01. Message From The Chairman of The General and Supervisory Board Profile of The Crédito Agrícola Financial Group 13

Transcription

1 Annual Report 2013

2 Contents 01. Message From The Chairman of The General and Supervisory Board Profile of The Crédito Agrícola Financial Group Caixa Central Governing Bodies Group Organisation Chart Key Aspects of the Group s Activity Key SICAM Indicators Key GCA Indicators The Macroeconomic Situation The International Economy The Portuguese Economy Financial Markets Development and Outlook for the Banking Sector Main Operations of The Crédito Agrícola Group Commercial Activities Deposits and Other Resources Loans Electronic Payments Direct Banking International Business Activities Financial Activities and Securities Exchange Market Strategy regarding Liquid Assets Intermediation in the Securities Exchange Markets Bancassurance Insurances Property Insurances Life Insurance Investment Banking Asset Management and Securities Investment Funds Real Estate Investment Trusts, Pension Funds and Venture Capital CONTENTS

3 05. Financial Analysis SICAM (Caixa Central + Associated Caixas Agrícolas) Income Statement Balance Sheet Crédito Agrícola Group (Consolidated) Consolidated Financial Statements 132 Notes to the Consolidated Financial Statements 141 Auditor s Report 275 Advisory Board Opinion Group Composition 282 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 03

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5 Message from the Chairman of the General and Supervisory board CRÉDITO AGRÍCOLA

6 01 Ladies and Gentlemen, Chairmen and Representatives of the Caixas de Crédito Agrícola, The deep economic stagnation that characterised the economy throughout 2013, and which is described in the text of the Annual Report that was sent to you, affected the performance of the Portuguese financial system in an extremely negative manner. In fact, during last year, we saw a considerable increase in overdue debts, which resulted in the need to significantly increase provisions. On the other hand, the recession has led to a fall in that value of real estate assets, reducing the value of collateral and forcing the recognition of impairments, sometimes of considerable value, with regard to the properties acquired by means of debt recovery processes. In a context where the financial margins of institutions also evolved negatively, and where, in as far as concerns debt, opportunities to generate new business become scarcer, the pressure on provisions and the value of impairments, as well as the declines in assets, leading to expressive losses in practically every banking group of relevance within the Portuguese financial system. Considering the eight banks that comprise the set of institutions with the most weight, which include Crédito Agrícola, almost all of them suffered losses during this financial year, adding up to a total of approximately 2,500 million euros, an impressive amount which, for some of them, was the equivalent to losses suffered by those banks during the two preceding years. The magnitude of these losses clearly conveys how complex the situation of the Portuguese banks really is, whose main institutions, in addition to taking steps to increase their capital, adopt measures to revitalise their balances, rearrange business models and rationalise operational structures, all in order to return to profitability, something we shall all praise, in order to balance the systemic risk in the Portuguese banking sector. Crédito Agrícola is not an island and therefore it too has suffered with the adverse factors that have affected the operating conditions in the other institutions. However, the conservative management performed by the Group meant comfortable solvency levels and solid capital ratios when the economic crisis unfolded (a comfortable situation that 06 MESSAGE FROM THE CHAIRMAN OF THE GENERAL AND SUPERVISORY BOARD

7 continues even today). This fact, together with other particularities of our Group, has meant that the quantitative impact of the current business environment, although also very negative for individual Caixas, did not affect Crédito Agrícola, certainly not to the same extent as with other banking groups. In fact in 2013 the financial results of Crédito Agrícola did fall considerably when compared to 2012, which in turn were lower than in 2011, but SICAM did manage to obtain positive although modest earnings, with a profit of just over 1 million euros, while the Caixas obtained a practically insignificant aggregate result (162 thousand euros). With regard to the Caixas, the financial results can be explained essentially by the rather considerable losses that occurred in a small number of Associates, which offset the profits obtained by the others, for which reason it should be noted that several Caixas, even in this difficult economic backdrop, managed to increase their earnings compared to recent years. It is a fact, however, that several Caixas, even some of those with positive earnings, suffered a significant decrease in earnings when compared to previous years. The information available for the first months of 2014 shows significant improvement compared to the same period last year, although these figures should be viewed with some caution since this year has only just begun. The negative results obtained by some Caixas, when viewed within the context of the current economic situation, are perceived as perfectly acceptable and superable, for which reason they do not cause great concern. However, matters are different when losses are accumulating from year to year, revealing structural problems in the specific Caixas. With regard to these CCAM, which are not many, the correction of imbalances is a priority, and the Central Caixa should attempt to find ways to help them succeed in doing so, by improving their management and their operating structure, though the Caixas, in their best interests and those of SICAM as a whole, must be receptive to do so. I would like to underline, however, that in view of certain concrete situations that are particularly negative, the General and Supervisory Board, following proposal by the Executive Board of Caixa Central, decided to approve an intervention in two Caixas that have experienced the greatest imbalances. As we have always said, and this is an established position, firmly reiterated by the General and Supervisory Board, interventions are measures of last resort, for the Caixas should be managed by its appointed leaders, within a perfectly normal framework of association. However, interventions cannot be avoided when the superior interests of the Group are in question. At this time, only five Caixas have undergone intervention according to Article 77-A of the Legal Regimen. Taking a look at the GCA results as a whole, in other words, not just SICAM but also the Group companies and investments funds that are included in the consolidation, Crédito Agrícola ended up with minimal losses of 2.9 million euros, mainly as a result of the fall in value of real estates and the change in the value of interests held in real estate trusts, which weighed against the results. The remaining results, taking into account the current situation, are fairly positive and were obtained in the insurance sector and in asset management and investment funds. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 07

8 During this highly and disruptive and complex time, these results allow the Group to stand out positively within the banking sector, clearly setting Crédito Agrícola apart from the general panorama of extremely negative results that occurred within the Portuguese financial system. Even more significant is the fact that, after almost seven years of the international and European financial crisis, Crédito Agrícola still has an excellent liquidity margin and extremely comfortable capital ratios, despite the new criteria and more demanding requirements set according to European regulations. However, our vigilance must not waiver. We must remain aware of the immense difficulties and challenges that the current situation produces and whose development it is hard to foretell, despite the fact that some signs of recovery have appeared, which everyone hopes will bear fruit. In order to respond to these challenges, we must improve the Group s performance in commercial terms, as well as operating efficiency and, overall, decisively improve credit risk management in every aspect analysis, contracts and concession, monitoring and recovery. This is precisely what is intended through the Group Transformation Program which, on the initiative and under the coordination of the Caixa Central Executive Board and the support and encouragement of the General and Supervisory Board, was opportunely presented to the Caixas and is currently at an advanced stage of implementation. We have noted the highest degree of motivation and commitment in the implementation of this Program among senior staff and employees of the Caixa Central and the companies, which we applaud and encourage. The Caixas Agrícolas have also shown an extremely positive outlook with regard to the general program outline, seeing that a wholehearted adoption of the Program is essential for its success. I would like to draw attention to the unwavering effort that is necessary during the next few years in order to sell the properties that Crédito Agrícola acquired as reimbursement for unpaid debt, properties which constitute assets that may provide no financial return and whose possession increasingly erodes our equity, in addition to several other inconveniences (maintenance costs, tax, among others). We are about to enter the new regulatory framework that has been instituted in the wake of the financial crisis through the European Banking Union, which will be based, first and foremost, on a single supervisory mechanism, but which also involves European legislation regarding recovery and resolution of ailing banking institutions as well as regarding customer deposit safeguards. Crédito Agrícola will not be included among the approximately 130 institutions supervised directly by the ECB (as of November this year). However, the fact that a single framework of standards for supervision of institutions and that Banco de Portugal, the national regulator, will ultimately exercise the powers delegated to it by the ECB, means that 08 MESSAGE FROM THE CHAIRMAN OF THE GENERAL AND SUPERVISORY BOARD

9 we shall have to count with a closer and more restrictive regulatory and supervisory framework, with little tolerance for any non-conformities. In this new context, it is important that Crédito Agrícola should maintain its relationship of compliance with regulatory authorities, consolidating the reliable status it has earned. This reputation for reliability was improved through the results obtained in the different inspections performed lately across the board with regard to our debt portfolio and procedures, both within the scope of the troika program for the financial sector and those that the Banco de Portugal carried out on the eight main Portuguese banks in anticipation of the Banking Union. This is due to the fact that the inspections as was noted at the time led to rather favourable outcomes for the Group, both in comparative and in absolute terms. As is well known, this new regulatory context has already determined a capital increase of the Caixa Central, seeing that Caixa Central is required to comply at individual level with Common Equity Tier 1 capital (a key element in the new regulations and whose minimum is set at 7%), in the regulator s opinion. In as far as concerns the Caixas, this requirement does not apply individually, for which reason the mandatory ratio applies to the consolidated Crédito Agrícola Group, regarding which, as I mentioned above, we are quite comfortable. However, in view of the new regulatory framework and the complexity of the challenges that the current situation has raised, close attention shall be given to the matter of capital, which must constitute a key element in our management. Adequate capital and its good use is an essential prior condition in order to ensure the Group s independence. Crédito Agrícola is one of the few Portuguese banking groups that did not resort to the banking recapitalisation line of credit created within the scope of the Portuguese financial assistance program which, naturally, we hope never to have to resort to. The revision of the Crédito Agrícola Mútuo Legal Regimen is also related to regulatory issues, a matter which the General and Supervisory Board considers highly important, and which is at this time under analysis by the Banco de Portugal. I cannot finish without once again applauding CA Seguros for the prize awarded by the magazine Exame as the best non-life insurer for its size, which has happened for the 4th time. As we are aware, in other years CA Vida has earned the same prize in the life insurance sector. In this way, we can safely say that the entry of Crédito Agrícola into the insurance sector, creating its own companies, has constituted a success story, demonstrating the strength and capacity of the Group to succeed. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 09

10 Dear colleagues and friends, We are the leaders of a great financial group which, deeply rooted in our communities, managed to earn its place within the national financial system, and is today an institution of reference. Without a doubt, the complexity of the current situation and the uncertainties caused by the new regulatory framework have thrown down the gauntlet to every bank, though current circumstances also create opportunities that it is important to benefit from. Crédito Agrícola is perfectly capable of improving its standing among the most relevant banking institutions, for which reason the Caixas shall achieve their important purpose of being the best banks in their community and regions (which, in fact, many of them already are). However, in order to achieve this, we must ensure that we remain close together and united. By this I do not mean a passive complacency that eclipses valid ideas, but rather clear and committed actions by the leaders, providing a good example and motivating employees, transmitting confidence to members, so that we together join efforts to decisively implement the choices taken by the Group. Our strength is in our union. Lisbon, 2nd May 2014 The Chairman of the General and Supervisory Board 10 MESSAGE FROM THE CHAIRMAN OF THE GENERAL AND SUPERVISORY BOARD

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13 Profile of the Crédito Agrícola Financial Group CRÉDITO AGRÍCOLA

14 02 1. Caixa Central Governing Bodies OFFICERS OF THE GENERAL MEETING Caixa de Crédito Agrícola Mútuo de Terras de Viriato Chairman Nuno Carlos Ferreira Carrilho Caixa de Crédito Agrícola Mútuo de Cantanhede e Mira Deputy Chairman Carlos Alberto Pereira Martins Caixa de Crédito Agrícola Mútuo de Ferreira do Alentejo Secretary Josué Cândido Ferreira dos Santos GENERAL AND SUPERVISORY BOARD Caixa de Crédito Agrícola Mútuo de Pombal Chairman Carlos Alberto Courelas Caixa de Crédito Agrícola Mútuo dos Açores Francisco Amâncio Oliveira Macedo Caixa de Crédito Agrícola Mútuo de Baixo Mondego António João Mota Cachulo da Trindade Caixa de Crédito Agrícola Mútuo da Batalha Afonso de Sousa Marto 14 Profile of the Crédito Agrícola Financial Group

15 Caixa de Crédito Agrícola Mútuo do Noroeste José Gonçalves Correia da Silva Caixa de Crédito Agrícola Mútuo de Porto de Mós Jorge Manuel da Piedade Volante Caixa de Crédito Agrícola Mútuo de Sotavento Algarvio João Lázaro da Cruz Barrote Caixa de Crédito Agrícola Mútuo do Baixo Vouga José Luís Sereno Gomes Quaresma Caixa de Crédito Agrícola Mútuo do Douro, Corgo e Tâmega Alcino Pinto dos Santos Sanfins EXECUTIVE BOARD Chief Executive Officer Licínio Manuel Prata Pina Member Renato Manuel Ferreira Feitor Member José Fernando Maia Alexandre Member Ana Paula Ramos Member Sérgio Raposo Frade CHARTERED ACCOUNTANT Ernst&Young Audit & Associados S.R.O.C., S.A. Represented by Ana Rosa Ribeiro Salcedas Montes Pinto ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 15

16 ADVISORY BOARD Caixa de Crédito Agrícola Mútuo de Albufeira Chairman João Manuel Correia da Saúde Caixa de Crédito Agrícola Mútuo de Alenquer Hélio José de Lemos Rosa Caixa de Crédito Agrícola Mútuo de Beja e Mértola Francisco José Salgueiro Correia Caixa de Crédito Agrícola Mútuo de Estremoz, Monforte e Arronches Normando António Gil Xarepe Caixa de Crédito Agrícola Mútuo de Lourinhã António Augusto Nascimento Mateus Caixa de Crédito Agrícola Mútuo de Paredes António Francisco Coelho Pinheiro Caixa de Crédito Agrícola Mútuo de Silves José Manuel Guerreiro Estiveira Gonçalves Caixa de Crédito Agrícola Mútuo de Vale do Távora e Douro Francisco Eduardo das Neves Rebelo Caixa de Crédito Agrícola Mútuo de Zona do Pinhal Ângelo de Jesus Antunes Ex officio, in conformity with article 35, no. 2, of the Caixa Central articles of association Adriano Augusto Diegues 16 Profile of the Crédito Agrícola Financial Group

17 2. Group Organisation Chart SICAM 1.13% CAIXAS ASSOCIADAS % (1) FENACAM 0.10% CAIXA CENTRAL 32.65% 57.27% 0.68% 96.72% CA VIDA 10.00% CA SEGUROS CRÉDITO AGRÍCOLA S.G.P.S % % % % CA IMÓVEIS CA GEST CA CONSULT 20.25% CA INFORMÁTICA 79.20% 1.40% 0.61% 85.20% CA SERVIÇOS 12.77% % CCCAM GESTÃO DE INVESTIMENTOS UNIPESSOAL LDA % 28.57% 26.05% 27.78% CA FINANCE FCR CENTRAL FRIE FCR PORTUGAL VENTURES GLOBAL 2 FCR AGROCAPITAL % 66.67% 52.78% 16.83% 5.04% 3.05% AGROCAPITAL SCR FII CA IMOBILIÁRIO FII CA PATRIMÓNIO CRESCENTE FII CA ARRENDAMENTO HABITACIONAL 86.52% 4.05% 5.76% 13.48% 48.27% FII IMOVALOR CA 51.73% 4.05% FII CARTEIRA IMOBILIÁRIA 52.78% (1) FENACAM holds 98.74% of its own equity > GCA total = 99.98% FULL CONSOLIDATION METHOD CONSOLIDATION THROUGH EQUITY METHOD On 31st/12/2013 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 17

18 3. Key Aspects of the Group s Activity 2013 highlighted the existence of a range of structural imbalances in the Portuguese Economy that were addressed by the Assistance Program, particularly the advocated objectives of budget consolidation, structural transformation of conditions for growth of business and industry, financial stability and the reduction of leverage on the banking system. The implementation of this program began its first results of economic recovery (measured, among others, by the following indicators: GDP growth, domestic demand, exports, employment, confidence index and investments) and the convergence of the budget deficit and debt (and the cost of sovereign debt) to levels more comparable to the Eurozone average. The debt reduction process undertaken by the State, companies and families influences the entire Portuguese banking system and is also reflected in the Crédito Agrícola Group business activities, particularly SICAM which, in this way, continues to face a range of challenges, including: (i) recovering profitability levels following the disappearance of the financial margin, particularly by increasing margins in active operations and reducing average deposit remuneration levels, despite the context of extremely low Euribor rates and the pursuit of expansionist monetary policies (adopted by the ECB in order to avoid deflation); (ii) increasing credit conceded by SICAM, especially Caixa Central, to the most dynamic economic sectors that are able to respond to loans taken out, despite the general context of debt elimination in the economy and the increased competitiveness of the main banks operating in Portugal (resulting from the deleveraging and capitalization processes recently undertaken); (iii) improvement of the debt portfolio, placing credit risk management as an operational priority, adopting homogenous and standardized processes and procedures within the context of SICAM, but taking into account the specificities that arise from the size and the heterogeneity of the Associated Caixas and the markets in which they operate; (iv) debt recovery activities, when financial liquidation is not possible, whereby recovery by means of acquisition of real property is limited to situations when there is no other alternative regarding restructuring customer debt; (v) reduction of direct and indirect exposure to real property assets, particularly by intensifying commercial activity; (vi) improving control of the Group s, SICAM s and Caixa Central s liquidity, solvency and equity, as well as solvency of affiliated companies, in accordance with the latest regulatory guidelines of prudential and behavioural nature issued by the supervisory and regulatory authorities; (vii) further dedication to and expenditure with issues related to observing regulatory requirements (including the necessary technological investments), in order to improve the Group s reputation as a top tier financial group with the supervisory and regulatory authorities; and (viii) higher applicable tax (e.g. termination of the special regimen applicable to cooperative institutions, extinction of tax benefits for inland institutions, special banking tax). 18 Profile of the Crédito Agrícola Financial Group

19 2013 saw the launch and implementation of the Caixa Central Restructuring Program and Crédito Agrícola Group Transformation Program which, among other things and in conformity with the guidelines adopted by the General Meeting, included: Revision of the organisation structure of Caixa Central, directing it towards the duties performed as a Central Structure; which were: (i) Central Entity for the Group, (ii) Business Support, (iii) Shared Services and (iv) Banking Business (its own); Structural optimization (reduction of departments and implementation of an early retirement program), concentration of services and optimization of physical space they use; Definition of the new organisation of CA Serviços, geared towards the duties performed as a Shared Services Entity; which are: (i) providing operation banking and general services and assisting the Group s business activities; (ii) definition, maintenance and evolution of the IT systems used by the Group, (iii) provide the selection, acquisition, installation and operation of support for IT systems and (iv) provide a user support service (consultation and service-desk); Implementation of a Transformation Program including 12 initiatives, following the results obtained from the diagnosis performed at the end of 2012, in order to transform the Crédito Agrícola Group into a top tier financial group, in particular by virtue of increasing skills and aligning the Group processes. In July 2013 the organisation structure of Caixa Central was approved and the 12 transformation initiatives were launched (PMO streams) with regard to the following areas and processes: (i) Implementing the new organisation structure, strategic council and strategic planning and control of the Crédito Agrícola Group; (ii) Detailing market strategy, commercial program and incentives system for the Crédito Agrícola Group; (iii) Detailing strategy for the Banco Urbano [Urban Bank] and its operationalization; (iv) Defining of the Group s communication plan; (v) Redesigning risk analysis and debt recovery processes within the scope of SICAM (from the first signs of default up to 90 days and the recovery cycle after 90 days); (vi) IS / IT Restructuring; (vii) optimizing and integrating insurers in the new market strategy and redefining the mission of instrumental companies; (viii) Implementing the strategy regarding real property and management instruments; (ix) Increasing capital and balance management instruments; (x) Implementing the Group s purchase strategy; (xi) Adapting the new legal framework to increase Group governance effectiveness and its evolution for the whole Financial Group; and (xii) Accelerating merger processes regarding the Caixas. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 19

20 In this context, since July 2013, monthly discussions were organised with those responsible for the initiatives that required the closest attention at any given time (revision of methodology and action plans, monitoring results compared to objectives initially proposed). By the 2nd semester of 2013 the initial results of these initiatives became apparent, such as: Implementation of the planning and budgeting program for Caixa Central, SICAM and the Group, integrated with the new Group strategy and the participation and / or consultation with all the entities within the Group. The works developed by Caixa Central with Insurers and the Asset Management Company and the Associated Caixas (particularly through new bodies Strategy Council and Marketing Committee) in the field of business development objectives and the works performed by Caixa Central and CA Serviços in the field of efficiency targets and investment in technological and communications infrastructures, information systems and operational business support services; Operationalization of the new model for business incentives and objectives, accompanied and managed centrally and structured into 9 product families (which are: deposits, credit, leasing, REITs, supplementary channels, Investment Funds, non-life insurance, life insurance and international business), revision of customer segment models and alignment of marketing campaigns with the new customer segments (with the planning and implementation of the necessary supervision in terms of commercial training in the field) in 2014; Revision of the Group guidelines with regard to granting and monitoring credit and functional design of a workflow pilot for private clients; Diagnosis of debt recovery and operationalization of the Collections Box pilot; Simplifying the Group s structure by (i) tidying up share interests and (ii) the amortisation and sale of shares of minor importance; Capacitation of CA Imóveis as the Group s real property competencies centre, launch of the closed Real Estate Investment Trust CA Imovalor in July 2013 and demerger of the Real Estate Investment Trust CA Imobiliário (process approved by Banco de Portugal during the 1st quarter of 2014); Request for adjustment of Legal Framework, particularly regarding the flexibility of sources to generate capital in the Group and operationalization of technological infrastructure elements that improve management of capital (e.g. risk support infrastructure, impairment support and prudential data mart, capital requirements data mart); Comprehensive diagnosis of the Group s purchase options and cost optimization by virtue of a central renegotiation of contracts, before the launch of the Group s Central Acquisitions Department; Start of the services catalogue characterisation process, as a joint initiative between CA Serviços and Caixa Central, for the future pricing of SICAM shared services and improvement in efficiency and effectiveness in providing those services. 20 Profile of the Crédito Agrícola Financial Group

21 Banking activities of the Crédito Agrícola Group (SICAM) obtained net earnings of 1.5 million euros, corresponding to a decline of 96% compared to the previous year, essentially due to the fall of the financial margin (-21.2%) the need to increase provisions (+24%) both with regard to non-performing debt and direct or indirect devaluation of collateral, which were partially offset by the capital gains obtained through the dynamic cash management performed by Caixa Central which, during 2013, generated earnings of 77 million euros. On the other hand, in 2013 the consolidated net income of the Crédito Agrícola Group registered a loss in the order of 2.9 million euros, mainly explained by the joint effect of fall in earnings from banking and the negative impact of the results obtained from real estate investment trust, due to debt recovery. The inspections within the scope of the Special Inspections Program carried out by Troika, the resulting recommendations in terms of models, risk management support, impairment calculation and equity instruments, and the need to adapt the business to the regulations and guidelines issued by Banco de Portugal, Portuguese Securities Exchange Commission and EBA underpinned our actions with regard to internal auditing, compliance and general risk departments in Caixa Central, which worked together to ensure compliance with legal requirements and to detect situations of non-conformity. Additionally, multidisciplinary efforts were made to implement an effective internal control system, not just for Caixa Central but for all SICAM. In as far as concerns inspection, guidelines and monitoring the Associated Caixas, the current context and challenges brought about the creation of new guidelines through the Special Inspections Program, such as: credit risk management, guarantee of economic / financial consolidation of the Associated Caixas, fostering mergers, intervention in seven Associated Caixas and monitoring the others more closely. In this field, there were developments, both completed and ongoing, in DFOA Online, monitoring SICAM management indicators (including those related to real estate assets). The human resources department in Caixa Central was split as part of the reorganisation that took place in July 2013 under the Crédito Agrícola Transformation Process, in order to assign specific means and resources to the strategic management of the Group s human capital. Through this reorganisation, in addition to optimising structures, new corporate departments were created, such as Planning and Control, Compliance and the Communication and Business Relations. Segment-oriented Marketing was augmented and focused on Business Enhancement that is, our bancassurance offer with the Group s business network (Caixa Central, Associated Caixas and foreign offices). Also within the scope of this reorganisation, CA Imóveis became the central body regarding matters related to real property, for which reason it now provides Caixa Central and the Associated Caixas with support on this subject. With regard to Marketing and Group communication, several marketing actions were implemented in order to increase awareness for the Crédito Agrícola brand, both in terms of advertising campaigns in different media (corporate and directed towards specific customer segments) and in terms of attending trade fairs and events, not to mention sponsorships. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 21

22 Crédito Agrícola got involved in a number of initiatives and meetings with foreign counterparts, associations, financial institutions and companies. The ultimate purpose of all these actions was the affirmation of Crédito Agrícola as The national Bank with a local accent. With regard to products, in addition to the developments operated by insurers and asset managers, we increased the offer of electronic means of payment via CA Buffet card, providing an offer in contactless technology and releasing Clube A card for members of the Associated Caixas. As far as the quality of service provided to Clients is concerned, based on Banco de Portugal information (2013 Report written and issued by the Behavioural Supervision of Banco de Portugal), Crédito Agrícola is still positioned in almost every field as one of the Banking Institutions that receives the least complaints, a fact which clearly reflects the posture and the closeness that the Associated Caixas enjoy with the Clients, meaning that any disagreements can be settled almost immediately and therefore there is rarely motive to file complaints with the Group s central bodies or the Supervisory Authorities. On the subject of process standardisation, we would like to draw attention to the development of the tool Collections Box, regarding certification of quality management systems and processes in the Associated Caixas and defining the standards and procedures in compliance with laws and regulation and the standardisation of practices in SICAM. In the field of cost efficiency, a new digital communication process was implemented and agreements regarding courier services (this agreement resulted in savings above 900 thousand euros), energy supply (adhered to by all the Group entities) handling and transportation of valuables (including cash for ATMs) and equipment assistance and maintenance were entered into. Regarding digital channels, 2013 saw an increase in the use of online and mobile services, both regarding individuals and companies. Additionally, the launch of digital documentation in the scope of online services meant more flexibility in responding to Customers and, simultaneously, obtaining reductions in terms of operational costs. A multi-bank channel was also launched in order to respond to requests made by corporate clients that sought to integrate Crédito Agrícola into the group of banks they interacted with by digital means in their daily operations. In terms of financial management and how to best improve the financial margin of the Associated Caixas, Caixa Central undertook to stabilise the fees table regarding cash excess of the Associated Caixas invested at Caixa Central, notwithstanding the reduction of solvency investment fees in line with the behaviour of the markets. With regard to tax issues, steps were taken to optimise processing and recovering VAT within the scope of SICAM as well as assessing the impact of amendments in tax matters (e.g. issue of invoices). 22 Profile of the Crédito Agrícola Financial Group

23 4. Key SICAM Indicators SICAM Evolution million euros 2002 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec. Customer Funds 6,863 7,181 7,599 8,174 8,671 9,158 9,613 10,070 9,989 9,884 10,178 10,210 Customer Loans 6,387 6,690 6,942 7,290 7,464 7,467 8,373 8,859 8,606 8,587 8,365 8,199 Net Assets 7,946 8,251 8,696 9,319 10,044 10,566 11,447 12,097 13,213 13,027 13,747 12,968 Operating Income ,000 1,026 1,054 1,098 1,105 Financial Margin Net banking fees Banking Income Net earnings Loan-to-deposit ratio - % a) 93.1% 93.2% 91.4% 89.2% 86.1% 81.5% 87.1% 88.0% 86.2% 86.9% 82.2% 80.3% Efficiency Ratio SICAM - % 52.5% 52.1% 52.5% 55.2% 58.4% 54.1% 55.5% 69.4% 67.1% 64.7% 65.3% 64.0% Return on Equity (ROE) - % 6.4% 14.1% 13.7% 11.8% 11.5% 13.0% 12.4% 4.2% 3.5% 4.5% 3.8% 0.1% Return on Assets (ROA) - % 0.4% 1.0% 1.0% 0.9% 1.0% 1.1% 1.1% 0.3% 0.3% 0.4% 0.3% 0.0% Leverage % Ratio of Overdue Loans > 90 days 5.3% 5.5% 5.7% 5.9% 4.0% 3.4% 3.8% 4.1% 4.9% 5.8% Coverage Ratio for Overdue Loans - % 73.6% 94.7% 98.4% 105.4% 113.6% 108.9% 136.0% 127.8% 127.8% 119.8% Number of CCAM Number of Branches (SICAM total) b) Average net assets per CCAM c) 61,543 67,026 71,754 81,993 91, , , , , , ,694 Average Number of Branches/CCAM d) Note: 2011 figures were reissued for the purposes of comparison a) calculated as gross credit over funds b) includes Caixa Central branches c) thousand euros d) only CCAM branches ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 23

24 5. Key GCA Indicators GCA Evolution million euros 2002 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec. Customer Funds 6,860 7,194 7,582 8,128 8,637 9,158 9,528 9,965 9,939 9,884 10,113 10,123 Customer Loans 5,634 6,010 6,191 6,413 6,972 7,467 7,926 8,366 8,041 8,587 7,660 7,472 Net Assets 7,933 8,290 8,693 9,370 10,601 10,566 12,122 12,948 14,224 13,027 15,113 14,621 Operating Income ,075 1,122 1,054 1,100 1,141 Financial Margin Net banking fees Insurance technical margin n.a. n.a. n.a. n.a Banking Income Net earnings Core Tier 1 GCA - % a) 8.1% 9.1% 10.4% 10.5% 11.6% 11.6% 12.2% 12.1% 12.7% 12.5% 11.6% 11.9% Tier 1 - GCA - % a) 8.1% 9.1% 10.4% 10.5% 11.6% 11.5% 12.0% 11.8% 12.5% 12.3% 11.1% 11.4% Solvency Ratio GCA - % a) 10.5% 11.3% 12.9% 14.0% 14.4% 14.4% 13.3% 12.7% 13.4% 12.7% 10.9% 10.8% Efficiency Ratio GCA % 59.1% 55.6% 53.5% 57.8% 45.5% 46.4% 56.8% 68.8% 68.3% 65.4% 67.0% 68.2% Return on Equity (ROE) - % 6.3% 15.0% 13.8% 10.8% 11.6% 13.5% 12.2% 4.9% 3.2% 5.3% 4.1% 0.3% Return on Assets (ROA) - % 0.4% 1.0% 1.0% 0.8% 0.8% 1.1% 1.0% 0.4% 0.2% 0.4% 0.3% 0.0% Notes: 2011 figures were reissued for the purposes of comparison 2010 figures were calculated according to the standards approved by the European Union that came into force on 1 January 2010; 2009 and 2008 figures were reissued for the purposes of comparison 2006 figures are pro forma (readjusted in conformity with the NCA [adjusted accounting standards] in force as of 1 January 2007) a) ratios from 2002 to 2006 calculated according to PCSB [banking system accounting], 2007 according to NCA and IAS since 2008, including Basel II criteria from March Profile of the Crédito Agrícola Financial Group

25 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 25

26 03

27 The Macroeconomic Situation CRÉDITO AGRÍCOLA

28 03 1. The International Economy According to the IMF s projections, published in the January 2014 world economic outlook update, the growth of the world economy in 2013 continued to slow down, in line with recent years, reaching a mere 3.0%. Forecasts also indicate that the GDP in advanced economies grew 1.3% in Japan grew moderately while GDP in the Eurozone fell by 0.4%. Altogether, the IMF estimates that the world economy will increase 3.7% in 2014, an increase in relation to the 2013 estimate of 3.0%. The slight decline in the growth of emerging economies together with the increased pace of the strongest economies may lead to more balanced growth of the world economy. Annual GDP variation (percent) World Economic Development E 2014 P 2015 P World Economy 5.2% 3.9% 3.1% 3.0% 3.7% 3.9% Advanced Economies 3.0% 1.7% 1.4% 1.3% 2.2% 2.3% United States 2.5% 1.8% 2.8% 1.9% 2.8% 3.0% Eurozone 2.0% 1.5% -0.7% -0.4% 1.0% 1.4% Japan 4.7% -0.6% 1.4% 1.7% 1.7% 1.0% Emerging Economies 7.5% 6.2% 4.9% 4.7% 5.1% 5.4% Russia 4.5% 4.3% 3.4% 1.5% 2.0% 2.5% China 10.4% 9.3% 7.7% 7.7% 7.5% 7.3% India 10.5% 6.3% 3.2% 4.4% 5.4% 6.4% Brazil 7.5% 2.7% 1.0% 2.3% 2.3% 2.8% World Trade (Goods and Services) 12.8% 6.1% 2.7% 2.7% 4.5% 5.2% Source: World Economic Outlook, October 2013, updated January The Macroeconomic Situation

29 In 2013 the largest economies in the world began to reap the benefits from economic policies implemented since the start of the 2008 crisis. China is expected to register growth similar to last year s, but the authorities say that uncertainties still persist in the world stage. The priorities of Chinese economic policies tend to vary from the external or the internal market. The results of the United States were better than expected. World Economic Development 10,4% 9,3% 7,7% 7,7% 7,5% 7,3% 4,7% 2,5% 2,8% 2,8% 3,0% 1,8% 1,9% 2,0% 1,5% 1,0% 1,4% 1,4% 1,7% 1,7% 1,0% 0,7% 0,4% -0,6% United States Eurozone Japan China E 2014 P 2015 P Source: World Economic Outlook, October 2013, updated January 2014 The main contributors towards the slowdown of the world economy were both the advanced economies, in particular the Eurozone which showed negative growth for the second year running, and the emerging economies, among which Russia registered the largest downturn compared to 2012, despite the growth of countries such as India and Brazil. Generally speaking, the Latin American countries grew less than expected. Brazil presented a GDP increase of 2.3%, in contrast to the 4% estimated in the April 2013 Outlook. Inflation came to 5.8% partially due to the Central Bank s decision to increase the base rate by 2.5%, to 10%. However, and despite organising the World Cup in 2014 and the Olympic games in 2016, economic forecasts for Brazil are not optimistic. During the first semester of 2013 there was an increase in accommodative policies in Japan and in the main emerging economies in South America. However, these policies were subject to review in some of the South American economies in order to avoid capital flight and the depreciation of the respective currencies, the effects brought about by the fear of a reduction of monetary stimulus in the USA. In mid-june the World Bank lowered its forecasts for growth in China during 2013 (from 8.3% to 7.7%), seeing that exports in May only increased 1%, as opposed to 14.7% in the previous month, the lowest increase in 15 months. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 29

30 The results obtained by the United States were higher than forecasted and the country is expected to enter 2014 in a far better condition than 2013 by virtue of an acceleration in consumer spending. GDP growth slowed in the fourth quarter of 2013 (increasing 3.2% instead of 4.1% in the third quarter, in annualized terms) due to the government shutdown that took place in October, following the failure to reach an agreement about increasing the debt ceiling. The budgetary agreement reached after a week-long shutdown permitted the dissipation of the negative effects on the economy caused by the unprecedented possibility of the United States defaulting on the payment of its debt. Even so, the outlook is positive due to the increase in consumer spending with regard to health and the increase of investment in technological companies. In October and November there was a significant increase in retail sales which, together with the increase in stocks, signalled higher business confidence, with exports growing 3.9% in the third quarter. Despite being far below the 10% registered in October 2009, the current unemployment rate of 7% is still higher than before the crisis. Improvements in the socioeconomic situation of families and the visible revitalisation of businesses through the securities exchange market indicators helped stimulate demand and increase real estate prices and the valuation of indices in this market. The Eurozone registered a sustained 0.3% in the fourth quarter, above the 0.1% obtained in the third quarter and the equivalent of the second quarter. This budding growth can be explained by socioeconomic factors (unemployment, bankruptcies) that caused a contraction in consumer spending, especially in large economies such as France and Germany. Nonetheless, we can safely say that this region has successfully escaped the greatest recession in its history. Economic conditions in the Eurozone still diverge considerably from country to country, with Germany and France practically at a standstill while GDP has decreased in Italy and Spain. Annual GDP growth (percent) Economic Development in the Eurozone E 2014 P 2015 P Germany 3.9% 3.4% 0.9% 0.5% 1.6% 1.4% France 1.7% 2.0% 0.0% 0.2% 0.9% 1.5% Italy 1.7% 0.4% -2.5% -1.8% 0.6% 1.1% Spain -0.2% 0.1% -1.6% -1.2% 0.6% 0.8% Source: World Economic Outlook, October 2013, updated January 2014 However, over the last few months there have been modest signs of a general economic recovery in the Eurozone, with a fall in unemployment and more positive economic sentiment. There are still some signs of concern regarding the contagion that a two-speed Europe may cause on the German economy, namely the revelation that the peripheral countries may not maintain a compatible growth rate in relation to current debt levels and costs. 30 The Macroeconomic Situation

31 Germany has obtained moderate growth during the fourth quarter (0.4%), after a decrease in industrial production in October and 0.3% GDP growth in the third quarter. This increase contrasts starkly with the 0.7% registered in the second quarter of According to the German Statistics Department, the German trade surplus decreased to 156 thousand million euros between January and October 2013, with exports worth 917 thousand million euros and imports of 751 thousand million euros. During the same period in the previous year, the trade surplus amounted to 161 thousand million euros. At the end of 2013, German business confidence registered the highest figures for 20 months, according to the German Economic Research Institute. This index reached in December, more than the registered in November and the in October. In November, the European Commission revised its estimates for GDP growth in Germany during 2013, from 0.4% to 0.5%. In South European countries (Portugal, Spain, Italy and Greece), the economic indicators cause more concern. In Spain, the austerity program and structural reform seem to start bearing fruit. In October, the Spanish central bank announced that the recession in Spain was officially over, two years after it had begun. In the third quarter, the Spanish economy grew by 0.1% in terms of GDP, when compared to the previous quarter, after falling during nine consecutive quarters, and in the fourth quarter growth remained positive, at 0.2%. The exports sector is indicated as the main cause for the boost given to the economy. For its turn, Greece suffered a 3% contraction in the GDP during the third quarter compared to the previous year, according to that country s statistics agency. During the third quarter, consumer spending fell 6.6% in relation to the previous quarter and the gross fixed capital formation fell by 12.6%. However, exports increased 5.7% as opposed to 2.3% in imports. With regard to France, the IMF lowered its estimates in June to contract by 0.2% in 2013, as compared to the 0.1% of the previous estimate, and forecasted a 0.8% growth in In its January update, the IMF estimates for the French economy are 0.2% in 2013 and 0.9% in These changes in the Fund s estimates are due to the evolution of GDP, seeing that there was a reduction of 0.1% in the first quarter, growth of 0.6% in the second and once again a reduction of 0.1% in the third quarter, which clearly reveals the volatility of economic growth not just in France but also in Europe. At the start of November, Standard & Poor s lowered the French rating from AA+ to AA, which puts France at the same level as Belgium. During the fourth quarter of 2013, growth of Product came to 0.3% and the estimate for 2013 is maintained: annual growth of 0.2% compared to the previous year. The Italian economy, which is also under great strain to consolidate its public finance and reduce debt, managed to stem the decline in the third quarter of 2013, with a GDP variation of zero after eight quarters of negative variation, and grew in the fourth quarter of 2013 by 0.1%. Despite the estimated decrease of 1.8% in 2013, the IMF expects Italy to return to growth already in 2014 (0.6%). ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 31

32 3,9% 3,4% Eurozone Economic Development 2,0% 1,6% 1,4% 1,7% 1,5% 0,9% 0,9% 0,5% 0,0% 0,2% 1,7% 0,4% 1,1% 0,6% 0,1% 0,6% 0,8% -0,2% -1,8% -2,5% -1,6% -1,2% Germany France Italy Spain E 2014 P 2015 P Source: World Economic Outlook, October 2013, updated January 2014 According to Eurostat data, industrial production in the Eurozone advanced 1.8% in November in relation to October, and 1.3% in the European Union (28 countries). Compared to the previous year, Portugal saw the ninth highest rise in the EU, with industrial production increasing by 3.1% in November, compared to the same month in In the Eurozone as well as in the 28 EU member-states, growth was registered at 3%. However, when compared to November, December saw a fall in industrial production of 0.7% in the Eurozone and in the European Union as a whole, although when compared to the previous year (in relation to December 2012) there was a growth (0.5% and 0.9%, respectively). It should be noted that in December, when compared to the previous year, Portugal once again had the highest increase in industrial production in the EU (+7.1%). The United Kingdom, according to S&P, benefits from exceptional monetary flexibility, with signs of economic recovery based on private consumption and residential investments. S&P expects the real GDP to achieve an annual growth rate above 2% between 2013 and In mid-december, the Bank of England justified the economic performance of the country with the weakness of the global economy, the deterioration of conditions for obtaining credit and the high level of uncertainty after the crisis. In its January update the IMF expects the United Kingdom to grow 1.7% in 2013, above the 1.1% of the previous estimate. The UK s Office for National Statistics revealed that the country s economic recovery accelerated in the third quarter, although production levels are still 2.5% below their peak following an increase of 0.8% in the third quarter. To sum up, the last few months of the year increased expectations for better economic performance in 2014 and 2015 in more advanced economies (Europe, United States, England) due to an increase in internal demand, and for emerging economies as a result of an increase in exports. In the Eurozone, the recession is at last expected to come to an end and turn into mild growth, despite the continued doubts regarding the capacity of southern European nations to meet their obligations (public and private debt) through economic growth. 32 The Macroeconomic Situation

33 2. The Portuguese Economy The Portuguese economy contracted by approximately 1.4% in 2013, which translates into a total contraction of approximately 6% during the period, within a context marked by the process of correcting macroeconomic imbalances that have accumulated over the last few decades. Portuguese Economic Indicators Annual GDP % 1,4% 1,2% 1,4% -1,3% -1,4% -3,2% P 2015 P Source: Banco de Portugal (Economic Bulletin & Projections for the Economy, March 2014) and INE - Portuguese Statistics Institute After a long period of continued GDP decline, the last three quarters of 2013 saw ensuing positive variations that contributed towards combatting the economic slowdown. The most recent known data indicates growth higher than projected with regard to private consumer spending and imports during the second half of With regard to private consumer spending in 2013, there was a minor fall in non-durable goods (-1.9%) and a slight rise in durable goods (0.9%). Spending on durable goods, which usually follows a markedly cyclical behaviour, was positive in 2013 despite the projected fall in real disposable income, following the very substantial contraction that took place during (36% in accumulated terms). Private spending increased again, reaching levels equivalent to October 2010 in December, with car sales standing out. During the third quarter of 2013, the annual savings rate didn t rise for the first time since its start in the 3rd quarter of 2008, falling by 0.1 percentage points to 13.5%. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 33

34 The car segment is helping the recovery in terms of Investment, by contributing towards the improvement of gross fixed capital formation in the transport sector and a less intense fall of this indicator which continues to suffer, though less intensely, due to the reduction in investment in construction and machines and equipment. Gross fixed capital formation fell by 6.6%, less than in The acquisition of residential real estate contracted very significantly in 2013, approximately -15.9%. House prices fell 2.9% in the 3rd quarter of 2013 compared to the same period in 2012, far more than the Eurozone average of 1.3%. Portuguese Economic Indicators Annual Internal Demand % 4,4% 2,1% 0,9% 1,3% 1,8% 1,1% -4,1% -3,3% -5,1% -5,3% -4,7% -1,7% -1,7% -6,6% -0,9% -0,5% -10,5% -14,3% P 2015 P Private consumption Public consumption Investment (GFCF) Source: Banco de Portugal (Economic Bulletin & Projections for the Economy, March 2014) and INE - Portuguese Statistics Institute Exports have played a crucial role in the adjustment of the Portuguese economy, growing by 6.1% in 2013, despite the fairly limited growth in the world economy during Dynamic exports during recent years have meant significant market share gains, partially related to the diversification of destination markets that, in 2013, led to a market share of Portuguese exports higher than those that existed at the start of the Monetary Union. In 2013 the gain in market share benefitted from specific factors; particularly, the rise in the installed refining capacity, with a very significant impact in energy product exports, which increased by approximately 40% in 2013 and corresponded to a contribution of 1.4% towards the increase in exports (0.5% in 2012). This increase in refining capacity had a permanent impact with regard to production and export of energy products. External demand regarding the manufacturing industries has grown, with outside EU exports increasing very considerably between October and November (+9.7%), in line with the overall increase in imports. 34 The Macroeconomic Situation

35 In as far as concerns the development of general external demand towards the Portuguese economy, it grew approximately 1% in Imports, after the accumulated fall of approximately 12% in 2011 and 2012, grew almost 2.8% in 2013, as a result of increased demand on products with high import content, such as energy products or transport material. Portuguese Economic Indicators Annual External Sector % 8,8% 5,4% 6,9% 6,1% 5,3% 5,4% 5,1% 4,7% 3,2% 2,8% -5,3% -6,6% P 2015 P Exports Imports Source: Banco de Portugal (Economic Bulletin & Projections for the Economy, March 2014) and INE - Portuguese Statistics Institute The fall in inflation to 0.3% in 2013 essentially resulted from the dissipation of the impact of budget consolidation measures adopted in 2012, particularly the hike in indirect tax and the prices of certain regulated goods and services. Some indicators reveal an improvement of economic activity in Portugal, particularly the increase of industrial production and the less significant fall in services and in the construction sector. The industrial production index for Portugal (excluding construction) in December reached the highest level since January The economic sentiment indicator showed similar behaviour and in December it registered its best performance since February As far as unemployment is concerned, and despite the latest indicators revealing a reduction in the number of jobless, recent data with reference to the fourth quarter of 2013 still pointed to an unemployment rate of 15.3%. Although the appearance of some positive signs in terms of industrial production, the external trade balance and the sentiment of economic agents, the continued pressure of additional austerity measures has not permitted the uncertainty to fade with regard to the Portuguese economy s ability to overcome the recession. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 35

36 The moderate increase in prices in 2013, conjugated with the fall in unit costs of labour in the private sector and the deflation of imports excluding energy costs, has led to an increase in unit profit margins in companies, measured according to gross operating surplus per unit. This development in profit margins reflects the adjustment of company balances in the scope of their deleveraging process, as well as the impact of the recomposition of the business sector due to the withdrawal of companies with lower profitability from the market. In 2013, the Portuguese economy s financing ability, measured according to the joint value of current and capital balances, increased to 2.6% of the GDP, largely due to the evolution of the goods and services balance sheet, which for the first time in several decades had a positive balance (1.7% GDP). In effect, exports of goods and services have continued to grow robustly, in harmony with the process of reorganisation of Portuguese companies. Current and Capital Account (% GDP) 0.8% 2.6% 3.3% 3.7% -5.8% -11.1% -10.1% -9.4% E 2014 P 2015 P Source: Banco de Portugal (Economic Bulletin & Projections for the Economy, March 2014) and INE - Portuguese Statistics Institute Since mid 2012, and in particular the start of 2013, there has been a considerable decrease in risk premiums associated to Portuguese issuers, which allowed some issues of sovereign debt to take place. However, access to financial markets by the Portuguese State remains conditioned. This situation was worsened temporarily by the Government instability that occurred in the month of July. In this way, the Portuguese sovereign risk premium is still higher than the risk premiums of other countries under pressure. Nonetheless, it should be noted that interest rates regarding public debt have been falling consistently since mid-october, whereby 10-year Fixed Rate Bonds in January 2014 were available at 5.21%. 36 The Macroeconomic Situation

37 Spreads of Peripheral Country Debt relative to German Debt Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec year spread Spain Germany 10 year spread Portugal Germany 10 year spread Ireland Germany 10 year spread Italy Germany 10 year spread Greece Germany Source: FD / Caixa Central, based on Bloomberg According to the Public Finance Council, the government agencies deficit will be clearly lower that the Government estimates of 5.9% and below 5.5%, according to the calculation method adopted by Troika, which does not include the recapitalisation of the bank Banif in the calculations. In the first three quarters of 2013, the deficit stood at 5.8% of the GDP, in line with the annual estimates of the Ministry of Finance. This value compares favourably with what occurred in the equivalent period in the previous year (6.1% GDP) and the previous quarter (7.0% GDP). State revenue increased almost twice as much as expenditure, boosted by the good results obtained via tax revenue, while the adjusted expenditure will be in line with Government estimates. In the last two quarters of 2013 the current balance registered a surplus, although minor (0.8% in the third quarter and 0.5% in the fourth quarter). The growth of adjusted tax revenue compared to the previous year increased at the close of the year, increasing from 7.2% at the end of the first quarter to 8.1% (2% above the figure estimated by the Ministry of Finance for the full year). ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 37

38 Tax revenue is likely to surpass the amount expected in the latest Ministry of Finance estimate, which points to 70,760 million euros. These good results are due both to direct taxation, which increased by 27.3%, and indirect taxation, which fell in the third quarter. During the first three quarters of 2013, the amounts registered (non-accumulated) came to 3.3%, 11.8% and 9.0%, respectively. In this way, the expectations that the 2013 deficit had not surpassed 5% came about following the recent disclosure by the Portuguese Statistics Institute (INE) that the 2013 deficit came to 4.9% GDP. The indicator based on business expectations with regard to employment improved in December, maintaining its steady improvement since the start of The main indicators related to employment recorded better statistics in December than in previous years. Unemployment figures were 2.8% lower in December 2013 than in the previous year, which corresponds to a decrease of 20,117 in the number of unemployed. Youth unemployment rose by 1.7% while unemployment in the general adult population fell by 3.5%. Company insolvencies increased by 4.7% in 2013 when compared to 2012, which corresponds to a noteworthy slowdown in relation to 2012 (when the insolvencies had grown 27.7% compared to the year before). This fact demonstrates that the adjustment of the Portuguese business sector is already practically complete. With regard to incorporation of new companies, this figure increased by 14.4%, with 34,714 new companies formed in The Macroeconomic Situation

39 3. Financial Markets In 2013, the central banks of the three main economic blocks (United States, Japan and Europe) continued to pursue the policy of low interest rates and unlimited access to liquidity, indicating that they will continue to do so in order to stimulate the economic recovery, 5 years after the start of the largest economic recession since The gradual reduction in the debt yields of peripheral countries, bringing them down to the average levels of 2010 seems to contrast with continuing degraded macroeconomic indicators (e.g. unemployment, GDP, industrial production, economic sentiment indicator). However, this still reflects the outlook of investors that the European Central Bank maintains its objective to preserve the Euro at all costs and that monetary union will continue to be used to stimulate the European economy and prevent the risk of deflation. Furthermore, in a context of high liquidity and low risk aversion, the debt of those countries revealed increasingly attractive to investors Evolution of Yields in Portuguese Public Debt and the 3-month Euribor 0 Jan 12 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 EURIBOR 3M Yield OT 2 years Yield OT 5 years Yield OT 10 years Source: FD / Caixa Central, based on Bloomberg ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 39

40 As opposed to what had been signalled by the ECB at the end of 2012, suggesting that any adjustments made to the benchmark rate would involve higher rates, in order to reinforce confidence in the end of the Eurozone recession and, after a year unchanged, in May the ECB decided to reduce the reference rate to 0.50% (-25 bps), reducing it further in November to the historic minimum of 0.25%, as a result of the disclosure of inflation data in October and a rise in prices of 0.7% - clearly below the ECB objective of approximately 2% - which brought the risk of deflation back onto the agenda, wich the ECB mitigated by increasing the accomodative nature of its monetary policy. Development of Euro, Dollar and 3-month Euribor Reference Rates Jan 08 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 ECB (REDISCOUNT RATE) 3M EURIBOR FED FUNDS Source: FD / Caixa Central, based on Bloomberg On the other hand, the American economy recovered its momentum in 2013, due to the dissipation of the impact of the fall in government and federal expenditure and of the tax increase on internal consumer spending. In this sense, the FED ended up considering that the American economy was sufficiently healthy to support lowering levels of stability intervention on financial markets, for which reason in December the decision to reduce the volume of the bond purchase program (QE3 tapering) to 75 thousand million USD was announced, reducing purchases at a monthly rate of 10 thousand million USD, promoting the start of a gradual trajectory of reducing this program in size until it disappeared entirely, in accordance with the positive development of the economy. 40 The Macroeconomic Situation

41 In 2013 the euro rose in relation to the main world currencies, notably rising about 10% in relation to the US dollar. This continued trend towards rising value has compromised the evolution of exports and consequently the growth of the Eurozone economy. According to a Nordea Markets study, a rise of 10% in terms of commercial trade (the rise of one currency in relation to another, for example) is the equivalent to a 0.5% to 1% increase in the reference rate and causes a reduction in growth of 0.8 GDP points in two years. 150 Development of the Currency Exchange Market (base 100 on 01/01/2012) Jan 12 Mar 12 May12 Jul 12 Oct 12 Feb 13 May 13 Jul 13 Sep 13 Dec 13 EUR/GBP EUR/USD EUR/JPY EUR/CNY Source: FD / Caixa Central, based on Bloomberg ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 41

42 Despite the backdrop of uncertainty and the low perspectives of growth recovery, the main European stock exchange indexes rose clearly during 2013, amounting to +16% in the PSI 20, +18% in the DJ Eurostoxx 50, +26% in the DJ Industrial and +25% in the DAX, maintaining the upwards trajectory that has consolidated since Development of Shareholder Indices (base 100 on 01/01/2012) Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 PSI 20 DJ Euro STOXX 50 Dow Jones Indust. DAX IBEX Source: FD / Caixa Central, based on Bloomberg 42 The Macroeconomic Situation

43 Empirical data reveals a very close correlation (0.8) between the price of agricultural commodities and metals and the growth of emerging economies. Additionally, a commodities market may have negative effects in the trade balance of some regions of the globe, particularly the Middle East and Africa, causing a larger contraction in international demand, according to a cyclical phenomenon that may sustain a fall in commodities prices during Development of Wheat, Oil and Gold Prices (base 100 on 01/01/2012) Jan 12 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Wheat Oil (WTI) Gold Source: FD / Caixa Central, based on Bloomberg ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 43

44 Following the fall in oil prices at the end of 2012 and start of 2013 as a result of poor perspectives of world economic growth, the intensification of political / military instability in Syria, together with the perspectives for economic recovery in the USA, led to a sustained increase in oil prices during the second quarter of However, and taking into account the indicators for the futures market, oil prices are expected to fall in 2014 as a result of the increased production of non-opec suppliers and stable productions levels by OPEC. 140 Development of Oil Price (Brent) Jan 12 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Oil (Brent) Source: FD / Caixa Central, based on Bloomberg 44 The Macroeconomic Situation

45 Volatility indicators remain high, though the VIX 1 indicator seems to show a sustained drop away from the psychological barrier of 20 points, while ItraxxFinancials 2 remained at historically high levels due to the continued global recession and the maintenance of uncertainties with regard to sovereign debt in the Eurozone, particularly in the southern nations. 140 Development of Volatility Indicators Jan 10 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 VIX ITRAXX SR FIN 5Y Source: FD / Caixa Central, based on Bloomberg 1 the VIX index, also known as the fear index, represents the measurement of expected volatility for the next 30 days. 2 ItraxxFinancials corresponds to the set of CreditDefaultSwaps (CDS) covering the following regions: Europe, Australia, Japan and Asia excluding Japan. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 45

46 4. Development and Outlook for the Banking Sector The activity of the banking system remains highly conditioned by the macroeconomic and financial environment, particularly the adjustment plan for the Portuguese economy which affects all economic agents across the board, resulting in significant contraction of the banking sector. Some of the adverse conditions that characterised banking last year remain, such as the maintenance of benchmark rates at historically low levels, the growing accumulation of overdue debt that is hard to manage, with the continued lack of definition in the real estate market render it impossible to manage the oversized real estate portfolio held by banks and generating significant pressure in terms of operating costs and equity. Since mid-2011, the main types of loan register negative annual variation rates, particularly accentuated in loans to individuals for non-residential purposes and loans to companies, the result of a considerable fall in household disposable income and the increase in unemployment and contraction of company business volume, especially micro and small enterprises without export capabilities. LOAN TYPES Annual variation rate 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2013 Jun 2013 Dec TOTAL Company Individuals Home Loans Other Loans for individuals Source: Banco de Portugal, Statistical Bulletin The downhill trend of the loan-to-deposit ratio reflects the reduction in credit and the moderate growth in Customer deposits, brought about by the commitment to deleveraging undertaken with Troika. Debt quality continues to add pressure to bank profitability levels due to the constant increase in impairment levels and the resulting need for provisions. The signs of improvement in the economic situation, as of the second quarter of 2013, are still not enough to invert the bad credit ratio, which increased by 5% in December 2010 to 11% in September Company and individual debt levels have fallen gradually, respectively -0.9% with regard to companies and -4.6% for individuals, according to the data issued by the Banco de Portugal on December 2013 in relation to the previous year. 46 The Macroeconomic Situation

47 In the Portuguese banking sector, capital margin is generally appropriate regarding the requirements set by the EBA and by Banco de Portugal and liquidity is improving. However, safeguarding profitability is still a challenge for most banks. Seeing that the debt accumulated by the private corporate sector is not compensated for by the capacity of those companies to undertake projects that generate positive and sustainable cash flows, although improvements have been visible recently for lower risk companies. The banking sector has strengthened its solvency levels by means of recapitalisation operations, the most relevant of which through the bank recapitalization plan leveraged by the State and whose value amounted to 7.8 thousand million euros. Recourse to funding from the Eurosystem by Portuguese banks remained stable following the rise that occurred until 2012, although it increased from 53.2 thousand million euros during the 2nd quarter to 55.4 thousand million euros in the 3rd quarter (+4.1%). The analysis of corporate overdue debt per region reveals not only the continuation but also the increase in default levels throughout in every region. NON-PERFORMING COMPANY LOANS (%) PER REGION Regions 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun North Centre Lisbon Alentejo Algarve Azores Source: Banco de Portugal, Statistical Bulletin If we compare current default levels with those that occurred at the end of 2010, we can see that in the Algarve, overdue debt increased more than fourfold, in the Lisbon area it tripled and in other regions it increased to over double. The evolution of non-performing debt analysed according to the size of the loan granted reveals the same downhill trend, with non-performing debt on the increase regardless of the initial value of the loan. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 47

48 NON-PERFORMING COMPANY LOANS RATIO (%) PER LOAN VALUE (Value in euros) 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Jun 2012 Sep 2012 Dec 2013 Jun 2013 Dec <20, ,000 50, , , , , , , ,000 1,000, ,000,000 5,000, >5,000, Source: Banco de Portugal, Statistical Bulletin Despite the continued trend towards overdue debt with regard to loans below 100,000 euro, the increase that has occurred in higher value loans has become more intense in the last few semesters, becoming fairly significant during the first semester of In as far as concerns non-performing company loans, there are no signs of slowdown in the business sectors related to construction, retail and real estate activities, whose loan sizes are permanently increasing. NON-PERFORMING LOANS RATIO INDIVIDUALS V. COMPANIES 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2013 Jun 2013 Dez Individual (Households) Company Source: Banco de Portugal, Statistical Bulletin With regard to the banking system, non-performing loans in the individuals segment (households) has recently tended to stabilise, although there was an increase at the end of the year (the ratio increased from 4.3% in June and September to 4.5% in December). Overdue debt has increased both with regard to home loans and with regard to other types of loans. NON-PERFORMING LOANS RATIO INDIVIDUALS (PER LOAN TYPE) 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2013 Jun 2013 Dec Home loans Other loans Source: Banco de Portugal, Statistical Bulletin 48 The Macroeconomic Situation

49 The funds remuneration rate has maintained its downward trend since the start of The debt reduction process and the substitution of household spending by savings allowed banks to progressively reduce costs with paying for deposits without jeopardising liquidity. As far as loans are concerned, rates registered different variations according to type of loan throughout The interest rates for home loans decreased until June, stabilising during the second semester of the year, while average loan rates applicable to companies and the average rates for other loans to individuals (including consumer loans) fluctuated throughout the year. It should be noted, however, that company loans at the end of December 2013 were lower than the levels registered in December INTEREST RATES (excl. balance at end of period) 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2013 Jun 2013 Dec Deposits up to 2 years Company loans Home loans Other loans to individuals Source: Banco de Portugal, Economic Indicators The improvement of margins in 2013 was mainly due to the reduction of resource costs, seeing that business conditions, both in as far as concerns demand for loans and the financial situation of most Customers did not permit the increased risk to be fully reflected in the spreads applied. It should be noted that with regard to home loans, the commercial margin has been negative since 2010 (thanks to the historically low level of the rate applicable to this type of loan and the reduced spreads applicable to older contracts), though the gap has decreased with the fall in costs with funds. DEVELOPMENT OF COMMERCIAL MARGIN FOR LOANS 2010 Dec 2011 Jun 2011 Dec 2012 Jun 2012 Dec 2013 Jun 2013 Dec Company loans Home loans Other loans to individuals Average loan interest rate less 2-year deposit remuneration, used as proxy for the commercial margin ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 49

50 04

51 Main Operations of the Crédito Agrícola Group CRÉDITO AGRÍCOLA

52 04 1. Commercial Activities The reduction of the total loans stands out in the SICAM business activities for 2013, together with the slight increases in customer deposits and a noteworthy increase in off-balance-sheet assets. SICAM Balance sheet Unit: thousand euros, or % 2010 Dec 2011 Dec 2012 Dec 2013 Dec Abs. % Net assets 13,213 13,027 13,747 12, % Customer loans (net) 8,069 7,988 7,717 7, % Investments in Banks and Central banks % Financial assets 3,820 3,508 4,372 3, % Liabilities 12,187 11,973 12,649 11, % Customer Funds 9,989 9,884 10,178 10, % Funds from Central Banks and other Banks 1,878 1,785 2,148 1, % Net situation 1,026 1,054 1,098 1, % Loan-to-deposit Ratio (%) 86.2% 86.9% 82.2% 80.3% -2.1 p.p. Fonte: World Economic Outlook, October 2013, updated January 2014 In effect, Customer Loans in net terms decreased by 2.9% in 2013 and in gross terms by 2.0%. Its weight in the total value of net assets at the end of 2013 was 57.8%, as opposed to 56.1% in However, Customer Deposits, which are the main component in the SICAM liabilities, corresponding to 86% of the total, increased by 0.3% compared to the previous year, reaching a total value of 10.2 thousand million euros in December 2013 (including charges payable, of residual value). The decrease in gross customer loans (-2.0%), together with the increase in client resources (+0.3%), meant a reduction of the loan-to-deposit ratio from 82.2% in 2012 to 80.3% in Main Operations of the Crédito Agrícola Group

53 It should be noted that SICAM s loan-to-deposit ratio over the last six years has fluctuated between 82% and 88%, always far below the reference prudential limit established within the context of the Portuguese financial assistance program (120%). Loan-to-deposit Ratio 12, % 10,000 8,000 6,000 8,069 9, % 7,988 9, % 7,717 10,178 7,492 10, % 4,000 2, % % Dec 10 Dec 11 Dec 12 Dec 13 Customer loans (net) Customer funds Loan-to-deposit ratio (%) 79.0% In fact, the value of deposits continues to far surpass loans granted, keeping SICAM in a strong position in terms of balance sheet liquidity. However, this fact does put pressure on the Group s profitability, seeing that remuneration of excess liquidity by the financial markets is currently extremely unfavourable. SICAM and the Crédito Agrícola Group were also dynamic and active during this financial year, in commercial terms and in other business sectors, such as insurance (life and property insurance segments), investment funds and management of assets. The development of capitalisation insurance and investment funds contributed to significant increases, which have already been mentioned, in off-balance-sheet customer funds Deposits and Other Resources The economic environment in 2013 was manifestly unfavourable for retaining capital and garnering customer deposits, while the highly competitive commercial approach of the other financial institutions continued, attempting to improve their liquidity and reduce the respective loan-to-deposit ratios. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 53

54 However, the comfortable liquidity of the Crédito Agrícola Group allowed it to pursue its essentially reactive and conservative policy in garnering resources. Even so, in this markedly recessive macroeconomic environment and with intense interbank competition regarding capturing new resources, SICAM customer deposits remained practically at the same level. Instruction 28/2011 from Banco de Portugal determined that Equity obtained on the basis of contracting, renewing and increasing remuneration for deposits above certain levels would be penalised, which effectively limited the maximum deposit rates on offer and contributed towards holding the upwards trend, through intermediate rates continued to be practiced at comparatively high levels compared to those existing before, during periods when Euribor rates were even higher than those currently in effect. Customer funds Thousand euros, or % Abs. % Current Accounts 2,642 2,476 2,587 2, % Term deposits and Savings 7,317 7,350 7,518 7, % Remuneration (net) % TOTAL 9,989 9,884 10,178 10, % The close connection that the Caixas enjoy with local populations, and the confidence that has cemented following a long relationship of proximity were factors that contributed heavily towards the maintenance of SICAM deposits and corresponded to an increase of 6.8% in Deposit Accounts, as opposed to Term Deposits and Savings which fell by 1.5% in relation to the end of Customer funds under the management of Crédito Agrícola also include off-balance-sheet which continues to register significant growth, in contrast to what has been observed in the sector overall. Off-balance-sheet resources Thousand euros, or % Abs. % Investment funds % Securities % REITs % Capitalisation insurances * ,017 1, % TOTAL 988 1,123 1,300 1, % * includes mathematical provisions and financial liabilities for insurance contracts recognised for accounting purposes as investment contracts, regarding the CCAM in SICAM 54 Main Operations of the Crédito Agrícola Group

55 The increase of off-balance-sheet products has permitted the Caixas and Caixa Central to avoid the adverse impact on financial margins of remuneration of funds at comparatively higher rates, though the resources remain in the orbit of Crédito Agrícola, in addition to contributing towards generating commissions due to the placement of those products, increasing the supplementary margin. With regard to the sale of investment funds, considerable increases occurred both in terms of securities investment funds and real estate investment funds, respectively 32.6% and 24.8%. In turn, regarding capitalisation insurances, the respective portfolio reached a value of 1,274 million euros in 2013, an increase of 25.3%. This growth can be explained mainly by the solutions presented by CA Gest and CA Vida, which have revealed attractive for customers, providing them with satisfactory remuneration levels without impacting the financial margin, as was mentioned. However, traditional deposits continued to dominate customer funds, which represented 86.2% of the total resources entrusted to the Group at the end of 2013, in contrast to 91% in In any case, there was a growing influence of all the items that correspond to off-balance-sheet resources and which totalled 13.8% of the customer funds managed by Crédito Agrícola, as opposed to 9.0% in 2010 and 11.3% in Customer funds managed by Crédito Agrícola Thousand euros, or % Structure (% total) Current accounts + Remuneration 2,672 2,534 2,660 2, % 23.0% 23.2% 23.7% Term deposits and Savings 7,317 7,350 7,518 7, % 66.8% 65.5% 62.5% Total funds 9,989 9,884 10,178 10, % 89.8% 88.7% 86.2% Capitalisation insurances ,017 1, % 8.2% 8.9% 10.8% Investment Funds % 2.0% 2.5% 3.1% Total off-balance-sheet resources 988 1,123 1,300 1, % 10.2% 11.3% 13.8% TOTAL 10,977 11,007 11,478 11, % 100.0% 100.0% 100.0% ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 55

56 Structure of Customer Funds % 62.5% 10.8% 3.1% Structure (% total) % 65.5% 8.9% 2.5% % 66.8% 8.2% 2.0% % 66.7% 7.2% 1.8% Current accounts + Remuneration Term deposits and Savings Capitalisation insurances Investment Funds In view of the positive evolution both in terms of off-balance-sheet products and traditional deposits, the total value of customer funds managed by Crédito Agrícola increased 3.2% in relation to the previous year, reaching almost 11.9 thousand million euros in December Evolution of Total Customer Funds (million euros) Total funds Total off-balance-sheet resources 1.2. Loans In 2013, as was mentioned above, the SICAM s loans portfolio decreased -2.0% in relation to the previous year, from 8,365 million euros in 2012 to 8,199 million in Main Operations of the Crédito Agrícola Group

57 Despite the general decline in the banking sector, in SICAM loans granted to companies increased 0.3%, although there was a decrease of 4.2% in loans to individuals, which led to the abovementioned overall reduction of -2.0% in the volume of customer loans when compared to Customer Loans Thousand euros, or % Abs. % Customer loans (1) 8,606 8,586 8,365 8, % Companies 4,119 4,180 4,108 4, % Individuals 4,488 4,407 4,257 4, % of which loans >90 days overdue % Non-performing Loans Ratio 4.9% 5.8% 6.8% 7.7% +0.9 p.p. Commitments to third parties 1,306 1,081 1, % irrevocable lines of credit % revocable lines of credit % Guarantees Provided * % * includes surety and aval and import documentary credit, excluding collateral, such as debt and securities, under the Eurosystem Non-performing loans more than 90 days overdue in SICAM at the end of 2013 grew 10.5% compared to the previous year, reaching 628 million euros at the end of Consequently, the ratio of loans more than 90 days overdue in 2013 reached 7.7%, in contrast to 6.8% in December 2012 and 5.8% in This increase in non-performing loans, which reveals the difficulties set by the current crisis, has revealed less serious for SICAM than for the financial system as a whole. During the current context of economic crisis, it is necessary to strengthen loan-monitoring processes and intensify recovery efforts, as well as additional care immediately during the concession stage, and the renewals themselves, in view of the less predictable and worsening risk factors. With regard to Commitments before Third Parties, there was a reduction of 12.8% in relation to 2012, due to the decrease of irrevocable and revocable lines of credit in 2013 by 9.6% and 8.9%, respectively. Regarding the Collateral given, related to operations with customers, there has been a decrease of 3.0% in their total value, which is explained by the decline in the real estate and public works sectors, which is one the main causes behind demand for this type of collateral. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 57

58 The retraction in loans in 2013 encompassed almost all loan types, except for commercial paper and funding contracts, which increased by 71.3 and 68.5 million euros respectively. It should also be noted that the weighted average rate of the SICAM loan portfolio has registered a fall since 2011, reaching 4.23% in Development of Loans per Type of Operation Thousand euros, or % Abs. % Home loans (including multipurpose) 2,460 2,481 2,449 2, % Revolving credit lines % Commercial discounts % Leasing % Credit Cards % Overdrafts % Foreign operations % Commercial Paper % Funding Contracts (various maturities) 5,047 4,939 4,854 4, % Receivables (net) % Income due to retained earnings (net) % Customer loans (1) 8,606 8,587 8,365 8, % Commitments to Third Parties (2) 1,306 1,081 1, % irrevocable lines of credit % revocable lines of credit % Guarantees provided (3) % subtotal (2+3) 1,608 1,354 1,342 1, % TOTAL (1+2+3) 10,214 9,941 9,708 9, % Weighted average of customer loan portfolio 4.17% 5.04% 4.36% 4.23% p.p. * includes surety and aval and import documentary credit, excluding collateral, such as debt and securities, under the Eurosystem Home loans decreased 85.1 million euros in 2013 compared to 2012, representing 28.8% of the total portfolio at the end of last year. 58 Main Operations of the Crédito Agrícola Group

59 Agreed Credit per Type of Loan Thousand euros, or % Abs. % Home loans 199, , , ,316-11, % Credit Cards 20,469 18,785 17,463 15,194-2, % Commercial discounts , % Revolving credit lines 24,504 21,378 24,340 14,526-9, % Loans 180, , , ,275 14, % Leasing 129, , ,449 68,723-34, % Foreign operations 2, ,098 2,656 1, % TOTAL 556, , , ,077-42, % Still with reduced vigour, loans decreased 8.6%, to million euros, with just two items foreign operations and loans registering increases. It should be noted that these decreases mainly reflect the current economic situation, with regarding to the type credit cards the fall is due to the transfer of credit cards to the Associated Caixas, and with regard to revolving credit lines this is due to the increased ability of Associated Caixas to support companies and sole proprietors in the short term. Under the item loans, one of the only two types that increased was company loans, which grew slightly due to the existence of formal lines of credit and the fact that this type of loan offers longer maturities. This increase contrasts with the fall in loans to companies by Caixa Central Companies Overall in the company segment, as was stated above, growth was almost negligible at 0.3%, reflecting the reduction in revolving credit lines, commercial discounts and leasing and an increase in loans, in particular commercial paper. Loans in the form of commercial paper increased by 71 million euros, 42% more than December 2012, resulting from the efforts by the Caixa Central throughout Some of the operations included under this heading are equivalent to cash investments with renowned Portuguese companies. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 59

60 The weighted average rate of the company loans portfolio has also decreased since 2011, standing at 4.93% in COMPANIES Thousand euros, or % Abs. % Company loans 4,119 4,180 4,108 4, % Revolving credit lines % Commercial discounts % Leasing % Loans 3,339 3,391 3,416 3, % of which Commercial Paper % Weighted average of company loan portfolio 4.46% 5.63% 5.08% 4.93% p.p. In terms of activity sectors, almost one fifth of the loans granted by SICAM are concentrated on wholesale and retail and the car and motorcycle repair. The manufacturing and extraction industries, construction and agriculture are also relevant. It should be noted that, compared to the rest of the sector, SICAM invests considerably in the primary sector, which represents more than 10% of loans granted (vs. a share of just 2% in Portuguese banking). On the other hand, SICAM has a smaller share of construction and real estate loans than other Portuguese banks, sectors that suffered a substantial rise in non-performing loans under the current crisis. Business Activity Sector % of total company Loans Car & Motorcycle wholesale and retail trade and repairs 18.7% Manufacturing and extractive industries 15.9% Construction 12.4% Agriculture, livestock, hunting, forestry and fishing 10.5% Education, health and other social and personal services 8.3% Real estate activities 8.0% Consultancy, technical, administrative, information and communication activities 6.3% Hospitality industry, restaurants and similar 6.3% Other activities 5.5% Non-financial holding company activities 3.2% Power, gas, water collection, treatment & supply, sanitation, waste & pollution management 3.0% Transport and storage 1.6% TOTAL 100.0% 60 Main Operations of the Crédito Agrícola Group

61 Individuals The impact of the economic recession, with the ensuing rise in unemployment, falling purchase power and the general mood of uncertainty, has caused additional difficulties to households and small businesses and, last year, conditioned loans activity in this segment too. In this way, loans to individuals decreased by approximately 180 million euros (-4.2%), to a total value of 4,078 million, with the largest fall in Home loans. INDIVIDUALS and MICRO-ENTERPRISES Thousand euros, or % Abs. % Loans to individuals 4,488 4,407 4,257 4, % Home loans 2,460 2,481 2,449 2, % Consumer loans * % of which Credit Cards % Leasing % Other Loans via Payment of Funds 1,609 1,538 1,455 1, % * includes overdrafts, discounted effects, current accounts and loans with various maturities Home loans, despite being the most relevant type of loan in this segment, fell by 112 million euros. However, it did maintain its relative weight, accounting for 57.3% of the total loans granted to individual customers. Consumer loans within SICAM fell by 3.7%. This was due to the stricter lending standards that were implemented because of the changes in risk factors underlying this type of loan, but also due to a clear decrease in demand. Overall, however, loans granted to individuals for consumption and other purposes only accounts for a small share of the loans in this segment (7.8% in 2013). Financial leasing, much as happened in the company segment, also fell significantly (24.4%), as it is explained in the next subsection. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 61

62 Financial Leasing Financial leases especially serve to fund investment in equipment, vehicles and real property for which reason we can say that 2013 represented a turning point after the considerable contraction which occurred since 2008, seeing that demand for these products actually increased slightly, in particular leases with regard to moveable property. In this way, according to the nationwide data available for the sector, there was an overall increase in new contracts, by roughly 4%, in different levels according to the three types of products (equipment rose by 3%, vehicles 16% and real property fell by 5%). Financial leasing in Crédito Agrícola did not follow the trend in the sector, with an accentuated fall of 44% regarding moveable property (38% for equipment and 48% for vehicles), but real property leasing grew by 120%. The Crédito Agrícola leasing portfolio fell by approximately 16%, amounting to a total value of 138 million euros. Thousand euros, or % Leasing assets Abs. % Portfolio structure Caixa Central 167, , ,448-30, % 91.1% 85.4% Associated Caixas 15,510 14,674 18,765 4, % 8.9% 13.6% Total 182, , ,213-26, % 100.0% 100.0% The non-financial business sector accounts for roughly 86% of the value of the portfolio in this field, while individuals and small businesses account for roughly 14%. The public sector and the financial sector, however, correspond to a negligible share of the Crédito Agrícola leasing portfolio. Thousand euros, or % Type of lessor Abs. % Portfolio structure Individuals & small business 28,820 22,479 18,421-4, % 13.6% 13.3% State Public Sector 1, % 0.5% 0.4% Financial sector % 0.5% 0.5% Non-financial sector 151, , ,546-22, % 85.4% 85.8% Total 182, , ,213-26, % 100.0% 100.0% 62 Main Operations of the Crédito Agrícola Group

63 It should also be noted that the real estate portfolio has gained weight in relative terms, in contrast to the decrease in the vehicle portfolio, while the weight of the equipment portfolio remained practically the same. Thousand euros, or % Type of lease asset Abs. % Portfolio structure Vehicles 57,293 51,731 36,254-15, % 31.4% 26.2% Equipment 59,034 52,598 44,516-8, % 31.9% 32.2% Real estate 66,197 60,566 57,443-3, % 36.7% 41.6% Total 182, , ,213-26, % 100.0% 100.0% 1.3. Electronic Payments In 2013 Electronic Payments started a number of initiatives in order to vitalise this segment, among which: Launch of the CA Buffet a prepaid bankcard aimed at public and private companies regarding the payment of the meal subsidy to employees, allowing companies and employees alike to benefit from facilitated tax returns within the scope of social security contributions (TSU) and Income tax (IRS). Consolidation of contactless technology, both as Issuer and as Acquirer, with the support of VISA Europe, in line with the other Portuguese banks and Acquirers. Conclusion of Stage II of the Visa Consulting Project, the electronic payments Data Mart development project, consisting in the definition of Behavioural Risk Models. Conclusion of the Electronic Payments Business Plan, consisting in the presentation of the respective Management Indicators to Boards and Commercial Coordinators of all CCAMs. Launch of the Clube A debit card, which is a personalised card stating the identity of the Member and the CCAM they belong to. Similarly to the Clube A credit card, this card offers all the Clube A advantages (Bonus and Discounts) and is part of the offer for Members, whether companies or individuals. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 63

64 There was an increase in operations performed via electronic payments during This increase is reflected in several indicators, such as the increase in numbers of Crédito Agrícola cards, both debit (+1.9%) and credit (+3%). Number of VISA debit cards Number of VISA credit cards + 1.9% + 3.0% 763, , , , Market share VISA debit cards Market share VISA credit cards 11.9% p.p. 8.9% 5.3% p.p. 8.0% Despite the increase in the number of cards, our debit card market share fell due to the regulation issued by Banco de Portugal, deferred debit cards were no longer considered credit cards and were classified as debit cards in the domestic market (corresponding to an increase of 36.3% in the total number of debit cards in 2013), which offset the rise in number of CA debit cards. Conversely, the Crédito Agrícola market share with regard to credit cards increased significantly, from 5.3% in 2012 to 8% in 2013, due to the increase in CA credit cards issued and the sharp fall in credit cards in the Portuguese market (-32.2%, explained by the abovementioned migration of deferred debit cards). 64 Main Operations of the Crédito Agrícola Group

65 Number of CA card transactions (thousands) Volume of CA card transactions (million euros) + 3.0% + 4.6% 84,494 87,010 4,326 4, The number and volume of transactions performed using Crédito Agrícola Cards rose 3% and 4.6%, respectively. Market share Internal cashpoints Number of transactions using CA cashpoints p.p % 6.28% 6.41% 27,053 28, The installation of internal cashpoints continued to develop, which meant an increase of the cashpoint market share, due to the increase in the number of Crédito Agrícola cashpoints (+0.8% in 2013) while the total number of internal cashpoints in the Portuguese market fell (minus 1.3%). Similarly, there was an increase of 6.2% in the number of operations performed in Crédito Agrícola cashpoints, rising from 27 million operations in 2012 to over 28.7 million operations in ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 65

66 Market share ATMs Number of transactions using CA ATMs p.p % 10.62% 11.12% 74,654,875 76,698, Also with regard to ATMs, the number of dispensers managed by Crédito Agrícola increased in 2013 (+1.3%, up from in 2012 to 1,442 in 2013), so that the market share rose by 0.5%. The number of Crédito Agrícola ATM operations rose 2.7% in Direct Banking Over the last years, our Customers have adhered increasingly to digital channels. These changes have come about due to the offers constantly made to consumers, which have caused changes in behavioural trends when selecting services. Therefore, the CA Group has adapted its Customer strategy and adjusted its offers in line with the best market practices, developing new solutions and technological functions that meet their needs, fomenting the profitability of business activities, drawing Customers closer and giving the Group a reputation for modernity and innovation while simultaneously reducing the institution s costs and optimizing processes. The activities undertaken in this field during 2013 registered a substantial increase: Above 14% increase in the portfolio of active customers using Online services Individuals and Companies. However, taking into account the average market penetration of these services (33%) when compared to CA s penetration rate of 20% it is important to continue promoting and disclosing these services to Customers; and The launch of digital documentation, a feature that allows Crédito Agrícola Group to provide more flexible services for customers regarding the management of their communications with the institution as well as to reduce operating costs. 66 Main Operations of the Crédito Agrícola Group

67 The main indicators for each of the services during the year are detailed below: A) Linha Directa (Contact Centre) In 2013, the Linha Directa service grew by 1% in terms of total contacts received (inbound). There was also an increase of 1% in Customer contacts compared to the previous year. During 2013, Linha Directa received 920 calls a day on average. Total Inbound contacts Total Contacts + 1% 332, , % 285, , Total Outbound contacts - 12% 264, , ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 67

68 In terms of Outbound (calls made telemarketing and telecollections), the most relevant telecollection actions are those regarding debts payable (15 CCAM until the end of 2013), regarding agreed loans and credit cards. The results of these actions led to 67% client recoveries and 34% of the amount recovered. In relation to 2012, this corresponded to a decrease of 1% in terms of Customers and 13% in terms of amounts, which is surely due to the current financial context. Telecollection Recoveries from Customers Telecollection Amounts Recovered - 3% - 21% 67% 65% 34% 27% The charts below show the key indicators for the service during 2013: Linha Directa Distribution of Calls per Quarter 84,939 87,309 81,498 73,644 81,267 68,426 42,719 47,082 18,818 13,350 12,947 12,371 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Inbound Outbound BackOffice Definitions: Inbound Telephone assistance to Customers and Caixas (Calls received). Outbound Actions involving Collecting Overdue Loans, Telemarketing and Call-Back (Calls made). BackOffice Faxes / s received and sent and office work. 68 Main Operations of the Crédito Agrícola Group

69 Telecollection Success Rate 64% 65% 66% 65% 28% 33% 22% 21% 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter % Recovered - Amounts % Recovered - Customers B) The Internet Banking Service On-Line B1) On-Line Empresas (Companies) The On-Line Empresas Service for companies registered growth of approximately 21% in active customers, in relation to On-Line Empresas Active Customers + 21% 40,324 48, ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 69

70 The semi-annual analysis for the 1 st and 2 nd semesters of 2013 reflect the growth in number of transactions performed using the On-Line Empresas Service in relation to 2012, of 34% and 41% respectively. Total Financial Operations / Inquiries + 34% + 41% 11,254,443 9,738,014 8,0% 7,268,014 7,926,579 7,975,506 8,973,208 6,340,082 7,913, ,392 1,811,435 1 st Semester st Semester ,061,533 2,281,235 2 nd Semester nd Semester 2013 Operations Inquiries B2) On-Line Particulares (Individuals) This service registered an increase of 13% in active new customers in the MultiChannel system, in relation to On-Line Particulares Total Contracts + 13% 158, , Main Operations of the Crédito Agrícola Group

71 In 2013, the volume of transactions performed via this service registered an increase of 24% and 11%, respectively during the 1st and 2nd semester, compared to the same period of Total Financial Operations / Inquiries + 24% + 11% 16,311,446 20,225,134 18,814,606 20,899,570 8,0% 18,916,647 19,540,648 15,239,550 17,642,946 1,071,896 1,308,487 1 st Semester st Semester ,171,660 1,358,922 2 nd Semester nd Semester 2013 Operations Inquiries C) CA Mobile Service This service grew by approximately 90% in terms of new users when compared to 2012, which corresponds to an average of 275 new users /month. CA Mobile Total Contracts + 90% 6,965 3, ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 71

72 In 2013, the volume of transactions via CA Mobile grew each semester by 1,233% and 118% respectively, when compared to the same period in Total Financial Operations / Inquiries % + 118% 810, ,823 8,0% 587, , ,287 46,032 44,234 1,798 25,962 1 st Semester st Semester ,512 17,530 34,774 2 nd Semester nd Semester 2013 Operations Inquiries D) Balcão 24 Service Balcão 24 service, which was created 8 years ago, reached the end of 2013 with 234 operational ATMs, which corresponds to an increase of 6% in the number of initialised services compared to B24 Initialised ATMs Balcão 24 Network + 6% + 3% Main Operations of the Crédito Agrícola Group

73 The total number of operations grew by 6% compared to The average number of transaction / month for each ATM is 4, ,533,578 5,531,972 11,065, % ,225,168 5,239,071 10,464,239 Operations Inquiries The average transfer rate, shifting from person-to-person services to ATMs, is above 30%. Total Financial Operations / Inquiries + 5% + 6% 5,167,055 5,424,811 5,297,184 5,640,739 2,583,177 2,709,053 2,655,894 2,822,919 2,583,878 2,715,758 2,641,290 2,817,820 1 st Semester st Semester nd Semester nd Semester 2013 Operations Inquiries In the above chart we can see the evolution in number of transactions operations and inquiries performed via Balcão 24, which increased 5% and 6% in 2013 when compared to the same periods in ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 73

74 E) Crédito Agrícola website ( In 2013 the Crédito Agrícola Group website received 12,560,626 visits (9% more than 2012), corresponding to an average of 1,046,719 visits/month and included 3,463,593 unique visitors. These visits resulted in 32,888,289 page views, an increase of 13% in relation to page views in 2012 (29,096,986). Page Views + 13% 29,096,986 32,888, Number of Visits / Visitors + 9% + 16% 11,476,097 12,560,626 2,996,601 3,463,593 Number of visits Visitors Main Operations of the Crédito Agrícola Group

75 1.5. International Business Activities The macroeconomic situation of the last few years have brought about significant changes in how markets are approached by Portuguese companies, especially SMEs, favouring a shift abroad and the resulting growth of international business activities. For essentially economic reasons, this new paradigm has reflected in an effort towards internationalization by several Portuguese companies, investing in emerging markets, especially the PALOP. Portuguese entrepreneurs have also sought to take advantage of business opportunities in Asia, especially in the People s Republic of China, in Africa, particularly the Maghreb, and in South America, especially Brazil. In line with this new trend, the Crédito Agrícola Group outlined a new strategy strongly supporting the international activity of Portuguese companies, which began at the end of 2013, acting as a business partner in their internationalization and the development of export capabilities. On the other hand, more support has been made available to expatriate communities by entering new markets while increasing the Group s presence in existing markets and offering specific products for this customer segment. By virtue of this new strategy, which in the near future will translate to a foreseeable internationalization and Group s expansion, some internal restructuring has taken place, with direct repercussions in the International Business Department, by aggregating the Expatriates and Foreign Branches that belonged to the defunct Expatriates and Foreign Branches Department with Correspondent Banking and Trade Finance activities from the also defunct International Department. In addition to the formal structure of the Caixa Central, the Group s Foreign Desk s have also been progressively subject to an intense restructuring process, both in terms of material resources and human resources, an example of which is the increase in commercial staff operating abroad, the restructuring of business promoter networks and the Opening and new Foreign Desk in Switzerland, which is currently underway. In 2014 the Group will continue to pursue its expansionist strategy, directed towards markets with a relevant Portuguese diaspora, in addition to its commitment to accompany Portuguese companies who are Crédito Agrícola customers in their incursions abroad, thus adding consistency to the Group s inherent feature of community banking. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 75

76 Correspondent Banking and Trade Finance Significant changes also occurred regarding the Correspondent Banking service, both due to the intensification of North American compliance standards, with restrictions regarding the provision of certain services by banks in that country and also due to the considerable difficulties in obtaining support of foreign trade operations, due to the current situation of the Portuguese economy, which has affected how the risk / country is perceived. In as far as concerns international trade, the Crédito Agrícola Group market share grew significantly in 2013: the overall amount of foreign operations of the Group developed positively, growing 20.7%, compared to domestic growth, during the same period of 2.4%. The difference in performance caused a growth in market share from 2.41% to 2.85%, an increase of almost 18%, coming close to what would be the natural share of Crédito Agrícola for this sort of operations, in other words, approaching the market share for domestic operations. International Trade Crédito Agrícola Market Share Millions of euros, or % National CA* Market Share Dec ,362 2, % Dec ,764 2, % Dec-12/Dec % 20.7% 17.9% * expatriates excluded In 2013, the overall value of foreign operations performed via Crédito Agrícola surpassed the 3 thousand million euros mark for the first time. DEVELOPMENT OF FOREIGN OPERATIONS Thousand euros, or % Type of Operations No. Operations Volume Dec 2012 Dec 2013 % No. of Total Operations % Total Volume No. Operations Volume % No. of Total Operations % Total Volume % Dec-13/ Dec-12 Documentary operations Non-documentary operations 2,737 96, % 3.8% 1,909 93, % 3.1% -2.7% 539,586 2,452, % 96.2% 619,403 2,915, % 96.9% 18.9% Total 542,323 2,548, % 100.0% 621,312 3,008, % 100.0% 18.1% 76 Main Operations of the Crédito Agrícola Group

77 The overall increase of more than 18% for 2013 was extremely positive and was mainly due to the growth of nondocumentary operations. Even so, Export Documentary Collections grew, in terms of amount, by almost 65%. Import Documentary Collections issued by Crédito Agrícola grew almost 90%. In as far as concerns Export Documentary Collections, sent abroad against payment, there was an overall increase of almost 20%. With regard to operations with lower total value, international interbank transfers, transfers received by Crédito Agrícola increased approximately 12% in 2013, reaching a volume of almost 1.3 thousand million euros, while outgoing transfers increased approximately 31%, with a total value of almost 1.5 thousand million euros. Balance of Credit Operations, December 2013 / 2012 Dec 2012 Dec 2013 % Dec-13/ Dec-12 Import Credits Collection Documents Surety and Aval Loans Totals No. Active Operations % Balance (in ) 1,594,108 2,104, % No. Active Operations % Balance (in ) 8,042,356 7,491, % No. Active Operations % Balance (in ) 6,100,312 6,612, % No. Active Operations % Balance (in ) 3,799,782 5,804, % 52,8% No. Active Operations % Balance (in ) 19,536,557 22,014, % Expatriates and Foreign Branches This business area, especially directed towards the development of a customer segment of significance for the Crédito Agrícola Group foreign residents has performed its activities in a manner that guarantees accompanying customers, contributing towards improving their relationship with the Group. Throughout 2013, the International Business Department undertook to develop the internationalization of the Crédito Agrícola Group by investing in a presence in some of the markets where Portuguese immigration is prevalent, such as France, Switzerland, Luxembourg and Venezuela. Last year, the Crédito Agrícola Group saw an increase of 4% in the number of remittances from expatriates, which translated into a market share of 14% in the remittances market, to a certain extent reflecting the results obtained from that strategy. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 77

78 In the same manner, and due to the sales work performed by Foreign Branches, together with the Associated Caixas, deposits made by expatriates increased by 1.7% in relation to the previous period. Remittances from Expatriates to the Crédito Agrícola Group 431, , , , , , , , , , , , , , Remittances from Expatriates Thousand euros, or % Oper. No. Volume Q.M , ,701 12% , ,393 14% , ,337 15% , ,270 15% , ,031 16% , ,234 16% , ,656 14% 12/13 3,8% 1.5% Deposits from Expatriates Thousand euros, or % National CA Group Q.M ,240, , % ,837, , % ,670, , % ,482, , % ,120, , % ,584, , % ,584, , % 12/13 0.0% 1.7% Não inclui os DP de Emigrantes na SFE Foreign Financial Branch The Foreign Financial Branch in Cape Verde (Sucursal Financeira Exterior de Cabo Verde SFE) is an important means of diversifying the offer made to foreign residents, as well as serving to strengthen the competitiveness of the Crédito Agrícola Group. 78 Main Operations of the Crédito Agrícola Group

79 In addition to providing competitive benefits that allow resources to remain within the Group. SFE plays an important role in garnering new resources for the Group. Operating in a very competitive market in terms of non-resident resources, SFE s activity during 2013 mainly sought to guarantee the competitiveness of its products as well as financial rigour and security in the management of balances. In this way, in 2013 and despite a slight decrease in customer funds, an appropriate management of assets and liabilities resulted in increasing banking income by 38%. This increase corresponded to a significant increase in net earnings, which came to 896 thousand euros. The solvency ratio was prudently kept at above 21%. Immigration Business related to immigrants has registered sustained continuous growth over the last years. The Western Union wire transfer service is currently available in approximately 600 agencies and its implementation throughout the entire network is a Group objective for the near future. This service is highly profitable for the Group, with approximately 11 million euros transacted during 2013 with an increase of 2% in the volume of commissions received and 5% in the number of operations performed. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 79

80 2. Financial Activities and Securities Exchange Market Below we list the most relevant facts regarding financial activities and the securities market in 2013: In order to reduce the risk in concentrating its position, Caixa Central decided to reduce its exposure to Portuguese public debt. In the management of its securities portfolio, Caixa Central adopted a dynamic conduct which resulted in significant gains to the value of 76 million euros. Throughout the year, Caixa Central continued its refunding operations with the Eurosystem, using additional credit claims pool of Associated Caixas as collateral. However, a change in the rules regarding the acceptance of collateral by the Eurosystem meant that these types of operations were suspended at the end of This situation did not affect the Caixa Central s liquidity which remained solid Strategy regarding Liquid Assets Over recent years, policy regarding liquid assets has mainly been subject to management objectives related to the SICAM balance sheet and income statement. The focus of this policy shifted rapidly away from the almost exclusive management of solvency, with the inevitable opportunity cost involved, towards the management of an investment portfolio that was also funded by substantial external funds strategically subordinated to supporting the financial margin of the Associated Caixas, with a view to retaining their deposit base. This was done, however, without neglecting solvency levels of Caixa Central and SICAM balance sheets. Throughout 2013, the Treasury bond investment policy continued to be particularly conditioned by its support of the financial margins of Associated Caixas, maintaining their deposits base and managing the capital invested and upholding a strong position in terms of solvency. In view of its impact during 2013, but which will also be felt in following years, we would like to draw attention to the decision taken in January to reduce the Caixa Central s exposure to Portuguese public debt. This decision sought to mitigate the concentration risk visible in the balance sheet at the end of Main Operations of the Crédito Agrícola Group

81 Support for the financial margin of the Associated Caixas was obtained by means of the relative stability of the fees regarding surpluses deposited with Caixa Central, despite the considerable narrowing in liquidity application rates throughout the year, the maintenance of the ceiling for the Special Coverage Term Deposit (DPEC) and DPADAC Deposits associated to funding obtained through the Eurosystem using additional credit claims (ACC) as collateral. Considering the significant reduction in income from the securities portfolio, the sustenance of such substantial support for the financial margin of the Associated Caixas in 2013 was only possible due to the high number of capital gains obtained from the management of the financial assets portfolio, not just by means of the sale of the Portuguese debt portfolio but also, in particular, through the dynamic management of the portfolio managed. This dynamic management is illustrated by the turnover shown for 2013 in the securities chart below. Securities Portfolio Turnover (million euros) Monthly 3,000 Accumulated 16,000 2,500 2,000 14,000 12,000 10,000 1,500 8,000 1, ,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Monthly Accumulated It should also be noted that at the end of 2013, interest on deposits at Caixa Central accounted for almost 28% total interest and similar revenue received by the Associated Caixas, when at the end of 2010 this amount corresponded to 17%. Throughout 2013, Caixa Central maintained a comfortable position in terms of solvency, whereby equity requirements associated to the financial asset portfolio fell progressively during the year as a result of the reduction of exposure to senior debt from financial institutions and non-financial companies, which have the highest associated risk levels. The progressive implementation of new rules under Basel III, which began on the 1st January 2014, will cause additional challenges to financial asset portfolio management. For example, over the next years, solvency levels will have to include recognition of latent capital losses in the financial asset portfolio. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 81

82 The change introduced by Banco de Portugal (imposed by the ECB) regarding eligibility of collateral to secure financing operations with the Eurosystem should also be noted. By virtue of this change, effectively as of 31/12/2013, Crédito Agrícola Group was not longer able to use additional credit claims portfolios as collateral for funding, a situation which forced the suspension of DPADAC Deposits at the end of In this context, any possibility of being able to use the loan portfolio in order to obtain liquidity depends once again on the Crédito Agrícola Group s ability to respond to market demands via the issue of collateralized debt. Assets managed by the Financial Department (thousand euros) Amount Variation % of the Total Absolute Relative M. Monetário, P. Comercial & BdP Deposits 365, ,315-48, % 8.8% 8.9% Bonds 3,795,367 3,264, , % 91.2% 91.1% Total 4,161,042 3,581, , % 100.0% 100.0% 2.2. Intermediation in the Securities Exchange Markets 2013 saw a recovery of European financial markets, clearly visible in securities exchange markets. Euronext shares registered similar growth rates, of 18.10%, with regard to the Belgian market, 17.99% in the French market and 17.24%, in the Dutch market. Despite the fact that the Portuguese economy is still subject to austerity measures under the European Union and IMF financial assistance program, investors seem to envisage a recovery, even if still at an early stage. The Portuguese stock exchange registered significant growth, with the PSI 20 index closing the year at 6, points, an increase totalling 16% in relation to the end of 2012, when it stood at 5, The development of this index was affected, however, by the June / July political crisis, at which time it fell to its lowest point of the year, at 5, points. Stock capitalisation rose 8.7% in relation to the end of 2012, reaching 226,057.0 million euros. In Portugal, spot transactions in the secondary market (annual total) increased by 22%, to 39,797.6 million euros. Futures market operations also increased substantially, roughly 116%. 82 Main Operations of the Crédito Agrícola Group

83 This positive evolution was reflected, according to the trend revealed in the last quarter of 2012, in the income from Caixa Central brokerage, in the spot and futures markets, growing by approximately 115%. The total amount processed in receiving and handling orders to the spot market was above 6,560 million euros, an increase of more than 750%. That income was mainly obtained (92%) from Customer transactions in Euronext Lisbon. The income obtained from registration and deposit of securities grew remarkably, about 18%. That income is divided up into Fund depositary fees, adding up to 2,196 thousand euros, custody fees, corresponding to 1,251 thousand euros, and transfer fees, payment of dividends and other events, amounting to 40 thousand euros. Correlatively, the value of the financial instruments under the care of Caixa Central, within the scope of custody or depositary services, increased by 16%. The organization of the Commercial Paper issue programs during 2013 continued to take place together with the Companies Department, with 5 new programs launched with a value of 164 million euros. The program with the largest sum, with a value of 140 million euros, involved the participation of 56 Associated Caixas, which encompassed a sum of million euros. In 2013, especially in the 2nd semester, there was considerable pressure from issuers of commercial paper to lower interest rates, noting the positive development of financial margins. The average interest rate spread associated to the issue of Commercial paper decreased by 0.44 points, from 4.26% in 2012 to 3.82% in Throughout the year, 266 issues took place, with the number of Commercial paper programs in which Caixa Central organised or participated in the respective bank syndicate decreasing slightly from 18 programs in 2012 to 16 programs in Correspondingly, there was a slight decrease in the income associated to this activity, by about 3%. Altogether, the total revenue obtained through intermediary activities in securities markets increased by approximately 15.5%. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 83

84 Unit: thousand euros Activity Value Gross banking fees Spot market 6,563, , , Custody / Depositary 1,866,468 1,612,593 1,382,395 3,486 2,951 2,107 Commercial paper issue programs 204, , , , * Balance on 31st December Unit: thousand euros Activity No. of Contracts traded Gross banking fees Futures market 8,300 6,296 21, Throughout 2013, 713 new securities accounts were opened, of which 279 belonging to legal persons. Due to the development of loan concession operations with the intervention of Mutual Guarantee Companies, the number of accounts with equity in those companies increased to a total of 1,689. The stock exchange trading platform via Crédito Agrícola Internet Banking CA Online, continued to be the most popular means for Crédito Agrícola customers to send their orders to the spot market, increasing the percentage from 71% in 2012 to 73% in No new Caixa Central Investment securities were issued in 2013, for which reason at the end of that year five issues were still in effect with a total subordinated debt of 81 million euros. 84 Main Operations of the Crédito Agrícola Group

85 3. Bancassurance 3.1. Insurances Property The new CA Seguros executive board proceeded with and intensified the Bancassurance strategy that had been applied during previous years, focusing the Company on increasing commercial emphasis on products with higher margins, rigorous technical pricing and selection of risks, and adopting an overall perspective for Customers. Despite the significant fall in gross premiums issued with regard to Worker s compensation and Car insurance, due to the heavy competition that exists in the non-life insurance sector, CA Seguros managed to uphold the overall level of gross premiums issued in 2012, growing in other types of insurance. Despite the consequences of the storm Gong, in January, CA Seguros managed to meet most of its economic and financial objectives, and also ensured high levels of performance in the strategic objectives defined in the strategic plan, measured according to a balanced scorecard. CA Seguros increased its Customers from 248 thousand to 262 thousand, proceeding proactively with its Vision of Becoming the Non-Life Insurer trusted by all the Crédito Agrícola Members and Customers. The number of active insurance policies increased from 439 thousand to 473 thousand, in other words, an increase of almost 8%, which can be considered in a market that has been contracting since eight years ago, including These results were only possible through the increasing commitment of the Caixas Agrícolas. Thousands, or % % No. of Clients % No. of Policies % Fully aware of the importance and relevance of this partnership, CA Seguros has encouraged even closer integration with the Caixas Agrícolas, by means of a visits program and work meetings by the Executive Board with all the Caixas Agrícolas, implementing important measures which were prompted by constructive cooperation and dialogue. Among these measures, CA Seguros recommended that all the Caixas Agrícolas should be represented in the share capital of CA Seguros, and increased the intermediary fees paid to the Caixas Agrícolas considerably, meaning that negotiating non-life insurances became even more rewarding. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 85

86 The commercial incentives system Seguros Positivos 2013, designed as an incentive for the commercial activities of Caixa Agrícola Employees once again revealed a key aspect in the commercial performance of CA Seguros, especially the travel incentives, which correspond to an investment for promoting Generating Value. The VIII CA Seguros Annual Convention, held in Albufeira, travel incentives with journeys to Tunisia and Barcelona and, in particular, the travel incentives associated to the CA CliniCard, (Vienna / Bratislava) which several Caixa Agrícola Employees took part in, were a huge success and an important factor in bringing commercial teams closer together, increasing the Group s union and team spirit among Caixas Agrícolas, and motivating Employees for commercial activities. Due to the excellent results, the CA Seguros and CA Vida (Crédito Agrícola life insurance) systems were adopted as models for the design of the new Crédito Agrícola integrated incentive system, in force since the start of 2014 and in whose definition and implementation we took part. CA Seguros actively cooperated in the Crédito Agrícola Group transformation program. Among other contributions, it assigned a substantial number of human resources to the new Business Dynamics Department in Caixa Central, developed the new software application for supporting and monitoring the business activities of the Caixas Agrícolas ( IGC Business Management Information ) and implemented a software application to monitor daily business activities in non-life insurances ( Commercial Statistics ). In 2013, CA Seguros was represented at all the meetings of the new Crédito Agrícola Group Strategy Board. Also, in several projects, CA Seguros promoted joint work with the Caixa Central Departments and with Group Companies, promoting synergies and improving the use of resources and the competencies existing within the Group. CA Seguros took firm steps in preparing the Company for the future Solvency II regimen, implementing a solution to quantify the future Solvency Capital Requirement (SCR), according to a standard formula, based on the most recent technical specifications issued by the European Union. An IT tool was also acquired to support the preparation of future charts and reports to the Supervisor in an integrated manner. The Environmental Certification process was concluded successfully, under which CA Seguros implemented several energy rationalisation and resource mitigation measures. One of the most important projects implemented in 2013 was a dematerialisation of the general conditions regarding policies, which were no longer sent to Customers in writing, but were made available digitally. This measure meant an improvement in the services rendered to Customers and, at the same time, a significant reduction of costs and savings in terms of paper and other resources. CA Seguros implemented waste sorting at its facilities, in addition to other environmental measures, that were generally adhered to by Employees. 86 Main Operations of the Crédito Agrícola Group

87 CA Seguros was awarded the prize for Best Non-Life Insurer in its size group and operating in Portugal by Exame magazine for the fourth time. The good results obtained in 2012, together with a financial structure that ensures high solvency levels and financial guarantees for the Insured parties were the reason for this award. CA Seguros invested in Quality and has obtained high levels of Customer satisfaction, leading to its growth in number of policies and Customers, with an ensuing sustained improvement in most economic and financial indicators. The results of the 2013 surveys demonstrate high levels of Customer Satisfaction, irrespective of claims, with Caixa Agrícola Employees and CA Seguros Employees, underscoring the commitment to Quality and Continuous Improvement. CA Seguros invested in strengthening and improving the skills of the Caixa Agrícola Employees, cooperating with the Human Resource Departments at Caixa Central and focusing on specific training actions that were generally applicable to the non-life insurance sector. The training of these Employees addressed the technical-commercial approach, including technical and operational insurance training, integration programs for new Caixa Agricola Employees including training in Bancassurance (FORBASIC), recycling programs Caixa Agricola Employees with training in Bancassurance (SABERES+) and COGEN, a simulator and other computer applications, and actions integrating new Employees or by rotating work duties, in a total of 3,290 hours training given to 271 Employees. The Seguros Positivos 2013 incentives system surpassed expectations once again, serving as a means to encourage sales and also providing an excellent means of permanent and personalised communication among the Caixa Agrícola Employees. The VIII Annual CA Seguros Convention took place in Albufeira, including the enthusiastic presence of some of the best non-life insurance promoters, representing the respective Caixas Agrícolas. In terms of commercial campaigns, two campaigns stand out: CA Responsabilidade Civil Familiar [CA Family Civil Liability], achieved an objective success rate of 147%, and CA Vinculação [CA Commitment], which targeted current Crédito Agrícola Customers, was a huge success, promoting their loyalty. The CA CliniCard challenge, launched in the first quarter of 2013, revealed a huge success, with considerable participation of the Caixa Agrícola Employees, regarding which a major motivational factor was the incentive travel associated to this challenge, to Vienna and Bratislava. Free health checks, organised at Crédito Agrícola agencies, were also used to promote the CA CliniCard, which caused an impact and raised awareness for the product with Employees at those branches. In 2013, CA Seguros introduced adjustments into how remuneration was calculated for intermediation work to Caixas Agrícolas, while simultaneously promoting closer alignment with Value Generation and lower sensitivity to claims fluctuations, by means of a guaranteed minimum fee two percent higher. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 87

88 Intermediary fees increased to above 11 million euros, corresponding to an increase of 13.4% in relation to 2012, notwithstanding the standstill in commercial premiums issued this year. In this way, we managed to ensure a continued trend towards sustained growth in intermediary fees paid to Caixas Agrícolas in recent years, which has contributed towards their increased involvement in insurance activities. Insurance intermediation fees paid to CCAMs Unit: million euros % CA Seguros % Gross premiums issued amounted to 80.6 million euros, which means that it was unaltered in relation to the previous year, but contrasts favourably with the development of the non-life market, which fell by 3.2% in relation to the previous year. Most of the products defined by the Company within its strategic context continued to grow at a steady pace, with increases in gross Premiums issued, in particular, CA CliniCard +24.6%, CA Saúde + 6.6%, CA Habitação +8.1% and CA Comércio e Serviços +7.3%. The number of renewable policies in force in December increased to 472 higher, 8% higher than at the end of In the same way, the number of customer with active policies increased 6%, from 248 thousand to 262 thousand. CA Seguros aims to provide a quality service in responding to and dealing with claims. This service applies throughout the Company, providing assistance to claimants suffering physical injuries with regard to all products, including CA Acidentes de Trabalho, CA Acidentes Pessoais, CA Automóvel e CA Responsabilidade Civil [respectively, Workers Compensation, Personal Accidents, Car Insurance and Civil Liability]. The storm Gong, which struck Portuguese territory on 18 and 19 January 2013, caused considerable losses and constituted the event with the greatest impact in the Company s history. Overall, more than 1,800 claims were filed with CA Seguros in association to this event, with a total cost rising above 4 million euros. As a result, 2013 saw an increase in the number of claims filed, especially regarding CA Habitação and CA Comércio e Serviços policies. In order to respond to the substantial increase in claims and to respond to the situations filed, CA Seguros adopted measures to minimise their impact on the quality of service provided to its Customers. Despite this sudden and unforeseeable event, with a huge increase in claims filed and which, due to their nature, required a rapid response in order to settle them, CA Seguros demonstrated good and suitable reaction and response capacity during such a serious crisis. 88 Main Operations of the Crédito Agrícola Group

89 Despite the strong impact of the storm Gong, 2013 was considered a positive year in terms of claims, meeting budget targets with regard to most products. Net earnings came to 2,645 thousand euros, lower than budgeted and the 2012 earnings, since they reflected the decision taken during the financial year to increase Fees for intermediary services paid to Caixas Agrícolas. For the seventh year in a row, the CA Seguros General Meeting deliberated to pay out dividends to Shareholders for a total of 2,160 thousand euros, corresponding to approximately 82% of the financial year results. The equity situation of CA Seguros developed favourably in 2013, translated into an increase of Equity. With regard to assets, financial investments increased 6 million euros, which corresponds to a 4.0% increase. The relative weight of this item in total Assets increased from 79.1% to 83.4% in With regard to liabilities, CA Seguros adopted a prudent policy in terms of provisions, as in past years. Overall, technical provisions remained stable, standing at a total of 119 million euros on 31 December On 31 December 2013, obligations towards Insured parties are duly guaranteed both in terms of Technical provisions and Solvency margin, regarding which the coverage ratio is 255% (before shareholder dividends for 2013). It should be noted that the eligible assets as Technical provisions provide a coverage ratio of 129%. CA Seguros Key Indicators Thousand euros, or % or no. of employees Item Gross Premiums issued 79,917 80,778 80,63 Assets 159, , ,134 Equity 25,195 31,134 32,564 Net earnings 3,197 3,203 2,645 Solvency margin 205% 239% 255% Employees at end of year ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 89

90 3.2. Insurances Life Insurance 2013, the year that CA Vida celebrated its 15th birthday, was the year that the Company obtained its highest turnover ever, reaching a value of 384 million euros in Life insurances and 10.7 million euros in pension fund contributions, an increase in relation to the previous year of 31% and 41%, respectively. This corresponded to a market share of 4.2% and 6th place in the Life Insurer ranking. The dynamics of the Caixas de Crédito Agrícola Mútuo, related to the competitiveness of the solutions made available by CA Vida, has allowed them to take advantage of market opportunities not only regarding premiums volume, but also number of portfolio policies. In this way, at the end of 2013 there were a total of 255,637 policies in force and 6,281 pension fund contracts, corresponding to an increase of 8% and 48%, respectively. Thousand euros, or % % No. of Policies % Number of Pension Fund Contracts % In 2013, reflecting the growth of capitalisation insurances and management based on the preservation of portfolio assets, managed assets increased by 24% compared to 2012, standing at 1,424 million euros. Despite the high production value and the dynamic attitude that has characterised the activity of CA Vida consistently over the last few years, the number of Company Employees has remained stable, to the order of 40 members of staff, whereby the ratio production volume / number of Employees is one of the most competitive in the market. At the end of 2013, CA Vida equity totalled 64.5 million euros, an increase of 7,8 million euros in relation to 2012, not only due to the positive variation in revaluation reserves because of adjustments in the fair value of financial assets, but also the net earnings obtained during the year, of 5,974,402 euros. Taking into account the results obtained and seeing that this was the policy followed in previous years, CA Vida proposed the payment of dividends with a value of 750 thousand euros, which was approved by the General Meeting. The Company, both through its remuneration and dividend policies, and through the nature of the actual business, protecting and safeguarding the interests of Customers and the Caixas Agrícolas, has been a successful bet for the entire Crédito Agrícola Group. 90 Main Operations of the Crédito Agrícola Group

91 In CA Vida s 15-year existence, the results obtained have been equally reflected in the direct profit of the Caixas Agrícolas, and 2013 was the year that the Company most contributed towards the Crédito Agrícola Group, with intermediation fees amounting to 11.8 million euros, an increase of 26% in relation to the previous year. The Company s net contribution to the Crédito Agrícola Group surpassed the abovementioned commissions, reaching 16.1 million euros in acquisition of goods and services within the Crédito Agrícola Group, a sum that confirms CA Vida s importance for the growth and consolidation of the Group s results. Insurance intermediation fees paid to CCAMs Unit: million euros % CA Life % CA Vida s concern in keeping its Customers satisfied goes further than the development of business, and the Company performed a group of initiatives that relate to its social mission in the community and with the Customers of the Crédito Agrícola Group. In this sense, custom-made donations boxes were placed in Crédito Agrícola Group branches, so that Clients and Employees could contribute to Liga Portuguesa Contra o Cancro, in particular screening for breast cancer. In addition to raising awareness and providing information, the entire Group was mobilised for a cause which, in practice, affects us all. CA Vida would like to thank everyone who directly or indirectly participated in this initiative, which led to a contribution above 59 thousand Euros. The Company also took part in other solidarity initiatives regarding cancer prevention, among which Um Balão, Uma Vida, Corrida Sempre Mulher and Pedalar por uma Causa stand out due to the number of people from the general public who got involved. Maintaining good practices from past years, CA Vida meets regularly with the Caixas Agrícolas and Crédito Agrícola Group bodies, discussing and debating relevant matters regarding business and strategic guideline. In 2013, the Company consolidated the different product innovations and coverage performed in the previous year, namely the risk product portfolio. In order to reinforce its and the Group s positioning in the Group with younger Customers, the Company designed a product that will serve to alleviate the concerns of parents, grandparents and Customers with children under their charge, allowing them to take out a Capitalisation Insurance and a Life Insurance, separately or together, in order to guarantee costs with their education. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 91

92 Due to the adverse macroeconomic environment of the first months of 2013, and in as far as concerns capitalisation products, CA Vida, without neglecting an efficient management model, invested in a product strategy based on capitalisation solutions with guaranteed capital and revenue, sold during limited periods and competitive in relation to the market and which differentiated the Crédito Agrícola Group. In terms of the company and entrepreneur segment, taking into account their specific needs, CA Vida tried to improve the offer available for this segment, by greater proximity with Agencies to jointly find innovative and tailored solutions, both in terms of protection / social incentives for human resources as well as investment and financial protection for businesses, thus responding to their needs for continuity and expansion. Considering that the offer is directed towards both individuals and companies, CA Vida proposes to develop and implement the means necessary in order to support the initiatives of the Caixas de Crédito Agrícola Mútuo within the scope of marketing its products. The challenge faced by CA Vida in 2014 is no different to those faced in recent years. The Company must continue to strategically strengthen policies that are essentially based in the preservation of invested capital and ensuring conditions that allow the development and sale of products adapted to the characteristics of the Group s customers, in a close partnership with the Caixas de Crédito Agrícola Mútuo and Caixa Central. CA Vida Key Indicators Thousand euros Gross premiums issued and investment contracts 302, , ,986 Pension fund contributions 3,506 7,607 10,704 Assets 990,553 1,149,802 1,428,197 Equity 50,662 56,706 64,525 Net earnings 4,134 4,151 5,974 Employees at end of year Main Operations of the Crédito Agrícola Group

93 4. Investment Banking 4.1. Asset Management and Securities Investment Funds Total assets under management CA Gest, together with the Group s marketing entities (Caixa Central and the Crédito Agrícola Mútuo Caixas as its agents), once again managed to rise above the additional challenges posed by its competitors and the financial market situation, achieving growth of 23.6% in 2013 (22.5% in 2012 and 8.6 % in 2011) in the assets entrusted to its management, which exceeded million euros (a rise of 362 million euros in relation to 31 December 2012). In 2013, the largest percentage rise (32.6%) was in Securities Investment Funds, which reached a value of million euros at the end of the year. With regard to the management of third party asset portfolios, there was an increase of 22.5%, reaching a total of thousand million euros. CA Gest Evolution of Value of Assets Managed 1, , , , , , , , , Securities investment funds Asset management ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 93

94 Investment Funds On 31 December 2012, CA Gest was responsible for the management of the following investment funds: CA Monetário Money Market Fund Raiz Rendimento Euro-indexed Securities Fund Raiz Global Mixed Equity-based Fund Raiz Europa EU, Swiss and Norwegian Shares Fund CA Rendimento Crescente Special Open Investment Fund CA Rendimento Fixo Special Open Investment Fund (Capital Guaranteed) CA Rendimento Fixo II Special Open Investment Fund (Capital Guaranteed) CA Renda Semestral Special Closed Investment Fund CA Rendimento Mais Special Closed Investment Fund CA Rendimento Mais II Special Closed Investment Fund CA Rendimento TOP Special Closed Investment Fund During the year, the following Securities Investment Funds were liquidated, either due to regulatory stipulations or because they had reached maturity: Raiz Tesouraria Raiz Conservador Raiz Poupança Acções CA Rendimento Fixo III Special Open Investment Fund (Capital Guaranteed) CA Rendimento Fixo IV Special Open Investment Fund (Capital Guaranteed) CA Saúde Valorização Two new special investment funds were studied and proposed, CA Cereais and CA Rendimento TOP, although, due to strategic reasons and later changes to the new legal regimen applicable to UCITS, only CA Rendimento TOP was marketed. Net value of Managed Assets The overall net value of Securities Investment Funds managed by CA Gest and marketed by SICAM saw a net increase of 54.2 million euros, with a total of approximately 221 million euros in December Taking into account all the liquidations, subscriptions, redemptions and valuations, the annual increase amounted to 110 million euros, mainly by virtue of the funds Raiz Rendimento and CA Monetário. 94 Main Operations of the Crédito Agrícola Group

95 CA Gest Securities investment funds Overall Net Value (Million Euros) The sustained growth since 2010, in counter cycle to the general market, was initially guaranteed by the special closed investment funds on offer in 2012, and especially in 2013, due to the dynamics of the Raiz Rendimento and CA Monetário funds, which were the leaders in the national APFIPP ranking in terms of profitability. Overall, the Special Investment Funds registered a fall of 8%, presenting an Overall Net Value of 56 million euros. Assets managed per type of Fund Assets managed per type of Fund % 2.0% 3.7% Special Investment Funds Money Market and Treasury Funds 1.0% 3.2% 25.4% Special Investment Funds Money Market and Treasury Funds 34.7% 56.0% Income Funds Mixed Funds and FOFs Equity Funds 40.2% 30.2% Income Funds Mixed Funds and FOFs Equity Funds The Fund Raiz Rendimento, which had already presented positive returns of 6.58% in 2012, meanwhile became CA Gest s star fund, showing remarkable growth on 31 December 2013 with an overall net value of 88 million euros, annual profitability of 7.07% and first place in the APFIPP ranking for its class. The Fund CA Monetário, the most profitable in 2012 and in 2013 in its class in the Portuguese market, according to APFIPP, reached 67 million euros, corresponding to a 35.06% increase in relation to the previous year. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 95

96 The Funds Raiz Europa and Raiz Global remained practically unchanged and are being reconfigured in terms of investment policies, a process that will naturally be performed according to the applicable legal and regulatory framework and will only occur in The growth of the amounts applied in the Funds managed by CA Gest above the sector average resulted in a market share increase, which advanced from 1.35% in 2012 to 1.78% on 31/12/2013 (in 2010 it had been 0.8%). Securities investment funds Market Share Unit: millions of euros, or % Abs. % Total Securities Investment Funds managed 12, , % Total Securities Investment Funds managed (CA Gest) % CA Gest Market share 1.35% 1.78% p.p. Portfolio management In 2013 the value of the customer portfolios managed was approximately 1,674 million euros, an increase of 307 million euros in relation to the previous year, which corresponded to an increase of 22.5% (21.7% in 2012 and 8% in 2011). This increase was substantially higher than the 4.6% (3.1% in 2012) for the sector in general and means that CA Gest was the management company that grew the most during , with 61.07%. 3 CA Gest Asset portfolio management Amount Managed (Million Euros) 1, , , , excluding Dunas Capital, whose managed assets are not comparable. 96 Main Operations of the Crédito Agrícola Group

97 The increase in corporate client portfolios was the reason behind this performance, though there was also a very considerable increase in the number of individual customer portfolios managed by CA Gest. Asset Management Market Share Unit: millions of euros, or % Abs. % Asset Management total amount managed 52, , , % Asset Management total amount managed (CA Gest) 1, , % CA Gest Market share 2.62% 3.07% p.p. As it was the case in securities investment funds, the clear upward trajectory in the amount managed by CA Gest gave rise to a 0.45% gain in market share, consolidating the company s position among the top six asset management companies in Portugal. Management Company 2010/2013 BPI Gestão de Activos -31.4% Caixagest 5.5% Crédito Agrícola Gest 61.1% Dunas Capital - Gestão de Activos 216.9% ESAF - GP -9.7% F&C Portugal -24.9% MNF Gestão de Activos -2.9% Montepio Gestão de Activos 18.7% Orey Financial -18.3% Patris Gestão de Activos -36.4% Santander Asset Management -10.5% Total -10.7% ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 97

98 PRODUCTS OFFERED In as far as concerns products on offer, within the abovementioned framework of considerable difficulties and economic crisis, in addition to historically low interest rates and tight margins for banking institutions, CA Gest sought to respond to the challenges before it by creating two new Special Investment Funds, CA Cereais 2016 and CA Rendimento TOP, though, for market reasons only, CA Rendimento TOP was marketed. This was completed with setting marketing targets for the network based on the already existing Open Investment Funds, especially Raiz Rendimento and CA Monetário. KEY FINANCIAL INDICATORS CA Gest Evolution of Value of Assets Managed Unit: euros, or % Abs. % Financial Margin 32, ,630 99,611 77,935-22, % Net banking fees 2,100,181 2,185,829 2,388,946 2,706, , % Banking Income 2,129,621 2,246,633 2,443,045 2,789, , % Operating Costs 1,920,126 1,985,919 2,107,523 2,182,962 75, % Net Earnings 133, , , , , % Assets (Net) 4,285,689 4,514,524 4,864,108 3,946, , % Liabilities 706, , ,913 1,039, , % Capital 3,579,138 3,753,898 3,979,195 2,907,449-1,071, % The financial margin was down by 22.3% as a result of the fall in interest rates on term deposits using Company surpluses, which meanwhile were reduced due to the distribution of Free Reserves with a value of 1,500,000 euros to the single shareholder in mid-december The 13.3% increase in net banking fees resulting from the increase of the total amount managed brought about a variation of +14.2% in banking income, reaching a value of 2.8 million euros on 31 December Marketing fees paid to the Caixas de Crédito Agrícola Mútuo and to Caixa Central reached a value of 614 thousand euros. Overall asset management activities performed by the Company in 2013 generated revenue for the Crédito Agrícola Group to the order of 4.7 million euros. Overall, the Company s total operating costs rose 3.6%. 98 Main Operations of the Crédito Agrícola Group

99 Net earnings after tax for the year amounted to thousand euros, an increase of 90.1% compared to the previous year. Total net assets fell 18.9%, mainly due to the payout of free reserves to the value of 1.5 million euros and resulting drop in the Company s financial investments. Company liabilities increased 1.4%, corresponding to 154 thousand euros, mainly reflecting the increase of other liabilities under trade payables and payments to the State, periodical charges regarding deferred placement fees and the normal periodic costs regarding employee holidays and holiday subsidy. Equity decreased to 2.9 million euros due to the distribution of free reserves in the manner mentioned above. Return on equity was 10.8% above the 9-year average of 8.3%. ORGANIZATION & HUMAN RESOURCES The internal structure was altered in order to take in a Consultant for the Board of Directors and the election of an employee to the Board of Directors, with the resulting suspension of their employment contract, for which reason the total number of employees was unaltered. The duties of the Investment Strategy and Analysis and Institutional Customer departments are temporarily performed by an Executive Member of the Board of Directors together with the Commercial and Investment departments: CA Gest Organization & Human Resources Board of Directors Consultant Investment Strategy and Analysis Institutional Customers Investment dept Commercial dept Back-Office Compliance / Internal Control Tax & Accounting Risk Management Administrative dept Total ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 99

100 The Company receives services from specialised entities within the Group in order to perform business support duties, in particular within the scope of Administrative and Accounting services, Human Resources, Legal Counsel and IT Systems, concentrating its own resources in the key duties within its business activity. The above table also mentions an employee whose salary, although paid by Caixa Central, is later refunded by CA Gest. ACTIVITY RISKS The main risks in the Company s activity relate to operational and reputational and IT system compliance risks, for liquidity, debt, interest rate and price risks are irrelevant in the Company s activity, because: The Company has 1.2 million euros in cash and financial investments, corresponding to a ratio above 1.2 in relation to Total Liabilities; The Company does not resort to loans and the income from its financial investments affected by interest rate risk correspond to just 2% of its Net Assets; Company receivables correspond almost exclusively to the management fees to be received, whose payment is guaranteed by the powers granted to the Company, by virtue of fund management regulations and the portfolio management contracts entered into with customers, as well as the management policy and regulations, which confer sufficient liquidity to pay for the abovementioned fees; Regulatory and contract provisions govern all the fees charged by the Company, the fundamental base of the Company s income, nullifying price risk; The Balance sheet does not include assets in currencies other than the euro. The management of operational and reputational compliance risks have been increased by improved organisation and information systems, as well as disaster recovery and security policies. The Company has also sought to develop specific procedures for each operating area, articulating them within the Company s internal control system. 100 Main Operations of the Crédito Agrícola Group

101 4.2. Real Estate Investment Trusts, Pension Funds and Venture Capital Real Estate Investment Trusts Crédito Agrícola has the following real estate investment trusts: Open Real Estate Investment Trust CA Património Crescente Type of Fund: Real Estate Investment Trust Managing Entity: Square Asset Management Sociedade Gestora de Fundos de Investimento Imobiliário, SA Start of Activity: 15/07/2005 Net Asset Value of the Fund on 31 December 2013: 211,731,911 Net Asset Value of the Fund on 31 December 2012: 189,533,786 Value of real estate acquired in 2013: 39,309,008 On 31 December 2013 the Fund had 7,026 investors (5,842 investors in 2012) who subscribed the Fund in 458 branches within the CA Group network (corresponding to 78 CCAM). The properties held by this Fund are buildings or independent units for construction or rehabilitation, lease, resale or any other form of commercial operation that may generate income for the Fund, within the business areas of commerce, housing, services, industry, logistics, tourism or any other legally admissible and economically justified activity. The fund may acquire property independently or jointly, in which case, if applicable, an agreement as to sectional title or regarding income generated by the property shall be necessary. Special Closed Real Estate Investment Trust IMOVALOR CA Type of Fund: Special Real Estate Investment Trust Managing Entity: Selecta - Sociedade Gestora de Fundos de Investimento Imobiliário, SA Start of Activity: 31/07/2013 Net Asset Value of the Fund on 31 December 2013: 9,657,665 Net Asset Value of the Fund on 31 December 2012: n/a Value of real estate acquired in 2013: 4,007,932 The Closed Fund IMOVALOR CA was created on the 18th July 2013, starting its activity with an initial share capital of 5 million euros. On 31 December 2013, IMOVALOR CA assets were worth 9.7 million euros, of which 4.0 million euros correspond to real estate and 5.7 million euros to liquid assets. The initial period for subscribing to this fund continues until 31 December ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 101

102 According to its Investments Policy, the Fund may invest in the purchase, sale or operation of real estate rehabilitation; buildings to be used for services, logistics, tourism, commerce, housing and services, or other purposes; buildings, rural or mixed properties in order to develop urban planning, parcelling and construction projects; rural or mixed properties for later sale, lease or any other means of operation for consideration or valuation that is permissible. The Fund s assets primarily possess properties acquired from the Caixas Agrícolas and the Caixa Central, which together constitute the Crédito Agrícola Mútuo Integrated System (SICAM), which were acquired by them within the scope of court and out of court loan recovery processes. Special Open Real Estate Investment Trust CA Imobiliário Type of Fund: Special Real Estate Investment Trust Managing Entity: Square Asset Management - Sociedade Gestora de Fundos de Investimento Imobiliário, SA Start of Activity: 01/09/2005 Net Asset Value of the Fund on 31 December 2013: 266,083,656 Net Asset Value of the Fund on 31 December 2012: 468,260,803 Value of real estate sold in 2013: 13,739,344 Value of real estate acquired in 2013: 32,050,000 On 31 December 2013, the Fund reached a total net asset value of 266 million euros, as opposed to 468 million euros at the end of This variation was due to the demerger operation of the Fund CA Imobiliário which took place at the end of last year, creating the Fund Carteira Imobiliária to which assets worth approximately 200 million euros were transferred. The aim of this Fund is to obtain the valuation of capital in the long-term, by constituting and managing a varied set of assets, mainly real property, under the terms and according to the rules established in this Management Regulation, without emphasising on any specific real estate segment, nor specific types of building. The Fund Assets are to be predominantly used in the purchase of real estate from companies that are undergoing restructuring processes, namely financial, through loan negotiation processes or acquired in lieu of foreclosure. In this sense, the investment policy will be directed towards acquisition of real estate that is not for leasing. Closed Real Estate Investment Trust CA Arrendamento Habitacional Type of Fund: Residential Lease Real Estate Investment Trust Managing Entity: Square Asset Management - Sociedade Gestora de Fundos de Investimento Imobiliário, SA Start of Activity: 23/10/2009 Net Asset Value of the Fund on 31 December 2013: 114,029,121 Net Asset Value of the Fund on 31 December 2012: 98,711,614 Value of real estate sold in 2013: 1,911,650 Value of real estate acquired in 2013: 23,522, Main Operations of the Crédito Agrícola Group

103 The Fund began the year with 319 units, of which 165 (52%) were rented, and ended the year with 459 units, of which 262 (57%) were rented. 11 units were sold during The Fund assets exclusively comprise real estate situated in Portugal, with at least 75% of its total assets constituted by properties for long-term residential lease. Within this context there are properties acquired by means of a home loan contract and whose owners, after the Fund has acquired the home, intend to enter into a lease agreement, as tenants, with the Fund, regarding the property they sold to the Fund. Pension Funds Open pension funds managed by CA Vida (CA Reforma Segura, CA Reforma Tranquila and CA Reforma Mais) registered fairly positive results in 2013, growing both in terms of policies and the total value being managed: Pension Fund Contracts (thousands) Pension Fund Contributions (million euros) Compared to 2012, the number of policies rose 48%, while the total value being managed increased 41%, continuing the increasing trend that dates back to These pension funds, which act as a supplement to Social Security retirement plans, stand out due to the investment policy adopted, according to suitable risk levels and the intended time frame. CA Reforma Segura is for risk averse investors, investing mainly in fixed income securities; CA Reforma Tranquila, for investors with moderate risk tolerance, invests in bonds and shares; finally, CA Reforma Mais, with a less risk averse profile, follows a more dynamic investment policy, with greater exposure to stock markets. In 2013, these funds obtained returns of 8.24% (CA Reforma Mais), 2.62% (CA Reforma Tranquila) and 0.17% (CA Reforma Segura). In addition to these funds, CA Vida also manages the Crédito Agrícola closed pension fund. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 103

104 Venture Capital Funds, Financial & Management Consulting, Administrative & Accounting Services Within the Crédito Agrícola Group, CA Consult is responsible for providing venture capital fund management, financial and management consulting, administrative and accounting services. In 2013, CA Consult underwent a profound change in its business model, focusing on providing the following types of consulting services to entities within the GCA: Management Consulting to CCCAM Governing Bodies and affiliates; Venture Capital Consulting; Administrative & Accounting Services; discontinuing its consulting activities to entities outside the group, in Portugal or in Brazil. Throughout the first quarter, CA Consult still maintained considerable means assigned to external entities, particularly with regard to the assessment of State interests in 9 companies: Águas de Portugal, ANA, ANAM, CTT, SIMAB, Lisnave, Efacec, SPE and Propnery. Within the scope of services provided to private companies, financial and management consulting services were provided to Portuguese manufacturing industry companies operating in potato, packaging, viticulture, gymnasiums, renewable energies and a Brazilian company engaged in prestressed concrete products. Venture Capital Consulting CA Consult continues to provide consulting services regarding support and performance of tasks under the responsibility of CCCAM and AGROCAPITAL, in their duties as Venture Capital Fund management entities. In as far as concerns FCR CENTRAL FRIE in 2013, it was essential to find investment opportunities for the available cash and close the fund s investment stage, seeing that two opportunities carried over from the previous year failed to generate the intended investments. Four investment intentions were acquired, of which two brought about proposals by the respective promoters; a cork manufacturing industry and a start-up in the field of packaging / devices for the pharmaceutical industry. This latter operation which aims to fund investments to the order of 1.5 million euros in developing new products and provides for an investment by the Fund of 0.9 million euros earned, in December 2013, an investment decision from the management company s Board of Directors and a favourable opinion from the Investments Commission. In 2014, it was suggested that the investment is to be made in the group s parent-company, for which reason the operation reformulation analysis is underway and, in necessary, shall be submitted to the Fund s own governing bodies. FCR AGROCAPITAL 1 suspended its investment activity in May 2012, which was only resumed a year later when the respective Participants Meeting deliberated to extend the fund s activity. In this way, in the 1st quarter of 2013, CA Consult s activity was limited to monitoring the Fund s affiliates, seeing that the 6 investment opportunities under examination for the previous year could not be resumed because the respective promoters found other funding solutions or relevant changes had registered the respective assumptions. 104 Main Operations of the Crédito Agrícola Group

105 From May onwards, CA Consult conceived and carried out a promotion program for FCR AGROCAPITAL 1 to detect investment opportunities, including: Direct and personalised contact with an initial sample of 50 SME that were in an investment stage, in particular within the scope of PRODER, holding meetings / visits with those that were available for this purpose; Presentation of the Fund in 6 Crédito Agrícola training sessions, attended by representatives from almost all the CCAM commercial / risk analysis teams; Presentations of FCR AGROCAPITAL 1 in three sessions disclosing funding instruments for agriculture and fishing, organised by the Algarve, Lisboa e Vale do Tejo and Centre Regional Agriculture Directorates; Presentation of the Fund and respective participation policy to several Venture Capital companies, in particular the management of the Revitalizar Funds; Participation and presentation of communications in several public sessions regarding SME funding, particularly within the scope of the following initiatives: 5th Entrepreneurship Forum, FINCENTRO Conference and Conference on the subject of Financial Engineering Instruments in post 2013 Annual reports and disclosure of the Fund to business associations. Due to these efforts, 15 investment intentions were received this year, of which 7 led to participation proposals by the respective promoters, relating to companies engaged in the following sectors: Fruit growing (2), viticulture, horticulture, diary products, small fruit; and cork manufacture, two of which were start-up operations and the other five capital increases in order to fund production and / or commercial investment. After the technical analysis, these 7 operations provide conditions for the Fund to get involved, though 4 of them are currently reformulating the respective business plan and the other 2 are still under the appraisal / evaluation stage. The operation regarding the cork manufacturing company which consists in using equity to fund an investment in modernising the company within the context of the restructuring process of the company group it belongs to establishes an investment of 1.5 million euros by the Fund. This operation, already approved by the Funds own bodies, has entered the final stage of negotiation for the contracts which will officialise and regulate the investment. Under the terms of the Shareholder Agreement entered into between FCR Central Frie, FCR Agrocapital 1 and the other shareholders of S&A Sociedade Industrial de Aperitivos, S.A. (S&A), the call option mentioned therein was exercised on 19 December 2013 and the operation performed by January The modernisation and expansion process that the funds contributed to was successful, to the extent that S&A is currently the largest chips private label producer in Portugal for large distribution networks active in the Portuguese market, as well as Spain and France, assuming particular relevance in the outflow of the national potato campaign. During the three years that the interest was held in the investee, invoicing and EBITDA grew at annual average rates of roughly 19% and 43% respectively, which was naturally reflected in the returns of the Fund s investment. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 105

106 Furthermore, CA Consult participated actively preparing / presenting studies and other documents in initiatives for the Agriculture and Fishing Funding Institute (IFAP) and Ministry of Agriculture and the Sea Policies and Planning Office (GPP) regarding increasing venture capital in Fileira Agro within the scope: (i) of what will become the Regional Development Plan and (ii) the widening of this instrument to initiatives starting in companies which, due to their nature and articles of association, do not permit equity partners. Management Consulting to CCCAM Governing bodies and Affiliates In view of the change to the business model that took place in 2013, consulting services provided to Crédito Agrícola Group entitles became a key aspect of CA Consult activities. Among the CCCAM projects verified by CA Consult, during the 1st semester, the following stood out: FIIRC Real Estate Investment Trust for Debt Recovery; CA Group Transformation; PME Líder; Support to the Caixa Central PMO; and Mozambique Credit Institution. Throughout the 2nd semester of 2013, CA Consult began to cooperate with CCCAM Governing Bodies and Affiliates, specifically in the following areas: CCCAM Companies Department; CCCAM Strategic Planning and Management Control Department; CA Imóveis; and CA Serviços. At the same time, CA Consult continued to monitor institutional investees and sector associations. Administrative & Accounting Services This department continues to provide administrative support and accounting services to the Company as well as CA Gest, CCCAM Gestão de Investimentos, FCR Central FRIE, Agrocapital SCR, FCR Agrocapital 1 and CA Finance, as well as preparing data regarding CCCAM accounts. Without prejudice to the increasing demand for external reporting regarding those companies due to the increased level of supervision ordered by both Portuguese and international authorities it has been possible to maintain appropriate minimum services for customers, within the restraints caused by the lack of human resources. 106 Main Operations of the Crédito Agrícola Group

107 ECONOMIC AND FINANCIAL PERFORMANCE Despite progressively discontinuing the consultancy services provided to external companies during the 1st semester, the total income and gains of CA Consult in 2013 rose 1.5% in relation to the previous year reaching 1,260 thousand euros - with the 26 thousand euros decrease regarding services provided more than counterbalanced by the rise in other income and gains. Income and gains were divided in the following manner: Venture Capital Consulting and monitoring Affiliates Management Consulting to CCCAM governing bodies and subsidiaries Financial Consulting to third parties Administrative and Accounting Services Other revenue and income The implementation of the costs cutback plan approved in the previous year was continued, resulting in savings substantially higher than had been initially expected and budgeted. Both operating costs and operating expenses fell more than 31% due to the decrease in External Services by roughly 41.6%, Payroll by 27.8% and Impairment Losses approximately 34% Payroll External services Impairments Others ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 107

108 These savings, which came to over 670 thousand euros, meant that the company EBITDA was positive, representing about 11% of operating gains. Due to the lower number of employees at the company s service, the requirements for fixed assets, particularly vehicles, was also lower, for which reason depreciation during the financial year dropped approximately 36%. The financial support provided by the shareholder at the start of the year, as well as the funds generated from the 2nd quarter, meant that recourse to external capital was considerably reduced, for which reason financial charges fell 72% in relation to the previous year. As a result, above all, of the abovementioned savings, CA Consult obtained positive net earnings in 2013 to the value of 88 thousand euros, corresponding to 5.8% of the total equity that had been invested by the sole shareholder. Company assets fell by about 59%, mainly as a result of the unpaid additional capital contribution made by the shareholder following deliberation in the previous year. This financial support given by the shareholder, as well as the funds released through operating activity and the reduction of working capital, cancelled out the loans debt, so that during the 2nd semester of 2013, CA Consult consistently registered cash surplus. The book value of operating credits decreased about 20% due to faster recovery times, through the company s new business model and increased impairments. Impairments at the end of 2013 covered more than 80% of the loans that can be considered bad debts for tax purposes. The abovementioned fall in liabilities, the net earnings generated and associated release of funds allowed financial autonomy to reach 57%, i.e. 40% more than in the previous year. CA Consult Key Indicators Thousand euros, except no. of employees Net assets Operating income Net earnings Number of Employees Main Operations of the Crédito Agrícola Group

109 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 109

110 05

111 Financial Analysis CRÉDITO AGRÍCOLA

112 05 1. SICAM (Caixa Central + Associated Caixas Agrícolas) The banking activity of the Crédito Agrícola Group, which includes the associated Caixas Agrícolas and Caixa Central, was directly affected by the adverse macroeconomic environment in Portugal, marked by the continued Economic and Financial Adjustment Program agreed by Portugal and International Institutions (EU-ECB-IMF) and the corresponding budget austerity policies adopted by the Government and which, together with reduced levels of economic leverage, have resulted in a fall in investment and consumer spending. These factors have had a negative impact on the banking sector, not only in terms of loans granted, but also the quality of loan portfolios and other assets, compelling financial institutions to increase impairments. KEY INDICATORS Thousand euros, or % /2012 Total assets 13,026,692 13,747,141 12,968, % Assets available for sale and held to maturity 3,493,704 4,364,678 3,907, % Customer loans (net) 7,988,301 7,716,888 7,491, % Customer funds 9,883,887 10,177,702 10,209, % Equity 1,054,129 1,097,827 1,105, % Financial margin 343, , , % Banking income 471, , , % Structural costs 304, , , % Provisions / impairments 117, , , % Net earnings 47,278 41,319 1,506-96% Return on Equity (ROE) 4.5% 3.9% 0.1% -3.7 p.p. Efficiency Ratio 64.6% 65.3% 64.0% -1.3 p.p. Ratio of Overdue Loans > 90 days 5.8% 6.8% 7.7% 0.9 p.p. Core Tier 1 Solvency ratio 12.7% 12.6% 12.7% 0.1 p.p. Total assets on the 31st December 2013 stood at 12,968 million euros, a drop of 5.7% in relation to total assets registered on 31 December 2012, amounting to 13,747 million euros. 112 Financial Analysis

113 Total liabilities also accompanied the decrease in assets and reached 11,863 million euros on 31 December 2013, which corresponds a reduction of 6.2% in relation to the sum of 12,649 million euros registered on 31 December This reduction is partially explained by the payment of part of the loan obtained from Banco de Portugal (645 million euros). Equity rose slightly by 7.5 million euros by means of capital increase, revaluation reserves and other reserves and retained earnings (which more than compensated for the loss in profit during the financial year), thus reaching a total of over 1,105 million euros on 31 December 2013, as compared to the 1,098 million euros on 31 December In 2013, the overdue loan ratio deteriorated by 0.9% compared to the previous year, increasing from 6.8% to 7,7% Income Statement The abovementioned difficulties that affected the Portuguese banking sector was also mirrored in SICAM s activity, with a reduction in net earnings by 41.3 million euros in relation to 31 December 2012, so that net earnings on 31 December 2013 amounted to 1.5 million euros (-96,4%). Income Statement Thousand euros, or % Abs. % Interest and similar income 560, , , % Interest and similar costs 242, ,794-35, % Financial Margin 318, ,657-67, % Net commissions 129, ,599 2, % Earnings from financial operations 5,930 78,779 72, % Other operating results 11,244 11, % Banking income 464, ,645 7, % Structural costs 303, ,256-1, % Payroll 162, ,962 1, % non-recurrent * - 1, General administrative costs 125, ,604-2, % non-recurrent * - 1, Amortisations 15,026 14, % Provisions & Impairments 120, ,025 29, %. Earnings before tax 40,513 20,264-20, % Tax, corrections and retained earnings ,758 19,565 - Net income 41,320 1,506-39, % * costs associated to the Caixa Central reorganisation program, including indemnities, early retirements, construction works and consultancy services. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 113

114 The fall in net earnings by million euros is justified by the reduction of the financial margin (-67.6 million euros) and the increase of provisions and impairments (+29.0 million euros) partially offset by the earnings from financial operations which amounted to 72.8 million euros, essentially derived from the dynamic cash management policies, in particular regarding securities issued by public entities Financial Margin SICAM s financial margin amounted to million euros, compared to the million euros obtained in FINANCIAL MARGIN Thousand euros Variables Average equity Average rate(%) Income / Costs Average equity Average rate(%) Income / Costs Customer loans 8,476, % 398,732 8,281, % 334,003 Securities and other investments 4,573, % 161,914 4,730, % 123,448 Financial assets 13,049, % 560,645 13,012, % 457,451 Customer funds 10,030, % 201,949 10,193, % 173,167 Funds from Central banks & other liabilities 2,124, % 40,412 1,907, % 33,626 Financial liabilities 12,155, % 242,361 12,101, % 206,794 Financial Margin - 2.3% 318, % 250,657 Intermediary margin - 2.7% % - Average Euribor rate (6-month) - 0.8% % - This negative variation of million euros was largely due to the fall in income obtained from other securities and investments (interest and amortisation of issue premiums / discounts) as a result of the decision to reclassify the securities portfolios held to maturity as available for sale and the adoption of dynamic cash management. The increased risk inherent to longer maturity Portuguese government debt securities, due to the reduction of Portugal s rating, as well as their considerable weight in the investment portfolio, led Caixa Central to define an investment strategy which involved a dynamic cash management based on diversification and investment in lower risk assets, consequently offering less profitability. In this way, the subjacent reduction in investment yields (variation of average interest rate by -0.9%) generated an accentuated fall in revenue associated to these securities (-23,8%) which was offset, however, by the capital 114 Financial Analysis

115 gains obtained from the sale of Portuguese debt and other securities which therefore contributed towards the positive results generated by bank operations (+1,7%). Moreover, earnings resulting from Customer loans also fell in 2013 (-64.7 million euros) due to the reduction of the average interest rate by 0.7%, partially explained by the drop of the average Euribor interest rate (-0.5%). On the other hand, and although customer deposits increased by 163 million euros, interest paid for these resources fell from million euros in 2012 to million euros in 2013 (-67.2 million euros) due to the reduction of the average interest rate by 0.3%, in line with the decline in market interest rates. This resulted from the increased liquidity of the banking system which was caused, among others, by easy access to liquidity provided by the ECB (funding based on sovereign debt and loans given as collateral). The analysis of the variation of the financial margin by breaking it down according to volume and price reveals that the fall of million euros arose from: The negative effect of lower interest applicable to customer loans, representing over 80% of the reduction in financial margin, justified by the decrease in the Euribor rate and the residual replacement of old debt with low spreads, in particular regarding home loans and other long-term maturity loans, for new loans at higher interest rates; and The reduction in yields and amortization of security premiums obtained, mainly, from the Portuguese debt securities portfolio, meanwhile sold and reinvested in other financial assets. BREAKDOWN OF EFFECTS OF FINANCIAL MARGIN VARIATION Thousand euros Volume Price Annual Variation Financial Assets -3,568-99, ,195 Customer loans -9,137-55,592-64,729 Securities and other investments 5,569-44,034-38,466 Financial liabilities ,719-35,567 Customer funds 3,280-32,061-28,781 Funds from Central banks & other liabilities -4,127-2,658-6,785 Financial Margin -2,721-64,907-67,628 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 115

116 Net banking fees Net banking fees increased 1.6% in 2013, reaching million euros. This increase can be partially explained by the evolution in fees received by virtue of services regarding placement and sale of group products (+19.0%, which meant an increase of +4.3 million euros) and the evolution of fees received due to the deposit and custody of securities (+ 50.2% which meant an increase of +1.4 million euros) which together offset the decrease in fees with regard to loans, cards and debt collection (-5.5 million euros). BANKING FEES Thousand euros, or % Abs. % Fees received 140, ,358 2, % Guarantees given 5,004 5, % Documentary credit opened % Commitments before third parties 7,438 7, % Deposit and custody 2,718 4,083 1, % Charging for assets 1,180 1, % Transfer of assets 3,909 3, % Loan operations 32,837 27,749-5, % Cards 26,257 26, % Interbank % Placement and sale 22,316 26,566 4, % Other fees received 38,207 39,266 1, % Fees paid 10,809 10, % Total net fees 41,320 1,506-39, % The increase in the activity of affiliate companies (insurance and asset management) translated into more remuneration for SICAM which in its capacity as a distribution network earned 22.6 million euros in fees in 2013, which corresponds to an increase of 3.7 million euros in relation to the previous period (+19.8%). The other placement fees relate to marketing real estate investment trusts (e.g. Património Crescente, CA Imobiliário, CAAH). 116 Financial Analysis

117 PLACEMENT AND MARKETING FEES Thousand euros, or % Abs. % CA Gest % CA Seguros 9,494 10,623 1, % CA Vida 9,114 11,584 2, % Sub-Total 18,858 22,583 3, % Other placement and marketing fees 3,458 3, % Total 22,316 26,566 4, % Income from Financial Operations Income from financial operations reached 78.8 million euros in 2013, in contrast to 5.9 million in Financial Operation Income thousand euros Abs. Financial assets available for sale 2,472 76,272 73,800 Sovereign debt 2,497 72,783 70,286 Other debt securities 5 3,283 3,278 Other assets Income from equity instruments 1, Exchange rates 1,626 1, Other income Total income from financial operation 5,930 78,779 72,849 Portugal s rating cut pushed public debt yields to previously unseen levels and due to the high concentration Caixa Central took the decision to: i) Sell public debt securities with long-term maturity, obtaining capital gains of approximately 25 million euros; and ii) Adopt a dynamic portfolio management approach, tending towards lower risk profile, looking for opportunities in the short / medium term. This method brought about profits above 40 million euros in ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 117

118 The variation in income from financial operations (+72.8 million euros) more than compensated for the negative variation of the financial margin due to loss of interest and amortisation of financial investments and securities discounts (-38.5 million euros) Structural Costs During 2013, structural costs fell 0.4%, from million euros to million euros, within the context of investment in the Caixa Central reorganisation program implemented by the new Board of Directors and which resulted in costs with early retirements, indemnities and strategic consultancy services (nonrecurring costs appraised at 2.8 million euros). Performing a comparative analysis without including these non-recurrent costs, it is clear that structural costs dropped 1.3% (-4,0 million euros), demonstrating the effort made to optimize general administrative costs (-3.1%) and an optimization of payroll is expected in 2014, at least equivalent to what occurred in Caixa Central in 2013 (which downsized 33 employees during this year, placing Caixa Central staff levels close to 2008). Structural Costs Thousand euros, or % Abs. % Operating costs 288, , % Payroll 162, ,962 1, % non-recurrent * - 1, General administrative costs 125, ,604-2, % non-recurrent * - 1, Amortisations 15,026 14, % Structural Costs 303, ,356-1, % Nonrecurring costs * - 2,890 n.a. n.a. Structural Costs excl. nonrecurring costs 303, ,466-3, % Efficiency Ratio 65% 64% -1% - * costs associated to the Caixa Central reorganisation program, including indemnities, early retirements, construction works and consultancy services. In as far as concerns the efficiency ratio, it remained practically unaltered, from 65.3% in 2012 to 64.0% in 2013 due to the increase of 1.7% in banking income and the -0.4% decrease in structural costs. 118 Financial Analysis

119 Structural costs (thousand euros) and Efficiency 67.1% 64.7% 65.3% 64.0% Structural costs Efficiency Ratio Tenured SICAM employees Number of SICAM employees 3, ,822 3, , ,900 3, ,326 3,363 3,374 3,337 3,434 3, Associated Caixas Agrícolas Caixa Central In 2013, SICAM reduced the number of employees from 3,900 to 3,834 (-66 employees) which represents a comparative decrease of -1.2%. However, this figure was still above the number of tenured employees in 2011 (3,800). Approximately half of this decrease related to the reorganisation of Caixa Central by reducing Departments (and Senior positions), as well as reducing the number of tenured employees within the company staff. In this way, in 2013, Caixa Central downsized 33 employees, from 466 to 433. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 119

120 Provisions / Impairment The unfavourable economic context that occurred in 2013 and persists at the start of 2014 was responsible for the increase in risk levels reflected in the loans portfolio and the build-up of foreclosed real property on bank balances, which in turn required a permanent increase in provisions and impairments. In 2013 SICAM presented an increase in provisions regarding customer loans with a value of million euros (+7.4% in relation to 2012), reaching coverage ratios for non-performing loans over 90 days past due to the order of 113% (as compared to 114% in 2012). In as far as concerns impairment of other financial assets, in 2013 SICAM registered losses to the order of 15.3 million euros essentially due to the revaluation of interests in the real estate investment trust CA Imobiliário. Furthermore, impairments to the value of 29.2 million euros were registered in real property received by means of debt recovery, which incorporate the changes made in November 2013 under the real estate portfolio revaluation program, stipulated by Banco de Portugal. Provisions Thousand euros, or % Abs. % Adjustments associated to customer loans 99, ,385 7, % Impairment of other financial assets 7,764 15,350 7, % Impairment of other assets 14,264 33,072 18, % regarding real property obtained through debt recovery 12,127 29,237 17, % Other provisions / impairments -74-4,783-4,709 - Total 120, ,025 29, % 120 Financial Analysis

121 Returns Return on equity, which dropped from 3.84% in 2012 to 0.14% in 2013, was prejudiced by the financial margin (-0.51%) which, because it was not offset by banking fees (+0.02%), was additionally impaired by the rise in provisions, impairments and taxes (+0.38%). In fact, the gross commercial margin registered in 2013 (-0.49%) demonstrates that banking activities performed worse than in the previous year, though the earnings obtained from financial operations (+0.56%) alleviated pressure on net earnings and allowed SlCAM to register negligible returns on assets (ROA) and equity (ROE) in RETURNS Variation + Financial asset rate 4.30% 3.52% -0.78% - Financial liability rate 1.86% 1.59% -0.27% = Financial Margin 2.44% 1.93% -0.51% + Fee Profitability 0.99% 1.01% 0.02% = Gross Commercial Margin 3.43% 2.94% -0.49% + Income from financial operations and other 0.13% 0.69% 0.56% = Business Margin 3.56% 3.63% 0.07% - Effect of structural costs 2.33% 2.32% 0.00% - Effect of provisions and tax 0.92% 1.30% 0.38% = Profitability of financial assets 0.32% 0.01% -0.31% x Financial assets / Net assets % = Return on assets (ROA) 0.30% 0.01% -0.29% x Net assets / Equity = Return on equity (ROE) 3.84% 0.14% -3.70% ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 121

122 Balance Sheet Balance on 31 December Thousand euros, or % Abs. % Assets Cash and cash equivalents 513, ,470-49, % Investments in Banking Institutions 106,979 31,931-75, % Customer loans (net) 7,716,888 7,491, , % Securities investments (net) 4,371,094 3,907, , % Fixed assets held for sale 367, ,990 33, % Invest. in subsidiaries, Tangible and Intangible 346, ,857-8, % Other Assets 325, ,950 9, % Total Assets 13,747,142 12,968, , % Liabilities Funds from Central Banks and other Banks 2,148,018 1,362, , % Customer Funds 10,177,702 10,209,731 32, % Subordinate Liabilities 128, ,404 4, % Other Liabilities 194, ,998-37, % Total Liabilities 12,649,315 11,863, , % Equity 1,097,827 1,105,390 7, % Total Equity + Liabilities 13,747,142 12,968, , % Total assets amounted to 12,968 million euros, corresponding to a reduction of 5.7% in relation to the total assets registered in 2012 with a value of 13,747 million euros, mainly due to: i) the reduction of financial assets from 4,371 million euros in 2012 to 3,907 million euros in 2013 (-10,6%), by virtue of the sale of Portuguese debt securities and resulting alteration of the securities portfolio; and ii) the drop in total net Customer loans by 2.9% compared to the equivalent period in the previous year, from 7,717 million euros in 2012 to 7,492 million euros in In 2013, total liabilities accompanied the fall in total net assets down to 11,863 million euros, corresponding to a reduction of 6.2% in relation to 12,649 million euros registered in The payment of 645 million euros in loans obtained from Banco de Portugal contributed towards the decrease in liabilities, which was due to the change, stipulated by the ECB and effective as of 31 December, with regard to the rules for eligibility of credit claims as collateral for Eurosystem funding. 122 Financial Analysis

123 Customer funds registered a minor increase of 0.3% (+32 million euros) rising from 10,178 million euros in 2012 to 10,210 million euros in On the other hand, equity rose slightly by 7.5 million euros by means of capital increase, revaluation reserves and other reserves and retained earnings (which more than compensated for the loss in profit during the financial year), thus reaching a total of 1,105.4 million euros in 2013, as compared to 1,097.8 million euros in Quality of Debt Portfolio The current economic situation, marked by a sharp drop in internal demand, restrictive conditions for access to loans, high unemployment and a considerable fall in income through employment and social contributions, has had nefarious effects on the quality of the Debt portfolio held by Banks in general, requiring Institutions to support added costs with provisions for bad loans and loss of income due to default. For SICAM, in 2013, there was an overall increase in overdue loans by 49.7 million euros (+8.2%), a sum which corresponds to the increase of overdue company loans by 53.7 million euros, counterbalanced to a slight degree by the 4 million euros drop in individual loans. Non-performing loans over 90 days past due increased by 10.5%, an increase of 59.6 million euros. NON-PERFORMING LOANS Thousand euros, or % /2012 Loans over 90 days past due Loans under 90 days past due Total loans past due Non-performing loans ratio > 90 days 4.9% 5.8% 6.8% 7.7% +0.9 p.p. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 123

124 In this way, the non-performing loans ratio for the Company and Government Agency segment increased from 9.0% in 2012 to 10.7% in 2013, while the Individuals segment increased from 5.6% in 2012 to 5.7% in NON-PERFORMING LOANS AND IMPAIRMENTS ON 31 DECEMBER 2013 Gross total credit Past due loans Total past due loans Provisions for credit risk Million euros, or % Covering rate Companies and Government Agencies 4, % % Individuals % % Home loans 2, % % Consumption and other loans 1, % % Total 8, % % In view of this increase in non-performing loans, SICAM increased provisions by 58.1 million euros, resulting in total accumulated provisions of million euros regarding loans. The default rate calculated according to Instruction no. 24/2012 from Banco de Portugal stood at 8.4% and the net default rate reached -0.2%, which corresponds to an appropriate level of provisions. DEFAULT RATE (*) Non-performing loans / Total loans 5.4% 6.5% 7.8% 8.4% Non-performing loans, net / Total loans, net -0.4% -0.4% 0.2% -0.2% * 2012 and 2011 rates calculated in conformity with Instruction no. 22/2011 issued by Banco de Portugal ratios calculated under the terms established in Instruction no. 24/2012 issued by Banco de Portugal which amended Instruction no. 22/2011. The bad debt ratio, which includes in general non-performing loans over 90 days past due, associated future payments and restructured debt, continued to rise, in line with debt portfolio risk, standing at 11.3% in 2013 and, in net terms falling to 3.0% when compared to BAD DEBT RATIOS (*) Bad debt / Total loans 7.6% 9.6% 10.7% 11.3% Bad debt, net / Total loans, net 1.8% 2.9% 3.3% 3.0% * 2012 and 2011 rates calculated in conformity with Instruction no. 22/2011 issued by Banco de Portugal ratios calculated under the terms established in Instruction no. 24/2012 issued by Banco de Portugal which amended Instruction no. 22/ Financial Analysis

125 The restructured debt ratio reached 10.8% and the ratio of restructured debt not included under bad debts stood at 10.2%. RESTRUCTURED DEBT RATIO 2013 Restructured debt / Total loans 10.8% Restructured debt not included under bad debts / Total loans 10.2% Financial Assets Available for sale In 2013 the financial assets portfolio, mainly managed by Caixa Central in its capacity as entity responsible for SICAM cash assets, suffered a change in its composition. By virtue of Portugal s lower rating, public debt yields rocketed at all maturities, reflecting the risk perceived by investors that Portugal was unable to respond to its financial obligations. In this sense, and as part of the policy to decrease exposure to risk and portfolio diversification, Caixa Central prudently decided to: Invest in shorter maturity assets (lower risk / profitability), namely foreign government bonds (e.g. Spanish and Italian public debt) which in 2013 represented 50% of the total portfolio, as opposed to 2.3% in 2012; and Reduce exposure to Portuguese public debt which in 2012 represented 65% of the portfolio, shrinking to 19.6% in Overall, their financial assets portfolio decreased from 4,366 million euros in 2012 to 3,908 million euros in 2013 Financial assets available for sale and held to maturity Thousand euros, or % Amount % of total Amount % of total % 2013/2012 Debt instruments 3,984,691 91,3 3,360, % -15.7% Assets available for sale 1,750, % 3,360, % 92.0% Treasury bills and other Portuguese public debt 1,530, % 641, % -58.1% Bonds issued by other resident issuers 14, % 623, % % Bonds issued by foreign public issuers 99, % 1,963, % 24.2% Bonds issued by other foreign issuers 106, % 132, % 24.2% ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 125

126 Financial assets available for sale and held to maturity Thousand euros, or % Amount % of total Amount % of total % 2013/2012 Investments held to maturity 2,234,398 51,2% 127, % - Treasury bills and other Portuguese public debt 1,316, % 124, % - Bonds issued by other Portuguese public entities 32, % 0 0.0% - Bonds issued by other resident issuers 630, % 0 0.0% - Bonds issued by foreign public issuers 69, % 0 0.0% - Bonds issued by other foreign issuers 160, % 0 0.0% - Others unspecified 24, % 2, % - Equity instruments 381, % 419, % 10.1% Equity in Portuguese companies 381, % 419, % 10.1% Equity in foreign companies % % 0.0% Total 4,365, % 3,907, % -10.5% 126 Financial Analysis

127 2. Crédito Agrícola Group (Consolidated) KEY INDICATORS Thousand euros, or % /2012 Total assets 14,240,832 15,113,117 14,620, % Assets available for sale and held to maturity 4,176,580 5,168,103 4,987, % Customer loans (net) 7,913,564 7,660,153 7,471, % Customer funds 9,821,452 10,112,824 10,122, % Technical provisions insurance contracts 1,006,884 1,137,404 1,261, % Equity 1,046,739 1,100,249 1,141, % Financial margin 380, , , % Banking income 505, , , % Structural costs 330, , , % Provisions / impairments 117, , , % Net earnings 55,024 44,708-2, % Return on Equity (ROE) 5.3% 4.1% -0.3% -4.3% Return on Assets (ROE) 0.4% 0.3% 0.0% -0.3% Efficiency Ratio 65.4% 67.0% 68.2% 1.2% Core Tier 1 Solvency ratio 12.5% 11.6% 11.9% 0.3% The total consolidated assets of the Crédito Agrícola Group, which integrates SICAM as well as the group companies (ancillary and core business), investment funds, FENACAM and other smaller interests, registered a total value of million euros in 2013, corresponding to a reduction of 3,3% as compared to the 15,113 million euros obtained in The fall registered in consolidated assets was not as substantial as SICAM (-3.3% vs. 5.7%) in view of: the relative weight of net loans lower than in consolidated assets (51% vs. 58%) in contrast to higher relative and absolute weight of investments in financial assets (34% vs. 30%); and the reduction of investment in financial assets in absolute terms was significantly lower than for SICAM (-181 million euros vs million euros) because it was offset by the rise in financial investments performed by insurers due to their activity. Total consolidated liabilities fell by 3.8%, from 14,013 million euros in 2012 to 13,480 million euros in Once again, the fall was not as sharp as with SICAM (-3.8% versus -6.2%) due to the increase in technical provisions regarding insurance contracts of 1,137 million euros in 2012 to million euros in 2013, which corresponds to an increase of 10.9% ( million euros). With regard to the consolidated equity of the Crédito Agrícola Group, there was an increase of equity by 41 million euros (+3.7%) as compared to the moderate increase of SICAM by 7.5 million euros (+0.7%). ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 127

128 In terms of net earnings, in 2013 Crédito Agrícola Group presented losses to the order of 2.9 million euros, which corresponds to a drop of 47.7 million euros in relation to 2012 (-106.6%). This drop in consolidated net earnings was essentially due to: reduction of SICAM s financial margin by 21.2% consubstantiated by the breakdown in loans and the decline of average interest rates; increase of Group s impairments both in terms of non-performing loans and real estate impairments following deed in lieu of foreclosure (20.0 million euros); and consolidation of the negative impact of earnings of group companies, particularly real estate investment trusts. The requirements regarding equity necessary for covering loan portfolio risk decreased by 6.5% in relation to December 2012 due to the contraction of the Loans portfolio, especially in terms of the amount of exposure towards financial institutions and companies but also with regard to retail. Core equity decreased by roughly 44 million euros in relation to 2012, while supplementary capital decreased by approximately 3 million euros. This reduction was not completely offset by the decrease in equity requirements, for which reason the solvency ratio fell slightly from 10.9% in 2012 to 10.8% in However, there was an increase in the Core Tier 1 ratio to 11.9%, compared to the 11.6% registered in EQUITY REQUIREMENTS AND SOLVENCY RATIO Crédito Agrícola Group Million euros, or % /2012 Eligible equity 1, % Core (*) 1,054 1, % Supplementary % Of which: UPPER TIER % LOWER TIER % Deductions from equity % Weighted risks 8,121 8,625 8, % Debt 7,606 8,096 7, % Operating % Equity requirements % Debt % Operating % Solvency Ratios Core Tier % 11.6% 11.9% 0.34 p.p. Tier % 11.1% 11.4% 0.26 p.p. Tier 2 1.0% 0.6% 0.6% 0.01 p.p. Global 12.7% 10.9% 10.8% p.p. (*) Including net result from exercise 128 Financial Analysis

129 Income Statement Thousand euros, or % Abs. % Interest and similar income 609, ,891-89, % Interest and similar costs 242, ,188-29, % Financial Margin 366, ,704-59, % Technical margin insurance activities -4, , % Net commissions 101, ,569-1, % Earnings from financial operations 13,766 94,968 81, % Other operating results 15,278-6,893-22, % Banking income 493, ,000-7, % Structural costs 330, , % Payroll 190, , % General administrative costs 108, ,014 1, % Amortisations 31,667 30, % Provisions & Impairments 117, ,118 19, % Investment in associates (equity method) 1,904 1, % Earnings before tax 47,259 19,154-28, % Tax 2,446 22,012 19, % Minority interests % Net income 44,708 2,941-47, % ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 129

130 Balance on 31 st December Thousand euros, or % Abs, % Assets Cash and cash equivalents 513, ,613-46, % Investments in Banking Institutions 122,721 32,031-90, % Customer loans (net) 7,660,153 7,471, , % Securities investments (net) 5,194,821 5,041, , % Invest. in subsidiaries, Tangible and Intangible 418, ,576-7, % Deferred tax 130, ,170-3, % Other Assets 1,072,778 1,069,799-2, % Total Assets 15,113,117 14,620, , % Liabilities Funds from Central Banks and other Banks 2,148,018 1,362, , % Customer Funds 10,112,824 10,122,543 9, % Technical provisions insurance contracts 1,137,404 1,261, , % Subordinate Liabilities 128, ,404 4, % Other Liabilities 485, , , % Total Liabilities 14,012,868 13,479, , % Equity 1,100,249 1,141,019 40, % Total Equity + Liabilities 15,113,117 14,620, , % 130 Financial Analysis

131 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 131

132 06

133 Consolidated Financial Statements CRÉDITO AGRÍCOLA

134 SICAM CRÉDITO AGRÍCOLA MÚTUO INTEGRATED SYSTEM CONSOLIDATED BALANCE SHEET ON 31 DECEMBER 2013 AND 2012 (amounts in euros) ASSETS Gross Asset Provisions, impairments and amortisations Net Assets Net Assets LIABILITIES AND EQUITY Cash and cash equivalents at central banks 384,777, ,777, ,899,600 Funds at central banks 1,262,845,139 1,907,789,583 Cash at other banking institutions 78,693,130-78,693,130 79,338,159 Financial liabilities held for trading 303, ,303 Financial assets held for trading 2,071-2,071 86,697 Funds at other banking institutions 100,067, ,227,969 Other financial assets at fair value via profit & loss ,329,461 Customer funds and other loans 10,209,731,246 10,177,702,320 Financial assets available for sale 3,820,786,061 (40,348,785) 3,780,437,276 2,130,280,338 Provisions 3,402,428 7,374,919 Investments in banking institutions 31,930,695-31,930, ,978,861 Current tax liabilities 6,577,028 6,389,871 Customer loans 8,198,572,805 (706,663,350) 7,491,909,455 7,716,887,965 Deferred tax liabilities 596, ,189 Investments held to maturity 127,370, ,370,363 2,234,397,871 Equity instruments 10,648,770 30,379,140 Fixed assets held for sale 472,124,751 (71,134,427) 400,990, ,264,429 Other subordinated liabilities 133,403, ,835,246 Other tangible assets 471,187,282 (209,889,756) 261,297, ,439,936 Other liabilities 135,469, ,517,216 Intangible assets 14,638,283 (14,385,159) 253, ,457 Total liabilities 11,863,045,002 12,649,314,756 Affiliates, associates and business combinations 76,850,855 (544,348) 76,306,507 85,699,089 Current tax assets 6,778,962-6,778,962 4,611,115 Equity 926,355, ,415,840 Deferred tax assets 125,777, ,777, ,450,653 Revaluation reserves 26,422,604 12,046,064 Other assets 218,470,895 (16,077,179) 202,393, ,092,000 Other reserves and retained earnings 151,588, ,045,494 Annual profit 1,506,339 41,319,477 Total equity 1,105,873,031 1,097,826,875 Total assets 14,027,961,037 (1,059,043,004) 12,968,918,033 13,747,141,631 Total Liabilities and Equity 12,968,918,033 13,747,141,631 The Head of Accounting The Board of Directors 134 Consolidated Financial Statements

135 SICAM CRÉDITO AGRÍCOLA MÚTUO INTEGRATED SYSTEM INCOME STATEMENT FOR THE FINANCIAL YEARS ENDING ON 31 DECEMBER 2013 AND 2012 (amounts in euros) HEADING Interest and similar income 457,450, ,645,110 Interest and similar charges (206,793,894) (242,360,550) Financial margin 250,656, ,284,560 Yields from equity instruments 856,331 1,373,539 Income from services and fees 142,358, ,309,892 Charges with services and fees (10,759,774) (10,809,268) Earnings from assets and liabilities at fair value through profit & loss 240, ,484 Income from financial assets available for sale 76,271,852 2,501,917 Earnings from foreign exchange revaluation 1,411,025 1,626,141 Earnings through sale of other assets (2,478,379) (801,201) Other operating earnings 14,088,909 12,044,720 Banking revenue 472,645, ,958,784 Payroll (163,962,342) (162,681,255) General administrative expenses (123,604,305) (125,743,377) Amortization (14,789,590) (15,026,258) Provisions net of replacements and cancellations 4,782,875 73,931 Corrections in value associated to customer loans and receivables from other debtors (net of replacements and cancellations) (139,457,403) (113,304,842) Financial asset impairment, net of reversions and recoveries (15,350,102) (7,764,459) Income before tax and minority interests 20,264,352 40,512,524 Tax current (18,787,697) (16,633,669) deferred 29,684 17,440,622 Consolidated annual income 1,506,339 41,319,477 The Head of Accounting The Board of Directors ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 135

136 CRÉDITO AGRÍCOLA GROUP CONSOLIDATED BALANCE SHEET ON 31 DECEMBER 2013 AND (amounts in euros) ASSETS Notes Gross Asset Provisions, impairments and amortisations Net assets Net assets LIABILITIES AND EQUITY Notes Cash and cash equivalents at central banks 6 384,781, ,781, ,907,221 Funds at central banks 21 1,262,845,139 1,907,789,583 Cash at other banking institutions 7 81,831,513-81,831,513 79,544,798 Financial liabilities held for trading ,933 1,309,351 Financial assets held for trading 8 23,531,359-23,531,359 18,388,931 Funds at other banking institutions ,067, ,227,969 Other financial assets at fair value via profit & loss 9 30,785,624-30,785,624 8,328,617 Customer funds and other loans 22 10,122,542,896 10,112,824,370 Financial assets available for sale 10 4,991,957,713 (4,876,962) 4,987,080,751 2,407,551,927 Provisions 23 4,125,557 7,572,648 Investments in banking institutions 11 32,030,820-32,030, ,720,945 Technical provisions insurance contracts 19 1,261,656,635 1,137,403,788 Customer loans 13 8,136,142,185 (664,152,719) 7,471,989,466 7,660,152,604 Current tax liabilities 18 9,957,674 9,970,122 Investments held to maturity ,760,551,345 Deferred tax liabilities 18 14,091,857 2,695,427 Other tangible assets ,902,464 (270,285,973) 280,616, ,682,603 Equity instruments 24 10,648,770 30,379,140 Intangible assets ,645,480 (159,874,860) 60,770,620 56,761,178 Other subordinated liabilities ,403, ,835,246 Affiliates, associates and business combinations 17 70,189,354-70,189,354 79,372,975 Other liabilities ,703, ,860,436 Current tax assets 18 11,031,905-11,031,905 6,988,406 Total liabilities 13,479,557,759 14,012,868,080 Deferred tax assets ,170, ,170, ,375,611 Other assets 20 1,206,255,550 (147,488,460) 1,058,767,090 1,065,789,771 Equity ,355, ,415,840 Revaluation reserves 29 51,088,525 1,242,634 Other reserves and retained earnings ,245, ,665,510 Annual profit 30 (2,941,419) 44,708,142 1,139,748,524 1,099,032,126 Minority interests 31 1,269,986 1,216,726 Total Equity 1,141,018,510 1,100,248,852 Total assets 15,867,255,243 (147,488,460) 14,620,576,269 15,113,116,932 Total Liabilities and Equity 14,620,576,269 15,113,116,932 The Head of Accounting The Board of Directors 136 Consolidated Financial Statements

137 CRÉDITO AGRÍCOLA GROUP INCOME STATEMENT FOR THE FINANCIAL YEARS ENDING ON 31 DECEMBER 2013 AND 2012 (amounts in euros) HEADING Notes Interest and similar income ,891, ,294,811 Interest and similar charges 33 (213,187,521) (242,712,008) Financial margin 306,703, ,582,803 Technical margin from insurance operations 42 (9,347,971) (4,386,125) Yields from equity instruments 34 1,555,675 1,948,455 Income from services and fees ,623, ,365,783 Charges with services and fees 36 (23,054,294) (22,438,373) Earnings from assets and liabilities at fair value through profit & loss 37 (533,643) 957,839 Income from financial assets available for sale 38 93,412,329 11,817,429 Earnings from foreign exchange revaluation 39 1,411,044 1,626,127 Earnings through sale of other assets 40 (11,901,729) (876,789) Other operating earnings 41 4,131,300 13,570,860 Banking revenue 486,000, ,168,009 Payroll 43 (190,647,712) (190,360,113) General administrative expenses ,013,798) (108,621,711) Amortization (30,974,908) (31,667,427) Provisions net of replacements and cancellations 23 4,257, ,931 Corrections in value associated to customer loans and receivables from other debtors (net of replacements and cancellations) 23 (106,385,128) (99,040,992) Financial asset impairment, net of reversions and recoveries 23 (34,990,065) (18,225,983) Negative consolidations adjustments Interests in associated companies and joint ventures (equity method) 30 1,908,392 1,903,698 Income before tax and minority interests 19,154,413 47,259,412 Tax current 18 (22,605,452) (19,733,515) deferred ,975 17,287,071 Income after tax and minority interests (2,858,064) 44,812,968 Minority interests (83,355) (104,826) Consolidated annual income (2,941,419) 44,708,142 The Head of Accounting The Board of Directors ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 137

138 CRÉDITO AGRÍCOLA GROUP CONSOLIDATED CASH FLOW STATEMENT FOR THE FINANCIAL YEARS ENDING ON 31 DECEMBER 2013 AND 2012 (amounts in euros) OPERATING ACTIVITIES Operating cash flow prior to variations in assets and liabilities Interest, fees and other similar income received 643,514, ,660,594 Interest, fees and other similar costs paid (236,241,815) (265,150,381) Payments to Employees and Suppliers (298,439,898) (296,760,212) Payments and contributions to pension funds (2,221,612) (2,221,612) Income tax (payments) / receipts (25,968,013) (27,927,678) Other (payments) / receipts regarding operational activities 19,539,069 47,917, ,182, ,518,140 (Increase) decrease in operating assets: Customer Loans (81,697,563) (154,370,621) Financial assets held for trading and other assets at fair value according to profit & loss 28,133,078 (1,069,727) Financial assets available for sale 2,445,651,846 1,594,085,850 Investments in banking institutions (90,690,125) (181,303,898) Investments held to maturity (2,760,551,345) (590,739,744) Other assets 38,710, ,813,738 (420,443,991) 813,415,598 (Increase) decrease in operating liabilities: Funds from other banking institutions and central banks (785,105,360) 242,901,058 Customer funds and other loans 9,718, ,372,545 Financial liabilities held for trading and hedge derivatives (794,418) (406,975) Other liabilities 226,084, ,354,619 (550,096,513) 823,221,247 Cash flow resulting from operating activities (29,469,849) 199,323,789 INVESTMENT ACTIVITIES Dividends (1,555,675) (1,948,455) Acquisition of subsidiaries and associated, net of sales (9,183,621) 9,534,612 Acquisition of tangible and intangible assets, investment properties, fee of sales 33,150,391 26,740,002 Cash flow resulting from investment activities 22,411,095 34,326,159 FINANCING ACTIVITIES Issue of subordinate liabilities, net of reimbursement 4,568,268 3,829,718 Minority interests 53, ,463 Capital increase (decrease) 420,130 1,502,639 Cash flow resulting from financing activities 5,041,658 5,509,820 (Increase) decrease in cash and cash equivalents: (46,839,286) 170,507,450 Cash and cash equivalents, start of period 513,452, ,944,569 Cash and cash equivalents, end of period 466,612, ,452,019 Cash and cash equivalents, end of period includes: Cash and cash equivalents in central banks 384,781, ,907,221 Cash equivalents in other banking institutions 81,831,513 79,544, ,612, ,452,019 The Head of Accounting The Board of Directors 138 Consolidated Financial Statements

139 CRÉDITO AGRÍCOLA GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEARS ENDING ON 31 DECEMBER 2013 AND 2012 (amounts in euros) Equity Revaluation reserves Other reserves and retained earnings Consolidated annual Other reserves Retained earnings Total earnings Sub-total Minority interests Total Balances on 31 December ,605,506 (12,634,414) 290,505,735 (154,800,742) 135,704,993 55,117,357 1,045,793, ,808 1,046,739,250 Application of 2011 results: Transfer to reserves and retained earnings ,862,005 4,161,897 55,023,902 (55,117,357) (93,455) - (93,455) Distribution of dividends to members - - (7,634,844) - (7,634,844) - (7,634,844) - (7,634,844) Capital increase via incorporation of reserves 35,307,695 - (35,307,695) - (35,307,695) Capital increase via new members 7,634, ,634,844-7,634,844 Capital reduction via refund to members (6,132,205) (6,132,205) - (6,132,205) Acquisition of minority interests , ,744 Other equity variations - (4,871,790) - 879, ,154 - (3,992,636) - (3,992,636) Net earnings ,708,142 44,708,142 (104,826) 44,603,316 Consolidated income for 2012 financial year - 13,576, ,576,974-13,576,974 Balances on 31 December ,415,840 (3,929,230) 298,425,201 (149,759,691) 148,665,510 44,708,142 1,093,860,262 1,216,726 1,095,076,988 Impact of accounting policy change (IAS 19 Revised) 5,171,864 5,171,864-5,171,864 Balances on 1 January ,415,840 1,242, ,425,201 (149,759,691) 148,665,510 44,708,142 1,099,032,126 1,216,726 1,100,248,852 Application of 2012 results: Transfer to reserves and retained earnings ,113,677 5,594,465 44,708,142 (44,708,142) Distribution of dividends to members - - (6,470,605) - (6,470,605) - (6,470,605) - (6,470,605) Capital increase via incorporation of reserves 21,519,659 - (21,519,659) - (21,519,659) Capital increase via new members 8,499, ,499,460-8,499,460 Capital reduction via refund to members (8,079,330) (8,079,330) - (8,079,330) Acquisition of minority interests , ,615 Other equity variations (137,599) (137,599) - (137,599) - (137,599) Net earnings (2,941,419) (2,941,419) (83,355) (3,024,774) Consolidated income for 2013 financial year - 49,845, ,845,891-49,845,891 Balances on 31 December ,355,629 51,088, ,548,614 (144,302,825) 165,245,789 (2,941,419) 1,139,748,524 1,269,986 1,141,018,510 The Head of Accounting The Board of Directors ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 139

140 CRÉDITO AGRÍCOLA GROUP CONSOLIDATED COMPREHENSIVE INCOME STATEMENT FOR THE FINANCIAL YEARS ENDING ON 31 DECEMBER 2013 AND 2012 (amounts in euros) Consolidated annual income (2,941,419) 44,708,142 Revaluation of financial assets available for sale 63,259,146 18,110,493 Variation of fixed assets revaluation reserve - 48,470 Transfer to earnings via sale (223,039) 269,026 Physical impact: 63,036,107 18,427,989 Revaluation of financial assets available for sale (14,501,573) (4,851,014) Recognition of comprehensive income within the scope of IAS 19 Revised 1,311,357 - Income not recognised in the income statement 49,845,891 13,576,975 Consolidated annual income 46,904,472 58,285,117 The Head of Accounting The Board of Directors 140 Consolidated Financial Statements

141 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Introduction A joint liability system was formed by virtue of the Crédito Agrícola Mútuo Integrated System (Sistema Integrado do Crédito Agrícola Mútuo SICAM), created in 1991, which comprises Caixa Central and Associated Caixas. The different Caixas are not required to associate with Caixa Central and may operate outside SICAM, although the rules for doing so are far more demanding and similar to those applicable to other banking institutions. The consolidated financial statements reflect the situation of the Sistema Integrado do Crédito Agrícola Mútuo (SICAM) that includes Caixa Central and Associated Caixas de Crédito Agrícola Mútuo which, together with the respective subsidiaries and associated companies, form the Crédito Agrícola Mútuo Financial Group (or simply Crédito Agrícola Group GCA ). They are prepared according to the applicable legal provisions and regulations specified in Article no. 74 of the Crédito Agrícola Mútuo Legal Regimen, Decree-Law no. 36/92 and the instructions set forth in Article no. 7 of that legislation. The Crédito Agrícola Group is a nationwide financial group with a vast number of local banks (Caixas Agrícolas) and by specialist companies, with Caixa Central de Crédito Agrícola Mútuo providing the central organisation. This banking institution also possesses supervisory powers, establishing guidelines and monitoring the activities of the associated Caixas and Fenacam, the cooperative representative that provides specialist services for the Group. The attached financial statements refer to the consolidated activity of the Crédito Agrícola Group, which were prepared in compliance with the requirements for presentation established by Banco de Portugal. The Caixa Central Executive Board approved the financial statements reported to 31 December 2013 and authorised their issue on 10 April The financial statements will be submitted to approval by the Annual General Meeting to be held on the 31st May The main change regarding the group structure that occurred during 2013 arose, due to the demerger process of the Real Estate Investment Trust (REIT) CA Imobiliário, resulting in the creation of the REIT Carteira Imobiliário, also integrated and consolidated according to the full consolidation method. The REIT Imovalor CA was created in 2013 and was also fully consolidated in the financial statements of the Crédito Agrícola Group. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 141

142 In addition to the situations described above, the main change within the scope of Consolidation resulted from the Venture Capital Fund Portugal Ventures Global 2 (previously designated as FCR InovCapital Global 2), which was consolidated according to the equity method and that due to changes in its shareholder structure is no longer included in the consolidation. For the purposes of the consolidation of financial statements, this entity is no longer considered an associate. The only changes that occurred within the scope of SICAM arose from mergers between Associated Caixas Agrícolas. In 2013, Oliveira de Azeméis CCAM merged with Estarreja CCAM, which together formed CCAM Oliveira de Azeméis e Estarreja, C.R.L. The consolidated financial statements integrate the statements of the 83 Caixas de Crédito Agrícola Mútuo associated on 31 December The Crédito Agrícola Group holds interests in subsidiaries and associated companies, both directly and indirectly. Companies regarding which the shareholding surpasses 50% of the total share capital and companies in which Caixa Central effectively controls the management are considered subsidiaries. Associated companies are those where the interest held is between 20% and 50% of the share capital or regarding which SICAM directly or indirectly holds a significant influence on the management and financial policies. 2. Bases for Presentation, Consolidation Principles and Main Accounting Policies 2.1. Bases for Presentation The GCA consolidated financial statements were prepared in conformity with the basis of going concern, based on the accounting books and records set out in accordance with the principles detailed in the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS), as adopted by the European Union under EC Regulation no. 1606/2002 of the European Parliament and the Council, of 19 July. These were transposed into domestic legislation by Decree-Law no. 35/2005, of 17 February and Banco de Portugal Notice no. 1/2005, of 21 February and according to the specific rules for consolidation of financial statements mentioned in article no. 74 of the Crédito Agrícola Mútuo Legal Regimen, Decree-Law no. 36/92, of 28 March and Instruction no. 71/96 issued by Banco de Portugal. With regard to Group companies that apply different accounting standards, these are adjusted and converted into IAS/IFRS. 142 Notes to the Consolidated Financial Statements

143 There was no materially relevant effect on the consolidated financial statements of the Group as at 31 December 2013 arising from the adoption of the new standards, interpretations, amendments or revisions. Amounts are in euros (unless otherwise expressly indicated) rounded to the nearest euro. The GCA consolidated financial statements were prepared in accordance with the historical cost principle, except with regard to assets and liabilities recorded at fair value, in particular derivative financial instruments, financial assets and liabilities recorded at fair value through earnings and financial assets available for sale. Except in as far as concerns matters regulated by Banco de Portugal, such as that referred to above, in 2013, the members of the Crédito Agrícola Group applied the Standards and Interpretations issued by the International Accounting Standards Board (IASB) and by the International Financial Reporting Interpretations Committee (IFRIC) that are relevant for its operations and effectively applicable for periods starting as of 1 January 2013, as long as these are approved by the European Union. Summary of new provisions regarding the issue, revision, amendment and improvements of standards and interpretations that have already been issued. Standards and interpretations recently issued by IASB, of relevance in the Group s activity, with mandatory application only for periods starting after 1 January 2013 and which the Group did not adopt beforehand are the following: a) Already endorsed by the European Union: APPLICABLE TO 2013 IFRS 1 First-time Adoption of International Financial Reporting Standards hyperinflationary economies (Amendment) When the date of transition to IFRS is on, or after, the date that the functional currency ceases to be subject to a hyperinflationary economy, the entity may measure all assets and liabilities held before the functional currency normalisation date at fair value on the date of transition to IFRS and use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. The amendment also replaces the fixed dates in IFRS 1 regarding the derecognition of financial assets and liabilities and profit and loss in transactions at initial recognition, the new date is deemed the date of transition to IFRS. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 143

144 IFRS 1 First-time Adoption of International Financial Reporting Standards (Amendment) and IFRS 9 and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance The amendment adds an exception to the retrospective application of IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. The amendment requires entities applying IFRS 1 to prospectively apply the requirements of IAS 20 with regard to Government grants existing on the date of transition to IFRS. However, entities may choose to apply the requirements of IFRS 9 (or IAS 39, if applicable) and IAS 20 to government loans retrospectively if all the information needed to do so was available at the time the loan was initially reported. These amendments give first-time adopters relief from retroactively measuring government loans at a below-market rate of interest. As a result, by not applying IFRS 9 (or IAS 39) and IAS 20 retrospectively, first-time adopters are not required to recognise the corresponding benefit of a government loan at a below-market rate of interest as a grant. IFRS 7 Offsetting financial assets and financial liabilities (Amendment) This amendment requires that entities disclose information on set-off rights and related agreements (for example collateral guarantees). These disclosures provide useful information for an assessment of the net effect that these agreements may have on the statement of financial position of each entity. The new disclosures are mandatory for all financial instruments that may be offset in the established in IAS 32 Financial Instruments: Presentation. The new disclosures are also applicable to financial instruments that are subject to offsetting or similar agreements notwithstanding whether they may be offset in accordance with IAS 32. The amendment is to be applied retrospectively. IFRS 13 Fair value measurement (Issue) IFRS 13 establishes a single source for guidelines as to the measurement of fair value according to IFRS. IFRS 13 does not affect when fair value is used, but provides guidelines on how to measure fair value where fair value is required or permitted. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard is to be applied prospectively. 144 Notes to the Consolidated Financial Statements

145 IAS 1 (Amendment) Presentation of financial statements The amendment to IAS 1 changes the aggregation of items presented in the Integral statement of income. Items that may be reclassified (or recycled ) for future profits or losses (for example on the date of derecognition or settlement) must be presented separately from items that will not be reclassified through profit or loss (for example revaluation reserves as set out in IAS 16 and IAS 38). This amendment does not affect the nature of the items that must be recognised in other comprehensive income, nor whether they may be reclassified through profit or loss in future periods. The amendment is to be applied retrospectively. IAS 12 Income Tax The amendment to IAS 12 clarifies that deferred tax regarding investment properties measured at fair value, under the provisions of IAS 40, should be measured taking into account its recovery through future sale. This principle can in fact be modified if the entity has a business model that shows tax recovery through own use of the investment property. The amendment also states that deferred tax on non-depreciable fixed assets are to be measured in accordance with the revaluation model calculated on the assumption of recovery through future sale. IAS 19 Employee benefits (Revised) IAS 19 Employee benefits (Revised), the main changes being: elimination of the option of deferring recognition of actuarial gains and losses, known as the corridor approach ; actuarial gains and losses are recognised in other comprehensive income when they occur. The figures recognised in profits and losses are limited to: current costs and for past services (which include gains and losses in cuts), gains and losses in settlement and costs (income) relating to net interest. All the other changes to the net value of assets (liabilities) in the benefit plan must be recognised in other comprehensive income, without any subsequent reclassification for profits or loss. objectives for disclosures relating to defined benefit plans are explicitly stated in the revised standard, along with new disclosures or revised disclosures requirements. The new disclosures include quantitative data relating to sensitivity of the defined benefits to possible changes in any of the main actuarial assumptions. Termination benefits must be recognised at the earlier of: (i) when offer of termination cannot be withdrawn or (ii) when provisions for restructuring costs are recognised under IAS 37. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 145

146 the distinction between short and long-term benefits will be based on the expected timing of settlement regardless of the employee s entitlement to benefits. The revised standard is to be applied retrospectively.. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine This Interpretation applies to waste removal incurred in surface mining activity during the production phase. If the benefit from the stripping activity is realised in the current period, an entity is required to account for the waste separation and removal costs as part of the cost of inventory. When the benefit is the improved access to ore, the entity should recognise these costs as a non-current asset, only if certain recognition criteria are met. The waste separation and removal assets are to be accounted for as an addition to or an enhancement of an existing asset. If the costs of the stripping activity cannot be recognised as an asset and the inventory produced is not separately identifiable, the entity shall allocate the respective costs between both assets using an allocation method based on a relevant production measure. After initial measurement, the asset created via waste separation and removal activity is registered at cost value or revalued amount, less amortisation and impairment, applying the same criteria for valuation of the assets this component in a part of. This IFRIC does not require full retrospective application. Annual improvements in relation to the cycle Regarding the Annual improvements in relation to the cycle, IASB issued six amendments for five standards, summarized as follows: IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards This amendment: Clarifies that an entity that has stopped applying IFRS may choose to either: (i) reapply IFRS 1, even if it has done so on a previous occasion; or (ii) apply it retrospectively in conformity with IAS 8, as if it had never stopped applying IFRS. If an entity reapplies IFRS 1 or applies IAS 8, it shall disclose the reasons why it stopped applying IFRS and subsequently resumed its application. 146 Notes to the Consolidated Financial Statements

147 Clarifies that, upon adoption of IFRS, an entity that capitalised borrowing costs in accordance with its previous accounting framework, may carry forward, without adjustment, the amount previously capitalised in the Statement of financial position at the date of transition. IAS 1 (Amendment) Presentation of financial statements This clarifies the difference between additional comparative information and minimum comparative information. In general, minimum comparative information required corresponds to the previous comparable period. An entity must include comparative information in the notes to the financial statements when it voluntarily discloses information over and beyond the minimum information required. The additional information relating to the comparable period does not have to include a complete set of financial statements. Additionally, the opening statement of financial position (third balance sheet) must be presented in the following circumstances: i) when an entity uses changes an accounting policy or sets out a retrospective restructuring of the items on the financial statements; or ii) when it reclassifies items on the financial statements and these changes are materially relevant for the statement of financial position. The opening balance must be the opening balance of the comparable period. However, unlike voluntary comparable information, notes are not required to accompany the third balance sheet. IAS 16 Tangible fixed assets Clarifies that spare parts and service equipment that complies with the definition of tangible fixed assets should be classified as such and not as inventories. IAS 32 Financial instruments This clarifies that income tax on resulting from payouts to shareholders should be registered in accordance with IAS 12 Income taxes. IAS 34 Interim financial reporting Clarifies the requirements of IAS 34 relating to segment information for total assets and liabilities for each reported segment, in this way enhancing the consistency with IFRS 8 Operating segments. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 147

148 This amendment states that the total assets and liabilities for each of the reporting segments only need to be disclosed when they are regularly supplied as internal management reports. Improvements are to be applied retrospectively. Effective in 2013 only if adopted early and as long as the early adoption is disclosed and the remaining applicable requirements are met: IFRS 10 Consolidated financial statements IASB issued IFRS 10 Consolidated financial statements, which replaces the consolidation requirements established in SIC 12 Consolidation Special purpose entities and IAS 27 Consolidated and separate financial statements. This IFRS establishes a new definition for control applicable to all special purpose entities and vehicles. The changes introduced by IFRS 10 will require comprehensive understanding by Management in order to determine which entities are controlled and should therefore be included in the Consolidated financial statements of the parent company. This standard, according to its endorsement (EU Regulation no. 1254/2012, of 11th December), is applicable to years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity simultaneously applies IFRS 11, IFRS 12, IAS 27 (revised in 2011) and IAS 28 (revised in 2011). IFRS 11 Joint arrangements IFRS 11: Replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Non-monetary Contributions by Venturers. Alters the concept of joint control and does not allow accounting a jointly controlled entity using proportionate consolidation, in that the interest in these entities is accounted using the equity method. Also defines joint operations (combining the existing concepts of jointly controlled assets and operations) redefining the concept of proportional consolidation for these operations, for which reason each entity shall register the complete or relative share they possess in assets, liabilities revenue and expenses. This standard, according to its endorsement (EU Regulation no. 1254/2012, of 11th December), is applicable to years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity simultaneously applies IFRS 10, IFRS 12, IAS 27 (revised in 2011) and IAS 28 (revised in 2011). 148 Notes to the Consolidated Financial Statements

149 IFRS 12 Disclosure of interests in other entities IFRS 12 Disclosure of interests in other entities sets out the minimum level of disclosures relating to subsidiaries, joint arrangements, associated entities and other non-consolidated entities. This standard includes, therefore, all the disclosures that were mandatory in IAS 27 Consolidated and separate financial statements referring to consolidated accounts, as well as disclosures included in IAS 31 Interests in joint ventures and in IAS 28 Investments in associates, as well as new information. This standard, according to its endorsement (EU Regulation no. 1254/2012, of 11th December), is applicable to years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity simultaneously applies IFRS 10, IFRS 11, IAS 27 (revised in 2011) and IAS 28 (revised in 2011). IFRS 10, IFRS 11 and IFRS 12 (Amendments) Transition guidelines These amendments allow less demanding procedures in transition to IFRS 10, IFRS 11 and IFRS 12, for example the required restatement of comparatives is limited to the immediately preceding annual period. This standard, according to its endorsement (EU Regulation no. 313/2013, of 4th April), amendments are applicable to years starting on or after 1 January It can be introduced early as long as the entity simultaneously applies IFRS 10, IFRS 11 and IFRS 12. IFRS 10, IFRS 12 and IAS 27 (Amendments) Investment Entities Investment entities that include Venture capital Funds must meet three elements of the definition and consider four typical characteristics, in order to qualify as an investment entity subject to the new provisions. For this purpose, all facts and circumstances, including its purpose and design, must be considered. These entities are exempt for consolidating subsidiaries, joint ventures and associates, which shall be accounted for at fair value through profit or loss in accordance with IFRS 9 (or IAS 39 as applicable), except for those that provide services exclusively to the investment entity, which must be consolidated (investments in subsidiaries) or accounted for using the equity method (investments in associates or joint ventures). Investments in another controlled investment entity must be measured at fair value. A non-investment parent entity of an investment entity is not permitted to retain the fair value accounting that the investment entity subsidiary applies to its controlled entities. Venture capital organisations, mutual funds, unit trusts and others that do not qualify as investment entities under the terms herein may choose to measure investments in associates and joint ventures at fair value through profit or loss according to IAS 28. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 149

150 According to the endorsement (EU Regulation no. 1174/2013, of 20th November), amendments are applicable to years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity applies all amendments simultaneously. IAS 27 (revised in 2011) Consolidated and individual financial statements With the introduction of IFRS 10 and IFRS 12, IAS 27 is limited to stipulating the accounting treatment for subsidiaries, jointly controlled entities and associates in separate financial statements. According to the endorsement, amendments to IAS 27 are applicable for years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity simultaneously applies IFRS 10, IFRS 11 IFRS 12 and IAS 28 (revised in 2011). IAS 28 Investments in associates and joint ventures With the changes to IFRS 11 and IFRS 12, IAS 28 was renamed and now sets out the application of the equity method for joint ventures in the same way as already happens with associates. According to the endorsement, amendments to IAS 28 are applicable for years starting on or after 1 January Application is retrospective and can be introduced early as long as the entity simultaneously applies IFRS 10, IFRS 11 IFRS 12 and IAS 27 (revised in 2011). IAS 32 Financial instruments (Offsetting financial assets and liabilities) The amendment clarifies the meaning of currently has a legal enforceable right of set-off and the application of IAS 32 to the criteria for setting-off in such systems (such as centralized systems of settlement and clearing) which apply gross settlement mechanisms and are not simultaneous. Paragraph 2 a) of IAS 32 requires that a financial asset and a financial liability should be offset and the net amount reported on the balance sheet when, and only when, an entity has a legally enforceable right to set off the amounts. This amendment clarifies that offsetting rights must be legally enforceable in the normal course of business, in the event of default and the event of insolvency or bankruptcy, of the entity and all of the counterparties, including the reporting entity. It also clarifies that the right of set-off must not be contingent on a future event. The criteria defined in IAS 32 for offsetting financial instruments require that the reporting entity intends to make a gross settlement or realize the asset and settle the liability at the same time. The amendment clarifies that the 150 Notes to the Consolidated Financial Statements

151 settlement mechanisms at gross value that eliminate or result in insignificant credit and liquidity risks through accounts receivable and payable is the only way to make the settlement and can be, in fact, equivalent to settlement for the net value, thus complying with the net settlement criteria. This standard is applicable for the year starting on or after 1 January The amendment to IFRS 7 must be applicable retrospectively in accordance with IAS 8. Early application is permitted if there is disclosure of this procedure, complying with the disclosures set out in IFRS 7 Disclosures (Amendment) Offsetting financial assets and financial liabilities. IAS 36 Impairment of assets (Amendment): Recoverable Amount Disclosures for Non-Financial Assets According to this amendment, the disclosure of recoverable amounts for cash-generating units that include goodwill or intangible assets with indefinite service life, if no impairment losses have been recognised, is no longer required, in order to avoid the unintended consequence of this standard, which required the disclosure of sensitive business information. It is necessary to disclose: (i) additional information about the fair value measurement of impaired assets when the recoverable amount is based on fair value less costs of disposal and (ii) information about the discount rates that have been used when the recoverable amount is based on fair value less costs of disposal using a present value technique. According to the endorsement (EU Regulation no. 1374/2013, of 19th December), amendments are applicable to years starting on or after 1 January Application is retrospective. IAS 39 Financial Instruments (Amendment): Novation of Derivatives and continuation of Hedge Accounting The amendments provide an exception to the requirement to discontinue hedge accounting in certain circumstances in which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. The amendments cover novations: that arise as a consequence of the applicability or amendment of laws or regulations; where the parties to the hedging instrument agree that one or more clearing counterparties replace the original counterparty to become the new counterparty to each of the parties; that did not result in changes to the terms of the original derivative other than changes directly attributable to the change in counterparty to achieve clearing. All of the above criteria must be met to continue hedge accounting under this exception. The amendments cover novations to central counterparties, as well as to intermediaries such as clearing members, or clients of the latter that are themselves intermediaries. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 151

152 For novations that do not meet the criteria for the exception, entities have to assess the changes to the hedging instrument against derecognition criteria for financial instruments and the general conditions for continuation of hedge accounting. According to the endorsement (EU Regulation no. 1375/2013, of 19th December), amendments are applicable to years starting on or after 1 January Application is retrospective and can be applied early as long as disclosed. However, entities that have discontinued hedging accounting in the past, because of a novation that would be in the scope of this amendment, may not reinstate that previous hedging accounting. NOT APPLICABLE TO 2013: a) Not yet endorsed by the EU: IFRS 9 Financial instruments (Introduces new requirements for classification and measurements of financial assets and liabilities) The first phase of IFRS 9 Financial instruments covers the classification and measurement of financial assets and liabilities. IASB continues to work on and discuss the themes of impairment and cover accounting with a view to the revision and total replacement of IAS 39. IFRS 9 applies to all financial instruments that come within the scope of IAS 39. The main changes are as follows: Financial Assets: All financial assets are measured at initial recognition at fair value. Debt instruments can subsequently be measured at amortized cost if: the option for fair value is not applied; the aim to hold the asset, in line with the business model, is to receive the contracted cash flows; and according to contract, the financial assets will generate, at specified dates, cash flows that only cover the payment of capital and interest relating to the capital that is in debt. All other debt instruments are recognised subsequently at fair value. All financial instruments using equity are measured at fair value through (i) the Statement of comprehensive income or (ii) Profit and loss (financial instruments using equity held for trading should be measured at fair value with the related variations always recognized through profit and loss). 152 Notes to the Consolidated Financial Statements

153 Financial liabilities: The differences in fair value for financial liabilities from fair value through profit and loss resulting from changes in the entity s credit risk must be presented in the other comprehensive income integral financial statements. All other changes must be recorded in profit and loss unless the differences in fair value resulting from the credit risk of the financial liability might create or increase a significant overshoot in the results for the period. All the other rules for classifying and measuring existing financial liabilities in IAS 39 are unchanged in IFRS 9, including the rules for separating embedded derivatives and the criterion to be recognised at fair value through profit and loss. This standard is applicable to years starting on or after 1 January Early application is possible as long as duly disclosed. The provisions regarding financial liabilities can also be applied early as long as this occurs simultaneously with the provisions regarding financial assets. IAS 19 R Defined Benefit Plans (Amendment): Employee contributions This amendment applies to contributions from employees or third parties when accounting for defined benefit plans. Accounting contributions that are independent of the number of year s service are simplified, for example contributions that are a fixed percentage of the employee s salary, a fixed amount of contributions throughout the service period, or contributions that depend on the employee s age. The contributions may be recognised as a reduction in service cost during the period when the service is rendered. The amendments are applicable to years starting on or after 1 July Application is retrospective and may be performed early as long as disclosed. Annual improvements regarding the cycle Regarding the Annual improvements in relation to the cycle, IASB issued eight amendments for seven standards, summarized as follows: IFRS 2 Share-based Payment Updates definitions, clarify what are vesting conditions and situations related to issues raised regarding service conditions, market conditions and performance conditions. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 153

154 IFRS 3 Business Combinations Introduces changes to recognition of adjustments to fair value for contingent consideration that is not classified as equity. These changes are only recognised in the financial statements. IFRS 8 Operating Segments Requires additional disclosures (description and economic indicators) that determined the aggregation of segments. Reconciliation of the total of the reportable segment assets to the entity s total assets is only required to be disclosed if it is reported to the manager in charge, in the same manner as disclosure is required for segment liabilities. IFRS 13 Fair Value Measurement Clarifies that receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. In this way, when amendments were made to IAS 9 and IAS 39 this was not related to changes in measurements but rather to the fact that the specific situation was immaterial and, therefore, did not require accounting in the manner established in IAS 8. IAS 16 Tangible Fixed Assets In the event of revaluation, the entity may choose to adjust the gross amount to market value or adjust the gross amount proportionately to the resulting carrying amount, through in either case, accumulated amortisation is eliminated from the gross value of the asset. These amendments only apply to revaluation performed on the year that the amendment is applied for the first time and with regard to the preceding year. Reinstatement can be performed for all preceding years but is not required. However, in this case, the criteria applied to those years must be disclosed. IAS 24 Related Party Disclosures Clarifies the definition of key management personnel and adjusts the associated disclosure requirements. 154 Notes to the Consolidated Financial Statements

155 IAS 38 Intangible Assets In the event of revaluation, the entity may choose to adjust the gross amount to market value or adjust the gross amount proportionately to the resulting carrying amount, through in either case, accumulated amortisation is eliminated from the gross value of the asset. These amendments only apply to revaluation performed on the year that the amendment is applied for the first time and with regard to the preceding year. Reinstatement can be performed for all preceding years but is not required. However, in this case, the criteria applied to those years must be disclosed amendments are applicable to the years starting on or after 1 July Application is generally prospective and may be performed early as long as disclosed. Annual improvements regarding the cycle Regarding the Annual improvements in relation to the cycle, IASB issued four amendments in four standards, summarized as follows: IFRS 1 First-time Adoption of International Financial Reporting Standards Meaning of effective IFRS. IFRS 3 Business Combinations Updates the exception of the Joint Arrangements standard, clarifying that the only exclusion refers to accounting the creation of a joint arrangement in the financial statements of the joint Arrangement. IFRS 13 Fair Value Measurement Updates paragraph 52 in the sense that the portfolio exception also includes other contracts that are in the scope or accounted according to IAS 39 or IFRS 9 regardless of whether they meet the definition of financial assets or financial liabilities in IAS 32. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 155

156 IAS 40 Investment Property Clarifies the interrelationship of IFRS 3 and IAS 40 when classifying the acquisition of investment property or owneroccupied property amendments are applicable to the years starting on or after 1 July Application is generally prospective and may be performed early as long as disclosed. IFRIC 21 Levies (issue) The interpretation is applicable to all levies by government entities that are not within the scope of other standards (e.g. IAS 12), and fines or other penalties for breaches of legislation. The interpretation clarifies that: (i) a levy is recognised as a liability when the activity that triggers payment, as identified by the relevant legislation, occurs; (ii) a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation; and (iii) if the payment is triggered upon reaching a minimum threshold, then no liability should be recognised before the specified minimum threshold is reached. The interpretation does not address the accounting for the debit side of the transaction, for which reason that established in other standards should be used to determine whether an asset or an expense should be recognised. Amendments are applicable to the years starting on or after 1 January Application is retrospective and may be performed early as long as disclosed. On 10th April 2014, the Caixa Central Executive Board approved the financial statements reported to 31st December 2013 and authorised their issue. The financial statements will be submitted to approval by the Annual General Meeting to be held on 31st May Notes to the Consolidated Financial Statements

157 2.2. Principles for consolidation and registration of associated companies The consolidation of the financial statements of the Crédito Agrícola Group complies with the requirements established in the following legislation: Article no. 74 of the Regime Jurídico de Crédito Agrícola Mútuo e das Cooperativas de Crédito Agrícola (Decree-Law no. 24/91, of 11 January, with the wording introduced by Decree-Law 142/2009 of 16 June); Decree-Law no. 36/92, of 28 March; Notice no. 1/2005 issued by Banco de Portugal. a) Affiliates or subsidiaries The consolidated financial statements include the accounts of the Caixa Central de Crédito Agrícola Mútuo, C.R.L. (Caixa Central) and the associated Caixas, as well as the affiliated and associated companies controlled directly or indirectly by Caixa Central (Note 4). Affiliates or subsidiaries are companies with regard to which GCA has effective control over current management for the purposes of obtaining economic benefits from its activities. Usually, control corresponds to holding over 50% of the share capital or voting rights. The accounts of affiliated companies were prepared according to the full consolidation method, from the time when Caixa Central controls their operations until such time as control ceases. Transactions and significant balances between consolidated companies were excluded. In addition, where applicable, consolidation adjustments were made in order to ensure consistency within the Group s accounting principles. Acquisition of affiliates is recorded according to the purchase method. The cost of acquisition is made up of the aggregate market value of the assets given and liabilities incurred or assumed in exchange for control, plus the costs directly involved in the operation. On the purchase date, the assets, liabilities and contingent liabilities that meet the recognition requirements of IFRS 3 ( Business combinations ) are recognised for their respective fair value. Until 1 January 2006 the accounting policies set out by Banco de Portugal permitted goodwill to be entirely offset against reserves on the year the interest was acquired. The Crédito Agrícola Group, in accordance with IFRS 1, has made no change to this record, for which reason the goodwill generated by operations prior to 1 January 2006 is recorded under reserves. The value of third party interests in affiliates is recorded in Minority interests under equity. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 157

158 Consolidated profit corresponds to the net earnings of SICAM plus those of affiliates, in proportion to the respective interest effectively held, after consolidation adjustments, such as removing dividends received and capital gains and losses generated through transactions between consolidated Group companies. b) Associated companies Associated companies are those regarding which the Group has significant influence, but does not control. Significant influence corresponds to a shareholding (direct or indirect) above 20% of the share capital or decision-making powers regarding financial or business policy, though without control or joint control with other parties. Any dividends received are registered against the fall in the value of the financial investment. Interests in associated companies are recorded by the equity method from the time when the Caixa Central Group gains the significant influence over operations until the time that it is no longer effective. The consolidated financial statements include the Group s share of the capital and the profits and losses that are recognised by the associated company. c) Goodwill Acquisitions of subsidiaries and associated companies occurring before 1 January 2006 are recorded by the purchase method. The cost of acquisition is equivalent to the fair value as at date of purchase, the assets and liabilities incurred or assumed, plus the costs directly allocated to the operation. Goodwill is registered as an asset and is subject to impairment testing in accordance with IAS 36. There is no amortization. In addition, whenever the fair value is above acquisition cost (negative goodwill), the differential is carried over to the income statement. 158 Notes to the Consolidated Financial Statements

159 2.3. Summary of main accounting policies The most important accounting policies underlying the financial statements are as follows: a) Accrual method The Group follows the principle of accrual-based accounting in relation to its consolidated financial statements. Costs and income, therefore, are recorded as they occur, irrespective of when they are paid or received. b) Foreign currency operations Assets and liabilities in foreign currency are converted into euros at the rate for fixing at the balance sheet date, as indicated by Banco de Portugal. Income and costs relating to foreign exchange transactions are recorded during the period when they occur at the exchange rate in force on the date they occurred. Additionally, the following accounting procedures are used: the spot exchange rate position for each currency is given by the net balance for the assets and liabilities of this currency. It is revalued daily according to the exchange rate published by Banco de Portugal and is recorded in the income statement; the forward position for each currency is given by the net balance for term operations awaiting settlement and is revalued at the forward exchange rate in the market, or, if such does not exist, through calculation on the basis of the interest rate which can be applied on the residual term for each operation. The difference between the balances converted into euros at the revaluation rates used and the balances at contracted rates corresponds to revaluation of the terms exchange position and is recorded in the income statement. c) Loans and other receivables Customer loans cover credit granted to individuals and companies and other loans (commercial papers). The credit is recognised at par value. Later, loans and other receivables are recorded at amortised cost. They are subject to periodic impairment analysis. Interest, including any premiums or discounts that are due, has a separate accounting entry in the income statement. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 159

160 Revenue is recorded when obtained and distributed in monthly periods, following the method of actual rate when the operation produces a residual flow over a period of more than one month. Whenever applicable, commissions and external costs that can be allocated to the operation underlying the assets are distributed throughout the period when the loan is active, according to the effective interest method. Interest is recognised according to the accrual method, with associated fees and costs spread throughout the operation, irrespective of when they are charged or paid. Collateral and irrevocable commitments Liabilities for collateral and irrevocable commitments are accounted as off-balance- sheet for the value they cover, while interest payments, fees or other gains are registered as income throughout the life of the operations. Impairment The Group regularly analyses customer loans and other receivables to identify possible impairment. A financial asset is considered impaired if and only if there is evidence that an event (or more events) occurs with a measurable effect on future cash flows expected from the asset or group of assets in question. For the purposes of calculating impairment of loans granted, GCA divided its portfolio into the following categories: Business loans; Mortgages; Consumer loans; Credit card debt; Other loans to individuals; Off-balance-sheet items. Additionally, liabilities with regard to commercial papers, foreign currency operations and financial leasing operations were also included. The Group impairment model in use for customers credit portfolio allows for an analysis of losses through impairment for individuals on a case by case and a group basis. When a group of financial assets is analysed together, the future cash flows for the group are estimated on the basis of the contractual flows of the assets and the historical data relating to losses in assets with a similar risk profile. Whenever the Group considers it necessary, profile history is updated on the basis of current data to provide an accurate picture of the current situation. 160 Notes to the Consolidated Financial Statements

161 The criteria for selecting customers for individual analysis were: All customers with liabilities above 1,000,000 euros; and Customers with non-performing loans (more than 90 days) above 50,000 euros. Evidence of impairment of an asset or group of assets as defined by the Group is associated to the occurrence of a range of events loss occurrences, such as: Contract default, in particular late payment of principal and / or interest; Debtor under significant financial difficulties; Significant changes to the financial situation of the debtor; Occurrence of adverse changes, such as: Payment terms and / or capabilities; Economic conditions of the sector in which the debtor operates, affecting their ability to perform their obligations. Losses through impairment when there is no default correspond to the ratio of the probability of default (PD) and the amount corresponding to the balance sheet values for the respective credits and the updated values of the cash flows from the operations. PD corresponds to the probability of an operation or a customer defaulting in the event of an emergency. The emergency period corresponds to the time that occurs between an event occurring that may result in losses and when the event is perceived by the Group s services (incurred but not reported). The Group has established an emergency period of six months for all segments of the portfolio. If there is evidence that GCA has incurred a loss through impairment on a loan or other receivables, the amount of the loss is determined by the difference between the value of this asset on the balance sheet and the current figure for its estimated future cash flows, calculated at the original rate of interest for the financial asset or assets. The value of the asset or assets on the balance sheet is reduced by the balance of the account for losses through impairment. For credit on a floating rate, the calculation used to determine any loss through impairment is the current rate of interest, as specified on the contract. Losses through impairment are recognised on the income statement. When in a later period there is a decline in the amount of losses through impairment attributed to an event, the amount at first allocated is reversed and the account for losses through impairment is adjusted. The amount of reversion is recognised directly on the income statement. Writing off capital and interest Periodically, GCA writes off the debt deemed unrecoverable from assets, using accumulated impairment for this purpose, following firstly specific analysis by those responsible for monitoring and recovering credit, and then approval by the Executive Board. If the debt is subsequently recovered, this is recognised as a deduction from the losses for impairment recognised on the income statement Debt impairment, net of reversions and recoveries. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 161

162 In line with the policies in force at the Group, interest on non-performing credit where there is no real property collateral is written off three months after the maturity date of the operation or the first instalment in arrears. Interest not recorded on the loan mentioned above is only recognised in the year when it is collected, if this occurs. Interest on overdue loans where there is a mortgage guarantee or other real guarantee is not written off. However, there is a break in the calculation and recording of the interest and capital still due where there is credit with a real guarantee and instalments with capital overdue and not paid for more than six months and twelve months respectively. Recovery of interest that has been written down on the assets side is reflected under the heading Debt impairment, net of reversions and recoveries. d) Other financial assets and liabilities Financial assets and liabilities are recognised at the transaction date, which is the date when the commitment to purchase or sale is made. The classification of financial instruments at the initial recognition date depends on their characteristics and the intention behind the acquisition. i) Held-for-trading financial assets and fair value through profit and loss Financial assets classified as held-for-trading include securities traded on active markets, acquired with the aim of selling on or repurchase in the short-term, as well as derivative instruments. Derivatives for trading with net gain receivable (positive fair value) are included under the heading of held-for-trading financial assets. Derivatives for trading with net loss receivable (negative fair value) are included under held-for-trading financial liabilities. Financial assets at fair value through profit and loss include fixed yield securities traded in active markets that the Group has opted to record and value at fair value through profit and loss, being therefore seen as within point 9 b) i) of IAS 39, in order to avoid or considerably reduce any inconsistency in measurement or recognition. Held-for-trading financial assets and liabilities and financial assets at fair value through profit and loss are initially recognised at fair value. Gains and losses stemming from subsequent valuation at fair value are recognised in the income statement. Interest inherent to financial assets is calculated in accordance with the effective interest method and recognised in the income statement as Interest and similar income. Dividends are recognised in the respective financial statements when the right to payout is determined. 162 Notes to the Consolidated Financial Statements

163 Fair value for held-for-trading financial assets and traded in active markets is the bid price or the quotation at market closing on the balance sheet date. If the market price is not available, the fair value of the instrument is estimated using valuation techniques, which include price assessment models and discounted cash flows. ii) Available for sale financial assets Available for sale financial assets include capital and debt instruments which are not classified as held-for-trading financial assets, at fair value through profit and loss, investments to be held to maturity, credit or loans and receivables. Available for sale financial assets are recorded at fair value, with the exception of financial instruments that are not quoted on an active market and whose fair value cannot be reliably measured. These are registered at cost. Gains and losses relating to subsequent variation in fair value are recorded under equity in a special item - Fair value reserve - until its sale (or until recognition as a loss through impairment). At this point they are carried to the income statement. Foreign exchange gains and losses on monetary assets are recognised directly on the income statement for the period concerned. Interest inherent in financial assets and the differences between acquisition cost and nominal value (premium or discount) are calculated in accordance with the effective interest method and recognised in the income statement as Interest and similar income. Dividends are recorded in their respective accounts in results when the right to payment is established. iii) Held-to-maturity investments Held-to-maturity investments are those that have a fixed yield, with a specific interest rate known at the time of issue and a specific reimbursement date, so that it is in GCA s interest to hold these until maturity. Held-to-maturity investments are recorded at acquisition cost. The interest inherent in financial assets and the recognition of differences between acquisition cost and nominal value (premium or discount) are calculated in accordance with the effective interest method and recognised in the income statement as Interest and similar income. iv) Funds in banking institutions Only amounts receivable from other banking institutions are recorded under this heading. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 163

164 These are financial assets with fixed payments or payments that can be calculated, not quoted on an active market and not included in any of the other categories of financial assets. When initially recognised, these assets are valued at fair value, less any commissions that may be included in the effective rate, plus all the incremental costs directly attributable to the transaction. These assets may subsequently be recognised on the balance sheet at amortised cost, less losses for impairment. Interest is recognised on the basis of the effective interest method, which means that it is possible to calculate the amortised cost and spread the interest across the period of the operation. The effective rate is the rate used to discount estimated future cash flows associated to the financial instrument at the date of initial recognition. v) Sales with repurchase agreement A repurchase agreement is considered an agreement to transfer a financial asset to another party in exchange for cash or another form of payment and with an associated obligation to acquire the financial asset at a future date for the same in amount in cash or in any other form of payment including interest. Securities sold with repurchase agreement are kept in the portfolio where they were originally registered. Funds received are recorded at settlement date in a separate account on the liabilities side, with related interest attributed on a periodical basis. vi) Purchases with resale agreement A resale agreement is considered to be an agreement where an institution buys a financial asset with the commitment to sell it back at a pre-determined price on a fixed date or on a date to be defined. Financial assets acquired with a resale agreement at a fixed price or a price that would be the same as the purchase price plus interest as per the period of the operation, are not recognised on the balance sheet, and the acquisition cost is recorded as a loan to other banking institutions. The difference between the purchase value and the selling value is treated as interest and is deferred during the existence of the agreement using the effective interest method. vii) Other financial liabilities Other financial liabilities, fundamentally funds from banking institutions, customer deposits and debt issued are initially valued at fair value, corresponding to the net counter-instalment received less the transaction costs. They are subsequently valued at amortised cost. 164 Notes to the Consolidated Financial Statements

165 The Crédito Agrícola Mútuo Guarantee Fund was created through Decree Law no. 182/87, of 21 April and its operations regulated through Decree Law no. 345/98, of 9 November. The purpose of the second of these was to convert the Guarantee Fund so that its objectives were to i) guarantee reimbursement of customer deposits in Caixa Central and the associated Caixas and ii) promote actions that would ensure the solvency and liquidity of these institutions in defence of the integrated system (Sistema Integrado do Crédito Agrícola Mútuo - SICAM). On 31 December 2013 the Group had subordinated loans granted by the Guarantee Fund to the amount of 81,433,884 euros (as opposed to 86,433,884 euros on 31 December 2012), described in Note 25. vii) Impairment in financial assets The Group carries out periodical checks for impairment of financial assets with the exception of credit to customers and other receivables, as referred in Note 2.3.c). When evidence of impairment in an asset or group of assets exists, the losses through impairment are recorded on the income statement. For listed securities and investment funds, evidence of impairment is considered to exist in a situation where there is continuous devaluation or a significant value in the quotation for the securities. Continuous devaluation is taken to be a significant figure, depreciation in value lasting more than 12 months or more than 30%, respectively. For unlisted securities, evidence of impairment is deemed the existence of impact on the estimated future cash flows of the financial asset, as long as this can be reasonably estimated. For unlisted securities, evidence of impairment is taken to be the existence of impact on the estimated future cash flows of the financial asset, as long as this can be reasonably estimated. If subsequently there is a decline in the amount of losses through impairment attributed to an event, the value previously recognised is reversed through an adjustment to the account detailing losses through impairment. The amount of the reversion is recognised directly on the income statement. In the case of available for sale assets, if there is objective evidence of impairment as the result of a significant and prolonged decline in fair value on the security or if there are financial difficulties with the issuer, the cumulative loss in the revaluation reserve at just value is removed from equity and recognised in the income statement. The losses through impairment recorded for fixed rate securities can be reversed on the income statement, if there is a positive change to the fair value of the security resulting from an event that occurred after the decision on impairment. Losses through impairment on variable yield securities cannot be reversed, so any gain coming after the recognition of losses through impairment is recorded on reserves at fair value. In the case of variable yield securities where losses through impairment have been recognised and a further negative variation occurs to fair value, this is always recognised on the income statement. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 165

166 e) Derivative financial instruments Financial derivatives are recorded at fair value on the date of contract. In addition, they are recorded on off-balancesheet accounts for their par value. Subsequently they are measured according to fair value. Fair value is calculated: On the basis of quotations obtained on active markets (for example, in terms of futures traded in organised markets); On the basis of models that incorporate valuation techniques accepted on the markets, including discounted cash flows and option valuation models. Derivatives are recorded at fair value, with the profit or loss recognised monthly under the profit or loss of the financial year, under the headings Profit and loss from assets and liabilities assessed at fair value through results. Positive and negative revaluations are recorded respectively under the headings Financial assets available for sale and Financial liabilities at fair value through profit and loss, respectively. f) Other tangible assets Tangible assets used by the Group for its activities are recorded for their acquisition price (including directly attributable costs) after subtracting accumulated amortizations. Depreciation of tangible assets is registered systematically according to the estimated service life of the asset: Years of service life Real property for own use 50 Expenses with leased property 10 Computer and office equipment 4 to 10 Furniture and fittings 6 to 10 Vehicles 4 Investment expenses in works that cannot be recovered, carried out on properties that are not owned by GCA, are amortized for a period compatible with their expected use or lease agreement. g) Intangible assets This heading essentially includes expenses during the development phase of projects regarding information systems already implemented or under implementation, as well as costs with application software, in both cases when the expected impact carries over from the year in which they were undertaken. 166 Notes to the Consolidated Financial Statements

167 On 31 December 2013 and 2012, this heading includes 42,050,147 euros and 37,142,122 euros, respectively for costs incurred with staff involved in the in-house development of the software at CA Serviços(Note 16). Intangible assets are recorded at acquisition cost, less amortization costs and losses due to accumulated impairment. Amortizations are recorded as costs for the year on a systematic basis during the estimated useful life of the assets, which is 3 to 6 years. h) Fixed assets held for sale Under Other assets, GCA registers the real property, equipment and other assets received in lieu of payment regarding non-performing loan operations. These assets are recorded at the value agreed on the date of repossession, either current debt or asset value, whichever is the lower. Real property is subject to periodical assessments which give rise to registration of losses through impairment whenever the value resulting from such assessments (net of cost of sale) is less than their book value. Tangible assets are recorded under this heading from the point when the preliminary repossession agreement is signed or they are auctioned. GCA does not recognise potential capital gains on these assets. i) Provisions This liabilities item includes provisions to cover tax risks, lawsuits and other specific risks arising from the Group s activities, in accordance with IAS 37 (Note 23). j) Employee benefits SICAM entered into the Collective Bargaining Agreement (ACTV) for the Crédito Agrícola (known as the Acordo Colectivo de Trabalho das Instituições de Crédito Agrícola Mútuo). Employees and their families are therefore entitled to retirement, disability and surviving spouse pensions. However, since the employees are registered with Social Security, SICAM obligations in terms of employee pensions consists in paying supplements in accordance with the provisions of the ACTV. SICAM has a Pension Fund to cover the Group s obligations, structured to pay out amounts in addition to Social Security retirement pensions due to old age or disability or surviving spouse or orphan pensions. The additional amounts are calculated by reference to the collective bargaining agreement, according to (i) the pension guaranteed at the presumed age of retirement, (ii) the coefficient between the number of years of service until the date of calculation and the total number of years of service on date of retirement. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 167

168 This fund, whose benefits are grants by means of the Pension Plan defined in the collective bargaining agreement (Acordo Colectivo de Trabalho Vertical do Crédito Agrícola Mútuo) is effectively a Solidarity Fund. The insurer Crédito Agrícola Vida S.A. is responsible for its management. As stipulated in the SICAM articles, members of the governing bodies are not covered by the benefits described above. In order to calculate the value of the ACTV pension, years of service were calculated as follows: For future length of service and automatic career promotions, the starting point considered was the date from which seniority was calculated; For the calculations in Annex V in determining the pensions, the starting point was the recognised date of admission to the pension fund. With regard to the obligations for past services to be supported by the Crédito Agrícola Pension Fund, the following parameters were taken into account: When the seniority date for the purposes of level and benefits is later than the admission date recognised by the Pension Fund, the latter will be used; When the seniority date for the purposes of level and benefits is prior to the admission date recognised by the Pension Fund, the latter will be used to calculate total years of service, since this corresponds to the date of admission to the Bank. The Projected Unit Credit Cost method was applied for old age retirement and the deferred surviving spouse pension, while the Successive Single Premiums was applied for retirement due to disability and immediate surviving spouse pension. Only those legally married are accepted for surviving spouse pensions, whereby the age of the spouse was considered the age of the employee plus or minus three years depending on whether the later was male or female. The value of the pension is based on salary level, in line with Annex VI of the collective bargaining agreement. SICAM records its annual contribution to the fund as a cost. The Crédito Agrícola Vida insurance company estimates the cost for each contributing entity on the basis of the numbers of employees enrolled. Banco de Portugal Notice no. 4/2005 specifies that full pension fund financing must be ensured, covering current pension payments and 95% of the value of obligations for past services due to staff still in service. It does, however, set out a transitional period of between 5 and 7 years for the cover of increased obligations arising from the adoption of IAS 19. In 2008, Banco de Portugal issued Notice no. 7/2008, of 14 October 2008, allowing the impact of transition described above to be extended for an additional period of three years. Caixa Central decided to extend the impact of the transition under the terms of this Notice. Post-employment benefits for employees also include health care (through the banking system health scheme, SAMS) which were calculated based on the same assumptions as the supplementary pensions. 168 Notes to the Consolidated Financial Statements

169 Applying IAS 19 Revised (starting with the financial year of 2013), actuarial gains and losses resulting from (i) the differences between actuarial and financial assumption used and the values that effectively occur and (ii) changes to actuarial assumptions are fully recognised as income during the financial year they take place and are recorded under revaluation reserves. The amounts registered in income are calculated according to their net interest: Cost of service (P&L): The cost of service includes costs with current service, with past service and gains or losses during liquidations; Net interest (P&L): Net interest is calculated by multiplying the discount rate by the liability (asset) net of defined benefits (both determined at the start of the annual reporting period, taking into account any variation in liability (asset) net of defined benefits during the period arising from the payment of contributions and benefits); Remeasurements (Other Comprehensive Income): Includes all the changes resulting from remeasuring obligations due to past services and plan benefits. k) Seniority bonuses Under the terms of the ACTV, SICAM accepted the commitment to award a seniority bonus to current employees who complete fifteen, twenty-five and thirty years of effective service. This would be, respectively, once, twice and three times their effective monthly salary at the time the bonus was awarded. SICAM calculates the actual benefit of length of service awards by the Projected Unit Credit Cost method. The actuarial assumptions (financial and demographic) are based on expectations for salary growth and make use of mortality tables used to calculate pension obligations. The discount rate is determined on the basis of market rates for highly rated companies in a similar period until the obligations are paid. l) Tax on profits The entities that make up the Group are taxed individually and are subject to corporate tax (in accordance with the Portuguese Corporate Tax Code). The accounts of branches are integrated with the accounts of the Caixa Central for tax purposes. Total tax recorded in the income statement includes current and deferred taxes. Current tax is calculated on the basis of the fiscal results for the year, which differ from the book value as a result of adjustments to costs and income that is not relevant for tax purposes or which are only considered in other periods. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 169

170 Deferred tax assets and liabilities correspond to the value of the tax to be recovered and payable in future periods, resulting from the temporary differences between the value of assets or liabilities on the balance sheet and the basis for tax liability. Tax credit is also recorded as deferred tax assets. Deferred tax liabilities are normally recorded for all temporary taxable differences, while deferred tax assets are only recorded when future taxable profits that permit the use of the corresponding differences in deductible tax or tax losses are likely to occur. However, deferred tax is not recorded under the following circumstances: Temporary differences in the initial recognition of assets and liabilities in transactions that do not affect accounting results or taxable profits; Tax-deductible differences from undistributed profits in affiliates or associated companies, to the extent that Caixa Central has the possibility of controlling its reversion and it is not likely to occur in the foreseeable future. Deferred tax is calculated according to the tax rates expected for the date of reversion of temporary differences, that correspond to the rates approved or substantially approved on the balance sheet date. Tax on income (current or deferred) is reflected in the annual income statement, except when the underlying transactions are reflected under other equity headings (for example, revaluation of available for sale financial assets). In such cases, the corresponding tax is also reflected against equity and does not affect the annual results. m) Financial leasing Assets under financial leasing are recorded on the balance sheet as loans and are reimbursed through amortization of capital in the financial plan for the contract. Interest included in the rents are recorded as financial income. n) Insurance i) Insurance Contracts The record of transactions relating to insurance contracts held by GCA were subject to the accounting principles stipulated in the accounting plan for insurance companies (Plano de Contas para as Empresas de Seguro PCES), issued by the Portuguese Insurance Institute (ISP) and approved by Regulation no. 4/2007-R, of 27 April, and amended by Regulation no. 20/2007-R, of 31 December, and Regulation no. 22/2010-R, of 16 December, as well as other standards regarding accounting for insurers issued by the Portuguese Insurance Institute. PCES complies with the International Financial Accounting Standards (IFRS) in force as adopted in the European Union, except for IFRS 4 Insurance Contracts, with regard to which only the classification principles regarding the type of contracts entered into by insurance companies are adopted. 170 Notes to the Consolidated Financial Statements

171 Insurance contracts correspond to contracts in which the Insurer assumes a significant insurance risk regarding the insured person, agreeing compensate in the event of the occurrence of a specific future adverse event. This type of contract is set down within the scope of IFRS 4 (Pure life insurance policies). Investment contracts exclusively involve financial risk. These contracts can also be divided according to purely financial contracts and those that possess a discretionary aspect (share in profits). If the investment contracts are pure, they are covered by IAS 39, if they possess a discretionary aspect they are covered by IFRS 4 (capitalization products with guaranteed rates and share of profits), whereby they continue to recognise the amounts received as revenue and the corresponding increase in liabilities as a cost. Potential capital gains, net of losses resulting from revaluation of assets allocated to with-profits insurance are shared between a liability component and an equity component, based on the conditions of the product and profitsharing history. ii) Recognition of income and costs Premiums regarding non-life insurance contracts, life insurance policies and with-profit investment contracts with a discretionary aspect are registered when issued under Premiums net of reinsurance in the income statement. Premiums relating to non-life insurance contracts and related acquisition costs are recognised as income and cost during the corresponding risk periods, through entries on the provisions for premiums not acquired. Responsibilities towards policyholders associated to life policies and with-profits investment contracts with a discretionary component are recognised through the mathematical provision for life insurance, with the cost reflected at the time that the income from the premium issued is recorded. The main accounting policies and bases for measurement of technical provisions are as follows: i) Provision for unacquired premiums It corresponds to the part of the premiums accounted in the financial year, regarding risks that have not occurred on the balance date and to be deferred to one or more of the following financial years, in order to ensure coverage of the risks assumed and the charges that result therefrom during the period included between the end of the exercise and the due date of each of the insurance contracts. This is determined, for each contract in force, by applying the pro rata temporis method to the gross premiums issued. The amount calculated for the provision for unacquired premiums is deducted from the part of the costs to be deferred from the remunerations arising from insurance intermediation and other acquisition costs. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 171

172 ii) Provision for risks in progress The provision for risks in progress corresponds to the amount needed to cover probable compensation and charges after completion of the year insofar as they exceed the value of premiums not acquired and the premiums that may be demanded for the contracts in force. This provision is calculated for direct insurance on the basis of claims ratios, assignment, charges and the profitability of the investments, in accordance with terms defined by the Portuguese Insurance Institute (ISP). iii) Provision for claims This provision covers the estimated value of indemnity to be paid for claims already made, including incurred but not reported (IBNR) and the direct and indirect costs to be incurred with settlement. The provision for claims submitted and not submitted is estimated by the Group on the basis of past experience, available information and statistical methods. In order to calculate the provision for IBNR in vehicle, accidents at work, home, business, services and civil liability (third party and company), actuarial estimates were made on the basis of triangulation of amounts paid, bearing in mind the specific characteristics of each branch. For other branches, a generic rate of 4% was applied to the costs with claims for the year relating to claims declared to cover responsibility with claims to be declared after the end of the year. The provision for claims management cost is calculated on the basis of average cost. A mathematical provision was considered regarding worker s compensation providing coverage for the following claims occurring until 31 December: (i) pensions to be paid homologated by employment courts; (ii) pensions to be paid according to agreement already reached; and (iii) pensions on claims already submitted but awaiting a final ruling or agreement. The mathematical provisions relating to claims made and involving life-long payment of pensions arising from work accidents is calculated using actuarial assumptions based on actuarial methods recognised in existing employment law. Additionally, a mathematical provision was created for: (i) pensions obligations resulting from permanent incapacity claims that have already occurred and the claimant is undergoing treatment; or (ii) claims incurred but not reported. Provisions for claims are not recognised at current value, except for the mathematical provision for work-related accidents. This is calculated on the basis of an estimate of future cash flows, updated by application of a 3.5% discount rate. Any shortfall or surplus on provisions for claims, if any comes to exist, is recorded in current income as and when specified. iv) Provision for exceptionally high claims This provision is for claims that, by their very nature, give rise to the expectation of much higher indemnity. Within the scope of risks assumed by the Group, this provision only relates to earthquake risk. It is calculated through the application of a risk factor, defined by the Portuguese Insurance Institute for each seismic zone and applied to the insurance cover given by the Group. 172 Notes to the Consolidated Financial Statements

173 v) Technical provisions for assigned reinsurance These are determined by applying the criteria described above for direct insurance, taking into account the percentages for assignment as well as other clauses in current reinsurance agreements. vi) Mathematical provision for life insurance The mathematical provision for Life insurances corresponds to the difference between the current values of Company obligations and the current values for the policyholder obligations regarding policies issued. The calculations are made on the basis of actuarial methods recognised and compliant with the technical notes approved by the Portuguese Insurance Institute for each type of insurance. According to these technical notes, the provision is calculated on the basis of the GKM80 mortality table and with the technical interest rate defined for each type of insurance. vii) Provision for stability of life insurance portfolio This provision is calculated with regard to renewable annual group contracts, whose main cover is the risk of death, in order to address worsening risk due to the increase of the average age of the insured group, whenever the fee for the group is based on a single rate which must be kept for a certain period according to the contract commitment. viii) Provision for life insurance rate commitments On each reporting date, the company assesses the adequacy of the responsibilities stemming from insurance contracts and discretionary with-profits investment contracts. This assessment is made according to future cash flow projections associated to each contract, discounting the rates determined by reference to the euroswap curve, on a product by product basis or aggregated when the product risks are similar or managed jointly. In the event of a discrepancy between the value of the obligations and the discounted future cash flow projections, this is recorded in income against the heading of Provision for rate commitments. ix) Provision for profit sharing Profit-sharing Provision still to be given (shadow accounting) In accordance with what is set down in IFRS 4, unrealized gains and losses for financial assets allocated to responsibilities for insurance contracts and discretionary with-profits investment are attributed to policy holders, according to the estimated amount of their participation through recognition of a responsibility, using as a basis the expectation that they will participate in the non-realized gains and losses when such are realized. This corresponds to the net value for adjustments to fair value relating to investments connected with life insurance with participation in results, estimated from the side of the policyholder or beneficiary. There needs ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 173

174 to be an estimate of the amounts to be allocated to policyholders in the form of participation in the results for each type of cover. This should be calculated on the basis of an adequate plan applied in a consistent way, bearing in mind the participation plan, the maturity of commitments for the linked assets and any other variable or variables specific to the types of cover in question. During the duration of the contracts for each type or types of cover, the balance on the participation in results as due should be fully used to offset the negative adjustments to fair value for investments and for transfer to the provision for participation in the results to be allocated. Profit-sharing Provision already given This provision includes the amounts payable to policyholders or beneficiaries of the contracts in the form of profit-sharing that has not yet been paid out, namely by including the mathematical provision specified in the contracts. x) Insurance and investment contracts with discretionary profit sharing As mentioned above, GCA maintained most of its accounting policies applicable to insurance contracts and with-profits investment contracts where the profit sharing includes a discretionary component. It continued to recognise premiums received as income and the corresponding increase in liabilities as a cost. An insurance or investment contract with discretionary profit sharing is considered to exist when the contract stipulates that the policyholder is entitled to receive an additional amount above the guaranteed amount: when it is likely that this amount will prove to be a significant part of the total benefits due on the contract; the amount or the timing depends contractually on the discretion of the issuer; and dependent on the performance of a specific group of contracts, with effective gains or not regarding specific assets held by the issuer of the contract or the result of the entity responsible for issuing the contract. Liabilities arising from insurance contracts and investment contracts with discretionary profit sharing are included in the liabilities adequacy tests performed by the Group. xi) Derivatives embedded in insurance contracts In conformity with that permitted by IFRS 4, options held by policyholders for early redemption of contracts in force at a fixed amount, or by a fixed amount plus interest, are not severable from the initial contract. xii) Liability adequacy tests In accordance with the requirements of IFRS 4, the Group carries out adequacy tests on liabilities related to current insurance contracts with reference to the date of the financial statements, taking into account estimates of the current value of future cash flows associated with the contracts, including expenses to be incurred with claims and the cash flows associated with options and guarantees implicit in the insurance contracts. 174 Notes to the Consolidated Financial Statements

175 If the current value of the estimated responsibilities shown up by these tests is higher than the value of the liabilities recognised in the financial statements, net of the book value of the deferred acquisition costs and the intangible assets related to the contract in question, an additional provision is set aside in the income statement for the financial year. The methodology and the main assumptions used to carry out these tests of adequacy for liabilities are as follows: Life insurance Adequacy tests on liabilities are performed by updating (using a risk-free market interest rate) future cash flows from claims, redemptions, maturities, commissions and management expenses deducted from the future cash flows from premiums. These cash flows are projected policy by policy, considering the prudent technical bases in use, these being calculated on the historical basis of their data in the following manner: Mortality: Based on the files taken from the IT systems, a number is reached for people insured, broken down by age groups, for the start and for the end, and the claims in the year. From these data, a calculation is made of the number of people exposed to risk for each age group and this figure is multiplied by the probability of death in any specific table to get the expected number of claims in accordance with the table. This figure is then compared with the real figure to obtain the real claim rate for the year as a percentage of the table. The assumption of mortality is then determined through an analysis of the figures for the previous five years. This analysis is carried out separately for life, risk and capitalisation policies. Redemptions: Based on the files taken from the IT systems, a number is reached for people insured, broken down by age groups, for the start and for the end, and the redemptions in the year. From these data, a calculation is made of the average figure for mathematical provisions for each product. Dividing the amount of redemptions by this figure, the rate of redemptions per year is obtained. The assumption of redemptions for each product is then determined through an analysis of the figures for the previous five years. Expenses: Expenses are divided between investment, administration and claims. In order to obtain unit costs, the expenses on investment are divided by the average figure for mathematical provisions, for administration they are divided by the average number of people with policies and for expenses on claims they are divided by the total number of claims in the year. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 175

176 Yield Rates: Future rates of yield to be applied to mathematical provisions are determined by the risk-free market rate of interest. Projected participation in future results is based on yield obtained and such participation is incorporated in the mathematical provisions and is then projected for maturities, claims and future redemptions. Provisions for Claims: Future cash flows are projected from the run-off of the company regarding death and disability cover for the purpose of determining future cost by comparison with current cost. Statistical methods are used for this. The cash flows are short-term so provisions are not taken into account. Non-life The actuaries who are responsible for assessment regularly check if provisions are adequate, making use of an analysis of the responsibilities of the companies, in the areas covering uncertainties, contract duration, nature of claims and expenditure on settling claims. They apply a set of micro and macroeconomic scenarios to verify their adequacy. xiii) Impairment of debtor balances related to insurance and reinsurance contracts With reference to each date that the financial statements are presented, the Group checks for indications of impairment in the assets generated by insurance and reinsurance contracts, including receivables from policyholders, brokers, reinsurers and the technical provisions of reinsurance ceded. If any losses through impairment are detected, the balance sheet value of the assets concerned is reduced on the income statement and is reflected under the heading Impairment of other financial assets net of reversions and recoveries. o) Comparative information In general, the values presented are comparable with the previous year s in relevant aspects, except for the following alteration with impact on the 2013 financial statements: Due to the sale of Public Debt securities in 2013, before the respective maturity / redemption date, which were registered under Investments held to maturity, the Group is now forbidden from registering any financial assets in this portfolio during the current financial year of 2013 and the two subsequent years, in conformity with the rules established in the international accounting standard (IAS 39 Financial Instruments). As a result, assets in that portfolio which were not sold had to be reclassified in 2013 as Financial Assets available for sale. According to the amendments of IAS 19 which became effective on 1 January 2013, the accounting policy for actuarial deviations regarding pension plans was altered, no longer applying the corridor method and being registering under other assets or other liabilities, whereby the actuarial gains and losses are recognised directly under equity, under Other reserves. 176 Notes to the Consolidated Financial Statements

177 A single rate is applicable to the plan s obligations and assets, whereby pension fund earnings correspond only to current costs and expenses net of interest. The application of the accounting policy generated the following impacts: Revaluation reserves Equity Other liabilities Balance (3,929,230) 1,095,076, ,032,300 Impact of retrospective application of accounting policy: - Accumulated actuarial and financial deviations 5,171,864 5,171,864 (5,171,864) - Current actuarial and financial deviations Proforma balance ,242,634 1,100,248, ,860,436 p) Cash flow statements For the purposes of setting out the Statement of cash flow and equivalent, the heading cash and cash equivalent includes the figures recorded under cash headings on the balance sheet, liquid assets at central banks and other banking institutions. Mandatory deposits at the central bank are excluded. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 177

178 3. Main Estimates and Uncertainties Associated to the Applicability of Accounting Policies Preparation of the financial statements requires the elaboration of estimates and the adoption of certain assumptions by management and these may affect the value of assets and liabilities, revenue and costs as well as disclosed contingent liabilities. The most significant estimates and assumptions used by management are the following: Fair value for financial instruments Fair value is based on market quotations, whenever possible. However, in the absence of a quotation, financial instruments are valued on the basis of indicative bids calculated by third parties using valuation models or in agreement with methodologies that look fundamentally at inputs that can be observed in markets with a significant impact on the value of the instrument. Employee benefits Responsibilities with additional retirement and survivor pensions are estimated on the basis of actuarial and financial assumptions, specifically as concerns mortality, salary and pension increases and long-term interest rates. It follows that the real figures may differ from the forecasts made. Assets due to deferred taxes Assets for deferred taxes covering unused tax losses are recognized, to the extent that they may exist upside tax results fixed by law in some future time. For these purposes estimates are made of the amount of deferred taxes that may be recognized, based on the level of future expected fiscal results according to economic and financial projections in conditions of uncertainty. Should these estimates prove incorrect, there is a risk that adjustment of the asset for deferred taxes may be different in future years. Valuation of real property Valuations are carried out by independent appraisers, registered with the Portuguese Securities Commission. They are qualified, have recognized skills and professional experience, suitable for the task they perform. These procedures assume that rigorous information is obtained in three areas: up-to-date documentation; the inspection of the property and the surrounding area; and in the analysis of the market, transactions, the relationship between supply and demand, and the prospects for development. The treatment of information then ensures the adoption of basic values for the calculation, applying the method and using it for comparative purposes. The value of these assets when sold depend on future developments in the property market. Impairment of real property for own use These are recorded at acquisition cost, deducted from accumulated amortizations and possible losses through impairment. The valuations of assets used for own service, used for impairment tests, were carried out on the assumption that they were part of a going concern and using the depreciated replacement cost method. 178 Notes to the Consolidated Financial Statements

179 Determination of insurance contract liabilities These liabilities are determined on the basis of methods and assumptions detailed in Note 2.3. n) above. These liabilities reflect an estimated figure for the impact of future events on the Group s insurance companies, on the basis of actuarial assumptions, claims history and methods generally accepted in the sector. Given the nature of insurance, determining provisions for claims and other liabilities for contracts is highly subjective and the actual figures to be disbursed in the future could well be considerably different from the estimates made here. The Group does, however, consider that these liabilities, as detailed in the consolidated accounts, reflect in an adequate way the best estimate at balance sheet date of the amounts that the Group will have to support. Impairment in loans to customers The Group regularly analyses customer loans and other receivables to identify possible impairment. In this context, customers who default and whose total liabilities are deemed significant for the Group are the subject of individual analysis to assess the needs to register impairment losses. These estimates are based on assumptions relating to an array of factors that may change in the future and, as a result, the amount of impairment may differ. In addition, a collective analysis of impairment is made of the other credit operations which were not subject to scrutiny on an individual basis, through the allocation of such operations to credit segments with similar characteristics and risks. An estimate is then made of the collective losses through impairment, with the basis for calculation the historical behaviour of losses for the same type of asset. Where no objective existence of impairment has been noticed in credit analysed on an individual basis, these are put together on the grounds of having similar risk characteristics and a collective assessment of impairment is then made. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 179

180 4. Group Companies On 31 December 2013, the entities that comprise Crédito Agrícola Group are: Equity Liquid Assets Annual Profit/ (Loss) Direct interest Effective interest Consolidation Method Banks Caixas de Crédito Agrícola Mútuo (1) 1,170,532,660 12,009,582, , % % Full Caixa Central de Crédito Agrícola Mútuo 155,977,781 6,136,354,492 1,024, % % Full Asset management and broking Crédito Agrícola Gest Sociedade Gestora de Fundos de Investimento Mobiliário S.A. 2,907,449 3,946, , % % Full Crédito Agrícola Imóveis, Unipessoal, Lda. 799,488 38,245,081 (2,418,853) % % Full Crédito Agrícola Finance Gestão de Activos (I.F.I.), Sociedade Unipessoal S.A. 181, ,085 (60,583) % % Full Service providers FENACAM Federação Nacional das Caixas de Crédito Agrícola Mútuo FCRL 5,185,486 7,343, , % 99.98% Full Crédito Agrícola Consult Assessoria Financeira e de Gestão S.A. 305, ,457 88, % % Full Crédito Agrícola Informática Serviços e Informática S.A. 6,307,834 26,948, , % 99.45% Full Venture capital Agrocapital Sociedade de Capital de Risco, S.A. 1,007,989 1,149,677 17, % 66.67% Full Investment Funds FIICA Património Crescente 211,731, ,240,068 6,922, % 30.67% Eq. Method FEIIA CA Imobiliário 266,083, ,304,007 (28,845,797) 52.78% 56.83% Full FIIF CA Arrendamento Habitacional 114,029, ,054,248 (2,682,440) % % Full FEIIF CA ImoValorCA 9,657,665 9,727,369 (19,236) % % Full FEIIA Carteira Imobiliária 202,495, ,706,364 (1,332,372) 52.78% 56.83% Full FCR Central Frie 2,326,911 2,329,817 (369,096) 28.57% 28.57% Eq. Method FCR Agrocapital 1 14,560,250 14,865,666 (365,510) 27.78% 30.00% Eq. Method Insurers Crédito Agrícola Seguros 32,560, ,133,852 2,644, % 97.40% Full Crédito Agrícola Vida 64,525,333 1,428,197,406 5,974, % 99.92% Full Others CA Serviços Serviços Informáticos e de Gestão - ACE - 59,233, % 99.98% Full Crédito Agrícola SGPS S.A. 50,070, ,951,974 (14,411,985) % % Full CCCAM Gestão de Investimentos Unipessoal Lda. 635,229 20,785,994 (818,042) % % Full Note: The amounts are reported to 31 December 2013 (accounting balance before consolidation adjustments) (1) These values correspond to the algebraic total of the balances of Associated Caixas Agrícolas 180 Notes to the Consolidated Financial Statements

181 The following are the registered offices of Group entities: Caixa Central de Crédito Agrícola Mútuo, CRL, Crédito Agrícola SGPS S.A., Crédito Agrícola Vida, S.A. and Crédito Agrícola Imóveis, Sociedade Imobiliária Unipessoal, Lda. are located at Rua Castilho, n.º Lisboa. Crédito Agrícola Seguros, S.A., is situated at Rua de Campolide 372, Lisboa. CA Informática Serviços de Informática, S.A. and CA Serviços Serviços Informáticos e de Gestão - ACE are located at Rua Teófilo Braga, Lote 43 Damaia Amadora. Crédito Agrícola Gest - Sociedade Gestora de Fundos de Investimento Mobiliário, S.A., Crédito Agrícola Consult S.A., CCCAM SGPS Unipessoal, Lda. and Agrocapital SCR, S.A. have their registered office at Avenida da República, n.º Lisboa. FENACAM - Federação Nacional das Caixas de Crédito Agrícola Mútuo, FCRL is situated at Rua Professor Henrique Barros, Edifício Sagres, 7.º Piso Prior Velho. Agrocapital Sociedade de Capital de Risco S.A. is located at Rua Júlio Dinis n.º Porto. FIIA CA Património Crescente, FEIIA CA Imobiliário, FIIA Carteira Imobiliária and FIIF CA Arrendamento Habitacional are real estate investment trusts managed by the management company Square Asset Management Sociedade Gestora de Fundos de Investimento Imobiliário, S.A, with registered office at Rua Tierno Galvan, Torre 3, Piso 7, Sala 706, Lisboa. FIIF Imovalor CA is a real estate investment trust, managed by the company Selecta Sociedade Gestora de Fundos de Investimento Imobiliário S.A, with registered office at Rua de S. Caetano à Lapa, nº 6, Bloco C, 1º Piso, Lisboa. FCR Agrocapital 1 is a risk capital investment fund for qualified investors, managed by Agrocapital SCR S.A.. FCR Central Frie is a risk capital investment fund for qualified investors, managed by Caixa Central CRL, with registered office at Rua Castilho, n.º Lisboa. The changes that occurred within the context of the consolidated companies in 2013 are described in Note 1. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 181

182 5. Segment Reporting In order to comply with that established in the IFRS 8 standard, the Group carried out an analysis of its business lines, identifying four materially relevant market segments: Commercial/retail banking: includes all operations related to its own portfolio, derivatives, investments and funds from other banking institutions and cash operations. Investment funds and asset management: includes operations related mainly to the management of real-estate investment trusts. Insurance: includes operations relating to marketing and management of life insurance and other types of insurance. Consultancy services: includes economic and financial services or specialist strategies, accountancy and company management consulting, along with drawing up or revising economic and financial studies. Others: this covers all other remaining operations such as those related to support services for the Group s business. With regard to the financial years ending on 31 December 2013 and 2012, the segmentation of GCA earnings according to business segment was as follows: 2013 Commercial / Retail banking Invest. funds and asset management Insurance Business Life Non-life Consulting Services Other Total Financial margin 250,656,658 6,598 53,380,962 4,433,341 (4,119) (1,769,797) 306,703,643 Technical margin for insurance - - (34,789,749) 25,441,778-9,347,971 - Equity instruments income 856, ,960 75,000 - (102,616) 1,555,675 Service & Fees Earnings 131,598,580 (9,648,428) (8,594,655) (9,382,699) - (3,403,314) 100,569,484 Other operating earnings 89,533,650 (17,236,048) 3,337,098 2,015,901 1,253, ,358, ,260,112 Banking product 472,645,219 (26,879,878) 14,060,616 22,583,321 1,249, ,430, ,088,914 Payroll and general admin. expenses (287,566,647) (4,840,176) (5,888,713) (15,291,129) (1,081,106) 14,006,261 (300,661,510) Amortizations (14,789,590) (43,350) (350,758) (2,554,126) (20,903) (13,216,181) (30,974,908) Provisions & impairments (150,024,630) (509,786) 115,337 (952,347) (42,486) (109,819,186) (261,233,098) Income from business combinations ,908,392 1,908,392 Earnings before tax and min. int. 20,264,352 (32,273,190) 7,936,482 3,785, ,803 6,309,624 6,127,790 Tax (18,758,013) (178,401) (1,962,080) (1,140,973) (16,785) 43,775 (22,012,477) Earnings after tax and min. int. 1,506,339 (32,451,591) 5,974,402 2,644,746 88,018 6,353,399 (15,884,687) Minority interests ,943,268 12,943,268 Net earnings 1,506,339 (32,451,591) 5,974,402 2,644,746 88,018 19,296,667 (2,941,419) 182 Notes to the Consolidated Financial Statements

183 2012 Commercial / Retail banking Invest. funds and asset management Insurance Business Life Non-life Consulting Services Other Total Financial margin 318,284, ,684 47,441,729 3,841,065 (14,819) (3,101,415) 366,582,803 Technical margin for insurance - - (27,884,660) 23,498, (4,386,125) Equity instruments income 1,373,539-1,099,986 75,000 - (600,070) 1,948,455 Service & Fees Earnings 129,500,624 (9,438,278) (9,655,584) (7,867,384) - (611,968) 101,927,410 Other operating earnings 15,800,061 (1,984,919) (135,603) 3,831,517 1,077,236 8,507,174 27,095,466 Banking product 464,958,783 (11,291,513) 10,865,868 23,378,732 1,062,418 4,193, ,168,009 Payroll and general admin. expenses (288,424,632) (3,652,956) (5,452,950) (14,954,791) (1,575,876) 15,079,381 (298,981,824) Amortizations (15,026,258) (54,856) (387,241) (2,500,013) (32,540) (13,666,519) (31,667,427) Provisions & impairments (120,995,370) (390,000) (33,247) (1,044,130) (64,479) 5,364,181 (117,163,044) Income from business combinations ,903,698 1,903,698 Earnings before tax and min. int. 40,512,524 (15,389,325) 4,992,430 4,879,798 (610,477) 12,874,462 47,259,412 Tax 806,953 (110,225) (841,484) (1,676,556) (20,806) (604,326) (2,446,444) Earnings after tax and min. int. 41,319,477 (15,499,551) 4,150,945 3,203,243 (631,282) 12,270,136 44,812,968 Minority interests (104,826) (104,826) 41,319,477 (15,499,551) 4,150,945 3,203,243 (631,282) 12,165,310 44,708,142 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 183

184 With regard to the financial years ending on 31 December 2013 and 2012, the segmentation of the Group s assets and liabilities according to business segment was as follows: 2013 Commercial / Retail banking Invest. funds and asset management Insurance Business Life Non-life Consulting Services Cash & equivalent in Central & other banks 463,470,263 8,903,241 12,062,370 3,265, ,851 (21,219,888) 466,612,733 Financial assets held for trading 2,071-22,752, ,359 23,531,359 Financial assets available for sale 3,780,437,276 11,336, ,822,507 80,525, ,959,251 4,987,080,751 Investment in banking institutions 31,930,695 7,927,045 31,541,201 23,138,611 - (62,506,732) 32,030,820 Customer loans 7,491,909,455-5,521, (25,441,043) 7,471,989,466 Investments held to maturity 127,370, ,203,517 23,138,611 - (620,536,162) - Others 1,073,797, ,006,072 32,290,872 38,367, ,606 (69,533,700) 1,639,331,140 Total net assets 12,968,918, ,172,769 1,425,194, ,259, ,457 (550,501,915) 14,620,576,269 Central bank funds (1,262,845,139) (1,262,845,139) Financial liabilities held for trading Other Total (303,906) - (211,027) (514,933) Funds from other banks (100,067,053) (5,616,928) - (735,721) - 6,352,649 (100,067,053) Client funds and other loans (10,209,731,246) ,188,350 (10,122,542,896) Others (290,097,658) (121,105,168) (1,360,458,090) (136,959,389) (227,864) (84,739,569) (1,993,587,738) Total liabilities (11,863,045,002) (126,722,096) (1,360,669,117) (137,695,110) (227,864) 8,801,430 (13,479,557,759) 2012 Commercial / Retail banking Invest. funds and asset management Insurance Business Life Non-life Consulting Services Cash & equivalent in Central & other banks 513,237, ,548 3,293,551 5,505,561 7,843 (8,859,243) 513,452,019 Financial assets held for trading 86,697-17,840, ,191 18,388,931 Financial assets available for sale 2,130,280,338 19,968, ,570,938 60,599,232 - (399,867,503) 2,407,551,927 Investment in banking institutions 106,978,861 7,793,880 23,187,235 38,173,502 - (53,412,533) 122,720,945 Customer loans 7,716,887,965-14,961, (71,696,928) 7,660,152,604 Investments held to maturity 2,234,397, ,775,740 38,377, ,760,551,345 Others 1,045,272, ,385,355 3,813,540 25,988,729 1,293,236 3,546,161 1,630,299,161 Total net assets 13,747,141, ,414,705 1,147,442, ,644,759 1,301,078 (529,827,855) 15,113,116,932 Central bank funds (1,907,789,583) (1,907,789,583) Financial liabilities held for trading Other Total (452,303) - (857,048) (1,309,351) Funds from other banks (240,227,969) (5,289,238) - (945,278) (665,000) 6,899,515 (240,227,969) Client funds and other loans (10,177,702,320) ,877,950 (10,112,824,370) Others (323,142,581) (216,934,433) (1,089,879,407) (136,565,622) (418,503) 11,051,875 (1,755,888,671) Total liabilities (12,649,314,755) (222,223,671) (1,090,736,455) (137,510,900) (1,083,503) 82,829,340 (14,018,039,944) 184 Notes to the Consolidated Financial Statements

185 6. Cash and Equivalent in Central Banks This heading is itemized as follows: Cash 108,076, ,760,590 Deposit accounts with Banco de Portugal 276,705, ,146, ,781, ,907,221 In accordance with Regulation no /98, of 1 December, issued by the European Central Bank, banking institutions with registered office in one of the participating member states must, from 1 January 1999, place minimum reserves in accounts held at the national central bank. The basis on which the amount is assessed is all the deposits in central banks and financial and monetary institutions that are outside the euro area and all customer deposits of less than 2 years. A coefficient of 2% is applied to this base figure and 100,000 euros written down. Minimum reserves required are remunerated at the average rate for main refinancing operations in the European System of Central Banks. 7. Cash at other Banking Institutions This heading is itemized as follows: Cash in domestic banking institutions: Cheques payable 58,264,995 67,707,158 Current accounts 6,011,051 3,494,359 64,276,046 71,201,517 Cash in foreign banking institutions: Current accounts 17,555,327 8,343,114 17,555,327 8,343,114 Interest receivable ,831,513 79,544,798 The vast majority of cheques receivable on 31 December 2013 and 2012 were cleared during the first days of January 2014 and January 2013, respectively. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 185

186 8. Financial Assets held for Trading This heading is broken down as follows: Securities issued by residents Equity instruments 776, ,191 Debt instruments 0 10,944 Financial derivative instruments with positive fair value (Note 12) Exchange forwards 2,071 75,753 Interest rate swaps 22,752,929 17,840,043 23,531,359 18,388,931 Listed 0 10,944 Unlisted 23,531,359 18,377,987 23,531,359 18,388,931 Details of the securities included under this heading are provided in Annex I. 9. Other Financial Assets at Fair Value via Profit & Loss This heading is broken down as follows: Securities issued by non-residents Debt instruments 30,732,472 8,300,897 Securities issued by residents Debt instruments 53,152 27,720 30,785,624 8,328,617 Listed 30,785,624 8,328,617 Unlisted ,785,624 8,328,617 All the securities issued by residents correspond to Portuguese sovereign debt. Details of the securities included under this heading are provided in Annex I. 186 Notes to the Consolidated Financial Statements

187 10. Financial Assets Available for Sale This heading is organised as follows: Securities issued by residents Debt instruments 1,666,814,199 1,557,386,233 Equity instruments 38,428,111 19,132,973 Securities issued by non-residents Debt instruments 3,181,442, ,570,991 Equity instruments 105,273,116 90,069,925 4,991,957,713 2,409,160,122 Impairment (Note 23) (4,876,962) (1,608,195) (4,876,962) (1,608,195) 4,987,080,751 2,407,551,927 Listed 4,954,192,824 2,386,724,244 Unlisted 32,887,927 20,827,683 4,987,080,751 2,407,551,927 With regard to debt securities issued by residents, 852,640,529 euros correspond to Portuguese sovereign debt. With regard to debt securities issued by non-residents, the part relating to foreign sovereign debt corresponds to 2,305,060,263 euros, for which reason the most relevant parts of the sovereign debt issued by Spain and Italy 1,210,045,414 euros and 936,965,605 euros, respectively. This portfolio does not include sovereign debt issued by Greece. Details of the securities included under this heading are provided in Annex I. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 187

188 11. Investments in Banking Institutions This heading is organised as follows: Investments in domestic banks: In other banks: Deposits 25,011,070 87,730,247 Discounted commercial paper - - Purchases with resale agreement - 10,057,251 Loans 6,990,000 8,600,000 Other investments 3,515 15,005,563 32,004, ,393,061 Interest receivable 26,235 1,327,884 32,030, ,720,945 With regard to the financial years ending on 31 December 2013 and 2012, residual periods for investments in banks were structured as follows: Up to three months 24,844,499 43,043,017 Between three months and one year 7,160,087 78,350,044 32,004, ,393,061 Interest receivable 26,235 1,327,884 32,030, ,720,945 On 31 December 2013, this heading breaks down per entity in the following manner: Banco Bilbao Vizcaya Argentaria 18,127,765 Finanfarma 6,990,000 Banco Finantia, SA 4,713,219 Banco Português de Gestão 2,000,000 Banco Espírito Santo, SA 100,000 Caixa Económica de Cabo Verde 70,086 Outras 3,515 32,004, Notes to the Consolidated Financial Statements

189 12. Derivatives On 31 December 2013 and 2012, this heading is composed of: Forward exchange contracts Notional amount Trading derivatives Assets held for trading (Note 8) 2013 Book value Liabilities held for trading Currency Forwards 2,071 (1,624) 447 Purchases 55,514 Sales 54,383 Swaps 133,925,000 22,752,928 (513,309) 22,239,619 Total 134,034,897 22,754,999 (514,933) 22,240,066 Forward exchange contracts Notional amount Trading derivatives Assets held for trading (Note 8) 2012 Book value Liabilities held for trading Currency Forwards 75,753 (9,079) 66,674 Purchases 1,642,645 Sales 1,570,685 Swaps 133,925,000 17,840,043 (1,300,272) 16,539,771 Total 137,138,330 17,915,796 (1,309,351) 16,606,445 The distribution of Group operations involving derivative financial instruments on 31 December 2013 and 2012 according to residual periods is as follows: <= 3 months > 3 months <= 6 months > 6 months <= 1 year > 1 year <= 5 years >=5 years Total Forward exchange contracts Currency Forwards Purchases - 55, ,514 Sales - 54, ,383 Swaps 16,000, ,130,000 57,795, ,925,000 16,000, ,897-60,130,000 57,795, ,034,897 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 189

190 <= 3 months > 3 months <= 6 months > 6 months <= 1 year > 1 year <=5 years Total Forward exchange contracts Currency Forwards Purchases 1,624,942 17, ,642,645 Sales 1,553,108 17, ,570,685 Swaps ,130,000 63,795, ,925,000 3,178,050 35,280 70,130,000 63,795, ,138,330 The distribution of Group operations involving derivative financial instruments on 31 December 2013 according to counterparty is as follows: Notional amount Book value Forward exchange contracts Currency Forwards Clients 109, Swaps Interest rate swaps Financial Institutions 133,925,000 22,239, ,034,897 22,240, Notes to the Consolidated Financial Statements

191 13. Customer Loans This heading is itemized in the following manner: Domestic Medium and long-term: Loans secured by real property 1,971,148,088 3,226,280,669 Loans not secured by real property 2,021,520, ,187,649 Mortgage loans (standard conditions) 2,063,934,062 2,092,985,328 Mortgage loans (subsidised conditions) 222,050, ,852,238 Commercial paper 245,583, ,887,783 Financial lease contracts 123,897, ,164,383 Short-term: Current account credit 426,756, ,022,672 Other credit Credit cards 32,579,432 33,796,023 Other credit 297,650, ,237,040 Overdrafts 16,127,096 20,278,305 7,421,247,589 7,637,692,090 Foreign Medium and long-term: Loans 6,157,769 5,796,334 Short-term: Overdrafts - 2,873 Other loans 33,177,737 26,832,177 39,335,506 32,631,384 Interest receivable 37,697,623 40,199,553 Fees at amortised cost: Revenue with deferred income (19,627,093) (16,998,807) Expenses with deferred charges 37,172 47,644 (19,589,921) (16,951,163) Total debt (not yet due) 7,478,690,797 7,693,571,864 Overdue debt and interest Non-performing loans 646,626, ,248,781 Due interest 10,825,025 12,508, ,451, ,757,124 8,136,142,185 8,301,328,987 Impairment (Note 23) Past due loans and interest (497,736,359) (440,365,189) Bad debt (166,416,360) (200,811,194) (664,152,719) (641,176,383) 7,471,989,466 7,660,152,604 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 191

192 On 31 December 2013 and 2012, customer loans according to business sector was as follows: 2013 Not yet due Overdue Total Companies Car & Motorcycle wholesale and retail trade and repairs 622,153,434 77,763, ,916,729 Manufacturing industries 531,105,464 78,427, ,533,319 Construction 379,132, ,565, ,697,522 Agriculture, livestock, hunting, forestry & fishing 407,874,777 21,639, ,514,665 Real estate activities 300,728,472 55,113, ,842,388 Financial and insurance activities 241,227,482 9,245, ,472,885 Public agencies & Defence; Mandatory Social Security 239,481,703 96, ,578,301 Human health and social support 221,978,829 4,243, ,222,459 Hospitality industry, restaurants and similar 186,468,143 21,159, ,627,908 Transport and storage 74,990,296 13,289,230 88,279,527 Consulting, scientific, technical & similar activities 76,704,304 4,236,175 80,940,479 Other services 65,545,713 3,554,413 69,100,127 Administrative activities & support services 60,914,130 2,565,117 63,479,247 Arts, shows, sports and leisure activities 30,760,710 3,965,015 34,725,725 Education 30,871,892 1,643,605 32,515,497 Power, gas, vapour, hot and cold water, air conditioning 29,430, ,677 29,572,780 Water collection, treatment & supply, sanitation, waste management 26,384, ,749 26,732,687 Extractive industries 16,176,848 7,033,281 23,210,128 Information and communication activities 8,486,991 4,755,546 13,242,537 Families employing maids and professional activities 8,597 18,787 27,384 Other 8,423 1,306 9,729 3,550,433, ,808,724 4,988,242,024 Individuals Home loans 2,352,872,761 50,634,503 2,403,507,264 Other purposes 1,557,277, ,008,161 1,726,285,195 3,910,149, ,642,664 4,129,792,459 Interest due 37,697,623 Fees associated to amortised cost -19,589,921 Total 7,460,583, ,451,388 8,136,142, Notes to the Consolidated Financial Statements

193 2012 Not yet due Overdue Total Companies Car & Motorcycle wholesale and retail trade and repairs 654,045,454 75,449, ,495,005 Manufacturing industries 607,422,197 63,628, ,051,091 Construction 459,746, ,364, ,110,368 Agriculture, livestock, hunting, forestry & fishing 360,893,270 19,394, ,287,637 Real estate activities 317,634,824 36,074, ,708,924 Financial and insurance activities 214,063,855 4,842, ,906,158 Public agencies & Defence; Mandatory Social Security 207,681,077 4,625, ,306,745 Human health and social support 199,084,983 2,207, ,292,212 Hospitality industry, restaurants and similar 179,331,436 15,571, ,902,789 Transport and storage 84,403,585 11,152,320 95,555,905 Consulting, scientific, technical & similar activities 76,817,083 4,810,026 81,627,109 Other services 64,781,023 2,922,370 67,703,393 Administrative activities & support services 59,671,969 2,863,870 62,535,838 Arts, shows, sports and leisure activities 36,531,453 2,133,120 38,664,573 Education 29,605,542 1,533,713 31,139,255 Power, gas, vapour, hot and cold water, air conditioning 24,884, ,093 25,040,688 Water collection, treatment & supply, sanitation, waste management 20,428,501 2,661,787 23,090,289 Extractive industries 19,175,837 13,663 19,189,501 Information and communication activities 12,302,288 5,567,747 17,870,035 Families employing maids and professional activities 27,413-27,413 Other 37,034,718 5,592,416 42,627,134 3,665,567, ,564,777 4,033,132,060 Individuals Home loans 2,398,326,082 50,731,665 2,449,057,747 Other purposes 1,606,430, ,460,682 1,795,890,790 4,004,756, ,192,347 4,244,948,537 Interest due 40,199,553-40,199,553 Fees associated to amortised cost (16,951,163) - (16,951,163) Total 7,693,571, ,757,124 8,301,328,987 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 193

194 With regard to the financial years ending on 31 December 2013 and 2012, customer loan residual periods were as follows: Up to three months 505,184, ,943,738 Between three months and one year 599,118, ,526,054 Between one and three years 1,218,255,457 1,308,182,831 Between three and five years 5,013,266,857 4,974,239,222 More than five years 782,209, ,188,752 8,118,034,483 8,278,080,597 Interest receivable 37,697,623 40,199,553 Fees associated with amortised cost (19,589,921) (16,951,163) 8,136,142,185 8,301,328,987 Crédito Agrícola has not performed any securitisation operations regarding its debt portfolio to date. 14. Investments Held to Maturity This heading is itemised as follows: Securities issued by residents Debt instruments Portuguese public debt - 1,401,908,058 Other residents - 721,060,323 Securities issued by non-residents Debt instruments Foreign public issuers - 176,465,836 Other non-residents - 424,571,671-2,724,005,888 Interest receivable - 36,545,457-2,760,551,345 Listed 2,760,551,345 Unlisted ,760,551, Notes to the Consolidated Financial Statements

195 In January 2013, the Caixa Central reclassified its entire held to maturity portfolio, to the value of 2,051 million euros, as available for sale. This reclassification was necessary due to the sale of Public Debt securities during 2013, before their maturity / redemption date, which were registered in the securities portfolio held to maturity, seeing that Caixa Central cannot register any financial assets in this portfolio during the current financial year of 2013 and the two following years, in conformity with the rules established in the international accounting standard (IAS 39 Financial Instruments). The same applies to the consolidated accounts of the Crédito Agrícola Group, seeing that all securities were reclassified as Financial Assets Held For Sale. During 2013, securities to the value of million euros were sold, generating capital gains of approximately 25.7 million euros. The revaluation reserves resulting from fair value valuation on 31st December 2013 came to 17.8 million euros. Details of the securities included under this heading are provided in Annex I. 15. Other Tangible Assets The operations that occurred under Other tangible assets during 2013 and 2012 were as follows: Description Net value Acquisitions Amortisations Impairment (Note 23) Write-off, sale, other Net value Real property at own service 218,899,309 2,410,852 (5,793,441) 63,135 11,526, ,106,479 works in leases 8,750, ,964 (877,015) - 436,164 8,510,733 other real property 2,260,292 6,888 (78,627) - (113,129) 2,075, ,910,221 2,618,704 (6,749,083) 63,135 11,849,659 - Equipment 38,477,372 7,693,634 (12,270,048) - 581,618 34,482,576 Artworks 975,886 8, , ,813 Leased equipment Equipment 236,724 65,705 (69,408) - (98,352) 134,669 Other leased assets (44,929) - (12,896) - 52,060 (5,765) 191,795 65,705 (82,304) - (46,292) 128,904 Other tangible assets: Tangible assets in progress 12,702,084 11,421, (17,126,416) 6,996,992 Others 425,245 2,706 (98,026) - (355) 329,570 13,127,329 11,424,030 (98,026) - (17,126,771) 7,326, ,682,603 21,810,098 (19,199,461) 63,135 (4,739,884) 280,616,491 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 195

196 Description Net value Acquisitions Amortisations Impairment (Note 23) Write-off, sale, other Net value Real property at own service 222,009,045 4,638,083 (5,533,826) (319,489) (1,894,504) 218,899,309 works in leases 9,345, ,436 (923,348) - (72,301) 8,750,620 other real property 2,317,021 24,366 (81,098) - 3 2,260, ,671,899 5,062,885 (6,538,272) (319,489) (1,966,802) 229,910,221 Equipment 44,183,879 8,262,548 (14,088,801) - 119,746 38,477,372 Artworks 960,006 15, ,886 Leased equipment Equipment 373,871 - (99,129) - (38,018) 236,724 Other leased assets (31,779) - (13,150) - - (44,929) 342,092 - (112,279) - (38,018) 191,795 Other tangible assets: Tangible assets in progress 10,035,971 3,577, (911,695) 12,702,084 Others 529,939 3,170 (106,501) - (1,363) 425,245 10,565,910 3,580,978 (106,501) - (913,058) 13,127, ,723,786 16,922,291 (20,845,853) (319,489) (2,798,132) 282,682, Intangible Assets The operations that occurred under Intangible assets during 2013 and 2012 were as follows: Description Net value Acquisitions Amortisations Write-off, sale, other Net value Automatic data processing system (software) 43,320,607 4,147,821 (11,770,478) 11,432,567 47,130,517 Other intangible assets 173,309 - (4,969) - 168,340 Intangible assets in progress 13,267,262 10,407,123 - (10,202,622) 13,471,763 56,761,178 14,554,944 (11,775,447) (319,489) 60,770,620 Description Net value Acquisitions Amortisations Write-off, sale, other Net value Automatic data processing system (software) 42,985,042 2,954,192 (10,807,151) 8,188,523 43,320,607 Other intangible assets 170,860 14,844 (14,423) 2, ,309 Intangible assets in progress 12,096,121 8,426,921 - (7,255,780) 13,267,262 55,252,023 11,395,957 (10,821,574) 934,772) 56,761, Notes to the Consolidated Financial Statements

197 On 31 December 2013 and 2012 the heading Automatic data processing system (software) includes 42,050,147 euros and 37,142,122 euros respectively, regarding costs borne with staff assigned to software developed internally by CA Serviços. The amount borne in 2013 was 4,908,025 euros. On 31 December 2013 the heading Intangible assets in progress relates essentially to costs borne with staff assigned to software developed internally by CA Serviços. During 2013 and 2012 the capital gains and losses obtained by the sale of tangible assets are registered under the title Earnings from the sale of other assets Other tangible assets (Note 40). 17. Investment in Affiliates, Associated Companies and Business Combinations This heading is broken down as follows: FII CA Património Crescente 64,945,980 71,996,573 FCR Agrocapital 1 4,368,075 4,477,729 FCR InovCapital Global 2-1,977,923 FCR Central Frie 664, ,250 Rede Nacional de Assistência, SA 210, ,500 70,189,354 79,372,975 On 31 December 2013 the most significant financial information removed from the financial statements of these companies are summarised in Note 4. During 2011 CA Seguros acquired a 20% interest in the share capital RNA - Rede Nacional de Assistência, SA, a company engaged in providing support services. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 197

198 18. Income Tax The balances of assets and liabilities due to income tax on 31 December 2013 and 2012 were the following: Assets due to deferred tax Regarding temporary differences 122,242, ,107,372 Regarding reported tax losses 4,927,231 1,268, ,170, ,375,611 Liabilities due to deferred tax Regarding temporary differences (14,091,857) (2,695,427) 113,078, ,680,184 Assets due to current tax Recoverable corporate tax 11,031,905 6,988,406 Liabilities due to current tax Payable income tax (9,957,674) (9,970,122) 1,074,231 (2,981,716) Details of operations that took place with regard to deferred tax during 2013 and 2012 were as follows: 2013 Balance on Variation in Earnings Variation in Reserves Balance on Tangible assets and impairment 14,493 63,739 78,232 Intangible assets 71,629 (71,525) 104 Provisions not accepted for tax purposes Provisions for bad debt 31,768,025 23,378,988 55,147,013 Provisions for non-performing loans 77,497,847 (22,637,335) 54,860,512 Provisions for general credit risks 9,848,297 (2,745,503) 7,102,794 Provision for financial investment 86,603 (46,089) 40,514 Provisions for real property 912,348 25, ,033 Provisions for other investments 826, ,126 1,346,356 Provisions for other risks and charges 2,140,818 (1,628,728) 512,090 Pensions Early retirement 380,488 82, ,900 Contributions 19, , ,348 Seniority awards 4,564,301 (191,941) 4,372,360 Health costs 254,008 (85,181) 168,827 Valuation at fair value for financial assets available for sale in reserves (1,382,790) 810,029 (15,194,960) (15,767,721) Revaluation fixed assets not accepted for tax (585,388) 61,082 (524,306) Fiscal credits - (1,180,468) (1,180,468) Reportable tax losses 1,169,294 3,757,937 4,927,231 Fees 69,281 (68) 69,213 Others 24, , , ,680, ,975 (15,194,960) 113,078, Notes to the Consolidated Financial Statements

199 2012 Balance on Variation in Earnings Variation in Reserves Balance on Tangible assets and impairment 97,266 (82,773) 14,493 Intangible assets 54,693 16,936 71,629 Provisions not accepted for tax purposes Provisions for bad debt 51,762,467 (19,994,442) 31,768,025 Provisions for non-performing loans 44,994,156 32,503,691 77,497,847 Provisions for general credit risks 6,348,553 3,499,744 9,848,297 Provision for financial investment 130,517 (43,914) 86,603 Provisions for real property 372, , ,348 Provisions for other investments 925,039 (98,809) 826,230 Provisions for other risks and charges 1,053,725 1,087,093 2,140,818 Pensions Early retirement 375,245 5, ,488 Contributions - 19,745 19,745 Seniority awards 3,958, ,470 4,564,301 Health costs 204,047 49, ,008 Valuation at fair value for financial assets 6,207,631 (717,471) (6,872,950) (1,382,790) available for sale in reserves (1,152,441) 567,053 (585,388) Revaluation fixed assets not accepted for tax (284,193) 284,193 - Fiscal credits 874, ,289 1,169,294 Reportable tax losses 70,010 (729) 69,281 Fees (450,626) 450,626 Others 1,724,405 (1,699,450) 24, ,266,063 17,287,071 (6,872,950) 127,680,184 The high level of deferred tax existing during the financial years of 2013 and 2012 is mainly due to provisions for mortgage loans. Expenditure with tax on profit recognised in earnings, as well as tax charges, measured as the relationship between tax liability and earnings before tax is presented in the following manner: Current tax 22,605,452 19,733,515 Deferred tax - - Registration and reversion of temporary differences (592,975) (17,287,071) Total tax recognised in earnings 22,012,477 2,446,444 Profit before tax 19,154,413 47,259,412 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 199

200 The reconciliation between the nominal tax rate and the effective tax rate in 2013 and 2012 can be demonstrated as follows: Tax rate Amount Tax rate Amount Profit before tax 19,154,413 47,259,412 Tax calculated according to nominal rate 26.50% 5,075, % 12,523,744 Additional tax (state surtax) 4.67% 895, % 553,338 Negative asset variations not reflected in net earnings due to recognition of impairment in FEIIA CA Imobiliário 0% - -7% (3,518,792) Local authority surtax 5.77% 1,105, % 1,020,050 Separate taxation 6.44% 1,232, % 1,341,431 Tax corrections regarding previous years -0.10% (18,569) % (5,327,603) Operations performed under lower tax rates 0.00% % - Tax Benefits -5.19% (993,244) -1.77% (837,901) Potential AID regarding unregistered losses 48.96% 9,377, Rate reduction due to deferred tax (-2%) 13.33% 2,553, Other 14.53% 2,783, % (3,307,823) % 22,012, % 2,446,444 In 2013 the variation between current tax and deferred tax is largely explained by the tax losses accrued during the financial year by Caixas Agrícolas and which were also not registered as assets due to deferred tax offsetting that effect. During 2012 the heading Tax corrections regarding previous years corresponds to Corporation tax refunds due to rectifying tax payments made by the Group in prior financial years. 200 Notes to the Consolidated Financial Statements

201 19. Technical Provisions This heading breaks down into the following items: Life insurance Mathematical provision 1,077,891, ,238,186 Claims provision 5,244,337 5,185,610 Other technical provisions: Profit-sharing provisions 24,623,935 24,579,674 Portfolio stabilisation provisions 14,308,054 14,596,656 Rate commitment provision 28,072,161 15,777,748 1,150,140,088 1,026,377,874 Non-life insurance Provisions for premiums not acquired 15,951,101 16,508,200 Claims provision 91,038,036 91,187,451 Other technical provisions: Provisions for risks in progress 3,832,012 2,725,811 Provisions for claims deviations 695, , ,516, ,025,914 1,261,656,635 1,137,403,788 Operations with regard to technical provisions during 2013 and 2012 were as follows: Balance on Increases net of replacements and cancellations (Note 42) Use / settlement Balance on Increases net of replacements and cancellations (Note 42) Use Settlement Balance on ,006,883, ,681,427 18,838,747 1,137,403, ,115, ,468 1,261,656,636 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 201

202 On 31 December 2013 and 2012 the mathematical provision consists in: Protecção Poupança Investimento 85,701, ,405,812 Protecção Poupança Reforma 112,917, ,203,927 Protecção Poupança Educação 17,161,660 18,218,890 CAPPR+6 7,939,052 18,178,494 CA Poupança Activa 258,466, ,940,896 Protecção Super-Crédito 47,251 25,453 CAPPR 130,390, ,568,814 CA Protecção Livre 200, ,491 CA Vida Plena 30,822 29,220 CA Super 4,25 77,899,813 76,429,419 CA Primavera 26,293,221 25,796,663 CA Verão Taxa Crescente 25,129,488 24,675,907 CA Verão PPR 10,687,802 10,580,091 CA Futuro Garantido PPR 25,393,567 25,066,665 CA Mulher 13,157 9,924 CA Super 5 38,202,601 37,295,636 CA Super 5-3,8% 7,935,897 7,857,231 CA Super 5 PPR 31,262,037 30,393,561 CA Super 5 - PPR (3,8%) 7,157,433 7,291,687 CA Sempre + 14,240,010 14,245,596 CA Sempre + PPR 11,600,847 11,641,950 CA Garantia Máxima 27,930,349 27,268,979 CA Garantia Máxima - PPR 21,441,011 20,905,774 CA Pessoa-Chave 3,860 2,462 CA Pessoa-Chave Crédito 9,885 5,644 CA Garantia 5 (1ª série) 19,457,421 0 CA Garantia 5 - PPR (1ª série) 29,321,641 0 CA Garantia 5-2ª série 39,286,480 0 CA Garantia 5 PPR - 2ª série 48,122,832 0 CA Universitário (Savings) 3,646, ,077,891, ,238, Notes to the Consolidated Financial Statements

203 20. Other Assets This item is composed of: Other assets Other cash and equivalent 1,972,467 9,819 Gold and precious metals 561, ,091 Debtors in futures operations 23, Escrow account investments 3,596,569 1,192,121 Other investments 37,757 90,131 Public Administrative Sector VAT reimbursements 73,743 72,472 Municipal Conveyance Tax refunds requested 1,737,543 1,183,908 Other receivables 1,659,833 2,053,391 Debtors for capital not paid up Debt under litigation 4,127,215 3,291,957 Shareholder loans 1,176,317 1,176,317 Subsidy receivables 1,309,842 1,596,710 Miscellaneous debtors advance payments 61,070,365 61,433,844 Financial lease customers 2,234,546 2,231,614 Other miscellaneous debtors 55,317,454 58,070, ,899, ,964,454 Income receivable Irrevocable commitments 134, ,686 Banking services rendered 2,389,339 2,300,345 Other income receivable 731, ,536 3,255,408 3,116,567 Expenses with deferred charges Rent and leases 377, ,449 Insurance 1,302,462 1,157,350 Other deferrable expenses 6,688,463 6,617,117 FGD, FGC CAM and SII contributions - 15,274 8,368,866 8,174,190 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 203

204 from previous page Amounts to be reconciled ATM clearance 44,299,278 35,482,570 Exchange operations to be settled 172, ,722 Stationery 2,190, ,417 Other operations to be settled 2,986,801 4,338,755 49,649,201 41,036,464 Tangible assets available for sale Real property 1,007,037, ,969,732 Equipment 694, ,937 Other 2,351,188 1,881,349 1,010,082, ,534,018 1,206,255,550 1,148,825,693 Impairment Other assets Other miscellaneous debtors (17,712,710) (16,419,513) Tangible assets available for sale Real property (129,399,242) (66,109,854) Equipment (149,750) (348,444) Other (226,758) (158,111) (147,488,460) (83,035,922) 1,058,767,090 1,065,789, Notes to the Consolidated Financial Statements

205 Entries regarding tangible assets available for sale during 2013 and 2012 are the following: Gross value Impairment Purchases Sales Use of impairment Adjustments Impairment Impairment bestowed Reinstated impairment Gross value Impairment Net value Tangible assets available for sale Real property 960,969,732 (66,109,855) 167,694,470 (121,626,758) 8,357,634 (39,491,678) (40,424,062) 8,268,718 1,007,037,444 (129,399,243) 877,638,201 Equipment 682,936 (348,444) 464,835 (453,419) 4,800 - (67,127) 261, ,352 (149,749) 544,603 Other 1,881,349 (158,110) 1,662,178 (1,192,339) 87,974 - (176,622) 20,000 2,351,188 (226,758) 2,124, ,534,017 (66,616,409) 169,821,483 (123,272,516) 8,450,408 (39,491,678) (40,667,811) 8,549,740 1,010,082,984 (129,775,750) 880,307, Gross value Impairment Purchases Sales Use of impairment Adjustments Impairment Impairment bestowed Reinstated impairment Gross value Impairment Net value Tangible assets available for sale Real property 650,669,289 (49,884,684) 406,539,049 (96,238,603) 6,380,059 (6,445,180) (19,233,513) 3,073, ,969,732 (66,109,855) 894,859,877 Equipment 669,297 (155,168) 1,182,312 (1,168,673) 5,864 - (262,897) 63, ,936 (348,444) 334,492 Other 914,147 (236,686) 1,602,873 (635,671) 58,132 - (32,494) 52,938 1,881,349 (158,110) 1,723, ,252,733 (50,276,538) 409,324,231 (98,042,947) 6,444,055 (6,445,180) (19,528,904) 3,190, ,534,017 (66,616,409) 896,917,608 The item ATM clearance corresponds to the fixed amounts in ATMs awaiting payment by SIBS. On 31 December 2013 and 2012 the heading Other assets Shareholder loans relates to loans granted to Propaço. On 31 December 2013 the heading Miscellaneous debtors advance payments includes a sum of 57,771,262 euros, regarding advance payments made by FII Carteira Imobiliária in order to purchase real property. On 31 December 2013 and 2012 the heading Other miscellaneous debtors includes the sums of 9,843,203 euros and 11,548,260 Euros, respectively, regarding subsidies to be received by CA Seguros from IFAP. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 205

206 21. Funds at Central Banks and other Banking Institutions These items have the following components: Funds at Central banks Banco de Portugal funds Loans 1,250,000,000 1,900,000,000 Interest payable 12,845,139 7,789,583 1,262,845,139 1,907,789,583 Funds at domestic banking institutions Deposits 53,992,151 78,340,874 Other funds 61, ,334 54,053,345 78,568,208 Funds at foreign banking institutions Other financial institutions: Deposits 489,282 7,776,632 Sales operations with repurchase agreement 43,819, ,028,496 Other funds 1,463,692 3,931,045 45,772, ,736,173 Interest payable 241, , ,067, ,227,969 On 31 December 2013 the item Sales operations with repurchase agreement regards Portuguese public debt repo operations with foreign entities, in order to increase solvency. On 31 December 2013 and 2012 the residual period for Central Bank funds and those of other financial institutions are itemized as follows: Up to three months 396,027,000 1,063,238,038 Between three months and one year - 82,246,797 Between one and three years 952,999, ,819,546 Between three and five years 799,761-1,349,825,865 2,139,304,381 Interest payable 13,086,327 8,713,171 1,362,912,192 2,148,017, Notes to the Consolidated Financial Statements

207 The heading Bank of Portugal funds includes four loans with a total amount of 1,250,000,000 euros with maturities on January 2014 (300,000,000 euros), January 2015 (300,000,000 euros) and February 2015 ( 50,000,000 euros). Securities given as collateral to Banco de Portugal in order to cover funding operations through the Eurosystem, reported to 31 December 2013 are: Securities ISIN Quantity Final Value SPGB /31/17 ES J8 12,5 13,353, SPGB /30/18 ES A5 138,5 147,252, SPGB /16 ES J ,149, SPGB /18 ES Q ,246, SPGB /18 ES B ,005, BTPS /18 IT ,973, BTPS /18 IT ,986, BTPS 3 1/2 11/17 IT ,5 39,678, BTPS /18 IT ,860, BPIL 15/01/15 PTBB5JOE ,274, BCP 29/10/2014 PTBCU31E ,422, BCPPL /22/17 PTBCUB1E0005 1,199 62,485, BES 17/02/2015 PTBLMVOE ,303, CGD 06/12/2016 PTCGF11E0000 2, ,558, CGD 21/07/2014 PTCGGFOM ,203, EDP 07/12/2014 PTEDPSOM , EDP 04/05/2015 PTEDPTOM , BT 19/09/14 PTPBT1GE ,000,000 9,302, BT 18/04/14 PTPBT2GE ,000, ,399, BT 23/05/14 PTPBTLGE ,000, ,297, BT 18/07/14 PTPBTYGE ,346, ,241, PORT. TELECOM FINANCE 03/17 XS ,5 15,702, EDP FINANCE 22/06/2015 XS , EDP FINANCE 26/09/2016 XS ,846, EDP FINANCE 16/03/2015 XS ,214 10,397, EDP FINANCE 01/02/2016 XS ,545, EDP FINANCE 21/09/2017 XS ,83 8,141, PORT. TELECOM FINANCE 04/18 XS ,5 17,234, PORT. TELECOM FINANCE 05/20 XS ,5 1,682, ,968,402, ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 207

208 Assets not derecognised and associated with repurchase operations are the following: Securities ISIN Quantity Repurchase Value BTPS 3 11/17 IT ,000,000 7,730, BTPS 3 11/17 IT ,830,000 12,266, BTPS 3 11/17 IT ,515,138 12,266, BTPS 3 11/17 IT ,199,251 4,798, BTPS 3 11/17 IT ,749,532 2,999, BTPS 3 11/17 IT ,672,871 2,959, BTPS 3 11/17 IT ,533, , ,819, Customer Funds and other Loans This heading is itemised as follows: Deposits: Current accounts 2,713,549,351 2,576,157,001 Term accounts 5,190,187,465 5,146,102,777 Savings accounts 2,150,048,805 2,310,978,583 Other customer funds 453, ,545 Cheques and payment orders 8,945,778 6,141,217 Others 67,630 50,366 10,063,252,609 10,039,714,489 Interest payable 59,290,287 73,109,881 10,122,542,896 10,112,824, Notes to the Consolidated Financial Statements

209 On 31 December 2013 and 2012 the residual periods for customer funds and other loans were as follows: Up to three months 5,693,954,674 5,463,966,578 Between three months and one year 4,133,288,259 4,241,298,539 Between one and three years 224,379, ,157,420 Between three and five years 8,985,937 9,399,871 More than five years 2,643,888 3,892,081 10,063,252,609 10,039,714,489 Interest payable 59,290,287 73,109,881 10,122,542,896 10,112,824,370 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 209

210 23. Provisions and Impairment Entries in provisions and impairment for the Group during 2013 and 2012 were the following: 2013 Balance on Increases net of rep. or canc Used Transfers Settlements Balance on Provision for customer loans (Note 13) Bad debt 200,811,194 4,159,967 (406,016) (38,130,465) (18,319) 166,416,361 Overdue credit and interest 440,365, ,225,161 (45,913,899) 1,100,081 (40,174) 497,736,358 Provisions: 641,176, ,385,128 (46,319,915) 37,030,384 (58,493) 664,152,719 Other risks and charges 7,572,648 (4,257,475) (624,572) 2,434,956-4,125,557 Impairment of other financial assets Financial assets available for sale (Note 10) Investments in subsidiaries, associates and business arrangements (Note 17) 7,572,648 (4,257,475) (624,572) 2,434,956-4,125,557 1,608, ,819 (842,355) 3,096,294 88,009 4,876, (4,000,528) (3,096,294) 7,096,822 - Impairment of other assets: Fixed assets held for sale (Note 20) 66,616,409 32,118,070 (8,483,517) 35,205,184 4,319, ,775,750 Other assets (Note 20) 16,419,513 1,974,817 (1,078,081) 390,244 6,217 17,712,710 Tangible assets (Note 15) 864,911 (63,135) ,776 Intangible assets ( Note 16) - 33, ,858 85,509,028 34,990,065 (14,404,481) 35,595,428 11,511, ,201, ,258, ,117,718 (61,348,968) - 11,452, ,479, Notes to the Consolidated Financial Statements

211 2012 Balance on Increases net of rep. or canc Used Transfers Settlements Balance on Provision for customer loans (Note 13) Bad debt 217,231,086 (11,432,306) (148,733) (10,277,478) 5,438, ,811,194 Overdue credit and interest 376,487, ,473,298 (49,202,132) 2,563,485 43, ,365, ,718,383 99,040,992 (49,350,865) (7,713,993) 5,481, ,176,383 Provisions: Other risks and charges 6,915,759 (103,931) (310,482) (59,454) 1,130,756 7,572,648 6,915,759 (103,931) (310,482) (59,454) 1,130,756 7,572,648 Impairment of other financial assets Financial assets available for sale (Note 10) 1,583,076 5,167 (2,493) 22,445-1,608,195 Investments in subsidiaries, associates and business arrangements (Note 17) Impairment of other assets: Fixed assets held for sale (Note 20) 50,240,059 16,338,744 (6,428,784) 7,387,331 (920,941) 66,616,409 Other assets (Note 20) 14,727,064 1,562,583 (197,326) 363,671 (36,479) 16,419,513 Tangible assets (Note 15) 545, , ,911 Intangible assets (Note 16) ,095,621 18,225,983 (6,628,603) 7,773,447 (957,420) 85,509, ,729, ,163,044 (56,289,950) - 5,655, ,258,059 On 31 December 2013 and 2012 the heading Provisions other risks and charges includes provisions created in order to cover tax risks, lawsuits and other risks arising from the specific activities of the Group. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 211

212 24. Equity Instruments This heading is comprised of the following: C.C.A.M. Açores, CRL 7,406,150 7,406,150 C.C.A.M. Guadiana Interior, CRL 1,022,100 1,257,650 C.C.A.M. Nordeste Alentejano, CRL 661, ,980 C.C.A.M. Sotavento Algarvio, CRL 398, ,810 C.C.A.M. Ribatejo Norte e Tramagal, CRL 377, ,155 C.C.A.M. Pernes, CRL 361, ,615 C.C.A.M. Beira Baixa (Sul), CRL 127, ,755 C.C.A.M. Porto de Mós, CRL 100,010 1,411,850 C.C.A.M. Douro, Corgo e Tâmega, CRL 91,125 95,430 C.C.A.M. Médio Ave, CRL 66,535 96,995 C.C.A.M. Baixo Vouga, CRL 30,435 32,435 C.C.A.M. Costa Azul, CRL 5,275 17,928,380 C.C.A.M. Mogadouro e Vimioso C.C.A.M. Oliveira do Hospital, CRL 0 56,765 C.C.A.M. Eivas e Campo Maior, CRL 0 2,870 C.C.A.M. Estremoz, CRL C.C.A.M. Alentejo Central, CRL ,648,770 30,379,140 In accordance with IAS 32, equity instruments correspond to equity if the entity is entitled to unconditionally refuse reimbursement. The introduction of IAS/IFRS implied an adjustment with reference to 1 January 2006 of an amount of 41,447,495 euros, due to the fact that equity instruments used to be classified as liabilities (Note 29). 212 Notes to the Consolidated Financial Statements

213 25. Other Subordinated Liabilities This heading is composed of the following: Subordinated loans granted by FGCAM Untitled 81,433,884 86,433,884 Investment securities Issued 51,558,840 41,889, ,992, ,323,524 Interest payable 410, , ,403, ,835,246 Taking the maturities of subordinated loans into account, the residual period on 31 December 2013 and 2012 is as follows: Less than three months 1,959,800 - Between three months and a year 496,000 10,061,000 Between a year and three years 35,953,700 45,773,424 Between three and five years 47,626,500 26,489,100 More than five years 46,956,724 46,000,000 Interest payable 410, , ,403, ,835,246 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 213

214 The balance of the Crédito Agrícola Mútuo Guarantee Fund is analysed in the following manner: Description Securities holding entity Currency Interest maturity Interest rate in effect on Due date Balance on Refunds Emissions Balance on FGCAM Loan C11340 Vale de Sousa e Baixo Tâmega Euro 16-Jun % ,000,000 5,000, FGCAM Loan C3220 Costa Verde Euro 31-Jan % ,000, ,000,000 FGCAM Loan C3400 Bairrada e Aguieira Euro 05-May % ,000, ,000,000 FGCAM Loan C3400 Bairrada e Aguieira Euro 05-May % ,000, ,000,000 FGCAM Loan C4050 Bairrada e Aguieira Euro 16-Jun % ,000, ,000,000 FGCAM Loan C5460 Beira Baixa (South) Euro 15-May % ,000, ,000,000 FGCAM Loan C5460 Entre Tejo e Sado Euro 23-Dec % ,000, ,000,000 FGCAM Loan C5460 Entre Tejo e Sado Euro 23-Dec % , ,745 FGCAM Loan C5460 Entre Tejo e Sado Euro 23-Dec % ,493, ,493,989 FGCAM Loan C5460 Entre Tejo e Sado Euro 23-Dec % ,493, ,493,990 FGCAM Loan C5460 Entre Tejo e Sado Euro 29-Oct % ,000, ,000,000 FGCAM Loan C6020 Álcacer Sal e Montemor-Novo Euro 30-Nov % ,000, ,000,000 FGCAM Loan C6240 Moravis Euro 15-Dec % ,000, ,000,000 FGCAM Loan C6440 Alentejo Central Euro 23-Oct % ,995, ,995,192 FGCAM Loan C6440 Alentejo Central Euro 23-Oct % ,481, ,481,968 86,433,884 5,000,000-81,433, Notes to the Consolidated Financial Statements

215 The balance of Investment Securities issued is the following: Description Securities holding entity Number of Bonds Currency Unit per Value Interest maturity Interest rate in effect on Due date Balance on Refunds Regularizations Issues Balance on Tit.Investment/2006 CCCAM 10,000 Euro Dec , , Tit.Investment/ st Issue CCCAM 10,000 Euro Mar % , , ,300 Tit.Investment/2008 C1280 Médio Ave 2,025 Euro Jun ,012,500 1,012, Tit.Investment/2010 C1340 Vale de Sousa e Baixo Tâmega 2,000,000 Euro 5 30-Jun % ,000, ,00,000 Tit.Investment/2008 C1420 Noroeste 3,133 Euro Feb % ,565, ,566,500 Tit.Investment/2011 C1420 Noroeste 5,883 Euro Mar % ,941, ,941,500 Tit.Investment/2011 C1420 Noroeste 9,186 Euro Apr % ,593, ,593,000 Tit.Investment/2012 C1420 Noroeste 2,142 Euro Apr % ,071,000 1,071,000 Tit.Investment/2011 C1440 Área Metropolitana do Porto Euro 23-Dec % ,400, ,400,100 Tit.Investment/2010 C2090 Beira Douro 1,032 Euro Jun % , ,000 Tit.Investment/ st Issue C2160 Vale do Távora 3,000 Euro Jul ,500,000 1,500, Tit.Investment/ nd Issue C2160 Vale do Távora 1,899 Euro Jul , , Tit.Investment/2009 C2160 Vale do Távora 392 Euro Sep % , ,000 Tit.Investment/ st Issue C2160 Vale do Távora 1,016 Euro Jul % , , ,800 Tit.Investment/ nd Issue C2160 Vale do Távora 3,000 Euro Dec % ,500, , ,200,000 Tit.Investment/ st Issue C2160 Vale do Távora 2,347 Euro Jun % ,173, ,173,500 Tit.Investment/ nd Issue C2160 Vale do Távora 3,302 Euro Sep % ,651,000 1,651, Tit.Investment/2008 C2190 Terra Quente 2,965 Euro Jan ,482,500 1,482, Tit.Investment/2011 C2190 Terra Quente 3,000 Euro Mar % ,500, ,500,000 Tit.Investment/ st Issue C2190 Terra Quente 3,000 Euro Mar % ,500, ,500,000 Tit.Investment/ nd Issue C2190 Terra Quente 1,578 Euro Feb % , ,000 Tit.Investment/2011 C3160 Vale de Cambra 286,600 Euro 5 01-Apr % ,433, ,433,000 Tit.Investment/2009 C3370 Serras de Ansião 60,000 Euro 5 16-Apr % , ,000 Tit.Investment/2010 C3370 Serras de Ansião 60,000 Euro 5 31-Mar % , ,000 Tit.Investment/2012 C5460 Entre Tejo e Sado 500,000 Euro 5 31-Mar % ,500, ,500,000 Tit.Investment/2008 C6160 Elvas e Campo Maior 60,000 Euro 5 30-Jul % , ,000 Tit.Investment/2010 C6250 Guadiana Interior 376,228 Euro 5 01-Apr % ,881, ,881,140 Tit.Investment/2013 C6320 Costa Azul 32,000 Euro Jun % ,000,000 16,000,000 41,889,640 7,401,800-17,071,000 51,558,840 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 215

216 26. Other Liabilities This heading comprises the following: Creditors and other funds Funds retained account 1,843,124 2,101,510 Funds escrow account 6,628,570 7,223,319 Other resources 2,117,664 1,148,805 Public administrative sector Withholding tax 10,537,196 10,323,617 Social Security contributions 3,250,077 3,037,414 Value Added Tax 1,798,154 1,657,369 Other tax 3,725,241 3,763,693 Third party collections 216, ,800 Other health system contributions 620, ,501 Financial insurance contract liabilities 196,833,430 51,281,880 Investment fund liabilities, within group consolidation 202,265, ,696,994 Miscellaneous creditors Goods and services creditors 12,651,815 12,438,336 Creditors payable 275, ,338 Creditors instalments to be paid regarding subscribed securities 3,447,174 - Creditors credit cards 162, ,110 Down payment on preliminary purchase contracts (real property) 3,544,099 3,197,101 Subsidies receivable 7,308 8,904 Other creditors 16,215,092 20,770, ,140, ,758,912 Obligations with pensions and other benefits Total obligations 61,424,384 59,876,378 Value of pension fund (57,395,358) (50,225,036) 4,028,926 9,651,342 Charges payable Payroll Holidays and holiday subsidy 21,802,527 21,977,372 Seniority benefit 18,978,567 19,533,013 Others 1,567,212 1,680,721 General administrative expenses 36,493 16,658 Others 2,095,860 2,292,276 44,480,659 45,500,040 Deferred revenue Fees regarding guarantees provided 655, ,320 Rents 383, ,180 Other 486, ,177 1,525,789 1,287, Notes to the Consolidated Financial Statements

217 from the previous page Amounts to be settled Exchange rates 1,223 72,006 Electronic transfers 313,203 15,895,421 Amounts collected direct debit system 3,598,964 5,840,046 Clearance of securities 5,112,379 6,387,023 Other operations to be settled 34,502,345 17,467,969 43,528,114 45,662, ,703, ,860,436 The Group recognises investment fund interests that are included within the consolidation, though held by third parties as Other liabilities, according to AG29A and BC 8 of IAS32, for which reason they are no longer recognised under minority interests. On 31 December 2013 the balance under the heading Creditors and other funds Financial liabilities in insurance contracts relates to CA Vida contracts, at the guaranteed rate, without discretionary participation in results, valued at their amortized cost. Their development between 31 December 2012 and 2013 was the following: Amount managed on Amounts Variations in profits and losses Exits (technical interest) Amount managed on Entries Valued at amortised cost 51,281, ,604,264 3,963,705 3,910, ,833,430 On 31 December 2013 and 2012 the balance of the heading Creditors and other funds Advances due to preliminary sale contracts (real property) includes the sum of 2,812,030 euros and 2,816,530 euros, respectively, with regard to preliminary sale contracts on the subject of residential units of the Expo 98 building, already received by CA Imóveis. On 31 December 2013 and 2012 the balance of the heading Other operations to be settled - electronic transfers refers to bank transfers to be carried out at their respective value date through Banco de Portugal. On 31 December 2013 and 2012, the balance of the heading Other operations to be settled - SDD includes amounts for direct debit operations. The figures under this heading were drawn from customers by the issuing bank and offset through Banco de Portugal during the first days of January 2014 and 2013 respectively. On 31 December 2013 and 2012 the balance of the heading Other operations to be settled includes Nostro accounts operations, in particular foreign currency operations made by CA customers, waiting for the operation value date to be specified. Most of these correspond to operations with data value in early January 2014 and 2013, respectively, at which time they were settled. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 217

218 27. Contingent Liabilities and Commitments Contingent liabilities and commitments associated with banking operations are recorded under off-balance-sheet items and are as follows: Guarantees given and other potential liabilities Guarantees and aval 232,170, ,728,873 Assets given as collateral 5,109,318,094 4,463,775,438 Documentary credit opened 3,467,694 2,332,321 Assets given as collateral other assets 13,743, ,000 Surety 17,494 41,172 Commitments to third parties Lines of credit Irrevocable commitments 660,437, ,709,764 Revocable commitments 286,987, ,131,495 Subscription of instruments 88,150,000 90,250,000 Potential liability regarding the investor Indemnity system 341, ,715 Liabilities for services rendered Deposit and custody of securities 1,166,220,156 1,093,855,137 Securities managed by the institution 1,894,260,843 1,532,506,991 Amounts received for collection 80,436, ,860,240 Other 2,563,766 1,710,526 9,538,114,760 8,529,707,672 On 31 December 2013 and 31 December 2012 the heading Assets given as collateral - securities includes the value of securities in the pool of collateral deposited at Banco de Portugal as collateral for funding through the Eurosystem. This item also includes securities given as a guarantee to cover repurchases under contract with other non-resident financial institutions. On 31 December 2012 a sum of 59,809, 50 euros is registered under irrevocable commitments, corresponding to the collateral provided with regard to the irrevocable commitment for the acquisition of securities that will integrate the Fundo FEI Rendimento Fixo portfolio. The total balance under the heading Commitments to third parties subscription of instruments relates to underwriting commercial paper. 218 Notes to the Consolidated Financial Statements

219 The figure recorded under the item Other liabilities for services rendered on 31 December 2012 essentially corresponds to documentary credit. Despite not being registered in the off-balance accounts under the Crédito Agrícola Mútuo legal regimen, the Group is jointly and severally liable with regard to the unfinanced part of the Caixas Agrícolas pension funds that do not belong to SICAM (Note 46). 28. Share Capital The share capital of Crédito Agrícola Group, divided up and represented by registered certificates, with a par value of 5 euros per share, amounted to 926,355,629 euros on 31st December Out of the total amount of subscribed capital, a sum of 10,648,770 euros was transferred to the liabilities item Instruments representing equity with the nature of liability, by virtue of IAS 32 Financial Instruments (Note 25). With the publication of Crédito Agrícola Mútuo Legal Regimen in the Official Journal Diário da República (Decree- Law no. 142/2009, of 16th June), as mentioned in the Introduction, the articles of the Caixas de Crédito Agrícola were adapted to the new Legal Regimen, which had to be amended, at the latest, by the first ordinary general meeting held in 2010, under the terms specified in the transitory provisions established in Article 5 of Decree-Law no. 142/2009, of 16th June. In this way, the Articles of Association of CCAMs were amended and approved by General Meeting during 2009 and the start of 2010, in order to subject the exoneration of members to a decision by the General Meeting, for which reason, in conformity with IAS 32, the classification of the registered share certificates of Caixas Agrícolas subscribed by its members was kept as equity, except for those that were defined as liabilities, according to IAS 32. According to the articles of association of the Caixas Agrícolas, the conditions for the exoneration of members were: Until 31 October of any year, members can request their exoneration or a reduction of their interest, in writing addressed to the Board of Directors, under the following conditions: At least three years have passed since the share certificates were paid up. Reimbursement does not imply a reduction of the share capital to lower than the minimum share capital established in the articles; not imply default or worse default of any prudential limits or relations established by law or by Banco de Portugal with regard to Caixa Agrícola. Exoneration shall become effective on approval by the General Meeting that deliberates on the annual report for the year that the request was submitted. Exonerated members, as well as members who reduced their interest, shall be entitled to the reimbursement of their share certificates, according to article eight, number seven of the articles, though the Board of Directors shall ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 219

220 be entitled to suspend the reimbursement under the terms established in article eight number eight. Reimbursement may be performed in three annual instalments, unless a shorter period is determined by the Board of Directors. During the 2013 financial year, share capital was increased twice, once by 21,519,659 euros by the incorporation of reserves and another by 8,499,460 euros, through the entry of new members. On 31 December 2013 and 2012 share capital per associated Caixa Agrícola was as follows: CCAM de Pombal, CRL 55,970,360 55,979,705 CCAM Batalha, CRL 41,360,680 40,057,865 CCAM Região Bragança e Alto Douro, CRL 32,501,985 31,345,880 CCAM Costa Azul, CRL 30,306,210 30,130,910 CCAM do Noroeste, CRL 27,790,145 29,571,670 CCAM Alto Cávado e Basto, CRL 27,004,705 26,002,170 CCAM da Serra da Estrela, CRL 22,917,800 21,579,590 CCAM Açores, CRL 22,842,120 22,263,310 CCAM C. da Rainha, Óbidos e Peniche, CRL 21,449,735 21,079,115 CCAM do Vale do Távora e Douro, CRL 18,936,055 18,341,420 CCAM do Sotavento Algarvio, CRL 18,607,630 18,508,950 CCAM Terras Sousa, Ave, Basto e Tâmega, CRL 17,700,330 16,789,190 CCAM P. Varzim, V. Conde e Esposende, CRL 17,483,030 17,631,595 CCAM de São Teotónio, CRL 17,471,220 17,475,470 CCAM do Douro, Corgo e Tâmega, CRL 17,333,005 17,097,225 CCAM de Vale de Sousa e Baixo Tâmega, CRL 16,930,430 16,916,845 CCAM do Baixo Mondego, CRL 15,596,760 15,601,065 CCAM Coimbra, CRL 14,032,295 14,041,885 CCAM Alenquer, CRL 13,170,250 12,980,990 CCAM Beira Douro, CRL 12,699,385 11,783,240 CCAM de Alcobaça, CRL 12,593,515 11,938,675 CCAM Vale do Dão e Alto Vouga, CRL 12,275,505 11,566,675 CCAM do Baixo Vouga, CRL 12,137,960 12,165,675 CCAM da Zona do Pinhal, CRL 12,075,105 12,026,910 CCAM Ribatejo Norte e Tramagal, CRL 11,889,440 11,897,675 CCAM S. Bart. Messin. e S. Marcos Serra, CRL 11,796,145 11,565,655 CCAM S. João da Pesqueira, CRL 11,689,550 11,679,065 CCAM do Guadiana Interior, CRL 11,246,725 11,226,725 CCAM Beja e Mértola, CRL 11,076,985 11,068,000 CCAM Costa Verde, CRL 10,807,940 11,021,940 CCAM de Terras de Viriato, CRL 10,637,985 10,068,800 CCAM Salvaterra de Magos, CRL 10,527,065 10,544,350 CCAM Coruche, CRL 10,462,940 10,462,815 CCAM Lourinhã, CRL 10,415,465 10,116, Notes to the Consolidated Financial Statements

221 from the previous page CCAM Albufeira, CRL 9,760,215 9,695,220 CCAM Loures, Sintra e Litoral, CRL 9,376,710 9,412,980 CCAM Região do Fundão e Sabugal, CRL 9,281,275 8,943,365 CCAM de Silves, CRL 9,272,510 8,986,645 CCAM da Terra Quente, CRL 9,086,980 8,879,730 CCAM Médio Ave, CRL 8,961,295 9,005,685 CCAM de Cantanhede e Mira, CRL 8,769,825 8,733,345 CCAM Oliveira de Azeméis e Estarreja, CRL 7,994,455 7,856,990 CCAM Estremoz, CRL 7,975,965 5,751,875 CCAM Nordeste Alentejano, CRL 7,930,275 7,813,835 CCAM Ferreira do Alentejo, CRL 7,875,820 7,658,755 CCAM de Moravis, CRL 7,490,010 7,436,625 CCAM de Lafões, CRL 7,283,945 6,830,885 CCAM Oliveira do Bairro, CRL 7,134,905 6,924,695 CCAM da Bairrada e Aguieira, CRL 6,903,325 6,900,765 CCAM Alentejo Central, CRL 6,820,285 6,743,140 CCAM Arruda dos Vinhos, CRL 6,763,175 6,762,880 CCAM Área Metropolitana do Porto, CRL 6,747,105 5,476,040 CCAM Arouca, CRL 6,712,045 6,685,160 CCAM Alcácer-Sal e Montemor-Novo, CRL 6,460,725 6,520,285 CCAM Cadaval, CRL 6,383,090 6,386,935 CCAM Beira Centro, CRL 6,256,120 6,096,240 CCAM Porto de Mós, CRL 6,172,735 6,291,545 CCAM Elvas e Campo Maior, CRL 6,165,805 6,166,925 CCAM Terras de Miranda do Douro, CRL 6,059,595 5,737,300 CCAM do Ribatejo Sul, CRL 6,043,890 6,047,050 CCAM Vila Franca de Xira, CRL 6,037,618 5,886,254 CCAM Sousel, CRL 5,883,890 5,880,350 CCAM Vila Verde e Terras do Bouro, CRL 5,840,190 5,603,770 CCAM Paredes, CRL 5,509,485 5,128,495 CCAM Anadia, CRL 5,481,610 5,028,755 CCAM Sobral de Monte Agraço, CRL 5,431,055 5,326,420 CCAM Pernes, CRL 5,429,675 5,429,905 CCAM Azambuja, CRL 5,297,095 5,247,040 CCAM Aljustrel e Almodôvar, CRL 5,230,955 5,141,340 CCAM Vagos, CRL 5,103,710 5,155,185 CCAM Cartaxo, CRL 5,093,895 4,728,600 CCAM do Norte Alentejano, CRL 5,043,370 4,646,445 CCAM Mogadouro e Vimioso, CRL 5,019,260 4,370,535 CCAM de Albergaria e Sever, CRL 4,836,500 4,181,320 CCAM da Beira Baixa (Sul), CRL 4,780,700 3,556,085 CCAM do Algarve, CRL 4,569,661 4,540,081 CCAM Alcanhões, CRL 4,336,870 3,600,615 CCAM Vale de Cambra, CRL 4,059,540 3,805,710 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 221

222 from the previous page CCAM Oliveira do Hospital, CRL 4,057,970 3,700,195 CCAM Borba, CRL 4,053,845 3,938,140 CCAM Serras de Ansião, CRL 3,964,185 3,535,245 CCAM Entre Tejo e Sado, CRL 3,876,015 3,713, ,355, ,415,840 On 31 December 2013 and 2012 the GCA shareholder structure was distributed over thousands of subscribers of share capital of the different Caixas Agrícolas, whereby no shareholders held an interest above 0.1%. 29. Reserves and Retained Earnings On 31 December 2013 and 2012 reserves and retained earnings were as follows: Revaluation reserves: Reserves resulting from valuation at fair value, net: Financial assets available for sale 41,096, ,725 Revaluation reserves of fixed assets, net 6,696,533 7,007,987 Other Revaluation reserves pension fund (Note 46) 6,483,221 5,171,864 Others (3,187,719) (11,266,942) 51,088,525 1,242,634 Other reserves 309,548, ,425,201 Retained earnings (144,302,825) (149,759,691) 165,245, ,665,510 Profit for the year (Note 30) (2,941,419) 44,708, ,392, ,444,422 Legal reserve The purpose of the legal reserves is to cover losses that might occur during the year. In line with Article 33 of the statutes, 20% of net annual profit is deposited in the legal reserves and any other amounts provided by the members for this purpose, until it reaches an amount equal to the share capital. 222 Notes to the Consolidated Financial Statements

223 Reserves for training and co-operative education The purpose of these reserves is to provide funding for expenses with technical, cultural or co-operative training programs of associates, the management or employees of Caixa Central. This fund is increased by a maximum of 2.5% of net annual profit and any other amounts that are obtained for this purpose, at any title. Reserves for mutual activities These reserves serve to cover the cost of mutual assistance needed by associates or employees. This fund is increased by a maximum of 2.5% of net annual profit. Revaluation reserves This heading includes the amount from the revaluation at fair value of available for sale financial assets and revaluation of fixed assets. These reserves cannot be distributed, though in the case of the revaluation of fixed assets they can be used for capital increases or to cover losses, to the extent they are used (amortisation) or when assets they represent are divested. The great variation in revaluation reserves results from the FII CA Imobiliário demerger process at the end of 2013, which resulted in the assumption of potential capital losses registered until that date. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 223

224 30. Consolidated Profit Consolidated profit was determined for 2013 and 2012 and can be summarised in the following manner: Net annual profit of Caixas de Crédito Agrícola Mútuo 156,857 Net annual profit of Caixa Central de Crédito Agrícola Mútuo 1,024, ,181,756 Effect on net income by reconciling common balances in SICAM 324,583 SICAM net income 1,506,339 Net income of other Group companies CCCAM SGPS Unipessoal, Lda (818,042) FENACAM - Federação Nacional das Caixas de Crédito Agrícola Mútuo FCRL 508,407 Crédito Agrícola Gest - Sociedade Gestora de Fundos de Investimento Mobiliário S.A. 428,254 Crédito Agrícola Consult - Acessoria Financeira e de Gestão S.A. 88,018 Crédito Agrícola Informática - Serviços de Informática S.A. 677,145 Crédito Agrícola Serviços - ACE - FEIIA CA Imobiliário (28,845,797) Crédito Agrícola SGPS S.A. (14,411,985) CA Imóveis, Unipessoal Lda (2,418,853) Agrocapital - Sociedade de Capital de Risco S.A. 17,960 Crédito Agrícola Vida, Companhia de Seguros S.A. 5,974,402 Crédito Agrícola Seguros Companhia de Seguros de Ramos Reais, S.A. 2,644,746 FII CA Arrendamento Habitacional (2,682,440) FEIIA Carteira Imobiliária (1,332,372) FIIF ImoValor CA (19,236) (40,189,793) Cancellation of increased impairment provisions in affiliates and associates registered in the individual reports of Group companies 1,140,754 Cancellation of provisions regarding interest in Crédito Agrícola SGPS 909,869 Results from equity method applied to associated companies 2,358,768 Consolidation difference regarding FII CA Imobiliário 5,572,125 9,981,516 Adjustment of intragroup relationships and cancellation of common balances Cancellation of gains and losses obtained through the sale of properties belonging to CA Imóveis acquired by FII CA Imobiliário and FII CA Arrendamento Habitacional (1,264,684) Adjustment of intragroup fixed assets cancelled capital gains and amortization corrections (16,174) Cancellation of fair value losses regarding financial interests in FII CA Arrendamento Habitacional and FII CAPC 347,214 Cancellation of CA SGPS provisions regarding financial interests in GCA companies 2,438,318 Cancellation of CA SGPS provisions regarding additional loans granted to GCA companies 15,200,512 Cancellation of intragroup dividends (3,671,519) Cancellation of FII CAI securities deposit and custody fees to CCCAM (430,033) Cancellation of insurance intermediation fees paid to CCAMs 28, Notes to the Consolidated Financial Statements

225 from the previous page 2013 Cancellation of intragroup invoicing and services (170,912) Cancellation of insurance premiums charged to CA Group companies 1,190,441 Cancellation of shareholder loan contract interest between CA SGPS and CA Imóveis (1,315) Adjustment in CA Services arising from reimbursement of pension fund operations (120,240) Income from non-controlled investment fund interests 13,026,623 Other consolidation adjustments (712,365) 25,843,874 (2,858,064) Income allocated to non-controlled interests (83,355) Consolidated annual profit of the Crédito Agrícola Group (2,941,419) Net annual profit of Caixas de Crédito Agrícola Mútuo 39,532,267 Net annual profit of Caixa Central de Crédito Agrícola Mútuo 1,308, ,840,566 Effect on net income by reconciling common balances in SICAM 478,190 SICAM net income 41,319,476 Net income of other Group companies: CCCAM SGPS Unipessoal, Lda (69,118) FENACAM - Federação Nacional das Caixas de Crédito Agrícola Mútuo FCRL 389,637 Crédito Agrícola Gest - Sociedade Gestora de Fundos de Investimento Mobiliário S.A. 225,297 Crédito Agrícola Consult - Acessoria Financeira e de Gestão S.A. (631,282) Crédito Agrícola Informática - Serviços de Informática S.A. 22,107 Crédito Agrícola Serviços ACE - FEIIA CA Imobiliário (15,594,126) Crédito Agrícola SGPS S.A. 646,078 CA Imóveis, Unipessoal, Lda (5,270,300) Agrocapital - Sociedade de Capital de Risco S.A. 54,068 Crédito Agrícola Vida, Companhia de Seguros S.A. 4,150,945 Crédito Agrícola Seguros Companhia de Seguros de Ramos Reais, S.A. 3,203,243 FII CA Arrendamento Habitacional (130,722) (13,004,173) Cancellation of increased impairment provisions in affiliates and associates registered in the individual reports of Group companies (115,732) Cancellation of Ups impairment in FEIIA CA Imobiliário registered in ,759,839 Results of equity method applied to associated companies 1,903,698 Results of unit interests acquired in FEIIA CA Imobiliário 1,330,240 Difference of FII CA Imobiliário consolidation (933,419) Adjustment of intragroup relationships and cancellation of common balances Cancellation of gains and losses obtained through the sale of properties of CA Imóveis acquired by FII CA Imobiliário 9,944, ,264 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 225

226 from the previous page 2012 Adjustment of intragroup fixed assets cancelled capital gains and amortization corrections 306,791 Cancellation of gains and losses through sale of properties held by FEII CA Imobiliário and FII CA Arrendamento Habitacional 746,380 Cancellation of fair value losses on financial interests in FII CA Arrendamento Habitacional and FII CAPC (609,181) Cancellation of CA SGPS provisions regarding additional loans granted to GCA companies 631,282 Cancellation of intragroup dividends (2,301,935) Cancellation of insurance intermediation fees paid to CCAMs 124,589 Cancellation of intragroup invoicing and services (926,300) Cancellation of insurance premiums charged to CA Group companies 616,725 Adjustment in CA Services arising from reimbursement of pension fund operations 398,221 Cancellation of shareholder loan contract interest between CA SGPS and CA Imóveis (52,560) Income from non-controlled investment fund interests 7,116,585 Other consolidation adjustments 253,177 6,553,038 44,812,967 Income allocated to non-controlled interests (104,826) Consolidated annual profit of the Crédito Agrícola Group 44,708, Notes to the Consolidated Financial Statements

227 31. Minority Interests Third party interests in the Group companies in 2013 and 2012 were the following: Balance Income statement Balance Income statement Crédito Agrícola Seguros 846,673 (68,763) 809,480 (83,284) Agrocapital SCR 335,963 (5,986) 329,977 (18,021) Crédito Agrícola Vida 51,620 (4,780) 45,365 (3,321) Crédito Agrícola Informática 34,693 (3,724) 30,969 (122) Fenacam 1,037 (102) 935 (78) 1,269,986 (83,355) 1,216,726 (104,826) Minority interests operations during the financial year ending on 31 December 2013 and 2012 were as follows: Minority interests on 31 December ,039,263 Net earnings allocated to minority interests: Crédito Agrícola Seguros 83,284 Agrocapital SCR 18,021 Crédito Agrícola Vida 3,321 Others ,826 Variation in equity (revaluation reserves) of insurers 72,637 Minority interests on 31 December ,216,726 Net earnings allocated to minority interests: Crédito Agrícola Seguros 68,763 Agrocapital SCR 5,986 Crédito Agrícola Vida 4,780 Crédito Agrícola Informática 3,724 Fenacam ,355 Variation in equity (revaluation reserves) of insurers (30,095) Minority interests on 31 December ,269,986 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 227

228 32. Interest and Similar Income This heading is itemised as follows: Interest from cash and equiv. in central banks 552, ,809 Interest from cash and equiv. in other banking institutions: Cash and equiv. in domestic banking institutions 2,457 6,006 Cash and equiv. in foreign banking institutions 1, ,971 6,966 Interest from investments in other banking institutions: Investments in domestic banking institutions 5,336,545 3,344,081 Investments in foreign banking institutions 2,498 4,082 5,339,043 3,348,163 Interest from customer loans: Loans 188,330, ,876,862 Home loans 40,780,839 56,667,183 Current account loans 32,418,572 40,533,973 Overdrafts 8,260,124 9,772,732 Other 44,636,163 52,373, ,426, ,223,771 Interest on non-performing loans 17,979,611 21,122,766 Interest from other financial assets at fair value according to P&L 655, ,618 Interest from financial assets available for sale 98,862,995 22,761,279 Interest from financial assets held for trading 7,991,123 8,239,115 Interest from financial assets held to maturity 33,844, ,083,189 Other interest and similar income 40,135,449 71,232, ,569, ,838, ,891, ,294, Notes to the Consolidated Financial Statements

229 33. Interest and similar Charges This heading is itemised as follows: Interest from customer funds and other loans 171,673, ,207,750 Interest from funds in other banking institutions 3,128,349 4,288,200 Interest from funds in central banks 8,401,389 15,621,458 Interest from financial liabilities arising from derivative financial instruments 203, ,606 Discount from operations regarding bonds in the securities market -346, ,864 Interest from subordinated liabilities 1,946,543 2,066,073 Pension Fund (Note 46) 0 0 Other interest and similar charges 28,179,966 18,886, ,187, ,712, Yields from Equity Instruments This heading is itemised as follows: Financial assets available for sale Issued by residents 974,875 1,222,027 Issued by non-residents 580, ,428 1,555,675 1,948,455 On 31 December 2013 and 2012 this heading refers to dividends received from equity instruments in the CA Vida and CA Seguros securities portfolios. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 229

230 35. Income from Services and Fees This heading is comprised by: Guarantees given Surety and aval 5,282,639 4,981,197 Documentary credit opened 143, ,723 Other guarantees given 56-5,426,410 5,103,920 Commitments before third parties Irrevocable commitments Irrevocable lines of credit 6,600,206 6,503,964 Other irrevocable commitments 1,257, ,217 7,857,375 7,437,181 Services provided Loan operations Other loan operations 27,743,886 32,834,348 Annual fees 6,240,120 5,966,688 Transfers 3,954,904 3,885,687 Securities regarding collective investment entities Management fee 1,136,075 1,018,249 Collections 678, ,257 Securities deposit and custody 1,182, ,297 Card management 82,872 87,484 Management of securities - 57 Other services provided Placement and marketing 3,931,047 3,457,748 Other interbank fees 364, ,281 Others 28,260,991 28,950,028 73,575,265 77,932,124 Operations performed on behalf of third parties Regarding securities Market transactions 194,072 92,024 Non- market transactions 11, Other operations performed on behalf of third parties 50,710 30, , ,107 Other fees received 36,508,868 33,769, ,623, ,365, Notes to the Consolidated Financial Statements

231 36. Charges with Services and Fees This heading is comprised by: Guarantees received Banking services performed by third parties Securities deposit and custody 966, ,496 Collections 21,198 25,592 Management of securities 55,830 67,053 Other banking services performed by third parties 20,202,439 20,098,512 Due to operations performed by third parties 141, ,833 Other fees paid 1,666,615 1,432,619 23,054,294 22,438, Earnings from Assets and Liabilities at Fair Value through Profit & Loss This heading is comprised by: 2013 Gains Losses Net Financial assets held for negotiation: Securities 198,094 (2,063) 196,031 Negotiation derivatives 1,785,689 (3,403,331) (1,617,642) Other financial assets at fair value through profit & loss 1,048,513 (160,545) 887,968 3,032,296 (3,565,939) (533,643) 2012 Gains Losses Net Financial assets held for negotiation: Securities 53,325 (9,385) 43,940 Negotiation derivatives 775,666 (414,188) 361,478 Other financial assets at fair value through profit & loss 623,958 (71,537) 552,421 1,452,949 (495,110) 957,839 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 231

232 38. Income from Financial Assets available for Sale This heading is organised as follows: Issued by residents Debt instruments 49,718,574 14,426,448 Equity instruments (2,778,724) (2,523,799) Issued by non-residents Debt instruments 46,472,479 (248,100) - 162,880 93,412,329 11,817, Earnings from Foreign Exchange Revaluation During 2013 and 2012 earnings arising from exchange revaluation correspond to spot currency exchange operations with a total of 1,411,044 euros and 1,626,127 euros, in 2013 and 2012, respectively. This heading includes the earnings arising from the revaluation of foreign currency assets and liabilities. Being these spot exchange operations, they relate to operations that are processed in two business days or less. 232 Notes to the Consolidated Financial Statements

233 40. Earnings through Sale of Other Assets This heading is itemized as follows: Income through non-financial assets Fixed assets held for sale (11,639,909) (587,858) Other tangible assets (261,820) (285,114) Other non-financial assets - (3,817) (11,901,729) (876,789) 41. Other Operating Earnings This heading is itemized as follows: Other operating income Rents 4,158,914 2,824,122 Reimbursement of expenses 2,082,456 2,416,809 Debt recovery, interest and expenses Recovery of bad debt 14,219,355 13,600,306 Recovery of overdue loan interest and expenses 17,602,425 16,153,292 Income from miscellaneous services 3,268,176 2,880,853 Gains regarding previous years 2,287,433 1,252,129 Earnings from integrated investment funds within the scope of the consolidation 13,026,623 7,116,585 Others 8,530,328 5,963,157 65,175,710 52,207,253 Other operating costs Subscriptions and donations (1,367,289) (1,444,193) Contributions towards the Crédito Agrícola Mútuo Guarantee Fund (6,853,191) (6,061,406) Other tax (6,774,638) (4,921,935) Management errors and procedures (227,424) (155,607) Other operational charges and expenses regarding previous years (1,438,107) (800,433) Other operational charges and expenses (44,383,761) (25,252,819) (61,044,410) (38,636,393) 4,131,300 13,570,860 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 233

234 42. Technical Margin from Insurance Operations This heading is itemized as follows: Net reinsurance premiums Life insurance Gross premiums issued 236,179, ,846,468 Reinsurance premiums assigned (6,490,909) (6,563,412) 229,688, ,283,056 Non-life insurance Gross premiums issued 80,630,528 80,778,075 Reinsurance premiums assigned (16,086,938) (15,366,175) 64,543,590 65,411, ,232, ,694,956 Costs with claims Indemnities paid Gross amounts 188,486, ,895,471 Reinsurer share (9,022,046) (6,495,817) 179,464, ,399,654 Variation of technical provisions, net of reinsurance (Note 19) (124,115,380) (111,681,427) (9,347,971) (4,386,125) 234 Notes to the Consolidated Financial Statements

235 43. Payroll This heading is itemized as follows: Salaries and pay Employees 134,243, ,338,432 Management and Supervisory Bodies 14,509,174 14,633,859 Mandatory social security charges Pension Funds (Note 46) - - Current service cost 1,020, ,096 Interest cost 493,362 2,626,411 Expected yield from fund assets - (1,697,4389) Actuarial gains and losses - (1,806,622) Additional obligations due to early retirements - 177,815 Insurance premiums paid 1,234,145 - Payroll charges Social Security 28,918,869 28,128,135 SAMS 6,197,284 6,244,579 Others 849,394 2,867,913 Other required social security charges 963,881 - Optional social charges 63,444 55,617 Other staff costs Contract indemnities 1,176, ,037 Other 978, , ,647, ,360,113 The average number of GCA employees in 2003 and 2012 was the following: Board Management and senior staff Technical staff Sales 1,652 1,677 Office staff Other ,234 4,311 The current remuneration policy for the governing bodies of Caixa Central de Crédito Agrícola Mútuo, the Group s parent company, is described in the Caixa Central individual Annual Report, in the chapter on governance and practices. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 235

236 44. General Administrative Expenses This heading is itemized as follows: With supplies: Water, energy and fuel 7,926,336 8,102,661 Running water 1,008,223 1,012,981 Publications 317, ,661 Hygiene and cleaning material 160, ,706 Assistance and repair material 41,711 43,246 Other third party supplies 1,238,108 1,092,418 10,692,232 10,716,673 With services: Communications 12,721,026 14,373,962 Maintenance and repairs 7,347,556 7,505,595 Advertising and publishing 5,148,514 5,955,571 Travel, accommodation & expenses 6,686,618 4,982,985 Rents and leases 6,391,822 7,688,978 Transport 2,197,240 2,378,277 Insurance 975, ,704 Staff training 723, ,530 Specialised services Computing 16,973,542 12,348,836 Fees and retainers 7,590,452 7,608,176 Legal, litigation and notaries 3,818,509 3,551,593 Security and surveillance 1,252,924 1,249,610 Information 1,280,388 1,355,097 Casual labour 165, ,549 Databases 183, ,032 Other specialised services: ATM services 6,922,361 7,778,305 External appraisers 1,416,859 1,047,350 Other third party services 18,525,116 18,117,888 99,321,566 97,905, ,013, ,621,711 The heading Other specialised services other third party services includes the sum of 2,098,373 euros regarding total fees invoiced by Chartered Accountants during the financial year of 2013 (2,790,259 euros in 2012), disclosed in compliance with the amendment made by virtue of Decree-Law no. 185/2009, of 12 August, to Article 66-A of the Portuguese Company Code. 236 Notes to the Consolidated Financial Statements

237 45. Related Entities On 31 December 2013 the loans granted to members of the governing bodies of Caixas Agrícolas within the Group amount to 14,844,483 euros (17,659,063 euros on 31 December 2012). 46. Retirement Plans and Pensions Actuarial studies were performed by the Insurer Crédito Agrícola Vida, S.A. (entity within the Crédito Agrícola Group) in order to determine obligations regarding past services by the Crédito Agrícola Group to both current and retired employees. The amendments published in June 2011 with regard to IAS 19, the international accounting standard that applies to employee benefits, became effective on 01 January The transition period for implementing the changes to IAS 19 ended at the start of 2013, and all the companies which adopt this standard with regard to accounting for employee benefits (pension plans) must reflect the amendments to IAS 19 during In this way, the financial statements reported to 31 December 2013 comply with the amendments to IAS 19 that became effective on 1 January 2013 and alter the accounting policy for actuarial deviations regarding pension plans, no longer applying the corridor method and being registered under other assets or other liabilities, whereby the actuarial gains and losses are recognised directly under equity, under the title Other reserves. On 31 December 2013 the value registered under comprehensive income revaluation reserves regarding actuarial gains and losses is positive to the order of 6,483,221 euros (the adjusted value for 2012 was 5,171,864 euros, also positive). A single rate is applicable to the plan s obligations and assets, whereby pension fund earnings correspond only to current costs and expenses net of interest. The impact on earnings is recorded under the heading Payroll, the value of costs with current employees and net interest, amounts to 2,748,254 euros (in December 2012 it came to -291,739 euros) (Note 43). ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 237

238 The actuarial and financial assumptions used in calculating obligations on 31 December 2013 and 2012 were the following: Demographic assumptions 31/12/ /12/2012 Mortality table TV - 88/90 TV - 88/90 Disability table EVK 80 EVK 80 Retirement age Evaluation method Financial assumptions Project Unit Credit Project Unit Credit Discount rate (*) 4.50% Rate of growth of salaries and other benefits 1.65% 2.0% Rate of growth of Pensions 1.40% 1.75% Revaluation rate of salaries for Social Security - according to article 27, no. 2, of Decree-Law 187/ % 1.81% - according to article 27, no. 1, of Decree-Law 187/ % 1.75% (*) Different discount rate applicable to different demographic groups Active employees and Leave with actuarial age < 55 years old: 4.25% Active employees and Leave with actuarial age >= 55 years old: 4.00% Early retirees, retirees and pensioners: 3.50% Obligations with pensions on 31 st December 2013 and 2012, of Crédito Agrícola Pension Fund (FPCAM Fundo de Pensões do Crédito Agrícola), as well as the respective coverage, were as follows: Estimated obligations for past services: Current and former employees 40,015,332 40,157,339 Unpaid leave 1,244,684 1,084,290 Early retirement 1,189, ,496 Pensions being paid 19,047,190 18,018,221 Total obligations 61,496,569 59,992,356 Coverage of obligations: Fund assets (Note 26) 57,395,358 50,225,036 Surplus / (deficit) (4,101,211) (9,767,320) The total value of obligations has been deducted from the net value of funding from the insurers autonomous pension fund, since they relate to a defined contributions plan and not a defined benefit such as FPCAM. 238 Notes to the Consolidated Financial Statements

239 Banco de Portugal Notice no. 4/2005 stipulates that it is mandatory to provide total funding in pension funds for pension obligations in progress and a minimum level of 95% for obligations regarding past service for current employees. However, the Notice also establishes a transition period of between 5 and 7 years until obtaining cover of additional obligations by adopting IAS 19. In 2008, Banco de Portugal issued Notice no. 7/2008, of 14 October, allowing for the impact of the above transition to be deferred for an additional 3-year period beyond the initial term established. Crédito Agrícola decided to extend deferral of the impact of transition in the manner permitted by the abovementioned Notice, for which reason the part of the obligations not covered by the fund s assets are recognised as liabilities (Note 27). The SICAM pension fund includes Caixas de Crédito Agrícola Mútuo of Leiria, Torres Vedras and Mafra. These, however, are not part of the Group s consolidated companies. The responsibilities of the Group, assessed in line with IAS 19 and the respective share in the Fund on 31 December 2013, are broken down as follows: Total obligations regarding past services 3,603,926 Coverage of obligations: Fund assets 3,545,399 Surplus / (deficit) (58,627) On 31 December 2013 the GCA balances did not include these amounts. On 31 December 2013 and 2012 the balances relating to the pension fund were as follows (Note 26): Value of obligations with pensions (61,496,569) (59,992,356) Value of Pension Fund 57,395,358 50,225,036 Differential (4,101,211) (9,797,320) Deferred actuarial deviations - (5,171,861) (4,101,211) (14,939,181) Because of the alteration in policies, by virtue of the implementation of the revised IAS 19, actuarial deviations are no longer deferred, but are registered directly in the comprehensive income, as a revaluation reserves item. In accordance with the revised IAS 19, the amount registered for the financial year in the income statement includes current service costs and net interest. Costs with services include costs with current services, costs with past services and profits or losses when payments are made, deducted from expected income. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 239

240 Costs in pensions for 2013 and 2012 are comprised by the following (Note 43): Costs with net interest (Note 43) 493,362 2,626,411 Costs with current service (Note 43) 1,020, ,096 Expected income from fund assets - (1,697,439) Amortization of ex-fund actuarial deviations - (1,806,622) Increased obligations resulting from early retirements - 177,815 Insurance premiums 1,234,145 - Annual increases of obligations 2,748,254 (291,739) The entries regarding the value of obligations during 2012 and 2013 were the following: Obligations on 31 December ,713,044 Costs with current service 408,096 Employee contributions 1,345,556 Interest 2,626,411 Actuarial gains and losses 10,360,797 Pensions paid (1,261,620) SAMS paid by the Pension Fund (377,732) Increased obligations resulting from early retirements 177,815 Obligations on 31 December ,992,357 Costs with current service 1,020,747 Employee contributions 1,371,686 Interest 2,775,890 Actuarial gains and losses (2,287,899) Pensions paid (978,848) SAMS paid by the Pension Fund (397,369) Obligations on 31 December ,496,569 The average duration of pensions obligations, according to the population groups below, was as follows: Current employees and staff on unpaid leave with ages < 55: 26.8 years Current employees and staff on unpaid leave with ages > = 55: 15.1 years Early retirees, Retired employees and Pensioners: 11.0 years 240 Notes to the Consolidated Financial Statements

241 Pension Fund entries during 2012 and 2013 were as follows: Assets on 31 December ,511,745 Crédito Agrícola Group Contributions 3,055,470 Employee Contributions 1,345,556 Capital received from insurance 264,006 Net income from the Fund 4,023,146 Insurance profit-sharing 792,290 Insurance premiums ( 1,127,823) Pensions paid (1,261,620) SAMS paid by the Pension Fund (377,732) Assets on 31 December ,225,036 Crédito Agrícola Group Contributions 4,893,442 Employee Contributions 1,371,686 Capital received from insurance 225,169 Net income from the Fund 2,373,195 Insurance profit-sharing 917,187 Insurance premiums (1,234,145) Pensions paid (878,848) SAMS paid by the Pension Fund (397,369) Assets on 31 December ,395,358 On 31 December 2013 the assets that comprise Crédito Agrícola Pension Funds are: Public Debt (37.35%), company bonds (33.64%), shares (15.74%), related to real estate investments (1,69%) and other investment assets (11.57%). These assets are valued at their fair value Public debt 22,785, % 22,347, % Company bonds 10,521, % 18,537, % Shares 9,602, % 7,450, % Other investment assets 7,055, % 4,112, % Assets related to real estate investments 1,033, % 1,046, % Total assets in the CAM Pension Plan 60,999,285 53,529,940 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 241

242 According to the actuarial report of the Crédito Agrícola Mútuo Pension Fund, the asset portfolio brought returns of +4.8% during 2013, divided up in the following manner: Asset Categories Benchmarks Average Return Standard Deviation Public debt Iboxx Euro Sovereign All Maturities 4.96% 3.81% Company bonds Iboxx Euro Non-Sovereign All Maturities 4.93% 4.0% Euro shares Dow Jones Euro Stoxx 6.53% 22.04% Non-Euro shares MSCI World Ex-MEU 4.98% 18.1% Other investment assets 3-month Euribor 2.5% 1.47% Assets related to real estate investments 6-month Euribor 2.6% 1.41% a) Risks associated to the benefits plan: The Plan guarantees pensions in the event of retirement due to age, disability, early retirement and surviving spouse pension, according to that established in the Collective Bargaining Agreement applicable to Crédito Agrícola Mútuo entities. In as far as concerns pension payments, this plan is a Social Security supplement. The plan also provides for the payment of contributions regarding post-employment medical and welfare assistance services. In this sense, the risks associated to plan benefits are the following: Dependence of benefits obtained from public Social Security systems; Death during the benefit accrual period and length during the post-employment stage; Disabilities of participants; Risk with regard to early retirement. Currently this risk is diminished, as that early retirement within the context of the general Social Security regimen is suspended. b) Presentation of sensitivity analysis with regard to each significant actuarial assumption: Value of Liabilities Change from Baseline Scenario DISCOUNT RATE Increase by 50 base points 59,034,776-6,007,187 Decrease by 50 base points 71,951,479 6,909,516 PENSION GROWTH RATE Increase by 50 base points 68,830,491 3,788,528 Decrease by 50 base points 61,557,670-3,484,293 MORTALITY TABLE Adjustment -1 year 67,076,120 2,034,157 SALARY GROWTH RATE Increase by 50 base points 75,583,388 10,541,425 Decrease by 50 base points 56,400,866-8,641, Notes to the Consolidated Financial Statements

243 The adjustment scenario for the mortality table consisted in considering an average age 1 year lower than the actual age of participants and beneficiaries with regard to the population covered. Furthermore, Crédito Agrícola Group assumed the commitment to subsidise employee seniority benefit (Note 27). On 31st December 2013 and 2012 obligations were: Seniority benefit: Current and former employees 18,448,669 18,981,224 Unpaid leave 576, ,967 Total obligations with seniority benefit (Note 27) 19,024,866 19,589, Disclosures Relating to Financial Instruments Market risk Market risk reflects potential losses arising from adverse alterations in the market value of a financial instrument as the result, for example, of variation in interest rates, exchange rates, shares or commodities prices, credit spreads or other similar variables. The rules for market risk management set down by Caixa Central s financial department with regard to each portfolio include market risk limits, limits on exposure to credit and solvency risk, guaranteed return, authorised instruments and maximum admissible losses. There is a policy to separate the execution of market operations from risk control at any moment arising from these operations. The aim is to mitigate the effects associated with assessing the risks undertaken. Hedging operations may be proposed by portfolio managers and also by those responsible for risk control, bearing in mind the risk limits and the instruments authorised. The CA Vida securities portfolio is fully managed by CA Gest. There is an investment benchmark in line with the risk that may be taken and the intended returns. The value of the portfolio is updated monthly on the basis of input from the Management Entity. In terms of the management of credit and market risk, CA Vida has implemented the following controls: Permanent contact is maintained with the Management Entity, in order to assess the portfolio s development; Risk analysis reports are drafted by the Management Entity periodically and are then examined; and Meetings are held with the management entity whenever market conditions and outlook recommend this, redefining risk profiles whenever necessary. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 243

244 Currency Exchange Risk Currency exchange risk is the result of changes in exchange rates of currencies whenever open positions are held in those currencies. Control and assessment of foreign exchange risk are carried out on a daily basis, individually for each branch and in consolidated terms. Amounts and limit compliance in totally open positions are calculated. There is centralised foreign exchange risk management, under the responsibility of the Financial Department, within limits approved by the Executive Board. The Group has low exposure to this type of risk. The profile defined for exchange risk is rather conservative and justified by the cover policy followed. Interest Rate Risk The Group is subject to interest rate risk when, by virtue of its business operations, it contracts future financial flows whose current value is sensitive to interest rate variations. Aggregate interest rate risk arises from a number of factors, such as: different periods for maturity or revision of rates for assets, liabilities and off-balance-sheet items (repricing risk); alterations to interest rate curves; asymmetrical variations for the various market curves that affect a number of asset and off-balance-sheet groups (base risk); and explicit or implicit options in various banking products (option risk). The interest rate risk management policy is defined and monitored by the assets and liabilities committee (ALCO). The financial department of Caixa Central takes monthly measurements of exposure to this type of risk, with recourse to a methodology based on grouping various sensitive assets and liabilities at intervals of time in line with the dates of rate revision. For each interval, the assets and liabilities cash flows are calculated and the corresponding risk-sensitive gap is measured. There is then an assessment of the impact of these gaps on the financial margin and on the economic value of the entity in various scenarios of differing interest rates. The risk/returns relationship is defined within limits and monitored every month by the ALCO in terms of financial margin exposure and the economic impact of adverse interest rate changes. In the case of CA Vida, this risk is monitored on a daily basis, observing the differential between the amount of assets and liabilities that will be subject to refixing of interest rate on the basis of pre-defined intervals. The Company can trade derivative financial instruments, specifically selling futures on interest rates with the strict aim of covering the risk of variation to assets. The use of futures only contemplates contracts that can be traded on the Stock Exchange or in organised markets. 244 Notes to the Consolidated Financial Statements

245 The Company also trades interest rate swaps over-the-counter, the aim being to ensure a suitable model for the financial streams generated by closed portfolios, traded and contracted with financial institutions whose rating is preferentially investment grade, thus minimising the credit and/or counterpart risk in portfolios. On 31 December 2013 and 2012, exposure to interest rate risk, excluding derivative instruments, can be summarised in the following manner (figures in thousand euros): 2013 Flat Rate Variable Rate Subtotal Not subject to interest rate risk Indeterminate Total Assets Cash and equiv. in Central Banks - 384, , ,781 Cash and equiv. in other banks - 81,832 81, ,832 Financial assets held for trading 23,531-23, ,531 Other financial assets at fair value via P&L Financial assets available for sale 30,786-30,786-30,786 4,653, ,605 4,855, ,436 3,432 4,991,958 Investments held at banks 32,005-32, ,031 Customer loans (gross balance) 594,137 7,508,866 8,103,003 18,108 15,031 8,136,142 Liabilities 5,333,944 8,177,084 13,511, ,570 18,463 13,681,061 Funds from Central Banks 1,250,000-1,250,000 12,845-1,262,845 Financial liabilities held for trading Funds from other banks 60,829 32,702 93, , ,067 Customer funds and other loans 7,926,714 2,128,657 10,055,372 59,290 7,881 10,122,543 Equity instruments ,649-10,649 Other subordinated liabilities - 132, , ,404 Derivative instruments held for trading 9,238,058 2,294,352 11,532,410 83,436 14,176 11,630, ,925 6, , ,925 Net Exposure (4,032,039) 5,876,732 1,844,692 68,134 4,287 1,917,113 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 245

246 2012 Flat Rate Variable Rate Subtotal Not subject to interest rate risk Indeterminate Total Assets Cash and equiv. in Central Banks - 433, , ,907 Cash and equiv. in other banks - 79,545 79, ,545 Financial assets held for trading Other financial assets at fair value via P&L Financial assets available for sale 18,389-18, ,389 8,329-8, ,329 2,248,617 23,675 2,272, ,432 3,432 2,409,160 Investments held at banks 121, ,393 1, ,721 Customer loans (gross balance) 549,952 7,696,339 8,246,291 23,248 31,790 8,301,329 Investments held to maturity 2,388, ,896 2,698,127 62,424-2,760,551 Liabilities 5,334,911 8,543,362 13,878, ,436 35,222 14,133,931 Funds from Central Banks 1,900,000-1,900,000 7,790-1,907,790 Financial liabilities held for trading 1,309-1, ,309 Funds from other banks 221,635 9, , , ,228 Customer funds and other loans 7,426,542 2,585,868 10,012,410 73,110 27,304 10,112,824 Equity instruments ,379-30,379 Other subordinated liabilities - 128, , ,835 Derivative instruments held for trading 9,549,486 2,723,963 12,273, ,603 35,313 12,421, ,925 6, , ,925 Net Exposure (4,342,500) 5,813,399 1,470, ,833 (91) 1,578, Notes to the Consolidated Financial Statements

247 On 31 December 2013 and 2012 the development of financial instruments with exposure to interest rate risks according to maturity or refixing date, excluding derivative instruments, is presented in the table below (figures in thousand euros): 2013 Refixing dates / Maturity dates Spot Until 3 months From 3 months to 1 year From 1 to 3 years From 3 to 5 years More than 5 years Subtotal not subject interest rate risk indeterminate Total Assets Cash and equiv. in Central Banks 384, , ,781 Cash and equiv. in other banks 81, , ,832 Financial assets held for trading ,554-14,199 23, ,531 Other fin. assets at fair value via P&L ,801-30, ,785 Financial assets available for sale - 136, , ,868 2,533, ,039 4,855, ,436 3,432 4,991,958 Investments held at banks ,841 6, , ,031 Customer loans (gross balance) 41,238 4,389,387 3,129, ,899 91, ,181 8,103,003 18,108 15,031 8,136, ,025 4,551,026 3,987,314 1,081,252 2,654, ,419 13,511, ,570 18,463 13,681,061 Liabilities Funds from Central Banks - 300, , ,250,000 12,845-1,262,845 Financial liabilities held for trading Funds from other banks 9,581 67,234 7,338 8, , , ,067 Customer funds and other loans 17,516 3,652,212 5,095,715 1,267,022 6,479 2,607 10,041,552 73,110 7,881 10,122,543 Equity instruments ,649-10,649 Other subordinated liabilities 11,000 11, , , ,404 38,097 4,031,151 5,123,855 2,225,717 6,479 2,607 11,517,907 97,939 14,176 11,630,022 Net exposure 469, ,875 (1,226,541) (1,144,465) 2,648, ,812 1,993,121 53,631 4,287 2,051,039 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 247

248 2012 Refixing dates / Maturity dates Spot Until 3 months From 3 months to 1 year From 1 to 3 years From 3 to 5 years More than 5 years Subtotal not subject interest rate risk indeterminate Total Assets Cash and equiv. in Central Banks 433, , ,907 Cash and equiv. in other banks 79, , ,545 Financial assets held for trading - (2,143) (3,886) (10,504) 8,392 26,530 18, ,389 Other fin. assets at fair value via P&L , , ,328 Financial assets available for sale - 862, , , , ,163 2,392,253 16,907-2,409,160 Investments held at banks - 48,370 73, ,393 1, ,721 Customer loans (gross balance) 39,846 4,583,222 3,067, ,433 94, ,370 8,246,291 23,248 31,790 8,301,329 Investments held to maturity - 343, ,872 1,134, , ,478 2,698,127 62,424-2,760, ,298 5,835,120 4,767,543 1,601, , ,541 13,998, ,907 31,790 14,133,931 Liabilities Funds from Central Banks - 950, , ,900,000 7,790-1,907,790 Financial liabilities held for trading , ,309 Funds from other banks 2,437 95,434 84,278 49, , , ,228 Customer funds and other loans 15,714 3,539,415 5,152,550 1,291,692 9,185 3,854 10,012,410 73,110 27,304 10,112,824 Equity instruments ,379-30,379 Other subordinated liabilities , , ,835 18,768 4,713,114 5,237,579 2,290,950 9,185 3,854 12,273, ,603 35,313 12,421,366 Net exposure 534,530 1,122,006 (470,036) (689,497) 514, ,687 1,724,784 (8,696) (3,523) 1,712, Notes to the Consolidated Financial Statements

249 The figures in the Tables above show relevant exposure to interest rate risk, both in terms of the financial margin and economic value of capital. This risk measures the impact of rising or falling interest rates on the indicators, according to net exposure at different time intervals. Below is the sensitivity analysis for interest rate risk to which the Group was exposed at 31 December 2013 and 2012, obtained through simulation involving sensitive assets and liabilities with a 200 b.p. variation in interest rates, (figures in thousand euros): Assets 2013 Impact resulting from reference interest rate variations bp bp - 50 bp + 50 bp bp bp Cash and equiv. in Central Banks (159) (314) (619) Cash and equiv. in other banks (0) (0) (1) Financial assets held for trading 2,904 1, (673) (1,327) (2,579) Other financial assets at fair value via P&L 1, (436) (670) (1,693) Financial assets available for sale 345, ,935 82,757 (80,466) (159,662) (308,977) Investments held at banks (20) (39) (78) Customer loans (gross balance) 234, ,425 54,395 (51,925) (101,532) (194,346) Liabilities 585, , ,473 (133,679) (263,545) (508,293) Funds from Central Banks 21,889 10,822 5,381 (5,322) (10,586) (20,942) Funds from other banks (119) (237) (470) Customer funds and other loans 116,004 57,345 28,511 (28,195) (56,079) (110,936) Other subordinated liabilities 27,857 13,647 6,755 (6,622) (13,115) (25,726) Financial liabilities for trading ,239 82,057 40,768 (40,258) (80,017) (158,074) Impact on economic value 419, ,988 97,705 (93,420) (183,528) (350,219) ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 249

250 2012 Impact resulting from reference interest rate variations bp bp - 50 bp + 50 bp bp bp Assets Cash and equiv. in Central Banks 36,407 22,148 11,675 (12,330) (24,904) (49,641) Cash and equiv. in other banks 1, (378) (750) (1,481) Financial assets held for trading 3,358 1, (766) (1,505) (2,907) Other financial assets at fair value via P&L (103) (205) (401) Financial assets available for sale 63,289 30,755 15,051 (14,582) (28,857) (55,746) Investments held at banks 1, (310) (617) (1,224) Customer loans (gross balance) 234, ,294 54,301 (51,785) (101,217) (193,599) Investments held to maturity 112,558 55,175 27,188 (26,587) (52,757) (102,927) Liabilities 453, , ,810 (106,842) (210,812) (407,927) Funds from Central Banks 42,205 20,768 10,302 (10,142) (20,127) (39,639) Funds from other banks 2,357 1, (575) (1,144) (2,266) Customer funds and other loans 115,263 56,991 28,338 (28,029) (55,754) (110,315) Other subordinated liabilities (123) (248) (500) Financial liabilities for trading (1) ,300 79,168 39,346 (38,862) (77,264) (152,709) Impact on economic value 292, ,433 70,464 (67,979) (133,548) (255,218) The sensitivity analysis table shows us the variation in the theoretical market value of a range of Assets and Liabilities items under several different market interest rate variation scenarios (+50bp, +100bp, +200bp, -50bp, -100bp, -200bp), updating the cash flows associated to each operation according to the different market scenarios. The variation of residual values in absolute terms (Assets minus Liabilities) can be interpreted as the impact on the economic value of the Group s equity. Liquidity risk Liquidity risk is associated with the potential inability of the Group to finance its assets and satisfy all contract obligations on their due date. The liquidity management policy is defined and monitored, with its daily management entrusted to the Financial Department. 250 Notes to the Consolidated Financial Statements

251 In order to assess the overall exposure to this type of risk in the short, medium and long-term reports are made allowing for any negative mismatches to be identified and their dynamic cover assessed. The Group and Caixa Central also monitor liquidity ratios from a prudential perspective, calculated according to the rules established by Banco de Portugal. In terms of liquidity, it should be noted that Crédito Agrícola Group has adopted a conservative policy that corresponds to a loan-to-deposit ratio in each unit that is clearly below the average loan-to-deposit ratio found in the Portuguese financial system. Excess funds from Caixas are channelled to Caixa Central, where they are applied on good quality assets in terms of debt and liquidity, such as public sovereign debt in Eurozone countries and short-term investment on front line domestic and international financial institutions. The Group has a solid position in the retail market, covering the whole country evenly, with 683 branches (Caixas) and a varied, stable and durable base. In terms of prevention and management of liquidity risk contingency, the following points are especially considered: Control of and constraint with any possible concentration of commercial resources. This could, if it developed, lead to a shakier portfolio, less stable and less permanent. Regular simulations are carried out to estimate impact, using very prudent hypothesis relating to the stability of retail funds and without using additional sources of financing as back up. Working without having to be dependent on these sources of additional financing, bearing in mind the overall position of the Group s treasury and keeping lines of credit open to domestic and international banking institutions, regularly tested; Frequent issue of debt instruments that help maintain continuity standards for planned resources. Maintenance of an asset cushion providing immediate liquidity to cope with any unexpected cash outflows. CA Vida liquidity is monitored on a daily basis by the financial department. Daily controls on existing balances are carried out and the guidelines set out to maintain liquidity. A prudent management of liquidity risk implies holding cash or sufficient liquid financial instruments and the possibility to close market positions. Management keeps a hands-on approach to updates of liquidity forecasts, bearing in mind expected cash flows. This is done on the basis of an analysis of the remaining contractual maturity of financial liabilities and the obligations on insurance contracts, as well as the expected date of inflows of financial assets. Specifically as regards investment portfolios, the management entity keeps a daily check on treasury, bearing in mind the incoming and outgoing streams and the settlement of transactions on securities. In addition, it is part of the investment policy to acquire special financial assets traded in organised markets. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 251

252 On 31 December 2013 and 2012 residual contract periods for financial instruments can be broken down as follows (figures in thousand Euros): 2013 Residual contract periods Spot Until 3 months From 3 months to 1 year From 1 to 3 years From 3 to 5 years More than 5 years Deferred interest and fees indeterminate Total Assets Cash and equiv. in Central Banks 384, ,781 Cash and equiv. in other banks 81, ,832 Financial assets held for trading - (1,441) (3,886) 6,184 (5,660) 28, ,532 Other financial assets at fair value via P&L ,365 8,404 18, ,785 Financial assets available for sale - 48, , ,856 2,411, ,176 8,581-4,991,958 Investments held at banks - 24,845 7, ,031 Customer loans (gross balance) - 505, ,118 1,218,255 5,013, ,209 18,108-8,136, , ,689 1,554,880 2,196,699 7,437,746 1,420,719 26,715-13,681,061 Liabilities Funds from Central Banks - 300, , ,845-1,262,845 Financial liabilities for trading Funds from other banks 9,676 86,351-2, ,067 Customer funds and other loans 2,713,549 2,980,406 4,133, ,380 8,986 2,644 59,290-10,122,543 Equity instruments ,649-10,649 Other subordinated liabilities - 1, ,954 47,626 46, ,404 2,723,225 3,368,930 4,133,784 1,213,333 57,412 49,903 83,436-11,630,023 Differential (2,256,612) (2,791,241) (2,578,904) 983,366 7,380,334 1,370,816 (56,721) - 2,051, Notes to the Consolidated Financial Statements

253 2012 Residual contract periods Spot Until 3 months From 3 months to 1 year From 1 to 3 years From 3 to 5 years More than 5 years Deferred interest and fees indeterminate Total Assets Cash and equiv. in Central Banks 433, ,907 Cash and equiv. in other banks 79, ,545 Financial assets held for trading - (2,605) (3,885) (10,504) 8,392 26, ,389 Other financial assets at fair value via P&L , ,329 Financial assets available for sale - 789, , , , , ,409,160 Investments held at banks - 43,043 78, , ,721 Customer loans (gross balance) - 615, ,526 1,308,183 4,974, ,189 23,248-8,301,329 Investments held to maturity - 263, ,259 1,199, , ,167 36,545-2,760, ,452 1,708,493 2,407,705 2,795,959 5,383,910 1,262,829 61, ,133,931 Liabilities Funds from Central Banks - 950, , ,790-1,907,790 Financial liabilities for trading (116) ,309 Funds from other banks 9, ,936 82,247 43, ,228 Customer funds and other loans 2,576,157 2,887,810 4,241, ,157 9,400 3,892 73,110-10,112,824 Equity instruments ,379-30,379 Other subordinated liabilities ,061 45,773 26,489 46, ,835 2,585,459 3,942,125 5,283, ,960 35,889 49, , ,421,365 Differential (2,072,007) (2,233,632) (2,875,785) 2,384,999 5,348,021 1,212,937 (51,594) (373) 1,712,566 In view of the information provided above, one can conclude that the risk of liquidity problems is low. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 253

254 Credit risk The performance of risk management activities and projects was heavily conditioned by the need to assign technological and human resources to the works regarding debt portfolios for bad debt management processes within the scope of the Special Inspections Program of the Portuguese financial system which involved the largest national banks, including Crédito Agrícola Group, as part of the economic and financial assistance programme for Portugal, agreed in May 2011 with the IMF, the European Commission and the European Central Bank. Essentially, the purpose of this action was to assess the effectiveness of problematic credit management processes, especially in as far as concerns credit granted to non-financial companies, in order to confirm the ability to promptly detect situations with a significant probability of default and to implement solutions that would make the most of the current value of the debt. In particular, this program assessed the strategies, policies and procedures implemented in order to manage bad debts, including the organisational structure adopted for that purpose, adequate numbers, capacity and experience of the resources assigned to processes, systems and tools used to identify, manage and monitor bad debt, as well as internal control mechanisms, quality control and incentives systems applied to recovery processes. The findings also led to the conclusion that the Group adopts methods appropriate to its size and risk profile in most of the aspects examined, although some improvements had to be made in specific areas, for which reason appropriate measures were immediately adopted in order to do so. On-going projects in 2013: COLLATERAL MANAGEMENT TOOL The technical implementation of the Collateral Management Tool took place during 2013, a process which was preceded by collecting comprehensive information regarding the entire collateral portfolio, for each Caixa Agrícola, and allowed the data set forth in the respective debt (paper) files to be completed and updated, using a provisional tool (FREGA). The completion of this initiative will provide a number of benefits, such as compliance with the legal requirements and regulations regarding information on collateral associated to debt operations, debt impairments and requirements regarding capital, and ensure obtaining current detailed information in order to support and assist different aspects of credit risk management, namely portfolio supervision and collection of overdue debt and the additional implementation of several opportunities for improvement (e.g. management of socalled general guarantees, automatic issue of discharge document). BALANCE SHEET CENTRE The economic and financial information of most Portuguese companies that comply with the duty to register their annual reports, by submitting their Simplified Company Information (Informação Empresarial Simplificada IES) to the appropriate public agencies was integrated. The availability of financial information regarding entities that are not members of SICAM, in addition to the customer data already available therein, aims to: provide reliable indicators and ratios per sectors for the purpose of comparison with the entities under analysis, providing more inclusive information on companies in each sector of activity; provide timely information regarding potential clients under evaluation and their risk profile, providing comparative analysis with other companies in the same sector and sector averages; progressively increase the program s coverage of businesses; and continue to enhance the process of mass automatic integration of information with noteworthy increases in operational efficiency. 254 Notes to the Consolidated Financial Statements

255 CREDIT LIMITS MANAGEMENT SYSTEM The requirements of the business model associated to the creation of a credit limit management system were defined in 2013 and the technical development of the application began. This initiative will render processes for granting credit and monitoring exposure towards a client or group of clients to become more efficient, ensuring better risk management, optimising solvency and capital, reducing the required operating resources and the costs inherent to the analysis of the framework of credit proposals within the limits stipulated by the client, consolidating the involvement of the bank with clients via commercial operation of the unused credit line, increasing agility and service levels within the credit concession process and, finally, ensuring a more complete response to the recommendations and regulation of supervisory agencies. Conclusion of its implementation is expected during the first quarter of SOLUTION FOR PROPOSALS & CREDIT SCORING (SPCS) Up-to-date versions of debt agreements were made available in relation to the sole proprietor businesses. Also during 2013, we continued with the definition of business requirements related to the technical implementation of rules established in Decree Law no. 226/2012 on the duty to inform with regard to mortgage loan contracts or contracts with other property rights executed with consumers. CREDIT CARD BEHAVIOURAL SCORING MODEL A credit card behavioural scoring model was developed during 2013 for the credit card segment (individual customers). The employment of the typology of models allows the development of risk levels to be assessed and monitored and determines the adoption of a variety of strategies according to the level of exposure of a certain client. In this way, behavioural models allow debt portfolio risk to be monitored periodically and, additionally, allow client relationship strategies to be adjusted individually to each client, both in terms of collecting payment and the management of credit limits and commercial actions. RISK SUPPORT INFRASTRUCTURE (ISR) Impairment Datamart (DMI) 2013 saw the start of production of GCA s new impairment model (DMI), developed within the framework of the risk support infrastructure. Basically, it aims to structure and integrate information regarding risk, obtained from the different operating systems within the Group, in a corporate data warehouse, for informational and application purposes. The impairment datamart was developed simultaneously in order to calculate and simulate losses due to debt portfolio impairment resulting from the adoption of International Accounting Standards, introducing a range of opportunities for improvement. DEBT IMPAIRMENT We continued with efforts to implement a group of opportunities for certain improvements that had been identified during the Special Inspections Program, which affected the calculation of losses due to impairment, despite the fact that the results obtained showed that GCA essentially uses the policies, procedures and controls that are adequate for its size and risk profile in most aspects analysed. COMPANY RISK NOTATION MODEL The Group has a heuristic rating model associated with a work-flow procedure. The aim of this new risk notation methodology for companies is to standardize the analysis of the client company and the associated credit risk, allowing the group to continue with improving its risk management capacity, based on a more accurate overview of the portfolio s risk profile in. In 2013, after they were identified, the specification process was started for a range of opportunities for improvement in order to ensure, in particular, the specialisation of a model for small businesses and its integration within the balance sheet centre and the impairment model. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 255

256 Initiatives whose continuity was ensured: FUNDING AND CAPITAL PLAN Within the scope of the Memorandum of Understanding for the economic and financial assistance programme, a quarterly report was issued, relating to a plan for funding and capital, by means of which the regulator monitors GCA (and the other seven largest Portuguese financial groups), from what is really a prospective stance, based on two macro-economic scenarios (a basic and an adverse) where there are principles, guidelines and restrictions relating to a broad array of indicators. Among the main features to be monitored there were the trajectory of the solvency ratio, liquidity positions, the deleveraging process (loan-to-deposit ratio), portfolios of funds, debt and securities, along with developments in the respective impairments. STRESS TESTS The Group took part in the quarterly exercises to assess solvency and liquidity in an adverse macroeconomic climate in the context of the revisions of the plan for funding and capital within the scope of the economic and financial assistance program and it was exempted from reporting requirements, as set down in Instruction 4/2011 with regard to stress tests. Naturally, the quarterly exercises are aimed at reaching a prospective approach under adverse conditions, for which reason they effectively constitute stress tests, taken from the macroeconomic scenario and magnitudes for a range of variables, particularly in as far as concerns business strategy and capital planning. A group of opportunities for certain improvements that had been identified during the Special Inspections Program was also applied, focusing on the methodologies used in stress test exercises, despite the fact that the results obtained showed that GCA essentially uses the adequate procedures. INTERNAL CONTROL SYSTEM Work continued on structuring and improving SICAM s internal control system, in compliance with the regulatory requirements defined in Banco de Portugal Notice no. 5/2008. A report on the risk function at the Caixa Central was made and a report on the deficiencies at SICAM, along with the measures for mitigation. CONCENTRATION RISK - Wherever there is concentration, the losses from a small number of exposures can have a disproportionate impact. It is therefore important to manage this risk and ensure adequate levels of solvency. With this in mind, and in line with Banco de Portugal Instruction 5/2011, a report was made presenting and analysing the situation of SICAM, not only in terms of its credit portfolio, but also in terms of its portfolio of funds and the analysis of liquidity in the assets and liabilities on the balance sheet. INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (ICAAP) The aim of ICAAP is to assist financial institutions in assessing and quantifying the main risks they are exposed to, thus constituting an important tool in the decision-making management regarding risk levels assumed and control and mitigation measures to adopt. The results obtained by the works performed at GCA point to full adequacy of internal capital, similarly to what occurred in previous years. RECOVERY PLANS In conformity with what was established in the respective regulatory framework, Crédito Agrícola Group Recovery Plan was created in order to identify the measures that would need to be adopted to perform prompt correction of any situation of financial imbalance that might arise, or even avoid them completely, thus ensuring a well- 256 Notes to the Consolidated Financial Statements

257 structured and swift means of reaction, contributing towards the financial stability of the banking system. The Recovery Plan was organised in a manner that allows an overview of the Group, particularly SICAM, preparing the institution for adverse scenarios and increasing its probability for recovery under extreme circumstances, by safeguarding capital and solvency levels, minimizing repercussions on the financial system. In the same way, the opportunity for improvement identified by Banco de Portugal was also implemented, regarding the need to present a detailed description of processes to determine the market feasibility and value of the main segments of the institution s activity, operations and assets. Maximum exposure to credit risk On 31 December 2013 and 2012 maximum exposure to credit risk according to type of financial instrument, excluding portfolio securities, can be summarised as follows: On balance sheet: Customer loans 8,136,142,185 8,301,328,987 Cash and equiv. at other banking institutions 81,831,513 79,544,798 Investments at banking institutions 32,030, ,720,945 8,250,004,518 8,503,594,730 Off-balance-sheet: Guarantees given 249,399, ,307,167 Irrevocable commitments 660,437, ,245, ,837,080 1,028,552,646 9,158,841,598 9,532,147,376 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 257

258 Quality of debt in financial assets without default or impairment On 31 December 2013 and 2012 the quality of debt in financial assets according to the internal rating can be summarised as follows (thousand euros): Asset Aaa Aa1 Aa2 Aa3 Financial assets held for trading Other financial assets at fair value via P&L Financial assets available for sale 2013 from A1 to A3 Baa1 to B3 C undetermined Total ,531,359 23,531, ,015 29,854, ,785,624 71,145,736 42,830,248 7,431,184 50,180, ,556,805 4,434,664, ,149,292 4,991,957,713 71,145,736 42,830,248 7,431,184 50,180, ,487,820 4,464,518, ,680,651 5,046,274, Financial assets held for trading Other financial assets at fair value via P&L Financial assets available for sale Financial assets held to maturity ,944-18,377,987 18,388, ,971,435 6,357, ,328,617-93,528,017 26,393,779 4,111, ,928,535 1,821,582, ,211,105 2,409,160, ,404,603 17,525,894 41,559,032 10,013,040 83,603,577 2,607,848, ,760,551, ,404, ,054,911 67,952,811 14,124, ,503,548 4,435,799, ,589,092 5,196,429,015 The Group uses the ratings published by Moody s, the international rating agency, as its reference or, if unavailable, the greater of the ratings published by either Fitch or Standard & Poor s. In terms of credit to customers, the Group has a heuristic rating model associated to a workflow process that seeks to standardise the debt risk analysis process for companies and scoring systems associated to loans to individuals. In this way, Crédito Agrícola Group has developed and improved its risk management capabilities, by means of methodologies that provide a more precise overview of the portfolio s risk profile. 258 Notes to the Consolidated Financial Statements

259 Restructuring On 31 December 2013 and 2012 the value of the customer credit balance that has been renegotiated or are considered under default or impaired is: Bad debt Restructured (gross) (gross) Customer debt Bad debt of which: restructured loans in default (gross) accrued impairment/ provisions regarding debt Debt amortised from assets 2013 Private sector residents 880,674, ,812,749 47,438, ,245, ,325, ,354,085 Individual residents, of which 274,322, ,974,267 13,650, ,586, ,151, ,743,098 Home loans 59,622,931 90,922, ,722 55,013,930 37,641,176 5,411,902 Consumer and other purposes 214,699, ,051,768 13,457, ,572, ,510, ,331,196 Non-financial resident companies 606,352, ,838,482 33,787, ,658, ,173, ,610,986 Government agencies 4,936,739 1,857, , Other residents Non-residents 1,149,930 1,063, , , ,784 Total 886,761, ,734,026 47,838, ,764, ,923, ,715, Private sector residents 593,199, ,109,654 22,168, ,306, ,551, ,602,352 Individual residents, of which 140,460, ,195,170 7,688, ,017, ,409, ,349,296 Home loans 23,959, ,018, ,578 56,337,713 37,623,099 5,019,531 Consumer and other purposes 116,501, ,177,070 7,576, ,679, ,786, ,329,765 Non-financial resident companies 452,738, ,914,485 14,479, ,289, ,141, ,253,056 Government agencies 132,248 1,376, Other residents Non-residents 22,393 1,138, , , ,386 Total 593,354, ,624,030 22,168, ,563, ,176, ,794,738 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 259

260 Length of default in non-performing loan operations On 31 December 2013 and 2012 default on non-performing loan operations is detailed below (Note 13): Up to 3 months 19,022,960 27,339,470 Between 3 and 6 months 24,349,540 30,557,617 Between 6 and 12 months 96,194,284 99,296,221 Between 1 and 3 years 291,118, ,882,652 Between 3 and 5 years 112,273, ,301,044 More than 5 years 103,667,632 73,871,777 Interest payable 10,825,025 12,508, ,451, ,757,124 Concentration risk Principles and Policies for Management of Concentration Risk 1. Risk management at GCA Risks management is a key issue in the Group s activity, which recognises its decisive impact in generating value. The definition of the global risk strategy, incorporating quantifiable objectives in terms of risks assumed and profitability is under the responsibility of the Caixa Central Executive Board (hereinafter referred to as CAE). The Global Risk Department (hereinafter referred to as DRG) and the Assets and Liabilities Commission (ALCO), in coordination with the other head governing units, plays a central role in the definition of policies and procedures for risk management, which require approval by the CAE. 1.1 Duties of the Global Risk Department In terms of risk management, CCCAM, by means of DRG, is responsible for defining the global risk management principles and policies, by developing and providing analysis and decision support instruments, consolidated impairment calculation, ICAAP (Internal Capital Adequacy Assessment Process), creating models and systems to support risk function, rules and guidelines for procedures and processes. DRG is responsible for the supervision of credit risk management as well as promoting and coordinating the management of all other risks in terms of strategy. On the other hand, DRC, the Credit Risk Department, is the body responsible for the implementation of policies defined by DRG with regard to credit risk in the scope of CCCAM, with the CCAM performing this management at local level. In as far as concerns concentration risk, DRG is responsible for the execution of the Concentration Risk Management Model: identifying relevant variables for evaluation, measurement of associated concentration level and writing the internal and external report. 260 Notes to the Consolidated Financial Statements

261 In the context of the identifying, evaluating and monitoring Concentration Risk, DRG is also responsible for the report referred to in Instruction no. 23/2007, in order to permit the calculation of the Individual Concentration Index specified according to Instruction no. 5/2011, issued by Banco de Portugal. 1.2 Duties of the ALCO Committee The ALCO Committee is chaired by Caixa Central and includes the different Departments and Offices directly responsible for: 1) Controlling activities related to the Caixa Central Balance sheet and the Group. 2) Risk control by organising management, accounting and reporting information regarding Caixa Central and the Group. Among ALCO s duties in the context of Risk Management, it is particularly required to: Permanently monitor and assess the different financial risks (such as concentration risk) to which GCA and Caixa Central are subject, performing their measurement and control using predefined methods and indicators; Propose risk limits to the CAE within the scope of Assets and Liabilities Management. In what concerns Concentration Risk, the ALCO Committee supervises the management of financial risk concentration (in particular interest rate, exchange rate, liquidity and market risks) with the assistance of the Financial Department, as well as monitoring the Group s overall concentration risk in coordination with DRG. 1.3 Duties of the DFOA Inspection, Guidelines and Monitoring Department The duties of this Department in terms of risk management are to monitor and offer guidelines for Associated Caixas, particularly with regard to risk assumption policies. With regard to concentration risk management, DFOA is responsible for articulation between CCCAM bodies (DRG and ALCO) and the CCAM, with the latter in charge of local management of concentration risk. 2. Integration of good practices in concentration risk management According to the guidelines of the Basel Committee and the CEBS (Committee of European Banking Supervisors), institutions are to implement systematised concentration risk management practices, including their identification, assessment, adjustment, monitoring and control. The Basel Committee provides two alternative approaches to concentration risk management: the standard approach (simple concentration risk evaluation methodologies) and the advanced approach (internal economic capital models that should measure concentration risk appropriately, but which are often limited due to insufficient data). 2.1 Measuring concentration risk: adopted approach GCA has implemented concentration risk management, a matter that will continue to merit close attention and the efforts of the Group in the medium term. Concentration risk assessment (performed by DRG) is based on an evaluation of the debt portfolio, investment portfolio and funds portfolio according to the different relevant correlations under the foundation approach and ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 261

262 an advanced approach, applying the Herfindahl and Gini coefficients, as well as the Relative Exposure. In certain relevant situations, the Correlation Coefficient is also used to explore interdependencies between credit risks or internal variables with external situations. GCA intends to permanently enhance the methodologies used in concentration risk management. 2.2 Monitoring concentration risk GCA established a Management Model that would coordinate monitoring and control or concentration risk through periodic analysis of contraction and the implementation of risk prevention or correction mechanisms. 3. Common characteristics that denote concentration Analysis of credit risk concentration: Concentration Risk analysis was performed with regard to the GCA (SICAM) Customer Loan Portfolio considered for the Group Prudential Report (in as far as concerns Customer Loans). The concept of exposure used for concentration analysis was Loan Balance (i.e. loan capital past due and falling due), which differs from the concept applied in the Annex to Instruction no. 5/2011 (in the calculation of the Sectorial Concentration Index and the Individual Concentration Index): Total Amount (loan borrowed plus unused credit limits). Single variable analysis is performed (Region, Product Family, Rate, Collateral, Client, Business Activity Sector, Total Payment Term and Residual Term) as well as complex analysis (Product Family per Region, Business Activity Sector per Region and Collateral per Product Family) regarding exposure to Concentration Risk. Multidimensional analysis according to Product Family per Region aims to evaluate concentration levels of loan portfolio regarding customers based in each Region according to Product Family. Analysis according to Business Activity Sector per Region aims to evaluate concentration levels of loan portfolio regarding customers based in each Region according to Business Activity Sector (CAE Classification of Economic Activities). Within each abovementioned multidimensional analysis, three regions were selected for the concentration analysis. Finally, the multidimensional analysis according to Collateral per Product Family aims to evaluate concentration levels of loan portfolio regarding clients of a certain product family according to the type of collateral given. Two product families were selected for the concentration analysis regarding these variables. 3.1 Analysis per region The variable Region was used to analyse the risk of geographical concentration in national territory, considering the Home Branch as the reference point for the region operation. The NUTS III regions of the Portuguese National Statistics Institute are employed to determine the region. Correlation analysis was performed between the distribution of the customer loan portfolio and the variable GDP per region. Correlation analysis was also performed between the number of GCA Branches per region and the distribution of the GCA (SICAM) loan portfolio per region. Additionally, correlation analysis was performed regarding customer loan size and Impairments per region. 262 Notes to the Consolidated Financial Statements

263 It was also considered important to compare the distribution of the GCA (SICAM) loan portfolio with the Portuguese banking sector in general. 3.2 Analysis per product family Concentration analysis was performed regarding the distribution of the customer loan portfolio per product family. Correlation analysis was performed regarding customer loan size and Impairments per Product Family. 3.3 Analysis per rate The portfolio distribution was analysed (weight per type of rate: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. 3.4 Analysis per collateral Concentration analysis of customer loan portfolio per collateral only takes into account one the available types of collateral registered in the system, selecting it according to its relative importance according to a conceptual hierarchy. The Portfolio distribution was analysed (weight per type of collateral: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. Correlation analysis was performed between the weight of the customer loans and the weight of Impairment per collateral. 3.5 Analysis per customer type The portfolio distribution was analysed (weight per type of customer: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. Correlation analysis was performed between the weight of the customer loans and the weight of Impairment per customer. It was also considered important to compare the distribution of the GCA (SICAM) loan portfolio per type of customer with the Portuguese banking sector in general. Including individual customers and companies, the Group s distribution in relation to the sector was the following. 3.6 Analysis per business activity sector (CAE) The portfolio distribution was analysed (weight per business activity sector: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. Correlation analysis was also performed between the Weight of Loans to non-financial customers in the Banking Sector and the GCA Loans Portfolio. 3.7 Analysis per total term The portfolio distribution was analysed (weight per total term interval: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. It was also considered important to compare the distribution of the GCA (SICAM) loan portfolio per loan term with the Portuguese banking sector in general. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 263

264 3.8 Analysis per residual term The portfolio distribution was analysed (weight per residual term interval: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. 3.9 Analysis per company size Analysis per company size aims to discover the concentration of loans granted according to type of Corporate customer by Crédito Agrícola. In the study, companies are divided according to turnover. Large Companies have a turnover above 50 million euros, Medium companies have a turnover between 10 and 50 million euros, Small Companies between 2 and 10 million euros and finally Micro Companies a turnover below 2 million euros. The portfolio distribution was analysed (weight per company size: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per product family in the region of greater Lisbon Multidimensional analysis per product family in the region of greater Lisbon aims to evaluate the concentration of loans in the same region according to product family. The West region, Lisbon and the Algarve were selected because they presented the highest concentrations in basic analysis of the Group s loan portfolio per region. The portfolio distribution was analysed (weight per product family in Lisbon: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per product family in the West region Multidimensional analysis per product family in the West region aims to evaluate the concentration of loans in the same region according to product family. The portfolio distribution was analysed (weight per product family in the West region: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per product family in the Algarve Multidimensional analysis per product family in the Algarve aims to evaluate the concentration of loans in the same region according to product family. The portfolio distribution was analysed (weight per product family in the Algarve: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per business activity sector in the Lisbon region Multidimensional analysis per business activity sector in Lisbon aims to evaluate the concentration of loans in the same region according to business activity sector. The West region, Lisbon and the Algarve were selected because it was these that presented the highest concentrations in basic analysis of the Group s loan portfolio per region. 264 Notes to the Consolidated Financial Statements

265 The portfolio distribution was analysed (weight per business activity sector in Lisbon: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per business activity sector in the West region Multidimensional analysis per business activity sector in the West region aims to evaluate the concentration of loans in the same region according to business activity sector. The portfolio distribution was analysed (weight per business activity sector in the region: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per business activity sector in the Algarve Multidimensional analysis per business activity sector in the Algarve aims to evaluate the concentration of loans in the same region according to business activity sector. The portfolio distribution was analysed (weight per business activity sector in the region: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per type of collateral for company business loans Multidimensional analysis per type of collateral regarding company loans for business purposes aims to evaluate the concentration of loans in this product family according to type of collateral. The portfolio distribution was analysed (weight per type of collateral for company business loans: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount Analysis per type of collateral for company investment loans Multidimensional analysis per type of collateral regarding company loans for investment purposes aims to evaluate the concentration of loans in this product family according to type of collateral. The portfolio distribution was analysed (weight per type of collateral for company investment loans: balance used and credit returns during the current year) and compared with the results from the analysis of balance used, overdue loan value and total amount. 4. Analysis of concentration of funds portfolio: 4.1 Analysis per region The variable Region was used to analyse the risk of geographical concentration of funds portfolio in national territory. Correlation analysis was performed between the number of Branches per region and the distribution of SICAM funds per Region. Correlation analysis was also performed between the distribution of cash and equivalent per District in Portugal (Banking Sector) and SICAM. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 265

266 4.2 Analysis per product group Concentration analysis was performed regarding the distribution of the funds portfolio per product family. 4.3 Analysis per customer Concentration analysis was performed on the distribution of the funds portfolio according to Customer type, between individuals and companies, which were in turn divided per business activity sector. Correlation analysis was performed between the weight of each type of Customer in Portugal (Banking Sector) and GCA (SICAM). Correlation analysis was performed between the type of Customers with funds in other banking institutions and in GCA (SICAM) Funds portfolio per Institutional sector. 4.4 Analysis per business activity sector Concentration analysis was performed on the distribution of the funds portfolio per business activity sector. 4.5 Analysis per residual term Concentration analysis was performed on the distribution of the funds portfolio per residual term. 4.6 Analysis per amount category Concentration analysis was performed on the distribution of the funds portfolio per amount. 4.7 Analysis per residual term and amount category: 5 to 25 thousand euros Multidimensional concentration analysis was performed regarding the distribution of funds portfolio associated to amounts between 5 and 25 thousand euros per Residual Term. The amount categories selected showed significant concentration levels, according to the respective basic analysis. 4.8 Analysis per residual term and amount category: 25 to 50 thousand euros Multidimensional concentration analysis was performed regarding the distribution of funds portfolio associated to amounts between 25 and 50 thousand euros per Residual Term. The amount categories selected showed significant concentration levels, according to the respective basic analysis. Analysis of Liquidity Risk Concentration: The Analysis of the Concentration Risk was performed with regard to the SICAM Balance sheet items. The concept of exposure taken into consideration for risk concentration analysis was cash flow reported to 31 December Analysis is performed according to the residual maturity of the items: Assets, Liabilities and Solvency Gap. 266 Notes to the Consolidated Financial Statements

267 1. ASSET ANALYSIS Total Assets were analysed in view of residual maturity. This was also performed regarding its most representative / concentrated headings. 2. LIABILITIES ANALYSIS Total Liabilities were analysed in view of residual maturity. This was also performed regarding its most representative/ concentrated items. 3. ANALYSIS OF SOLVENCY GAP The Solvency Gap was analysed in view of its residual maturity (Positive Gap and Negative Gap). Specific risks in insurance Insurance companies assume risks by means of insurance contracts, which are classified according to the specific risk category of the insurance. The nature of specific insurance risks These include the risks inherent to selling insurance contracts, associated with the form of the contract and the tariff, with the process of subscription and the provisioning of responsibilities, along with the management of claims and reinsurance. These risks apply to all types of insurance and can be divided into sub-risks: a) The risk from the form of the contract: this includes the risk of the company s exposure to features unanticipated when drawing up the form and defining the price of the contract. b) premium risk: this is related with future claims from existing policies, where the premiums have been already collected or are fixed. The risk is that the amounts collected or due under fixed schemes may be insufficient to cover all the future obligations deriving from these contracts (under-pricing). c) Subscription risk: this relates to exposure to financial losses stemming from the choice and approval of risks to be insured. d) Provisioning risk: this relates to the provisions set aside, which may turn out to be insufficient for the cost of claims already put in. e) Claims risk: this relates to the fact that more claims may be made than expected and some claims have much higher costs than anticipated, bringing unexpected losses. f) Retention risk: this means there is not enough cover (less reinsurance protection), leading to losses from catastrophic events or a higher claims rate. There is also risk of disasters, resulting from extreme occurrences that imply destruction of property, death/injuries to people, generally due to natural disasters (earthquakes, hurricanes, floods). This means there is a risk that a ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 267

268 specific event or a series of events of great magnitude, normally in a short period (up to 72 hours), implies a significant discrepancy between the number and cost of claims and what was expected. Management of specific insurance risks Specific insurance risk is managed by the company through operating procedures with embedded preventive control and detection. This must be automatized to a high degree, run by skilled staff and with clear responsibilities for senior management: a) Product design (applying to new products and changes to those existing) and pricing, within which there is a stipulation of the risks stemming from cover and insured capital, defined in the way premiums are determined, checked and matched for adequacy with the reinsurance plan associated with new products, compliance with inhouse regulatory standards, a complete test programme undertaken, properly structured training schemes and outsourcing for services associated with the new product. The tariffs applied to risks are adjusted as a function of factors relating to pricing, and this makes it possible to assess the level of risk associated to each insurance contract, which is determined on the basis of technical actuarial studies. b) Distribution and management of the risk portfolio, according to which subscription policies are defined, along with the level of delegation of power and acceptance of risk, systems encouraging Sales and the subscription of new insurance, and the procedures for portfolio management and revision of premiums. The rules for accepting risk are set out in the supporting IT systems and there are also mechanisms fixed with blocks and alerts whenever any of these rules is broken. The subscription area has control over acceptance of conditions relating to exceptions and exclusions. c) Provisioning, in the scope of which technical provisions are defined and administered, ensuring the cover of company obligations towards policyholders and claimants. This is based on studies assessing the adequacy of provisions prepared regularly by the senior actuary. d) Claims management, in the scope of which payments are made to claimants, ensuring: (i) prompt treatment and management of claims; (ii) the speedy provision of assistance to claimants; (iii) rigorous compliance with the law, internal rules and regulations; (iv) minimizing the average cost of claims, without compromising the fair treatment of all claimants and insured parties. e) Reinsurance management, in the scope of which will be found the specification, implementation, monitoring, report and control of treaties and other conditions agreed with reinsurers. The reinsurance policy plays a crucial role in mitigating specific insurance risks, allowing for a better stabilisation of results and of solvency levels, as well as the most efficient use of available capital and an increase in the company s capacity to take on risks. The management of specific insurance risk is also backed by a range of studies carried out by the Technical Office and by the Actuary in charge, who analyse the adequacy of tariffs, identify the types of risk and the most profitable segments, as well as specifying the most reliable figures for technical provisions. 268 Notes to the Consolidated Financial Statements

269 Fair value of financial assets and liabilities The following table provides a comparison between fair value and balance sheet value for the main assets and liabilities on 31 st December 2013 and 2012 (figures in thousand euros): 2013 Analysed Balances Balances not analysed Balance value Fair value Difference Balance value Total Balance value Assets Cash and equiv. in Central Banks 384, , ,781 Cash and equiv. in other banks 81,832 81, ,832 Investments held at banks 32,031 32, ,031 Customer loans (net balance) 7,333,134 7,194,163 (138,970) 138,856 7,471,990 Liabilities 7,831,777 7,693,158 (138,619) 138,856 7,970,633 Funds from Central Banks 1,262,845 1,262, ,262,845 Funds from other Banks 95,679 95, , ,067 Customer funds and other loans 10,111,596 10,117,852 6,256 10,947 10,122,543 Other subordinated liabilities 133, , ,404 11,603,523 11,610,614 7,091 15,335 11,618,858 Analysed Balances 2012 Balances not analysed Balance value Fair value Difference Balance value Total Balance value Assets Cash and equiv. in Central Banks 433, , ,907 Cash and equiv. in other banks 79,545 79, ,545 Investments held at banks 122, ,232 2, ,721 Customer loans (net balance) 7,417,492 7,385,897 (31,595) 242,661 7,660,153 Investments held to maturity 2,760,551 2,807,347 46,796-2,760,551 Liabilities 10,814,216 10,831,928 17, ,661 11,056,877 Funds from Central Banks 1,907,790 1,907, ,907,790 Funds from other Banks 232, ,356 3,137 8, ,228 Customer funds and other loans 10,068,292 10,102,212 33,920 44,532 10,112,824 Other subordinated liabilities 128, , ,835 12,337,136 12,374,703 37,567 52,541 12,389,677 ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 269

270 The main considerations regarding fair value of assets and liabilities are as follows: With regard to spot balances, the balance sheet figure was taken as fair value; With regard to investments held to maturity, the maximum effective market bid from a pool of 10 contributors was taken; The fair value for remaining instruments was determined on the basis of discounted cash flow models, bearing in mind the contractual conditions of the operations involved and using appropriate interests rates for the instruments, including: a) Market interest rates for Investments held at banks and Other subordinated liabilities ; b) The interest rate used by Caixa Central for comparable loan operations; c) Reference interest rates for the issue of retail products. d) Reference interest rates in intra-group operations taking place in conformity with the Crédito Agrícola Legal Regimen, namely using resources from Associated Caixas to be applied centrally at Caixa Central. Specific curves were used for the items Customer Loans, Investments held at banks and Funds from other banks based on the application of average spreads for operations performed during the last three months leading up too 31 December 2013 on the Euribor/SWAP curve on 31 December The rates applied were: Euribor Euribor/Swap Individual loans spread Business loans spread Home loans spread Customer funds spread Other bank funds spread 1 day (overnight) 0,45% 1 month(s) 0,23% 2 month(s) 0,27% 3 month(s) 0,29% 4 month(s) 0,33% 5 month(s) 0,36% 6 month(s) 0,39% 9 month(s) 0,49% 12 month(s) 0,56% 2 year(s) 0,53% 6,53% 5,60% 2,01% 1,35% 0,10% 3 year(s) 0,75% 4 year(s) 1,01% 5 year(s) 1,27% 8 year(s) 1,87% 10 year(s) 2,16% 15 year(s) 2,59% 20 year(s) 2,72% 30 year(s) 2,74% As set down in IFRS 7 and for presentation purposes, financial instruments recorded on the balance sheet at fair value are classified according to the following hierarchy: 270 Notes to the Consolidated Financial Statements

271 Level 1 Listed on active markets This level includes financial instruments valued on the basis of active market prices (executable bids) disclosed through negotiation platforms. Level 2 Value techniques based on market data This level includes financial instruments valued by use of in-house models using data observable in the market, in particular interest rate or exchange rate curves. Level 3 Value techniques based on inputs not based on observable market data This level encompasses financial instruments valued by use of in-house methods based essentially on inputs that are cannot be observed in the market and with significant impact on valuing the instrument or valued on the basis of indicative bids calculated by third parties using valuation models. On 31 December 2013 fair value of financial instruments reflected in the financial statements was assessed in the following manner: Value at historic cost (1) Active market quotations (2) Value techniques Market data (3) Models (4) Total Financial assets held for trading - 776,359 22,755,000-23,531,359 Other financial assets at fair price through P&L Financial assets available for sale - 30,785, ,785,624 31,111,682 4,913,517,110-42,451,959 4,987,080,751 31,111,682 4,945,079,093 22,755,000 42,451,959 5,041,397,734 Financial liabilities held for trading , , , ,933 (1) Unlisted securities regarding which it is not possible to assess fair value accurately. (2) in addition to listed securities on Stock Exchanges, this category includes securities assessed on the basis of market prices in active markets available on negotiation platforms. (Level 1). (3) Valuation based on market rates, such as interest rate curves, swap curves and exchange rate curves (Level 2). (4) these correspond to securities valued at indicative bids as informed by the issuer (Level 3). All of this amount corresponds to Banco Finantia Internacional subordinated debt securities. During the 2013 and 2012 financial years, there were no reclassifications between levels or between categories of financial assets, except for the reclassification of the entire investment portfolio held to maturity as financial assets available for sale. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 271

272 In as far as concerns sovereign debt, the entire portfolio is registered as available for sale and itemized by country, according to the table below: OAFJVAR AFDV Qtt. Value Qtt. Value Portugal 53,000 53, ,800, ,640,529 Austria 0 0 9,950,000 10,410,797 Belgium ,800,000 31,744,898 Spain 0 0 1,129,845,000 1,210,045,414 France ,240,000 37,462,901 Ireland ,980,000 27,439,109 Italy ,350, ,965,605 Germany ,200,000 30,828,689 Holland ,555,000 18,199,314 Poland 0 0 1,750,000 1,963,536 Totals 53,000 53,152 3,009,470,922 3,157,700,792 At the end of the previous year of 2012, sovereign debt was divided between financial assets available for sale and the investment portfolio held to maturity: AFDN OAFJVAR AFDV IDM Qtt. Value Qtt. Value Qtt. Value Qtt. Value Portugal 10,974 10,944 28,000 27,720 1,543,219,119 1,534,944,520 1,458,727,218 1,412,442,896 Austria ,575,000 11,855,267 3,000,000 3,224,756 Belgium ,385,000 8,597,049 10,250,000 10,337,765 Spain ,750, ,282,999 91,795,000 89,633,902 France ,300,000 52,761,019 9,900,000 10,283,975 Ireland ,980,000 32,169,251 Italy ,250,000 11,724,045 34,980,000 33,192,091 Germany ,210,000 69,437, Holland ,740,000 41,201, Canada ,500,000 3,058, Finland ,250,000 12,898, Luxemburg ,000,000 1,036, Poland ,750,000 1,920, Totals 10,974 10,944 28,000 27,720 1,839,929,119 1,849,718,154 1,643,632,218 1,591,284, Notes to the Consolidated Financial Statements

273 48. Consolidated Equity On 31 December 2013 and 2012 Crédito Agrícola Group equity was as follows: Core equity 967,262,361 1,011,095,766 Additional equity 49,715,108 52,649,980 Discounts (103,485,521) (71,313,347) Total equity 913,491, ,432,399 Total equity 8,495,338,975 9,087,939,516 Core Tier 1 Ratio 11.9% 11.6% TIER I Ratio 11.4% 11.1% TIER II Ratio 0.6% 0.6% Solvency Ratio 10.8% 10.9% With the economic and financial assistance program agreed in the second quarter of 2011 with the IMF, the ECB and the European Commission, the solvency demands have put even more emphasis on the Core Tier 1 ratio, which corresponds to the division of top quality capital, valued in the market as an indicator of the financial robustness of a banking institution through total assets weighted according to risk. Crédito Agrícola has also revealed a comfortable Core Tier 1 ratio over time, above the minimum levels of 10% (Banco de Portugal Notice no. 3/2011), with a ratio of 11.9% obtained in December 2013 (as opposed to 11.6% in December 2012), indicating the stability and robustness of the Group s equity. The Overall Solvency ratio of 11% recorded in December 2013 is also above the minimum level of 8% defined by Banco de Portugal (Notice no. 5/2007). ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 273

274 49. Subsequent Events At the date when these financial statements were approved by the Executive Board of Caixa Central, there were no events subsequent to the reference date of the statements, 31 December 2013 which would require adjustments or modifications to the values for assets and liabilities, under the provisions of IAS 10 Events after balance sheet date. 274 Notes to the Consolidated Financial Statements

275 Auditor s Report Introduction 1. We have examined the consolidated financial statements of Caixa Central de Crédito Agrícola M tuo Caixa Central, the associated Caixas de Crédito Agrícola M tuo Associadas and subsidiaries ( Caixa Agrícola Group ), which comprise the Consolidated balance Sheet on 31st December 2013 (showing a total of 14,620,567,269 euros and total equity of 1,141,018,510 Euros, including the net loss of 2,941,419 euros), the Consolidated income statement by nature, Other Comprehensive Income, Consolidated Statement of Changes in Equity and the Consolidated Cash Flow Statement for the year reported to that date, and Notes. Responsibilities 2. The Executive Board of Caixa Central is responsible for the preparation of the consolidated financial statements that present a true and appropriate description of the financial situation of those companies encompassed by the consolidation, the consolidated income and comprehensive income, consolidated changes in equity and consolidated cash flows, as well as the adoption of appropriate accounting policies and criteria as well as suitable internal control systems. 3. We are responsible for expressing an independent professional opinion based on our examination of those financial statements. Scope 4. The examination was performed complied with the Technical Standards and Guidelines for Revising / Auditing of the Society of Chartered Accountants, which require that this examination is planned and carried out in a manner that ensures an acceptable level of certainty as to whether the financial statements are free of any materially relevant distortions. In order to do so, out examination included:

276 - checking that the financial statements of the entities encompassed in the consolidation were appropriately examined and, for significant situations when they were not, verifying a sample of the support for amounts and disclosures therein and evaluation of estimates, based on judgments and criteria defined by the Board of Directors, used in their preparation; - verifying consolidation procedures; - assessment as to whether the accounting policies adopted are appropriate, if they were applied uniformly and their disclosure, taking the circumstances into account; - verifying the applicability of the going concern principle; and - assessment as to whether the presentation of the consolidated financial statements is appropriate, in general terms. 5. Our examination also encompassed verifying the conformity of the financial information specified in the consolidated management report with the consolidated financial statements. 6. We consider that the examination performed provides us with acceptable grounds to express our opinion. Opinion 7. In our opinion, the financial statements mentioned above provide a true and appropriate portrayal, in all materially relevant ways, of the consolidated financial position of the Crédito Agrícola Group, on 31 December 2013, together with the consolidated income and comprehensive income results and the total consolidated integral income from their operations, consolidated changes in equity and consolidated cash flows during the financial year ending on the abovementioned date, in compliance with the International Financial Reporting Standards, as adopted in the European Union.

277 Report on other legal requirements 8. We are also of the opinion that the financial information provided in the consolidated Management Report complies with the consolidated financial statements for the year. Lisbon, 12 May 2014 Ernst & Young Audit & Associados, SROC S.A. Chartered Accountant Firm (no. 178) Represented by: Ana Rosa Ribeiro Salcedas Montes Pinto (ROC no. 1230)

278 ADVISORY BOARD OPINION In conformity with Article 37, paragraph g) of the Caixa Central Articles, the Advisory Board issues its opinion with regard to the Consolidated Annual Report of the Crédito Agrícola Mútuo Integrated System (SICAM) for the financial year of Based on the Document to be examined, discussed and voted in SICAM s Annual General Meeting, which will take place on the 31 May, the members of the Advisory Board do hereby issue this opinion. The referred document provides a true and appropriate portrayal of the performance of the Crédito Agrícola Mútuo Integrated System (SICAM) and the Crédito Agrícola Group during the year ending on 31 December In as far as concerns the most relevant facts in Crédito Agrícola s activity of 2013, we noted the three main areas of intervention, which were: 1 Caixa Central Restructuring Program and Transformation of the Crédito Agrícola Group; 2 Launch of 12 initiatives for the transformation of Caixa Central; 3 Evaluation of Caixa Central s global strategy, during the 2nd semester of We noted the launch and implementation of the Caixa Central Restructuring Program and Transformation of the Crédito Agrícola Group in terms of organisation and structure of Caixa Central and CA Serviços, which involved the application of 12 measures. We registered the launch of 12 initiatives to transform Caixa Central, regarding organisational and commercial structure, strategy for the Banco Urbano, institutional communication, risk analysis and debt recovery, IS / OT, new strategy for insurers, real estate strategy, capital and balance sheet management instruments, implementation of the Group s acquisitions strategy, adaptation to the new legal framework and its evolution into a Universal Financial Group as well as the acceleration of the Caixa merger processes. Following the measures implemented, we have also noted the first perceptible results, as an evaluation of this global strategy during the 2nd semester. SICAM Net Earnings on 31 December 2013 have decreased 96% compared to the previous year, essentially due to falling financial margin (-21.2%) and the need to increase provisions (+24%) both regarding to non-performing debt and to cover the devaluation of real estate devaluation cover. The combination of a substantial contraction of Group banking activity and the negative results of the Real Estate Investment Trusts are behind the losses of 2.9 million euros presented by the Crédito Agrícola Group at the end of the 2013 financial year. 278 ADVISORY BOARD OPINION

279 Despite this unfavourable scenario for banking activities, the complementary margin was positive, increasing 1.5%, in other words, 2 million euros, when compared to We noted the efforts made by Caixa Central and some of the instrumental Group companies to develop models and tools that would support risk management and the calculation of impairments and equity, not only in order to respond to the Troika s Special Inspections Program but also to adjust the business to the stipulations of Banco de Portugal, the Securities Exchange Commission and the EBA, especially with regard to Internal Auditing, Compliance and Global Risk of Caixa Central. We noted the definition and implementation of new guidelines for the Caixas Agrícolas, issued by DFOA (Inspection, Guidelines and Monitoring Department), with regard to credit risk management, and the economic/financial consolidation guarantee for the Associated Caixas, following new requirements set by supervisory entities, with recourse to development and updated tools such as DFOA Online, among others, in order to supervise and monitor the development of SICAM. We also noted the activity performed by Caixa Central for the purposes of mergers and its intervention in seven Associated Caixas during the financial year in question, according to the RJCAM legal framework. We noted the creation of Corporate departments such as Internal Control and Planning; Compliance, Communication and Institutional Relations, as well as segment-oriented Marketing operating within the Group s commercial network. We further noted brand disclosure and the Crédito Agrícola Slogan, enhancement of digital channels, the comfortable position portrayed in the Banco de Portugal Behavioural Supervision report, cost efficiency, the launch of the Multi-bank channel, the stability of the remuneration of the Caixas surpluses by Caixa Central and the study regarding optimizing the handling and recovery of VAT within the scope of SICAM. During 2013 the activity of the Crédito Agrícola Group faced the adjustment of the national banking system, through the capitalisation bailout that most of the banks adhered to. The liquidity injected into the banks cooled the aggressiveness regarding resources to a certain degree. However, the restrictive policies implemented, the salary cuts for public servants and in pensions, the rise in taxation and lack of public investment led to a slowdown in the economy as a response to these measures. Small and medium enterprises were wound up, contributing decisively towards unemployment and abnormal emigration levels, with direct impact in defaults by borrowers, with the value of non-performing loans reaching new heights. The additional effort to fund the banks and the decline in the value of real estate given in lieu of payment resulted in the degradation of operating conditions. ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 279

280 Furthermore, these properties place constant pressure on bank balance sheets due to their operating costs. Even so, SICAM continues to possess lower non-performing loan ratios than other banks, with the due corrections made according to the top lenders, which does not apply to Crédito Agrícola. Caixa Central structural costs have dropped 0.4% compared to 2012, from million euros to million euros. However, it should be noted that putting aside non-recurrent costs, the reduction was actually approximately 4%, in other words, expected savings of 4 million euros. The impact of the reorganisation in terms of structural costs will only be effectively felt from 2014 onwards, when the non-recurrent costs will no longer apply. Despite the difficult conditions in the insurance market, the performance of our Insurers CA Seguros and CA Vida deserve praise, since besides their contribution towards fees of the Caixas Agrícolas assisting their operating costs, these insurers obtained profit of 2.6 and 3.9 million euros respectively, that is a total of 8.5 million euros, which corresponds to an important contribution towards the consolidated statements of the Crédito Agrícola Group. This result is also due to the very considerable efforts of the Caixas and their employees in marketing these products to our Customers. The Crédito Agrícola Group continues to present a rather favourable set of indicators, achieving at the end of 2013 a consolidated solvency ratio (Core Tier 1) of 11.9% for SICAM and 11.4% for the Group and a loans-to-deposit ratio of 80.1%, demonstrating economic solidness and capacity to absorb an occasional blow, and financial solidness that will allow Crédito Agrícola to assume its position as the bank in the best condition to support relaunching the economy, especially the local economy, by investing its surpluses. This is what we would like to say to the General Meeting regarding the Consolidated Annual Report of the Crédito Agrícola Group, regarding the current state of the economy and our Group, as well as recommend the Report s approval by the Associated Caixas following their due examination and discussion. Lisbon, 5 May ADVISORY BOARD OPINION

281 The Advisory Board Caixa de Crédito Agrícola de Albufeira (Chairman) João Manuel Correia da Saúde Caixa de Crédito Agrícola de Alenquer Hélio José de Lemos Rosa Caixa de Crédito Agrícola de Beja e Mértola Francisco José Salgueiro Correia Caixa de Crédito Agrícola de Estremoz Monforte e Arronches Normando António Gil Xarepe Caixa de Crédito Agrícola de Lourinhã António Augusto Nascimento Mateus Caixa de Crédito Agrícola de Paredes António Francisco Coelho Pinheiro Caixa de Crédito Agrícola de Silves José Manuel Guerreiro Estiveira Gonçalves Caixa de Crédito Agrícola de Vale do Távora e Douro Francisco Eduardo das Neves Rebelo Caixa de Crédito Agrícola de Zona do Pinhal Ângelo de Jesus Antunes Caixa de Crédito Agrícola de Região de Bragança e Alto Douro, ex officio, in conformity with article 35, no. 2, of the Caixa Central Articles Adriano Augusto Diegues ANNUAL REPORT 2013 CRÉDITO AGRÍCOLA 281

282 07

283 Group Composition CRÉDITO AGRÍCOLA