CGD Consolidated Operations

4 Nov 2021

First 9 Months 2021

(unaudited accounts)

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CGD reaches a net profit of 429 M€ and approves an extraordinary dividend of 300 M€. New upgrade from Moody’s while Fitch’s change of the outlook to “positive” prospects further improvement.

Highlights

In the first nine months of 2021, CGD Group’s consolidated net income reached €429 million euros (up 9.4% over the same period in 2020), equivalent to a return on equity (ROE) of 6.9%, with economic activity in Portugal continuing the recovery process started in the second half of 2020, despite the longer lasting impact in certain sectors and companies.

Prospects of a less severe impact of the pandemic on the economy compared to the past, with lesser effects on credit asset quality, together with a robust capital position, allowed the bank to make an extraordinary dividend payment of €300 million.

Core operating income shows relative stabilisation, due to the recovery of net interest income for the second consecutive quarter. Income from financial operations performed well in achieving €92.5 million on a current basis.

Net income also included extraordinary profit of €32.7 million (after tax) on the revaluation of liabilities on post employment benefits and provisions for the pre-retirement programme. Current net income of €394 million was therefore up 15.2% over current income for first half 2020, largely due to the good evolution of net trading income.

New credit impairments at the end of the first nine months of 2021 stood at €180.4 million, as opposed to the €90.2 million recorded in the end of the first half year, which, net of recoveries (-€138 million), resulted in a cost of credit risk of 11 bps. These new credit impairments were mostly preventive of the impact from the end of moratoria.

Operating costs on a recurring basis were down 1.6% over the same period 2020 to €606 million. This translated into a recurring cost-to-income ratio of 47.3%, as opposed to 49.5% in first nine months of 2020.

Customer deposits were up 8.0% by €5.8 billion in first nine months of 2021. This essentially derived from resources taken by CGD Portugal, fuelled by higher levels of household savings and customers’ trust and loyalty to Caixa.

Credit to companies in Portugal (excluding the construction and real estate sectors, in which the reduction of NPLs is concentrated) was up 5.9%, reflecting greater commercial support to companies.

The amount of new mortgage loans was up 56% over the same period of 2020. This resulted in a leading market position with a new sales share of 24.2% up to August 2021. CGD continued to trend to higher than sector growth and strengthened its market share in comparison to 2020.

Asset quality continued to improve. The non-performing loans ratio was down to 2.8% and, together with a preventive increase of impairment, made it possible to achieve an NPL ratio net of impairment of 0% (taking all impaired credit into account). This has been the case since the first quarter. Considering only specific impairments, CGD's net ratio already compares favorably with the average for European banks.

Capital ratios were strengthened, allowing them to reach, after the extraordinary dividend payment, 18.2% for core capital (CET1) and 20.8% for total capital, levels similar to those at the end of 2020 and comfortably complying with the capital requirements in force for CGD. These capital ratios, higher than the Portuguese and European averages, are indicative of CGD’s robust solvency.

In September, Moody’s once again upgraded CGD’s rating, to Baa2, and Fitch, already in October, affirmed the BB+ rating, complemented by a change in outlook to positive, leaving continued expectations of an upwards movement.

At the end of the third quarter, CGD became the first Portuguese bank to issue a sustainable bond. The funds raised will finance a series of projects ranging from energy efficiency to job creation in less developed areas. This €500 million senior preferred issue with a 6 year maturity and a coupon rate of 0.375% − the lowest ever achieved by CGD – assured compliance with the MREL interim target for January 2022.

DISCLAIMER

The financial statements have been prepared on the basis of the International Financial Reporting Standards (IFRS) as adopted in the European Union in accordance with Regulation (EC) No. 1606/2002 of the European Council and of the Parliament of July 19 and provisions of Decree-Law No. 35/2005 of February 17. The financial information reported is unaudited.

The financial metrics in this presentation refer to September 30, 2021, unless otherwise stated. These may be estimates subject to revision. Solvency ratios include net income for the period, unless where otherwise noted.

In the first nine months of 2021, economic activity in Portugal and worldwide was significantly affected by the new variants of the Covid 19 pandemic and by the imposed containment efforts, conditioning a series of economic activities. The third quarter of 2021 continued to witness the gradual lifting of restrictions but the economic outlook remains surrounded by uncertainty, despite the level of vaccination achieved and the non-appearance of new variants.

The Portuguese economy maintains the recovery process that began in the third quarter of 2020, despite the longer impact on certain sectors and companies.

Bank of Portugal and supranational institutions anticipate an acceleration of growth in 2022 as a result of the lifting of restrictive measures, the reduction in the savings rate and the recovery of the main trading partners.

In light of these uncertainties, and based on the information available at this time, CGD estimated and recognized in its financial statements for the period ending on September 30, 2021 its best estimate of the financial effects of this pandemic, including the valuation of financial assets and the measurement of expected losses in the loan portfolio, which will be subject to continuous monitoring and reassessment.

This document is intended for general information only and does not constitute investment recommendation or professional guidance and may not be construed as such.

This document is an English translation of the Portuguese language document “Resultados Consolidados 9M2021”. In the event of any inconsistency, the original version prevails.

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CGD Consolidated Operations

First 9 Months 2021

(unaudited accounts)