Presentation title

Transcription

Presentation title

DOURO Mortgages No. 2
€ [1,500] million Securitisation of Prime Portuguese Residential Mortgage Loans originated by Banco BPI
September 2006
STRICTLY PRIVATE AND CONFIDENTIAL
Disclaimer
This Presentation has been prepared for information purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument. Although the information in this Presentation has been obtained from sources which each of ABN AMRO, Banco BPI, S.A., La Caixa, and Societe Generale Corporate & Investment Banking (the Joint Lead Managers) believe to be reliable, the Joint Lead Managers do not represent or warrant its accuracy, and such information may be incomplete or condensed. This Presentation is an advertisement and does not constitute a prospectus for the purposes of EU Directive 2003/71/EC and/or any other relevant implementing measures. Potential investors should not subscribe for any securities referred to in this Presentation except on the basis of the information contained in the final prospectus. When available, the final prospectus will be made available to the public in accordance with EU Directive 2003/71/EC and/or any other relevant implementing measures. Investors may obtain a copy of the final prospectus via the relevant stock exchange’s chosen publication system. All estimates and opinions included in this Presentation constitute the Joint Lead Manager’s judgement as of the date of the Presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein. Each of the Joint Lead Managers or any of its affiliates may, from time to time, have a position or make a market in the securities mentioned in this Presentation, or in derivative instruments based thereon, may solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager or lender) for any company, institution or person referred to in this Presentation and may, to the extent permitted by law, have used the information herein contained, or the research or analysis upon which it is based, before its publication. The Joint Lead Managers will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission.
This Presentation is confidential and is being submitted to selected recipients only. It may not be reproduced (in whole or in part) to any other person without the prior written permission of the Joint Lead Managers. The information contained herein is not for publication or distribution to persons in the United States, and these materials do not constitute an offer of securities for sale in the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold without registration thereunder or pursuant to an available exemption therefrom. No public offering of securities will be made in the United States. ABN AMRO is authorised by the Dutch Central Bank and the Financial Services Authority; regulated by the Financial Services Authority for the conduct of its UK business. BPI is regulated by the Banco de Portugal. La Caixa is regulated by the Banco de Espana. Societe
Generale is authorized by the Banque de France and the Financial Services Authority.
2
Contents
I
Executive Summary
4
II
Transaction Structure
11
III
Banco BPI
20
IV
Banco BPI Mortgage Business
26
IV
Portfolio Performance Analysis
39
Appendix
I
The Douro Programme
43
II Portuguese Mortgage & Housing Market
46
III
Provisional Portfolio Stratification
54
IV
Comparables
61
V
Contact List
63
3
I) Executive Summary
4
EXECUTIVE SUMMARY
Transaction Overview
Issuer
Sagres - Sociedade de Titularização de Creditos, a limited liability company incorporated under Portuguese securitisation law.
Transaction Type
Prime RMBS
Transaction Name
Douro Mortgages No. 2
Aggregate Principal Amount
€[1,500] million
Collateral
Portfolio of first lien mortgages originated in Portugal by BPI in its ordinary course of business
Settlement Date
September [●], 2006
Legal Final Maturity
April, 2059
Payment Dates
[January, April, July, October]
First Payment Date
January [●], 2007
Step-up Date
October [●], 2015
Optional Redemption Date
9 year Call and 10% Clean-up Call
Listing
Ireland
Minimum Denominations
€[50,000] with additional increments of €[1,000]
Swap Counterparty
ABN AMRO
Governing Law
Portuguese Law
Arranger
ABN AMRO
Joint-Lead Managers
ABN AMRO / BPI / La Caixa / Société Générale
Bookrunners
ABN AMRO / La Caixa / Société Générale
5
EXECUTIVE SUMMARY
Transaction Highlights

Banco BPI is the fourth largest private financial group in Portugal with a long-term rating of A-/A2/A+ by
S&P, Moody’s and Fitch Ratings respectively. BPI has net total assets of €32.2 billion and a current market
capitalization of €4.5 billion (June 2006)

BPI provides commercial banking services to a client base of about 1.4 million people in Portugal. Out
of a total loan portfolio of €20.5 billion, BPI has an outstanding mortgage book of €9.3 billion

Douro Mortgages No.2 is the second RMBS of the BPI Group. The main objectives of the transaction for BPI
are to release regulatory capital and diversify funding sources

Douro Mortgages No.2 will be issued on the Irish Stock Exchange by Sagres STC, a Portuguese Securitisation
company owned by Citigroup that can be used for multiple issuances and is also used for Douro Mortgages
No.1 and Douro SME Series 1

Douro Mortgages No.2 benefits from different sources of credit support and liquidity including
subordination, excess spread, cash reserve, principal draws to cover interest shortfalls and a
contingent liquidity facility agreement (entered into if the short-term unsecured debt obligations of the
Servicer cease to be rated at least P-1 by Moody's)

The notes will be backed by a €[1.5] billion pool of first and consecutive ranking prime Portuguese
residential mortgages originated by Banco BPI

Superior historical performance of BPI’s mortgage book is indicative of the group’s sophisticated and
conservative underwriting policy. BPI’s performance is considerably superior to its peers

Low LTVs, with a WA CLTV of [63.14%] and WA Seasoning of [3.65] years, the Douro No.2 portfolio is of high
quality when compared to other recent Portuguese RMBS transactions

[21.5]% of the portfolio comprises subsidised mortgages, which have historically performed as well if not better
than standard mortgages
Originator
Douro Programme
Collateral
6
EXECUTIVE SUMMARY
Transaction Structure
Swap Counterparty
Borrowers
ABN AMRO
Interest and
principal
repayments
Class A1 Notes
Interest
and
principal
repayments
Purchase
Price
Banco BPI, S.A.
SAGRES STC, S.A.
(“Originator
and Servicer”)
(“Issuer”)
Class A2 Notes
Class B Notes
Issue
Proceeds
Mortgage
Class C Notes
Class D Notes
Assets
Class E Notes
Contingent
Liquidity
Facility
Cash Reserve
Account
The Class E Notes will fund the Cash Reserve in full at closing and some upfront expenses
7
EXECUTIVE SUMMARY
Tranching and Credit Enhancement at Closing
No te Descr ip tio n
Cla ss A 1 No tes
[ O ffer ed ]
Cla ss A 2 No tes
[ O ffer ed ]
Cla ss B No tes
[ O ffer ed }
Cla ss C No tes
[ O ffer ed }
Cla ss D No tes
[ O ffer ed }
Cla ss E No tes
[ No t O ffer ed }
A mo u n t in Eu r o s
[ 315] millio n
[ 1,125] millio n
[ 27.75] millio n
[ 18] millio n
[ 14.25] millio n
[ 9] millio n
Cr ed it En h a n cemen t
[ 4.8] %
[ 4.8] %
[ 2.95] %
[ 1.75] %
[ 0.80] %
N/A
Ex p ected R a tin g (Fitch / M o o d y's / S&P )
[ A A A / A a a / A A A ]
[ A A A / A a a / A A A ]
[ A A / A a 3 / A A ]
[ A / A 2 / A - ]
[ BBB+ / Ba a 2 / BBB]
[ NR ]
P a ymen t Fr eq u en cy
Q u a r ter ly
Q u a r ter ly
Q u a r ter ly
Q u a r ter ly
Q u a r ter ly
Q u a r ter ly
Fin a l Leg a l M a tu r ity
A p r il, 2059
A p r il, 2059
A p r il, 2059
A p r il, 2059
A p r il, 2059
A p r il, 2059
Step - u p Da te
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
Ex p ected Ca ll Da te
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
O cto b er , 2015
R ep a ymen t
Seq u en tia l u n til [ 25] % Seq u en tia l u n til [ 25] % Seq u en tia l u n til [ 25] % Seq u en tia l u n til [ 25] % Seq u en tia l u n til [ 25] % [ Seq u en tia l with a r a p id o f th e Cla ss A No tes o f th e Cla ss A No tes o f th e Cla ss A No tes o f th e Cla ss A No tes o f th e Cla ss A No tes a mo r tiza tio n sch ed u le h a ve b een r ep a id ; P r o - h a ve b een r ep a id ; P r o - h a ve b een r ep a id ; P r o - h a ve b een r ep a id ; P r o - h a ve b een r ep a id ; P r o u n til a ll p r in cip a l is r a ta th er ea fter
r a ta th er ea fter
r ep a id ]
Estima ted Weig h ted A ver a g e Life
[ 1.51]
[ 7.51]
[ 7.58]
[ 7.58]
[ 7.58]
N/A
I n ter est
Flo a tin g - A ct / 360
R esid u a l I n ter est
3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s
Step - Up I n ter est
3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s 3m EUR I BO R + [ ●] b p s
8
R esid u a l I n ter est
EXECUTIVE SUMMARY
Key Investment Considerations

Banco BPI is the fourth largest private financial group in Portugal with total assets of €37 billion and a market capitalization of €4.5 billion (June 2006). BPI is rated A-/A2/A+ by S&P, Moody’s and Fitch Ratings respectively

BPI is an experienced underwriter and servicer. BPI has previous experience acting as Originator and Servicer for the Douro Mortgages No.1 and Douro SME Series 1 (the first SME loan cash securitisation in Portugal) transactions, both of which were very
well received in the market
As with BPI’s previous securitisation transactions, Douro Mortgages No.2 will utilise Sagres STC, a Securitisation company owned by Citigroup set up under Portuguese law exclusively to issue ABS

In comparison to its peers, BPI’s superior mortgage product performance is illustrative of the strong risk control procedures and conservative underwriting criteria they have set in place

Eligibility criteria is tighter than for any other transaction in Portugal, specifically as it relates to the past performance of a borrower. BPI checks the Bank of Portugal’s Central Credit Register for arrears across the entire financial system, whereas other transactions only take into consideration the performance within the originator’s own loan books

BPI’s Credit in Arrears (+30 days) ratio is below the Portuguese market average by 16%, demonstrating the strictness and efficiency of the underwriting process. On mortgage credit, the results further outperform its peers

The transaction benefits from subordination and different sources of credit enhancement and of liquidity including excess spread, a cash reserve, principal draws, and a contingent liquidity facility

The issuer will enter into an Interest Rate Swap Agreement will be established between the Issuer and ABN AMRO to mitigate the interest rate risk associated with the transaction
9
EXECUTIVE SUMMARY
Key Investment Considerations (continued)

High quality portfolio:
All first ranking, or first and consecutively lower ranking, prime Portuguese residential mortgages originated by BPI
Low LTVs, low WA CLTV of [63.14]% and WA OLTV of [69.69]% (rare quality well below standard Portuguese RMBS)
All mortgage loans are current for at least the last [18] months
Since late 2005 loans with a LTV over 90% are guaranteed by a mortgage credit insurance (BPI is one of only two institutions in Portugal to require this feature)
Well seasoned portfolio with WA Seasoning of [3.65] years (well above the levels of recent Portuguese RMBS)
Low Average Current Balance Outstanding of €[54,552]
Well diversified geographically with [40.63]% in Greater Lisbon, [18.09]% in the Center, [15.23]% in the North and [11.63]% in Greater Porto
Approximately [21.5%] of the Portfolio is composed of government subsidised loans where the government has agreed to pay a portion of the interest up to 44% due on the loan, a percentage which will decrease over time. Note that the subsidised portion of the current portfolio has a WA Actual Subsidy of [24.91]%

Douro Mortgages No1 performance: still early days but so far one of the best performances within the Portuguese RMBS sector

Selection Criteria: Unique selection criteria, at least 18 months with no past arrears within the entire Portuguese banking system
10
2) Transaction Structure
11
TRANSACTION STRUCTURE
Summary of the Proposed Transaction

Issue and Collateral Amount: EUR [1,500] million Notes: –
–
–
–
–
–

Class A1: Class A2: Class B: Class C: Class D: Class E: EUR [315] million
EUR [1,125] million
EUR [27.75] million
EUR [18] million
EUR [14.25] million
EUR [9] million
Credit Enhancement:
•
Subordination and Cash Reserve:
–
–
–
–
–
–
•
Class A1:
Class A2:
Class B:
Class C:
Class D:
Class E:
[4.80] %
[4.80] %
[2.95] %
[1.75] %
[0.80] %
N/A
Excess Spread

The Notes are pass-through with repayment on a pro-rata or sequential basis (subject to satisfaction of the Pro Rata Test)
The notes incorporate a step-up at year [9], at which date the spread on the Class A, B, C, D notes will be doubled, and the issuer may call the notes at this date, and at any subsequent Interest Payment Date. In addition, the Notes benefit from a 10% clean-up call feature
12
Credit Support

Excess Spread – Should any losses be realised, excess spread is first used to cover those losses before its release through the waterfall. Excess spread is trapped as per the provisioning mechanism below.

Cash Reserve – Where excess spread is insufficient to cover a loss, amounts may be drawn from the Cash Reserve Account for this purpose

Subordination – In the unlikely event that losses exceed the above resources, the uncovered amounts will be allocated to investors in reverse seniority order

The Douro No.2 transaction includes Performance Triggers that govern:
Release of funds from the Cash Reserve
Trapping of excess spread to increase the Cash Reserve
Pro-rata versus sequential amortisation

In addition, protection against losses is enhanced through an accelerated loss provisioning mechanism:
[25]% when 12 or more monthly instalments have not been paid when due and which remain outstanding [50]% when 24 or more monthly instalments have not been paid when due and which remain outstanding [100]% when 36 or more monthly instalments have not been paid when due and which remain outstanding 13
Expected Average Lives and Payment Windows
CLASS A1 NOTES AVERAGE LIVES AND PAYMENT WINDOWS
0% CPR
2% CPR
4% CPR
6% CPR
8% CPR
10% CPR
12% CPR
WAL (yrs) to Step Up Call Date
Principal Payment Window
4.00
Jan 2007
to
Apr 2014
2.60
Jan 2007
to
Oct 2011
1.91
Jan 2007
to
Jul 2010
1.51
Jan 2007
to
Oct 2009
1.25
Jan 2007
to
Apr 2009
1.07
Jan 2007
to
Oct 2008
0.94
Jan 2007
to
Jul 2008
WAL (yrs) to Clean Up Call Date
4.00
Jan 2007
to
Apr 2014
2.60
Jan 2007
to
Oct 2011
1.91
Jan 2007
to
Jul 2010
1.51
Jan 2007
to
Oct 2009
1.25
Jan 2007
to
Apr 2009
1.07
Jan 2007
to
Oct 2008
0.94
Jan 2007
to
Jul 2008
CLASS A2 NOTES AVERAGE LIVES AND PAYMENT WINDOWS
0% CPR
2% CPR
4% CPR
6% CPR
8% CPR
10% CPR
12% CPR
8.96
Apr 2014
to
Oct 2015
8.57
Oct 2011
to
Oct 2015
8.05
Jul 2010
to
Oct 2015
7.51
Oct 2009
to
Oct 2015
6.99
Apr 2009
to
Oct 2015
6.49
Oct 2008
to
Oct 2015
6.03
Jul 2008
to
Oct 2015
18.48
Apr 2014
to
Jan 2035
15.24
Oct 2011
to
Oct 2031
12.74
Jul 2010
to
Apr 2029
10.78
Oct 2009
to
Oct 2026
9.20
Apr 2009
to
Apr 2024
7.97
Oct 2008
to
Apr 2022
6.99
Jul 2008
to
Jul 2020
CLASS B, C AND D NOTES AVERAGE LIVES AND PAYMENT WINDOWS
0% CPR
2% CPR
4% CPR
6% CPR
8% CPR
10% CPR
12% CPR
8.98
Jan 2015
to
Oct 2015
8.63
Apr 2012
to
Oct 2015
8.17
Jan 2011
to
Oct 2015
7.58
Jan 2010
to
Oct 2015
7.08
Jul 2009
to
Oct 2015
6.68
Apr 2009
to
Oct 2015
6.26
Jan 2009
to
Oct 2015
18.73
Jan 2015
to
Jan 2035
15.40
Apr 2012
to
Oct 2031
12.99
Jan 2011
to
Apr 2029
10.90
Jan 2010
to
Oct 2026
9.35
Jul 2009
to
Apr 2024
8.23
Apr 2009
to
Apr 2022
7.27
Jan 2009
to
Jul 2020
14
Hedging

The mortgage assets bear interest based on three-month/six-month/twelve-month EURIBOR and the notes pay interest based on three month EURIBOR. In order to mitigate the basis risk between the interest income received under the Mortgage Assets and the EURIBOR-based Notes, Sagres will enter into a Swap Agreement with ABN AMRO N.V.

ABN AMRO N.V will pay Sagres certain amounts calculated from the EURIBOR relating to the interest rate on the Notes, on a notional amount equal to the Aggregate Principal Outstanding Balance of the mortgage assets in respect of which no payment is overdue by more than 90 days at the beginning of the relevant Collection Period
Liquidity Support

Excess Spread – Excess spread will be used to meet any shortfalls in coupon payments before its release to the ultimate beneficiaries

Cash Reserve – Where excess spread is insufficient to meet interest and fees, amounts may be drawn from the Cash Reserve Account to cover the shortfall

Principal draws – Additional liquidity will be provided through principal draws (i.e. the ability to use principal as interest)
Subject to certain performance tests
Must be ‘repaid’ in subsequent periods from interest collections

Contingent Liquidity Facility
Banco BPI’s short-term rating must drop below [P-1] (Moody’s)
A third-party liquidity facility provider will be engaged on terms acceptable to the Rating Agencies
15
Interest Payment Priority
Allocation As Follows
Mortgage Interest Received
Senior Issuer Expenses
Interest on the Class D Notes
Swap Payment
Swap Payment
Class D PDL
Reserve Fund Drawings
+
Interest on Class A Notes
Replenish Cash Reserve
Principal Drawings
+
Class A PDL
Swap Termination Payment
Authorized Investments
+
Interest on the Class B Notes
Principal on Class E Notes
Interest on Bank Accounts
+
Class B PDL
Class E Return Amount
=
Interest on the Class C Notes
Available Interest Amount
Class C PDL
16
Pro-Rata vs. Sequential Amortisation

Pro-Rata Test
Subject to satisfaction of the Pro-Rata Test, payments of principal on each of the Class A1/ A2 to D Notes will be made on a pro-rata amortisation schedule as opposed to sequential.

Pro-Rata Triggers
[25] % of Class A1 / A2 Notes have amortised Cash Reserve Account Balance is at the Cash Reserve Required Amount
Outstanding balance of the mortgage loans in arrears by not less than 90 days (deducted of amounts already provisioned for) is under [2.5] % of the initial balance of the mortgage loans
Allocation As Follows
Mortgage Principal Received
Principal on the A1 Notes
Interest used to pay down PDL
Principal Drawings
+
=
-
Principal on the A2 Notes
Principal on the B Notes
Available Principal Amount
Principal on the C Notes
Principal on the D Notes
* Please note that post-enforcement principal on the A1 and A2 will be paid in the same order of priority and senior to the Class B,C, and D Notes.
17
Assumptions:
Class D
Class C
0% CDR
6% CPR
18
Class B
Class A2
Class A1
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Expected Amortisation Profile
Permitted Variations and Substitutions

Permitted Variations
The seller may vary the conditions on the Mortgage Assets subject to a maximum of [20] % of the initial outstanding balance of the Mortgage Assets and a maximum reduction in margin of [50] basis points and/or a maximum extension to the maturity of the Mortgage Assets of no more than [3] years prior to the Final Legal Maturity Date

Substitutions
Any Mortgage Asset that has to be repurchased as a result of a breach of reps and warranties or a non-permitted variation, may be substituted by new mortgage assets with the same eligibility criteria, subject to certain conditions such as:
– a maximum limit of [5]% of the Aggregate Principal Outstanding Balance of the Mortgage Assets during the first 12 months and [10]% of the Aggregate Principal Outstanding Balance of the Mortgage Assets during the life of the transaction
– the weighted average original LTV of the substituted mortgages does not exceed the weighted average original LTV of the retired mortgages at the Collateral Determination Date plus [15]%
– the weighted average CLTV of the mortgage asset pool, inclusive of the substituted mortgages, does not exceed the weighted average CLTV as at the Collateral Determination Date plus [0.25]%
19
III) Banco BPI
20
BANCO BPI
Banco BPI Timeline

Post-1974, first financial institution to be privately owned in Portugal
1985, fully authorised as a bank and incorporated under “Banco Português de Investimento, S.A.”
1986, first bank in Portugal to undergo a public offering and get listed on the Lisbon Stock Exchange.

1991-1996, BPI builds the largest single-brand banking network in Portugal through acquisitions.

1998, merger of all subsidiaries under BPI group and drive for modernisation, growth, structural reinforcement and brand development.

1999-2001, BPI boosts its market share in all key areas of commercial banking, expands and streamlines its distribution structure and
transforms itself into a multi-channel bank.

Post - 2001, emphasis on internal efficiency, namely through cost cutting programmes and development of commercial areas.
New Brand
Total Assets
€ Bn.
Merger of
Commercial Banks
BFE + BBI
34
BFA
(Angola)
Multichannel
17
BFB
5
SPI
0.005
81
91
Leadership in
Investment Bank
96
Acquiring
commercial banks
21
98 99 00
02
04 05
Organic growth
BANCO BPI
Organizational Structure

BPI is a financial and multi-specialist group focusing on domestic commercial banking business
Domestic commercial banking is organized into two main segments: individuals and small businesses, and corporate banking, institutional banking, and project finance

BPI has a strong commitment to market performance and is run by an independent Executive Board, director’s compensation is directly linked to share price

The main shareholders are La Caixa – 19.2%, Itau – 17.5%, and Allianz – 8.6% (as of June 2006)
22
BANCO BPI
BPI at a Glance
Evolution of Funding Structure
BPI Group Ratings
Long Term
Short
Term
A-
A-2
S&P
Assigned
18.0%
A2
26.3%
31.6%
27.1%
1999
Positive
Moody’s
21.5%
53.3%
P-1
52.3%
56.4%
58.2%
1996
56.7%
Positive
28.7%
Fitch
A+
F1
1996
Stable
Dec-02
M one y M arket
Comfortable Capital Ratios
11.5%
(1)
6.5%
Co re
C ap ital
5.1%
31 Dec. 04
11.7%
Dec-04
Dec-05
Deposits and other resource s
16.6%
Jun-06
Debt Securitie s (inc. Sub. Debt)
10.8%

Strong capital base with a Tier I ratio of 7.4% as of June
2006
4.2%
3.4%

Senior rating with positive outlook from two agencies
7.3%
7.4%

5.9%
5.9%
Money market funding has been declining against the
increase in long term funding

Once the present transaction is completed, about 12.5% of
total funding will have been obtained through securitisation

Customer resources comprise about 59% of the bank’s
overall funding sources
3.3%
Tie r I
Dec-03
15.5%
2006, 2005 and 2004 figures according to IAS; 2003 and 2002 PCSB
9.8%
Tie r II
26.2%
31 Dec. 05
30 Jun. 06
23
BANCO BPI
BPI Group Performance and Returns
Performance and Asset Growth
40,000
(€ m n)
35,000

Resilient performer with 23.5% Return on Equity as of June 2006

Efficiency ratio has improved continuously for the past 7 years – from 71.6% in 1999 to 57.7% in June 2006 – indicating constant improvement in operational efficiency

A consistent better performance than the market, for a long period of time

Integration of acquired banks did not compromise long term ROI

Organic growth complemented with the search for higher levels of efficiency was recognised by the market as an adding-value strategy
70%
30,000
65%
25,000
20,000
60%
15,000
10,000
55%
5,000
0
50%
Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Jun98
99
00
01
02
03
04
05
06
Efficiency Ratio
Assets
Return On Investment (ROI)
BPI
Market
3
2
4
1)
2)
3)
4)
10.Mar.06 25.Jul.06 25.Jul.06
€ 5.78
€ 4.79
Since incorporation (Oct/1981)
17.1%
18.5%
N.A.
Since IPO (Oct. 1986)
16.2%
17.6%
11.4%
10.3%
Since BFB acquisition (Aug. 91)
14.0%
15.6%
10.3%
9.3%
Since BFE and BBI acquisition
(Aug. 96)
17.9%
19.9%
9.3%
10.9%
Since 31/Dec/01
24.5%
28.0%
4.5%
8.6%
Annual average return, before taxes, assuming shareholders reinvested all dividends received in new shares and subscribed new shares in all capital increases
March 10th was the last trading day before the announcement of BCP’s bid over BPI
Portuguese market measured by PSI General Index (“total return”)
As “Sociedade Portuguesa de Investimentos”
24
BANCO BPI
Financial Overview Banco BPI

Growth estimates for 2005-2010 per sector are: Customer Resources - 7%, Mortgages – 9%, Small Businesses – 9%, and Corporates – 10%
Key Figures
IAS / IFRS
IAS / IFRS
2004
2005
yoy gr
Jun.05
Jun.06
yoy gr
Net total assets
25,783.2
30,158.7
+ 17.0%
27,350.0
32,290.1
+ 18.1%
Loans to Customers (gross) and guarantees
22,180.6
24,366.7
+ 9.9%
22,802.1
25,576.1
+ 12.2%
Total Customer resources (1)
19,542.3
22,168.3
+ 13.4%
20,343.8
22,726.0
+ 11.7%
+ 88.6%
Stock market capitalisation
2,264.8
2,933.6
+ 29.5%
2,394.0
4,514.4
Net profit
159.3
250.8
+ 57.5%
106.9
148.6
+ 39.1%
Net profit per share (euro)
0.212
0.335
+ 57.9%
0.143
0.199
+ 39.6%
17.1%
23.5%
-
20.8%
24.2%
-
61.3%
57.7%
-
56.3%
57.7%
-
-
11.5%
-
12.0%
10.8%
-
Ratio of loans in arrears for more than 90 days
1.0%
1.3%
-
1.1%
1.1%
-
Accumulated loan impairments as % of total loan portfolio
1.6%
1.6%
-
1.7%
1.5%
-
0.33%
0.24%
-
0.27%
0.16%
-
Return on Shareholders equity (ROE)
Administrative overheads, amortisation and depreciation /
operating income from banking (2)
Ratio of own funds requirements (3)
Cost of risk (4)
Amounts expressed in millions of euro, except where indicated otherwise
(1) Corrected for duplication of balances
(2) Administrative overheads, amortisation and depreciation excluding costs with early retirements. The operating income from banking excludes recovery of
loans written-off.
(3) Calculated in accordance with Bank of Portugal rules
(4) Loans provisions (PCSB) and loan impairments (IAS / IFRS) in the year, deducted of recoveries of loans in arrears written-off (in the income statement) /
Customer loans (annualised figure).
yoy gr - year-on-year growth rate.
IAS = International Accounting Standards
Source: www.bpi.pt
IFRS = International Financial Reporting Standards
25
IV) Banco BPI Mortgage Business
26
BANCO BPI MORTGAGE BUSINESS
Banco BPI Mortgage Business

BPI is a highly experienced originator/servicer that has demonstrated above average underwriting and arrears management procedures

BPI has become a market leader in the mortgage market (currently has 9.5% of the market) by positioning itself as an innovator; BPI pioneered the use of Mortgage Insurance, a centralised Valuation service, a mortgage and housing website, the one-stop Mortgage Shop and Mortgage Corners within branches; BPI’s branches were recently recognised as having the best lay-out in Europe (Lafferty Group, May 2006)

BPI has experienced an average annual growth since 1999 of 6.2% in its production of mortgage credit, leading to an estimate of €1.5 billion in new mortgage credit in 2006

While the overall ratio of non-performing mortgage loans in Portugal lies around 1.4%, BPI’s ratio is 1.24%

Banco BPI has an extensive branch and sales network across Portugal set up to sell its mortgage products (and other commercial banking products), including:

533 Retail Branches

18 Mortgage Shops

18 Investment Centres

BPI Net (online banking) with 335,000 users

BPI Directo (telephone banking) with 305,000 users
BPI has expanded its sales network among real estate agents which has proved very successful. The agents are compensated through an upfront fee but have no intervention in credit decision. In 2005, BPI originated 16.1% of its loan business through agents while this percentage grew to 21.3% in 2006
27
Total Credit Portfolio
Credit Portfolio (June 2006)
Other
3%
Small
Business
9%
Evolution of Mortgage Portfolio 14,000
Individuals Consumer
Credit
4%
(€ m n)
12,000
10,000
40%
43%
45%
43%
43%
2002
2003
2004
2005
Jun-06
34%
28%
8,000
Corporates
41%
6,000
4,000
2,000
0
Individuals Mortgage
Loans
43%
2000
2001
Mortgage Loans
Other Loans
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
%
Ratio of loans in arrears
(more than 30 days)
10%
Mortgage loans make up 43% of the credit portfolio (as of June 2006)
8.6%
8%
During 2005, the weight of mortgage loans on the credit portfolio decreased slightly for the first time in recent years
6%
This was due to the combination of lower demand and Aquisition
BFB
4%
stricter credit policy
3.6%
Aquisition
BFE + BBI
90
91
92
93
94
95
96
97
98
99
significantly lower than industry average of 2%
BPI: 1.4%
0.1%
0%
Ratio of loans in arrears (more than 30 days), 1.4% is Market: 2.0%1
2.6%
2%
00
01
02
03
04
05
Impairments as % of nonperforming loan potfolio
112.2%
28
Provisioning coverage for loans in arrears provides sufficient cover over credit and country risk
Total BPI Mortgage Portfolio and Market Share

BPI is among the top 6 mortgage lenders in Portugal, with a market share of 9.5% (as of March 06)

In 2005, BPI had a total loan portfolio of €20.5 billion, of which €9.3 billion were mortgage loans. The compound annual growth on mortgage loans from 1998 to 2005 was 23%

BPI’s decision criteria was revised and tightened in 2003, which explains the small drop in market share experienced in the following years. BPI expects to return to its natural market share while still relying on a stricter criteria than its peers in the market and maintaining the high performances of its mortgage portfolio

BPI is also reorganizing the channel of real estate agents, which is one of the fastest growing in Portugal. In order to regain market share in this segment BPI is dealing with bigger networks centrally while smaller ones are covered through BPI’s branches and mortgage shops
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
(€ m n)
9.90%
9.90%
9.50%
11%
10%
9.20%
8.40%
9%
7.20%
8%
7%
6%
2000
2001
2002
2003
Mortgage Credit
29
Market Share
2004
2005
Mortgage Production
Mortgage Credit Production
13.10%
2,000
11.40%
12.30%
12.80%
€ mn
1,200
Since 1999, mortgage credit production at BPI has grown at an average annual rate of 6.2%; this compares with 3.3% for the Portuguese market in general
8%

Average remaining term: 25.5 years
6%

Floating rate: 99.2%
2%

Subsidised credit (Mar 06) – 20.6% of outstanding
0%

Clients with LTV above 90% are required by BPI to purchase mortgage credit insurance, a highly innovative and conservative approach to higher LTV mortgages

The mortgage credit insurance is provided by Genworth and covers the first losses of the insured mortgage loans
12%
10.20%
1,600

14%
9.00%
7.70%
7.20%
800
10%
4%
400
0
1999
2000
2001
2002
2003
Production of Mortgage Credit
2004
2005
2006
(JanJuly)
Market Share -Production
Distribution of new loans by LTV 2005
5.10%
> 90%
24.40%
75% - 90%
32.70%
50% - 75%
<= 50%
37.80%
30
Banco BPI’s Underwriting Process

BPI does not have a credit scoring system, instead it uses GPC (Gestor de Processos
de Crédito), a simulation/pre-decision model which is used for all mortgages
Table 1
BPI bases its loan decision on the following criteria:

Term 0-40 Yrs
Without
Mortgage
Insurance
With
Mortgage
Insurance
Household Disposable Income, confirmed by a wage slip or tax return, must be equal to or greater than minimum requirements set for each household size

Monthly Expenses (including mortgage payments at a 200 basis point markup plus insurance payments) divided by Monthly Net Income plus Other Monthly Income must be less than 50%

LTV must fall inside limits defined for each product and term, with an allowance made for Mortgage Insurance (Table 1)
31
Term 40-45 Yrs Term 45-50 Yrs
90%
80%
70%
100%
100%
n/a
Credit Check

Credit checks are carried out for all loans to check for applicant defaults and aggregate obligation exposure.

All Portuguese banks and financial institutions share credit information through the Central Credit Register managed by the Banco de Portugal.

The Central Credit Register provides aggregate credit amounts by term and product type, as well as non-performing exposures by time in arrears. Detailed information is also shared regarding unpaid cheques, IOUs, and borrowers prevented from issuing cheques. BPI checks each customer application in this database.
Insurance

Life, incapacity, fire and earthquake Insurance policies are mandatory for customers, while unemployment and hospital care Insurances are optional. BPI has a partnership with Allianz that allows policies to be processed through the bank and payment taken directly from the customer’s account. BPI is the beneficiary for these policies
Centralized Real Estate Evaluation

BPI uses a centralised real estate valuation department, allowing for greater control and checks within the system. All engineers/surveyors are certified on a national level. For all loans, an independent surveyor is always sent to do an onsite inspection and full valuation.
32
BPI’s Mortgage Lending Structure
DFI
DRCCP
(Real Estate Financing Central Department)
DLEH
(Mortgage Shops Department)
DPC
DDC
(Sales Department )
(Credit Decision Department)
DCH
(Mortgage Financing Department)
Mortgage Shops
Real Estate Agents - South
Credit Decision South
Loan Application Management
Mortgage Corners
Real Estate Agents - North
Credit Decision North
After Sales Management
(Credit Recovery
Department)
BPI Imobiliário Web Site
Insurance
Training
= Sales oriented
Real Estate Evaluation
Main tasks:
Support to specialised
channels
Support to real estate agents
Credit decision for loans originated in mortgage shops or 1
branches
Notes:
1. The decision on branch originated loans depends on approval limits
2. No point of sale has influence over the real estate valuation performed by independent valuators
33
Central control over evaluations2 ;
Management of each application after preliminary approval (including after sales service)
Management of specialized internet site
Recovery of
credit in arrears
Overall Loan Process
* GPC – “Gestor de Processos de Crédito” (Credit Application Management System)
** The majority of clients choose insurance from Allianz as premiums are automatically debited from their BPI bank account, however, this option is not obligatory. 34
Total Mortgage Portfolio In Arrears
Credit in arrears (+ 30 days) Outstanding and Arrears
10,000
(€ m n)
Total Outstanding
Credit in Arears
1.23% 1.25% 1.24%
0.94%
6,000
0.61%
0.80%
4,000
0.61%
0.41%
1.45%
1.00%
1.40%
0.80%
1.35%
1.30%
0.60%
1.25%
0.40%
1.20%
0.20%
1.15%
1.25%
BPI
Market Average
1.10%
0.00%
0
1.49%
1.50%
1.20%
8,000
2,000
1.55%
1.40%
Qtr 1 - 2006
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Mar-06 Jun-06
Source: Bank of Portugal; BPI Analysis
The trend in credit in arrears ratio at BPI is driven by several
factors:
Credit in arrears ratio at BPI is 16% lower than the average market value. This superior performance is the result of BPI’s stringent underwriting criteria.
The aging of outstanding credit Recent lower growth in outstanding mortgage credit
The absence of NPL’s sales or write-offs during this period
Nevertheless, the arrears ratio remains low in comparison with the industry average
35
Recovery Process
Test
tt
36
Recovery Of Payments In Arrears
(97,5% recovered *)
= 0.17% (on average)
37
Legal Action Overview
38
V) Portfolio Performance Analysis
39
PORTFOLIO PERFORMANCE ANALYSIS
BPI Historical Defaults
Default definition: 12 months in arrears
2.50%
Î
BPI’s cumulative defaults per vintage show a superior performance when compared to its peers, the result of a conservative underwriting criteria. The portfolio of Douro
Mortgages No2, given its seasoning provides additional comfort on the quality of the portofolio as a considerable portion of the marginal default frequency has been already experienced.
Î
Moreover, the selection criteria provides additional comfort on the quality of the borrowers included in the portfolio, as 100% of the loans have not been in arrears during the past 18 months while 99.82% of the loans have never been in arrears. For the portfolio selection criteria, BPI looks for arrears in the entire banking system as opposed to all other Portuguese transactions that only look at arrears within the bank. This is an unique and valuable characteristic of the Douro programme.
Defaulted
2.00%
1.50%
1.00%
0.50%
0.00%
12
24
36
48
60
72
Month of Default
1999
2004
2000
2005
2002
2006
2003
Average
Source: Banco BPI
40
BPI Historical Recoveries
140%
Full Principal Recovery
120%
Î
BPI’s historical recoveries as shown in the graph on the left, illustrate the quality of BPI’s servicing capabilities
Î
100% principal recoveries are achieved up to 48 months after default
Î
In the transaction, both the recoveries and the timing will even be improved given the provisioning mechanism that will trap excess spread at an earlier stage
% Recovered
100%
80%
60%
40%
20%
0%
0
12
24
36
48
60
72
Months After Default
2000
2003
2006
2001
2004
Average
2002
2005
Source: Banco BPI
41
Excess Spread
Î
Reserve Fund Build-up
0.850%
0.800%
C P R (% )
0.750%
0.700%
0.650%
0.600%
0.550%
0.500%
1
2
3
4
5
6
7
8
Years After Closing
0% CPR
6% CPR
2% CPR
8% CPR
4% CPR
Source: Banco BPI
42
9
The excess spread graph on the left, shows the excess spread, under different CPR scenarios, available in the structure after accounting for the WA cost of the notes and other senior expenses as basis points of the outstanding balance. The simulations were run under a 0% default rate.
Appendix I
The Douro Programme
43
THE DOURO PROGRAMME
Douro Mortgages No. 1 and Douro SME Series 1

Douro Mortgages No. 2 is BPI’s second RMBS deal. Douro Mortgages No. 1 was launched in November 2005

Douro Mortgages No. 1’s main objectives were the release of regulatory capital and the diversification of funding sources

Similarly to the current deal, Douro Mortgages No. 1 was issued directly out of Portugal under Portuguese law by Sagres STC

BPI made its debut securitisation deal in April 2005 with Douro SME Series 1 which was the first Portuguese SME loan cash securitisation. Sagres STC was also the issuer

Douro SME Series 1’s main objectives were the release of regulatory capital, diversification of funding sources, development of the SME business sector within the Bank, and taking advantages of the public incentives available
DOURO SME SERIES 1
Tranche
Amount
DOURO MORTGAGES No. 1
Average
expected
(Moody's,
€
%
life
S&P, Fitch)
million
Tranche
Average
expected
life
Rating
(Moody's, S&P,
Fitch)
Guarantee
Class
A
95.6%
1,434
5.95 years
Aaa/AAA/AAA
B
1.7%
24.75
7.46 years
Aa2/AA/AA
C
1.5%
22.5
7.46 years
A1/A-/A+
D
1.3%
18.75
7.46 years
Baa1/BBB/A-
9
7.46 years
-
Class
%
€ million
A
89.0%
445
4.0 years
Aaa/AAA/AAA
No guarantee
B
5.2%
26
6.5 years
Aaa/AAA/AAA
European Investment Fund
C
4.8%
24
-
-
Fundo de Garantia de
Titularização de Créditos
D
1.0%
5
-
-
No guarantee
E
44
0.6%
THE DOURO PROGRAMME
Proven Experience as a Servicer
Capital Structure
Class
Class
Class
Class
Class
A
B
C
D
E
Cash Reserve Account
Cut-off date
Amount
1,434,000,000
24,750,000
22,500,000
18,750,000
9,000,000
9,000,000
%
95.6%
1.7%
1.5%
1.3%
0.6%
Credit
Enhancement
5.0%
3.4%
1.9%
0.6%
0.6%
Current
Amount
1,322,966,335
24,750,000
22,500,000
18,750,000
9,000,000
12,000,000
%
95.2%
1.8%
1.6%
1.3%
0.6%
Credit
Enhancement
5.6%
3.8%
2.1%
0.8%
Rating
Moody's
Aaa
Aa2
A1
Baa1
n.r.
Rating
S&P
AAA
AA
ABBB
n.r.
Rating
Fitch
AAA
AA
A+
An.r.
Coupon
E3m + 0.14%
E3m + 0.17%
E3m + 0.27%
E3m + 0.47%
Residual
Expected
Maturity
Set/14
Set/14
Set/14
Set/14
Original
WAL
5.95
7.46
7.46
7.46
Current
WAL
5.13
6.64
6.64
6.64
Sep. 2006
Legal
Maturity
Jun/56
Jun/56
Jun/56
Jun/56
0.8%
Cash Reserve Account
Nov-05
9,000,000
0.60%
Mar-06
10,000,000
0.67%
Jun-06
11,000,000
0.73%
Sep-06
12,000,000
0.80%
Nov-05
1,500,003,959
423,822,462
29,268
3.23%
1.08%
41.6
297.1
61.25%
Mar-06
1,453,883,729
407,368,404
28,783
3.39%
1.07%
45.4
294.2
60.62%
Jun-06
1,419,361,562
395,828,629
28,431
3.78%
1.07%
48.3
291.8
60.15%
Sep-06
1,388,970,295
382,714,952
28,080
4.06%
1.05%
51.2
289.9
59.74%
Permited Variations
As % of Outstanding Balance at the Cut-off date
Trigger (1)
27,491,253
1.83%
20.00%
54,011,256
3.60%
20.00%
111,567,961
7.44%
20.00%
Outgoing Loans
For unpermited variations
For breach of Mortgages Asset and Warranties
As % of Outstanding Balance at the Cut-off date
Trigger (2)
11,274,493
10,698,573
575,919
0.71%
5.00%
21,967,831
20,428,199
963,712
1.36%
5.00%
39,991,676
36,810,507
1,641,539
2.45%
5.00%
Incoming Loans
11,274,566
10,695,638
18,024,259
Mar-06
62,052,089
Jun-06
47,294,938
Sep-06
44,095,415
46,130,670
15,921,419
397,088
0
34,511,728
12,279,884
311,191
192,136
30,391,267
13,097,277
325,672
281,198
1,625,983
85,240
0
0
0
0
0
0
3,086,195
394,734
0
0
0
0
0
0
2,727,104
784,842
60,077
120,686
0
0
0
0
0
85,240
0
394,734
0
965,605
Mar-06
16,437,179
Jun-06
12,713,173
Sep-06
10,452,671
29,693,565
21,800,855
19,939,008
21,431,447
8,262,118
16,818,454
4,982,401
16,091,709
3,847,299
1.98%
1.50%
1.40%
7.918%
6.958%
6.512%
Cash Reserve
Cash Reserve as % of Outstanding Balance at Cutt-off date
Portfolio Profile
Aggregate Principal Balance
Aggregate Principal Balance of subsidized loans
Number of Contracts
Weighted average interest rate
Weighted average spread
Weighted average seasoning (months)
Weighted average remaining term (months)
Weighted LTV Ratio
Portfolio Performance
Total Collections
of which
Principal
Interest
Fees and other commisions
Subsidies received from Portuguese Government
Arrears (Principal Balance)
1 month < overdue =< 3 months
12 months < overdue =< 24 months
24 months < overdue =< 36 months
Overdue > 36 months
Overdue > 12 months
Overdue > 3 months
Principal Collections
Scheduled principal payments received
Prepayment principal received
of which
Totally
Partiallly
As % of Outstanding Balance at the start of the period
Annualised prepayment rate
(1) If the trigger is reached, the variations will be considered as unpermitted, and affected loans will have to be substituted
(2) 5% of the Outstanding balance at the cut-off date in the 1st year, 10% afterwards.If the trigger is reached the originator will have to repurchase the loans
45
a
Appendix II
Portuguese Mortgage & Housing Market
46
PORTUGUESE MORTGAGE & HOUSING MARKET
Portugal Market Characteristics

Very strong culture of home ownership; roughly 76% of the population are owner-occupiers, largely due to the boom following the liberalisation of the mortgage market in 1993, the government mortgage subsidization program until 2002, and the recent low interest rate environment

Housing credit in Portugal is concentrated in the Lisbon and Porto regions

Rental market is undeveloped due to restrictive government control on rental prices, about 60% of total rental agreements are from pre-1990 and fall under legislation limiting rent appreciation

The estimated average original LTV for the Portuguese market has risen from 70% to 80% in the past five years

Despite growing household indebtedness, debt service burden has stabilized in recent years as banks have introduced new products, perhaps most importantly products with longer terms, moving the maximum term from 30 year to between 40 to 50 years

Since the first RMBS transaction in 2001 in Portugal, the market has grown to a total of €22.2 billion, which comprises over 76% of the total securitisation market
Growth in mortgages granted to individuals has continued to outperform other kinds of consumer credit. The mortgage market continues to grow at roughly 10% per annum, despite several years of slow GDP growth, increased unemployment, and low consumer confidence

The NPL ratio across the market remained at roughly 2% between 2000 and 2005, which is a very reasonable level. Annual gross mortgage production growth has averaged 3.3% since 1999, with an expectation for 2006 of €17.15 billion in new mortgage credit

Significant increases in interest rates should only take place in the context of a stronger domestic economy, hence limiting some of the possible risk arising from such an environment
Source: Bank of Portugal.
Source: “Portuguese RMBS Performance Bulletin 2006” Fitch Ratings.
47
Portugal

In 2005 real GPD expanded at an annual rate of 0.3%. Since the middle of 2005 the economy has shown positive signs and the cycle has clearly turned. Confidence is slowly improving and economic growth is accelerating on the back of exports, which have
been growing at a healthy rate. The favourable momentum of Portugal’s principal external partners and domestic competitiveness gains explain this evolution

Overall, the Portuguese economy should maintain a steady, albeit slow, progression towards the EU growth average. Several structural adjustments currently under way are slowing the convergence but also ensuring that growth is achieved in a consistent and sustainable manner
G D P g r o w th
YO Y c h a n g e (% )
%
5 .0
4 .0
3 .0
2 .0
1 .0
0 .0
- 1 .0
- 2 .0
1995
1997
1999
2001
2003
P o r tu g al
S o u r c e : E C , IN E , B B P I.
B B P I f o recast s
48
2005
2007
EM U
B B P I f o recast s
Portugal

Low economic growth and the absence of one-off measures justified 2005 deficit, which reached 6% of GDP. For 2006, the Government expects to achieve 4.6% of GDP, an ambitious but feasible target given the Government’s efforts to curb expenditure and the increase in tax collections
2000
2001
2002
2003
2004
2005
2006F
2007F
3.8
3.6
3.5
2.1
8.3
5.3
2.0
1.3
3.3
1.2
1.8
0.9
0.8
1.3
2.6
-4.7
1.5
-0.7
-1.1
0.1
0.3
-9.7
3.7
-0.4
1.1
2.4
2.0
1.8
4.5
6.8
0.3
2.0
1.7
-3.6
0.9
1.8
1.1
1.2
-0.5
0.8
6.2
4.2
1.5
1.3
-0.8
2.0
2.8
1.4
Consumer Prices (year-end average)
2.9
4.4
3.7
3.3
Unemployment Rate
4.0
4.1
5.1
6.3
Budget Balance (excl.one-off measures) (% GDP)
-2.9
-4.1
-4.1
-5.3
Public Debt (% GDP)
53.3
55.2
55.5
57.0
Source: Bank of Portugal and INE for observed data and BPI forecasts
2.3
6.7
2.3
7.6
2.5
7.9
2.3
7.5
-4.9
58.7
-6.0
63.9
-4.9
68.5
-4.0
68.5
Real GDP (annual)
Household Spending
Public Spending
Investment
Exports
Imports
49
Portuguese Housing Market Evolution
Licenses for the construction of new residences
New residences constructed
160,000

Construction of new houses almost doubled from 1996 to 2002, due to falling interest rates and economic growth

Since then, the market has shrunk, reaching its lowest level since 1996

Market prices are also stabilising and adjusting after the rapid above inflation growth during 1997-2001
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1996
1997
1998
1999
2000
2001
2002
2003
House Price (%)
2004
2005
2006
(est)
Inflation (%)
10
7.91
8
6
4
2
0
3.94
4.35
3.05
2.15
2.36 2.7
1.1
3.1
2.29 2.75
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: INE; Annual values for 2006 are based on 1st quarter.
Source of House prices: BPI Analysis based on the index of “Confidencial Imobiliário”
50
Evolution of Mortgage Credit in Portugal
Outstanding credit to individuals
140
Total
M ort gage Credit
Consumer Credit + Other

In the 1999 – 2005 period consumer credit grew marginally while mortgage loans continued to grow steadily. This growth was due to the downward trend in interest rates associated with the introduction of the euro and to the diversification in terms of the offer of mortgage credit products

The annual growth rate of mortgage loans was 13.3% in 2003, 10.4% in 2004 and 12.2% in 2005

The mortgage loan market is a highly competitive one, with almost 100% of the loans bearing a floating rate

Due to historical reasons, the percentage of homeowners is very high.

The ratio of non-performing loans to total loans registered a reduction in 2004 from a maximum in 2003 and stabilized in 2005
120
€ bn
100
80
60
40
20
0
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Credit in arrears (excludes securitised credit)
Total
Mortgage Credit
Consumer Credit + Other
% of Outstanding
9
8
7
6
5
4
3
2
1
0
Dec- Dec- Dec- Dec- Dec- Dec97
98
99
00
01
02
Source: Bank of Portugal; MKT DFI Analysis
Dec03
Dec04
Dec05
51
Subsidised Mortgages

Subsidised mortgage products are one of the key characteristics of the Portuguese mortgage market. The programme of subsidies by
the Portuguese Government was introduced in the 1970s to encourage the general improvement of housing conditions in Portugal. The success of the policy has contributed to the increase in the home ownership rate in Portugal from 50% to above 70.0%

Subsidised mortgages were targeted at first-time buyers and lower income individuals. A subsidy ranging from 11% up to 44% of interest income was granted after taking into consideration (i) annual income and (ii) the number of family members

The percentage of subsidised interest decreases over the life of the loan: It is fixed for the first two years, and then reduces by a percentage point per annum during the next three years and two percentage points until maturity thereafter

The procedures regarding the payment of subsidies have improved significantly, which has allowed for a reduction of the time lag
between the date when the subsidies are requested and the date when they are effectively received by the banks. This was mainly achieved through the electronic processing of information

The process currently in place works as follows: every month, until the 10th day, BPI sends the Treasury a file that contains all the subsidised loans whose anniversary has occurred in the previous month. This file contains the data of the loans and the data of the client, namely in what concerns age and reported income. The Treasury validates this data with the information it received from the Tax Department. If it finds doubts in any piece of information, that particular loan may be retained for further enquiries, but that does not compromise the payment of subsidies for the other loans

The payment occurs 1 month after the process has been filed. The amount paid by the Treasury includes the subsidy allocated to the client and a compensation that is calculated by applying to the subsidy of each instalment the contractual interest rate in place for that instalment for the time elapsed between the date when that instalment was due and the date of the loan anniversary. Therefore, BPI gets a financial compensation for not having received the entire instalment when originally due
52
Subsidised Mortgages (continued)

Historical data has shown that portfolios containing subsidised loans demonstrate arrears levels that are in line or lower than non-subsidised transactions. This has been attributed to the incentive for individuals with lower earnings to perform well in their first property purchase, as well as the fact that many mortgages of this type include personal guarantees from family members. The significance of the grey economy in Portugal also plays a role here as subsidy eligibility was determined by tax declared income. This performance is shown in the graph below
The Portuguese government stopped granting subsidies to new loans in 2002 but existing subsidies are grandfathered
Borrowers that were previously eligible for this product are now targeting longer maturity mortgages, up to 50 year terms, and are included in new origination and part of recent transactions with no exception
60+ Day Delinquencies of Subsidised Versus Non-Subsidised Loans
(%)
3.0
2.5
6 0 + D a y D e lin q u e n c ie s

2.0
1.5
1.0
0.5
0.0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Months Since Issue
Source: Fitch
Indexed
53
Subsidised
Non-Subsidised
Appendix III
Provisional Portfolio Stratification
54
PROVISIONAL PORTFOLIO STRATIFICATION
Summary of Provisional Portfolio for the Transaction
Aggregate Current Outstanding Balance
1,600,000,374.87
Aggregate Original Outstanding Balance
1,866,160,340.72
Average Principal Outstanding Balance
54,551.67 Average Original Principal Outstanding Balance
63,626.33
Maximum Original Principal Outstanding Balance
363,124.86
Maximum Current Principal Outstanding Balance
248,975.93
Total Number of Loans
29,330.00
Total Number of Borrowers
21,735
Weighted Average Seasoning (Years) **
3.65
Weighted Average Remaining Maturity (Months) **
310.59
Weighted Average Original LTV
69.69%
Weighted Average Current LTV*
63.14%
Maximum Original LTV
100.05%
Maximum Current LTV*
99.72%
% Subsidised
21.50%
Weighted Average Interest Rate - Index
2.99%
Weighted Average Interest Rate - Spread
0.98%
Weighted Average Interest Rate
3.97%
Note: Additional information in respect of the provisional pool will be available upon request from ABN AMRO (subject to signing a confidentiality
agreement with Banco BPI)
55
Number of Loans
30.00%
30.00%
20.00%
20.00%
10.00%
10.00%
0.00%
0.00%
Balance
Number of Loans
56
Balance
200,001 - 250,000
40.00%
150,001 - 200,000
40.00%
100,001 - 150,000
50.00%
50,001 - 100,000
50.00%
40,001 - 50,000
60.00%
30,001 - 40,000
60.00%
20,001 - 30,000
Breakdown by Original Loan Amount
10,001 - 20,000
1 - 10,000
250,001 - 400,000
200,001 - 250,000
150,001 - 200,000
100,001 - 150,000
50,001 - 100,000
40,001 - 50,000
30,001 - 40,000
20,001 - 30,000
10,001 - 20,000
1 - 10,000
Breakdown by Current Loan Amount
Breakdown by Year of Origination
Breakdown by Maturity Date
18%
40%
16%
35%
14%
30%
12%
25%
10%
20%
8%
15%
6%
10%
4%
5%
2%
0%
0%
1992
1993
1994
1995
1996
1997
1998
1999
Number of Loans
2000
2001 2002
2003
2004
2005
2006
2006 - 2010
Balance
2011 - 2015
2016 - 2020
2021 - 2025
2026 - 2030
Number of Loans
57
2031 - 2035
2036 - 2040
Balance
2041 - 2055
2056
Number of Loans
Balance
Number of Loans
58
Balance
6.05% >=6.10%
5.51% - 6.05%
15%
5.01% - 5.51%
25%
4.51% - 5.01%
40%
4.01% - 4.51%
50%
3.51% - 4.01%
Breakdown by Interest Spread
3.01% - 3.51%
2.51% - 3.01%
3.501% - 3,750%
3.251% - 3,500%
3.000% - 3,250%
2,751% - 3.000%
2,501% - 2,750%
2,251% - 2,500%
2,001% - 2,250%
1,751% - 2,000%
1,501% - 1,750%
1,251% - 1,500%
1,001% - 1,250%
0,751% - 1,000%
0,501% - 0,750%
<= 0.500%
Breakdown by Interest Rate
60%
45%
50%
35%
30%
40%
30%
20%
20%
10%
5%
10%
0%
0%
Number of Loans
Balance
59
20%
15%
15%
10%
10%
5%
5%
0%
0%
Number of Loans
Balance
90,01 - 100,00
%
20%
80,01 - 90,00 %
25%
70,01 - 80,00 %
25%
60,01 - 70,00 %
Breakdown by Current LTV
50,01 - 60,00 %
Breakdown by Original LTV
40,01 - 50,00 %
30,01 - 40,00 %
20,01 - 30,00 %
10,01 - 20,00 %
0,01 - 10,00 %
90,01 - 100,00
%
80,01 - 90,00 %
70,01 - 80,00 %
60,01 - 70,00 %
50,01 - 60,00 %
40,01 - 50,00 %
30,01 - 40,00 %
20,01 - 30,00 %
10,01 - 20,00 %
0,00 - 10,00 %
Number of Loans
20%
15%
Balance
Number of Loans
60
Balance
Norte
25%
Islands
40%
Grande Porto
30%
Grande Lisboa
45%
Center
35%
Algarve
Breakdown by Employment Status
Alentejo
Unemployed
Student
Skilled worker
Self Employed - Univ. Degree
Self Employed - Retailer
Self Employed - Other
Retired
Other
Middle ranking officer
Housekeeper
High ranking officer
Entrepreneurs
Employee - comm. based
Clerk
Managing Director
Breakdown by Property Location
35%
30%
25%
10%
20%
5%
15%
0%
10%
5%
0%
Appendix IV
Comparables
61
COMPARABLES
Summary Portuguese RMBS Transactions
Arrears 90D+
Quart ers
1
0.40%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.05%
0.00%
0.01%
Magellan 1
Magellan 2
Magellan 3
Lusitano 1
Lusitano 2
Lusitano 3
Lusitano 4
Atlantes 1
Nostrum
Pelican 1
Pelican 2
Douro 1
2
0.50%
0.09%
0.11%
0.33%
0.16%
0.11%
0.11%
0.08%
0.02%
0.20%
0.03%
0.03%
3
0.60%
0.29%
0.24%
0.54%
0.34%
1.28%
0.43%
0.39%
0.04%
0.31%
0.10%
0.06%
4
0.99%
0.41%
5
1.41%
0.43%
6
1.63%
0.63%
7
1.96%
8
1.93%
9
2.21%
10
2.51%
11
2.44%
12
2.44%
13
2.47%
14
2.88%
0.69%
0.48%
0.60%
0.73%
0.54%
0.53%
0.86%
1.15%
1.06%
1.11%
1.20%
1.33%
1.28%
1.27%
1.40%
0.72%
0.91%
0.51%
0.06%
0.28%
0.12%
0.38%
0.07%
0.55%
0.14%
0.69%
0.68%
0.93%
1.32%
1.11%
0.99%
1.04%
1.60%
2.40%
0.68%
0.25%
0.75%
1.00%
1.09%
1.17%
1.21%
1.36%
1.28%
1.48%
No surprise… one of the best performances so far of all Portuguese RMBS
Arrears 90D+
15
2.54%
16
2.57%
17
2.77%
PPR
16.00%
3.50%
14.00%
3.00%
12.00%
2.50%
10.00%
2.00%
8.00%
1.50%
6.00%
1.00%
4.00%
0.50%
2.00%
0.00%
0.00%
1
2
3
4
5
Magellan 1
Lusitano 2
Nostrum
6
7
8
Magellan 2
Lusitano 3
Pelican 1
9
10
11
12
Magellan 3
Lusitano 4
Pelican 2
13
14
15
16
17
1
2
3
4
5
Magellan 1
Lusitano 2
Pelican 1
Lusitano 1
A tlantes 1
Douro 1
Source: Fitch Ratings
62
6
7
8
Magellan 2
Lusitano 3
Pelican 2
9
10
11
12
Magellan 3
Lusitano 4
Nostrum
13
14
15
Lusitano 1
Nostrum
Douro 1
16
17
Appendix V
Contact List
63
CONTACT LIST
Contact List
Debt Capital Markets:
Isabel Castelo Branco
+351 21 310 1046
isabel.castelo.branco@bancobpi.pt
Antonio Lobo Ferreira
+351 21 310 1166
antonio.lobo.ferreira@bancobpi.pt
Luisa Gouveia
+351 21 321 3739
luisa.rocha.gouveia@bancobpi.pt
Natália Varela
+351 21 723 4426
natalia.maria.varela@bancobpi.pt
Daria Marques
+351 21 310 4423
daria.adriano.marques@bancobpi.pt
Yuneza Latif
+351 21 310 4418
yuneza.abdul.latif@bancobpi.pt
João Ferreira Marques
+44 207 678 4164
joao.ferreira.marques@uk.abnamro.com
Osman Hameed
+44 207 678 7894
osman.hameed@uk.abnamro.com
Tom Ashworth
+44 207 678 4190
tom.ashworth@uk.abnamro.com
Steven Stolk
+44 207 678 4836
steven.stolk@uk.abnamro.com
Ben Metcalf
+44 207 678 9655
ben.metcalf@uk.abnamro.com
Dean Atkins
+44 207 678 3337
dean.atkins@uk.abnamro.com
Mortgage Finance Team:
Risk Team:
Structuring:
Syndicate:
64
CONTACT LIST
Contact List
Structuring:
Santiago Armada
+34 91 700 5271
sarmada@lacaixa.es
Antonio Sanz Pastor
+34 91 436 5247
asanzpastor@lacaixa.es
Josep Jaume Fina
+34 91 557 6979
jjfina@lacaixa.es
Susana Garcia Fernandez
+34 91 557 6979
susana.garcia.f@lacaixa.es
Jesus Santolaya
+34 91 557 6979
jsantolaya@lacaixa.es
Miguel Lafont
+34 91 589 3666
miguel.lafont@sgcib.com
Andre Navarro
+351 21 330 3220
andre.navarro@sgcib.com
Martim Vasconcellos e Sa
+351 21 330 3220
martim.vasconcellos@sgcib.com
Jason Russell
+44 207 676 7649
jason.russell@sgcib.com
Rupert Carter
+44 207 676 7637
rupert.carter@sgcib.com
Syndicate:
Capital Markets:
Syndicate:
65