banif finance, ltd.

This service has three distinctive channels, Internet, Telephone (Banifone) and Wap (Wap Banif). Theuse of any of these three channels allow clients who have subscribed to this service to connect to Banif in adistinctive way and have access to their account.In June 2004, 18.3 per cent. of the Bank’s active clients used Banif@st (representing 41.6 per cent. oftotal corporates and 16.5 per cent of total individuals), whilst 36.3 per cent. of total clients had, already,subscribed to the service (61.4 per cent. of total corporates subscribed against 33.8 per cent. of totalindividuals).In the past five years competition and the need to cover the whole country, has led Banif to expandits branch network, with the opening of 47 branches (from 100 in 1998 to 147 in June 2004). Branchesusually take 4 to 5 years to reach break-even, a fact that has penalised Banif’s Cost to Income ratio which isstill relatively high at 62.7 per cent. (June 2004). Since the opening of a large number of new branches is notanticipated in the coming years, it is expected that the Cost to Income ratio will stabilise close to 50 per cent.by 2007.The corporate banking division, “Banif Empresas”, was created in 1993, and currently servesapproximately 7,000 small and medium sized companies from a network of 19 corporate centres. Thedivision has 50 “account management teams”, each team serving an average portfolio of 130 companies. Thecorporate loan portfolio, managed by “Banif Empresas”, amounts to approximately Euro 1,358 million,while total deposits taken by this unit amounted to approximately Euro 365 million, as at June 2004. In June2004, this unit generated Euro 7.3 million in fees and other income contributing 32 per cent. of the total feesand other income of Banif.Banif has also created “product units” that specialise in specific products and operate exclusively inmainland Portugal. In February 2003, the “product units” were merged into a single department, the DP –Direcção de Produtos. This department also absorbed some functions previously under the responsibility ofthe Marketing Department, namely the management of deposit products. The rationale of this change was toenhance “cross-selling” possibilities, to standardise procedures and to centralise credit analysis.Notwithstanding the merger, the function of each unit has not been changed:• Unidade de Crédito Imobiliário (UCI) mortgage lending, with a loan portfolio ofapproximately Euro 892 million as of June 2004, (of which Madeira retail contributed Euro236 million). In addition total securitised loans amounted to Euro 437 million.• Unidade de Crédito Pessoal (UCP) – personal and consumer loans, with a loan portfolio ofapproximately Euro 70.3 million as of June 2004.• Unidade de Cartões (UC) – credit/debit cards provider, controlling and managing a total ofapproximately 120,000 cardholders and 175,000 cards, of which 40,000 are credit cards.• Unidade de Pequenos Negócios (UPN) – serving a specific market composed of smallbusinesses, individual traders and independent workers through a single account thatincorporates credit facilities, cash management and banking services (known as Conta Gestãode Tesouraria – Cash Management Account). The total loan portfolio amounted toapproximately Euro 226.5 million as of June 2004 split between more than 16,000 clients. Forthe same period the total of customers deposits attached to this account amounted to Euro 31million.• Unidade de Banca e Seguros (UBS) – specialising in the cross-selling of banking products andservices through Companhia de Seguros Açoreana (CSA) and insurance products (life and nonlifeproducts) through Banif.Main Financial Indicators of BanifThe total net assets of Banif stood at Euro 4.2 billion in June 2004, representing a reduction of 10 percent. against June 2003, due to the offset of the operations with Banif Madeira since December 2003.Currently, Banif operates directly with Banif Madeira and no longer through a third entity. As of June 2004,the loan portfolio reached Euro 3.4 billion (an increase of 8.9 per cent. over June 2003) and represented 82.253