Investor Presentation. April 2016

Transcription

1 Investor Presentation April 2016

2 Disclaimer The information contained in this document, which has been prepared by Novo Banco S.A. ( Novo Banco ), is provided as at the date hereof and is subject to updating, revision and amendment. The information in this document has not been independently verified and there is no guarantee of the accuracy or completeness of such data. None of Novo Banco or its subsidiary undertakings (the Novo Banco Group ), or its financial or other advisers, or their respective directors, officers, employees, agents and affiliates, undertakes or is under any duty to update this document or to correct any inaccuracies in any such information which may become apparent or to provide you with any additional information. To the fullest extent permissible by law, such persons disclaim all and any responsibility or liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this document. Certain information in this document is based on management estimates. Such estimates represent the current beliefs of applic able members of management of the Novo Banco Group. While those management members believe that such estimates are founded on reasonable grounds, estimates by their nature may not be correct or complete. Accordingly, undue reliance should not be placed on any of the esti mates contained in this document and no representation or warranty is given that such estimates are correct or complete. This document does not constitute an offer or invitation for the sale, issuance or purchase of securities, nor does it purpor t to give legal, tax or financial advice. Nothing herein shall be taken as constituting the giving of investment advice or an inducement to enter into investment activity in any jurisdiction and this document is not intended to provide, and must not be taken as, the basis of any decision and should not be considered as an invitation, inducement, solicitation or recommendation to purchase, underwrite, subscribe for or otherwise a cquire any securities of Novo Banco. This document is not delivered in connection with any public offer of securities (oferta pública relativa a valores mobiliários) regulated in the Securities Code (Código dos Valores Mobiliarios). This document may include certain statements relating to the Novo Banco Group that are neither reported financial results nor other historical information. The statements, which may include targets, forecasts, projections, descriptions of anticipated cost savings, sta tements regarding the possible development or possible assumed future results of operations and any statement preceded by, followed by or that includes the words believes, expects, aims, intends, may or similar expressions or negatives thereof are or may constitute forwa rd-looking statements. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, changes in economic conditions in individual countries in which the Novo Banco Group conducts its business, fiscal or other policies adopted by various governments and regulatory authorities of Portugal and other jurisdictions, levels of competition from other banks and financial services companies as well as future exchange rates and interest rates. 2

3 Disclaimer (continued) None of Novo Banco Group or its financial or other advisers, nor their respective directors, officers, employees, agents or affiliates, ( i) undertakes any obligation to release publicly any revision to the forward-looking information included in this document to reflect events, circumstances or unanticipated events occurring after the date hereof or (ii) accepts liability for any of such statements. This document contains operational and financial targets of the Novo Banco Group, and other information derived from such targets. Such information does not constitute nor is it intended to constitute in any way any form of projection or forecast or expectation of future performance of the Novo Banco Group. These targets are presented for illustrative purposes only, and do not constitute nor are they intended to constitute in any way any form or projection or forecast or expectation of future profitability. These targets are based on a number of underlying assumptions made by the management of the Novo Banco Group and which have not been verified by any independent source and are subject to inherent uncertainties and risks and subject to change and there is no assurance that these assumptions will be realised nor that such targets will be achieved. As such, you should not place undue reliance on them. Novo Banco Group, its financial and other advisers, and their respective directors, officers, employees, agents, and representatives, accept no liability for any loss however arising, directly or indirectly, from any use of these operational and financial targets or in connection therewith. This document presents data relating to the commercial franchise and side bank of the Novo Banco Group. This information is presented based on internal data used by the management of the Novo Banco Group to monitor the performance of its restructuring plan, with the commercial franchise data representing the assets of the Novo Banco Group identified by management as core banking activities (the core assets ) and the side bank data representing the assets of the Novo Banco Group identified by management as non-core services and operations (the noncore assets ). This information should be considered supplemental in nature and is not meant as a substitute for the financia l statements or figures in this document prepared in accordance with IFRS. Data presented herein relating to the commercial franchise and side bank represent management s current division of the core assets and non-core assets as at the date hereof. Ongoing assessment may result in certain core assets being reclassified as non-core assets and/or certain non-core assets being reclassified as core assets. As a result, data relating to the commercial franchise and side bank of the Novo Banco Group presented after the date of this document may represent a different classification and division of the core assets and non-core assets comprising the commercial franchise and side bank, respectively. 3

4 Novo Banco at a glance The leading SME bank (1) in Portugal with a distinctive retail franchise Proven track record in downsizing non-core operations Market leader in Corporate Banking: loans market share of 21% (2) (credit to Corporates and SMEs representing 70% (3) of overall credit portfolio), with network of 23 corporate centres and >100 relationship managers Strong penetration of SME segment: ~78% (4) of Portuguese SMEs are Novo Banco clients Comprehensive value proposition to support companies with international activity Well placed to benefit from Portuguese economic recovery driven by export-oriented SMEs Top 3 domestic franchise in retail and private banking with market share of 10% (2) in mortgages and 11% (2) in deposits Clear customer segmentation strategy throughout all customer base Universal product offering through wholly-owned life insurance and asset management businesses 3rd (2) largest bank by total assets in Portugal with ~1.3m clients Already achieved: Deleveraging of Eur12bn in RWAs (24%) and Eur15bn (21%) in total assets since 4-Aug-14 Sale of BESI for Eur379mn to Haitong Securities (+80bps impact on CET1) completed in Sep 15 Sale of real estate assets amounting to Eur782mn since 4-Aug-14 at average ~3% premium Sale of relevant equity stakes totalling Eur63mn since 4-Aug-14 Cost reduction of 13% (5), along with reduction of 39 branches and 576 FTEs since 4-Aug-14 Further potential Proactive reduction of non-core assets with targeted ~Eur700mn (6) real estate sales in 2016 and ongoing sale processes for equity stakes Cost optimisation in line with Iberian benchmarks with approximately 170 domestic branch closures currently planned in the medium term and ~1,000 FTE reduction in 2016 Independent Portugal-focused banking play Restructuring opportunity (1) Source: management estimates based on corporate banking loans market share of ~21% (2) Source: management estimates based on data published by Banco de Portugal and INE (3) Source: Novo Banco 2015 financial statements (4) Estimated by management, based on Informa DB (turnover between Eur2.5mn and Eur50mn) (5) 2015 operating expenses vs Aug Dec 2014 annualised operating expenses (6) Targeted net book value of assets to be sold 4

5 Novo Banco timeline 3 Aug 14 Novo Banco created following Resolution measure applied to BES by Banco de Portugal ( BdP ) 14 Nov 15 Results of Comprehensive Assessment undertaken by ECB with no shortfall in Baseline Scenario and Eur1.4bn shortfall in Adverse Scenario 29 Dec 15 Banco de Portugal, acting as Resolution Authority, announced several decisions, including re-transfer to BES of 5 series of non-subordinated bonds 31 Mar 16 Banco de Portugal announced that both strategic and market (potentially involving cornerstone investors) sale processes will be pursued for Novo Banco and published eligibility criteria for investors 3 Aug Sep Sep Nov Dec Jan Dec Mar Sep 14 Current senior management appointed led by Eduardo Stock da Cunha as Chairman and CEO 15 Sep 15 Sale process for Novo Banco suspended by Banco de Portugal decision 15-Dec-15 Restructuring Plan agreed with DG COMP. Internal separation between Commercial Franchise (core) and Side Bank (non-core) 15 Jan 16 Banco de Portugal announced re-launch of the sale process of the Resolution Fund s holding in Novo Banco 5

6 Experienced management team leading Novo Banco Board of Directors Eduardo Stock da Cunha, Chairman and CEO Chairman and CEO since Sep-14 Formerly with Lloyds Banking Group in London Former Member of the Board of Grupo Santander Totta and subsequently Sovereign Bank/Santander Bank N.A. in the United States 30 years of banking experience Francisco Cary CFO and Head of Treasury Board member since Mar-15 Former Deputy CEO of Banco Espirito Santo de Investimento Previously CEO of Banco Espirito Santo de Investimento Brasil 25 years of banking experience José João Guilherme Head of Retail and Private Banking Board member since Sep-14 Former Member of the Board of Banco Comercial Português Previously CEO of Millennium BIG Bank (Poland) and Banco Internacional de Moçambique 29 years of banking experience Jorge Freire Cardoso Head of Risk, Credit and Side Bank Board member since Sep-14 Formerly with Caixa Geral de Depósitos, where he was a Member of the Board and of the Executive Committee Former CEO of Caixa - Banco de Investimento 20 years of banking experience Vítor Fernandes Head of Corporate Banking Board member since Sep-14 Former Member of the Board of Banco Comercial Português and Caixa Geral de Depósitos Previously CEO of Fidelidade Mundial and Império Bonança insurance companies 14 years of banking experience Francisco Vieira da Cruz Head of Legal, HR and Compliance Board member since Mar-15 Former Head of Legal Department at Novo Banco 15 years of banking experience Speakers at the meetings 6

7 Strategic priorities: leveraging key commercial strengths and orderly reduction of exposure to non-core assets I II Solving liquidity and funding constraints Managing the capital position III Restoring profitability (Commercial Franchise) IV Downsize Side Bank I II III IV Deleverage Improve liquidity and funding position by strengthening the customer deposit base (+Eur2.7bn net inflows since 4-Aug-14) Reduce non-performing asset base Manage regulatory capital position through deleveraging Sale of BESI Selected sales of real estate and equity stakes Optimisation of RWAs Phased-in CET 1 ratio at 13.5% at 31-Dec-15 Focus on core business with distinctive value proposition Normalise funding costs Reduce operating costs by simplifying the group structure and reducing footprint Increase productivity leveraging on digitalisation Reduce cost of risk and impairment charges by reviewing risk appetite and strengthening governance Starting Side Bank asset size of Eur10.8 bn as of 31-Dec-15 Wind-down or sell non-core international operations Accelerated sale of non-core assets (real estate, equity stakes) Recovery or sale of out-ofstrategy credit portfolio 7

8 Novo Banco update 8

9 Refocus of the balance sheet into traditional commercial banking Asset side of the balance sheet (Net assets, Eur bn) (1) Customer loans (Dec-15) Side Bank 22% Corporate 48% Mortgages 26% Other individual loans 4% Gross customer loans declined 6.6% YoY to Eur37.4bn mainly through the reduction in large exposures Provisions amounted to Eur5.8bn, leading to net customer loans of Eur31.6bn Includes Eur8.1bn of gross loans (Eur5.1bn net) allocated to the Side Bank Eur6.6bn (Eur3.8bn net) arising of out of strategy corporate loans and Eur1.3bn (Eur1.2bn net) from BES Venetie Cash, deposits, loans & advances at central banks and other banks Customer loans Securities portfolio (ex. insurance) Insurance securities portfolio Non current assets held for sale Current and deferred tax assets Other assets BESI (2) Aug Dec Dec GNB Vida 39% Securities portfolio (Dec-15) Other 15% Total: Eur13.4bn Sovereign debt 39% Bonds 7% Non-current assets held for sale (Dec-15) RE stakes 12% Land/under development 32% Total (gross): Eur37.4bn Other non-current assets held for sale 7% (1) Total (gross): Eur4.4bn Finished properties 50% The securities portfolio totalled Eur13.4bn and represented 23.2% of assets Eur5.1bn of securities portfolio are related to Novo Banco s insurance operations (GNB Vida s exposure) Net non-current assets held for sale amounted to Eur3.2bn, due to provisions of Eur1.2bn and a coverage ratio of 27% Net real estate assets owned by Novo Banco amounted to Eur2.7bn, with coverage ratio of 25% Other net non-current assets held for sale amounted to Eur0.5bn, with coverage ratio of 36% It includes Eur2.7bn net non-current assets held for sale allocated to the Side Bank (1) Excluding BESI, net assets for Novo Banco would amount to Eur69.1bn and Eur62.6bn as of August 4, 2014 and December 31, 2014 respectively (2) Including consolidation adjustments; BESI on a standalone basis had total assets of Eur5.1bn and Eur4.4bn as of August 4, 2014 and December 31, 2014 respectively 9

10 Significant deleveraging and deposit gathering effort which has contributed to strengthen the liquidity and capital position Funding side of the balance sheet (Eur bn) (1) Net loan-to-deposit ratio and deposits (Eur bn) 69.1 Customer deposits (Eur bn) Net loan-to-deposit ratio Customer deposits 37.9% % 126% 113% Amounts owed to central banks and other banks 44.7% 47.9% 4-Aug Dec Dec-15 Debt securities Insurance technical provisions and investment contracts Other liabilities Equity 24.9% 18.0% 20.5% 14.4% 14.5% 7.4% 9.5% 9.3% 9.4% 4.6% 4.8% 4.5% 8.8% 8.7% 10.3% 4-Aug Dec Dec-15 Deposit growth in domestic market, driven by increased confidence in the bank despite lower interest rates Overall growth in customer deposits of 2.8% YoY, underpinned by retail deposits (+21.3%) and private banking (+17.5%) Increasing importance of customer deposits which now represent 48% of the funding side in the balance sheet as of December 31, 2015 Central bank funding (2) The resources from ECB totaled Eur7.6bn, -10.6% YoY ECB eligible assets amounted to Eur12.7bn (including Eur5.2bn of sovereign debt) (1) Excluding BESI (2) As of December 31,

11 Asset quality issues have been identified and are provisioned Overdue and Credit at Risk ratios evolution Overdue and Credit at Risk ratios (Dec-15) 14.5% 15.5% 12.1% 13.4% 8.7% 9.8% Overdue loans > 90 days Coverage ratios evolution 22.8% 20.2% 16.5% Overdue loans Credit at Risk (1) Dec-14 Jun-15 Restructured loans incl. in Credit at Risk 16.2% 17.7% 14.7% Dec % 5.6% 7.2% Restructured loans (2) Risk ratios Coverage ratios (Dec-15) Commercial Franchise Side Bank Group Overdue loans 10.4% 34.4% 15.5% Credit at Risk (1) 16.9% 44.7% 22.8% Restructured loans (2) 11.3% 41.5% 17.7% Credit at Risk (1) + restructured loans (2) (3) 23.2% 71.0% 33.3% 148% 114% 108% 131% 103% 101% 78% 68% 68% 48% 44% 47% Coverage ratios Commercial Franchise Side Bank Group Overdue loans 96% 106% 101% Credit at Risk (1) 59% 82% 68% Overdue loans > 90 days Overdue loans Credit at Risk (1) Credit at Risk (1) + Restructured loans Dec-14 Jun-15 Dec-15 (2) (3) Restructured loans (2) 88% 88% 88% Credit at Risk (1) + restructured loans (2) (3) 43% 51% 47% (1) According to Banco de Portugal instruction n.23/2011 (2) According to Banco de Portugal Instruction n.32/2013 (3) Restructured loans not included in Credit at Risk 11

12 Focus on reducing largest corporate exposures and contained increase of Credit at Risk in the Commercial Franchise Top-10 corporate exposures (Eur mn) Change in Credit at Risk between Aug-14 and Dec-15 (1) -10.8% Commercial Franchise Eur663mn (23%) 7,318 6,932 Side Bank Eur2,264mn (77%) Eur2,927mn 6,526 Credit at Risk ratios (1) Provision coverage 67% 63% 59% 160% 109% 82% 88% 78% 68% 44.7% 12.7% 13.8% 16.9% 27.6% 17.2% 13.5% 22.8% 16.5% 31-Dec Jun Dec-15 Commercial Franchise Side Bank Group 4-Aug Dec Dec-15 (1) For the entire credit portfolio; data for the Side Bank are calculated in accordance with the methodology described in the disclaimer 12

13 Significant reinforcement of provisions throughout asset categories Loan provisions formation (Eur mn) On BS loan provisions / gross loans (accumulated) 11.9% 12.8% 13.7% 15.6% Non-current assets held for sale (Eur mn) Real estate 31-Dec Jun Dec-15 YoY chg.% 4, ,833 Book value (gross) 2,768 3,709 (1) 3,567 29% Provisions % Book value (net) 1,943 2,839 2,667 37% Coverage 30% 23% 25% Other non-current assets held for sale (2) Book value (gross) 1, (3) % Provisions % Book value (net) % Coverage 34% 35% 36% Aug-14 Aug - Dec 14 1H15 2H15 Dec-15 (1) Real estate assets declined on a comparable basis and the increase is explained by consolidation and/or reclassification of real estate and other funds ( 973mm) (2) Includes equipment held for sale and investments in subsidiaries (3) This reduction is due to changes in the consolidation perimeter of RE assets: the comparable values at Dec-14 were Eur858mn (GBV) and Eur517mn (NBV) so YoY change is 4% (GBV) and 13% (NBV) 13

14 Coverage levels in line with domestic peers On BS provision reserve / gross loans (Dec-15) Credit at Risk and restructured loans ratios (Dec-15) 15.6% 22.8% 10.0% 7.3% 7.2% 7.1% (1) 3.8% 8.9% 6.6% 4.4% 4.5% 13.5% 11.5% 10.0% 9.8% 16.9% 11.3% 17.7% Commercial Franchise Bank 1 Bank 2 Bank 3 Bank 4 Bank 3 Bank 4 Bank 1 Bank 2 Credit at Risk Restructured Commercial Franchise Coverage ratios (Dec-15) Non-current assets held for sale coverage ratio (Dec-15) (3) 87% 85% 33% 42% 68% 47% 64% 59% 43% 43% 53% 37% 37% 32% 27% 18% 16% Bank 3 Bank 4 Bank 1 Bank 2 Bank 3 Bank 1 Bank 4 Bank 2 Commercial Franchise Credit at Risk coverage ratio Credit at Risk + Restructured loans (2) coverage ratio Source: Company information and figures for peers as per public disclosure. Note: Peer group includes CGD, Millennium bcp, Santander Totta and BPI. Ratios based on latest information available. Bank 2 and Bank 4 figures for Portuguese operations only except for restructured loans and restructured loans coverage ratios which are for each Group as a whole (1) Pro-forma for disclosed corporate transactions 14 (2) Restructured loans not included in Credit at Risk (3) Bank 2 and Bank 4 figures denote foreclosed assets coverage ratio as of Dec-15 whereas Bank 1 and Bank 3 figures denote coverage ratios for non-current assets held for sale as of Jun-15

15 Reinforcement of capital position CET1 phased-in ratio evolution Capital ratios (Dec-15) 10.3% 9.5% 13.5% Eur mn Phased-in Fully implemented Total shareholders equity (A) 5,989 5,989 Regulatory and prudential deductions AFS eligible reserves (79) - Non controlling interests 8 21 Goodwill and other intangible assets (293) (293) Deferred tax assets (473) (1,210) Investments in financial entities (49) (186) Others 39 (39) Total adjustments (B) (847) (1,707) Common equity tier 1 (A) + (B) 5,142 4,282 Tier 1 5,142 4,282 Tier Total capital 5,142 4,382 Risk weighted assets 38,168 37,870 4-Aug Dec Dec-15 Common equity tier 1 ratio 13.5% 11.3% Total capital ratio 13.5% 11.6% The CET1 phased-in ratio for 31 December 2015 was 13.5% (Dec-14: 9.5%) given the decrease of Eur8.8bn in RWA and the increase of Eur0.7bn in own funds as compared to 31 December 2014 CET1 fully implemented ratio of 11.3% in Dec-15 (7.5% in Dec-14) 15

16 following the 29-Dec-15 decision by Banco de Portugal Impact on the balance sheet of Eur2bn non-subordinated bonds re-transfer to BES (Eur bn, 31-Dec-15) Estimated impact on phased-in CET1 (31-Dec-15) % 13.5% 8.0% Deposits 27.4 Deposits pre-eur2bn bond re-transfer to BES Impact of Eur2bn bond re-transfer to BES 2015 Debt securities 6.2 Due to ECB 7.6 Insurance technical provisions and investment contracts 5.4 Other 6.9 Equity 4.0 Debt securities 4.3 Due to ECB 7.6 Insurance technical provisions and investment contracts 5.4 Other 6.9 Equity 5.9 Pre-EUR2bn bond re-transfer to BES After EUR2bn bond re-transfer to BES Estimated impact on net interest income (Eur mn, 2015) net interest income before reversal of accrued interest on Eur2bn bond re-transfer Reversal of accrued interest on Eur2bn bond re-transfer 2015 stated net interest income Aggregate impact of Eur84mn on net interest income of Eur2bn bond retransfer Impact of Eur2bn bond re-transfer to BES not reflected in 2015 net interest income Adjusted 2015 net interest income Source: Company information 16

17 Fully implemented CET1 ratio (Dec-15) Novo Banco's capital position compares favourably to its Portuguese peers Phased-in CET1 ratio (Dec-15) Fully implemented CET1 ratio / RWA density (Dec-15) 14.7% (1) (1) 13.7% 13.5% 16% 11.1% 10.8% 15% Bank 3 14% Bank 3 Bank 2 Bank 4 Bank 1 13% Fully implemented CET1 ratio (Dec-15) 12% 14.6% (1) 11.3% 10.2% 10.0% 10.0% 11% 10% Bank 2 Bank 4 Bank 1 (3) Bank 3 Bank 2 Bank 4 Bank 1 9% 30% 40% 50% 60% 70% RWA density (Dec-15) (2) Source: Company information and figures for peers as per public disclosure Note: Peer group includes CGD, Millennium bcp, Santander Totta and BPI (1) Pro-forma for disclosed corporate transactions (2) Ratio of RWA to total assets based on phased-in RWA figures (3) As of June 30,

18 FY2015 income statement highlights Results Income statement (Eur mn) Commercial banking income of Eur806mn with net interest income posting an increasing contribution throughout 2015 (NIM of 0.93%), in spite of the negative impact of the annulment of overdue interest in the amount of Eur172mn, with a large part of it being related to large non recurring operations (1) Operating costs amounted to Eur755mn in 2015 showing a reduction of 12.7% vs. the comparable figure in 2014 (2) Net operating income was positive Eur125mn highlighting the Group's ability to deliver positive operating results Net provisions of Eur1,058mn. The reinforcement of provisions for the real estate portfolio and for the 50 largest exposures that existed at the time of the resolution of BES amounted to Eur592mn Net income in 2015 amounted to a loss of Eur981mn, mostly explained by the high level of provisions for an amount of Eur1,058mn and the write-off of Eur160mn of 2013 tax losses carried forward 4-Aug-14 to 31-Dec-14 1-Jan-15 to 31-Dec-15 Net interest income Fees and commission = Commercial banking income Capital markets Other results (71.8) (44.5) = Banking income Operating costs = Net operating income Net provisions ,057.9 Credit Securities Other assets and contingencies = Income before taxes (271.2) (933.0) - Corporate income tax Special tax on banks = Income after taxes (499.6) (995.4) - Non-controlling interest (2.0) (14.8) = Net income (497.6) (980.6) (1) The annulled interest is related to legacy credits (from BES) (2) Annualized figure for the period 4-Aug-14 to 31-Dec-14 not adjusted for seasonality 18

19 Investment highlights 19

20 Investment highlights 1 2 Leading domestic franchise with renewed focus Proactive downsizing of Side Bank Focus on the Portuguese market, supported by reduced international footprint Strengthen positioning as a leading corporate / SME franchise (1) Grow in retail to reach natural market share of c. 13% in mortgage production and deposits (2) in Portugal, leveraging strong customer focus Orderly wind-down of non-core and non-productive assets in the context of a focused deleveraging plan Side Bank total assets to reduce from Eur10.8bn at end 2015 to a target of Eur4.6bn in the longer term 3 Reducing funding cost Net interest income uplift anticipated on the back of: Deposits repricing Maturity of wholesale funding instruments 4 Efficiency optimisation Improving efficiency on the back of the restructuring plan, which targets FTE reduction (~1,000 in 2016) and closing of approximately 170 domestic branches in the medium term 5 Normalisation of cost of risk New risk management procedures, focused on attracting customers with low and medium-risk profiles in retail and SME segments Following significant provision charges in 2014 and 2015, as well as allocation of out-of-strategy exposures to the Side Bank, the cost of risk of the Commercial Franchise is expected to normalise (1) Source: management estimates based on corporate banking loans market share of ~21% (2) Only NB Portugal (excluding Banco BEST, NB Açores and SFE), excludes mortgage securitsations 20

21 Fee income / customer volumes 1 Leading domestic franchise with renewed focus Corporate Banking Novo Banco s market share in selected business lines (Dec-15) 69.6% Weight of corporate credit in overall portfolio (Dec-15) 47.4% 45.6% 44.7% 41.0% Clients of Novo Banco 85% (3) of ~3,500 large corporates in Portugal are NB clients Trade finance Corporate credit POS Personal loans Mortgages 10.0% (6) 15.3% (6) 21.9% 20.7% 19.6% (7) (6) (5) (1) (2) Bank 1 Bank 2 Bank 3 Bank 4 78% (4) of ~25k SMEs in Portugal are NB clients Pension plans Life insurance Deposits Asset management 7.1% (8) 11.6% 10.7% 13.1% (6) (9) (8) Retail banking (Dec-15) Resilient fee income generation capability (2015) (10) Specialised, diversified and distinct product offering to meet client needs In addition to the 596 branches and the 16 private banking units in Portugal, Novo Banco has a multi-channel approach through internet banking, phone banking, helpdesk services and mobile banking Universal product offering including life insurance (through GNB Vida) and asset management (through GNB Gestão de Ativos) Small businesses Affluent Mass market Deposits (Eur bn) Loans (Eur bn) In addition, Private Banking is sub segmented in Executive Professionals ; Entrepreneurs ; Traditional Family and Top Private. Sub-segmentation leads to a more focused commercial approach 0.60% 0.59% 0.58% 0.57% 0.37% Bank 2 Bank 4 Bank 3 Bank 1 Peer group includes CGD, Millennium bcp, Santander Totta and BPI (1) Press Release for Dec 2015 considers only domestic credit. International credit assumed to be corporate; (2) Press Release for Dec 2015 considers only the activity in Portugal. Calculated as domestic corporate credit over total credit portfolio; (3) Management estimates based on market data; (4) Estimated by management, based on Informa DB (turnover between Eur2.5mn and Eur50mn) (5) Swift; (6) Data published by Banco de Portugal and INE (7) SIBS, Unicre; (8) APFIPP, CMVM, management estimates; (9) APS, ASF, management estimates (10) Company information and figures for peers as per public disclosure. Customer volumes defined as customer loans and customer deposits 21

22 2 Proactive down-sizing of Side Bank (1/2) Strategic goals Description International operations 2.3 Wind-down on sale or non-core operations Selected international operations Equity stakes 1.0 Orderly sale process aimed at value maximisation either initiated or to be initiated Selected equity stakes A Real estate 2.6 Staggered sales with ~Eur500mn (1) sales targeted for 2016 Owned real estate assets with ~30% impairment recorded Out-ofstrategy loans 3.7 Orderly deleverage to maximise value Detailed business plan with identified options Includes non core loans, of which 44.7% are Credit at Risk with 82% provision coverage international loans (incl project finance) real estate development loans loans for acquisition of shares B Restructuring funds (2) 1.2 Opportunistic sales Stakes in real estate and diversified restructuring funds, with other Portuguese banks as shareholders Total 10.8 Targeted reduction to Eur9bn by 2016YE Total assets, Eur bn (Dec-15) (1) ~Eur700mn targeted sales for both Side Bank and Commercial Franchise (2) As of 30 September

23 2 Proactive down-sizing of Side Bank (2/2) A Real estate owned assets (Dec-15) B Restructuring funds (managed by external parties) (Sep-15) Real estate funds 4.0% Retail 24.2% Eur2.6bn Large properties 71.8% Diversified 20.3% Construction 7.5% Eur1.2bn Real estate 72.2% Residential 4.2% Other 10.5% Industrial 9.0% Commercial / services 26.3% Eur2.6bn Land 50.1% 23

24 3 Net interest income improvement estimated to be driven primarily by reduced funding cost 2015 estimated net interest income bridge (Eur mn) Loan yield for new production in Dec 2015 at 3.7% (1) vs 3.2% (1) average stock yield in 2015 in Portugal 1,273 Negative impact of the annulment of overdue interest 288 New term deposit production at 0.7% (2) yield in Dec 2015 vs 1.8% (2) average stock yield in 2015 in Portugal Average yield in 2015 for issued debt securities of 7.0%, which would decrease to 4.5% by the end of 2020, assuming no changes to the maturity profile of the current portfolio and no new issues (172) securities: 230 money market: 39 swaps: 33 credit restructurings: -14 (352) sight deposits: 13 term deposits: 339 (80) NIM 0.93% 451 (506) issued debt: 400 insurance: 106 Loan yield Interest income Annulment of overdue interest Others Retail funds cost Money market Others (1) Net Interest income Interest expense (1) Excludes financial institutions and public sector (2) Refers to data in Portugal, incl. Madeira branch (SFE) for residents and in Euros 24

25 3 Encouraging signals on yields for new lending production Yield on customer loans (1) (%) Customer loan yields (1) (%) 4.91% 4.82% Stock (average Q4 2015) New production (average Q4 2015) 4.40% Corporate loans 3.59% 3.95% 3.52% 3.47% 3.27% 4.19% 3.12% 3.97% 3.02% Mortgages 1.46% 2.50% Other loans to individuals 5.66% 5.67% Total 3.02% 3.97% 4Q14 1Q15 2Q15 3Q15 4Q15 Stock (quarterly average) New production (quarterly average) (1) Refers to Portugal only, excludes financial institutions and public sector 25

26 3 supported by a reduction in deposit costs Yield on term deposits (1) (%) Maturity profile (1) of term deposits (Eur mn and %) 2.30% 2.22% 2.07% 1.21% 1.51% 1.44% 1.58% 1.52% 1.43% 1.83% 1.67% 1.55% 43% 19% 12% 12% 13% 6, % 0.77% 0.72% 2,940 1,779 1,835 2,029 4Q14 1Q15 2Q15 3Q15 4Q15 Stock (quarterly average) New production (quarterly average) 1Q16 2Q16 3Q16 4Q16 > 1 year Term deposit maturities Cost of maturities % of total maturities (1) Refers to data in Portugal, incl. Madeira branch (SFE) for residents and in Euros 26

27 Outstanding by maturity Interest expense by maturity Cost by maturity 3 Manageable maturity schedule for wholesale funding instruments (1) 11.0% 0.0% 1.4% 10.4% 4.5% (Eur bn) (Eur mn) (%) H16 2H > H16 2H >2020 (1) Includes debt securities issued 27

28 Operating expenses 4 Focus on efficiency optimisation Approximately 27% operating costs optimisation targeted driven by Consolidated operating expenses, excl restructuring costs (Eur mn) 755 c -27% ~605 ~540 approximately 29% branch network reduction targeted (1) Number of domestic branches, Dec-2015 (3) Average % Longer term Staff costs Admin Amortisations 2015 Longer term Bank 4 Bank 3 Bank 2 Bank 1 Number of branches in 2012 and approximately 14% FTE decrease targeted in 2016 targeting productivity in line with peers Number of employees (thousand) Business volume (2) per FTE, Eur mn domestic results, FY 2015 (3) c -14% ~ Peer group includes CGD, Millennium bcp, Santander Totta and BPI (1) Not taking into account recent corporate transaction for Bank 4 (2) Customer deposits and customer loans (3) Source: Publicly available 2015YE financial statements 2015 Longer Bank 4 Bank 3 Bank 2 Bank 1 Bank 5 Bank 6 Bank 7 Bank 8 Bank 9 term Portugal (other banks) Spain Average in Portugal Average in Spain 28

29 Credit at risk Cost of risk 5 Cost of risk normalisation Commercial Franchise credit at risk significantly lower than for the group, with strong provision coverage Through the cycle cost of risk of Portuguese banks Credit at risk provision coverage 68% 22.8% 59% 53% 64% 85% 84% 300 Average bps per bank ( ) % (1) 13.5% 11.5% % 4.4% Commercial Franchise Bank 2 Bank 1 Bank 4 Bank NB Bank 1 Bank 2 Bank 3 Bank 4 (1) Average of period from 4-Aug-14 to 31- Dec-14 (annualised) and period of 1-Jan-15 to 31-Dec-15 Note: Financials based on latest information available. Peer group includes CGD, Millennium bcp, Santander Totta and BPI. Bank 2 and Bank 4 figures for Portuguese operations only 29

30 Group Side Bank Commercial Franchise Novo Banco: financial targets Key targets Key drivers 2015 actual Medium term Longer term Net interest margin (1) 1 (%) ~1.8% >2.0% 2 Cost/income ratio (%) ~40% <40% 1 Management believes uplift in the longer term will be driven by normalisation of term deposits cost to the market level (c. ~100bps reduction) maturity of high cost debt securities (~250bps reduction) Operating costs (Eur mn) ~520 ~530 loans repricing (~30bps increase in yield) 3 Cost of risk (2) (bps) ~120 <100 Total assets (Eur bn) 10.8 ~5.7 ~4.5 2 Driven by intended FTE reduction and closure of ~170 domestic branches (45% of cost savings in personnel expenses, 45% in SG&A) Loans/deposits ratio (%) 113% ~95% ~95% RWA (Eur bn) 38 ~34 ~35 3 Normalisation of provisions following substantial impairments in Note: 3M Euribor is assumed to increase to 77bps in the longer term (1) Based on average total assets (2) Based on average net loans 30

31 Appendix Portuguese macro economic overview 31

32 Mar-10 Jun-10 Sep-10 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-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 (30.9)% (36.2)% (27.4)% (43.3)% (41.3)% (42.5)% (47.5)% (50.0)% (46.1)% (42.9)% (49.6)% (52.0)% (49.0)% (45.7)% (34.5)% (30.3)% (24.8)% (19.5)% (16.8)% (17.6)% (11.0)% (12.0)% (10.5)% (11.7)% Significant economic recovery in Portugal Real GDP growth rate (yoy) Unemployment rate (%) Current account balance (as % of GDP) 1.9 (1.8) (1.1) (6.0) (2.0) (4.0) (10.2) E 2017E 2018E E Source: INE, IMF Source: INE, IMF Source: IMF Investment in machinery and equipment index (rebased, Q4-13 = 100%) Exports ( bn) Consumer confidence indicator (%) Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q Source: INE Source: IMF Source: INE 32

33 Fiscal consolidation on track in Portugal Budget deficit and primary balance (as % of GDP) Government debt (as % of GDP) (0.8) (0.0) 0.4 (2.2) (3.1) (4.8) (2.3) (4.4) (8.2) (7.4) (5.7) (7.2) (11.2) E E 2016E 2017E 2018E Budget deficit Primary balance Portugal Ireland Greece Source: INE, Budget 2016 Source: IMF 33

34 Resilient real estate prices Evolution of real estate prices Change between 2005 (1) and 2007YE Change between 2007YE and 2012YE Change between 2012YE and 2015YE % (19.0)% 5.0% % (26.6)% (2.7)% % (49.2)% 31.3% Portugal Spain Ireland (1) Values as of 31/01/2005 Source: Bank for International Settlements 34