i)

—

69,560,227

69,553,730

Non subordinated debt securities issued (i)

—

2,188,363

2,199,979

Subordinated debt (i)

—

1,394,780

1,486,659

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

231,241

—

231,241

Financial liabilities designated

at fair value through profit or loss

1,581,778

—

1,581,778

Hedging derivatives (ii)

377,206

—

377,206

2,190,225

—

82,039,444

84,229,669

84,327,930

(i)- The book value includes the effect of the adjustments resulting from the application of hedge accounting;

(ii) - Includes a portion that is recognised in reserves in the application of accounting cash flow hedge.

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The following table shows the fair value of financial assets and liabilities of the Group, as at 31 December 2020:

(Thousands of euros)

2020 (restated)

Fair value

through profit

or loss

Fair value

through other

comprehensive

income

Amortised

cost

Book value

Fair value

Assets

Cash and deposits at Central Banks

—

5,303,864

Loans and advances to credit institutions repayable

on demand

—

262,395

Financial assets at amortised cost

Loans and advances to credit institutions

—

1,015,087

1,006,561

Loans and advances to customers (i)

—

52,022,357

51,616,636

Debt securities

—

6,234,545

6,320,581

Financial assets at fair value through profit or loss

Financial assets held for trading

1,031,201

—

1,031,201

Financial assets not held for trading mandatorily

at fair value through profit or loss

1,315,467

—

1,315,467

Financial assets at fair value through

other comprehensive income

—

12,140,392

—

12,140,392

Hedging derivatives (ii)

91,249

—

91,249

2,437,917

12,140,392

64,838,248

79,416,557

79,088,346

Liabilities

Financial liabilities at amortised cost

Resources from credit institutions

—

8,898,759

8,899,871

Resources from customers (i)

—

63,000,829

63,008,920

Non subordinated debt securities issued (i)

—

1,388,849

1,409,362

Subordinated debt (i)

—

1,405,172

1,419,565

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

278,851

—

278,851

Financial liabilities designated

at fair value through profit or loss

1,599,405

—

1,599,405

Hedging derivatives (ii)

285,766

—

285,766

2,164,022

—

74,693,609

76,857,631

76,901,740

(i) - The book value includes the effect of the adjustments resulting from the application of hedge accounting;

(ii) - Includes a portion that is recognised in reserves in the application of accounting cash flow hedge.

The Group classified the financial instruments recorded in the balance sheet at fair value in accordance with the

hierarchy established in IFRS 13. The fair value of financial instruments is determined using quotations recorded in

active and liquid markets, considering that a market is active and liquid whenever its stakeholders conduct transactions

on a regular basis giving liquidity to the instruments traded. When it is verified that there are no transactions that

regularly provide liquidity to the traded instruments, valuation methods and techniques are used to determine the fair

value of the financial instruments.

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Level 1 - With quotation in active market

In this category are included, in addition to financial instruments traded on a regulated market, bonds and units of

investment funds valued based on the prices disclosed through trading systems.

The classification of the fair value of level 1 is used when:

i) - There is a firm daily enforceable quotation for the financial instruments concerned, or;

ii) - There is a quotation available in market information systems that aggregate multiple prices of various stakeholders,

or;

iii) - Financial instruments have been classified in level 1, at least 90% of trading days in the year (at the valuation

date).

Level 2 - Valuation methods and techniques based on market data

Financial instruments, when there are no regular transactions in the active and liquid markets (level 1), are classified in

level 2, according to the following rules:

i) - Failure to comply with the rules defined for level 1, or;

ii) - They are valued based on valuation methods and techniques that use mostly observable market data (interest rate

or exchange rate curves, credit curves, etc.).

Level 2 includes over-the-counter derivative financial instruments contracted with counterparties with which the Bank

maintains collateral agreements (ISDAs with Credit Support Annex (CSA)), in particular with MTA (Minimum Transfer

Amount) which contributes to the mitigation of the counterparty credit risk, so that the CVA (Credit Value Adjustment)

component is not significant. In addition, derivative financial instruments traded in the over-the-counter market,

which, despite not having CSA agreements, the non-observable market data component (i.e. internal ratings, default

probabilities determined by internal models, etc.) incorporated in valuation of CVA is not significant in the value of the

derivative as a whole. In order to assess the significance of this component, the Bank defined a quantitative relevance

criterion and performed a qualitative sensitivity analysis on the valuation component that includes unobservable

market data.

Level 3 - Valuation methods and techniques based on data not observable in the market

If the level 1 or level 2 criteria are not met, financial instruments should be classified in level 3, as well as in situations

where the fair value of financial instruments results from the use of information not observable in the market, such as:

- financial instruments which are not classified as level 1 and which are valued using evaluation methods and

techniques without being known or where there is consensus on the criteria to be used, namely:

i) - They are valued using comparative price analysis of financial instruments with risk and return profile, typology,

seniority or other similar factors, observable in the active and liquid markets;

ii) - They are valued based on performance of impairment tests, using performance indicators of the underlying

transactions (e.g. default probability rates of the underlying assets, delinquency rates, evolution of the ratings, etc.);

iii) - They are valued based on NAV (Net Asset Value) disclosed by the management entities of securities/real estate/

other investment funds not listed on a regulated market.

Level 3 includes over-the-counter derivative financial instruments that have been contracted with counterparties with

which the Bank does not maintain collateral exchange agreements (CSAs), and whose unobservable market data

component incorporated in the valuation of CVA is significant in the value of the derivative as a whole. In order to

assess the significance of this component, the Bank defined a quantitative relevance criterion and performed a

qualitative sensitivity analysis on the valuation component that includes unobservable market data.

2021 REPORT & ACCOUNTS

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The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Group as at 31

December 2021:

(Thousands of euros)

2021

Level 1

Level 2

Level 3

Total

Assets

Cash and deposits at Central Banks

7,796,299

—

7,796,299

Loans and advances to credit institutions repayable on demand

361,786

—

361,786

Financial assets at amortised cost

Loans and advances to credit institutions

—

411,867

Loans and advances to customers

—

54,310,839

Debt securities

1,768,269

761,886

5,715,597

8,245,752

Financial assets at fair value through profit or loss

Financial assets held for trading

499,147

169,181

263,157

931,485

Financial assets not held for trading mandatorily

at fair value through profit or loss

—

990,938

Financial assets at fair value through other comprehensive income

12,463,415

303,629

123,944

12,890,988

Hedging derivatives

—

109,059

—

109,059

22,888,916

1,343,755

61,816,342

86,049,013

Liabilities

Financial liabilities at amortised cost

Resources from credit institutions

—

8,897,337

Resources from customers

—

69,553,730

Non subordinated debt securities issued

—

2,199,979

Subordinated debt

—

1,486,659

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

—

221,040

10,201

231,241

Financial liabilities designated at fair value through profit or loss

961,730

—

620,048

1,581,778

Hedging derivatives

—

377,206

—

377,206

961,730

598,246

82,767,954

84,327,930

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The following table shows, by valuation levels, the fair value of financial assets and liabilities of the Group as at 31

December 2020:

(Thousands of euros)

2020

Level 1

Level 2

Level 3

Total

Assets

Cash and deposits at Central Banks

5,303,864

—

5,303,864

Loans and advances to credit institutions repayable on demand

262,395

—

262,395

Financial assets at amortised cost

Loans and advances to credit institutions

—

1,006,561

Loans and advances to customers

—

51,616,636

Debt securities

3,852,938

475,237

1,992,406

6,320,581

Financial assets at fair value through profit or loss

Financial assets held for trading

481,107

258,821

291,273

1,031,201

Financial assets not held for trading mandatorily

at fair value through profit or loss

—

1,315,467

Financial assets at fair value through other comprehensive income

11,764,197

215,818

160,377

12,140,392

Hedging derivatives

—

91,249

—

91,249

21,664,501

1,041,125

56,382,720

79,088,346

Liabilities

Financial liabilities at amortised cost

Resources from credit institutions

—

8,899,871

Resources from customers

—

63,008,920

Non subordinated debt securities issued

—

1,409,362

Subordinated debt

—

1,419,565

Financial liabilities at fair value through profit or loss

Financial liabilities held for trading

218

257,275

21,358

278,851

Financial liabilities designated at fair value through profit or loss

678,860

—

920,545

1,599,405

Hedging derivatives

—

285,766

—

285,766

679,078

543,041

75,679,621

76,901,740

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336 |

For financial assets classified at level 3 recorded in the balance sheet at fair value, the changes occurred during 2021 is

presented as follows:

(Thousands of euros)

2021

Financial assets

Held for

trading

Not held for

trading

mandatorily at fair

value through

profit or loss

At fair value

through other

comprehensive

income

Financial

liabilities held

for trading (*)

Balance as at 1 January

291,273

1,315,467

160,377

7,153

Gains / (losses) recognised in profit or loss

Results on financial operations

(9,319)

(8,185)

—

Net interest income

—

12,137

—

Transfers between levels

1,278

—

(42,615)

(2,763)

Purchases / (Sales, repayments or amortisations)

(20,076)

(326,667)

3,650

2,174

Gains / (losses) recognised in reserves

—

(99)

—

Exchange differences

—

(1,770)

2,653

—

Accruals of interest

(44)

(22)

—

Balance as at 31 December

263,157

990,938

123,944

6,576

(*) Do not include short sales in the amount of Euros 3,625,000 (note 36).

For financial assets classified at level 3 recorded in the balance sheet at fair value, the changes occurred during 2020 is

presented as follows:

(Thousands of euros)

2020

Financial assets

Held for

trading

Not held for

trading

mandatorily at fair

value through

profit or loss

At fair value

through other

comprehensive

income

Financial

liabilities held

for trading (*)

Balance as at 1 January

307,962

1,405,513

108,571

15,350

Gains / (losses) recognised in profit or loss

Results on financial operations

(1,493)

(72,884)

—

(10,362)

Net interest income

—

15,690

—

Transfers between levels

151

—

7,073

2,763

Purchases / (Sales, repayments or amortisations)

(15,347)

(5,766)

52,391

(598)

Gains / (losses) recognised in reserves

—

(7,155)

—

Exchange differences

—

(27,086)

(844)

—

Accruals of interest

—

341

—

Balance as at 31 December

291,273

1,315,467

160,377

7,153

(*) Do not include short sales in the amount of Euros 14,205,000 (note 36).

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50.Post-employment benefits and other long-term benefits

The Group assumed the liability to pay to their employees' pensions on retirement or disability and other obligations, in

accordance with the accounting policy described in note 1 R.

As at 31 December 2021 and 2020, the number of participants in the Pension Fund of Banco Comercial Português

covered by this pension plan and other benefits is analysed as follows:

Number of participants

2021

2020

Pensioners

17,177

17,011

Former Attendees Acquired Rights

3,539

3,282

Employees

6,407

7,138

27,123

27,431

In accordance with the accounting policy described in note 1 R, the Group's retirement pension liabilities and other

benefits and the respective coverage, based on the Projected Unit Credit method are analysed as follows:

(Thousands of euros)

2021

2020

Actual amount of the past services

Pensioners

2,454,361

2,432,628

Former attendees acquired rights

255,662

246,981

Employees

787,599

977,918

3,497,622

3,657,527

Pension fund value

(3,699,988)

(3,750,567)

Net (assets) / liabilities in balance sheet (note 31)

(202,366)

(93,040)

Accumulated actuarial losses and changing assumptions

effect recognised in Other comprehensive income

3,528,224

3,663,509

In 2017, following the authorization of the Insurance and Pension Funds Supervisory Authority, the BCP group's pension

fund agreement was amended. The main purpose of this process was to incorporate into the pension fund the changes

made to the Group's Collective Labour Agreement (CLA) in terms of retirement benefits and to pass on to the pension

fund the responsibilities that were directly in charge by the companies (extra-fund liabilities). The pension fund has a

share exclusively related to the financing of these liabilities, which under the scope of the fund is called an Additional

Complement, which as at 31 December 2021 amounts to Euros 260,168,000 (31 December 2020: Euros 285,422,000).

The End of Career Premium also came to be borne by the pension fund under the basic pension plan.

In 2021, negotiations continued with all the unions subscribing to the Group's Collective Labour Agreements Group, to

conclude the full revision of the respective clauses, negotiations which are still ongoing.

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338 |

The change in the projected benefit obligations is analysed as follows:

(Thousands of euros)

2021

2020

Balance as at 1 January

3,657,527

3,490,341

Service cost

(14,466)

(15,235)

Interest cost / (income)

43,034

49,847

Actuarial losses / (gains)

Not related to changes in actuarial assumptions

57,564

30,841

Related to changes in assumptions

(167,476)

197,943

Payments

(122,563)

(115,901)

Early retirement programmes and terminations by mutual agreement

36,583

11,799

Contributions of employees

7,451

7,892

Transfer from / (to) other plans

(32)

—

Balance at the end of the year

3,497,622

3,657,527

As at 31 December 2021, the pensions paid by the Fund, including the Additional Complement, amounts to Euros

122,563,000 (31 December 2020: Euros 115,901,000).

The liabilities with health benefits are fully covered by the Pension Fund and correspond to Euros 311,161,000 as at 31

December 2021 (31 December 2020: Euros 335,401,000).

Additionally, regarding the coverage of some benefit obligations related to pensions, the Bank contracted with

Ocidental Vida the acquisition of perpetual annuities for which the total liability as at 31 December 2021 amounts to

Euros 40,811,000 (31 December 2020: Euros 41,018,000), in order to pay:

i) pensions of former Group's Board Members in accordance with the Bank's Board Members Retirement Regulation;

ii) pensions and complementary pension to pensioners in accordance with the Pension Fund of the BCP Group

employees established in 28 December 1987, as also to pensioners, in accordance with other Pension Funds, that were

incorporated after on the BCP Group Pension Fund and which were planed that the retirement benefits should be paid

through the acquisition of insurance policies, in accordance with the Decree - Law no. 12/2006.

Ocidental Vida is 100% owned by Ageas Group and Ageas Group is 49% owned by the BCP Group.

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During 2021 and 2020, the changes occurred in the plan's assets value is analysed as follows:

(Thousands of euros)

2021

2020

Balance as at 1 January

3,750,567

3,500,869

Contributions to the Fund

—

173,594

Employees' contributions

7,451

7,892

Actuarial gains / (losses)

25,374

140,139

Payments

(122,563)

(115,901)

Expected return on plan assets

38,606

43,548

Amount transferred to the Fund resulting from acquired rights unassigned

related to the Complementary Plan

586

426

Others

(33)

—

Balance at the end of the year

3,699,988

3,750,567

The elements of the Pension Fund's assets are analysed as follows:

(Thousands of euros)

2021

2020

Assets with

market price in

active market

Total

Assets with

market price in

active market

Total

Asset class

Remaining

Portfolio

Remaining

Portfolio

397,322

1,098

398,420

420,572

105,095

525,667

Bonds and other fixed income securities

1,377,330

4,820

1,382,150

1,934,823

4,608

1,939,431

Participations units in investment funds

—

1,186,146

—

398,740

Participation units in real estate funds

—

304,736

—

261,574

Properties

—

239,838

—

239,844

Loans and advances to credit institutions

and others

—

188,698

—

385,311

1,774,652

1,925,336

3,699,988

2,355,395

1,395,172

3,750,567

The balance Shares includes, in 31 December 2020, an investment of 2.73% held in the Dutch unlisted insurance group

"Achmea BV", whose valuation amounts to Euros 103,642,000. The Fund sold this participation to Achmea in December

2021.

The balance Properties includes buildings booked in the Fund's financial statements and used by the Group's companies

which, as at 31 December 2021 amounts to Euros 239,838,000 (31 December 2020: Euros 239,844,000).

The securities issued by Group's companies accounted in the portfolio of the Fund are analysed as follows:

(Thousands of euros)

2021

2020

4,140

—

Loans and advances to credit institutions and others

170,115

413,238

Bonds and other fixed income securities

15,386

12,230

185,501

425,468

2021 REPORT & ACCOUNTS

340 |

The evolution of net (assets) / liabilities in the balance sheet is analysed as follows:

(Thousands of euros)

2021

2020

Balance as at 1 January

(93,040)

(10,528)

Recognised in the income statement:

Service cost

(14,466)

(15,235)

Interest cost / (income) net of the balance liabilities coverage

4,428

6,299

Cost with early retirement programs (note 7)

36,583

11,799

Amount transferred to the Fund resulting from acquired rights

unassigned related to the Complementary Plan

(586)

(426)

25,959

2,437

Recognised in the statement of comprehensive income:

Actuarial (gains) / losses

Not related to changes in actuarial assumptions

Difference between the estimated and the actual income of the fund

(25,374)

(140,139)

Difference between expected and effective obligations

57,564

30,841

Arising from changes in actuarial assumptions

(167,475)

197,943

(135,285)

88,645

Contributions to the fund

—

(173,594)

Balance at the end of the year

(202,366)

(93,040)

The estimated contributions to be made in 2022, by the employees, for the Defined Benefit Plan amount to Euros

6,728,000.

In accordance with IAS 19, during 2021 and 2020, the Group registered costs with post-employment benefits, which is

analysed as follows:

(Thousands of euros)

2021

2020

Current service cost

(14,466)

(15,235)

Net interest cost in the liability coverage balance

4,428

6,299

Cost with early retirement programs (note 7)

36,583

11,799

Amount transferred to the Fund resulting from acquired rights

unassigned related to the Complementary Plan

(586)

(426)

(Income) / Cost of the year

25,959

2,437

Within the framework of the three-party agreement between the Government, the Banking and the Trade Unions, the

bank's employees in activity as at 31 December 2010 under the CAFEB / CLA regime were integrated into the General

Social Security System (RGSS) with effect from 1 January 2011. The integration led to an effective decrease in the

present value of the total benefits reported at the retirement age to be borne by the Pension Fund, and this effect is

recorded on a straight-line basis over the average period of active life until the normal retirement age is reached. The

calculation of the liability for pensions carried out periodically by the actuary considers this effect and is calculated

considering the actuarial assumptions in force, ensuring that the liabilities calculated with reference to 31 December

2010, not considering the effect of the integration of bank employees into the General Social Security Scheme are fully

covered and deducted from the amount of the effect recognised until the date. The component of this effect for the

year is recognised under the heading "Current service costs".

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Board of Directors Plan

As the Board of Directors Retirement Regulation establish that the pensions are subjected to an annual update, and as

it is not common in the insurance market the acquisition of perpetual annuities including variable updates in pensions,

the Bank determined, the liability to be recognised on the financial statements related to that update, taking into

consideration current actuarial assumptions.

In accordance with the remuneration policy of the Board Members, the Group has the responsibility of supporting the

cost with: i) the retirement pensions of former Group's Executive Board Members; and ii) the Complementary Plan for

these members in accordance with the applicable rules funded through the Pension Fund, Extra-fund and perpetual

annuities.

In order to cover liabilities with pensions to former members of the Executive Board of Directors, under the Bank's

Board of Directors Retirement Regulation the Bank contracted with Ocidental Vida to purchase immediate life annuity

insurance policies.

Assumptions used in the liabilities assessment

Considering the market indicators, particularly the inflation rate estimates and the long-term interest rate for Euro

Zone, as well as the demographic characteristics of its employees, the Group considered the following actuarial

assumptions for calculating the liabilities with pension obligations:

2021

2020

Salary growth rate (c)

0.75%

Pension's growth rate (c)

0.50%

Discount rate / Projected Fund's rate of return

1.35%

1.05%

Mortality tables

Men

TV 88/90

Women (a)

TV 88/90-3 years

Disability rate

Non applicable

Turnover rate

Non applicable

Normal retirement age (b)

66 years and 6

months

66 years and 5

months

Total salary growth rate for Social Security purposes

1.75%

Revaluation rate of wages / pensions of Social Security

a)The mortality table considered for women corresponds to TV 88/90 adjusted in less than 3 years (which implies an

increase in hope life expectancy compared to that which would be considered in relation to their effective age).

b)Retirement age is variable. The normal retirement age increases one month for each civil year and cannot be higher

than the normal retirement age in force in the General Social Security Regime (RGSS). The normal retirement age in

the RGSS is variable and depends on the evolution of the average life expectancy at 65 years of age.

For 2021, the retirement age is 66 years and 6 months, for 2022 it is 66 years and 7 months. For 2023, due to the

evolution of the average life expectancy at 65 years in Portugal and, consequently, the reduction of the normal

retirement age in RGSS, the estimate of the normal retirement age was reduced to 66 years and 4 months.

For the projection of life expectancy’s increment it was considered an increase of one year in every 10 years, with

the maximum retirement age being set at 67 years and 2 months.

c)This rate refers to the growth for the years following the reporting year. For the reporting year, an update of the

salary table was incorporated, consistent with the proposal that the Group intends to make to the Bank's employees

representative trade unions, in the context of the ongoing salary negotiations.

The assumptions used on the calculation of the actuarial value of the liabilities are in accordance with the

requirements of IAS 19. No disability decreases are considered in the calculation of the liabilities.

2021 REPORT & ACCOUNTS

342 |

As defined by IAS 19, the discount rate used to update the responsibilities of the Bank's pension fund, regarding the

defined benefit pension plans of its employees and managers, was determined based on an analysis performed over the

market yield of a bond portfolio issues with high quality (low risk), different maturities (appropriate to the period of

liquidation of the fund's liabilities), denominated in Euros and related to a sundry and representative range of issuers.

With reference to 31 December 2021, the Group used a discount rate of 1.35% (31 December 2020: 1.05%).

The Actuarial losses are related to the difference between the actuarial assumptions used for the estimation of the

liabilities and the values verified and the change in actuarial assumptions, are analysed as follows:

(Thousands of euros)

Actuarial (gains) / losses

2021

2020

Values

effectively

verified in %

Amount

of deviations

Values

effectively

verified in %

Amount

of deviations

Deviation between expected and actual liabilities

57,564

30,841

Changes on the assumptions:

Discount rate

(167,475)

197,943

Deviation between expected income and income from funds

1.92%

(25,374)

5.77%

(140,139)

(135,285)

88,645

In accordance with IAS 19, the sensitivity analysis to changes in assumptions, is as follows:

(Thousands of euros)

Impact resulting from changes in financial assumptions

2021

2020

-0.25%

0.25%

-0.25%

0.25%

Discount rate

135,482

(127,790)

152,812

(143,761)

Pension's increase rate

(143,548)

151,248

(158,701)

167,405

Salary growth rate

(32,795)

35,922

(40,905)

44,341

(Thousands of euros)

Impact resulting from changes in demographic assumptions

2021

2020

- 1 year

+ 1 year

- 1 year

+ 1 year

Changes in mortality table (*)

128,401

(127,687)

138,611

(137,599)

(*) The impact of 1 year reduction in the mortality table implies an increase in the average life expectancy

Defined contribution plan

According to what is described in accounting policy 1 R3, in the scope of the Defined Contribution Plan provided for the

BCP Pension Fund of the BCP Group, no contributions were made in 2021 and 2020, for employees who have been

admitted until 1 July 2009, because the following requirements have not been met, cumulatively: (i) the previous year

BCP's ROE equals or exceeds the rate of government bonds of 10 years plus 5 percentage points, and (ii) distributable

profits or reserves exist in the accounts of Banco Comercial Português.

For employees who have been admitted after 1 July 2009, are made monthly contributions equal to 1.5% of the monthly

remuneration received by employees in the current month, either by themselves or by the Group and employees. This

contribution has a mandatory character and is defined in the Collective Labour Agreement of the BCP Group and does

not have a performance criterion. The Group accounted as staff costs in 2021 the amount of Euros 268,000 (2020: Euros

218,000) related to this contribution.

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| 343

51.Related parties

As defined by IAS 24, are considered related parties of the Group, the companies detailed in note 60 - List of subsidiary

and associated companies of Banco Comercial Português Group, the Pension Fund, the members of the Board of

Directors and key management members. The key management members are the first line Directors. Beyond the

members of the Board of Directors and key management members, are also considered related parties, people who are

close to them (family relationships) and entities controlled by them or in whose management they have significant

influence.

As the transactions with subsidiaries are eliminated in consolidation, these are not included in the notes to the Group's

consolidated financial statements.

According to Portuguese law, namely under Article no. 109 of the General Law for Credit Institutions and Financial

Companies and also in accordance with Article no. 33 of Notice 3/2020 of the Bank of Portugal, are considered related

parties as well, the qualified shareholders of Banco Comercial Português, S.A. and the entities controlled by them or

with which they are in a group relationship. The list of the qualified shareholders is detailed in note 40.

A)Balances and transactions with qualified shareholders

The balances reflected in assets of consolidated balance sheet with qualified shareholders, are analysed as follows:

(Thousands of euros)

2021

2020

Assets

Financial assets at amortised cost

Loans and advances to customers

148,916

79,467

Debt securities

79,673

137,685

Financial assets at fair value through profit or loss

Financial assets held for trading

2,881

5,243

Financial assets at fair value through other comprehensive income

136,849

134,527

Others

368,367

356,975

Liabilities

Resources from customers

319,137

307,631

319,137

307,631

Loans and advances to customers are net of impairment in the amount of Euros 3,140,000 (31 December 2020: Euros

526,000) and for Debt securities the amount of Euros 347,000 (31 December 2020: Euros 193,000).

The transactions with qualified shareholders, reflected in the consolidated income statement items, are as follows:

(Thousands of euros)

2021

2020

Income

Interest and similar income

9,979

11,903

Commissions

5,358

8,812

15,337

20,715

Costs

Interest and similar expenses

—

Commissions

122

2021 REPORT & ACCOUNTS

344 |

The balances with qualified shareholders, reflected in the guarantees granted and revocable and irrevocable credit

lines, are as follows:

(Thousands of euros)

2021

2020

Guarantees granted

48,060

44,173

Revocable credit lines

143,225

66,248

Irrevocable credit lines

150,000

151,000

341,285

261,421

In 2021, the Group accounted for provisions for Guarantees granted the amount of Euros 86,000 (2020: Euros 48,000),

for Revocable credit lines the amount of Euros 184,000 (2020: Euros 37,000) and for Irrevocable credit lines the amount

of Euros 26,000 (em 2020: Euros 22,000).

B)Balances and transactions with members of the Board of Directors and key management

members

The balances with related parties discriminated in the following table, included on the consolidated balance sheet, are

analysed as follows:

(Thousands of euros)

Loans and advances to customers

Resources from customers

2021

2020

2021

2020

Board of Directors

Non-executive directors

7,272

5,540

Executive Committee (*)

1,628

937

Closely related people

230

259

2,210

1,575

Controlled entities

—

Key management members

6,114

6,921

9,996

8,856

Closely related people

1,146

838

5,224

4,306

Controlled entities

2,232

2,298

7,559

8,107

28,607

23,543

(*) The item Loans to Customers corresponds to mortgage loans granted prior to the respective election and to the

amount used from private credit cards which must be settled on the maturity date.

In accordance with Article 85, no. 9 of RGICSF, no credits were granted during 2021 and 2020.

2021 REPORT & ACCOUNTS

| 345

In 2021 and 2020, the transactions with related parties discriminated in the following table, included in income items

of the consolidated income statement, are as follows:

(Thousands of euros)

Interest and similar income

Commissions income

2021

2020

2021

2020

Board of Directors

Non-executive directors

—

Executive Committee

—

Closely related people

—

Key management members

Closely related people

Controlled entities

—

169

143

In 2021 and 2020, the transactions with related parties discriminated in the following table, included in cost items of

the consolidated income statement, are as follows:

(Thousands of euros)

Interest and similar expense

Commissions' expense

2021

2020

2021

2020

Board of Directors

Non-executive directors

111

—

Closely related people

—

Key management members

Closely related people

Controlled entities

—

121

The revocable credit lines granted by the Group to the following related parties are as follows:

(Thousands of euros)

Revocable credit lines

Irrevocable credit lines

2021

2020

2021

2020

Board of Directors

Non-executive directors

—

Executive Committee (*)

175

162

—

Closely related people

—

Key management members

878

799

—

Closely related people

210

226

—

Controlled entities

—

1,436

1,295

—

(*) Corresponds to the maximum authorized and unused limit of private credit cards and overdraft authorization in a

salary account under the same regime as all the Bank's other employees.

2021 REPORT & ACCOUNTS

346 |

The shareholder and bondholder position of members of the Board of Directors, key management members and people

closely related to the previous categories, as well as the movements occurred during 2021, are as follows:

Number of securities

Unit

price

Euros

Shareholders/Bondholders

Security

2021

2020

Acquisitions

Disposals

Date

MEMBERS OF BOARD OF DIRECTORS

Ana Paula Alcobia Gray

BCP Shares

Cidália Maria da Mota Lopes (1)

BCP Shares

2,184

Fernando da Costa Lima

BCP Shares

18,986

João Nuno Oliveira Jorge Palma

BCP Shares

426,957

268,687

279,135

(a)

120,865

25/6/2021

0.1422

Jorge Manuel Baptista Magalhães Correia

BCP Shares

88,500

Bonds (i)

Bonds (ii)

17/11/2021

100,000

José Manuel Elias da Costa

BCP Shares

José Miguel Bensliman Schorcht da Silva Pessanha(4)

BCP Shares

333,829

209,611

222,608

(a)

98,390

25/6/2021

0.1422

Lingjiang Xu

BCP Shares

Maria José Henriques Barreto de Matos de Campos (3)

BCP Shares

396,914

221,325

219,478

(a)

43,889

25/6/2021

0.1422

Miguel de Campos Pereira de Bragança

BCP Shares

763,422

602,626

280,613

(a)

119,817

25/6/2021

0.1422

Miguel Maya Dias Pinheiro (5)

BCP Shares

800,692

621,467

320,034

(a)

140,809

25/6/2021

0.1422

Nuno Manuel da Silva Amado

BCP Shares

1,525,388

Bonds (i)

Bonds (ii)

11/11/2021

100,000

Rui Manuel da Silva Teixeira (2)

BCP Shares

376,663

244,199

237,387

(a)

104,923

25/6/2021

0.1422

Teófilo César Ferreira da Fonseca

BCP Shares

10,000

Valter Rui Dias de Barros

BCP Shares

Wan Sin Long

BCP Shares

Xiao Xu Gu

BCP Shares

KEY MANAGEMENT MEMBERS

Albino António Carneiro de Andrade

BCP Shares

101,557

Alexandre Manuel Casimiro de Almeida

BCP Shares

55,865

31,878

23,987

(b)

25/6/2021

0.1422

Américo João Pinto Carola (9)

BCP Shares

61,269

25,459

35,810

(c)

25/6/2021

0.1422

Ana Isabel dos Santos de Pina Cabral (1)

BCP Shares

96,648

70,507

45,227

(b)

19,086

25/6/2021

0.1422

Ana Maria Jordão F. Torres Marques Tavares (8)

BCP Shares

161,758

134,652

42,620

(b)

15,514

25/6/2021

0.1422

André Cardoso Meneses Navarro

BCP Shares

290,091

206,944

10/5/2021

0.1383

106,697

23,550

(c)

25/6/2021

0.1422

António Augusto Amaral de Medeiros

BCP Shares

100,077

55,139

44,938

(c)

25/6/2021

0.1422

António Ferreira Pinto Júnior

BCP Shares

33,187

António José Lindeiro Cordeiro

BCP Shares

32,631

16,314

25,656

(b)

9,339

25/6/2021

0.1422

António Luís Duarte Bandeira (7)

BCP Shares

239,209

210,905

49,744

(b)

21,440

25/6/2021

0.1422

António Ricardo Fery Salgueiro Antunes

BCP Shares

15,035

6,035

14,778

(b)

5,778

25/6/2021

0.1422

António Vítor Martins Monteiro (16)

BCP Shares

3,872

Artur Frederico Silva Luna Pais

BCP Shares

396,760

365,663

31,097

(c)

25/6/2021

0.1422

Belmira Abreu Cabral

BCP Shares

57,285

37,841

30,863

(b)

11,419

25/6/2021

0.1422

Bernardo Roquette de Aragão de Portugal Collaço

BCP Shares

25,999

15,015

18,125

(b)

7,141

25/6/2021

0.1422

The paragraphs stated in the tables above for the categories "Members of Board of Directors" and "Key management members", identify the people who

they are associated with in the category "People closely related to the previous categories".

(i) - Tejo Project - Fixed Rate Reset Perpetual Temporary Write Down Additional Tier 1 Capital Notes

(ii) - BCP Tier 2 Subordinated Callable Notes

(a) - identifies the increment and sell-cover of shares up to 31 December 2021 corresponding to variable compensation deferred in 2019 and awarded in

2021.

(b) - identifies the increment and sell-cover of shares up to 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred

from 2020 and 2019.

(c) - identifies share increment through 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred from 2020 and 2019.

2021 REPORT & ACCOUNTS

| 347

Number of securities

Unit price

Euros

Shareholders/Bondholders

Security

2021

2020

Acquisitions

Disposals

Date

Chi Wai Leung (Timothy)

BCP Shares

9,852

(c)

25/6/2021

0.1422

Constantino Alves Mousinho

BCP Shares

40,664

Fernando Maria Cardoso Rodrigues Bicho

BCP Shares

237

Filipe Maria de Sousa Ferreira Abecasis

BCP Shares

85,467

57,309

49,661

(b)

21,503

25/6/2021

0.1422

Francisco António Caspa Monteiro (10)

BCP Shares

137,027

87,283

49,744

(c)

25/6/2021

0.1422

Gonçalo Nuno Belo de Almeida Pascoal

BCP Shares

78,390

53,591

40,923

(b)

16,124

25/6/2021

0.1422

Hugo Miguel Martins Resende

BCP Shares

92,696

65,527

45,357

(b)

18,188

25/6/2021

0.1422

João Brás Jorge

BCP Shares

91,709

João Manuel Rodrigues Tomé Cunha Martins

BCP Shares

João Manuel Taveira Pinto Santos Paiva

BCP Shares

103,739

58,429

45,310

(c)

25/6/2021

0.1422

Jorge Filipe Nogueira Freire Cortes Martins

BCP Shares

47,495

38,003

(c)

25/6/2021

0.1422

38,003

47,495

15/7/2021

0.13

Jorge Manuel Machado de Sousa Góis

BCP Shares

73,203

39,316

33,887

(c)

25/6/2021

0.1422

Jorge Manuel Nobre Carreteiro

BCP Shares

27,648

14,701

20,357

(b)

7,410

25/6/2021

0.1422

Jorge Octávio Neto dos Santos

BCP Shares

471,191

José Artur Gouveia Coelho Caetano

BCP Shares

José Carlos Benito Garcia de Oliveira

BCP Shares

37,941

30,321

12,807

(b)

5,187

25/6/2021

0.1422

José Gonçalo Prior Regalado (12)

BCP Shares

83,836

42,438

41,398

(c)

25/6/2021

0.1422

José Guilherme Potier Raposo Pulido Valente

BCP Shares

208,437

186,063

40,096

(b)

17,722

25/6/2021

0.1422

José Laurindo Reino da Costa (15)

BCP Shares

751,100

José Maria Gonçalves Pereira Brandão de Brito

BCP Shares

23,878

13,158

15,696

(b)

4,976

25/6/2021

0.1422

Luis Miguel Manso Correia dos Santos

BCP Shares

125,615

82,903

53,390

(b)

10,678

25/6/2021

0.1422

Maria de Fátima Coelho Dias

BCP Shares

Maria de Los Angeles Sanchez Sanchez

BCP Shares

19,191

8,192

18,486

(b)

7,487

25/6/2021

0.1422

Maria Helena Soledade Nunes Henriques

BCP Shares

199,132

188,015

18,621

(b)

7,504

25/6/2021

0.1422

Maria Manuela de Araújo Mesquita Reis (11)

BCP Shares

152,857

132,646

31,779

(b)

11,568

25/6/2021

0.1422

Maria Rita Sítima Fonseca Lourenço

BCP Shares

112,778

79,222

33,556

(c)

25/6/2021

0.1422

Mário António Pinho Gaspar Neves

BCP Shares

73,963

56,522

29,214

(b)

11,773

25/6/2021

0.1422

Mário Madeira Robalo Fernandes

BCP Shares

79,512

43,702

35,810

(c)

25/6/2021

0.1422

Moisés Jorge

BCP Shares

Nelson Luís Vieira Teixeira

BCP Shares

59,343

32,840

45,227

(b)

18,724

25/6/2021

0.1422

Nuno Alexandre Ferreira Pereira Alves (14)

BCP Shares

101,156

59,982

41,174

(c)

25/6/2021

0.1422

Nuno Maria Lagoa Ribeiro de Almeida

BCP Shares

2,560

Nuno Miguel Nobre Botelho

BCP Shares

33,366

30,630

(c)

25/6/2021

0.1422

33,366

30,630

25/6/2021

0.1425

Pedro José Mora de Paiva Beija

BCP Shares

107,673

57,929

49,744

(c)

25/6/2021

0.1422

Pedro Manuel Francisco da Silva Dias (13)

BCP Shares

50,473

27,583

22,890

(c)

25/6/2021

0.1422

Pedro Manuel Macedo Vilas Boas

BCP Shares

79,512

43,702

35,810

(c)

25/6/2021

0.1422

Pedro Manuel Rendas Duarte Turras

BCP Shares

61,176

41,596

32,151

(b)

12,571

25/6/2021

0.1422

Pedro Trigo de Morais de Albuquerque Reis

BCP Shares

71,205

37,108

34,097

(c)

25/6/2021

0.1422

The notes stated in the table above for the categories "Members of Board of Directors" and "Key management members" identify the people who they are

related to in the category "People closely related to the previous categories".

(b) - identifies the increment and sell-cover of shares up to 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred

from 2020 and 2019.

(c) - identifies share increment through 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred from 2020 and 2019.

2021 REPORT & ACCOUNTS

348 |

Number of securities

Unit price

Euros

Shareholders/Bondholders

Security

2021

2020

Acquisitions

Disposals

Date

Ricardo Potes Valadares

BCP Shares

32,102

33,093

(c)

25/6/2021

0.1422

33,093

32,102

2/9/2021

0.1324

Rosa Maria Ferreira Vaz Santa Bárbara

BCP Shares

68,163

41,204

45,310

(b)

18,351

25/6/2021

0.1422

Rui Emanuel Agapito Silva

BCP Shares

60,219

33,078

45,310

(b)

18,169

25/6/2021

0.1422

Rui Fernando da Silva Teixeira

BCP Shares

145,098

113,674

31,424

(c)

25/6/2021

0.1422

Rui Manuel Pereira Pedro

BCP Shares

252,786

203,538

49,248

(c)

25/6/2021

0.1422

Rui Miguel Alves Costa

BCP Shares

217,920

194,493

23,427

(c)

25/6/2021

0.1422

Rui Nelson Moreira de Carvalho Maximino

BCP Shares

60,954

32,151

49,661

(b)

20,858

25/6/2021

0.1422

Rui Pedro da Conceição Coimbra Fernandes

BCP Shares

70,740

39,316

31,424

(c)

25/6/2021

0.1422

Vânia Alexandra Machado Marques Correia

BCP Shares

66,426

39,316

33,887

(b)

6,777

25/6/2021

0.1422

PEOPLE CLOSELY RELATED TO THE PREVIOUS

CATEGORIES

Alexandre Miguel Martins Ventura (1)

BCP Shares

2,184

Maria Helena Espassandim Catão (2)

BCP Shares

576

Ricardo Gil Monteiro Lopes de Campos (3)

BCP Shares

(d)

Anne Marie Bensliman Silva Pessanha (4)

BCP Shares

139

José Pedro Maya Dias Pinheiro (5)

BCP Shares

10,656

Isabel Susana Rodrigues Marques Alves Geraldes Pires (5)

BCP Shares

2,048

Cristina Dias Pinheiro (5)

BCP Shares

2,100

José Manuel de Vasconcelos Mendes Ferreira (1)

BCP Shares

1,616

Ana Margarida Rebelo A.M. Soares Bandeira (7)

BCP Shares

2,976

António da Silva Bandeira (7)

BCP Shares

20,000

Álvaro Manuel Correia Marques Tavares (8)

BCP Shares

25,118

Francisco Jordão Torres Marques Tavares (8)

BCP Shares

1,016

Maria Avelina V C L J Teixeira Diniz (8)

BCP Shares

16,770

Ana Isabel Salgueiro Antunes (9)

BCP Shares

Ricardo Miranda Monteiro (10)

BCP Shares

1,639

Rita Miranda Monteiro (10)

BCP Shares

1,639

José Francisco Conceição Monteiro (10)

BCP Shares

18,002

Luís Filipe da Silva Reis (11)

BCP Shares

280,000

Américo Simões Regalado (12)

BCP Shares

880

Filomena Maria Brito Francisco Dias (13)

BCP Shares

4,290

António Henrique Leite Pereira Alves (14)

BCP Shares

73,926

Maria Raquel Sousa Candeias Reino da Costa (15)

BCP Shares

10,000

Isabel Maria Vaz Leite Pinto Martins Monteiro (16)

BCP Shares

3,104

The notes stated in the table above for the categories "Members of Board of Directors" and "Key management members" identify the people who they are

related to in the category "People closely related to the previous categories".

(b) - identifies the increment and sell-cover of shares up to 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred

from 2020 and 2019.

(c) - identifies share increment through 31 December 2021 corresponding to variable compensation awarded in 2021 and deferred from 2020 and 2019.

(d) - joint ownership of the account in which the Member of Governing Bodies is not the 1st holder, with the 1st holder holding 96,240 shares.

2021 REPORT & ACCOUNTS

| 349

C)Balances and transactions with associated companies

The balances with associated companies included in the consolidated balance sheet items, except for investments in

associated companies, are as follows:

(Thousands of euros)

2021

2020

Assets

Loans and advances to credit institutions repayable on demand

2,130

2,364

Financial assets at amortised cost

Loans and advances to credit institutions

18,290

82,475

Loans and advances to customers

63,681

64,253

Financial assets at fair value through profit or loss

Financial assets held for trading

53,553

Other assets

12,542

12,958

96,678

215,603

Liabilities

Financial liabilities at amortised cost

Resources from credit institutions

46,158

94,040

Resources from customers

342,674

423,256

Non subordinated debt securities issued

15,140

17,855

Subordinated debt

—

213,368

Financial liabilities held for trading

96,536

43,224

Other liabilities

500,559

791,768

As at 31 December 2021, the associated company Millenniumbcp Ageas Grupo Segurador, S.G.P.S., S.A. holds

142,601,002 BCP shares (31 December 2020: 142,601,002 shares) in the amount of Euros 20,078,000 (31 December

2020: Euros 17,568,000).

In 2021 and 2020, the transactions with associated companies included in the consolidated income statement items are

as follows:

(Thousands of euros)

2021

2020

Income

Interest and similar income

3,409

5,953

Commissions

58,859

58,045

Profits from financial operations

718

10,647

Other operating income

1,020

1,044

64,006

75,689

Costs

Interest and similar expenses

5,294

19,878

Commissions

Other administrative costs

139

408

Losses from financial operations

1,234

10,563

Other operating losses

625

186

7,330

31,062

2021 REPORT & ACCOUNTS

350 |

The guarantees granted and revocable and irrevocable credit lines by the Group over associated companies are as

follows:

(Thousands of euros)

2021

2020

Guarantees granted

7,363

8,193

Revocable credit lines

335,367

327,733

Irrevocable credit lines

600

343,330

336,526

Under the scope of the Group's insurance mediation activities, the remuneration from services provided is analysed as

follows:

(Thousands of euros)

2021

2020

Life insurance

Saving products

32,101

34,427

Mortgage and consumer loans

19,333

17,714

Others

51,464

52,171

Non-Life insurance

Accidents and health

20,144

19,207

Motor

4,078

4,097

Multi-Risk Housing

7,392

6,923

Others

1,549

1,486

33,163

31,713

84,627

83,884

Remuneration from insurance intermediation services was received through bank transfers and resulted from insurance

intermediation with the subsidiary of Millenniumbcp Ageas Group (Ocidental - Companhia Portuguesa de Seguros de

Vida, S.A.) and with Ocidental - Companhia Portuguesa de Seguros, SA. The Group does not collect insurance premiums

on behalf of Insurance Companies nor performs any movement of funds related to insurance contracts. Thus, there is no

other asset, liability, income or expense to be reported related to the activity of insurance mediation exercised by the

Group, other than those already disclosed.

The receivable balances from insurance intermediation activities, by nature, are analysed as follows:

(Thousands of euros)

2021

2020

Funds receivable for payment of life insurance commissions

12,525

12,857

Funds receivable for payment of non-life insurance commissions

8,482

8,187

21,007

21,044

The commissions received result from insurance mediation contracts and investment contracts, under the terms

established in the contracts in force. The mediation commissions are calculated according to the nature of the

contracts subject to mediation, as follows:

- insurance contracts – use of fixed rates on gross premiums issued;

- investment contracts – use of fixed rates on the responsibilities assumed by the insurance company under the

commercialisation of these products.

2021 REPORT & ACCOUNTS

| 351

D)Transactions with the Pension Fund

The balances with the Pension Fund included in items of the consolidated balance sheet are as follows:

(Thousands of euros)

2021

2020

Assets

Financial assets held for trading

711

—

Liabilities

Resources from customers

173,377

417,950

Non subordinated debt securities issued

29,144

20,630

Financial liabilities held for trading

—

1,772

202,521

440,352

In 2021 and 2020, there were no transactions related to other financial instruments between the Group and the Pension

Fund.

In 2021 and 2020, income and expenses with the Pension Fund included in the items of the consolidated income

statement are as follows:

(Thousands of euros)

2021

2020

Income

Commissions

2,268

1,374

Expenses

Interest expense and similar charges

1,114

462

Other administrative costs

14,231

14,270

15,345

14,732

The balance Other administrative costs corresponds to rents incurred under the scope of the Pension Fund's properties

in which the tenant is the Group.

As at 31 December 2021 and 2020, the guarantees granted by the Group to the Pension Fund amount to Euros 5,000.

52.Consolidated Balance sheet and Income statement by geographic and

operational segments

The segments presented are in accordance with IFRS 8. In accordance with the Group's management model, the

segments presented correspond to the segments used for management purposes by the Executive Committee. The

Group offers a wide range of banking activities and financial services in Portugal and abroad, with a special focus on

Commercial Banking, Companies Banking and Private Banking.

Segments description

A.Geographical Segments

The Group operates in the Portuguese market, and also in a few affinity markets with recognised growth potential.

Considering this, the geographical segments are structured in Portugal and Foreign Business (Poland, Mozambique and

Other). Portugal segment reflects, essentially, the activities carried out by Banco Comercial Português in Portugal and

ActivoBank.

Portugal activity includes the following segments: i) Retail Banking; ii) Companies, Corporate & Investment Banking; iii)

Private Banking and iv) Other.

2021 REPORT & ACCOUNTS

352 |

Retail Banking includes the following business areas:

- Retail network, which ensures the monitoring of individual customers, entrepreneurs, merchants and small and

medium enterprises with a turnover less than Euros 2.5 million. The Retail network strategic approach is to target

“Mass Market” customers, who appreciate a value proposal based on innovation and speed, as well as Prestige and

Small Business customers, whose specific characteristics, financial assets or income imply a value proposal based on

innovation and personalisation, requiring a dedicated Account Manager;

- Retail Recovery Division that accompanies and manages the responsibilities of customers or economic groups in

effective default, as well as customers with bankruptcy requirement or other similar mechanisms, looking through the

conclusion of agreements or payment restructuring processes that minimizes the economic loss to the Bank; and

- ActivoBank, a bank focused on clients who are young, intensive users of new communication technologies and who

prefer a banking relationship based on simplicity, offering modern products and services.

Companies, Corporate and Investment Banking segment includes:

- Companies and Corporate network, which monitors clients included in the corporate segment, economic groups and

institutional entities, with a turnover higher than Euros 2.5 million, offering a wide range of traditional banking

products complemented by specialised financing;

- Large Corporate network that assures the relationship and the monitoring of a set of Groups / Clients, which in

addition to Portugal, develop their activity in several geographies (Poland, Angola, Mozambique and East), providing a

complete range of value-added products and services;

- Specialised Monitoring Division which carries out the monitorisation of business groups that have high and complex

credit exposures or that show relevant signs of impairment, in order to defend the value and managing credit risk, in

a sustainable medium and long term perspective;

- Investment Banking unit, that ensures the offer of products and specific services, in particular financial advice,

including corporate finance services, capital market transactions and analysis and financing structuring in the medium

to long term;

- Trade Finance Department (from Marketing Division for Corporate, Business and Institutional since the end of 2021),

which coordinates the business with banks and financial institutions, boosting international business with the

commercial networks of the Bank and institutional custody services for securities;

- Specialised Recovery Division which ensures efficient tracking of customers with predictable or effective high risk of

credit, from Companies, Corporate, Large Corporate and retail networks (exposure exceeding Euros 1 million);

- Interfundos with the activity of management of real estate investment funds.

The Private Banking segment, for the purposes of geographical segments, comprises:

- Private Banking Division in Portugal, which ensures the monitoring of clients with high net worth, based on a

commitment to excellence and a personalized relationship with clients;

- Wealth Management Division, which provides advisory services and portfolio management for clients in the Private

Banking network and the affluent segment.

For the purposes of business segments also includes Banque Privée BCP in Switzerland and Millennium bcp Bank & Trust

in Cayman Islands that are considered Foreign Business on geographical segmentation. It should be noted that the

results generated by the subsidiary in Switzerland in the current period, as well as in the same period of the previous

year, are recorded in a single line as results of discontinued or discontinuing operations, since the date on which the

sale agreement was announced on 29 June 2021, which was later completed in early November 2021.

All other businesses not previously discriminated are allocated to the Other segment (Portugal) and include centralized

management of financial investments, corporate activities and operations not integrated in the remaining business

segments and other amounts not allocated to segments.

2021 REPORT & ACCOUNTS

| 353

Foreign Business includes the following segments:

- Poland, where the Group is represented by Bank Millennium, a universal bank offering a wide range of financial

products and services to individuals and companies nationwide;

- Mozambique, where the Group is represented by BIM – Banco Internacional de Moçambique, a universal bank targeting

companies and individual customers; and

- Other, which includes other countries activity such as Switzerland where the Group is represented by Banque Privée

BCP (classified as discontinued operations at the end of the first half of 2021, following the agreement signed for the

sale of Banque Privée BCP, which was effectively concluded in early November), a Private Banking platform under Swiss

law and Cayman Islands by Millennium bcp Bank & Trust, a bank designed for international services in the area of

Private Banking to customers with high financial assets (Affluent segment). The Other segment also includes the

contribution of the associate in Angola.

B.Business Segments

For the purposes of business segments reporting, Foreign Business segment comprises the Group’s operations developed

in other countries already mentioned excluding the activity of Banque Privée BCP in Switzerland and Millennium bcp

Bank & Trust in the Cayman Islands which, in this context, are considered in Private Banking segment.

Business segments activity

The figures reported for each segment resulted from aggregating the subsidiaries and business units integrated in each

segment. For the business units in Portugal, the aggregation process reflects the impact from capital allocation and

balancing process in the balance sheet and income statement, based on average figures. The balance sheet headings

for each business unit and Portuguese subsidiaries were re-calculated, considering the replacement of the equity book

values by the amounts assigned through the allocation process, based on the regulatory solvency criteria.

Considering that the process of capital allocation complies with the regulatory criteria of solvency in force, as at 31

December 2021 and 31 December 2020 the risk weighted assets, and consequently the capital allocated to the business

segments, are determined in accordance with the Basel III framework, pursuant to the CRD IV/CRR. The capital

allocated to each segment resulted from the application of a target capital ratio to the risks managed by each segment,

reflecting the application of the Basel III methodology previously referred. Each operation is balanced through internal

transfers of funds, with impact on the net interest income and income taxes of each segment, hence with no impact on

consolidated accounts.

Commissions and other net income, as well as operating costs calculated for each business area, are based on the

amounts accounted for directly in the respective cost centres, on the one hand, and the amounts resulting from

internal processes for allocating revenues and costs, for another. In this case, the allocation is based on the application

of pre-defined criteria related to the level of activity of each business area.

The following information has been prepared based on the individual and consolidated financial statements of the

Group prepared in accordance with international financial reporting standards (IFRS), as adopted by the European

Union (EU), at the reference date and with the Organization of the Group's business areas in force on 31 December

2021. Information relating to prior periods is restated whenever it occurs changes in the internal organization of the

entity susceptible to change the composition of the reportable segments (business and geographical).

Following the agreement concluded on 29 June 2021 with Union Bancaire Privée, UBP SA regarding the sale of the

entire share capital of Banque Privée BCP (Suisse) SA (“Banque Privée”), the contribution of this subsidiary to the

"Private Banking" segment (geographical segments) and "Other" from "Foreign business" segment (business segments) is

reflected as income from discontinued operations and the historical information has been restated in order to ensure its

comparability, as required by IFRS 5. Banque Privée BCP (Suisse) S.A. ceased to be part of the BCP Group on 2

November 2021, the date on which the sale of this subsidiary was completed. In this context, the capital gain arising

from the sale of the operation was also recorded as income of discontinued or discontinued operations. It should also

be noted that on 29 December 2021, BIM – Banco Internacional de Moçambique, S.A. also formalized the sale to

Fidelidade of shares representing 70% of the share capital and voting rights of Seguradora Internacional de Moçambique,

S.A., with BIM maintaining approximately 22% of its share capital. The contribution of this subsidiary to the net income

of the Foreign Business segment is also presented as income of discontinued or discontinued operations for the periods

corresponding to the years 2021 and 2020, as required by IFRS 5. The presentation of assets and liabilities of Banque

Privée BCP (Suisse) S.A. and Seguradora Internacional de Moçambique, S.A. referring to previous periods remained

unchanged when compared to the criteria considered in the preparation of the consolidated financial statements

previously disclosed.

2021 REPORT & ACCOUNTS

354 |

The information in the financial statements of reportable segments is reconciled, at the level of the total revenue of

those same segments, with the revenue from the demonstration of the consolidated financial position of the reportable

entity for each date on which is lodged a statement of financial position.

As at 31 December 2021, the net contribution of the major business segments, for the income statement, is analysed as

follows:

(Thousands of Euros)

2021

Commercial banking

Companies,

Corporate and

Investment

banking in

Portugal

Retail in

Portugal

Foreign

business (1)

Total

Private

banking

Other

Consolidated

INCOME STATEMENT

Interest and similar income

452,695

845,017

1,297,712

265,743

8,616

137,053

1,709,124

Interest expense and similar charges

(4,727)

(90,820)

(95,547)

(6,312)

(1,117)

(17,547)

(120,523)

Net interest income

447,968

754,197

1,202,165

259,431

7,499

119,506

1,588,601

Commissions and other income

462,357

326,399

788,756

165,373

36,517

(4,042)

986,604

Commissions and other costs

(52,274)

(171,744)

(224,018)

(20,248)

(3,188)

(139,394)

(386,848)

Net commissions and other income (2)

410,083

154,655

564,738

145,125

33,329

(143,436)

599,756

Net gains arising from trading activity (3)

18,449

10,968

29,417

286

1,391

55,444

86,538

Share of profit of associates under the

equity method

—

(1,380)

—

58,317

56,937

Gains/(losses) arising from the sale of

subsidiaries and other assets

—

402

—

2,164

2,570

Net operating revenue

876,500

918,842

1,795,342

404,846

42,219

91,995

2,334,402

Operating expenses

462,162

421,815

883,977

121,064

19,879

90,678

1,115,598

Impairment for credit and financial assets

(4)

(75,370)

(77,311)

(152,681)

(150,831)

3,005

(56,952)

(357,459)

Other impairments and provisions (5)

(69)

(545,071)

(545,140)

—

(158,468)

(703,608)

Net income before income tax

338,899

(125,355)

213,544

132,951

25,345

(214,103)

157,737

Income tax

(105,825)

(94,592)

(200,417)

(41,615)

(7,643)

46,049

(203,626)

Net income after income tax from

continuing operations

233,074

(219,947)

13,127

91,336

17,702

(168,054)

(45,889)

Income arising from discontinued

operations

—

18,587

—

52,294

—

70,881

Net income for the year

233,074

(201,360)

31,714

91,336

69,996

(168,054)

24,992

Non-controlling interests (6)

—

113,291

—

(201)

113,090

Net income for the year attributable to

Bank's Shareholders

233,074

(88,069)

145,005

91,336

69,996

(168,255)

138,082

1) Includes the contribution associated with the investments held in Angola, in Banco Millennium Atlântico.

2) Includes net fees and commissions income, other operating income/(loss), net gains from insurance activity and dividends from

equity instruments.

3) Includes results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge

accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost and results

from derecognition of financial assets measured at fair value through other comprehensive income.

4) Includes impairment of financial assets at amortised cost, for loans and advances of credit institutions, for loans to customers (net

of recoveries - principal and accrual) and for debt instruments related to credit operations. It also includes impairment of financial

assets at amortised cost not associated with credit operations.

5) Includes impairment of non-current assets held for sale, investments in associated companies, goodwill, other assets and provisions,

highlighting the provisions for legal proceedings related to mortgage loans granted in Swiss francs, booked by the Polish subsidiary.

6) Includes the non-controlling interests of BIM Group related to Seguradora Internacional de Moçambique, S.A., entity classified as a

discontinued operation.

2021 REPORT & ACCOUNTS

| 355

As at 31 December 2021, the net contribution of the major operational Segments, for the balance sheet, is analysed as

follows:

(Thousands of Euros)

2021

Commercial banking

Companies,

Corporate and

Investment

banking in

Portugal

Retail in

Portugal

Foreign

business

Total

Private

banking

Other

Consolidated

BALANCE SHEET

Cash and Loans and advances to

credit institutions

12,164,325

1,563,611

13,727,936

1,589,469

2,779,056

(9,485,163)

8,611,298

Loans and advances to customers (1)

25,010,925

17,780,147

42,791,072

12,077,141

344,222

1,147,494

56,359,929

Financial assets (2)

1,222,529

5,089,223

6,311,752

—

5,022

15,423,364

21,740,138

Other assets

69,403

928,378

997,781

7,933

1,741

5,185,992

6,193,447

Total Assets

38,467,182

25,361,359

63,828,541

13,674,543

3,130,041

12,271,687

92,904,812

Resources from credit institutions (3)

362,803

149,167

511,970

3,107,835

—

5,276,269

8,896,074

Resources from customers (4)

35,416,593

21,847,825

57,264,418

9,287,187

2,555,177

453,445

69,560,227

Debt securities issued (5)

1,396,658

8,632

1,405,290

1,418

165,410

2,198,023

3,770,141

Other financial liabilities (6)

—

501,480

—

1,501,747

2,003,227

Other liabilities (7)

46,338

693,806

740,144

61,480

1,041

810,421

1,613,086

Total Liabilities

37,222,392

23,200,910

60,423,302

12,457,920

2,721,628

10,239,905

85,842,755

Total Equity

1,244,790

2,160,449

3,405,239

1,216,623

408,413

2,031,782

7,062,057

Total Liabilities and Equity

38,467,182

25,361,359

63,828,541

13,674,543

3,130,041

12,271,687

92,904,812

Number of employees

3,897

9,575

13,472

541

144

1,711

15,868

1) Includes loans to customers at amortised cost net of impairment, debt instruments at amortised cost associated to credit operations

net of impairment and balance sheet amount of loans to customers at fair value through profit or loss.

2) Includes debt instruments at amortised cost not associated with credit operations (net of impairment), financial assets at fair value

through profit or loss (excluding the ones related to loans to customers), financial assets at fair value through other comprehensive

income, assets with repurchase agreement and hedging derivatives.

3) Includes resources and other financing from central banks and resources from other credit institutions.

4) Corresponds to deposits and other resources from customers (including resources from customers at amortised cost and customer

deposits at fair value through profit or loss).

5) Includes non-subordinated debt securities at amortized cost and financial liabilities at fair value through profit or loss (debt

securities and certificates).

6) Includes financial liabilities held for trading, subordinated debt and hedging derivatives.

7) Includes provisions, current and deferred tax liabilities and other liabilities.

2021 REPORT & ACCOUNTS

356 |

As at 31 December 2020, the net contribution of the major business segments, for the income statement, is analysed as

follows:

(Thousands of Euros)

2020 (restated)

Commercial banking

Companies,

Corporate and

Investment

banking in

Portugal

Private

banking

Other

Consolidated

Retail in

Portugal

Foreign

business (1)

Total

INCOME STATEMENT

Interest and similar income

504,181

902,672

1,406,853

295,471

19,379

84,057

1,805,760

Interest expense and similar charges

(14,218)

(179,665)

(193,883)

(41,161)

(4,192)

(34,859)

(274,095)

Net interest income

489,963

723,007

1,212,970

254,310

15,187

49,198

1,531,665

Commissions and other income

414,250

278,149

692,399

159,113

29,030

20,389

900,931

Commissions and other costs

(42,312)

(174,909)

(217,221)

(22,916)

(2,226)

(135,498)

(377,861)

Net commissions and other income (2)

371,938

103,240

475,178

136,197

26,804

(115,109)

523,070

Net gains arising from trading activity (3)

19,249

79,240

98,489

295

123

41,736

140,643

Share of profit of associates under the

equity method

—

9,397

—

58,298

67,695

Gains/(losses) arising from the sale of

subsidiaries and other assets

1,415

1,423

—

(7,815)

(6,387)

Net operating revenue

881,158

916,299

1,797,457

390,807

42,114

26,308

2,256,686

Operating expenses

475,732

439,022

914,754

122,476

21,543

31,630

1,090,403

Impairment for credit and financial assets

(4)

(98,885)

(155,995)

(254,880)

(266,975)

(2,774)

863

(523,766)

Other impairments and provisions (5)

(43)

(212,587)

(212,630)

—

(104,952)

(317,582)

Net income before income tax

306,498

108,695

415,193

1,356

17,797

(109,411)

324,935

Income tax

(93,414)

(51,798)

(145,212)

562

(5,120)

17,680

(132,090)

Net income after income tax from

continuing operations

213,084

56,897

269,981

1,918

12,677

(91,731)

192,845

Income arising from discontinued

operations

—

8,431

—

7,089

—

15,520

Net income for the year

213,084

65,328

278,412

1,918

19,766

(91,731)

208,365

Non-controlling interests (6)

(25,489)

136

(25,353)

Net income for the year attributable to

Bank's Shareholders

213,084

39,839

252,923

1,918

19,766

(91,595)