Half-yearly Report

LUXEMBOURG/PORTUGAL--(BUSINESS WIRE)--

ESPÍRITO SANTO FINANCIAL GROUP S.A. ANNOUNCES ITS UNAUDITED CONSOLIDATED RESULTS FOR THE FIRST HALF OF 2011

Luxembourg/Portugal – 16 August 2011 - Espírito Santo Financial Group S.A. (“ESFG” or the “Company”) (NYSE Euronext Lisbon: ESF; Bloomberg: ESF PL; Reuters: ESF LS) today announces its unaudited consolidated results for the first half of 2011. The report is compiled under IFRS as implemented by the EU.

HIGHLIGHTS FOR THE REPORTING PERIOD¹

Despite the ongoing challenging environment, ESFG posted positive results for the first half of 2011. Key highlights for the reporting period are:

• Consolidated H111 Net Income reached EUR 38.2 million (EUR 57.7 million) a YoY decrease of 33.7%;
• Consolidated Commercial Banking Income at ESFG rose by 3.6% to EUR 976.9million (EUR 942.8 million);
• Consolidated Net Interest Income increased by 3.1% YoY to EUR 565.4 million (EUR 548.2 million);
• Consolidated Net Fees and Commissions rose 4.3% YoY to EUR 411.5 million (EUR 394.6 million) as ESFG continues to support enterprises abroad;
• Consolidated Market Results² and Other Results increased by 22.6% to EUR 351.5 million (EUR 286.6 million);
• Consolidated Insurance Earned Premiums Net of Reinsurance rose 10.7% YoY to EUR 172.6 million (EUR 155.9 million);
• Consolidated Claims Incurred Net of Reinsurance rose 31.5% YoY to EUR 148.6 million (EUR 113.0 million);
• Consolidated Operating Expenses rose by 24.8% to EUR 1.44 billion (EUR 1.16 billion) on the back of increased provisioning charges;
• Staff Costs and General Administrative Expenses increased by 4.2% to EUR 640.8 million (EUR 614.9 million).

CONFERENCE CALL

A conference call for investors and analysts will be held today at 3pm (GMT) / 4pm (CET) / 10am (EDT). An instant replay of the call will be available for two weeks. For details, contact Devina Artley at Taylor Rafferty on telephone number [phone].

MACRO ECONOMIC ENVIRONMENT

The second quarter of 2011 was marred by deterioration in the economic environment, resulting from a deepening of the Euro Zone sovereign risk crisis, with raised concerns over the US budgetary situation and fears over an unexpected slowdown in global economic activity due to an environment of reduced levels of liquidity.

In the Euro Zone, questions over the effectiveness of the financial stabilisation efforts in Greece and the uncertainty over the creation of new mechanisms for external assistance saw further contagion of the debt crisis. During the second quarter sovereign debt spreads versus 10 year Germany rose; in Greece spreads rose by close to 390 basis points (bps) to 1331 bps, in Portugal spreads rose by 273 bps to 787 bps, in Ireland by 270 bps to 867 bps, in Spain by 48 bps to 242 bps and in Italy by 43 bps to 186 bps. By July spreads in Spain and Italy had reached new highs of over 330 bps. In addition, the market saw heightened levels of risk aversion during the period, marked by an increase in demand for risk free or ‘safe haven’ assets by investors.

Despite the expectation of an increase in the reference rate set by the ECB (having risen by 25 bps in April and July to 1.5%), the yield of the 10 year Bund fell from 3.354% to 3.025%. The Swiss Franc (CHF) touched new historical highs against the USD and the EUR. In the quarter, the CHF rose by 8% against the EUR to 1.22, and in July had reached 1.14. Gold rose by close to 5% to USD 1,500 per ounce (it went on to breach the USD 1,600 per ounce at the beginning of the third quarter).

In Europe, the CAC40 and IBEX stock indices saw quarterly decreases of 0.17% and 2.05% respectively, whilst the DAX gained 4.76%, clearly reflecting the favourable performance of the German economy. In the US, the NASDAQ and S&P500 indices fell by 0.27% and 0.39% respectively, the Dow Jones however rose by 0.77%. In China and Brazil, the second quarter saw the removal of monetary stimuli by their respective central banks following an increase in inflationary pressures. In this context, and in spite of continued strong growth in economic activity, the Bovespa and Shanghai Composite indices saw significant falls of 9.02% and 5.67% respectively.

In Portugal, funding difficulties arising from the Euro Zone sovereign debt crisis and the restrictive nature of budgetary constraints continued to weigh on internal demand which led to a further contraction in economic activity in the second quarter. In contrast, exports continued to show strong growth during the period. The PSI20 stock index retreated by 5.54% in relation to the first quarter.

OVERVIEW OF OPERATIONS

ESFG’s un-audited consolidated net profit for the first half of 2011, attributable to equity holders of the Company, reached EUR 38.2 million. The results reflect the extremely challenging sovereign debt environment and resulting financial constraints which weighed on the activities of the Company during the period. Total consolidated assets declined by 3.9% year-on-year as a result of the ongoing deleveraging programme at ESFG’s principal banking subsidiary Banco Espírito Santo (‘BES’) which began in the third quarter 2010. Total consolidated assets fell from EUR 87.2 billion at the end of the 2010 to EUR 83.8 billion at the end of the first half of 2011.

The signing of the Memorandum of Economic and Financial Policies (MEFP) between the Portuguese government, the European Commission, the ECB and the IMF lead to the requirement of all Portuguese banks to provide a Medium term Plan (2011 to 2015) that lays out explicit strategies for the deleveraging of the balance sheet, the strengthening of capital ratios and the improvement of liquidity. The broad ranging deleveraging programme by ESFG’s banking subsidiary aims to reach a Loans to Deposit Ratio (LDR) of 120% and a stable Funding Ratio (SDR) of 100% by year end 2014. In H111, the Bank announced it had decreased its net assets by 5.6% year-on-year to EUR 80.2 billion through the reduction of the Available for Sale (AFS) portfolio, trading portfolio and international customer loans portfolios.

During the second quarter 2011 the determining factors for impairments on Portuguese banking assets changed considerably. Following the Portuguese government’s request for assistance and the signing of the MEFP, perceived risks changed. The forecasts provided by Troika and the Bank of Portugal for completion of the Medium Term Plan by the banks clearly showed a worsening of the macroeconomic trend over that period.

BES took the prudent decision to further strengthen provisions for impairments on the Bank’s activities with special focus on the coverage of risk relating to the loans book. Total provisions by the second quarter at the Bank reached EUR 469.7 million, twice that of the same period in 2010 (EUR 238.8 million). The increase in provisions for securities reached EUR 56.4 million (H110: EUR 32.3 million) and other provisions reached EUR 107.9 million (H110: EUR 32.0 million). The deleveraging programme and decision to increase provisions at BES impacted on the consolidated results at ESFG in the first half of 2011.

ESFG posted an increase in consolidated Net Interest Income (‘NII’) and Net Fees and Commissions. NII rose during the period to EUR 565.4 million despite the increase in funding costs and the volume reduction caused by the deleveraging process and, notwithstanding these impacts, Net Interest Margins (‘NIM’) also improved. Deposits at BES grew by 22.6% year-on-year driving the LDR down to 155% from 198% in H110, and 165% by year end 2010. Fees and commissions totalled EUR 411.5 million. Overall, recurrent income remained healthy and despite a very difficult operating environment, commercial banking income rose by 3.8% year-on-year.

Operating expenses during the period rose by 24.8% year-on-year on the back of increased provisioning charges and staff costs, which grew by 4.2%, reflecting ESFG’s drive towards business outside of its traditional markets. The consolidation of Execution Noble also contributed to this increase in costs. Staff costs at BES grew by 3.0%; staff costs outside of Portugal decreased by 2.6%, when excluding the consolidation cost of new operational units (26.7% when included) whilst staff costs in Portugal fell by 5.6%. The integration of the Bank’s employees (those employed before 3 March 2009) into the General Social Security Scheme in January 2011 led to a rise in the Bank’s domestic staff costs. ESFG’s banking and insurance operations have both implemented cost control measures.

Retail banking at BES, supported by a domestic branch network of 709 branches, includes 46 on-site branches and benefits from the bank’s partnership with insurance agents of Companhia de Seguros Tranquilidade (‘Tranquilidade’) under the assurfinance programme. Cross-selling activities, including the drive to attract customer funds and retain client deposits, have helped mitigate the impact of non-performing loans.

The growth in international operations at BES continues to contribute positively to consolidated net income, particularly towards NII, which rose by 12.9% year-on-year compared to a fall in domestic NII of 10.1%. Commercial banking income at BES grew by 1.0% year-on-year, with commercial banking income outside Portugal increasing by 13.1% during the same period. Consolidated banking income at BES grew by 11.3% year-on-year.

Although overall asset quality remained resilient, the worsening economic situation has had its effect on the levels of overdue loans both in Portugal and elsewhere. Non Performing Loans (‘NPL’) of over 90 days rose from 1.95% at year end 2010 to 2.35% by the end of the second half of 2011. The associated prudent provisions charge of 1.18 basis points raised credit provisions to EUR 2.0 billion following an increase in provisions in the last six months of EUR 469.7 million, close to double the amount reported in the first six months a year earlier. The Provisions for Credit against Gross Loans ratio (PC/GL) increased from 3.38% at year end 2010 to 3.83% by the end of the first six months of 2011, the strongest provision coverage ratio in Iberia.

International operations continue to drive ESFG’s strategy of diversification, with international banking operations at BES contributing EUR 83.5 million versus a domestic contribution of EUR 72.5 million. In Angola, Banco Espírito Santo Angola (‘BESA’) continues to make substantial contributions to BES’s international growth. Both Spain and Brazil (principally investment banking operations) also contributed positively to consolidated results. Net income from the strategic triangle of Africa, Brazil and Spain rose to EUR 63.1 million at BES, or 76.0% of the Bank’s international business.

At Banque Espírito Santo et de la Vénétie (‘BESV’), in France, gross individual banking income grew by 11.0% year-on-year to EUR 22.4 million, whilst operating costs grew by 19.0% year-on-year reflecting continued expansion and diversification. Net individual income, reported by the company, during the first of the year rose year-on-year to EUR 5.7 million, a rise of 121.1% from a year earlier.

Banque Privée Espírito Santo (‘BPES’) in Switzerland, which focuses primarily on private banking business, continues to make positive contributions to ESFG’s consolidated results, with individual net income reaching EUR 1.7 million in the first half of the year from EUR 2.2 million in H110. Operating expenses rose by 2.5% as BPES opens new offices in both Spain and Poland. Assets under Management (AuM) at BPES decreased by 2.3% to CHF 4.6 billion in the period due mainly to the weakness of the EUR versus the CHF. ES Bankers (Dubai) (‘ESBD’) and ES Bank (Panama) (‘ESBP´) also reported robust activity with net individual income reaching EUR 2.3 million and EUR 5.4 million respectively.

Investment banking activities at ESFG, through the banking subsidiary Espírito Santo Investment Bank (‘BESI’), include advisory services in project finance, mergers and acquisitions, placements of shares and bonds, stock broking and other investment banking services. Pre-tax profit at BESI fell by 78.2% to EUR 9.4 million due to the increase in provisions on loans in Portugal and Spain. Through its acquisition of a controlling stake in Execution Noble the investment bank expects to increase its international business further. Banking business fell during the period to EUR 118.8 million, a year-on-year decrease of 7.1%.

Despite a stagnant non-life market and diminishing life market, ESFG’s insurance operations contributed positively to overall net profit. When combining both Life and non-Life business ESFG ranks as the fourth largest insurance group in Portugal, with a combined market share of 6.5%. This ranking reflects the performance of the Life operations which were impacted by the liquidity shortage as banks compete for deposits. The combined market share in the Life business of T-Vida and BES Vida reached 4.2%. ESFG's market share in the non-Life sector, through Tranquilidade, BES Seguros and Seguros LOGO ('LOGO'), grew strongly during the period to 10.3%, and is now the second largest non-Life group in Portugal.

Tranquilidade's net individual income reached EUR 12.2 million, a 139.0% year-on-year increase. Technical results increased during the period by 34.6% to EUR 32.7 million. Financial results rose 3.6% year-on-year to EUR 18.9 million and operational costs decreased 3.8% to EUR 33.0 million. Tranquilidade’s market share rose to 8.1% from 7.8% a year earlier. Tranquilidade's market share in health, motor and workers compensation increased from 6.6%, 8.0% and 8.8% in the first half of 2010 to 7.0%, 8.3% and 9.8%, respectively.

Tranquilidade's direct insurance business, LOGO, reported that its customer base had reached 120,713 clients and gross written premiums of EUR 11.5 million. LOGO is the second largest direct insurer in Portugal.

T-Vida posted a net income of EUR 1.5 million. The technical margin decreased mainly due to the reduction in sales of risk products, namely group risk and mortgage loans. Pastor Vida, the new life operation in Spain posted a EUR 3.6 million net profit, which represents a 29.7% increase over the 1H 2010 figure. This performance is mainly related to an improvement in technical results and to the development of risk products.

Year-on-year operating revenues at ESFG’s healthcare operator Espírito Santo Saúde (‘ESS’) rose by 12.2%. Individual Net income at the healthcare unit for the first half of 2011 rose strongly to EUR 2.6 million. Hospital da Luz, the largest private hospital in Portugal and key investment at ESS, saw revenue growth up by 10.0%. The healthcare operator’s positive performance is a key growth driver reported in consolidated Other Operating Income.

INCOME STATEMENT SUMMARY

Fig.I.

(EUR Thousands)	H110	H111	YoY
+ Net Interest Income	548 190	565 377	3.10%
+ Net Fees and Commissions	394 648	411 530	4.30%
= Commercial Banking Income	942 838	976 907	3.60%
+ Capital Markets Results and Other Income	286 620	351 489	22.60%
+ Insurance Earned Premiums Net of Reinsurance	155 916	172 614	10.70%
+ Dividend Income	68 879	141 431	105.30%
= Operating Income	1 454 253	1 642 441	12.90%
- Operating Expenses	1 155 898	1 443 056	24.80%
= Profit before Tax (inc. Gains from Financial  Investments & Share of profit of Associates)	319 755	211 887	-33.70%
- Direct Taxes	49 077	71 138	44.30%
- Deferred Taxes	19 029	66 723	-
- Minority Interests	232 054	169 250	-27.10%
= Net Income	57 653	38 222	-33.70%

PRINCIPAL ITEM ANALYSIS

Consolidated NII rose by 3.1% year-on-year to EUR 565.4 million (EUR 548.2 million in H110). The rise in interest rates, increase in the cost of funding and the adjustment of credit spreads to reflect perceived risk, coupled with the reduction in volume resulting from the deleveraging process at BES, all impacted on results. Despite this, the Net Interest Margin (‘NIM’) rose by 4 basis points. During the period the average 3-month Euribor reached 1.25%, a 58 basis point rise from a year earlier (0.67%).

ESFG noted that international NII business at BES, outside Portugal, increased by 12.9% to 47% of the Bank’s consolidated NII. The average rate on interest earning assets at BES increased by 87 basis points to 4.77%. The average rate on interest bearing liabilities increased by 83 basis points to 3.22%.The rise in the key interest rate and deterioration in funding conditions were the key drivers to the consolidated results. The average rate of deposits at BES rose to 2.95% from 1.53% benefiting depositors but impacting negatively on the Bank’s profitability.

Consolidated Fees and Commissions (Net of Expenses) saw an increase of 4.3% year-on-year to EUR 411.5 million (EUR 394.6 million in H110). The first half of the year saw strong growth in fees on guarantees, driven by corporate banking and commercial paper issues. Fees on securities activities grew strongly, benefiting from the consolidation of Execution Noble. In addition, guarantees and credit card commissions also grew at BES by 50.0% and 5.2% respectively. Other areas, including documentary credit, bancassurance commission on loans and collections also contributed positively, but notably their contribution fell when compared to a year earlier.

Consolidated Capital Markets and Other Results totalled EUR 351.5 million in H111 from EUR 286.6 million reported in H110. Financial market pressures and heightened concerns over the public accounts of number of EU member states, including those of Portugal, have led to a widening of credit spread. Despite this BES reported positive results from equity, credit and interest rate trading, although costs relating to the sale of part of the Bank’s loan portfolio impacted negatively on Other Results. At BES the sale of EUR 1.4 billion of loans as part of the deleveraging programme represented a cost of EUR 53.8 million. The sale of the stake in Banco Bradesco, which occurred in the second quarter 2011, for the approximate amount of BRL 2 billion, resulted in a profit of EUR 143.6 million. Finally, BES reported the receipt of an extraordinary dividend distributed by Portugal Telecom for the sum EUR 58.5 million.

Core Tier 1 solvency. ESFG is approved by the Bank of Portugal to use the IRB (Internal Ratings Based) method for calculating the minimum core capital requirements to cover credit risk. The authorisation covers ESFG and its subsidiaries BES and BESI and their respective subsidiaries. BES, ESFG’s principal banking and fully consolidated interest, announced on the 28 April that it had further bolstered its Core and Tier I positions through the sale of a 4.1% stake in Bradesco. Continued improvement in the solvency position of ESFG’s banking investments will strengthen ESFG’s capital position with the aim of achieving a 9.0% minimum core capital position by year end 2011, as required by the Bank of Portugal.

The table below provides the relevant information on risk weighted assets, regulatory capital and capital ratios under the BIS IRB II, as of 30 June 2011, 31 December 2010 and 30 June 2010:

Fig.II.

Solvency	H110	FY10	H111
Bank of Portugal (under Basel II, IRB Foundation)			(preliminary data)
Core Tier I	7.0%	6.9%	7.2%
Tier I	8.0%	8.2%	8.7%
Total	9.6%	10.6%	10.2%

ESFG was subject to the 2011 EU-wide Stress Test conducted by the European Banking Authority (EBA), in cooperation with the Banco de Portugal, the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB). The EU-wide stress test, announced on the 15 July 2011, carried out across 91 banks covering over 65% of the EU banking system’s total assets, sought to assess the resilience of European banks to severe shocks as well the solvency of each bank to hypothetical stress events under certain restrictive conditions.

The assumptions and methodology were established to assess banks’ capital adequacy against a 5% Core Tier 1 capital benchmark. The adverse stress test scenario was set by the ECB and covers a two-year time horizon (2011-2012). The stress test has been carried out using a static balance sheet assumption as at December 2010. The stress test did not take into account future business strategies and management actions and is not a forecast of ESFG’s profits.

As a result of the assumed shock, the estimated consolidated Core Tier 1 capital ratio of ESFG would change to 5.8% under the adverse scenario in 2012 compared to 6.4% as of end of 2010. This result incorporates the effects of the measures announced, fully committed and executed up to 30 April 2011 and does not take into account future mitigating actions planned by ESFG after that date. Considering a more demanding target of 6.0% for the Core Tier 1 ratio under the stress test adverse scenario in 2012, ESFG has already planned, and partially executed to date, disposals of part of its loan portfolio, which is expected to be ongoing up until the end of 2011, as well as buy backs of hybrid instruments with an aggregate impact of 50 basis points in the Core Tier 1 ratio under the stress test adverse scenario in 2012. Among these measures, those already executed between the end of April and the date the 15 July 2011 were sufficient for ESFG to reach the 6.0% target.

Credit Rating: On 11 April, DBRS Inc. announced that it had initiated ratings’ coverage of ESFG, assigning a Senior Long-Term Debt rating of BBB (high) and a Short-Term Instruments rating of R-2 (high). The trend on all ratings is Negative. At the same time, DBRS assigned an intrinsic assessment (IA) to the Group of BBB (high). On 12 July, DBRS published its report on ESFG and is available for review: http://www.esfg.com/LinkClick.aspx?link=2011%2fESFG+Rating+Report_Publishing+Final+07.12.11.pdf&tabid=38&mid=680. ESFG is also rated by Moody’s who, on the 15 July, following the downgrade of the Republic of Portugal to Ba2, announced the downgrade of ESFG also to Ba2.

Consolidated Insurance Earned Premiums Net of Reinsurance increased by 10.7% to EUR 172.6 million in the first half of 2011 from EUR 155.9 million a year earlier. Consolidated Claims Incurred Net of Reinsurance rose, however, to EUR 148.6 million in H111, compared to EUR 113.0 million in the first half of 2010, on the back of a reduction in mathematical reserves due to the decrease in life products. Overall, consolidated contribution of all insurance activities rose strongly at ESFG when compared to a year earlier.

The assurfinance programme of cross-selling banking products through its agents accounted for 19% of new clients at BES and represents 6% of total assets under management. Tranquilidade’s distribution chain is made up of more than 1,700 points of sale, of which 38 are own branches and 77 franchise shops. The combined ratio at Tranquilidade improved to 98.5%. The expense ratio improved from 27.8% to 26.4%, reflecting the ongoing cost reduction programme which included a 3.8% fall in expenses.

T-Vida reported a net income of EUR 1.5 million. Premiums decreased by 51.0% following an increased focus on deposits by banks in Portugal. Risk products continue to be the main focus for ESFG’s insurance operations. The technical margin decreased by 10.9% (from EUR 4.4 million to EUR 3.9 million). Operating costs increased 3.3% reflecting higher IT, consulting and advertising costs, but remains below budget.

AdvanceCare, ESFG’s managed care platform for healthcare insurers provides the link between the Company’s insurance and healthcare operations. AdvanceCare continues to provide positive results, and in the period net individual income rose by 1.8% to EUR 865 thousand from EUR 850 thousand a year earlier.

ESS, which contributes to Other Operating Income, reported a net individual income of EUR 2.6 million for the period. EBITDA at ESFG’s healthcare subsidiary rose from 15.4% in H110 to 16.3% in H111; ESS owns and operates 18 hospitals, out-patient clinics, residential hospitals, senior care residencies in Portugal. Operating revenues rose by 12.2% year-on-year to EUR 138.6 million.

Dividend income rose to EUR 141.4 million in H111 from EUR 68.9 million, a rise of 105.3% and reflects the extraordinary dividend paid by Portugal Telecom (PTC PL) to BES during the period.

Consolidated Staff Costs and General Administrative Expenses increased by 4.2% year-on-year to EUR 640.8 million from EUR 614.9 million in H110. The increase in staff costs resulted from ESFG’s subsidiaries continued international expansion. Portuguese staff costs at BES were affected by the integration of the Bank’s employees into the General Social Security Scheme which led to a EUR 10.4 million rise in social welfare contributions and amortization of IT related activities.

Other Expenses rose year-on-year by 25.4% to EUR 130.7 million (EUR 104.2 million), the costs include the business and running costs at ESS.

DEVELOPMENTS DURING H111 AND SUBSEQUENT EVENTS

• On 15 July, ESFG announced the successful conclusion of the EU-wide stress test conducted by the European Banking Authority (EBA), in cooperation with the Banco de Portugal, the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB).
• On 15 July, and following the downgrade of the Republic of Portugal, Moody’s Investor Services announced that it had downgraded the debt ratings of Espírito Santo Financial Group S.A.
• On 12 July, DBRS published its ratings report on ESFG reaffirming its senior rating at BBB (high) with negative outlook.
• On 9 May, ESFG, in conjunction with ESFIL, announced the establishment of a EUR 2 billion Euro Medium Term Note programme. On this date DBRS confirmed ESFG’s dated subordinated debt at BBB (Neg).
• On 3 May, ESFG announced the adjusted conversion price of ESF 5.05% November 2025, EUR 500 million convertible (XS0234103546) as EUR 21.24. The adjustment will be in effect as of 3 June 2011.
• A dividend per share of EUR 0.28 was approved at ESFG’s AGM held on 29 April, 2011 in Luxembourg. The figure represents a dividend yield of 2.0% relative to the share price at year end 2010.
• On 11 April, DBRS Inc. announced that it had initiated ratings coverage of ESFG assigning a Senior Long-Term Debt rating of BBB (high) and a Short-Term Instruments rating of R-2 (high). The trend on all ratings is Negative. At the same time, DBRS assigned an intrinsic assessment (IA) to the Group of BBB (high).
• On 21 January, ESFG announced that it had terminated its contract with Fitch Ratings. The decision follows a similar action taken by Banco Espírito Santo S.A. announced on the 8th November 2010.

CONTACTS

Espírito Santo Financial Group	Taylor Rafferty
Filipe Worsdell	Faisal Kanth
[phone]	[phone]
[e-mail]	[e-mail]

The Espírito Santo Financial Group provides, through its subsidiaries, a global and diversified range of financial services to its clients including Commercial banking, Insurance, Investment banking, Stock-brokerage, Healthcare services and Asset management in Portugal and internationally. For additional information on Espírito Santo Financial Group, its subsidiaries, operations and results, please visit the Company’s website on www.esfg.com.

ESPÍRITO SANTO FINANCIAL GROUP SA

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2011, 30 JUNE 2010 AND 31 DECEMBER 2010

	Unaudited	Unaudited	Audited
	30.06.2011	30.06.2010	31.12.2010
	(in thousands of euro)
Assets
Cash and deposits at central banks	1 114 269	1 984 339	976 515
Deposits with banks	874 083	749 525	879 561
Financial assets held for trading	3 028 063	5 997 018	3 951 786
Other financial assets at fair value through profit or loss	919 295	1 833 577	1 325 449
Available-for-sale financial assets	11 502 540	10 786 267	12 474 836
Loans and advances to banks	2 135 284	2 396 664	3 071 674
Loans and advances to customers	52 449 686	53 954 202	53 346 807
Held-to-maturity investments	2 465 961	2 750 025	2 453 465
Derivatives for risk management purposes	329 048	532 552	447 304
Non-current assets held for sale	637 413	486 369	574 550
Property and equipment	1 145 761	1 106 574	1 165 040
Investment properties	340 316	78 910	341 410
Intangible assets	545 492	387 735	557 837
Investments in associates	582 107	474 315	585 240
Technical reserves of reinsurance ceded	65 346	83 987	65 098
Current income tax assets	114 671	27 726	103 117
Deferred income tax assets	419 818	282 168	327 788
Other assets	5 106 162	4 129 236	4 502 794
Total assets	83 775 315	88 041 189	87 150 271
Liabilities
Deposits from central banks	9 672 687	8 995 744	7 964 837
Financial liabilities held for trading	1 929 342	2 186 039	2 121 305
Deposits from banks	6 036 287	7 399 880	6 617 077
Due to customers	32 434 810	26 425 812	31 205 688
Debt securities issued	20 977 702	30 091 363	24 904 746
Derivatives for risk management purposes	230 041	241 304	228 944
Investment contracts	270 481	340 490	324 934
Non-current liabilities held for sale	5 411	35 217	5 411
Provisions	226 965	192 984	233 614
Technical reserves of direct insurance	1 128 007	1 019 718	1 157 019
Current income tax liabilities	59 050	129 488	57 765
Deferred income tax liabilities	95 424	110 241	131 289
Subordinated debt	1 991 395	2 728 244	2 689 697
Other liabilities	1 913 883	1 447 855	2 206 082
Total liabilities	76 971 485	81 344 379	79 848 408
Equity
Share capital	778 549	778 549	778 549
Share premium	253 656	253 656	253 656
Preference shares	394 514	394 514	394 514
Other equity components	115 109	113 905	115 109
Fair value reserve	( 151 295)	( 19 918)	( 39 766)
Other reserves and retained earnings	( 12 335)	( 81 579)	( 82 818)
Profit for the year attributable to equity holders of the Company	38 222	57 653	122 165
Total equity attributable to equity holders of the Company	1 416 420	1 496 780	1 541 409
Non-controlling interest	5 387 410	5 200 030	5 760 454
Total equity	6 803 830	6 696 810	7 301 863
Total equity and liabilities	83 775 315	88 041 189	87 150 271

CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS PERIODS ENDED 30 JUNE 2011 AND 2010

	Unaudited
	30.06.2011	30.06.2010
	(in thousands of euro)
Interest and similar income	2 022 815	1 907 431
Interest expense and similar charges	1 457 438	1 359 241
Net interest income	565 377	548 190
Dividend income	141 431	68 879
Fee and commission income	481 430	451 451
Fee and commission expenses	( 69 900)	( 56 803)
Net gains / (losses) from financial assets and financial liabilities at fair value through profit or loss	( 139 895)	( 56 754)
Net gains from available-for-sale financial assets	164 898	170 678
Net gains from foreign exchange differences	30 500	24 041
Net gains / (losses) from the sale of other assets	( 46 206)	( 3 836)
Insurance earned premiums net of reinsurance	172 614	155 916
Other operating income	342 192	152 491
Operating profit	1 642 441	1 454 253
Staff costs	398 195	374 821
General and administrative expenses	242 572	240 121
Claims incurred net of reinsurance	148 560	113 008
Change on the technical reserves net of reinsurance	( 25 938)	4 519
Insurance commissions	16 944	16 431
Depreciation and amortisation	70 805	69 774
Provisions net of reversals	9 512	12 877
Loans impairment net of reversals and recoveries	291 683	168 992
Impairment on other financial assets net of reversals	59 129	30 300
Impairment on other assets net of reversals	100 936	20 876
Other operating expenses	130 658	104 179
Operating expenses	1 443 056	1 155 898
Share of profit of associates	12 502	21 400
Profit before income tax	211 887	319 755
Income tax
Current tax	71 138	49 077
Deferred tax	( 66 723)	( 19 029)
	4 415	30 048
Profit for the year	207 472	289 707
Attributable to equity holders of the company	38 222	57 653
Attributable to non-controlling interest	169 250	232 054
	207 472	289 707

¹ A year-on-year comparison of the key indicators is provided. Figures in parentheses following the operational and financial results for 2011 refer to the same item in 2010

² Aggregate of Net Gains/Losses from Financial Assets at Fair Value through Profit and Loss, Net Gains on Available for Sale Financial Assets, Net Gains from Foreign Exchange Differences and Net Gains/Losses from the Sale of Other Assets

Category Code: IR

Sequence Number: 285472

Time of Receipt (offset from UTC): 20110815T182226+0100