NOVO BANCO Annual Report 2020

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FY2020 Annual Report · NOVO BANCO

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Annual Report
2020

Abbreviations and Acronyms

NOVO BANCO

GNB

NOVO BANCO Group

ECB

European Central Bank

DG Comp

Directorate-General | Competition

CCA

Contingent Capital Agreement

YTD

YoY

NII

LCR

Year-to-date - change since the start of the year

Year-on-Year - change on a year earlier

Net Interest Income

Liquidity Coverage Ratio

€, EUR

euro

€mn

million euro

€bn

bps

billion euro

basis points

percentage points

Additional Notes to this Report

NOVO BANCO discloses its results, since 2018, presenting
separately the financial results of “NOVO BANCO Recurrent”, and
those of “NOVO BANCO Legacy”. Therefore, all the references in
this report must take in consideration this segmentation.

In 3rd quarter 2020, NOVO BANCO classified the Spanish Branch
as discontinued operations, in line with the strategy to discontinue
the Spanish business. Thus, for comparison purposes, 2019 is
presented pro-forma.

This Annual Report is a free translation into English of the original
Portuguese version. In case of doubt or misinterpretation the
Portuguese version will prevail.

NOVO BANCO, S.A.
Head Office: Av. da Liberdade, n. 195, 1250-142 Lisbon
Commercial and Tax identification number: 513 204 016
Share Capital: €5 900 000 000.00

1.0 MESSAGE 2.0 MANAGEMENT REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTESNOVO BANCO MANAGEMENT REPORT 2020Contents

Message from the Chairman of the General and Supervisory Board . . . . . . . . . . . . . . . . . 4

Message from the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

I. MANAGEMENT REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II. SUSTAINABILITY REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

III. FINANCIAL STATEMENTS AND FINAL NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

IV. ANNEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500

Auditor’s Report on the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500

Auditor’s Report on the Separate Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510

Report of the General and Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520

Evaluation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522

NOVO BANCO MANAGEMENT REPORT 2020Message from
the Chairman
of the General
and Supervisory
Board

BYRON
HAYNES

Chairman of the General
and Supervisory Board

Dear Stakeholders,

Year 2020 will forever be shaped by the Covid-19 global health pandemic that has changed and
impacted all our lives.

NOVO BANCO’s focus, despite the unprecedented challenges of COVID-19, has been to remain fully open,
servicing and supporting our clients and society at large, while at the same time protecting the health and
welfare of our employees. NOVO BANCO’s rapid response in strengthening its remote servicing capabilities,
supporting clients use of digital and remote channels, maintaining key payment, on-line and ATM network
systems and ensuring operational and IT stability and security has ensured that NOVO BANCO’s clients
could access the Bank’s products and services to meet all their daily banking needs. At the same time the
Bank has taken care that its employees’ health and welfare have been protected and supported throughout
this Covid-19 pandemic through such measures as the launch of the Pandemic Plan on People Safety,
home office working, access to occupational doctors and regular interaction and dialogue with the health
authorities.

Year 2020 has not only been about managing the impact of Covid-19 but also it has been a pivotal year for
NOVO BANCO in securing its long-term viability. The Bank has largely met one of the key targets for the
year, the completion of the de-risking of the balance sheet through the clean-up of the past legacy issues,
including disposal of non-core assets. This de-risking process of the past legacy issues was first launched
immediately following the acquisition of 75% of NOVO BANCO by Nani Holdings SGPS S.A. in October
2017, and has been executed throughout this period to year-end 2020 in accordance with the agreed

NOVO BANCO ANNUAL REPORT 20201.0 MESSAGE 2.0 MANAGEMENT REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTESRestructuring Plans and commitments by the Republic of Portugal to the European Commission,
State Aid Director General for Competition (“DGComp”).

The Legacy Bank further reduced its balance sheet by €1.4bn during the year through non-core
asset disposals and real estate asset sales as well as through the normal year-end impairment
and revaluation processes. Given the ongoing public debate around the sale of non-performing
loans (“NPLs”) and real estate assets by NOVO BANCO and related limitations imposed on the
Bank, the deleveraging of such non-productive assets as required by the European Central Bank
(“ECB”) and under the Restructuring Plans agreed with DGComp have been focused on assets not
covered by the Contingent Capital Agreement (“CCA”). In this context, NOVO BANCO has been
able to sell c.€626mn of gross NPLs and real estate assets during 2020. NOVO BANCO was able
to take advantage of the continued investor appetite for these types of assets in Portugal with the
sale of the assets having been executed at levels, which have been capital accretive to the Bank.
NOVO BANCO has been able to further reduce the NPL ratio from 11.8% in 2019 to 8.9% in 2020,
targeting a further reduction during 2021.

The Recurrent Bank has been impacted by Covid-19 during 2020 realising a loss of €130mn,
mainly due to an increase in cost of risk of 46bps compared to 2019. Despite the challenges of
managing Covid-19, NOVO BANCO has continued to invest, transform and develop its commer-
cial businesses, including the roll-out of the New Retail Distribution Model from the fourth quarter
of 2020 onwards.

During 2020 the Bank has maintained liquidity. The CCA provided the capital support in the clean-
up of the past legacy issues. A loan to deposit ratio of 90% and a liquidity coverage ratio of 144%
reflects the healthy liquidity position of the Bank at year-end 2020.

Throughout the year 2020, the General and Supervisory Board (“GSB”) and the respective GSB
committees supervised and supported the Executive Board of Directors (“EBD”) in the execution
of NOVO BANCO’s response to the Covid-19 pandemic as well as the monitoring of the execution
of the Bank’s strategic goals and financial targets as set out and agreed in the medium-term plan.

At the end of year 2020, Vitor Fernandes, José Bettencourt and Jorge Cardoso left NOVO BANCO
following the completion of their respective EBD mandates. On behalf of the GSB, I would like to
thank them for their significant individual contributions since 2014 and wish them every success
in their future endeavors.

I would also like to take this opportunity, on behalf of the GSB, in welcoming Andres Baltar, a vastly
experienced Corporate Banker particularly in the Portuguese and Spanish markets, who joined
NOVO BANCO as a member of the EBD at the end of year 2020. The EBD is now comprised of
six people, under the leadership of António Ramalho, which reflects NOVO BANCO’s recently
simplified business and operating models, who are focused on continuing to build and invest in
the Bank’s commercial franchises and in managing the risk and impact of Covid-19 going forward.

For year 2021, realistic strategic goals and financial targets for NOVO BANCO have been set and
agreed, in line with the current market and economic conditions and projections. It is expected
that NOVO BANCO will deliver profits in 2021, the first time in NOVO BANCO’s history, a very
important milestone for all its stakeholders, demonstrating continued future viability.

On behalf of the GSB, I would like to thank our customers and our other stakeholders for their
continued trust and loyalty to NOVO BANCO during this challenging year of 2020. Finally, the GSB
and myself would like to thank the EBD and the employees of NOVO BANCO for all their hard
work, dedication and commitment in managing the impact of Covid-19 and ensuring that NOVO
BANCO continued to service its customers and society in general throughout, as well as achieving
the key milestones and targets for year 2020.

NOVO BANCO ANNUAL REPORT 2020Message from
the Chief Executive
Officer

ANTÓNIO
RAMALHO

Chief Executive Officer

Dear Stakeholders,

The year 2020 would always have been a crucial year in the life of NOVO BANCO.

This was the year defined in the Bank's capitalisation agreements as the year of conclusion of the restructuring
process and legacy winddown. And it should not be forgotten that NOVO BANCO was born with an undeniably
heavy legacy.

This was achieved through the fulfilment of all the commitments assumed with the European Union, which implied a
79% reduction of the legacy assets, a 19 percentage points reduction in the NPL ratio, the conclusion of the sale of 15
international structures, and determining an adequate volume of impairments in loans not protected by the contingent
capital agreement.

This long process was subject to high scrutiny, both by regulators and other authorities, and by the public opinion, making
this year a particularly challenging one in terms of stakeholder management.

But even more so, 2020 was a crucial year in the face of the sudden emergence of the pandemic.

In this unknown environment, NOVO BANCO demonstrated its experience, professionalism, agility, resilience and dedica-
tion by responding quickly to the new needs of its clients. We had a decisive role in terms of lending under protocoled lines
(more than one billion euros in 6 months), we ensured moratoria to our clients without penalising their future (6.9 billion
euros), and we processed the social grants provided under the simplified lay off scheme.

At the same time, we ensured protection to our employees and our clients, promoting various initiatives to support society.

The pandemic did not just have consequences for our health and daily lives: it also impacted, albeit unevenly, the vitality of
Portugal's business fabric. All the while, the Bank kept its doors open, created COVID-related impairments in the amount
of 268.8 million euros covering 7.7% of stage 2 loans and 56.5% of stage 3 loans, and thus ensured that the conditions

NOVO BANCO ANNUAL REPORT 20201.0 MESSAGE 2.0 MANAGEMENT REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTESwere in place to maintain its mission of standing by the Portuguese companies, “the Portugal that does”, helping
them to reinvent themselves and to turn great difficulties into opportunities. Without ever neglecting its role of
supporting families.

In these circumstances, the trust that our clients keep placing in their relationship with us should be highlighted.
This is reflected in the annual growth of credit (+2.2%), with corporate loans rising by 5.1%, as well as in customer
funds (+0.5% growth in the deposit base).

It was this relationship that enabled the recurring activity to post a core operating income of 369 million euros
(+4%), underpinned by the growth of Commercial Banking Income. Even so, despite the significant increase in
net interest income (+11%) and the reduction in costs (-1%), the net result of the recurrent activity was signifi-
cantly affected by the creation of provisions, foreshadowing potential adverse impacts of the pandemic.

But in 2020 we also laid the foundations for a future for NOVO BANCO in its determination to serve its clients.

We launched a "New Distribution Model", which is one of the strategic pillars of the bank's transformation, and
which comprises a set of cross-cutting initiatives bearing on the manner in which the Bank interacts with the cli-
ent, transforming the branches into a meeting place and a place of relationship-building with the client and the
community, and promoting increased process automation and digitisation as well as the constant improvement
and expansion of the digital channels’ functionalities.

The approach to digital deserved particular attention, with new solutions launched for individuals and companies
recognised by the market and our clients alike, alongside information and training for employees and clients,
aligned with best security standards and.

Also in 2020, the sustainability principles underlying NOVO BANCO's activity gained increased importance,
with a special focus on the social dimension, health, safety and the mitigation of less favourable economic
scenarios. On the environmental front, and within the scope of the “Letter of Commitment for Sustainable
Finance in Portugal”, signed in 2019, the Bank reinforced its offer of products with environmental concerns. We
also successfully concluded the first edition of the Social Dividend model, a commitment to give back to society
that NOVO BANCO assumed before the community and its employees, consisting of four programmes - Equal
Gender, Work & Life, the Environment, and Social Responsibility - whose targets, set in 2017, at the time of its
creation, were exceeded. In 2021, this model will have a new edition, which will continue to address issues
such as gender equality and the reconciliation of professional, personal and family life, and minimising the
environmental impact from the Bank's activity.

The Bank's sustainability model, together with the social and environmental measures implemented, are an
integral part of NOVO BANCO's strategy and business, contributing to reinforce the trust that the different
stakeholders place in the Bank. It is with this vision that we will continue to be part of and foster a sustainable
society.

The objectives set for 2021 also involved an adjustment in the executive team that I have the honour of leading.
And in this respect, I would like to draw attention to the work done by Mr. Vitor Fernandes, Mr. Jose Bettencourt,
and Mr. Jorge Cardoso, and to their dedication to this project and the results obtained, and also take the
opportunity to thank Mr. Andres Baltar for his smooth integration into an executive team strongly committed
to the Bank's success. The reduction of the Executive Committee to 6 members further contributed to the
simplification of processes.

I would like to thank each and every one of our employees for their commitment and dedication in this
unprecedented year.

A word to the regulators, which in the case of Novo Banco also involve EU regulators, and an emphasis on the
exacting professionalism that has enabled us to achieve many objectives which some thought impossible.

Finally, I would like to thank our clients for their loyalty and their preference, making us their partners in good
times and in adversity.

To the other stakeholders and society in general, I would like to assure them that they can continue to count on
NOVO BANCO's experience and professionalism in supporting the economy.

Novo Banco is today turning a page that will allow it to focus on creating value for its clients and shareholders,
and in doing so contribute to the development of the Portuguese economy.

We have been and will always be open!

NOVO BANCO ANNUAL REPORT 2020Management Report
2020

1.0 MESSAGE 2.0 MANAGEMENT REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTESNOVO BANCO MANAGEMENT REPORT 2020Management Report

2020

Contents

I. MANAGEMENT REPORT

1.0
1.1
1.2

2.0
2.1
2.2

3.0
3.1
3.2
3.3
3.3.1
3.3.2
3.4
3.4.1
3.4.2
3.5
3.6
3.7
3.8
3.9
3.10

4.0
4.1
4.2
4.3

5.0
5.1
5.2

6.0
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8

7.0
7.1
7.2
7.3
7.3.1
7.3.2
7.4

WHO WE ARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
NOVO BANCO Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

OUR STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
DGCOMP objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

OUR PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Economic Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Recurrent and Legacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Novo Banco Recurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Novo Banco Legacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
NOVO BANCO Group (consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Balance Sheet and Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Corporate Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
NOVO BANCO Separate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Main Risks and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

CAPITAL, LIQUIDITY & RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Capital Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Liquidity and Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

OUTLOOK 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Economic Expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Strategic Priorities for 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

CORPORATE GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Shareholder Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Corporate Bodies: Composition and Functioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Internal Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Main Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Credit to Members of the Corporate Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Remuneration of the Members of the Corporate Bodies and Identified Employees . . . . . . . . . . . . . . . . . . . . . . . . 90
Securities Held by Members of the Corporate Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Non-Material Indirect Investment in NOVO BANCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

FINANCIAL STATEMENTS AND FINAL NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Separate Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Final Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Declaration of Conformity with the Financial Information Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Proposal for the distribution of NOVO BANCO results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Note of Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

8.0

ALTERNATIVE PERFORMANCE MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

NOVO BANCO MANAGEMENT REPORT 2020Who
We Are

1.0

Title: Quem espera sempre alcança
Author: Marta Vieira Pereira

1.1 Novo Banco Group

NOVO BANCO, S.A. ("NOVO BANCO" or "Bank") together with the subsidiaries and equity holdings that make
up the NOVO BANCO Group ("Group" or "GNB") is mainly active in the Portuguese banking sector, but also in
asset management, and also has equity stakes in companies operating in venture capital, real estate, renting
and corporate services.

NOVO BANCO was born in 2014 upon the resolution of Banco Espírito Santo S.A. From the outset, NOVO BANCO has
shown its resilience, overcoming the huge challenges resulting from its status as a transitional bank and from the new
commitments imposed by the European Commission for the sale, in October 2017, of 75% of the Resolution Fund's
holdings to Lone Star, through Nani Holdings S.G.P.S., S.A..

Chronology

2014

2015

2016

2017

2018

2019

2020

AUGUST
Incorporation of Novo Banco upon the
Resolution applied to Banco Espírito Santo by
the Bank of Portugal.

DECEMBER
Restructuring Plan agreed with DG COMP
EC) involving the separation between core
and non-core assets.

MARCH
Announcement of sale of 75% of Novo
Banco's share capital to Lone Star

OCTOBER
Completion of sale process of 75% of Novo
Banco's share capital to Nani Holdings
(Lone Star Group) with subsequent injection
of €750mn (Oct) and €250mn (Dec) by the
bank's main shareholder.

JUNE
Issuance of €400mn Tier 2 Subordinated
Debt combined with a securities exchange
offer.

TRANSITION

Closure of 33% of the Branch Network.
Divestment process included BESV, BICV,
New York, London and Venezuela
Branches along with non-strategic assets,
such as GNB Vida, GNB Seguros and Novo
Activos Financieros España and
non-productive assets, such as the
portfolios Nata I and II, Viriato, Sertorius
and Carter

RESTRUCTURING

POST-2020
With a proven track record of reducing costs and increasing commercial efficiency, NOVO
BANCO prepares to embark on a new phase where it asserts itself as a leading commercial
bank in SMEs, with a strong presence in the Corporate segment and a relationship of
proximity with the client.

REBIRTH

In 2020 the Group continued to deploy the strategy defined for 2019-2021, focusing its actions on:

i. optimising its core activity, by striving for improved and increasingly efficient processes, and for the deleveraging

of its Legacy assets;

ii. consolidating its digital transformation by incorporating the most advanced technological developments and

pre-empting the new client interaction trends; and

iii. continuing to build up factors of differentiation, notably products and services specifically designed for Business

and Small companies.

Who

We Are

1.0

Title: Quem espera sempre alcança

Author: Marta Vieira Pereira

NOVO BANCO MANAGEMENT REPORT 2020A team of professionals committed…

PEOPLE

4 582

GNB employees

€288.5k

investment in training
and development

training hours
per employee¹

...to supporting families, and driving Portuguese companies to innovate, reinvent, export…

BUSINESS

1.4

million
clients

96.3%

satisﬁed and very
satisﬁed clients
– Retail

98.1%

satisﬁed and very
satisﬁed clients
– Medium Enterprises

359

branches

...and to turning great difficulties into great opportunities…

FINANCIAL RESOURCES

€25.2bn

Loans granted

€26.1bn

Deposits

31%

Reduction in Legacy
activity assets (vs 2019)

... using an omnichanel approach based on agile methodology...

TECHNOLOGY & EXPERIENCE

multidisciplinary agile
teams working on digital
transformation

600

thousand active clients
in the digital channels

41%

of total sales are digital
(vs 25% in 2019)

... to give back to community the support it has received.

SOCIETY

initiatives/solutions
addressing social issues

1. NOVO BANCO

paintings loaned in
2020, increasing to 75
the works on permanent
exhibition in 33
Museums around the
country

4 562

people helped through
community programmes
in 2020

NOVO BANCO focuses its business model on three main segments – domestic commercial banking - retail, domestic
commercial banking - corporate, and asset management. NOVO BANCO seeks to anticipate and respond to the needs
of its clients through its offer of innovative, effective and transparent banking products and services, based on high
ethical and integrity standards and customer satisfaction assessment tools.

Domestic commercial banking - corporate

BUSINESS

Domestic commercial banking - retail

Asset management

BRANDS:

NOVO BANCO

NOVO BANCO is a universal bank that provides the full spectrum of financial products to individual, corporate and
institutional clients, serving the entire national territory, with a strong focus on servicing and supporting the Portuguese
business community.

The Bank's differentiation element is its strong relational DNA, which underpins the high quality of the service provided
to more than 1.3 million clients and is implemented through a service model sectioned to serve five different client
segments:

Retail Banking

•

Individual Clients, served by a straightforward and comprehensive digital platform and a national network of 339
branches

• NB360º Individual Clients, served by a dedicated account manager through the digital channels, remotely or at

NOVO BANCO's branches.

• usinesses served by a dedicated account manager specialised in supporting small business clients through the

national branch network or the digital channels.

Corporate Banking

• Medium-sized Companies served by a corporate account manager at one of the 20 corporate centres across the

country.

• Large Companies, served by a corporate account manager at 2 Corporate Centres, in Lisbon and Porto.

NOVO BANCO DOS AÇORES

NBA is the result of a strategic alliance between NOVO BANCO (57.5%) and Santa Casa da Misericórdia de Ponta Delgada
(30%), which was joined by the Bensaude Group (10%) and thirteen other Santa Casa da Misericórdia institutions from
all the Azores islands (2.5%).

The mission of NBA is to serve its clients (individual, corporate and institutional) and the Azorean regional economy by
deepening the links with the Azorean emigrant communities, particularly in the United States, Canada, Bermuda and
Brazil. Its strategy leverages on unique competitive advantages such as economic and financial strength, a culture of
service to the benefit of the population of the Azores, wide experience of the local markets and a strong tradition of
close relationships with the Clients.

As at December 2020, NBA had total assets of €584.4mn, representing a YoY increase of 4.6%.

Detailed information on the activity of NBA available here: www.novobancodosacores.pt

NOVO BANCO MANAGEMENT REPORT 2020Best - Banco Electrónico de Serviço Total, S.A.

Banco Best offers the full range of products and services of an open architecture universal bank with a strong techno-
logy content. The services available at Banco BEST (saving, investment, credit and day-to-day financial management
solutions) are designed to let clients take full advantage of the new information technologies through the internet,
namely greater speed and efficiency in the treatment of processes and transactions and access to innovative services
that facilitate and streamline the clients’ relationship with the Bank.

BEST's business strategy is geared towards serving the investment needs of a segment of individual clients who share
the need for more diversified and sophisticated financial services. Through its B2B activity, BEST also makes its cus-
tomised platform available to national and international institutional investors, allowing these entities a comprehensive,
agile and effective management of their financial assets.

As at December 2020, BEST had €2.2bn in assets under management, corresponding to a YoY increase of 6.1%.

Detailed information on the activity of BEST available here: www.bancobest.pt

GNB Gestão Ativos
GNB GA develops its asset management business through
a product range that covers all types of funds - mutual
funds, real estate funds and pension funds - besides pro-
viding discretionary and portfolio management services.

In December 2020, the entire share capital of NOVO
ACTIVOS FINANCIEROS ESPAÑA, S.A. was sold, as part of
the strategy of focusing on the domestic banking busi-
ness and consequent divestment of non-strategic assets.

As at December 2020, GNB GA had €10.0bn assets under
management in Portugal and the Luxembourg.

Detailed information on the activity of GNBGA available
here: www.gnbga.pt

GNB GA - AuM

11%

13%

€10.0bn

25%

51%

Discritionary/Portfolio Mgmt
Pension Fund

Real Estate
Funds

NOVO BANCO...

Partner Bank

a reliable partner and a reference in high quality service

Professional Bank

with an approach that is both highly professional and builds a relationship of
trust with all clients

Proximity Bank

with a differentiating, unique and integrated experience of omnichannel relationships.

As at December 2020, NOVO BANCO had a global market share of 11% and total assets of €44.4bn.

• €26.1bn in Customer Deposits, of which 72% from Retail Clients

• €25.2bn in Customer Loans, of which 55% to Corporate Clients

The strategy of permanently enhancing the quality of customer service and of the services provided also entails a large
investment in digitisation. In 2020, 41% of sales to retail clients were digital.

NOVO BANCO elected
Best Trade Finance Bank in Portugal

In 2020 NOVO BANCO was once again elected the Best Trade Finance Bank in Portugal,
by the Global Finance international magazine.

GNB Gestão de Ativos’s NB Euro Bond won the 2020
Morningstar Portugal Fund Award

The NB Euro Bond Fund, managed by GNB Gestão de Ativos, was the winner in the Best
Foreign Fund in Euro Bonds category of the Morningstar Fund Awards 2020.

NOVO BANCO once again elected by Global Finance

In 2020 NOVO BANCO was once again elected the Bank in the provision of Securities
Custody Services in Portugal by the Global Finance international magazine.

NOVO BANCO earns award for “Best Integrated
Corporate Banking Site in Western Europe”

NB earned recognition for the quality of its digital solutions for the corporate
market, which include Nbnetwork, its Internet Banking service for businesses,
with a broad-based functional coverage permitting to carry out a vast range of
transactions autonomously and in a simple, intuitive and effective manner.

NOVO BANCO shortlisted for Finovate Awards 2020

O NOVO BANCO has been shortlisted for the Finovate Awards 2020, with two initiatives:
Home Buying and Small Business Finance. Finovate, the promoter of these awards, is the
most prestigious ﬁrm showcasing technology oriented to the ﬁnancial sector worldwide.

NBnetwork innovative solution wins Portugal Digital Awards
2020’ prize for "Best Banking Project"

The innovative NBnetwork+ solution, launched by NB for clients in the Small Businesses and
Corporate segments, won the "Best Banking Project" award at the 2020 edition of the
Portugal Digital Awards.

NOVO BANCO awarded two honourable mentions in the
Banking Tech Awards 2020 edition

NOVO BANCO awarded two honourable mentions in the 2020 edition of the Banking
Tech Awards. From NOVO BANCO's three shortlisted initiatives, two earned awards:
Small Business Finance (in the Best Digital Initiative category) and Onboarding Digital (in
the Best Use of IT in Retail Banking category). The prestigious Banking Tech Awards,
which are already in their 21st edition, reward the use of information technology in the
ﬁnancial sector worldwide.

JAN

APR

JUL

AUG

SEP

DEC

NOVO BANCO MANAGEMENT REPORT 20201.1.3 Main Events in 2020

1.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESNOVO BANCO MANAGEMENT REPORT 2020JANFEBMARAPRMAYJUNJULAGOSEPOCTNOVDECNOVO BANCO applies artiﬁcial intelligence to the real estate sectorNOVO BANCO closed a partnership with a Portuguese start-up Alfredo AI, aiming to bring the latest artiﬁcial intelligence innovations to the real estate sector.SISAB 2020 - Best Trade Finance Bank in Portugal supports agrifood exportsNOVO BANCO was present in the International Trade Fair for Portuguese Food and Beverages (SISAB), the largest and most important annual fair for the Portuguese agrifood business.NOVO BANCO Group Activity and Results - 2019On 28 February, NOVO BANCO GROUP disclosed its 2019 results, a consolidated loss of €1,066.5mn. In the recurrent activity, GNB posted a €177.6mn proﬁt for the year.NOVO BANCO launches package of products and services designed to address the COVID-19 contextNB creates “green tollway” ﬁnancing to support business sectors in the context of COVID-19NOVO BANCO makes available to its clients and to the Portuguese business community a set of cash management support and ﬁnancing solutions, a true “green tollway” designed to help companies deal with the economic effects from Covid-19NOVO BANCO decides to pay all suppliers immediately upon receipt of invoiceGiven the context of crisis caused by COVID-19, NOVO BANCO decided that all its suppliers would start being paid immediately upon receipt, checking and posting of invoices by the bank’s Purchasing Structures. NOVO BANCO creates pre-payment line for companies using the Simpliﬁed Lay-off Line to pay salariesNOVO BANCO launches solutions to assist landlords overcome liquidity problemsNOVO BANCO, S.A. informs about changes in the Board of the General MeetingNOVO BANCO informs on a change in the composition of the Board of the General Meeting following the resignation of Pedro Moreira de Almeida Queiroz de Barros as the General Meeting’s Secretary and the election of Mário Nuno de Almeida Martins to this position.NOVO BANCO Group Activity and Results - 1st half 2020On 31 July, NOVO BANCO disclosed a consolidated loss of €556.8mn for the 1st half of the year, with activity being constrained not only by the restructuring of the bank's balance sheet but also by the impacts of the Covid-19 pandemic. Even so, the Bank's results from the recurrent activity in the ﬁrst six months of the year were a net proﬁt of €34mn.Press Release on conclusion of Deloitte auditNOVO BANCO launches new campaign praising the country's production capacity“This is the Portugal that does. And this is the Bank that helps it do it” - new campaign that reinforces NB's position at the side of Portuguese companies to help them innovate, reinvent and export. The campaign included conferences in various regions of the country, bringing together companies and associations to discuss and share experiences and knowledge.NOVO BANCO, S.A. Informs on conclusion of sale agreement on the sale of its equity holding in GNB – Companhia de Seguros, S.A.NOVO BANCO, together with its subsidiaries BEST and GNB-GA, entered an agreement to sell their 25% shareholding in GNB – Companhia de Seguros, S.A., (“GNB Seguros”), a non-life insurance company, for a total consideration of €15.9mn, to Crédit Agricole Assurances, S.A., a company of Crédit Agricole Group, which already held the remaining 75% of the share capital of GNB Seguros.NOVO BANCO launches NB smarterThe ﬁrst app of a new generation of smarter, more personalised applications that revolutionises the way clients interact with the bank in their everyday life.NOVO BANCO GROUP ACTIVITY AND RESULTS - 3rd quarter 2020NOVO BANCO’s recurrent activity continued to exhibit a positive trend, the bank posting a net proﬁt of €98.2mn. At consolidated level, the process of restructuring and sale of legacy assets continued, with the NPL ratio dropping to 9.7% and for the ﬁrst time reaching a single digit ﬁgure. The legacy activity was reduced by 24.1% (-€1 078mn) since the start of the year, to €4 482mn. NOVO BANCO, S.A. Informs on beginning of term of office of a member of the Executive Board of DirectorsUpon conclusion of the ﬁt and proper process, on 1 December 2020, Andrés Baltar Garcia took office as member of the Executive Board of Directors of NOVO BANCO, with the position of Chief Commercial Officer - Corporate, for the ongoing mandate (2017-2020)NOVO BANCO, S.A. informs on sale of entire share capital of NOVO ACTIVOS FINANCIEROS ESPAÑA, S.A.Through its subsidiary GNB Gestão de Ativos, SA, NOVO BANCO concludes the sale of the entire share capital of NOVO ACTIVOS FINANCIEROS ESPAÑA, S.A., for a total consideration of €12.9mn.NOVO BANCO, S.A. informs on Sale and Purchase Agreement for a portfolio of NPLsConclusion of a competitive bid process for the sale of a portfolio of non-performing loans and related assets (together known as Project Carter) with a gross book value of €79mn. The sale price was approximately €37mn.NOVO BANCO GROUP ACTIVITY AND RESULTS - 1st quarter 2020On 5 June, NOVO BANCO GROUP disclosed a consolidated net loss of €179.0mn, a result signiﬁcantly penalised by the impact of the Covid-19 pandemic in the period, with an increase in the cost of risk and markdowns in the bank's investment portfolio. NOVO BANCO, S.A. informs on appointment of corporate bodiesOn 22 October, the General Meeting of NOVO BANCO appointed the members of the GSB for the 2021-2024 mandate, subject to the authorisation of the competent regulatory authorities. The Meeting also approved the composition of the Board of the General Shareholders Meeting, and the appointment of the Statutory Auditor for the 2021-2024 mandate. NOVO BANCO, S.A. informs about change in composition and appointment of members of the Executive Board of Directors for the new mandateOn 22 October, the members of the Executive Board of Directors Jorge Freire Cardoso, José Eduardo Bettencourt and Vítor Fernandes handed in their resignation from their positions, with effect from 30 November 2020, and, to replace Vítor Fernandes, Andrés Baltar Garcia was appointed by the General and Supervisory Board as a member of the Executive Board of Directors for the current mandate, subject to the authorisation of the relevant regulatory authorities. The bank also informed that the General and Supervisory Board had appointed the members of the Executive for the 2021-2024 period, and subject to the authorisation of the relevant regulatory authorities.NOVO BANCO, S.A. – AnnouncementOn 27 November, NOVO BANCO noted the approval of the legislative proposal no. 61/XIV/2 concerning the Portuguese State Budget for 2021, which aims to withdraw the authorisation for the Resolution Fund to transfer additional funds to NOVO BANCO under the Contingent Capital Agreement (“CCA”). The Bank noted that it had fulﬁlled and continued to fulﬁl all its commitments, and that based on three years of Resolution Fund having met its payment obligations, the Bank believed that it would continue to do so. It also noted the statement made by the Portuguese Prime Minister to the President of the ECB where he guaranteed “full compliance with the commitments undertaken in the framework of the sale of NOVO BANCO”.NOVO BANCO, S.A. Informs on appointment of the members of the Monitoring CommitteeOn 26 November the General Meeting elected the members of the Monitoring Committee provided for in the CCA for the 2021-2024 mandate.17

NOVO BANCO MANAGEMENT REPORT 2020JANFEBMARAPRMAYJUNJULAGOSEPOCTNOVDECNOVO BANCO applies artiﬁcial intelligence to the real estate sectorNOVO BANCO closed a partnership with a Portuguese start-up Alfredo AI, aiming to bring the latest artiﬁcial intelligence innovations to the real estate sector.SISAB 2020 - Best Trade Finance Bank in Portugal supports agrifood exportsNOVO BANCO was present in the International Trade Fair for Portuguese Food and Beverages (SISAB), the largest and most important annual fair for the Portuguese agrifood business.NOVO BANCO Group Activity and Results - 2019On 28 February, NOVO BANCO GROUP disclosed its 2019 results, a consolidated loss of €1,066.5mn. In the recurrent activity, GNB posted a €177.6mn proﬁt for the year.NOVO BANCO launches package of products and services designed to address the COVID-19 contextNB creates “green tollway” ﬁnancing to support business sectors in the context of COVID-19NOVO BANCO makes available to its clients and to the Portuguese business community a set of cash management support and ﬁnancing solutions, a true “green tollway” designed to help companies deal with the economic effects from Covid-19NOVO BANCO decides to pay all suppliers immediately upon receipt of invoiceGiven the context of crisis caused by COVID-19, NOVO BANCO decided that all its suppliers would start being paid immediately upon receipt, checking and posting of invoices by the bank’s Purchasing Structures. NOVO BANCO creates pre-payment line for companies using the Simpliﬁed Lay-off Line to pay salariesNOVO BANCO launches solutions to assist landlords overcome liquidity problemsNOVO BANCO, S.A. informs about changes in the Board of the General MeetingNOVO BANCO informs on a change in the composition of the Board of the General Meeting following the resignation of Pedro Moreira de Almeida Queiroz de Barros as the General Meeting’s Secretary and the election of Mário Nuno de Almeida Martins to this position.NOVO BANCO Group Activity and Results - 1st half 2020On 31 July, NOVO BANCO disclosed a consolidated loss of €556.8mn for the 1st half of the year, with activity being constrained not only by the restructuring of the bank's balance sheet but also by the impacts of the Covid-19 pandemic. Even so, the Bank's results from the recurrent activity in the ﬁrst six months of the year were a net proﬁt of €34mn.Press Release on conclusion of Deloitte auditNOVO BANCO launches new campaign praising the country's production capacity“This is the Portugal that does. And this is the Bank that helps it do it” - new campaign that reinforces NB's position at the side of Portuguese companies to help them innovate, reinvent and export. The campaign included conferences in various regions of the country, bringing together companies and associations to discuss and share experiences and knowledge.NOVO BANCO, S.A. Informs on conclusion of sale agreement on the sale of its equity holding in GNB – Companhia de Seguros, S.A.NOVO BANCO, together with its subsidiaries BEST and GNB-GA, entered an agreement to sell their 25% shareholding in GNB – Companhia de Seguros, S.A., (“GNB Seguros”), a non-life insurance company, for a total consideration of €15.9mn, to Crédit Agricole Assurances, S.A., a company of Crédit Agricole Group, which already held the remaining 75% of the share capital of GNB Seguros.NOVO BANCO launches NB smarterThe ﬁrst app of a new generation of smarter, more personalised applications that revolutionises the way clients interact with the bank in their everyday life.NOVO BANCO GROUP ACTIVITY AND RESULTS - 3rd quarter 2020NOVO BANCO’s recurrent activity continued to exhibit a positive trend, the bank posting a net proﬁt of €98.2mn. At consolidated level, the process of restructuring and sale of legacy assets continued, with the NPL ratio dropping to 9.7% and for the ﬁrst time reaching a single digit ﬁgure. The legacy activity was reduced by 24.1% (-€1 078mn) since the start of the year, to €4 482mn. NOVO BANCO, S.A. Informs on beginning of term of office of a member of the Executive Board of DirectorsUpon conclusion of the ﬁt and proper process, on 1 December 2020, Andrés Baltar Garcia took office as member of the Executive Board of Directors of NOVO BANCO, with the position of Chief Commercial Officer - Corporate, for the ongoing mandate (2017-2020)NOVO BANCO, S.A. informs on sale of entire share capital of NOVO ACTIVOS FINANCIEROS ESPAÑA, S.A.Through its subsidiary GNB Gestão de Ativos, SA, NOVO BANCO concludes the sale of the entire share capital of NOVO ACTIVOS FINANCIEROS ESPAÑA, S.A., for a total consideration of €12.9mn.NOVO BANCO, S.A. informs on Sale and Purchase Agreement for a portfolio of NPLsConclusion of a competitive bid process for the sale of a portfolio of non-performing loans and related assets (together known as Project Carter) with a gross book value of €79mn. The sale price was approximately €37mn.NOVO BANCO GROUP ACTIVITY AND RESULTS - 1st quarter 2020On 5 June, NOVO BANCO GROUP disclosed a consolidated net loss of €179.0mn, a result signiﬁcantly penalised by the impact of the Covid-19 pandemic in the period, with an increase in the cost of risk and markdowns in the bank's investment portfolio. NOVO BANCO, S.A. informs on appointment of corporate bodiesOn 22 October, the General Meeting of NOVO BANCO appointed the members of the GSB for the 2021-2024 mandate, subject to the authorisation of the competent regulatory authorities. The Meeting also approved the composition of the Board of the General Shareholders Meeting, and the appointment of the Statutory Auditor for the 2021-2024 mandate. NOVO BANCO, S.A. informs about change in composition and appointment of members of the Executive Board of Directors for the new mandateOn 22 October, the members of the Executive Board of Directors Jorge Freire Cardoso, José Eduardo Bettencourt and Vítor Fernandes handed in their resignation from their positions, with effect from 30 November 2020, and, to replace Vítor Fernandes, Andrés Baltar Garcia was appointed by the General and Supervisory Board as a member of the Executive Board of Directors for the current mandate, subject to the authorisation of the relevant regulatory authorities. The bank also informed that the General and Supervisory Board had appointed the members of the Executive for the 2021-2024 period, and subject to the authorisation of the relevant regulatory authorities.NOVO BANCO, S.A. – AnnouncementOn 27 November, NOVO BANCO noted the approval of the legislative proposal no. 61/XIV/2 concerning the Portuguese State Budget for 2021, which aims to withdraw the authorisation for the Resolution Fund to transfer additional funds to NOVO BANCO under the Contingent Capital Agreement (“CCA”). The Bank noted that it had fulﬁlled and continued to fulﬁl all its commitments, and that based on three years of Resolution Fund having met its payment obligations, the Bank believed that it would continue to do so. It also noted the statement made by the Portuguese Prime Minister to the President of the ECB where he guaranteed “full compliance with the commitments undertaken in the framework of the sale of NOVO BANCO”.NOVO BANCO, S.A. Informs on appointment of the members of the Monitoring CommitteeOn 26 November the General Meeting elected the members of the Monitoring Committee provided for in the CCA for the 2021-2024 mandate.1.2 Organisation

1.2.1 Governance Model

NOVO BANCO's management relies on a governance model that is unique for systemic banks within the Portuguese
financial sector. In line with international best practices in management, and under the new shareholder structure,
since 18 October 2017 the Bank has a General and Supervisory Board (GSB) and an Executive Board of Directors (EBD).

The GSB is responsible for regularly monitoring, advising and supervising the management of the Bank and of the Group
companies, as well as for supervising the EBD with regard to compliance with the relevant regulatory requirements of
banking activity. The GSB meets on a monthly basis, and its Chairman maintains regular communication and dialogue
with the CEO. In its activity, the GSB is supported by committees to which it delegates some of its powers: the Finan-
cial Affairs (Audit) Committee, the Risk Committee, the Compliance Committee, the Nomination Committee and the
Remuneration Committee. These committees are chaired by independent members of the GSB and its composition
complies with the applicable legislation regarding the majority of independent members (when required).

The GSB has the responsibilities and powers provided for by law, by the Articles of Association and by its internal
regulations, including the supervision of all matters related to risk management, compliance and internal audit, as well
as granting prior approval on relevant matters for NOVO BANCO, which are detailed in the Articles of Association.

The Executive Board of Directors is responsible for the management of the Bank, for the definition of the general
policies and strategic objectives, and for ensuring the running of the business in compliance with the rules and good
banking practices.

The governance model was designed to ensure monitoring of the Bank's activity and achievement of its strategic
objectives:

Organograma do Modelo de Governo do NOVO BANCO

GENERAL SHAREHOLDERS MEETING

Statutory Auditor

Company Secretary

GENERAL AND
SUPERVISORY BOARD

Risk Committee

EXECUTIVE BOARD
OF DIRECTORS

MONITORING
COMMITTEE

Capital, Assetc and
Liabilities Committee (CALCO)

Non-Performing Assets (NPA)
Sub Committee

Financial Affairs (Audit) Committee

Risk Committee

Sub Committee Risk Model

Remuneration Committee

Compliance and Product Committee

Sub Committee Operational Risk

Nomination Committee

Internal Control System Committee

Compliance Committee

Digital Transformation Committee

Financial and Credit Committee

Investment and Costs Committee

Impairment Committee

Further information is provided in the Corporate Governance Report, namely points 6.2.3 General Supervisory Board
and 6.2.4 Executive Board of Directors.

1.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESNOVO BANCO MANAGEMENT REPORT 2020

1.2.2 Organisational structure

The composition of the corporate and statutory bodies, at the signature date of this Report, is as follows:

BOARD OF THE GENERAL MEETING

MONITORING COMMITTEE

Chairman:

Fernando Augusto de Sousa Ferreira Pinto

Chairman:

José Bracinha Vieira

Vice-Chairwoman:

Magdalena Ivanova Ilieva

Secretary:

Mário Nuno de Almeida Martins Adegas

Member:

Carlos Miguel de Paula Martins Roballo

Pedro Miguel Marques e Pereira

GENERAL AND SUPERVISORY BOARD (GSB)

STATUTORY AUDITOR

Chairman:

Byron James Macbean Haynes

Ernst & Young, Audit & Associados – SROC, S.A., registered

Vice-Chairman:

Karl-Gerhard Eick

in the Portuguese Securities Market Commission (“CMVM”)

Member:

Donald John Quintin

Kambiz Nourbakhsh

Mark Andrew Coker

under number 20161480 and in the Portuguese Institute of

Statutory Auditors (“OROC”) under number 178, represented

by António Filipe Dias da Fonseca Brás, registered in the

Benjamin Friedrich Dickgiesser

CMVM under number 20161271 and in the OROC under

John Ryan Herbert

Robert Alan Sherman

Carla Antunes da Silva

number 1661, and by João Carlos Miguel Alves, as alternate

statutory auditor, registered in the CMVM under number

20160515 and in the OROC under number 896.

EXECUTIVE BOARD OF DIRECTORS (EBD)

COMPANY SECRETARY

Chairman:

António Manuel Palma Ramalho

Mário Nuno de Almeida Martins Adegas

Chief Executive Officer

Ana Rita Amaral Tabuada Fidalgo Brás (Alternate Secretary)

Member:

Mark George Bourke

Chief Financial Officer

Member:

Rui Miguel Dias Ribeiro Fontes

Chief Risk Officer

Member:

Luísa Marta Santos Soares da Silva Amaro de Matos

Chief Legal & Compliance Officer

Member:

Luís Miguel Alves Ribeiro

Chief Commercial Officer (Retail)

Member:

Andrés Baltar Garcia

Chief Commercial Officer (Corporate)

Pursuant to resolution of the General Meeting held on 22 October 2020, all the members of the GSB (including a new
member William Henry Newton) and, pursuant to the resolution of GSB of the same date, all the members of the EBD
were appointed for the new mandate (2021-2024) subject to the corresponding fit and proper authorisations which, at
the date of this report, are still pending. Accordingly, the remaining members of NOVO BANCO corporate bodies are
already in functions under the new mandate.

NOVO BANCO MANAGEMENT REPORT 20201.2.3 Human Capital

NOVO BANCO seeks to follow the best fair-process practices in decision-making, focusing not only on results but also
on sustainability and involving the employees in the process of seeking results. The bank thus endeavours to be aware
of the needs and difficulties experienced by employees throughout their life cycle and to meet their expectations, so
as to contribute to their full development and allow them to fully unlock their potential.

One of the main tools to analyse the organisational climate and the employees’ involvement is the NB Experience
questionnaire, used by the first time in late 2018. Successive half-yearly updates, through the PULSE rapid surveys,
allow a continuous assessment and evolution of employee confidence levels, with the last survey in October 2020
seeing a participation rate of 79%.

4 582

EMPLOYEES

53%

WOMEN

45 years

18 years

AVERAGE AGE

AVERAGE LENGTH OF SERVICE

47%

MEN

31%
FROM 27% IN 2019

THE PERCENTAGE OF WOMEN
IN HEADS OF DEPARTMENT INCREASED

43.4%
FROM 41.5% IN 2019

NUMBER OF WOMEN SENIOR
EXECUTIVES INCREASED

2.0

Title: Gare do Oriente
Author: Marta Vieira Pereira

2.1 Overview

The 2019-2021 strategic plan is based on four strategic pillars that drive the Bank in the transition to a growth
strategy, namely in terms of adjusting risk processes, fostering talent and merit, optimising IT, data and
processes, and revolutionising the distribution model. These four strategic pillars are implemented within a
framework of operational circles: optimisation, digitisation and differentiation.

The 2019-2021 strategic plan has been built to enable NOVO BANCO to make the leap from a bank in resolu-
tion to a transformation bank. In 2020, the framework of the strategic plan progressed on two main fronts: reinforced
focus on rebuilding its Purpose and Identity and closing the final phase of divestment of the Legacy assets.

NOVO BANCO is committed to be a positive contributor to the ecosystem of which it is part, continuously monitoring
the impact of its behaviour on society, and continuing to demonstrate authenticity, transparency, integrity and con-
sistency.

The circles and pillars of NOVO BANCO's Strategic Plan serve as the basis for the 9 priorities underlying the bank's
growth strategy.

Activation

Efficiency

Purpose and Identity

Optimisation

Digitalisation

New business

Differentiation

Divestment

Legacy

Activation

Distribution
Model

IT, Data
& Processes

Talent
and Merit

Risk
Adjustment

NOVO BANCO steers its activity by sustainability principles and with the resolve to give back to the
community the support it has received from it. With the aim of managing the business in a responsible
manner, the Bank has been implementing a culture that involves permanent monitoring of its impact
on the surrounding ecosystem, training and raising the awareness of its employees, business partners

and clients, and promoting the values of authenticity, transparency, integrity and consistency.

In order to support the local economies and its clients, NOVO BANCO launched the NB Marketplace - a free-of-charge
platform that, in the context of the pandemic, allowed clients in the Small Business segment to open a new sales
channel, and individual clients to buy from local suppliers without having to leave their homes.

At the same time, and from the onset of the pandemic, NOVO BANCO strengthened its reference position as a pro-
ximity and present Bank, developing initiatives to discuss the challenges that each sector and region are facing in the
current context, and to support, promote and give voice to Portuguese companies and entrepreneurs that persevere
and reinvent themselves. Highlights:

• The 3 editions of the “NOVO BANCO Summit - Our champions” - webinars on the Agrofood, Tourism and Manu-

facturing sectors held in the 1st half of 2020;

• The 5 editions of the “Portugal that Does Roadshows” carried out by NOVO BANCO about the business activity;

More information on the sustainability strategy is provided in the Sustainability Report.

2. Optimisation

To increase operational profitability and gain competitive advantage, NOVO BANCO has been de-
veloping and implementing a set of measures that reduce costs and streamline the bank's processes
and restructuring.

In 2020, the Bank developed a set of actions, with a strong impact on Commercial Network efficiency and the customer
experience, which allowed to:

• Streamline and dematerialise 28 processes, in a
teleworking environment, including credit approval
processes;

• Create and improve critical business processes,
namely in the credit and remote transactional areas,
which included a new process to obtain loan mora-
toria through NBnetwork or the Centres and Branch-
es, a protocoled credit origination process through
NBnetwork, and the Acceptance of the Qualified
Electronic Signature (QES).

The divestment/liquidation of subsidiaries and interna-
tional activity to focus on domestic activity along with
ongoing recalibration of operating model and structure
and through the implementation of innovative initiatives
and processes, the Bank has been optimising the cost
structure, reaching in 2020 a Cost to Income ratio 11 pp
lower than in 2018.

Efficiency:
Cost Income Ratio / Consolidated %

63%

55%

52%

2018

2019

2020

NOVO BANCO MANAGEMENT REPORT 20203. Digitalisation

NOVO BANCO strives for a higher level of digitalisation to increase efficiency and meet the clients’
expectations. This means a transition to a more efficient business model, driven by an integrated
intelligent service, combined with a differentiating and innovative experience.

Digital transformation requires an organisational transformation. NOVO BANCO therefore conti-
nued to implement some key pillars to prepare the organisation: a customer-centric strategy (+150
clients interviewed), an agile organisation (+200 people and 14 agile teams), a specific governance
model (+25 Board-led meetings in 2020), an adjusted working environment (+1000 sqm agile
already) and a deep technological transformation.

Know more
here:

Objectives of the Digital Transformation Strategy

To be the Best Bank
for Clients
in Portugal

To transition towards
a highly efficient
operational model

To develop new business
models bringing in new
revenue sources

Workstreams implemented, providing solutions aligned with the
highest standards, and best service and satisfaction levels...

...with repercussions in terms of activation and digital sales

DIGITAL ACTIVATION
50%
(+4% active digital
clients vs 2019)

RETALHO - MOBILE
35%
(+9% YoY active
mobile Clients

600 thousand
Active Digital Clients

388 thousand
Mobile Clients

DIGITAL SALES
41%
(+16 p.p. vs 2019)

+36%
units sold digitally
vs 2019

COVERAGE
71%
functional coverage
of sales (products
available online)

Pillars of the Digital Transformation Strategy

New Customer
Journeys

Digital Channels
Renovation

Leveraged
on Data Science

Home purchase digital
omnichannel experience

Digital Financial Advisor
for Small Businesses

HIGHLIGHTS:

Online Account
Opening

Stronger relationship
through mobile/phygital

Mass personalisation
to leverage relationship

Support to the central areas
(risk, compliance, AML)

NOVO BANCO develops differentiated proposals and new business lines that diversify revenue
sources and distinguish the Bank from its competitors, increasing the Group's differentiation.

In 2020 the Bank launched, for its Corporate clients, NBnetwork+, a solution that supports companies in their daily
financial management, allowing them to aggregate all the company's accounts in one place with an integrated view of
the consolidated balance, to manage payments and to ensure financial control through the vision and categorisation
of executed and planned transactions.

For its Individual clients, NOVO BANCO launched in 2020 a new offer of service-accounts that seeks to respond to the
daily needs of the various segments, making it possible to open an account totally remotely, by video call or digital mo-
bile key. And as sustainability is central to the Bank's activity, its accounts offer also seeks to reduce the environmental
impact and support social, environmental and cultural solidarity causes.

5. Legacy

Legacy Total Assets Evolution
Net; €bn

NOVO BANCO has concluded the
clean-up of its Legacy balance sheet,
preparing the next cycle of focus on its
core business.

10.7

-71%

In December 2020, Legacy's net assets totalled €3.1bn,
representing a decrease of 71% vs. 2018. Mostly through
asset revaluations and disposal processes, the share of
Legacy assets in NOVO BANCO's balance sheet de-
creased from 22% in 2018 to 7% in 2020.

4.5

3.1

2018

2019

2020

6. Risk Adjustment

Holistic, specialised, resilient and efficient risk management and control is a key pillar of NOVO
BANCO Group's Strategy and Culture, supporting the decision-making processes at the various
levels, from top management to the first lines of defence.

The programmes defined aim to ensure the alignment of risk management and control by continuously factoring in the
new industry challenges, customer demands, new technological competitors, and the emerging risks, in compliance
with the risk appetite rules defined by the Executive Board of Directors, as follows:

RISK MANAGEMENT PROGRAMME RESULTS

Financial
and
non-Financial
Risks

• Permanent adaptation of Risk Policies to incorporate changes in the regulatory framework

and innovation in business models and to continuously reinforce effective risk control

• Regular revision of risk models to incorporate new scenarios and the necessary regulatory

adjustments

• Continuous strengthening of the risk control culture in the 1st and 2nd lines of defence

NOVO BANCO MANAGEMENT REPORT 2020
Credit
Risk

Market
Risk

• Deﬁnition of the risk appetite in line with the Bank's strategy and its timely and conservative

adjustment to the risks underlying macroeconomic conditions, particularly with regard to the
industry sectors and professional activities more affected by the pandemic and the economic
deterioration

• Compliance with the risk appetite metrics deﬁned for the different credit portfolios

• Once implementation is consolidated, control and maintenance of, and compliance with, a
conservative risk appetite in the Bank's trading activity and of an investment portfolio policy
designed for liquidity management and net interest income generation

• Strengthening of the mechanisms for monitoring risk appetite metrics as well as the

implementation of mitigation measures to deal with the impacts of the pandemic crisis on the
ﬁnancial markets;

Liquidity
Risk

• Continuous monitoring and control of liquidity risk, using indicators that permit prompt

assessment of the liquidity position

• Compliance with regulatory limits and the liquidity risk appetite

Operational
Risk

• Reinforcement of the operational risk culture, namely in risk identiﬁcation and control processes by

the ﬁrst lines of defence

• Strengthening/improving the management and control of risks with greater exposure, such as
cyber risk, and continuous effort of adaptation to regulatory and strategic challenges (such as
digitisation)

7. Talent and Merit

NOVO BANCO implements a comprehensive talent and merit strategy, establishing and commu-
nicating sound governance policies to attract and retain talent, enable employees to realise their
potential and offer a better employee experience from recruitment to retirement.

The 2019-2021 talent and merit plan, built upon employee's feedback, is structured in 3 journeys: Look & Join, Live &
Grow, Transition & Depart, and its aim is to ensure a deep evolution in human capital management.

The main achievements aimed to respond to six challenges: 1. Attracting and retaining talent; 2. Employee develop-
ment; 3. Gender equality, equal opportunities and respect for diversity; 4. Conciliation of professional, personal and
family life; 5. Social responsibility; and 6. Health, well-being and safety at work

Attracting and retaining talent
With the objective of rejuvenating the teams by attracting and retaining young talent using intervention models
suited to the new generation, the Trainee programme "Talent Attracts Talent" and the "Tech Academy" have
contributed to increase the share of employees under 30 (from 3.5% in 2018 to 6% in 2020).

Employee development
Through function-adjusted training, with a special emphasis on regulatory / legal contents and a mobility and
meritocracy model involving a regular promotion and progress process where the criteria for appointment to new
positions are focused on employee performance.

Gender equality, equal opportunities and respect for diversity

Through the objectives defined in the Social Dividend Model, NOVO BANCO promotes diversity and gender equality
as an integral part of its human capital management. One of the programmes developed with this aim in mind is the
NB Equal Gender, comprising a set of indicators to monitor the Bank's performance in this area and push it towards
greater gender equality and fairness, having contributed to increase the share of women in senior management
from 41.5% in 2019 to 43.4% in 2020.

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESHealth, well-being and safety at work
The pandemic significantly magnified the challenge of "Looking after health, well-being and safety at work". Besides
resorting to telework whenever the functions in question allowed it and there were conditions for that,, the Bank
developed a package of benefits to address employees’ households financial needs, when such existed, including
bringing forward the payment of 50% of the Christmas bonus, loans with special conditions, computer equipment
and training, family coaching sessions and psychological support (psychology, psychiatry and nutrition consul-
tations), and the "My Side B" programme focusing on 8 dimensions (Health, Food, Physical Exercise, Emotional
Management, Family and Home, Interpersonal Relations, Personal Image, Culture and Leisure).

8. IT, Data & Processes

NOVO BANCO continues to streamline processes and systems and to implement new ways of
working, so as to become a leaner bank and thus improve the customer experience, maximise
operational efficiency and reduce the cost of service.

In 2020, the new data and AI platform went live, enabling the agile development of predictive models, the real-time
provision of insights for our clients, as well as the cross-fertilisation and mining of very high volume and frequency data
sources.

In 2020 the Bank stepped up the introduction of new efficiency tools such as robotics, having launched a programme
to achieve a broad-based implementation of these tools in its various areas and processes by 2022. A Robotic Officer
and Robotics Champions were also appointed in all departments. In 2000, 10 new processes were robotised.

9. Distribution Model

NOVO BANCO's new distribution model emerges from the need to innovate and thus meet the
expectations of clients, who are increasingly demanding and digital, but also value the proximity and
relationship with their account manager.

This new model will help build a more personalised, simple and convenient relationship between the client and the
bank, based on intelligent tools that will give client a unique, global and cohesive experience in their relationship and
contact with the Bank throughout the different processes and through the different channels.

To execute the new distribution model, NOVO BANCO has designed a 3-year investment plan that includes the re-
newal of the physical network, technological infrastructures in the branch network, the creation of an omnichannel
experience, new sales channels under partnerships, redefinition of roles in the organisation, communication and
engagement with the community, and customer migration and activation. These innovations will allow the client to:

• Schedule a meeting from a digital device or self-check-in, and be serviced in the space/medium they deem most

appropriate

• Make self-service deposits of banknotes, coins and cheques 24/7 in the new Branch Model

• Have the support of a specialist immediately upon starting a search and simulation on the website, and finalizing the

process with a remote or face-to-face account manager

2020 was above all a year dedicated to designing and testing pilot solutions, which have meanwhile been implemented
under more than 45 initiatives launched and worked on by multidisciplinary teams. Three full-service branches and
one master branch were remodelled in an innovative and functional layout focused on the relationship with the client,
featuring a distinctive self-service cash management service, employee mobility and digital communication. This re-
modelling took into account sustainability principles, focusing, among others, on the reduction of paper consumption
as well as on the suppliers and construction materials used. Also, in the area of omnicanality, new face-to-face and
remote contact services were tried out, as well as new approaches to contacting clients and building customer loyalty.

2021 will be the year of industrialisation of the processes tried out in 2020 with a view to transforming NOVO BANCO.

NOVO BANCO MANAGEMENT REPORT 2020
2.2 DGCOMP² Objectives

2020 targets fully achieved³

The letter of commitment agreed between the Portuguese State and the European Commission in connection to
the authorisation of state aid in the context of the sale process of 75% shareholding in NOVO BANCO established 33
commitments to be fulfilled by the Bank until the end of the restructuring period (currently defined as 31 December
2021). These commitments are divided into three categories, and compliance therewith is closely monitored and
confirmed every six months by an international audit company chosen by the European Commission (the Monitoring
Trustee).

Structural
Commitments

Namely the divestment commitments in various geographies and businesses and the
reduction of the Bank's non-core assets, which included divestment
of the insurance business - GNB Seguros -, concluded this year.

Behavioural
Commitments

Namely the establishment of ROE (Return on Equity) based pricing tools subject to deﬁned
minimum limits, restrictions on acquisitions, dividend distribution ban, ban on the exercise
of voting rights by the minority shareholder (the Resolution Fund) and caps (of 10x the
Bank's average salary) on the remuneration of any employee or member of the Bank's
corporate bodies4.

Viability
Commitments

Interim targets and 2021 targets, notably Full Time equivalent (FTE) reduction targets,
branch reduction targets, and Cost-to-Income targets, and the reinforcement of risk
management policies, already carried out.

Given the pandemic context and its impact on the banking sector and consequent need for closer monitoring, in 2020
the DGCOMP asked the Monitoring Trustee to perform a specific quarterly monitoring of the Bank with a particular
focus on its financial performance.

Although deeply marked by the adverse effects of the pandemic context, the year 2020 stood out, for the second
consecutive time, by the fulfilment of all the commitments⁵ assumed by the Portuguese State before the European
Commission.

In 2020, NOVO BANCO continued to pursue its goal of reduction the legacy assets, an essential factor to achieve the
Bank's viability in 2021, and in line with the 2019-2022 strategic plan. At the same time, and in accordance with the
defined strategy, the Bank maintained its focus on reducing costs, while continuing to provide a service of excellence
to its corporate and individual clients, through a strong commitment to digital and information technology.

The implementation of the strategic plan and achievement of the DGCOMP targets allowed, as expected, a very posi-
tive evolution in the performance of NOVO BANCO's recurrent banking activity.

2. Directorate-General Competition – European Commission
3. Pending the Monitoring Trustee’s certification due in May 2021;
4. In view of the fulfilment of the commitments for 2019, this latter restriction ceased to be effective in July 2020. However, the Bank opted to maintain this cap, keeping its
remuneration policy unchanged.
5. Pending the Monitoring Trustee’s certification due in May 2021;

3.0

Title: Depois da Chuva
Author: Marta Vieira Pereira

3.1 Economic Context

2020 was inexorably marked by the Covid-19 pandemic, which infected 83.9 million people and caused 1,8
million deaths globally. Economic activity was severely affected by the containment and mitigation measures
adopted in most countries - which included periods of mandatory lockdown and restrictions on production
in several industry sectors -, as well as by fears of contagion and of unknown impacts on the economy (e.g. unem-
ployment), postponing household consumption decisions. The high level of uncertainty in turn penalised companies’
productive investment. In this context, international trade flows fell by 6.5% in 2020, with a 17,6% YoY downfall in May.

The world economy contracted by 3.5% in the year, with GDP falling by 4.9% in the advanced economies and by 2,4%
in the emerging economies. In the US, GDP retreated by 3.5% in 2020. The US unemployment rate rose to a peak
of 14,8% of the labour force in April, subsequently subsiding to 6.7% at the end of the year, above the 3.5% seen in
January. In the Eurozone, where restrictions to activity were more prolonged and severe, the economy shrank by 6.6%.
Unemployment rose from 7.4% to 8.3% of the labour force, being assuaged by the employment and income protection
public policies implemented in the various countries. The number of hours worked, however, actually slumped by close
to 15% YoY in 2Q20, with the first period of confinement.

In Portugal, which registered 414,000 cases and 6,900 deaths from Covid-19 in 2020, GDP fell by 7.6% in the year. This
is broadly the cumulative contraction suffered by the Portuguese GDP between 2009 and 2013, during the sovereign
debt crisis. Although Covid-19's reach was by nature widespread and global, its economic impacts across countries,
industry sectors, and groups within each economy were asymmetrical, spawning increased inequality. In the Eurozone
the peripheral economies were more affected than the core economies. This is because they were more exposed to
the tourism and hospitality services industries, which were particularly penalised by the pandemic, and also due to their
weaker budgetary capacity to allay the effects of the crisis.

The sharper effects of the pandemic on the Portuguese economy were felt in 2Q20, upon the first lockdown, with GDP
retreating by 13.9% QoQ and 16.3% YoY. Activity partially recouped in the second half of the year, with 13.3% growth
in 3Q20 and 0.2% growth in 4Q20, in spite of a second wave of the pandemic forcing new restrictions. The tourism
accommodation sector was particularly penalised, with the number of guests and overnight stays at one point falling
as low as by 95% YoY, or 99% in the case of non-resident overnight stays. At the end of the year the sector's activity
was still 76% lower than in the same period in 2019. With trade and restaurants also severely hit, turnover from services
contracted by around 15% in the year. Industrial production retreated by 7% in 2020, after hitting a low of nearly 30%
YoY. Industrial activity was quicker to take off in 2Q20, as seen in the recovery of exports of goods and in particular of
agrifood goods. Even so, exports of goods and services as a whole fell 18.6% in real terms in 2020, contributing to a
decline in the external account surplus, from 0.8% to close to 0% of GDP. This despite a significant (and forced) increase
in household savings, to 10.8% of disposable income by 3Q20, and a sharp contraction in imports.

The adverse effects of the pandemic were mitigated by several stabilisation measures, including, among others, em-
ployment and income protection schemes (such as simplified layoff and support for the gradual resumption of business
activity), State guarantees for loans taken by companies of up to €13bn (or 6,8% of GDP), mainly operated by the
banking sector, and the deferral of taxes and social contributions (for an estimated €7.9bn, or 37% of GDP). A moratoria
scheme for loans to companies and individuals affected by the pandemic was approved, which reached 21,5% of total
loans. And certain regulatory and macro-prudential requirements imposed on the banking sector were temporarily
relaxed.

Together, these measures definitely limited the negative impacts of Covid-19 on the labour and housing markets. The
average unemployment rate rose from 6.5% to 6.8% of the labour force, even if at some point the number of hours
worked in industry and services fell by as low as 25% to 30% YoY. Home prices also proved resilient, decelerating from
10.3% to 7.1% YoY between 1Q20 and 3Q20. In this context, the banking sector's NPL ratio prolonged in 2020 the
downward trend of recent years, falling from 6.2% to 5.3% between the end of 2019 and 3Q20. The budgetary support
measures and the activity downturn pushed up the budget and public debt deficits to around 7.3% and 136% of GDP
respectively.

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESOverall, the pandemic significantly accelerated some existing structural trends. Chief among these are the digitisation
of economic activity, namely featuring significant growth in online trade and entertainment, as well as in electronic
payments. The disruption of productive activity during the first wave of the pandemic led to adjustments in value
chains, so as to mitigate their risks, to the benefit of locally or regionally based chains. Health restrictions forced a
reorganisation and flexibilisation of labour in companies, including - where possible - a generalisation of teleworking.
Families and companies became more selective in their spending, with the former favouring the acquisition of food
and certain durable goods, associated with staying and working at home for longer periods. Sustainability gained more
visibility, both in terms of consumer requirements and in terms of corporate practices and communication, leading to
an increase in the relative weight of ESG investment in the financial markets.

On top of Covid-19, economic activity and financial markets were also marked in 2020 by some political uncertainty
factors. With Brexit implementation completed at the end of January, negotiations between the EU and the UK on their
future trade relationship dragged on until the end of the year, with the threat of a hard Brexit after the transition period
conditioning investment decisions. The agreement reached in December avoided the imposition of tariffs and quotas,
but introduced frictions in the free movement of people, goods and services between the two economies. Financial
services were not part of the agreement and will be subject to separate discussions in 2021. The pound lost 5.6%
against the euro in the full year. Other factors of political uncertainty included the lingering of trade tensions between
the US and China, despite the "Phase One" agreement in January, and the US Presidential and Congressional elections
in November, after several months of political and social instability in the country. These factors fuelled some volatility
in the financial markets.

In response to the deterioration of activity caused by the pandemic, the main central banks intensified the expansionary
stance of monetary policy in 2020. In the US, the Federal Reserve lowered the fed funds target rate from 1.5%-1.75%
to 0%-0.25% and expanded its balance sheet from $4.2tn to $7.4tn, through the creation of several liquidity injection
programmes. The Fed also announced in August a major change to its monetary policy framework, aiming for average
inflation of 2% over time, in a suggestion of greater tolerance to possible inflation overshooting. In the Eurozone, the
ECB maintained the key rates unchanged (refinancing rate at 0% and deposit facility rate at -0.5%), but significantly
increased its purchases of debt securities, creating new programmes (PEPP, PELTRO), reinforcing those already in
place (PSPP), and easing restrictions on the purchase of debt from the peripheral economies. The ECB balance sheet
expanded from €4.7tn to close to €7tn in the year. The strong monetary stimuli averted liquidity constraints during the
Covid-19 crisis by maintaining favourable financing conditions, particularly in the peripheral economies most affected
by the pandemic.

This stance of the Central Banks was made possible by the persistence of low levels of inflation. Although following a
rising trend from a low of 0.1% in May, year-on-year inflation in the US fell from 2.5% to 1.4% in 2020. In the Eurozone
year-on-year inflation slid from 1.4% to -0.3% in 2020, entering negative ground as from August. In addition to falling
economic activity and cuts to indirect taxes, the decline in oil prices (by an annual average of -32.5% for Brent) also
pressured down inflation.

Fiscal policy also took on a strongly expansionary stance in the main economies. In the US, the Federal deficit rose in
2020 from 6.3% to 18.7% of GDP, not only through the effect of dwindling activity but also reflecting the two stimulus
packages approved by Congress in March and December, totalling $2tn and $900mn, respectively. In the Eurozone,
where fiscal support included employment protection measures, tax cuts or deferrals, subsidies to companies, and,
at another level, State guarantees to loans, the combined public deficit surged from 0.6% to 10.1% of GDP. The EU
approved a Recovery Fund (Next Generation EU) with an estimated allocation of €750bn, in part funded by common
debt issues, including more than €312bn in outright grants.

The retrenchment of inflation and inflationary expectations, combined with the ECB's expansionary stance, pushed the
3-month Euribor from an annual high of -0.16% in April down to -0.545% at the end of the year. Following a period of
high volatility between March and June, the yield on the 10-year Bund went on a downward slide, to close the year
at -0.569%. The spread on the 10-year PGB remained tight, closing the year at 60 bps (vs. 63 bps at the start of the
year and 134 bps at the end of 1Q20). Portuguese debt benefited from a relatively favourable external perception of
the Portuguese economy, from the ECB's purchase of Portuguese debt, and from the optimism generated around the
announcement of the European Recovery Fund.

NOVO BANCO MANAGEMENT REPORT 2020This context of ample liquidity, aggressive fiscal stimuli, and, in the context of a more digital economy, the attractive-
ness of the technology industry, drove a strong rally in the stock market, from its lows in March. The S&P 500 and Euro
Stoxx 600 climbed by 67.9% and 42.7% respectively, after hitting those lows. In the full year, the S&P 500 gained 16.3%,
while the Euro Stoxx 600 fell 4%. The Nasdaq went up by 87.9% since its low in March and by 43.6% in the full year.
An environment of risk propensity in financial markets and the more accommodative posture of the Federal Reserve
penalised the dollar, which retreated by 7% in real terms. Against the US currency, the euro advanced by 8.8%, to
€/US$ 1.222.

3.2 Highlights

During 2020, NOVO BANCO transferred the Spanish Branch to discontinued operations, in line with the decision to
discontinue the Spanish business. Thus, for comparison purposes only, 2019 is presented pro-forma.

Highlights

• NOVO BANCO delivered €189.0mn of adjusted6 recurrent income before taxes, generated from a recurrent

commercial banking income of €787.8mn (+1.7% YoY) and operating costs of €418.6mn (-0.6% YoY).

• Completion of balance sheet clean-up, with a YoY reduction of legacy assets of 31.2% or -€1.400mn,
of which loans to customers (net) (-26.3%; -€359mn), real estate (-28.8%; -€235mn) and other assets
(-35.1%; -€806mn); A 79% reduction in total legacy assets has been achieved in the 3 years since Dec.17.

• Reduction of non-performing loans (NPL) ratio to 8.9%, being 3.2 pp lower YoY and leading to a NPL coverage

ratio of 74.1% (Dec.19: 56.5%).

• Contingent Capital Agreement (CCA)

- As a result of the losses in the CCA assets and regulatory capital requirements, NOVO BANCO will request

€598.3mn under the Contingent Capital Agreement;

- The total amount of the requested payments from 2017 to 2019, and to be called in 2020, is €3.57bn. The

maximum amount of compensation established in the CCA is €3.89bn.

Continued improvement in recurrent profitability

• NOVO BANCO increased its recurrent core operating income (commercial banking income – operating costs) to

€369.1mn (+4.5% YoY), as a result of:

- Higher recurrent commercial banking income (2020: €787.7mn; +1.7% YoY), supported by an improvement in net

interest income (+€52.3mn; +11.3% YoY);

- Lower operating costs (-0.6% YoY), benefiting from the implementation of cost optimization measures along

with efficient and automatized processes.

• The YoY growth of €177.6mn in recurrent impairments and provisions (Dec.20: €386.0mn, Dec.19: €208.4mn)
reflects the impact of the Covid-19 pandemic (€250.7mn). Without this effect, impairments and provisions would
total €135.3mn, well below 2019 values;

• Recurrent loan volumes increased by +2.2% YoY (+€492mn) building on the momentum of the previous year

(2019: +5.6%; +€1,303mn);

6. After adjusting for Covid-19 provisions (€250.7mn) and losses from the Liability Management Exercise (LME; -€24.8mn)

NB customers’ continued confidence in NOVO BANCO;

• NPL ratio of the recurrent activity was 3.2% (Dec.19: 3.5%), with a coverage ratio of 88.0% (Dec.20: 69.5%).

Completion of the restructuring process

NOVO BANCO Group's results and activity for the financial year of 2020 reflect the deleveraging of legacy assets,
discontinuation of the Spanish business, additional imairment of non-performing loans and the impact of the Covid-19
pandemic, resulting in a consolidated net income at -€1,329.3mn (of which legacy accounted for -€1,198.9mn).

In Dec.20, NOVO BANCO legacy assets totalled €3.1bn, representing a substantial YoY reduction of 31.2% or
-€1,400mn. The lower exposure of NOVO BANCO to legacy assets is a result of:

• A reduction in non-performing loans (NPL) stock of -€814mn YoY to €2,498mn, leading to a NPL ratio of 8.9%

(Dec.19: 12.0%);

• A reduction in the stock of real estate assets of -€235mn YoY to €582mn, thus reducing its exposure as % of total

assets to 2.0% (vs Dec.19: 2.5%);

• An independent valuation assessment of the restructuring funds, including appraisals of underlying assets, which

resulted in a €300.2mn loss.

In light of the execution of the deleveraging plan and reflecting the slowdown of economic activity and market
volatility due to the Covid-19 pandemic, the Bank recorded increased credit impairments of €736.1mn in the period.
The additional impairments for credit, guarantees and securities risk specifically arising from the Covid-19 pandemic
totalled €268.8mn.

NOVO BANCO continues to deliver on its plan, targets and commitments assumed by the Portuguese Government
with respect to DGComp.

The Bank has strong liquidity, which leaves it well positioned to continue supporting its retail and corporate customers.

NOVO BANCO MANAGEMENT REPORT 2020MAIN HIGHLIGHTS - CONSOLIDATED

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

31-Dec-20

ACTIVITY (mn€)

Net Assets

Customer Loans (gross)

Customer Deposits

Equity

SOLVENCY (3)

Common EquityTier I / Risk Weighted Assets

Tier I / Risk Weighted Assets

Total Capital / Risk Weighted Assets

LIQUIDITY (mn€)

European Central Bank Funding (2)

Eligible Assets for Repo Operations (ECB and others), net of haircut

(Total Credit - Credit Provision) / Customer Deposits (1)

Liquidity Coverage Ratio (LCR) (3)

Net Stable Funding Ratio (NSFR) (3)

ASSET QUALITY

Overdue Loans > 90 days / Customer Loans (gross)

Non-Performing Loans (NPL) / (Customer Loans + Deposits with banks and Loans
and advances to banks)

Credit Provision / Overdue Loans > 90 days

Credit Provision / Customer Loans (gross)

Cost of Risk

PROFITABILITY

45 296

27 055

27 835

4 003

13.5%

15.1%

4 714

15 253

92%

143%

101%

4.0%

11.8%

171.0%

6.8%

2.32%

45 296

44 396

25 396

25 217

25 966

26 093

4 003

3 147

13.5%

15.1%

11.3%

13.3%

4 714

4 740

15 253

16 684

92%

143%

101%

4.0%

12.0%

90%

144%

113%

2.4%

8.9%

178.6%

262.2%

7.1%

2.13%

6.3%

2.08%

Net Income for the Period (mn€)

-1 058.8

-1 329.3

Income before Taxes and Non-controlling interests / Average Net Assets (1)

Banking Income / Average Net Assets (1)

Income before Taxes and Non-controlling interests / Average Equity (1)

EFFICIENCY

Operating Costs / Banking Income (1)

Staff Costs / Banking Income (1)

EMPLOYEES (No.)

Total

- Domestic

- International

BRANCH NETWORK (No.)

Total

- Domestic

- International

-2.1%

0.9%

-22.3%

113.8%

63.1%

4 869

4 648

221

387

375

-2.1%

0.6%

-2.9%

1.4%

-22.3%

-32.0%

156.1%

87.7%

4 671

4 648

376

375

69.9%

39.7%

4 582

4 560

359

358

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
(1) According to Banco de Portugal Instruction n. 16/2004, in its version in force
(2) Includes funds from and placements with the ESCB; positive = net borrowing; negative = net lending
(3) Preliminary

ACTIVITY (mn€)

Net Assets

Customer Loans (gross)

Customer Deposits

ASSET QUALITY

Non-Performing Loans (NPL) / (Customer Loans + Deposits with banks and Loans
and advances to banks)

Credit Provision / Overdue Loans > 90 days

Credit Provision / Customer Loans (gross)

Cost of Risk

PROFITABILITY

Net Income for the Period (mn€)

Income before Taxes and Non-controlling interests / Average Net Assets (1)

Banking Income / Average Net Assets (1)

Income before Taxes and Non-controlling interests / Average Equity (1)

EFFICIENCY

Operating Costs / Banking Income (1)

EMPLOYEES (No.)

Total

- Domestic

- International

BRANCH NETWORK (No.)

Total

- Domestic

- International

31-Dec-19

40 814

24 380

27 835

31-Dec-19
Pro-forma*
(exc. Spain)

31-Dec-20

40 814

22 835

25 966

41 314

23 327

26 093

3.6%

68.3%

2.6%

0.91%

177.6

0.4%

2.1%

5.3%

3.5%

69.5%

2.6%

0.87%

177.6

0.4%

2.0%

5.3%

3.2%

88.0%

3.1%

1.34%

-130.4

-0.2%

1.7%

-2.7%

54.9%

52.3%

58.3%

4 869

4 648

221

387

375

4 671

4 648

376

375

4 582

4 560

359

358

MAIN HIGHLIGHTS - LEGACY

ACTIVITY (mn€)

Net Assets

Customer Loans (gross)

ASSET QUALITY

Non-Performing Loans (NPL) / (Customer Loans + Deposits with banks and Loans
and advances to banks)

Credit Provision / Overdue Loans > 90 days

Credit Provision / Customer Loans (gross)

Cost of Risk

PROFITABILITY

Net Income for the Period (mn€)

Income before Taxes and Non-controlling interests / Average Net Assets (1)

Banking Income / Average Net Assets (1)

Income before Taxes and Non-controlling interests / Average Equity (1)

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

31-Dec-20

4 482

2 675

81.3%

51.7%

45.2%

15.15%

4 482

2 562

3 082

1 890

83.1%

76.2%

51.9%

46.6%

13.33%

67.3%

46.6%

11.26%

-1 236.4

-1 198.9

-7.1%

-2.5%

-70.7%

-14.3%

-6.2%

-31.7%

-2.6%

-142.6%

-230.6%

NOVO BANCO MANAGEMENT REPORT 20203.3 Recurrent and Legacy

As in 2018 and 2019, NOVO BANCO discloses its full year 2020 results presenting separately the financial
results of NOVO BANCO Recurrent, which include all the core banking activity, and those of NOVO BANCO
Legacy, which includes loans to clients, integrating not only loans included in the CCA, as well as other credits,
bonds, real estate and discontinued operations, mostly considered as non-strategic in the commitments imposed by
DGCOMP after the resolution, therefore, all the references in this report must take in consideration this segmentation.

NOVO BANCO considers that differentiating between NOVO BANCO Recurrent and NOVO BANCO Legacy will allow
customers and other stakeholders to better understand the progress of the Bank’s ongoing restructuring.

3.3.1 NOVO BANCO Recurrent
Results

In 2020, NOVO BANCO Recurrent achieved an income before taxes of €189.0mn, adjusted by credit and securities
impairments arising from the Covid-19 pandemic (€250.7mn) and results of the Liability Management Exercise (LME;
-€24.8mn) performed in 4Q20.funding, the expansion of the loan volume and continued focus on pricing policy.

INCOME STATEMENT

Net Interest Income

Fees and Commissions

Commercial Banking Income

Capital Markets Results

Other Operating Results

Banking Income

Operating Costs

Net Operating Income

Restructuring funds - independent valuation

Net Impairments and Provisions

Credit

Securities

Other Assets and Contingencies

Income before Taxes

Corporate Income Tax and Special Tax on Banks

Income after Taxes

Non-Controlling Interests

Net Income for the period

Income before taxes

Covid Impairment

LME

Normalized Income Before Taxes

Recurrent

até
31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

Change

31-Dec-20

absolute

491.2

320.7

811.9

72.2

- 45.5

838.6

460.8

377.8

0.0

202.5

222.4

3.5

- 23.4

175.3

-10.6

185.8

8.2

177.6

464.7

309.5

774.3

71.9

- 41.5

804.7

421.0

383.7

0.0

208.4

199.1

3.6

5.7

175.3

-10.6

185.8

8.2

517.0

270.6

787.7

-23.1

-46.4

718.2

418.6

299.6

0.0

386.0

311.6

41.7

32.6

-86.4

48.3

52.3

-38.9

13.4

-95.0

-4.9

-86.5

-2.4

-84.1

0.0

177.6

112.6

38.2

26.9

-261.7

58.9

-134.7

-320.6

-4.4

-12.6

177.6

-130.4

-308.0

-86.4

-250.7

-24.8

189.0

11.3%

-12.6%

1.7%

...

-11.8%

-10.8%

-0.6%

-21.9%

...

85.2%

56.5%

...

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

31-Dec-20

mn€

NET INTEREST INCOME (NII) AND
NET INTEREST MARGIN (NIM)

Average
Balance

Avg. Rate

Income /
Costs

Average
Balance

Avg. Rate

Income /
Costs

Interest earning assets

Customer Loans

Money Market Placements

Securities and Other Assets

35 237

23 902

1 056

10 279

1.86%

2.23%

0.01%

1.18%

Interest earning assets and other

35 237

1.86%

666

543

123

666

35 892

1.75%

22 593

2.20%

2 689

-0.07%

10 610

1.27%

35 252

1.79%

Interest bearing liabilities and
other

NIM /NII (without stage 3
impairment adjustment)

Stage 3 impairment

NIM / NII

35 237

0.48%

172

35 252

0.33%

1.38%

1.37%

494

- 3

491

1.46%

1.44%

640

505

- 2

137

640

117

523

- 6

517

Net interest income increased by €52.3mn compared to Dec.19, to €517.0mn (+11.3%), reflecting an improved cost of
funding, the expansion of loan volumes and a continued focus on pricing policy.

Compared with the previous financial year, there was an increase in the average volumes of loans (excluding the effect
of the transfer of the Spanish Branch to discontinued operations). The competitive market conditions, origination of
guaranteed credit lines, and the consequent pressure on interest rates on loans to companies resulted in a marginal
decrease in average interest rates to 2.20%.

Continued liability management led to a reduction of the average cost of funding from 0.48% to 0.33%. The net interest
margin was 1.44%, above the margin achieved in 2019 (1.37%).

Fees and commissions on banking services contributed +€270.6mn, which compares with +€309.5mn in the previous
year (-12.6%). The decrease occurred across all products lines, reflecting the impact of Covid-19 on the economy, and
client activity.

The Capital markets results were negative at -€23.1mn, of which -€24.8mn was from the Liability Management
Exercise performed in 4Q20. Total Group securities portfolio amounts to circa €11.4bn, of which about €6.5bn relates
to sovereign debt which is marked to market with changes in fair value booked in reserves. At the end of 2020 the fair
value reserve on this portfolio was €364mn, being higher YoY (Dec.19: €331mn).

Other Operating Results of -€46.4mn, including €35mn of contributions to the resolution funds.

Operating costs totalled €418.6mn, a slight decrease of -0.6% YoY, which, notwithstanding the investment in the core
business and in digital transformation, reflects continued focus on cost optimization.

Core operating income (commercial banking income net of operating costs) reached €369.1mn, +4.5% compared with
previous year.

The cost of risk reached 134bps, an increase comparing to 2019, due to the impact of the Covid-19 pandemic which
resulted in credit impairments of €200.7mn. Without this effect, the cost of risk was 48bps.

NOVO BANCO MANAGEMENT REPORT 2020Activity

Throughout 2020, net assets increased by €500mn (+1.2%), with net customer loans growing by 1.7% (+€374mn)
compared to Dec.19. The growth in corporate loans reflects the continued support of domestic companies, across
all economic sectors, with a focus on small and medium-sized enterprises (SMEs) and the establishment of Covid-19
related credit lines to corporate customers.

Recurrent activity

Customer loans (net)

Real estate

Other assets

Total Net Assets

Total Liabilities and Equity

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

YTD Change

31-Dec-20

absolute

23 735

307

16 772

40 814

22 234

22 608

306

18 274

40 814

299

18 406

41 314

374

-7

132

500

mn€

1.7%

-2.2%

0.7%

1.2%

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Comparing to 2019, the recurrent asset quality indicators showed an improvement as the NPL ratio reduced to 3.2%
and the coverage ratio increased +18.6pp to 88.0%.

Customer loans

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

YTD Change

31-Dec-20

absolute

Customer Loans (gross)

Corporate

Residential Mortgage

Consumer finance and other

Non-Performing Loans (NPL)¹

Impairment

NPL Ratio¹

NPL coverage¹

Cost of Risk (bps)

24 380

12 925

10 100

1 355

946

645

3.6%

68.3%

22 835

23 327

11 727

9 909

1 199

866

601

3.5%

12 311

9 857

1 158

817

718

492

585

- 52

- 41

- 49

118

3.2%

-0.4 p.p.

69.5%

88.0%

18.6 p.p.

134

mn€

2.2%

5.0%

-0.5%

-3.4%

-5.6%

19.6%

…

1 Includes Deposits and Loans and advances to Banks and Customer Loans
* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOVO BANCO Legacy reported a loss of -€1,198.9mn in the financial year 2020. This result includes the following
significant items:

•

independent assessment of the Bank's investment in restructuring funds based on a third party valuation, including
appraisals of underlying assets, with a negative impact of -€300.2mn;

• net

impairments and provisions of -€805.5mn,

the discontinuation of Spanish activities
(-€166.0mn), the provision for restructuring (-€123.9mn), and higher credit costs (loans to customers, guarantees
and financial institutions).

including

Income Statement

Net Interest Income

Fees and Commissions

Commercial Banking Income

Capital Markets Results

Other Operating Results

Banking Income

Operating Costs

Net Operating Income

Restructuring funds - independent
valuation

Net Impairments and Provisions

Credit

Securities

Other Assets and Contingencies

mn€

-20.1%

-54.5%

-22.0%

81.7%

68.4%

80.1%

-25.1%

78.3%

31-dez-19
Pro-forma*
(exc. Espanha)

31-Dec-19

Change

31-Dec-20

absolute

49.4

2.7

52.2

- 269.0

- 201.5

-418.3

17.7

-436.0

0.0

732.9

405.1

- 3.7

331.5

47.7

2.7

50.5

- 269.6

- 285.2

- 504.4

17.7

-522.1

38.1

1.3

39.4

- 49.5

- 90.1

-100.2

13.2

-113.5

- 9.6

- 1.5

- 11.1

220.2

195.1

404.2

-4.4

408.6

646.8

341.5

- 3.7

308.9

805.5

212.8

- 0.7

593.4

0.0

- 300.2

-300.2

...

158.7

- 128.7

2.9

284.5

- 50.3

- 97.9

47.7

10.2

37.5

24.5%

-37.7%

79.8%

92.1%

-4.3%

...

3.8%

64.0%

3.0%

Income before Taxes

-1 168.9

-1 219.1

Corporate Income Tax and Special Tax
on Banks

83.4

-14.5

Income after Taxes

-1 252.3

-1 204.6

Non-Controlling Interests

-15.9

-5.7

Net Income for the period

-1 236.4

-1 198.9

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

There are no liabilities directly allocated to the legacy activity. Funding costs for legacy assets are calculated based on
the Group’s average balance sheet funding rate (0.34%).

NOVO BANCO Legacy assets decreased by €1,400mn (-31.2%) compared to Dec.19, underpinned by a reduction of the
net loan book of €359mn (-26.3%), real estate assets €235mn (-28.8%), and other assets, which includes restructuring
funds, €806mn (-35.1%).

NOVO BANCO MANAGEMENT REPORT 2020Legacy activity

Customer loans (net)

Real estate

Other assets

Total Net Assets

Total Liabilities and Equity

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

YTD Change

31-Dec-20

absolute

1 467

829

2 186

4 482

1 368

818

2 297

4 482

1 009

582

1 491

3 082

- 359

- 235

- 806

-1 400

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Customer loans

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

YTD Change

31-Dec-20

absolute

Customer Loans (gross)

Corporate

Residential Mortgage

Consumer finance and other

Non-Performing Loans (NPL)¹

Impairment

NPL Ratio¹

NPL coverage¹

Cost of Risk (bps)

2 675

2 307

165

203

2 485

1 208

81.3%

51.7%

1 515

2 562

2 194

165

203

2 446

1 194

83.1%

51.9%

1 333

1 890

1 562

153

175

1 681

881

76.2%

67.3%

- 672

- 632

- 11

- 28

- 765

- 312

-6.9 p.p.

15.3 p.p.

1 126

-207

1. Includes Deposits and Loans and advances to Banks and Customer Loans
* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations. which occurred in the third quarter of 2020

mn€

-26.3%

-28.8%

-35.1%

-31.2%

mn€

-26.2%

-28.8%

-6.9%

-13.9%

-31.3%

-26.2%

…

3.4 NOVO BANCO Group (Consolidated)

3.4.1 Results

NOVO BANCO Group reported a net loss of -€1,329.3mn in financial year 2020, including the following:

• a negative impact of €300.2mn as a result of the independent valuation of restructuring funds;

• €1,191.5mn of impairments and provisions, resulting from the discontinuation of the business in Spain and higher
credit risk (loans to customers, guarantees and financial institutions), including €268.8mn of additional impairment
for credit risks arising from Covid-19; and

•

€123.9mn increase in provisions for restructuring.

31-Dec-19

Change

31-Dec-20

absolute

Net Interest Income

Fees and Commissions

Commercial Banking Income

Capital Markets Results

Other Operating Results

Banking Income

Operating Costs

Net Operating Income

Restructuring funds - independent
valuation

Net Impairments and Provisions

Credit

Securities

Other Assets and Contingencies

- 40.4

-12.9%

31-Dec-19
Pro-forma*
(exc. Spain)

512.4

312.3

824.7

- 197.7

555.1

271.9

827.0

- 72.5

-326.8

- 136.6

300.2

438.7

-138.4

617.9

431.8

186.1

540.6

323.5

864.1

- 196.8

- 247.0

420.3

478.5

- 58.2

42.7

2.3

125.2

190.2

317.7

- 6.8

324.5

0.0

- 300.2

935.4

627.5

- 0.2

308.1

855.1

540.6

- 0.1

314.7

1 191.5

336.3

524.4

41.0

626.0

- 16.1

41.1

311.4

mn€

8.3%

0.3%

63.3%

58.2%

...

-1.6%

...

39.3%

-3.0%

...

98.9%

Income before Taxes

- 993.6

-993.6

-1 305.6

- 312.0

-31.4%

Corporate Income Tax

Special Tax on Banks

45.8

27.1

45.8

27.1

1.1

32.8

- 44.7

-97.6%

5.7

20.9%

Income after Taxes

-1 066.5

-1 339.4

- 272.9

-25.6%

Non-Controlling Interests

-7.7

- 7.7

- 10.1

- 2.4

-31.6%

Net Income for the period

-1 058.8

-1 329.3

- 270.5

-25.5%

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The most relevant aspects of the combined activity during the year of 2020 include the following:

• Commercial banking income at €827.0mn, stable YoY with the increase in Net Interest Income (+8.3%), offsetting

the decrease in Fees and commissions (-12.9%; given Covid-19 impact on the economy and client activity);

• Capital markets results at -€72.5mn, reflecting volatility in the financial and capital markets during 2020 and the

results of the Liability Management Exercise (LME; -€27mn);

• The 2.4% YoY increase of Core operating income (commercial banking income – operating costs), backed by higher
Net Interest Income (+8.3%) and lower Operating costs (-1.6%), reflecting the ongoing recalibration of the business
model and optimisation of the corporate structure, leading to an improvement of Bank’s efficiency ratios;

• The provision charge in the period, totalling €1,191.5mn, includes €268.8mn impact of the Covid-19 pandemic,
€550.2mn from impairments and provisions, resulting mainly from higher impairment charges in Legacy assets, and
the discontinuation of the business in Spain (€166.0mn).

NOVO BANCO MANAGEMENT REPORT 2020

Net Interest Income

The reduction in the average interest rate on assets of 5bps YoY (from 1.82% to 1.77%) was offset by the reduction of
14bps average interest rate on liabilities. That resulted in a net interest margin increase of 9bps YoY (from 1.32% to
1.41%).

31-Dec-19

31-Dec-20

mn€

Net interest income (NII) and
net interest margin (NIM)

Average
Balance

Avg. Rate

Income /
Costs

Average
Balance

Avg. Rate

Income /
Costs

745

601

385

127

125

745

196

38 597

1.77%

24 939

13 624

9 987

1 328

2 993

10 665

2.13%

2.42%

1.20%

6.24%

0.54%

1.26%

38 597

1.77%

36 769

0.35%

25 775

0.27%

9 913

1 081

1 828

-0.13%

6.70%

694

541

335

122

137

694

132

- 13

Interest earning assets

40 344

1.82%

Customer Loans

28 558

2.08%

Corporate

Mortgage

Consumer & Others

Money Market Placements

17 131

9 860

1 567

1 442

Securities and Other Assets

10 344

2.22%

1.27%

5.58%

1.32%

1.19%

Interest earning assets and other

40 344

1.82%

Interest bearing liabilities

37 960

0.51%

27 949

8 931

1 080

2 383

0.34%

0.28%

6.68%

Customer Deposits

Money Market Funding

Other Liabilities

Other non-interest bearing
liabilities

Interest bearing liabilities and
other

NIM / NII (without stage 3
impairment adjustment)

Stage 3 impairment

NIM / NII

40 344

0.48%

196

38 597

0.34%

132

1.34%

1.32%

549

- 9

541

1.43%

1.41%

561

- 6

555

The average rate on customer loans was 2.13%. The average balance of deposits was €25.8bn, with an average interest
rate of 0.27%, and Money Market Funding was €9.9bn, with -0.13% average interest rate, benefiting in part from the
conditions of the ECB long-term refinancing operations (TLTRO III).

The Group therefore continued to increase the spread between the rate on interest earning assets (1.77%; Dec.19:
1.82%) and the cost of liabilities (0.34%; Dec.19: 0.48%) with a positive impact on overall net interest margin (1.41%;
Dec.2019: 1.32%).

Fees and commissions on banking services contributed +€271.9mn which compares with +€312.3mn in 2019, -12.9%
YoY given lower levels of transactions and banking activity in Portugal.

Fees and commissions

31-Dec-19

Payments Management

Commissions on Loans, Guarantees and
Similar

Asset Management and Bancassurance

Advising, Servicing and Other

117.2

107.8

71.5

26.9

31-Dec-19
Pro-forma*
(exc. Spain)

mn€

Change

31-Dec-20

absolute

115.6

108.5

-7.1

-6.1%

102.6

65.4

28.8

86.3

61.4

15.6

-16.2

-15.8%

-3.9

-6.0%

-13.2

-45.9%

TOTAL

323.5

312.3

271.9

-40.4

-12.9%

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Operating Costs

Operating costs reduced by -1.6% YoY, reflecting the continued optimisation and simplification of organisational struc-
ture and processes.

Operating costs

31-Dec-16

31-Dec-17

31-Dec-18

31-Dec-19

mn€

Change

31-Dec-20

absolute

31-Dec-19
Pro-forma*
(exc. Spain)

Staff Costs

303.5

275.7

266.1

265.4

246.4

245.6

- 0.8

-0.3%

General and Administrative
Costs

231.4

215.4

199.0

179.5

161.9

153.2

- 8.8

-5.4%

Depreciation

56.1

58.1

22.1

33.7

30.3

33.1

2.7

9.0%

TOTAL

590.9

549.2

487.3

478.5

438.7

431.8

- 6.8

-1.6%

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Staff costs totalled €245.6mn (-0.3% YoY). The significant reduction since Dec.16 (-19.1%) results from the continuous
recalibration of the business model with the aim of increasing efficiency.

Compared to 2019, there was a headcount reduction of 287 employees (including the effect of the transfer of Spanish
Branch to discontinued operations). As at 31 December 2020, NOVO BANCO Group had 4,582 employees (4,869 on
31 December 2019).

General and administrative costs decreased 5.4% YoY, to €153.2mn. This reduction also reflects the continued rationali-
sation and streamlining of the Bank’s internal processes that allowed these costs to reduce by 33.8% in the last 5 years.

As at 31 December 2020 the branch network comprised 359 units (vs Dec.19: 387), of which 358 were in Portugal.

NOVO BANCO MANAGEMENT REPORT 2020

Impairments and Provisions

NOVO BANCO Group increased provisions by €1,191.5mn (+€336.3mn YoY), including a €268.8mn impact from
Covid-19 (customer loans and securities; anticipating losses specifically related to the pandemic), €550.2mn from
impairments and provisions resulting mainly from higher charges in Legacy assets, and the discontinuation of the
business in Spain (€166.0mn).

The cost of risk was 208bps. Excluding the above-mentioned impairment related to the impact of Covid-19, the cost
of risk in the period would have been 121bps.

Net impairments and provisions

31-Dec-19

Customer Loans

Securities

Other Assets and Contingencies

TOTAL

627.5

-0.2

308.1

935.4

Change

31-Dec-20

absolute

31-Dec-19
Pro-forma*
(exc. Spain)

540.6

-0.1

314.7

524.4

41.0

626.0

-16.1

41.1

311.4

336.3

855.1

1 191.5

mn€

-3.0%

...

98.9%

39.3%

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

3.4.2 Balance Sheet and Activity

Customer loans

NOVO BANCO's strategy is one of supporting the domestic business community combined with a robust lending
policy. This support has been provided across all industry sectors and all companies, with an emphasis on exporting
SMEs and those that focus on innovation in their products, services or production systems.

Customer loans

31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

Change

31-Dec-20

absolute

Loans to corporate customers

Loans to Individuals

Residential Mortgage

Other Loans

15 232

11 823

10 264

1 558

13 921

13 873

11 476

11 344

10 108

10 010

1 368

1 333

Customer Loans (gross)

27 055

25 396

25 217

Provisions

1 852

1 794

1 600

Customer Loans (net)

25 202

23 602

23 617

- 47

- 132

- 63

- 69

- 180

-195

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

mn€

-0.3%

-1.2%

-0.6%

-4.9%

-0.7%

-10.8%

0.1%

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURES

NOVO BANCO’s commitment to support corporates and households resulted in the granting of €6.9bn of support
moratoria, representing circa 27% of the gross loan book, along with €1.1bn of guaranteed credit lines granted to
corporates, of which ~92% are already disbursed. The moratoria under the regulatory framework support more than
40,000 clients and represented ~33% of the corporate portfolio, ~20% of the mortgage book and ~16% of Other
individual loans portfolio.

In December 2020, gross customer loans reached €25,217mn, showing a slight YoY decrease (-0.7%) entirely due to
the evolution of the legacy loan book (-€672mn; -26.2% vs Dec.19). In the recurrent activity, loan volumes increased by
2.2%, propelled by the corporate portfolio of +5.0%.

The main credit risk indicators are shown below compared with December 2019:

Asset quality and coverage ratios

31-Dec-19

Overdue Loans > 90 days

Non-Performing Loans (NPL)¹

Overdue Loans > 90 days / Customer Loans (gross)

Non-Performing Loans (NPL)¹ / Customer Loans
(gross) + Deposits with banks and advances to
banks (gross)

31-Dec-19
Pro-forma*
(exc. Spain)

1 005

3 312

4.0%

1 083

3 430

4.0%

mn€

YtD Change

31-Dec-20

absolute

610

2 498

-395

-814

-39.3%

-24.6%

2.4%

-1.5 p.p.

11.8%

12.0%

8.9%

-3.2 p.p.

Credit Provisions / Customer Loans

6.8%

7.1%

6.3%

-0.7 p.p.

Coverage of Overdue Loans > 90 days

171.0%

178.6%

262.2%

83.6 p.p.

Coverage of Non-Performing Loans¹

56.2%

56.5%

74.1%

17.6 p.p.

The reduction in loans overdue by more than 90 days, and in non-performing loans (including deposits with banks and
loans and advances to banks), led to an improvement in the respective asset quality ratios to 2.4% and 8.9%, respectively
(versus 4.0% and 12.0% on Dec.19).

On 31 December 2020, the coverage of non-performing loans by impairments (including deposits with banks and
loans and advances to banks) was 74.1% (+17.6 pp compared to Dec.19).

Provisions for credit amounted to €1.6bn, representing 6.3% of the total loan book.

NOVO BANCO MANAGEMENT REPORT 20203.5 Business Segments

NOVO BANCO focuses its business model on three main segments – domestic commercial banking - retail,
domestic commercial banking - corporate, and asset management –, with digital transformation applying to
all the activities developed.

NOVO BANCO's Digital Transformation emerges from a context of fast-expanding and increasingly intense digital
disruption, with ever higher customer expectations. In 2020 the Bank set as a priority to address the needs created
by the Covid-19 pandemic. With the Covid-related restrictions on mobility and economic impacts, new opportunities
arose to better serve the clients, meet their needs and cement the commercial relationship.

The Bank thus started to provide a set of structural developments:

Onboarding

Account opening remote
solutions, through Digital Mobile
Key / Video Call, for an all-inclusive
and efficient onboarding
experience.

• Average monthly growth rate of 25% (accounts opened

digitally in 2020).

• Reduction of the average time to open an account by up to

80%.

• Reduction of 62,000 litres of water, and elimination of

paper documentation (in 2020).

• International recognition - honourable mention in the
2020 Banking Tech Awards , on top of the accolades
already received in 2019 (Exame informática, Portugal
Digital Awards).

NB smarter

Launch of a new app for Individual
Clients: renewed design and
customer experience, adaptable,
customisable, and predictive
(based on data science), and
offering a wide range of services
and solutions, including the
aggregation of accounts with
other banks.

• Launched in December 2020, this is a new-generation App,
better prepared to address the speciﬁc needs of the less
digitally inclined.

• Broad range of services and solutions plus new

functionalities: i) Balance/ movements enquiries in all
accounts (regardless of the bank where they are held); ii)
Categorisation and automatic organisation of all
transactions allow giving Clients concrete suggestions to
improve their ﬁnancial life.

Homebuying

origin in 2020

• +55% of daily applications and 80% of title deeds with digital

Reinvention of the home buying
experience, from simulation to
title deed. Now with a new branch
platform that completes the
omnichannel experience.
A simpler, faster and more
transparent process.

• 50% of online-sourced applications are from new clients and

of these 25% are from foreign clients

• Up to 55% reduction in the number of clicks to submit a loan

application

• Reduction of 80,000 litres of water, and elimination of paper

documentation

• International Recognition - Shortlisted for Finovate Awards

2020 and Banking Tech Awards 2020

Improves the customer experience
through mobility and sharing,
enabling a remote but close
relationship.
Streamlines processes through
digital signatures with validation
code and handwritten electronic
signature, fostering transparent
relationships.
Adoption of digital processes that
promote a paperless culture.

NBnetwork+

Digital ﬁnancial management
solution for companies, pioneering
in Portugal, that allows a
combined view of bank accounts,
permits to initiate payments, and
whose functionalities improve
companies’ operating efficiency:
Financial calendar, categorisation
of expenses and alerts and
notiﬁcations. Based on analytical
and predictive capabilities.

Small Business
Finance

Digital solution for loans to small
businesses: automated and
integrated access to credit through
the NBnetwork digital channel.
Totally secure, with no need to
deliver any documentation or go
to the branch, and with funds made
available in less than 48 hours.

• Mobile customer service solution made available to 3000

employees.

• Impacts in pilot phase:

- +50% (vs 2019) in homebanking sharing sessions

- Sharp rise in the volume of eligible operations executed

through the new solutions (+55%)

- Environmental impacts in 2020: saving of 199 thousand

litres of water.

• Solution launched in October 2020

• Available to all the companies that use NBnetwork (NOVO

BANCO's Internet Banking)

• Winner in the ‘Best Banking Project’ category of the 2020

edition of the Portugal Digital Awards

• Funds made available to clients in <48 hours

• Greater efficiency: 80% to 100% reduction in process times,

and 100% paperless.

• # of self-service transactions account for 40% of the total

equivalent

• Honourable Mention in the Banking Tech Awards 2020

3.5.1 Corporate

During 2020 NOVO BANCO maintained its role as strategic partner of its corporate clients, at three key levels:

i. providing financial support to small and medium-sized enterprises in the Covid context - by Dec-20 it had granted

€1.1bn under Credit Lines with Mutual Guarantee Entities, covering more than 4,900 clients.

ii. responding to requests for moratoria on loans which to date reach approximately 7,700 corporate clients and total

€4.6bn;

iii. maintaining its focus on the digital transformation of processes, investing on remote relationship and signature
tools to continue to address the needs of its clients quickly but in compliance with the social distancing restrictions
imposed in the Covid context.

NOVO BANCO MANAGEMENT REPORT 2020NOVO BANCO, which continues to be a reference bank for the national companies, has remained faithful to its matrix
of proximity to the business community, seeking, as always, and beyond the financial support, to help companies adjust
their strategies to the new realities, by recognizing that it is more important than ever to share experiences, to learn
more about distribution chains, to receive specialized advice and information on new opportunities, and to access
international markets, among others.

Therefore, in 2020 NOVO BANCO continued to promote and/or participate in several initiatives, aiming at the joint
search for solutions and the promotion of outstanding economic sectors, regions and companies that can be set as a
reference for the remaining national business community. From this set of initiatives, the following stand out:

• Regional and Sector-specific Events "Portugal que Faz" (“Portugal that Does”), an initiative under a partnership
with Global Media, aimed at giving voice to the Business Associations representing the Portuguese business fabric,
by identifying companies’ needs across the board and discussing the necessary solutions to achieve a future of
overcoming and resilience;

• PME Líder: Developed in partnership with Exame magazine, it aims to foster the role of SMEs in the Portuguese
business fabric. In 2020 the newsletters and webinars focused, among others, on security inside and outside
organisations, the acceleration of digital transformation and increasing competitiveness, the ability to adapt to new
business models, the change of production processes, and financial aid.

• Exports and Internationalisation: Portugal Exportador, in partnership with the AIP Foundation and AICEP Portugal

Global, is considered the biggest event for the promotion of exports and internationalisation.

3.5.2 Retail

During 2020, NOVO BANCO remained open and available to serve its clients, and its response included, among others,
the opening of branches and incentives and training on the use of remote and digital channels. The Bank also supported
its clients by setting in motion and making available credit lines to assist companies affected by the crisis, and taking
part in the banking sector's global solution to help families in difficulties due to the pandemic (Moratoria on Mortgage
Loans and Personal Loans).

The following should thus be stressed in terms of the offer:

• The performance in the various lending components, which, after some months of slowdown, consolidated a re-
covery trajectory. Notwithstanding the economic downturn in the last quarter of 2020, Mortgage Loans production
exceeded that of the third quarter, surpassing the established targets and consolidating the quality of the digital
subscription process.

• Production in the Non-Financial Offer, through which the bank regularly launches thematic products, was signifi-

cantly higher than in the previous year.

•

Investment Advisory Service for NB360o clients, which provides the most adequate investment propositions to fit
the profile of each client.

• Process flexibility and digitisation to mitigate the impact of the pandemic on normal commercial activity, namely

with regard to the remote subscription/ formalisation of contracts, proved to be an added value.

• Redefinition of the risk insurance offer, including the launch of: Life Insurance for young adults, who require
protection appropriate to their age and lifestyle, and Insurance for older adults, with a significant increase in
coverage for disability, and expansion of the array of protection for Serious Illnesses.

• Redefinition of the Service-account offer, reflecting sustainability concerns. In the new Service-account products,
the Bank offsets the non-avoided CO2 emissions of all the users of these accounts, making them carbon neutral.

• Regular launch of ESG (Environmental, Social and Governance) Structured Deposits, whose remuneration is linked
to the share performance of companies that stand out for their capacity to lead social and governance changes and
change in environmental criteria.

NBA's strategy of supporting the Azores regional business fabric was developed with rigor, and with a focus on SMEs
and companies that incorporate innovation into their products, services or productive systems. NBA continued to work
closely with its clients, providing support for the pressing and growing needs of the Azorean society.

The activity results had a positive performance compared to the previous year, with banking income and net interest
income increasing by 3.8% and 1.8%, respectively. NBA reported a net profit of €2.8mn, which compares with €4.0mn
in 2019. This reduction was mainly due to the reinforcement of impairments, mainly for credit risks, as a result of the
Covid-19 pandemic, and for real estate.

In 2020, assets increased by €25.8mn (+4.6%), with net customer loans growing by 3.2% (+€11.0mn) compared to
December 2019. The growth in corporate loans reflects the continued support to the regional business community,
across all sectors and all companies, with a focus on SMEs, and the availability of Covid-19 related credit lines for
corporate clients. NBA recorded the lowest amount of non-performing loans in recent years (€7.1mn), corresponding
to a non-performing loans ratio of 1.9% only.

As to customer funds, at the end of the year customer deposits totalled €392.7mn (+7.0% vs. 2019).

BEST - Banco Electrónico de Serviço Total, S.A.

In 2020 the financial markets recorded historically high levels of volatility, with a significant impact on the AUMs of
Banco Best's clients, - which, even so, increased by 6% YoY, to €2,193mn, as well as on the volume of customer loans
(of which 94% collateralised by financial assets), which contracted by 17% YoY, to €123mn, of which only a small
amount in moratoria (€0.3mn). On the other hand, the volume of customer deposits reached €694mn, showing a
significant increase of 27% YoY.

Trading, which, together with Asset Management, is one of BEST's core activities, strongly benefited from this financial
market’s volatility, with the volume of transactions up to December 2020 having more than doubled compared to the
previous year.

As a result, Banco Best recorded a net profit of €1.8mn in 2020.

BEST's strong traditional presence in digital banking is reflected, among others, on the fact that the number of new
clients increased by 28%, with 40% of the new accounts being opened by video call or through the Digital Mobile Key.

In 2020, and all the more so due to the context of the Covid-19 pandemic, BEST pursued its strategy of focusing
on digital banking, on the innovation of its offer of financial products and services - particularly in the area of asset
management -, and on the reinforcement of the independence of the offer, as shown by the following achievements:

Main achievements in 2020

ENRICHMENT OF THE OPEN INVESTMENT PLATFORM (ASSET MANAGEMENT), IN LINE
WITH MARKET TRENDS AND TO BOLSTER MARKET LEADERSHIP:

Business

• Launch of precious metals ETCs (Platinum, gold and silver)
• Exclusive distribution of Mutual Fund (Square Property Core)
• New partnerships: Amundi (ETF ESG), Flossbach von Storch, BlueBay, Natixis and Sixty Degrees
• New post-Covid related “investment themes”: Technology, Health, ESG, Lower interest rates

and A-Commerce.

NOVO BANCO MANAGEMENT REPORT 2020BEST'S NEW APP, FOCUSED ON BANKING SERVICES INTEGRATION AND WITH NEW OPTIONS:

Innovation

• Mutual funds, targeted saving, plus TDs and Auctions
• Equipment and travel insurance
• Cards blocking and unblocking
• Sending of notiﬁcations (SCA)
• Upload of certiﬁcates and document photos for data updates (KYC)

THE INVESTMENT MADE TO SUPPORT THE CORE ACTIVITY GENERATED ADDITIONAL VALUE
FOR THE CLIENT AND INCREASED PROCESS EFFICIENCY:

Structural

• Commercial Dashboard (Capital gains and losses on Funds and Securities)
• Replacement of structure for receiving quotes from stock exchanges
• New approach to the Investor Proﬁle Questionnaire, now with a modular rationale

ASSET MANAGEMENT

Net Profit Evolution
€mn

GNB GA's management remained faithful to its mission
of creating financial value, notwithstanding the disrup-
tion in the financial markets caused by the pandemic
context. In December 2020, in line with the strategy of
focusing on the domestic banking business and divesting
non-strategic assets, Novo Activos Financieros España,
S.A. was sold.

In 2020 income from asset management activities in-
creased by 1.6%, to €8.3mn, with the positive impact of
the disposal of the asset management business in Spain
being partially offset by non-recurrent events.

Highlights in 2020

Mutual Funds:

+1.6%

8.2

8.3

2019

2020

• +28% increase, to €1.1bn, in assets under management of all the funds domiciled in Portugal and Luxembourg.

• Awards: GNB GA earned 5 awards in 2020, in connection to pension funds, bond mutual funds and flexible mutual
funds. The main highlight was the Lipper award in the segment of Euro bond funds sold in Europe. The NB Euro
Bond fund won in this category for the 2nd consecutive year in all three tenors: 3, 5 and 10 years.

• Sustainability: GNB GA continued to take important steps to reinforce the incorporation of sustainability principles.
Having formally adopted ESG criteria in the management of equity funds, the company went on developing other
initiatives to include more products in its offer of funds considered socially responsible.

• GNB GA's management remained faithful to its
mission of creating financial value, pursuing its main
objective of reducing exposure to non-strategic real
estate.

• The volume under management of real estate invest-
ment funds totalled approximately €1,066mn on 31
December 2020 (+2.7% vs 2019).

• The implementation of the project to reorganise the
portfolio of real estate funds managed by the com-
pany, involving the transfer in kind of properties, had
its first phase starting in December.

• GNB RE closed 2020 with a market share of 10.2% (vs

10.4% in 2019).

Wealth Management:

Mutual Funds - AuM
€mn

+28%

1 129

885

312

573

465

665

2019

2020

Portugal

Luxembourg

• Confirming the confidence placed by clients in GNB GA management, the number of clients with discretionary
management portfolios increased to 1,002 (vs 985 in 2019). Including the remaining management contracts, the
amount of assets under management totals €5.1bn.

3.6 NOVO BANCO Separate

Results

NOVO BANCO reported a net loss of €1 374.2mn in 2020, which compares with a net loss of €1 087.6million in 2019.

Commercial banking income reached €812.2mn (+1.4% YoY) driven by the increase in net interest income (+9.7%),
despite lower fees and commissions (-13.9%).

Capital markets results were negative, at €224.2mn, and the impact of the independent evaluation of NOVO BANCO's
restructuring funds had a negative effect of € 300.2mn.

Operating costs decreased by -1.7% YoY, to €402.7mn, reflecting staff cuts and the improvements achieved in terms of
simplifying processes and streamlining the structures.

Net operating income (excluding the extraordinary effect of the independent assessment of restructuring funds) was
positive, at €149.4mn. On the other hand, the evolution of impairments and provisions, which increased by 21.1% YoY,
to €1 195.5mn, was influenced by the impairments associated with the Covid-19 pandemic (€268.8mn).

NOVO BANCO MANAGEMENT REPORT 2020 31-Dec-19

31-Dec-19
Pro-forma*
(exc. Spain)

31-Dec-20

% Change

mn€

Income statement

Net Interest Income

Fees and Commissions

Commercial Banking Income

Capital Markets Results

Other Operating Results

Banking Income

Operating Costs

Net Operating Income

Restructuring funds - independent valuation

Net Impairments and Provisions

Credit

Securities

Other Assets and Contingencies

546.2

295.0

841.1

-313.9

-31.4

495.8

450.7

45.1

0.0

1 067.4

630.9

0.2

436.3

517.6

283.5

801.1

-314.9

-111.6

374.6

409.7

-35.1

0.0

987.1

543.9

0.3

442.9

568.0

244.2

812.2

-224.2

-35.9

552.1

402.7

149.4

-300.2

1 195.5

520.5

40.9

634.1

Income before Taxes

-1 022.2

-1 346.3

Taxes

Special Tax on Banks

Net Income for the year

38.7

26.6

38.7

26.6

-4.2

32.2

-1 087.6

-1 374.2

* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

9.7%

-13.9%

1.4%

28.8%

67.8%

47.4%

-1.7%

...

21.1%

-4.3%

...

43.2%

-31.7%

...

20.8%

-26.4%

Activity

NOVO BANCO’s activity in 2020 was developed under the same guidelines already referred to for NOVO BANCO Group

Activity evolution

31-Dec-19

Assets

Customer Loans (gross)

Loans to Individuals

Residential Mortgage

Other Loans

Loans to corporate customers

On Balance Sheet Funds

Deposits

Other Customer Funds (1)

Debt Securities

Subordinated Debt

45 026

25 046

9 939

8 524

1 415

15 106

28 891

27 419

561

496

415

31-Dec-19
Pro-forma*
(exc. Spain)

45 026

23 367

9 593

8 334

1 259

13 775

27 019

25 547

561

496

415

mn€

Change

31-Dec-20

absolute

44 042

23 332

9 609

8 395

1 214

13 723

26 709

25 557

222

515

415

- 984

- 35

- 44

- 51

- 310

- 340

-2.2%

-0.1%

0.2%

0.7%

-3.5%

-0.4%

-1.1%

0.0%

-60.5%

3.9%

0.0%

(1) Includes checks and pending payment instructions, Repos and other funds.
* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Gross customer loan portfolio remained stable YoY (Dec.20: €23.3bn; Dec.19: € 23.4bn), together with a significant
decrease in non-performing loans (-€808M; -24.8%).

The quality of the loan portfolio at the end of the period shows a transversal improvement in NOVO BANCO's asset
quality, with the Overdue loans >90 days / Gross loans ratio decreasing to 2.6% (Dec.19: 4.3%) and with the NPL
coverage ratio rising to 65.2% (Dec.19: 54.8%).

Asset quality

31-Dec-19

DATA BASIS (Euro millions)

31-Dec-19
Pro-forma*
(exc. Spain)

mn€

Change

31-Dec-20

absolute

Customer Loans (gross)

25 046

23 367

23 332

- 35

-0.1%

Overdue Loans

Overdue Loans > 90 days

Forborne Loans

Non-Performing Loans (NPL)*

Customer Loans Impairment

ASSET QUALITY AND COVERAGE RATIOS (%)

Overdue Loans / Gross Loans to Customers

Overdue Loans > 90 days / Gross Loans to
Customers

Forborne Loans / Gross Loans to Customers

Non-Performing Loans (NPL)* / Gross Loans to
Customers + Gross Loans to Credit Institutions

Impairment / Total Loans to Customers

Impairment / Overdue Loans

Impairment / Overdue Loans > 90 days

Impairment / Non-Performing Loans*

1 097

1 073

2 694

3 372

1 841

4.4%

4.3%

10.8%

12.4%

7.4%

167.8%

171.6%

54.6%

1 009

994

2 536

3 253

1 783

4.3%

10.9%

12.8%

7.6%

176.8%

179.3%

54.8%

616

603

2 054

2 445

1 587

- 393

-38.9%

- 392

-39.4%

- 482

-19.0%

- 808

-24.8%

- 196

-11.0%

2.6%

-1.7 p.p.

2.6%

-1.7 p.p.

8.8%

-2.1 p.p.

9.3%

-3.5 p.p.

6.8%

-0.8 p.p.

257.5%

80.8 p.p.

263.3%

83.9 p.p.

64.9%

10.1 p.p.

* includes Credit Institutions
* Pro-forma values to consider the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOVO BANCO MANAGEMENT REPORT 20203.7 Relevant facts from the activity and
subsequent events

• On 1 September, NOVO BANCO received the Independent Audit Report prepared by Deloitte prepared pursuant to
Law 15/2019. As referred in the note sent by the Ministry of Finance, the audit report "shows that the losses incurred
by NOVO BANCO resulted primarily from exposures to assets that originated in the period of activity of Banco Espírito
Santo and that were transferred to NOVO BANCO within the scope of the resolution".

• On 8 October NOVO BANCO completed the sale of its 25% stake in GNB – Seguros, a non-life insurance company, for
a total consideration of €15.9mn, to Crédit Agricole Assurances, a company of Crédit Agricole Group, which already
held the remaining 75% of the share capital of GNB – Seguros. The transaction also included the renegotiation of the
non-life insurance distribution agreement for the Portuguese market for a period of 22 years. The sale had an expected
positive impact on the income statement of approximately €6mn;

• On 22 October the General Meeting of NOVO BANCO appointed the members of GSB for the 2021-2024 four-year
mandate, subject to authorisation by the competent regulatory authorities, ten members led by Byron Haynes as
Chairman and Karl-Gerhard Eick as Vice-Chairman, including the new member William Henry Newton.

• The GSB also appointed the members to the EBD subject to authorisation by the competent regulatory authorities
for the 2021-2024 mandate. The GSB appointed António Ramalho as Chief Executive Officer, Mark Bourke as Chief
Financial Officer, Luísa Soares da Silva as Chief Legal and Compliance Officer, Rui Fontes as Chief Risk Officer, Luís
Ribeiro as Chief Commercial Officer (Retail) and Andrés Baltar as the new member of the Bank's Executive Board of
Directors as Chief Commercial Officer (Corporate).

• On 11 November NOVO BANCO announced a tender offer on NB Finance’s outstanding bonds.

• On 27 November, NOVO BANCO noted the approval of the legislative proposal no. 61/XIV/2 concerning the Portu-
guese State Budget for 2021, which aims to withdraw the authorisation for the Resolution Fund to transfer additional
funds to NOVO BANCO under the CCA. Considering that the Resolution Fund had met its payment obligations over
the last three years, the Bank trusted it would continue to do so. Also, in this context, the Bank stressed the statement
made by the Portuguese Prime Minister to the President of the ECB where he guaranteed “full compliance with the
commitments undertaken in the framework of the sale of NOVO BANCO”.

• On 22 December, NOVO BANCO, through its subsidiary GNB Gestão de Ativos, S.A., announced the conclusion of
the sale of the total share capital of NOVO ACTIVOS FINANCIEROS ESPAÑA, S.A. (“NAFE”) to TEAM & WORK 5000,
S.L. (“TEAM & WORK”), which holds 100% of the share capital of TREA ASSET MANAGEMENT, S.G.I.I.C., S.A., for a total
amount of €12.9mn. NAFE holds the entire share capital of NOVO BANCO GESTION, S.G.I.I.C., S.A. and NOVO BANCO
PENSIONES, S.G.I.I.C., S.A., and in November 2020 the assets under management totalled €678mn. The sale had an
expected positive impact on the 2020 Income Statement of approximately €3.5mn.

• On 28 December NOVO BANCO informed that following a competitive bid process, on 23 December a Sale and
Purchase Agreement had been signed for the sale of a portfolio of non-performing loans and related assets (together
known as Project Carter), with a gross book value of €79mn, to a company owned by affiliated companies, advised
by AGG Capital Management Limited and Christofferson, Robb & Company, LLC. The sale price was approximately
€37mn, and the completion of the transaction, on the agreed terms, is expected to have a marginal positive impact on
NOVO BANCO's income statement and capital.

• On March 5 2021, NOVO BANCO informed that, following a competitive bid process, it had signed a Sale and Purchase
Agreement with BURLINGTON LOAN MANAGEMENT DAC, a company affiliated with, and advised by, DAVIDSON
KEMPNER EUROPEAN PARTNERS, LLP, for the sale of a portfolio of non-performing loans and related exposures
(also known as Project Wilkinson) with an outstanding balance amount of €216.3mn (still being subject to perimeter
adjustments usual in transactions of this nature). The portfolio sale price totalled €67.5mn, and the completion of the
transaction on the agreed terms is expected to have a marginally positive impact on NOVO BANCO’s capital and its
2021 income statement.

2021 will continue to be marked by the Covid-19 pandemic which, despite the progress being made in terms
of vaccination, which should start yielding results as the year advances, continues to exert acute pressure on
the economy due to the imposition of successive states of emergency, with potential impacts in terms of Credit and
Liquidity Risk.

With the slowdown of the world's main economies, the financial markets sustained large and widespread losses, fore-
shadowing a severe deterioration of the global macroeconomic scenario.

This environment generates risks for all Financial Institutions, namely: i) geopolitical uncertainties; ii) stock of non-pro-
ductive assets and their potential growth; iii) cybercrime and disruption in Information Technology (IT); iv) low interest
rates; and v) growing competition from non-banking entities.

NOVO BANCO MANAGEMENT REPORT 2020Capital,
Liquidity
& Risk

4.0

Title: Sobre o Rio
Author: Francisco Costa

4.1 Capital Ratios

NOVO BANCO’s Common Equity Tier 1 (CET1) is protected at pre-established levels up to the amounts of
losses already recorded on the assets protected by the Contingent Capital Agreement. The amount to be
requested in 2020 (of €598.3mn), considers the losses incurred on the assets covered by the Contingent
Capital Agreement, as well as the minimum capital condition applicable at the end of 2020 under the Contingent
Capital Agreement.

As at 31 December 2020, the CET1 ratio was 11.3% and total solvency ratio was 13.3%, representing a decrease com-
pared with 2019, due to the decrease in the minimum capital condition of the Contingent Capital Agreement.

In this context, it is important to highlight the fact that the European Central Bank (ECB) disclosed during March 2020
several measures that allow Banks to operate temporarily below the required capital level. Following these measures
NOVO BANCO opted for the IFRS9 dynamic approach. These measures aim to prevent Banks from suspending
financing to the economy in an adverse economic environment. In addition, changes were introduced to the regulatory
framework on the calculation of capital ratios, in force since June 2020, aimed at mitigating the impacts of the Covid-19
pandemic, both at the level of related impairment reinforcement and at the level of risk-weighted assets.

In addition, the accounts contain an aggregate provision of €166mn in relation to the discontinuation of Spanish
operations. As there is a potential for dispute between the parties and therefore potential barrier to immediate access
of this amount, the Bank, as a matter of prudence, has deducted this amount from regulatory capital calculation.

Capital ratios (CRD IV/CRR)

Risk Weighted Assets

Own Funds

Common Equity Tier 1

Tier 1

Total Own Funds

Common Equity Tier 1 Ratio

Tier 1 Ratio

Solvency Ratio

Leverage Ratio

milhões de euros

31-Dec-19
(Phased-in)

31-Dec-20
(Phased-in)¹

31-Dec-20
(fully loaded)¹

29 579

26 719

26 411

3 996

3 998

4 475

13.5%

15.1%

8.4%

3 029

3 030

3 541

11.3%

13.3%

6.5%

2 638

3 150

10.0%

11.9%

5.7%

(A)

(B)

(C)

(D)

(B/A)

(C/A)

(D/A)

(1) Preliminary; Novo Banco and Fundo de Resolução have different positions regarding the implementation of IFRS9 from the phase-in to the fully-loaded regime, and so
both parties have submitted the matter to arbitration, in accordance with the rules of the CCA, the impact of such implementation in the calculation of the amount due by
Fundo de Resolução under the CCA for 2019 financial year.
It was further agreed that NB would not change the implementation of IFRS9 from the transitional arrangements to the full implementation, pending a settlement of the
dispute.
In the event the arbitration decides in favor of NB, Fundo de Resolução shall pay an amount corresponding to the amount that would have been paid had NB implemented
IFRS9 in full as of 31 December 2019, provided that the CCA cap is not exceeded. The arbitration proceeding is still pending, and the decision is expected in the 4Q2021.
Novo Banco requested the ECB's authorization to apply the transitional arrangements (IFRS 9 dynamic approach), subject to arbitration, in the context of Novo Banco and
Fundo de Resolução having recognized another divergence regarding the application of such regime.

NOVO BANCO MANAGEMENT REPORT 20204.2 Liquidity and Funding

Liquidity remains at comfortable levels and well above regulatory requirements.

Stable funding structure, relying mainly in customer deposits.

Cost optimization continues to be one of the main focus of the bank, without incurring undesirable liquidity risks.

Liquidity Management

NOVO BANCO manages liquidity in accordance with all the regulatory rules and its own management principles,
guaranteeing that all responsibilities are met, whether in normal market conditions or under stress conditions. These
include, among others, the ECB´s legal reserves, liquidity ratios (LCR and NSFR), maintenance of adequate levels of
liquid assets, definition of funding transfer pricing (FTP) framework and establishment of an offer of financial products
that results in a diversified panel of funding sources.

Short-term liquidity is monitored through daily mismatch reports, prepared in accordance with pre-established guide-
lines and internally defined metrics, which allows the bank to make an early detection of any signals of crisis with
potential impacts on the Bank, namely through idiosyncratic risk, contagion risk (due to market tensions) or the risk of
repercussions of an economic crisis on the Bank. The report monitors the evolution of the liquidity position, including
eligible assets and liquidity buffers, main cash inflows and outflows, deposits’ evolution, medium- and long-term
funding, central banks funding, the evolution of the treasury gap (net interbank deposits), as well as several warning
indicators established for the purpose.

This process ensures an ongoing and active role in liquidity risk management and risk assessment from the EBD and
also allows the Bank to take immediate action whenever necessary.

In addition, the liquidity position is also regularly reported to the Joint Supervisory Team.

In terms of the structural liquidity, NOVO BANCO manages its activity and funding sources in order to achieve funding
stability and cost optimization, avoiding as much as possible undesirable liquidity risks. The structural liquidity of the
bank is analysed in detail on the Capital and Asset Liability Committee (CALCO), which meets on a monthly basis.
Among other, CALCO analyses and discusses the Bank's liquidity position, performs a comprehensive analysis of the
liquidity risk and its evolution, with special focus on current liquidity buffers and generation / maintenance of eligible
assets for rediscount with the ECB and respective impacts on the liquidity ratios.

NOVO BANCO Group’s funding policy is one of the major components of the Bank’s liquidity risk management, which
stresses the diversification of funding sources by instruments, investors and maturities. Given the commercial nature of
the balance sheet, NOVO BANCO's strategy has, since its incorporation, largely relied on boosting customer deposits as
its major source of funding, as deposits were severely hit by the resolution and market access has not been normalized.

Additionally, the bank prepares a monthly liquidity report (for more details see ‘4.3. Risk Management), considering
not only the effective maturity but also behavioural maturity of the various products, which allows to determine the
structural mismatches for each time bucket. Based on this information and the Bank’s medium-term plan, the annual
activity funding plan is prepared considering the established budget targets. This plan, which is regularly reviewed,
favours, as much as possible, stable funding instruments.

The Bank also has in place a contingency liquidity plan, which comprises a set of measures that, if triggered, would
allow the bank to manage and/or minimize the effects of a severe liquidity crisis. These measures aim to address
additional liquidity needs and boost the resilience of NOVO BANCO in a potential stress situation.

Finally, the Bank also performs, on an annual basis, an Internal Liquidity Adequacy Assessment Process or ILAAP, which
evaluates the liquidity position of the Bank in a normal and stress scenario. The results of this process, which is approved
by the EBD, must be sent to the regulatory authorities and concluded that the Bank’s funding and liquidity structure and
Internal processes are solid and that the Bank could withstand a stress scenario.

NOVO BANCO maintained a comfortable liquidity position in 2020, with deposits at the ECB having increased by
€0.9bn, to €2.4bn. During the year, liquidity management continued to involve the rationalization of funding sources
and improvement of profitability.

At the end of 2020 NOVO BANCO’s customer deposits totalled €26.1bn, having remained stable since the end of
2019, excluding the effect of the transfer of the Spanish Branch to discontinued operations. However, retail customer
deposits showed a very positive performance having increased €0.8 bn YoY, notwithstanding the reduction of interest
rates. The Bank managed to maintain the weight of customer deposits in its financing structure, achieving, however, a
relevant reduction in the associated cost.

Customer Deposits
(€bn)

Funding Structure
(€bn)

27.8

26.0

26.1

45.3

44.4

Deposits 57%

26.0

26.1

Deposits 59%

2019

2020

Customer Deposits

Pro-forma excl. Spain

ECB and Interbank
Funding 22%

Debt Securities 2%

Other Liabilities 10%

Equity 9%

9.8

1.1
4.4
4.0

2019
Pro-forma

ECB and Interbank
Funding 23%

Debt Securities 2%
Other Liabilities 9%

Equity 7%

10.1

1.0
4.1
3.1

2020

At the end of 2020, customer deposits remained the Bank's main funding source, accounting for 59% of its funding
structure (61% at the end of 2019, or 57% excluding the effect of the Spanish Branch), of which 72% were deposits from
the retail segment.

In terms of loan portfolio, the Bank’s core business continued to grow both on the retail and corporate segment,
reflecting the moratorium in place and the Covid-19 credit lines for the corporate segment. However, given the
continuous effort to reduce non-strategic and non-productive assets, either through write-offs, outright sales and/or
other deleveraging strategies, the total loan book, remained fairly stable standing at €25.2bn at December 2020, a YoY
decrease of €0.2bn, excluding the effect of the Spanish Branch.

NOVO BANCO MANAGEMENT REPORT 2020Gross Loan Book Evolution
(€bn)

Securities Portfolio
(€bn)

27.1

25.4

25.2

12.0

1.3

Other

Bonds

2.9

Other
Sovereign Debt

3.8

Portuguese
Sovereign Debt

4.1

11.4
0.9

3.3

3.7

3.5

2019

2020

2019

2020

Customer Loans

Pro-forma excl. Spain

On the other hand, the securities portfolio reduced by around €0.6bn, largely due to the de-risking strategy followed
by the Bank as a result of the Covid-19 outbreak and the market disruption it caused at the time. The Bank’s security
portfolio remained substantially composed of high-quality liquid assets (HQLAs), and among these approximately 80%
are public debt securities. In 2020, as mentioned above, within its HQLA’s portfolio, as part of the de-risk strategy, the
Bank sold a portion of the longer dated sovereign bonds and partially replaced it with HQLA corporate bonds with a
maturity up to 10 years.

One of the main liquidity events on 2020 was the capital contribution of €1.0bn made by the Resolution Fund to NOVO
BANCO under the CCA in May 2020, which had a significant positive impact on the liquidity position of the Bank.

In terms of medium- and long-term funding, the Bank performed a liability management exercise at the end of 2020.
This exercise consisted of a Tender Offer and Consent Solicitation on all the outstanding bonds issued by NB Finance,
NOVO BANCO’s debt issuing vehicle based in the Cayman Islands. As foreseen in the EU Commitments, NOVO
BANCO should, on best-effort basis, unwind NB Finance by the end of 2021. However, given the long maturity dates
of the outstanding bonds and the voluntary nature of any transaction that attempted to substitute or exchange the
existing bonds, the execution of the transaction on economic favourable terms to the investors was enough to ensure
compliance with the said commitment. The transaction was very successful, and it allowed the Bank to redeem 97% of
the bonds (€370mn in nominal amount, or €160mn in book value).

Regarding medium- and long-term funding, the sub-
stitution of some credit lines for longer and cheaper
financing including, but not limited, the TLTRO III will
also improve the funding profile of the Bank in the
coming years. As of the end of 2020, gross funding from
the ECB increased €0.9bn YoY, all under the TLTRO III, to
€7.0bn. However, net funding remained stable at €4.7bn,
as the amount of cash placed with the ECB increased
€0.9 bn as well, to €2.3bn. During 2020, as deposits with
the ECB largely exceeded tiering, the Bank decided to
significantly redeem short term repo transactions in the
amount of €0.7bn.

Evolution of Funding from the ECB
(€bn)

6.1

7.0

4.7

2019

2020

Gross Funding

Net Funding

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESDespite the reduction of the HQLA’s securities portfolio, NOVO BANCO maintained its liquidity buffer at very
comfortable, due to not only the liquidity inflows referred above but also to the collateral easing measures applied by
the ECB in April. In December 2020, the portfolio of eligible securities for rediscount with the ECB totalled €16.7bn (net
of haircuts), which compares with €15.3bn in 2019.

NOVO BANCO thus maintained a comfortable liquidity position, with the regulatory Liquidity Coverage Ratio (LCR)
standing at 144% at the end of 2020 and the Net Stable Funding Ratio (NSFR) at 113%, well above the regulatory
requirement

Evolution of Eligible Assets at the ECB
(€bn)

Liquidity Ratios
(%)

15.3

16.7

143%

144%

101%

113%

2019

2020

2019

2020

NSFR

LCR

NOVO BANCO MANAGEMENT REPORT 20204.3 Risk Management

The definition of a risk management framework with standards, patterns, objectives and responsibilities
established for all areas of NOVO BANCO Group, allows to follow the strategic direction in compliance of the
established risk appetite.

Supporting top management in effective risk management and in the development of a strong risk culture, this frame-
work defines the following:

• the main risks faced by NOVO BANCO Group;

• the risk appetite requirements;

• the responsibility functions in risk management;

• the risk management governance structures and committees.

Risk Management Framework

1. GOVERNANCE
Risk management and control Committee;
Deﬁnition of Policies, roles and responsibilities

2. RISK APPETITE STATEMENT
Deﬁnition of the level of risk that the Group is willing to
take on

3. RISK CULTURE
Risk culture embedded at the various levels of the organisation making all
employees accountable for risk management and control

4. RISK CLASSES
Shared holistic vision of the Credit, Market,
Liquidity and Operational Risk classes

5. RISK TOOLS
Stress testing, limits policy, model validation,
quantiﬁcation and evaluation methodologies

6. 3 LINES OF DEFENCE
The pillar for ongoing risk management
at the various levels of the Bank

The Risk Culture at NOVO BANCO Group

NOVO BANCO Group is naturally exposed to the various classes of risk inherent to the banking system, arising from
external and internal factors, namely from the nature of the markets in which it operates.

GNB considers that Risk Management is a key pillar for sustained value creation over time.

GNB's Risk Management is therefore grounded on the following assumptions:

•

Independence vis-à-vis the other Bank’s units

• Universality, through application across the whole GNB

•

Integration of the risk culture, through a holistic and preemptive approach to risk

• Specialisation

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURES• Three lines of defence model, viewing the adequate detection, measurement, monitoring and control of all material
risks to which GNB is exposed. This Model implies that all employees, in their sphere of activity, are responsible for
the management and control of risks.

RISKS

NOVO
BANCO
Group

1ST LINE OF DEFENCE

2ND LINE OF DEFENCE

3TH LINE OF DEFENCE

Business Areas

• Global Risk Department
• Compliance Department

Internal Audit Department

Function

Maximise return

Control

Limitation

Takes risk according to Risk
Appetite

Does not take risk

Mission

• Correctly identify risks
• Make sure that risk remains within deﬁned limits
• Measure, monitor, report

• Independent review
• Ensure adequacy

of policies and processes

• Ensure correct
implementation
of policies and processes

Risk Management Function

The risk management function is organised in such a way as to allow effective management of the risks considered
relevant and material by GNB (those to which senior management pays special attention and which may impact the
achievement of the objectives defined by the Bank) as well as those considered as emerging (those where little is
known about their components, and whose impact may occur over a longer time horizon).

The risks identified as relevant and material are quantified within the scope of the Internal Capital Adequacy Self-
Assessment (ICAAP) exercise, the most relevant being:

i. credit risk, which includes default, counterparty and concentration risk,

ii. liquidity risk,

iii. market risk in the trading book and banking book, which includes interest rate risk (IRRBB), equities risk, credit

spread risk, real estate risk and pension fund risk,

iv. operational risk, which includes operations risk, information systems risk, compliance risk, and reputational risk, and

v. business risk.

Emerging risks, which are closely monitored by the risk structures, include climate change and regulatory changes,
among others.

Risk Management is Considered Vital for NB Group

Risk Management, as a vital function for the development of GNB’s activity, is centralised in the Risk Management
Function, which comprises the Global Risk Department (GRD) and the Rating Department (RTD). It defines holistic
principles for risk management and control, in close coordination with the Compliance Function, which is responsible
for operationalizing and implementing the policies defined by the EBD.

NOVO BANCO MANAGEMENT REPORT 2020All materially relevant risks are reported to the management and supervision bodies (as applicable, to the EBD, GSB,
both Risk Committees and the specialised committees), which are responsible for supervising, monitoring, assessing
and defining the Risk Appetite and control principles.

At operational level, the GRD centralises NB Group's Risk Management Function, namely in terms of the responsibilities
inherent to the function, supervising the various institutions of the Group and ensuring independence vis-à-vis the
business areas.

The Head of GNB’s Risk Management Function is the Head of the GRD. To ensure maximum efficiency in the articulation
with the GRD, a local Risk Function Officer was appointed in each relevant entity of GNB. The GRD acts either directly
or as coordinator, in articulation with the units in charge of the local Risk Management Function.

The Risk Appetite framework defines:

The mais risks
to which GNB
is exposed

The risk
appetite
statements

The roles and
responsibilities
in risk
management

The organization
and function
in risk
management

Governance
and risk
decision-taking
and monitoring
committees

RISKS

CONCEPT

MANAGEMENT

Credit

The risk of ﬁnancial loss arising from the failure
of a borrower or counterparty to honour the
contractual obligations established with NOVO
BANCO within the scope of its lending activity

Management and control of risks of this nature
are based on an internal risk identiﬁcation,
assessment and quantiﬁcation system

Liquidity

The current or future risk deriving from
an institution’s inability to satisfy its
commitments as they mature, without
incurring excessive losses

Market

The risk of a potential loss resulting from an
adverse change in the value of a ﬁnancial
instrument due to ﬂuctuations in interest rates,
foreign exchange rates, equity prices, commodity
prices, real estate prices, volatility and credit
spreads

The risk of occurrence of events with negative
impacts on results or equity, resulting from
inadequacies or weaknesses in procedures or
information systems, staff behaviour, or
external events, including legal risk.
Operational risk is, therefore, understood to
be the sum of the following risks: Operations,
Information Systems, Compliance and
Reputational.

Operational

Based on the measurement of liquidity outﬂows
from contractual and contingent positions in
normal or stress situations, the management and
control of this risk consists, on the one hand, in
determining the size of the liquidity pool available
at any given time and, on the other hand, in
planning for stable sources of funding in the
medium and long term.

A GRD expert team centralises GNB’s market risk
management and control, in line with the
regulations and good risk practices

• A GRD expert team deﬁnes the Operational
Risk Policies, with other units, namely the
Compliance Department and the
Information Security Office issuing speciﬁc
risk Policies

• The implementation of operational risk

identiﬁcation and control methodologies is
carried out through the operational risk
management Representatives appointed for
each organisational Unit, promoting the risk
culture in the ﬁrst line of defence in
continuous collaboration with the GRD

RISK APPETITE

FOCUS IN 2021

Credit

Conservative risk appetite

• Reinforcement of the Bank's operational

capacity to manage credit exposures under
moratoria by identifying early signs of
ﬁnancial deterioration and deﬁning
strategies for timely action with viable
debtors in need of debt service support to
avoid potential "cliff effects" at the end of
the moratoria

• Reinforcement of remote service models

and creation of automated credit
assessment and decision tools

• Reinforcement of continuous monitoring

processes of credit portfolios

Liquidity

• Funding of medium- and long-term assets

through stable liabilities;

• Withstanding liquidity stresses for a

minimum of 12 months

• Always respect the limits imposed by the

regulations

• Permanent alignment to regulatory framework

• Increasing risk management support to the

commercial and management areas,
ensuring the Bank's overall alignment

• Compliance with the established risk appetite

Market

Market investments of cash and liquidity
surpluses in accordance with conservative risk
appetite predeﬁned rules

Operational

The operational risk appetite deﬁned for GNB
covers the various categories under this risk,
reﬂecting the infeasibility of eliminating it, from
a cost-beneﬁt perspective, along with GNB’s
ethical and conduct values.

Incorporation of the new reference interest rates
(short-term rates and IBORs) into market risk
models, namely market risk control models,
IRRBB and economic capital calculations within
the scope of the ICAAP exercise

• Strengthen the Fraud Risk framework in light

of the increasingly sophisticated fraud
typologies

• Reinforcement of compliance with the

established risk appetite

• Reinforcement of the risk culture as the basis

for the activity and decision-taking at the
various levels of the organisation

• Due to the change in Customers behaviour and

the Bank's digitalization strategy, further
strengthening of Cyber risk prevention and
control mechanisms

NOVO BANCO MANAGEMENT REPORT 2020i. p64 word

Outlook
2021

5.0

Title: Visitus
Author: Pedro Biu

5.1 Economic Expectations

Economic activity in 2021 will be conditioned by the evolution of the Covid-19 pandemic and as such should remain
subject to very high levels of uncertainty. In a baseline scenario, the start of the vaccination process at the end of 2020
bolsters expectations of a more visible recovery of growth as from the second half of the year. However, this recovery
could be constrained by the possible need for new confinements and restrictions on activity (as was the case in 1Q21)
should there be no herd immunity and also as a result of the natural logistic hurdles of mass vaccination. Hence it
is assumed at both European and Portuguese level that in a first phase the recovery will be gradual, non-linear and
incomplete, as opposed to a V-shaped recovery. With this recovery profile, activity should remain for quite some time
below its pre-Covid levels. In the Eurozone GDP is expected to grow by 3% to 4% in the year. As to the Portuguese
economy, the expectation is that GDP will grow by around 2.7% in 2021. This recovery should be asymmetrical, with
industrial activity showing more vigour and services (mainly tourism and hospitality) being initially slower to pick up.

This recovery baseline scenario is supported by several factors. First, the expected progress in vaccination allowing a
gradual evolution towards herd immunity between the end of 2021 and the first half of 2022, with a consequent increase
in confidence levels. Second, the release of forced household savings should allow the materialisation of demand
postponed during the confinement. In this context, stronger growth should be seen in demand for the services most
penalised by the pandemic, including tourism and hospitality services. Third, the recovery should be driven by strong
monetary and fiscal policy stimuli in the main economies. In the Eurozone the ECB is expected to maintain key interest
rates unchanged and extend or reinforce several liquidity injections programmes. Expansionary monetary and financial
conditions are therefore assumed, including in the Portuguese economy. Fiscal policy should also take an expansionary
stance, with domestic stimuli being complemented by the start of disbursements under the European Recovery Fund
(NextGenEU) as from 2Q21 and on a larger scale in 2022. In the baseline scenario, the external environment is expected
to be favourable, with stronger GDP growth in the US and China, in the first case benefiting from aggressive fiscal
stimuli within the new political environment.

Ample liquidity combined with a strong increase in public spending, and some production restrictions, are conducive
to a climate of reflation in the global economy. Market expectations for inflation are on the rise and, as soon as in
1H21 some statistical base effects related to the sharp fall in oil prices and the temporary drop in indirect taxes in
2020 could heighten year-on-year price growth and generate noise in financial markets. However, the persistence of
excess production capacity in the projected recovery profile (including unemployment rates above pre-Covid levels)
should contain any significant wage-induced inflationary pressures. It is therefore assumed that Central Banks will
avoid a sudden withdrawal of stimuli, even if markets may anticipate less expansionary monetary policies. In addition
to the possible rise in inflation, other main risks include delays in the vaccination process, difficulties in overcoming
the pandemic (e.g. due to virus mutations), less aggressive fiscal stimuli than expected, and the markets’ revaluation
of assets upon an increase in indebtedness and risk exposure driven by widely available liquidity. In Portugal, concerns
about high debt levels and the possible withdrawal of support measures, including credit moratoria and employment
protection schemes, may condition activity. Other risks include the possibility of political uncertainty towards the end
of the year.

Besides cyclical developments, the outlook is also marked by the need for economic agents to adapt to several ongoing
structural trends. At the macro level, the following stand out: the State's increased role in the economy and greater
focus on inequality; the persistence of high levels of indebtedness and low interest rates; population ageing; growing
focus on sustainability; shifts in globalisation towards more diversified and local or regional value chains; and, above
all, a more digital economy. At the micro level, consumption trends favour a greater use of digital channels. In addition,
consumers are also expected to be more focused on physical, mental and financial health, and to demand greater
convenience, quality, transparency, purpose and social responsibility from companies.

Outlook

2021

5.0

Title: Visitus

Author: Pedro Biu

NOVO BANCO MANAGEMENT REPORT 20205.2 Strategic Priorities For 2021

In 2020, NOVO BANCO completed the restructuring process launched upon the sale of the Bank to Lone
Star, characterised by the subsequent restoration of profitability focused on the deleveraging of non-core

businesses and non-productive assets, as well as on cost optimisation.

Real Estate Exposure:
Evolution
% Net Assets

NPL: Evolution
% Consolidated
Reported Figures

Efficiency: Cost to Income Rate
% Consolidated
Reported Figures

4.8%

4.2%

28%

22%

75%

63%

55%

52%

2.5%

2.0%

12%

2017

2018

2019

2020

2017

2018

2019

2020

2017

2018

2019

2020

In 2021 NOVO BANCO embarks on a new phase, affirming itself as a partner, professional, and proximity bank. A Bank
focused on responding to a new market reality and regaining indisputable relevance in the Portuguese market.

AS IT ENTERS THIS PHASE OF RENEWAL AND TRANSFORMATION, NOVO BANCO AIMS TO LEVERAGE ON ITS HISTORIC
COMPETITIVE ADVANTAGES:

• Market leader in the Portuguese SMEs segment, with a strong position in Corporate Banking
• Distinctive relational DNA, especially focused on SMEs and affluent clients
• Resilient organisation, capable of reinventing itself to tackle different contexts and environments
• Proven track record in reducing costs while meeting commercial targets

IN ORDER TO:

Support the growth of the Portuguese economy

Maintain its support to businesses and in particular to SMEs,
increasing the value per current client and strengthening /
diversifying the portfolio of corporate clients;

Leverage the competitive edge in the SME segment to serve
and promote small businesses by offering them integrated
products, POS solution and a "simpliﬁed and innovative"
credit process;

Optimise the retail commercial banking model

Grow the customer base, positioning itself as a modern,
easy to interact with and humane bank, with a simple and
differentiated offer covering life's major events;

Maintain a relationship-focused service model targeting
affluent and singular clients, with simple and
complementary offers and superior customer service.

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESIn 2020 NOVO BANCO remained at the side of the Portuguese families and businesses, helping the Portuguese busi-
ness community to innovate, reinvent and export, and assisting them, not only in turning difficulties into opportunities,
but also with measures to ensure cash flow and employment protection. The Bank redesigned its offer for this segment
in order to meet the needs of its individual and corporate clients in this year's abnormal context. The Bank strengthened
and reinvented its unique project to bring to light regional entrepreneurs, businesses and other relevant entities through
Regional and Sectoral Summits.

In 2021, the sustainability model will remain an essential part of the Bank's strategy, bolstering the confidence of the
various stakeholders in NOVO BANCO. This model will focus on the mitigation of less favourable economic scenarios
by continuing to provide banking services and adapting them to the new needs, implementing a renewed Social Divi-
dend Programme and enhancing its offer of Sustainable Financing.

Contributing to society's sustainable future is a commitment that NOVO BANCO embraces in this new phase.

NOVO BANCO MANAGEMENT REPORT 2020Corporate
Governance

6.0

Title: Reﬂexos
Author: Marta Vieira Pereira

6.1 Shareholder Structure

6.1.1 Qualified holdings in NOVO BANCO’s share capital

NOVO BANCO has a share capital of €5,900,000,000.000 (five billion nine hundred million euros), divided into
9,799,999,997 (nine billion, seven hundred ninety-nine million, nine hundred ninety-nine thousand and nine hundred
ninety-seven) nominative dematerialised shares with no nominal value, fully subscribed and paid up.

Qualified holdings in NOVO BANCO’s share capital as at 31 December 2020:

SHAREHOLDER

NUMBER OF SHARES

% OF SHARE CAPITAL

Nani Holdings S.G.P.S., S.A.

7.349.999.998

Fundo de Resolução
(Resolution Fund)

2.449.999.999

75%

25%

6.1.2 Equity holders with special rights

There are no shareholders with special rights.

6.1.3 Restrictions on voting rights

By virtue of the commitments assumed by the Portuguese State before the European Commission in the context of
the approval of the sale of a 75% holding in the share capital of NOVO BANCO under European Union rules on State
aid, the shareholder Resolution Fund should refrain from exercising its non-economic rights, namely its voting rights.

NOVO BANCO MANAGEMENT REPORT 20206.2 Corporate Bodies: Composition
And Functioning

6.2.1 Composition and functioning of the management
and supervisory corporate bodies and changes in the
Company’s Articles of Association

Under the terms of the Company's articles of association, the corporate and statutory bodies of NOVO BANCO are the
Shareholder’s General Meeting, the General and Supervisory Board, the Executive Board of Directors, the Monitoring
Committee, the Statutory Auditor and the Company’s Secretary. The members of the corporate bodies are elected for
four-year mandates and they may be re-elected once or more than once.

Also in accordance with the Articles of Association, the members of the Board of the Shareholder’s General Meeting,
General and Supervisory Board, and Monitoring Committee are elected by the Shareholder’s General Meeting. The
Shareholder’s General Meeting also has the powers to appoint and replace the Bank's Statutory Auditor, acting upon
a proposal of the General and Supervisory Board, based on a proposal of the Financial Affairs (Audit) Committee. The
members of the Executive Board of Directors are appointed by the General and Supervisory Board. The Company’s
Secretary and Alternate Secretary are appointed by the EBD, after consulting with the GSB.

6.2.2 Amendments to the Articles of Association

Changes to NOVO BANCO’s Articles of Association are the responsibility of the Shareholder’s General Meeting. In 2020
there were no changes in NOVO BANCO's Articles of Association.

6.2.3 General and Supervisory Board

The GSB is the supervisory body of NOVO BANCO and its members are elected by the Shareholder’s General Meeting.

In October 2020, the General Meeting of NOVO BANCO appointed the following members of the General and Super-
visory Board for the 2021-2024 mandate e subject to the authorisation of the competent regulatory authorities, which
is still pending:

Byron Haynes Chairman

Benjamin Dickgiesser

Karl-Gerhard Eick Vice-Chairman

John Herbert

Donald Quintin

Kambiz Nourbakhsh

Mark Coker

Robert A. Sherman

Carla Antunes da Silva

William Henry Newton

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESAll the members in office in the previous term were reappointed, with the exception of Mr. William Henry Newton, and
therefore, until the fit and proper authorisations are obtained, the current mandate stands and the GSB is composed
of 9 members.

At the date of this Annual Report, 6 (six) of the 9 (nine) members of the General and Supervisory Board, including its
Chairman, are independent.

The General and Supervisory Board has the powers vested upon it by law and by the Articles of Association, having
as main functions to regularly monitor, advise and supervise the management of NOVO BANCO and of the Group
companies, as well as to supervise the Executive Board of Directors with regard to compliance with the relevant
regulatory requirements of banking activity. Additionally, the General and Supervisory Board has specific powers to elect
the members of the Executive Board of Directors and responsibilities in granting previous consents for approval by the
Executive Board of Directors of certain matters established in the Articles of Association, namely in what concerns the
approval of (i) credit, risk and accounting policies, (ii) business plan, budget and activity plan, (iii) change of registered
address, and closure or changes to representation structures abroad, (iv) capital expenditure, debt or refinancing, sales
or acquisitions, creation of liens or granting of loans above certain limits and within certain conditions, (v) practice or
omission of any material act related with the Contingent Capital Agreement; and (vi) hiring of employees with annual
remuneration above certain limits.

The General and Supervisory Board holds meetings on a monthly basis. The Chairman of the General and Supervisory
Board and the Chief Executive Officer maintain regular, and at least weekly, dialogue and communication between
them.

In its activity, the General and Supervisory Board is directly supported by 5 (five) Committees, namely the Financial
Affairs (Audit) Committee, the Risk Committee, the Compliance Committee, the Nomination Committee and the
Remuneration Committee, these holding some powers delegated by the General and Supervisory Board.

These Committees are composed of and chaired by independent members of the General and Supervisory Board.
Their meetings may also be attended by members of the Executive Board of Directors responsible for the matters that
are dealt with by said committees.

Financial Affairs (Audit) Committee

The Financial Affairs (Audit) Committee has monitoring and supervision responsibilities concerning the financial perfor-
mance of the Bank and other financial entities included in the prudential consolidation perimeter, the accounting and
accounts reporting policies and procedures and the follow-up of the external auditor, and in particular, has the powers
provided for in the Companies Code.

This Committee also has delegated powers of the General and Supervisory Board with regard to, among others,
material changes to accounting policies, the approval of the annual budget, and prior consent to the issuance of
certain debt instruments.

In addition, this Committee supports the General and Supervisory Board in overseeing the effectiveness of the internal
control system, risk management system and internal audit system of the Bank and of the financial companies within
its scope of prudential consolidation.

At the signature date of this Report the members of the Financial Affairs (Audit) Committee are the following:

Chairman: Karl-Gerhard Eick

Byron Haynes
Kambiz Nourbakhsh

NOVO BANCO MANAGEMENT REPORT 2020Risk Committee

The Risk Committee advises and supports the General and Supervisory Board in monitoring the Bank's actual and future
global risk appetite and risk strategy as well as the effectiveness of the internal control system and risk management
system of the Bank and the financial companies included in its prudential consolidation perimeter.

This Committee also has the powers provided for by law and the delegated powers of the General and Supervisory
Board with regard to certain credit transactions and changes in risk policies.

At the signature date of this Report the members of the Risk Committee are the following:

Chairman: Byron Haynes

Karl-Gerhard Eick
Kambiz Nourbakhsh
Benjamin Dickgiesser

William Newton will become the Chairman of the Risk Committee of the General and Supervisory Board upon obtaining
the fit and proper approval by the regulatory authorities.

Compliance Committee

The Compliance Committee advises and supports the General and Supervisory Board, among others, in monitoring
compliance issues pertaining to the Bank, the members of corporate bodies and employees, internal policies and
processes related to compliance, policies on business conduct and ethics, and compliance and reputational risk.

In addition, it has delegated powers in matters related to related parties (except for transactions between the Bank and
shareholders and their related parties, a non-delegable matter that falls to the General and Supervisory Board).

The above functions also extend to the following financial subsidiaries: BEST, NOVO BANCO Açores and GNB Gestão
de Ativos.

At the signature date of this Report the members of the Compliance Committee are the following:

Chairman: Robert Sherman

John Herbert
Mark Coker

Nomination Committee

The Nomination Committee supports the General and Supervisory Board in overseeing the Executive Board of Directors’
action in the establishment of, and in ensuring compliance with, consistent and well-integrated nomination policies at
the Bank and the following financial subsidiaries: BEST, NOVO BANCO Açores and GNB Gestão de Ativos companies.

At the signature date of this Report the members of the Nomination Committee are the following:

Chairman: John Herbert

Robert Sherman
Donald Quintin
Mark Coker
Carla Antunes da Silva7

7. Appointed by the General and Supervisory Board on 22 October 2020 to serve on the Nomination Committee of the General and Supervisory Board

The Committee advises and supports the General and Supervisory Board in the establishment of adequate, consistent
and well-integrated remuneration policies in the Bank and in monitoring the implementation of remuneration policies
in the Bank and in its financial subsidiaries BEST, NOVO BANCO Açores and GNB Gestão de Ativos companies.

This Committee also has delegated powers with regard to the hiring of employees with annual remuneration above
€200,000.00.

At the signature date of this Report the members of the Remuneration Committee are the following:

Chairman: Byron Haynes

Karl-Gerhard Eick
Benjamin Dickgiesser

The company documents and main regulations can be accessed at www.novobanco.pt > Institutional > Governance
> Company Documents > here

6.2.4 Executive Board of Directors

The members of the Executive Board of Directors (EBD) are appointed by the General and Supervisory Board, which
also appoints the Chief Executive Officer (CEO).

Regarding the composition of the EBD, the members of the EBD in office at the date of this report (identified in point
1.2 Who We Are - Organisation) are the following:

António Manuel Palma Ramalho
Chief Executive Officer

Luísa Marta Santos Soares da Silva Amaro de Matos
Chief Legal & Compliance Officer

Mark George Bourke
Chief Financial Officer

Luís Miguel Alves Ribeiro
Chief Commercial Officer (Retail)

Rui Miguel Dias Ribeiro Fontes
Chief Risk Officer

Andrés Baltar Garcia
Chief Commercial Officer (Corporate)

In 2020 changes in the composition of the Executive Board of Directors included the appointment of Mr. Andrés Baltar
Garcia by the General and Supervisory Board on 22 October 2020. Mr. Andrés Garcia took office on 2 December 2020,
replacing Mr. Vítor Manuel Lopes Fernandes, who had resigned on 22 October 2020, with effect from 30 November
2020.

On 22 October 2020, Mr. Jorge Telmo Maria Freire Cardoso and Mr. José Eduardo Tavares de Bettencourt also resigned,
with effect from 30 November 2020, and were not replaced.

Upon obtaining the fit and proper approval by the regulatory authorities, the EBD members will begin functions for the
new mandate (2021-2024) following their appointment on 22 October 2020 by the GSB.

Committees of the Executive Board of Directors

The activity of the EBD is supported by several Committees. In accordance with its rules of procedure, the EBD may
establish committees to complement its own management activity, ensuring the monitoring of the Bank's activity in
areas that are considered relevant.

NOVO BANCO MANAGEMENT REPORT 2020Risk Committee

Responsible for issuing an opinion on, approving, under the powers delegated by the Executive Board of Directors,
and monitoring NOVO BANCO Group’s policies and risk levels. In this context, the Risk Committee is responsible for
monitoring the evolution of GNB’s integrated risk profile, and for analysing and proposing methodologies, policies,
procedures and instruments to deal with all types of risk, namely credit, market, liquidity and operational.

Chairman: Rui Fontes

Financial and Credit Committee

Responsible for deciding the main credit operations in which the NOVO BANCO Group participates, in line with the risk
policies defined for NOVO BANCO Group.

Chairman: António Ramalho

Capital, Assets and Liabilities Committee (CALCO)

Responsible for the definition of the balance sheet management policies (capital, pricing, and interest rate, liquidity and
foreign exchange risk) and for monitoring their impact at NOVO BANCO Group level. The CALCO also monitors early
warning indicators with regard to the Recovery Plan and Liquidity, proposing mitigation measures, and if necessary,
triggering the recovery plan and/or the liquidity contingency plan.

Chairman: Mark Bourke

Internal Control System Committee

The Committee monitors all issues related to NOVO BANCO Group’s Internal Control System, without prejudice to the
responsibilities attributed in this regard to the Executive Board of Directors and other Committees in place at NOVO
BANCO Group, namely the Risk Committee, the Operational Risk Subcommittee and the Compliance and Product
Committee.

Chairman: Rui Fontes

Compliance and Product Committee

Responsible for approving, from a compliance standpoint, products and services to be developed and/or distributed by
the Bank, issuing an opinion on all of them within the scope of the products’ signoff process in force, as well as monitor
the issues related to control implementation, without prejudice of competences of other governing bodies and GSB
Committees.

Chairwoman: Luísa Soares da Silva

Digital Transformation Committee

Responsible for defining and driving digital transformation at NOVO BANCO.

Chairman: António Ramalho

Costs and Investments Committee

Responsible for approving the execution of expenses, within the limits of the powers conferred upon it. Its objectives
include the definition of an annual expenditure plan and the revision of the acquisition’s strategy.

Chairman: Mark Bourke

Responsible for defining the amount of impairment to be allocated to each client, when NOVO BANCO has an expo-
sure above €100 million to that client or group of clients.

Chairman: Rui Fontes

In addition, the Executive Board of Directors has set up 3 (three) subcommittees, (i) Non-Performing Assets (NPA)
Subcommittee; (ii) Extended Models Risk Subcommittee; (iii) Operational Risk Subcommittee and 6 (six) steering groups
for the areas of (i) Retail, (ii) Corporate Clients, (iii) Human Capital, (iv) Management Information System (MIS), (v)
Investment and (vi) Business Monitoring. The Steering Groups have no rules of their own, their composition and rules
of procedure being decided on a case-by-case basis by the members of the Executive Board of Directors.

6.2.5 Monitoring Committee

The Monitoring Committee is a statutory advisory body ruled by the Articles of Association and deriving from the
CCA. It is composed of three members elected by the Shareholders’ General Meeting, one of whom to act as Chair-
man. The composition of the Monitoring Committee must respect the following criteria: one of its members must be
independent from the parties to the CCA, and another shall be a registered charter accountant. Two of its members
are appointed by the Resolution Fund.

The Committee has as main tasks to discuss and issue (non-binding) opinions on any Relevant Issue concerning the
CCA upon which it is requested to issue an opinion. The members of the Monitoring Committee are entitled to attend
as observers and speak (but note vote) at all meetings of the GSB.

6.2.6 Supervision

Supervision is the responsibility of the General and Supervisory Board and the Statutory Auditor.

The Statutory Auditor and Alternate Statutory Auditor are elected and removed by the Shareholders’ General Meeting,
under a proposal of the General and Supervisory Board, and they have the powers and responsibilities provided for in
the law.

6.2.7 Powers of the management body

Including regarding resolutions on share capital increases

The Executive Board of Directors is the corporate body in charge of the management of the Bank. Under the law and
the Articles of Association, and respecting the powers of the other corporate bodies, it is responsible for defining the
general policies and strategic objectives of the Bank and of the Group and for ensuring the activity not comprised
within the functions of other bodies of the Bank, in compliance with the rules and standards of good banking practice.

The EBD has no powers to resolve on capital increases, or on the issuance of securities convertible into shares or
securities granting subscription rights, such decisions being the exclusive responsibility of the Shareholders’ General
Meeting. In the case of securities’ issuance, the GSB issues a previous opinion.

NOVO BANCO MANAGEMENT REPORT 20206.3 Internal Control

Definition and Objectives

Internal Control is integral to the running of the organisation, combining strategies, policies, processes, systems and
procedures to ensure the medium- and long-term sustainability of the institution and the prudent exercise of its activity.

An efficient and effective internal control system is key for the organisation to ensure:

• the fulfilment of the objectives set out in strategic planning, through the efficient execution of operations, the

efficient use of the institution's resources and the safeguarding of its assets;

• the proper identification, assessment, monitoring and control of the risks to which the institution is or may come

to be exposed;

• the existence of comprehensive, relevant, reliable, and timely financial and non-financial information;

• the adoption of solid accounting principles;

• compliance with the legislation, regulations and guidelines applicable to the institution's activity, issued by the
competent authorities, with the institution's own internal regulations, and with professional and ethical standards
and practices and with rules on conduct and relationship with clients.

Internal Control concerns all the members of the management and supervisory bodies, and Institution's employees,
who perform their duties in accordance with internal policies and standards of ethics, integrity and professionalism,
also applying to the structural units responsibilities and to all the institution's business segments, outsourced activities,
and product distribution channels.

Each employee has a role to play as well as duties and responsibilities, which contribute to ensure the efficiency and
effectiveness of Internal Control.

The Executive Board of Directors is the body with ultimate and global responsibility for the institution and that which
defines, supervises and is responsible for the implementation of an adequate Internal Control System, with a clear
organisational structure and independent and efficient functions in terms of risk management, compliance and audit.

In turn, it is incumbent upon the General and Supervisory Board, among other duties detailed in the Bank’s Articles
of Association, to ensure that the Executive Board of Directors establishes and maintains adequate, independent and
effective internal control, in compliance with the law, regulations and internal policies.

NOVO BANCO Group's Internal Control System is consistently implemented across all the financial entities of the
Group where management control exists, without prejudice to additional requirements of host territories and of the
specificities of the functions involved in the System.

General Principles

In order to effectively achieve the defined objectives, NOVO BANCO Group's Internal Control System is based on the
following principles:

• Adequate control environment reflecting the importance recognized by NOVO BANCO Group for the Internal
Control System and whose organization is supported by a model of 3 lines of defence, which defines the levels
of responsibility in terms of governance and risk management for the different functions that integrate each line,
including permanent, independent and effective Internal Control functions;

• Solid risk management system, designed to identify, assess, monitor and control all risks that may influence the

strategy, risk appetite and objectives of NOVO BANCO Group (as detailed in section 4.3 – Risk Management);

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURES• Efficient information and communication system that guarantees the capture, treatment and exchange of relevant,
reliable, complete, comprehensive and consistent information, in a timely manner and in a way that allows effective
and timely management and control of the activity and the inherent risks;

• Effective monitoring process, implemented to ensure the adequacy and effectiveness of the Internal Control System
over time, ensuring in particular the timely identification of any deficiencies and opportunities for improvement that
will enable the Internal Control System to be strengthened, promoting the triggering of corrective actions.

Under NOVO BANCO Group’s Internal Control System, policies, processes, procedures, systems and controls are
formalised in internal standards, process catalogues, internal control manuals, presentations supporting the main
committees involved in the management of risk, information and communication, control function reports, and in the
Annual Self-assessment Report itself.

3 Lines of Defence Model

The Internal Control System is grounded on the 3 lines of defence model, which clearly defines the levels of interven-
tion and responsibility in risk management and in the execution of controls, in order to guarantee the adequacy and
overall effectiveness of Internal Control within in the organisation.

General and Supervisory Board

EXECUTIVE BOARD OF DIRECTORS

Internal Control System

3RD LINE OF DEFENCE
Assessment of the adequacy and effectivness of control

Internal Audit Function

2ND LINE OF DEFENCE
Risk and Control Monitoring

1ST LINE OF DEFENCE
Risk Management

Control Function (Risk and Compliance)
Other Functions

Business Function

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n
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l

A
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d
i
t
e
r
s

R
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g
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s

The 1st line of defence is held by the organisational units that daily assume and manage the risk of their activities,
of the IT processes and systems they sponsor, and of the outsourced activities under their responsibility, within pre-
established limits set by the Executive Board of Directors.

These units are responsible for the continuous identification, assessment and control of risks in the activities under
their responsibility. It is up to them to defend the institution from taking risks that are not duly mitigated. Maintaining
effective internal controls and conducting established control procedures is also their responsibility.

The mission of the 2nd line of defence is to maintain the Bank within its risk limits by controlling, measuring and
monitoring risks and reporting any deviations relative to the risk policies in force. This line of defence comprises the
"Risk Management" and "Compliance" Control Functions, for which the Global Risk and the Rating Departments,
and the Compliance Department are respectively responsible, being complemented by activities carried out by
other departments of the Bank (e.g., Accounting, Consolidation and Taxation Department, Internal Control and Data
Protection Department, Chief Information Security Officer).

NOVO BANCO MANAGEMENT REPORT 2020
The 2nd line of defence defines risk management and control policies, methodologies and tools, exercising functional
supervision and monitoring over the effectiveness of the 1st Line, controls legal and regulatory compliance, and reports
to the Bank's management and supervisory bodies as well as to the competent external authorities, when applicable.

The 3rd line of defence is held by the Internal Audit Department, and its mission is to assess, independently and based
on risk, the adequacy and effectiveness of the entity's organizational culture and its governance and internal control
systems.

To ensure its necessary independence, the internal audit function:

• Reports functionally to the Financial Affairs (Audit) Committee of the General and Supervisory Board, and adminis-

tratively (i.e., daily operations) to the Chief Executive Officer;

• Performs its activity in accordance with a pre-established plan and a risk-based approach. This plan is approved by

the General and Supervisory Board;

• Cannot have any kind of responsibility or authority over the design, implementation and execution of the control

procedures which it audits.

The Executive Board of Directors may request information and opinions from the internal audit function, namely in
matters of risk, internal control and compliance.

Additionally, and as external intervenients in the defence of the Internal Control System (4th line of defence):

• the Statutory Auditor, bearing in mind its functions, acts as an additional line of defence, essentially of an account’s

supervision nature, including within the scope of the internal control report; and

• the Supervision Authorities (European Central Bank and Banco de Portugal) act as the last line of defence, monitoring
and promoting compliance with prudential rules at financial level and at the level of people, incentives schemes,
governance structures, systems and processes. The intervention of the supervision authorities does not exempt the
institution from its responsibility of ensuring sound and prudent management and compliance with the prudential
rules.

This line of defence external to the Bank promotes a strong risk culture as well as a more efficient risk management
within the parameters institutionally defined for the purpose. In this context, these entities contribute in the following
manner: (I) They provide guidelines/recommendations and supervise the governance of the Bank, including through
detailed assessments and regular interaction with the Executive Board of Directors and top management; (ii) request
improvements and remediation measures, when and if necessary.

Control Functions Independence

The independence of the control functions is ensured through implementation of the following mechanisms:

•

Internal authority: the functions are established at an appropriate hierarchical level and report hierarchically to the
Executive Board of Directors and functionally to the General and Supervisory Board and respective committees,
regularly participating in the meetings of these bodies;

• Head of function: the person responsible for the control function does not carry out activities in business or support

areas that are subject to control;

• Human Resources: the employees allocated to these functions only perform control functions and are independent
of the negotiation and support units that they supervise and control. However, they are not isolated from them, and
are familiar with their activity. The control functions have an adequate number of qualified employees (at both the
Bank and in its branches and subsidiaries);

• Remuneration: the remuneration of control function employees is not linked to the results of the activities which

they supervise and control, nor does it compromise, in any other way, their objectivity;

organisationally independent from each other;

• Scope: the Bank's control functions carry out supervision activities over the control functions of its branches and

subsidiaries.

6.4 Main Policies

For NOVO BANCO Group, the legal framework that regulates its activities is as decisive for its course of action
as the set of values, principles and good practices which it assumes and which steer its actions and define the
standards that shape the manner in which the Group does business and carries out its activities. The existence and
application of a Code of Conduct, policies on the Prevention of Conflicts of Interest, a Whistleblowing Policy and an
Anti-Bribery and Anti-Corruption Policy are therefore paramount across the entire NOVO BANCO Group. Additionally,
but no less importantly, the scrutiny and transparency requirements of the Related-Party Transactions Policy, the strict
application of the Law and Policies on the Prevention of Money Laundering and Terrorist Financing, the care and
transparency towards clients and investors derived from the Investor Protection and Market Transparency Policies,
and the assurance of sound and prudent management ensured by the Remuneration Policies for the Management
and Supervisory Bodies and for the Employees, altogether provide evidence of the importance that NOVO BANCO
attributes to the compliance culture dimension.

The commitment assumed by NOVO BANCO Group focuses on the prevention, detection, reporting and management
of situations involving risks of conduct or irregular conducts, based on principles of integrity, honesty, diligence, com-
petence, transparency and fairness.

Code of Conduct

NOVO BANCO Group’s Code of Conduct, which entered into force in 2015, applies to the members of the General
and Supervisory Board and Executive Board of Directors, to the employees of NOVO BANCO and to the NOVO BANCO
Group companies, and also to all third parties which, at the request of NOVO BANCO, adhered to this Code. The Code
of Conduct promotes a set of rules and good practices to be followed by the employees in their relationship with the
clients and with the Bank itself and aims to ensure that everyone knows the ethical and professional principles and
standards that should guide their performance and is aware of the need and importance to follow them so as to ensure
that the interests of shareholders, employees and clients are at all times respected.

The Code of Conduct is available at NOVO BANCO's website, in Portuguese and English, at NOVO BANCO >
Governance > Compliance > here.

Monitoring the Code of Conduct and clarifying employees’ doubts about its content and application is the responsibility
of the Compliance Department.

In 2020, in NOVO BANCO, as a result of non-compliance with internal regulations and negligence in the performance
of their duties, 13 employees received sanctions, namely: 1 dismissal without any indemnity or compensation; 10 cases
of days of suspension without pay and with loss of seniority; and 2 registered reprimands.

Policies on the Prevention of Conflicts of Interest

The Policies on the Prevention of Conflicts of Interest establish rules on the identification, management and monitoring
of potential conflicts of interest in the various activities of NOVO BANCO and the NOVO BANCO Group, but also with
respect to their corporate bodies, employees, and ultimately, their suppliers. They enable compliance with the applica-
ble legal and regulatory provisions, as well as with the recommendations of the European Central Bank, the European
Securities and Markets Authority, the Bank of Portugal, and the Securities and Exchange Commission (CMVM), and seek

NOVO BANCO MANAGEMENT REPORT 2020to ensure that any possible situation of conflict of interests identified is recorded, assessed, and, as the case may be,
mitigated or, at limit, abstaining from action, by the Group, the Bank and its agents.

The Conflicts of Interest Policy is available at NOVO BANCO's website, in Portuguese and English, at NOVO BANCO >
Governance > Compliance > here.

Related-Party Transactions Policy

NOVO BANCO’s Related-Party Transactions Policy sets down rules aimed at identifying transactions concluded be-
tween NOVO BANCO and Related Parties and at ensuring that the Bank complies with several provisions and regula-
tions, namely the European Banking Authority (EBA) Guidelines on Internal Governance (EBA/GL/2017/11), Articles 85
and 109 of the General Law on Credit Institutions and Financial Companies and the International Accounting Standards
(IAS 24).

In this context, the control system implemented identifies those involved in transactions contracted with the Bank, in
strict compliance with the applicable legislation, and the process of identification, analysis and validation is described
in Internal Regulations. Assessment and approval of any transaction (credit, sale of assets, passive or contractual rela-
tionship) are mandatory prior to its conclusion - all proposed transactions with related parties must be submitted to
the Compliance Department, which checks their conformity with the applicable internal rules and legal and regulatory
provisions, and subsequently to the approval of the Compliance Committee of the General and Supervisory Board,
ratification of the General and Supervisory Board and approval by the Executive Board of Directors.

The Related-Party Transactions Policy is available at NOVO BANCO's website, in Portuguese and English, at NOVO
BANCO > Governance > Compliance > here.

During 2020, transactions were carried out with Related Parties (credit transactions, provision of services and other
contracts) under which credit transactions, including extensions and renewals of limits, reached a total amount of
€1,767 million.

Article 85 of the General Law on Credit Institutions and Financial Companies stipulates that credit institutions may not
grant credit, in any form or type, including the provision of guarantees, to members of their management or super-
visory bodies and their relatives, or to companies or other collective bodies directly or indirectly controlled by them.
However, the granting of credit to companies and other collective bodies not included in paragraph 1, of which they are
managers or in which they have a qualifying holding is allowed under paragraph 8 of the same article 85. In this context,
the Compliance Department issued favourable opinions on 13 credit transactions allowed under said paragraph 8 of
Article 85, which subsequently received the approval of the Compliance Committee of the General and Supervisory
Board, the approval of the Executive Board of Directors and the ratification of the General and Supervisory Board.

In addition, under Article 109 of the General Law on Credit Institutions and Financial Companies, credit granting to
qualifying shareholders, or entities directly or indirectly controlled or in a group relationship with them is allowed, sub-
ject to certain limits. During 2020 NOVO BANCO did not conclude any credit transactions with qualifying shareholders,
under said legal rule.

Whistleblowing Policy

NOVO BANCO remains strongly committed to the growing internalisation of a culture of compliance, namely entailing
the reporting of undue or irregular behaviours or behaviours that go against the law, the regulations, good practices,
and the Bank's internal policies.

The Whistleblowing Policy regulates the reporting of irregularities by the Bank's employees, as well as by service pro-
viders or any third parties, and its objectives are to preserve the Bank's reputation, effectively protect its assets and
those of its clients, and prevent or detect in advance any irregularities that may be committed.

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESExamples of irregularities are any violations committed within NOVO BANCO in the fields of accounting, internal
accounting controls, auditing, prevention of corruption and banking and financial crime, crimes against the market,
or breaches of the Law and regulations that inform the internally defined policies, procedures and controls on the
prevention of money laundering and terrorist financing.

The communication of irregularities - which may be anonymous but in any case guarantees at all times that the author
is maintained confidential, providing he/she acts in good faith -, is made in writing and submitted through any of the
following channels, at the choice of the author:

Addressed to the Compliance Committee of the General and Supervisory Board

• Avenida da Liberdade, 195, 14º, 1250-142 Lisbon, Portugal; or

• Through the form available at NBWeb; or

• By e-mail to the address: irregularidades@novobanco.pt.

The General and Supervisory Board is responsible for managing the irregularities communication system, ensuring the
confidentiality of communications.

The Whistleblowing Policy is available at NOVO BANCO's website, in Portuguese and English, at NOVO BANCO >
Governance > Compliance > here.

Anti-Bribery and Anti-Corruption Policy

Corruption and bribery represent one of the key challenges in modern society and fighting them requires a joint effort
by all sectors of society, including banking, which plays an important role in promoting a culture of public integrity.
The fight against practices of corruption and bribery becomes everyone’s responsibility, requiring the development of
a new set of preventive duties and methodologies across organisations and public and private entities. The Anti-Bribery
and Anti-Corruption Policy approved by the Compliance Committee of the General and Supervisory Board, and by
the Executive Board of Directors aims to prevent and mitigate the risk of corruption and bribery, and related practices,
reaffirming NOVO BANCO's commitment to building up integrity in society.

The Anti-Bribery and Anti-Corruption Policy is available at NOVO BANCO's website, in Portuguese and English, at
NOVO BANCO > Governance > Compliance > here.

Policies on the Prevention of Money Laundering and Terrorist Financing

A Bank's ability to detect and prevent activities capable of constituting money laundering is directly linked to its
knowledge of certain key elements relating to its counterparties and their transactions.

The NOVO BANCO Group, through its Compliance Department, sets up the conditions that enable the Bank to detect
and prevent, through adequate policies and procedures, the possibility of the Bank and the Group being used as
vehicles for money laundering or terrorist financing activities, such risks materialising to a significant extent within the
financial system.

Aware of the challenge that this control and preventive action represents, the NOVO BANCO Group maintains the
ongoing reassessment of the risks it incurs, by virtue of its business, operations and the geographies where it operates,
endeavouring to identify weaknesses and areas of greater exposure, in order to ensure it has in place adequate methods
of control and mitigation of money laundering or terrorist financing risks. The ability to prevent and, if possible,
detect activities capable of constituting such crimes is directly linked to the Bank's knowledge about its clients, their
counterparties and the transactions they engage in, particularly at the following moments:

• Opening of contract or change of a party in an existing contract, through what is known as KYC (Know Your
Customer) - i.e., the identification of contract parties, representatives and beneficial owners must be effectively
established;

NOVO BANCO MANAGEMENT REPORT 2020• Monitoring contracts' transactions - KYT (Know Your Transactions), spotting unusual situations, either beforehand

or by contacting the client after the situation was detected.

• Analysis of counterparties in investment and divestment transactions, and of transaction and source of funds

circuits, under the terms of the Law.

To that end, NOVO BANCO Group, using software tools with internationally recognised results to complement the
experience of its human capital, has created and developed assessment models that will ensure that greater scrutiny is
applied where this proves more necessary.

NOVO BANCO Group, complying with its regulatory obligations, develops training exercises in preventing money laun-
dering and terrorist financing for all its employees (commercial and central structures, including senior management).
Training can be remote or face-to-face, the latter mainly directed to new employees, and the objective is to equip them
with skills that enable them to collaborate with the control functions in mitigating the risks inherent to the execution
of their functions.

In 2020, NOVO BANCO reinforced training on money laundering and terrorism financing prevention, having provided
23 634 hours of online training (including 955 hours for senior management) and 38 hours of face-to-face training (of
which 4 hours for senior management), making a total of 23 672 hours.

Training is seen as a key tool for a correct flagging by the
employees of potential situations of money laundering
and terrorist financing. On the other hand, it is also useful
for compliance with the legal and regulatory duties to
which the Bank is subject.

The prevention of money laundering and terrorist fi-
nancing is one of the foundations of confidence in the
financial system and as such will continue to deserve
permanent attention by the NOVO BANCO Group.

In 2020 the NOVO BANCO Group examined 3 362 new
contracts, of which 99 were rejected. In addition, 1 068
other contracts were analysed, upon which their own-
ership was changed. It also analysed 13 186 transactions
under existing contracts, of which 893 were reported to
the competent authorities.

Reports to the competent authorities
(number)

1 078

893

2019
2019

2020

The Bank's Policies on the Management of the Risk of money laundering and terrorist financing are available at NOVO
BANCO's website, in Portuguese and English, at NOVO BANCO > Governance > Compliance > here.

Policies on Investor Protection and Market Transparency

The Markets in Financial Instruments Directive, no. 2014/65/EU, of 15 May 2014 (“MiFID II), and related regulations,
which entered into force in January 2018, aim to reinforce investor protection and increase the transparency and
quality of the financial market operation and services provided, and cover all persons and entities operating in the mar-
kets in financial instruments. In addition, the national legislation on financial intermediation activities (in particular the
Securities Code) and life insurance mediation (in particular Law 7/2019 of 16 January) constitutes the basic framework
for fair and transparent action by financial market operators and, as such, for the NOVO BANCO Group.

To address the international trend towards a tightening of the duties of financial intermediaries - of transparency,
legality, completeness of information, diligence and protection of investors -, as well as changes in the rules for mar-
keting financial instruments, NOVO BANCO has adopted the best practices in terms of the governance of products
and services, ensuring the prior assessment and subsequent monitoring of its offer, with the Compliance Department
having extended responsibilities in this area.

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESIn compliance with the legal framework, NOVO BANCO has approved its standards and policies, and discloses them
in a dedicated area of its website, at www.novobanco.pt > Produtos > Poupança e Investimento > Informação ao
Investidor (here). The most salient aspects of these standards and policies are summarised below:

Recording and register of communications. NOVO BANCO is obliged to keep recordings and registers of all com-
munications with Customers and potential Customers, with regard to all services, activities and operations carried out.

Customer classification. NOVO BANCO classifies its customers for the purpose of transactions in financial instruments
into one of three categories: non-professional, professional and eligible counterparty. These classifications have impli-
cations on the level of protection allocated to the investor. The lower the knowledge and experience of the customer
about markets and financial instruments the greater the level of protection.

Assessment of adequacy. In order to ensure that the financial instruments or investment services it provides suit its
Customers’ investment profile, NOVO BANCO asks its Customers and potential Customers to complete investor
profile questionnaires, in order to obtain a more comprehensive and detailed image of, inter alia, their experience and
knowledge of investment, their financial situation, their investment objectives (including capacity to withstand losses)
and their risk tolerance. This sharing of information and knowledge permits to assess whether a given investment
product or service is adequate to the specific situation of the investing client.

Safeguard of Customer Assets. The Securities Code sets forth that in all acts performed, as well as in accounting and
transactions records, the financial intermediary should adopt procedures and implement measures permitting to main-
tain a clear distinction between its assets and the assets of each of its clients to ensure that the opening of proceedings
for the insolvency, recovery of the company or reorganisation of the financial intermediary does not have effects on
actions carried out by the financial intermediary on behalf of its clients. The financial intermediary may not utilise, for
its own or a third party’s benefit, the clients’ financial instruments or exercise the rights inherent thereto, unless the
holders have agreed thereto. NOVO BANCO has in place procedures that ensure compliance with these rules.

Offer screening process. NOVO BANCO has established procedures that govern the design, approval, distribution and
monitoring of the products and services offered. These procedures provide for the screening of new products and
services offers, and the monitoring of the existing offer.

Remuneration Policies for the Management and Supervisory Bodies and
Staff Members

Under the terms and for the purposes of Regime Geral das Instituições de Crédito e Sociedades Financeiras (“RGICSF”),
and Banco de Portugal Notice no. 3/2020, and for compliance with the disclosure duties related to the remuneration
policies provided for therein, the Remuneration Committee has undertaken the annual review and assessment of these
remuneration policies to be presented, discussed and reviewed by the General and Supervisory Board and the Executive
Board of Directors. A report prepared by the Remuneration Committee regarding the annual review and assessment
of the remuneration policy for the Management and Supervisory Bodies is to be submitted for approval at the General
Shareholders’ Meeting of NOVO BANCO.

Prior to the closing of year end 2020, an assessment and review has been made by several NOVO BANCO departments
(Human Capital, Legal, Compliance and Risk) with respect to the remuneration policies for the Management and
Supervisory Bodies and for Staff and these remuneration policies have been amended accordingly. These amendments
are mainly related with:

i. Update of current regulatory framework, for example, Notice 03/2020 of Banco de Portugal among others;

ii. Improvement of the internal governance process regarding the definition and approval of the total annual Variable

Remuneration Budget and related matters.

These Policies have been prepared in accordance with the legislation in force on this date, in particular RGICSF, and the
EBA Guidelines no. 2015/22 on sound remuneration policies and related legislation and reflect the Bank's objectives,

NOVO BANCO MANAGEMENT REPORT 2020strategy, structure and culture, steered by principles of meritocracy and transparency. Recently, these Policies have also
been amended (subject to the approval of the General Shareholders’ Meeting regarding the Management and Supervi-
sory Bodies policy) to reflect the changes in the legislation, including Banco de Portugal Notice no. 3/2020, Regulation
(UE) No. 2019/2088, of 27 November 2019, on sustainability-related disclosures in the financial services sector (SRDR),
where gender neutrality guidance have also been introduced following the best practices and recommendations. Their
implementation aims to foster adequate professional practices and conducts, namely in the sale of products and
services, as well as in the prevention of conflicts of interest with clients.

The Remuneration Committee believes that the Remuneration Policies are appropriate to the current situation of NOVO
BANCO, being in line with the objectives of the Restructuring Plan and respect the related limitations. Accordingly, the
incentives defined for the members of the Executive Board of Directors and for the different categories of employees,
as well as the structure of those incentives, are considered to support the long-term objectives of the institution and
of the various stakeholders.

The Governance of the Remuneration Policy provides for the involvement of several internal bodies and structures,
notably the Remuneration Committee, the Risk Committee of the General and Supervisory Board, and also several
Departments of the Bank, including the Risk, Compliance, Audit, Legal, and Human Capital Departments, ensuring
full alignment of the established practices with the applicable regulatory requirements and the higher interests of the
institution.

i) Limits to remuneration in NOVO BANCO

Following the sale process of NOVO BANCO, and in the context of the State aid granted, the Portuguese State assumed
certain commitments before the European Commission (State Aid no.SA.49275 (2017 / N)) up to the end of the
Restructuring Period – currently 31 December 2021 (hereinafter the “Restructuring Period”).

This situation entails the following limitations to the Remuneration of the Management and Supervisory Bodies and the
Employees of NOVO BANCO:

• Up to 30 June 2020 the Bank could not pay any employee or Member of a Management or Supervisory Body a total
annual salary (includes salary, pension contribution, premium/bonus) above 10 times the average annual salary of
the employees of NOVO BANCO. In the period comprised between 30 June 2020 and the end of the Restructuring
Period, this limit may be exceeded providing all the established viability commitments have been met. In any case,
the Bank may attribute deferred bonuses for performance during the Restructuring Period, making the respective
payment only at the end of this period.

In view of the fulfilment of the commitments for 2019, the above restriction ceased to be effective in July 2020.
However, the Bank opted to maintain this cap, keeping its remuneration policy unchanged.

• Up to the end of the Restructuring Period, the total remuneration and respective conditions of payment/attribution
may be affected by non-compliance with the commitments referred to above. The aforementioned Remuneration
Policies are thus subject to changes resulting from the said commitments.

ii) Description of the Remuneration Policy of the Management and Supervisory Bodies

Policy Approval Powers. The approval of the Remuneration Policy of the Management and Supervisory Bodies is the
responsibility of the General Shareholders’ Meeting, upon proposal of the Remuneration Committee of the General and
Supervisory Board, and this Committee is also responsible for, among others:

• Decide on the remuneration to be attributed to the members of the Executive Board of Directors, as well as their
KPIs, and set and approve, when applicable, the budget for the total variable remuneration of employees, based on,
amongst other factors, the operating results in the period;

• Verify if the existing remuneration policies are updated and if necessary, propose the appropriate changes;

• Review the mechanisms and systems used to ensure that remuneration systems are consistent with sound and
effective risk management and assess the criteria used to define remuneration and ex ante risk adjustment based
on actual risk outcomes (Clawback or Malus).

NOVO BANCO MANAGEMENT REPORT 20201.0 WHO WE ARE 2.0 OUR STRATEGY 3.0 OUR PERFORMANCE 4.0 CAPITAL, LIQUIDITY & RISK 5.0 OUTLOOK 2021 6.0 CORPORATE GOVERNMENT 7.0 STATEMENTS 8.0 ALTERNATIVE MEASURESGeneral and Supervisory Board. Only the independent members of the General and Supervisory Board shall receive
remuneration from NOVO BANCO, such remuneration being fixed only and paid 12 times per year. If applicable, the
members of the General and Supervisory Board shall also be subject to the limitations referred to in i) above.

Executive Board of Directors. The remuneration of the Executive Board of Directors consists of a fixed component and
a variable component. The fixed remuneration is established according to the complexity, level of responsibility and
skills required for the function, and is paid 14 times per year. The variable component of the remuneration is awarded
on a discretionary basis, according to individual and collective performance assessment that takes into account quan-
titative and qualitative criteria. These criteria are set by the Remuneration Committee and informed in due time to the
members of the Executive Board of Directors.

The following criteria are also considered in the process of attribution of variable remuneration:

•

It may only be attributed if it does not jeopardise the Bank's ability to maintain a solid capital base, if the Bank
has achieved a positive operational performance, and if its attribution is consistent with sound and effective risk
management practices;

•

It is subject to a maximum cap of 100% of the annual fixed remuneration;

•

It is phased over a multi-year framework, being fully deferred proportionally over a minimum period of three years.
However, during the Restructuring Period, the amounts attributed relative to 2019 and 2020 are 100% deferred
and will only become a vested right and, consequently, will only be paid, at the end of that period, under the terms
defined in the respective Policy.

• 50% of the amounts attributed shall take the form of “Remuneration Units”, whose terms and conditions regarding
the award, vesting and payment are defined in the Remuneration Units Regulation. The value of each “Remunera-
tion Unit” is determined by the Remuneration Committee, according to financial indicators of the Bank, prior to any
settlement of any deferred amount.

Besides any commitment agreed in the hiring process under the form of a sign-on bonus, no other Variable
Remuneration shall be guaranteed in any way.

All amounts paid or deferred, regardless of whether they constitute vested rights, are subject to risk-based adjustments,
Clawback and/or Malus, including those that are deferred as a result of the application of the limits established in point
i) (Limitations on remuneration at NOVO BANCO).

In what concerns other benefits, such as Health Insurance or Mobile Phone, their attribution is aligned to the internal
policies for the employees of the Bank.

iii) Identified staff

Policy Approval Powers. The approval of the Remuneration Policy for Staff Members is the responsibility of the
Executive Board of Directors, upon a proposal of the Remuneration Committee.

Selection of employees. The Bank's Staff Members Remuneration Policy includes specific chapters applicable to em-
ployees who have or may have a significant impact on NOVO BANCO's risk profile and that are classified as Identified
Staff in accordance with the criteria set out in the Policy.

The list of Identified Staff is shared every year with the Bank of Portugal, under Bank of Portugal Notice 3/2020.

Components of Remuneration The attribution of a Fixed Remuneration shall reflect the skills, experience and
responsibility inherent to the function performed, and does not depend on performance. The attribution of Variable
Remuneration to the Identified Staff, as well as its annual amount, depends on the discretionary decision of the
Remuneration Committee. When a Variable Remuneration exists, it is calculated based on individual and collective
performance, taking into account the following principles:

• Performance must be assessed according to quantitative and qualitative criteria and through financial and non-

financial variables;

NOVO BANCO MANAGEMENT REPORT 2020• The period of assessment of performance and attribution of variable remuneration must be multi-annual - which
implies that a substantial part of the amount attributed be deferred so as to take into account economic cycles and
the management of risk -, and promote the retention of Identified Employees;

• The existence of risk adjustment mechanisms (Malus and Clawback), as described in the Remuneration Policy;

• The amount attributed is limited to 100% of the annual Fixed Remuneration;

• Guaranteed variable remuneration can only be established in the first year after hiring, under the form of a Sign-on

bonus;

• Limits to Remuneration set in i) above, also apply to these employees.

iv) Disclosure of Remuneration

Refer to point 6.6 Remuneration of the members of the Corporate Bodies and Identified Staff.

Policy for Selection and Assessment of the Management and Supervisory
Bodies and Key Function Holders

NOVO BANCO approved in March 2018 a Policy for Selection and Assessment of the Management and Supervisory
Bodies and Key Function Holders (the “Policy”), thus ensuring compliance with the regulations in force and the
implementation of the required governance standards for Significant Financial Institutions. The Policy was approved
by the Nomination Committee, the Executive Board of Directors, the General and Supervisory Board, and the General
Meeting.

The Policy aims to ensure that the members of the Management and Supervisory Bodies and Key Function Holders
(essentially the holders of the Risk, Audit, and Compliance Functions and the general managers of branches) meet all
the fit and proper criteria to perform their functions, both at the time of appointment and throughout their mandates.
This suitability to the function basically refers to the capacity to permanently ensure a sound and prudent management
of the institution, which is assessed in accordance with the following requirements: i) Experience; ii) Repute; iii)
Independence; iv) Availability; and v) Collective Suitability.

Recently, this Policy has been amended (subject to the approval of the General Shareholders’ Meeting) and includes the
heads of Treasury and Marketing as Key Function Holders.

Policy for the Selection and Evaluation of NOVO BANCO’ Statutory
Auditor and the Contracting of Non-prohibited Non-audit services.

NOVO BANCO approved in 2018 and amended in 2020 its Policy for the Selection and Evaluation of Novo Banco'
Statutory Auditor and for the contracting of non-prohibited non-audit services (the "Policy"), in compliance of
the applicable regulations. This Policy was approved by the Financial Affairs (Audit) Committee of the General and
Supervisory Board and by NOVO BANCO’s General Shareholders’ Meeting.

The Policy applies to the selection and assessment of the Statutory Auditor and aims to ensure that the Statutory
Auditor fulfils the necessary requirements of suitability (“fit and proper”), professional experience, independence and
availability, taking into account the nature, dimension and complexity of NOVO BANCO’ activity and the responsibilities
inherent to the specific tasks to be performed. To achieve its purpose, the Policy defines the assessment criteria, the
internal responsibilities and the procedures that must be followed.

In addition, the Policy defines the criteria and procedures to apply in case non-audit services are contracted with the
Statutory Auditor and defines the ones which are allowed and the ones which are prohibited.

At 31 December 2020 the outstanding amount of loans to persons and entities falling under the provisions of art. 85 of
the General Law on Credit Institutions and Financial Companies (Regime Geral das Instituições de Crédito e Sociedades
Financeiras – RGICSF) is presented below:

Name

Position

Amount (in euros)

Members of the Corporate Bodies in office at the date of this Report

Executive Board of Directors

Luís Miguel Alves Ribeiro
Closely related persons

General and Supervisory Board

Carla Alexandra Severino Antunes da Silva
Closely related persons

Statutory Auditor

António Filipe Dias da Fonseca Brás

Member of the Executive Board of Directors

€192 477.13
€138 601.53

Member of the General and Supervisory Board

€294 637.67

Statutory Auditor, representative of Ernst &
Young Audit & Associados - SROC, S.A.

€132 536.77

Entity where a member of the Executive Board of Directors holds a management position

LOCARENT - Companhia Portuguesa Aluguer Viaturas S.A.

NOVO BANCO dos AÇORES

SIBS - SGPS SA

UNICRE - Instituição Financeira de Crédito SA

Members of the Corporate Bodies no longer in office at the date of this Report

Executive Board of Directors

€115 801 359.57

€1 294 560.00

€25 080 335.73

€22 550 000.00

José Eduardo Fragoso Tavares de Bettencourt
Closely related persons

Member of the Executive Board of Directors

€56 747.85

Mr. José Eduardo Fragoso Tavares de Bettencourt resigned his position on 22.10.2020 with effects from 30.11.2020.

The amounts shown in the tables above concern Residential Mortgage Loans, save for those listed for Entities where
a member of the Executive Board of Directors holds a management position and the person related to the member of
the General and Supervisory Board, where they concern corporate loans and bank guarantees.

For the disclosure purposes of Art. 109 (7) of the RGICSF, during 2020 there were no loans granted to direct or indirect
holders of qualified holdings. For the purposes of the same article, outstanding amount of loans to persons related
were as follows:

Name

Type of Credit

Amounts (in euros)

Entities controlled directly or indirectly by a person holding directly or indirectly a stake in the credit institution

Esmalglass Portugal Productos Ceramicos, S.A.

Bank Guarantee

Inframoura - Empresa de Infraestruturas de Vilamoura, E.M.

Leasing

€1 500.00

€114 061.82

NOVO BANCO MANAGEMENT REPORT 20206.6 Remuneration of the Members of
the Corporate Bodies and Identified
Staff

According to several regulatory obligations, among others, Bank of Portugal Notice 3/2020 and Regulation (EU) No
575/2013 of the European Parliament and of the Council, NOVO BANCO shall disclose the Remuneration of Members
of Corporate Bodies and Identified Staff.

i) Executive Board of Directors

Executive Board of Directors

António Manuel Palma Ramalho

Mark George Bourke

Rui Miguel Dias Ribeiro Fontes

Role

CEO

Member

Amount in euros

Total 2020

Fixed Remuneration

Others

Total
Paid and
Deferred

Other post-
employment
benefics

Amount in euros

Variable
Remuneration
Award of
2020 (*)

8 266 161 5 766 161 5 739 116

27 046

2 500 000

1 214 434

874 371

867 028

699 866

538 553

537 967

6 351 862

4 353 237

4 334 121

7 343

587

19 116

340 063

161 313

1 998 625

Identified Staff

Commercial

Control Functions

Suport

(*) The 2020 award will be deferred and paid out in subsequent years in accordance with Remuneration Policy.
(**) As of 31st December 2020 2/3 of the identified Staff Bonus award of 2018 and 1/3 of Bonus award 2019 have been paid (1.402.588€).

6.7 Securities held by members of the

management and supervisory bodies

As at 31 December 2020, and with regard to 2020, the members of the management and supervisory bodies
of NOVO BANCO did not hold any securities issued by NOVO BANCO or by companies in a control or group

relationship with NOVO BANCO.

Additionally, no acquisitions, disposals or transmissions of securities issued by NOVO BANCO or by companies in a
control or group relationship with NOVO BANCO were carried out in this period by the members of the management
and supervisory bodies of NOVO BANCO.

6.8 Non-Material Indirect Investment in

Novo Banco

All members of the Executive Board of Directors and certain members of the General and Supervisory Board
acquired in 2018 (as disclosed in the 2018 Annual Report), using their own resources, holdings in an indirect
investment structure in Novo Banco, which had been set up (and is controlled) by LSF Nani GP, LLP, which owns
indirectly a 75% interest in Novo Banco. This indirect investment represents a shareholding of substantially less than 1%
in Novo Banco and has no financial impact on the Bank, or in the exercise of the functions, suitability and independence
of the aforesaid members, taking into account the reduced weight of their investment as a percentage of the share
capital, either collectively or individually. These situations were disclosed to the relevant supervisory authorities and
internal control bodies. There were no changes in 2020.

7.0

Title: Feno
Author: António Capitão

7.1 Consolidated Financial Statements

Consolidated income statement as at 31 december 2020 and 2019

Interest Income

Interest Expenses

Net Interest Income

Dividend income

Fee and comission income

Fee and comission expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair value
through profit or loss

Gains or losses on financial assets and liabilities held for trading

Gains or losses on financial assets mandatorily at fair value through profit or loss

Gains or losses on financial assets and liabilities designated at fair value through profit and
loss

Gains or losses from hedge accounting

Exchange differences

Gains or losses on derecognition of non-financial assets

Other operating income

Other operating expenses

Operating Income

Administrative expenses

Staff expenses

Other administrative expenses

Cash contributions to resolution funds and deposit guarantee schemes

Depreciation

Provisions or reversal of provisions

Commitments and guarantees given

Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value through
profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and
associates

Impairment or reversal of impairment on non-financial assets

Share of the profit or loss of investments in subsidiaries, joint ventures and associates
accounted for using the equity method

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax

Deferred tax

Profit or loss after tax from continuing operations

Profit or loss from discontinued operations

Profit or loss for the period

Attributable to Shareholders of the parent

Attributable to non-controlling interests

thousands of Euros

31.12.2019

31.12.2020

753 087

743 707

( 212 474)

( 188 573)

540 613

9 909

367 400

( 53 456)

555 134

16 478

313 823

( 47 305)

61 554

88 472

( 59 223)

( 91 611)

( 253 720)

( 364 000)

( 1 740)

38 829

3 954

( 11 641)

( 2 414)

( 3 416)

139 802

120 732

( 368 592)

( 230 294)

425 334

343 958

( 444 840)

( 265 350)

( 179 490)

( 34 707)

( 33 664)

( 21 297)

60 776

( 398 769)

( 245 606)

( 153 163)

( 35 048)

( 33 072)

( 186 423)

( 22 116)

( 82 073)

( 164 307)

( 627 294)

( 755 070)

333

( 4 192)

( 287 159)

( 245 778)

1 470

9 430

( 1 021 824)

( 1 304 964)

( 45 769)

( 8 804)

( 36 965)

(1 082)

8 639

( 9 721)

( 1 067 593)

( 1 306 046)

1 128

( 33 345)

( 1 066 465)

( 1 339 391)

( 1 058 812)

( 1 329 317)

( 7 653)

( 10 074)

( 1 066 465)

( 1 339 391)

The Certificated Accountant

Executive Board of Directors

ASSETS

Cash, cash balances at central banks and other demand deposits

Financial assets held for trading

Financial assets mandatorily at fair value through profit or loss

Financial assets at fair value through other comprehensive income

Financial assets at amortised cost

Securities

Loans and advances to banks

Loans and advances to customers

Derivatives – Hedge accounting

Fair value changes of the hedged items in portfolio hedge of interest rate risk

Investments in subsidiaries, joint ventures and associates

Tangible assets

Tangible fixed assets

Investment properties

Intangible assets

Tax assets

Current Tax Assets

Deferred Tax Assets

Other assets

Non-current assets and disposal groups classified as held for sale

TOTAL ASSETS

LIABILITIES

Financial liabilities held for trading

Financial liabilities designated at fair value through profit or loss

Financial liabilities measured at amortised cost

Deposits from central banks and other banks

Due to customers

Debt securities issued, Subordinated debt and liabilities associated to transferred assets

Other financial liabilities

Derivatives – Hedge accounting

Provisions

Tax liabilities

Current Tax liabilities

Deferred Tax liabilities

Other liabilities

Liabilities included in disposal groups classified as held for sale

TOTAL LIABILITIES

EQUITY

Capital

Accumulated other comprehensive income

Retained earnings

Other reserves

Profit or loss attributable to Shareholders of the parent

Minority interests (Non-controlling interests)

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

thousands of Euros

31.12.2019

31.12.2020

1 854 081

2 695 459

748 732

1 314 742

655 273

960 962

8 849 896

7 907 587

27 141 460

25 898 046

1 622 545

369 228

2 229 947

113 795

25 149 687

23 554 304

7 452

52 540

92 628

889 152

188 408

700 744

26 378

900 095

1 628

898 467

3 378 492

40 255

12 972

63 859

93 630

779 657

187 052

592 605

48 833

775 498

610

774 888

2 944 292

1 559 518

45 295 903

44 395 586

544 825

102 012

554 791

39 673 649

37 808 767

9 849 623

10 102 896

28 400 127

26 322 060

1 065 211

358 688

58 855

307 817

17 980

11 873

6 107

1 017 928

365 883

72 543

384 382

14 324

9 203

5 121

586 066

417 762

1 942

1 996 382

41 293 146

41 248 951

5 900 000

( 702 311)

( 823 420)

( 6 115 245)

( 7 202 828)

5 942 501

6 570 153

( 1 058 812)

( 1 329 317)

36 624

32 047

4 002 757

3 146 635

45 295 903

44 395 586

The Certificated Accountant

Executive Board of Directors

NOVO BANCO MANAGEMENT REPORT 20207.2 Separate Financial Statements

Income statement as at 31 december 2020 and 2019

Interest Income

Interest Expenses

Net Interest Income

Dividend income

Fee and comission income

Fee and comission expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair value
through profit or loss

thousands of Euros

31.12.2019

31.12.2020

765 259

760 111

( 219 109)

( 192 112)

546 150

567 999

17 313

16 928

333 362

279 878

( 48 049)

( 41 438)

59 377

86 183

Gains or losses on financial assets and liabilities held for trading

( 60 446)

( 91 208)

Gains or losses on financial assets mandatorily at fair value through profit or loss

( 372 645)

( 521 059)

Gains or losses on financial assets and liabilities designated at fair value through profit and
loss

Gains or losses from hedge accounting

Exchange differences

Gains or losses on derecognition of non-financial assets

Other operating income

Other operating expenses

Operating Income

Administrative expenses

Staff expenses

Other administrative expenses

Cash contributions to resolution funds and deposit guarantee schemes

Depreciation

Provisions or reversal of provisions

Commitments and guarantees given

Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value through
profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and
associates

Impairment or reversal of impairment on non-financial assets

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax

Deferred tax

Profit or loss after tax from continuing operations

Profit or loss from discontinued operations

Profit or loss for the period

( 102)

( 2 261)

38 599

7 996

62 522

( 12 053)

( 2 000)

2 272

87 599

( 78 216)

( 89 879)

503 600

283 222

( 413 977)

( 367 635)

( 242 098)

( 223 604)

( 171 879)

( 144 031)

( 34 448)

( 36 681)

( 34 766)

( 35 033)

( 101 844)

( 187 839)

60 467

( 21 595)

( 162 311)

( 166 244)

( 631 044)

( 750 975)

( 36 040)

( 41 285)

( 298 424)

( 215 397)

( 1 048 858)

( 1 349 708)

( 38 726)

( 2 541)

( 36 185)

4 216

13 400

( 9 184)

( 1 087 584)

( 1 345 492)

( 28 754)

( 1 087 584)

( 1 374 246)

The Certificated Accountant

Executive Board of Directors

ASSETS

Cash, cash balances at central banks and other demand deposits

Financial assets held for trading

Financial assets mandatorily at fair value through profit or loss

Financial assets at fair value through other comprehensive income

Financial assets at amortised cost

Securities

Loans and advances to banks

Loans and advances to customers

Derivatives – Hedge accounting

Fair value changes of the hedged items in portfolio hedge of interest rate risk

Investments in subsidiaries, joint ventures and associates

Tangible assets

Tangible fixed assets

Investment properties

Intangible assets

Tax assets

Current Tax Assets

Deferred Tax Assets

Other assets

Non-current assets and disposal groups classified as held for sale

TOTAL ASSETS

LIABILITIES

Financial liabilities held for trading

Financial liabilities measured at amortised cost

Deposits from central banks and other banks

(dos quais: Operações com acordo de recompra)

Due to customers

thousands of Euros

31.12.2019

31.12.2020

1 674 826

2 524 868

748 836

655 327

3 044 724

2 445 605

8 758 131

7 813 584

26 042 243

24 804 483

2 392 843

2 873 753

495 252

245 472

23 154 148

21 685 258

7 992

49 884

231 425

194 753

26 043

892 713

680

13 606

60 976

189 924

188 968

48 331

771 854

892 033

771 854

3 333 586

2 956 010

21 273

1 568 912

45 026 429

44 042 448

544 400

554 343

39 924 564

37 895 984

10 542 549

10 778 468

2 168 488

1 625 724

27 980 577

25 778 507

Debt securities issued, Subordinated debt and liabilities associated to transferred assets

1 044 445

Other financial liabilities

Derivatives – Hedge accounting

Provisions

Tax liabilities

Current Tax liabilities

Other liabilities

Liabilities included in disposal groups classified as held for sale

TOTAL LIABILITIES

EQUITY

Capital

Accumulated other comprehensive income

Retained earnings

Other reserves

Profit or loss attributable to Shareholders of the parent

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

The Certificated Accountant

Executive Board of Directors

356 993

58 854

371 744

9 239

974 996

364 013

72 543

438 572

5 536

471 626

314 611

2 007 770

41 380 427

41 289 359

5 900 000

( 632 033)

( 749 259)

( 6 115 245)

( 7 202 828)

5 580 864

6 179 422

( 1 087 584)

( 1 374 246)

3 646 002

2 753 089

45 026 429

44 042 448

NOVO BANCO MANAGEMENT REPORT 20207.3 Final Notes

7.3.1 Declaration of Conformity with the Financial
Information Reported

In accordance with Article 246-1-c) of the Portuguese Securities Code (“Código dos Valores Mobiliários”), the members
of the Executive Board of Directors of NOVO BANCO, S.A., named below, state that:

i. the separate and consolidated financial statements of NOVO BANCO, S.A., for the year ended on 31 December
2020 were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted in the
European Union;

ii. to the best of their knowledge the financial statements referred to in (i) provide a true and fair view of the assets
and liabilities, equity and earnings of NOVO BANCO and of NOVO BANCO Group, in accordance with the referred
standards;

iii. the management report describes accurately the evolution of the businesses, the performance and the financial
position of NOVO BANCO and of NOVO BANCO Group in 2020 and includes a description of the main risks and
uncertainties faced.

The management report and the individual and consolidated financial statements have been approved at the meeting
of the Executive Board of Directors held on 24 March 2021.

7.3.2 Proposal for the distribution of NOVO BANCO results

Under the terms of Article 66 (5-f) and for the purposes of Article 376 (1-b) of the Portuguese Companies Code, and
pursuant to Article 29 of the Bank’s Articles of Association, the Executive Board of Directors of NOVO BANCO proposes,
for approval by the General Meeting, that the net loss reported in the separate accounts for financial year 2020, in the
amount of -€1 374 246 267.71 be allocated to the "Other Reserves and Retained Earnings" caption on the Balance Sheet.

7.4 Note of Recognition

The General and Supervisory Board and the Executive Board of Directors hereby express their recognition for
the loyalty, trust and involvement with the Bank of its Clients and Employees, as well as for the collaboration of

the Governmental, Supervision and Resolution Authorities and the European Commission.

Lisbon, 24 March 2021

Executive Board of Directors

António Manuel Palma Ramalho

Luísa M. S. Soares da Silva Amaro de Matos

Rui Miguel Dias Ribeiro Fontes

Luís Miguel Alves Ribeiro

Mark George Bourke

Andrés Baltar

Alternative

Performance

Measures

8.0

Title: Nascer do Sol

Author: João Ribeiro

8.0

Title: Nascer do Sol
Author: João Ribeiro

NOVO BANCO MANAGEMENT REPORT 2020The European Securities and Markets Authority (ESMA) issued on 5 October 2015 a set of guidelines on the disclosure
of Alternative Performance Measures (APM) by issuers of securities (ESMA/2015/1415), of compulsory application from
03 July 2016.

The NOVO BANCO Group uses a set of indicators in the analysis of its financial performance that can be classified as
Alternative Performance Measures, in accordance with the referred ESMA guidelines.

In compliance with the ESMA guidelines, we present hereunder (i) the reconciliation of the Consolidated Income
Statement and (ii) the Alternative Performance Measures:

I – Reconciliation of the Income Statement

Reconciliation between the Official Consolidated Income Statement and the Management Consolidated Income
Statement used by NOVO BANCO's management as a work tool in the analysis of the Group's performance:

Net Interest
Income

Fees and
Commissions

Market
Results

Other
Operating
Results

General and
Administrative
Costs

Staff Costs

555 134

271 891

( 72 548)

( 136 555)

( 245 606)

( 153 163)

euro thousand

Official Income Statement

Interest Income

Interest Expenses

Net Interest Income

Dividend income

Fee and comission income

Fee and comission expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair
value through profit or loss

Gains or losses on financial assets and liabilities held for trading

743 707

( 188 573)

555 131

16 478

313 823

( 47 305)

88 472

( 91 611)

Gains or losses on financial assets mandatorily at fair value through profit or loss

( 364 000)

Gains or losses on financial assets and liabilities designated at fair value through profit
and loss

Gains or losses from hedge accounting

Exchange differences

Gains or losses on derecognition of non-financial assets

Other operating income

Other operating expenses

Operating Income

Administrative expenses

Staff expenses

Other administrative expenses

Contributions to resolution funds and deposit guarantee schemes

Depreciation

Provisions or reversal of provisions

Commitments and guarantees given

Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and
associates

Impairment or reversal of impairment on non-financial assets

Share of the profit or loss of investments in subsidiaries, joint ventures and associates
accounted for using the equity method

( 11 641)

( 2 414)

( 3 416)

120 732

( 230 294)

339 804

( 245 606)

( 153 163)

( 35 048)

( 33 072)

( 22 116)

( 164 307)

( 755 070)

( 4 192)

( 245 778)

9 430

Profit or loss before tax from continuing operations

(1 316 991)

Tax expense or income related to profit or loss from continuing operations

Current tax

Deferred tax

Profit or loss after tax from continuing operations

Profit or loss from discontinued operations

Profit or loss for the period

Attributable to Shareholders of the parent

Attributable to non-controlling interests

100

8 639

( 9 721)

(1 309 358)

( 33 345)

(1 338 310)

( 1 328 236)

( 10 074)

(1 339 391)

16 478

313 823

( 47 305)

88 575

( 103)

( 91 611)

( 63 825)

( 11 641)

( 2 414)

5 373

30 683

( 3 416)

84 676

( 38 793)

( 158 749)

( 245 606)

( 153 163)

( 35 048)

9 430

( 33 345)

Depreciation

Restructuring
funds -
independent
valuation

Credit
Impairment

Securities
Impaiment

Other
Assets and
Contingencies
Provisions

Taxes

Special Tax
on Banks

( 33 072)

( 300 175)

( 524 442)

( 40 999)

( 626 022)

( 1 082)

( 32 752)

Interest Income

Interest Expenses

Net Interest Income

Dividend income

Fee and comission income

Fee and comission expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair
value through profit or loss

Gains or losses on financial assets and liabilities held for trading

Gains or losses on financial assets mandatorily at fair value through profit or loss

( 300 175)

Gains or losses on financial assets and liabilities designated at fair value through profit
and loss

Gains or losses from hedge accounting

Exchange differences

Gains or losses on derecognition of non-financial assets

Other operating income

Other operating expenses

Operating Income

Administrative expenses

Staff expenses

Other administrative expenses

( 33 072)

Contributions to resolution funds and deposit guarantee schemes

Depreciation

Provisions or reversal of provisions

Commitments and guarantees given

Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and
associates

Impairment or reversal of impairment on non-financial assets

Share of the profit or loss of investments in subsidiaries, joint ventures and associates
accounted for using the equity method

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax

Deferred tax

Profit or loss after tax from continuing operations

Profit or loss from discontinued operations

Profit or loss for the period

Attributable to Shareholders of the parent

Attributable to non-controlling interests

101

( 32 752)

( 22 116)

( 164 307)

( 524 442)

( 40 999)

( 189 629)

( 4 192)

( 245 778)

8 639

( 9 721)

NOVO BANCO MANAGEMENT REPORT 2020II – Alternative performance measures

Information on the Alternative Performance Measures (definition, calculation method and scope).

Income Statement

Designation

Definition/Utility

Calculation Basis

Conciliation with the Financial
Statements

Fees and Commissions

Commercial banking
income

Indicator of results of financial
activity directly related to services
provided to clients Historical financial
performance indicator

Indicator of the results of commercial
activity most directly related to
customers Historical financial
performance indicator

Fee and commission income less fee
and commission expenses

(DR): Fee and commission income
and Fee and commission expenses

Financial margin + Customer services

Capital markets results

Indicator of results of activity in the
financial markets Historical financial
performance indicator

Results from trading and hedging
operations, assets at fair value
through other comprehensive
income and at amortized cost

(DR): Dividend income, gains or
losses on the derecognition of
financial assets and liabilities not
measured at fair value through profit
or loss, gains or losses on financial
assets and liabilities held for trading,
gains or losses on financial assets that
must be accounted for at fair value
through profit or loss, gains or losses
on financial assets and liabilities
accounted for at fair value through
profit or loss, gains or losses from
hedge accounting and exchange
differences

Other operating results

Indicator of other diverse results,
not directly related to activity with
customers and markets Historical
financial performance indicator

Gains or losses on the derecognition
of non financial assets + Other
operating income + Other operating
expenses + Proportion of profits
or losses from investments in
subsidiaries and joint ventures and
associates accounted for using the
equity method

(DR): Gains or losses on the
derecognition of non -financial
assets, other operating income, other
operating expenses, proportion of
profits or losses from investments in
subsidiaries and joint ventures and
associates accounted for using the
equivalence method

Banking Income

Financial activity results indicator
Historical financial performance
indicator

Net interest income + Fees and
commissions + Capital markets
results + Other operating results

Operating costs

Operational result

Indicator of structural costs that
support commercial activity and
whose analysis allows to assess the
trajectory of progression of costs
Indicator of historical financial
performance

Indicator of results of financial activity
less costs and before impairment.
Measures the extent to which the
income generated covers / exceeds
operating costs Historical financial
performance indicator

Provisions, net
of replacement /
Impairments

Indicator of net reinforcements
of impairments made in the year
Historical financial performance
indicator

Personnel expenses + Other
administrative expenses +
Depreciation

(DR): Personnel expenses, Other
administrative expenses and
Depreciation

Banking income Operating costs

Provisions or reversal of provisions
+ Impairment or reversal of
financial assets not measured at
fair value through profit or loss +
Impairment or reversal of impairment
of investments in subsidiaries,
joint ventures and associates +
Impairment or reversal of impairment
of non-financial assets

(DR): Provisions or reversal of
provisions, Impairment or reversal
of impairment of financial assets
not measured at fair value through
profit or loss, Impairment or reversal
of impairment of investments in
subsidiaries, joint ventures and
associates and Impairment or reversal
of impairment of non-assets financial

102

Designation

Definition/Utility

Calculation Basis

Conciliation with the Financial
Statements

Assets eligible
for rediscount
transactions with
the ECB

Securities portfolio

Trading financial securities or
other types of assets, such as
non-marketable assets or cash,
accepted as collateral by the ECB
in financing operations Indicator of
historical financial performance

Indicator of the size of funds
invested in trading assets, at fair
value through profit or loss, at
fair value through profit or loss
mandatory, at fair value through
other comprehensive income
and at amortized cost Historical
financial performance indicator

Securities (bonds, shares and
other variable income securities)
recorded in trading portfolios, at
fair value through profit or loss,
at fair value through mandatory
income, at fair value through equity
and amortized cost.

(BAL): Securities held for trading
and Securities portfolio

Customer deposits
Instruction No
16/2004 of Banco de
Portugal

Indicator of the asset's financing
capacity Historical financial
performance indicator

Set of amounts entered in
the following general ledges
accounting items: [# 400 # 34120
+ # 52020 + # 53100]

(BAL): Customer resources

Net financing from
the ECB

Indicator that reflects the net
amount that was obtained from
the ECB to finance the activity
Historical financial performance
indicator

Difference between the amount of
financing obtained from the ECB
and investments in the ECB

(BAL): Applications at the ECB and
Resources from the ECB

Customer funds

Indicator of the asset's financing
capacity Historical financial
performance indicator

'Deposits + Other customer
funds + Debt securities placed on
customers

(BAL): Customer funds, Debt
securities issued, subordinated
liabilities and Liabilities associated
with transferred assets

Off-balance funds

Indicator of off-balance sheet
customer funds Historical financial
performance indicator

Off-balance sheet resources
managed by Group companies,
which include real estate and
investment funds, pension funds,
banking insurance, portfolio
management and discretionary
management

Total customer funds

Indicator of customer resources
registered on the balance sheet
and off balance sheet Historical
financial performance indicator

Deposits + Other customer
resources + Issued bonds
+ Subordinated liabilities +
Disintermediation resources

(BAL): Customer resources,
Liabilities represented by
securities, subordinated liabilities
and Liabilities associated with
transferred assets

Commercial gap

Liquidity gap

Loans to
Deposit Ratio
Instruction No
16/2004 of Banco de
Portugal

Indicator that measures the need
/ excess of financing in absolute
value of the commercial area
Historical financial performance
indicator

Indicator that allows assessing
the need / excess liquidity
accumulated up to 1 year, in
each cumulative scale of residual
maturity. Historical financial
performance indicator Indicator
of the relationship between the
financing of the

Indicator of the relatioship
between the financing of the
activity and the funds raised from
customers
Historical financial performance
indicator

Difference between customer
deposits and net credit

(BAL): Net customer loans and
customer deposits

Difference between [(Net assets
volatile liabilities)]

Ratio between [(total credit -
accumulated impairment for credit)
and customer deposits]

(BAL): Net customer loans and
customer deposits

103

NOVO BANCO MANAGEMENT REPORT 2020Asset Quality and Coverage Ratios

Designation

Definition/Utility

Calculation Basis

Overdue loans ratio

Ratio of loans
overdue for more
than 90 days

Loans quality indicator, showing
the proportion of the gross loan
portfolio that is in default Historical
financial performance indicator

Loans quality indicator, reflects
the proportion of the gross loan
portfolio that has been in default
for more than 90 days Historical
financial performance indicator

Non-performing
loans ratio

Loans portfolio quality indicator,
reflects the proportion of the gross
loans portfolio including cash and
deposits with loans institutions that
are in a non-performing situation
Historical financial performance
indicator

Ratio between overdue loans and
total loans

Ratio between loans overdue for
more than 90 days and total loans

Ratio between the total balance
of loans agreements with
customers and cash equivalents
and investments in loans
institutions identified as: (i) being
in default (internal definition in
line with Article 178 of the Capital
Requirements Regulation, that
is, contracts with higher material
defaults) 90 days and contracts
identified as unlikely to pay,
according to qualitative criteria;
and (ii) having specific impairment
and total loans

Conciliation with the Financial
Statements

(BAL): Overdue loans, that is, loans
with installments of capital and
interest in default and loans to
customers, gross

(BAL): Loans overdue for more
than 90 days, that is, loans with
installments of capital and interest
in default for more than 90 days
and loans to customers, gross

(BAL). Loans identified as non-
productive loans and Gross
customer loans

Forborne ratio
Instruction No
32/2013 of Banco de
Portugal

Loans quality indicator, reflects
the proportion of the gross loan
portfolio that was restructured
Historical financial performance
indicator

Ratio between forborne and total
loans

(BAL). Loans identified as
restructured due to financial
difficulties of the customer and
loans to customers gross

Overdue loans
coverage

Coverage of loans
overdue for more
than 90 days

Non-performing
loans coverage

Coverage of loans to
customers

Cost of Risk

Indicator of the ability to absorb
potential losses related to loans
default Historical financial
performance indicator

Indicator of the ability to absorb
potential losses related to loans
default for more than 90 days
Historical financial performance
indicator

Indicator of the capacity to absorb
potential losses related to non-
performing loans default Historical
financial performance indicator

Indicator of the ability to absorb
potential losses related to the
customer loan portfolio Historical
financial performance indicator

Measure of the cost recognised
in the year to cover the risk
defaultin the customer loans book
-historical financial performance
measure

Ratio between balance sheet
impairments for loans to customers
and the amount of overdue loans

(BAL): Provisions for loans and
overdue loans to customers

Ratio between balance sheet
impairments for loans to customers
and loans overdue for more than
90 days

(BAL): Provisions for loans and
loans to customers overdue by
more than 90 days

Ratio between balance sheet
impairments for loans to customers
and non-performing loans

(BAL): Provisions for loans and
non-performing loans

Ratio between balance sheet loan
impairments and gross loans to
customers

(BAL): Provisions for loans and
gross loans to customers

Ratio between impairment charges
recorded in the period for loans
risk and the balance of loans to
customers gross

(DR): Reinforcement of provisions
for loans, in the year (BAL): Gross
customer loans

104

Designation

Definition/Utility

Calculation Basis

Conciliation with the Financial
Statements

EFFICIENCY I
Instruction No
16/2004 of Banco de
Portugal

EFFICIENCY Il
Instruction No
16/2004 of Banco de
Portugal

Cost to Income

PROFITABILITY
Instruction No
16/2004 of Banco de
Portugal

It expresses the proportion of
income necessary to cover the
staff costs incurred. The lower
the value of the indicator, the
higher the level of efficiency of the
organization's human resources
Historical financial performance
indicator

Expresses the proportion of
income necessary to cover
operating costs incurred. The
lower the value of the indicator,
the greater the level of efficiency of
the organization Historical financial
performance indicator

It expresses the proportion of
income necessary to face the
operating costs incurred and
allows to measure the progression
of efficiency levels. The lower the
value of the indicator, the greater
the level of efficiency of the
organization Historical financial
performance indicator

Expresses the banking income
(in%) generated by the asset, in the
period and provides an analysis of
the capacity to generate income
per unit of assets used Indicator of
historical financial performance

Ratio between staff expenses and
banking income

(DR): Staff expenses

Ratio between [administrative
expenses and depreciation] and
banking income

(DR): Operating costs include Staff
expenses, Other administrative
expenses and Depreciation

Ratio between operating costs and
banking income

Ratio between banking income and
average net assets

(BAL): Active; the calculation of
the average net asset includes, in
addition to the values at the ends
of the period under analysis, the
values recorded in each of the
months in the interval considered

(DR): Profit or loss from continuing
operations before taxes (BAL):
Assets; the calculation of the
average net asset includes, in
addition to the values at the ends
of the period under analysis, the
values recorded in each of the
months in the interval considered

(DR): Profit or loss from continuing
operations before taxes (BAL):
Equity; the calculation of average
equity includes, in addition to the
values at the ends of the period
under analysis, the values recorded
in each of the months in the
interval considered

Return on average
net assets
Instruction No
16/2004 of Banco de
Portugal

Expresses the income (in%)
generated by the asset, in the
period and provides an analysis of
the capacity to generate results
per unit of assets used Indicator of
historical financial performance

Ratio between profits or losses of
continuing operations before taxes
and average net assets.

Return on average
equity
Instruction No
16/2004 of Banco de
Portugal

Expresses the income (in%)
generated by equity in the period
and provides information on the
efficiency with which capital is
used to generate results Indicator
of historical financial performance

Ratio between profits or losses of
continuing operations before taxes
and average equity

105

NOVO BANCO MANAGEMENT REPORT 2020Sustainability Report
2020

Sustainability Report

2020

Contents

II. SUSTAINABILITY REPORT

1.0
1.1
1.2
1.3
1.4

2.0
2.1
2.2
2.3
2.3.1
2.3.2
2.4
2.5

3.0
3.1
3.2
3.2.1
3.2.2
3.2.3
3.2.4
3.3
3.4
3.5
3.6

4.0
4.1
4.2
4.2.1
4.2.2
4.2.3
4.3
4.4
4.5
4.51
4.5.2

5.0
5.1
5.2
5.2.1
5.2.2
5.2.3

6.0
6.1
6.2

7.0
7.1
7.2
7.3

SUSTAINABILITY AT NOVO BANCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Key indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Approach to sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

OUR CLIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Listening to the clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Retail Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Corporate Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Medium-sized companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Large companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
New technological experiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Customer protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

OUR EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Listening to the employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Attracting Talent and Merit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127
Capturing talent to NOVO BANCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Internal mobility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Performance Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Valuing employee development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Promoting gender equality, equal opportunities and respect for diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Promoting the reconciliation of professional, personal and family life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Addressing social work needs - internal social responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Looking after heath, well-being and safety at work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

OUR SUSTAINABLE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Listening to the stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Sustainable products and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
NB 18.25 Account and NB26.31 Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
ESG and NOVO BANCO ECO Structured Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Credit products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Financial Inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Environmental impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Environmental performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
New Distribution Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

OUR RESPONSIBLE CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Governance Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Giving back to the community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Social Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
NOVO BANCO Solidary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Cultural Patronage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

OUR PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Social Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Environmental Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

ABOUT THIS REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Methodological Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Global Reporting Initiative (GRI) Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Independent Limited Assurance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197

107

NOVO BANCO SUSTAINABILITY REPORT 2020Sustainability
at NOVO BANCO

1.0

Títle: I can see clearly know
Author: Nair Domingues

1.1 Key indicators

Social Indicators

Employees

Training (no. of hours)

Staff Turnover

Total of Women (%)

Women in management positions (%)

Women in first line positions (%)

Gender pay gap (%)

Environmental Indicators

ESG Structured Products launched in the period (#)

Subscription of ESG Structured Products in the period (#)

Cumulative subscription of ESG Structured Products (#)

Clients that subscribed ESG Structured Products in the period (#)

Cumulative Clients that subscribed ESG Structured Products (#)

Total ESG Structured Products subscribed in the period (€mn)

Total cumulative ESG Structured Products subscribed in the period (€mn)

C02 emissions from electricity consumption (ton)

Active Digital Clients (# thousand)

Corporate Governance Indicators

2019

2020 2020 vs 2021

4 326

4 321

200 545

194 925

- 25.0%

6.7

52.5%

34.7

31.3

9.6

5 339

6 735

4 870

5 973

121

151

5 828

566

7.4

53.5%

38.2

31.3

10.2

5 120

11 855

4 911

9 540

117

268

4 241

600

-0.1%

-2.8%

0.7 p.p.

1.0 p.p.

3.5 p.p.

0.6%

-5.2%

76.0%

0.8%

59.7%

-3.3%

77.5%

-27.2%

6.0%

-0.3%

-18.6%

-16.3%

-20.8%

47.6%

Entries of analysed accounts (# warnings)

11 457

11 422

Notifications to the authorities (#)

Account openings investigated (#)

Insertion of investigated participations

Account openings refused after investigation

Economic Indicators: Community and Society

1 035

3 705

1 138

843

3 101

901

Planned saving/"Poupança programada” (# clients)

277 495

225 935

- 18.6%

Planned saving/"Poupança programada” (€mn)

Minimum banking services account (#)

No of suppliers with sustainability scoring

Clients Very Satisfied and Satisfied with customer service - Retail (%)

Clients Very Satisfied and Satisfied with customer service - SMEs (%)

Donations (€mn)

Direct economic value generated (€mn)

Economic value distributed (€mn)

Economic value retained (€mn)

109

1 090

8 491

496

97.0

95.1

0.58

841

412

429

1 039

9 740

569

96.3

94.0

0.50

812

381

431

-4.7%

14.7%

-0.7 p.p.

-1.2 p.p.

-13.8%

-3.4%

-7.5%

0.5%

NOVO BANCO SUSTAINABILITY REPORT 20201.2 Highlights

110

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTJANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC7 | NOVO BANCO CULTURA NOVO BANCO offers a tour guide on the NOVO BANCO CULTURA website, showing several regions and museums in the country and walking you through their painting collections.11 | NOVO BANCO CULTURANOVO BANCO lends six paintings from German painter Günther Förg to the Ourique Art Gallery.12 | NOVO BANCO SUMMIT DO ALENTEJOIn partnership with SIC Notícias TV channel and the Expresso newspaper, NOVO BANCO held a regional summit, where it highlighted entrepreneurs, businesses, and other relevant entities in the region.23 | NB ESG MELHOR SAÚDENOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of companies included in the STOXX® Global ESG Impact index, which stand out for compliance with environmental, social and internal governance criteria.25 | CLIENTS SUPPORT MEASURESNOVO BANCO launches support measures for families and companies due to Covid-19 context.11 | SOS CORONAVÍRUS NOVO BANCO joins the Associação Empresarial de Portugal in the SOS-Coronavirus campaign.20 | NB ESG INOVAÇÃO BIOFARMACÊUTICA and NB ESG MAIS SAÚDENB launches two new structured deposits, with interest rate pegged to the share performance of companies that engage in pharmaceutical and biotechnology research and development and are included in the STOXX® Global ESG Impact index.20 | "A FRIEND IN NEED IS A FRIEND INDEED"NOVO BANCO joins AMI – Foundation for International Medical Assistance in the "A friend in need is a friend indeed" campaign to provide this organisation's most vulnerable beneﬁciaries, who are alone at home, with food and health goods.28 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches a campaign to position its brand in the context of Covid-19, where it highlights its strategic traits of being essential, convenient, close and nonconformist.4 | GLOBAL RESPONSE TO COVID-19 NOVO BANCO joins the “Global Response to Covid-19” initiative, through which Portugal will contribute €10 million to accelerate the development, production and equitable access to Covid-19 vaccines, diagnostics and treatments.6 | SUSTAINABILITY REPORTNOVO BANCO publishes 2019 Sustainability Report.10 | NB ESG MAIS NUTRIÇÃONOVO BANCO launches new structured deposit - NB ESG Mais Nutrição (more nutrition), with interest rate pegged to the share performance of companies included in the MSCI World ESG Leaders Index, which stand out for compliance with the environ-mental, social and internal governance criteria established in global sustainable investment requirements.13 | NOVO BANCO CULTURANOVO BANCO lends the works of Frederico Ayres to the Viana do Castelo museums. 14 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Nikias Skapinakis, Maluda and Noronha da Costa to the Mirandela Municipal Museum.15 | NB MAIS ELÉTRICONOVO BANCO launches new structured deposit with interest rate pegged to the share performance of electrical car makers included in the STOXX® Global ESG Impact Index, which stand out for compliance with the environmental, social and internal governance criteria established in global sustainable investment requirements.3| NBnetwork + NOVO BANCO earns award for "Best Banking Project" at this year's Portugal Digital Awards. 10 | NOVO BANCO CULTURANOVO BANCO lends two paintings by Thomas Buttersworth to the Olhão Municipal Museum.10 | NOVO BANCO CULTURANOVO BANCO Photo Collection opens “Território Solar” exhibition at Faro museum.10 | EPIM AWARDNOVO BANCO earns the EIPM (European Institute of Purchasing Management), award in the ‘Business Continuity’ Master category.15 | NB ESG INFRASTRUCTURES STRUCTURED DEPOSITNOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of 3 companies included in the STOXX® Global ESG Impact index, which stand out for compliance with sustainable investment global requirements.18 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Júlio Resende, Manuel Amado, Francisco Relógio, Roberto Chichorro and Noronha da Costa to the Barrancos Municipal Museum.9 | NOVO BANCO TOURISM SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NB organises a summit on the tourism sector, the ﬁrst in webinar format.25 | NOVO BANCO CULTURANOVO BANCO's Photography Collection in international prominence though its inclusion in the study group of the International Association of Corporate Collections.1 | NOVO BANCO CULTURAOpening of “REFLEX: World with a Future Exhibition”, an initiative of Cais, which the Bank is a sponsor. The exhibition enhances positive and sustainable initiatives.3 | NOVO BANCO EDUCATION PATRONAGEClosing Ceremony of the 38th edition of the Portuguese Mathematics Olympics.22 | NOVO BANCONOVO BANCO appoints Andrés Baltar as new member of Executive committee and approves corporate bodies.23 | NOVO BANCO CULTURANOVO BANCO Photo Collection exhibits works by Vik Muniz at Universidade NOVA SBE.26 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches new campaign praising the country's production capacity, under the motto “Portugal que faz” (Portugal that does).9 | NOVO BANCO DigitalNOVO BANCO launches the ﬁrst app of a new generation of smarter, more personalised applications that revolutionises the way clients interact with the bank in their everyday life.23 | NB ECO ZERO CARBONONOVO BANCO launches new structured deposit - NB ECO Zero, with interest rate pegged to the share performance of companies with clear commitments to reduce carbon emissions.3 | NBnetwork +NOVO BANCO earns award for “Best Integrated Corporate Banking Site in Western Europe”.10 | TALENT ATTRACTS TALENTNOVO BANCO opens applications for the 3rd edition of the 6-month or 1-year traineeships programme for young graduates.8 | NOVO BANCONOVO BANCO shares with its clients and the community in general specialised and technical information (GPS) that can support decision making in the context of Covid and preparation for post-Covid.11 | NOVO BANCONOVO BANCO publishes a page on its website with advice and measures intended for employees, clients and the community in the context of COVID-19.19 | NOVO BANCO AGRIFOOD SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO organises a summit on the agrifood sector, the ﬁrst in webinar format.26 | NOVO BANCO CULTURANOVO BANCO lends ﬁve works by Portuguese painters Graça Morais, Manuel Amado and Luís Noronha da Costa to the Lousã Museum17 | NOVO BANCO INDUSTRY SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO holds another industry-speciﬁc summit in webinar format, this time addressing the industrial sector.26 | NEW DISTRIBUTION MODELNOVO BANCO opens its ﬁrst branch in the New Distribution Model, with social and environmental criteria.31 | SOCIAL DIVIDEND MODELEnd of the 1st edition of the Social Dividend Model, surpassing the target points for 2020.111

NOVO BANCO SUSTAINABILITY REPORT 2020JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC7 | NOVO BANCO CULTURA NOVO BANCO offers a tour guide on the NOVO BANCO CULTURA website, showing several regions and museums in the country and walking you through their painting collections.11 | NOVO BANCO CULTURANOVO BANCO lends six paintings from German painter Günther Förg to the Ourique Art Gallery.12 | NOVO BANCO SUMMIT DO ALENTEJOIn partnership with SIC Notícias TV channel and the Expresso newspaper, NOVO BANCO held a regional summit, where it highlighted entrepreneurs, businesses, and other relevant entities in the region.23 | NB ESG MELHOR SAÚDENOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of companies included in the STOXX® Global ESG Impact index, which stand out for compliance with environmental, social and internal governance criteria.25 | CLIENTS SUPPORT MEASURESNOVO BANCO launches support measures for families and companies due to Covid-19 context.11 | SOS CORONAVÍRUS NOVO BANCO joins the Associação Empresarial de Portugal in the SOS-Coronavirus campaign.20 | NB ESG INOVAÇÃO BIOFARMACÊUTICA and NB ESG MAIS SAÚDENB launches two new structured deposits, with interest rate pegged to the share performance of companies that engage in pharmaceutical and biotechnology research and development and are included in the STOXX® Global ESG Impact index.20 | "A FRIEND IN NEED IS A FRIEND INDEED"NOVO BANCO joins AMI – Foundation for International Medical Assistance in the "A friend in need is a friend indeed" campaign to provide this organisation's most vulnerable beneﬁciaries, who are alone at home, with food and health goods.28 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches a campaign to position its brand in the context of Covid-19, where it highlights its strategic traits of being essential, convenient, close and nonconformist.4 | GLOBAL RESPONSE TO COVID-19 NOVO BANCO joins the “Global Response to Covid-19” initiative, through which Portugal will contribute €10 million to accelerate the development, production and equitable access to Covid-19 vaccines, diagnostics and treatments.6 | SUSTAINABILITY REPORTNOVO BANCO publishes 2019 Sustainability Report.10 | NB ESG MAIS NUTRIÇÃONOVO BANCO launches new structured deposit - NB ESG Mais Nutrição (more nutrition), with interest rate pegged to the share performance of companies included in the MSCI World ESG Leaders Index, which stand out for compliance with the environ-mental, social and internal governance criteria established in global sustainable investment requirements.13 | NOVO BANCO CULTURANOVO BANCO lends the works of Frederico Ayres to the Viana do Castelo museums. 14 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Nikias Skapinakis, Maluda and Noronha da Costa to the Mirandela Municipal Museum.15 | NB MAIS ELÉTRICONOVO BANCO launches new structured deposit with interest rate pegged to the share performance of electrical car makers included in the STOXX® Global ESG Impact Index, which stand out for compliance with the environmental, social and internal governance criteria established in global sustainable investment requirements.3| NBnetwork + NOVO BANCO earns award for "Best Banking Project" at this year's Portugal Digital Awards. 10 | NOVO BANCO CULTURANOVO BANCO lends two paintings by Thomas Buttersworth to the Olhão Municipal Museum.10 | NOVO BANCO CULTURANOVO BANCO Photo Collection opens “Território Solar” exhibition at Faro museum.10 | EPIM AWARDNOVO BANCO earns the EIPM (European Institute of Purchasing Management), award in the ‘Business Continuity’ Master category.15 | NB ESG INFRASTRUCTURES STRUCTURED DEPOSITNOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of 3 companies included in the STOXX® Global ESG Impact index, which stand out for compliance with sustainable investment global requirements.18 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Júlio Resende, Manuel Amado, Francisco Relógio, Roberto Chichorro and Noronha da Costa to the Barrancos Municipal Museum.9 | NOVO BANCO TOURISM SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NB organises a summit on the tourism sector, the ﬁrst in webinar format.25 | NOVO BANCO CULTURANOVO BANCO's Photography Collection in international prominence though its inclusion in the study group of the International Association of Corporate Collections.1 | NOVO BANCO CULTURAOpening of “REFLEX: World with a Future Exhibition”, an initiative of Cais, which the Bank is a sponsor. The exhibition enhances positive and sustainable initiatives.3 | NOVO BANCO EDUCATION PATRONAGEClosing Ceremony of the 38th edition of the Portuguese Mathematics Olympics.22 | NOVO BANCONOVO BANCO appoints Andrés Baltar as new member of Executive committee and approves corporate bodies.23 | NOVO BANCO CULTURANOVO BANCO Photo Collection exhibits works by Vik Muniz at Universidade NOVA SBE.26 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches new campaign praising the country's production capacity, under the motto “Portugal que faz” (Portugal that does).9 | NOVO BANCO DigitalNOVO BANCO launches the ﬁrst app of a new generation of smarter, more personalised applications that revolutionises the way clients interact with the bank in their everyday life.23 | NB ECO ZERO CARBONONOVO BANCO launches new structured deposit - NB ECO Zero, with interest rate pegged to the share performance of companies with clear commitments to reduce carbon emissions.3 | NBnetwork +NOVO BANCO earns award for “Best Integrated Corporate Banking Site in Western Europe”.10 | TALENT ATTRACTS TALENTNOVO BANCO opens applications for the 3rd edition of the 6-month or 1-year traineeships programme for young graduates.8 | NOVO BANCONOVO BANCO shares with its clients and the community in general specialised and technical information (GPS) that can support decision making in the context of Covid and preparation for post-Covid.11 | NOVO BANCONOVO BANCO publishes a page on its website with advice and measures intended for employees, clients and the community in the context of COVID-19.19 | NOVO BANCO AGRIFOOD SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO organises a summit on the agrifood sector, the ﬁrst in webinar format.26 | NOVO BANCO CULTURANOVO BANCO lends ﬁve works by Portuguese painters Graça Morais, Manuel Amado and Luís Noronha da Costa to the Lousã Museum17 | NOVO BANCO INDUSTRY SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO holds another industry-speciﬁc summit in webinar format, this time addressing the industrial sector.26 | NEW DISTRIBUTION MODELNOVO BANCO opens its ﬁrst branch in the New Distribution Model, with social and environmental criteria.31 | SOCIAL DIVIDEND MODELEnd of the 1st edition of the Social Dividend Model, surpassing the target points for 2020.JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC7 | NOVO BANCO CULTURA NOVO BANCO offers a tour guide on the NOVO BANCO CULTURA website, showing several regions and museums in the country and walking you through their painting collections.11 | NOVO BANCO CULTURANOVO BANCO lends six paintings from German painter Günther Förg to the Ourique Art Gallery.12 | NOVO BANCO SUMMIT DO ALENTEJOIn partnership with SIC Notícias TV channel and the Expresso newspaper, NOVO BANCO held a regional summit, where it highlighted entrepreneurs, businesses, and other relevant entities in the region.23 | NB ESG MELHOR SAÚDENOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of companies included in the STOXX® Global ESG Impact index, which stand out for compliance with environmental, social and internal governance criteria.25 | CLIENTS SUPPORT MEASURESNOVO BANCO launches support measures for families and companies due to Covid-19 context.11 | SOS CORONAVÍRUS NOVO BANCO joins the Associação Empresarial de Portugal in the SOS-Coronavirus campaign.20 | NB ESG INOVAÇÃO BIOFARMACÊUTICA and NB ESG MAIS SAÚDENB launches two new structured deposits, with interest rate pegged to the share performance of companies that engage in pharmaceutical and biotechnology research and development and are included in the STOXX® Global ESG Impact index.20 | "A FRIEND IN NEED IS A FRIEND INDEED"NOVO BANCO joins AMI – Foundation for International Medical Assistance in the "A friend in need is a friend indeed" campaign to provide this organisation's most vulnerable beneﬁciaries, who are alone at home, with food and health goods.28 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches a campaign to position its brand in the context of Covid-19, where it highlights its strategic traits of being essential, convenient, close and nonconformist.4 | GLOBAL RESPONSE TO COVID-19 NOVO BANCO joins the “Global Response to Covid-19” initiative, through which Portugal will contribute €10 million to accelerate the development, production and equitable access to Covid-19 vaccines, diagnostics and treatments.6 | SUSTAINABILITY REPORTNOVO BANCO publishes 2019 Sustainability Report.10 | NB ESG MAIS NUTRIÇÃONOVO BANCO launches new structured deposit - NB ESG Mais Nutrição (more nutrition), with interest rate pegged to the share performance of companies included in the MSCI World ESG Leaders Index, which stand out for compliance with the environ-mental, social and internal governance criteria established in global sustainable investment requirements.13 | NOVO BANCO CULTURANOVO BANCO lends the works of Frederico Ayres to the Viana do Castelo museums. 14 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Nikias Skapinakis, Maluda and Noronha da Costa to the Mirandela Municipal Museum.15 | NB MAIS ELÉTRICONOVO BANCO launches new structured deposit with interest rate pegged to the share performance of electrical car makers included in the STOXX® Global ESG Impact Index, which stand out for compliance with the environmental, social and internal governance criteria established in global sustainable investment requirements.3| NBnetwork + NOVO BANCO earns award for "Best Banking Project" at this year's Portugal Digital Awards. 10 | NOVO BANCO CULTURANOVO BANCO lends two paintings by Thomas Buttersworth to the Olhão Municipal Museum.10 | NOVO BANCO CULTURANOVO BANCO Photo Collection opens “Território Solar” exhibition at Faro museum.10 | EPIM AWARDNOVO BANCO earns the EIPM (European Institute of Purchasing Management), award in the ‘Business Continuity’ Master category.15 | NB ESG INFRASTRUCTURES STRUCTURED DEPOSITNOVO BANCO launches new structured deposit, with interest rate pegged to the share performance of 3 companies included in the STOXX® Global ESG Impact index, which stand out for compliance with sustainable investment global requirements.18 | NOVO BANCO CULTURANOVO BANCO lends a set of works by Júlio Resende, Manuel Amado, Francisco Relógio, Roberto Chichorro and Noronha da Costa to the Barrancos Municipal Museum.9 | NOVO BANCO TOURISM SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NB organises a summit on the tourism sector, the ﬁrst in webinar format.25 | NOVO BANCO CULTURANOVO BANCO's Photography Collection in international prominence though its inclusion in the study group of the International Association of Corporate Collections.1 | NOVO BANCO CULTURAOpening of “REFLEX: World with a Future Exhibition”, an initiative of Cais, which the Bank is a sponsor. The exhibition enhances positive and sustainable initiatives.3 | NOVO BANCO EDUCATION PATRONAGEClosing Ceremony of the 38th edition of the Portuguese Mathematics Olympics.22 | NOVO BANCONOVO BANCO appoints Andrés Baltar as new member of Executive committee and approves corporate bodies.23 | NOVO BANCO CULTURANOVO BANCO Photo Collection exhibits works by Vik Muniz at Universidade NOVA SBE.26 | INSTITUTIONAL CAMPAIGNNOVO BANCO launches new campaign praising the country's production capacity, under the motto “Portugal que faz” (Portugal that does).9 | NOVO BANCO DigitalNOVO BANCO launches the ﬁrst app of a new generation of smarter, more personalised applications that revolutionises the way clients interact with the bank in their everyday life.23 | NB ECO ZERO CARBONONOVO BANCO launches new structured deposit - NB ECO Zero, with interest rate pegged to the share performance of companies with clear commitments to reduce carbon emissions.3 | NBnetwork +NOVO BANCO earns award for “Best Integrated Corporate Banking Site in Western Europe”.10 | TALENT ATTRACTS TALENTNOVO BANCO opens applications for the 3rd edition of the 6-month or 1-year traineeships programme for young graduates.8 | NOVO BANCONOVO BANCO shares with its clients and the community in general specialised and technical information (GPS) that can support decision making in the context of Covid and preparation for post-Covid.11 | NOVO BANCONOVO BANCO publishes a page on its website with advice and measures intended for employees, clients and the community in the context of COVID-19.19 | NOVO BANCO AGRIFOOD SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO organises a summit on the agrifood sector, the ﬁrst in webinar format.26 | NOVO BANCO CULTURANOVO BANCO lends ﬁve works by Portuguese painters Graça Morais, Manuel Amado and Luís Noronha da Costa to the Lousã Museum17 | NOVO BANCO INDUSTRY SUMMITIn partnership with SIC Notícias and the Expresso newspaper, NOVO BANCO holds another industry-speciﬁc summit in webinar format, this time addressing the industrial sector.26 | NEW DISTRIBUTION MODELNOVO BANCO opens its ﬁrst branch in the New Distribution Model, with social and environmental criteria.31 | SOCIAL DIVIDEND MODELEnd of the 1st edition of the Social Dividend Model, surpassing the target points for 2020.1.3 Partnerships

Signatory

Corporate citizenship initiative which had its origin, back in 2000, in a proposal
by the then UN Secretary-General, Koﬁ Annan. It is based on ten fundamental
Principles, in the areas of human rights, labour practices, environmental
protection and anti-corruption, and aims to promote businesses’ public and
voluntary commitment to endorse these principles.

Member

Non-proﬁt association that brings together and represents more than 90 leading
companies in Portugal, which are actively committed to the transition to
sustainability.

Member

Organisations for Equality Forum, created in 2013, comprises 69 organisations
committed to reinforcing and highlighting their organisational culture of social
responsibility, incorporating, in their strategies and management models, the
principles of equality between women and men at work.

Associate

Main entity representing the Portuguese banking sector, it was created in 1984
to strengthen the ﬁnancial system and contribute to the development of a more
solid banking sector.

Associate

Portuguese Association of Investment and Pension Funds and Asset Management
Firms, which represents the interests of Mutual Funds management, Real Estate
Funds management, Pension Funds Management and Asset Management,
viewing a more efficient defence of these activities.

Associate

The Portuguese Quality Association is a non-proﬁt organisation, founded in 1969,
that aims to promote and disseminate theoretical and practical knowledge in the
ﬁeld of Quality and Excellence in Portugal.

Associate

National Customer Satisfaction Index is a system for measuring the quality of
goods and services available in the national market, through customer
satisfaction surveys.

Subscriber

Document presented by the United Nations Global Compact, which has as its
main objective to achieve the transition to a low carbon economy and to
avoid the overheating of the atmosphere.

Subscriber

Commitment to Sustainable Finance in Portugal Letter, which aims to
contribute to the promotion of sustainable investment practices.

112

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT1.4 Approach to sustainability

NOVO BANCO steers its activity based on sustainability principles and with the firm resolve to give a positive
contribution to the entire ecosystem within which it operates. With the aim of managing its business in a fair
and responsible manner, the Bank has been implementing a culture that involves permanent monitoring of
its impact on the community, training and raising the awareness of its employees, business partners and clients, and
adherence to the principles and policies that govern its activity.

Business ethics and social and environmental responsibility criteria are incorporated in NOVO BANCO's management
model. By integrating these criteria, the Bank commits itself to managing the business with a view to creating value for
clients, employees, shareholder(s), people, the environment and the communities where it develops its activity. NOVO
BANCO’s management model thus aims to ensure sustainable development both within its line of activity and in terms
of the dimension that links sustainability to the community, i.e., Corporate Social Responsibility (CSR).

To this end and to strengthen its sustainability governance model, in 2020 NOVO BANCO started up a multidisci-
plinary working group which, after sounding the various stakeholders, will review the Bank's sustainability strategy, in
an integrated approach with its business plan and economic and financial objectives. This working group will assist
and strengthen the Bank's governance and management in carrying out their activities by reconciling economic
development issues with social, environmental and ethical responsibility issues to ensure that the Bank's operations are
aligned to its sustainability strategy.

To implement its sustainability strategy in 2020, several studies and trend analyses were carried out to validate the
materiality of the issues to be considered. In light of the constraints caused by the pandemic, the Bank immediately
decided to take a more proactive social stance, acting based on the following themes of first materiality matrix,
published in 2020:

• Physical and digital security of the Client and security of its financial assets

• Financial inclusion of people and companies

• Health and safety in the workplace and reconciling the personal and professional lives of employees

Materiality Matrix

Security of ﬁnancial assets, phusical
and digital security of customers

Products with social and environmental
aspects

Customer satisfaction and service quality

Financing with sustainable criteria

Occupational health and safety
and work/life balance

Financial inclusion
of people and companies

Business ethics in stakeholders
relations

Eco-efficiency at the bank’s branches, buildings and operations
Management of social and environmental risks in the loan portfolio

The bank’s reputation

Recycling and circular economy

Climate change strategy

Supplier selection using environmental,
social and ethical criteria

Partnerships with private charity
institutions and NGOs

Human rights

Community investments

Strategy and results

Diversity and gender equality

Digitization and omni-channel
approach

Attracting and developping talent

Important issues

Material issues

Management bodies

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113

NOVO BANCO SUSTAINABILITY REPORT 2020

Despite the commitments made in 2019, where environmental commitments were very relevant, in 2020 the social
area was paramount in the Bank's ESG (Governance, Social Environment) activities. Striving to provide a quick and
prompt response to issues arising from the pandemic, NOVO BANCO focused its activity in favour of the community,
and sought to give its best contribution to its individual and corporate clients, its employees and society in general, in
an attempt to mitigate the adverse context.

NOVO BANCO is aware of the challenge that sustainable financing poses to the financial sector, faced with the need
to classify and redirect private financial resources towards more sustainable investments, and therefore assumes the
commitment to gradually transition its business model to fit a more sustainable economy, in compliance with the
provisions of the Community directives deriving from the European Ecological Pact and the commitment made by the
European Union in the framework of the Paris Agreement. In its social dimension, in 2020 the Bank will continue to
support its individual and corporate clients in their transition towards a more sustainable and carbon-neutral economy.
The new climate change financing framework will provide the Bank with the opportunity to take effective measures to
mitigate climate change and risks that are already present, and to address their causes.

To this end, the Bank pays and will continue to pay particular attention to the two-way relationship maintained with its
various stakeholders through the existing communication channels.

Canais de comunicação de stakeholders

Employees

Clients

Regulators

Request for in-person feedback via
questionnaires and meetings

Intranet (Somos NOVO BANCO, NBweb
and Human Resources Portal)

Thematics Mailboxes Email (including CEO
Office and “Ask the Chairman” address”)

HCD manager for active and retired
employees

Human Resources Business Partner

Executive leadership visits to the
commercial network

Whistleblower line

Workshops and Lectures

Annual Meeting and other meetings

Thematic meetings, workshops,
clariﬁcation sessions and webinars

Workers Committee, Union Secretariat
and Information and Consultation
Procedure

Suppliers

Contacts established through a speciﬁc
website (Grupo NOVO BANCO Supplier Portal),
coordinating the exchange of information via
e-mail, telephone and in person.

114

Request for by phone, online and in person;

Formal system for ﬁling complaints;

Branch Network, Corporate Centres and
Regional Divisions;

Social networks (NOVO BANCO Cultura,
NOVO BANCO Facebook and Linkedin)

Provision of mandatory and voluntary
information

Request for feedback by phone, online and
in person.

Investor Relations team

Regular meetings with investors

Events, such as NOVO BANCO Summit

Quarterly results presentation

Investors website

Media

Community

Information provided in-person, by phone
and online;

Press conferences

Quarterly results presentation

Sharing of specialized knowledge through
social networks and media (radio, newspa-
pers, televisions).

Continuous in-person, telephone and online
dialogue with Associations, Private Social
Solidarity Institutions, social and environ-
mental NGOs;

Corporate Social Responsibility Initiatives

Participation in conferences

Social networks (NOVO BANCO Cultura,
NOVO BANCO Facebook and Linkedin)

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTOur
Clients

2.0

Title: Namoro ao pôr do sol
Author: Isabel Chapert

NOVO BANCO shapes its business strategy according to the specific needs and preferences of its clients, with the
aim of providing an offer of products and services with value and appropriate to each of the segments, supported by
a commercial network and the various business channels available to the client. In this extremely challenging year,
marked by the constraints and limitations arising from the Covid-19 pandemic, NOVO BANCO sought to protect its
community of clients, by keeping its branches open (following the appropriate protection rules), and taking several
initiatives, including financial support through credit lines and moratorium, encouraging the use of remote channels,
creating more flexible ways of subscribing to products, and promoting the secure use of digital channels, NOVO
BANCO positioned itself from the outset as a strategic partner for its clients.

More information is provided in chapter 1.1.1 - Business Model, of the Annual Report.

2.1 Listening to the clients

In order to offer the best experience to its clients, the Bank seeks to gather as much information as possible about
what they want, when, where and how. Knowing the clients’ expectations throughout their life cycle permits to
identify opportunities for improvement, using a robust model for monitoring the customer experience based
on several action pillars.

Customer
Experience
Monitoring
Model

SERVICE
QUALITY

EXTERNAL
SURVEYS

MOMENTS
OF TRUTH

AD HOC
SURVEYS

DIGITAL
CHANNELS

QUALITY
INDICATOR

MISTERY
CLIENT

Monitoring the clients’ experience of the service provided in all the commercial structures of the
Bank, through a questionnaire designed to measure their satisfaction with the various dimensions
of service, as well as other global indicators.

Continuous monitoring of the clients' experience immediately after the main moments of their
relationship with the Bank, in order to identify improvements that will allow them to meet their
expectations and needs.

Customer satisfaction survey targeting the different aspects of the digital channels (available
features, ease of use, security, visual attractiveness) and comparison with the competition.

Service
quality

Moments
of Truth

Digital
channels

116

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTMystery
Client

Quality
Indicator

Ad hoc
surveys

External
Surveys

Development of a customised Mystery Client programme with the main objective of assessing
compliance with the quality principles deﬁned by the Bank, and identifying any service
weaknesses as well as training needs.

Development of a Quality indicator for the commercial areas that reﬂects the quality of service
and other elements that impact the customer experience.

Carrying out speciﬁc surveys on a case-by-case basis and using different methodologies,
depending on the critical themes of the moment.

Monitoring of external benchmark market surveys such as the ECSI (National Customer
Satisfaction Index), developed by APQ and NOVA IMS, BASEF Banca, developed by Marktest, and
the Financial Services Barometer, developed by DATA E.

The information obtained through this monitoring model is shared with the Bank's commercial structures and with the
central areas, enabling a set of actions to be taken that aim to improve this group of stakeholders’ experience of the
Bank in its various dimensions.

In order to correct the reasons of dissatisfaction conveyed by clients through satisfaction surveys, the Restart pro-
gramme sends a lead to the commercial network's workstations, allowing it to assess the grounds for dissatisfaction
and mitigate them whenever possible.

The management of complaints also has a significant impact on the clients’ relationship with the bank, providing an
opportunity to win back unhappy clients. For each complaint received, the underlying causes are analysed, the ensuing
losses are quantified and corrective and preventive measures are implemented to avoid the recurrence of failures.

In 2020, the Bank received 0.35 complaints for every thousand active customers, which compares with 0.30 in 2019.

Clients may lodge complaints through several channels, and an effort is made to solve problems at the first contact
with the client.

NB NET

NB DIRETO
707 24 7 365

NOVO BANCO
BRANCHES

CORPORATE
CENTRES

E-MAIL
satisfacao@novobanco.pt

ONLINE
FORM

LETTER

A frank and continuous contact with the clients requires fast and efficient replies to their comments or complaints, and
helps to develop a relationship of trust.

The Bank maintains its ambition to be recommended as a reliable, straightforward, and fast-response bank, with easy
physical and digital access, viewing the strengthening of customer confidence and the development of a sustainable
business.

117

NOVO BANCO SUSTAINABILITY REPORT 20202.2 Retail Banking

The Bank seeks to learn about the needs of its clients at every step of their lives, listening carefully to what
they have to say through the various channels available, so as to keep developing and implementing offers and
products that best suit the clients' needs.

In 2020, approximately 54 thousand replies to the satisfaction questionnaires were collected, covering the three
segments of Retail: individual clients, 360º and Small Businesses.

Customer Service - Retail (%)

Retail (total)

Individual Clients

3.7%

9.2%

3.6%

9.9%

3.7%

6.8%

360

4.7%

9.3%

Small Businesses

87.1%

86.5%

89.5%

86.0%

Not Satisﬁed

Satisﬁed

Very Satisﬁed

In 2020 the confidence index¹ is 75%. Global satisfaction
(very satisfied clients) stands at 75%, up from 70% in 2019.
The Net Promoter Score (which indicates the intention to
recommend the Bank) is currently 25.

In 2020, a survey was once again conducted to sound
the opinion of clients (around 15.8 thousand) concerning
their experience in the main moments of truth in their
relationship with the Bank, and in particular with regards
to: personal loans, mortgage loans and account opening.

The Bank also promotes a Mystery Client programme that
covers all the commercial structures of Retail. However,
in 2020, due to the Covid-19 restrictions imposed, there
were no Mystery Client visits.

Moments of Truth
Very satisfied clients (%)

88%

83%

94%

Account
opening

Mortage
loans

Personal
loans

1. See methodological notes

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NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTA survey was carried out in April to the individual clients
and businesses segments to assess their opinion on some
of the measures implemented by the bank to address the
Covid-19 pandemic.

For 88% of the clients surveyed, the measures imple-
mented by NOVO BANCO were in line with or above their
expectations. The level of satisfaction with the manner in
which NOVO BANCO informs on the measures taken to
respond to the Covid-19 outbreak is worth noting, with
84% of the respondents saying they were satisfied or very
satisfied.

In terms of the offering, NOVO BANCO developed a
large set of initiatives aimed at supporting individual and
small business clients, by setting in motion and making
available credit lines of support to companies affected by
the crisis, and taking part in the financial sector's global
solution to support families in financial difficulties due to
the pandemic (moratoria for Residential Mortgage Loans
and Personal Loans), thus encouraging and promoting

Do the measures taken by the NB to respond
to the Covid-19 outbreak meet your needs/
expectations? (%)

12%

80%

Above expectations
In line with expectations
Below expectations

a digital relationship with the Client. Moreover, the Bank offered temporary exemptions from payment on certain
commissions (such as on digital transfers and cash advances), and made available free-of-charge debit cards, as well
as insurance products with special Covid-19 related coverage.

2.3 Corporate Banking

In terms of support to companies, NOVO BANCO positioned itself from the outset as a strategic partner,
providing financial support to small and medium-sized enterprises through the available lines (Capitalizar
2018-Covid-19 Credit Line and industry-specific lines of Support to the Economy), responding to requests
for loan moratoria, and developing the ‘NB Empresas – Antecipação Fundos Lay-off” (to receive in advance the funds
provided by the Social Security Institute for the payment of salaries by companies using the simplified lay-off scheme).
The Bank also strongly focused on the digital transformation of processes, investing in remote relationship and
signature tools so as to continue to address the needs of its clients quickly but in compliance with the social distancing
restrictions imposed in the COVID context.

Customer Service - Corporate (%)

6.0%

7.4%

1.9%

9.3%

Large corporate

Medium-sized
corporate

119

86.6%

88.8%

Not satisﬁed

Satisﬁed

Very satisﬁed

NOVO BANCO SUSTAINABILITY REPORT 2020Trade Finance is another business area where the Bank stands out, providing a wide range of products and specialised
advice designed to support international trade. In January 2020 NOVO BANCO was once again elected the ‘Best trade
finance bank’ in Portugal by the Global Finance international magazine, based on its activity in 2019. In June 2020,
NOVO BANCO was also elected "Best Sub-custodian Bank 2020" in Portugal by Global Finance”.

Creating a value proposition for the Corporate segment that is innovative, competitive and profitable, and bolsters
NOVO BANCO's role as the reference bank for companies in Portugal, remains one of the Bank's priorities, and the
customers’ voice gives a crucial contribution to attaining this goal.

In 2020, Corporate Banking obtained approximately 2,400 replies to customer service satisfaction surveys. The results
show that 89% of the Medium-sized corporate clients and 87% of the Large corporate clients are very satisfied with the
Bank's service, which proves that the Bank's activity matches the needs and expectations of its clients.

2.3.1 Medium-sized companies

In 2020 the confidence index was 75%. Global satisfaction continued to improve, with the percentage of very satisfied
clients standing at 75% in 2020, which compares with 69% in 2019. The Net Promoter Score is currently 24.

Also, in the Medium-sized Companies segment, the Bank evaluates the customers’ experience after taking out a loan.
The resulting data is shared not only with the commercial areas, but also with the marketing areas, and are used to
support the introduction of innovations and the launch of new products and services.

In June and July, the Bank conducted surveys to assess how the measures and solutions adopted in the context of
Covid-19 measured up to the clients’ needs and expectations, where 93% of the corporate clients responded that they
were in line or above their expectations. It should be noted that 71% of these clients were very satisfied with the support
provided by NOVO BANCO in this period. Of those surveyed, about 37% had resorted to a specific Credit Line, or a
Moratorium, or both, and of these, 89% were very satisfied with the Bank's follow-up during the process.

How do you rank your satisfaction with the
support provided by NOVO BANCO during
this period in which we are living? (%)

How do you rank your satisfation with each
of the following aspects of the Covid-19
Lines to which you resorted? (%)

71.3%
Very satisﬁed

Time elapsed until the approval
was communicated

8.3%

17.5%

74.2%

Time elapsed until the amount
was availabre

9.0%

22.9%

68.1%

3.9%

7.4%

88.7%

Bank´s follow up during
the process

22.4%
Satisﬁed

6.3%
Not satisﬁed

Medium-sized Corporate

Not satisﬁed

Satisﬁed

Very satisﬁed

120

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT2.3.2 Large companies

In the Large Companies segment, clients answer a very detailed annual questionnaire that aims to assess the various
items that count towards their choice of NOVO BANCO as their Bank.

In 2020, the confidence index of these clients was 74%, which compares with 64% in 2019. As to global satisfaction,
64% of the clients are very satisfied with the Bank. Additionally, 67% of the clients are very satisfied with customer
service and 87% are very satisfied with the service provided by their Account Manager.

2.4 New technological experiences

Its digital transformation is one of NOVO BAN-
CO's top priorities, emerging this year in an even
more demanding context in terms of speed in
response to the clients’ new needs and expectations. The
aim is to have an agile organisation, focused on the client
and its needs.

The digital offer covers all the different segments of the
bank.

In 2020 we launched
NB smarter, the new mobile
app.

For retail customers, NOVO BANCO offers the NB smart app and the NB smarter mobile solutions (the latter is the new
mobile app launched at the end of 2020), the NBnet homebanking service and the NB app tablet.

To its corporate clients, NOVO BANCO offers the NBnetwork internet banking service, this year further reinforced
with the NBnetwork+, a digital financial management solution for companies, pioneering in Portugal and allowing
a combined view of all their bank accounts, which permits to initiate payments and has functionalities such as a
Financial Calendar, the categorisation of account entries, as well as alerts and notifications, contributing to improve the
operational efficiency of NOVO BANCO's clients and their digital transformation.

NBnetwork + solution won
the prize for "Best Banking
Project.

The NBnetwork + solution won Portugal Digital Awards
2020’ prize for "Best Banking Project”, which recognised
NOVO BANCO’s effort to deliver excellence in value
creation for its clients.

As part of NOVO BANCO's digital transformation strategy, and with a view to widening the scope of this strategy,
improving efficiency, and addressing environmental and social positive impacts, the following solutions stand out:

• New account opening remote solutions, using the Digital Mobile Key or by Video Call, offering a new onboarding

experience that is complete, fast, intelligent, efficient, and entirely digital;

• Launch of a new app for Individual Clients (NB smarter) with a completely renewed design and customer experi-
ence, adaptable and customisable, inclusive and predictive (based on data science) and offering a wide range of
services and solutions, including the aggregation of accounts with other banks;

• Reinvention of the home buying experience, from simulation to title deed. Now with a new branch platform that

completes the omnichannel experience. A simpler, faster and more transparent process;

121

NOVO BANCO SUSTAINABILITY REPORT 2020• Development of Phygital solutions aimed at i) improving the customer experience through mobility and sharing,
also allowing a remote but close relationship with the bank; ii) streamlining processes through digital signatures with
validation code and handwritten electronic signature, reinforcing transparency in relationships, and iii) adoption of
digital processes that foster a paperless culture;

• Digital solution for loans to small businesses: automated and integrated access to credit through the NBnetwork
digital channel. A totally secure process, with no need to deliver any documentation or go to the branch, with funds
made available in less than 48 hours.

Throughout the year, the Bank also continued to renew its digital channels and to leverage on new data science skills:

• A new Non-Financial Offering was made available online;

• The approval circuit for personal loans requested through the digital channels was streamlined;

• The offer of more 60 Investment Funds available for subscription through the Digital Channels was expanded

(Morning Star offer);

• Alternative signature solution via NBnetwork, with no need for Digital Certificates / PKI (public key infrastructure)

Signatures;

• Batch payments, payments to the Social Security and sending of payment files now available through the Open

Banking channel;

•

Introduction of new functionalities in the app to enhance convenience for the client: new Mbway functionalities
(Account division and credit card request);

• Machine Learning models introduced in money laundering prevention methods;

• Contributions to the customer days through the development of customisation models and functionalities in the

channels;

• Support to business using propensity models, to activate or deactivate clients, or identify better offers.

Faced with the adverse scenario resulting from the Covid-19 pandemic, NOVO BANCO used digital transformation to
support its clients:

• Launch of a regional Marketplace hosted on the
novobanco.pt website to support clients in the small
businesses segment implement or reinforce their
digital presence;

•

Improvements in applications for loans under the
protocol credit;

lines, as well as for moratoria (individual and corpo-
rate clients): the process is now more automated and
access can be made directly through NOVO BANCO's

website;

In 2020 we launched the
Marketplace to boost local
commerce.

• The process of activating the Digital Channels on NOVO BANCO's website (individual and corporate clients) was
streamlined and made easier, and client/bank communication tools were promoted on the app (mail messaging,
appointment of meetings and contact request);

• Development of several use cases using Artificial Intelligence to predict and model Covid-19 impacts on the national

economy.

122

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTWith a view to promoting digital education, in 2020, NOVO BANCO made a commitment to Lar Escola António Luis
de Oliveira to support both the Foundation itself and the young people which it supports, by providing equipment and
digital know-how, together with its partners.

In order to assess the impact of technological innovations on the customer experience, in 2020 approximately 42
thousand people were surveyed to assess the global satisfaction with the Bank's channels - NBSmart app, NB net, and
Nbnetwork. In addition, another 3.5 thousand people were surveyed to assess the use of these channels’ functionalities,
to analyse the competition and to detect opportunities for improvement. In terms of customer satisfaction, the channel
with the best score is NBnet, followed by NBnet and NBnetwork.

Net Promoter Score
NB smart app

Net Promotor Score
NBnet

Net Promotor Score
NBnetwork

As regards the intention to recommend, the NB smart app was the channel with the highest Net Promoter Score.

The year 2020 closed with 600 thousand active clients in the digital channels and more than 415 thousand active
mobile clients. The goal for 2021 is therefore to continue to grow and to innovate.

The result of the ongoing digital transformation is
clearly visible in customer interactions with the bank.
Most of the interactions between NOVO BANCO and its
individual clients already take place through the Bank's
mobile channel (in December the figure was 55%, far
outstripping the points of contact made through ATMs).
Currently 70% of the contact points with the bank are
made through the digital channels.

600 thousand

415 thousand

DIGITAL ACTIVE CLIENTS

MOBILE CLIENTS

Mobile clients’ interaction has seen exponential growth over the last five years, having in 2017 surpassed online
interactions. In 2015, only 7% of NOVO BANCO's clients used this channel, with 2018, 2019 and, of course, 2020 being
the years of strongest growth.

123

NOVO BANCO SUSTAINABILITY REPORT 20202.5 Customer protection

The protection of customers can only be properly safeguarded if NOVO BANCO's activity is adequately pro-
tected. Therefore, and in accordance with the best market practices and legal and regulatory requirements, the
Bank ensures the confidentiality, integrity and availability of information.

Customer protection is present in all the Bank's activities, including the safety of the client, the security of the
transactions carried out, and the protection of the personal data of clients and remaining account holders. To ensure
privacy and the correct treatment of personal data, the Bank has developed a set of procedures and internal rules, as
well as a Privacy Policy, and its website provides detailed information on the treatment of personal data.

To prevent, detect and react to the new cyber threats arising from digitisation, leading to increased attention and
stronger technical control.

The Bank invests in the strengthening of its software and
continuously warns its clients about the latest fraud at-
tempts issuing security advice for safe Internet browsing
and safeguarding the security of transactions and per-
sonal data, in the various channels (namely e-mail, direct
channels, PC, smartphone, tablet).

During 2020, in the context of the pandemic, NOVO
BANCO also stepped up information security, including
in its annual plan different communication activities to
raise awareness among the employees to topics such as cyber security and social engineering.

In 2020 we reinforce the
digital protection of our
customers

Given the key role played by all the employees in the prevention of cyber risks, the Bank provided tips on security that
may come useful both in the professional context and in the personal and family context, thus contributing to enhance
security and resilience in the global cyberspace.

The digital channels, which permit to view all contents very quickly and practically, at any time and from anywhere, were
also much focused in the communication campaign. The digital channels are indeed essential to ensure confidence in
the ecosystem in the context of teleworking.

In 2020 the Bank received no complaints originating from the National Data Protection Commission (CNPD). The only
complaint, received in 2019, has been solved with no consequences for the Bank.

NOVO BANCO seeks to satisfy the needs of its clients, allowing them to fulfil their dreams, build up and strengthen
their business, always aiming for a long-term relationship, based on trust, the security of their assets and the privacy
of their data.

124

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTOur
Employees

3.0

Title: Projetos futuros
Author: Jorge Esteves da Costa

Being aware that good results stem from a diversified, and inclusive human capital, bringing different life
experiences, NOVO BANCO bases its relationship with all its employees on the Talent & Merit pillar of its
strategic plan, as well as on other sound governance policies and general principles, which aim to respond to
five challenges:

• Attract and Retain talent;

• Promote gender equality, equal opportunities and respect for diversity;

• Promote the conciliation of professional, personal and family life;

• Address social work / internal social responsibility needs; and

• Watch over health, well-being and safety at work.

Total staff

Total NOVO BANCO Employees in Portugal

Women

Men

2018

4 382

2 274

2 108

2019

4 326

2 272

2 054

2020

2020 vs 2019

4 321

2 313

2 008

- 0.1%

1.8%

-2.2%

94%

UNIONISED
EMPLOYEES

98%

53.5%

EMPLOYEES COVERED BY
COLLECTIVE WAGE AGREEMENT

WOMEN

46.5%

MEN

3.1 Listening to the employees

To implement its human capital strategy, NOVO BANCO seeks to follow the best fair-process practices in deci-
sion-making, focusing not only on results, but deploying a fair and reasoned process with strong engagement
of the employees, in order to deliver results. The Bank thus endeavours to be aware of the needs and difficulties
experienced by employees throughout their life cycle and to meet their expectations, so as to contribute to
their full development, and allow them to fully unlock their potential and maintain their motivation. In 2020 NOVO
BANCO once again conducted the half-yearly Engagement Survey, one of its main tools to sound the organisational
climate of the Bank - which had a participation rate of around 79%, as well as the Internal Customer Satisfaction Survey
and the Psychosocial Risk Questionnaire.

126

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTEngagement Results (%)

50%

40%

45%

47%

49%

54%

68%

32%

37%

31%

36%

32%

31%

18%

23%

24%

17%

19%

15%

24%

Engagement

Would I remain at
NOVO BANCO even
if they offered the same
salary and/or beneﬁts
in any other company?

Would I recommend
NOVO BANCO as a
good company to
work for?

I am proud to
work at
NOVO BANCO

Overall, at the moment,
how would you rate
your level of satisfation
with NOVO BANCO?

I am motivated
to came daily
to work

I am motivated and
avalable to overcame
whait is expected of
me, to help boast the
success of NB

Unfavorable

Neutral

Favorable

Sounding and keeping in touch with the employees became even more important in 2020, especially when teleworking
took on a prominent role in the performance of each employee's duties. In this context, the Bank made available new
communication channels, such as the "We are NOVO BANCO" platform, based on SharePoint technology, to bring
news to the employees and ensure that all relevant information was disclosed in real time, and the Yammer social
network, which put everyone in contact with each other in a new form of communication marked by greater proximity,
participation and collaboration. These new communication channels proved to be an essential factor in an adverse
scenario, by promoting integration, union and motivation within the NOVO BANCO team.

3.2 Attracting Talent and Merit

NOVO BANCO uses a set of means and initiatives to capture new talent and retain existing talent from within
the personal and professional development of all its employees. This model is deployed in four stages:

3.2.1 Capturing talent to NOVO BANCO

In 2020 there were two internship programmes aimed at attracting young talent at the beginning of their professional
careers, seeking not only to address the Banks’ staff recruitment and rejuvenation needs, but also to give young pro-
fessionals career opportunities and the possibility to establish themselves in regions where labour supply is scarcer:

• Talent Attracts Talent Programme – annual programme of paid internships lasting 6 or 12 months for young
graduates or with a master's degree, to be carried out not only in the central departments but also in the commercial
areas. In 2020, 58 young people were integrated into the Bank's staff, of whom 33 came from the second edition
of this programme and 25 from the NB Retail Banking Programme (an exclusive programme for the Commercial
Network of the North Commercial Department). The third edition of the Talent Attracts Talent Programme received
a further 49 young graduates.

127

NOVO BANCO SUSTAINABILITY REPORT 2020• NB UP Programme- programme with the duration of one month for young people attending national higher edu-
cation institutions. The programme allows these students to have working experience during the summer holidays
and is also paid. In 2020, 117 young people participated in this internship.

3.2.2 Internal mobility

NOVO BANCO encourages the career development of each employee throughout his or her professional career. To
this end the Bank has in place, among other tools, an internal mobility programme that enhances the Bank's human
capital, enabling its employees to embrace new challenges and opportunities for individual development and progress.
In 2020, 19 employees were given the opportunity to change their jobs. By enabling and contributing to the develop-
ment of a more motivating working environment, the Bank contributes to the retention of talent.

3.2.3 Performance Assessment

The Performance Management Process, which covers all employees and is included in the Employee Portal (called
“My Portal”), offers a personal development programme where each employee can define his or her own objectives in
terms of continuous improvement in the performance of their functions. Performance Evaluation, carried out annually,
is based on two aspects:

• fulfilment of objectives;

• skills and behaviour observed (general, specific and technical).

It is an important tool in the alignment between
the organisational strategy and the performance of
each employee/team, supporting a constructive and
continuous dialogue between each Employee and his or
her line manager.

We launched the AppRH, a new mobile for employees

Download Transforming Our World - Sustainable
Development Goals - Full Size PNG Image - PNGkitIn
line with the new operating models and evolution of
NOVO BANCO, which are based on modernisation and

We launched the AppRH,
a new mobile for employees

digitisation, AppRH was launched in 2020. AppRH is a new mobile tool for fast and intuitive access to "My Portal", the
Bank's Employees Portal, from the employees’ private smartphones, which allows executing the task involved in the
Performance Assessment process. Employees can also access other personal data through this app, such as details of
their holidays and absences, as well as general data of the Bank, search other employees’ professional contacts, and
view and browse through the Bank's organisational chart.

3.2.4 Valuing employee development

By continually reinforcing the knowledge of its employees, NOVO BANCO promotes their retention, also contributing
to the recognition of the diverse talent possessed by its staff and guaranteeing they have the decisive skills required to
attain the challenging objectives it proposes to achieve.

Aware of the current environment of deep changes and huge challenges faced by the financial sector, the Bank seeks
innovative solutions that enhance the contribution of its employees, continuing to invest consistently in the design and
implementation of distinctive and motivating training, enabling the improvement of performance, and the development
and evolution of NOVO BANCO's employees.

128

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTTo ensure that employees had access to adequate
training, approximately 288.5 thousand euros were
invested in training, averaging 45.1 hours per employee,
with a special focus on:

• Regulatory Training | Markets and Financial Instru-
ments Directive (MiFID II), IDD - New Insurance
and Reinsurance Distribution Law, Mortgage Credit
Marketing Directive; Prevention of Money Laundering
and Financing of Terrorism and Information Security;

We provide more than 194
thousand hours of training
to our employees

• Continuous professional training|: New Investment

Advisory Platform (provided to 425 employees working in NB360 segment);

• Training designed for the New Distribution Model: the implementation of this new Model, which is included in
one of NOVO BANCO's strategic transformation pillars, entails a set of initiatives intended to give the Clients a
new experience, both inside and outside the branch, and using all the forms and channels( digitals, remotes and in
person) with which the Bank relates to its clients.

Because the practical learning at NOVO BANCO is highly valued the on-the-job training is also provided at the 20
School branches all over the country, although this year it is being provided remotely due to the pandemic. Based
on the concept of learning by doing, this is a pioneering project in Portuguese banking, which over the years has
broadened its scope of action and is now responsible for:

• the initial training framework for new employees;

• the reinforcement of skills of current employees;

• the development of appropriate skills to support functional mobility;

• the monitoring of current employees returned from extended leaves;

• support in the implementation of strategic projects.

During 2020, 210 employees attended school branch training, 53 of whom were part of the group of employees who
joined the Bank via the "Talent attracts Talent" programme.

Included in the various tools to attract and retain talent, in 2020 the Bank made 712 promotions on merit, 16 promo-
tions due to change of job and 66 promotions on the basis of seniority, making a total of 794 promotions.

129

NOVO BANCO SUSTAINABILITY REPORT 20203.3 Promoting gender equality,
equal opportunities and respect
for diversity

NOVO BANCO's relationship with all its employees is based on two fundamental policies: the Human Rights Policy
and the Policy of Non-Discrimination and Equal Opportunities. These policies tackle issues such as equal opportu-
nities, diversity, respect for freedom of association, rejection of forced and child labour, discrimination, any form of
harassment and, in general, respect for the Employee as a Person. NOVO BANCO complies with the legislation, rules
and regulations in force and develops its activity in full compliance with its Equality and Non-Discrimination Policy and
Human Rights Policy, defined based on:

• the United Nations Global Compact Principles;

• the Universal Declaration of Human Rights;

• The Guidelines of the Organization for Economic Cooperation and Development (OECD) for Multinational

Enterprises;

• European and National Legislation on Gender Equality and Harassment prevention.

Diversity and gender equality are an integral part of human capital management, with gender parity already a reality in
NOVO BANCO, where women account for 53.5% of the workforce. However, the Bank is strongly committed to further

reinforcing women representation at top management
level. Although there has clearly been a positive evolu-
tion, there is still a way to go (namely in terms of closing
the wage gap).

Gender equality is part of the NOVO BANCO Social
Dividend model, a model created in 2017 of commitment
to give back to the community and the employees.
The model comprises four programmes, one of which,
#NB Equal Gender, measures and sets targets for three
indicators: percentage of women in top jobs, percentage
of women in management positions and gender pay gap.

The DCH (Human Capital Department) produces an
internal Gender Equality report where various Human
Capital Management processes are monitored by gender
(e.g., admissions, exits, performance evaluation, distribu-
tion of each functional group, vocational training, use of
work and life benefits, etc).

The Bank actively participates in the iGen Forum for
Gender Equality, and in 2020 the working group of which
it is part produced a book (to be launched in the first half
of 2021) aimed at raising awareness among children and
young people to the need for a fairer world in terms of
gender equality.

130

#NB Equal Gender

36.2%

24.2%

36.1%

31.3%

9.4%

9.6%

38.2%

31.3%

10.2%

2018

2019

2020

Woman in senior leadership roles rate
Woman in leadership roles rate
Pay Gap

We actively participate
in iGen working group
producing a book that aims
to raise awareness among
young people about a more
equal world

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTIn 2020, the representation of the female gender increased in management and administrative functions.

Employees by Gender Professional Category

Total

Men

Women

2018

4 382

2019

4 326

2020

2020 vs 2019

4 321

-0.1%

2 108 (48.1%)

2 054 (47.5%)

2 008 (46.5%)

- 2.2%

2 274 (51.9%)

2 272 (52.5%)

2 313 (53.5%)

Management

435 (9.9%)

375 (8.7%)

382 (8.8%)

Men

Women

278 (63.9%)

245 (65.3%)

236 (61.8%)

157 (36.1%)

130 (34.7%)

146 (38.2%)

Heads of Department

441 (10.1%)

546 (12.6%)

484 (11.2%)

-11.4%

1.8%

1.9%

-3.7%

12.3%

0.2%

3.3%

5.8%

261 (59.2%)

314 (57.5%)

271 (56.0%)

-13.7%

180 (40.8%)

232 (42.5%)

213 (44.0%)

-8.2%

1 889 (43.1%)

2 070 (47.9%)

2078 (48.1%)

-0.4%

882 (46.7%)

925 (44.7%)

931 (44.8%)

-0.6%

1 007 (53.3%)

1 145 (55.3%)

1 147 (55.2%)

672 (42.1%)

559 (42.3%)

559 (40.9%)

926 (57.9%)

763 (57.7%)

807 (59.1%)

19 (0.4%)

13 (0.3%

11 (0.3%)

-15.4%

15 (78.9%)

11 (84.6%)

11 (100%)

4 (21.1%)

2 (15.4%)

0 (0%)

-100%

Administrative

1 598 (36.5%)

1 322 (30.6%)

1 366 (31.6%)

Men

Women

Specific

Men

Women

Men

Women

Auxiliary

Men

Women

131

NOVO BANCO SUSTAINABILITY REPORT 20203.4 Promoting the reconciliation of
professional, personal and family life

The balance between the professional, personal and family life of its employees deserves a special attention
from NOVO BANCO and it is also a talent acquisition and retention tool. The Bank therefore integrated the “#
NB Work & Life” programme, a set of initiatives that promote conciliation and flexibility at work, into the Social
Dividend Model. Under this programme, the employees may enjoy the following benefits:

• Holiday purchase - possibility to purchase up to 5 additional holiday days per year;

• Leave on special days - the employee's birthday; afternoon on the birthday of dependent children and/or
stepchildren up to the age of 18, first day of classes for the 1st to 5th school year of dependent children and/or
dependent stepchildren;

• Early Friday / Late Monday - Half-day leave (Friday afternoon or Monday morning), compensated by additional

work during the week;

• Home Office - remote work, for greater flexibility in terms of workplace and working hours;

• Take Away - the employees can buy and take home low-cost and nutritionally balanced meals.

In 2020, Home Office/Telework took on a particular importance due to the pandemic situation. The fact that the Bank
had created this benefit and established the rules and instruments on its use prior to the outbreak of Covid-19 was
crucial for the success of Telework in this context.

The results obtained in each of these initiatives show their importance for the employees and justify their maintenance.

NB Work& Life
# Employees Leave on Special Days

18 942

15 707

# Employees in Home Office

# Employees Purchase of Holidays

12 093

11 912

2 200

630

175

296

334

580

2018

2019

2020

Goal

2018

2019

2020

Goal

2018

2019

2020

Goal

# Employees Early Friday/Late Monday

# Takeaway Meals

1 188

1 290

1 348

450

145 269

124 466

84 834

82 500

2018

2019

2020

Goal

2018

2019

2020

Goal

132

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT
3.5 Addressing social work needs -
internal social responsibility

NOVO BANCO has a strong concern for the social well-being of its employees. Therefore, it offers a set of
benefits that go beyond monetary retribution and aim to strengthen employees’ relationship with NOVO
BANCO, personal satisfaction and savings. These benefits, attributed within the scope of the internal social responsibility
programme, take the form of:

• Education support for children of employees in active service;

• Support to retired employees;

• Christmas presents for employees and their children and dependent stepchildren;

• Special conditions in NOVO BANCO's commercial offer.

In 2020, due to the impossibility of holding the traditional employee Christmas dinner and in order to keep the
Christmas spirit alive, the Bank instead gave each of its employees a basket composed exclusively of Portuguese
products produced by NOVO BANCO's client companies, in line with its positioning in support of the national economy,
as featured in its external communication: “This is the Portugal that does and this is the Bank that helps doing”.

In addition to the benefits enjoyed under the Banking
Sector Collective Bargaining Agreement, namely birth
support allowance, child allowance and study allowance,
NOVO BANCO also provides a series of social supports
aimed at the education of its employees' children, as
well as providing for the basic necessities for its retired
employees, such as charges for internment in homes,
day centres, home support, among others.

In 2020 we gave 2,990
Christmas presents to the
children of the employees.

Employee Benefits

Education support

Early childhood benefits

School grants

Support to children and youths with special needs

Support to retired employees

2018

2019

2020

2020 vs 2019

391

435

434

0.2%

506 000 €

532 000 €

509 440

208

210

262

164 800 €

164 100 €

192 835€

-4.2%

24.8%

17.5%

11.0%

90 000 €

79 940€

-11.2%

Expenses with senior residences, day-care centres, home
support, medicines and other basic necessities.

-9.1%

126 900 €

108 640€

-14.4%

133

NOVO BANCO SUSTAINABILITY REPORT 2020In 2020, approximately 92.6% of the employees who applied for the social support provided by the Bank were granted
that support.

O NOVO BANCO also has four canteens where working and retired employees can have lunch and order take away
meals. These canteens serve low-cost nutritionally balanced meals, with 3 to 4 options to choose from every day, each
coming with the respective nutrient information sheet (nutrition traffic light). In addition to providing free meals, the
aim is also to encourage each employee to make responsible choices in terms of healthy eating. Awareness-raising
initiatives sometimes also take place in the canteen areas. In 2020, despite the significant increase in teleworking the
Bank maintained its canteens and bars in full operation,
and increased the take-away component, all in full
compliance with the social distancing and hygiene rules
imposed under COVID 19.

Loans to employees
(€mn)

The employees, including retired employees up to 65
years old, also benefit from special conditions in mort-
gage and consumer loans. In 2020, new loans to em-
ployees totalled €18.3 million, from a total loan portfolio
of circa €75.5 million. Aware of the difficulties caused by
the pandemic, the Bank granted moratoria on mortgage
loan payments (Purchase, Works or Construction of Own
Permanent Housing) and Consumer Loan payments to
its employees experiencing a fall in income.

13.1

13.5

15.8

3.9

3.3

2.5

2018

2019

2020

Mortgage Loans
Consumer Loans

3.6 Looking after health,
well-being and safety at work

The physical, psychological and social well-being of its employees is essential for the Bank, which to this end

has in place a health and well-being policy based on five lines of action:

1. Communicate and raise awareness enhancing continuous and relevant communication about the Bank's path and
strategy, as well as providing contents in various formats about health and well-being, encouraging employees to
make conscious and healthy choices;

2. Diagnose and prevent risk situations early, so as to act preventively;

3. Dynamise and promote moments of focus on certain topics to increase employee involvement and accelerate

positive results;

4. Offer and provide benefits aligned with best practices in healthy habits that contribute positively to the holistic

well-being of employees;

5. Reconcile and flexibilise practices for a balance between professional, personal and family life.

Due to the pandemic, the challenge of "Looking after health, well-being and safety at work" became a paramount issue
for NOVO BANCO's Human Capital. In a first step, resources focused on emergency response, where the priority was to
protect people and implement measures aimed at providing a sense of security. As many employees as possible were
put in telework, while safeguarding the activity and safety of the organisation.

134

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTSince banking activity has a social and society support
component, a set of operational services had to be kept
running, even during the State of Emergency, and there-
fore the Branches were always open to the public. Hence
the Bank always kept a significant part of its staff working
In Office. In the Commercial Network, about two thirds
of the workforce was always present (commercial func-
tions do not allow for full teleworking) and in the Central
Departments this figure was around 25%. The Employees
were therefore in one of three working contexts:

• Always in Office;

• Always in Telework (priority for risk groups and pregnant women);

• Rotation between thus Office and Telework.

As part of our Covid-19
Prevention effort, we
provided our employees
around 1 494 hours of
health and safety training.

For those who remained in Office, ensuring their protection and comfort was the priority, thus they were provided with
all the personal protection equipment items (masks, disinfectant gel, acrylics, etc). The canteens and takeaway service
were kept in operation, parking spaces were available, and remote communication tools were ensured. An effective
communication plan was deployed to ensure greater proximity as well as information on how to manage the natural
anxiety and fears caused by the situation at hand.

In addition, the employees impacted by Covid (infected or in isolation) were accompanied by the Bank's occupational
physicians, as a complement to the NHS.

After the first months of the pandemic and once the response to the emergency had been ensured, an everyday
approach to this context that was set to continue for an indefinite period of time was sought. The activities that had
been suspended - namely, General and Family Medicine, Psychology, Psychiatry and Nutrition consultations, and the
so-called "Meu Lado B”(My W Side- W of Well-Being) programme - were resumed, with adjustments to the situation.
The purpose of the "Meu lado B” programme is to provide a holistic wellbeing to the Employees, through a set of
initiatives - the Wellbeing experiences - deployed at 8 levels: Health, Food, Physical Exercise, Emotional Management,
Family and Home, Interpersonal Relations, Personal Image, Culture and Leisure. A series of workshops, Conversations
with Experts, and Lectures on these themes were made available in virtual format.

In addition to access to loan moratoria, a package of benefits was also made available to address possible financial
needs experienced by Employees’ families, including the possibility of prepaying 50% of the Christmas allowance,
access to loans under special conditions to purchase IT equipment or pay for other education needs, access to Family
Coaching sessions and psychological support. It should also be noted that during the initial state of emergency the
Bank took care to minimise the impact of confinement on Employees and, among others, complemented the salary of
Employees at home to care for children under 12.

At the end of the year, the Bank rewarded the employees who had been at the forefront of the emergency response by
granting them two days of leave to be taken during 2021.

In terms of occupational health, the Bank also has clinical posts that offer a range of services in privileged support
conditions to employees, both in preventive and curative terms.

135

NOVO BANCO SUSTAINABILITY REPORT 2020Health Services

2018

2019

2020

2020 vs 2019

Occupational Health - Occupational Medicine

Medical Exams

2 808

2 731

1 437

- 47.4%

General Practice Consultations

Curative Medicine consultations and prescriptions

18 966

10 296

9 444

- 8.3%

Consultations in other medical specialities

Psychology Consultations and Psychiatric Consultations

Nutrition Consultations

Nursing

Total procedures (treatments, vaccination, medication,
ECG)

Risk Prevention and Control Programmes

Cardiovascular screening

Cancer screening

Vision screening

Executive Check-up (senior executives)

1 043

820

1 061

945

751

348

-29.2%

-63.2%

7 373

8 984

5 760

-35.9%

2 319

739

2 696

286

2 314

727

2 601

306

1 064

-55.4%

338

-53.5%

1 161

- 55.4%

-73.2%

In 2020 the number of occupational health examinations was significantly lower than in previous years. This is explained
by the suspension of regular medical examinations between the end of March and the beginning of September due to
the pandemic. During this period only onboarding and one-off examinations were performed.

In 2020 the absenteeism rate was 4.9%, which compares with 2.6% in 2019.

To provide the best response to the pandemic and maintain adequate working conditions, in 2020 NOVO BANCO
provided appropriate and useful information to all its employees through different channels and took measures
adjusted to both the commercial network and the central departments in order to minimise the transmission of the
new coronavirus, namely the setting of conduct and social etiquette rules and the provision of personal protection of
equipment.

For employees in telework, NOVO BANCO designed a set of tips and good practices for easier adaptation to this new
working environment, not only in terms of individual good practices, but also covering team management and security,
in order to ensure healthy working conditions and protect the physical and mental health of everyone.

In the area of occupational safety in the specific context of the pandemic, in 2020 NOVO BANCO conducted audits
of the Central Buildings, where the larger number of employees is concentrated, the canteens and some branches,
in order to check that the procedures and practices put in place in the context of the pandemic were being followed.
In terms of safety and security at work, NOVO BANCO continues to assess the risks inherent to conditions in the
workplace and the functions performed.

136

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTOur
Sustainable
Business

4.0

Title: O Momento
Author: Ana Ferreira

Sustainability is present in the manner in which NOVO BANCO manages its activity. The incorporation of environmental
and social criteria in business expansion viewing the progressive transition to a low carbon economy, recognising the
duty to support the community in which it operates, is an objective which NOVO BANCO proposes to achieve.

4.1 Listening to the stakeholders

Adjusting products and services to customer needs, new market trends and regulatory requirements has been
the basis for the redefinition of NOVO BANCO's offer, which is increasingly more attuned to environmental,
social and ethical concerns. The results obtained through the materiality matrix questionnaire and other
channels at the disposal of the various stakeholders permitted to assess the concerns considered as material
concerning the approach in which the Bank carries out its activity, including its value chain.

4.2 Sustainable products
and services

The Bank is aware that the manner in which it carries out its business has an impact, not only on the com-
munity where it operates, but also at a wider level, i.e., on the Planet. For this reason, it always seeks to take
into account not only the economic perspective, but also environmental and social ones, contributing to the

construction of more ecological society based on equal opportunities.

The Bank's strategic plan designate a sustainable purpose, concerned with developing a business that promotes sus-
tainability. New technologies contribute to reducing the direct impact of banking on the environment, but the indirect
impact will also have to be reduced. Therefore, and in order to build a strong and lasting relationship with the clients
and respond to their concerns about climate change, which were further increased by the Covid-19 pandemic, in 2019
the Bank signed the "Letter of Commitment for Sustainable Financing in Portugal", and in 2020 pursued its strategy of
increasing the offer of products with environmental, social and social responsibility considerations.

In 2020, NOVO BANCO thus restructured its service accounts aimed at the day-to-day financial management of its
clients and adjusted them to their new needs, while linking the 100% NB Account and 360º NB Account to social
responsibility causes reflecting social, cultural and environmental concerns. When opening a NB 100% or NB 360º
account, clients can choose which of the projects supported by NOVO BANCO they wish to follow:

SEMEAR
(Sow) Project

Social inclusion programme for young people and adults with intellectual and developmental difficulties
organised by the BIPP Association. The programme provides certiﬁed training, and development of skills
for employability and professional integration, in the processing and production of components from
organic farming. This programme minimises the limitations of these young people and adults by
encouraging them to develop their full potential and become autonomous.

Este Espaço Que
Habito (This
space I Inhabit)
Project

This project is promoted by the PHOTOGRAPHIC EXPRESSION MOVEMENT (MEF) in 5 Educational
Centres hosting young people in compulsory internment, and uses photography as a technical and
personal expression means to search for and develop one's own identity based on the spaces
photographed. The project is developed in partnership with the Ministry of Justice and the Youth Justice
Services.

Recreational
Toys
Recycling
Project

Developed by ZERO WASTE LAB, the project aims to help with the problem of what to make with discarded
plastic toys. It promotes the recycling and circulation of plastic and other toy materials for new purposes
and raises the awareness of and educates citizens about the problems arising from the increase in waste
production.

More information at https://www.novobanco.pt/site/cms.aspx?labelid=causas

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NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT4.2.1 NB 18.25 Account and
NB26.31 Account

We have already neutralized
the equivalent to 2 290
round-trip single flights
between Lisbon and London.

In the context of transition to a low-carbon economy, the
Bank aims to contribute to the promotion of sustainable
investment practices in Portugal, and in so doing help
accelerate the process of transition to a carbon neutral
economy by 2050. In this context and also to build a strong and lasting relationship with its clients, the Bank restruc-
tured the NB 18.31 account by adapting it to the needs of younger age groups and providing for the neutralisation of
its carbon emissions. These accounts, designed to have a low environmental impact, are totally carbon neutral. This
is due to the fact that they are online accounts and therefore have very low emissions, and because these emissions
are neutralised in accordance with the PAS 2050:2008 methodology, which analyses the entire life cycle of products
and services, to calculate the emissions produced. These accounts neutralise unavoidable emissions by supporting the
Soil & More project, a green waste composting project in South Africa that not only reduces carbon emissions but also
contributes social and economic benefits for local communities and sustainable development and Kamuthi project, a
photovoltaic solar park project to replace the production of energy from coal plants. The NB 18.31, NB 18.25 and NB
26.31 accounts have an estimated carbon impact of about 944g CO2eq/year. At 31 December 2020, NOVO BANCO
had 138,862 NB 18.31, NB 18.25 and NB26.31 Accounts with offset emissions, which corresponds to the neutralisation
of 1 498 tonnes of CO2, of which 152 in 2020. These accounts have already permitted to neutralise the equivalent of
emissions from 2,290 single return flights between Lisbon and London.

4.2.2 ESG and NOVO BANCO ECO Structured Products

The Bank continued to strengthen its commitment to the marketing of structured products whose remuneration is
indexed to the share performance of companies that stand out for leading social and governance changes towards
environmental goals. The selection of companies to integrate these products is subject to a rigorous assessment
process and criteria, which was further strengthened in 2020 not only in line with the Bank's risk policy, but also with
industry-sector exclusion criteria (companies producing or selling tobacco, or engaged in coal mining and nuclear
energy are not eligible), and criteria governing the exclusion of companies engaging in practices involving violations of
human and labour rights, including child and/or forced labour. When manufacturing, construction, transport, tourism,
agriculture and forestry, electricity, gas and oil companies are at stake, the Bank undertakes to assess their environmen-
tal and social performance, and will not include companies with:

• air pollutant activity: > 50% of turnover, or

• Reduced the weight of their air polluting activity in the last 5 years by: < 5%, or

• Have no defined environmental objectives.

The nine ESG structured savings products subscribed in 2020 represent an investment of €116.8 million, making up a
cumulative investment of €268 million in subscriptions as at 31 December.

The ESG and NOVO BANCO ECO Structured Products account for 77.39% of the total structured product portfolio that
NOVO BANCO makes available to its clients.

NOVO BANCO received the “Best Performance Distributor, Portugal” award, given by SRP (Structured Retail Products),
of the Euromoney Group, seeing internationally recognized its Structured Products offer.

139

NOVO BANCO SUSTAINABILITY REPORT 20204.2.3 Credit products

The mortgage loans offer also has an environmental component whereby the client may benefit from a spread reduc-
tion when buying a property with A+, A or B certification. In 2020, there were 39 loans granted based on this criterion.

The ‘Casa Eficiente’ 2020 line (Efficient Home line) continues to be part of the offering, providing favourable conditions
in transactions that promote the improvement of the environmental performance of private residential buildings.

NOVO BANCO also offers its small and medium company’s customers the Credit Line for Decarbonization and
Circular Economy, a credit line to finance the implementation of sustainable projects. This line of financing allows
the investment in existing equipment by other more innovative, modern and efficient ones, investment in renewable
sources for self-consumption in the production process or in circular strategies for any stage of the product / service
life cycle, the implementation of monitoring, control and performance devices that allow optimizing the conditions of
use, energy consumption and consumption of raw materials, among many others projects.

4.3 Financial Inclusion

The adaptation of products to the needs of customers also involves the progressive integration of social con-
cerns. NOVO BANCO intends to increasingly adapt its products to the new realities of its clients. Accordingly,
its saving products permit to build up a nest according to each family's budget. In line with this positioning,
the Bank has designed a package of Micro Savings solutions comprising three products, namely Planned Savings,
Micro Savings and the Targeted Savings Smart app, under which a cumulative amount of €1 059 million in savings were
reached in 2020.

This encouraged clients to adopt saving behaviours, through the regular deposit of small amounts, the rounding up of
bills, or similar practices.

Planned
Saving

Micro
Saving

Permits to build up savings from as low as 10 euros
per month through the subscription of a monthly
plan in which the clients set the amount and the
time of month of deposits, thus adjusting savings to
the family budget.

226 thousand subscriber
clients
€1,039 million in savings

This solution allows any client to start saving money by
small amounts through the rounding up of debits of
day-to-day expenses (such as residential mortgage
loan instalments or personal loan repayments,
insurance premiums, or direct debits), which are
transferred to a savings account.

Used by ca. 42
thousand clients
€8.2 million in
savings

NB smart app
(Targeted
savings)

Launched in 2017, this is an exclusive product for
Clients who have installed the NB smart app: once the
Client has deﬁned his/her saving objectives (how much
and for how long he/she wants to save) the NB smart
app traces the path to reach this objective.

8.3 thousand subscriber
clients
€11.2 million in savings

140

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTThese products account for 4.7% of NOVO BANCO's total portfolio of saving products.

To expand the reach of financial services and consequently achieve wider social inclusion, the Bank offers the Minimum
Banking Services Account, a current account providing a debit and a credit card, with an annual maintenance fee of
€4.12. This account is intended for:

•

individuals who hold no other current account in any other institution, or who hold only one current account which
is converted into a Minimum Banking Services Account;

• persons who hold other current accounts, but wish to open a minimum banking services account in which one of

the holders is over 65 years old or is dependent on others.

In 2020 the Bank had 9.7 thousand Minimum Banking Services accounts.

Given the increasing digitisation of services and the difficulties experienced by older people in using digital channels,
during the pandemic NOVO BANCO launched digital and financial literacy actions to teach people a clear and simple
way of going to the Bank without actually having to go to a branch.

4.4 Suppliers

The management of a sustainable business extends to the Bank's entire value chain, including its suppliers.
As a relevant buyer of products and services in the market, NOVO BANCO has set up a supplier relationship
model (around €268 million invoiced to NOVO BANCO in 2020), which is based on a commitment to follow
good international practices and principles. This model, which is based on the recognition of the importance of the
economic, environmental and social impacts produced by this group of stakeholders, is based on two main pillars:

• Code of conduct, which determines that the process of supplier evaluation and selection is strict and carried out in

accordance with the highest standards of transparency and ethics;

• Supplier Relationship Principles - these principles aligned with the OECD guidelines for multinational companies
and the United Nations Global Compact, setting the minimum requirements, not only for suppliers but also for the
Bank, with regard to business practices, health and safety at work, ethics and environmental management. Supplier
selection principles are based on:

- Fairness - equal treatment, without privileges or cronyism, and always seeking to avoid conflicts of interest;

- Transparency and Ethics - adequate disclosure of information;

- Quality and Efficiency as criteria for selecting the best suppliers.

The signature of the Global Compact ten principles, issued by the United Nations as a result of a corporate citizenship
initiative launched by Secretary-General Kofi Annan, and announced on 31 January 1999 at the World Economic Forum,
were the basis for the design of the set of Supplier Relationship Principles residential buildings and the integration of
sustainability in the Bank's value chain.

Group NOVO BANCO's suppliers are invited to subscribe to these principles, which imply the adoption of consistent
conduct, namely with regards to the environment, employment conditions and ethics.

A responsible and consistent attitude in the selection of suppliers starts with the total availability with which all presen-
tations and proposals from the most varied entities that intend to provide services or supply goods are received. To this
end, the Supplier Portal (https://fornecedores.novobanco.pt/) is the place where any supplier, actual or potential, may
introduce itself and register. In addition to providing the prime sourcing basis for market consultation processes, the
database of registered entities allows for an easier and faster detection, assessment and comparison of the suppliers'
characteristics, technical skills and commercial propositions.

141

NOVO BANCO SUSTAINABILITY REPORT 2020The quality of this information permits to select the best
propositions, i.e., the suppliers best capable of meeting
the Group's needs and service requirements. The de-
gree of suppliers’ coverage, in terms of billing, that had
completed their registration or were in the process of
registering (pre-registered) in the Portal was 92% at 31
December 2020.

For a more rigorous selection of this group of Stake-
holders and based on the information provided, NOVO
BANCO calculates the “sustainability scoring”, which
takes into account ethical, labour, hygiene and safety at
work, and environmental aspects. Around 26% of NOVO
BANCO’s suppliers registered in the Portal have a score
of excellent and 91% have a positive score cumulatively,
which compares with 83% in 2019.

In 2020 we increased
by 15% the number of
suppliers with sustainability
scoring; of these, 63%
have an excellent or good
scoring.

Sustainability Score (%)

26%

37%

28%

Bad

Improving

Acceptable

Good

Excellent

Maintaining a professional relationship with suppliers
also implies responsible action, namely guaranteeing
payment periods of 30 days, in line and in compliance
with good market practices. This includes giving suppliers
access to their current account, free of charge and at all
times, simply by logging into the supplier's account on
the Supplier Portal.
In line with its stance of support to the Portuguese
economy, in 2020 the Bank increased its preference for

domestic suppliers, which represented 88.2% of the total.
In 2020 the Bank's supplier management model earned the EIPM (European Institute of Purchasing Management)
award in the ‘Master of Business Continuity’ category, an independent recognition that attests to the Bank's good
performance in terms of organisation, innovation and respect for the environment and society.

4.5 Environmental impact

The reduction of the direct environmental impact resulting from NOVO BANCO's activities, achieved through
the implementation of various measures that promote the reduction of consumption, including the consump-
tion of electricity and paper, among others, is
part of the Bank's environmental responsibility.
Given its importance, the NOVO BANCO Social Dividend
model comprises a commitment to give back to society
and the Bank's employees (see pages 148 and 149), is in-
cluded. Comprising 4 programmes, one of which is #NB
Environment, it sets goals and monitors 5 indicators,
viewing the consolidation of environmentally responsi-
ble management.

In 2020 electricity
consumption was reduced
by around -8.6% compared
to 2019.

142

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT#NB Environment

88.8

#NB Environment
Cars CO2 emissions (ton)

100

3 993

4 036

3 947

2 829

43.2

40.1

38.1

35.1

27.1

20.9

Digital
communication
with clients (%)

Electricity
consumption
(GWh)

Paper
consumption
(millions of leaves)

Recycling (%)

2018

2019

2020

Goal

2018

2019

2020

Goal

2018

2019

2020

Goal

Of the five objectives, two have already been achieved – 88.8% of communications with clients is digital and electricity
consumption has decreased to 21 GWh.

4.5.1 Environmental performance

NOVO BANCO has promoted different initiatives to improve its environmental performance, investing heavily in raising
the awareness of its employees to the need to promote and integrate in their daily routines, an ethical and responsible
management of the resources provided by the Bank.

Paper, in particular, has been under focus, as one of the most widely used consumables in the financial sector, whose
rationalisation, both internally and externally, remains a must for the Bank. To this end, dematerialisation operations
involving digitisation of processes have been carried out
and will be further stepped up, while at the same time
the Bank promotes actions to raise awareness among
its employees, and to change their habits, both in the
central departments and in the branch network.

46kg

PAPER/EMPLOYEE

In 2020, the Bank started its Phygital project, currently
in a pilot phase, which involves the digitalisation of
some processes and their formalisation through a digital
signature and will help promote a paperless organisation
with a paperless culture. The Bank expects that once the
project has been rolled out to the entire commercial
network and all the use cases have been completed, it
will permit to reduce printing by approximately 8,5 million
sheets of paper, the equivalent of 41 tons of paper.

Through the Phygital
project we will continue to
reduce paper

In 2020 the Bank used 199.6 tonnes of white paper and 109.8 tonnes of finishing forms and account statements, a
year-on-year increase of 6% and 16% respectively.

As regards its external communication, and in addition to the account statements, NOVO BANCO also sends most other
banking documents to its clients in digital format (credit card statements, deposit certificates, account entry notices,
statements of securities and investment funds’ portfolio movements and position, entry notices, integrated billing noti-
ces, and sundry notices). 88.8% of client communications are now digital, surpassing the 83% target set for 2020.

143

NOVO BANCO SUSTAINABILITY REPORT 2020 # Accounts with digital statement
(Million)

# Credit card accounts with digital
statements (Million)

1 291.1

1 376.3

1 474.6

406.5

431.4

357.6

169.5

85.1

98.3

62.5

49.0

24.9

2018 Accumulated

2019 Accumulated

2020 Accumulated

2018 Accumulated

2019 Accumulated

2020 Accumulated

2018

2019

2020

2018

2019

2020

In 2020, new measures for waste collection were implemented. For easy and adequate waste management, new con-
tainers were placed in all the Bank's central buildings, cafeterias and bars, differentiated according to the type of waste:

• Yellow container placed near the pantries, for packages;

• Green Covid-19 container, placed at the entrance to buildings, canteens and bars, for masks, gloves and tissues;

• Black container next to pantries and coffee machines, for undifferentiated rubbish.

The Bank continued to separate waste and promote its reuse and recycling, namely:

• paper and cardboard are separated, safely destroyed and sent for recycling;

• toner cartridges are recycled through Lexmark;

• waste separation in the clinical units.

Environmental performance

2018

2019

2020

2020 vs 2019

White paper

Internal use (tonnes)

Internal use (tonne/employee)

Energy

Total electricity

215.3

0.049

188.8

0.043

199.6

0.046

Total electricity consumption (GJ)

97 456

82 138

75 098

Electricity consumption (kWh)

27 071 205

22 816 220

20 860 668

Total electricity consumption (kWh/employee)

6 178

5 274

4 828

Water

Water consumption from public supply network (m³)

Water consumption per employee (m³/employee)

56 552

12.9

56 145

13.0

45 394

10.5

5.8%

7.0%

-8.6%

-8.5%

-19.1%

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NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTEnvironmental performance

2018

2019

2020

2020 vs 2019

Trips

Vehicles gasoline consumption (litres)

Vehicles gasoline consumption (GJ)

840

21 140.4

693

840

Vehicles diesel consumption (litres)

1 520 591

1 506 128

1 484 134

Vehicles diesel consumption (GJ)

54 668

54 148

53 358

Number of vehicles

Number of flights

CO2 Emissions

Direct emissions (Scope 1)

Indirect emissions (Scope 2)

Indirect emissions (Scope 3)

Total (Scopes 1, 2 and 3)

832

615

4 012.8

9 089.0

6 183.5

866

762

4 039

5 828

6 430.0

868

331

3 948.4

4 240.6

4 609.7

19 285.0

16 297.1

12 798.7

Total (Scopes 1, 2 and 3/employee)

4.4

3.7

3.0

- 96.0%

-96.0%

- 3.4%

0.2%

-56.6%

-2.2%

-27.2%

-28.3%

-21.5%

-18.9%

Being aware that there is a direct relationship between energy consumption and CO2 emissions, NOVO BANCO
monitors and calculates its direct and indirect emissions (Scope 1, 2 and 3) according to the guidelines of the Inter-
governmental Panel on Climate Change (IPCC), and the WRI/WBCSD Greenhouse Gas Protocol. In 2020, the total
CO2 emissions decreased by 22% compared to 2019.

4.5.2 New Distribution Model

In 2020, the Bank rolled out a new distribution model, which included the redefinition of two branches and paid special
attention to environmental responsibility, not only under the Phygital project but also involving the dematerialisation of
promotional communication to the clients. The branches’ redesign was based on a choice of environmentally certified
materials and companies, namely wood furniture with PEFC certification, which attests that the wood is sourced from
sustainably managed forests.

Digital and lighting equipment were also chosen with a
focus on energy efficiency. Through its New Distribution
Model, the Bank makes available, in its Master and / or
Full Service branches, bicycle parking supports produced
exclusively with 30 kg of recycled plastic, promoting
ecological mobility to its customers and employees.

The New Distribution
Model has environmental
concerns

145

NOVO BANCO SUSTAINABILITY REPORT 2020Our
Responsible
Conduct

5.0

Title: Transparência
Author: Joao Diogo Ribeiro

For NOVO BANCO it is essential to conduct its activity with the firm resolve to give a positive contribution to the entire
ecosystem within which it operates. This performance requires not only correctness in financial performance, but
also a responsible performance that integrates social, environmental and ethical concerns in the interaction with all
stakeholders. NOVO BANCO manages its business based on a governance model steered by integrity and policies and
principles that ensure an effective and prudent management and the commitment to give back to society the fruit of
its activity.

5.1 Governance Model

NOVO BANCO's entire activity is based on a strong and solid governance structure that enables effective,
responsible and transparent decision making, in accordance with the provisions of the law and NOVO BANCO's
corporate documents and regulations, which are published on the Bank's corporate governance website.

The Bank's statutory governing bodies - General Meeting, General and Supervisory Board, Executive Board
of Directors, Monitoring Committee, Statutory Auditor and Company Secretary - are appointed for 4-year terms and
may be re-elected once or more than once. Decision-making may be monitored by the different Committees of the
General and Supervisory Board and Executive Board of Directors.

More information on NOVO BANCO’s governance model is provided in chapter 6 CORPORATE GOVERNANCE of the
Management Report.

5.2 Giving back to the community

In the Covid-19 pandemic context, NOVO BANCO considered that it had to reinforce its role as an active agent
in the ecosystem to which it belongs, with a particular focus on "reviving the economy" and supporting the
community. Under the slogan "The economy is all of us", the Bank put its experience and knowledge at the
service of the players and decision-makers of the economic future of the country and shared with its clients
and society in general, specialised and technical information, which it considered could support decision-making in the
pandemic context and in the preparation for the post-Covid.

This led to the development of several initiatives, such as:

NB
Marketplace

A free-of-charge online shopping platform where the products and services of some of
the Bank's small business clients are made available to the population at large. Under this
concept, NOVO BANCO helps its small business clients to open a new sales channel, and
in turn to buy products from local suppliers, thus supporting the local community and
economy.

GPS

Publication featuring macroeconomic updates, trends in consumer behaviour patterns,
ﬁnancial markets outlook, among others.

Open to
Information
and the
economy

"Open to Information", a cycle of daily conversations at TSF, a Portuguese radio station in 3
editions where employees of the Bank shared forecasts and economic scenarios, among
others, for different sectors of activity, and for consumption and new habits, thus placing
their knowledge at the service of society.
"Open to the economy", a cycle of twelve webtalks in partnership with ECO, a Portuguese
newspaper where the various dimensions and effects of Covid-19 in different economic
contexts were reviewed.

During the pandemic, the Bank continued its unprecedented project to highlight regional
entrepreneurs, businesses and other relevant entities, through Regional and Sector-speciﬁc
Summits. During 2020, it held 4 Summits, 3 in webinar format, supporting companies that
persevere and reinvent themselves, despite the adversities, setting an example to the rest
of the business community.

Summits

147

NOVO BANCO SUSTAINABILITY REPORT 20205.2.1 Social Dividend

In 2020, the first edition Corporate Social Responsibility (CSR) programme - a commitment to give back made by
NOVO BANCO to society and its employees -, created in 2017 and known as the Social Dividend model, came to an
end. Composed of 4 programmes - #NB Equal Gender/#NB Work & Life/#NB Environment/#NB Social Responsibility
-, with specific goals to be achieved by 2020, for four years it had a reference role in the Bank’s CSR structure.

In 2020, the goal of 200 points for 2020 were surpassed in 2 points. Several initiatives achieved very good results,
namely: leaves on special days, Home Office, Early Friday/Late Monday, take away meals, percentage of digital
communication to customers, electricity consumption, and cultural patronage.

The Social Dividend model includes the #NB Social Responsibility programme, which monitors 3 indicators, and under
which the NOVO BANCO Revelação initiative had a very good performance. Participation in the other initiatives was
reduced, given the current context. In the case of the Mathematics Olympics, this involved postponing the final phase
of its 38th edition to September, holding just one test instead of the usual two, and holding it in five different locations
due to social distancing requirements.

The #NB Social Responsibility programme gave continuity to the Corporate Social Responsibility architecture, with the
aim of helping devise solutions for important issues within the community in which the Bank operates. This programme
is deployed in three areas, namely:

• Cultural patronage, to promote and spread culture throughout the country;

• Solidarity, promoting solidarity initiatives or under partnerships with a diverse range of private social solidarity insti-

tutions (“IPSS”) and NGOs;

• Financial Inclusion, in close collaboration with the Portuguese Mathematics Society.

In 2020, given the adverse context created by the pandemic, the Bank focused its activity on helping the community
and showing the utmost sense of social responsibility through a number of different initiatives.

148

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTSocial Dividend
(% of objective reached)

% of Woman in Leadership roles

#NB EQUAL GENDER

% of woman in Senior
leadership roles

Global salary gap

Leave on special days

52.5%
51.3%

77.5%

70.6%

5.5%

10.6%
6.9%
-4.7%

101.9%

139.3%

172.8%

Home Office

2.1%

3.7%

#NB WORK & LIFE

Early Friday ou Late Monday

349,2%

264,0%

286,7%

299,6%

Purchase of holidays

30.2%

51.0%

57.6%

TakeAway

102.8%

152.1%

176.1%

CO₂ Emissions

50.0%

60,47%

Digital communication
with clients (%)

#NB ENVIRONMENT

Electricity consumption (GWh)

Paper consumption
(million of leaves)

Recycling (%)

NB Crowdfunding donators

100.0%

125.0%

129.0%

87.0%

112.1%

124.7%

77.0%

91.6%
85.9%

40.0%
40.0%
40.0%

37.0%
43.2%
48.4%

#NB SOCIAL
RESPONSIBILITY

Cultural patronage

56.0%

105.7%

254,9%

Educacional patronage

25.0%

50.8%

63,9%

2018

2019

2020

149

NOVO BANCO SUSTAINABILITY REPORT 20205.2.2 NOVO BANCO Solidary

The NOVO BANCO Solidary programme, through which the Bank aims to help overcome financial, social and emo-
tional needs, on its own or in partnership with IPSS and/or NGOs, saw its scope of action enlarged in 2020 due to the
social, health and financial fragility of the community and their needs arising from the Covid-19 situation, which the
Bank sought to respond to by joining efforts in various incentives:

“Amigos
são para
as ocasiões”
(A friend
in need is
a friend
indeed)
Project

NOVO BANCO has joined AMI, a long-standing partner, in its "A friend in need is a friend
indeed" project, a fund-raising initiative calling on voluntary work to help the beneﬁciaries
of this association, namely elderly people living alone, single-parent families with minor
children and people at risk or with chronic diseases, which in the Covid- 19 context
became even more vulnerable, suffering from social exclusion and having no family
support network. In this campaign the Bank helped around 390 beneﬁciaries of the AMI
association during two months, in seven Portuguese cities, through the delivery of
approximately 920 baskets containing food, hygiene and health items to meet the needs of
each beneﬁciary for 15 days. 170 volunteers cooperated in this initiative. The results of this
campaign were positive, and none of the AMI's beneﬁciaries at risk was contaminated by
COVID 19.

SOS
COVID-19
Account

NOVO BANCO has joined a fund-raising initiative of Associação Empresarial de Portugal
(AEP) in partnership with the Ordem dos Médicos (Portuguese Medical Association) to assist
health professionals and to build an infectious disease unit at S. João Hospital, in Porto. To
this end, an account was opened at NOVO BANCO to collect the donations, to which the
Bank contributed with €30 thousand. In addition, given the increase in requests for food
support from users of the National Health Service, part of the money raised with this
campaign was donated to the Food Bank against Hunger.

Acquisition
of
Ventilators

NOVO BANCO joined the Portuguese Association of Banks and its member banks in an effort
to reinforce the means at the disposal of health professionals to treat citizens infected by
Covid -19. The funds raised were donated to the National Health Service for the acquisition
of 100 fans and 100 monitors.

Global
Response to
Covid-19

NOVO BANCO joined the “Global Response to Covid-19” initiative, through which Portugal
will contribute €10 million to accelerate the development, production and equitable access
to Covid-19 vaccines, diagnostics and treatments. Launched in April 2020, this campaign,
which brought together European and global organisations and foundations from the
health, retail, banking and other industry sectors, committed to the development of
solutions to combat Covid-19, raised to €7.5 billion to ﬁnance diagnosis, therapies,
treatment and vaccine development activities aimed at ﬁnding solutions to ﬁght Covid-19.

150

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTDespite the context, the bank maintained some of its solidarity initiatives, such as the NOVO BANCO Christmas cam-
paign, which this year had a new focus, namely helping the national economy.

At the Bank, Christmas began with the usual solidarity initiative which every year gathers the employees around a
common cause. In 2020, the Bank selected the "Barrete de Natal Solidário" (Christmas Solidarity Bonnet) campaign,
of the Salvador Association, a fund-raising campaign aimed at supporting people with reduced mobility. In exchange
for a donation of 2 euros, each employee received a Christmas Bonnet. Around 1,100 employees participated in the
initiative, raising among them approximately €4,500.

The novelty of NOVO BANCO's 2020 Christmas campaign was the Christmas basket offered to its employees, made up
entirely of Portuguese products produced by NOVO BANCO's client companies, in line with its positioning of support
to the national economy, under the motto "This is Portugal that does, and This is the Bank that helps you to do", in
which the Bank assumes a clear positioning of support and encouragement of the national businesses that contribute
to the country's development. In this manner the Bank enhanced its support to the community by helping small
businesses to further their capacity to innovate, reinvent and turn difficulties into opportunities.

In 2020, the Bank launched a page in its website aimed at its clients, employees and society where it publishes advice,
recommendations and the initiatives taken in the context of Covid-19, all with the intent of being of help in the present
situation.

5.2.3 Cultural Patronage

Even in the context of a pandemic, NOVO BANCO pursued its strategy of cultural patronage, namely focusing on its
NOVO BANCO Cultura programme, under which it lent works from its collection to various Museums. In 2020, the
Bank lent 24 works, increasing to 75 the number of its works now on permanent exhibition in 33 Museums around the
country. The Bank also published a platform with a road map to various regions and museums in the country, where the
works of the NOVO BANCO Painting Collection can be visited.

In terms of photography, the NOVO BANCO Photography Collection was included in the study group of the Interna-
tional Association of Corporate Collections (IACCCA), affording recognition to the techniques and practises used in the
Bank's collection. Comprising approximately 1,000 works by more than 300 artists of 38 nationalities from all over the
world, NOVO BANCO's Contemporary Photography Collection is one of the corporate collections in Europe that has
won more awards.

Two exhibitions featuring works from the Photography Collection were opened this year, namely Vick Muniz's show at
the Nova School of Business and Economics and the "Solar Territory" Exhibition at the Faro Museum.

In 2020, the exhibition of the 2019 edition of the REFLEX photo competition, of the Cais Association - an initiative
supported by the Bank since its first edition - was inaugurated at the Estufa Fria, Lisbon. The competition, under the
theme ‘World with Future Exhibition’ received more than 150 applications, and around 370 photographs, which aimed
to portray positive and sustainable initiatives aimed at counteracting the uncertain future arising from climate change
and the scarcity of resources, translating into photography the small and big actions that can make a difference at the
environmental level and that prove that change is possible if we expand our gestures.

151

NOVO BANCO SUSTAINABILITY REPORT 2020Our
Performance

6.0

Title: Plantar o Futuro
Author: Marta Vieira Pereira

NOVO BANCO manages its business by constant monitoring financial and non-financial data, which allows it to gauge
its performance, not only financial, but also at social, environmental and corporate governance level. Monitoring social,
environmental and corporate governance indicators over time is essential for the Bank to assess its progress and adjust
its action plan in order to achieve the best results.

6.1 Social Indicators

Total staff

Total NOVO BANCO Employees in Portugal

Employment contract

Permanent

Women

Men

Fixed-term

Women

Men

Temporary

Women

Men

Internships

Women

Men

Other

Women

Men

2018

4 382

2018

4 268

2 210

2 058

2019

4 326

2019

4 130

2 153

1 977

2020

2020 vs 2019

4321

-0.1%

2020

2020 vs 2019

4 093

-0.9%

2 176

1 917

1.1%

-3.0%

146

-73.8%

57.4%

103.3%

- 42.4%

-41.0%

-45.0%

-7.8%

11.5%

-28.0%

-50.0%

Approximately 95% of NOVO BANCO's employees work on permanent employment contracts, which gives them
greater professional stability, and only 3.4% work on fixed-term contracts.

153

NOVO BANCO SUSTAINABILITY REPORT 2020Staff Turnover (%)

Total

Gender

Women

Men

Age bracket

< 30 years old

30 to 50 years old

> 50 years old

2018

3.9

4.0

3.8

36.4

2.8

2019

5.8

6.2

5.2

63.0

3.0

5.6

2020

2020 vs 2019

7.4

1.6 p.p.

6.8

8.0

0.6 p.p.

2.8 p.p.

45.3

-17.7 p.p.

3.0

9.6

4 p.p.

New hires and new hires rate (%)

2018

2019

2020

Absolute values 2020 vs 2019

2020

Total

Gender

Women

Men

Age bracket

< 30 years old

30 to 50 years old

> 50 years old

2.7

6.7

7.3

317

0.6 p.p.

2.7

7.6

5.7

6.8

8.0

50.3

94.1

45.3

1.2

0.3

2.5

0.6

3.0

9.6

138

179

178

114

-0.5 p.p.

2.3 p.p.

-48.4 p.p.

0.5%

9.0 p.p.

2018

2019

2020

2020 vs 2019

Admissions Resignations

130

469

267

323

317

322

18.7%

-0.3%

259

210

113

154

163

180

246

164

159

137

115

138

179

178

114

185

137

22.1%

16.2%

12.8%

-13.8%

9.2%

15.5%

20.0%

-52.6%

175

117.8%

-52.2%

Admissions
and
resignations

Gender

Women

Men

Age bracket

< 30 years
old

30 to 50
years old

> 50 years
old

154

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT2018

2019

2020

2020 vs 2019

Training hours /
employee

Total

Average per
employee

Total

Average per
employee

Total

Average per
employee

Total

Average per
employee

275 183

62.7

200 545

46.4

194 924

45.1

-2.8%

-10.6%

135 039

61.6

109 365

48.1

107 522

46.5

-1.7%

140 143

64.1

91 181

44.4

87 403

43.5

-4.1%

-3.3%

-2.0%

Total

Gender

Women

Men

Professional
Category

Management

25 377

58.3

16 807

44.8

7 822

20.5

-53.5%

-54.2%

Heads of
Department

38 697

87.7

17 107

31.3

22 048

45.6

28.9%

45.7%

Specific

120 150

63.6

77 811

37.6

86 432

41.6

11.1%

10.6%

Administrative

90 916

56.9

88 820

67.2

78 622

57.6

-11.5%

-14.3%

Auxiliary

2.2

Employee distribution by
gender and professional
categories

Total

Men

Women

2018

2019

2020

2020 vs 2019

4 382

4 326

4 321

- 0.1%

2 108 (48.1%)

2 054 (47.5%)

2 008 (46.5%)

2 274 (51.9%)

2 272 (52.5%)

2 312 (53.5%)

Management

435 (9.9%)

375 (8.7%)

382 (8.8%)

Men

Women

278 (63.9%)

245 (65.3%)

236 (61.8%)

157 (36.1%)

130 (34.7%)

146 (38.2%)

< 30 years old

0 (0.0%)

3 (0.8%)

1 (0.3%)

30 to 50 years old

287 (66.0%)

249 (66.4%)

261 (68.3%)

> 50 years old

148 (34.0%)

123 (32.8%)

120(31.4%)

Heads of Department

441 (10.1%)

546 (12.6%)

484 (11.2%)

Men

Women

261 (59.2%)

314 (57.5%)

271 (56.0%)

180 (40.8%)

232 (42.5%)

213 (44%)

< 30 years old

0 (0.0%)

30 to 50 years old

357 (81.0%)

424 (77.7%)

362 (74.8%)

> 50 years old

84 (19.0%)

122 (22.3%)

122 (25.2%)

155

-2.2%

1.8%

1.9%

-3.7%

12.7%

0.3%

68.3%

31.4%

-11.4%

-13.7%

-8.2%

-17.1%

0.0%

NOVO BANCO SUSTAINABILITY REPORT 2020Employee distribution by
gender and professional
categories

Specific

Men

Women

2018

2019

2020

2020 vs 2019

1 889 (43.1%)

2 070 (47.9%)

2 078 (48.1%)

882 (46.7%)

925 (44.7%)

931 (44.8%)

1 007 (53.3%)

1 145 (55.3%)

1 147 (55.2%)

< 30 years old

60 (3.2%)

112 (5.4%)

152 (7.3%)

30 to 50 years old

1 551 (82.1%)

1 601 (77.3%)

1 550 (74.6%

> 50 years old

278 (14.7%)

357 (17.2%)

376 (18.1%)

Administrative

1 598 (36.5%)

1 322 (30.6%)

1 366 (31.6%)

Men

Women

672 (42.1%)

559 (42.3%)

559 (40.9%)

926 (57.9%)

763 (57.7%)

807 (59.1%)

< 30 years old

86 (5.4%)

104 (7.9%)

134 (9.8%)

30 to 50 years old

1 093 (68.4%)

812 (61.4%)

820 (60%)

> 50 years old

419 (26.2%)

406 (30.7%)

413 (30.2%)

Auxiliary

Men

Women

19 (0.4%)

13 (0.3%)

11 (0.3%)

15 (78.9%)

11 (84.6%)

11 (100%)

4 (21.1%)

2 (15.4%)

0 (0.0%)

< 30 years old

1 (5.3%)

1 (7.7%)

30 to 50 years old

9 (47.4%)

5 (38.5%)

4 (40.0%)

> 50 years old

9 (47.7%)

7(53.8%)

6 (60.0%)

0.4%

0.6%

0.2%

35.7%

-3.2%

5.3%

1.1%

0.0%

5.8%

28.8%

1.0%

1.7%

-15.4%

0.0%

-100%

- 100%

-20%

16.7%

Health in the workplace

Cardiovascular screenings

Cancer screening

Mammography

PSA screenings

Vision screening

Executive Check-ups

156

2018

2 319

151

588

2 696

286

2019

2 314

140

587

2 601

306

2020

2020 vs 2019

1 064

-55.4%

268

1 161

- 50.0%

-54.3%

55.4%

73.2%

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTParental Leave

Employees entitled to parental
leave

Employees who took parental
leave

Employees who returned to
work after parental leave ended

2018

2019

2020

2020 vs 2019

Men Woman

4 382

4 326

4 321

-0.1%

138

124

122

-11.1%

-1.6%

-11.3%

.10.8%

Return to work rate

100%

63.8%

98.8%

66.9%

98.6%

75.4%

-0.2 p.p.

5.5 p.p.

Health and Safety Indicators

2018

2019

2020

2020 vs 2019

Work related accidents

Men

Women

Occupational diseases

Men

Women

Deaths

Men

Women

Accident rate

Men

Women

Lost days rate

Men

Women

Absenteeism rate

Men

Women

Health and safety training

Number of hours of health training

Number of hours of safety training

157

3.0%

1.9%

4.0%

0.1%

0.03%

0.19%

2.3%

1.8%

2.7%

2018

181

1 257

7.7%

5.0%

10.2%

0.1%

0.06%

0.11%

2.6%

2.0%

3.2%

4.1%

3.2%

4.9%

0.0%

0.03%

0.09%

4.9%

3.2%

6.3%

-26.3%

-35.3%

-46.3%

- 3.7p.p.

- 1.8 p.p.

- 3.9 p.p.

0.03 p.p.

0.02 p.p.

2.3 p.p.

1.2 p.p.

3.1 p.p.

2019

2020

2020 vs 2019

113

39.5%

1 381

1 650.2%

NOVO BANCO SUSTAINABILITY REPORT 20206.2 Environmental Indicators

Environmental Indicators - Materials consumed

2018

2019

2020

2020 vs 2019

White paper

Internal use (tonnes)

Internal use (tonne/employee)

Forms - printing and finishing area (tonnes)

IT and electronic consumables

Toner cartridges (units)

Ink cartridges (units)

Bands (units)

DVD/CDRom (units)

Batteries

215.3

0.049

116.4

245

4 237

2 340

2 742

Total IT and electronic consumables

5 641

188.8

0.043

94.6

484

735

1 499

2 754

199.6

0.046

109.7

1 061

1 630

2 402

5 218

5.76%

7.0%

16.0%

-82.1%

52.6%

119.0%

121.7%

60.2%

86.3%

Environmental Indicators - Energy

2018

2019

2020

2020 vs 2019

Total electricity

Total electricity consumption (GJ)

97 456

82 138

75 098

Electricity consumption (kWh)

27 071 205

22 816 220

20 860 668

Data Centre

Electricity consumption (GJ)

Electricity consumption (kWh)*

27 495

5 076*

7 637 400

1 409 929*

-8.6%

Electricity consumption (kWh/employee)

6 178

5 274*

4 828

-8.5%

Natural gas**

Natural gas consumption (GJ)

Natural gas consumption (N.m3)

Propane gas**

Propane gas consumption (GJ)

Propane gas consumption (kg)

Diesel***

Generator diesel consumption (litres)

Generator diesel consumption (GJ)

256

6 663

1 485

400

1 135

400

Vehicles diesel consumption (litres)

1 520 591

1 506 128

1 484 134

Vehicles diesel consumption (GJ)

54 668

54 148

53 358

Gasoline

Vehicles gasoline consumption (litres)

Vehicles gasoline consumption (GJ)

840

21 140.4

693

840

Total energy consumption (GJ)

152 493

137 021

128 498

Trips

Number of vehicles

Number of flights

832

615

866

762

868

331

-65%

-66%

- 3.4%

-1.5%

96.0%

-6.2%

0.2%

-56.6%

Na - non applicable
*Includes Data Centre up to July 2019
** In 2019 NOVO BANCO decommissioned its canteen at Carnaxide and therefore ceased to consume propane gas.
*** Diesel consumption in 2019 is an estimate based on the number of hours generators were operating. In 2018 only the consumption of two generators had been reported, which explains the increase in 2019.

158

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTEnvironmental Indicators - Emissions (tCO2e)*

2018

2019

2020

2020 vs 2019

Direct emissions (Scope 1)

4 012.8

4039.0

3 948.4

Emissions from trips in company cars

3 993

4036.0

3 947.3

Emissions from natural gas and butane gas kitchen equipment

Emissions from emergency generators

18.7

1.1

3.0

1.1

Indirect emissions (Scope 2)**

9 089.0

5 828

4 240.6

-2.3%

-0.6%

0.00%

-64.6%

-4.8%

Emissions from the production of electricity purchased
(market-based method)

Emissions from the production of electricity purchased
(Location based method)

Total (Scopes 1 and 2)

Indirect emissions (Scope 3)

9 089.0

5 828

4 240.6

-4.8%

9 800

5 336

3 524.9

-36.6%

13 101.8

9 867.1

8 189.0

6 183.5

6 430.0

4 609.7

Emissions from Employees’ business trips. including flights

323.8

405.3

139,2

Emissions from employees’ home/ work daily trips***

5 696.0

5 973.0

4 323.1

Emissions from wastewater treatment***

52.4

51.7

Emissions in the life cycle of paper consumed ***

Emissions in the paper recycling process ***

Emissions from water consumption ***

38.9

93.9

3.6

12.0

-17.1%

-28.3%

-65.7%

-27.6%

-24.8%

Total (Scopes 1. 2 and 3)

19 285.0

16 297.1

12 798.7

-21.5%

*See methodological notes in GRI table.
**Scope 2 calculation by location-based method since 2018 only. The Total (A1+A2) was calculated using the Market-Based approach.
*** Activities whose emissions started to be calculated in 2020

Environmental Indicators - Water consumption

2018

2019

2020

2020 vs 2019

Water consumption from public supply network (m³)

56 552

56 145

45 394

Water consumption per employee (m³/employee)

12.9

13.0

10.5

-19.1%

Environmental Indicators - Waste management

Paper sent for recycling (tonnes)

Cardboard sent for recycling (tonnes)

Toner cartridges (units)

Ink cartridges (units)

Bands (units)

DVD/CDRom (units)

Batteries

2018

434.2

60.3

245

4 273

2 340

2 742

2019

265.6

10.6

484

735

1499

Total IT and electronic consumables collected (units)

9 641

2 754

2020

2020 vs 2019

106.1

61.3

8 300

-60.1%

476.0%

159

NOVO BANCO SUSTAINABILITY REPORT 2020About
this Report

7.0

Title: Complementariedade
Author: Paulo Gil

This report describes the manner in which NOVO BANCO approaches sustainability in the management of
its activity, in its involvement with employees and clients, in carrying out sustainable business and in ensuring
responsible conduct. It also details the sustainability performance over the last three years, therefore the data
presented concern only to the NOVO BANCO scope.

This report was drawn up in accordance with the Global Reporting Initiative (GRI) model, standard option.
The GRI table is available in the Bank's website, at: NOVO BANCO/Institutional/Sustainability/Sustainability
Report. This report, which under the terms of Article 508-G of the Commercial Companies Code constitutes
the Non-Financial Statement of NOVO BANCO, is also drawn up for compliance with the legal requirements
introduced by Decree-Law no. 89/2017, of 28 July.

Ernst & Young, Audit & Associados, SROC, SA carried out an independent review for a limited level of assurance
of reliability, non-financial and sustainability information contained in the 2020 Sustainability Report, regarding its
sustainability performance, considering that the acceptable indicators were reported in accordance with the GRI
sustainability reporting standards and Decree-Law No. 89/2017, as can see on pages 197 and 198.

The 2020 Sustainability Report complements and details the information contained in the 2020 Annual Report,
providing evidence that sustainability is an integral part of the Bank's strategy.

In order to continue to progress and improve its performance, NOVO BANCO takes into account the concerns and
suggestions of its stakeholders. To this end, any questions, comments or suggestions may be sent to the following
email address:

sustentabilidade@novobanco.pt

161

NOVO BANCO SUSTAINABILITY REPORT 20207.1 Methodological Notes

SOCIAL INDICATORS

Staff Turnover

New hires rate

Accident Rate

Absenteeism Rate

Return to Work Rate

Average training hours per gender

Average training hours per professional category

Remuneration Ratio

Pay gap

Social Dividend
#NB Equal Gender and #NB Work & Life

Branches located in low density areas.

ENVIRONMENTAL INDICATORS

Electricity

Generators diesel

Natural gas

Propane gas

Water

Social Dividend | NB Environment

162

((Number of admissions + resignations/ 2) total employees) 2

New hires in 2020/total number of employees in 2020

Number of accidents at work/Hours worked*1000000

Number of absences (without maternity / paternity leave)/Possible
working hours*100

* Employees who returned to work after parental leave ended
and remained in service after 12 months, based on the number of
returns in 2020

Total number of training hours per gender/Total number of
employees in each gender

Total number of training hours per professional category/Total
number of employees in each category

Ratio of average base remuneration and total average remuneration
between women and men, by function category - (remuneration
for women / remuneration for men) * 100

Sum of the gap weighted by functional group) / (Average value of
male salary).

Amount reached in December 2020 - baseline value 2016/target
set for 2020 - baseline value 2016
The methodology for the Home office, Early Friday/ Late Monday
and purchase of holidays initiatives was changed in 2109. In the
previous methodology, no account was taken of the employees
who used the initiatives, regardless of the year in which the
benefit was used. From 2020 and with the new methodology only
repetitions within the same year are excluded. This new calculation
formula is justified by the extended monitoring period of the
indicators.

Number of branches located in the 165 low-density municipalities
identified by Deliberation 55/2015 of the Interministerial
Commission for Coordination, Portugal 2020

Amount calculated directly from EDP records and billing

*** Diesel consumption in 2020 is an estimate based on the
number of hours generators were operating.

The amount calculated corresponds to the total invoices for the
year 2018 and 2017. In 2019 the Bank ceased to consume natural
gas.

Estimate based on real water consumption in 100% of the central
buildings and 48% of the branches.

Amount reached in December 2020 - baseline value 2016/target
set for 2020 - baseline value 2016

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTEnergy

The following formula was used to calculate direct energy consumption (fuel
consumption) in GJ: Fuel consumption (l) * PCIX * Density X/1000, using the
following conversion factors:

PCI diesel (road)
Density of diesel (generators)
PCI Propane gas (LPG) and Natural
gas
Electricity

42.8 GJ/t (Source: Order No. 17313/2008 (SGCIE)
0.84 (Source: DGEG 2017, data for 21-09-2019)
46.65 GJ/t (Source: APA 2013 - https://apambiente.pt/_zdata/DPAAC/CELE/tabela_
PCI_FE_FO_2013.pdf)
conversion:1 kWh = 0.0036 GJ (Source: International Energy Agency and GRI)

The following formula was used to calculate direct energy consumption (fuel con-
sumption) in GJ: Fuel consumption (l) * PCIX * Density X/1000, using the following
conversion factors:
- PCI diesel (generators) - 43.07 GJ/ (Source: APA - Fuel density values to be used

under the EU ETS)

- Diesel density (generators) - 0.837 kg/l (Source: APA - Fuel density values to be

used under the EU ETS)

- It also includes the following emission factors and parameters used to calculate

Greenhouse Gas (GHG) emissions:

- Passenger car, petrol, engine capacity < 1 400 cm3 - 0.173 kg CO2e/km (Source:

GHG Protocol: Emission Factors from Cross-Sector Tools, 2017)

- Passenger car, petrol, engine capacity ≥ 1 400 and < 2 000 cm3 - 0.215 kg

CO2e/km (Source: GHG Protocol: Emission Factors from Cross-Sector Tools,
2017)

- Passenger car, petrol, engine capacity ≥ 2 000 cm3 - 0.299 kg CO2e/km
(Source: GHG Protocol: Emission Factors from Cross-Sector Tools, 2017)

- Passenger car, diesel, engine capacity < 2 000 cm3 - 0.181 kg CO2e/km (Source:

GHG Protocol: Emission Factors from Cross-Sector Tools, 2017)

- Passenger car, diesel, engine capacity ≥ 2 000 cm3 - 0.245 kg CO2e/km (Source:

GHG Protocol: Emission Factors from Cross-Sector Tools, 2017)

- Hybrid Car - 0.143 kg CO2e/km (Source: APA - NIR 2020)
- Electric car - 0.022 kg CO2e/km (consumption of 13.3 kW/100 km) (Source:

APREN, 2020)

In calculating the transformation of indirect electricity consumption to GJ the fol-
lowing conversion factor was used: 1 kWh= 0.0036 GJ.
The following formula was used to calculate electricity consumption: Emission =
Consumption X * Emission factor (EF)X
It also includes the following emission factors and parameters used to calculate GHG
emissions:
- Mainland electricity production - market based method - 0.266 kg CO2e/kWh

(Source: EDP Sustainability Report 2019)

- Mainland electricity production - location-based method - 0.162 kg CO2e/kWh

(Source: APREN, energy mix 2020)

- Electricity production in Madeira - location and market method - 0.510 kg CO2e/

kWh (Source: EE Madeira 2019)

The calculation includes emissions from employee commuting, from home/work/
home (HWH) commuting, using the following formula: Emission = Journey (km) X *
FEX
It also includes the following emission factors and parameters used to calculate GHG
emissions:
- Diesel Car - 0.200 kg CO2e/km (Source: APA - NIR 2020)
- Petrol Car - 0.205 kg CO2e/km (Source: APA - NIR 2020)
- LPG Car - 0.195 kg CO2e/km (Source: APA - NIR 2020)
- Hybrid Car - 0.143 kg CO2e/km (Source: APA - NIR 2020)
- Electric car - 0.022 kg CO2e/km (consumption of 13.3 kW/100 km) (Source:

APREN 2020)

- Bus - 0.103 kg CO2e/km (Source: DEFRA 2020); 1.420 kg CO2e/km (Source:

STCP 2011) and 0.115 kg CO2e/km (Source: Carris 2019)

- Underground - 0.0467 kg CO2e (Source: Metro Lisboa 2016) and km, 0.040 kg

CO2e/km (Source: Metro do Porto 2018)

CO2 Emissions Scope 1

CO2 Emissions Scope 2

CO2 Emissions Scope 3

163

NOVO BANCO SUSTAINABILITY REPORT 2020 - Train - 0.0157 kg CO2e/km (Source: CP 2019) and 0.021 kg CO2e/km (Source:

Fertagus 2013/2014)

- Ferry - 0.190 CO2e/km (Source: Transtejo+Soflusa, 2014)
- Motorbike (petrol) - 0.129 kg CO2e/km (Source: APA - NIR 2020)
- Motorbike (electric) - 0.015 kg CO2e/km (Consumption of 9 kW/100 km) (Source:

APREN 2020)

- Aircraft Emission = Trip (Km) X * FEX * Take-off Factor * RFI2
- It also includes the following emission factors and parameters used to calculate

GHG emissions:

- Aircraft, Domestic Flight FE CO2 - 0.17147 kg CO2e/km (Source: GHG Protocol:

Emission Factors from Cross-Sector Tools 2017)

- Aircraft, Short Haul Flight FE CO2 - 0.09700 kg CO2e/km (Source: GHG Protocol:

Emission Factors from Cross-Sector Tools 2017)

- Aircraft, Long Haul FE CO2 - 0.11319 kg CO2e/km (Source: GHG Protocol:

Emission Factors from Cross-Sector Tools 2017)

The weight of customers very satisfied with the service is measured by the % of
responses of 8 to 10 on a scale of 1 to 10

The weight of customers very satisfied with the Bank is measured by the % of
responses of 8 to 10 on a scale of 1 to 10

The confidence index corresponds to the average of responses on a scale of 0 to 10,
with the average being converted into an index of 0 to 100

The Net Promoter Score is calculated based on the recommendation intention, as the
difference between the % of promoters and the % of detractors
The % of promoters corresponds to the % of responses of 9 to 10 on a scale of 0 to 10
The % of detractors corresponds to the % of responses of 0 to 6 on a scale of 0 to 10

CO2 Emissions Scope 3

CLIENT INDICATORS

Customer service

Global satisfaction

Confidence

Net Promoter Score

Very Satisfied Clients

The weight of very satisfied clients is measured by the % of responses of 8 to 10 on a
scale of 1 to 10

Complaint rate per 1000 active
clients

Number of existing complaints divided by the number of active clients, with active
clients considered as those that used the Bank's service in the last 3 months.

164

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT7.2 Global Reporting Initiative (GRI)
Table

GENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

ORGANISATIONAL PROFILE

102-1

Name of the organisation

AR - page 2

102-2

Main brands, products, and
services

SR - pages 120-123; 138-141
MR - pages 13-14; 45-51
Institutional website, product and
corporate

102-3

Location of headquarters

AR - page 2

102-4

Number of countries where the
organisation operates, and the
names of countries where it
has significant operations and/
or that are relevant to the topics
covered in the report.

MR - pages 13-14; 45-51
The 2020 Sustainability Reports
covers only the scope of NOVO
BANCO in Portugal.

102-5

Ownership and legal form

FS- page 205

102-6

102-7

102-8

102-9

Markets served:
- geographic locations where
products and services are
offered;

- sectors served;

- types of customers and

beneficiaries

Scale of the organisation:
- total number of employees;

- total number of operations;

- net sales;

- total capitalisation broken
down in terms of debt and
equity;

- quantity of products or

services provided

Total number of employees
by employment contract
(permanent and temporary), by
gender and region

A description of the
organisation's supply chain,
including its main elements as
they relate to the organisation's
activities, primary brands,
products, and services

MR - 13-14; 45-51
The 2020 Sustainability Reports
covers only the scope of NOVO
BANCO in Portugal.

SR - pages 109; 126; 131; 154
MR - pages 11-14; 20; 34-45;
45-51
Notes to the financial
statements- pages

SR - pages 131; 153-156
MR - pages 12; 20

SR - pages 141-142

102-10

Significant changes to the
organisation's size, structure,
ownership, or supply chain
during reporting period

MR - pages 54-55

165

NOVO BANCO SUSTAINABILITY REPORT 2020GENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

102-11

Precautionary Principle or
approach

RM - pages 57-61

102-12

A list of externally-developed
economic, environmental and
social charters, principles, or
other initiatives to which the
organisation subscribes, or
which it endorses.

SR - page 112

102-13

A list of the main memberships
of industry or other associations,
and national or international
advocacy organizations

SR - page 112

STRATEGY

102-14

A statement from the most
senior decision-maker of the
organisation (such as CEO,
chair, or equivalent senior
position) about the relevance of
sustainability to the organisation
and its strategy for addressing
sustainability.

AR- pages 6-7

102-15

A description of key impacts,
risks, and opportunities

SR - pages 113-114
MR - pages 30-32; 57-69

ETHICS AND INTEGRITY

102-16

Values, principles, standards, and
norms of behaviour.

SR – page 147
MR- pages 18-19; 71-81

102-17

A description of internal and
external mechanisms for:
seeking advice about ethical
and lawful behaviour, and
organisational integrity;
reporting concerns about
unethical or unlawful behaviour,
and organisational integrity.

CORPORATE GOVERNANCE

102-18

102-19

Governance structure of
the organization, including
committees of the highest
governance body. Committees
responsible for decision making
on economic, environmental,
and social topics.

Process for delegating authority
for economic, environmental,
and social topics from the
highest governance body to
senior executives and other
employees.

SR - pages 147-149
MR - pages 81-93
Institutional website

SR - pages 147-149
MR-pages 18-19; 71-81
Institutional website

SR - pages 147-149

102-20

Executive-level responsibility for
economic, environmental, and
social topics.

Chairman of the Executive Board
of Directors
SR - pages 147-149
AR Institutional website

102-21

Consulting stakeholders on
economic, environmental, and
social topics

SR - pages 113-114; 116-117;
119-123
Institutional website

166

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTGENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

102-22

Composition of the highest
governance body and its
committees

MR - pages 18-19
Institutional website

102-23

102-24

Whether the chair of the
highest governance body is
also an executive officer in the
organisation. If the chair is also
an executive officer, describe
his or her function within the
organisation’s management and
the reasons for this arrangement.

Nomination and selection
processes for the highest
governance body and its
committees and criteria used
for nominating and selecting
highest governance body
members-

5, 16

MR - pages 18-19
Institutional website

MR - pages 71-81
Institutional website - NOVO
BANCO Articles of Association

5, 16

102-25

Processes for the highest
governance body to ensure
conflicts of interest are avoided
and managed.

MR - page 82
Institutional website, Conflicts of
Interest Policy

The CEO based on objectives
defined for 2020 (which are
monitored through an action plan
and the coordination of teams
appointed for the implementation
of the Social Dividend model)
controls this model on a quarterly
basis. This model ensures the
alignment of sustainability
performance across the Bank's
various operations, through
coordination of the initiatives
with the officers appointed in
each operation.

Sustainability issues are submitted
to the Chairman of the Executive
Board of Directors whenever
justified. The Social Dividend
model is submitted quarterly.
The social dividend aims to give
back to the bank's employees
and the community in general
what the bank generates with
its activity. Through quarterly
monitoring, it assesses the
Bank's environmental and social
performance against the targets
set for 2020.

The performance assessment
processes, with regard to
the identification of risks and
opportunities in economic, social
and environmental issues, are
identified and managed by the
Executive Board of Directors,
Committees, Commissions,
Departments and subsequently
submitted to the highest
hierarchical governance body
and to the Chairman of the
Executive Board of Directors.
For more information see MR –
pages 77-89

102-26

Highest governance body’s and
senior executives’ roles in the
development, approval, and
updating of the organisation’s
purpose, value or mission
statements, strategies, policies,
and goals related to economic,
environmental, and social topics.

102-27

Measures taken to develop and
enhance the highest governance
body’s collective knowledge of
economic, environmental, and
social topics.

102-28

Processes for evaluating the
highest governance body’s
performance with respect
to governance of economic,
environmental, and social topics

167

NOVO BANCO SUSTAINABILITY REPORT 2020GENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

102-29

102-30

102-31

102-32

Highest governance body’s role
in identifying and managing
economic, environmental,
and social topics and their
impacts, risks, and opportunities
– including its role in the
implementation of due diligence
processes.

Highest governance body’s role
in reviewing the effectiveness
of the organisation’s risk
management processes for
economic, environmental, and
social topics

Frequency of the highest
governance body’s review of
economic, environmental, and
social topics and their impacts,
risks, and opportunities

The highest committee or
position that formally reviews
and approves the organisation’s
sustainability report and ensures
that all material aspects are
covered

MR - pages 77-89

MR - pages 57 -65; 77-89

The CEO analyses the
performance of the Social
Dividend model on a quarterly
basis; this model that assesses
17 environmental and social
indicators.

The AR and the Sustainability
Report are approved by the
Executive Board of Directors
and the General and Supervisory
Board.

102-33

Process for communicating
critical concerns to the highest
governance body.

MR - pages 77-89

102-34

Total number and nature of
critical concerns that were
communicated to the highest
governance body.

SR - pages 109; 113-114
MR - pages 77-89
Institutional website - supervision
committees and Whistle-blowing
Policy

a. Remuneration policies for the
highest governance body and se-
nior executives for the following
types of remuneration:
• Fixed pay and variable pay,

including:

- performance-based pay,

equity-based pay, bonuses,
and deferred or vested
shares;

- Sign-on bonuses or

recruitment incentive
payments; • Termination
payments;

- Clawbacks;

- Retirement benefits,

including the difference
between benefit schemes
and contribution rates for
the highest governance
body, senior executives, and
all other employees.

b. How performance criteria in
the remuneration policies relate
to the highest governance body’s
and senior executives’ objectives
for economic, environmental, and
social topics.

102-35

168

MR - pages 86-89
Institutional website,
Remuneration Policies

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTGENERAL DISCLOSURES

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102-36

Process for determining
remuneration.

MR - pages 86-89
Institutional website,
Remuneration Policies

102-37

Stakeholders’ opinions with
regard to remuneration are
requested and taken into
account, including through
voting on remuneration policies
and proposals, when applicable.

102-38

102-39

Ratio of the annual total
compensation for the
organisation’s highest-paid
individual in each country
of significant operations
to the median annual total
compensation for all employees
(excluding the highest-paid
individual) in the same country

Ratio of the percentage increase
in annual total compensation
for the organization’s highest-
paid individual in each country
of significant operations to the
median percentage increase in
annual total compensation for
all employees (excluding the
highest-paid individual) in the
same country

SR - pages 113-114; 116-117; 126-
127; 132-133
MR- pages 86-89
Institutional website,
Remuneration Policies

Median annual total
compensation for all employees
(excluding the highest-paid
individual); 33 014.8
CEO total annual remuneration:
€367 457
Ratio of the CEO total annual
compensation to the median
annual total compensation for all
employees (excluding the highest-
paid individual) 11.3%

The wage increase in 2020, as per
the Collective wage agreement,
was + 0.30%.
Change 2019/2020
Average remuneration – 0.5%

STAKEHOLDER INVOLVEMENT

102-40

List of stakeholder groups

SR - pages 113-115

102-41

102-42

102-43

Percentage of total employees
covered by collective bargaining
agreements

Identifying and selecting
stakeholders

Approach to stakeholder
engagement

SR - pages 113-115

102-44

Key topics and concerns raised

SR - pages 113-115

REPORTING PRACTICE

102-45

Entities included in the
consolidated financial
statements

MR- pages 45-51

102-46

Defining report content and
topic boundaries

SR - pages 113-114

102-47

List of material topics

SR - pages 113-114

102-48

Restatements of information

The 2020 Sustainability Report
details the performance over the
last three years for the NOVO
BANCO scope, therefore the data
presented in this report for 2018
and 2019 concern only NOVO
BANCO and were recalculated
for this scope.

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102-49 Changes in reporting

The 2020 Sustainability Report
details the performance over the
last three years for the NOVO
BANCO scope, therefore the
data presented in this report for
2018 and 2019 concern only the
NOVO BANCO scope.

102-50

Reporting period

1 January to 31 December 2020

102-51

Date of most recent report

2020

102-52

Reporting cycle

Annual

102-53

Contact point for questions
regarding the report

102-54

Claims of reporting in
accordance with the GRI
Standards

sustentabilidade@novobanco.pt

“Core option”

102-55

5 GRI content index

SR - pages 162-196

102-56

A description of the
organisation’s policy and current
practice with regard to seeking
external assurance for the report.

ECONOMIC INDICATORS
TOPIC: ECONOMIC PERFORMANCE

SR - page 161

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders and will become the
basis of its Sustainability Strategy,
alongside the commitments
assumed and the objectives
defined. NOVO BANCO is also
in the process of selecting
the SDGs to which its strategy
and medium-term plan will be
aligned.

The Strategic Plan defined for the
2019-2021 three-year period, on
which the management approach
has been based, was designed
to put in place the necessary
conditions for NOVO BANCO to
transition from a restructuring
bank into a growth bank
prepared for the future. To this
end, the Bank is defining a new
distribution model, streamlining
its technological and process
infrastructure, rejuvenating and
enhancing its human capital,
and fine-tuning its risk model,
electing as cross-cutting priorities
optimisation, digitisation and
differentiation.

170

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103-3

Evaluation of the management
approach

201-1

Direct economic value
generated and distributed

201-2

Financial implications and other
risks and opportunities due to
climate change

NOVO BANCO has over the years
promoted several initiatives with
economic impacts. The Bank's
activity has been shaped by
and developed in accordance
with the objectives established
in the Strategic Plan, which
resulted in the growth of the
recurrent credit portfolio, with
a reduction in the cost of risk,
in significant improvements in
commercial banking income,
and in the continuous reduction
of operating costs, despite the
strong increase in investment.
The Bank monitors the indicators
defined for this topic on a
monthly basis.

Banking Income: €812.2 million
MR - page 52
Economic Value Generated:
€812.2 million
MR - page 52
General and administrative
expenses €144.0 million
MR - page 96
Staff Costs: €223.6 million
MR - page 96
Payments to providers of Capital
- Shareholders - There was no
distribution of dividends
Taxes: €13.4 million
MR - page 96
Community Investments: €0.5
million in donations
Economic Value Distributed:
€381.4 million
Economic Value Retained €430.8
million

With regard to climate change,
NOVO BANCO offers its clients
a number of environmental
products, namely the NB
18.31, NB 18.25 and NB 26.31
account, as well as structured
products with environmental
concerns. It is also concerned
with dematerialising client
communications and reducing
the direct environmental impact
of its activity. The Bank has
recently signed commitments
concerning the decarbonisation
of the economy.
SR - pages 139-140

2, 5,
8, 9

201-3

Defined benefit plan obligations
and other retirement plans

SR - pages 132-136

171

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FS - pages 203; 204; 424; 440

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy based on this matrix,
the commitments assumed and
the objectives defined, and is
also selecting the SDGs that will
be aligned to its strategy and
medium-term plan.

The Strategic Plan defined for the
2019-2021 three-year period, on
which the management approach
has been based, was designed
to put in place the necessary
conditions for NOVO BANCO to
transition from a restructuring
bank into a growth bank
prepared for the future. To this
end, the Bank is defining a new
distribution model, streamlining
its technological and process
infrastructure, rejuvenating and
enhancing its human capital,
and fine-tuning its risk model,
electing as cross-cutting
priorities optimisation, digitisation
and differentiation. The Bank
develops its activity with a strong
focus on the Iberian market.

NOVO BANCO has over the
years promoted several initiatives
with economic impacts. The
Bank's activity has been steered
by the objectives established in
the Strategic Plan, translating
into the growth of the recurrent
credit portfolio, with a reduction
in the cost of risk, a significant
improvement in commercial
banking income, and
the continuous reduction of
operating costs, despite the
strong increase in investment.
The Bank monitors the indicators
defined for this topic on a
monthly basis.

For the professional categories
that are representative of its
workforce, NOVO BANCO pays
a minimum salary that is higher
than the national minimum wage
(the lowest salary paid by NOVO
BANCO is 1.39% times higher
than the national minimum
wage).

201-4

Financial assistance received
from government

TOPIC: MARKET PRESENCE

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

202-1

Ratios of standard entry level
wage by gender compared to
local minimum wage

172

5, 7,
8

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The Sustainability Report is
restricted to NOVO BANCO and
its activity in Portugal. Local hiring
is an integral part of the Bank's
hiring practices. Priority is always
given to local employees, so as to
build a sustained and competent
workforce, with possibilities for
career advancement, moving
on to leadership positions.
Consequently, management
positions are mostly held by
local employees and non-local
employees are few. At national
level and taking into account
senior management - Executive
Board of Directors - employees
of Portuguese nationality and
women employees represent
33.3% and 16.7% of the workforce

NOVO BANCO has over the years
promoted several initiatives with
indirect economic impacts.

The Bank monitors indicators
pertaining to this topic and
reports the results in its Annual
Report, institutional website and
Sustainability Report.

202-2

Proportion of senior
management hired from the
local community

TOPIC: INDIRECT ECONOMIC IMPACTS

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

2, 5,
7, 9,
11

1, 2,
3, 8,
10,
17

203-1

Infrastructure investments and
services supported

SR - pages - 118-124; 138-141
MR - pages 45-51

203-2

Significant identified indirect
economic impacts of the
organisation, including positive
and negative impacts

TOPIC: PROCUREMENT PRACTICES

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

173

SR - pages 118-124; 138-141
MR - pages 45-51

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO is
building its Sustainability Strategy
and considers the Selection of
suppliers with environmental,
social and ethical criteria as a
material topic.

NOVO BANCO has over the
years promoted several initiatives
in this area, having namely
designed a sustainability scoring
for the process of registration of
suppliers in its Supplier Portal
SR - pages 141-142

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103-3

Evaluation of the management
approach

204-1

Percentage of the procurement
budget used for significant
locations of operation that is
spent on suppliers local to that
operation

TOPIC: ANTI-CORRUPTION

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

The Bank monitors indicators
pertaining to this topic and
reports the results in its Annual
Report, institutional website and
Sustainability Report.

NOVO BANCO Group acquires its
regular consumption products,
such as stationery, equipment
and specialised services for
mainland Portugal and Islands,
from national companies. Around
82.2% of the expenses refer to
national suppliers vs 11.8% from
international suppliers.
Taking into account the Covid-19
context, in 2020 the Bank
reduced its payment period to
suppliers to 22 days, from 23 days
in 2019.

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO is
building its Sustainability Strategy
and considers Corporate ethics
and ethics in the relationship with
stakeholders as a material topic.

NOVO BANCO focuses on
the prevention, detection,
reporting and management
of situations involving risks of
conduct or irregular conducts,
based on principles of integrity,
honesty, diligence, competence,
transparency and fairness.

The Bank monitors indicators
pertaining to this topic and
reports the results in its Annual
Report, institutional website and
Sustainability Report.

205-1

205-2

Total number and percentage
of operations assessed for risks
related to corruption

NOVO BANCO
SR - page 109
MR - pages 81-89

Communication and training
about anti-corruption policies
and procedures

SR - page 109
MR - pages 84-85

205-3

Confirmed incidents of
corruption and actions taken

During 2020 no instances of
corruption came to the attention
of NOVO BANCO concerning
operations.

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ANTI-COMPETITIVE BEHAVIOUR

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers
Corporate ethics and ethics
in the relationship with
stakeholders as a material
topic. The survey carried out
in order to build the materiality
matrix included questions to
the Bank's peers. The Bank
also assumed commitments in
terms of Sustainable Financing
in partnership with the main
financial players, which involved
the development of common
approaches and not anti-
competitive behaviour.

NOVO BANCO has over the years
participated in several initiatives in
the area of sustainable financing,
in partnership with its peers. In
2019 the Bank signed the “Letter
of Commitment for Sustainable
Finance in Portugal”, which aims
to contribute to the promotion
of sustainable investment
practices in the country, with
the purpose of accelerating the
process of transition to a carbon
neutral economy by 2050, in
full partnership with its peers.
The Bank also participates in
another two working groups on
Sustainable Finance, promoted
respectively by the Portuguese
Association of Banks and the
Portuguese Association of
Investment and Pension Funds
and Asset Management Firms.

The Bank monitors indicators
pertaining to this topic and
reports the results in its Annual
Report, institutional website and
Sustainability Report.

There is no record of any legal
action regarding anti-competitive
behaviour and violations of anti-
trust and monopoly legislation
involving the Bank in 2020.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

206-1

Number of legal actions
pending or completed during
the reporting period regarding
anti-competitive behaviour
and violations of anti-trust and
monopoly legislation in which
the organisation has been
identified as a participant.

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ENVIRONMENTAL INDICATORS
TOPIC: MATERIALS

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

301-1

Materials used by weight or
volume

301-2

301-3

Percentage of recycled input
materials used to manufacture
the organisation’s primary
products and services.

Percentage of reclaimed
products and their packaging
materials for each product
category

TOPIC: ENERGY

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing its direct
environmental impact, namely
through its NB Environment
programme, integrated in its
Social Dividend model.

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

SR - pages 109; 142-145;158-159

8,12

7,8

NOVO BANCO does not monitor
this type of materials.

8,12

The Bank's activity does not allow
reclaiming products, therefore
this indicator is not reported.

8,12

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers Eco-
efficiency in the Bank's branches,
buildings and operations as a
material topic. Energy, along
with paper, is the resource most
consumed by the Bank, and
as such has deserved special
attention.

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing its direct
environmental impact, namely
through its NB Environment
programme, integrated in its
Social Dividend model.

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

302-1

Energy consumption within the
organisation

SR - pages 142-144; 149; 158

7, 8,
12, 13

7,8

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302-2

Energy consumption outside of
the organisation

NOVO BANCO does not monitor
this consumption.

7, 8,
12, 13

302-3

Energy intensity

SR - pages 142-144; 149; 158

302-4

Reduction of energy
consumption

302-5

Reductions in energy
requirements of products and
services

TOPIC: WATER

SR - pages 142-144; 149; 158

7, 8,
12, 13

8,9

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

Given the scarcity of this
resource, NOVO BANCO has
over the years promoted several
initiatives aimed at reducing its
direct environmental impact in
terms of water consumption.

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

303-1

Water withdrawal by source

SR - pages 144; 159

7,8

303-2

Water sources significantly
affected by withdrawal of water

NOVO BANCO's operations are
located in urban or urbanised
areas, with all water consumed
coming from the public
supply system. Therefore, any
impacts associated with water
management upstream of
its activity are outside NOVO
BANCO's sphere of influence.

303-3

Water recycled and reused

NOVO BANCO has no systems
for water recycling and reuse.

6, 8,
12

BIODIVERSITY

103-1

Explanation of the material topic
and its Boundary

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers climate
change as a material topic.
Climatic change affects
biodiversity, however this topic
is not included in the indicators
monitored.

103-2

The management approach and
its components

Non applicable

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103-3

Evaluation of the management
approach

Non applicable

6,
14,
15

304-1

Operational sites owned, leased,
managed in, or adjacent to,
protected areas and areas of
high biodiversity value outside
protected areas

304-2

Significant impacts of activities,
products, and services on
biodiversity

304-3

Habitats protected or restored

304-4

IUCN Red List species and
national conservation list species
with habitats in areas affected by
operations

TOPIC: EMISSIONS

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

NOVO BANCO's operations
are located in urban or
urbanised areas, therefore any
environmental impacts directly
linked to its activity are naturally
limited.

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers Eco-
efficiency in the Bank's branches,
buildings and operations as
a material topic. Sustainable
Financing is considered a material
topic.

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing its direct
environmental impact, namely
through its NB Environment
programme, integrated in
its Social Dividend model.
NOVO BANCO measures and
monitors the CO2 indicators.
In 2019, within the scope of its
commitment to reduce CO2
emissions, the Bank signed the
‘Business Ambition for 1.5ºC’
letter, a document recently
issued by the United Nations
Global Compact. With this
signature, the Bank assumes its
commitment to preserve the
planet and contribute to limit the
temperature increase to 1.5ºC by
2050, and undertakes to submit
a scientific project to reduce the
CO2 emissions resulting from its
activity.

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3, 12,
13, 14,
15

13, 14,
15

7, 8

8, 9

3, 12

7, 8

3, 12,
14, 15

7, 8

103-3

Evaluation of the management
approach

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

305-1

Direct (Scope 1) GHG emissions

SR - pages 143-144; 149, 159

305-2

Energy indirect (Scope 2) GHG
emissions

SR - pages 109; 143-144; 149, 159

305-3

Energy indirect (Scope 3) GHG
emissions

SR - pages 143-144; 149, 159

305-4

GHG emissions intensity

SR - pages 143-144; 149, 159

305-5

Reduction of GHG emissions

SR - pages 109; 143-144; 149, 159

305-6

Emissions of ozone-depleting
substances (ODS)

305-7

Nitrogen oxides (NOx), sulphur
oxides (SOx), and other
significant air emissions

EFFLUENTS AND WASTE

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

There have been no recharges
of gases with the potential to
destroy the ozone layer since
2015, as these are prohibited
under Regulation (EC) No.
1005/2009, on substances
that deplete the ozone layer.
Moreover, NOVO BANCO
had been gradually replacing
equipment that emit ozone-
depleting gases, when such exist.

SOx and NOx emissions linked
to NOVO BANCO's activity result
from combustion associated
with transportation, emergency
generators and boilers. However,
due to the reduced expression of
these activities within the Bank's
typical activity, these emissions
are immaterial and therefore are
not accounted for.

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing its direct
environmental impact, namely
through its #NB Environment
programme, integrated in its
Social Dividend model.

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103-3

Evaluation of the management
approach

306-1

Water discharge by quality and
destination

306-2

Waste by type and disposal
method

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

NOVO BANCO has implemented
no regular monitoring processes
for effluents produced at its
facilities. Discharge is classified
as a typical domestic discharge,
taking into account that all the
Bank's facilities are in urban
areas with basic sanitation
infrastructures.

NOVO BANCO monitors only
the disposal method for the
most frequent types of waste
produced, namely paper,
cardboard and consumables,
however it does not yet have
a data systematisation system
allowing it to collect data
and report on the total waste
produced by type and disposal
method.

3, 6,
12, 14

3, 6,
12

306-3

Significant spills

Not applicable to the activity of
NOVO BANCO.

3, 6,
12, 14

306-4

Hazardous waste transported.
Hazardous waste imported.
Hazardous waste exported.
Hazardous waste treated.
Percentage of hazardous waste
shipped internationally.

306-5

Water bodies affected by water
discharges and/or runoff

ENVIRONMENTAL COMPLIANCE

Not applicable to the activity of
NOVO BANCO.

3, 12

NOVO BANCO's operations
are located in urban or
urbanised areas, therefore any
environmental impacts directly
linked to its activity are naturally
limited.

6, 14,
15

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing its direct
environmental impact, namely
through its #NB Environment
programme, integrated in its
Social Dividend model.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

180

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307-1

Significant fines and non-
monetary sanctions for non-
compliance with environmental
laws and/or regulations

In 2020 there were no instances
of non-compliance with
environmental laws and/or
regulations, nor were any fines
paid in connection therewith.

TOPIC: SUPPLIERS ENVIRONMENTAL ASSESSMENT

NOVO BANCO has over the
years promoted several initiatives
to ensure a judicious selection
of its suppliers, based on the
information provided. The
Bank calculates the suppliers’
‘sustainability scoring’, which
takes into account environmental,
ethical, labour, hygiene and safety
in the workplace aspects of its
suppliers.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

SR - pages 109; 141-142

NOVO BANCO has over the
years promoted several initiatives
concerning the development of
programmes that ensure human
capital management focused on
talent acquisition and retention,
the rejuvenation of teams and the
unlocking of the potential of the
more experienced employees,
using methodologies and
programmes aimed at individual
development, a balance between
professional and personal life,
and the creation of a circle of
knowledge and sharing.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

308-1

308-2

New suppliers that were
screened using environmental
criteria

Negative environmental impacts
in the supply chain and actions
taken

TOPIC: EMPLOYMENT

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

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Omissions

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NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

SR - pages 109, 154

5, 8

NOVO BANCO does not usually
hire part-time employees, or
only on an exceptional basis. In
this context, benefits are granted
under equal circumstances to
all the Bank's employees and
subsidies are attributed based on
the employee's income. Trainees
and temporary workers are not
entitled to these benefits.
SR - pages 132-136

SR - page 157

Taxa de
Retenção
não
reportada

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

103-3

Evaluation of the management
approach

401-1

Total number and rate of new
employee hires during the
reporting period, by age group,
gender and region.

401-2

Benefits provided to full-time
employees that are not provided
to temporary or part-time
employees

401-3

Total number of employees that
were entitled to parental leave,
by gender and return to work
and retention rates of employees
that took parental leave, by
gender

LABOUR/MANAGEMENT RELATIONS

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

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402-1

Minimum notice periods
regarding operational changes
and whether the notice period
and provisions for consultation
and negotiation are specified in
collective agreements

NOVO BANCO informs its
employees of any relevant
facts pertaining to their career
management in accordance with
the established notice periods,
seeking compliance with clause
27 of the Collective Wage
Agreement, which stipulates that
workplace transfers are subject
to an advice notice of at least 30
days.

TOPIC: OCCUPATIONAL HEALTH AND SAFETY

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers Health,
safety in the work place and a
balance between personal and
professional life as a material
topic. The physical, psychological
and social well-being of its
employees is essential for the
Bank, which to this end has in
place a health and well-being
policy based on five lines of
action.

The physical, psychological and
social well-being of its employees
is essential for the Bank, which to
this end has in place a health and
well-being policy based on five
lines of action:
1. Communicate and raise
awareness;
2. Diagnose and prevent:
3. Encourage and promote;
4. Offer and provide;
5. Reconcile and flexibilise:
practices for a balance between
professional, personal and family
life.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

NOVO BANCO has no formal
safety commissions, however
it engages its employees in the
definition and implementation
of safety practices and the
prevention of occupational
hazards. The national legislation
requires a minimum guarantee
of hygiene, health and safety
conditions. NOVO BANCO
goes beyond the requirements
of the law, annually reporting
its practices and results in the
management of hygiene, health
and safety of all its employees.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

403-1

Percentage of workers whose
work, or workplace, is controlled
by the organisation, that are
represented by formal joint
management-worker health and
safety committees.

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403-2

Types of injury and rates of
injury, occupational diseases,
lost days, and absenteeism, and
number of work-related fatalities
by gender

SR - page 157

NOVO BANCO is not aware
of a high incidence or high
risk of diseases related to
their occupation amongst its
employees.

NOVO BANCO has entered into
Company-level Agreements with
all the trade unions represented
in the institution, which enshrine
the obligations of Occupational
Medicine and hygiene and
safety in the workplace. In
addition to the legally mandatory
consultations and exams,
the Bank has in place other
measures.
SR - pages 133-136

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers Attracting
and developing talent as
a material topic. The Bank
consistently invests in the design
and implementation of distinctive
and motivating training,
enabling the improvement
of performances, and the
development and evolution of its
employees.

NOVO BANCO has over the
years promoted several initiatives
and programmes to ensure that
human capital management is
focused on talent attraction and
retention.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

SR - pages 109; 128 ;155

4, 5, 8

SR - pages 128; 134-136

403-3

Workers with high incidence or
high risk of diseases related to
their occupation

403-4

Health and safety topics covered
in formal agreements with trade
unions

TOPIC: TRAINING AND EDUCATION

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

Average hours of training that
the organisation’s employees
have undertaken during the
reporting period, by gender and
employee category

Programas para a gestão
de competências e
aprendizagem contínua
que apoiam a continuidade
da empregabilidade dos
funcionários e para a gestão de
carreira

404-1

404-2

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404-3

Percentage of employees
receiving regular performance
and career development reviews

NOVO BANCO's Performance
Management Model, based on
the continuous management
of employee performance and
development, is integrated in
the Employee Portal, called
“My Portal”. The Performance
Management Process covers
all employees and includes
a personal development
programme where each
employee can define his or her
objectives in terms of continuing
improvement in the performance
of their functions. At the closing
date of this report the 2020
performance assessment had not
been concluded.

5, 8

TOPIC: DIVERSITY AND EQUAL OPPORTUNITIES

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

405-1

Percentage of individuals within
the organisation's governance
bodies in each of the following
diversity categories: Gender,
Age group, Other indicators of
diversity where relevant (such as
minority or vulnerable groups).

405-2

Ratio of basic salary and
remuneration of women to men
for each employee category

NOVO BANCO has over the
years promoted several initiatives
within its #NB Equal Gender
programme, which monitors
three indicators and aims to
develop a fair and gender-equal
model, having for the purpose
defined specific objectives for
2020.

NOVO BANCO monitors
indicators pertaining to this topic
and annually reports the results
in its website and Sustainability
Report.

SR - pages 109; 130-131; 147 -149;
153-156
MR - page 18 - 20

5, 8

Management:
- Heads of Department: 94%

/ 86%

- Technical staff: 96% / 95%

- Administrative: 94% /89%

- Total: 90% /82%

5, 8,
10

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TOPIC: NON-DISCRIMINATION

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

406-1

Total number of incidents of
discrimination and corrective
actions taken

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing discrimination
negative impacts, namely
through its #NB Equal Gender
programme, integrated in its
Social Dividend model.

NOVO BANCO has over the
years promoted several initiatives
within its #NB Equal Gender
programme, which monitors
three indicators with the aim
of making the bank fairer and
more gender-equal, having for
the purpose defined specific
objectives for 2020.

In 2020 no incidents or lawsuits
came to the attention of
NOVO BANCO concerning
discrimination on grounds of
race, colour, gender, religion,
public opinion or social class.

TOPIC: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

407-1

Operations and suppliers in
which the right to freedom
of association and collective
bargaining may be at risk

At NOVO BANCO, the majority
of the employees is covered by
collective bargaining agreements
and perform their activity in
accordance with the obligations
established therein.

NOVO BANCO has over the
years promoted several initiatives
viewing non-discrimination, and
in this context meets often with
the Workers’ Committee and the
Trade Unions.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

In 2020, NOVO BANCO was
not aware of any instances of
non-compliance with laws and
regulations for breaches of the
right to freedom of association
and collective bargaining, or the
payment of fines in connection
thereof, within its value chain.

5, 8,
16

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TOPIC: CHILD LABOUR

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

408-1

Operations and suppliers at
significant risk for incidents of
child labour

TOPIC: FORCED OR COMPULSORY LABOUR

103-1

Explanation of the material topic
and its Boundary

NOVO BANCO only employs
adults (in accordance with the
labour legislation). The Bank
assumes unconditional respect
for the United Nations
Declaration of Human Rights
and the requirements of the
International
Labour Organisation. NOVO
BANCO's Human Rights Policy
reflects its endorsement and
commitment to the Global
Compact Principles. The
compliance and audit functions
and the mechanisms in place
for the anonymous reporting of
irregularities minimise the risk
of any such occurrences within
the Bank and in connection to its
employees.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

During 2020 no instances came
to the attention of NOVO BANCO
concerning operations and
suppliers at significant risk for
incidents of child labour.

8, 16

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NOVO BANCO complies with the
legislation, rules and regulations
in force and develops its activity
in full compliance with its
Equality and Non-Discrimination
Policy and Human Rights Policy,
defined based on:
- the United Nations Global

Compact Principles;

- the Universal Declaration of

Human Rights;

- The Guidelines of the

Organization for Economic
Cooperation and
Development (OECD) for
Multinational Enterprises;

- the Core Conventions of
the International Labour
Organization (ILO).

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

During 2020 no instances
came to the attention of NOVO
BANCO concerning operations
and suppliers at significant
risk for incidents of forced or
compulsory labour.

NOVO BANCO has over the years
promoted several initiatives in
this area for compliance with the
legislation in force.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

In 2020 NOVO BANCO did not
provide training in human rights
policies or procedures to its
security personnel.

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

409-1

Operations and suppliers at
significant risk for incidents of
forced or compulsory labour

TOPIC: SECURITY PRACTICES

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

410-1

Security personnel trained
in human rights policies or
procedures

TOPIC: RIGHTS OF INDIGENOUS PEOPLES

103-1

Explanation of the material topic
and its Boundary

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103-2

The management approach and
its components

NOVO BANCO does not promote
initiatives in this regard as its
activity is developed in urban or
urbanised areas.

103-3

Evaluation of the management
approach

Non applicable

411-1

Total number of identified
incidents of violations involving
the rights of indigenous peoples
during the reporting period and
remediation action taken

NOVO BANCO's operations are
located in urban or urbanised
areas, therefore there are no
instances of violation of the rights
of indigenous people.

TOPIC: HUMAN RIGHTS ASSESSMENT

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

NOVO BANCO has over the
years promoted several initiatives
aimed at reducing negative
impacts arising from Human
Rights issues, namely through its
#NB Equal Gender programme,
integrated in its Social Dividend
model. The development of a
culture of respect for human
beings is part of NOVO BANCO's
standards of excellence: respect
for employees, respect in the
manner we deal with clients,
suppliers and other stakeholders,
respect in the relationships
established with the communities
in the locations where the
Bank operates. The Bank has a
Human Rights policy that can be
consulted on its website.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

412-1

Total number and percentage
of operations that have been
subject to human rights reviews
or impact assessments

Non applicable

412-2

Employee training on human
rights policies or procedures

In 2020 NOVO BANCO did not
provide training on this topic.

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All NOVO BANCO Group's
suppliers are covered by its
Principles for Suppliers, which
require compliance with Human
Rights obligations. These criteria
are included in the agreements
entered into with all suppliers
(100%). The certification of
suppliers requires answering
mandatory response questions
concerning human rights
policies and practices. The Bank
visits all its material suppliers to
check their supply capabilities
and their compliance with the
requirements of the Principles
for Suppliers. In 2020 the Group
found no instance of non-
compliance with these principles
by its material Suppliers, namely
through its visits to their facilities.
Should any cases of violation
of human rights occur, NOVO
BANCO undertakes to investigate
them and reserves the right to
terminate the agreement with
the Supplier in question if it finds
evidence of non-compliance
with Human Rights obligations.

NOVO BANCO has over the years
promoted several initiatives under
its Corporate Social Responsibility
programme, which aims to help
devise solutions for important
issues within the community in
which the Bank operates. This
programme is deployed based
on three pillars, namely: culture,
financial literacy and solidarity.
These pillars are an integral part
of the NB Social Responsibility
programme, included within the
Bank's Social Dividend Model.

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

SR - pages 138-139; 147-151

412-3

Significant investment
agreements and contracts that
include human rights clauses or
that underwent human rights
screening

TOPIC: LOCAL COMMUNITIES

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

Operations with local
community engagement, impact
assessments, and development
programmes

413-1

413-2

190

Operations with significant
actual and potential negative
impacts on local communities

NOVO BANCO is not aware of
any operations having negative
impacts on local communities.

1, 2

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TOPIC: SUPPLIERS SOCIAL ASSESSMENT

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

NOVO BANCO has over the
years promoted several initiatives
addressing its value chain,
namely endorsing the Principles
of Relationship with Suppliers,
and calculating the “sustainability
scoring”, which takes into
account environmental, ethical,
labour, hygiene and safety in the
workplace aspects of its suppliers.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report and website.

414-1

414-2

New suppliers that were
screened using social criteria

SR - pages 109; 141-142

Negative social impacts in the
supply chain and actions taken

In 2020 NOVO BANCO was not
aware of any impacts at this level.

5, 16

TOPIC: PUBLIC POLICY

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

415-1

Political contributions

NOVO BANCO manages its
activity in full compliance with
the legislation in force.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

Political contributions by
companies are not permitted
under Decree Law No. 19/2003,
of 20 June, and NOVO BANCO
complies with these provisions.

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TOPIC: CUSTOMER HEALTH AND SAFETY

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

416-1

Assessment of the health and
safety impacts of product and
service categories

NOVO BANCO has over the
years promoted several initiatives
across all client security activities,
namely with respect to the
clients’ safety, the security of
transactions, and the safeguard of
the personal data of clients and
other data subjects.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

The Bank's facilities comply with
all existing rules for secure and
private customer service. NOVO
BANCO conducts its relationship
with clients in accordance with
the new General Data Protection
Regulation, guaranteeing privacy
and security in the treatment of
customer data. More information
may be found in Indicator 418-1.

416-2

Total number of incidents of
non-compliance concerning
the health and safety impacts of
products and services

In 2020 there were no penalties
and/or fines applied to NOVO
BANCO in relation to the General
Data Protection Regulation
(GDPR).

TOPIC: LABELLING OF PRODUCTS AND SERVICES

NOVO BANCO has over the
years promoted several initiatives
aimed at providing clear and
transparent information about
its products and services to its
clients. Products disclosure is
subject to prior approval by the
competent supervision authority.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

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417-1

Requirements for product and
service information and labelling
and percentage of significant
product or service categories
covered by and assessed
for compliance with such
procedures.

417-2

417-3

Número total de incidentes
resultantes da não conformidade
com os regulamentos e
códigos voluntários relativos
à informação e rotulagem
de produtos e serviços,
discriminados por tipo de
resultado

Total number of incidents
of noncompliance with
regulations and/or voluntary
codes concerning marketing
communications, including
advertising, promotion, and
sponsorship, by type of result

TOPIC: CUSTOMER PRIVACY

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

NOVO BANCO provides clear
information about each product
or service offered, including
about their characteristics
and specific conditions. This
information and underlying
processes are subject to strict
internal controls in terms of
the Bank's internal audit and
quality control, as well as strict
external controls, through the
supervision conducted by the
Bank of Portugal, the CMVM and
the external audits to the Bank's
processes.

12, 16

In 2020 no incidents of non-
compliance with voluntary
procedures and voluntary codes
concerning product and service
information or labelling of NOVO
BANCO were identified.

In 2020 no incidents of non-
compliance with voluntary
procedures and voluntary
codes concerning marketing
communications, including
advertising, promotion, and
sponsorship by NOVO BANCO
were identified.

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO is
building its Sustainability Strategy
and considers Security of the
financial assets, and physical and
digital security of the client as a
material topic.

NOVO BANCO has over the years
promoted several initiatives to
ensure it performs its activity in
accordance with best market
practices and the legal and
regulatory requirements. The
Bank ensures the confidentiality,
integrity and availability of the
information.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

418-1

Total number of substantiated
complaints received concerning
breaches of customer privacy

In 2020, there were no sanctions
and/or fines imposed on NOVO
BANCO related to the General
Data Protection Regulation
(NDPC).

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TOPIC: SOCIOECONOMIC COMPLIANCE

NOVO BANCO has over the years
promoted several initiatives to
ensure it performs its activity in
accordance with best market
practices and the legal and
regulatory requirements.

NOVO BANCO monitors
indicators pertaining to this topic
and reports the results in its
Sustainability Report.

In 2020 NOVO BANCO was
convicted and fined for 8
infractions for breaches of the
duty of bank secrecy, duty of
information and in administrative
proceedings which resulted in
three sanctions.in the amount of
23 500 euros.

NOVO BANCO's materiality
matrix, which contains the
sustainability topics, results
from the dialogue with the
stakeholders NOVO BANCO
is developing its Sustainability
Strategy and considers Customer
Satisfaction and Service Quality,
as well as Financial products
with social and environmental
concerns as material topics.

NOVO BANCO has been
enhancing its customer
experience monitoring model
with a view to offering the
best experience to its clients.
Knowing the clients’ expectations
throughout their life cycle
permits to identify opportunities
for improvement, using a
robust model for monitoring
the customer experience based
on several action pillars. The
Bank has also reinforced its
offering and services based on
environmental criteria.

NOVO BANCO monitors
indicators pertaining to this
topic and reports the results
in its Sustainability Report and
institutional website.

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

419-1

Significant fines and non-
monetary sanctions for non-
compliance with laws and/or
regulations in the social and
economic area

FINANCIAL SUPPLEMENT INDICATORS
TOPIC: PORTFOLIO OF PRODUCTS

103-1

Explanation of the material topic
and its Boundary

103-2

The management approach and
its components

103-3

Evaluation of the management
approach

194

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORTGENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

Policies with specific
environmental and social
components applied to business
lines.

Procedures for assessing and
screening environmental and
social risks in business lines.

SR - pages 138-141

Processes for monitoring
clients’ implementation of and
compliance with environmental
and social requirements included
in agreements or transactions.

Management
Approach

NOVO BANCO has in place
several mechanisms to regulate
customer monitoring. In cases
which may be considered
more sensitive, prevention and
monitoring plans are negotiated,
and the situations are monitored,
resorting, when necessary, to
external experts.

Process(es) for improving staff
competency to implement
the environmental and social
policies and procedures as
applied to business lines

NOVO BANCO provides adequate
training to its employees on
the marketing of products
with environmental and social
concerns.

Interactions with clients/
investees/business partners
regarding environmental and
social risks and opportunities

Percentage of the portfolio for
business lines by specific region,
size (e.g., micro/SME/ large) and
by sector

Monetary value of products and
services designed to deliver a
specific social benefit for each
business line broken down by
purpose

Monetary value of products and
services designed to deliver a
specific environmental benefit
for each business line broken
down by purpose

FS6

FS7

FS8

SR - pages 112-114; 118-123;
126-127; 127-138

MR - páginas 12-14

1, 8, 9

SR - pages 138-141

1, 8, 9,
10, 11

SR - pages 138-141

TOPIC: AUDIT

FS9

Coverage and frequency of
audits to assess implementation
of environmental and social
policies and risk assessment
procedures

TOPIC: ACTIVE OWNERSHIP

No audits strictly dedicated to the
implementation of environmental
and social policies are carried out.
NOVO BANCO annually assesses
the practices implemented and
the quantitative data through an
external independent verification
of its AR and Sustainability Report.

Percentage and number
of companies held in the
institution’s portfolio with which
the reporting organisation has
interacted on environmental or
social issues

Percentage of assets subject
to positive and negative
environmental or social
screening

SR - pages 109 -112

Non applicable

FS10

FS11

195

NOVO BANCO SUSTAINABILITY REPORT 2020GENERAL DISCLOSURES

Page in the Report

SDG

GC Principles

Omissions

Scope

FS12

Voting policy(ies) applied to
environmental or social issues
for shares over which the
reporting organisation holds the
right to vote shares or advises
on voting

TOPIC: LOCAL COMMUNITIES

FS13

Access points in low-populated
or economically disadvantaged
areas by type

FS14

Initiatives to improve access
to financial services for
disadvantaged people

NOVO BANCO’s equity holdings
in other companies are always
aimed at obtaining profitability in
the long term.
Having said that, the Bank's
stance as a shareholder takes into
account the relevant principles to
ensure consistent ethical, social
and environmental management.

Despite the downsizing carried
out, NOVO BANCO still has a
large network of branches across
the country and has 53 branches
in low populated areas. NOVO
BANCO has been investing in the
digitisation of its services, which
has permitted greater coverage
and easier contact with its clients,
wherever they are.

NOVO BANCO's branch network
is equipped with access ramps
and lifting platforms. It also
provides lowered ATMs with
Braille keyboards. his equipment
is being installed if and when
necessary, as the branch network
is refurbished. The aim is to
gradually extend these access
improvements to all NOVO
BANCO's branches and services.

TOPIC: LABELLING OF PRODUCTS AND SERVICES

1, 10

FS15

Policies for the fair design and
sale of financial products and
services

All the financial products
and services are designed in
compliance with the legal
requirements, the regulators’
guidelines and the policies of
the institution. NOVO BANCO
regularly reports to its regulators
proof of its respect for and
compliance with politics and
rules of conduct, externally
and internally. The internal and
external audits to the Bank's
procedures verify whether its
procedures comply with the
requirements issued by the Bank
of Portugal and the Portuguese
Insurance Institute.

FS16

Initiatives to enhance financial
literacy by type of beneficiary

SR - pages 148-150

1, 8,
10

AR
MR
SR
FS

Annual Report
Management Report
Sustainability Report
Financial Statements and Final Notes

NOVO BANCO
NOVO BANCO Group

196

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT7.3 Independent Limited Assurance
Report

Ernst & Young
Audit & Associados - SROC, S.A.
Avenida da República, 90-6º
1600-206 Lisboa
Portugal

Tel: +351 217 912 000
Fax: +351 217 957 586
www.ey.com

(Free translation from the Original Independent Limited Assurance Report in Portuguese. In case of
any discrepancy, the Portuguese version always prevails)

Independent Limited Assurance Report of the Sustainability Report

To the Board of Directors of
Novo Banco, S.A.

Introduction

We were contracted by the Board of Directors of Novo Banco, S.A. to proceed with the independent review
of the “Sustainability Report 2020”, hereinafter the “Sustainability Report”,included in the “Report and
Accounts 2020” relating to the sustainability performance from 1 January to 31 December 2020.

Responsibilities

The Board of Directors is responsible for preparing the “Sustainability Report” and to maintain an
appropriate internal control system that allows the information presented to be free of material
misstatements due to fraud or error.

It is our responsibility to issue a limited assurance report, professional and independent, based on the
procedures performed and described in the “Scope” section below.

Scope

Our review procedures have been planned and executed in accordance with the International Standard on
Assurance Engagements (ISAE 3000, Revised) – “Assurance engagements other than Audits and Reviews
of Historical Financial Information”, for a limited level of assurance.

The procedures performed in a limited assurance engagement vary in timing and nature from, and are less
in extent than for, a reasonable assurance engagement, therefore, the assurance provided by these
procedures is lower than the assurance that would have been obtained had a reasonable assurance
engagement been performed. Our independent review procedures comprised the following:

► Conducting interviews with Management, in order to understand how the information system is

structured and assess their level of knowledge of the topics addressed in the report;

► Review of the processes, criteria and systems adopted to collect, consolidate, report and validate the

data for the year 2020;

► Review, on a sample basis, of the data calculated by Management, and of quantitative and qualitative

information disclosed in the report;

► Confirmation on how collection, consolidation, validation and report procedures are being implemented

in selected operating units;

► Verification of the conformity of the information included in the “Sustainability Report” with the results

of our work.

Regarding sustainability reporting standards of the Global Reporting Initiative – GRI Standards, we
performed a review of the self-evaluation made by Management of the adopted option to apply the GRI
Standards and conformity with Article 66B of the Portuguese Companies Act (Código das Sociedades
Comerciais) (disclose of non-financial information).

Sociedade Anónima - Capital Social 1.335.000 euros - Inscrição n.º 178 na Ordem dos Revisores Oficiais de Contas - Inscrição N.º 20161480 na Comissão do Mercado de Valores Mobiliários

Contribuinte N.º 505 988 283 - C. R. Comercial de Lisboa sob o mesmo número
A member firm of Ernst & Young Global Limited

197

NOVO BANCO SUSTAINABILITY REPORT 2020

Financial Statements

and Final Notes

Novo Banco, S.A.
(Free translation from the Original Independent Limited Assurance Report in
Portuguese. In case of any discrepancy, the Portuguese version always prevails)
Independent Limited Assurance Report of the 2020 Sustainability Report Report
1 of January to 31 of December 2020

Quality and independence

Our firm applies International Standard on Quality Control 1 (ISQC 1), and consequently maintains a global
quality control system which includes documented policies and procedures relating to compliance with
ethical requirements, professional standards, and the legal and regulatory provisions applicable and we
comply with the independence and ethical requirements of the International Ethics Standards Board for
Accountants (IESBA) Code of Ethics and the Code of Ethics of the Order of Chartered Accountants (OROC).

Conclusion

Based on our work, nothing has come to our attention that causes us to believe that the systems and
procedures for the collection, consolidation, validation and reporting of the “Sustainability Report” are not
operating appropriately and the information disclosed is not free from relevant material misstatements.
Additionally, nothing has come to our attention that causes us to believe that the “Sustainability Report” do
not include all the required data and information as defined by the Article 66B of the Portuguese
Companies Act.

Lisboa, March 25, 2021

Ernst & Young Audit & Associados – SROC, S.A.
Sociedade de Revisores Oficiais de Contas
Represented by:

(signed)

Manuel Ladeiro de Carvalho Coelho da Mota – ROC nº 1410
Registered with the Portuguese Securities Market Commission under license nr. 20161020

198

2/2

NOVO BANCO SUSTAINABILITY REPORT 20201.0 SUSTAINABILITY 2.0 CLIENTS 3.0 EMPLOYEES 4.0 SUSTAINABLE BUSINESS 5.0 RESPONSIBLE CONDUCT 6.0 PERFORMANCE 7. ABOUT THIS REPORT

Financial Statements
and Final Notes

Title: White Cars
Author: Pedro Biu

Consolidated income statement for
the years ended 31 December 2020
and 2019

CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO GROUP

Notes

31.12.2020

31.12.2019 *

(in thousands of Euros)

Interest Income

Interest Expenses

Net Interest Income

Dividend income

Fees and comission income

Fees and comission expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair value through profit or loss

Gains or losses on financial assets and liabilities held for trading

Gains or losses on financial assets mandatorily at fair value through profit or loss

Gains or losses on financial assets and liabilities designated at fair value through profit and loss

Gains or losses from hedge accounting

Exchange differences

Gains or losses on derecognition of non-financial assets

Other operating income

Other operating expenses

Operating Income

Administrative expenses

Staff expenses

Other administrative expenses

Contributions to resolution funds and deposit guarantee

Depreciation

Provisions or reversal of provisions

Commitments and guarantees given

Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates

Impairment or reversal of impairment on non-financial assets

25, 27

27, 29, 30

Share of the profit or loss of investments in subsidiaries, joint ventures and associates accounted for using the equity method

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax

Deferred tax

Profit or loss after tax from continuing operations

Profit or loss before tax from discontinued operations

Profit or loss for the period

Attributable to Shareholders of the parent
Attributable to non-controlling interests

Basic earnings per share (in Euros)
Diluted earnings per share (in Euros)

Basic earnings per share of continuing activities (in Euros)
Diluted earnings per share of continuing activities (in Euros)

19
19

743 707

( 188 573)

555 134

16 478

313 823

( 47 305)

88 472

( 91 611)

( 364 000)

( 11 641)

( 2 414)

( 3 416)

120 732

( 230 294)

720 519

( 208 087)

512 432

9 866

352 136

( 49 254)

61 553

( 59 945)

( 253 729)

106

( 1 924)

38 716

11 516

132 574

( 364 505)

343 958

389 542

( 398 769)

( 245 606)

( 153 163)

( 35 048)

( 33 072)

( 186 423)

( 22 116)

( 164 307)

( 755 070)

( 4 192)

( 245 778)

9 430

( 408 323)

( 246 393)

( 161 930)

( 34 707)

( 30 341)

( 41 407)

56 596

( 98 003)

( 540 437)

337

( 273 634)

1 470

(1 304 964)

( 937 500)

( 1 082)

8 639

( 9 721)

( 45 790)

( 8 815)

( 36 975)

(1 306 046)

( 983 290)

( 33 345)

( 83 175)

(1 339 391)

(1 066 465)

(1 329 317)

( 10 074)

(1 058 812)

( 7 653)

(1 339 391)

(1 066 465)

(0,14)
(0,14)

(0,13)
(0,13)

(0,11)
(0,10)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The accompanying explanatory notes are as integral part of these consolidated financial statements.

The accompanying explanatory notes are an integral part of these consolidated financial statements

31 December 2020

Notes to the Consolidated Financial Statements

200

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDConsolidated statement of
comprehensive income for the years
ended 31 December 2020 and 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO GROUP

Net profit / (loss) for the period

Other comprehensive income/(loss)

Items that will not be reclassified to results

Actuarial gains / (losses) on defined benefit plans
Other comprehensive income from associates accounted for using the

equity method

Fair value changes of equity instruments measured at fair value through

other comprehensive income

Fair value changes of financial liabilities at fair value through profit or loss that is

attributable to changes in their credit risk

Items that may be reclassified to results

Foreign exchange differences
Financial assets at fair value through other comprehensive income

Total other comprehensive income/(loss) for the period

Attributable to non-controlling interest
Attributable to Shareholders of the Bank

a) See Statement of Changes in the Consolidated Equity

Notes

31.12.2020

31.12.2019

(in thousands of Euros)

( 1 339 391)

( 1 066 465)

a)
a)

( 127 689)
( 124 331)

( 107 623)
( 107 341)

( 2 048)

( 12 193)

10 883

6 580
( 1 518)
8 098

897

1 692

( 2 871)

209 412
31
209 381

(1 460 500)

( 964 676)

( 10 074)
(1 450 426)

( 7 653)
( 957 023)

The accompanying explanatory notes are as integral part of these consolidated financial statements.

The accompanying explanatory notes are an integral part of these consolidated financial statements

201

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESConsolidated balance sheet as at 31
December 2020 and 2019

NOVO BANCO GROUP

CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2020 AND 2019

(in thousands of Euros)

Notes

31.12.2020

31.12.2019

ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost

Securities
Loans and advances to banks
Loans and advances to customers

Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets

Tangible fixed assets
Investment properties

Intangible assets
Tax assets

Current Tax Assets
Deferred Tax Assets

Other assets
Non-current assets and disposal groups classified as held for sale

TOTAL ASSETS

LIABILITIES
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities measured at amortised cost

Deposits from banks

(of which, Repurchase Agreement)

Due to customers
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
Other financial liabilities

Derivatives – Hedge accounting
Provisions
Tax liabilities

Current Tax liabilities
Deferred Tax Liabilities

Other liabilities
Liabilities included in disposal groups classified as held for sale

TOTAL LIABILITIES

EQUITY
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent
Minority interests (Non-controlling interests)

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

20
21
22
22
22

23
23
24

25
26
27
28

29
30

21
31
31

23
32
28

33
30

34
35
35
35

2 695 459
655 273
960 962
7 907 587
25 898 046
2 229 947
113 795
23 546 405

12 972
63 859
93 630
779 657
187 052
592 605
48 833
775 498
610
774 888
2 944 292
1 559 518

1 854 081
748 732
1 314 742
8 849 896
27 141 460
1 622 545
369 228
25 149 687

7 452
52 540
92 628
889 152
188 408
700 744
26 378
900 095
1 628
898 467
3 378 492
40 255

44 395 586
-

45 295 903

554 791
-
37 808 767
10 102 896
1 625 724
26 322 060
1 017 928
365 883
72 543
384 382
14 324
9 203
5 121
417 762
1 996 382

544 825
102 012
39 673 649
9 849 623
2 168 488
28 400 127
1 065 211
358 688
58 855
307 817
17 980
11 873
6 107
586 066
1 942

41 248 951

41 293 146

5 900 000
( 823 420)
(7 202 828)
6 570 154
(1 329 317)
32 046

5 900 000
( 702 311)
(6 115 245)
5 942 501
(1 058 812)
36 624

3 146 635

4 002 757

44 395 586

45 295 903

The accompanying explanatory notes are as integral part of these consolidated financial statements.

The accompanying explanatory notes are an integral part of these consolidated financial statements

202

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDConsolidated statement of changes
in equity for the years ended 31
December 2020 and 2019

NOVO BANCO GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

Notes

Share
Capital

Other
Comprehen
sive Income

Retained
earnings

Other
reserves

(in thousands of Euros)

Net profit/(loss)
for the period
attributable to
shareholders of
the Bank

Non-controlling interests

Other
Comprehensive
Income

Other

Total

Balance as at 31 December 2018

5 900 000

( 790 884)

( 4 682 300)

4 872 841

( 1 412 642)

( 25 258)

60 604

3 922 361

Other Increase / (Decrease) in Equity

Appropriation to retained earnings of net profit / (loss) of the previous period
Reserve of Contingent Capital Agreement
Transactions with non-controlling interests
Other movements
Other changes in non-controlling Interests
Total comprehensive income for the period

Changes in fair value, net of tax
Foreign exchange differences, net of tax
Remeasurement of defined benefit plans, net of tax
Other comprehensive income appropriated from associated companies
Variation in the credit risk of financial liabilities at fair value, net of taxes
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
Net profit / (loss) for the period

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

( 13 216)
-
-
-
( 13 216)
-
101 789
211 207
31
( 107 341)
897
( 2 871)
4 336
( 4 470)
-

( 1 432 945)
( 1 412 642)
-
-
( 20 303)
-
-
-
-
-
-
-
-
-
-

1 069 660
-
1 037 013
-
32 647
-
-
-
-
-
-
-
-
-
-

1 412 642
1 412 642
-
-
-
-
( 1 058 812)
-
-
-
-
-
-
-
( 1 058 812)

( 1)
-
-
-
-
( 1)
( 7 653)
-
-
-
-
-
-
-
( 7 653)

8 932
-
-
( 1 746)
-
10 678
-
-
-
-
-
-
-
-
-

1 045 072
-
1 037 013
( 1 746)
( 872)
10 677
( 964 676)
211 207
31
( 107 341)
897
( 2 871)
4 336
( 4 470)
( 1 066 465)

Balance as at 31 December 2019

5 900 000

( 702 311)

( 6 115 245)

5 942 501

( 1 058 812)

( 32 912)

69 536

4 002 757

Other Increase / (Decrease) in Equity

Appropriation to retained earnings of net profit / (loss) of the previous period
Reserve of Contingent Capital Agreement
Other movements

Total comprehensive income for the period

Changes in fair value, net of tax
Foreign exchange differences, net of tax
Remeasurement of defined benefit plans, net of tax
Other comprehensive income appropriated from affiliates
Credit risk changes of financial liabilites at fair value, net of tax
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
Net income of the period

35
35
35

-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
( 121 109)
12 729
( 1 518)
( 124 331)
( 2 048)
10 883
( 1 852)
( 14 972)
-

( 1 087 583)
( 1 087 584)
-
1
-
-
-
-
-
-
-
-
-

627 653
28 772
596 315
2 566
-
-
-
-
-
-
-
-
-

1 058 812
1 058 812
-
-
( 1 329 317)
-
-
-
-
-
-
-
( 1 329 317)

-
-
-
-
( 10 074)
-
-
-
-
-
-
-
( 10 074)

5 496
-
-
5 496
-
-
-
-
-
-
-
-
-

604 378
-
596 315
8 063
( 1 460 500)
12 729
( 1 518)
( 124 331)
( 2 048)
10 883
( 1 852)
( 14 972)
( 1 339 391)

Balance as at 31 December 2020

5 900 000

( 823 420)

( 7 202 828)

6 570 154

( 1 329 317)

( 42 986)

75 032

3 146 635

The accompanying explanatory notes are as integral part of these consolidated financial statements.

The accompanying explanatory notes are an integral part of these consolidated financial statements

203

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESConsolidated cash flow statement for
the years ended 31 December 2020
and 2019

CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO GROUP

Cash flows from operating activities
Interest received
Interest paid
Fees and commissions received
Fees and commissions paid
Recoveries on loans previously written off
Contributions to the pension fund
Contributions to resolution funds and deposit guarantee
Cash payments to employees and suppliers

Changes in operating assets and liabilities:

Deposits with / from Central Banks
Financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost

Debt securities
Loans and advances to banks
Loans and advances to customers
Financial liabilities at amortised cost

Deposits from banks
Due to customers

Derivatives - Hedge accounting
Other operating assets and liabilities

(in thousands of Euros)

Notes

31.12.2020

31.12.2019

727 929
( 239 957)
314 412
( 47 304)
30 181
( 269 419)
( 35 048)
( 392 640)

88 154

915 128
( 453 921)
173
802 686
478 647
( 654 460)
64 756
1 068 351
(2 696 827)
( 655 784)
(2 041 043)
( 3 151)
840 403

723 210
( 217 305)
367 940
( 53 456)
31 372
( 1 535)
( 34 707)
( 449 187)

366 332

( 297 651)
( 248 408)
85 964
( 869 032)
(1 194 539)
( 185 695)
54 090
(1 062 934)
1 491 918
1 781 604
( 289 686)
( 2 225)
122 956

Net cash from operating activities before corporate income tax

( 38 708)

( 544 685)

Corporate income taxes paid

Net cash from operating activities

Cash flows from investing activities
Acquisition of investments in subsidiaries and associated companies
Sale of investments in subsidiaries and associated companies
Dividends received
Acquisition of investment properties
Sale of investment properties
Acquisition of tangible fixed assets
Sale of tangible fixed assets
Acquisition of intangible assets
Sale of intangible assets

Net cash from investing activities

Cash flows from financing activities
Contingent Capitalization Mechanism
Issuance of bonds and other liabilities
Repayment of bonds and other liabilities

Net cash from financing activities

Net changes in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Net changes in cash and cash equivalents

Cash and cash equivalents at the end of the period

Cash and cash equivalents include:
Cash
Deposits with Central Banks
(of which, Restricted balances)
Deposits with banks

Total

( 22 645)

( 61 353)

( 2 919)
58 283
16 478
( 11 966)
67 581
( 48 285)
4 566
( 26 866)
6 013

( 34 868)

( 579 553)

( 36 700)
163 828
9 909
-
197 058
( 19 959)
16 477
( 26 439)
-

62 885

304 174

1 035 016
-
( 189 913)

1 149 295
1 300 000
(1 307 855)

845 103

1 141 440

846 635

866 061

1 585 602

846 635

719 541

866 061

2 432 237

1 585 602

20
20

149 205
2 292 797
( 263 222)
253 457

179 220
1 408 908
( 268 479)
265 953

2 432 237

1 585 602

The accompanying explanatory notes are an integral part of these consolidated financial statements

The accompanying explanatory notes are as integral part of these consolidated financial statements.

31 December 2020

Notes to the Consolidated Financial Statements

204

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNotes to the Consolidated Financial
Statements as at 31 December 2020

(Amounts expressed in thousands of Euro, except when otherwise indicated)

NOTE 1 – Activity and group structure

NOVO BANCO, S.A. is the main entity of the financial Group NOVO BANCO focused on the banking activity, having
been incorporated on the 3rd of August 2014 per deliberation of the Board of Directors of Banco de Portugal (the
Central Bank of Portugal) dated 3rd of August 2014 (8 p.m.), under No. 5 of article 145-G of the General Law on Credit
Institutions and Financial Companies (“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF)¹,
approved by Decree-Law No. 298/92, of 31 December, following the resolution measure applied by Bank of Portugal
to Banco Espírito Santo, S.A. (BES), under the terms of paragraphs 1 and 3-c) of article 145-C of the RGICSF, from which
resulted the transfer of certain assets, liabilities and off-balance sheet elements as well as assets under management
of BES from BES to NOVO BANCO, S.A. (NOVO BANCO or the Bank).

As a result of the resolution measure applied, Fundo de Resolução (“Resolution Fund”) became the sole owner of the
share capital of NOVO BANCO, in the amount of Euro 4,900 million, which acquired the status of a transition Bank, with
a limited duration, due to the commitment assumed by the Portuguese State with the European Commission to sell its
shares within two years from the date of its incorporation, extendable for one year.

On 31 March 2017, the Resolution Fund signed the sale agreement of NOVO BANCO. On 18 October 2017, the sale
process was concluded, following the acquisition of the majority (75%) of its share capital by Nani Holdings, SGPS, SA,
a company belonging to the North-American Group Lone Star, through two share capital increases in the amount
of Euro 750 million and Euro 250 million, in October and December, respectively. Thus, as at 30 June 2020 and 31
December 2019, the share capital of NOVO BANCO amounted to Euro 5,900 million, represented by 9,799,999,997
nominative shares, with no nominal value.

Within the sale process, a Contingent Capital Agreement was created, which in case its capital ratios decrease below
the regulatory requirements defined for NOVO BANCO, and cumulatively, losses are recorded in a delimited portfolio
of assets, the Resolution Fund makes a payment corresponding to the lower of the losses recorded and the amount
needed to restore the capital ratios at the relevant level, up to a maximum of Euro 3,890 million.

With the conclusion of the sale process, NOVO BANCO ceased to be considered a transition Bank and began to
operate normally, although still being subject to certain measures restricting its activity, imposed by the European
Competition Authority.

Since 18 October 2017 the financial statements of NOVO BANCO are consolidated by Nani Holdings SGPS, S.A., with
registered office at Avenida D. João II, No. 46, 4A, Lisbon. LSF Nani Investments S.à.r.l., headquartered in Luxembourg,
is the parent company of the Group.

NOVO BANCO, S.A. has its registered office in Lisbon, at Avenida da Liberdade, No. 195.

NOVO BANCO Group (hereinafter also designated as Group or NB Group) has a retail network comprising 386
branches in Portugal and abroad (31 December 2019: 387 branches), including branches in Spain and Luxembourg,
and 4 representative offices overseas (31 December 2019: 4 representative offices).

Group companies in which the Bank has a direct or indirect holding higher or equal to 20%, over which the Bank
exercises control or significant influence, and that were included in the consolidation perimeter, are presented below.

1. References made to RGICSF refer to the version in force at the date of the resolution measure. The current version of the RGICSF has suffered changes, namely in article 145,
following the publication of Law 23-A 2015, of 26 March, that came into force on the day following its publication.

205

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe entities directly consolidated into NOVO BANCO are the following:
The entities directly consolidated into NOVO BANCO are the following:

Year
incorporated

Year
acquired

Registered office

Activity

% Economic
Interest

Consolidation method

NOVO BANCO, SA

Novo Banco dos Açores, SA (NB Açores)

BEST - Banco Electrónico de Serviço Total, SA (BEST)

NB África, SGPS, SA

GNB - Gestão de Ativos, SGPS, SA (GNB GA)

ES Tech Ventures, S.G.P.S., SA (ESTV)

NB Finance, Ltd. (NBFINANCE)

GNB - Recuperação de Credito, ACE (GNBREC)

GNB Concessões, SGPS, SA (GNB CONCESSÕES)

GNB - Serviços de Suporte Operacional, ACE (GNB ACE)

Espírito Santo Representações, Ltda. (ESREP)

Fundo de Capital de Risco NOVO BANCO PME Capital Growth

Fundo FCR PME / NOVO BANCO

Fundo de Gestão de Património Imobiliário - FUNGEPI - Novo Banco

Fundo de Gestão de Património Imobiliário - FUNGEPI - Novo Banco II

FUNGERE - Fundo de Gestão de Património Imobiliário

ImoInvestimento – Fundo Especial de Investimento Imobiliário Fechado

Prediloc Capital – Fundo Especial de Investimento Imobiliário Fechado

Imogestão – Fundo de Investimento Imobiliário Fechado

Arrábida - Fundo Especial de Investimento Imobiliário Fechado

Invesfundo VII – Fundo de Investimento Imobiliário Fechado

NB Logística - Fundo Especial de Investimento Imobiliário Aberto

NB Património - Fundo de Investimento Imobiliário Aberto

Fundes - Fundo Especial Investimento Imobiliário Fechado

NB Arrendamento - Fundo de Investimento Imobiliário Fechado para Arrendamento Habitacional

Fimes Oriente - Fundo de Investimento Imobiliário Fechado

Fundo de Investimento Imobiliário Fechado Amoreiras

ASAS Invest - Fundo Especial de Investimento Imobiliário Fechado

Novimove - Fundo de Investimento Imobiliario Fechado

Febagri-Actividades Agropecuárias e Imobiliárias SA

Autodril - Sociedade Imobiliária, SA

JCN - IP - Investimentos Imobiliários e Participações, SA

Greenwoods Ecoresorts empreendimentos imobiliários, SA

Sociedade Imobiliária Quinta D. Manuel I, SA

Quinta da Areia - Sociedade Imobiliária, SA

Sociedade Agrícola Turística e Imobiliária da Várzea da Lagoa, SA

Imalgarve - Sociedade de Investimentos Imobiliários, SA

Promotur - Empreendimentos Turístico, SA

Herdade da Boina - Sociedade Imobiliária

Ribagolfe - Empreendimentos de Golfe, SA

Benagil - Promoção Imobiliária, SA

Imoascay - Promoção Imobiliária, SA

Fundo de Investimento Imobiliário Fechado Quinta da Ribeira

Promofundo - Fundo Especial de Investimento Imobiliário Fechado

Herdade da Vargem Fresca VI - Comércio e Restauração SA

Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA (LOCARENT)

UNICRE - Instituição Financeira de Crédito, SA

Ijar Leasing Algérie

Edenred Portugal, SA

2014

2002

2001

2009

1992

2000

2015

1998

2002

2006

1996

2009

1997

2011

1997

2012

2006

2008

2007

1992

2008

2009

2004

2006

2010

2004

2006

1998

1995

2012

1986

1983

1999

1995

1970

2011

2006

2008

1997

2003

1974

2011

1984

2002

2001

2009

1992

2000

2015

1998

2003

2006

1996

2009

1997

2012

2013

2012

2014

2015

2012

2015

2013

2019

2012

2014

2012

2017

2018

2012

2003

2010

2011

2013

Portugal

Bank

57,53%

Full consolidation

Eletronic Bank

100,00%

Full consolidation

Holding

100,00%

Full consolidation

100,00%

Full consolidation

100,00%

Full consolidation

Cayman Islands

Issue and distribution of securities

100,00%

Full consolidation

Portugal

Brazil

Portugal

Algeria

Portugal

Debt Collection

99,15%

Full consolidation

Holding

100,00%

Full consolidation

Provision of various services

97,86%

Full consolidation

Representation services

99,99%

Full consolidation

Venture Capital Fund

100,00%

Full consolidation

Venture Capital Fund

56,78%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

95,28%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

91,22%

Full consolidation

Real Estate Investment Fund

55,90%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

95,24%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

95,28%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

99,875%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Golf Course Exploration

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real estate promotion

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Real Estate Investment Fund

100,00%

Full consolidation

Catering sector

95,28%

Full consolidation

Renting

50,00%

Equity method

Financial credit company

17,50%

Equity method

Leasing

18,85%

Equity method

Provision of various services

50,00%

Equity method

a) The percentage presented above reflects the Group's economic interest. These entities were included in the consolidated balance sheet via the equity method as the Group exercises significant influence over their activities
b) Entities consolidated under the equity method as the voting rights grant control to the other shareholders.

31 December 2020

Notes to the Consolidated Financial Statements

206

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED
Subgroups:
Subgroups:

Subgroups:
GNB - Gestão de Ativos, SGPS, SA (GNB GA)

Year
incorporated

Year
acquired

Registered office

Activity

% Economic
Interest

Consolidation method

1992

Portugal

Management of shareholdings

100,00%

Full Consolidation

GNB Fundos Mobiliários - Sociedade Gestora de Organismos de Investimento Coletivo, SA

GNB Real Estate - Sociedade Gestora de Organismos de Investimento Coletivo, SA

1987
Year
incorporated
1992

1987
Year
acquired
1992

GNB - Sociedade Gestora de Fundos de Pensões, SA
GNB - Gestão de Ativos, SGPS, SA (GNB GA)

Espírito Santo International Asset Management, Ltd.
GNB Fundos Mobiliários - Sociedade Gestora de Organismos de Investimento Coletivo, SA

GNB - Sociedade Gestora de Patrimónios, SA
GNB Real Estate - Sociedade Gestora de Organismos de Investimento Coletivo, SA

GNB - International Management, SA
GNB - Sociedade Gestora de Fundos de Pensões, SA

ES Tech Ventures, S.G.P.S., SA (ESTV)
Espírito Santo International Asset Management, Ltd.

Yunit Serviços, SA
GNB - Sociedade Gestora de Patrimónios, SA

Fundo de Capital de Risco NOVO BANCO PME Capital Growth
GNB - International Management, SA

Righthour, SA
ES Tech Ventures, S.G.P.S., SA (ESTV)

Yunit Serviços, SA

Imbassaí Participações, SA

Fundo de Capital de Risco NOVO BANCO PME Capital Growth

Lírios Investimentos Imobiliários, Ltda

Righthour, SA

UCH Investimentos Imobiliários, Ltda

Imbassaí Participações, SA

UCS Participações e Investimentos, Ltda

UR3 Investimentos Imobiliários, Ltda
Lírios Investimentos Imobiliários, Ltda

Fundo FCR PME / NOVO BANCO

UCH Investimentos Imobiliários, Ltda

LOGI C - Logística Integrada, SA

UCS Participações e Investimentos, Ltda

Epedal - Indústria de Componentes Metálicos, S.A.
UR3 Investimentos Imobiliários, Ltda

Fundo FCR PME / NOVO BANCO

Nexxpro - Fábrica de Capacetes, S.A.

Cristalmax – Indústria de Vidros, S.A.
LOGI C - Logística Integrada, SA

Ach Brito & Ca, SA

Epedal - Indústria de Componentes Metálicos, S.A.

M. N. Ramos Ferreira, Engenharia, SA
Nexxpro - Fábrica de Capacetes, S.A.

GNB Concessões, SGPS, SA (GNB CONCESSÕES)

Cristalmax – Indústria de Vidros, S.A.

Lineas – Concessões de Transportes, SGPS, SA

Ach Brito & Ca, SA

1989
1992

1998
1987

1987
1992

1995
1989

2000
1998

2000
1987

2009
1995

2013
2000

2009
2000

2007
2009

2007
2013

2004
2009

2007
2007

1997
2007

2014
2004

1981
2007

2001
1997

1994
2014

1918
1981

1983
2001

2002
1994

2008
1918

1989
1992

1998
1987

1987
1992

1995
1989

2000
1998

2000
1987

2009
1995

2013
2000

2013
2009

2013
2013

1997
2013

2016
2013

2015
2013

2015
1997

2017
2016

2015
2015

2013
2015

2003
2017

2010
2015

Portugal
Registered office

Portugal

Portugal
Portugal

Investment fund management
Activity

Investment fund management

100,00%
% Economic
Interest
100,00%

Full Consolidation
Consolidation method

Full Consolidation

Investment fund management
Management of shareholdings

100,00%
100,00%

Full Consolidation
Full Consolidation

English Virgin Islands
Portugal

Investment fund management
Investment fund management

50,00%
100,00%

Equity method
Full Consolidation

Portugal
Portugal

Wealth management
Investment fund management

100,00%
100,00%

Full Consolidation
Full Consolidation

Luxembourg
Portugal

Investment fund management
Investment fund management

100,00%
100,00%

Simplified integral
Full Consolidation

Portugal
English Virgin Islands

Management of shareholdings
Investment fund management

100,00%
50,00%

Full Consolidation
Equity method

Portugal
Portugal

Portugal
Luxembourg

Internet portal management
Wealth management

33,33%
100,00%

Equity method
Full Consolidation

Venture Capital Fund
Investment fund management

100,00%
100,00%

Full Consolidation
Simplified integral

Portugal
Portugal

Brazil
Portugal

Brazil
Brazil

Portugal
Brazil

Portugal
Portugal

Services Provider
Management of shareholdings

100,00%
100,00%

Full Consolidation
Full Consolidation

Management of shareholdings
Internet portal management

100,00%
33,33%

Full Consolidation
Equity method

Real estate investment management
Venture Capital Fund

100,00%
100,00%

Full Consolidation
Full Consolidation

Real estate investment management
Services Provider

100,00%
100,00%

Full Consolidation
Full Consolidation

Real estate investment management
Management of shareholdings

100,00%
100,00%

Full Consolidation
Full Consolidation

Real estate investment management
Real estate investment management

100,00%
100,00%

Full Consolidation
Full Consolidation

Venture Capital Fund
Real estate investment management

Logistic
Real estate investment management

Management of shareholdings
Real estate investment management

56,78%
100,00%

20,74%
100,00%

12,22%
100,00%

Full Consolidation
Full Consolidation

Equity method
Full Consolidation

Helmet manufacturing
Venture Capital Fund

38,99%
56,78%

Equity method
Full Consolidation

Glass manufacturing
Logistic

Soap manufacture
Management of shareholdings

Engineering
Helmet manufacturing

18,96%
20,74%

a)
a)

8,77%
12,22%

8,11%
38,99%

Equity method
Equity method

Management of shareholdings
Glass manufacturing

a)
100,00%
18,96%

Full Consolidation
Equity method

Management of shareholdings
Soap manufacture

40,00%
8,77%

8,11%

Equity method
Equity method

Equity method

Lusitano Mortgages No.6 plc (*)
Lusitano Mortgages No.7 plc (*)

1983

2013

Portugal

Engineering

M. N. Ramos Ferreira, Engenharia, SA

b) Entities consolidated under the equity method as the voting rights grant control to the other shareholders.
GNB Concessões, SGPS, SA (GNB CONCESSÕES)

2002

2003

Portugal

Management of shareholdings

100,00%

Full Consolidation

Additionally, and considering the requirements of IFRS 10, the Group’s consolidation perimeter includes the following structured
Lineas – Concessões de Transportes, SGPS, SA
Additionally, and considering the requirements of IFRS 10, the Group’s consolidation perimeter includes the following
entities:
structured entities:

b) Entities consolidated under the equity method as the voting rights grant control to the other shareholders.

Management of shareholdings

Equity method

Portugal

40,00%

2008

2010

Year incorporated

Year acquired

Consolidation method

% Economic Interest

Registered
office

Additionally, and considering the requirements of IFRS 10, the Group’s consolidation perimeter includes the following structured
entities:
2007

Full Consolidation

100%

2007

2008
Year incorporated

2008
Year acquired

100%
% Economic Interest

Full Consolidation
Consolidation method

Ireland
Registered
Ireland
office

(*) - Structured entities set up in the scope os securitization operations, recorded in the consolidated financial statements in accordance with the continued involvement of the
Group in these operations, determined based on the percentage of the equity pieces held of the respective vehicles (see Note 38)

2007

2008

2007

2008

Ireland

100%

Full Consolidation

During 2020, the main changes in NOVO BANCO Group’s structure were as follows:
(*) - Structured entities set up in the scope os securitization operations, recorded in the consolidated financial statements in accordance with the continued involvement of the
Group in these operations, determined based on the percentage of the equity pieces held of the respective vehicles (see Note 38)
- Subsidiaries and branches
During 2020, the main changes in NOVO BANCO Group’s structure were as follows:


In April 2020, NOVO BANCO sold the entire participation and supplementary contributions of Herdade do Pinheirinho and
Herdade do Pinheirinho II, recording a gain of Euro 209 thousand.
- Subsidiaries and branches
During 2020, the main changes in NOVO BANCO Group’s structure were as follows:
In September 2020, Orey Urban Rehabilitation Fund was liquidated;

In November 2020, there was a capital reduction of the NB Arrendamento Fund in the amount of Euro 2,800 thousand;

In April 2020, NOVO BANCO sold the entire participation and supplementary contributions of Herdade do Pinheirinho and

Durante o exercício de 2020 as alterações mais relevantes ao nível da estrutura do Grupo NOVO BANCO foram as
In December 2020, Solid and R Invest Funds, as well as Sociedade Portucale, were liquidated and the holding held in Sociedade

Herdade do Pinheirinho II, recording a gain of Euro 209 thousand.
Herdade da Vargem Fresca VI is now held directly by Fungere Fund;
seguintes:
In September 2020, Orey Urban Rehabilitation Fund was liquidated;

In December 2020, a capital increase of NB Logística Fund was carried out in the amount of Euro 23,200 thousand;

In November 2020, there was a capital reduction of the NB Arrendamento Fund in the amount of Euro 2,800 thousand;

In December 2020, there was a capital increase of Fungepi Fund in the amount of Euro 84,079 thousand, having been subscribed
Subsidiaries and branches

In December 2020, Solid and R Invest Funds, as well as Sociedade Portucale, were liquidated and the holding held in Sociedade

by the Fungepi II and Fundes Funds (Euro 12,787 thousand and Euro 71,292 thousand, respectively), with in-kind entry of real
Herdade da Vargem Fresca VI is now held directly by Fungere Fund;
estate;
In April 2020, NOVO BANCO sold the entire participation and supplementary contributions of Herdade do
In December 2020, a capital increase of NB Logística Fund was carried out in the amount of Euro 23,200 thousand;
In December 2020, a capital increase of Fungepi II Fund was carried out in the amount of Euro 1,444 thousand, having been
In December 2020, there was a capital increase of Fungepi Fund in the amount of Euro 84,079 thousand, having been subscribed
Pinheirinho and Herdade do Pinheirinho II, recording a gain of Euro 209 thousand.
subscribed by Fungepi Fund and by the entities Febagri and Imoascay (Euro 963 thousand, Euro 30 thousand and Euro 451
by the Fungepi II and Fundes Funds (Euro 12,787 thousand and Euro 71,292 thousand, respectively), with in-kind entry of real
thousands, respectively) with in-kind entry of real estate.
estate;
In September 2020, Orey Reabilitação Urbana Fund was liquidated;
In December 2020, a capital increase of Fungepi II Fund was carried out in the amount of Euro 1,444 thousand, having been
subscribed by Fungepi Fund and by the entities Febagri and Imoascay (Euro 963 thousand, Euro 30 thousand and Euro 451
In November 2020, there was a capital reduction of the NB Arrendamento Fund in the amount of Euro 2,800
thousands, respectively) with in-kind entry of real estate.
thousand;
In June 2020, FCR PME NB converted a credit granted to Nexxpro in the amount of Euro 639 thousand into supplementary
contributions.
- Associated companies
In December 2020, Solid and R Invest Funds, as well as Sociedade Portucale, were liquidated and the holding held
•
In June 2020, FCR PME NB sold its stake in Enkrott, at the balance sheet value;

in Sociedade Herdade da Vargem Fresca VI is now held directly by Fungere Fund;
In June 2020, FCR PME NB converted a credit granted to Nexxpro in the amount of Euro 639 thousand into supplementary
contributions.
In June 2020, FCR PME NB sold its stake in Enkrott, at the balance sheet value;
31 December 2020

•

- Associated companies
•

Notes to the Consolidated Financial Statements

•






207

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES•

In December 2020, a capital increase of NB Logística Fund was carried out in the amount of Euro 23,200 thousand;

•

In December 2020, there was a capital increase of Fungepi Fund in the amount of Euro 84,079 thousand, having
been subscribed by the Fungepi II and Fundes Funds (Euro 12,787 thousand and Euro 71,292 thousand, respectively),
with in-kind entry of real estate;

In December 2020, a capital increase of Fungepi II Fund was carried out in the amount of Euro 1,444 thousand,
having been subscribed by Fungepi Fund and by the entities Febagri and Imoascay (Euro 963 thousand, Euro 30
thousand and Euro 451 thousands, respectively) with in-kind entry of real estate.

Associated companies

•

In June 2020, FCR PME NB converted a credit granted to Nexxpro in the amount of Euro 639 thousand into
supplementary contributions.

•

In June 2020, FCR PME NB sold its stake in Enkrott, at the balance sheet value;

•

In December 2020, FCR PME NB converted a credit granted to Nexxpro in the amount of EUR 2,280 thousand into
supplementary installments;

In December 2020, Ijar Leasing made a capital increase, and NOVO BANCO did not accompany this operation, so
the Group's participation in this Company went from 24.5% to 18.85%;

•

In December 2020, the PNCB - Plataforma de Negociação Integrada de Créditos Bancários, A.C.E. has been extinct.

During the financial year of 2019, the main changes in NOVO BANCO Group’s structure were as follows:

Subsidiaries and branches

•

In January 2019, the London branch was closed;

•

In March 2019, the early redemption of Lusitano Project Finance No. 1, FTC;

•

In September 2019, BES GMBH merged into NOVO BANCO;

•

In December 2019, a capital increase was made in the Fundo Amoreiras in the amount of Euro 36,200 thousand,
entirely carried out by the NB, with the holding percentage going from 94.16% to 95.24%;

•

In December 2019, Fundo Fimes Oriente capital was reduced in the amount of Euro 163,815 thousand;

•

In December 2019, the Cayman Islands branch was closed:

•

In December 2019, BESIL was merged into NOVO BANCO;

•

In December 2019, ES Plc was merged into NOVO BANCO.

Associated companies

•

In March 2019, the Nexxpro, an associated company held by the FCR PME NB Fund, made a capital increase of
Euro 440 thousand, which was fully subscribed by the Fund. As such, the Fund's participation percentage in this
Company went from 59.58% to 68.68%;

•

In August 2019, Epedal, SGPS, S.A. was merged into Epedal - Indústria de Componentes Metálicos, S.A.

During 2020 and 2019, the movements relating to acquisitions, disposals and other investments and reimbursements
in subsidiaries and associated companies are detailed as follows:

208

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDSubsidiaries Companies
Herdade do Pinheirinho
Herdade do Pinheirinho II
NB Arrendamento
NB Logística
Fungepi
Fungepi II
Benagil
Ribagolfe

Associated Companies

Nexxpro
Enkrott

31.12.2020

(in thousands of Euros)

Acquision
Value

Acquisitions

Other
Investments
(a)

Total

Sales Price

Other
Reimbursements
(a)

Sales

Total

Gains/Losses in
sales/settlements

-
-
-
-
-
-
-
-
-

-
-
-

-
-
-
23 200
84 079
1 444
500
100
109 323

2 919
-
2 919

14 996
44 744
-
-
-
-
-
-
59 740

-
1 134
1 134

-
-
( 2 800)
-
-
-
-
-
( 2 800)

-
-
-

14 996
44 744
( 2 800)
-
-
-
-
-
56 940

-
1 134
1 134

4 284
( 4 075)
-
-
-
-
-
-
209

-
-
-

112 242

60 874

( 2 800)

58 074

209

(a) Capital increases / decreases, supplementary capital, supplies, transactions involving the exchange of financial instruments and incorporation of companies.

Subsidiaries Companies

Autodril
Amoreiras
Fimes Oriente

Associated Companies

Nexxpro

31.12.2019

(in thousands of Euros)

Acquision
Value

Acquisitions

Other
Investments
(a)

Total

Sales Price

Other
Reimburseme

nts (a)

Total

Gains/Losses in
sales/settlements

-
-

60
36 200
-
36 260

440

36 700

60
36 200
-
36 260

-
440

440

36 700

-
-
-
-

-
-
( 163 815)
( 163 815)

-
-

( 163 815)

-
-
-
-

(a) Capital increases/decreases, supplementary capital, supplies, transactions involving the exchange of financial instruments and incorporation of companies.

The subsidiaries classified under IFRS 5 as non-current assets held for sale and discontinued operations, are detailed
in Note 30.

NOTE 2 – Main accounting policies

2.1. Basis of presentation

In accordance with Regulation (EC) No. 1606/2002 of 19 July 2002 of the European Council and the Parliament and
Notices 5/2015 of the Bank of Portugal, the consolidated financial statements from NOVO BANCO, S.A. (the group or
NOVO BANCO) were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by
the European Union effective as of 1 January 2020.

The IFRS comprise accounting standards issued by International Accounting Standards Board (IASB) as well as inter-
pretations issued by the International Reporting Interpretations Committee (IFRIC), and by their predecessor bodies
Standing Interpretations Committee (“SIC”).

209

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe consolidated financial statements of NOVO BANCO are presented as at 31 December 2020. The accounting poli-
cies used by the Group in their preparation are consistent with those used in the preparation of the financial statements
as at 31 December 2019. Changes to the most relevant accounting policies are described in the following section.

The accounting standards and interpretations recently issued, but which have not yet come into force and which the
Bank has not yet applied in the preparation of its financial statements can also be analyzed in Note 47.

The consolidated financial statements are expressed in thousands of Euro, rounded to the are expressed in thousands
of Euro, rounded to the nearest thousand. They have been prepared under the assumption of continuity of operations
from the accounting records and following the historical cost convention, except for the assets and liabilities account-
ed for at fair value, namely derivative financial instruments, financial assets and liabilities at fair value through profit or
loss, financial assets at fair value through other comprehensive income, investment properties and hedged assets and
liabilities, in respect of their hedged component.

Changes in Accounting Estimates

The preparation of the financial statements in accordance with IFRS requires the Group to make judgments and esti-
mates and use assumptions that affect the application of accounting policies and the amounts of income, costs, assets
and liabilities. Changes in such assumptions or differences in relation to reality may have an impact on current estimates
and judgments. The areas that involve a higher level of judgment or complexity or where significant assumptions and
estimates are used in the preparation of the consolidated financial statements, are analyzed in Note 3.

The consolidated financial statements and the Management Report of 31 December 2020 were approved at the Execu-
tive Board of Directors’ meeting held on 24 March 2021 and will be submitted to the General Assembly of Shareholders,
which has the power to justifiably decide to change them. However, it is Executive Board of Directors conviction that
these consolidated financial statements will be approved without changes.

2.2. Consolidation principles

These consolidated financial statements comprise the assets, liabilities, income, expenses, other comprehensive
income and cash flows of NOVO BANCO and of its subsidiaries (Group or NOVO BANCO Group) and the results
attributable to the Group relating to shareholdings in associated companies.

These accounting policies have been consistently applied to all the Group companies during the financial years
covered by these consolidated financial statements, with the exception of Gama Life -Companhia de Seguros Vida,
S.A. (Gama Life) (formerly known as GNB - Companhia de Seguros de Vida, S.A. (GNB Vida)) which did not adopt IFRS
9 as of 1 January 2018 due to the company benefiting from the deferment period of the adoption of this standard
granted to Insurance Companies, which extends until 1 January 2021, which is why its assets and liabilities recognized
in discontinued operations still follow the valuation recommended in IAS 39 - Financial Instruments. The sale process
of this entity was concluded in the second half of 2019.

Subsidiaries

Subsidiaries are entities (including investment funds and securitization vehicles) over which the Group exercises con-
trol. The Group controls an entity when it is exposed, or has rights, to the variability of the return deriving from its
involvement with that entity and may take possession of same by way of the power it has over the entity (de facto
control) and has the ability to affect these variable returns through the power it held over the relevant activities of
the entity. As provided in IFRS 10, the Group analyses the objective and the structuring of how an entity’s operations
are developed when assessing its control over such entity. Subsidiaries are fully consolidated from the date on which
control over their activities is transferred to the Group and until the date that control ceases. Holdings of third parties in
these entities are presented in the caption Non-controlling interests, except for open investment funds in which these
values are presented in the caption Other liabilities, due to the high probability of their redemption.

The accumulated losses of a subsidiary are attributed proportionally to non-controlling interests even if this results in
the recognition of non-controlling interests of a negative value.

210

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDWhen control is obtained in a business combination achieved in stages (step acquisition) the Group remeasures its
previously held non-controlling interest in the entity at its fair value and recognizes the resulting gain or loss in the
income statement upon determining the respective goodwill. At the moment of a partial sale, resulting in the loss of
control of a subsidiary, any remaining non-controlling interest retained is remeasured to its fair value at the date the
control is lost, and the resulting gain or loss is recognized in the income statement.

The entity identified as acquirer or incorporator integrates the results of the entity/ business acquired as from the date
of its acquisition, that is, from the date of the takeover of control.

The accounting treatment of mergers by incorporation, between entities under common control, follows the same
principles - the integration of the assets and liabilities of the entity to be incorporated is carried out at the amounts
presented in the consolidated financial statements of the entity that has control over the two entities, at the highest
level of the Group's financial holdings chain (the "predecessor"). The difference between the carrying book value of the
incorporated assets and liabilities and the amount of the financial investment is recognized as a merger reserve.

Associated companies

Associated companies are those entities over which the Group has significant influence over the company’s financial
and operating policies, but not its control. Generally, when the Group owns more than 20% of the voting rights but
less than 50%, it is presumed to have a significant influence. Even if the Group owns less than 20% of the voting rights,
it can still have a significant influence through its participation in the management of the associated company or its
representation in its executive Management bodies.

Investments in associated companies are recorded in the consolidated financial statements of the Bank using the
equity method of accounting from the date on which significant influence is attained by the Group and until the date
that significant influence ceases. The carrying value of the investments in associated companies includes the value of
the respective goodwill determined at the acquisition date and is presented net of impairment losses. The Group carries
out impairment tests on its investments in associated companies, whenever there are any indications of impairment.
Impairment losses recognized in prior years may be reversed, up to the limit of the accumulated losses.

In a step acquisition that results in the Group obtaining significant influence over an entity, any previously held stake in
that entity is remeasured to its fair value through the income statement when the equity method is first applied.

When the Group’s share of losses of an associated company equals or exceeds its interest in the associated company,
including any medium and long-term interest, the Group discontinues the application of the equity method, except
when it has a legal or constructive obligation to cover those losses or has made payments on behalf of the associated
company.

Gains or losses on disposals of shares in associated companies are recognized in the income statement even if those
disposals do not result in the loss of significant influence. Dividends attributed by associated companies reduce the
balance sheet value recognized by the Group.

Structured Entities (SE)

The Group consolidates, using the full consolidation method, certain special purpose entities, created specifically to
accomplish a narrow and well-defined objective, when the substance of the relationship with those entities indicates
that they are controlled by the Group, irrespective of the percentage of the equity held.

The evaluation of the existence of control is made based on the established by IFRS 10 – Consolidated Financial
Statements, according to which a SE is controlled if (i) the Group is exposed, or has rights to its results; and (ii) the
Group has the power to affect the SE’s results through the control it exercises over them.

Investment funds managed by the Group

As part of its asset management activity, the Group manages investment funds on behalf of the holders of the participa-

211

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTEStion units. The financial statements of these funds are not consolidated by the Group except in the cases where control
is exercised over their activity, according to the criteria established by IFRS 10.

Goodwill

Goodwill represents the difference between the acquisition cost and the fair value of the Group’s share of identifiable
net assets, liabilities and contingent liabilities acquired.

Business combinations occurring after 31 December 2009 were accounted for using the purchase method. The ac-
quisition cost includes the fair values: i) of the assets transferred, ii) of the liabilities assumed by the acquirer before the
previous shareholders of the acquired, and iii) of the equity instruments issued.

In accordance with IFRS 3 – Business Combinations, the Group measures goodwill as the difference between the fair
value of the consideration transferred including the fair value of any non-controlling interest previously held, and the
fair value attributable to the assets acquired and the liabilities assumed and any equity instruments issued. The fair
values are determined at the acquisition date. The costs directly attributable to the acquisition are expensed at the
moment of the acquisition.

As at the acquisition date, the non-controlling interests are measured at their proportional interest in the fair value of
the net identifiable assets acquired and liabilities assumed, without their respective portion of goodwill. As a result, the
goodwill recognized in these consolidated financial statements corresponds solely to the portion attributable to the
shareholders of the Bank.

In accordance with IFRS 3 – Business Combinations, positive goodwill is recognized as an asset at its cost and is not
amortised. Goodwill relating to the acquisition of associated companies is included in the carrying book value of the
investments in those associated companies, determined using the equity method. Negative goodwill is recognized
directly in the income statement in the period the business combination occurs. Impairment losses of goodwill may
not be reversed in the future.

The recoverable amount of the goodwill recognized as an asset is reviewed annually, regardless of whether there is, or
not, any indication of impairment. Impairment losses are expensed directly in the income statement. The recoverable
amount corresponds to the lower of market value less costs to sell and the respective value in use. In determining value
in use, estimated future cash flows are discounted using a rate that reflects market conditions, the time value of money
and business risks.

Transactions with non-controlling interests

Acquisitions of non-controlling interests that do not result in a change in control over a subsidiary are accounted for
as transactions with shareholders and, therefore, no additional goodwill is recognized as a result of such transactions.
Any difference between the acquisition cost and the carrying book value of the non-controlling interest acquired is
recognized directly in reserves. Similarly, gains or losses arising from sale of non-controlling interests that do not result
in a loss of control over a subsidiary, are always recorded against reserves.

Transcription of financial statements in foreign currency

The financial statements of each of the Group’s subsidiaries and associated companies are prepared using their func-
tional currency, which is defined as the currency of the primary economic environment in which that entity operates.
The Group’s consolidated financial statements are prepared in Euro, which is NOVO BANCO’s functional currency.

The financial statements of each of the Group entities that have a functional currency different from the Euro are
translated into Euro in accordance with the following criteria:

• Assets and liabilities are translated using the exchange rate prevailing at the reporting date;

•

Income and expenses are translated at exchange rates approximating the real rates ruling at the dates of the trans-
actions;

212

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED• The exchange differences arising between the translation amount of the equity at the beginning of the period and
the amount determined at the balance sheet date of the consolidated accounts, using the exchange rates applica-
ble at that date, are recorded against reserves (other comprehensive income). Similarly, regarding the subsidiaries
and associated companies’ results, the exchange differences arising from the translation of income and expenses
at the rates ruling at the dates of the transactions and that determined at the balance sheet date are recorded in
reserves. When the entity is sold, such exchange differences are recognized in results as an integral part of the gain
or loss on the disposal.

Balances and transactions eliminated with consolidation

Intercompany balances and transactions, including any unrealised gains and losses on transactions between Group
companies, are eliminated in preparing the consolidated financial statements, unless the unrealised losses provide
evidence of an impairment loss that should be recognized in the consolidated financial statements.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of
the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transactions reveal
evidence of impairment.

The accounting policies of subsidiaries and associated companies are changed, whenever necessary, to ensure that
same are applied consistently throughout the Group.

2.3. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into Euro at the foreign exchange rates
ruling at the balance sheet date. Foreign exchange differences arising on this translation are recognized in the income
statement.

Non-monetary assets and liabilities recorded at historical cost, denominated in foreign currency, are translated using
the exchange rate prevailing at the transaction date. Non-monetary assets and liabilities, denominated in foreign
currency, that are stated at fair value are translated into Euro at the foreign exchange rates ruling at the dates the
fair value was determined. The resulting exchange differences are accounted for in the income statement, except if
related to equity instruments classified as financial assets at fair value through other comprehensive income, which are
recorded in equity reserves.

Foreign exchange differences relating to cash flow hedges and the hedging of the net investment in foreign operational
units, when they exist, are recognized in other comprehensive income.

2.4. Derivative financial instruments and hedge accounting

Classification

The Group classifies its derivative portfolio into (i) fair value hedge and (ii) trading derivatives, which include, in addition
to the trading book, other derivatives contracted for the purpose of hedging certain assets and liabilities designated at
fair value through profit or loss but not classified as hedging (fair value option).

Recognition and measurement

Derivative financial instruments are initially recognized at their fair value on the date the derivative contract is entered
into (trade date). Subsequent to initial recognition, the fair value of derivative financial instruments is remeasured on
a regular basis and the resulting gains or losses on remeasurement are recognized directly in the income statement,
except for derivatives designated as hedging instruments. The recognition of the resulting gains or losses arising on the
derivatives designated as hedging instruments depends on the nature of the risk being hedged and the hedge model
used.

213

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESDerivatives traded on organised markets, namely futures and some options contracts, are recorded as trading derivatives
and their fair value changes are recorded against the income statement. The margin accounts are included under other
assets and other liabilities (see Notes 29 and 33) and comprise the minimum collateral mandatory for open positions.

The fair value of the remaining derivative financial instruments corresponds to their market value, if available, or is
determined using valuation techniques, including discounted cash flow models and options pricing models, as appro-
priate.

Hedge accounting

Classification criteria

Derivative financial instruments used for hedging purposes may be classified in the accounts as hedging instruments
provided the following criteria are cumulatively met:

i. Hedging instruments and hedged items are eligible for the hedge relationship;

ii. At the inception of the hedge, the hedge relationship is identified and documented, including identification of the

hedged item and hedging instrument and evaluation of the effectiveness of the hedge;

iii. There is an economic relationship between the hedged item and the hedging instrument;

iv. The effect of credit risk does not dominate the changes in value that result from this economic relationship;

v. The effectiveness of the hedge can be reliably measured, both at the inception of the hedge and on an ongoing

basis.

For the cases in which the Group uses macro hedging, accounting is performed in accordance with IAS 39 (using the
policy choice permitted under IFRS 9), with the Group carrying out prospective tests on the hedge relationship start
date, when applicable, and retrospective tests in order to confirm, on each balance sheet date, the effectiveness of
hedging relationships, demonstrating that changes in the fair value of the hedging instrument are covered by changes
in the fair value of the hedged item in the portion attributed to the hedged risk. Any ineffectiveness found is recognized
in the income statement when it occurs in gains or losses of hedge accounting.

The use of derivatives is framed in the Group's risk management strategy and objectives.

Fair value hedge

In a fair value hedging operation, the carrying value of the hedged asset or liability, determined in accordance with the
respective accounting policy, is adjusted to reflect the changes in its fair value attributable to the risk being hedged.
Changes in the fair value of the derivatives that are designated as hedging instruments are recorded in the income
statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the risk
hedged. In cases where the hedging instrument covers an equity instrument designated at fair value through other
comprehensive income, changes in fair value are also recognized in other comprehensive income.

If the hedge no longer meets the effectiveness requirement, but the objective of risk management stays the same, the
Group may adjust the hedging operation in order to meet the eligibility criteria (rebalancing).

If the hedge no longer meets the criteria for hedge accounting (if the hedging instrument expires, is sold, terminated
or exercised, without having been replaced in accordance with the entity's documented risk management objec-
tive), the derivative financial instrument is transferred to the trading portfolio and hedge accounting is discontinued
prospectively. The cumulative adjustment to the carrying book value of a hedged asset or liability corresponding to
a fixed income instrument, is amortised via the income statement over the period to its maturity, using the effective
interest rate method.

Cash flow hedge

When a derivative financial instrument is designated as a hedge against the variability of highly probable future cash

214

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDflows, the effective portion of the changes in the fair value of the hedging derivative is recognized in reserves, being re-
cycled to the income statement in the periods in which the hedged item affects the income statement. The ineffective
portion is recognized in the income statement.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss recognized in reserves at that time is recognized in the income statement when the hedged
transaction also affects the income statement. When a hedged transaction is no longer expected to occur, the cumu-
lative gain or loss reported in equity is recognized immediately in the income statement and the hedging instrument
is reclassified to the trading portfolio.

As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of reference interest
rates, which led to the transition from EONIA (Euro OverNight Index Average) to € STR (Euro Short Term Rate ), in
the course of 2020, the Group changed the discount curve of its positions in derivative financial instruments cleared
in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD SOFR. In accordance with the
implementation principle of the aforementioned regulation, that no substantial changes to the original objective of risk
management or discontinuation of hedging relationships will occur, the Group did not record any relevant impacts
on retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging
relationships were subject to the same change (hedged and hedged items).

Embedded derivatives
If a hybrid contract includes a host contract that is a financial asset under IFRS 9, the Group classifies the entire contract
in accordance with the policy outlined in Note 2.5.

If a hybrid contract includes a host contract that is not an asset under IFRS 9, an embedded derivative shall be separated
from the host contract and accounted for as a derivative under this Standard if, and only if:

a. The economic characteristics and risks of the embedded derivative are not closely related to the economic

characteristics and risks of the host contract;

b. a separate financial instrument with the same terms as the embedded derivative satisfies the definition of a derivative;

and

c. The hybrid contract is not measured at fair value and changes in fair value are recognized in profit or loss (a

derivative that is embedded in a financial liability at fair value through profit or loss is not separated).

These embedded derivatives are measured at fair value with the changes in fair value being recognized in the income
statement.

2.5. Other financial assets: placements with credit institutions, customer loans
and securities

The Group initially classifies all of its financial assets based on the business model for managing the assets and the
asset’s contractual terms. This classification determines how the asset is measured after its initial recognition:

• Amortised cost: if it is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows that are solely payments of principal and interest (SPPI - solely payments of principal and
interest);

• Fair value through other comprehensive income: if it is held within a business model, the objective of which is
achieved by both collecting contractual cash flows and selling financial assets and the contractual cash flows fall
under the scope of SPPI. In addition, upon initial recognition, the Bank may choose to classify irrevocably equity
instruments in the fair value through other comprehensive income portfolio being the changes in the fair value
recognized in equity;

• Mandatorily measured at fair value through profit or loss: all cases not within the scope of SPPI;

215

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES• Measured at fair value through profit or loss: other financial instruments not included in the business models
described above. If these assets are acquired for the purpose of trading in the short term, they are classified as held
for trading.

Initial recognition and measurement
These financial assets are initially recognized at fair value plus transaction costs, except for financial assets at fair value
through profit or loss, where transaction costs are directly recognized in the income statement.

Deposits and loans and advances to Banks and loans and advances to customers are recorded on the date the amount
of the transaction is advanced to the counterparty. Acquisitions and disposals of securities are recognized on the trade
date, that is, on the date on which the Group undertakes to acquire or dispose of the asset.

Financial assets at amortised cost or accounted at fair value through other comprehensive
income
In accordance with IFRS 9 - Financial Instruments, for a financial asset to be classified and measured at amortised cost
or at fair value through other comprehensive income, it is necessary that:

i. The contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest
(SPPI - solely payments of principal and interest) on the principal amount outstanding. Principal, for the purposes
of this test is defined as the fair value of the financial asset at initial recognition. The contractual terms that are SPPI
are consistent with a basic lending arrangement. Contractual terms that introduce exposure to risks or volatility in
the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to changes in stocks
or commodity prices, do not give rise to contractual cash flows that are solely payments of principal and interest
on the amount outstanding. In such cases, the financial asset is required to be measured at fair value through profit
or loss;

ii. The financial asset is held within a business model with the objective to hold financial assets to maturity to collect
contractual cash flows (financial assets at amortised cost) or to collect the contractual cash flows until maturity and
selling the financial asset (financial assets at fair value through other comprehensive income). The assessment of
the business models of the financial asset is fundamental for its classification. The Group determines the business
models by financial asset groups according to how they are managed to achieve a particular business objective. The
Group's business models determine whether cash flows will be generated by obtaining only contractual cash flows,
from selling the financial assets or both. At initial recognition of a financial asset, the Group determines whether it is
part of an existing business model or if it reflects a new business model. The Group reassesses its business models
in each reporting period in order to determine whether there have been changes in business models since the last
reporting period.

The above requirements do not apply to lease receivables, which meet the criteria defined in IFRS 16 – Leases.

Financial assets that are subsequently measured at amortised cost or at fair value through other comprehensive income
are subject to impairment.

Financial assets at fair value through other comprehensive income are initially recorded at fair value and subsequen-
tly measured at fair value with changes in the fair value recognized in reserves (other comprehensive income) until
derecognition, when cumulative potential gains and losses recognized in reserves are reclassified to the caption Gains
and losses on financial assets and liabilities designated at fair value through profit or loss. In the specific case of equity
instruments, the cumulative gains/ (losses) previously recognized in equity is not reclassified to profit or losses being
reclassified between equity accounts. However, dividends received from these equity instruments are recognized in
profit or loss in the exercise.

At initial recognition, financial assets at amortised cost are recorded at acquisition cost, and subsequently measured at
amortised cost based on the effective interest rate. Interest, calculated at the effective interest rate, and dividends are
recognized in profit or loss.

216

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDFinancial assets at fair value through profit or loss
Financial assets measured at fair value through profit or loss present the following characteristics:

• contractual cash flows are not SPPI (mandatorily measured at fair value through profit or loss); and/or

•

it is held within a business model which objective is neither to obtain only contractual cash flows or to obtain
contractual cash flows and sale; or

•

it is designated at fair value through profit or loss as a result of applying the fair value option.

These assets are measured at fair value and the respective revaluation gains or losses are recognized in the income
statement.

Reclassifications
If the Group changes a business model, the financial assets included in that model are reclassified and the classification
and measurement requirements for the new category are applied prospectively as from that date.

Impairment
The Group record impairment allowance for expected credit losses ("ECLs") for the following debt instruments:

• Loans and advances to customers;

• Financial and performance guarantees;

•

Import documentary credits;

• Confirmed export documentary credits;

• Undrawn loan commitments;

• Money market exposures;

• Securities portfolio.

Debt instruments at amortised cost or at fair value through other comprehensive income are in the scope of the
impairment calculation.

Impairment losses identified are recognized in the income statement and are subsequently reversed through the
income statement if, in a subsequent period, the amount of impairment losses decreases.

Staging
The impairment calculation approach distinguishes between the 12 months’ expected credit losses - Stage 1 - and
the lifetime expected credit losses. To determine expected lifetime losses, the approach considers the projection of
contractual cash flows - Stage 2 - or the present value of the expected recoveries - Stage 3. Thus, the model of
impairment calculation by Stage is summarized as follows:

• expected credit loss resulting from a potential loss event occurring within the next 12 months after the calculation

date (Stage 1); or

• expected credit loss, resulting from all potential loss events expected over the lifetime, applied to the projection of

contractual cash flows (Stage 2); or

• expected credit loss resulting from the difference between the amount outstanding and the present value of the

cash flows estimated to be recovered from the exposure² (Stage 3).

Therefore, for the determination of impairment, the classification by Stage for all exposures according to their level of
credit risk, as summarized in the figure below, is made beforehand:

2. Parameters used to determine recoveries vary, mainly depending on the risk profile / nature of the exposure.

217

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESStage 1

Stage 2

Stage 3

Signiﬁcant increase
in credit risk?

Objective evidence
of impairment?

• Stage 3

The process of assigning Stage to an exposure starts by checking if the Stage 3 criteria applies. If the exposure is
classified as Default - according to the internal definition¹ - that exposure is classified as Stage 3.

Thus, the classification of exposures in Stage 3 is based on the occurrence of a default event, with objective evidence
of loss occurring at the time from which a significant change occurs in the creditor-debtor relationship, being the
creditor exposed to a monetary loss.

Whether by measuring the specific triggers of Default, or by the Stage 3 determination indicators, the result will be
the determination of Default and Stage 3 in a consistent manner, starting with the Default setting.

• Stage 2

Exposures are classified as Stage 2 whenever there is a significant increase in credit risk, since initial recognition.
If there is no objective evidence of loss associated with the exposure, criteria are analyzed to determine whether
exposure has significantly increased its credit risk.

The significant increase in credit risk is assessed through qualitative and quantitative evidence. Once it is verified
that - at least - one of these triggers is active, the exposure is classified in Stage 2. The table below describes the
criteria and respective thresholds applicable:

Criteria for Stage 2
classiﬁcation1

Low default
portfolios
(Risk Solutions
Templates)

Rated on the
reporting and
origination date

Not rated on the
origination

Note rated on the
reporting date3

Exposure

Quantitative Triggers
• PD relative and absolute
change since origination

Qualitative Triggers

• PD Lifetime Forward Looking (LT FL)

captured on origination and comparison
(absolute and relative) - SICR2
• Relative Threshold of +200%
• Absolute Threshold of +1.5%

• Worse Rating / Worse Scoring

• Credit in litigation/written off on CRC; or
• Check use inhibition; or
• Forborne due to ﬁnancial difficulties; or

Backstop Triggers

• Past due for more than 30 days, above materiality

• > €100 overdue, for loans to individuals
• > €500 overdue, for corporate loans

1. To some of the criteria presented, there are applicable concept of contamination and cure period.
2. SICR not applicable in the case the rating/scoring atribute to the contract/client represents a PD lower than 0.75 (3 x Investment Grade Rating)
3. For unrated exposures it is only applicable qualitative and backstop triggers, in order to assess if they classify as for Stage 2.

218

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDAs explained in IFRS 9, the assessment of the significant increase in credit risk also involves comparing the current risk
level of an exposure against the level of risk at origination.

The Group assigns an internal credit risk grade to the exposure / borrower, depending on its quality and associated
with the probability of default. In assessing whether the exposure credit risk has increased significantly since initial
recognition, the Group compares, at the reporting date, the lifetime probability of default with the probability of default
at origination of the exposure. Depending on whether the observed variation falls above a defined threshold - relative
and / or absolute - the exposure is classified in Stage 2.

In addition to this event, the Group considers other events, that if verified imply the classification in Stage 2 (e.g.:
material default for more than 30 days, risk events in the financial system, internal credit risk grade above a certain
threshold, among others).

• Stage 1

The classification of exposures as Stage 1 depends of:

i. absence of active events that qualify for Stage 3 and Stage 2, which were mentioned and described above; or

ii. the framing of these exposures under the low-credit risk exemption. These exposures, if not in Stage 3, are

automatically classified in Stage 1.

The outlined vision is based not only on the requirement in IFRS 9, but also on the approach defined for capital
calculation, where for these exposures a 0% risk weight is considered. Thus, entities that are not classified as default and
fully comply with the conditions mentioned above are classified as low credit risk, being assigned stage 1. Each month
the list of entities in these conditions is reviewed, whose majority is composed of Portuguese public debt, public debt
in the Euro zone, American public debt and / or equivalent.

Segmentation

For purposes of the collective assessment of impairment, loans are grouped on the basis of similar credit risk
characteristics, taking in consideration the Group’s credit risk management process. For each of these homogeneous
risk groups, risk factors are estimated and then applied for impairment assessment purposes.

For the purpose of determining collective impairment, operations are allocated to risk sub-segments in accordance
with the following definitions in the table below:

Client Type

Corporate

Risk Segment

Large Companies
Real Estate
Medium Companies
Small Companies
Start-ups
Financial Institutions
Sovereign

Rating Notation

Individuals

Product Type

Mortgage
Consumer Loans
Credit Cards
Other Individuals

Scoring Notation

Collaterals - LTV

Typically, Corporate segments consider
the value of collateral for segmentation
purposes

The mortgage segment considers the
value of the ﬁnanced asset for the
purposes of segmentation

1st Segmentation

2nd Segmentation

3rd Segmentation

4th Segmentation

219

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESScenarios
As required by IFRS 9, the impairment assessment of the Group reflects different expectations of macroeconomic
developments, i.e., it incorporates multiple scenarios. In order to incorporate the effects of future macroeconomic
behaviour on loss estimates, forward looking macroeconomic estimates are included in some of the risk parameters
used to calculate impairment. In fact, different possible scenarios giving rise to the same number of impairment results
are considered.

In this context, the process of defining macroeconomic scenarios considers the following principles:

• Representative scenarios that capture the existing non-linearities (e.g. a base scenario, an optimistic and a pessi-

mistic scenario);

• The base scenario should be consistent with the inputs used in other exercises in the Group (e.g., Planning). This is
ensured since the option used for the purpose of calculating impairment was precisely the same methodology that
the Group uses in internal and / or regulatory planning exercises;

• Alternative scenarios to the base scenario should not originate extreme scenarios;

• The correlation between the projected variables should be realistic with the economic reality (e.g. if GDP is

increasing it is expected that unemployment is decreasing).

Write-offs

Write-off is defined as the derecognition of a financial asset from the Group’s balance sheet, which should only occur
when cumulatively:

i. the total amount of the credit has been demanded, that is, the credit must be fully recognized as overdue credit.
Exemptions from this requirement are extra-judicial agreements, PER and Insolvency, where part of the credit may
remain due and the remaining debt is written off by judicial/ extra-judicial decision;

ii. All the recovery efforts, considered appropriate, have been developed (and the relevant evidence gathered) and

additional efforts to recover the asset will not be considered economically viable;

iii. The credit recovery expectations are very low, leading to an extreme scenario of total impairment– 100% impair-
ment. This rule is only applicable for contracts without real estate collateral and if the whole contract is classified
as overdue. In all other cases, it is necessary to ensure that the amount to be written off is fully impaired (at least in
the month prior to the month of the write-off); and

iv. A final agreement has been obtained as part of a restructuring process and the remaining debt can no longer be

recovered.

Subsequent payments received after the write-off must be recognized as subsequent write-off recoveries at other
operating income.

Derecognition

Financial assets are derecognized from the balance sheet when (i) the Group's contractual rights relating to the
respective cash flows have expired, (ii) the Group has substantially transferred all the risks and benefits associated
with its ownership, or (iii) despite the Group having withholding part, but not substantially all of the risks and benefits
associated with its ownership, control over the assets has been transferred. When an operation measured at fair value
through other comprehensive income is derecognized, the accumulated gain or loss previously recognized in other
comprehensive income is reclassified to results. In the specific case of equity instruments, the accumulated gain or
loss previously recognized in other equity is not reclassified to profit or loss, being transferred between equity items.

In the specific case of loans to customers, at the time of sale, the difference between the sale value and the book value
must be 100% provisioned, and at the time of the sale, the credit sold will be derecognized against the funds / assets
received. and consequent use of impairment on the balance sheet.

220

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED2.6. Assets sold with repurchase agreements, securities loaned and short sales

Securities sold subject to repurchase agreements (repos) at a fixed price or at a price that corresponds to the sales
price plus a lender’s return are not derecognized from the balance sheet. The corresponding liability is included under
amounts due to banks or to customers, as appropriate. The difference between the sale and repurchase price is treated
as interest and deferred over the life of the agreement, using the effective interest rate method.

Securities purchased under agreements to resell (reverse repos) at a fixed price or at a price that corresponds to the
purchase price plus a lender’s return are not recognized in the balance sheet, the purchase price paid being recorded
as loans and advances to banks or customers, as appropriate. The difference between the purchase and resale price is
treated as interest and deferred over the life of the agreement, using the effective interest rate method.

Securities ceded under loan agreements are not derecognized in the balance sheet, being classified and measured in
accordance with the accounting policy described in Note 2.5. Securities received under borrowing agreements are not
recognized in the balance sheet.

Short sales correspond to securities sold that are not included in the Group’s assets. They are recorded as financial
liabilities held for trade, at the fair value of the assets to be returned in the scope of the repurchase agreement. Gains
and losses resulting from the change in their respective fair value are recognized directly in the income statement in
Gains or Losses from financial assets and liabilities held for trading.

2.7. Passivos financeiros

An instrument is classified as a financial liability when it contains a contractual obligation to transfer cash or another
financial asset, regardless of its legal form. Financial liabilities are derecognized when the underlying obligation is
liquidated, expires or is cancelled.

Non-derivatives financial liabilities include deposits from banks and customers, loans, debt securities, subordinated
debt and short sales. Preference shares issued are considered to be financial liabilities when the Group assumes the
obligation of reimbursement and/or the payment of dividends.

These financial liabilities are recognized (i) initially, at fair value less transaction costs and (ii) subsequently, at amortised
cost, using the effective interest rate method, except for short sales and financial liabilities designated at fair value
through profit or loss, which are measured at fair value.

The Group designates, at inception, certain financial liabilities at fair value through profit or loss when:

•

It eliminates or significantly reduces, a measurement or recognition inconsistency (accounting mismatch) that
would otherwise occur;

• The financial liability it’s part of a portfolio of financial assets or financial liabilities or both, managed and evaluated

on a fair value basis, according with the Group’s risk management or investment strategy; or

• These financial liabilities contain embedded derivatives and IFRS 9 allows designate the entire hybrid contract at fair

value through profit and loss.

Reclassifications between categories of liabilities are not allowed.

The structured products issued by the Group – except for the structured products for which the embedded derivatives
were separated, recorded separately and revalued at fair value - are classified under the fair value through profit or loss
category because they always meet one of the abovementioned conditions.

The fair value of listed financial liabilities is their current market bid prices. In the absence of a quoted price, the Group
establishes the fair value by using valuation techniques based on market information, including the Group issuer’s own
credit risk.

221

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESof derecognition of the liability, the amount recorded in other comprehensive income attributable to changes in credit
risk is not transferred to the income statement.

The Group accounts material changes in the terms of an existing liability or part of it as an extinction of the original
financial liability and recognises of a new liability. The terms are assumed to be substantially different if the present
value of the cash flows under the new terms, including any fees paid net of commissions received, and discounted
using the original effective interest rate is at least 10% different from the discounted present value of the remaining
cash flows from the original financial liability. The difference between the carrying amount of the original liability and
the value of the new liability is recognized in the income statement.

If the Group repurchases debt securities issued, these are derecognized from the balance sheet and the difference
between the carrying book value of the liability and its acquisition cost is recognized in the income statement.

2.8. Financial and performance guarantees

Financial guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder
for a loss due to non-compliance with the contractual terms of a debt instrument, namely the payment of principal
and/or interest.

Financial guarantees are initially recognized in the financial statements at fair value. Financial guarantees are subse-
quently measured at the higher of (i) the fair value recognized on initial recognition and (ii) the amount of any financial
obligation arising as a result of guarantee contracts, measured at the balance sheet date. Any change in the amount of
the liability relating to guarantees is taken to the income statement.

Financial guarantee contracts issued by the Group normally have a stated maturity date and a periodic fee, usually paid
in advance, which varies in function of the counterpart risk, the amount and the time period of the contract. Conse-
quently, the fair value of the financial guarantee contracts issued by the Group, at the inception date, is approximately
equal to the initial fee received, considering that the conditions agreed to are market conditions. Hence, the amount
recognized at the contract date is equal to the amount of the commission initially received, which is recognized in the
income statement over the period to which it relates. Subsequent periodic fees are recognized in the income statement
in the period to which they relate.

Performance guarantees
Performance guarantees are contracts that result in the compensation of a party if the other does not comply with its
contractual obligation. Performance guarantees are initially recognized at their fair value, which is normally evidenced
by the amount of the commissions received during the contract period. When there is a breach of contract, the Group
has the right to reverse the guarantee, recognizing the amounts in Loans and advances to customers after transferring
the compensation for the losses to the collateral taker.

2.9. Equity instruments

An instrument is classified as an equity instrument when it does not contain a contractual obligation to deliver cash
or another financial asset, regardless of its legal form, but evidences a residual interest in the assets of an entity after
deducting all of its liabilities.

Transaction costs directly attributable to the issuance of equity instruments are recorded against equity as a deduction
from the amount issued. Amounts paid or received relating to acquisitions or sales of equity instruments are recognized
in equity, net of transaction costs.

Distributions to holders of an equity instrument are deducted directly from equity as dividends, when declared.

Preference shares issued are considered equity instruments if the Group has no contractual obligation to redeem these
and if dividends, non-cumulative, are paid only if, and when, declared by the Group.

222

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED2.10. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the
asset and settle the liability simultaneously. The legally enforceable right may not be contingent on future events, and
must be enforceable in the course of the normal activity of the NOVO BANCO Group, as well as in the event of default,
bankruptcy or insolvency of the Group or the counterparty.

2.11. Foreclosed properties and non-current assets held for sale

Non-current assets or disposal groups (groups of assets to be disposed of together and the related liabilities that
include at least one non-current asset) are classified as held for sale when their carrying values will be recovered mainly
through a sale transaction (including those acquired exclusively with a view to their subsequent disposal), the assets or
disposal groups are available for immediate sale and the sale is highly probable (within the period of one year).

Immediately before the initial classification as held for sale, the measurement of the non-current assets (or of all the
assets and liabilities in a disposal group) is brought up to date in accordance with the applicable IFRS. Subsequently,
these assets or disposal groups are remeasured at the lower of their carrying value and fair value less costs to sell.

In the scope of its loan granting activity, the Group incurs in the risk of the borrower failing to repay all the amounts due.
In case of loans and advances with mortgage collateral, the Group executes these and receives real estate properties
resulting from foreclosure. Due to the provisions of the General Law on Credit Institutions and Financial Companies
(“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF)), banks are prevented, unless authorised
by Bank of Portugal, from acquiring real estate property that is not essential to their installation and daily operations
and the pursuit of their object (No. 1 of article 112 of RGICSF), being able to acquire, however, real estate property in
exchange for loans granted by same. This real estate property must be sold within 2 years, period which may, based
on reasonable grounds, be extended by Bank of Portugal, on the conditions to be determined by this Authority (article
114 of RGICSF).

Although the Group’s objective is to immediately dispose of all real estate property acquired as payment in kind for
loans, during financial year 2016 the Group changed the classification of this real estate properties from Non-current
assets held for sale to Other assets (and to Investment properties, in the case of assets owned by investment funds
or real estate properties leased out), due to the permanence of same in the portfolio exceeding 12 months. However,
the accounting method has not changed, these being initially recognized at the lower of their fair value less costs to
sell and the carrying amount of the subjacent loans. Subsequently, these real estate properties are measured at the
lower of its initial carrying amount and the corresponding fair value less costs to sell and it is not depreciated. For real
estate properties recorded in the balance sheet of NOVO BANCO and of the remaining credit institutions integrating
the consolidation perimeter of the Group, the amount recoverable from their immediate sale is considered to be their
respective fair value. For real estate properties held by investment funds, and in accordance with Law No. 16/2015,
of February 24, fair value is determined as the average between two valuations, obtained from independent entities,
determined at the best price that could be obtained if it were put up for sale under normal market conditions at the
time of valuation, which is reviewed at least annually or, in the case of open investment funds, with the frequency of
redemption, and whenever acquisitions or disposals occur or when significant changes in the value of the real estate
property occur. The market value of properties for which a promissory purchase and sale agreement was entered into
corresponds to the value of that agreement.

The valuation of these real estate properties is performed in accordance with one of the following methodologies,
applied in accordance with the specific situation of the asset:

i. Market Method

The Market Comparison Criteria takes as a reference transaction values of similar and comparable real estate prop-
erties to the real estate property under valuation, obtained through market prospection carried out in the zone.

4. Definição em vigor de acordo com a aprovação da JST.

223

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESii. Income Method

Under this method, the real estate property is valued based on the capitalization of its net income, discounted to
the present using the discounted cash-flow method.

iii. Cost Method

This method aims to reflect the current amount that would be required to substitute the asset in its present con-
dition, separating the value of the real estate property into its fundamental components: Urban Ground Value and
Urbanity Value; Construction Value; and Indirect Costs Value.

Valuations carried out are performed by independent entities specialized in these services. The valuation reports are
analyzed internally, namely comparing the sales values with the revalued amounts of the assets so as to assess the
parameters and process adequacy with the market evolution.

Additionally, since these are assets whose fair value level in the hierarchy of IFRS 13 mostly corresponds to level 3,
given the subjectivity of some assumptions used in the valuations and the fact that there are external indications with
alternative values, the Group proceeds to analysis on the assumptions used, which may imply additional adjustments
to their fair value, supported by additional internal or external valuations.

Assets / liabilities of subsidiaries acquired for resale purposes reflect, essentially, assets and liabilities of subsidiaries
acquired by the Group in the scope of loan restructuring operations, for which the Group’s objective is their subsequent
disposal within one year. Since these acquisitions arise from loan restructuring operations, they are recognized at their
fair value, and any differences between their fair values and those of the extinguished loans following the acquisitions,
are recognized as impairment losses on loans and advances. On the acquisition of an entity meeting the subsidiary
criteria and for which the Group’s objective is its resale, it is consolidated in accordance with the applicable procedures
adopted by the Group and its assets and liabilities are measured at fair value at the acquisition date. However, in these
specific cases, the assets are classified as non-current assets held for sale and the liabilities are classified as non-current
liabilities held for sale. Consequently, and at the first consolidation date, the net value of the assets and liabilities of
the subsidiary reflects their fair value determined at the acquisition date (which results from the loan restructuring
operation).

These subsidiaries are consolidated until their effective sale. At each balance sheet date, the net carrying book value
of their assets and liabilities is compared with their fair value, less costs to sell, and impairment losses are recognized
when necessary. Assets and liabilities relating to discontinued operations are recorded in accordance with the valuation
policies applicable to each category of assets and liabilities, as set down in IFRS 5, according to the IAS/IFRS applicable
to the respective assets and liabilities.

For purposes of determining the fair value of subsidiaries held for resale, the Group adopts the following methodologies:

• for subsidiaries which assets comprise fundamentally real estate, their fair value is determined with reference to the

value of those assets, which is based on valuations performed by independent specialised entities;

• for the remaining entities, their fair value is determined based on the discounted cash flow methodology, using
assumptions consistent with the business risks of each of the subsidiaries under valuation. If these subsidiaries cease
to comply with the conditions necessary to be recorded as non-current assets held for sale in accordance with IFRS
5, their assets and liabilities are fully consolidated in the respective asset and liability captions, in accordance with
that provided for in Note 29.

2.12. Tangible fixed assets

The Group’s tangible fixed assets are measured at cost less accumulated depreciation and impairment losses. The cost
includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs with tangible fixed assets are only recognized when it is probable that future economic benefits
associated with them will flow to the Group. All repair and maintenance costs are charged to the income statement
during the period in which they are incurred, on the accrual basis.

224

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDGroup proceeds to analysis on the assumptions used, which may imply additional adjustments to their fair value, supported by

additional internal or external valuations.

Assets / liabilities of subsidiaries acquired for resale purposes reflect, essentially, assets and liabilities of subsidiaries acquired by the

Group in the scope of loan restructuring operations, for which the Group’s objective is their subsequent disposal within one year.

Since these acquisitions arise from loan restructuring operations, they are recognized at their fair value, and any differences between

their fair values and those of the extinguished loans following the acquisitions, are recognized as impairment losses on loans and

advances. On the acquisition of an entity meeting the subsidiary criteria and for which the Group’s objective is its resale, it is

consolidated in accordance with the applicable procedures adopted by the Group and its assets and liabilities are measured at fair

value at the acquisition date. However, in these specific cases, the assets are classified as non-current assets held for sale and the

liabilities are classified as non-current liabilities held for sale. Consequently, and at the first consolidation date, the net value of the

assets and liabilities of the subsidiary reflects their fair value determined at the acquisition date (which results from the loan

restructuring operation).

These subsidiaries are consolidated until their effective sale. At each balance sheet date, the net carrying book value of their assets

and liabilities is compared with their fair value, less costs to sell, and impairment losses are recognized when necessary. Assets and

liabilities relating to discontinued operations are recorded in accordance with the valuation policies applicable to each category of

assets and liabilities, as set down in IFRS 5, according to the IAS/IFRS applicable to the respective assets and liabilities.



For purposes of determining the fair value of subsidiaries held for resale, the Group adopts the following methodologies:

for subsidiaries which assets comprise fundamentally real estate, their fair value is determined with reference to the value of

those assets, which is based on valuations performed by independent specialised entities;

for the remaining entities, their fair value is determined based on the discounted cash flow methodology, using assumptions

consistent with the business risks of each of the subsidiaries under valuation. If these subsidiaries cease to comply with the

conditions necessary to be recorded as non-current assets held for sale in accordance with IFRS 5, their assets and liabilities
are fully consolidated in the respective asset and liability captions, in accordance with that provided for in Note 29.

2.12. Tangible fixed assets

The Group’s tangible fixed assets are measured at cost less accumulated depreciation and impairment losses. The cost includes
expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs with tangible fixed assets are only recognized when it is probable that future economic benefits associated with
them will flow to the Group. All repair and maintenance costs are charged to the income statement during the period in which they
are incurred, on the accrual basis.

Land is not depreciated. The depreciation of tangible fixed assets is calculated using the straight-line method, at the
following depreciation rates that reflect their estimated useful lives:

Land is not depreciated. The depreciation of tangible fixed assets is calculated using the straight-line method, at the following
depreciation rates that reflect their estimated useful lives:

Own use properties
Leased building improvements
Computer equipment
Furniture and material
Indoor facilities
Safety equipment
Machines and tools
Transport material
Other equipment

Number of years
35 to 50
10
4 to 8
4 to 10
5 to 10
4 to 10
4 to 10
4
5

The useful lives and residual values of the tangible fixed assets are reviewed at each reporting date.

When there is an indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and an impairment
loss recognized when the book value of the asset exceeds its recoverable amount. Impairment losses are recognized in the income
statement, being reversed in subsequent periods, when the reasons that led to their initial recognition cease to exist. For this purpose,
the new depreciated amount shall not exceed that which would be recorded had the impairment losses not been imputed to the asset
but considering the normal depreciation the asset would have been subject to.

When there is an indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and
an impairment loss recognized when the book value of the asset exceeds its recoverable amount. Impairment losses
are recognized in the income statement, being reversed in subsequent periods, when the reasons that led to their
initial recognition cease to exist. For this purpose, the new depreciated amount shall not exceed that which would be
recorded had the impairment losses not been imputed to the asset but considering the normal depreciation the asset
would have been subject to.

The recoverable amount is determined as the lower of its net selling price and its value in use, which is based on the net present
value of the estimated future cash flows arising from the continued use and ultimate disposal of the asset at the end of its useful life.

On the date of the derecognition of a tangible fixed asset, the gain or loss determined as the difference between the net selling price
and the net carrying book value is recognized under the caption Other operating income or Other operating expenses.

The recoverable amount is determined as the lower of its net selling price and its value in use, which is based on the
net present value of the estimated future cash flows arising from the continued use and ultimate disposal of the asset
at the end of its useful life.

On the date of the derecognition of a tangible fixed asset, the gain or loss determined as the difference between the
net selling price and the net carrying book value is recognized under the caption Other operating income or Other
31 December 2020
22
Notes to the Consolidated Financial Statements
operating expenses.

2.13. Intangible assets

The costs incurred with the acquisition, production and development of software are capitalised, as are additional
costs incurred by the Group to implement said software. These costs are amortised on a straight-line basis over their
expected useful lives, which usually range between 3 and 6 years.

Costs that are directly associated with the development of specific software applications, that will probably generate
economic benefits beyond one financial year, are recognized and recorded as intangible assets.

All remaining costs associated with information technology services are recognized as an expense as incurred.

2.14. Leases

IFRS 16 – Leases

A. Lease Definition

Determining whether an Agreement Contains a Lease: The Group assesses whether a contract is or contains a lease
based on the lease definition which focuses on controlling the identified asset. In accordance with IFRS 16, a contract
is or contains a lease if it has the right to control the use of an identified asset, allowing to obtain substantially all
the economic benefits of using it and the right to guide the use of that identified asset for a certain period of time in
exchange for retribution.

225

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe Group has adopted some practical expedients provided for in the standard in applying IFRS 16:

• Applies the exception, mentioned above, of non-recognition of assets under right of use and liabilities for short-

term leases (i.e. with a lease term of 12 months or less);

• Apply the exception, mentioned above, of non-recognition of assets under use and liabilities for low value leases

(i.e. new value less than Euro 5 thousand);

• For leases in which the entity is a lessee, it was decided not to separate the non-lease components and account for

the lease and non-lease components as a single lease component.

The option of not applying this standard to leases of intangible assets was also used.

B. As lessee
In accordance with IFRS 16, the Group recognizes leased assets and lease liabilities for some asset classes, i.e., these
leases are on the entity's balance sheet.

Leasing contracts are recorded on the date they start, in assets and liabilities, being capitalized to the lower of the fair
value of the leased assets and the minimum lease payments contracted. Rents are constituted (i) by the financial charge
that is charged to the income statement and (ii) by the financial amortization of the capital that is deducted from the
liability. Financial charges are recognized as costs over the lease period, in order to produce a constant periodic interest
rate on the remaining balance of the liability in each period.

The Group leases various assets, including real estate, vehicles and IT equipment.

As previously mentioned, the Group has opted not to recognize assets under right of use and liabilities for short-term
leases, with a lease term of 12 months or less, and low value asset leases (e.g. IT equipment) with a new value of
less than Euro 5 thousand. The Group recognizes the lease payments associated with these leases as expenses on a
straight-line basis over the lease term in income statement as “Other administrative expenses – rents and rentals”.

The Group presents assets under right of use that do not fit the definition of investment property as "tangible fixed
assets", in the same line as the underlying assets of the same nature that they own. Right-of-use assets that fall under
the definition of investment property are presented as investment property.

The Group presents the lease liabilities under "Other liabilities" in the statement of financial position.

Significant judgment in determining contract lease term
The Group has applied judgment to determine the lease term of certain agreements, in which it acts as lessee, and
which include renewal and termination options. The Group determines the lease term as the non-cancellable lease
term, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if reasonably certain not to be exercised. This assessment
will have an impact on the lease term, which will significantly affect the amount of the lease liabilities and recognized
right-of-use assets.

The Group has the option, namely in real estate lease agreements, to lease assets for additional periods from 1 month
to 20 years. The Group applies judgment in assessing whether it is reasonably right to exercise the renewal option. That
is, it considers all the relevant factors that create an economic incentive for renewal.

Measurement and remeasurement of assets under right of use and lease liabilities
Lease payments are discounted at the lessee's incremental financing interest rate, which incorporates the risk-free
interest rate curve plus the Group’s risk spread, applied over the weighted average term of each lease.

The lease liability is initially recorded at the present value of the future cash flows from the lease and is subsequently
measured (i) by increasing it’s carrying amount to reflect interest on it, (ii) by decreasing its carrying amount by to reflect
lease payments.

An asset under right of use, initially measured at cost, must take into account the present value of the future cash flows
of the lease liability, being subsequently subject to depreciation / amortization according to the lease term of each
contract and to tests of impairment.

226

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDC. As lessor

In accordance with IFRS 16, lessors will continue to classify leases as financial or operational.

Financial leases
Transactions in which the risks and benefits inherent in the ownership of an asset are substantially transferred to the
lessee are classified as finance leases. Financial leasing contracts are recorded in the balance sheet as credits granted
for an amount equivalent to the net investment made in the leased assets, together with any estimated non-guaranteed
residual value. Interest included in rents charged to customers is recorded as income while capital amortizations, also
included in rents, are deducted from the amount of credit granted to customers. The recognition of interest reflects a
constant periodic rate of return on the lessor's remaining net investment.

Operating leases
All lease transactions that do not fall under the definition of finance lease are classified as operating leases. Payments
made by the Group under operating lease agreements, from the perspective of the lessee, are recorded in costs in the
periods to which they relate.

2.15. Employee benefits

Pensions
Pursuant to the signature of the Collective Labour Agreement (“Acordo Coletivo de Trabalho” (ACT)) for the banking
sector and its subsequent amendments resulting from the 3 tripartite agreements described in Note 16, pension funds
and other mechanisms were set up to cover liabilities assumed with pensions on retirement, disability, survival and
health-care benefits.

The liabilities’ coverage is assured, for most of the Group companies, by pension funds managed by GNB - Sociedade
Gestora de Fundos de Pensões, SA, subsidiary of the Group.

The pension plans of the Group are defined benefit plans, as they establish the criteria to determine the pension benefit
to be received by employees during retirement, usually dependent on one or more factors such as age, years of service
and salary level.

The retirement pension liabilities are calculated semi-annually, in 31 December and 30 June of each year, for each
plan individually, using the Projected Unit Credit Method, being annually reviewed by qualified independent actuaries.
The discount rate used in this calculation is determined with reference to market rates associated with high-quality
corporate bonds, denominated in the currency in which the benefits will be paid out and with a maturity similar to the
expiry date of the plan’s liabilities.

The Group determines the net interest income / expense for the period incurred with the pension plan by multiplying
the plan’s net assets / liabilities (liabilities net of the fair value of the fund’s assets) by the discount rate used to measure
the retirement pension liabilities referred to above. On that basis, the net interest income / expense was determined
based on the interest cost on the retirement pension liabilities net of the expected return on the funds’ assets, both
calculated using the discount rate applied in the determination of the retirement pension liabilities.

Re-measurement gains and losses, namely (i) actuarial gains and losses arising due to differences between actuarial
assumptions used and real values verified (experience adjustments) and changes in actuarial assumptions and (ii) gains
and losses arising due to the difference between the expected return on the fund’s assets and the actual investment
returns, are recognized in equity under the caption other comprehensive income.

The Group recognizes as a cost in the income statement a net total amount that includes (i) current service costs, (ii)
net interest income / expense with the pension fund, (iii) the effect of early retirement, (iv) past service costs, and (v) the
effect of settlements or curtailments occurring during the period. The net interest income / expense with the pension
plan is recognized as interest income or interest expense, depending on its nature. Early retirement costs correspond
to increases in liabilities due to employees retiring before turning 65 (normal retirement age foreseen in the ACTV)
and which forms the basis of the actuarial calculation of pension fund liabilities. Whenever the possibility of the early

227

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESretirement provided for in the pension fund regulation is invoked, the responsibilities of same must be incremented by
the value of the actuarial calculation of the liabilities corresponding to the period between the early retirement and the
employee turning 65.

The Group makes payments to the funds to assure their solvency, the minimum levels set by Bank of Portugal being: (i)
the liability with pensioners must be totally funded at the end of each period, and (ii) the liability relating to past service
costs for active employees must be funded at a minimum level of 95%.

The Group assesses the recoverability of any excess in a fund regarding he retirement pension liabilities, based on the
expectation of reductions in future contributions.

Health-care benefits
The Group provides to its banking employees health-care benefits through a specific Social-Medical Assistance Ser-
vice. This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union.

SAMS provides its beneficiaries services and/or contributions with medical assistance expenses, diagnostics, medica-
tion, hospitalization and surgeries, in accordance with its funding availability and internal regulations.

Arising from the signature of the new Collective Labour Agreement (ACT) on 5 July 2016, published in Labour Bulletin
(Boletim do Trabalho) No. 29, of 8 August 2016, the Group’s contributions to SAMS, correspond to a monthly fixed
amount (as per Annex VI of the new ACT) for each employee, 14 times a year, recorded on a monthly basis in personnel
costs, while the component to be paid by the employee is discounted monthly in the processing of salary, against the
caption Amounts payable (SAMS).

The calculation and recognition of the Group’s liability with post-retirement health-care benefits is similar to the calcu-
lation and recognition of the pension liability described above. These benefits are covered by the Pension Fund, which
presently covers all liabilities with pensions and health-care benefits (defined benefit plan).

Career bonus
The ACT provides for the payment by the Group of a career bonus, due at the time immediately prior to the employee's
retirement if he retires at the Group's service, corresponding to 1.5 of his salary at the time of payment.

These long-term service bonuses were accounted for by the Group in accordance with IAS 19, as other long-term
employee benefits. The Group’s liability with these long-term service bonuses were periodically estimated by the
Group using the Projected Unit Credit Method. The actuarial assumptions used were based on expectations as to future
salary increases and mortality tables. The discount rate used in this calculation was determined using the methodology
described for retirement pensions. In each period, the increase in the liability for long-term service bonuses, including
actuarial gains and losses and past service costs, was charged to the income statement, in Personnel Expenses.

Employees’ variable remuneration and other obligations
The Group recognises under costs the short-term benefits paid to employees who were at its services in the respective
accounting period.

• Profit-sharing and bonus plans

The Group recognizes the cost expected with profit-sharing pay-outs and bonuses when it has a present, legal or
constructive, obligation to make such payments as a result of past events, and can make a reliable estimate of the
obligation.

• Obligations with holidays, holiday subsidy and Christmas subsidy

In accordance with the legislation in force in Portugal, employees are annually entitled to one month of holidays and
one month of holiday subsidy, this being a right acquired in the year prior to their payment. In addition, employees
are annually entitled to one month of Christmas subsidy, which right is acquired throughout the year and settled
during the month of December of each calendar year. Hence, these liabilities are recorded in the period in which
the employees acquire the right to same, regardless of the date of their respective payment.

228

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED2.16. Corporate Income tax

NOVO BANCO and its subsidiaries are subject to the tax regime consigned in the Código do Imposto sobre o Rendi-
mento das Pessoas Coletivas (IRC Code).

Corporate income tax comprises current tax and deferred tax.

Corporate income tax is recognized in the income statement except to the extent that it relates to items recognized
directly in equity, in which case it is recognized under deferred tax reserves (other comprehensive income). Corporate
income tax recognized directly in equity relating to fair value remeasurement of financial assets at fair value through
other comprehensive income and cash flow hedges is subsequently recognized in the income statement when the
gains or losses giving rise to said income tax are also recognized in the income statement.

Current tax

Current tax is the tax expected to be paid on the taxable profit for the year, calculated using tax rules and tax rates
enacted or substantively enacted in each jurisdiction. The tax is recognized in each financial reporting period based on
management estimates as regards the average effective tax rate foreseen for the entire fiscal year.

Current tax is calculated based on taxable income for the period, which differs from the accounting result due to
adjustments resulting from expenses or income not relevant for tax purposes or which will only be considered in
subsequent years.

Deferred tax

Deferred tax is calculated on timing differences arising between the carrying book values of assets and liabilities for
financial reporting purposes and their respective tax base and is calculated using the tax rates enacted or substantively
enacted at the balance sheet date in each jurisdiction and that are expected to apply when the timing differences are
reversed.

Deferred tax liabilities are recognized for all taxable timing differences except for: i) goodwill non-deductible for tax
purposes; ii) differences arising on the initial recognition of assets and liabilities that neither affect the accounting
nor taxable profit; iii) that do not result from a business combination, and iv) differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future and the Group does not control
the timing of the reversal of the timing differences. Deferred tax assets are recognized to the extent that it is probable
that future taxable profits will be available against which the deductible timing differences can be offset. Deferred tax
liabilities are always accounted for, regardless of the performance of Group.

Deferred tax assets are recognized only to the extent that it is expected that there will be taxable profits in the future,
which will absorb temporary deductible differences for tax purposes (including reportable tax losses).

The Group, as established in IAS 12, paragraph 74, offsets deferred tax assets and liabilities whenever (i) it has the legally
enforceable right to offset current tax assets and current tax liabilities; and (ii) they relate to corporate income taxes
levied by the same Taxation Authority, on the same tax entity or different taxable entities that intent to settle current tax
liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period
in which the deferred tax liabilities or assets are expected to be settled or recovered.

The Bank complies with the guidelines of IFRIC 23 - Uncertainty on the Treatment of Income Tax with regard to the
determination of taxable profit, tax bases, tax losses to be reported, tax credits to be used and tax rates in scenarios of
uncertainty regarding the treatment of income tax, with no material impact on its financial statements resulting from
its application.

2.17. Provisions and Contingent liabilities

Provisions are recognized when: (i) the Group has a current legal or constructive obligation, (ii) it is probable that its
settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.

229

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESProvisions related to legal cases opposing the Group to third parties, are constituted according to internal risk
assessments made by Management, with the support and advice of its legal advisors.

When the effect of the passage of time (discounting) is material, the provision corresponds to the net present value of
the expected future payments, discounted at an appropriate rate considering the risk associated with the obligation. In
these cases, the increase in the provision due to the passage of time is recognized in financial expenses.

Restructuring provisions are recognized when the Group has approved a formal, detailed restructuring plan and such
restructuring has either commenced or has been publicly announced.

A provision for onerous contracts is recognized when the benefits expected to be derived by the Group from a contract
are lower than the unavoidable costs of meeting its obligation under the contract. This provision is measured at the
present value of the lower of the estimated cost of terminating the contract and the estimated net costs of continuing
the contract.

If a future outflow of funds is not probable, this situation reflects a contingent liability. Contingent liabilities are always
disclosed, except when the likelihood of their occurrence is remote.

2.18. Recognition of interest income and expense

Interest income and expense is recognized in the income statement under interest and similar income and interest
expense and similar charges for all financial instruments measured at amortised cost and for all financial assets at fair
value through other comprehensive income, using the effective interest rate method. Interest arising on financial assets
and liabilities at fair value through profit or loss is also included under interest and similar income or interest expense
and similar charges, as appropriate.

The effective interest rate is the rate that discounts the estimated future cash payments or receipts throughout the
expected life of the financial instrument or, when appropriate, a shorter period to the net book value of the financial
asset or liability. The effective interest rate is calculated at inception and is not subsequently revised, except in respect
of financial assets and liabilities with a variable interest rate. In this case, the effective interest rate is periodically revised,
taking into consideration the impact of the change in the interest rate of reference on the estimated future cash flows.

When calculating the effective interest rate, the Group estimates the cash flows considering all the contractual terms of
the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation
includes all the commissions that are an integral part of the effective interest rate, transaction costs and all other related
premiums or discounts.

Interest and similar income includes interest from financial assets for which were recognized impairment. The interest
from financial assets classified as Stage 3 are determined based on the effective interest rate method applied to the net
book value. When the asset is no longer classified as Stage 3, the interest is calculated based on the gross book value.

For derivative financial instruments, the interest component in the change in fair value of derivative financial instru-
ments classified as fair value hedge and fair value option is recognized under interest income or interest expense. For
other derivatives, the interest component inherent in the fair value change will not be separated and will be classified
under the income statement of assets and liabilities at fair value through profit or loss (see Note 2.4).

2.19. Recognition of fee and commission income

Fees and commissions income are recognized as revenue from customer contracts to the extent that performance
obligations are met:

• Fees and commissions that are earned on the execution of a significant act, such as loan syndication fees, are

recognized as income when the significant act has been completed;

• Fees and commissions earned over the period during which the services are provided are recognized as income in

the financial year in which the services are provided;

230

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED• Fees and commissions that are an integral part of the effective interest rate of a financial instrument are recognized

as income using the effective interest rate method, as described in note 2.18.

2.20. Recognition of dividend income

Dividend income is recognized when the right to receive the dividend payment is established.

2.21. Earnings per share

Basic earnings per share are calculated by dividing the net income attributable to the shareholders of the parent com-
pany by the weighted average number of ordinary shares outstanding during the period.

For the calculation of diluted earnings per share, the weighted average number of ordinary shares outstanding is
adjusted to reflect the impact of all potential dilutive ordinary shares, such as those resulting from convertible debt and
share options granted to employees. The dilution effect translates into a decrease in earnings per share, based on the
assumption that the convertible instruments will be converted or the options granted exercised.

2.22. Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with a maturity of less than
three month from the date of acquisition / contracting and whose risk of change in value is immaterial, including cash,
deposits with Central Banks and deposits with other credit institutions. Cash and cash equivalents exclude restricted
balances with Central Banks.

2.23. Investment properties

The Group classifies as investment properties the real estate assets held to earn rentals or for capital appreciation or
both. Investment properties are initially recognized at acquisition cost, including directly attributable transaction costs,
and subsequently at their fair value. Changes in fair value determined at each balance sheet date are recognized in the
income statement, under the caption Other operating income and expenses, based on periodic valuations performed
by independent entities specialised in this type of service. Investment properties are not depreciated.

Since these are assets whose fair value level in the hierarchy of IFRS 13 mostly corresponds to level 3, given the
subjectivity of some assumptions used in the valuations and the fact that there are external indications with alternative
values, the Group proceeds to analysis on the assumptions used, which may imply additional adjustments to their fair
value, supported by additional internal or external valuations.

Reclassifications to and from the caption Investment properties may occur whenever a change in respect of the use of
a real estate property is verified. On the reclassification of investment properties to real estate properties held for own
use, the estimated cost, for accounting purposes, is the fair value, at the date of the change in usage. If a real estate
property held for own use is reclassified to investment properties, the Group records that asset in accordance with the
policy applicable to real estate properties held for own use, up to the date of its reclassification to investment properties
and at fair value subsequently, with the difference arising in its measurement at the date of the reclassification being
recognized in revaluation reserves. If a real estate property is transferred from other assets to investment properties,
any difference between the fair value of the asset at that date and the previous carrying book value is recognized in the
income statement.

Subsequent expenditure is capitalised only when it is probable that the Group will obtain future economic benefits in
excess of those originally estimated based on the performance of the asset.

Gains and losses on the disposal of investment properties resulting from the difference between the realised value
and the carrying book value are recognized in the income statement for the year under the caption Other operating
income and expenses. Gains and losses on the disposal of investment properties resulting from the difference between

231

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESthe realised value and the carrying book value are recognized in the income statement for the year under the caption
Other operating income or Other operating expenses.

Investment properties recorded relate solely to non-banking activities (Investment Funds and Real Estate Companies).

NOTE 3 – Main accounting estimates and judgements
used in preparing the financial statements

Considering that the current accounting framework requires applying judgements and calculating estimates involving
some degree of subjectivity, the use of different parameters or judgements based on different evidence may result in
different estimates. The main accounting estimates and judgments used in applying the accounting principles by the
Group are discussed in this Note in order to improve the understanding of how their application affects the reported
results of the Bank and its disclosure.

The Bank and its subsidiaries do not have projects or intentions for actions that could question the continuity of the
operations.

The COVID-19 pandemic, despite the government and regulatory response measures adopted, resulted in an addi-
tional high level of uncertainty about the Portuguese and European economy and in particular banking activity, with
an impact on the judgments and estimates used in the financial statements. However, the internal control policies and
standards adopted by the Group allow us to consider that these judgments and estimates were made independently
and appropriately as of 31 December 2020.

The relevant judgments made by management in the application of the Group's accounting policies and the main
sources of uncertainty in the estimates were the same as those described in the last reporting of the Financial State-
ments.

3.1. Impairment of financial assets at amortised cost and at fair value through
other comprehensive income

The critical judgements with greater impact on the recognized impairment values for the financial assets at amortised
cost and at fair value through other comprehensive income are the following:

• Assessment of the business model: the measurement and classification of financial assets depends on the results of
SPPI test and on the business model setting. The Group determines its business model based on how it manages the
financial assets and its business objectives. The Group monitors if the business model classification is appropriate
based on the analysis on the anticipated derecognition of the assets at amortised cost or at fair value through other
comprehensive income, assessing if it is necessary to prospectively apply any changes;

• Significant increase on the credit risk: as mentioned on the Note 2.5 – Other financial assets investments in credit
institutions, customer loans and securities, the determination of the transfer of an asset from stage 1 to stage 2 with
the purpose of determining the respective impairment is made based on the judgement that, in accordance to the
Group management, constitutes a significant increase on credit risk;

• Classification of default: the internal definition of exposure in default is broadly in line with the regulatory definition
in Article 178 of CRR/CRD IV. This regulation defines qualitative criteria for assessing the default classification –
unlikely to pay -, which are replicated in the internal definition implemented by NOVO BANCO and which result in
performing judgements when assessing the high probability that the borrower does not fulfil its obligations within
the conditions agreed with NOVO BANCO. This concept is covered in more detail below;

232

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDcharacteristics. The Group monitors the credit risk characteristics in order to assure the correct reclassification of
the assets, in cases of changes on the credit risk characteristics;

• Models and assumptions: the Group uses several models and assumptions on the measurement of the expected
credit losses. The judgement is applied on the identification of the more appropriate model for each type of asset
as well as in the determination of the assumptions used in these models, including the assumptions related with
the main credit risk drivers. In addition, in compliance with the IFRS9 regulation that clarifies the need for the
impairment result to consider multiple scenarios, a methodology for incorporating different scenarios into the risk
parameters was implemented. Thus, the calculation of collective impairment considers several scenarios with a
specific weighting, based on the internal methodology defined about scenarios - definition of multiple perspectives
of macroeconomic evolution, with probability of relevant occurrence.

3.2. Fair value of derivative financial instruments and other financial assets and
liabilities at fair value

Fair value is based on listed market prices when available; otherwise fair value is determined based on similar recent
arm’s length transaction prices or using valuation methodologies, based on the net present value of estimated future
cash flows taking into consideration market conditions, the time value, the yield curve and volatility factors, in accor-
dance with IFRS 13 - Fair Value Measurement. The Group uses several models and assumption in measuring the fair
value of financial assets. Judgement is applied on the identification of the more appropriate model for each type of
asset as well as in the determination of the assumptions used in these models, including the assumptions related with
the main credit risk drivers.

Consequently, the use of a different methodology or different assumptions or judgements in applying a particular
model could have produced different financial results, summarised in Note 40.

3.3. Corporate income taxes

The Group is subject to corporate income tax in numerous jurisdictions. Certain interpretations and estimates are
required in determining the overall corporate income tax amount. Different interpretations and estimates could result
in a different level of income tax, current and deferred, being recognized in the period and evidenced in Note 28.

This aspect assumes additional relevance for effects of the analysis of the recoverability of deferred taxes, while the
Bank considers forecasts of futures taxable profits based on a group of assumptions, including the estimate of income
before taxes, adjustments to the taxable income and its interpretation of fiscal legislation. This way, the recoverability
of deferred taxes depends on the concretization of the strategy of the Executive Board of Directors, namely in the
capacity to generate the estimated taxable results and its interpretation of fiscal legislation.

The Tax Authorities are charged with reviewing the calculation of the tax base made by the Bank during a period of
four or twelve years, in the event of reportable tax losses. Thus, it is possible that there are corrections to the tax
base, resulting mainly from differences in the interpretation of tax legislation. However, the Bank's Executive Board of
Directors believes that there will be no significant corrections to taxes on profits recorded in the financial statements.

3.4. Pensions and other employee benefits

The determination of the retirement pension liabilities presented in Note 14 requires the use of assumptions and esti-
mates, including the use of actuarial tables, assumptions regarding the growth of pensions, salaries and discounts rates
(which are determined based on the market rates associated with high quality corporate bond, denominated in the
same currency in which the benefits will be paid and with a maturity similar to the expiry date of the plan's obligations).
These assumptions are based on the expectations of the NOVO BANCO Group for the period during which the liabilities
will be settled as well as other factors that may impact the costs and liabilities of the pension plan.

Changes in these assumptions could materially affect the amounts determined.

233

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES3.5. Provisions and Contingent Liabilities

The recognition of provisions involves a significant degree of complex judgment, namely identifying whether there is
a present obligation and estimating the probability and timing, as well as quantifying the outflows that may arise from
past events. When events are at an early stage, judgments and estimates can be difficult to quantify due to the high
degree of uncertainty involved. The Executive Board of Directors monitors these matters as they develop to regularly
reassess whether the provisions should be recognized. However, it is often not feasible to make estimates, even when
events are already at a more advanced stage, due to existing uncertainties.

The complexity of such issues often requires expert professional advice in determining estimates, particularly in terms
of legal and regulatory issues. The amount of recognized provisions may also be sensitive to the assumptions used,
which may result in a variety of potential results that require judgment in order to determine a level of provision that is
considered appropriate in view of the event in question.

The Group recognises provisions intended to cover for losses arising from commercial offers approved by the Executive
Board of Directors of the Bank, when these are not opposed by Bank of Portugal. The amount of the provisions reflects
NOVO BANCO’s best estimate as each reporting date. The subjectivity inherent to the determination of the probability
and amount of the internal resources required for the payment of the obligations may lead to significant adjustments (i)
due to variations in the assumptions used (ii) for the future recognition of provisions previously disclosed as contingent
liabilities; and/or (iii) for the future write-off of provisions, when they start to classify as contingent liabilities only. The
provisions are detailed in Note 32.

3.6. Investment properties, Assets received from credit recovery and Non-current
assets held for sale

Investment properties are initially recognized at cost, including directly related transaction costs and subsequently at
fair value. Assets received from credit recovery and Non-current assets held for sale are measured at the lower of the
net book value and the fair value less costs to sell.

The fair value of these assets is determined based on valuations conducted by independent entities specialized in this
type of service, using the market, income or cost methods, as defined in Notes 2.11 and 2.23. The valuation reports are
analyzed internally, namely comparing the sales values with the revalued values of the properties, to keep the valuation
parameters and processes updated to the market evolution.

The use of alternative methodologies and different assumptions may result in a different level of fair value with respec-
tive impact on the recognized balance sheet value.

3.7. Entities included in the consolidation perimeter

For the determination of the entities to be included in the consolidation perimeter, the Group evaluates the extent to
which (i) it is exposed, or has rights, to the variability of the return from its involvement with this entity, and (ii) it can
seize that return through of its power. In this analysis, the Bank also considers shareholder agreements that may exist
and that result in the power to take decisions that impact the management of the entity's activity. The decision that an
entity should be consolidated by the Group requires the use of judgments to determine to what extent the Group is
exposed to the variability of an entity's return and has the power to seize that return. In using this judgment, the Group
analyses assumptions and estimates. Thus, other assumptions and estimates could lead to a different consolidation
perimeter, with a direct impact on the balance sheet.

NOTA 4 – Segment reporting

NOVO BANCO Group activities are centered on the financial sector targeting corporate, institutional and private indi-
vidual customers. Its decision center is in Portugal, making the domestic territory its main market.

234

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe products and services rendered include deposit taking, granting of loans to corporate and private customers,
investment fund management, broker and custodian services and the commercialization of life and non-life insurance
products. Additionally, the Group makes short-, medium- and long-term investments in the financial and currency
exchange markets with the objective of taking advantage of price changes or to get returns on its available financial
resources.

For this purpose, as at 31 December 2020, the Group has NOVO BANCO as its main operating unit - with 339 branches
in Portugal (31 December 2019: 356 branches) and branches in Luxembourg and Spain (discontinued) and 4 repre-
sentation offices – with NBA Açores (13 branches), Banco BEST (6 branches), GNB GA and GNB Seguros (non-life
insurance segment), amongst other companies.

When evaluating performance by business area, the Group considers the following Operating Segments: (1) Domestic
Commercial Banking, including Retail, Corporate and Private Banking; (2) International Commercial Banking; (3) Asset
Management; (4) Life Insurance (December 31, 2019 only); (5) Markets; and (6) Corporate Centre. Each segment
integrates the NOVO BANCO structures that directly relate to it, as well as the units of the Group whose businesses
are mainly related to the segments. The individual and independent monitoring of each operating unit of the Group is
complemented, at the Board of Directors of NOVO BANCO level, by the definition of specific strategies and commercial
programs for each unit.

In accordance with the commitments assumed with Directorate General for Competition – European Commission
(“DGComp”), at the end of 2019 the Bank discontinued the Private Banking services.

Additionally, in 2019 NOVO BANCO derecognized the investment on Gama Life (formerly GNB Vida), after obtaining
the necessary regulatory authorizations, discontinuing the information reported in the Life Insurance Activity segment.

During 2020, NOVO BANCO started the sale process of the Spanish Branch, which was reclassified to a discontinued
operation.

4.1. Description of the operating segments

Each of the operating segments includes the following activities, products, customers and Group structures,
aggregated by criteria of risk, market / geography and nature of the products and services:

Domestic Commercial Banking

This Operating Segment includes all the banking activity developed on national territory involving corporate and pri-
vate customers and using the branch network, corporate centres and other channels, and includes the following sub
segments:

a. Retail: corresponds to all the activity developed in Portugal with private customers and small businesses. The
financial information of the segment relates, amongst other products and services, to mortgage loans, consumer
credit, small business financing, deposits, retirement plans and other insurance products sold to private customers,
account management and electronic payments and placement of investment funds, brokerage and custodian
services;

b. Corporate and Institutional: includes the activities developed in Portugal with medium- and large-sized
companies, developed through a commercial structure dedicated to this segment, which includes 20 Corporate
Centres. This segment also includes activities with institutional and municipal customers. The Group maintains an
important presence in this segment, the result of the support it has lent to the development of the national business
community, focused on companies with good risk, an innovative nature and an exporter activity;

c. Private Banking: comprises the Private banking activity integrating all the asset-side products and the fundraising
activities, namely, deposits, discretionary management services, custodian services, brokerage services and
insurance products.

235

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESInternational Commercial Banking

This Operating Segment integrates the units located abroad, which banking activities focus both on corporate and
private customers, excluding the asset management business, which is integrated in the corresponding segment.

Amongst the units comprising this segment are NOVO BANCO’s branches in Spain, London (closed at the beginning of
2019) and Luxembourg. The aggregation of this units in the same segment is related with the geographic criteria and
with the nature of the clients, the products and the services provided.

Asset Management

This segment, which depends on the specific nature of the products and services provided, includes the asset manage-
ment activities developed both in Portugal and abroad through specialised companies incorporated for the purpose.
The product range includes all types of funds - investment funds, real estate funds and pension funds - as well as
discretionary management and portfolio management.

Life insurance

Segment that depends on the specific nature of the products and services provided, including the activities of
Companhia de Seguros Gama Life (formerly GNB Vida) that sells traditional and investment insurance contracts
and retirement plans. As mentioned in Note 30, NOVO BANCO derecognized this investment in September 2019,
after obtaining the necessary regulatory authorizations, discontinuing the information reported in this segment.

Markets

This segment includes the overall financial management of the Group, including the taking and ceding of funds on
the financial markets, as well as the investment and risk management of credit, interest rate, currency and securities
instruments, whether of a strategic nature or related to the current activity of the Markets’ area. It also covers the
activity involving non-resident institutional investments and the effects of strategic decisions with a transversal impact
on the Group.

Corporate Centre

This area does not correspond to an operational segment in the true sense of the concept, it is an aggregation of trans-
versal corporate structures that ensure the basic functions of the Group's global management, such as those linked
to the Administration and Supervision, Compliance, Planning, Accounting, Risk Management and Control, Institutional
Communication, Internal Audit, Organization and Quality, among others. Since the Bank is in a tax loss situation in the
first six months of 2020 and 2019, the deferred taxes recognized were fully allocated to this segment.

4.2. Criteria for the allocation of activities and results to the operating segments

The financial information presented for each segment was prepared in accordance with the criteria followed in the
preparation of the internal information that is analyzed by the Executive Board of Directors of the Group, as required
by IFRS.

The accounting policies applied in the preparation of the financial information related to the operating segments are
consistent with those used in the preparation of these consolidated financial statements, which are described in Note
2, with the adoption of the following additional principles:

Measurement of the profit or loss of the segments

The Group uses net income / (loss) before taxes as the measure of the profit or loss for purposes of evaluating the
performance of each operating segment.

236

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDAutonomous operating units

As mentioned above, each autonomous operating unit (foreign branches, subsidiaries and associated companies) is
evaluated separately, as each of these units is considered an investment centre. Additionally, based on the characteris-
tics of the primary business developed by these units, they are fully integrated into one of the Operating Segments, i.e.
their assets, liabilities, income and expenses.

NOVO BANCO structures dedicated to the Segment

NOVO BANCO’s activity, given its characteristics, can be allocated to most of its operating segments and is, therefore,
accordingly disaggregated.

For purposes of allocating the financial information, the following principles are used: (i) the origin of the operation, i.e.
the operation is allocated to the same segment that the commercial structure that originated it integrates, even if, in a
subsequent phase, the Group, strategically, decides to securitize some of the assets; (ii) the allocation of a commercial
margin to mass-products, defined at top management level when the products are launched; (iii) for non-mass pro-
ducts, the allocation of a margin directly negotiated by the commercial structures with customers; (iv) the allocation
of the direct costs of commercial and central structures dedicated to the segment; (v) the allocation of indirect costs
(central support and IT services) determined based on specific drivers; (vi) the allocation of credit risk determined in
accordance with the impairment model; and (vii) the allocation of NOVO BANCO’s total equity to the Markets segment.

The transactions between the legally autonomous units of the Group are made at market prices; the price for services
rendered between the structures of each unit, namely the price established for internal funding between units, is
determined using the margins process referred to above (which varies in accordance with the strategic relevance of the
product and the equilibrium of the structures’ funding and lending functions); the remaining internal transactions are
allocated to the segments, without any margin for the supplier; the strategic decisions and/or of an exceptional nature
are analyzed on a case-by-case basis, with the income and/or costs being generally allocated to the Markets segment.

The interest rate risk, currency risk, liquidity risk and others, excluding credit risk, are included in the Financial Depart-
ment, which mission it is to undertake the Bank’s financial management, and which activity and results are included in
the Markets segment.

Interest and similar income / expense

Since the Group’s activities are exclusively carried out in the financial sector, the income reflects, fundamentally, the
difference between interest received on assets and interest paid on liabilities. This situation and the fact that the seg-
ment evaluation is based on margins previously negotiated or determined for each product, leads to the presentation
of the results from the intermediation activity, as permitted by IFRS 8, paragraph 23, at the net value of interest, under
the designation “Net interest income / expense”.

Investments presented using the equity method

Investments in associated companies presented under the equity method are included in the Markets segment, in
the case of NOVO BANCO’s associated companies. For other associated companies of the Group, these entities are
included in the segment to which they relate.

Non-current assets

Non-current assets, according to IFRS 8, include Tangible fixed assets, Intangible assets and Non-current assets held for
sale. NOVO BANCO includes these assets in the Markets segment, with the non-current assets held by the remaining
subsidiaries being allocated to the segment in which these subsidiaries primarily develop their business.

Corporate income tax

Corporate income tax is part of the Group’s net income that, for purposes of monitoring the performance of the

237

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESOperating Segments, by the Executive Board of Directors, does not affect the evaluation of most of the Operating
Segments. In the tables presented below the deferred tax recognized in net income for the year are included in the
Corporate Centre. Deferred tax assets and liabilities are included in the Markets segment.

Domestic and International Areas

In the presentation of financial information by geographic areas, the operational units that integrate the International
Area are NOVO BANCO’s branches in Spain, Luxembourg and London (closed in early 2019), and the subsidiaries Novo
Banco Servicios, Ijar Leasing Algérie, as well as units located outside GNB GA, and the discontinued operations NOVO
AF and Banco Delle Tre Venezie.

The financial and economic elements related to the international area are those consistent with the financial statements
of such units, with the respective consolidation adjustments and eliminations.

Legacy and recurrent activity

From 2018 the GROUP started to present separate financial information between "NOVO BANCO Recurrent", that
includes all the core banking activity, and "NOVO BANCO Legacy” that include loans and advances to customers,
integrating not only the credits included in Contingent Capital Agreement, as well as other receivables, securities,
real estate and discontinued operations considered, on its majority, as no strategic in the commitments imposed
by DGCOMP after the resolution measure, so the references in these explanatory notes should be read taking this
segmentation into account.

When determining the NOVO BANCO Legacy, the Bank considered the following items:

• Loans and advances include the entire CCA perimeter and other non-strategic exposures;

• Securities and associated companies were selected by contract and include restructuring funds, minority equity

stakes, real estate funds, commercial paper and mandatory convertible securities (“VMOCs”);

• The portfolio of real estate properties available for sale has been selected by contract and excludes yielding assets;

• Assets and liabilities of the discontinued operations were allocated to legacy, based on a case-by-case analysis

insofar as they were considered by management to be legacy assets;

• All profit and loss associated with legacy assets was considered as results of this activity;

• There are no liabilities directly allocated to the legacy activity, therefore the funding costs for legacy assets are

calculated based on the Group’s average balance sheet funding rate; and

• Operating costs include all CCA costs, and the operating costs of some departments, according to the weight of

legacy assets in their activity.

The Group considers that the split between the NOVO BANCO Recurrent and NOVO BANCO Legacy will allow
customers and other stakeholders to have a better understanding of the Bank's ongoing restructuring process.

The segment reporting is presented as follows:

238

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED
Net interest income

Net fees and commissions
Other operating income

Total operating income

Operational expenses

Of which:

Provisions / Impairment losses
Depreciation and amortization
Net gains / (losses) from investments in subsidiaries, joint ventures and associated companies
registered by the equity method

Retail

200 736

165 851

19 288

Corporate
and
Institutional
221 839

98 403

24 873

385 875

345 115

354 653

515 379

100 195

477 820

12 355

920

Profit / (loss) from continued operations before taxes and non-controlling interests

31 222

( 170 264)

Taxes

Profit / (loss) of discontinued operations

Net Profit / (loss) for the period attributable to non-controlling interests

Net Profit / (loss) for the period attributable to Shareholders of the parent

Intersegment operating income (1)

Total Net Assets
Total Liabilities

Investments in associated companies
Investments in tangible fixed assets

Investments in intangible assets
Investments in investment properties

Investments in other assets - real estate properties

(1) inter-segment operating income is mainly characterized by interest (financial result)

Net interest income
Net fees and commissions

Other operating income
Total operating income

Operational expenses
Of which:

1 134

30 088

( 170 264)

4 164

5 977

20 626 864

10 704 403

20 372 193

10 862 412

3 718

340

624

Retail

153 602

Corporate
and
Institutional
170 274

171 441

110 009

15 480

18 514

340 523

298 797

273 315

694 359

31.12.2020

Private
banking

International
Commercial
Banking

Asset
Management

Life
Insurance

Markets

Corporate
centre

Total

(in thousands of Euros)

19 687

10 022

( 28 727)

982

29 252

20 996

668

( 11)

26 023

170

26 182

14 755

1 624

640

( 28 270)

11 427

( 40 830)

3 104

1 498

8 057

112 883

( 33 781)

( 493 298)

( 414 196)

639 600

104 713

590 828

1 215

17 274

555 134

266 518

( 477 694)

343 958

1 658 352

1 191 463

33 072

9 430

(1 044 366)

( 104 713)

(1 304 964)

11 617

( 2 070)

( 13 694)

( 11 208)

( 69 155)

78 170

4 474 776

4 470 127

305

1 941

9 821

189

88 507

11 554

825

8 057

(1 046 845)

( 91 019)

( 80 342)

8 501 036

5 532 665

93 630

43 093

26 508

11 966

28 126

344

31.12.2019 *

Private
banking

International
Commercial
Banking

Asset
Management

Life
Insurance

Markets

Corporate
centre

Total

(in thousands of Euros)

2 538

5 121

( 5)

7 654

4 680

29 668

12 337

( 14 132)

27 873

25 747

( 1 056)

24 693

156 348

( 21 773)

( 444 573)

( 309 998)

48 761

12 179

4 082

192 619

98 517

1 082

( 33 345)

( 10 074)

(1 329 317)

8 158

44 395 586

41 248 951

93 630

48 285

26 866

11 966

30 691

512 432

302 882

( 425 772)

389 542

1 328 512

855 141

30 341

1 470

Provisions / Impairment losses
Depreciation and amortization
Net gains / (losses) from investments in subsidiaries, joint ventures and associated companies
registered by the equity method

16 172

10 803

653 594

( 1 452)

882

423

39 028

671

536

433

4 082

143 181

1 550

15 579

1 470

Profit / (loss) from continued operations before taxes and non-controlling interests

67 208

( 395 562)

2 974

( 20 888)

12 514

( 4 082)

( 501 147)

( 98 517)

( 937 500)

Taxes
Profit / (loss) of discontinued operations

Net Profit / (loss) for the period attributable to non-controlling interests

1 736

( 21 339)

( 103 470)

3 418

( 392)

1 533

3 391

( 73)

( 9 389)

41 093

Net Profit / (loss) for the period attributable to Shareholders of the parent

65 472

( 395 562)

2 974

Intersegment operating income (1)

Total Net Assets
Total Liabilities

Investments in associated companies
Investments in tangible fixed assets

Investments in intangible assets
Investments in other assets - real estate properties

4 970

6 005

19 835 663

11 223 700

19 541 454

11 605 333

1 633

282

1 134

( 103 019)

112 670

4 846 926

4 964 199

767

703

4 358

8 704

610

84 058

13 649

1 196

( 2 549)

( 495 222)

( 139 610)

( 114 418)

9 305 556

5 168 511

92 628

16 363

25 436

81 319

26 563

( 102 402)

( 7 653)

(1 058 812)

9 837

45 295 903

41 293 146

92 628

19 959

26 439

86 811

(1) Intersegment operating income refers essentially to interest (net interest income)
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The geographical information of the different business units of the Group is as follows:

Portugal

Spain

Luxembourg

Brazil

Angola

Cape Verde

Macao

Other

Total

31.12.2020

(in thousands of Euros)

(1 300 233)

( 37 559)

8 322

153

(1 329 317)

Net profit / (loss) for the period attributable to Shareholders of
the parent
(of which: rel. to discontinued units)
Total income
Intersegment operating income
Net assets
(of which: rel. to discontinued units)
Investments in associated companies
Investments in tangible fixed assets
Investments in intangible assets
Investments in investment properties

6 466
4 693 042
( 41 855)
40 323 724
7 861
93 630
47 980
26 866
11 966

( 39 811)
-
-
2 062 005
1 545 138
-
-
-
-

-
244 271
50 013
1 998 432
-
-
305
-
-

Investments in other assets - real estate properties

28 750

1 941

-
1 054
-
1 740
-
-
-
-
-

-
-
-
3 060
1 037
-
-
-
-

-
-
-
-
1 299
-
-
-
-

-
-

-
-
-
-
1 883
-
-
-
-

-
-

-
-
-
6 625
2 300
-
-
-
-

-
7

( 33 345)
4 938 367
8 158
44 395 586
1 559 518
93 630
48 285
26 866
11 966

30 691

(1 304 964)

803 893
4 582
33

Profits / (losses) of continuing operating units before taxes
and non-controlling interests
Turnover (a) (b)
Number of employees (a)

31 December 2020

(1 315 492)

( 817)

11 187

158

107 489
10
Notes to the Consolidated Financial Statements

695 966
4 560

438
5

-
-

(a) Financial information presented according to art. 2 of DL no. 157/2014
(b) Turnover corresponds to the sum of the following items in the consolidated operating account: interest income, dividend income, fee and commission income, gains or losses on derecognition of financial assets and liabilities not measured at
fair value through profit or loss on financial assets and liabilities held for trading, gains or losses on financial assets mandatorily at fair value through profit or loss, gains or losses on financial assets and liabilities ca rried at fair value through profit
or loss hedge accounting losses, exchange differences, gains or losses on derecognition of non-financial assets, other operating operating income and proportion of profits or losses on investments in subsidiaries, joint ventures and associates
accounted for under the equity method.

Net profit / (loss) for the period attributable to Shareholders of

( 930 114)

( 103 761)

( 20 909)

( 303)

(of which: rel. to discontinued units)

1 460

( 84 635)

239

the parent

Total income

Net assets

Intersegment operating income

(of which: rel. to discontinued units)

Investments in associated companies

Investments in tangible fixed assets

Investments in intangible assets

Investments in other assets - real estate properties

Profits / (losses) of continuing operating units before taxes

and non-controlling interests

Turnover (a) (b)

Number of employees (a)

(a) Financial information presented according to art. 2 of DL no. 157/2014

Portugal

Spain

Luxembourg

Brazil

Angola

Cape Verde

Macao

Other

Total

31.12.2019 *

(in thousands of Euros)

40 772 690

2 011 246

2 498 979

3 303

3 060

2 946

1 299

4 121

2 300

40 255

4 348 294

( 38 977)

25 349

92 628

19 192

25 736

82 453

4 240

767

703

4 358

497 028

48 814

919

( 911 060)

( 291)

( 22 121)

( 303)

945 859

4 648

70 591

198

367

( 3 725)

(1 058 812)

( 83 175)

4 846 241

9 837

6 625 45 295 903

92 628

19 959

26 439

86 811

( 3 725)

( 937 500)

1 016 817

4 869

(b) Turnover corresponds to the sum of the following items in the consolidated operating account: interest income, dividend income, fee and commission income, gains or losses on derecognition of financial assets and liabilities not

measured at fair value through profit or loss on financial assets and liabilities held for trading, gains or losses on financial assets mandatorily at fair value through profit or loss, gains or losses on financial assets and liabilities ca rried at

fair value through profit or loss hedge accounting losses, exchange differences, gains or losses on derecognition of non-financial assets, other operating operating income and proportion of profits or losses on investments in

subsidiaries, joint ventures and associates accounted for under the equity method.

*Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe geographical information of the different business units of the Group is as follows:

Portugal

Spain

Luxembourg

Brazil

Angola

Cape Verde

Macao

Other

Total

31.12.2020

(in thousands of Euros)

Net profit / (loss) for the period attributable to Shareholders of

(1 300 233)

( 37 559)

8 322

153

(of which: rel. to discontinued units)

6 466

( 39 811)

the parent

Total income

Net assets

Intersegment operating income

(of which: rel. to discontinued units)

Investments in associated companies

Investments in tangible fixed assets

Investments in intangible assets

Investments in investment properties

4 693 042

( 41 855)

244 271

50 013

1 054

40 323 724

2 062 005

1 998 432

1 740

7 861

1 545 138

305

93 630

47 980

26 866

11 966

28 750

Investments in other assets - real estate properties

1 941

Profits / (losses) of continuing operating units before taxes
and non-controlling interests
Turnover (a) (b)
Number of employees (a)

(1 315 492)

( 817)

11 187

695 966
4 560

-
-

107 489
10

158

438
5

3 060

1 037

1 299

1 883

6 625

2 300

-
-

-
7

(1 329 317)

( 33 345)

4 938 367

8 158

44 395 586

1 559 518

93 630

48 285

26 866

11 966

30 691

(1 304 964)

803 893
4 582

Portugal

Spain

Luxembourg

Brazil

Angola

Cape Verde

Macao

Other

Total

31.12.2019 *

(in thousands of Euros)

( 930 114)

( 103 761)

( 20 909)

( 303)

( 3 725)

(1 058 812)

1 460
4 348 294
( 38 977)
40 772 690
25 349
92 628
19 192
25 736
82 453

( 84 635)
-
-
2 011 246
4 240
-
767
703
4 358

-
497 028
48 814
2 498 979
-
-
-
-
-

-
919
-
3 303
-
-
-
-
-

Profits / (losses) of continuing operating units before taxes
and non-controlling interests
Turnover (a) (b)
Number of employees (a)

( 911 060)

( 291)

( 22 121)

( 303)

945 859
4 648

-
198

70 591
11

367
-

-
-
-
3 060
2 946
-
-
-
-

-
-

-
-
-
-
1 299
-
-
-
-

-
-

-
-
-
-
4 121
-
-
-
-

-
-
-

( 83 175)
4 846 241
9 837
6 625 45 295 903
40 255
2 300
92 628
-
19 959
-
26 439
-
86 811
-

-
-

( 3 725)

( 937 500)

-
7

1 016 817
4 869

(a) Financial information presented according to art. 2 of DL no. 157/2014
(b) Turnover corresponds to the sum of the following items in the consolidated operating account: interest income, dividend income, fee and commission income, gains or losses on derecognition of financial assets and liabilities not
measured at fair value through profit or loss on financial assets and liabilities held for trading, gains or losses on financial assets mandatorily at fair value through profit or loss, gains or losses on financial assets and liabilities ca rried at
fair value through profit or loss hedge accounting losses, exchange differences, gains or losses on derecognition of non-financial assets, other operating operating income and proportion of profits or losses on investments in
subsidiaries, joint ventures and associates accounted for under the equity method.

*Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The information aggregated by legacy and recurring activity is as follows:
The information aggregated by legacy and recurring activity is as follows:

Net interest income
Net fees and commissions
Other operating income
Total operating income

31.12.2020

31.12.2019 *

(in thousands of Euros)

Recurrent

Legacy

Total

Recurrent

Legacy

Total

517 020
265 266
( 43 003)
739 283

38 114
1 252
( 434 691)
( 395 325)

555 134
266 518
( 477 694)
343 958

463 007
300 133
133 967
897 107

49 425
2 749
( 559 739)
( 507 565)

512 432
302 882
( 425 772)
389 542

839 641

818 711

1 658 352

664 051

664 461

1 328 512

386 000

805 463

1 191 463

208 363

646 778

855 141

Operating expenses
Includes:
Provisions / Impairment losses
Net gains / (losses) from investments in subsidiaries, joint ventures and
associated companies registered by the equity method
Taxes
Profit / (loss) of discontinued operations
31 December 2020

Net Profit / (loss) for the period attributable to non-controlling interests

( 4 354)

( 5 720)

( 10 074)

8 217

( 15 870)

5 732

3 698

9 430

Notes to the Consolidated Financial Statements

15 554
( 24 568)

( 14 472)
( 8 777)

1 082
( 33 345)

4 462

( 37 653)
( 89 328)

( 2 992)

83 443
6 153

1 470

45 790
( 83 175)
34
( 7 653)

Net Profit / (loss) for the period attributable to Shareholders of the
parent

( 130 394)

(1 198 923)

(1 329 317)

177 626

(1 236 438)

(1 058 812)

Total net Assets

41 313 597

3 081 989

44 395 586

40 813 669

4 482 234

45 295 903

(of which: related to discontinued operations)

1 451 195

108 323

1 559 518

15 891

24 364

40 255

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 5 – NET INTEREST INCOME

The breakdown of this caption as at 31 December 2020 and 2019 is as follows:

NOTE 5 – Net interest income

31.12.2020

31.12.2019 *

(in thousands of Euros)

The breakdown of this caption as at 31 December 2020 and 2019 is as follows:

Calculated by the effective interest method

Other

Calculated by the effective interest method

Other

Interest Income

Interest from loans and advances

Interest from deposits with and loans and advances to banks

Interest from securities
Interest from derivatives held for risk management purposes
Other interest and similar income

Interest Expenses

Interest on debt securities issued

Interest on amounts due to customers

Interest on deposits from Central Banks and other banks

240

Interest on subordinated liabilities
Interest on derivatives held for risk management purposes
Other interest and similar expenses

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expenses
from negative
interest rates

From assets /
liabilities at fair
value through
profit or loss

Total

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expenses
from negative interest
rates

From assets /
liabilities at fair
value through
profit or loss

Total

538 083

19 111

125 806
-
530

683 530

39 487

71 688

15 991

34 165
-
7 549

168 880

514 650

39 401

-
1 630
-

41 031

2 750

-
5 771
356

8 877

32 154

10 793
8 353
-

19 146

-
10 816
-

10 816

8 330

538 083

58 512

136 599
9 983
530

743 707

39 487

71 688

18 741

34 165
16 587
7 905

188 573

555 134

563 716

20 205

117 855
-
1 402

703 178

38 956

93 831

19 269

34 166
-
6 771

192 993

510 185

3 118

-
496
-

7 063
6 664
-

563 716

23 323

124 918
7 160
1 402

3 614

13 727

720 519

1 864

-
4 114
147

6 125

( 2 511)

-
8 969
-

8 969

4 758

38 956

93 831

21 133

34 166
13 083
6 918

208 087

512 432

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Interest on amounts due to customers and deposits from Central Banks and other banks include as at 31 December 2020,

respectively, the amounts of Euro 16 thousand and Euro 822 thousand related to repurchase agreement operations (31 December

2019: Euro -2 thousand of interest on deposits with and loans and advances to Banks, Euro 16 thousand in customer deposits and

Euro 2,166 thousand in interest on deposits from other banks).

As at 31 December 2020, Interest from loans and advances to customers includes Euro 35,385 thousand related to finance lease

operations (31 December 2019: Euro 40,035 thousand).

Interest income and expense items related to derivative interest include, according to the accounting policy described in Notes 2.4

and 2.18, interest from hedging derivatives and from derivatives used to manage the economic risk of certain financial assets and

liabilities designated at fair value through profit or loss, as per the accounting policies described in Notes 2.4 e 2.7.

The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to these liabilities.

NOTE 6 – DIVIDEND INCOME

The breakdown of this caption is as follows:

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe information aggregated by legacy and recurring activity is as follows:

Net interest income

Net fees and commissions

Other operating income

Total operating income

Operating expenses

Includes:

31.12.2020

31.12.2019 *

(in thousands of Euros)

Recurrent

Legacy

Total

Recurrent

Legacy

Total

517 020

265 266

( 43 003)

739 283

38 114

1 252

( 434 691)

( 395 325)

555 134

266 518

( 477 694)

343 958

463 007

300 133

133 967

897 107

49 425

2 749

( 559 739)

( 507 565)

512 432

302 882

( 425 772)

389 542

839 641

818 711

1 658 352

664 051

664 461

1 328 512

Provisions / Impairment losses

386 000

805 463

1 191 463

208 363

646 778

855 141

Net gains / (losses) from investments in subsidiaries, joint ventures and

associated companies registered by the equity method

Taxes

Profit / (loss) of discontinued operations

5 732

3 698

9 430

15 554

( 24 568)

( 14 472)

( 8 777)

1 082

( 33 345)

4 462

( 37 653)

( 89 328)

( 2 992)

83 443

6 153

1 470

45 790

( 83 175)

Net Profit / (loss) for the period attributable to non-controlling interests

( 4 354)

( 5 720)

( 10 074)

8 217

( 15 870)

( 7 653)

Net Profit / (loss) for the period attributable to Shareholders of the
parent

( 130 394)

(1 198 923)

(1 329 317)

177 626

(1 236 438)

(1 058 812)

Total net Assets

41 313 597

3 081 989

44 395 586

40 813 669

4 482 234

45 295 903

(of which: related to discontinued operations)

1 451 195

108 323

1 559 518

15 891

24 364

40 255

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 5 – NET INTEREST INCOME

The breakdown of this caption as at 31 December 2020 and 2019 is as follows:

31.12.2020

31.12.2019 *

(in thousands of Euros)

Calculated by the effective interest method

Other

Calculated by the effective interest method

Other

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expenses
from negative
interest rates

From assets /
liabilities at fair
value through
profit or loss

Total

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expenses
from negative interest
rates

From assets /
liabilities at fair
value through
profit or loss

Total

538 083

19 111

125 806
-
530

683 530

39 487

71 688

15 991

34 165
-
7 549

168 880

514 650

39 401

-
1 630
-

41 031

2 750

-
5 771
356

8 877

32 154

10 793
8 353
-

19 146

-
10 816
-

10 816

8 330

538 083

58 512

136 599
9 983
530

743 707

39 487

71 688

18 741

34 165
16 587
7 905

188 573

555 134

563 716

20 205

117 855
-
1 402

703 178

38 956

93 831

19 269

34 166
-
6 771

192 993

510 185

3 118

-
496
-

7 063
6 664
-

563 716

23 323

124 918
7 160
1 402

3 614

13 727

720 519

1 864

-
4 114
147

6 125

( 2 511)

-
8 969
-

8 969

4 758

38 956

93 831

21 133

34 166
13 083
6 918

208 087

512 432

Interest Income

Interest from loans and advances

Interest from deposits with and loans and advances to banks

Interest from securities
Interest from derivatives held for risk management purposes
Other interest and similar income

Interest Expenses

Interest on debt securities issued

Interest on amounts due to customers

Interest on deposits from Central Banks and other banks

Interest on subordinated liabilities
Interest on derivatives held for risk management purposes
Other interest and similar expenses

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Interest on amounts due to customers and deposits from Central Banks and other banks include as at 31 December 2020,
respectively, the amounts of Euro 16 thousand and Euro 822 thousand related to repurchase agreement operations (31 December
2019: Euro -2 thousand of interest on deposits with and loans and advances to Banks, Euro 16 thousand in customer deposits and
Euro 2,166 thousand in interest on deposits from other banks).
Interest on amounts due to customers and deposits from Central Banks and other banks include as at 31 December
2020, respectively, the amounts of Euro 16 thousand and Euro 822 thousand related to repurchase agreement
As at 31 December 2020, Interest from loans and advances to customers includes Euro 35,385 thousand related to finance lease
operations (31 December 2019: Euro -2 thousand of interest on deposits with and loans and advances to Banks, Euro
operations (31 December 2019: Euro 40,035 thousand).
16 thousand in customer deposits and Euro 2,166 thousand in interest on deposits from other banks).
Interest income and expense items related to derivative interest include, according to the accounting policy described in Notes 2.4
and 2.18, interest from hedging derivatives and from derivatives used to manage the economic risk of certain financial assets and
As at 31 December 2020, Interest from loans and advances to customers includes Euro 35,385 thousand related to
liabilities designated at fair value through profit or loss, as per the accounting policies described in Notes 2.4 e 2.7.
finance lease operations (31 December 2019: Euro 40,035 thousand).
The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to these liabilities.
Interest income and expense items related to derivative interest include, according to the accounting policy described
NOTE 6 – DIVIDEND INCOME
in Notes 2.4 and 2.18, interest from hedging derivatives and from derivatives used to manage the economic risk of
certain financial assets and liabilities designated at fair value through profit or loss, as per the accounting policies
The breakdown of this caption is as follows:
described in Notes 2.4 e 2.7.

31 December 2020

Notes to the Consolidated Financial Statements

The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to
these liabilities.

NOTE 6 – Dividend income

The breakdown of this caption is as follows:

Financial assets mandatorily at fair value through profit or loss

Shares
Participation units

Financial assets at fair value through other comprehensive income

Shares
Participation units

(in thousands of Euros)

31.12.2020

31.12.2019 *

1 781
6 407

8 290
-

16 478

3 374
4 080

2 257
155

9 866

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

In 2020, dividend income of Euro 16,478 thousand was recorded (31 December 2019: Euro 9,866 thousand), which is detailed as

follows:

• Euro 8,188 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss, which include dividends
received from the Fundo Solução Renda in the amount of Euro 3,141 thousand, from the Fundo Mais Mais in the amount of Euro
1,593 thousands, from Euronext NV in the amount of Euro 1,391 thousand and Explorer III B in the amount of Euro 634 thousands
(31 December 2019: Euro 7,454 thousands, which include dividends received from Euronext in the amount of Euro 1, 348 thousands,
from Fundo Soluções Leasing in the amount of Euro 1,767 thousands, from Sealion Ltd of Euro 1,161 thousands and the Explorer
III Fund in the amount of Euro 738 thousands); and
• Euro 8,290 thousand in financial assets accounted for at fair value through other comprehensive income, which include dividends
received from FLITPTREL X in the amount of Euro 6,000 thousands, from SIBS SGPS in the amount of Euro 978 thousands and
from ESA Energia in the Euro 1,106 thousand (31 December 2019: Euro 2,412 thousand, which includes dividends received from
ESA Energia of Euro 1,080 thousand, from the Explorer III Fund in the amount of Euro 738 thousand and from SIBS SGPS in the
Euro 922 thousand).

241

NOTE 7 – FEE AND COMMISSION INCOME AND FEE AND COMISSION EXPENSES

The breakdown of this caption is as follows:

Fees and commissions income

From banking services

From guarantees provided

From transaction of securities

From commitments to third parties

From transactions carried out on behalf of third parties - cross-selling

Other fee and commission income

Fees and commissions expenses

With banking services rendered by third parties

With guarantees received

With transaction of securities

Other fee and commission income

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

(in thousands of Euros)

31.12.2020

31.12.2019 *

233 059

35 096

5 241

8 065

30 882

1 480

313 823

32 525

1 755

2 527

10 498

47 305

250 054

42 935

7 146

7 793

35 089

9 119

352 136

35 220

1 900

2 219

9 915

49 254

266 518

302 882

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES(in thousands of Euros)
In 2020, dividend income of Euro 16,478 thousand was recorded (31 December 2019: Euro 9,866 thousand), which is
detailed as follows:

31.12.2019 *

31.12.2020

Financial assets mandatorily at fair value through profit or loss

Shares
• Euro 8,188 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss,
Participation units
which include dividends received from the Fundo Solução Renda in the amount of Euro 3,141 thousand, from the
Financial assets at fair value through other comprehensive income
Fundo Mais Mais in the amount of Euro 1,593 thousands, from Euronext NV in the amount of Euro 1,391 thousand
Shares
and Explorer III B in the amount of Euro 634 thousands (31 December 2019: Euro 7,454 thousands, which include
Participation units
dividends received from Euronext in the amount of Euro 1, 348 thousands, from Fundo Soluções Leasing in the
amount of Euro 1,767 thousands, from Sealion Ltd of Euro 1,161 thousands and the Explorer III Fund in the amount
of Euro 738 thousands); and

In 2020, dividend income of Euro 16,478 thousand was recorded (31 December 2019: Euro 9,866 thousand), which is detailed as

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

1 781
6 407

3 374
4 080

2 257
155

8 290
-

16 478

9 866

follows:
• Euro 8,290 thousand in financial assets accounted for at fair value through other comprehensive income, which
• Euro 8,188 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss, which include dividends
include dividends received from FLITPTREL X in the amount of Euro 6,000 thousands, from SIBS SGPS in the amount
received from the Fundo Solução Renda in the amount of Euro 3,141 thousand, from the Fundo Mais Mais in the amount of Euro
of Euro 978 thousands and from ESA Energia in the Euro 1,106 thousand (31 December 2019: Euro 2,412 thousand,
1,593 thousands, from Euronext NV in the amount of Euro 1,391 thousand and Explorer III B in the amount of Euro 634 thousands
which includes dividends received from ESA Energia of Euro 1,080 thousand, from the Explorer III Fund in the
(31 December 2019: Euro 7,454 thousands, which include dividends received from Euronext in the amount of Euro 1, 348 thousands,
from Fundo Soluções Leasing in the amount of Euro 1,767 thousands, from Sealion Ltd of Euro 1,161 thousands and the Explorer
amount of Euro 738 thousand and from SIBS SGPS in the Euro 922 thousand).
III Fund in the amount of Euro 738 thousands); and
• Euro 8,290 thousand in financial assets accounted for at fair value through other comprehensive income, which include dividends
received from FLITPTREL X in the amount of Euro 6,000 thousands, from SIBS SGPS in the amount of Euro 978 thousands and
from ESA Energia in the Euro 1,106 thousand (31 December 2019: Euro 2,412 thousand, which includes dividends received from
ESA Energia of Euro 1,080 thousand, from the Explorer III Fund in the amount of Euro 738 thousand and from SIBS SGPS in the
Euro 922 thousand).

NOTE 7 – Fee and commission income and fee and
comission expenses

NOTE 7 – FEE AND COMMISSION INCOME AND FEE AND COMISSION EXPENSES
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

Fees and commissions income

From banking services
From guarantees provided
From transaction of securities
From commitments to third parties
From transactions carried out on behalf of third parties - cross-selling
Other fee and commission income

Fees and commissions expenses

With banking services rendered by third parties
With guarantees received
With transaction of securities
Other fee and commission income

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

(in thousands of Euros)

31.12.2020

31.12.2019 *

233 059
35 096
5 241
8 065
30 882
1 480

313 823

32 525
1 755
2 527
10 498

47 305

250 054
42 935
7 146
7 793
35 089
9 119

352 136

35 220
1 900
2 219
9 915

49 254

266 518

302 882

NOTE 8 – Gains or losses on derecognition of financial
assets and liabilities not measured at fair value through
profit or loss

The breakdown of this caption is as follows:

31 December 2020

Notes to the Consolidated Financial Statements

242

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOTE 8 – GAINS OR LOSSES ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS

The breakdown of this caption is as follows:

31.12.2020

31.12.2019 *

Gains

Losses

Total

Gains

Losses

Total

(in thousands of Euros)

From financial assets at fair value through other comprehensive income

NOTE 8 – GAINS OR LOSSES ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS
Bonds and other fixed income securities

Securities

The breakdown of this caption is as follows:

Issued by government and public entities
Issued by other entities

95 449
1 010

6 529
7 482

88 920
( 6 472)

67 860
2 442

2 021
443
(in thousands of Euros)

65 839
1 999

96 459

31.12.2020
14 011

82 448

70 302

31.12.2019 *
2 464

67 838

From financial assets and liabilities at amortised cost

Gains

Losses

Total

Gains

Losses

Total

From financial assets at fair value through other comprehensive income

Bonds and other fixed income securities

Securities

Issued by other entities

Bonds and other fixed income securities
Issued by government and public entities
Loans
Issued by other entities

6 281

154

6 127

2 050

95 449
8 336
1 010
14 617

96 459
111 076

6 529
8 439
7 482
8 593
14 011
22 604

88 920
( 103)
( 6 472)
6 024
82 448
88 472

67 860
23 662
2 442
25 712
70 302
96 014

2 021
31 997
443
31 997
2 464
34 461

65 839
( 8 335)
1 999
( 6 285)
67 838
61 553

From financial assets and liabilities at amortised cost

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Securities
Bonds and other fixed income securities
NOTE 9 - GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
6 127

Issued by other entities

6 281

154

2 050

The breakdown of this caption is as follows:
Loans

8 336

8 439

( 103)

23 662

31 997

( 8 335)

NOTE 9 - Gains or losses on financial assets and liabilities
held for trading

(in thousands of Euros)
31 997
31.12.2019 *
34 461

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

31.12.2020

Losses

111 076

61 553

14 617

25 712

22 604

88 472

96 014

( 6 285)

Gains

8 593

6 024

Total

NOTE 9 - GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

TítulosSecurities

The breakdown of this caption is as follows:

Bonds and other fixed income securities

The breakdown of this caption is as follows:

Issued by government and public entities
Issued by other entities

Financial Derivatives

TítulosSecurities

Foreign exchange rate contracts
Interest rate contracts
Equity / Index contracts
Credit default contracts
Other
Issued by government and public entities
Issued by other entities

Bonds and other fixed income securities

13 710
5

13 121
-

589
5

26 480
260

10 963
-

15 517
260

(in thousands of Euros)

68 313
Gains
604 219
82 587
42
488
13 710
769 364
5

Losses

31.12.2020
52 606
713 130
81 270
71
777
13 121
860 975
-

15 707
Total
( 108 911)
1 317
( 29)
( 289)
589
( 91 611)
5

24 466
Gains
643 255
93 255
78 141
4 566
26 480
870 423
260

31.12.2019 *

26 441
Losses
719 091
92 499
78 522
2 852
10 963
930 368
-

( 1 975)
Total
( 75 836)
756
( 381)
1 714
15 517
( 59 945)
260

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
Financial Derivatives

In accordance with the accounting policy described in Note 2.5, financial instruments are initially recorded at fair value. It is deemed
that the best evidence of the fair value of the instrument at inception is the transaction price. However, in certain circumstances, the
fair value of a financial instrument at inception, determined based on valuation techniques, may differ from the transaction price,
namely due to the existence of an intermediation fee, originating a day one profit.

Foreign exchange rate contracts
Interest rate contracts
Equity / Index contracts
Credit default contracts
Other

15 707
( 108 911)
1 317
( 29)
( 289)

24 466
643 255
93 255
78 141
4 566

26 441
719 091
92 499
78 522
2 852

52 606
713 130
81 270
71
777

68 313
604 219
82 587
42
488

( 1 975)
( 75 836)
756
( 381)
1 714

769 364

860 975

( 91 611)

870 423

930 368

( 59 945)

The Group recognizes in its income statement the gains arising from the intermediation fee (day one profit), which is generated,
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
primarily, through currency and derivative financial product intermediation, given that the fair value of these instruments, both at
inception and subsequently, is determined based solely on observable market data and reflects the Group’s access to the (wholesale
In accordance with the accounting policy described in Note 2.5, financial instruments are initially recorded at fair value. It is deemed
market).
that the best evidence of the fair value of the instrument at inception is the transaction price. However, in certain circumstances, the
fair value of a financial instrument at inception, determined based on valuation techniques, may differ from the transaction price,
As at 31 December 2020, the gains recognized in the income statement arising from intermediation fees, which are essentially related
namely due to the existence of an intermediation fee, originating a day one profit.
In accordance with the accounting policy described in Note 2.5, financial instruments are initially recorded at fair value.
to foreign exchange transactions, amounted to approximately Euro 5,100 thousand (31 December 2019: Euro 3,114 thousand).
It is deemed that the best evidence of the fair value of the instrument at inception is the transaction price. However, in
The Group recognizes in its income statement the gains arising from the intermediation fee (day one profit), which is generated,
certain circumstances, the fair value of a financial instrument at inception, determined based on valuation techniques,
primarily, through currency and derivative financial product intermediation, given that the fair value of these instruments, both at
may differ from the transaction price, namely due to the existence of an intermediation fee, originating a day one profit.
inception and subsequently, is determined based solely on observable market data and reflects the Group’s access to the (wholesale
market).

The Group recognizes in its income statement the gains arising from the intermediation fee (day one profit), which is
As at 31 December 2020, the gains recognized in the income statement arising from intermediation fees, which are essentially related
generated, primarily, through currency and derivative financial product intermediation, given that the fair value of these
to foreign exchange transactions, amounted to approximately Euro 5,100 thousand (31 December 2019: Euro 3,114 thousand).
instruments, both at inception and subsequently, is determined based solely on observable market data and reflects the
Group’s access to the (wholesale market).

As at 31 December 2020, the gains recognized in the income statement arising from intermediation fees, which are
essentially related to foreign exchange transactions, amounted to approximately Euro 5,100 thousand (31 December
2019: Euro 3,114 thousand).

31 December 2020

Notes to the Consolidated Financial Statements

243
31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOTA 10 – Gains or losses on financial assets
mandatorily at fair value through profits or loss and gains
or losses on financial assets and liabilities designated at
fair value through profit and loss

NOTE 10 - GAINS OR LOSSES ON FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFITS OR LOSS AND
GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS
The breakdown of this caption is as follows:

The breakdown of this caption is as follows:

31.12.2020

(in thousands of Euros)

31.12.2019 *

Gains

Losses

Total

Gains

Losses

Total

Gains or losses on financial assets mandatorily
at fair value through profit or loss
NOTE 10 - GAINS OR LOSSES ON FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFITS OR LOSS AND
GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS

Bonds and other fixed income securities

Securities

Issued by other entities

The breakdown of this caption is as follows:

Other variable income securities

Gains or losses on financial assets and liabilities designated
Gains or losses on financial assets mandatorily
at fair value through profit and loss
at fair value through profit or loss

Securities
Securities

Other variable income securities
Bonds and other fixed income securities

Issued by other entities

12 877

36 600

( 23 723)

3 031

6 062

( 3 031)

23 557

141 372

( 117 815)

35 257

90 864
(in thousands of Euros)

( 55 607)

746

31.12.2020

223 208

( 222 462)

16 600

211 691
31.12.2019 *

( 195 091)

37 180

Gains

401 180
Losses

( 364 000)
Total

54 888

Gains

308 617
Losses

( 253 729)
Total

-
12 877
-

-
36 600
-

-
( 23 723)
-

106
3 031
106

-
6 062
-

106
( 3 031)
106

23 557
37 180

141 372
401 180

( 117 815)
( 364 000)

35 257
54 994

90 864
308 617

( 55 607)
( 253 623)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Other variable income securities

746

223 208

( 222 462)

16 600

211 691

( 195 091)

37 180

401 180

( 364 000)

54 888

308 617

( 253 729)

Securities

Other variable income securities

As at December 31, 2020, gains or losses on financial assets that are mandatorily accounted for at fair value through profit or loss -
securities - shares and other variable income securities include a loss of Euro -300.2 million, resulting from the completion of an
Gains or losses on financial assets and liabilities designated
at fair value through profit and loss
independent appraisal of the restructuring funds. These funds are “level 3” assets in accordance with the IFRS 13 fair value hierarchy
As at December 31, 2020, gains or losses on financial assets that are mandatorily accounted for at fair value through
(quotations provided by third parties whose parameters used are not observable in the market), and NOVO BANCO requested an
independent evaluation from an international consulting company in articulation with real estate consultancy companies. This work
profit or loss - securities - shares and other variable income securities include a loss of Euro -300.2 million, resulting
resulted in a market value of Euro 498.8 million for the total investment held in these assets (see Note 22), which led to the recording
from the completion of an independent appraisal of the restructuring funds. These funds are “level 3” assets in
of the said loss of Euro -300.2 million in 2020 (see Note 40).
accordance with the IFRS 13 fair value hierarchy (quotations provided by third parties whose parameters used are not
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
observable in the market), and NOVO BANCO requested an independent evaluation from an international consulting
NOTE 11 – GAINS OR LOSSES FROM HEDGE ACCOUNTING
As at December 31, 2020, gains or losses on financial assets that are mandatorily accounted for at fair value through profit or loss -
company in articulation with real estate consultancy companies. This work resulted in a market value of Euro 498.8
securities - shares and other variable income securities include a loss of Euro -300.2 million, resulting from the completion of an
million for the total investment held in these assets (see Note 22), which led to the recording of the said loss of Euro
The breakdown of this caption is as follows:
independent appraisal of the restructuring funds. These funds are “level 3” assets in accordance with the IFRS 13 fair value hierarchy
(in thousands of Euros)
-300.2 million in 2020 (see Note 40).
(quotations provided by third parties whose parameters used are not observable in the market), and NOVO BANCO requested an
independent evaluation from an international consulting company in articulation with real estate consultancy companies. This work
resulted in a market value of Euro 498.8 million for the total investment held in these assets (see Note 22), which led to the recording
of the said loss of Euro -300.2 million in 2020 (see Note 40).

Fair value changes of hedging instruments
Fair value changes of hedging instruments

NOTE 11 – Gains or losses from hedge accounting

Foreign exchange rate contracts

31.12.2019 *

31.12.2020

( 253 623)

( 364 000)

401 180

308 617

( 16 178)

( 22 010)

50 141

76 026

98 036

66 319

37 180

54 994

Losses

Gains

106

Total

Fair value changes of hedging item attributable to hedged risk
Instrumentos financeiros derivados

NOTE 11 – GAINS OR LOSSES FROM HEDGE ACCOUNTING
The breakdown of this caption is as follows:

50 369

40 000

10 369

29 079

14 825

14 254

126 395

138 036

( 11 641)

79 220

81 144

( 1 924)

The breakdown of this caption is as follows:

Compensations for hedging operations interruptions (see Note 14)

438

461

(in thousands of Euros)

Amount net of compensations

126 833

138 036
31.12.2020

( 11 203)

79 681

81 144
31.12.2019 *

( 1 463)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Gains

Losses

Total

Gains

Losses

Total

Fair value changes of hedging instruments
Fair value changes of hedging instruments
NOTE 12 – EXCHANGE DIFFERENCES

Foreign exchange rate contracts

Fair value changes of hedging item attributable to hedged risk
Instrumentos financeiros derivados

The breakdown of this caption is as follows:

76 026

98 036

( 22 010)

50 141

66 319

( 16 178)

50 369

40 000

10 369

29 079

14 825

14 254

126 395

138 036

( 11 641)

79 220

81 144
(in thousands of Euros)

( 1 924)

Compensations for hedging operations interruptions (see Note 14)

Amount net of compensations

438

31.12.2020
126 833
Losses

Gains

438

138 036

Total

( 11 203)

Gains

461

-
31.12.2019 *
81 144

79 681

Losses

461

( 1 463)
Total

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Foreign exchange revaluation

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

NOTE 12 – EXCHANGE DIFFERENCES
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

The breakdown of this caption is as follows:
This caption includes the results arising from the foreign currency revaluation of monetary assets and liabilities denominated in foreign
currency in accordance with the accounting policy described in Note 2.3.

(in thousands of Euros)

31.12.2020

31.12.2019 *

244

Foreign exchange revaluation

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

31 December 2020

Notes to the Consolidated Financial Statements

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Gains

Losses

Total

Gains

Losses

Total

This caption includes the results arising from the foreign currency revaluation of monetary assets and liabilities denominated in foreign

currency in accordance with the accounting policy described in Note 2.3.

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOTE 10 - GAINS OR LOSSES ON FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFITS OR LOSS AND

GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS

The breakdown of this caption is as follows:

Gains or losses on financial assets mandatorily

at fair value through profit or loss

Bonds and other fixed income securities

Issued by other entities

Securities

Other variable income securities

Gains or losses on financial assets and liabilities designated

at fair value through profit and loss

Securities

Other variable income securities

31.12.2020

(in thousands of Euros)

31.12.2019 *

Gains

Losses

Total

Gains

Losses

Total

12 877

36 600

( 23 723)

3 031

6 062

( 3 031)

23 557

141 372

( 117 815)

35 257

90 864

( 55 607)

746

223 208

( 222 462)

16 600

211 691

( 195 091)

37 180

401 180

( 364 000)

54 888

308 617

( 253 729)

106

37 180

401 180

( 364 000)

54 994

308 617

( 253 623)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

As at December 31, 2020, gains or losses on financial assets that are mandatorily accounted for at fair value through profit or loss -

securities - shares and other variable income securities include a loss of Euro -300.2 million, resulting from the completion of an

independent appraisal of the restructuring funds. These funds are “level 3” assets in accordance with the IFRS 13 fair value hierarchy

(quotations provided by third parties whose parameters used are not observable in the market), and NOVO BANCO requested an

independent evaluation from an international consulting company in articulation with real estate consultancy companies. This work

resulted in a market value of Euro 498.8 million for the total investment held in these assets (see Note 22), which led to the recording

of the said loss of Euro -300.2 million in 2020 (see Note 40).

NOTE 11 – GAINS OR LOSSES FROM HEDGE ACCOUNTING

The breakdown of this caption is as follows:

Fair value changes of hedging instruments
Fair value changes of hedging instruments

Foreign exchange rate contracts

31.12.2020

31.12.2019 *

Gains

Losses

Total

Gains

Losses

Total

(in thousands of Euros)

76 026

98 036

( 22 010)

50 141

66 319

( 16 178)

Fair value changes of hedging item attributable to hedged risk
Instrumentos financeiros derivados

50 369

40 000

10 369

29 079

14 825

14 254

126 395

138 036

( 11 641)

79 220

81 144

( 1 924)

Compensations for hedging operations interruptions (see Note 14)

438

461

Amount net of compensations

126 833

138 036

( 11 203)

79 681

81 144

( 1 463)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 12 – Exchange differences

NOTE 12 – EXCHANGE DIFFERENCES
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

31.12.2020

31.12.2019 *

Gains

Losses

Total

Gains

Losses

Total

(in thousands of Euros)

Foreign exchange revaluation

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

1 305 708 1 308 122

( 2 414)

1 114 460 1 075 744

38 716

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

This caption includes the results arising from the foreign currency revaluation of monetary assets and liabilities denominated in foreign
currency in accordance with the accounting policy described in Note 2.3.
This caption includes the results arising from the foreign currency revaluation of monetary assets and liabilities deno-
minated in foreign currency in accordance with the accounting policy described in Note 2.3.

31 December 2020

Notes to the Consolidated Financial Statements

NOTE 13 – Gains or losses on derecognition of
non-financial assets

NOTE 13 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

31.12.2020

31.12.2019 *

(in thousands of Euros)

Real Estate
NOTE 13 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS
Equipment
Other
The breakdown of this caption is as follows:

( 4 527)
( 520)
1 631

( 3 416)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

31.12.2020

9 962
( 479)
2 034

(in thousands of Euros)

11 516

31.12.2019 *

NOTE 14 – OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES
Real Estate
Equipment
The breakdown of these captions is as follows:
Other

NOTE 14 – Other operating income and other operating
expenses

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
Other operating income
NOTE 14 – OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES
The breakdown of these captions is as follows:

11 516
31.12.2019 *

(in thousands of Euros)

31.12.2020

( 3 416)

( 4 527)
( 520)
1 631

9 962
( 479)
2 034

The breakdown of these captions is as follows:

Gains / (losses) on recoveries of loans
Non-recurring advisory services
Income of Funds and real estate companies
Gains on investment properties revaluation (see Note 26)
Other income

Other operating income
Other operating expenses

Other operating expenses

Gains / (losses) on recoveries of loans
Losses on repurchase of Group debt securities (see Note 31)
Non-recurring advisory services
Direct and indirect taxes
Income of Funds and real estate companies
Contribution on the banking sector and solidarity additional
Gains on investment properties revaluation (see Note 26)
Membership fees and donations
Other income
Expenses of Funds and real estate companies
Charges with Supervisory entities
Losses on investments properties revaluation (see Note 26)
Losses on repurchase of Group debt securities (see Note 31)
Other expenses
Direct and indirect taxes
Contribution on the banking sector and solidarity additional
Membership fees and donations
Expenses of Funds and real estate companies
Charges with Supervisory entities
Losses on investments properties revaluation (see Note 26)
Other expenses

Other operating income / (expenses)

30 181
264
29 955
3 590
56 742
120 732

31.12.2020

30 181
( 26 998)
264
( 8 476)
29 955
( 32 752)
3 590
( 1 666)
56 742
( 11 647)
120 732
( 2 321)
( 107 900)
( 26 998)
( 38 534)
( 8 476)
( 230 294)
( 32 752)
( 109 562)
( 1 666)
( 11 647)
( 2 321)
( 107 900)
( 38 534)
( 230 294)

(in thousands of Euros)

31.12.2019 *

30 731
1 299
37 858
44 347
18 339
132 574

30 731
( 465)
1 299
( 12 929)
37 858
( 27 091)
44 347
( 2 396)
18 339
( 14 317)
132 574
( 2 456)
( 260 466)
( 465)
( 44 385)
( 12 929)
( 364 505)
( 27 091)
( 231 931)
( 2 396)
( 14 317)
( 2 456)
( 260 466)
( 44 385)
( 364 505)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

As at 31 December 2020, the amount received as compensation for discontinued hedging operations, included in other income,
amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 11).

NOTE 15 – STAFF EXPENSES
Other operating income / (expenses)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
The breakdown of these captions is as follows:

( 109 562)

( 231 931)

(in thousands of Euros)
As at 31 December 2020, the amount received as compensation for discontinued hedging operations, included in other income,
amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 11).

31.12.2019 *

31.12.2020

245
Wages and salaries

NOTE 15 – STAFF EXPENSES

Remuneration
Long-term service / Career bonuses (see Note 16)
The breakdown of these captions is as follows:

Mandatory social charges

Costs with post-employment benefits (see Note 16)

Other costs

Wages and salaries

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Remuneration

Long-term service / Career bonuses (see Note 16)

The provisions and costs related to the restructuring process are presented in Note 32.

Mandatory social charges

Costs with post-employment benefits (see Note 16)

As at 31 December 2020 and 2019, the number of employees of NOVO BANCO Group has the following breakdown:

Other costs

4 803

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Novo Banco employees

The provisions and costs related to the restructuring process are presented in Note 32.

Employees of the Group's subsidiaries

As at 31 December 2020 and 2019, the number of employees of NOVO BANCO Group has the following breakdown:

Total employees of the Group

4 582

245 606

31.12.2020

246 393

31.12.2019

Notes to the Consolidated Financial Statements

31.12.2020

31.12.2019

Novo Banco employees

31 December 2020

Employees of the Group's subsidiaries

Total employees of the Group

31 December 2020

Notes to the Consolidated Financial Statements

1 735

(in thousands of Euros)

31.12.2020

4 803

31.12.2019 *

4 563

183 798
182 847
951

55 270

245 606

183 798

182 847

951

55 270

1 735

4 256

326

4 256

326

4 582

185 453
184 589
864

56 363

246 393

185 453

184 589

864

56 363

4 563

4 428

441

4 869

4 428

441

4 869

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOTE 13 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS

The breakdown of this caption is as follows:

NOTE 13 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS

The breakdown of this caption is as follows:

Real Estate

Equipment

Other

Real Estate

Equipment

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Other

NOTE 14 – OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

The breakdown of these captions is as follows:

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 14 – OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

Other operating income

The breakdown of these captions is as follows:

Gains / (losses) on recoveries of loans

Non-recurring advisory services

Income of Funds and real estate companies

Gains on investment properties revaluation (see Note 26)

Other operating income

31.12.2020

31.12.2019 *

(in thousands of Euros)

31.12.2020

( 3 416)

( 4 527)

( 520)

1 631

( 4 527)

( 520)

1 631

( 3 416)

9 962

( 479)

(in thousands of Euros)

2 034

31.12.2019 *

11 516

9 962

( 479)

2 034

11 516

(in thousands of Euros)

31.12.2020

31.12.2019 *

30 181

30 731

264

(in thousands of Euros)

1 299

31.12.2020

29 955

31.12.2019 *

37 858

3 590

44 347

Other operating expenses

Other income
Gains / (losses) on recoveries of loans
Non-recurring advisory services
Income of Funds and real estate companies
Losses on repurchase of Group debt securities (see Note 31)
Gains on investment properties revaluation (see Note 26)
Direct and indirect taxes
Other income
Contribution on the banking sector and solidarity additional
Membership fees and donations
Expenses of Funds and real estate companies
Losses on repurchase of Group debt securities (see Note 31)
Charges with Supervisory entities
Direct and indirect taxes
Losses on investments properties revaluation (see Note 26)
Contribution on the banking sector and solidarity additional
Other expenses
Membership fees and donations
As at 31 December 2020, the amount received as compensation for discontinued hedging operations, included in other
Expenses of Funds and real estate companies
income, amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 11).
Other operating income / (expenses)
Charges with Supervisory entities
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
Losses on investments properties revaluation (see Note 26)
Other expenses

18 339
30 731
132 574
1 299
37 858
( 465)
44 347
( 12 929)
18 339
( 27 091)
132 574
( 2 396)
( 14 317)
( 465)
( 2 456)
( 12 929)
( 260 466)
( 27 091)
( 44 385)
( 2 396)
( 364 505)
( 14 317)
( 231 931)
( 2 456)
( 260 466)
( 44 385)
( 364 505)

56 742
30 181
120 732
264
29 955
( 26 998)
3 590
( 8 476)
56 742
( 32 752)
120 732
( 1 666)
( 11 647)
( 26 998)
( 2 321)
( 8 476)
( 107 900)
( 32 752)
( 38 534)
( 1 666)
( 230 294)
( 11 647)
( 109 562)
( 2 321)
( 107 900)
( 38 534)
( 230 294)

NOTE 15 – Staff expenses

( 109 562)

( 231 931)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
NOTE 15 – STAFF EXPENSES
The breakdown of these captions is as follows:
As at 31 December 2020, the amount received as compensation for discontinued hedging operations, included in other income,
The breakdown of these captions is as follows:
amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 11).

(in thousands of Euros)

31.12.2020

31.12.2019 *

31.12.2020

183 798
182 847
951
55 270
1 735
183 798
4 803
182 847
245 606
951
55 270
1 735
4 803

(in thousands of Euros)

185 453
184 589
864
31.12.2019 *
56 363
14
185 453
4 563
184 589
246 393
864
56 363
14
4 563

NOTE 15 – STAFF EXPENSES

Wages and salaries

The breakdown of these captions is as follows:

Remuneration
Long-term service / Career bonuses (see Note 16)

Mandatory social charges
Costs with post-employment benefits (see Note 16)
Wages and salaries
Other costs

Remuneration
Long-term service / Career bonuses (see Note 16)

Mandatory social charges
Costs with post-employment benefits (see Note 16)
Other costs

4 428
441

39
4 869

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The provisions and costs related to the restructuring process are presented in Note 32.

As at 31 December 2020 and 2019, the number of employees of NOVO BANCO Group has the following breakdown:
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
The provisions and costs related to the restructuring process are presented in Note 32.

245 606

246 393

The provisions and costs related to the restructuring process are presented in Note 32.
As at 31 December 2020 and 2019, the number of employees of NOVO BANCO Group has the following breakdown:
4 428
441

As at 31 December 2020 and 2019, the number of employees of NOVO BANCO Group has the following breakdown:

Novo Banco employees
Employees of the Group's subsidiaries

4 256
326

31.12.2020

31.12.2019

Total employees of the Group

Novo Banco employees
Employees of the Group's subsidiaries

31 December 2020
Total employees of the Group

Notes to the Consolidated Financial Statements

4 256
326

4 582

31.12.2020

4 582

31.12.2019

4 869

31 December 2020

Notes to the Consolidated Financial Statements

By professional category, the number of employees at NOVO BANCO Group is analyzed as follows:
By professional category, the number of employees at NOVO BANCO Group is analyzed as follows:

Senior management functions
Middle management positions
Specific positions
Administrative and other functions

NOTE 16 – EMPLOYEE BENEFITS

31.12.2020

31.12.2019

472
513
2 175
1 422

4 582

481
591
2 348
1 449

4 869

Pension and health-care benefits

NOTE 16 – Employee benefits
In compliance with the Collective Labour Agreement (ACT) for the banking sector established with the unions, the Bank undertook
the commitment to grant its employees, or their families, pensions on retirement, disability and survival. These payments consist of
Pension and health-care benefits
a percentage that increases in accordance with the years of service, applied to each year’s negotiated salary table for the active
In compliance with the Collective Labour Agreement (ACT) for the banking sector established with the unions, the Bank
workforce.
undertook the commitment to grant its employees, or their families, pensions on retirement, disability and survival.
Banking employees also receive health-care benefits through a specific Social-Medical Assistance Service (SAMS) managed by the
These payments consist of a percentage that increases in accordance with the years of service, applied to each year’s
Union. As a result of the signing of the new Collective Labour Agreement (ACT) on July 5, 2016, with publication in Labour Bulletin
negotiated salary table for the active workforce.
No. 29 of August 8, 2016, the contributions to SAMS, under the responsibility of the Group, as of February 1, 2017 started to
correspond to a fixed amount (according to Annex VI of the new ACT) for each employee, 14 times in a year. The calculation and
recording of the Group's obligations with health benefits attributable to workers at retirement age are carried out in a similar way to
Banking employees also receive health-care benefits through a specific Social-Medical Assistance Service (SAMS)
pension liabilities. These benefits are covered by the Pension Fund, which integrates all liabilities with pensions and health benefits.
managed by the Union. As a result of the signing of the new Collective Labour Agreement (ACT) on July 5, 2016, with
publication in Labour Bulletin No. 29 of August 8, 2016, the contributions to SAMS, under the responsibility of the
For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions consecrated
under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension fund, managed by GNB –
Sociedade Gestora de Fundos de Pensões, S.A..

246

Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the General Social Security
Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all banking employees who were beneficiaries of
“CAFEB – Caixa de Abono de Família dos Empregados Bancários” were integrated in the General Social Security Regime as from
1 January 2011.

Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.

Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the 2nd tripartite

agreement continue to be calculated in accordance with the provisions of the ACT and other conventions; however, banking

employees are entitled to receive a pension under the General Regime that considers the number of years of contributions under

that regime. The Banks are responsible for the difference between the pension determined in accordance with the provisions of the

ACT and that which the banking employees are entitled to receive from the General Social Security Regime.

The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de Abono de

Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change, pension entitlements

of active employees are to be covered on the terms defined under the General Social Security Regime, for the length of their

employment between 1 January 2011 and their retirement date. The differential required to make up the pension guaranteed under

the ACT is paid by the Banks.

At the end of financial year 2011 and pursuant to the 3rd tripartite agreement, it was decided to transfer, definitively and irreversibly,

to the General Social Security Regime all the banks’ liabilities with pensions in payment to retirees and pensioners that were in that

condition as at 31 December 2011 at constant values (0% discount rate) for the component foreseen in the “Instrumento de

Regulação Coletiva de Trabalho” (IRCT) applicable to banking employees, including the eventualities of death, disability and survival.

The liabilities relating to the updating of pension amounts, pension benefits other than those to be borne by Social Security, health-

care contributions to SAMS, death allowances and deferred survivor’s pensions will remain under the banks’ responsibility, with the

corresponding funding being met through the respective pension funds.

The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to the satisfaction

responsibilities for those pensions, be transferred to the State.

According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering the resolution by

the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained in the deliberation of the Board of

Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES responsibilities not transferred to NOVO BANCO

relate to the retirement and survival pensions and complementary retirement and survival pensions of the Directors of BES who had

been members of its Executive Committee, as defined in BES’s Articles of Association and BES’s General Assembly Regulations to

which the Articles of Association refer, not having, therefore, been transferred to NOVO BANCO, without prejudice to the transfer of

the responsibilities relating exclusively to the employment contracts with BES.

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDGroup, as of February 1, 2017 started to correspond to a fixed amount (according to Annex VI of the new ACT) for each
employee, 14 times in a year. The calculation and recording of the Group's obligations with health benefits attributable
to workers at retirement age are carried out in a similar way to pension liabilities. These benefits are covered by the
Pension Fund, which integrates all liabilities with pensions and health benefits.

For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions
consecrated under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension
fund, managed by GNB – Sociedade Gestora de Fundos de Pensões, S.A..

Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the
General Social Security Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all
banking employees who were beneficiaries of “CAFEB – Caixa de Abono de Família dos Empregados Bancários”
were integrated in the General Social Security Regime as from 1 January 2011.

Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.

Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the
2nd tripartite agreement continue to be calculated in accordance with the provisions of the ACT and other conven-
tions; however, banking employees are entitled to receive a pension under the General Regime that considers the
number of years of contributions under that regime. The Banks are responsible for the difference between the pension
determined in accordance with the provisions of the ACT and that which the banking employees are entitled to receive
from the General Social Security Regime.

The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de
Abono de Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change,
pension entitlements of active employees are to be covered on the terms defined under the General Social Security
Regime, for the length of their employment between 1 January 2011 and their retirement date. The differential required
to make up the pension guaranteed under the ACT is paid by the Banks.

At the end of financial year 2011 and pursuant to the 3rd tripartite agreement, it was decided to transfer, definitively
and irreversibly, to the General Social Security Regime all the banks’ liabilities with pensions in payment to retirees and
pensioners that were in that condition as at 31 December 2011 at constant values (0% discount rate) for the component
foreseen in the “Instrumento de Regulação Coletiva de Trabalho” (IRCT) applicable to banking employees, including
the eventualities of death, disability and survival. The liabilities relating to the updating of pension amounts, pension
benefits other than those to be borne by Social Security, health-care contributions to SAMS, death allowances and
deferred survivor’s pensions will remain under the banks’ responsibility, with the corresponding funding being met
through the respective pension funds.

The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to
the satisfaction responsibilities for those pensions, be transferred to the State.

According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering
the resolution by the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained
in the deliberation of the Board of Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES
responsibilities not transferred to NOVO BANCO relate to the retirement and survival pensions and complementary
retirement and survival pensions of the Directors of BES who had been members of its Executive Committee, as defined
in BES’s Articles of Association and BES’s General Assembly Regulations to which the Articles of Association refer, not
having, therefore, been transferred to NOVO BANCO, without prejudice to the transfer of the responsibilities relating
exclusively to the employment contracts with BES.

Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to
NOVO BANCO. Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive
Committee Plan were split, with a part (described above) remaining in BES, with the other part being transferred to
NOVO BANCO, together with the Pension Fund’s liabilities relating to the Base Plan and the Complementary Plan.

To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES,
following the decision of Bank of Portugal of 11 February 2015, from those that were transferred to NOVO BANCO, the

247

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESassets existing on 3 August 2014 were split in proportion to the liabilities calculated on the same date, allocated to each
of the groups of former participants and beneficiaries allocated to each of the entities. The split performed on these
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to NOVO BANCO.
Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive Committee Plan were split,
terms will result, on 3 August 2014, in a level of funding of the Complementary Plan of the Executive Commission that
with a part (described above) remaining in BES, with the other part being transferred to NOVO BANCO, together with the Pension
is equal for each of the associates of the Fund (NOVO BANCO and BES).
Fund’s liabilities relating to the Base Plan and the Complementary Plan.
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to NOVO BANCO.
On June 16, 2020, the Insurance and Pension Funds Supervisory Authority (“ASF”) approved the extinction of the por-
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES, following the
Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive Committee Plan were split,
decision of Bank of Portugal of 11 February 2015, from those that were transferred to NOVO BANCO, the assets existing on 3 August
tion that finances the Plan of the former Executive Committee and, simultaneously, the amendment of the Constitutive
with a part (described above) remaining in BES, with the other part being transferred to NOVO BANCO, together with the Pension
2014 were split in proportion to the liabilities calculated on the same date, allocated to each of the groups of former participants and
Fund’s liabilities relating to the Base Plan and the Complementary Plan.
Contract of the NOVO BANCO Pension Fund. This approval led to the creation of three aspects of the Executive
beneficiaries allocated to each of the entities. The split performed on these terms will result, on 3 August 2014, in a level of funding
Committee's Pension Plan: (i) Executive Committee - BES, (ii) Executive Committee - NOVO BANCO and (iii) Undivided
of the Complementary Plan of the Executive Commission that is equal for each of the associates of the Fund (NOVO BANCO and
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES, following the
BES).
Party. The assets of the undivided party are not allocated to any liability of NOVO BANCO or BES until the final decision
decision of Bank of Portugal of 11 February 2015, from those that were transferred to NOVO BANCO, the assets existing on 3 August
2014 were split in proportion to the liabilities calculated on the same date, allocated to each of the groups of former participants and
of the court (limit of article 402), so NOVO BANCO transferred the amount of Euro 21.2 million of net liabilities of the
On June 16, 2020, the Insurance and Pension Funds Supervisory Authority (“ASF”) approved the extinction of the portion that
beneficiaries allocated to each of the entities. The split performed on these terms will result, on 3 August 2014, in a level of funding
amount of the fund's assets relating to the undivided portion for Provisions.
finances the Plan of the former Executive Committee and, simultaneously, the amendment of the Constitutive Contract of the Novo
of the Complementary Plan of the Executive Commission that is equal for each of the associates of the Fund (NOVO BANCO and
Mercado Pension Fund Bank. This approval led to the creation of three aspects of the Executive Committee's Pension Plan: (i)
BES).
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary
Executive Committee - BES, (ii) Executive Committee - NOVO BANCO and (iii) Undivided Party. The assets of the undivided party
are not allocated to any liability of NOVO BANCO or BES until the final decision of the court (limit of article 402), so NOVO BANCO
On June 16, 2020, the Insurance and Pension Funds Supervisory Authority (“ASF”) approved the extinction of the portion that
plan became a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19,
transferred the amount of Euro 21.2 million of net liabilities of the amount of the fund's assets relating to the undivided portion for
finances the Plan of the former Executive Committee and, simultaneously, the amendment of the Constitutive Contract of the Novo
this plan´s responsibilities and assets are net of the amounts presented for the defined benefit plans. On 31 December
Provisions.
Mercado Pension Fund Bank. This approval led to the creation of three aspects of the Executive Committee's Pension Plan: (i)
2020, the amount of Euro 535 thousand was recorded in Personnel Costs related to the defined contribution plan (31
Executive Committee - BES, (ii) Executive Committee - NOVO BANCO and (iii) Undivided Party. The assets of the undivided party
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary plan became
are not allocated to any liability of NOVO BANCO or BES until the final decision of the court (limit of article 402), so NOVO BANCO
December 2019: Euro 492 thousand).
a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19, this plan´s responsibilities
transferred the amount of Euro 21.2 million of net liabilities of the amount of the fund's assets relating to the undivided portion for
and assets are net of the amounts presented for the defined benefit plans. On 31 December 2020, the amount of Euro 535 thousand
Provisions.
The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as
was recorded in Personnel Costs related to the defined contribution plan (31 December 2019: Euro 492 thousand).
follows:
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary plan became
The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as follows:
a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19, this plan´s responsibilities
and assets are net of the amounts presented for the defined benefit plans. On 31 December 2020, the amount of Euro 535 thousand
was recorded in Personnel Costs related to the defined contribution plan (31 December 2019: Euro 492 thousand).

31.12.2020

31.12.2019

Actual
The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as follows:

Assumptions

Actual

Actuarial Assumptions

Projected rate of return on plan assets
Discount rate
Pension increase rate
Actuarial Assumptions
Salary increase rate
Projected rate of return on plan assets
Mortality table men
Discount rate
Mortality table women
Pension increase rate
Salary increase rate

31.12.2020

31.12.2019

1,00%
1,00%
Assumptions
0,25%
0,50%
1,00%
1,00%
0,25%
0,50%

2,41%
-
Actual
1,34%
3,07%
2,41%
-
1,34%
3,07%

1,35%
1,35%
Assumptions
0,25%
0,50%
1,35%
1,35%
0,25%
0,50%

TV 88/90
TV 88/90-2 anos

6,82%
-
Actual
0,49%
1,20%
6,82%
-
0,49%
1,20%

Mortality table men
Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as at 31 December
Mortality table women
2020 and 31 December 2019 was based on: (i) the evolution of the main indices for high quality corporate bonds and (ii) the duration
Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as at
of the liabilities.
31 December 2020 and 2019 was based on: (i) the evolution of the main indices for high quality corporate bonds and
Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as at 31 December
Pension plan participants are detailed as follows:
(ii) the duration of the liabilities.
2020 and 31 December 2019 was based on: (i) the evolution of the main indices for high quality corporate bonds and (ii) the duration
of the liabilities.
Pension plan participants are detailed as follows:
Pension plan participants are detailed as follows:

TV 88/90
TV 88/90-2 anos

31.12.2020

31.12.2019

Employees
Pensioners and survivors

4 417
6 949

4 520
6 818

31.12.2020

31.12.2019

11 338
4 520
6 818
The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:

TOTAL
Employees
Pensioners and survivors

11 366
4 417
6 949

TOTAL

11 366

11 338

The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:

The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 2019 is as follows:

31 December 2020

Notes to the Consolidated Financial Statements

248

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDAssets / (liabilities) recognized in the balance sheet

Total liabilities

Pensioners

Employees

Assets / (liabilities) recognized in the balance sheet
Coverage
Fair value of plan assets
Total liabilities
Net assets / (liabilities) in the balance sheet (See Notes 29 and 33)
Pensioners

(in thousand Euros)

31.12.2020

31.12.2019

(1 934 668)

(1 848 930)

(in thousand Euros)

(1 368 021)

31.12.2020

( 566 647)

(1 287 349)

31.12.2019

( 561 581)

1 907 616
(1 934 668)

1 695 857
(1 848 930)

(in thousand Euros)

( 27 052)
(1 368 021)

31.12.2020

( 153 073)
(1 287 349)

31.12.2019

Employees

( 566 647)
723 723

( 561 581)
599 454

1 907 616
(1 934 668)

1 695 857
(1 848 930)

(1 368 021)
( 27 052)
( 566 647)
723 723

Accumulated actuarial deviations recognized in other comprehensive income
Assets / (liabilities) recognized in the balance sheet
Coverage
Fair value of plan assets
Total liabilities
According to the policy defined in Note 2.15 - Employee Benefits, the Group calculates liabilities for pensions and actuarial gains and
Pensioners
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
Net assets / (liabilities) in the balance sheet (See Notes 29 and 33)
According to the policy defined in Note 2.15 - Employee Benefits, the Group calculates liabilities for pensions and
Employees
respective pension liabilities.
Accumulated actuarial deviations recognized in other comprehensive income
actuarial gains and losses half-yearly and evaluates at each balance sheet date and for each plan separately, the
Coverage
As at 31 December 2019, the net book value includes Euro 30,4 million related to the deficit of the complementary plan CE - NOVO
recoverability of the excess of the respective pension liabilities.
Fair value of plan assets
BANCO's participation. With respect to the base and complementary net liabilities as at 31 December 2019, the Group has made the
According to the policy defined in Note 2.15 - Employee Benefits, the Group calculates liabilities for pensions and actuarial gains and
Net assets / (liabilities) in the balance sheet (See Notes 29 and 33)
contribution in early 2020.
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
As at 31 December 2019, the net book value includes Euro 30,4 million related to the deficit of the complementary plan
respective pension liabilities.
Accumulated actuarial deviations recognized in other comprehensive income
CE - NOVO BANCO's participation. With respect to the base and complementary net liabilities as at 31 December 2019,
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
the Group has made the contribution in early 2020.
mortality table results in the following changes in the current value of liabilities determined for past services:
As at 31 December 2019, the net book value includes Euro 30,4 million related to the deficit of the complementary plan CE - NOVO
According to the policy defined in Note 2.15 - Employee Benefits, the Group calculates liabilities for pensions and actuarial gains and
BANCO's participation. With respect to the base and complementary net liabilities as at 31 December 2019, the Group has made the
(in thousands of Euros)
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
contribution in early 2020.
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one
respective pension liabilities.
year in the mortality table results in the following changes in the current value of liabilities determined for past services:
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
of +0.25% in the
of +0.25% in the
As at 31 December 2019, the net book value includes Euro 30,4 million related to the deficit of the complementary plan CE - NOVO
mortality table results in the following changes in the current value of liabilities determined for past services:
rate used
rate used
BANCO's participation. With respect to the base and complementary net liabilities as at 31 December 2019, the Group has made the
Discount rate
contribution in early 2020.
Salary increase rate
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
Pension increase rate
54 664
57 714
of +0.25% in the
of +0.25% in the
mortality table results in the following changes in the current value of liabilities determined for past services:
rate used
rate used
in +1 ano
in +1 ano

of -0.25% in the
rate used
(in thousands of Euros)
73 693

Change in the amount of liabilities due to the change:

of -0.25% in the
rate used
in -1 ano

(1 287 349)
( 153 073)
( 561 581)
599 454

of -0.25% in the
rate used

Assumptions

31.12.2020

31.12.2019

31.12.2020

31.12.2019

( 153 073)

1 695 857

1 907 616

( 27 052)

723 723

599 454

( 73 282)

( 68 854)

( 52 943)

( 16 935)

( 18 882)

( 50 705)

26 643

78 127

27 329

Discount rate
Mortality table
Salary increase rate

Assumptions

Change in the amount of liabilities due to the change:

( 73 282)
( 70 811)
26 643

31.12.2020

78 127
71 808
( 16 935)

( 68 854)
( 64 631)
27 329

31.12.2019

of -0.25% in the
rate used
(in thousands of Euros)
in -1 ano
73 693
65 300
( 18 882)

Pension increase rate
The evolution of the actuarial gains and losses in the balance sheet can be analyzed as follows:

( 52 943)

of +0.25% in the
57 714
rate used
in +1 ano

of -0.25% in the
rate used
in -1 ano

( 73 282)
( 70 811)
26 643

78 127
71 808
( 16 935)

of +0.25% in the
54 664
rate used
in +1 ano

31.12.2020

( 68 854)
( 64 631)
27 329

( 50 705)

of -0.25% in the
rate used
in -1 ano
(in thousands of Euros)
73 693
65 300
( 18 882)

31.12.2019

Discount rate
Mortality table
Salary increase rate

54 664
1 848 930
in +1 ano

( 50 705)

1 675 608
in -1 ano

(in thousands of Euros)

Pension increase rate
Retirement pension liabilities at beginning of the exercise
The evolution of the actuarial gains and losses in the balance sheet can be analyzed as follows:

( 52 943)

57 714

in +1 ano

in -1 ano

14
31 687
65 300
2 645
285
1 675 608

31.12.2019

71 808

( 70 811)

31.12.2020

425
23 870
( 64 631)
2 617
238
1 848 930

Current service cost
Interest cost
Mortality table
The evolution of the actuarial gains and losses in the balance sheet can be analyzed as follows:
Plan participants' contribution
Contributions from other entities
Retirement pension liabilities at beginning of the exercise
The evolution of the actuarial gains and losses in the balance sheet can be analyzed as follows:
Actuarial (gains) / losses in the exercise:
Current service cost
- Changes in financial assumptions
Interest cost
- Experience adjustments (gains) / losses
Plan participants' contribution
Pensions paid by the fund / transfers and once-off bonuses
Retirement pension liabilities at beginning of the exercise
Contributions from other entities
Amount of the responsibilities transferred to defined contribution plans
Actuarial (gains) / losses in the exercise:
Early retirement
Current service cost
- Changes in financial assumptions
Foreign exchange differences and other
Interest cost
- Experience adjustments (gains) / losses
Plan participants' contribution
Retirement pension liabilities at end of the exercise
Pensions paid by the fund / transfers and once-off bonuses
Contributions from other entities
Amount of the responsibilities transferred to defined contribution plans
Actuarial (gains) / losses in the exercise:
Early retirement
The evolution of the value of pension funds in the years ended 31 December 2020 and 2019 can be analyzed as follows:
- Changes in financial assumptions
Foreign exchange differences and other
- Experience adjustments (gains) / losses
Pensions paid by the fund / transfers and once-off bonuses
Retirement pension liabilities at end of the exercise
Amount of the responsibilities transferred to defined contribution plans
Early retirement
The evolution of the value of pension funds in the years ended 31 December 2020 and 2019 can be analyzed as follows:
Foreign exchange differences and other

425
101 787
23 870
50 737
2 617
( 73 073)
1 848 930
238
( 54 679)
32 902
425
101 787
914
23 870
50 737
2 617
1 934 668
( 73 073)
238
( 54 679)
32 902
101 787
914
50 737
( 73 073)
1 934 668
( 54 679)
32 902
914

31.12.2020

14
125 523
31 687
64 098
2 645
( 69 708)
1 675 608
285
-
15 670
14
125 523
3 108
31 687
64 098
2 645
1 848 930
( 69 708)
285
-
15 670
125 523
3 108
64 098
( 69 708)
1 848 930
-
15 670
3 108

31.12.2019

(in thousands of Euros)

Retirement pension liabilities at end of the exercise

1 934 668

1 848 930

The evolution of the value of pension funds in the years ended 31 December 2020 and 2019 can be analyzed as follows:

31 December 2020

Notes to the Consolidated Financial Statements

249

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe evolution of the value of pension funds in the years ended 31 December 2020 and 2019 can be analyzed as follows:

Fair value of fund assets at beginning of period

(in thousands of Euros)

31.12.2020

31.12.2019

1 695 857

1 648 168

75
-

Total

7 818

6 683

Quoted

57 984

71 489

59 309

39 710

1
59 309

75
39 710

-
39 710

216 168

395 969

163 866

324 480

1 013 356

1 105 727

115 855
-

250 183
71 489

-
163 866

250 183
395 969

-
324 480

-
1 013 356

-
1 105 727

115 855
1 105 727

31.12.2019

31.12.2020

31.12.2019

Structured debt

(in thousands of Euros)

Derivatives
Equity instruments

Debt instruments
Real estate properties

31
437 633
-
75

Net return from the fund

31.12.2019
(in thousands of Euros)

74
(in thousands of Euros)

-
216 168
1 907 616

66
1 469 983
39 710
-

Investment funds
Cash and cash equivalents

107 166
74
(in thousands of Euros)

Cash and cash equivalents
Investment funds

31.12.2020
Unquoted

Fund balance at the end of the year

Structured debt
Total
Equity instruments
Derivatives

- Share of the net interest on the assets
- Return on assets excluding net interest

Group contributions
Fair value of fund assets at beginning of period
Employee contributions
Net return from the fund
Pensions paid by the fund / transfers and once-off bonuses
Transfer to Undivided Party
Foreign exchange differences and other
Group contributions
Fair value of fund assets at beginning of period
Fund balance at the end of the year
Employee contributions
Net return from the fund
Pensions paid by the fund / transfers and once-off bonuses
Pension fund assets can be analyzed as follows:
Transfer to Undivided Party
Foreign exchange differences and other
Group contributions
Fair value of fund assets at beginning of period
Fund balance at the end of the year
Employee contributions
Pension fund assets can be analyzed as follows:
Net return from the fund
Pensions paid by the fund / transfers and once-off bonuses
Equity instruments
- Share of the net interest on the assets
Pension fund assets can be analyzed as follows:
Transfer to Undivided Party
- Return on assets excluding net interest
Debt instruments
Foreign exchange differences and other
Group contributions
Investment funds
Fund balance at the end of the year
Employee contributions
Pensions paid by the fund / transfers and once-off bonuses
Pension fund assets can be analyzed as follows:
Transfer to Undivided Party
Real estate properties
Debt instruments
Foreign exchange differences and other

110 313
28 026
82 287
1 535
1 648 168
2 645
110 313
( 69 708)
28 026
-
82 287
2 904
1 535
1 648 168
1 695 857
2 645
110 313
( 69 708)
28 026
-
82 287
2 904
1 535
1 648 168
1 695 857
2 645
Total
110 313
( 69 708)
223 175
28 026
-
82 287
1 013 430
2 904
1 535
274 152
1 695 857
2 645
Total
14 501
( 69 708)
1
223 175
-
107 166
1 013 430
2 904
63 432
274 152
1 695 857
Total
14 501
1 695 857
223 175
1
Pension fund assets can be analyzed as follows:
The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed as follows:
1 013 430
74
107 166
107 166
(in thousands of Euros)
(in thousands of Euros)

47 403
19 891
27 512
269 419
1 695 857
2 617
47 403
( 73 073)
19 891
( 35 523)
27 512
916
269 419
1 695 857
1 907 616
2 617
47 403
( 73 073)
19 891
( 35 523)
27 512
916
269 419
31.12.2019
1 695 857
1 907 616
2 617
Unquoted
47 403
( 73 073)
19 891
( 35 523)
27 512
916
269 419
31.12.2019
1 907 616
2 617
Unquoted
( 73 073)
( 35 523)
916

Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period

31.12.2020
6 683
1 400 073
-
163 866
131 265
-
1 013 356
63 630

31.12.2020
6 683
1 400 073
-
131 265
-
63 630
-
31.12.2020
194 895

274 152
63 432
31.12.2019
Total
14 501
Structured debt
1 695 857
Total
1
Derivatives
223 175
Equity instruments
92 601
Participation units
The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed as follows:
107 166
Real estate properties
1 013 430
Debt instruments
75 851
Real estate properties
(in thousands of Euros)
63 432
Cash and cash equivalents
274 152
Investment funds
168 452
Total
14 501
97
Structured debt
1 695 857
1 907 616
Total
The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed
1
75
Derivatives
92 601
Participation units
The evolution of actuarial deviations on the balance sheet can be analyzed as follows:
as follows:
The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed as follows:
107 166
115 855
Real estate properties
75 851
Real estate properties
(in thousands of Euros)
(in thousands of Euros)
63 432
Cash and cash equivalents
31.12.2019
168 452
Total
31.12.2019
1 695 857
Total
492 177
92 601
Participation units
Actuarial (gains) / losses in the period:
The evolution of actuarial deviations on the balance sheet can be analyzed as follows:
The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed as follows:
- Changes in assumptions
75 851
Real estate properties
(in thousands of Euros)
- Financial assumptions
125 523
101 787
(in thousands of Euros)
23 225
( 18 189)
( 57)
( 743)
492 177
599 454
599 454
723 723

- Plan assets return (excluding net of interests)
Other
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Participation units
Actuarial (gains) / losses in the period:
The evolution of actuarial deviations on the balance sheet can be analyzed as follows:
- Changes in assumptions
Real estate properties
- Financial assumptions

92 601
75 851
(in thousands of Euros)
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
31.12.2019
- Plan assets return (excluding net of interests)
168 452
The evolution of actuarial deviations on the balance sheet can be analyzed as follows:
(in thousand of Euros)
Other
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Actuarial (gains) / losses in the period:
The evolution of actuarial deviations on the balance sheet can be analyzed as follows:
- Changes in assumptions
(in thousands of Euros)
Current service cost
14
125 523
- Financial assumptions
3 661
Net interest
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
( 18 189)
- Plan assets return (excluding net of interests)
-
Reformas antecipadas
( 57)
Other
(in thousand of Euros)
492 177
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Post-employment benefits costs
3 675
599 454
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Actuarial (gains) / losses in the period:
- Changes in assumptions
Current service cost
- Financial assumptions
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
Net interest
- Plan assets return (excluding net of interests)
Reformas antecipadas
(in thousand of Euros)
Other

425
101 787
3 979
31.12.2020
23 225
1 310
( 743)
599 454
5 714
723 723

131 265
63 630
31.12.2020
194 895

101 787
23 225
( 743)
599 454
723 723

125 523
( 18 189)
( 57)
492 177
599 454

425
101 787
3 979
23 225
1 310
( 743)

-
216 168
194 895

14
125 523
3 661
( 18 189)
-
( 57)

Total
97
1 907 616
39 710
75

Total
97
1 907 616
75
39 710

131 265
63 630

31.12.2019
168 452
31.12.2019

66
1 469 983
-
39 710

66
1 469 983
-

6 683
1 400 073
163 866
-

31.12.2019
Unquoted

31
437 633
75
-

7 818
295 784
1
59 309

31
437 633
75

7 818
295 784
1

7 818
295 784
59 309
1

31.12.2020
194 895

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

1 105 727
-

1 105 727
115 855

1 013 356
-

31.12.2019

31.12.2020

-
1 105 727

115 855
1 105 727

1 469 983

1 907 616

1 400 073

-
115 855

71 489
250 183

395 969
250 183

Unquoted

324 480
-

216 168
-

31.12.2019

250 183
71 489

250 183
395 969

107 166
74

115 855
-

-
324 480

295 784

107 166

250 183

115 855

437 633

250 183

63 432
57 984

57 984
63 432

599 454

63 432
57 984

63 432

Quoted

Total

Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Post-employment benefits costs

31.12.2020

723 723
5 714

31.12.2019

599 454
3 675

Current service cost
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
Net interest
Reformas antecipadas
(in thousand of Euros)

14
3 661
-

425
3 979
1 310

Post-employment benefits costs

31 December 2020

Current service cost
250
Net interest
Reformas antecipadas

Post-employment benefits costs

31.12.2020

5 714

31.12.2019

3 675

Notes to the Consolidated Financial Statements

425
3 979
1 310

5 714

14
43
3 661
-

3 675

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDFair value of fund assets at beginning of period

Net return from the fund

- Share of the net interest on the assets

- Return on assets excluding net interest

Group contributions

Employee contributions

Transfer to Undivided Party

Foreign exchange differences and other

Fund balance at the end of the year

Pensions paid by the fund / transfers and once-off bonuses

Pension fund assets can be analyzed as follows:

Quoted

Total

Quoted

Total

31.12.2020

Unquoted

(in thousands of Euros)

31.12.2019

Unquoted

39 710

1 105 727

324 480

71 489

395 969

115 855

250 183

39 710

1 105 727

115 855

250 183

163 866

1 013 356

216 168

59 309

223 175

1 013 430

57 984

274 152

6 683

7 818

14 501

107 166

63 432

1 469 983

437 633

1 907 616

1 400 073

295 784

1 695 857

The pension fund assets used by the Group or representative of securities issued by entities of the Group are detailed as follows:

Equity instruments

Debt instruments

Investment funds

Structured debt

Derivatives

Real estate properties

Cash and cash equivalents

Total

Participation units

Real estate properties

Total

(in thousands of Euros)

31.12.2020

31.12.2019

1 695 857

1 648 168

47 403

19 891

27 512

269 419

2 617

( 73 073)

( 35 523)

916

110 313

28 026

82 287

1 535

2 645

( 69 708)

2 904

1 907 616

1 695 857

(in thousands of Euros)

31.12.2020

31.12.2019

131 265

63 630

92 601

75 851

194 895

168 452

(in thousands of Euros)

31.12.2020

31.12.2019

The evolution of actuarial deviations on the balance sheet can be analyzed as follows:

Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period

599 454

492 177

Actuarial (gains) / losses in the period:
- Changes in assumptions
- Financial assumptions

- Plan assets return (excluding net of interests)
Other

101 787
23 225
( 743)

125 523
( 18 189)
( 57)

Accumulated actuarial losses recognized in other comprehensive income at the end of the period
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed
as follows:
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
(in thousand of Euros)

723 723

599 454

Current service cost
Net interest
Reformas antecipadas

Post-employment benefits costs

31.12.2020

31.12.2019

425
3 979
1 310

5 714

14
3 661
-

3 675

The evolution of net assets / (liabilities) on the balance sheet can be analyzed in the years ended 31 December 2020
The evolution of net assets / (liabilities) on the balance sheet can be analyzed in the years ended 31 December 2020 and 2019 as
and 2019 as follows:
follows:

31.12.2020

31.12.2019

(in thousands of Euros)

( 153 073)

31.12.2020

(in thousands of Euros)

Notes to the Consolidated Financial Statements

The evolution of net assets / (liabilities) on the balance sheet can be analyzed in the years ended 31 December 2020 and 2019 as
At the beginning of the period
follows:
31 December 2020
Cost for period
Actuarial gains / (losses) recognized in other comprehensive income
Contributions made in the period
Undivided transfer and reduction of responsibilities
The evolution of net assets / (liabilities) on the balance sheet can be analyzed in the years ended 31 December 2020 and 2019 as
At the beginning of the period
Other
follows:
Cost for period
At the end of the period
Actuarial gains / (losses) recognized in other comprehensive income
Contributions made in the period
Undivided transfer and reduction of responsibilities
In 2020, the value of early retirements amounted to Euro 32.9 million (31 December 2019: Euro 15.7 million), of which Euro 31.6
At the beginning of the period
Other
million are part of the Group's restructuring process and as such, they were recognized against the use of the provision for
Cost for period
restructuring (see Note 32). These amounts are considered in Other in the previous table.
At the end of the period
Actuarial gains / (losses) recognized in other comprehensive income
In 2020, the value of early retirements amounted to Euro 32.9 million (31 December 2019: Euro 15.7 million), of which
Contributions made in the period
Euro 31.6 million are part of the Group's restructuring process and as such, they were recognized against the use of the
The summary of the last five years of the funds liabilities and the funds balances, as well as experience gains and losses, is analyzed
In 2020, the value of early retirements amounted to Euro 32.9 million (31 December 2019: Euro 15.7 million), of which Euro 31.6
Undivided transfer and reduction of responsibilities
as follows:
million are part of the Group's restructuring process and as such, they were recognized against the use of the provision for
Other
provision for restructuring (see Note 32). These amounts are considered in Other in the previous table.
restructuring (see Note 32). These amounts are considered in Other in the previous table.
At the end of the period
The summary of the last five years of the funds liabilities and the funds balances, as well as experience gains and losses,
The summary of the last five years of the funds liabilities and the funds balances, as well as experience gains and losses, is analyzed
is analyzed as follows:
In 2020, the value of early retirements amounted to Euro 32.9 million (31 December 2019: Euro 15.7 million), of which Euro 31.6
as follows:
million are part of the Group's restructuring process and as such, they were recognized against the use of the provision for
Retirement pension liabilities
restructuring (see Note 32). These amounts are considered in Other in the previous table.
Funds balance

( 27 440)
43
( 3 675)
( 107 277)
1 535
-
( 27 440)
( 16 216)
( 3 675)
( 153 073)
( 107 277)
1 535
-
( 27 440)
( 16 216)
( 3 675)
( 153 073)
( 107 277)
1 535
-
( 16 216)

( 5 714)
( 124 269)
269 419
19 156
( 153 073)
( 32 571)
( 5 714)
( 27 052)
( 124 269)
269 419
19 156
( 153 073)
( 32 571)
( 5 714)
( 27 052)
( 124 269)
269 419
19 156
( 32 571)

( 153 073)
(in thousands of Euros)

(in thousands of Euros)

31.12.2020

31.12.2019

( 27 052)

(1 934 668)

(1 848 930)

(1 675 608)

(1 663 489)

(1 577 750)

1 907 616

1 695 857

1 648 168

1 648 405

1 557 979

31.12.2019

31.12.2018

31.12.2016

31.12.2020

31.12.2017

(in thousands of Euros)

(Under) / overfunding of liabilities
The summary of the last five years of the funds liabilities and the funds balances, as well as experience gains and losses, is analyzed
as follows:
Retirement pension liabilities
(Gains) / losses on experience adjustments in retirement pension liabilities

(1 934 668)
50 737

(1 848 930)
64 098

(1 675 608)
17 839

(1 577 750)
12 318

(1 663 489)
15 263

( 153 073)

31.12.2019

31.12.2018

31.12.2016

31.12.2020

31.12.2017

( 27 052)

( 27 440)

( 15 084)

( 19 771)

Funds balance
(Gains) / losses on experience adjustments in plan assets

1 907 616
( 27 512)

1 695 857
( 82 287)

1 648 168
53 917

1 648 405
( 91 900)

1 557 979
43 716

(in thousands of Euros)

(Under) / overfunding of liabilities

( 27 052)

31.12.2020

( 153 073)

31.12.2019

( 27 440)

31.12.2018

( 15 084)

31.12.2017

( 19 771)

31.12.2016

The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
(Gains) / losses on experience adjustments in retirement pension liabilities
Retirement pension liabilities
following table shows the temporal detail of the estimated benefits to be paid:
(Gains) / losses on experience adjustments in plan assets
Funds balance

53 917
1 648 168

( 27 512)
1 907 616

( 82 287)
1 695 857

( 91 900)
1 648 405

17 839
(1 675 608)

15 263
(1 663 489)

12 318
(1 577 750)

50 737
(1 934 668)

64 098
(1 848 930)

(Under) / overfunding of liabilities
The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
following table shows the temporal detail of the estimated benefits to be paid:
(Gains) / losses on experience adjustments in retirement pension liabilities
Estimated amount of benefits payable

1 879 351

222 542

73 801

74 092

( 153 073)

( 27 052)

( 27 440)

( 15 084)

17 839

50 737

64 098

15 263

12 318

Up to 1
year

From 1 to
2 years

(Gains) / losses on experience adjustments in plan assets
The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16
Career bonuses
years). The following table shows the temporal detail of the estimated benefits to be paid:
The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
Estimated amount of benefits payable
following table shows the temporal detail of the estimated benefits to be paid:
As at 31 December 2020, the liabilities assumed by the Group amounted to Euro 7,523 thousand, corresponding to the liabilities for
past services subjacent to the career bonuses, as described in Note 2.15 – Employee benefits (31 December 2019: Euro 7,106
thousand) (see Note 33).
Career bonuses

43 716
More than 5
years

From 2 to 5
years

From 1 to
2 years

(in thousands of Euros)

Up to 1
year

1 879 351

222 542

73 801

74 092

( 82 287)

( 27 512)

( 91 900)

53 917

(in thousands of Euros)

From 1 to
2 years

From 2 to 5
years

More than 5
years

Up to 1
year

As at 31 December 2020, the costs recognized with career bonuses were Euro 951 thousand (31 December 2019: Euro 864
Estimated amount of benefits payable
As at 31 December 2020, the liabilities assumed by the Group amounted to Euro 7,523 thousand, corresponding to the liabilities for
thousand) (see Note 15).
past services subjacent to the career bonuses, as described in Note 2.15 – Employee benefits (31 December 2019: Euro 7,106
thousand) (see Note 33).
Career bonuses
As at 31 December 2020, the costs recognized with career bonuses were Euro 951 thousand (31 December 2019: Euro 864
As at 31 December 2020, the liabilities assumed by the Group amounted to Euro 7,523 thousand, corresponding to the liabilities for
thousand) (see Note 15).
past services subjacent to the career bonuses, as described in Note 2.15 – Employee benefits (31 December 2019: Euro 7,106
thousand) (see Note 33).

1 879 351

222 542

73 801

74 092

As at 31 December 2020, the costs recognized with career bonuses were Euro 951 thousand (31 December 2019: Euro 864
thousand) (see Note 15).

251

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

From 2 to 5
years

43 716
(in thousands of Euros)
1 557 979
More than 5
( 19 771)
years

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESCareer bonuses

As at 31 December 2020, the liabilities assumed by the Group amounted to Euro 7,523 thousand, corresponding to
the liabilities for past services subjacent to the career bonuses, as described in Note 2.15 – Employee benefits (31
December 2019: Euro 7,106 thousand) (see Note 33).

As at 31 December 2020, the costs recognized with career bonuses were Euro 951 thousand (31 December 2019: Euro
864 thousand) (see Note 15).

NOTE 17 – Other administrative expenses

NOTE 17 – OTHER ADMINISTRATIVE EXPENSES
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

(in thousands of Euros)

31.12.2020

31.12.2019 *

NOTE 17 – OTHER ADMINISTRATIVE EXPENSES

The breakdown of this caption is as follows:

(in thousands of Euros)

31.12.2020

2 800
6 739
12 113
8 766
1 386
4 584
3 123
45 610
2 800
2 569
6 739
1 322
12 113
11 625
8 766
4 938
1 386
24 688
4 584
3 185
3 123
1 487
45 610
18 228
2 569
153 163
1 322
11 625
4 938
24 688
3 185
1 487
18 228

3 457
8 443
11 795
8 945
3 086
4 267
31.12.2019 *
2 621
45 920
3 457
3 614
8 443
1 525
11 795
10 482
8 945
7 407
3 086
24 979
4 267
3 681
2 621
1 588
45 920
20 120
3 614
161 930
1 525
10 482
7 407
24 979
3 681
1 588
20 120

Rentals
Advertising
Communication
Maintenance and repairs expenses
Travelling and representation
Transportation of valuables
Insurance
IT services
Rentals
Independent work
Advertising
Temporary work
Communication
Electronic payment systems
Maintenance and repairs expenses
Legal costs
Travelling and representation
Consultancy and audit fees
Transportation of valuables
Water, energy and fuel
Insurance
Consumables
IT services
Other costs
Independent work
Temporary work
Electronic payment systems
Legal costs
Consultancy and audit fees
Water, energy and fuel
Consumables
Other costs

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The caption Other costs includes, amongst others, specialised service costs incurred with security and surveillance, information
services, training and sundry external supplies.

As at 31 December 2020, rental costs includes an amount of Euro 196 thousand related to short-term operating lease contracts, as
The caption Other costs includes, amongst others, specialised service costs incurred with security and surveillance,
described in note 2.14.
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
information services, training and sundry external supplies.
The fees invoiced during the years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
The caption Other costs includes, amongst others, specialised service costs incurred with security and surveillance, information
As at 31 December 2020, rental costs includes an amount of Euro 196 thousand related to short-term operating lease
services, training and sundry external supplies.
contracts, as described in note 2.14.
As at 31 December 2020, rental costs includes an amount of Euro 196 thousand related to short-term operating lease contracts, as
The fees invoiced during the years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article
described in note 2.14.
508-F of the Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
The fees invoiced during the years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
NOTE 18 - CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

Statutory audit of annual accounts
Other reliability assurance services

Total value of billable services

(in thousands of Euros)

1 685
1 043

2 307
802

31.12.2020

31.12.2019

161 930

153 163

3 109

2 728

This caption on 31 December 2020 and 2019 is analyzed as follows:

Statutory audit of annual accounts
Other reliability assurance services

(in thousands of Euros)

31.12.2020

31.12.2019

31.12.2020

2 307
802

1 685
(In thousands of Euros)
1 043

31.12.2019 *

Total value of billable services
Contribution to the Fundo Único de Resolução
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

NOTE 18 - CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

3 109

22 266
12 743
39

35 048

2 728

22 469
12 196
42

34 707

This caption on 31 December 2020 and 2019 is analyzed as follows:
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 18 - Contributions to resolution funds and deposit
guarantee schemes

NOTE 19 – EARNINGS PER SHARE

Basic earnings per share
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted
This caption on 31 December 2020 and 2019 is analyzed as follows:
average number of ordinary shares in circulation during the financial year /period.

Contribution to the Fundo Único de Resolução
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

22 469
12 196
42

22 266
12 743
39

31.12.2019 *

31.12.2020

34 707

35 048

(In thousands of Euros)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 19 – EARNINGS PER SHARE
Net consolidated profit / (loss) attributable to shareholder of the Bank

(In thousands of Euros)

31.12.2020

31.12.2019 *

(1 328 236)

(1 058 812)

252

Basic earnings per share
Weighted average number of common shares outstanding (thousands)
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted
Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)
average number of ordinary shares in circulation during the financial year /period.

9 800 000

(0,11)

(0,14)

Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Net consolidated profit / (loss) attributable to shareholder of the Bank

Weighted average number of common shares outstanding (thousands)

(In thousands of Euros)

31.12.2020

(0,13)

31.12.2019 *

(0,10)

(1 328 236)

(1 058 812)

9 800 000

Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)

31 December 2020

Notes to the Consolidated Financial Statements

Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

(0,14)

(0,13)

(0,11)

(0,10)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOTE 17 – OTHER ADMINISTRATIVE EXPENSES

The breakdown of this caption is as follows:

NOTE 17 – OTHER ADMINISTRATIVE EXPENSES

The breakdown of this caption is as follows:

Rentals

Advertising

Communication

Maintenance and repairs expenses

Travelling and representation

Transportation of valuables

Rentals

Insurance

Advertising

IT services

Communication

Independent work

Maintenance and repairs expenses

Temporary work

Travelling and representation

Electronic payment systems

Transportation of valuables

Legal costs

Insurance

Consultancy and audit fees

IT services

Water, energy and fuel

Independent work

Consumables

Temporary work

Other costs

Electronic payment systems

Legal costs

Consultancy and audit fees

Water, energy and fuel

Consumables

Other costs

(in thousands of Euros)

31.12.2020

31.12.2019 *

(in thousands of Euros)

31.12.2020

1 386

31.12.2019 *

3 086

2 800

6 739

12 113

8 766

4 584

2 800

3 123

6 739

45 610

12 113

2 569

8 766

1 322

1 386

11 625

4 584

4 938

3 123

24 688

45 610

3 185

2 569

1 487

1 322

18 228

11 625

4 938

153 163

24 688

3 185

1 487

18 228

3 457

8 443

11 795

8 945

4 267

3 457

2 621

8 443

45 920

11 795

3 614

8 945

1 525

3 086

10 482

4 267

7 407

2 621

24 979

45 920

3 681

3 614

1 588

1 525

20 120

10 482

7 407

161 930

24 979

3 681

1 588

20 120

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The caption Other costs includes, amongst others, specialised service costs incurred with security and surveillance, information

services, training and sundry external supplies.

153 163

161 930

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

As at 31 December 2020, rental costs includes an amount of Euro 196 thousand related to short-term operating lease contracts, as

described in note 2.14.

The caption Other costs includes, amongst others, specialised service costs incurred with security and surveillance, information

services, training and sundry external supplies.

The fees invoiced during the years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the

Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
As at 31 December 2020, rental costs includes an amount of Euro 196 thousand related to short-term operating lease contracts, as
(in thousands of Euros)
described in note 2.14.

31.12.2019

31.12.2020

Statutory audit of annual accounts
Other reliability assurance services

1 685
The fees invoiced during the years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
1 043
Portuguese Companies Code (Código das Sociedades Comerciais), have the following:
2 728
(in thousands of Euros)

Total value of billable services

2 307
802

3 109

NOTE 18 - CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

Statutory audit of annual accounts
Other reliability assurance services

Total value of billable services

This caption on 31 December 2020 and 2019 is analyzed as follows:

NOTE 18 - CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

Contribution to the Fundo Único de Resolução
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

This caption on 31 December 2020 and 2019 is analyzed as follows:

31.12.2020

31.12.2019

2 307
802

1 685
1 043

3 109

2 728
(In thousands of Euros)

31.12.2019 *

31.12.2020

22 266
12 743
39

22 469
12 196
42
(In thousands of Euros)

31.12.2020

35 048

31.12.2019 *

34 707

22 266
12 743
39

22 469
12 196
42

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Contribution to the Fundo Único de Resolução
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

NOTE 19 – EARNINGS PER SHARE

NOTE 19 – Earnings per share
Basic earnings per share
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted
Basic earnings per share
average number of ordinary shares in circulation during the financial year /period.
NOTE 19 – EARNINGS PER SHARE
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the
Basic earnings per share
weighted average number of ordinary shares in circulation during the financial year /period.
(1 058 812)
Net consolidated profit / (loss) attributable to shareholder of the Bank
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted
average number of ordinary shares in circulation during the financial year /period.
Weighted average number of common shares outstanding (thousands)

(In thousands of Euros)

31.12.2019 *

(1 328 236)

31.12.2020

9 800 000

34 707

35 048

9 800 000
(In thousands of Euros)

Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)

Net consolidated profit / (loss) attributable to shareholder of the Bank
Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

Weighted average number of common shares outstanding (thousands)
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)

Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

31 December 2020

Notes to the Consolidated Financial Statements

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Diluted earnings per share

31 December 2020

Notes to the Consolidated Financial Statements

31.12.2020

(0,14)

31.12.2019 *

(0,11)

(1 328 236)
(0,13)

(1 058 812)
(0,10)

9 800 000

(0,14)

(0,13)

(0,11)

(0,10)

The diluted earnings per share are calculated considering the net profit attributable to the shareholders of the Bank and
the weighted average number of ordinary shares in circulation, adjusted for the effects of all potential dilutive ordinary
shares.

The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.

Diluted earnings per share

The diluted earnings per share are calculated considering the net profit attributable to the shareholders of the Bank and the weighted
average number of ordinary shares in circulation, adjusted for the effects of all potential dilutive ordinary shares.

NOTE 20 – Cash, cash balances at Central Banks and other
demand deposits

The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.

NOTE 20 – CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Cash

Demand deposits with Central Banks

Bank of Portugal
Other Central Banks

Deposits in other domestic credit institutions

Repayable on demand
Uncollected checks

Deposits with banks abroad
Repayable on demand
Other deposits

(in thousands of Euros)

31.12.2020

31.12.2019

149 205

179 220

2 289 339
3 458

1 387 250
21 658

2 292 797

1 408 908

19 565
51 590

71 155

143 614
38 688

182 302

12 303
51 437

63 740

175 761
26 452

202 213

2 695 459

1 854 081

253

Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the average amount

of the deposits with Bank of Portugal over said period. The balance of the account with Bank of Portugal as at 31 December 2020

was included in the observation period running from 16 December 2020 to 26 January 2020.

Checks to be collected on credit institutions at home and abroad were sent for collection within the first business days following the

reference dates.

NOTE 21 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Financial assets held for trading

Securities

Bonds and other fixed income securities

Issued by government and public entities

Derivatives

Derivatives held for trading with positive fair value

Fair value option derivatives with positive fair value

Financial liabilities held for trading

Derivatives

Derivatives held for trading with negative fair value

(in thousands of Euros)

31.12.2020

31.12.2019

267 016

388 257

655 273

254 848

419 791

74 093

493 884

748 732

554 791

544 825

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESDiluted earnings per share

The diluted earnings per share are calculated considering the net profit attributable to the shareholders of the Bank and the weighted

average number of ordinary shares in circulation, adjusted for the effects of all potential dilutive ordinary shares.

The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.

NOTE 20 – CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS

As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Cash

Demand deposits with Central Banks

Bank of Portugal
Other Central Banks

Deposits in other domestic credit institutions

Repayable on demand
Uncollected checks

(in thousands of Euros)

31.12.2020

31.12.2019

149 205

179 220

2 289 339
3 458

1 387 250
21 658

2 292 797

1 408 908

19 565
51 590

12 303
51 437

71 155

63 740

The caption Demand Deposits with Bank of Portugal includes mandatory deposits to comply with the minimum legal
cash reserve requirements in an amount of Euro 262.2 million (31 December 2019: Euro 246.8 million). According
Deposits with banks abroad
to the European Central Bank Regulation (EU) No. 1358/2011, of 14 December 2011, minimum cash requirements of
Repayable on demand
Other deposits
demand deposits with Bank of Portugal are interest-bearing and correspond to 1% of the deposits and debt certificates
maturing in less than 2 years, after excluding from these the deposits of institutions subject to the European System
of Central Banks minimum reserve requirements. As at 31 December 2020, the average interest rate on these deposits
was null (31 December 2019: null).
The caption Demand Deposits with Bank of Portugal includes mandatory deposits to comply with the minimum legal cash reserve
requirements in an amount of Euro 262.2 million (31 December 2019: Euro 246.8 million). According to the European Central Bank
Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the
Regulation (EU) No. 1358/2011, of 14 December 2011, minimum cash requirements of demand deposits with Bank of Portugal are
average amount of the deposits with Bank of Portugal over said period. The balance of the account with Bank of
interest-bearing and correspond to 1% of the deposits and debt certificates maturing in less than 2 years, after excluding from these
the deposits of institutions subject to the European System of Central Banks minimum reserve requirements. As at 31 December
Portugal as at 31 December 2020 was included in the observation period running from 16 December 2020 to 26
2020, the average interest rate on these deposits was null (31 December 2019: null).
January 2021.
Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the average amount
Checks to be collected on credit institutions at home and abroad were sent for collection within the first business days
of the deposits with Bank of Portugal over said period. The balance of the account with Bank of Portugal as at 31 December 2020
was included in the observation period running from 16 December 2020 to 26 January 2020.
following the reference dates.

143 614
38 688

175 761
26 452

1 854 081

2 695 459

202 213

182 302

Checks to be collected on credit institutions at home and abroad were sent for collection within the first business days following the
reference dates.

NOTE 21 – Financial assets and liabilities held for trading

NOTE 21 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

As at 31 December 2020 and 2019, this caption is analyzed as follows:
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Financial assets held for trading

Securities

Bonds and other fixed income securities

Issued by government and public entities

Derivatives

Derivatives held for trading with positive fair value
Fair value option derivatives with positive fair value

Financial liabilities held for trading

Derivatives

Derivatives held for trading with negative fair value

(in thousands of Euros)

31.12.2020

31.12.2019

267 016
267 016

388 257
-
388 257

655 273

254 848
254 848

419 791
74 093
493 884

748 732

554 791

544 825

31 December 2020

Notes to the Consolidated Financial Statements

Securities held for trading
Securities held for trading
In accordance with the accounting policy described in Note 2.5, securities held for trading are those acquired to be
In accordance with the accounting policy described in Note 2.5, securities held for trading are those acquired to be traded in the
traded in the short-term regardless of their maturity.
short-term regardless of their maturity.

As of 31 December 2020 and 2019, the schedule of securities held for trading by maturity is as follows:
As of 31 December 2020 and 2019, the schedule of securities held for trading by maturity is as follows:

1 to 5 years
More than 5 years

(in thousands of Euros)

31.12.2020

31.12.2019

3 734
263 282

267 016

117 227
137 621

254 848

A breakdown of the securities held for trading, by fair value hierarchy, is presented in Note 40.

Derivatives

As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Notional

31.12.2020

Fair Value

Assets

Liabilities

Notional

(in thousands of Euros)

31.12.2019

Fair Value

Assets

Liabilities

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

- buy

- sell

Trading derivatives

254
Exchange rate contracts

Forward
- buy
- sell
Currency Swaps

Currency Interest Rate Swaps

Currency Options

Interest rate contracts

Interest Rate Swaps

Swaption - Interest Rate Options

Interest Rate Caps & Floors

Equity / Index contracts

Equity / Index Swaps

Equity / Index Options

Credit default contracts

Credit Default Swaps

Fair value option derivatives

Interest rate contracts

Interest Rate Swaps

- compras

- vendas

5 307

5 757

23 668

7 956

743 210
744 649

1 019 987

1 025 562

22 951

22 947

219 866

192 493

7 808 593

7 809 654

400 000

93 846

91 073

152 294

711 682

743 755

2 883

622 307
605 890

967 872

968 543

21 390

168 095

167 870

7 138 184

7 139 186

89 767

165 221

30 467

663 491

685 480

2 399

1 431

5 468

1 118

490

21 363

21 875

21 870

10 743

10 706

6 240

5 836

57 205

45 493

34 540

33 953

318 578

499 782

349 152

499 619

2 821

1 177

1 084

3 961

966

893

319 662

503 743

352 939

501 689

2 337

2 204

3 988

3 739

3 335

5 539

28 323

32 311

5 402

9 141

388 257

554 791

419 791

544 825

171 371

74 093

9 053

11 390

a) Derivatives traded on organized markets, whose market value is settled daily through the margin account (see Note 28)

Fair value option derivatives include instruments designed to manage the risk associated with certain financial assets and liabilities

designated at fair value through profit or loss, in accordance with the accounting policy described in Notes 2.4 and 2.7, and which

the Group has not designated for hedge accounting.

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDSecurities held for trading

In accordance with the accounting policy described in Note 2.5, securities held for trading are those acquired to be traded in the
short-term regardless of their maturity.

As of 31 December 2020 and 2019, the schedule of securities held for trading by maturity is as follows:

(in thousands of Euros)

31.12.2020

31.12.2019

1 to 5 years
More than 5 years

3 734
263 282

A breakdown of the securities held for trading, by fair value hierarchy, is presented in Note 40.

267 016

117 227
137 621

254 848

A breakdown of the securities held for trading, by fair value hierarchy, is presented in Note 40.
Derivatives
Derivatives
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

Notional

31.12.2020

Fair Value

Assets

Liabilities

Notional

(in thousands of Euros)

31.12.2019

Fair Value

Assets

Liabilities

Trading derivatives

Exchange rate contracts

Forward
- buy
- sell
Currency Swaps
- buy
- sell
Currency Interest Rate Swaps
- buy
- sell
Currency Options
- buy
- sell

Interest rate contracts
Interest Rate Swaps
- buy
- sell
Swaption - Interest Rate Options
- buy
- sell
Interest Rate Caps & Floors
- buy
- sell

Equity / Index contracts
Equity / Index Swaps
- buy
- sell
Equity / Index Options
- buy
- sell

Credit default contracts
Credit Default Swaps
- buy
- sell

Fair value option derivatives

Interest rate contracts
Interest Rate Swaps
- compras
- vendas

622 307
605 890

967 872
968 543

21 390
21 390

168 095
167 870

7 138 184
7 139 186

-
-

89 767
165 221

30 467
30 467

663 491
685 480

2 399
2 399

23 668

7 956

1 431

5 468

21 363

10 743

10 706

743 210
744 649

1 019 987
1 025 562

22 951
22 947

219 866
192 493

5 307

5 757

1 118

490

21 875

21 870

6 240

5 836

57 205

45 493

34 540

33 953

318 578

499 782

1 084

3 961

7 808 593
7 809 654

400 000
-

93 846
91 073

349 152

499 619

2 821

1 177

966

893

319 662

503 743

352 939

501 689

2 337

2 204

9 053

11 390

3 335

5 539

152 294
152 294

711 682
743 755

2 883
2 883

3 988

3 739

28 323

32 311

5 402

9 141

388 257

554 791

419 791

544 825

-
-

171 371
171 371

74 093

a) Derivatives traded on organized markets, whose market value is settled daily through the margin account (see Note 28)

Fair value option derivatives include instruments designed to manage the risk associated with certain financial assets and liabilities
designated at fair value through profit or loss, in accordance with the accounting policy described in Notes 2.4 and 2.7, and which
Fair value option derivatives include instruments designed to manage the risk associated with certain financial assets
the Group has not designated for hedge accounting.
and liabilities designated at fair value through profit or loss, in accordance with the accounting policy described in
Notes 2.4 and 2.7, and which the Group has not designated for hedge accounting.

31 December 2020

Notes to the Consolidated Financial Statements

The Group calculates the Credit Valuation Adjustment (CVA) for derivative instruments in accordance with the following
methodology: (i) Portfolio basis – the calculation of the CVA corresponds to the application, to the aggregate exposure
of each counterpart, of an expected loss and a recovery rate, considering the average duration period estimated for
each exposure; (ii) Individual basis – the calculation of the CVA on an individual basis is based on the determination
of the exposure using stochastic methods (Expected Positive Exposure) which translates into the calculation of the
expected fair value exposure that each derivative is likely to assume over its remaining life. Subsequently, are applied to
the exposure determined, an expected loss and a recovery rate.

In the financial year of 2020, the Group recognized a loss of Euro -291 thousand related to the CVA of derivative
instruments (31 December 2019: gain of Euro 1,796 thousand).

255

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe Group calculates the Credit Valuation Adjustment (CVA) for derivative instruments in accordance with the following methodology:
(i) Portfolio basis – the calculation of the CVA corresponds to the application, to the aggregate exposure of each counterpart, of an
expected loss and a recovery rate, considering the average duration period estimated for each exposure; (ii) Individual basis – the
calculation of the CVA on an individual basis is based on the determination of the exposure using stochastic methods (Expected
Positive Exposure) which translates into the calculation of the expected fair value exposure that each derivative is likely to assume
over its remaining life. Subsequently, are applied to the exposure determined, an expected loss and a recovery rate.

In the financial year of 2020, the Group recognized a gain of Euro -291 thousand related to the CVA of derivative instruments (31
The Group chooses not to register "Debt Valuation Adjustment" (DVA), which represents the market value of own credit
December 2019: gain of Euro 1,796 thousand).
risk of the group of a certain negative exposure to a counterparty, reflecting a prudent perspective of application of
The Group chooses not to register "Debt Valuation Adjustment" (DVA), which represents the market value of own credit risk of the
this regulation. It should be noted that the exposure potentially subject to DVA is controlled on a monthly basis and has
group of a certain negative exposure to a counterparty, reflecting a prudent perspective of application of this regulation. It should be
assumed immaterial values.
noted that the exposure potentially subject to DVA is controlled on a monthly basis and has assumed immaterial values.
The Group calculates the Credit Valuation Adjustment (CVA) for derivative instruments in accordance with the following methodology:
(i) Portfolio basis – the calculation of the CVA corresponds to the application, to the aggregate exposure of each counterpart, of an
As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:
expected loss and a recovery rate, considering the average duration period estimated for each exposure; (ii) Individual basis – the
As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:
calculation of the CVA on an individual basis is based on the determination of the exposure using stochastic methods (Expected
Positive Exposure) which translates into the calculation of the expected fair value exposure that each derivative is likely to assume
over its remaining life. Subsequently, are applied to the exposure determined, an expected loss and a recovery rate.

(in thousands of Euros)

31.12.2020

31.12.2019

Assets
In the financial year of 2020, the Group recognized a gain of Euro -291 thousand related to the CVA of derivative instruments (31
December 2019: gain of Euro 1,796 thousand).

Liabilities

Assets

Derivatives held for negotiation

Notional

Fair Value (net)

Notional

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

The Group chooses not to register "Debt Valuation Adjustment" (DVA), which represents the market value of own credit risk of the
group of a certain negative exposure to a counterparty, reflecting a prudent perspective of application of this regulation. It should be
noted that the exposure potentially subject to DVA is controlled on a monthly basis and has assumed immaterial values.

( 81)
8 725
( 23 606)
( 151 572)
( 166 534)

2 094 664
1 053 257
2 111 144
5 916 247
11 175 312

1 597 161
822 432
2 329 447
4 954 932
9 703 972

1 597 477
805 003
2 349 045
5 034 921
9 786 446

( 892)
16 406
1 301
( 141 849)
( 125 034)

As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:

Fair value option derivatives

More than 5 years

-
-

171 371
171 371

74 093
74 093

(in thousands of Euros)

1 924 137
843 821
2 098 238
5 919 114
10 785 310

171 371
171 371
31.12.2019

Credit Support Annex (CSA)
Derivatives held for negotiation

31.12.2020

Notional

Assets

Liabilities

Fair Value (net)

Notional

Assets

Liabilities

Fair Value (net)

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

Credit Support Annex (CSA)
NOVO BANCO has several contracts negotiated with counterparts with which it trades derivatives on the Over-the-counter market.
The CSAs take the form of collateral agreements established between two parties negotiating over-the-counter derivatives with each
other, with the main objective of providing protection against credit risk, defining for that purpose rules regarding collateral. Derivative
NOVO BANCO has several contracts negotiated with counterparts with which it trades derivatives on the Over-the-
transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have minimum risk margin that may
counter market. The CSAs take the form of collateral agreements established between two parties negotiating over-
change according to the ratings of the parties.
the-counter derivatives with each other, with the main objective of providing protection against credit risk, defining for
NOTE 22 – FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS, DESIGNATED AT FAIR
-
that purpose rules regarding collateral. Derivative transactions are regulated by the International Swaps and Derivatives
VALUE THROUGH PROFIT OR LOSS, AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME AND AT AMORTISED
-
Association (ISDA) and have minimum risk margin that may change according to the ratings of the parties.
COST

2 094 664
1 053 257
2 111 144
5 916 247
11 175 312

1 924 137
843 821
2 098 238
5 919 114
10 785 310

1 597 477
805 003
2 349 045
5 034 921
9 786 446

1 597 161
822 432
2 329 447
4 954 932
9 703 972

( 81)
8 725
( 23 606)
( 151 572)
( 166 534)

( 892)
16 406
1 301
( 141 849)
( 125 034)

Fair value option derivatives

171 371
171 371

74 093
74 093

More than 5 years

-
-

As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:
Credit Support Annex (CSA)

NOVO BANCO has several contracts negotiated with counterparts with which it trades derivatives on the Over-the-counter market.
The CSAs take the form of collateral agreements established between two parties negotiating over-the-counter derivatives with each
other, with the main objective of providing protection against credit risk, defining for that purpose rules regarding collateral. Derivative
transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have minimum risk margin that may
change according to the ratings of the parties.

NOTE 22 – Financial assets mandatorily at fair value
through profit or loss, designated at fair value through
profit or loss, at fair value through other comprehensive
income and at amortised cost

NOTE 22 – FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS, DESIGNATED AT FAIR
VALUE THROUGH PROFIT OR LOSS, AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME AND AT AMORTISED
COST

Fair value
through other
comprehensive
income

Mandatorily at fair
value through
profit and loss

Loans and advances to banks

Fair value
changes *

Amortised cost

11 099 625

7 907 587

2 229 947

31.12.2020

113 795

960 962

113 795

Securities

1 129

Total

(in thousands of Euros)

Loans and advances to customers

As at 31 December 2020 and 2019, this caption is analyzed as follows:
As at 31 December 2020 and 31 December 2019, this caption is analyzed as follows:

960 962

7 907 587

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)

23 554 304

62 730

23 617 034

25 898 046

63 859

34 830 454

(in thousands of Euros)

31.12.2020

Mandatorily at fair
value through
profit and loss

Fair value
through other
comprehensive
income

Amortised cost

Fair value
changes *

Total

Securities

Loans and advances to banks

Loans and advances to customers

960 962

7 907 587

2 229 947

113 795

23 554 304

31 December 2020

25 898 046
Notes to the Consolidated Financial Statements

7 907 587

960 962

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)

1 129

62 730

63 859

11 099 625

113 795

23 617 034

34 830 454
48

256

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Mandatorily at fair
Mandatorily at fair
value through
value through
profit and loss
profit and loss

Fair value
Fair value
through other
through other
comprehensive
comprehensive
income
income

31.12.2019
31.12.2019

(in thousands of Euros)
(in thousands of Euros)

Amortised cost
Amortised cost

Fair value
Fair value
changes *
changes *

Total
Total

Securities
Securities
Loans and advances to banks
Loans and advances to banks
Loans and advances to customers
Loans and advances to customers

1 314 742
1 314 742
-
-
-
-

1 314 742
1 314 742

8 849 896
8 849 896
-
-
-
-

8 849 896
8 849 896

1 622 545
1 622 545
369 228
369 228
25 149 687
25 149 687

27 141 460
27 141 460

-
-
-
-
52 540
52 540

52 540
52 540

11 787 183
11 787 183
369 228
369 228
25 202 227
25 202 227

37 358 638
37 358 638

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)
* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 23)

Securities
Securities

As at 31 December 2020 and 31 December 2019, the detail of securities portfolio is as follows:
Securities
As at 31 December 2020 and 31 December 2019, the detail of securities portfolio is as follows:

As at 31 December 2020 and 2019, the detail of securities portfolio is as follows:

Securities mandatorily at fair value through profit or loss
Securities mandatorily at fair value through profit or loss

Bonds and other fixed income securities
Bonds and other fixed income securities

From other issuers
From other issuers

Shares
Shares

Other securities with variable income
Other securities with variable income

Securities at fair value through other comprehensive income
Securities at fair value through other comprehensive income

Bonds and other fixed income securities
Bonds and other fixed income securities

From public issuers
From public issuers
From other issuers
From other issuers

Shares
Shares

Other variable income securities
Other variable income securities

Securities at amortised cost
Securities at amortised cost

Bonds and other fixed income securities
Bonds and other fixed income securities

From public issuers
From public issuers
From other issuers
From other issuers

Impairment
Impairment

Value adjustments for hedging operations for interest rate risk *
Value adjustments for hedging operations for interest rate risk *

* See Note 23
* See Note 23

(in thousands of Euros)
(in thousands of Euros)

31.12.2020
31.12.2020

31.12.2019
31.12.2019

160 184
160 184

406 104
406 104

394 674
394 674

960 962
960 962

6 490 076
6 490 076
1 352 759
1 352 759

64 752
64 752

-
-

57 590
57 590

603 851
603 851

653 301
653 301

1 314 742
1 314 742

7 108 022
7 108 022
1 661 538
1 661 538

80 334
80 334

2
2

7 907 587
7 907 587

8 849 896
8 849 896

421 249
421 249
2 009 935
2 009 935

( 201 237)
( 201 237)

2 229 947
2 229 947

1 129
1 129

459 260
459 260
1 322 059
1 322 059

( 158 774)
( 158 774)

1 622 545
1 622 545

-
-

11 099 625
11 099 625

11 787 183
11 787 183

The securities mandatorily accounted at fair value through profit or loss include the participation units held by the Group in
The securities mandatorily accounted at fair value through profit or loss include the participation units held by the Group in
Restructuring Funds, which are accounted for in accordance with the accounting policy described in Note 2.5, based on the net book
Restructuring Funds, which are accounted for in accordance with the accounting policy described in Note 2.5, based on the net book
value disclosed by the Management Companies, which may be adjusted according to information, analyzes or independent
value disclosed by the Management Companies, which may be adjusted according to information, analyzes or independent
evaluations deemed necessary to determine its fair value, in response to guidelines from the European Central Bank.
evaluations deemed necessary to determine its fair value, in response to guidelines from the European Central Bank.
The securities mandatorily accounted at fair value through profit or loss include the participation units held by the
Group in Restructuring Funds, which are accounted for in accordance with the accounting policy described in
At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds are “level 3”
At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds are “level 3”
Note 2.5, based on the net book value disclosed by the Management Companies, which may be adjusted according
assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose parameters used are not
assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose parameters used are not
observable in the market), and NOVO BANCO requested an independent evaluation from an international consulting company in
observable in the market), and NOVO BANCO requested an independent evaluation from an international consulting company in
to information, analyzes or independent evaluations deemed necessary to determine its fair value, in response to
articulation with real estate consultancy companies. This work resulted in a market value of Euro 498.8 million for the total investment
articulation with real estate consultancy companies. This work resulted in a market value of Euro 498.8 million for the total investment
guidelines from the European Central Bank.
held in these assets, which led to the recording of a loss of Euro -300.2 million in the year 2020 recorded under the heading of gains
held in these assets, which led to the recording of a loss of Euro -300.2 million in the year 2020 recorded under the heading of gains
or losses with financial assets mandatorily accounted for at fair value through profit or loss (see Note 10). This assessment included
or losses with financial assets mandatorily accounted for at fair value through profit or loss (see Note 10). This assessment included
At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds
the establishment of assumptions for the valuation of assets included in the funds, a discount at the level of the fund based on
the establishment of assumptions for the valuation of assets included in the funds, a discount at the level of the fund based on
parameters equivalent to quoted funds and an appreciation of the potential evolution of the fund.
parameters equivalent to quoted funds and an appreciation of the potential evolution of the fund.
are “level 3” assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose
parameters used are not observable in the market), and NOVO BANCO requested an independent evaluation from
an international consulting company in articulation with real estate consultancy companies. This work resulted in a
market value of Euro 498.8 million for the total investment held in these assets, which led to the recording of a loss of
Euro -300.2 million in the year 2020 recorded under the heading of gains or losses with financial assets mandatorily
accounted for at fair value through profit or loss (see Note 10). This assessment included the establishment of assump-
tions for the valuation of assets included in the funds, a discount at the level of the fund based on parameters equivalent
to quoted funds and an appreciation of the potential evolution of the fund.

Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements

31 December 2020
31 December 2020

49
49

257

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as
As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as follows:
follows:

Cost (1)

Fair value reserve

Positive

Negative

Balance sheet
value

Impairment
reserves

(in thousands of Euros)

From public issuers

Bonds and other fixed income securities
( 3 125)
As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as follows:
( 1 435)
( 1 690)
(in thousands of Euros)
( 565)
Impairment
( 3)
reserves
( 562)

360 033
129 520
230 513
68 749
Fair value reserve
107
68 642

6 490 076
2 780 473
3 709 603
1 352 759
Balance sheet
27 378
value
1 325 381

6 130 285
2 650 953
3 479 332
1 286 344
Cost (1)
29 605
1 256 739

Residents
Non residents
From other issuers

( 242)
-
( 242)
( 2 334)
( 2 334)
-

Residents
Non residents

Negative

Positive

Shares
Bonds and other fixed income securities

Other securities with variable income

From public issuers

Residents
Non residents
Residents
Non residents
From other issuers

Residents
Residents
Non residents

Balance as at 31 December 2020

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
Shares

Residents
Non residents

Other securities with variable income

Residents

Balance as at 31 December 2020
Bonds and other fixed income securities

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

From public issuers

Residents
Non residents
From other issuers

Residents
Non residents

463 232
359 127
6 130 285
104 105
2 650 953
3 479 332
2
1 286 344
2
29 605
1 256 739
7 879 863

463 232
359 127
104 105

Cost (1)

2
2

7 879 863
6 781 109
3 201 240
3 579 869
1 575 607
33 212
Cost (1)
1 542 395

18 163
15 396
360 033
2 767
129 520
230 513
-
68 749
-
107
68 642
446 945

( 416 643)
( 319 824)
( 242)
( 96 819)
-
( 242)
( 2)
( 2 334)
( 2)
( 2 334)
-
( 419 221)

64 752
54 699
6 490 076
10 053
2 780 473
3 709 603
-
1 352 759
-
27 378
1 325 381
7 907 587

-
-
( 3 125)
-
( 1 435)
( 1 690)
-
( 565)
-
( 3)
( 562)
( 3 690)

18 163
15 396
2 767
Fair value reserve

( 416 643)
( 319 824)
( 96 819)

-
-

Negative

( 2)
( 2)

Positive

446 945
327 605
162 006
165 599
87 363
Fair value reserve
20 711
66 652

( 419 221)
( 692)
( 490)
( 202)
( 1 432)
-
( 1 432)

Negative

Positive

64 752
54 699
10 053

-
-
(in thousands of Euros)
-

Balance sheet
-
value
-

Impairment
-
reserves
-

7 907 587
7 108 022
3 362 756
3 745 266
1 661 538
Balance sheet
53 923
value
1 607 615

( 3 690)
( 4 527)
( 2 158)
( 2 369)
(in thousands of Euros)
( 1 029)
Impairment
( 8)
reserves
( 1 021)

From public issuers

Residents
Non residents

Other securities with variable income

Shares
Bonds and other fixed income securities

25 771
24 590
327 605
1 181
162 006
165 599
2
87 363
-
20 711
2
66 652
440 741
25 771
24 590
1 181

Balance as at 31 December 2019
Shares
(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

480 591
375 391
6 781 109
105 200
3 201 240
3 579 869
2
1 575 607
2
33 212
-
1 542 395
8 837 309
480 591
375 391
105 200

Residents
Non residents
Residents
Non residents
From other issuers
Residents
Residents
Non residents
Non residents

-
-
( 4 527)
-
( 2 158)
( 2 369)
-
( 1 029)
-
( 8)
-
( 1 021)
( 5 556)
-
-
During the year 2020, the Group sold Euro 1,323.9 million of financial instruments classified at fair value through other comprehensive
-
income (31 December 2019: Euro 3,761.0 million), with a gain of Euro 82, 4 million (31 December 2019: gain of Euro 67.8 million),
-
Other securities with variable income
recorded in the income statement, from the sale of debt instruments and a loss of Euro 15.0 million that were transferred from
-
During the year 2020, the Group sold Euro 1,323.9 million of financial instruments classified at fair value through other
revaluation reserves to sales-related reserves (31 December 2019: loss of Euro 4.5 million).
-
comprehensive income (31 December 2019: Euro 3,761.0 million), with a gain of Euro 82, 4 million (31 December 2019:
( 5 556)
Balance as at 31 December 2019
The movements in the impairment reserves in fair value securities through other comprehensive income are presented as follows:
gain of Euro 67.8 million), recorded in the income statement, from the sale of debt instruments and a loss of Euro 15.0
(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
million that were transferred from revaluation reserves to sales-related reserves (31 December 2019: loss of Euro 4.5
During the year 2020, the Group sold Euro 1,323.9 million of financial instruments classified at fair value through other comprehensive
income (31 December 2019: Euro 3,761.0 million), with a gain of Euro 82, 4 million (31 December 2019: gain of Euro 67.8 million),
million).
recorded in the income statement, from the sale of debt instruments and a loss of Euro 15.0 million that were transferred from
revaluation reserves to sales-related reserves (31 December 2019: loss of Euro 4.5 million).
The movements in the impairment reserves in fair value securities through other comprehensive income are
Balance as at 31 December 2018
presented as follows
The movements in the impairment reserves in fair value securities through other comprehensive income are presented as follows:

80 334
64 764
7 108 022
15 570
3 362 756
3 745 266
2
1 661 538
-
53 923
2
1 607 615
8 849 896
80 334
64 764
15 570

( 426 028)
( 335 217)
( 692)
( 90 811)
( 490)
( 202)
( 2)
( 1 432)
( 2)
-
-
( 1 432)
( 428 154)
( 426 028)
( 335 217)
( 90 811)

Impairment movement of securities at fair value
through other comprehensive income

Residents
Non residents

(in thousands of Euros)

( 2)
( 2)
-

2
2
-

2
-
2

8 837 309

8 849 896

( 428 154)

440 741

Stage 1

Stage 2

Stage 3

1 191

1 213

Total

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

6 233
( 1 729)
( 137)
( 2)

-
( 18)
-
( 4)

Impairment movement of securities at fair value
through other comprehensive income

-
6 233
(in thousands of Euros)
( 1 747)
-
( 137)
-
( 6)
-

Balance as at 31 December 2019

Stage 1

5 556

Stage 2

Stage 3

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Increases due to changes in credit risk
Utilization during the period
Decreases due to changes in credit risk
Other movements
Utilization during the period
Other movements

Balance as at 31 December 2020

Balance as at 31 December 2019

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2020
31 December 2020

258

1 191
3 516
( 5 080)
6 233
( 232)
( 1 729)
( 70)
( 137)
( 2)
3 690

5 556

3 516
( 5 080)
( 232)
( 70)

3 690

22
38
-
-
( 44)
( 18)
6
-
( 4)
-

38
-
( 44)
6

Notes to the Consolidated Financial Statements

-
-
-
-
-
-
-
-
-
-

-
-
-
-

Total

5 556

1 213
3 554
( 5 080)
6 233
( 276)
( 1 747)
( 64)
( 137)
( 6)
3 690

5 556

3 554
( 5 080)
( 276)
( 64)

3 690
50

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDChanges in impairment losses on amortised cost securities are as follows:

Changes in impairment losses on amortised cost securities are as follows:

Balance as at 31 December 2018

2 233

57 623

134 930

194 786

Impairment movement of securities at amortised cost

Stage 1

Stage 2

Stage 3

Total

(in thousands of Euros)

Derecognized financial assets
Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2019

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2020

-
8 212
( 8 208)
-
59

-
638 922
( 642 526)
( 1)
38

( 3 424)
6 616
( 7 690)
( 28 019)
9

( 3 424)
653 750
( 658 424)
( 28 020)
106

2 296

54 056

102 422

158 774

10 187
( 8 816)
( 36)
294

3 925

717 848
( 683 933)
( 2)
( 317)

10 533
( 3 294)
-
( 1)

738 568
( 696 043)
( 38)
( 24)

87 652

109 660

201 237

In accordance with the accounting policy mentioned on Note 2.5, the Group regularly evaluate if there is any objective evidence of
impairment in its securities portfolio at a fair value through other comprehensive income based on the judgement criteria mentioned
on Note 3.1.

In accordance with the accounting policy mentioned on Note 2.5, the Group regularly evaluate if there is any objective
The dotation for impairment for securities during 2020 financial year include Euro 29.0 million, reflecting the update of information in
evidence of impairment in its securities portfolio at a fair value through other comprehensive income based on the
IFRS 9 models, anticipating losses related to the Covid-19 pandemic.
judgement criteria mentioned on Note 3.1.
As at 31 December 2020 and 2019, the securities portfolio, by residual maturity period, is as follows:
(in thousands of Euros)
The dotation for impairment for securities during 2020 financial year include Euro 29.0 million, reflecting the update of
information in IFRS 9 models, anticipating losses related to the Covid-19 pandemic.
Loans and advances to banks in Portugal
As at 31 December 2020 and 2019, the securities portfolio, by residual maturity period, is as follows:

31.12.2020

31.12.2019

Very short-term placements
Deposits
Loans
Other loans and advances

4 075
4 897
30 280
4

8 902
9 342
34 013
3
(in thousands of Euros)
52 260

31.12.2019

39 256

31.12.2020

Loans and advances to banks abroad
Loans and advances to banks in Portugal

Deposits
Very short-term placements
Loans
Deposits
Other loans and advances
Loans
Other loans and advances

Outstanding applications
Loans and advances to banks abroad

Deposits
Loans
Other loans and advances

Impairment losses

Overdue loans
The detail of the securities portfolio by fair value hierarchy is presented in Note 40.

The portfolio securities pledged by the Group are analyzed in Note 36.
Impairment losses

The detail of the securities portfolio by fair value hierarchy is presented in Note 40.

The portfolio securities pledged by the Group are analyzed in Note 36.

10 532
4 075
-
4 897
279 419
30 280
4
289 951

39 256
34 726

10 532
363 933
-
( 250 138)
279 419

289 951
113 795

10 850
8 902
1 645
9 342
381 561
34 013
3
394 056

52 260
-

10 850
446 316
1 645
( 77 088)
381 561

394 056
369 228

34 726

363 933

446 316

( 250 138)

( 77 088)

113 795

369 228

31 December 2020

Notes to the Consolidated Financial Statements

259

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESLoans and advances to Banks

As at 31 December 2020 and 31 December 2019, the detail of Loans and advances to Banks is as follows:

Loans and advances to Banks

(in thousands of Euros)

31.12.2020

31.12.2019

Loans and advances to banks in Portugal

As at 31 December 2020 and 31 December 2019, the detail of Loans and advances to Banks is as follows:

As at 31 December 2020 and 31 December 2019, the detail of Loans and advances to Banks is as follows:
Loans and advances to banks in Portugal

Very short-term placements
Deposits
Loans and advances to Banks
Loans
Other loans and advances

Loans and advances to banks abroad

Loans and advances to banks in Portugal

Very short-term placements
Deposits
Loans
Deposits
Other loans and advances
Loans
Very short-term placements
Operations with reverse repurchase agreements
Deposits
Other loans and advances
Loans
Deposits
Other loans and advances
Loans
Operations with reverse repurchase agreements
Other loans and advances
Deposits
Loans
Operations with reverse repurchase agreements
Other loans and advances

Overdue loans
Loans and advances to banks abroad

Impairment losses
Outstanding applications

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

31.12.2019

4 075
4 897
30 280
4

39 256
4 075
4 897
30 280
10 532
4
-
4 075
-
39 256
4 897
279 419
30 280
10 532
289 951
4
-
39 256
-
34 726
279 419
363 933
10 532
289 951
-
( 250 138)
-
34 726
279 419
113 795
363 933
289 951

8 902
9 342
34 013
3

52 260
8 902
9 342
34 013
10 850
3
1 645
8 902
-
52 260
9 342
381 561
34 013
10 850
394 056
3
1 645
52 260
-
-
381 561
446 316
10 850
394 056
1 645
( 77 088)
-
-
381 561
369 228
446 316
394 056

Impairment losses
Outstanding applications

( 250 138)
34 726

113 795
363 933

( 77 088)
-

369 228
446 316

Impairment losses

Investments in credit institutions are all recorded in the amortised cost portfolio.
Investments in credit institutions are all recorded in the amortised cost portfolio.
As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:
113 795
As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:

( 250 138)

( 77 088)

369 228

Investments in credit institutions are all recorded in the amortised cost portfolio.

(in thousands of Euros)

As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:

31.12.2020

31.12.2019

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Up to 3 months
Unlimited duration (Overdue Loans)
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Unlimited duration (Overdue Loans)

Changes in impairment losses on loans and advances to banks are presented as follows:

31.12.2020

16 200
4 854
302 182
5 971
16 200
34 726
4 854
302 182
363 933
5 971
34 726

(in thousands of Euros)

31.12.2019

24 302
11 793
406 305
3 916
24 302
-
11 793
406 305
446 316
3 916
-

363 933

446 316

(in thousands of Euros)

Changes in impairment losses on loans and advances to banks are presented as follows:

Loans and advances to Banks

Changes in impairment losses on loans and advances to banks are presented as follows:

Stage 1

Stage 2

Stage 3

Total

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements
Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2019

170

Stage 1

406
( 234)
-
170
( 24)
406
318
( 234)
-
536
( 24)
( 436)
12
318

75 143

Loans and advances to Banks

(in thousands of Euros)
75 740

427

Stage 2

2 752
( 2 959)
( 22)
75 143
1 427
2 752
76 341
( 2 959)
( 22)
2 457
1 427
( 1 948)
( 76 848)
76 341

Stage 3

-
-
-
427
2
-
429
-
-
317 540
2
( 128 520)
60 257
429

Total

3 158
( 3 193)
( 22)
75 740
1 405
3 158
77 088
( 3 193)
( 22)
320 533
1 405
( 130 904)
( 16 579)
77 088

Balance as at 31 December 2020

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

250 138
320 533
( 130 904)
The increase of impairment for investments in credit institutions verified in 2020 results from the degradation of the credit risk of
( 16 579)
international exposures analyzed on an individual basis, whose partial default situation at the end of 2020, among other signs of
250 138
Balance as at 31 December 2020
impairment, led to the transfer of the same to stage 3 and the constitution of additional impairments of Euro 189.6 million, and the
total impairment recorded on 31 December 2020 for this exposure was Euro 249.3 million.
The increase of impairment for investments in credit institutions verified in 2020 results from the degradation of the credit risk of
international exposures analyzed on an individual basis, whose partial default situation at the end of 2020, among other signs of
impairment, led to the transfer of the same to stage 3 and the constitution of additional impairments of Euro 189.6 million, and the
total impairment recorded on 31 December 2020 for this exposure was Euro 249.3 million.

249 706
317 540
( 128 520)
60 257

2
2 457
( 1 948)
( 76 848)

430
536
( 436)
12

249 706

430

260

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe increase of impairment for investments in credit institutions verified in 2020 results from the degradation of the
credit risk of international exposures analyzed on an individual basis, whose partial default situation at the end of
2020, among other signs of impairment, led to the transfer of the same to stage 3 and the constitution of additional
impairments of Euro 189.6 million, and the total impairment recorded on 31 December 2020 for this exposure was Euro
249.3 million.

Loans and advances to customers
Loans and advances to customers
As at 31 December 2020 and 31 December 2019, the detail of loans and advances to customers is presented as follows:
As at 31 December 2020 and 31 December 2019, the detail of loans and advances to customers is presented as follows:

Domestic loans and advances

Corporate

Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances

Individuals

Residential Mortgage loans
Consumer credit and other loans

Foreign loans and advances

Corporate

Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances

Individuals

Residential Mortgage loans
Consumer credit and other loans

Overdue loans and advances and interests

Under 90 days
Over 90 days

Impairment losses

Fair value adjustaments of interest rate hedges *

Corporate
Loans
Individuals

Residential Mortgage loans

* See Note 23

(in thousands of Euros)

31.12.2020

31.12.2019

1 147 959
8 980 908
81 843
576 766
7 109
1 421 599
21 077

8 977 196
1 118 813

1 408 191
8 436 268
121 203
710 493
3 061
1 523 091
29 617

9 102 659
1 178 338

22 333 270

22 512 921

851 881
146 986
4
51 483
8 321
-
1

950 312
186 020

2 195 008

667 842
1 068 336
21 206
138 292
39 158
37 422
1

1 085 701
321 114

3 379 072

15 632
610 169

26 695
1 083 494

625 801

1 110 189

25 154 079

27 002 182

(1 599 775)

(1 852 495)

23 554 304

25 149 687

6 774

14 390

55 956

62 730

38 150

52 540

23 617 034

25 202 227

During the year of 2020, the Group completed the sale of a portfolio of non-performing loans (called “Carter”) and the impact of this
operation on the balance sheet resulted in a reduction of net loans and advances to customers of Euro 37.0 million (Euro 82.8 million
During the year of 2020, the Group completed the sale of a portfolio of non-performing loans (called “Carter”) and the
in gross value and Euro 45.8 million in impairment) and the impact on results translated into a gain of Euro 2.9 million (see Note 43).
impact of this operation on the balance sheet resulted in a reduction of net loans and advances to customers of Euro
During the year of 2019, the Group completed the sale of a portfolio of non-performing loans (called “NATA II”), and the impact of
37.0 million (Euro 82.8 million in gross value and Euro 45.8 million in impairment) and the impact on results translated
this operation on the balance sheet resulted in a reduction in net loans and advances to customers of Euro 128.1 million (Euro 1,189.3
into a gain of Euro 2.9 million (see Note 43).
million in gross value and Euro 1,061.1 million in impairment), and the impact on results was a loss of Euro 83.5 million (see Note
43).
During the year of 2019, the Group completed the sale of a portfolio of non-performing loans (called “NATA II”), and the
Loans to customers are all recorded in the amortised cost portfolio.
impact of this operation on the balance sheet resulted in a reduction in net loans and advances to customers of Euro
128.1 million (Euro 1,189.3 million in gross value and Euro 1,061.1 million in impairment), and the impact on results was
As at 31 December 2020, the amount of loans and advances to customers (net of impairment) includes the amount of Euro 1,390.3
million (31 December 2019: Euro 1,608.7 million), related to securitization operations in which, according to the accounting policy
a loss of Euro -79.0 million (see Note 43).
referred to in Note 2.2, structured entities are consolidated by the Group (see Notes 1 and 39). The liabilities associated with these
securitization operations were recognized as Debt Securities (see Note 31).

261

As at 31 December 2020, the caption Loans and advances to customers include Euro 6,104.8 million of mortgage loans related to
the issuance of mortgage bonds (31 December 2019: Euro 6,076.8 million) (see Note 31).

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESLoans to customers are all recorded in the amortised cost portfolio.

As at 31 December 2020, the amount of loans and advances to customers (net of impairment) includes the amount of
Euro 1,390.3 million (31 December 2019: Euro 1,608.7 million), related to securitization operations in which, according
to the accounting policy referred to in Note 2.2, structured entities are consolidated by the Group (see Notes 1 and 39).
The liabilities associated with these securitization operations were recognized as Debt Securities (see Note 31).

As at 31 December 2020, the caption Loans and advances to customers include Euro 6,104.8 million of mortgage loans
related to the issuance of mortgage bonds (31 December 2019: Euro 6,076.8 million) (see Note 31).

As at 31 December 2020, the amount of interest and commissions recorded in the balance sheet relating to credit
operations amounts to Euro 25,256 thousand (31 December 2019: Euro 26,343 thousand).
As at 31 December 2020, the amount of interest and commissions recorded in the balance sheet relating to credit operations amounts
to Euro 25,256 thousand (31 December 2019: Euro 26,343 thousand).
As at 31 December 2019 and 2018, the analysis of loans and advances to customers, by residual maturity period, is as
As at 31 December 2020, the amount of interest and commissions recorded in the balance sheet relating to credit operations amounts
to Euro 25,256 thousand (31 December 2019: Euro 26,343 thousand).
follows:
As at 31 December 2019 and 2018, the analysis of loans and advances to customers, by residual maturity period, is as follows:

(in thousands of Euros)

As at 31 December 2019 and 2018, the analysis of loans and advances to customers, by residual maturity period, is as follows:
31.12.2019
(in thousands of Euros)
1 773 496
1 496 699
5 108 121
1 773 496
17 566 217
1 496 699
1 110 189
5 108 121
17 566 217
27 054 722
1 110 189

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
Up to 3 months
More than 5 years
From 3 months to 1 year
Unlimited duration (Overdue Loans)
From 1 to 5 years
More than 5 years
Unlimited duration (Overdue Loans)

1 049 929
1 299 816
5 157 298
1 049 929
17 083 965
1 299 816
625 801
5 157 298
17 083 965
25 216 809
625 801

31.12.2019

31.12.2020

Changes in credit impairment losses are presented as follows:

25 216 809

27 054 722

Changes in credit impairment losses are presented as follows:
Changes in credit impairment losses are presented as follows:

Credit Impairment Movement

(in thousands of Euros)

Stage 1

Stage 2

Stage 3

Total

265 353
Stage 1

110 355
Stage 2

Balance as at 31 December 2019

Balance as at 31 December 2018

Total
Financial assets derecognised
( 1 056 780)
Balance as at 31 December 2018
3 957 922
Increases due to changes in credit risk
949 544
Financial assets derecognised
( 1 056 780)
Decreases due to changes in credit risk
( 322 027)
Increases due to changes in credit risk
949 544
Utilization during the period
( 1 710 042)
Decreases due to changes in credit risk
( 322 027)
Other movements
33 878
( 1 710 042)
Utilization during the period
1 852 495
33 878
Other movements
( 294 007)
Financial assets derecognised
Balance as at 31 December 2019
1 852 495
808 179
Increases due to changes in credit risk
( 294 007)
Financial assets derecognised
( 283 737)
Decreases due to changes in credit risk
Increases due to changes in credit risk
808 179
Utilization during the period
( 441 450)
Other movements (a)
( 283 737)
Decreases due to changes in credit risk
( 41 705)
Utilization during the period
( 441 450)
1 599 775
Other movements (a)
( 41 705)
(a) It includes 58 046 thousand euros of impairment of credits of the Spanish Branch transferred to discontinued operations (22 427 thousand euros in stage 1 and 35 619 thousand euros in stage
1 599 775
3).

Credit Impairment Movement
3 582 214
Stage 3
( 1 055 717)
3 582 214
705 452
( 1 055 717)
( 133 970)
705 452
( 1 709 571)
( 133 970)
270 367
( 1 709 571)
1 658 775
270 367
( 294 005)
1 658 775
428 745
( 294 005)
( 68 607)
428 745
( 441 321)
( 68 607)
( 55 246)
( 441 321)
1 228 341
( 55 246)

( 1 050)
265 353
137 482
( 1 050)
( 156 076)
137 482
( 49)
( 156 076)
( 191 715)
( 49)
53 945
( 191 715)
( 2)
53 945
40 289
( 2)
( 116 192)
40 289
( 16)
( 116 192)
83 405
( 16)
61 429
83 405

( 13)
110 355
106 610
( 13)
( 31 981)
106 610
( 422)
( 31 981)
( 44 774)
( 422)
139 775
( 44 774)
-
139 775
339 145
-
( 98 938)
339 145
( 113)
( 98 938)
( 69 864)
( 113)
310 005
( 69 864)

Balance as at 31 December 2020

1 228 341

3 957 922

310 005

61 429

(a) It includes 58 046 thousand euros of impairment of credits of the Spanish Branch transferred to discontinued operations (22 427 thousand euros in stage 1 and 35 619 thousand euros in stage
3).
The increase of impairment for credit risk during the year 2020 include Euro 218.8 million, reflecting the updating of the information
in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.
The increase of impairment for credit risk during the year 2020 include Euro 218.8 million, reflecting the updating of the information
in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.
Credit distribution by type of rate is as follows:
The increase of impairment for credit risk during the year 2020 include Euro 218.8 million, reflecting the updating of
Credit distribution by type of rate is as follows:
the information in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.

(in thousands of Euros)

31.12.2020

31.12.2019
(in thousands of Euros)

Credit distribution by type of rate is as follows:

Fixed rate
Variable rate
Fixed rate
Variable rate

Fixed rate
Variable rate

262

31.12.2020

3 982 917
21 233 887
3 982 917
31.12.2020
25 216 804
21 233 887

31.12.2019
(in thousands of Euros)

3 705 246
23 349 476
3 705 246
31.12.2019
27 054 722
23 349 476

3 982 917
25 216 804
21 233 892

3 705 246
27 054 722
23 349 476

25 216 809

27 054 722

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

An analysis of finance lease loans, by residual maturity period, is presented as follows:
An analysis of finance lease loans, by residual maturity period, is presented as follows:

31.12.2020

31.12.2019

(in thousands of Euros)

Gross investment in finance leases receivable
An analysis of finance lease loans, by residual maturity period, is presented as follows:

Up to 1 year
1 to 5 years
More than 5 years

An analysis of finance lease loans, by residual maturity period, is presented as follows:
Gross investment in finance leases receivable
Unrealized finance income in finance leases
Up to 1 year
Up to 1 year
1 to 5 years
1 to 5 years
More than 5 years
Gross investment in finance leases receivable
More than 5 years
Up to 1 year
1 to 5 years
Unrealized finance income in finance leases
More than 5 years
Present value of minimum lease payments receivable
Up to 1 year
Up to 1 year
1 to 5 years
1 to 5 years
More than 5 years
Unrealized finance income in finance leases
More than 5 years
Up to 1 year
1 to 5 years
More than 5 years
Impairment
Up to 1 year
1 to 5 years
More than 5 years
Present value of minimum lease payments receivable

Present value of minimum lease payments receivable

270 188
761 487
571 105

31.12.2020

1 602 780

31.12.2020

270 188
44 830
761 487
67 455
571 105
32 654
1 602 780
270 188
144 939
761 487
571 105
44 830
1 602 780
225 358
67 455
694 032
32 654
538 285
144 939
44 830
1 457 675
67 455
32 654
( 220 447)
225 358
144 939
694 032
1 237 228
538 285

293 189
827 824
(in thousands of Euros)
663 672

31.12.2019

1 784 685

31.12.2019

(in thousands of Euros)
293 189
35 558
827 824
91 219
663 672
57 541
1 784 685
293 189
184 318
827 824
663 672
35 558
1 784 685
257 631
91 219
736 605
57 541
605 996
184 318
35 558
1 600 232
91 219
57 541
( 202 575)
257 631
184 318
736 605
1 397 657
605 996

Up to 1 year
1 to 5 years
Impairment
More than 5 years

NOTE 23 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS

At 31 December 2020 and 31 December 2019, the fair value of the hedging derivatives is analyzed as follows:

NOTE 23 – Derivatives – hedge accounting and fair value
changes of the hedged items

NOTE 23 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS

(in thousands of Euros)

Impairment

1 397 657
31.12.2019

1 237 228

( 202 575)

( 220 447)

31.12.2020

1 457 675
225 358
694 032
( 220 447)
538 285
1 237 228
1 457 675

1 600 232
257 631
736 605
( 202 575)
605 996
1 397 657
1 600 232

Hedging derivatives
At 31 December 2020 and 31 December 2019, the fair value of the hedging derivatives is analyzed as follows:
At 31 December 2020 and 31 December 2019, the fair value of the hedging derivatives is analyzed as follows:

Assets
Liabilities

NOTE 23 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS

12 972
( 72 543)
( 59 571)

7 452
( 58 855)
(in thousands of Euros)
( 51 403)

31.12.2020

31.12.2019

31.12.2020

12 972
1 129
( 72 543)
62 730
( 59 571)
63 859

(in thousands of Euros)
7 452
-
( 58 855)
52 540
( 51 403)
52 540

31.12.2019

12 972
( 72 543)
( 59 571)
1 129
62 730

63 859

7 452
( 58 855)
( 51 403)
-
52 540

52 540

At 31 December 2020 and 31 December 2019, the fair value of the hedging derivatives is analyzed as follows:
Fair value component of the assets and liabilities hedged for interest rate risk
Hedging derivatives
Financial assets
Assets
Liabilities

Securities (see Note 22)
Loans to customerss (see Note 22)

Hedging derivatives

Assets
Liabilities
Financial assets

Fair value component of the assets and liabilities hedged for interest rate risk
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
recognized in the income statement in the caption Gains and losses from hedge accounting.

Securities (see Note 22)
Loans to customerss (see Note 22)

Fair value component of the assets and liabilities hedged for interest rate risk

Financial assets

Securities (see Note 22)
Loans to customerss (see Note 22)

The Group calculates the “Credit Valuation Adjustment” (CVA) for derivative instruments in accordance with the methodology
described in Note 21 - financial assets and liabilities held for trading.
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
recognized in the income statement in the caption Gains and losses from hedge accounting.
As at 31 December 2020 and 2019, fair value hedging operations may be analyzed as follows:
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives
(in thousands of Euros)
The Group calculates the “Credit Valuation Adjustment” (CVA) for derivative instruments in accordance with the methodology
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
are recognized in the income statement in the caption Gains and losses from hedge accounting.
31.12.2020
described in Note 21 - financial assets and liabilities held for trading.
recognized in the income statement in the caption Gains and losses from hedge accounting.
The Group calculates the “Credit Valuation Adjustment” (CVA) for derivative instruments in accordance with the
Hedged risk
The Group calculates the “Credit Valuation Adjustment” (CVA) for derivative instruments in accordance with the methodology
As at 31 December 2020 and 2019, fair value hedging operations may be analyzed as follows:
methodology described in Note 21 - financial assets and liabilities held for trading.
described in Note 21 - financial assets and liabilities held for trading.
31.12.2020

Change in fair
value
component of
item hedged
in period (1)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(1)

Fair value of
derivatives (2)

-
52 540

1 129
62 730

(in thousands of Euros)

Hedged item

Derivative

63 859

52 540

Notional

As at 31 December 2020 and 2019, fair value hedging operations may be analyzed as follows:
Interest Rate Swap
As at 31 December 2020 and 2019, fair value hedging operations may be analyzed as follows:
Interest Rate Swap/ CIRS

Securities at amortized cost
Loans to customers

801
( 9 045)

Interest rate
Interest and exchange rates
Hedged risk
31.12.2020

378 000
3 325 224
Notional
3 703 224

665
( 60 236)
Fair value of
( 59 571)
derivatives (2)

Change in
fair value of
derivative in
period

( 8 244)

1 129
62 730

Fair value
component of
63 859
item hedged(1)

Derivative

Hedged item

(1) Attributable to hedged risk

(2) Includes accrued interest

Derivative

Interest Rate Swap
Interest Rate Swap/ CIRS

Securities at amortized cost
Loans to customers

Hedged item

Hedged risk
Interest rate
Interest and exchange rates

Notional

378 000
3 325 224

Fair value of
665
derivatives (2)
( 60 236)

Change in
fair value of
derivative in
period

801
( 9 045)

Fair value
component of
1 129
item hedged(1)
62 730

1 130
Change in fair
11 416
value
(in thousands of Euros)
component of
12 546
item hedged
in period (1)
Change in fair
value
component of
1 130
item hedged
11 416
in period (1)

31 December 2020

(1) Attributable to hedged risk
Interest Rate Swap
(2) Includes accrued interest
Interest Rate Swap/ CIRS

Securities at amortized cost
Loans to customers

( 59 571)
Notes to the Consolidated Financial Statements
665
( 60 236)

Interest rate
Interest and exchange rates

378 000
3 325 224

3 703 224

( 8 244)

63 859

801
( 9 045)

1 129
62 730

12 546
55
1 130
11 416

(1) Attributable to hedged risk

(2) Includes accrued interest

31 December 2020

Notes to the Consolidated Financial Statements

263

31 December 2020

Notes to the Consolidated Financial Statements

3 703 224

( 59 571)

( 8 244)

63 859

12 546

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESProduto derivado

Hedged item

Hedged risk

Notional

31.12.2019

(in thousands of Euros)

Fair value of
derivatives (2)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(1)

Change in fair
value
component of
item hedged
in period (1)

Interest Rate Swap/ CIRS

Loans to customers

Interest and exchange rates

3 295 352

( 51 403)

( 16 142)

52 540

18 007

(1) Attributable to hedged risk

(2) Includes accrued interest

3 295 352

( 51 403)

( 16 142)

31.12.2019

52 540

(in thousands of Euros)

18 007

Fair value of
derivatives (2)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(1)

Change in fair
value
component of
item hedged
in period (1)

18 007

Notional

52 540

( 51 403)

( 16 142)

( 51 403)

3 295 352

(2) Includes accrued interest

(1) Attributable to hedged risk

Hedged item

Produto derivado

(in thousands of Euros)

Loans to customers

Fair value of
derivatives (2)

3 295 352
Notional
3 295 352

Fair value
component of
item hedged(1)

Change in
fair value of
derivative in
period

Hedged risk
On 31 December 2020, the ineffective part of the fair value hedging operations, which translated into a cost of Euro 4.3 million, was
recorded in the income statement (31 December 2019: profit of Euro 1.8 million). The Group periodically conducts tests of the
31.12.2019
effectiveness of existing hedging relationships.
On 31 December 2020, the ineffective part of the fair value hedging operations, which translated into a cost of Euro 4.3
Interest and exchange rates
Interest Rate Swap/ CIRS
Hedged risk
Produto derivado
million, was recorded in the income statement (31 December 2019: profit of Euro 1.8 million). The Group periodically
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which
18 007
led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their positions
conducts tests of the effectiveness of existing hedging relationships.
in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD
SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original
Interest and exchange rates
Interest Rate Swap/ CIRS
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference
objective of risk management or discontinuation of hedging relationships will occur, the Group did not record significant impacts on
On 31 December 2020, the ineffective part of the fair value hedging operations, which translated into a cost of Euro 4.3 million, was
interest rates, which led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change
retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships were
recorded in the income statement (31 December 2019: profit of Euro 1.8 million). The Group periodically conducts tests of the
given the same change (hedged items and hedging).
the discount curve of their positions in derivative financial instruments cleared in central counterparty (CCP) from
effectiveness of existing hedging relationships.
EUR OIS to EUR € STR and from USD OIS to USD SOFR. In accordance with the principle of implementation of the
Transactions with risk management and hedge derivatives as of 31 December 2020 and 2019, by maturity, can be analyzed as
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which
On 31 December 2020, the ineffective part of the fair value hedging operations, which translated into a cost of Euro 4.3 million, was
aforementioned regulation, that no substantial changes to the original objective of risk management or discontinuation
follows:
led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their positions
recorded in the income statement (31 December 2019: profit of Euro 1.8 million). The Group periodically conducts tests of the
of hedging relationships will occur, the Group did not record significant impacts on retrospective and prospective
in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD
effectiveness of existing hedging relationships.
SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original
(in thousands of Euros)
effectiveness, taking into account that all assets and liabilities involved in hedging relationships were given the same
objective of risk management or discontinuation of hedging relationships will occur, the Group did not record significant impacts on
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which
change (hedged items and hedging).
retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships were
led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their positions
Fair value (net)
given the same change (hedged items and hedging).
in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD
Transactions with risk management and hedge derivatives as of 31 December 2020 and 2019, by maturity, can be
SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original
170 866
Transactions with risk management and hedge derivatives as of 31 December 2020 and 2019, by maturity, can be analyzed as
objective of risk management or discontinuation of hedging relationships will occur, the Group did not record significant impacts on
analyzed as follows:
803 084
follows:
retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships were
877 662
given the same change (hedged items and hedging).

3 months to 1 year
1 to 5 years
More than 5 years

Change in fair
value
component of
item hedged
in period (1)

170 866
803 084
877 662

-
772 860
874 816

-
( 14 413)
( 36 990)

( 912)
( 8 747)
( 49 912)

( 51 403)
(in thousands of Euros)
Transactions with risk management and hedge derivatives as of 31 December 2020 and 2019, by maturity, can be analyzed as
follows:

Fair value (net)

31.12.2020

31.12.2019

31.12.2020

31.12.2019

1 851 612

1 647 676

( 59 571)

Notional

3 295 352

( 51 403)

( 16 142)

( 51 403)

( 16 142)

52 540

18 007

Buy

Sell

Notional

Fair value (net)

NOTE 24 – INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

Buy

Sell

Buy

Sell

( 912)
Investments in subsidiaries, joint ventures and associates are presented as follows:
( 8 747)
( 49 912)
Fair value (net)

3 months to 1 year
1 to 5 years
More than 5 years

Notional

170 866
803 084
877 662
Buy
1 851 612
170 866
803 084
Cost of participation
877 662

170 866
31.12.2020
803 084
877 662
Sell
1 851 612
170 866
803 084
877 662

Notional

-
772 860
874 816
Buy
1 647 676
-
772 860
874 816

31.12.2019

-
772 860
874 816
Sell
1 647 676
-
772 860
874 816

Fair value (net)

(in thousands of Euros)
-
( 14 413)
( 36 990)
Fair value (net)

(in thousands of Euros)

( 51 403)
-
( 14 413)
Group profit / losses
( 36 990)
attributable to the Group

( 59 571)
( 912)
( 8 747)
( 49 912)

Economic interest (b)

Book value

3 months to 1 year
1 to 5 years
More than 5 years

NOTE 24 – INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

31.12.2020

1 851 612

31.12.2019

1 851 612

31.12.2020

( 59 571)
31.12.2019

31.12.2020

1 647 676

31.12.2019

1 647 676

31.12.2020

( 51 403)
31.12.2019

LOCARENT
Investments in subsidiaries, joint ventures and associates are presented as follows:
LINEAS - CONCESSÕES DE TRANSPORTES

NOTE 24 – Investments in subsidiaries, joint ventures and
associates

EDENRED
NOTE 24 – INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
UNICRE a)

146 769

11 497

28 983

24 640

20 607

19 612

60 200

61 786

( 1 784)

17,50%

50,00%

40,00%

50,00%

2 967

1 021

4 526

4 984

2 102

1 992

1 325

469

513

2 624
4 242
(in thousands of Euros)
( 828)
( 1 208)

Group profit / losses
attributable to the Group

9 430

1 470

Others
Investments in subsidiaries, joint ventures and associates are presented as follows:
Investments in subsidiaries, joint ventures and associates are presented as follows:
Economic interest (b)
Impairment

Cost of participation
194 789

194 598

28 381

28 572

19 701

20 915

131 593

Book value

128 945

( 37 963)

( 36 317)

31.12.2019
(in thousands of Euros)
a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence
1 325
1 021
LOCARENT
over its activities.
LINEAS - CONCESSÕES DE TRANSPORTES
b) The percentage of economic interest indicated corresponds to the proportion of voting rights held.
EDENRED

Group profit / losses
attributable to the Group

Economic interest (b)

Cost of participation
146 769

Book value

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

146 769

93 630

92 628

20 607

19 612

60 200

61 786

( 1 784)

50,00%

40,00%

50,00%

2 967

4 984

4 526

4 984

2 102

1 992

469

513

UNICRE a)

Others
LOCARENT

LINEAS - CONCESSÕES DE TRANSPORTES

EDENRED
Impairment

31.12.2020

11 497

31.12.2019

11 497

31.12.2020

17,50%

31.12.2019

17,50%

31.12.2020

28 983

31.12.2019

24 640

31.12.2020

4 242

31.12.2019

2 624

28 572
2 967

146 769
194 789
4 984

28 381
2 967

146 769
194 598
4 984

50,00%

40,00%

50,00%

40,00%

50,00%

19 701
20 607

60 200
131 593
2 102
( 37 963)

20 915
19 612

61 786
128 945
1 992
( 36 317)

( 828)
1 021

4 526
9 430
469

( 1 208)
1 325

( 1 784)
1 470
513

2 624
UNICRE a)
a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence
( 1 208)
Others
over its activities.

28 983
93 630

24 640
92 628

11 497

28 381

28 572

19 701

20 915

17,50%

4 242

( 828)

b) The percentage of economic interest indicated corresponds to the proportion of voting rights held.
Impairment

194 789

194 598

131 593

128 945

9 430

1 470

( 37 963)

( 36 317)

93 630

92 628

a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence
over its activities.

Notes to the Consolidated Financial Statements

31 December 2020

b) The percentage of economic interest indicated corresponds to the proportion of voting rights held.

264

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe financial information of the most relevant associated companies is presented in the following table:
The financial information of the most relevant associated companies is presented in the following table:

Income
The financial information of the most relevant associated companies is presented in the following table:

Liabilities

Assets

Equity

(in thousands of Euros)

Profit / (loss) for the period

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

LOCARENT

278 892

285 608

238 299

247 005

40 593

LINEAS - CONCESSÕES DE TRANSPORTES

EDENRED

239 341

Assets

78 399

314 608

74 183

154 744

Liabilities

227 063

67 973

63 978

84 597

Equity

10 426

38 603

87 545

10 205

33 115

66 882

2 649
(in thousands of Euros)

2 042

19 769

Income

7 083

2 272

7 713

12 333

( 4 461)
Profit / (loss) for the period
1 026

938

UNICRE a)
The financial information of the most relevant associated companies is presented in the following table:
LOCARENT
Note: Data adjusted for consolidation purposes

148 490

140 802

210 647

257 476

165 619

376 266

398 278

278 892

285 608

238 299

247 005

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

40 593

38 603

33 115

31.12.2019

156 270

31.12.2020

24 239

31.12.2019

14 995

66 882

2 042

2 649

227 063
LINEAS - CONCESSÕES DE TRANSPORTES
a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence over its
activities.
EDENRED

( 4 461)
(in thousands of Euros)
938
1 026

154 744

314 608

239 341

67 973

87 545

84 597

10 426

10 205

63 978

74 183

19 769

12 333

78 399

2 272

7 083

7 713

UNICRE a)

376 266

Assets

398 278

210 647

Liabilities

257 476

165 619

Equity

140 802

148 490

Income

156 270

14 995
Profit / (loss) for the period

24 239

7 713

7 083

2 272

2 042

1 026

( 4 461)

24 239

78 399

12 333

19 769

66 882

33 115

63 978

38 603

10 205

10 426

67 973

87 545

84 597

40 593

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

148 490

257 476

210 647

376 266

398 278

238 299

278 892

247 005

239 341

140 802

165 619

154 744

227 063

31.12.2020

31.12.2019

31.12.2020

31.12.2019
938

(in thousands of Euros)

Balance at the end of the exercise
Balance at the beginning of the exercise

(a) As of 31 December 2019 it includes 22 904 thousand euros related to the reclassification of GNB Seguros, ESEGUR and Multipessoal for discontinued operations (see
Note 29)

The changes in the caption as at 31 December 2020 and 2019, is analyzed as follows:
Note: Data adjusted for consolidation purposes
31.12.2019
a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence over its
2 649
285 608
LOCARENT
activities.
The changes in the caption as at 31 December 2020 and 2019, is analyzed as follows:
314 608
LINEAS - CONCESSÕES DE TRANSPORTES
74 183
EDENRED
The changes in the caption as at 31 December 2020 and 2019, is analyzed as follows:
UNICRE a)
Balance at the beginning of the exercise
Note: Data adjusted for consolidation purposes

Additional acquisitions and investments (see Note 1)
Share of profits / (losses) of associated companies
Impairment in associated companies
Balance at the beginning of the exercise
Fair value reserves of investments in associated companies
The changes in the caption as at 31 December 2020 and 2019, is analyzed as follows:
Additional acquisitions and investments (see Note 1)
Dividends received
Share of profits / (losses) of associated companies
Foreign exchange differences and other (a)
Impairment in associated companies
Fair value reserves of investments in associated companies
Dividends received
Foreign exchange differences and other (a)
Additional acquisitions and investments (see Note 1)
Share of profits / (losses) of associated companies
Impairment in associated companies
Fair value reserves of investments in associated companies
Dividends received
Foreign exchange differences and other (a)

14 995
118 698
(in thousands of Euros)
-
a) Despite the Group's economic interest being less than 20%, this entity was included in the consolidated balance sheet using the equity method since the Group exercises significant influence over its
1 470
activities.
333
118 698
709
-
( 5 371)
1 470
( 23 211)
333
92 628
709
( 5 371)
118 698
( 23 211)
-
1 470
92 628
333
In 2020, dividend income of Euro 1,541 thousand was recorded in financial assets in investments in associates and subsidiaries,
(a) As of 31 December 2019 it includes 22 904 thousand euros related to the reclassification of GNB Seguros, ESEGUR and Multipessoal for discontinued operations (see
709
which include dividends received from Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583
Note 29)
( 5 371)
thousand and ESEGUR in the amount of Euro 548 thousand (31 December 2019: Euro 5,371 thousands, which include dividends
( 23 211)
received from Unicre in the amount of Euro 4,165 thousand, from Locarent in the amount of Euro 1.050 thousand and Edenred in the
In 2020, dividend income of Euro 1,541 thousand was recorded in financial assets in investments in associates and subsidiaries,
amount of Euro 156 thousand).
which include dividends received from Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583
thousand and ESEGUR in the amount of Euro 548 thousand (31 December 2019: Euro 5,371 thousands, which include dividends
(a) As of 31 December 2019 it includes 22 904 thousand euros related to the reclassification of GNB Seguros, ESEGUR and Multipessoal for discontinued operations (see
The changes in impairment losses for investments in associates are presented as follows:
In 2020, dividend income of Euro 1,541 thousand was recorded in financial assets in investments in associates and
received from Unicre in the amount of Euro 4,165 thousand, from Locarent in the amount of Euro 1.050 thousand and Edenred in the
Note 29)
(in thousands of Euros)
amount of Euro 156 thousand).
subsidiaries, which include dividends received from Locarent in the amount of Euro 958 thousand, from Edenred in
the amount of Euro 583 thousand and ESEGUR in the amount of Euro 548 thousand (31 December 2019: Euro 5,371
In 2020, dividend income of Euro 1,541 thousand was recorded in financial assets in investments in associates and subsidiaries,
The changes in impairment losses for investments in associates are presented as follows:
which include dividends received from Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583
thousands, which include dividends received from Unicre in the amount of Euro 4,165 thousand, from Locarent in the
Balance at the beginning of the period
thousand and ESEGUR in the amount of Euro 548 thousand (31 December 2019: Euro 5,371 thousands, which include dividends
amount of Euro 1,050 thousand and Edenred in the amount of Euro 156 thousand).
received from Unicre in the amount of Euro 4,165 thousand, from Locarent in the amount of Euro 1.050 thousand and Edenred in the
amount of Euro 156 thousand).
The changes in impairment losses for investments in associates are presented as follows:
Balance at the beginning of the period
The changes in impairment losses for investments in associates are presented as follows:

156 270
92 628
2 919
9 430
( 4 192)
92 628
691
2 919
( 1 541)
9 430
( 6 305)
( 4 192)
93 630
691
( 1 541)
92 628
( 6 305)
2 919
9 430
93 630
( 4 192)
691
( 1 541)
( 6 305)

Balance at the end of the exercise

(in thousands of Euros)

31.12.2019

31.12.2020

31.12.2019

31.12.2020

36 317

92 628

93 630

Charges
Uses
Reversals
Foreign exchange differences
Charges
Uses
Reversals
Foreign exchange differences

Balance at the end of the period

Balance at the beginning of the period
Balance at the end of the period

Charges
Uses
Reversals
Foreign exchange differences

31.12.2020

31.12.2019

36 650
(in thousands of Euros)
5 142
1
-
( 2 680)
36 650
36 317
( 334)
( 950)
134
-
1
5 142
(in thousands of Euros)
-
( 2 680)
36 317
37 963
( 334)
( 950)
-
134
36 650
36 317
36 317
37 963
1
5 142
-
( 2 680)
( 334)
( 950)
-
134

31.12.2019

Balance at the end of the period

37 963

36 317

31 December 2020

Notes to the Consolidated Financial Statements

265

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOTE 25 – Tangible fixed assets

NOTE 25 – TANGIBLE FIXED ASSETS

This caption as at 31 December 2020 and 2019 is analyzed as follows:
This caption as at 31 December 2020 and 31 December 2019 is analyzed as follows:

Real estate properties

For own use
Improvements in leasehold properties
Assets under right-of-use

Equipment

Computer equipment
Fixtures
Furniture
Security equipment
Office equipment
Transport equipment
Assets under right-of-use
Other

Work in progress

Improvements in leasehold properties
Real estate properties
Equipment
Others

Accumulated impairment
Accumulated depreciation

(in thousands of Euros)

31.12.2020

31.12.2019

225 571
135 909
53 082

207 553
139 257
60 531

414 562

407 341

106 337
56 936
52 296
24 248
7 993
583
10 228
189

110 371
58 243
71 061
24 829
8 230
640
5 952
1 195

258 810

280 521

673 372

687 862

-
148
1
1 417

1 566

22
67
6
-

674 938

687 957

( 13 943)
( 473 943)

( 10 609)
( 488 940)

187 052

188 408

31 December 2020

Notes to the Consolidated Financial Statements

266

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED
The changes in this caption were as follows:
The changes in this caption were as follows:

Real estate
properties

Equipment

Other

(in thousand of Euros)

Work in
progress

Total

Acquisition cost
Balance at 31 December 2018

Acquisitions
Disposals/write-offs
Transfers (a)
IFRS16 transition impact
Foreign exchange differences and other

Balance at 31 December 2019

Acquisitions
Disposals/write-offs
Transfers
Foreign exchange differences and other (c)

347 224
8 230
( 20 244)
491
66 644
4 996

407 341
31 178
( 12 539)
( 1 665)
( 9 753)

286 815
11 371
( 22 634)
950
4 461
( 442)

280 521
15 514
( 10 360)
( 147)
( 26 718)

Balance at 31 December 2020

414 562

258 810

Depreciation
Balance at 31 December 2018

Depreciation
Disposals/write-offs
Transfers (a)
Foreign exchange differences and other

Balance at 31 December 2019

Depreciation
Disposals/write-offs
Transfers (b)
Foreign exchange differences and other (d)

225 713
20 542
( 5 998)
( 210)
1 085

241 132
17 829
( 8 928)
( 805)
( 801)

257 149
11 866
( 21 292)
( 74)
142

247 791
12 456
( 9 973)
( 143)
( 24 622)

Balance at 31 December 2020

248 427

225 509

Impairment
Balance at 31 December 2018

Balance at 31 December 2019

Impairment loss

Balance at 31 December 2020

10 609

10 609
3 334

13 943

-
-

Net book value at 31 December 2020

152 192

33 301

Net book value at 31 December 2019

155 600

32 730

-
-
-
-
-
-

-
-
-
-
-

16
1
-
-
-

17
-
( 7)
-
( 3)

-
-

( 7)

( 17)

1 942
358
-
( 2 205)
-
-

95
1 593
-
( 121)
( 1)

1 566

-
-
-
-
-

-
-

635 981
19 959
( 42 878)
( 764)
71 105
4 554

687 957
48 285
( 22 899)
( 1 933)
( 36 472)

674 938

482 878
32 409
( 27 290)
( 284)
1 227

488 940
30 285
( 18 908)
( 948)
( 25 426)

473 943

10 609

10 609
3 334

13 943

1 566

187 052

188 408

(a) Includes Euro 764 thousand of fixed assets (real estate and equipment) and Euro 284 thousand of accumulated amortizations related to discontinued branches which were transferred by the net
amount to the appropriate balance sheet items.

(b) Includes Euro 1 951 thousand of fixed assets (real estate and equipment) and Euro 1 064 thousand of accumulated amortizations related to discontinued branches which were transferred by the net
amount to the appropriate balance sheet items.

(c) Includes Euro 9 005 thousand and Euro 27 118 thousand of fixed asset (real estate and equipment) transferred by discontinued activities during the financial year 2020.

(d) Includes Euro 2 034 thousand and Euro 24 274 thousand of amortizations related to fixed assets (real estate and equipment) of the Spain branch transferred to discontinued activities during the
financial year 2020.

NOTE 26 – Investment properties

The changes in the caption Investment properties is presented as follows:

Balance at the beginning of the exercise
Changes in consolidation perimeter
Acquisitions
Sales
Changes in fair value
Other (a)

Balance at the end of the exercise

31.12.2020

(in thousands of Euros)
31.12.2019

700 744
-
11 966
( 67 581)
( 101 827)
49 303

592 605

1 098 071
9 455
-
( 197 058)
( 216 119)
6 395

700 744

(a) Includes Euro 52 915 thousand of real estate assets transferred in financial year 2020 within the scope of the Restructuring of Real Estate Funds that were previously classified as Other Assets (see Note
29).

31 December 2020

Notes to the Consolidated Financial Statements

267

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOTE 26 – INVESTMENT PROPERTIES

The changes in the caption Investment properties is presented as follows:

31.12.2020

(in thousands of Euros)
31.12.2019

592 605

700 744

700 744
-
11 966
( 67 581)
( 101 827)
49 303

1 098 071
9 455
-
( 197 058)
( 216 119)
6 395

Balance at the beginning of the exercise
Changes in consolidation perimeter
Acquisitions
Alienation
Changes in fair value
According to the accounting policy described in Note 2.23, the book value of investment properties is the fair
Other (a)
value of the properties, as determined by a registered and independent appraiser with a recognized professional
Balance at the end of the exercise
qualification and experience in the geographical location and category of the property being valued. For the purposes
(a) Includes Euro 52 915 thousand of real estate assets transferred in financial year 2020 within the scope of the Restructuring of Real Estate Funds that were previously classified as Other Assets (see Note
of determining the fair value of these assets, generally accepted criteria and methodologies are used, which integrate
29).
analyses by the income method and the market method, corresponding to level 3 of the fair value hierarchy (see
Note 40). In view of the uncertainty associated with the estimated value of these assets, NOVO BANCO Group
According to the accounting policy described in Note 2.23, the book value of investment properties is the fair value of the properties,
considers the impacts of the current context of the Covid-19 pandemic as the assets are subject to revaluation.
as determined by a registered and independent appraiser with a recognized professional qualification and experience in the
geographical location and category of the property being valued. For the purposes of determining the fair value of these assets,
generally accepted criteria and methodologies are used, which integrate analyses by the income method and the market method,
Investment properties comprise some assets held by Funds and Real Estate firms, and include commercial properties
corresponding to level 3 of the fair value hierarchy (see Note 40). In view of the uncertainty associated with the estimated value of
leased for revenue and properties held for valuation. Most of the lease contracts have no specific tenor, enabling the
these assets, NOVO BANCO Group considers the impacts of the current context of the Covid-19 pandemic as the assets are subject
lessee to cancel it at any time. However, for a small number of these commercial properties leased to third parties there
to revaluation.
is a non-cancelling clause for approximately 10 years. Subsequent leases are negotiated with the lessee.
Investment properties comprise some assets held by Funds and Real Estate firms, and include commercial properties leased for
revenue and properties held for valuation. Most of the lease contracts have no specific tenor, enabling the lessee to cancel it at any
In the financial year of 2020, the decrease in the fair value of investment properties of Euro 101.8 million (31 December
time. However, for a small number of these commercial properties leased to third parties there is a non-cancelling clause for
2019: reduction of Euro 216.1 million) (see Note 14), and the rental income from investment properties of Euro 19.3
approximately 10 years. Subsequent leases are negotiated with the lessee.
million (31 December 2019: Euro 15.0 million), are recognized in Other operating income and expenses.
In the financial year of 2020, the decrease in the fair value of investment properties of Euro 101.8 million (31 December 2019:
reduction of Euro 216.1 million) (see Note 14), and the rental income from investment properties of Euro 19.3 million (31 December
The fair value changes and sales presented as at 31 December 2019 include Euro 35.0 million and Euro 17.4 million
2019: Euro 15.0 million), are recognized in Other operating income and expenses.
related to the sale of real estate assets (Project Sertorius) (see Note 43).
The fair value changes and sales presented as at 31 December 2019 include Euro 35.0 million and Euro 17.4 million related to the
sale of real estate assets (Project Sertorius) (see Note 43).

NOTE 27 – Intangible assets

NOTE 27 – INTANGIBLE ASSETS

This caption as at 31 December 2020 and 31 December 2019, is analyzed as follows:
This caption as at 31 December 2020 and 31 December 2019, is analyzed as follows:

Goodwill

Internally developed

Software - Automatic data processing system
Other

Acquired from third parties

Software - Automatic data processing system
Other

Work in progress

Accumulated amortization
Impairment losses

(in thousands of Euros)

31.12.2020

31.12.2019

13 907

13 908

69 511
1

69 408
1

353 678
-

371 533
4

423 190

440 946

21 439

17 464

458 536

472 318

( 395 796)
( 13 907)

( 432 032)
( 13 908)

48 833

26 378

31 December 2020

Notes to the Consolidated Financial Statements

268

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe changes in this caption were as follows:
The changes in this caption were as follows:

The changes in this caption were as follows:

Acquisition cost
Balance as at 31 December 2018

Goodwill e Value
In Force

Goodwill e Value
251 004
In Force

(in thousands of Euros)

Software

Work in progress

Total

(in thousands of Euros)

Software

442 494

Work in progress
2 618

Total

696 116

Acquisitions
Acquisition cost
Acquired from third parties
Balance as at 31 December 2018

Acquired from third parties

Disposals / write-offs
Acquisitions
Transfers
Foreign exchange differences and other
Disposals / write-offs
Transfers
Acquisitions
Foreign exchange differences and other

Balance as at 31 December 2019

Acquired from third parties
Balance as at 31 December 2019

Acquired from third parties

Disposals / write-offs
Acquisitions
Transfers
Foreign exchange differences and other (a)
Disposals / write-offs
Transfers
Foreign exchange differences and other (a)

Balance as at 31 December 2020

Amortizations
Balance as at 31 December 2020
Balance as at 31 December 2018

Balance as at 31 December 2019

Amortizations
Balance as at 31 December 2018

Amortization for the period
Disposals / write-offs
Foreign exchange differences and other
Amortization for the period
Disposals / write-offs
Amortization for the period
Foreign exchange differences and other
Disposals / write-offs
Foreign exchange differences and other (b)
Amortization for the period
Disposals / write-offs
Foreign exchange differences and other (b)

Balance as at 31 December 2019

Balance as at 31 December 2020

Impairment
Balance as at 31 December 2020
Balance as at 31 December 2018

Impairment losses
Impairment
Reversal of impairment losses
Balance as at 31 December 2018
Foreign exchange changes and other
Impairment losses
Balance as at 31 December 2019
Reversal of impairment losses
Impairment losses
Foreign exchange changes and other
Disposals / write-offs
Foreign exchange differences and other
Impairment losses
Disposals / write-offs
Foreign exchange differences and other

Balance as at 31 December 2019

Balance as at 31 December 2020

Net balance at 31 December 2020

-
251 004
( 234 575)
-
-
( 2 521)
( 234 575)
13 908
-
( 2 521)
-
13 908
-
-
-
( 1)
-
13 907
-
( 1)

13 907
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
250 561
443
( 234 575)
250 561
( 2 521)
443
13 908
( 234 575)
-
( 2 521)
-
13 908
( 1)
-
13 907
-
( 1)
-

3 421
442 494
( 7 458)
4 467
3 421
( 1 978)
( 7 458)
440 946
4 467
( 1 978)
2 730
440 946
( 24)
20 161
2 730
( 40 623)
( 24)
423 190
20 161
( 40 623)

423 190
440 130
1 254
( 7 460)
440 130
( 1 892)
1 254
432 032
( 7 460)
2 787
( 1 892)
( 20)
432 032
( 39 003)
2 787
395 796
( 20)
( 39 003)

395 796
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27 394

Balance as at 31 December 2020
Net balance at 31 December 2019
Net balance at 31 December 2020
(a) Includes 40 083 thousands of Euros of projects assigned to the Spain branch transferred to Discontinued Entities during the financial year 2020.

13 907
-
-

-
8 914
27 394

23 018
2 618
-
( 8 172)
23 018
-
-
17 464
( 8 172)
-
24 136
17 464
-
( 20 161)
24 136
-
-
21 439
( 20 161)
-

21 439
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21 439

-
17 464
21 439

Net balance at 31 December 2019
(b) Includes 38 463 thousands of Euros of investment projects related to the Spanish Branch transferred to Discontinued Entities during the financial year 2020.

8 914

17 464

(a) Includes 40 083 thousands of Euros of projects assigned to the Spain branch transferred to Discontinued Entities during the financial year 2020.

(b) Includes 38 463 thousands of Euros of investment projects related to the Spanish Branch transferred to Discontinued Entities during the financial year 2020.
Goodwill is recognized in accordance with the accounting policy described in Note 2.2, is analyzed as follows:

26 439
696 116
( 242 033)
( 3 705)
26 439
( 4 499)
( 242 033)
472 318
( 3 705)
( 4 499)
26 866
472 318
( 24)
-
26 866
( 40 624)
( 24)
458 536
-
( 40 624)

458 536
440 130
1 254
( 7 460)
440 130
( 1 892)
1 254
432 032
( 7 460)
2 787
( 1 892)
( 20)
432 032
( 39 003)
2 787
395 796
( 20)
( 39 003)

395 796
250 561
443
( 234 575)
250 561
( 2 521)
443
13 908
( 234 575)
-
( 2 521)
-
13 908
( 1)
-
13 907
-
( 1)
48 833

13 907
26 378
48 833

26 378

Goodwill is recognized in accordance with the accounting policy described in Note 2.2, is analyzed as follows:
Goodwill is recognized in accordance with the accounting policy described in Note 2.2, is analyzed as follows:

(in thousands of Euros)

31.12.2020

31.12.2019

Subsidiaries
Imbassaí
Other

Subsidiaries
Imbassaí
Other
Imbassaí
Other

Imbassaí
Other

Impairment losses

31.12.2020

13 526
381
13 907
13 526
381
(13 526)
13 907
( 381)
(13 907)
(13 526)
-
( 381)
(13 907)

(in thousands of Euros)

31.12.2019

13 526
382
13 908
13 526
382
(13 526)
13 908
( 382)
(13 908)
(13 526)
-
( 382)
(13 908)

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

269

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOTE 28 – Income taxes

NOVO BANCO and its subsidiaries and associated companies located in Portugal are subject, individually, to taxation
in accordance with the Corporate Income Tax (IRC) Code. As a result, deferred taxes are recorded depending on
the temporary differences between accounting and tax income relevant for IRC purposes, whenever such temporary
differences are to be reverted in the future.

The income taxes correspond to the value determined of taxable income (if applicable) of the period, using the overall
Corporate Income Tax (IRC) at the general rate of 21% and autonomous taxations.

Corporate income taxes (current or deferred) are recognized in the income statement except when the underlying
transactions or items to which they are related have been reflected under equity captions (e.g. revaluation of financial
assets at a fair value through other comprehensive income). In these situations, the corresponding tax is also charged
to equity, not affecting the net profit / (loss) for the year.

Deferred taxes are calculated based on the tax rates expected to be in force at the temporary differences’ reversal date,
which correspond to the rates enacted or substantively enacted at the balance sheet date.

Thus, at 31 December 2020 the deferred tax related to temporary differences was determined based on an aggregate
rate of 31%, resulting from the sum of the general IRC rate (21%), the Municipal Surcharge of 1.5% and an average rate
of State Surcharge of 8.5%.

On 4th September 2019, Law No. 98/2019 was published, which amended the IRC Code on the tax treatment of credit
institutions' impairments, creating rules applicable to impairment losses recorded in the tax periods beginning before
1st January 2019, not yet accepted for tax purposes. This Law established a transition period for the aforementioned tax
regime, which allows taxpayers in the five tax periods beginning on or after January 1, 2019, to continue to apply the
tax regime in force before publication of this law, except if they perform the exercise of opt in until the end of October
of each tax period of the adaptation regime.

The IRC payment declarations are subject to inspection and possible adjustment by the Tax Authorities for a period
of four years or during the period in which it is possible to deduct tax losses or tax credits (up to a maximum of
twelve years, depending on the year of determination). Thus, possible additional tax assessments may take place due
essentially to different interpretations of tax legislation. However, Management believes that, in the context of the
consolidated financial statements, there will be no additional charges of significant value.

In 2020 and 2019, NOVO BANCO Group recorded deferred tax assets associated with impairments not accepted for
tax purposes for credit operations, which have already been written off, considering the expectation that these will
contribute to a taxable profit in the periods taxation in which the conditions required for tax deductibility are met.

Pursuant to Law No. 55-A/2010, of 31 December, a Bank Levy was established, which is levied on the average annual
liabilities recorded on the balance sheet net of own funds and of deposits covered by the guarantee of the Deposit
Guarantee Fund and on the notional amount of derivative financial instruments. The Bank Levy is not eligible as a
tax cost, and the respective regime has been extended. As at 31 December 2020, NOVO BANCO Group recognized
Banking Levy charges as a cost in the amount of Euro 27,440 thousand (31 December 2019: Euro 27,091 thousand). The
cost recognized as at 31 December 2020 has been calculated and paid based on the maximum rate of 0.110% levied on
the average annual liabilities recorded on the balance sheet, net of own funds and deposits covered by the guarantee
of the Deposit Guarantee Fund, approved by Law No. 7-A/2016, of 30 March and by Ordinance No. 165-A/2016, of 14
June.

In 2020, following one of the measures provided for in Economic and Social Stabilization Program (SSPE) and following
the art. 18 of Law no. 27 -A / 2020, of July 24, the Solidarity Additional on the Banking Sector was created, which,
similarly to what happens with the Contribution on the Banking Sector, is levied on the average annual liability calcu-
lated balance sheet deducted from own funds and deposits covered by the Deposit Guarantee Fund guarantee and
on the notional value of derivative financial instruments. Its settlement is carried out until the end of June of the year
following the year to which the surcharge relates. A transitional regime was established for the year 2020 and 2021, the
settlement of which was carried out in accordance with the following rules:

270

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED• The reserve base is calculated by reference to the half-yearly average of the final balances of each month, which
correspond in the accounts for the first half of 2020, in the case of the solidarity surcharge due in 2020, and in the
accounts for the second half of 2020 , in the case of the solidarity surcharge due in 2021, published in compliance
with the obligation established in Banco de Portugal Notice No. 1/2019;

• Settlement is carried out by the taxable person through the declaration to be sent until 15 December 2020 and

2021, respectively, with payment due on the same dates.

The Solidarity Additional on the Banking Sector is not eligible as a tax cost. As at 31 December 2020, the Bank recog-
nized as an expense in relation to the Solidarity Additional on the Banking Sector the amount of Euro 5,312 thousand.
The recognized expense was calculated and paid based on the maximum rate of 0.02% which is levied on the average
annual liability calculated on the balance sheet less the own funds and deposits covered by the Deposit Guarantee
Fund guarantee.

The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 2019 may be
The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 31 December 2019 may be
analyzed as follows:
analyzed as follows:

The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 31 December 2019 may be
analyzed as follows:

31.12.2020

31.12.2019

(in thousands of Euros)

Assets

Liabilities

Assets

Liabilities

The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 31 December 2019 may be
analyzed as follows:

(in thousands of Euros)

Current tax

Corporate tax recoverable
Other
Deferred tax

Current tax

Corporate tax recoverable
Other
Deferred tax
Current tax

31.12.2020

610
144
466
774 888
Assets
775 498
610
144
31.12.2020
466
774 888
610
775 498
144
466
774 888

9 203
9 129
74
5 121

Liabilities

14 324
9 203
9 129
74
5 121
9 203
14 324
9 129
74
31.12.2019
5 121

The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:
Liabilities

Assets

Liabilities

31.12.2020

31.12.2019

31.12.2020

Corporate tax recoverable
Other
The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:
The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:
Deferred tax
Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Liabilities
Provisions
The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:
Pensions
Long-term service bonuses
Financial instruments
Other
Impairment losses on loans and advances to customers
Tax losses carried forward
Other tangible assets
Deferred tax asset / (liability)
Provisions
Pensions
Asset / liability set-off for deferred tax purposes
Financial instruments
Long-term service bonuses
Net Deferred tax asset / (liability)
Impairment losses on loans and advances to customers
Other
Other tangible assets
Tax losses carried forward
Provisions
Deferred tax asset / (liability)
Pensions
The changes occurred in the deferred tax captions are as follows:
Long-term service bonuses
Asset / liability set-off for deferred tax purposes
Other
Net Deferred tax asset / (liability)
Tax losses carried forward

( 138 855)
14 324
-
( 8 203)
-
-
31.12.2020
-
( 138 855)
( 9 989)
-
-
( 8 203)
( 157 047)
-
31.12.2020
-
151 926
( 138 855)
-
( 5 121)
-
( 9 989)
( 8 203)
-
-
( 157 047)
-
-
151 926
( 9 989)
( 5 121)
-

64 322
790 784
-
Assets
39 136
31 676
31.12.2020
22
64 322
123
790 784
751
-
Assets
926 814
39 136
31.12.2020
31 676
( 151 926)
64 322
22
774 888
790 784
123
-
751
39 136
926 814
31 676
22
( 151 926)
123
774 888
751

54 531
906 917
-
48 560
27 375
31.12.2019
23
54 531
5 364
906 917
762
-
1 043 532
48 560
31.12.2019
27 375
( 145 065)
54 531
23
898 467
906 917
5 364
-
762
48 560
1 043 532
27 375
23
( 145 065)
5 364
898 467
762

( 137 302)
-
( 8 377)
-
-
31.12.2019
-
( 137 302)
( 5 493)
-
-
( 8 377)
( 151 172)
-
31.12.2019
-
145 065
( 137 302)
-
( 6 107)
-
( 5 493)
( 8 377)
-
-
( 151 172)
-
-
145 065
( 5 493)
( 6 107)
-

775 498

Liabilities

Assets

Net

Liabilities

900 095

31.12.2019

(in thousands of Euros)

11 873
7 865
4 008
6 107

1 628
802
826
898 467
Assets
900 095
1 628
802
31.12.2019
826
898 467
1 628
900 095
802
826
31.12.2020
898 467

17 980
11 873
7 865
4 008
6 107
11 873
17 980
7 865
4 008
31.12.2019
6 107
( 82 771)
( 74 533)
17 980
790 784
906 917
( 8 203)
( 8 377)
39 136
48 560
31 676
27 375
31.12.2020
31.12.2019
22
23
( 74 533)
( 82 771)
( 9 866)
( 129)
(in thousands of Euros)
790 784
906 917
751
762
( 8 203)
( 8 377)
769 767
892 360
39 136
48 560
31.12.2019
31.12.2020
31 676
27 375
-
-
( 82 771)
( 74 533)
22
23
892 360
769 767
906 917
790 784
( 9 866)
( 129)
( 8 377)
( 8 203)
762
751
48 560
39 136
892 360
769 767
27 375
31 676
23
22
-
-
( 129)
( 9 866)
(in thousands of Euros)
892 360
769 767
762
751

(in thousands of Euros)

Net

Deferred tax asset / (liability)

926 814

1 043 532

( 157 047)

31.12.2020

( 151 172)

769 767

31.12.2019

892 360

( 5 121)

774 888

151 926

898 467

( 145 065)

( 151 926)

The changes occurred in the deferred tax captions are as follows:

Asset / liability set-off for deferred tax purposes
The changes occurred in the deferred tax captions are as follows:
Net Deferred tax asset / (liability)

Balance at the beginning of the exercise
Recognised in Results for the exercise
Recognised in Fair value reserves
Recognised in Other reserves
Balance at the beginning of the exercise
Conversion of Deferred taxes into Tax credits
Recognised in Results for the exercise
Foreign exchange differences and other
Recognised in Fair value reserves
Balance at the end of the exercise (Assets / (Liabilities))
Recognised in Other reserves
Balance at the beginning of the exercise
Conversion of Deferred taxes into Tax credits
Recognised in Results for the exercise
Foreign exchange differences and other
Recognised in Fair value reserves
Recognised in Other reserves
Conversion of Deferred taxes into Tax credits
Foreign exchange differences and other

-
1 190 122
892 360
( 36 965)
( 105 943)
( 74)
1 190 122
( 145 899)
( 36 965)
( 8 881)
( 105 943)
892 360
( 74)
1 190 122
( 145 899)
( 36 965)
( 8 881)
( 105 943)
( 74)
892 360
(in thousands of Euros)
( 145 899)
( 8 881)
Recognised in
Recognised in
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:
892 360
the income
reserves
statement

145 065
892 360
( 6 107)
( 9 721)
( 4 699)
2 169
892 360
( 107 705)
( 9 721)
( 2 637)
( 4 699)
769 767
2 169
892 360
( 107 705)
( 9 721)
( 2 637)
( 4 699)
2 169
769 767
( 107 705)
( 2 637)

The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:

Balance at the end of the exercise (Assets / (Liabilities))

Recognised in
769 767
the income
statement

Recognised in
reserves

769 767
(in thousands of Euros)

(in thousands of Euros)

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

Financial instruments
105 943
( 11 350)
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:
Recognised in
-
14 041
Impairment losses on loans and advances to customers
Recognised in
the income
-
( 174)
Other tangible assets
reserves
statement
-
9 424
Provisions
271
( 2 100)
74
Pensions
105 943
( 11 350)
Financial instruments
Recognised in
Recognised in
-
1
Long-term service bonuses
the income
-
14 041
Impairment losses on loans and advances to customers
reserves
statement
-
( 132)
Other
-
( 174)
Other tangible assets
-
Tax losses carried forward
11
9 424
-
Provisions
105 943
( 11 350)
Financial instruments

1 897
Recognised in
( 135 968)
the income
( 175)
statement
33 255
944
1 897
Recognised in
-
the income
( 135 968)
statement
( 1 120)
( 175)
138 132
33 255
1 897

4 699
-
Recognised in
-
reserves
-
( 2 169)
4 699
Recognised in
-
-
reserves
-
-
-
-
4 699

(in thousands of Euros)

Pensions

Deferred taxes

Impairment losses on loans and advances to customers

Long-term service bonuses

Other tangible assets

Current taxes

Other

Provisions

Tax losses carried forward

Total tax recognised (income) / expense

Pensions

Deferred taxes

Long-term service bonuses

Current taxes

Tax losses carried forward

Total tax recognised (income) / expense

Deferred taxes

31 December 2020

Current taxes

Total tax recognised (income) / expense

( 2 100)

9 721

14 041

( 174)

( 8 639)

( 132)

9 424

1 082

( 2 100)

9 721

( 8 639)

1 082

9 721

( 8 639)

1 082

( 2 169)

2 530

( 2 169)

2 530

944

36 965

( 135 968)

( 175)

8 804

( 1 120)

33 255

138 132

45 769

944

36 965

8 804

138 132

45 769

36 965

8 804

45 769

106 017

( 74)

105 943

106 017

( 74)

105 943

106 017

( 74)

105 943

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:

Notes to the Consolidated Financial Statements

Other

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:

( 1 120)

( 132)

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 31 December 2019 may be

analyzed as follows:

Corporate tax recoverable

Current tax

Other

Deferred tax

31.12.2020

(in thousands of Euros)

31.12.2019

Assets

Liabilities

Assets

Liabilities

610

144

466

774 888

775 498

9 203

9 129

5 121

14 324

1 628

802

826

898 467

900 095

11 873

7 865

4 008

6 107

17 980

The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:

Impairment losses on loans and advances to customers

Financial instruments

Other tangible assets

Provisions

Pensions

Other

Long-term service bonuses

Tax losses carried forward

Deferred tax asset / (liability)

Assets

Liabilities

Net

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

(in thousands of Euros)

64 322

790 784

39 136

31 676

123

751

54 531

906 917

48 560

27 375

5 364

762

( 138 855)

( 137 302)

( 8 203)

( 8 377)

( 9 989)

( 5 493)

( 74 533)

790 784

( 8 203)

39 136

31 676

( 9 866)

751

( 82 771)

906 917

( 8 377)

48 560

27 375

( 129)

762

926 814

1 043 532

( 157 047)

( 151 172)

769 767

892 360

Asset / liability set-off for deferred tax purposes

( 151 926)

( 145 065)

151 926

145 065

Net Deferred tax asset / (liability)

774 888

898 467

( 5 121)

( 6 107)

769 767

892 360

The changes occurred in the deferred tax captions are as follows:

Balance at the beginning of the exercise
Recognised in Results for the exercise
Recognised in Fair value reserves
Recognised in Other reserves
Conversion of Deferred taxes into Tax credits
Foreign exchange differences and other

(in thousands of Euros)

31.12.2020

31.12.2019

892 360
( 9 721)
( 4 699)
2 169
( 107 705)
( 2 637)

1 190 122
( 36 965)
( 105 943)
( 74)
( 145 899)
( 8 881)

Balance at the end of the exercise (Assets / (Liabilities))

769 767

892 360

The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the
following origins:
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:

Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Provisions
Pensions
Long-term service bonuses
Other
Tax losses carried forward

Deferred taxes

Current taxes

Total tax recognised (income) / expense

31.12.2020

31.12.2019

Recognised in
the income
statement

Recognised in
reserves

Recognised in
the income
statement

Recognised in
reserves

(in thousands of Euros)

( 11 350)
14 041
( 174)
9 424
( 2 100)
1
( 132)
11

9 721

( 8 639)

1 082

4 699
-
-
-
( 2 169)
-
-
-

2 530

1 897
( 135 968)
( 175)
33 255
944
-
( 1 120)
138 132

36 965

8 804

45 769

105 943
-
-
-
74
-
-
-

106 017

( 74)

105 943

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be
analyzed as follows:

Notes to the Consolidated Financial Statements

31 December 2020

Income before tax
Tax rate of NOVO BANCO
Income tax calculated based on the tax rate of NOVO BANCO

Tax-exempt dividends
Impairment on investments in subsidiaries or associated companies subject to Participation Exemption
Rate differential on the generation / reversal of timing differences
Profits / losses in units with a more favorable tax regime
Taxes of Bank Branches and tax withheld abroad
Impairments and provisions for loans
Impairments for stocks
Provisions for other risks, costs and contingencies
Annulment of tax losses carried forward
Share of profits / (losses) of associated companies
Deffered tax assets not recognized under tax losses for the exercise
Extraordinary Contribution and Solidarity Additional over the Banking Sector
Other

Total tax recognized

(in thousands of Euros)

31.12.2020

31.12.2019

Amount

21,0

0,0
(3,0)
3,5
(0,2)
(0,2)
(11,0)
(7,8)
(1,6)
-
(0,0)
(1,2)
(0,5)
0,9

(0,1)

(1 338 309)

(1 020 696)

( 281 045)

( 214 346)

21,0

( 482)
40 166
( 46 706)
2 107
2 902
147 255
104 665
21 988
-
61
15 913
6 860
( 12 602)

1 082

0,2
(2,2)
(3,8)
(0,1)
(0,3)
22,1
(0,1)
0,6
(13,5)
(0,0)
(24,9)
(0,6)
(2,8)

(4,5)

( 1 759)
22 788
38 344
592
3 391
( 225 299)
922
( 6 264)
138 030
426
254 300
5 689
28 955

45 769

Deferred tax assets are recognized to the extent they are expected to be recovered with future taxable income. The Group has
evaluated the recoverability of the deferred tax assets considering its expectations of future taxable profits until 2028. The
recoverability of deferred tax assets covered by the Special Regime (per Law no. 61/2014) applicable to Deferred Tax Assets is not
Deferred tax assets are recognized to the extent they are expected to be recovered with future taxable income. The
dependent on the generation of future taxable income.
Group has evaluated the recoverability of the deferred tax assets considering its expectations of future taxable profits
The assessment of the recoverability of the deferred tax assets is made annually. With reference to 31 December 2020, this exercise
until 2028. The recoverability of deferred tax assets covered by the Special Regime (per Law no. 61/2014) applicable to
was made based on the latest business plan (“MTP”) for the period 2021-2023, submitted to the European Central Bank in the end
Deferred Tax Assets is not dependent on the generation of future taxable income.
of February 2021.



In the evaluation of the expectation of future taxable income generation in Portugal for the purposes of the above recovery exercise,
The assessment of the recoverability of the deferred tax assets is made annually. With reference to 31 December 2020,
the following assumptions were also considered:
this exercise was made based on the latest business plan (“MTP”) for the period 2021-2023, submitted to the European
In addition to the detailed estimates up to 2023, it is assumed, thereafter an increase in pre-tax results at a rate of 2.64%
Central Bank in the end of February 2021.
from 2023;
Financial results moderate growth (average of 4%), with the expected cost of debt issuing to meet MREL requirements offset
In the evaluation of the expectation of future taxable income generation in Portugal for the purposes of the above
by the development of new lines of activity and the resumption of economic activity, which is strongly affected by the current
pandemic situation. The growth in economic activity should also provide a return to commission levels to values similar to
recovery exercise, the following assumptions were also considered:
previous years;



 Operating costs reduction, based on specific cost reduction plans and the implementation of a new distribution model,
reflecting the favorable effect of the decrease in the number of employees and branches and, generally, the simplification
and increase in the efficiency of processes; and
Credit impairment charges in line with the evolution of the Bank's activity and supported by macroeconomic projections,
bearing in mind, in particular, the significant effort made in the last few years in the provisioning of the loan portfolio and the
progressive convergence towards gradually normalized risk costs.


272

The evolution of the business plan used for this exercise is strongly conditioned by the evolution of the Covid-19 pandemic situation,
whose evolution is difficult to predict.

Depending on the analysis mentioned above, the amount of deferred taxes not recognized for tax losses, per year of expiry, is as

follows:

2024-2026

2028 and following

31.12.2020

31.12.2019

(in thousands of Euros)

468 903

1 124 790

482 974

1 124 790

1 593 693

1 607 764

In addition, during the financial year 2020, the Bank became aware of the Tax Authority’s position with regards to adjustments

resulting from the application of fair value to units in real estate investment funds and private equity funds. Such position implies

that fair value adjustments to units of real estate investment funds and private equity funds do not contribute to the taxable profit in

the respective year of booking. For the purpose of taxable income, such adjustments will only be accounted for at the moment of

the respective realization, namely upon sale of the participation units or liquidation of the funds. In this context, the Bank is

assessing the impacts related to the potential creation of deferred tax assets arising from temporary differences

Special Regime applicable to Deferred Tax Assets

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Income tax calculated based on the tax rate of NOVO BANCO

( 281 045)

( 214 346)

Impairment on investments in subsidiaries or associated companies subject to Participation Exemption

Income before tax

Tax rate of NOVO BANCO

Tax-exempt dividends

Rate differential on the generation / reversal of timing differences

Taxes of Bank Branches and tax withheld abroad

Profits / losses in units with a more favorable tax regime

• p75 word

Impairments and provisions for loans

Impairments for stocks

Provisions for other risks, costs and contingencies
Annulment of tax losses carried forward
Share of profits / (losses) of associated companies
Deffered tax assets not recognized under tax losses for the exercise
Extraordinary Contribution and Solidarity Additional over the Banking Sector
Other

Total tax recognized

(in thousands of Euros)

31.12.2020

31.12.2019

Amount

(1 338 309)

(1 020 696)

(11,0)

21,0

0,0

(3,0)

3,5

(0,2)

(7,8)

(1,6)
-
(0,0)
(1,2)
(0,5)
0,9

(0,1)

21,0

0,2

(2,2)

(3,8)

(0,1)

(0,3)

22,1

(0,1)

0,6
(13,5)
(0,0)
(24,9)
(0,6)
(2,8)

(4,5)

( 482)

40 166

( 46 706)

2 107

2 902

147 255

104 665

21 988
-
61
15 913
6 860
( 12 602)

1 082

( 1 759)

22 788

38 344

592

3 391

( 225 299)

922

( 6 264)
138 030
426
254 300
5 689
28 955

45 769

In addition to the detailed estimates up to 2023, it is assumed, thereafter an increase in pre-tax results at a rate of
2.64% from 2023;

The assessment of the recoverability of the deferred tax assets is made annually. With reference to 31 December 2020, this exercise
was made based on the latest business plan (“MTP”) for the period 2021-2023, submitted to the European Central Bank in the end
• Financial results moderate growth (average of 4%), with the expected cost of debt issuing to meet MREL
of February 2021.
requirements offset by the development of new lines of activity and the resumption of economic activity, which
In the evaluation of the expectation of future taxable income generation in Portugal for the purposes of the above recovery exercise,
is strongly affected by the current pandemic situation. The growth in economic activity should also provide a
the following assumptions were also considered:
return to commission levels to values similar to previous years;


In addition to the detailed estimates up to 2023, it is assumed, thereafter an increase in pre-tax results at a rate of 2.64%
from 2023;
• Operating costs reduction, based on specific cost reduction plans and the implementation of a new distribution
Financial results moderate growth (average of 4%), with the expected cost of debt issuing to meet MREL requirements offset

model, reflecting the favorable effect of the decrease in the number of employees and branches and, generally, the
by the development of new lines of activity and the resumption of economic activity, which is strongly affected by the current
pandemic situation. The growth in economic activity should also provide a return to commission levels to values similar to
simplification and increase in the efficiency of processes; and
previous years;

 Operating costs reduction, based on specific cost reduction plans and the implementation of a new distribution model,
• Credit impairment charges in line with the evolution of the Bank's activity and supported by macroeconomic pro-
reflecting the favorable effect of the decrease in the number of employees and branches and, generally, the simplification
jections, bearing in mind, in particular, the significant effort made in the last few years in the provisioning of the loan
and increase in the efficiency of processes; and
portfolio and the progressive convergence towards gradually normalized risk costs.
Credit impairment charges in line with the evolution of the Bank's activity and supported by macroeconomic projections,

bearing in mind, in particular, the significant effort made in the last few years in the provisioning of the loan portfolio and the
The evolution of the business plan used for this exercise is strongly conditioned by the evolution of the Covid-19
progressive convergence towards gradually normalized risk costs.
pandemic situation, whose evolution is difficult to predict.
The evolution of the business plan used for this exercise is strongly conditioned by the evolution of the Covid-19 pandemic situation,
whose evolution is difficult to predict.
Depending on the analysis mentioned above, the amount of deferred taxes not recognized for tax losses, per year of
expiry, is as follows:
Depending on the analysis mentioned above, the amount of deferred taxes not recognized for tax losses, per year of expiry, is as
follows:

2024-2026
2028 and following

31.12.2020

(in thousands of Euros)
31.12.2019

468 903
1 124 790

482 974
1 124 790

1 593 693

1 607 764

In addition, during the financial year 2020, the Bank became aware of the Tax Authority’s position with regards to adjustments
resulting from the application of fair value to units in real estate investment funds and private equity funds. Such position implies
that fair value adjustments to units of real estate investment funds and private equity funds do not contribute to the taxable profit in
the respective year of booking. For the purpose of taxable income, such adjustments will only be accounted for at the moment of
In addition, during the financial year 2020, the Bank became aware of the Tax Authority’s position with regards to
the respective realization, namely upon sale of the participation units or liquidation of the funds. In this context, the Bank is
adjustments resulting from the application of fair value to units in real estate investment funds and private equity funds.
assessing the impacts related to the potential creation of deferred tax assets arising from temporary differences
Such position implies that fair value adjustments to units of real estate investment funds and private equity funds do not
Special Regime applicable to Deferred Tax Assets
contribute to the taxable profit in the respective year of booking. For the purpose of taxable income, such adjustments
will only be accounted for at the moment of the respective realization, namely upon sale of the participation units or
liquidation of the funds. In this context, the Bank is assessing the impacts related to the potential creation of deferred
tax assets arising from temporary differences

Notes to the Consolidated Financial Statements

31 December 2020

Special Regime applicable to Deferred Tax Assets

During 2014, NOVO BANCO adhered to the Special Regime applicable to deferred tax assets, after a favourable decision
of the Shareholders General Meeting.

The Special Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, covers deferred tax
assets resulting from non-deduction of expenses and negative equity changes related to impairment losses on credit
and with post-employment or long-term employee benefits.

The changes to the mentioned above regime, introduced by Law No. 23/2016, of August 19, limited the temporal appli-
cation of the above mentioned negative expenses and equity variations, accounted for in the tax periods beginning on
or after 1 January 2016, as well as the associated deferred taxes. Thus, the deferred taxes covered by this special regime
correspond only to expenses and negative equity variations calculated up to 31 December 2015.

Deferred tax assets covered by the above mentioned regime are convertible into tax credits when the taxpayer records
a negative net result in the respective tax period, or in case of liquidation by voluntary dissolution or insolvency decreed
by court decision.

273

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES
During 2014, NOVO BANCO adhered to the Special Regime applicable to deferred tax assets, after a favourable decision of the
Shareholders General Meeting.

The Special Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, covers deferred tax assets
resulting from non-deduction of expenses and negative equity changes related to impairment losses on credit and with post-
employment or long-term employee benefits.

During 2014, NOVO BANCO adhered to the Special Regime applicable to deferred tax assets, after a favourable decision of the
The changes to the mentioned above regime, introduced by Law No. 23/2016, of August 19, limited the temporal application of the
Shareholders General Meeting.
above mentioned negative expenses and equity variations, accounted for in the tax periods beginning on or after 1January 2016, as
well as the associated deferred taxes. Thus, the deferred taxes covered by this special regime correspond only to expenses and
The Special Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, covers deferred tax assets
negative equity variations calculated up to 31 December 2015.
resulting from non-deduction of expenses and negative equity changes related to impairment losses on credit and with post-
To convert to a tax credit (other than by liquidation or insolvency), a special reserve should be created for the amount
employment or long-term employee benefits.
Deferred tax assets covered by the above mentioned regime are convertible into tax credits when the taxpayer records a negative
of the respective tax credit increased by 10%. The exercise of conversion rights results in the capital increase of the
net result in the respective tax period, or in case of liquidation by voluntary dissolution or insolvency decreed by court decision.
The changes to the mentioned above regime, introduced by Law No. 23/2016, of August 19, limited the temporal application of the
taxable person by incorporation of the special reserve and issuance of new common shares. This special reserve may
above mentioned negative expenses and equity variations, accounted for in the tax periods beginning on or after 1January 2016, as
To convert to a tax credit (other than by liquidation or insolvency), a special reserve should be created for the amount of the respective
not be distributed.
well as the associated deferred taxes. Thus, the deferred taxes covered by this special regime correspond only to expenses and
tax credit increased by 10%. The exercise of conversion rights results in the capital increase of the taxable person by incorporation
negative equity variations calculated up to 31 December 2015.
of the special reserve and issuance of new common shares. This special reserve may not be distributed.
Deferred tax assets recorded by the Group and considered eligible the special regime at 31 December 2020 and 2019,
are as follows:
Deferred tax assets covered by the above mentioned regime are convertible into tax credits when the taxpayer records a negative
Deferred tax assets recorded by the Group and considered eligible the special regime at 31 December 2020 and 31 December 2019,
net result in the respective tax period, or in case of liquidation by voluntary dissolution or insolvency decreed by court decision.
are as follows:

To convert to a tax credit (other than by liquidation or insolvency), a special reserve should be created for the amount of the respective
tax credit increased by 10%. The exercise of conversion rights results in the capital increase of the taxable person by incorporation
of the special reserve and issuance of new common shares. This special reserve may not be distributed.

31.12.2019

31.12.2020

Credit impairment

(in thousands of Euros)

Deferred tax assets recorded by the Group and considered eligible the special regime at 31 December 2020 and 31 December 2019,
are as follows:
Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets converted or
estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are as follows:

(in thousands of Euros)

31.12.2020

400 414

516 072

31.12.2019
(in thousands of Euros)
516 072

400 414

Credit impairment

Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets
converted or estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are
Tax credit
as follows:
Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets converted or
As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution of the special
estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are as follows:
reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and Customs Authority, within the
(in thousands of Euros)
scope of the review procedures for the assessment of the taxable income for the relevant tax periods

516 072
153 555

400 414
99 474

127 575

161 974

110 922

2019

2016

2018

2017

2015

2018

2017

2016

2015

2019

Tax credit

110 922

161 974

127 575

99 474

153 555

As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution of the special
reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and Customs Authority, within the
scope of the review procedures for the assessment of the taxable income for the relevant tax periods
As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution
of the special reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and
Customs Authority, within the scope of the review procedures for the assessment of the taxable income for the relevant
tax periods.

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

274

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOTE 29 – OTHER ASSETS

NOTE 29 – Other assets

As at 31 December 2020 and 31 December 2019, the caption Other assets is analyzed as follows:
As at 31 December 2020 and 2019, the caption Other assets is analyzed as follows:

Collateral deposits placed
Derivative products
Collateral CLEARNET and VISA
Collateral deposits relating to reinsurance operations
Other collateral deposits

Debtors for mortgage credit interest subsidies
Public sector
Contingent Capital Agreement
Other debtors
Income receivable
Deferred costs
Precious metals, numismatics, medal collection and other liquid assets
Real estate properties a)
Equipment a)
Stock exchange transactions pending settlement
Other assets

Impairment losses

Real estate properties a)
Equipment a)
Other debtors - Shareholder loans, supplementary capital contributions
Other

a) Real estate properties and equipment received in settlement of loans and discontinued

(in thousands of Euros)

31.12.2020

31.12.2019

806 215
655 952
33 092
117 127
45
6 756
703 701
598 312
491 627
64 025
52 822
9 722

770 054
3 488
60 917
62 752
3 630 391

( 481 358)
( 2 285)
( 124 939)
( 77 517)
( 686 099)

807 810
631 994
33 175
141 697
944
4 663
459 752
1 037 013
611 802
36 319
56 910
9 555

977 465
3 130
-
138 881
4 143 300

( 542 589)
( 2 404)
( 126 452)
( 93 363)
( 764 808)

2 944 292

3 378 492

venture capital business which are entirely provisioned (31 December 2019: Euro 14.7 million, entirely provisioned);

The caption Collateral deposits placed includes, amongst others, deposits made by the Group as collateral in order to celebrate
certain derivative contracts on organised markets (margin accounts) and on over the counter markets (Credit Support Annex – CSA).
The caption Collateral deposits placed includes, amongst others, deposits made by the Group as collateral in order to
At 31 December 2020, the caption Other debtors includes, amongst others:
celebrate certain derivative contracts on organised markets (margin accounts) and on over the counter markets (Credit
 Euro 14.7 million in shareholder loans and supplementary capital contributions granted to entities within the scope of the Group’s
Support Annex – CSA).
 Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of loans and
At 31 December 2020, the caption Other debtors includes, amongst others:
 Euro 67.0 million receivable relation to the sale operation of non-performing loans (Project NATA II) (31 December 2019: Euro
• Euro 14.7 million in shareholder loans and supplementary capital contributions granted to entities within the scope
 Euro 28.8 million of receivables related to the property sale operation carried out in 2019 (called “Project Sertorius”) (31 December
of the Group’s venture capital business which are entirely provisioned (31 December 2019: Euro 14.7 million, entirely
2019: Euro 28.0 million);
provisioned);
in 2019 (denominated “Project Albatross”) (31 December 2019: Euro 37.7 million); and

 Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the Spanish Branch

advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned),

135.9 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 43);

• Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of
 Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project Carter”).
loans and advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned),
As at 31 December 2020, the caption Deferred costs includes the amount of Euro 41,346 thousand (31 December 2019: Euro 43,
• Euro 67.0 million receivable relation to the sale operation of non-performing loans (Project NATA II) (31 December
836 thousand) related to the difference between the nominal amount of the loans and advances granted to Group employees under
the Collective Labour Agreement (ACT) for the banking sector and their respective fair value at grant date, calculated in accordance
with IFRS 9. This amount is charged to the income statement under staff costs over the lower of the remaining period to the maturity
of the loan granted and the estimated remaining years of service life of the employee.
• Euro 28.8 million of receivables related to the property sale operation carried out in 2019 (called “Project Sertorius”)

2019: Euro 135.9 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 43);

(31 December 2019: Euro 28.0 million);

Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and pending settlement,
in accordance with the accounting policy described in Note 2.5.
• Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the

Spanish Branch in 2019 (denominated “Project Albatross”) (31 December 2019: Euro 37.7 million); and

The captions of Real estate properties and Equipment relate to foreclosed assets through the recovery of loans and advances and
to discontinued facilities, for which the Group has the objective of immediate sale.
• Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project

Carter”).

The Group implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, continuing its efforts
to meet the sales program established, of which we highlight the following (i) the existence of a web site specifically aimed at the sale

31 December 2020

Notes to the Consolidated Financial Statements

275

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES
As at 31 December 2020, the caption Deferred costs includes the amount of Euro 41,346 thousand (31 December 2019:
Euro 43,836 thousand) related to the difference between the nominal amount of the loans and advances granted to
Group employees under the Collective Labour Agreement (ACT) for the banking sector and their respective fair value
at grant date, calculated in accordance with IFRS 9. This amount is charged to the income statement under staff costs
over the lower of the remaining period to the maturity of the loan granted and the estimated remaining years of service
life of the employee.

Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and
pending settlement, in accordance with the accounting policy described in Note 2.5.

The Group implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, con-
tinuing its efforts to meet the sales program established, of which we highlight the following (i) the existence of a web
site specifically aimed at the sale of real estate properties; (ii) the development and participation in real estate events
both in Portugal and abroad; (iii) the establishment of protocols with several real estate agents; and (iv) the regular
sponsorship of auctions. Despite its intention to sell these assets, the Group regularly requests the Bank of Portugal’s
authorization, under article 114 of RGICSF, to extend the period the Group has to hold foreclosed assets.

In the financial year of 2020, the Group recorded impacts related to the sale of a portfolio of real estate assets (Project
Anibal), in the financial year of 2019, the Group recorded impacts related to the sale of a portfolio of real estate assets
(Project Sertorius) and to a sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The
details of these operations can be found in Note 43.
of real estate properties; (ii) the development and participation in real estate events both in Portugal and abroad; (iii) the establishment
of protocols with several real estate agents; and (iv) the regular sponsorship of auctions. Despite its intention to sell these assets, the
Group regularly requests the Bank of Portugal’s authorization, under article 114 of RGICSF, to extend the period the Group has to
During the year 2020, an impairment value of Euro 64.4 million was recorded for properties in the portfolio (31
hold foreclosed assets.
December 2019: Euro 281.3 million). In view of the uncertainty associated with the estimated value of these assets,
NOVO BANCO Group considers the impacts of the current context of the Covid-19 pandemic as the assets are
In the financial year of 2020, the Group recorded impacts related to the sale of a portfolio of real estate assets (Project Anibal), in the
financial year of 2019, the Group recorded impacts related to the sale of a portfolio of real estate assets (Project Sertorius) and to a
subject to revaluation.
sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The details of these operations can be found in
Note 43.
During 2020, the Group started a process of reorganization of the real estate funds that are the object of consolida-
tion, which implied the transfer of properties from Other assets to Investment properties according to the strategy
During the year 2020, an impairment value of Euro 64.4 million was recorded for properties in the portfolio (31 December 2019: Euro
281.3 million). In view of the uncertainty associated with the estimated value of these assets, NOVO BANCO Group considers the
defined for them. The gross value of the transferred properties amounted to Euro 118,987 thousand and the respective
impacts of the current context of the Covid-19 pandemic as the assets are subject to revaluation.
impairment to Euro 66,072 thousand. Since the valuation method for these properties is different, as indicated in the
accounting policies (Notes 2.11 and 2.23), the change resulted in the recognition of a gain of Euro 1,805 thousand
During 2020, the Group started a process of reorganization of the real estate funds that are the object of consolidation, which implied
the transfer of properties from Other assets to Investment properties according to the strategy defined for them. The gross value of
recorded in Other operating income.
the transferred properties amounted to Euro 118,987 thousand and the respective impairment to Euro 66,072 thousand. Since the
valuation method for these properties is different, as indicated in the accounting policies (Notes 2.11 and 2.23), the change resulted
The changes occurred in impairment losses are presented as follows:
in the recognition of a gain of Euro 1,805 thousand recorded in Other operating income.

The changes occurred in impairment losses are presented as follows:

Balance at the beginning of the exercise

Allocation for the exercise
Utilisation during the exercise
Write-back for the exercise
Foreign exchange differences and other (a)

Balance at the end of the exercise

(in thousands of Euros)

31.12.2020

31.12.2019

764 808

78 613
( 34 848)
( 13 938)
( 108 536)

686 099

866 348

309 572
( 370 341)
( 28 259)
( 12 512)

764 808

(a) Includes 66 072 thoousand euros of impairment of assets transferred to Investment Properties during the financial year 2020 (see Note 26) and 19 854 thousand
euros of impairment of assets of the Spanish Branch transferred to discontinued operations.

The changes occurred in the real estate properties were as follows:

Balance at the beginning of the exercise

Additions
Sales
Other movements
276

Balance at the end of the exercise

(in thousands of Euros)

31.12.2020

31.12.2019

977 465

30 691
( 93 936)
( 144 166)

770 054

1 551 977

86 811
( 657 235)
( 4 088)

977 465

(a) Includes 118 987 thoousand euros of assets transferred to Investment Properties during the financial year 2020 (see Note 26) and 31 732 thousand euros of assets of the Spanish
Branch transferred to discontinued operations.

As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDof real estate properties; (ii) the development and participation in real estate events both in Portugal and abroad; (iii) the establishment

of protocols with several real estate agents; and (iv) the regular sponsorship of auctions. Despite its intention to sell these assets, the

Group regularly requests the Bank of Portugal’s authorization, under article 114 of RGICSF, to extend the period the Group has to

hold foreclosed assets.

Note 43.

In the financial year of 2020, the Group recorded impacts related to the sale of a portfolio of real estate assets (Project Anibal), in the

financial year of 2019, the Group recorded impacts related to the sale of a portfolio of real estate assets (Project Sertorius) and to a

sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The details of these operations can be found in

During the year 2020, an impairment value of Euro 64.4 million was recorded for properties in the portfolio (31 December 2019: Euro

281.3 million). In view of the uncertainty associated with the estimated value of these assets, NOVO BANCO Group considers the

impacts of the current context of the Covid-19 pandemic as the assets are subject to revaluation.

During 2020, the Group started a process of reorganization of the real estate funds that are the object of consolidation, which implied

the transfer of properties from Other assets to Investment properties according to the strategy defined for them. The gross value of

the transferred properties amounted to Euro 118,987 thousand and the respective impairment to Euro 66,072 thousand. Since the

valuation method for these properties is different, as indicated in the accounting policies (Notes 2.11 and 2.23), the change resulted

in the recognition of a gain of Euro 1,805 thousand recorded in Other operating income.

The changes occurred in impairment losses are presented as follows:

Balance at the beginning of the exercise

Allocation for the exercise
Utilisation during the exercise
Write-back for the exercise
Foreign exchange differences and other (a)

Balance at the end of the exercise

(in thousands of Euros)

31.12.2020

31.12.2019

764 808

78 613
( 34 848)
( 13 938)
( 108 536)

686 099

866 348

309 572
( 370 341)
( 28 259)
( 12 512)

764 808

The changes occurred in the real estate properties were as follows:

Balance at the beginning of the exercise

Additions
Sales
Other movements

Balance at the end of the exercise

(in thousands of Euros)

31.12.2020

31.12.2019

977 465

30 691
( 93 936)
( 144 166)

770 054

1 551 977

86 811
( 657 235)
( 4 088)

977 465

As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:

31.12.2020

(in thousands of Euros)

Number of
properties

Gross value

Impairment

Net book value

Fair value of
assets (b)

Land

Urban
Rural

Buildings under construction

Commercial
Residential
Other

Other (a)

31 December 2020

520
207
727

1 041
1 483
-
2 524

75 122
195 556
270 678

356 643
142 592
-
499 235

34 055
145 732
179 787

255 203
38 721
-
293 924

142

7 648

Notes to the Consolidated Financial Statements

770 055

3 253

481 359

41 067
49 824
90 891

101 440
103 871
-
205 311

( 7 506)

288 696

46 030
58 652
104 682

138 103
115 506
-
253 609

( 7 506)

350 785
67

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

(b) Determined in accordance with accounting policy mentioned in Note 2.11

Land

Urban
Rural

Buildings under construction

Commercial
Residential
Other

Buildings constructed

Commercial
Residential
Other

Other (a)

31.12.2019

(in thousands of Euros)

Number of
properties

Gross value

Impairment

Net book value

Fair value of
assets (b)

594
246
840

2
3
2
7

493
2 177
308
2 978

146 600
216 860
363 460

36
580
1 668
2 284

259 668
185 915
142 068
587 651

71 049
140 986
212 035

4
413
830
1 247

164 932
52 122
59 300
276 354

24 070

52 953

3 830

977 465

542 589

75 551
75 874
151 425

32
167
838
1 037

94 736
133 793
82 768
311 297

( 28 883)

434 876

151 269
79 484
230 753

59
730
838
1 627

106 343
156 752
86 686
349 781

( 28 883)

553 278

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

(b) Determined in accordance with accounting policy mentioned in Note 2.11

The detail of the real estate properties included in Other assets, by ageing, is as follows:

Land

Urban
Rural

277

Buildings under construction

Commercial
Residential

Other

Other (a)

31.12.2020

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5
years

Total net book
value

128
153
281

10 975
7 707

18 682

( 3 537)

2 110
2 730
4 840

20 020
16 779

29 295
15 500
44 795

23 541
28 444

9 535
31 442
40 977

46 904
50 939

41 067
49 824
90 891

101 440
103 871

( 3 969)

( 7 506)

36 799

51 985

97 843

205 311

15 426

41 639

96 780

134 851

288 696

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

(b) Determined in accordance with accounting policy mentioned in Note 2.11

Buildings under construction

Land

Urban

Rural

Commercial

Residential

Other

Other (a)

Buildings under construction

Land

Urban

Rural

Commercial

Residential

Other

Buildings constructed

Commercial
Residential
Other

Other (a)

Number of

properties

Gross value

Impairment

Net book value

31.12.2020

(in thousands of Euros)

Fair value of

assets (b)

520

207

727

1 041

1 483

2 524

75 122

195 556

270 678

356 643

142 592

34 055

145 732

179 787

255 203

38 721

41 067

49 824

90 891

101 440

103 871

46 030

58 652

104 682

138 103

115 506

499 235

293 924

205 311

253 609

142

7 648

( 7 506)

3 253

770 055

481 359

288 696

350 785

Number of

properties

Gross value

Impairment

Net book value

31.12.2019

(in thousands of Euros)

Fair value of

assets (b)

594

246

840

493
2 177
308
2 978

146 600

216 860

363 460

580

1 668

2 284

259 668
185 915
142 068
587 651

71 049

140 986

212 035

413

830

1 247

164 932
52 122
59 300
276 354

24 070

52 953

3 830

977 465

542 589

75 551

75 874

151 425

167

838

1 037

94 736
133 793
82 768
311 297

( 28 883)

434 876

151 269

79 484

230 753

730

838

1 627

106 343
156 752
86 686
349 781

( 28 883)

553 278

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

(b) Determined in accordance with accounting policy mentioned in Note 2.11

The detail of the real estate properties included in Other assets, by ageing, is as follows:
The detail of the real estate properties included in Other assets, by ageing, is as follows:

Land

Urban
Rural

Buildings under construction

Commercial
Residential
Other

Other (a)

31.12.2020

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5
years

Total net book
value

128
153
281

10 975
7 707
-
18 682

( 3 537)

2 110
2 730
4 840

20 020
16 779
-
36 799

29 295
15 500
44 795

23 541
28 444
-
51 985

9 535
31 442
40 977

46 904
50 939
-
97 843

( 3 969)

41 067
49 824
90 891

101 440
103 871
-
205 311

( 7 506)

15 426

41 639

96 780

134 851

288 696

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

31.12.2019

(in thousands of Euros)

31 December 2020

Land

Urban
Rural

Buildings under construction

Commercial
Residential
Other

Buildings constructed

Commercial
Residential
Other

Other (a)

Notes to the Consolidated Financial Statements

1 to 2.5 years 2.5 to 5 years

Up to 1 year

More than 5
years

Total net book
value

2 359
7 698
10 057

-
68
-
68

2 587
8 845
8 887
20 318

( 28 883)

3 397
13 493
16 890

-
-
-
-

5 661
33 882
10 398
49 941

43 946
7 474
51 420

29
-
825
854

9 698
33 188
11 180
54 066

25 849
47 209
73 058

3
99
13
115

76 790
57 878
52 303
186 971

75 551
75 874
151 425

32
167
838
1 037

94 736
133 793
82 768
311 297

( 28 883)

1 560

66 831

106 340

260 144

434 876

(a) The net book value of this caption is negative due to the imputation of costs incurred with the sale of real estate properties

As at 31 December 2020, the amount related to discontinued facilities included in the caption Real estate properties amounts to Euro
35,535 thousand (31 December 2019: Euro 16,569 thousand), having the Group recorded impairment losses for these assets in the
total amount of Euro 28,661 thousand (31 December 2019: Euro 8,079 thousand).
As at 31 December 2020, the amount related to discontinued facilities included in the caption Real estate properties
amounts to Euro 35,535 thousand (31 December 2019: Euro 16,569 thousand), having the Group recorded impairment
NOTE 30 – NON-CURRENT ASSETS AND DISPOSAL GROUPS FOR SALE CLASSIFIED AS HELD FOR SALE AND
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
losses for these assets in the total amount of Euro 28,661 thousand (31 December 2019: Euro 8,079 thousand).

Under IFRS 5 - Non-current assets held for sale and discontinued operations, a group of directly associated assets and liabilities are
reclassified for discontinued operations if their balance sheet value is recoverable through a sale transaction, which must be ready
for immediate sale.

NOTE 30 – Non-current assets and disposal groups for
sale classified as held for sale and liabilities included in
disposal groups classified as held for sale

This category includes the subsidiaries and associated companies in the Group's consolidation perimeter, but which the Bank intends
to sell and are actively in the process of selling with the net value of assets and liabilities measured at the lower of book value or fair
value net of costs to sell.

The breakdown of Non-current assets and liabilities held for sale and discontinued operations on 31 December 2020 and 2019, net
of consolidation adjustments, is as follows:
Under IFRS 5 - Non-current assets held for sale and discontinued operations, a group of directly associated assets
and liabilities are reclassified for discontinued operations if their balance sheet value is recoverable through a sale
transaction, which must be ready for immediate sale.

278

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThis category includes the subsidiaries and associated companies in the Group's consolidation perimeter, but which
the Bank intends to sell and are actively in the process of selling with the net value of assets and liabilities measured at
the lower of book value or fair value net of costs to sell.

The breakdown of Non-current assets and liabilities held for sale and discontinued operations on 31 December 2020
and 2019, net of consolidation adjustments, is as follows:

Assets/Liabilities of discontinued operations

International Investment Bank, S.A. (previous BICV)
Banco Well Link (previous NB Ásia)
Banco Delle Tre Venezie
International Investment Bank, S.A. (previous BICV)
Económico FI
Banco Well Link (anterior NB Ásia)
Greendraive
Banco Delle Tre Venezie
NOVO AF
Económico FI
GNB Seguros
Greendraive
ESEGUR
NOVO AF
Multipessoal
GNB Seguros
Novo Banco - Spain Branch
ESEGUR
NB Servicios
Multipessoal
Novo Vanguarda
Novo Banco - Spain Branch
Nueva Pescanova
NB Servicios
Novo Vanguarda
Impairment losses
Nueva Pescanova
Novo Banco - Spain Branch
Banco Delle Tre Venezie
Impairment losses
Económico FI
Novo Banco - Spain Branch
Greendraive
Banco Delle Tre Venezie
ESEGUR
Económico FI
Greendraive
ESEGUR

(in thousand of Euros)

31.12.2020

31.12.2019

Assets

Liabilities

Assets

Liabilities
(in thousand of Euros)

31.12.2020

31.12.2019

Assets

1 299
1 883
9 633
1 299
3 060
1 883
1 887
9 633
-
3 060
-
1 887
14 003
-
2 687
-
1 696 245
14 003
14 845
2 687
48
1 696 245
-
14 845
1 745 590
48
-
( 166 000)
1 745 590
( 7 333)
( 2 023)
( 166 000)
( 1 887)
( 7 333)
( 8 829)
( 2 023)
( 186 072)
( 1 887)
1 559 518
( 8 829)

( 186 072)

Liabilities

-
-
-
-
-
-
1 969
-
-
-
-
1 969
-
-
-
-
1 993 851
-
535
-
27
1 993 851
-
535
1 996 382
27
-
-
1 996 382
-
-
-
-
-
-
-
-
-
1 996 382
-

Assets

1 299
4 121
9 633
1 299
3 060
4 121
856
9 633
2 770
3 060
8 209
856
14 499
2 770
2 641
8 209
-
14 499
-
2 641
-
-
1 470
-
48 558
-
1 470
-
48 558
( 7 333)
( 114)
-
( 856)
( 7 333)
-
( 114)
( 8 303)
( 856)
40 255
-

Liabilities

-
-
-
-
-
-
982
-
960
-
-
982
-
960
-
-
-
-
-
-
-
-
-
-
1 942
-
-
-
1 942
-
-
-
-
-
-
-
-
-
1 942
-

( 8 303)

1 559 518

1 996 382

40 255

1 942

As at 31 December 2020 and 2019, the results from discontinued operations is as follows:
As at 31 December 2020 and 2019, the results from discontinued operations is as follows:

Profit / (loss) generated by discontinued operations

Greendraive
NOVO AF
GNB Seguros
ESEGUR
Multipessoal
NB Espanha
NB Servicios

(in thousand of Euros)

31.12.2020

31.12.2019 *

( 1 694)
1 498
8 057
52
51
( 40 830)
( 479)

( 761)
( 392)
1 533
487
201
( 84 243)
-

( 33 345)

( 83 175)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The impairment movement for non-current Assets and Liabilities for disposal classified as held for sale is as follows:

Balance at the beginning of the exercise

Allocation / reversals for the exercise
Utilizations
Exchange differences and other

Balance at the end of the exercise

31.12.2020

(in thousands of Euros)
31.12.2019

8 303

217 559

177 769
-
-

186 072

5 403
( 214 658)
( 1)

8 303

279

During 2019, the associates GNB Seguros, Esegur, Multipessoal and Novo AF were transferred to non-current assets held for sale
because they are in active sale processes with the objective of their sale in the short term.

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESAssets/Liabilities of discontinued operations

International Investment Bank, S.A. (previous BICV)

Banco Well Link (anterior NB Ásia)

Banco Delle Tre Venezie

Económico FI

Greendraive

NOVO AF

GNB Seguros

ESEGUR

Multipessoal

Novo Banco - Spain Branch

NB Servicios

Novo Vanguarda

Nueva Pescanova

Impairment losses

Novo Banco - Spain Branch

Banco Delle Tre Venezie

Económico FI

Greendraive

ESEGUR

Greendraive

NOVO AF

GNB Seguros
ESEGUR
Multipessoal
NB Espanha
NB Servicios

31.12.2020

31.12.2019

Assets

Liabilities

Assets

Liabilities

(in thousand of Euros)

1 696 245

1 993 851

1 299

1 883

9 633

3 060

1 887

14 003

2 687

14 845

( 166 000)

( 7 333)

( 2 023)

( 1 887)

( 8 829)

( 186 072)

1 969

535

1 299

4 121

9 633

3 060

856

2 770

8 209

14 499

2 641

1 470

( 7 333)

( 114)

( 856)

( 8 303)

982

960

1 745 590

1 996 382

48 558

1 942

1 559 518

1 996 382

40 255

1 942

(in thousand of Euros)

31.12.2020

31.12.2019 *

( 1 694)

1 498

8 057
52
51
( 40 830)
( 479)

( 761)

( 392)

1 533
487
201
( 84 243)
-

( 33 345)

( 83 175)

As at 31 December 2020 and 2019, the results from discontinued operations is as follows:

Profit / (loss) generated by discontinued operations

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The impairment movement for non-current Assets and Liabilities for disposal classified as held for sale is as follows:
The impairment movement for non-current Assets and Liabilities for disposal classified as held for sale is as follows:

Balance at the beginning of the exercise

Allocation / reversals for the exercise
Utilizations
Exchange differences and other

Balance at the end of the exercise

31.12.2020

(in thousands of Euros)
31.12.2019

8 303

217 559

177 769
-
-

186 072

5 403
( 214 658)
( 1)

8 303

During 2019, the associates GNB Seguros, Esegur, Multipessoal and NOVO AF were transferred to non-current assets
held for sale because they are in active sale processes with the objective of their sale in the short term.

31 December 2020

Notes to the Consolidated Financial Statements

Gama Life (former GNB Vida)

As consequence of the commitments made between the Portuguese State and European Commission
Competition Authority communicated to the Group by the end of 2017, after the completion of Bank’s sale
process, the group launched in 2017 an organized sale process of 100% of the share capital of GNB Vida.
Therefore, this entity was considered as a discontinued operation on 31 December 2017. On 12 September 2018,
the Group entered into a purchase and sale agreement of the entire share capital of GNB Vida, with Bankers
Insurance Holdings, S.A., a company of the Global Bankers Insurance Group, LLC. The derecognition of this
investment occurred in September 2019, after obtaining the necessary regulatory authorizations (see Note 42).

GNB Seguros

Also due to the commitments assumed between the Portuguese State and the European Competition Comission and
communicated to the Group at the end of 2017, during the financial year 2020 the Group completed the process of
divesting its stake in GNB Seguros (25%), recognized a gain of Euro 6.4 million.

Spanish Branch

Following the accounting policy followed by the Group, and in accordance with IFRS5 5 - Non-current assets
held for sale and discontinued operations, during the financial year 2020 the Group transferred its activity in Spain
to the caption of Non-current assets and divestiture groups classified as held for sale, as their value is expected
to be recovered through a sale transaction and it is highly probable, with the respective assets in immediate sale
conditions. The determination of fair value less costs to sell, which took into account the amounts received from
potential interested in partial sales of this activity, the cost of selling a selected loan portfolio, and the cost of
discontinuing the remaining residual activity, resulted in a need to establish an impairment of Euro 166.0 million.

NOTE 31 – Financial liabilities designated at fair value
through profit or loss and financial liabilities measured at
amortised cost

This caption as at 31 December 2020 and 2019 is analyzed as follows:

280

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDGama Life (former GNB Vida)

As consequence of the commitments made between the Portuguese State and European Commission Competition Authority

communicated to the Group by the end of 2017, after the completion of Bank’s sale process, the group launched in 2017 an organized

sale process of 100% of the share capital of GNB Vida. Therefore, this entity was considered as a discontinued operation on 31

December 2017. On 12 September 2018, the Group entered into a purchase and sale agreement of the entire share capital of GNB

Vida, with Bankers Insurance Holdings, S.A., a company of the Global Bankers Insurance Group, LLC. The derecognition of this

investment occurred in September 2019, after obtaining the necessary regulatory authorizations (see Note 42).

Also due to the commitments assumed between the Portuguese State and the European Competition Comission and communicated

to the Group at the end of 2017, during the financial year 2020 the Group completed the process of divesting its stake in GNB Seguros

(25%), recognized a gain of Euro 6.4 million.

GNB Seguros

Spanish Branch

Following the accounting policy followed by the Group, and in accordance with IFRS5 5 - Non-current assets held for sale and

discontinued operations, during the financial year 2020 the Group transferred its activity in Spain to the caption of Non-current assets

and divestiture groups classified as held for sale, as their value is expected to be recovered through a sale transaction and it is highly
probable, with the respective assets in immediate sale conditions. The determination of fair value less costs to sell, which took into
account the amounts received from potential interested in partial sales of this activity, the cost of selling a selected loan portfolio, and
the cost of discontinuing the remaining residual activity, resulted in a need to establish an impairment of Euro 166.0 million.

NOTE 31 – FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS AND FINANCIAL
LIABILITIES MEASURED AT AMORTISED COST

This caption as at 31 December 2020 and 31 December 2019 is analyzed as follows:

31.12.2020

(in thousands of Euros)

Fair value
through profit
and loss

Measured at
amortised cost

Fair value
changes *

Total

Deposits from banks

Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred
assets
Other financial liabilities

* Fair value changes of the elements covered by the interest rate hedge portfolio

Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred
assets
Other financial liabilities

* Fair value changes of the elements covered by the interest rate hedge portfolio

-
-

Fair value
through profit
and loss

10 102 896

26 322 060

1 017 928

365 883

37 808 767

10 102 896

26 322 060

1 017 928

365 883

37 808 767

31.12.2019

(in thousands of Euros)

Measured at
amortised cost

Fair value
changes *

Total

9 849 623
28 400 127

102 012

1 065 211

358 688

102 012

39 673 649

-
-

9 849 623
28 400 127

1 167 223

358 688

39 775 661

Deposits from Banks
Deposits from Banks

The balance of Deposits from banks is composed, as to its nature, as follows:
The balance of Deposits from banks is composed, as to its nature, as follows:

Deposits from Central Banks

From the European System of Central Banks

Deposits
Other funds

31 December 2020
Deposits from credit institutions

Notes to the Consolidated Financial Statements

Domestic

Deposits
Other funds

Foreign

Deposits
Loans
Operations with repurchase agreements
Other resources

(in thousands of Euros)

31.12.2020

31.12.2019

29 030
7 004 000
7 033 030

155 313
4 788
160 101

651 656
596 534
1 625 724
35 851
2 909 765

3 069 866

10 102 896

36 176
6 087 000
6 123 176
71

105 183
12 827
118 010

780 583
634 557
2 168 488
24 809
3 608 437

3 726 447

9 849 623

As at 31 December 2020, the balance of the European Resources System of Central Banks caption includes Euro 7,004 million
collateralized by the Group's financial assets, within the scope of the third series of long-term refinancing operations of the European
Central Bank (TLTRO III ) The bonus introduced by the ECB in the interest rate of these operations, in accordance with the stipulated
in IAS 20, is being deducted from the financing costs on a linear basis for accounting purposes, taking into account the Bank's
As at 31 December 2020, the balance of the European Resources System of Central Banks caption includes Euro 7,004
expectation of complying with the requirements of eligibility criteria defined by the ECB.
million collateralized by the Group's financial assets, within the scope of the third series of long-term refinancing
The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement
operations of the European Central Bank (TLTRO III). The bonus introduced by the ECB in the interest rate of these
(repos), recorded in accordance with the accounting policy mentioned in Note 2.6.
operations, in accordance with the stipulated in IAS 20, is being deducted from the financing costs on a linear basis
for accounting purposes, taking into account the Bank's expectation of complying with the requirements of eligibility
As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:
criteria defined by the ECB.

(in thousands of Euros)

Deposits from Central Banks

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

281

Deposits from credit institutions

Up to 3 months

From 3 months to 1 year

From 1 to 5 years

More than 5 years

International

Up to 3 months

From 3 months to 1 year

From 1 to 5 years

The analysis of Repurchase agreements operations, by residual maturity, is as follows:

31.12.2020

31.12.2019

29 030
-
7 004 000
7 033 030

1 286 176
3 210 000
1 627 000
6 123 176

918 156

496 630

1 085 594

569 486

3 069 866

1 993 950

98 131

1 089 749

544 617

3 726 447

10 102 896

9 849 623

(in thousands of Euros)

31.12.2020

31.12.2019

225 507

350 014

1 050 203

1 306 243

199 972

662 273

1 625 724

2 168 488

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESDeposits from Banks

The balance of Deposits from banks is composed, as to its nature, as follows:

Deposits from Banks

The balance of Deposits from banks is composed, as to its nature, as follows:

(in thousands of Euros)

Deposits from Central Banks

From the European System of Central Banks

Deposits from Central Banks

Deposits

Other funds

From the European System of Central Banks

Deposits from credit institutions

Other funds

Deposits from credit institutions

Deposits

Domestic

Other funds

Domestic

Deposits

Foreign

Other funds

Deposits

Loans

Foreign

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

31.12.2019

29 030

7 004 000

7 033 030

29 030

7 004 000

7 033 030

155 313

4 788

160 101

155 313

4 788

651 656

160 101

596 534

36 176

6 087 000

6 123 176

36 176

6 087 000

6 123 176

105 183

12 827

118 010

105 183

12 827

780 583

118 010

634 557

Operations with repurchase agreements

1 625 724

2 168 488

Deposits
Loans
Operations with repurchase agreements
Other resources

780 583
24 809
634 557
3 608 437
2 168 488
24 809
3 726 447
3 608 437
9 849 623
3 726 447
As at 31 December 2020, the balance of the European Resources System of Central Banks caption includes Euro 7,004 million
9 849 623
collateralized by the Group's financial assets, within the scope of the third series of long-term refinancing operations of the European
Central Bank (TLTRO III ) The bonus introduced by the ECB in the interest rate of these operations, in accordance with the stipulated
As at 31 December 2020, the balance of the European Resources System of Central Banks caption includes Euro 7,004 million
in IAS 20, is being deducted from the financing costs on a linear basis for accounting purposes, taking into account the Bank's
collateralized by the Group's financial assets, within the scope of the third series of long-term refinancing operations of the European
expectation of complying with the requirements of eligibility criteria defined by the ECB.
The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing
Central Bank (TLTRO III ) The bonus introduced by the ECB in the interest rate of these operations, in accordance with the stipulated
in IAS 20, is being deducted from the financing costs on a linear basis for accounting purposes, taking into account the Bank's
agreement (repos), recorded in accordance with the accounting policy mentioned in Note 2.6.
The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement
expectation of complying with the requirements of eligibility criteria defined by the ECB.
(repos), recorded in accordance with the accounting policy mentioned in Note 2.6.
As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:
The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement
As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:
(repos), recorded in accordance with the accounting policy mentioned in Note 2.6.

651 656
35 851
596 534
2 909 765
1 625 724
35 851
3 069 866
2 909 765
10 102 896
3 069 866

Other resources

10 102 896

(in thousands of Euros)

As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:

31.12.2020

31.12.2019

Deposits from Central Banks

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

Deposits from Central Banks

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

Deposits from credit institutions

Up to 3 months
From 3 months to 1 year
Deposits from credit institutions
From 1 to 5 years
More than 5 years

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

The analysis of Repurchase agreements operations, by residual maturity, is as follows:

The analysis of Repurchase agreements operations, by residual maturity, is as follows:
The analysis of Repurchase agreements operations, by residual maturity, is as follows:

(in thousands of Euros)

31.12.2020

29 030
-
7 004 000
29 030
7 033 030
-
7 004 000
7 033 030
918 156
496 630
1 085 594
918 156
569 486
496 630
3 069 866
1 085 594
10 102 896
569 486
3 069 866

31.12.2019

1 286 176
3 210 000
1 627 000
1 286 176
6 123 176
3 210 000
1 627 000
6 123 176
1 993 950
98 131
1 089 749
1 993 950
544 617
98 131
3 726 447
1 089 749
9 849 623
544 617
3 726 447

10 102 896

9 849 623

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)

International

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

International

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
31 December 2020

Notes to the Consolidated Financial Statements

1 625 724

31.12.2020

225 507
350 014
1 050 203
225 507
1 625 724
350 014
1 050 203

31.12.2019

1 306 243
199 972
662 273
1 306 243
2 168 488
199 972
662 273
72
2 168 488

31 December 2020

Notes to the Consolidated Financial Statements

Due to customers
Due to customers
The balance of Deposits due to costumers is composed, as follows:

The balance of Deposits due to costumers is composed, as follows:

Repayable on demand

Demand deposits

Time deposits
Time deposits
Other

Savings accounts

Retirement saving accounts
Other

Other funds
Other

(in thousands of Euros)

31.12.2020

31.12.2019

11 883 026

12 159 032

9 234 116
251
9 234 367

233 160
4 742 284
4 975 444

11 307 364
262
11 307 626

244 009
4 494 220
4 738 229

216 598
216 598

195 240
195 240

26 322 060

28 400 127

As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:

282

Repayable on demand

Term deposits

Up to 3 months
3 months to 1 year

1 to 5 years

More than 5 years

(in thousands of Euros)

31.12.2020

31.12.2019

11 883 026

12 159 032

7 128 529
5 678 797

1 591 570

40 138

7 252 713
5 930 567

2 598 190

459 625

14 439 034

16 241 095

26 322 060

28 400 127

Debt Securities issued, subordinated debt and financial liabilities associated to transferred assets

This caption has the following breakdown:

Debt securities issued

Euro Medium Term Notes (EMTN)

Bonds

Subordinated debt

Financial liabilities associated to transferred assets

Asset lending operations

Fair value

through profit

and loss

31.12.2020

Measured at

amortised cost

Total

through profit

Fair value

and loss

Measured at

amortised cost

Total

(in thousands of Euros)

31.12.2019

518 866

39 377

558 243

518 866

39 377

558 243

102 012

559 837

45 855

605 692

661 849

45 855

707 704

415 234

415 069

44 451

44 450

1 017 928

102 012

1 065 211

1 167 223

Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro

10,000 million, the Group issued covered bonds which, on 31 December 2020, amount to Euro 5,500 million (31 December 2019:

Euro 5,500 million), being these covered bonds totally repurchased by the Group. The main characteristics of the outstanding issues

as at 31 December 2020 and 2019 are as follows:

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDDue to customers

Due to customers

The balance of Deposits due to costumers is composed, as follows:

Repayable on demand

Demand deposits

Repayable on demand

Demand deposits

Time deposits

Other

Time deposits

Other

Savings accounts

Retirement saving accounts
Other
Retirement saving accounts
Other

Other funds
Other
Other funds
Other

(in thousands of Euros)

31.12.2020

(in thousands of Euros)

31.12.2019

31.12.2020

31.12.2019

11 883 026

12 159 032

11 883 026

12 159 032

9 234 116

251

9 234 116

9 234 367

251

9 234 367
233 160
4 742 284
233 160
4 975 444
4 742 284
4 975 444

216 598
216 598
216 598
216 598
26 322 060

26 322 060

11 307 364

262

11 307 364

11 307 626

262

11 307 626
244 009
4 494 220
244 009
4 738 229
4 494 220
4 738 229

195 240
195 240
195 240
195 240
28 400 127

28 400 127

As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:
As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:

As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:

(in thousands of Euros)

Repayable on demand

Term deposits
Repayable on demand

Term deposits

Up to 3 months
3 months to 1 year
Up to 3 months
1 to 5 years
3 months to 1 year
More than 5 years
1 to 5 years
More than 5 years

31.12.2020

31.12.2019
(in thousands of Euros)

31.12.2020

11 883 026

31.12.2019

12 159 032

11 883 026
7 128 529
5 678 797
7 128 529
1 591 570
5 678 797
40 138
1 591 570
14 439 034
40 138
26 322 060
14 439 034

12 159 032
7 252 713
5 930 567
7 252 713
2 598 190
5 930 567
459 625
2 598 190
16 241 095
459 625
28 400 127
16 241 095

26 322 060

28 400 127

Debt Securities issued, subordinated debt and financial liabilities associated to transferred assets
Debt Securities issued, subordinated debt and financial liabilities associated to
Debt Securities issued, subordinated debt and financial liabilities associated to transferred assets
transferred assets
This caption has the following breakdown:

This caption has the following breakdown:
This caption has the following breakdown:

Debt securities issued

Euro Medium Term Notes (EMTN)
Bonds
Euro Medium Term Notes (EMTN)
Bonds

Subordinated debt

Bonds

Subordinated debt
Financial liabilities associated to transferred assets

Bonds
Asset lending operations

Financial liabilities associated to transferred assets

Asset lending operations

31.12.2020

Measured at
31.12.2020
amortised cost
Measured at
amortised cost

518 866
39 377
518 866
558 243
39 377
558 243
415 234

415 234
44 451

Total

518 866
39 377
518 866
558 243
39 377
558 243
415 234

415 234
44 451

Fair value
through profit
Fair value
and loss
through profit
and loss

102 012
-
102 012
102 012
-
102 012
-

-
-

(in thousands of Euros)

31.12.2019

(in thousands of Euros)

Measured at
31.12.2019
amortised cost
Measured at
amortised cost

Total

559 837
45 855
559 837
605 692
45 855
605 692
415 069

415 069
44 450

661 849
45 855
661 849
707 704
45 855
707 704
415 069

415 069
44 450

1 017 928
44 451

102 012
-

1 065 211
44 450

1 167 223
44 450

Fair value
through profit
Fair value
and loss
through profit
and loss

-
-
-
-
-
-
-

-
-

1 017 928

1 167 223
-
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro
10,000 million, the Group issued covered bonds which, on 31 December 2020, amount to Euro 5,500 million (31 December 2019:
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro
Euro 5,500 million), being these covered bonds totally repurchased by the Group. The main characteristics of the outstanding issues
10,000 million, the Group issued covered bonds which, on 31 December 2020, amount to Euro 5,500 million (31 December 2019:
as at 31 December 2020 and 2019 are as follows:
Euro 5,500 million), being these covered bonds totally repurchased by the Group. The main characteristics of the outstanding issues
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum
as at 31 December 2020 and 2019 are as follows:
amount of Euro 10,000 million, the Group issued covered bonds which, on 31 December 2020, amount to Euro 5,500
million (31 December 2019: Euro 5,500 million), being these covered bonds totally repurchased by the Group. The main
characteristics of the outstanding issues as at 31 December 2020 and 2019 are as follows:

1 017 928

1 065 211

102 012

31 December 2020
31 December 2020

Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements

73
73

(in thousands of Euros)

Designation

NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
NB 2019 SR.6
NB 2019 SR.7

Designation

NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
NB 2019 SR.6
NB 2019 SR.7

Nominal value
(in thousands
of Euros)

Carrying book
value (in
thousands of
Euros)

31.12.2020

Issue date

Maturity date

1 000 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000

5 500 000

07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
10/12/2019
10/12/2019

07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
10/06/2023
10/12/2024

-
-
-
-
-
-
-

Nominal value
(in thousands
of Euros)

Carrying book
value (in
thousands of
Euros)

31.12.2019

Issue date

Maturity date

1 000 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000

5 500 000

07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
10/12/2019
10/12/2019

07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
10/06/2023
10/12/2024

-
-
-
-
-
-
-

Interest
payment

Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly

Interest
payment

Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly

Interest Rate

Market

Rating

Moody's

DBRS

3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%
3 months Euribor rates + 0,25%

XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB

A2
A2
A2
A2
A2
A2
A2

A
A
A
A
A
A
A

Interest Rate

Market

(in thousands of Euros)

Rating

Moody's

DBRS

XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB

A2
A2
A2
A2
A2
A2
A2

A
A
A
A
A
A
A

283

These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in NOVO BANCO
Group’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities have a special creditor
privilege. The conditions of the covered debt securities issues are framed in Decree-Law No. 59/2006, and in Notices No. 5, 6 and 8
and Instruction No. 13 of Bank of Portugal. As at 31 December 2020, the assets that collateralize these covered debt securities
amount to Euro 6,104.8 million (31 December 2019: Euro 6,076.8 million) (see Note 22).

The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities associated

to transferred assets was as follows:

Balance as at

31.12.2019

Issues

Redemptions

LME

(in thousands of Euros)

Net

Other

Balance as at

purchases

movements a)

31.12.2020

a) Other movements include accrued interest, corrections for hedging operations, corrections of fair value and exchange rate changes.

( 6 476)

( 155 869)

( 570)

13 620

1 017 928

Debt securities issued

Euro Medium Term Notes (EMTN)

Bonds

Subordinated debt

Bonds

Financial liabilities associated to transferred assets

Asset lending operations

Debt securities issued

Euro Medium Term Notes (EMTN)

Bonds

Mortgage bonds

Subordinated debt

Bonds

Financial liabilities associated to transferred assets

Asset lending operations

( 155 869)

( 570)

( 155 869)

( 570)

13 456

( 2)

13 454

518 866

39 377

558 243

661 849

45 855

707 704

415 069

44 450

1 167 223

634 186

55 066

689 252

414 903

44 450

( 6 476)

1 300 000

( 9 210)

Balance as at

31.12.2018

Issues

Redemptions

LME

165

415 234

44 451

(in thousands of Euros)

Net

Other

Balance as at

purchases

movements a)

31.12.2019

(1 300 000)

27 663

( 1)

661 849

45 855

27 662

707 704

166

415 069

44 450

a) Other movements include accrued interest, corrections for hedging operations, corrections of fair value and exchange rate changes.

1 148 605

1 300 000

( 9 210)

(1 300 000)

27 828

1 167 223

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESDesignation

Issue date

Maturity date

Interest Rate

Market

Nominal value

(in thousands

of Euros)

Carrying book

value (in

thousands of

Euros)

NB 2015 SR.1

NB 2015 SR.2

NB 2015 SR.3

NB 2015 SR.4

NB 2015 SR.5

NB 2019 SR.6

NB 2019 SR.7

07/10/2015

07/10/2021

07/10/2024

07/10/2020

700 000

• p 85 word

22/12/2016

10/12/2019

07/10/2015

22/12/2023

10/06/2023

10/12/2024

07/10/2022

500 000

750 000

550 000

1 000 000

5 500 000

31.12.2020

Interest

payment

Quarterly

31.12.2019

Designation

Nominal value
(in thousands
of Euros)

Carrying book
value (in
thousands of
Euros)

Issue date

Maturity date

Interest
payment

Interest Rate

Market

(in thousands of Euros)

Rating

Moody's

DBRS

(in thousands of Euros)

Rating

Moody's

DBRS

3 months Euribor rates + 0,25%

XDUB

-
-
-
-
-
-
-

07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
10/06/2023
10/12/2024

07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
10/12/2019
10/12/2019

1 000 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000

NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
NB 2019 SR.6
These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in
NB 2019 SR.7
NOVO BANCO Group’s accounts as autonomous patrimony and over which the holders of the relevant covered
debt securities have a special creditor privilege. The conditions of the covered debt securities issues are framed in
These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in NOVO BANCO
Decree-Law No. 59/2006, and in Notices No. 5, 6 and 8 and Instruction No. 13 of Bank of Portugal. As at 31 December
Group’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities have a special creditor
privilege. The conditions of the covered debt securities issues are framed in Decree-Law No. 59/2006, and in Notices No. 5, 6 and 8
2020, the assets that collateralize these covered debt securities amount to Euro 6,104.8 million (31 December 2019:
and Instruction No. 13 of Bank of Portugal. As at 31 December 2020, the assets that collateralize these covered debt securities
Euro 6,076.8 million) (see Note 22).
amount to Euro 6,104.8 million (31 December 2019: Euro 6,076.8 million) (see Note 22).

Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly

XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB

A2
A2
A2
A2
A2
A2
A2

A
A
A
A
A
A
A

5 500 000

The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities
The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities associated
associated to transferred assets was as follows:
to transferred assets was as follows:

Debt securities issued

Euro Medium Term Notes (EMTN)
Bonds

Subordinated debt

Bonds

Financial liabilities associated to transferred assets

Asset lending operations

Balance as at

31.12.2019

Issues

Redemptions

LME

Net
purchases

(in thousands of Euros)
Balance as at
31.12.2020

Other
movements a)

661 849
45 855
707 704

415 069

44 450

1 167 223

-
-
-

-
( 6 476)
( 6 476)

( 155 869)
-
( 155 869)

( 570)
-
( 570)

13 456
( 2)
13 454

518 866
39 377
558 243

165

415 234

44 451

( 6 476)

( 155 869)

( 570)

13 620

1 017 928

a) Other movements include accrued interest, corrections for hedging operations, corrections of fair value and exchange rate changes.

Debt securities issued

Euro Medium Term Notes (EMTN)
Bonds
Mortgage bonds

Subordinated debt

Bonds

Financial liabilities associated to transferred assets

Asset lending operations

Balance as at

31.12.2018

Issues

Redemptions

LME

634 186
55 066
-
689 252

-
-
1 300 000
1 300 000

-
( 9 210)
-
( 9 210)

414 903

44 450

1 148 605

1 300 000

( 9 210)

Net
purchases

(in thousands of Euros)
Balance as at
31.12.2019

Other
movements a)

-
-
(1 300 000)
(1 300 000)

27 663
( 1)
-
27 662

661 849
45 855
-
707 704

166

415 069

44 450

(1 300 000)

27 828

1 167 223

-
-
-
-

a) Other movements include accrued interest, corrections for hedging operations, corrections of fair value and exchange rate changes.

Liability Management Exercise (LME) – NB Finance
Liability Management Exercise (LME) – NB Finance

31 December 2020

Notes to the Consolidated Financial Statements

As at 10 December 2020, following an early redemption offer, the EMTN issued by the subsidiary NB Finance with a total nominal
As at 10 December 2020, following an early redemption offer, the EMTN issued by the subsidiary NB Finance with a
amount of Euro 440.8 million (out of a total amount of Euro 453.3 million). This operation resulted in a loss in the amount of Euro
total nominal amount of Euro 440.8 million (out of a total amount of Euro 453.3 million). This operation resulted in a
26,980 thousand (See Note 14).
loss in the amount of Euro 26,980 thousand (See Note 14).
The residual duration of liabilities represented by securities and subordinated liabilities, as at 31 December 2020 and 2019, is as
The residual duration of liabilities represented by securities and subordinated liabilities, as at 31 December 2020 and
follows:
2019, is as follows:

Debt securities issued
1 to 5 years
More than 5 years

Subordinated debt

1 to 5 years

Financial liabilities associated to transferred assets

Undetermined maturity

31.12.2020

31.12.2019

At fair value
through profit
and loss

Measured at
amortised cost

Total

At fair value
through profit
and loss

Measured at
amortised cost

Total

(in thousands of Euros)

-
-
-

-
-

1 773
556 470
558 243

-
102 012
102 012

2 237
603 455
605 692

2 237
705 467
707 704

415 234
415 234

44 451
44 451

-
-

415 069
415 069

44 450
44 450

1 017 928

102 012

1 065 211

1 167 223

The main characteristics of these liabilities, as at 31 December 2020 and 31 December 2019, are as follows:

284

Entity

ISIN

Description

Currency

Issue date

Unit Price
(€ )

Carrying
Book value

Maturity

Interest rate

Market

31.12.2020

(in thousands of Euros)

Bonds

Euro Medium Term Notes

NB (Luxemburgo Branch)

NB Finance

Subordinated debt

a) Date of the next call option

Lusitano Mortgage nº 6

XS0312981649

XS0312982290

Lusitano Mortgage nr 6- Classe A

Lusitano Mortgage nr 6- Classe B

37 877

1 500

2031 a)

Euribor 3m + 0,40%

Euribor 3m + 0,60%

Ireland

XS0869315241

XS0877741479

XS0888530911

XS0897950878

XS0972653132

XS1031115014

XS1034421419

XS1038896426

XS1042343308

XS1053939978

XS1055501974

XS1058257905

XS0439764191

XS0723597398

BES Luxembourg 3.5% 02/01/43

BES Luxembourg 3.5% 23/01/43

BES Luxembourg 3.5% 19/02/2043

BES Luxembourg 3.5% 18/03/2043

BES Luxembourg ZC

Banco Esp San Lux ZC 12/02/49

Banco Esp San Lux ZC 19/02/49

Banco Esp San Lux ZC 27/02/51

BES Luxembourg ZC 06/03/2051

BES Luxembourg ZC 03/04/48

BES Luxembourg ZC 09/04/52

BES Luxembourg ZC 16/04/46

EMTN 57

EMTN 114

EUR

2007

2013

2014

2009

2011

0,24

1,00

42 287

97 153

63 183

46 521

36 398

45 717

40 220

34 848

15 212

43 649

38 646

11 477

1 782

1 773

973 477

2043

2048

2049

2051

2048

2052

2046

2044

2021

Fixed rate 3.5%

Zero Coupon

Fixed rate 6%

XLUX

NOVO BANCO

PTNOBFOM0017 NB 06/07/2028

EUR

2018

100,00

415 234

2023 a)

8.5%

XDUB

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe main characteristics of these liabilities, as at 31 December 2020 and 31 December 2019, are as follows:

Entity

ISIN

Description

Currency

Issue date

Unit Price
(€ )

Carrying
Book value

Maturity

Interest rate

Market

31.12.2020

(in thousands of Euros)

Bonds

Lusitano Mortgage nº 6
Lusitano Mortgage nº 6

XS0312981649
XS0312982290

Lusitano Mortgage nr 6- Classe A
Lusitano Mortgage nr 6- Classe B

Euro Medium Term Notes

NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB Finance
NB Finance

Subordinated debt

XS0869315241
XS0877741479
XS0888530911
XS0897950878
XS0972653132
XS1031115014
XS1034421419
XS1038896426
XS1042343308
XS1053939978
XS1055501974
XS1058257905
XS0439764191
XS0723597398

BES Luxembourg 3.5% 02/01/43
BES Luxembourg 3.5% 23/01/43
BES Luxembourg 3.5% 19/02/2043
BES Luxembourg 3.5% 18/03/2043
BES Luxembourg ZC
Banco Esp San Lux ZC 12/02/49
Banco Esp San Lux ZC 19/02/49
Banco Esp San Lux ZC 27/02/51
BES Luxembourg ZC 06/03/2051
BES Luxembourg ZC 03/04/48
BES Luxembourg ZC 09/04/52
BES Luxembourg ZC 16/04/46
EMTN 57
EMTN 114

EUR
EUR

EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

2007
2007

2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2009
2011

0,24
1,00

1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00

37 877
1 500

2031 a)
2031 a)

Euribor 3m + 0,40%
Euribor 3m + 0,60%

Ireland
Ireland

42 287
97 153
63 183
46 521
36 398
45 717
40 220
34 848
15 212
43 649
38 646
11 477
1 782
1 773

2043
2043
2043
2043
2048
2049
2049
2051
2051
2048
2052
2046
2044
2021

Fixed rate 3.5%
Fixed rate 3.5%
Fixed rate 3.5%
Fixed rate 3.5%
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Fixed rate 6%

XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX

NOVO BANCO

PTNOBFOM0017 NB 06/07/2028

EUR

2018

100,00

415 234

2023 a)

8.5%

XDUB

973 477

a) Date of the next call option

31.12.2019

(in thousands of Euros)

Entity

ISIN

Description

Currency

Issue date

Unit Price
(€ )

Carrying
Book value

Maturity

Interest rate

Market

Bonds

Lusitano Mortgage nº 6
Lusitano Mortgage nº 6

XS0312981649
XS0312982290

Lusitano Mortgage nr 6- Classe A
Lusitano Mortgage nr 6- Classe B

Euro Medium Term Notes

Subordinated debt

XS0869315241
XS0877741479
XS0888530911
XS0897950878
XS0972653132
XS1031115014
XS1034421419
XS1038896426
XS1042343308
XS1053939978
XS1055501974
XS1058257905
XS0210172721
XS0439763979
XS0439764191
XS0439639617
XS0442126842
XS0442126925
XS0442127063
XS0723597398

EUR
EUR

EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

2007
2007

2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2005
2009
2009
2009
2009
2009
2009
2011

0,26
1,00

1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00

44 355
1 500

2031 b)
2031 b)

Euribor 3m + 0.40%
Euribor 3m + 0.60%

Ireland
Ireland

41 798
96 270
62 461
46 011
34 344
42 861
37 674
32 615
14 236
40 699
36 317
10 703
102 012
11 498
3 745
5 677
14 859
15 716
10 116
2 237

2043
2043
2043
2043
2048
2049
2049
2051
2051
2048
2052
2046
2035
2043
2044
2045
2042
2040
2041
2021

Fixed rate 3.5%
Fixed rate 3.5%
Fixed rate 3.5%
Fixed rate 3.5%
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Indexed to swap 12m
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Zero Coupon
Fixed rate 6%

XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX

NOVO BANCO

PTNOBFOM0017 NB 06/07/2028

EUR

2018

100,00

415 069

2023 b)

8.5%

XDUB

1 122 773

a) Liabilities at fair value through profit and loss

b) Date of the next call option

As at 31 December 2019, this caption includes a balance sheet value of Euro 102,012 thousand of liabilities repre-
sented by securities recorded at fair value through profit or loss. This compares with Euro 104,699 thousand related
to the amount to be repaid at the maturity date of this issue. This issue was repaid during 2020 within the scope of
the LME program previously mentioned.

285

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESEntity

ISIN

Description

Currency

Issue date

Maturity

Interest rate

Market

31.12.2019

Unit Price

Carrying

(€ )

Book value

(in thousands of Euros)

Bonds

Euro Medium Term Notes

NB (Luxemburgo Branch)

NB Finance

Subordinated debt

Lusitano Mortgage nº 6

XS0312981649

XS0312982290

Lusitano Mortgage nr 6- Classe A

Lusitano Mortgage nr 6- Classe B

44 355

1 500

2031 b)

Euribor 3m + 0.40%

Euribor 3m + 0.60%

Ireland

XS0869315241

XS0877741479

XS0888530911

XS0897950878

XS0972653132

XS1031115014

XS1034421419

XS1038896426

XS1042343308

XS1053939978

XS1055501974

XS1058257905

XS0210172721

XS0439763979

XS0439764191

XS0439639617

XS0442126842

XS0442126925

XS0442127063

XS0723597398

BES Luxembourg 3.5% 02/01/43

BES Luxembourg 3.5% 23/01/43

BES Luxembourg 3.5% 19/02/2043

BES Luxembourg 3.5% 18/03/2043

BES Luxembourg ZC

Banco Esp San Lux ZC 12/02/49

Banco Esp San Lux ZC 19/02/49

Banco Esp San Lux ZC 27/02/51

BES Luxembourg ZC 06/03/2051

BES Luxembourg ZC 03/04/48

BES Luxembourg ZC 09/04/52

BES Luxembourg ZC 16/04/46

EMTN 40

EMTN 56

EMTN 57

EMTN 58

EMTN 59

EMTN 60

EMTN 61

EMTN 114

EUR

2007

2013

2014

2005

2009

2011

0,26

1,00

41 798

96 270

62 461

46 011

34 344

42 861

37 674

32 615

14 236

40 699

36 317

10 703

102 012

11 498

3 745

5 677

14 859

15 716

10 116

2 237

2043

2048

2049

2051

2048

2052

2046

2035

2043

2044

2045

2042

2040

2041

2021

Fixed rate 3.5%

Zero Coupon

Fixed rate 6%

XLUX

Indexed to swap 12m

NOVO BANCO

PTNOBFOM0017 NB 06/07/2028

EUR

2018

100,00

415 069

2023 b)

8.5%

XDUB

1 122 773

a) Liabilities at fair value through profit and loss

b) Date of the next call option

As at 31 December 2019, this caption includes a balance sheet value of Euro 102,012 thousand of liabilities represented by securities
recorded at fair value through profit or loss. This compares with Euro 104,699 thousand related to the amount to be repaid at the
maturity date of this issue. This issue was repaid during 2020 within the scope of the LME program previously mentioned.

The table below presents the fair value component attributable to the credit risk of the fair value through profit or loss:
The table below presents the fair value component attributable to the credit risk of the fair value through profit or loss:

Fair value attributable to credit risk at the beginning of the exercise
Recognized in other comprehensive income

Changes through other comprehensive income
Variation due to debt repurchases

Fair value attributable to credit risk at the end of the exercise

(in thousands Euros)

31.12.2020

31.12.2019

47 935

50 806

10 883
( 58 818)

( 2 871)
-

47 935

The change in fair value attributable to changes in the credit risk of the issues is calculated using the credit spread observed in recent
issues of similar debt, adjusted for subsequent changes in the credit spread of the senior debt CDS issued by Group entities. As of
January 1, 2018, in accordance with IFRS 9, this liability component is reflected in Other comprehensive income. With the redemption
The change in fair value attributable to changes in the credit risk of the issues is calculated using the credit spread
in 2020 of the issue recorded at fair value through profit or loss, the Group no longer has associated credit risk. However, the credit
risk recognized since 1 January 2018 in the amount of Euro 9,214 thousand, was fixed in the respective credit risk reserve caption,
observed in recent issues of similar debt, adjusted for subsequent changes in the credit spread of the senior debt CDS
in accordance with IFRS 9 (see Note 35).
issued by Group entities. As of January 1, 2018, in accordance with IFRS 9, this liability component is reflected in Other
comprehensive income. With the redemption in 2020 of the issue recorded at fair value through profit or loss, the
The Group did not present capital or interest defaults on its debt issued in the financial years of 2020 and 2019.
Group no longer has associated credit risk. However, the credit risk recognized since 1 January 2018 in the amount of
Euro 9,214 thousand, was fixed in the respective credit risk reserve caption, in accordance with IFRS 9 (see Note 35).
NOTE 32 – PROVISIONS

The Group did not present capital or interest defaults on its debt issued in the financial years of 2020 and 2019.
As at 31 December 2020 and 2019, the caption Provisions presents the following changes:

NOTE 32 – Provisions

As at 31 December 2020 and 2019, the caption Provisions presents the following changes:

31 December 2020
Balance as at 31 December 2018

Balance as at 31 December 2019

Balance as at 31 December 2018
Reinforcements / (replacements)
Utilization during the period
Reinforcements / (replacements)
Transfers
Utilization during the period
Foreign exchange differences and other
Transfers
Foreign exchange differences and other
Reinforcements / (replacements)
Balance as at 31 December 2019
Utilization during the period
Reinforcements / (replacements)
Foreign exchange differences and other (a)
Utilization during the period
Foreign exchange differences and other (a)

Balance as at 31 December 2020

Programme of
antecipated
Programme of
repayment of
antecipated
liabilities
repayment of
Notes to the Consolidated Financial Statements
liabilities
38 865

Provision for
guarantees and
Provision for
commitments
guarantees and
commitments

Restructuring
provision
Restructuring
provision

Commercial
Offers
Commercial
Offers

189 661

72 877

9 781

9 781
47 291
( 33 052)
47 291
24
( 33 052)
-
24
24 044
-
123 915
24 044
( 42 188)
123 915
( 8 798)
( 42 188)
96 973
( 8 798)

189 661
( 60 776)
-
( 60 776)
-
-
( 31 799)
-
97 086
( 31 799)
22 116
97 086
( 2 188)
22 116
( 15 028)
( 2 188)
101 986
( 15 028)

72 877
( 1 366)
( 29 937)
( 1 366)
-
( 29 937)
( 240)
-
41 334
( 240)
( 629)
41 334
( 29 506)
( 629)
-
( 29 506)
11 199
-

38 865
( 1 172)
( 37 694)
( 1 172)
-
( 37 694)
1
-
-
1
-
-
-
-
-
-
-
-

Other
provisions
Other
provisions

114 751

114 751
37 320
( 22 188)
37 320
-
( 22 188)
15 470
-
145 353
15 470
41 021
145 353
( 16 578)
41 021
4 428
( 16 578)
174 224
4 428

(a) Includes 8 798 thousand euros of restructuring provisions and 14. 420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations.
Balance as at 31 December 2020

101 986

96 973

11 199

174 224

(in thousands of Euros)

Total

Total
76
425 935

425 935
21 297
( 122 871)
21 297
24
( 122 871)
( 16 568)
24
307 817
( 16 568)
186 423
307 817
( 90 460)
186 423
( 19 398)
( 90 460)
384 382
( 19 398)

384 382

(a) Includes 8 798 thousand euros of restructuring provisions and 14. 420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations.

The changes in the caption Provisions for guarantees, are detailed as follows:
The changes in the caption Provisions for guarantees, are detailed as follows:
The changes in the caption Provisions for guarantees, are detailed as follows:

(in thousands of Euros)

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2019

Balance as at 31 December 2020

Stage 1

Stage 2

Stage 3

(in thousands of Euros)

Total

Stage 1

26 779

Stage 2

16 832

Stage 3

143 738

26 779
312
( 2 511)
312
( 21 331)
( 2 511)
( 21 331)
3 249

3 249
1 086
( 627)
1 086
-
( 627)
( 2 392)
-
( 2 392)
1 316

16 832
6 729
( 7 710)
6 729
( 1 753)
( 7 710)
( 1 753)
14 098

14 098
20 502
( 12 830)
20 502
-
( 12 830)
2 299
-
2 299
24 069

143 738
37 973
( 96 409)
37 973
( 8 715)
( 96 409)
( 8 715)
76 587

76 587
23 309
( 16 000)
23 309
( 2 188)
( 16 000)
( 14 930)
( 2 188)
( 14 930)
66 778

Total
187 349

187 349
45 014
( 106 630)
45 014
( 31 799)
( 106 630)
( 31 799)
93 934

93 934
44 897
( 29 457)
44 897
( 2 188)
( 29 457)
( 15 023)
( 2 188)
( 15 023)
92 163

Balance as at 31 December 2020

(a) Includes 14 420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations (2 360 thousand euros on stage 1 and 12. 060 thousand euros on
stage 3).
(a) Includes 14 420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations (2 360 thousand euros on stage 1 and 12. 060 thousand euros on
stage 3).

92 163

66 778

24 069

1 316

The changes in the caption Provisions for commitments are detailed as follows:
The changes in the caption Provisions for commitments are detailed as follows:

286

Balance as at 31 December 2018

Increases due to changes in credit risk

Decreases due to changes in credit risk

Increases due to changes in credit risk

Other movements

Decreases due to changes in credit risk

Balance as at 31 December 2019

Other movements

Balance as at 31 December 2019

Increases due to changes in credit risk

Decreases due to changes in credit risk

Increases due to changes in credit risk

Other movements

Decreases due to changes in credit risk

Other movements

Balance as at 31 December 2020

(in thousands of Euros)

Stage 1

Stage 2

Stage 3

(in thousands of Euros)

Total

Stage 1

1 867

Stage 2

445

Stage 3

Total

2 312

1 867

509

( 432)

509

( 432)

1 984

6 617

1 984

( 3 875)

6 617

1 093

( 3 875)

1 093

5 819

445

949

( 183)

949

( 43)

( 183)

1 168

( 43)

5 572

1 168

( 1 605)

5 572

( 1 131)

( 1 605)

( 1 131)

4 004

212

( 215)

212

( 215)

( 33)

2 312

1 670

( 830)

1 670

( 830)

3 152

12 189

3 152

( 5 513)

12 189

( 5 513)

( 5)

9 823

The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising

from the Group's sale and restructuring process. During the financial year of 2020, a provision of Euro 127.4 million was set up, and

The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising

there was also a reversal of the provisions set up in 2016 and 2017 in the amount of Euro 3.4 million. As of December 31, 2020, the

from the Group's sale and restructuring process. During the financial year of 2020, a provision of Euro 127.4 million was set up, and

amount of restructuring provisions on the balance sheet is Euro 97.0 million.

there was also a reversal of the provisions set up in 2016 and 2017 in the amount of Euro 3.4 million. As of December 31, 2020, the

amount of restructuring provisions on the balance sheet is Euro 97.0 million.

Other provisions amounting to Euro 174.2 million (31 December 2019: Euro 145.4 million) are intended to cover certain identified

contingencies related to the Group’s activities, the most relevant being:

Other provisions amounting to Euro 174.2 million (31 December 2019: Euro 145.4 million) are intended to cover certain identified

contingencies related to the Group’s activities, the most relevant being:

 Contingencies associated with ongoing tax processes. To cover for these contingencies, the Group maintains provisions of Euro

29.2 million (31 December 2019: Euro 32.2 million);

 Contingencies associated with ongoing tax processes. To cover for these contingencies, the Group maintains provisions of Euro

 Contingencies associated with legal proceedings amounting to Euro 11.1 million (31 December 2019: Euro 16.2 million);

29.2 million (31 December 2019: Euro 32.2 million);

 Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);

 Contingencies associated with legal proceedings amounting to Euro 11.1 million (31 December 2019: Euro 16.2 million);

 Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Restructuring

provision

Provision for

guarantees and

commitments

Commercial

Offers

Balance as at 31 December 2018

Reinforcements / (replacements)

Utilization during the period

Transfers

Foreign exchange differences and other

Balance as at 31 December 2019

Reinforcements / (replacements)

Utilization during the period

Foreign exchange differences and other (a)

Balance as at 31 December 2020

9 781

47 291

( 33 052)

24 044

123 915

( 42 188)

( 8 798)

96 973

189 661

( 60 776)

( 31 799)

97 086

22 116

( 2 188)

( 15 028)

101 986

(a) Includes 8 798 thousand euros of restructuring provisions and 14. 420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations.

The changes in the caption Provisions for guarantees, are detailed as follows:

Programme of

antecipated

repayment of

liabilities

38 865

( 1 172)

( 37 694)

72 877

( 1 366)

( 29 937)

( 240)

41 334

( 629)

( 29 506)

11 199

(in thousands of Euros)

Other

provisions

Total

114 751

425 935

37 320

( 22 188)

15 470

145 353

41 021

( 16 578)

4 428

174 224

21 297

( 122 871)

( 16 568)

307 817

186 423

( 90 460)

( 19 398)

384 382

Stage 1

Stage 2

Stage 3

Total

(in thousands of Euros)

26 779

312

( 2 511)

( 21 331)

3 249

1 086
( 627)
-
( 2 392)

16 832

6 729

( 7 710)

( 1 753)

143 738

187 349

37 973

( 96 409)

( 8 715)

45 014

( 106 630)

( 31 799)

14 098

76 587

93 934

20 502
( 12 830)
-
2 299

23 309
( 16 000)
( 2 188)
( 14 930)

44 897
( 29 457)
( 2 188)
( 15 023)

1 316

24 069

66 778

92 163

Balance as at 31 December 2018

Increases due to changes in credit risk

Decreases due to changes in credit risk

Other movements

Balance as at 31 December 2019

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2020

The changes in the caption Provisions for commitments are detailed as follows:

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2019

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2020

Stage 1

Stage 2

Stage 3

Total

(in thousands of Euros)

1 867

509
( 432)
40

1 984

6 617
( 3 875)
1 093

5 819

445

949
( 183)
( 43)

1 168

5 572
( 1 605)
( 1 131)

4 004

212
( 215)
3

-
( 33)
33

2 312

1 670
( 830)
-

3 152

12 189
( 5 513)
( 5)

9 823

The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising
from the Group's sale and restructuring process. During the financial year of 2020, a provision of Euro 127.4 million was set up, and
there was also a reversal of the provisions set up in 2016 and 2017 in the amount of Euro 3.4 million. As of December 31, 2020, the
The restructuring provisions were set up within the scope of the commitments assumed before the European
amount of restructuring provisions on the balance sheet is Euro 97.0 million.
Commission arising from the Group's sale and restructuring process. During the financial year of 2020, a provision of
Other provisions amounting to Euro 174.2 million (31 December 2019: Euro 145.4 million) are intended to cover certain identified
Euro 127.4 million was set up, and there was also a reversal of the provisions set up in 2016 and 2017 in the amount of
contingencies related to the Group’s activities, the most relevant being:
Euro 3.4 million. As of December 31, 2020, the amount of restructuring provisions on the balance sheet is Euro 97.0
million.
 Contingencies associated with ongoing tax processes. To cover for these contingencies, the Group maintains provisions of Euro

29.2 million (31 December 2019: Euro 32.2 million);

 Contingencies associated with legal proceedings amounting to Euro 11.1 million (31 December 2019: Euro 16.2 million);
Other provisions amounting to Euro 174.2 million (31 December 2019: Euro 145.4 million) are intended to cover certain
 Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);
identified contingencies related to the Group’s activities, the most relevant being:

• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Group maintains

Notes to the Consolidated Financial Statements

31 December 2020

provisions of Euro 29.2 million (31 December 2019: Euro 32.2 million);

• Contingencies associated with legal proceedings amounting to Euro 11.1 million (31 December 2019: Euro 16.2

million);

• Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5

million);

• Contingencies related to the undivided part of the Executive Committee's pension plan, in the amount of Euro 19.2

million, transferred from the liability items net of the value of the assets of the Pension Fund (see Note 16);

• The remaining amount, of Euro 73.6 million (31 December 2019: Euro 61.5 million), is intended to cover losses
 Contingencies related to the undivided part of the Executive Committee's pension plan, in the amount of Euro 19.2 million, transferred
from the liability items net of the value of the assets of the Pension Fund (see Note 16);
arising from the Group's normal activity, such as fraud, theft and robbery and lawsuits ongoing lawsuits for contin-
 The remaining amount, of Euro 73.6 million (31 December 2019: Euro 61.5 million), is intended to cover losses arising from the
gencies related to asset sale processes, among others.
Group's normal activity, such as fraud, theft and robbery and lawsuits ongoing lawsuits for contingencies related to asset sale
processes, among others.

NOTE 33 – OTHER LIABILITIES

NOTE 33 – Other liabilities

As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:
As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

Public sector
Creditors for supply of goods
Other creditors
Non-controlling interests of Open Investment Funds (see Note 35)
Career bonuses (see Note 16)
Retirement pensions and health-care benefits (see Note 16)
Other accrued expenses
Deferred income
Foreign exchange transactions pending settlement
Other transactions pending settlement

(in thousands of Euros)

31.12.2020

31.12.2019

34 658
58 793
64 412
90 206
7 591
27 052
75 495
2 175
-
57 380

417 762

33 110
78 686
77 350
99 394
7 106
153 073
86 277
2 557
6 577
41 936

586 066

As at 31 December 2020, the caption Creditors for supply of goods includes Euro 39,826 thousand related to creditors of assets for
right of use (31 December 2019: Euro 46,127 thousand), whose maturity dates are present the following detail:

287

Up to 3 months

3 months to 1 year

1 to 5 years

More than 5 years

NOTE 34 – SHARE CAPITAL

Ordinary shares

Nani Holdings, SGPS, SA

Resolution Fund (1)

(in thousands of Euros)

31.12.2020

484

22 194

17 068

39 826

% Share Capital

31.12.2020

31.12.2019

75.00%

25.00%

75.00%

25.00%

100.00%

In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro 750

million and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020 and 2019, the

share capital of the Bank amounts to Euro 5,900,000,000, represented by 9 799 999 997 registered shares, with no nominal value,

fully subscribed and realised by the following shareholders:

(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.

As mentioned in Note 28, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by

Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax

purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances

to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted

into tax credits when the taxable entity reports an annual net loss.

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

 Contingencies related to the undivided part of the Executive Committee's pension plan, in the amount of Euro 19.2 million, transferred

from the liability items net of the value of the assets of the Pension Fund (see Note 16);

 The remaining amount, of Euro 73.6 million (31 December 2019: Euro 61.5 million), is intended to cover losses arising from the

Group's normal activity, such as fraud, theft and robbery and lawsuits ongoing lawsuits for contingencies related to asset sale

processes, among others.

 Contingencies related to the undivided part of the Executive Committee's pension plan, in the amount of Euro 19.2 million, transferred

from the liability items net of the value of the assets of the Pension Fund (see Note 16);

NOTE 33 – OTHER LIABILITIES

 The remaining amount, of Euro 73.6 million (31 December 2019: Euro 61.5 million), is intended to cover losses arising from the

Group's normal activity, such as fraud, theft and robbery and lawsuits ongoing lawsuits for contingencies related to asset sale

As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

processes, among others.

NOTE 33 – OTHER LIABILITIES

As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

(in thousands of Euros)

31.12.2020

31.12.2019

Public sector
Creditors for supply of goods
Other creditors
Non-controlling interests of Open Investment Funds (see Note 35)
Career bonuses (see Note 16)
Public sector
Retirement pensions and health-care benefits (see Note 16)
Creditors for supply of goods
Other accrued expenses
Other creditors
Deferred income
Non-controlling interests of Open Investment Funds (see Note 35)
Foreign exchange transactions pending settlement
Career bonuses (see Note 16)
Other transactions pending settlement
Retirement pensions and health-care benefits (see Note 16)
Other accrued expenses
As at 31 December 2020, the caption Creditors for supply of goods includes Euro 39,826 thousand related to creditors
Deferred income
of assets for right of use (31 December 2019: Euro 46,127 thousand), whose maturity dates are present the following
Foreign exchange transactions pending settlement
As at 31 December 2020, the caption Creditors for supply of goods includes Euro 39,826 thousand related to creditors of assets for
detail:
Other transactions pending settlement
right of use (31 December 2019: Euro 46,127 thousand), whose maturity dates are present the following detail:

33 110
78 686
77 350
99 394
7 106
33 110
153 073
78 686
86 277
77 350
2 557
99 394
6 577
7 106
41 936
153 073
586 066
86 277
2 557
6 577
41 936

34 658
58 793
64 412
90 206
7 591
34 658
27 052
58 793
75 495
64 412
2 175
90 206
-
7 591
57 380
27 052
417 762
75 495
2 175
-
57 380

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)
As at 31 December 2020, the caption Creditors for supply of goods includes Euro 39,826 thousand related to creditors of assets for
right of use (31 December 2019: Euro 46,127 thousand), whose maturity dates are present the following detail:

31.12.2020

417 762

586 066

Up to 3 months
3 months to 1 year
1 to 5 years
More than 5 years
Up to 3 months
3 months to 1 year
1 to 5 years
More than 5 years

NOTE 34 – SHARE CAPITAL

31.12.2020

80
(in thousands of Euros)
484
22 194
17 068
80
39 826
484
22 194
17 068

Ordinary shares

NOTE 34 – Share capital
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro 750
NOTE 34 – SHARE CAPITAL
million and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020 and 2019, the
Ordinary shares
share capital of the Bank amounts to Euro 5,900,000,000, represented by 9 799 999 997 registered shares, with no nominal value,
Ordinary shares
fully subscribed and realised by the following shareholders:
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro 750
Euro 750 million and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December
million and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020 and 2019, the
share capital of the Bank amounts to Euro 5,900,000,000, represented by 9 799 999 997 registered shares, with no nominal value,
2020 and 2019, the share capital of the Bank amounts to Euro 5,900,000,000, represented by 9 799 999 997 registered
fully subscribed and realised by the following shareholders:
shares, with no nominal value, fully subscribed and realised by the following shareholders:

% Share Capital

31.12.2020

31.12.2019

39 826

Nani Holdings, SGPS, SA
Resolution Fund (1)

75.00%

25.00%
% Share Capital

25.00%

31.12.2020

100.00%

31.12.2019

100.00%

(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.
Nani Holdings, SGPS, SA
Resolution Fund (1)

25.00%

75.00%

25.00%

100.00%
As mentioned in Note 28, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by
Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax
(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.
purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances
to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted
into tax credits when the taxable entity reports an annual net loss.
As mentioned in Note 28, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by
Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax
As mentioned in Note 28, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA)
purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances
to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted
approved by Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction,
into tax credits when the taxable entity reports an annual net loss.
for corporate income tax purposes, of costs and negative equity changes recorded up to 31 December 2015 for
impairment losses on loans and advances to customers and with employee post-employment or long-term benefits.
Said regime foresees that those assets can be converted into tax credits when the taxable entity reports an annual net
loss.

Notes to the Consolidated Financial Statements

31 December 2020

100.00%

The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount
of said net loss to total equity at the individual company level.

A special reserve was established with an amount identical to the tax credit approved, increased by 10%. This special
reserve was established using the originating reserve and is to be incorporated in the share capital.

The conversion rights are securities that grant the State the right to demand of NOVO BANCO the respective share
capital increase, through the incorporation of the amount of the special reserve and the consequent issue and delivery
of ordinary shares at no cost.

288

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of said net
loss to total equity at the individual company level.

A special reserve was established with an amount identical to the tax credit approved, increased by 10%. This special reserve was
The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of said net
established using the originating reserve and is to be incorporated in the share capital.
loss to total equity at the individual company level.

The conversion rights are securities that grant the State the right to demand of NOVO BANCO the respective share capital increase,
A special reserve was established with an amount identical to the tax credit approved, increased by 10%. This special reserve was
through the incorporation of the amount of the special reserve and the consequent issue and delivery of ordinary shares at no cost.
established using the originating reserve and is to be incorporated in the share capital.

It is estimated that the conversion rights to be issued and allocated to the State following the net loss of years 2015 and 2019 will
The conversion rights are securities that grant the State the right to demand of NOVO BANCO the respective share capital increase,
confer a shareholding of up to approximately 12.82% of the share capital of NOVO BANCO, which will only dilute, in accordance to
through the incorporation of the amount of the special reserve and the consequent issue and delivery of ordinary shares at no cost.
the sale contract, the Resolution Fund stake.

NOTE 35 – Accumulated other comprehensive income,
retained earnings, other reserves and minority interests
(non-controlling interests)

It is estimated that the conversion rights to be issued and allocated to the State following the net loss of years 2015 and 2019 will
confer a shareholding of up to approximately 12.82% of the share capital of NOVO BANCO, which will only dilute, in accordance to
NOTE 35 – ACCUMULATED OTHER COMPREHENSIVE INCOME, RETAINED EARNINGS, OTHER RESERVES AND
the sale contract, the Resolution Fund stake.
MINORITY INTERESTS (NON-CONTROLLING INTERESTS)

NOTE 35 – ACCUMULATED OTHER COMPREHENSIVE INCOME, RETAINED EARNINGS, OTHER RESERVES AND
As at 31 December 2020 and 2019, the accumulated other comprehensive income, retained earnings and other re-
As at 31 December 2020 and 31 December 2019, the accumulated other comprehensive income, retained earnings and other
MINORITY INTERESTS (NON-CONTROLLING INTERESTS)
reserves present the following detail:
serves present the following detail:

As at 31 December 2020 and 31 December 2019, the accumulated other comprehensive income, retained earnings and other
reserves present the following detail:

31.12.2020

31.12.2019

(in thousands of Euros)

Other accumulated comprehensive income

Retained earnings

Other reserves
Other accumulated comprehensive income

Originating reserve

Retained earnings
Special reserve

Other reserves

Other reserves and Retained earnings
Originating reserve

Special reserve

Other accumulated comprehensive income

Other reserves and Retained earnings

( 823 420)

( 702 311)

(in thousands of Euros)

( 7 202 828)

31.12.2020

( 6 115 245)

31.12.2019

6 570 154
( 823 420)
1 976 173
( 7 202 828)
728 561
6 570 154
3 865 420
1 976 173
( 1 456 094)
728 561

5 942 501
( 702 311)
2 098 188
( 6 115 245)
606 547
5 942 501
3 237 766
2 098 188
( 875 055)
606 547

3 865 420

( 1 456 094)

3 237 766

( 875 055)

The movements in Other accumulated comprehensive income were as follows:
Other accumulated comprehensive income
Other accumulated comprehensive income

The movements in Other accumulated comprehensive income were as follows:
The movements in Other accumulated comprehensive income were as follows:

Other accumulated comprehensive income

(in thousands of Euros)

Balance as at 31 December 2018

Actuarial deviations

Fair value changes, net of taxes

Foreign exchange differences
Balance as at 31 December 2018
Changes in credit risk of financial liabilities at fair value,
net of taxes
Actuarial deviations
Impairment reserves of securities at fair value through
Fair value changes, net of taxes
other comprehensive income
Foreign exchange differences
Reserves of sales of securities at fair value through other
Changes in credit risk of financial liabilities at fair value,
comprehensive income
net of taxes
Other comprehensive income of associated companies
Impairment reserves of securities at fair value through
Other
other comprehensive income
Reserves of sales of securities at fair value through other
Balance as at 31 December 2019
comprehensive income

Other comprehensive income of associated companies
Actuarial deviations
Other
Fair value changes, net of taxes

Foreign exchange differences
Balance as at 31 December 2019
Changes in credit risk of financial liabilities at fair value,
net of taxes
Actuarial deviations
Impairment reserves of securities at fair value through
Fair value changes, net of taxes
other comprehensive income
Foreign exchange differences
Reserves of sales of securities at fair value through other
Changes in credit risk of financial liabilities at fair value,
comprehensive income
net of taxes
Other comprehensive income of associated companies
Impairment reserves of securities at fair value through
other comprehensive income
Balance as at 31 December 2020
Reserves of sales of securities at fair value through other
comprehensive income
Other comprehensive income of associated companies

Credit risk
reserves

Sales
reserves

Fair value
reserves

Other accumulated comprehensive income

Other variations of
other
comprehensive
income

Actuarial
deviations (net
of taxes)

(in thousands of Euros)

Total

Impairment
reserves

1 211

Impairment
reserves

-
1 211

-
-

-
4 336
-

-
-
-
-
4 336

5 547
-

-
-
-
-

1 202

Credit risk
reserves

( 3 315)

Sales
reserves

-
1 202

( 2 871)
-

-
-
-

-
( 2 871)
-
-
-

( 1 669)
-

-
-
-
-

-
( 3 315)

-
-

-
-
-

( 4 470)
-
-
-
-

( 7 785)
( 4 470)

-
-
-
-

-
5 547

-
( 1 669)

-
( 7 785)

-
-

10 883
-

-
( 1 852)
-

-
-
-

( 1 852)
3 695

-
-

-
-
-

-
10 883
-

-
9 214

-
-

-
-
-

( 14 972)
-
-

-
( 22 757)

( 14 972)
-

( 297 995)

Fair value
reserves

211 207

-
( 297 995)

-
-

211 207
-
-

-
-
897
-
-

( 85 891)
-

897
-
-
12 729

-
( 85 891)

-
-

12 729
-
-

-
-
( 2 048)

-
( 75 210)

-
( 2 048)

Other variations of
( 191)
other
comprehensive
income

Actuarial
( 491 796)
deviations (net
of taxes)
( 107 341)

31
( 191)

-
( 491 796)

-
-

-
-
31

-
-
-
( 13 216)
-

( 13 376)
-

-
-
( 13 216)
-

( 1 518)
( 13 376)

-
( 107 341)

-
-
-

-
-
-
-
-

( 599 137)
-

-
( 124 331)
-
-

-
( 599 137)

-
-

-
( 124 331)

-
-
( 1 518)

-
-
-

-
( 14 894)

-
( 723 468)

-
-

Total

( 790 884)

( 107 341)

211 207

31
( 790 884)

( 2 871)
( 107 341)

211 207
4 336
31

( 4 470)
( 2 871)
897
( 13 216)
4 336

( 702 311)
( 4 470)

897
( 124 331)
( 13 216)
12 729

( 1 518)
( 702 311)

10 883
( 124 331)

12 729
( 1 852)
( 1 518)

( 14 972)
10 883
( 2 048)

( 1 852)
( 823 420)

( 14 972)
( 2 048)

Balance as at 31 December 2020

3 695

9 214

( 22 757)

( 75 210)

( 14 894)

( 723 468)

( 823 420)

31 December 2020

Notes to the Consolidated Financial Statements

31 December 2020
Fair value reserve

Notes to the Consolidated Financial Statements

The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio
classified as at a fair value through other comprehensive income, net of impairment losses. The amount of this reserve
is shown net of deferred taxes and non-controlling interests.

289

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Fair value reserve
The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio classified as at
a fair value through other comprehensive income, net of impairment losses. The amount of this reserve is shown net of deferred
taxes and non-controlling interests.
Fair value reserve
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as
The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio classified as at
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:
a fair value through other comprehensive income, net of impairment losses. The amount of this reserve is shown net of deferred
follows:
taxes and non-controlling interests.

The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:

31.12.2020
Fair value reserves

(in thousands of Euros)

31.12.2019
Fair value reserves

Financial assets at fair
value through other
comprehensive income

Deferred tax
reserves

Total fair
value reserves

31.12.2020

Financial assets at fair
value through other
comprehensive income

Deferred tax
reserves

(in thousands of Euros)

Total fair
value reserves

31.12.2019

Fair value reserve
The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio classified as at
Balance at the beginning of the exercise
a fair value through other comprehensive income, net of impairment losses. The amount of this reserve is shown net of deferred
Total fair
Changes in fair value
383 497
value reserves
taxes and non-controlling interests.
Foreign exchange differences
( 6 678)
Alienations in the exercise
( 70 140)
Balance at the beginning of the exercise
( 297 995)
Impairment in the exercise
-
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:
Deferred taxes recognized in the exercise in reserves
Changes in fair value

( 293 622)
Financial assets at fair
383 497
value through other
( 6 678)
comprehensive income
( 70 140)
( 293 622)
-

13 057
Financial assets at fair
95 596
value through other
( 4 280)
comprehensive income
( 69 652)
13 057
( 6 284)

Total fair
95 596
value reserves
( 4 280)
( 69 652)
( 85 891)
( 6 284)

Deferred tax
-
reserves
-
-
( 98 948)
-

-
-
-
( 4 373)
-

Deferred tax
reserves

Fair value reserves

( 297 995)

( 98 948)

( 85 891)

( 4 373)

-
383 497

( 94 575)
383 497

( 94 575)
-

-
95 596

( 4 699)
95 596

( 4 699)
-

Foreign exchange differences
Balance at the end of the exercise
Alienations in the exercise
Impairment in the exercise
The fair value reserves are analyzed as follows:
Deferred taxes recognized in the exercise in reserves

Balance at the end of the exercise

The fair value reserves are analyzed as follows:
The fair value reserves are analyzed as follows:

( 4 280)
28 437
( 69 652)
( 6 284)

-
( 103 647)
-
-

31.12.2020
-
Fair value reserves
28 437
Financial assets at fair
value through other
comprehensive income

Deferred tax
reserves

( 103 647)

( 4 699)

( 4 280)
( 75 210)
( 69 652)
( 6 284)

( 4 699)

( 75 210)

Total fair
value reserves

( 6 678)
13 057
( 70 140)
-

-
( 98 948)
-
-

( 6 678)
( 85 891)
( 70 140)
(in thousands of Euros)
-

( 94 575)

31.12.2019
Fair value reserves

( 94 575)

13 057
Financial assets at fair
value through other
31.12.2020
comprehensive income

Deferred tax
reserves

( 85 891)
( 98 948)
(in thousands of Euros)

Total fair
value reserves

31.12.2019

Balance at the beginning of the exercise
Amortised cost of financial assets at fair value through other comprehensive income
Changes in fair value
Market value of financial assets at fair value through other comprehensive income
Foreign exchange differences
Alienations in the exercise
Unrealised gains / (losses) recognized in fair value reserve
Impairment in the exercise
Amortised cost of financial assets at fair value through other comprehensive income
Fair value reserves by the equity method
Deferred taxes recognized in the exercise in reserves
Market value of financial assets at fair value through other comprehensive income
Balance at the end of the exercise
Fair value reserves of discontinued activities

95 596
( 4 280)
( 69 652)
( 6 284)
-

28 437

13 057

Unrealised gains / (losses) recognized in fair value reserve
Non-controlling Interests
The fair value reserves are analyzed as follows:
Fair value reserves by the equity method
Total fair value reserve
Fair value reserves of discontinued activities
Deferred Taxes

Non-controlling Interests
Fair value reserve attributable to shareholders of the Bank
Total fair value reserve

( 98 948)

-
-
-
-
( 4 699)

( 85 891)

95 596
( 4 280)
( 69 652)
( 6 284)
( 4 699)

( 103 647)

( 75 210)

( 293 622)

7 879 863

383 497
7 907 587
31.12.2020
( 6 678)
( 70 140)
27 724
-
7 879 863
917
-
7 907 587
13 057
1 193

27 724
( 1 397)

917
28 437

1 193
( 103 647)

31.12.2020

( 1 397)
( 75 210)
28 437

( 4 373)
(in thousands of Euros)

31.12.2019

( 297 995)
8 837 309
383 497
8 849 896
( 6 678)
( 70 140)
12 587
-
8 837 309
2 965
( 94 575)
8 849 896
( 85 891)
-

-
-
-
-
( 94 575)

( 98 948)

12 587
( 2 495)

2 965
13 057

-
( 98 948)
(in thousands of Euros)
( 2 495)
( 85 891)
13 057

31.12.2019

917

1 193

2 965

( 1 397)

12 587

27 724

8 849 896
( 85 891)

7 907 587
( 75 210)

8 837 309
( 98 948)

7 879 863
( 103 647)

Amortised cost of financial assets at fair value through other comprehensive income
Deferred Taxes
Originating reserve
Market value of financial assets at fair value through other comprehensive income
Fair value reserve attributable to shareholders of the Bank
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
Unrealised gains / (losses) recognized in fair value reserve
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the
Fair value reserves by the equity method
Originating reserve
independent auditor nominated by Bank of Portugal.
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
Fair value reserves of discontinued activities
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
Non-controlling Interests
Originating reserve
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the
Total fair value reserve
Special reserve
independent auditor nominated by Bank of Portugal.
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO
As mentioned in Note 34, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime
Deferred Taxes
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax
BANCO, on the terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve
Fair value reserve attributable to shareholders of the Bank
assets into tax credits and the simultaneous establishment of a special reserve.
Special reserve
includes the effects of Bank of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions
As mentioned in Note 34, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime
Following the net losses recorded from 2015 until 2019 and with reference to the eligible deferred tax assets at the end of each year,
reached through the audit conducted by the independent auditor nominated by Bank of Portugal.
Originating reserve
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax
the special reserve was set up for the same amount of the tax credit calculated, increased by 10%, as follows:
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
assets into tax credits and the simultaneous establishment of a special reserve.
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
(in thousands of Euros)
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the
Following the net losses recorded from 2015 until 2019 and with reference to the eligible deferred tax assets at the end of each year,
Special reserve
independent auditor nominated by Bank of Portugal.
the special reserve was set up for the same amount of the tax credit calculated, increased by 10%, as follows:
31.12.2020
As mentioned in Note 34, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special
2016 (net loss of 2015)
Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of
2017 (net loss of 2016)
Special reserve
31.12.2020
eligible deferred tax assets into tax credits and the simultaneous establishment of a special reserve.
2018 (net loss of 2017)
As mentioned in Note 34, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax
2019 (net loss of 2018)
2016 (net loss of 2015)
assets into tax credits and the simultaneous establishment of a special reserve.
2020 (net loss of 2019)
Following the net losses recorded from 2015 until 2019 and with reference to the eligible deferred tax assets at the
2017 (net loss of 2016)
2018 (net loss of 2017)
end of each year, the special reserve was set up for the same amount of the tax credit calculated, increased by 10%, as
Following the net losses recorded from 2015 until 2019 and with reference to the eligible deferred tax assets at the end of each year,
2019 (net loss of 2018)
follows:
the special reserve was set up for the same amount of the tax credit calculated, increased by 10%, as follows:
2020 (net loss of 2019)

168 911
109 421
150 044
178 171
168 911
122 014
109 421
150 044
728 561
178 171
122 014

168 911
109 421
150 044
178 171
168 911
-
109 421
150 044
606 547
178 171
-

(in thousands of Euros)

31.12.2019

( 103 647)

( 75 210)

( 98 948)

( 85 891)

28 437

13 057

( 2 495)

Other reserves and retained earnings

31 December 2020

Other reserves and retained earnings
2016 (net loss of 2015)
2017 (net loss of 2016)
2018 (net loss of 2017)
2019 (net loss of 2018)
2020 (net loss of 2019)

31 December 2020

Notes to the Consolidated Financial Statements

728 561

(in thousands of Euros)

606 547

31.12.2020

31.12.2019

168 911
109 421
150 044
178 171
122 014

728 561

168 911
80
109 421
150 044
178 171
80
-

606 547

Other reserves and retained earnings

290

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Other reserves and retained earnings

Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created.
In this context, if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited
asset portfolio, the Resolution Fund makes a payment corresponding to the lower of the losses recorded and the
amount necessary to restore the ratios to the defined threshold, of up to a maximum of Euro 3,890 million (see Note
35 – Contingent liabilities and commitments).

The capital corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around
Euro 7.9 billion. As at 31 December 2020 these assets had a net value of Euro 2.1 billion, mainly as a result of losses
Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,
if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution
recorded as well as payments and recoveries (31 December 2019: net value of Euro 3.1 billion).
Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the
defined threshold, of up to a maximum of Euro 3 890 million (see Note 35 – Contingent liabilities and commitments).
As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining
The capital corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion.
the payment by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand
Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,
As at 31 December 2020 these assets had a net value of Euro 2.1 billion, mainly as a result of losses recorded as well as payments
if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution
and recoveries (31 December 2019: net value of Euro 3.1 billion).
were meet and the payments occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the
Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the
caption Reserves registered the responsibility of the Resolution Fund amounting to Euro 598,312 thousand relating to
defined threshold, of up to a maximum of Euro 3 890 million (see Note 35 – Contingent liabilities and commitments).
As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining the payment
the Contingent Capital Agreement. The amount is accounted for under Other reserves and it results at each Balance
The capital corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion.
by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand were meet and the payments
As at 31 December 2020 these assets had a net value of Euro 2.1 billion, mainly as a result of losses recorded as well as payments
occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the caption Reserves registered the responsibility
Sheet date of the incurred losses and of the regulatory ratios in force at the moment of its determination.
and recoveries (31 December 2019: net value of Euro 3.1 billion).
of the Resolution Fund amounting to Euro 598,312 thousand relating to the Contingent Capital Agreement. The amount is accounted
for under Other reserves and it results at each Balance Sheet date of the incurred losses and of the regulatory ratios in force at the
As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining the payment
moment of its determination.
Non-controlling interests
by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand were meet and the payments
occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the caption Reserves registered the responsibility
The caption Non-controlling interests, by subsidiary, is detailed as follows:
of the Resolution Fund amounting to Euro 598,312 thousand relating to the Contingent Capital Agreement. The amount is accounted
Non-controlling interests
for under Other reserves and it results at each Balance Sheet date of the incurred losses and of the regulatory ratios in force at the
The caption Non-controlling interests, by subsidiary, is detailed as follows:
moment of its determination.
(in thousands of Euros)

Non-controlling interests
The caption Non-controlling interests, by subsidiary, is detailed as follows:
NB Património a)
NB Açores
Amoreiras
Other

-
18 451
9 099
4 496
Balance sheet

( 7 759)
1 134
( 123)
( 3 326)

31.12.2020

Balance sheet

Income
statement

32 046

( 10 074)

% Non-
controlling
interests

44,17%
42,47%
4,76%

% Non-
controlling
interests

31.12.2020

Income
statement

NB Património a)
( 7 759)
a) Non-controlling interests relating to Open real estate investment funds are recorded as Other liabilities (see Note 33)
1 134
NB Açores
( 123)
Amoreiras
The changes occurred in the caption Non-controlling interests may be analyzed as follows:
( 3 326)
Other

-
18 451
9 099
4 496

44,17%
42,47%
4,76%

32 046

( 10 074)

Balance sheet

-
18 745
9 222
8 657
Balance sheet

36 624

-
18 745
9 222
8 657

36 624

31.12.2019

Income
statement

% Non-
controlling
interests

31.12.2019

( 7 189)
1 736
( 166)
( 2 034)

Income
statement

(in thousands of Euros)

44,27%
42,47%
4,76%

% Non-
controlling
interests

( 7 653)

( 7 189)
1 736
( 166)
( 2 034)

44,27%
42,47%
4,76%

( 7 653)

(in thousands of Euros)

a) Non-controlling interests relating to Open real estate investment funds are recorded as Other liabilities (see Note 33)

31.12.2020

31.12.2019

The changes occurred in the caption Non-controlling interests may be analyzed as follows:
The changes occurred in the caption Non-controlling interests may be analyzed as follows:
Non-controlling interests at the beginning of the exercise
Changes in consolidation perimeter and control percentages

36 624

( 1 553)

35 346

( 1 746)

Increases / (decreases) in share capital of subsidiaries
Changes in fair value reserves

Other
Non-controlling interests at the beginning of the exercise
Net profit / (loss) for the period
Changes in consolidation perimeter and control percentages
Non-controlling interests at the end of the exercise
Increases / (decreases) in share capital of subsidiaries

Changes in fair value reserves
Other
NOTE 36 – CONTINGENT LIABILITIES AND COMMITMENTS
Net profit / (loss) for the period

(in thousands of Euros)
-
( 830)

1 798
225

31.12.2019

31.12.2020

7 879
36 624
( 10 074)
( 1 553)
32 046
-

( 830)
7 879

( 10 074)

8 654
35 346
( 7 653)
( 1 746)
36 624
1 798

225
8 654

( 7 653)

Non-controlling interests at the end of the exercise
In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 30 December 2020 and 31
December 2019 are the following:

32 046

36 624

NOTE 36 – CONTINGENT LIABILITIES AND COMMITMENTS

(in thousands of Euros)

31.12.2020

31.12.2019

In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 30 December 2020 and 31
Contingent liabilities
December 2019 are the following:
Guarantees and standby letters
Financial assets pledged as collateral
Open documentary credits

2 826 190
14 101 034
410 292

2 993 785
11 833 012
516 162

(in thousands of Euros)
31.12.2019

31.12.2020

Contingent liabilities
Commitments
Guarantees and standby letters
Revocable commitments
Financial assets pledged as collateral
Irrevocable commitments
Open documentary credits

17 337 516

15 342 959

2 826 190
6 389 435
14 101 034
631 500
410 292
7 020 935
17 337 516

2 993 785
6 845 430
11 833 012
411 378
516 162
7 256 808
15 342 959

Commitments
Revocable commitments
291
Irrevocable commitments

Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the Group.

6 389 435
631 500

6 845 430
411 378

As at 31 December 2020, the caption financial assets pledged as collateral includes:
 The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity facility, in the

7 020 935

7 256 808

amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);

Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the Group.

As at 31 December 2020, the caption financial assets pledged as collateral includes:

Notes to the Consolidated Financial Statements

31 December 2020

 The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity facility, in the

amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESFollowing the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,

if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution

Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the

defined threshold, of up to a maximum of Euro 3 890 million (see Note 35 – Contingent liabilities and commitments).

The capital corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion.

As at 31 December 2020 these assets had a net value of Euro 2.1 billion, mainly as a result of losses recorded as well as payments

and recoveries (31 December 2019: net value of Euro 3.1 billion).

As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining the payment

by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand were meet and the payments

occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the caption Reserves registered the responsibility

of the Resolution Fund amounting to Euro 598,312 thousand relating to the Contingent Capital Agreement. The amount is accounted

for under Other reserves and it results at each Balance Sheet date of the incurred losses and of the regulatory ratios in force at the

moment of its determination.

Non-controlling interests

The caption Non-controlling interests, by subsidiary, is detailed as follows:

NB Património a)

NB Açores

Amoreiras

Other

Balance sheet

31.12.2020

Income

statement

( 7 759)

1 134

( 123)

( 3 326)

( 10 074)

18 451

9 099

4 496

32 046

% Non-

controlling

interests

44,17%

42,47%

4,76%

(in thousands of Euros)

% Non-

controlling

interests

44,27%

42,47%

4,76%

31.12.2019

Income

statement

( 7 189)

1 736

( 166)

( 2 034)

( 7 653)

18 745

9 222

8 657

36 624

a) Non-controlling interests relating to Open real estate investment funds are recorded as Other liabilities (see Note 33)

The changes occurred in the caption Non-controlling interests may be analyzed as follows:

(in thousands of Euros)

31.12.2020

31.12.2019

Non-controlling interests at the beginning of the exercise

Changes in consolidation perimeter and control percentages

Increases / (decreases) in share capital of subsidiaries
Changes in fair value reserves

Other
Net profit / (loss) for the period

36 624

( 1 553)

-
( 830)

7 879
( 10 074)

Non-controlling interests at the end of the exercise

32 046

NOTE 36 – Contingent liabilities and commitments

35 346

( 1 746)

1 798
225

8 654
( 7 653)

36 624

NOTE 36 – CONTINGENT LIABILITIES AND COMMITMENTS
In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 30 December
In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 30 December 2020 and 31
2020 and 2019 are the following:
December 2019 are the following:

Contingent liabilities
Guarantees and standby letters
Financial assets pledged as collateral
Open documentary credits

Commitments
Revocable commitments
Irrevocable commitments

(in thousands of Euros)

31.12.2020

31.12.2019

2 826 190
14 101 034
410 292

17 337 516

6 389 435
631 500

7 020 935

2 993 785
11 833 012
516 162

15 342 959

6 845 430
411 378

7 256 808

Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the Group.

As at 31 December 2020, the caption financial assets pledged as collateral includes:
Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the
 The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity facility, in the
Group.

amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);

As at 31 December 2020, the caption financial assets pledged as collateral includes:

31 December 2020

Notes to the Consolidated Financial Statements

• The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity

facility, in the amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);

• Securities pledged as collateral to the Portuguese Securities and Exchange Commission (“Comissão do Mercado
de Valores Mobiliários” (CMVM)) in the scope of the Investors Indemnity System (“Sistema de Indemnização aos
Investidores”), in the amount of Euro 9.7 million (31 December 2019: Euro 9.6 million);

• Securities pledged as collateral to the Deposits’ Guarantee Fund (“Fundo de Garantia de Depósitos”), in the amount

of Euro 70.8 million (31 December 2019: Euro 73.1 million);

• Securities pledged as collateral to the European Investment Bank, in the amount of Euro 769.7 million (31 December

2019: Euro 98.5 million);

• Securities delivered as collateral in connection with derivatives trading with a central counterparty in the amount of

Euro 107.0 million (31 December 2019: Euro 113.0 million).

The above mentioned financial assets pledged as collateral are recorded in the various asset categories of the Group’s
balance sheet and may be executed in the event the Group does not fulfil its obligations under the terms and conditions
of the contracts celebrated. The increase in the value of securities pledged as collateral to the European Investment
Bank is related to the reinforcement of the collateral due to changes in the minimum required amounts.

Documentary credits are irrevocable commitments made by the Group, on behalf of its customers, to pay or order
to pay a certain amount to a supplier of goods or services, within a determined period, upon the presentation of
documentation of the expedition of the goods or rendering of the services. The condition of “irrevocable” derives from
the fact that they may not be cancelled neither changed without the agreement of all involved parties.

Revocable and irrevocable commitments represent contractual agreements to extend credit to customers of the Group
(e.g. undrawn credit lines), which are, generally, contracted for fixed periods of time or with other expiration conditions
and, usually, require the payment of a fee. Almost all credit commitments in force require that customers continue
meeting certain conditions that were verified at the time the credit was contracted.

Despite the characteristics of these contingent liabilities and commitments, these operations require a previous
rigorous risk assessment of the solvency of the customer and of its business, similarly to any other commercial
operation. When necessary, the Group requires the collateralisation of these transactions. Since it is expected that
the majority of these operations will mature without any funds having been drawn, these amounts do not necessarily
represent future cash out-flows.

292

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED Securities pledged as collateral to the Portuguese Securities and Exchange Commission (“Comissão do Mercado de Valores

Mobiliários” (CMVM)) in the scope of the Investors Indemnity System (“Sistema de Indemnização aos Investidores”), in the amount

 Securities pledged as collateral to the Deposits’ Guarantee Fund (“Fundo de Garantia de Depósitos”), in the amount of Euro 70.8

 Securities pledged as collateral to the European Investment Bank, in the amount of Euro 769.7 million (31 December 2019: Euro

of Euro 9.7 million (31 December 2019: Euro 9.6 million);

million (31 December 2019: Euro 73.1 million);

98.5 million);

million (31 December 2019: Euro 113.0 million).

 Securities delivered as collateral in connection with derivatives trading with a central counterparty in the amount of Euro 107.0

The above mentioned financial assets pledged as collateral are recorded in the various asset categories of the Group’s balance sheet

and may be executed in the event the Group does not fulfil its obligations under the terms and conditions of the contracts celebrated.

The increase in the value of securities pledged as collateral to the European Investment Bank is related to the reinforcement of the

collateral due to changes in the minimum required amounts.

Documentary credits are irrevocable commitments made by the Group, on behalf of its customers, to pay or order to pay a certain

amount to a supplier of goods or services, within a determined period, upon the presentation of documentation of the expedition of

the goods or rendering of the services. The condition of “irrevocable” derives from the fact that they may not be cancelled neither

changed without the agreement of all involved parties.

Revocable and irrevocable commitments represent contractual agreements to extend credit to customers of the Group (e.g. undrawn
credit lines), which are, generally, contracted for fixed periods of time or with other expiration conditions and, usually, require the
payment of a fee. Almost all credit commitments in force require that customers continue meeting certain conditions that were verified
at the time the credit was contracted.

Despite the characteristics of these contingent liabilities and commitments, these operations require a previous rigorous risk
assessment of the solvency of the customer and of its business, similarly to any other commercial operation. When necessary, the
Group requires the collateralisation of these transactions. Since it is expected that the majority of these operations will mature without
any funds having been drawn, these amounts do not necessarily represent future cash out-flows.

Additionally, liabilities recorded in off-balance sheet items related to banking services provided are as follows:
Additionally, liabilities recorded in off-balance sheet items related to banking services provided are as follows:

Deposit and custody of securities and other items
Amounts received for subsequent collection
Securitized loans under management (servicing)
Other responsibilities related with banking services

(in thousands of Euros)

31.12.2020

31.12.2019

35 469 555
233 699
697 905
1 519 011

36 644 517
283 647
776 249
2 582 526

37 920 170

40 286 939

Pursuant to the resolution measure applied to BES by resolution of Banco de Portugal of 3 August 2014 (point 1., point b),
subparagraph (vii) of Annex 2), as amended by the decision of Banco de Portugal of 11 August 2014, the “excluded liabilities” of
transfer to NOVO BANCO include “any obligations, guarantees, liabilities or contingencies assumed in the commercialization,
Pursuant to the resolution measure applied to BES by resolution of Banco de Portugal of 3 August 2014 (point 1., point
financial intermediation and distribution of debt instruments issued by entities that are part of the Espírito Santo Group (…) ”.
b), subparagraph (vii) of Annex 2), as amended by the decision of Banco de Portugal of 11 August 2014, the “excluded
Pursuant to point and subparagraph above and subpoint (v), liabilities excluded also include “any liabilities or contingencies, namely
liabilities” of transfer to NOVO BANCO include “any obligations, guarantees, liabilities or contingencies assumed in the
those arising from fraud or violation of regulatory, criminal or administrative offenses or provisions”.
commercialization, financial intermediation and distribution of debt instruments issued by entities that are part of the
Espírito Santo Group (…) ”.
On December 29, 2015, Banco de Portugal adopted a new resolution on “Clarification and retransmission of responsibilities and
contingencies defined as liabilities excluded in subparagraphs (v) to (vii) of paragraph 2 (b) of Annex 2 to the Resolution of Banco de
Portugal of 3 August 2014 (8 pm), as amended by the Resolution of Banco de Portugal of 11 August 2014 (5 pm) ”. Under the terms
Pursuant to point and subparagraph above and subpoint (v), liabilities excluded also include “any liabilities or contin-
of this resolution, Banco de Portugal came:
gencies, namely those arising from fraud or violation of regulatory, criminal or administrative offenses or provisions”.
(i) Clarify the treatment as liabilities excluded from BES's contingent and unknown liabilities (including litigious liabilities related
to pending litigation and liabilities or contingencies resulting from fraud or the violation of regulatory, criminal or administrative
On December 29, 2015, Banco de Portugal adopted a new resolution on “Clarification and retransmission of respon-
offenses or provisions), regardless of their nature ( tax, Labour, civil or other) and whether or not they are registered in BES's
accounts, under the terms of sub-paragraph (v) of paragraph (b) of paragraph 1 of Exhibit 2 of the Resolution of 3 August;
sibilities and contingencies defined as liabilities excluded in subparagraphs (v) to (vii) of paragraph 2 (b) of Annex 2 to
and
the Resolution of Banco de Portugal of 3 August 2014 (8 pm), as amended by the Resolution of Banco de Portugal of
11 August 2014 (5 pm) ”. Under the terms of this resolution, Banco de Portugal came:

a. All credits related to preferred shares issued by vehicle companies established by BES and sold by BES;
b. All credits, indemnities and expenses related to real estate assets that have been transferred to NOVO BANCO;
c. All indemnities related to non-compliance with contracts (purchase and sale of real estate and other assets) signed
i. Clarify the treatment as liabilities excluded from BES's contingent and unknown liabilities (including litigious
liabilities related to pending litigation and liabilities or contingencies resulting from fraud or the violation of
d. All indemnities related to life insurance contracts, in which the insurer was BES - Companhia de Seguros de Vida,
regulatory, criminal or administrative offenses or provisions), regardless of their nature ( tax, Labour, civil or other)
and whether or not they are registered in BES's accounts, under the terms of sub-paragraph (v) of paragraph (b)
of paragraph 1 of Exhibit 2 of the Resolution of 3 August; and
31 December 2020

(ii) Clarify that the following BES liabilities have not been transferred from BES to NOVO BANCO:

Notes to the Consolidated Financial Statements

and executed before 8:00 pm on August 3, 2014;

S.A .;

ii. Clarify that the following BES liabilities have not been transferred from BES to NOVO BANCO:

a. All credits related to preferred shares issued by vehicle companies established by BES and sold by BES;

b. All credits, indemnities and expenses related to real estate assets that have been transferred to NOVO BANCO;

c. All indemnities related to non-compliance with contracts (purchase and sale of real estate and other assets)

signed and executed before 8:00 pm on August 3, 2014;

d. All indemnities related to life insurance contracts, in which the insurer was BES - Companhia de Seguros de Vida,

S.A .;

e. All credits and indemnities related to the alleged cancellation of certain loan agreement clauses in which BES

was the lender;

f. All indemnities and credits resulting from the cancellation of operations carried out by BES as a provider of

financial and investment services;

g. Any responsibility that is the subject of any of the processes described in Appendix I of said resolution.

iii. To the extent that, despite the clarifications made above, it turns out that any liabilities of BES that, under the terms
of any of those paragraphs and the Resolution of August 3, were effectively transferred to NOVO BANCO legal
liabilities, these liabilities will be retransmitted from NOVO BANCO to BES, with effect from 8:00 pm on August 3,
2014.

293

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESIn the preparation of its consolidated financial statements for 31 December 2020 (as well as in the previous financial
statements), NOVO BANCO incorporated the determinations resulting from the resolution measure, as amended, with
regard to the perimeter of transfer of assets, liabilities, off-balance sheet items and assets under BES management,
as well as the decisions of Banco de Portugal of 29 December 2015, in particular, regarding the clarification of the
non-transmission to NOVO BANCO of contingent and unknown liabilities and clarifications relating to the liabilities
contained in paragraph (ii) above, including the lawsuits listed in that resolution.

Additionally, also by resolution of Banco de Portugal of 29 December 2015, it was decided that the Resolution Fund is
responsible for neutralizing, at the level of NOVO BANCO, the effects of decisions that are legally binding, outside the
will of NOVO BANCO and for the which it has not contributed and that, simultaneously, translate into the materialization
of responsibilities and contingencies that, according to the transfer perimeter to NOVO BANCO, as defined by Banco
de Portugal, should remain within the sphere of BES or give rise to the establishment compensation in the context of
the execution of annulments of decisions adopted by Banco de Portugal.

Considering that the creation of the Bank results from the application of a resolution measure to BES, which had
significant impacts on the equity of third parties, and without prejudice to the decisions of Banco de Portugal of
December 29, 2015, there are still relevant litigation risks , although mitigated, namely, regarding the various litigations
related to the loan made by Oak Finance to BES, the commercialization by BES of debt instruments and those related
to the issue of senior bonds relayed to BES, as well as the risk of non-recognition and / or application of the various
decisions of Banco de Portugal by Portuguese or foreign courts (as in the case of courts in Spain) in disputes related
to the perimeter of assets, liabilities, off-balance sheet items and assets under BES management transferred to NOVO
BANCO. These disputes include the two lawsuits brought at the end of January 2016, before the Supreme Court of
Justice of Venezuela, by the Banco de Desarrollo Económico y Social de Venezuela and the Fondo de Desarrollo
Nacional against BES and NOVO BANCO, relating to the sale of debt instruments issued by entities belonging to the
Espírito Santo Group, in the amount of US $ 37 million and US $ 335 million, respectively, and in which reimbursement
of the amount invested is requested, plus interest, indemnity for the inflation value and costs (in the global value
estimated by the respective authors of US $ 96 milion and US $ 871 million, respectively). These main actions and the
respective precautionary foreclosure procedures are still pending before the Supreme Court of Justice of Venezuela.

In the preparation of NOVO BANCO's individual and consolidated financial statements of 31 December 2020 (as
well as in the previous financial statements), the Executive Board of Directors reflected the Resolution Measure
and related decisions taken by Banco de Portugal, in particular the decisions of 29 December 2015. In this context,
these financial statements, namely with regard to provisions for contingencies arising from lawsuits, reflect the exact
perimeter of assets, liabilities, off-balance sheet items and assets under BES management and liabilities transferred to
NOVO BANCO, as determined by Banco de Portugal and with reference to the current legal bases and the information
available at the present date.

Additionally, within the scope of the NOVO BANCO sale operation, concluded on 18 October 2017, the respective
contractual documents contain specific provisions that produce effects equivalent to the resolution of the Board of
Directors of Banco de Portugal, of 29 December 2015, regarding the neutralization, at the level of NOVO BANCO, of
the effects of unfavorable decisions that are legally binding, although, now, with contractual origin, thus maintaining
the framework of contingent responsibilities of the Resolution Fund.

Relevant disputes

For the purposes of contingent liabilities, and without prejudice to the information contained in these notes to the
accounts, namely with regard to the conformity of the policy of setting up provisions with the resolution measure and
subsequent decisions of Banco de Portugal (and criteria for the allocation of responsibilities and contingencies arising
therefrom), it is also necessary to identify the following disputes whose effects or impacts on the financial statements
of GRUPO NOVO BANCO are, at the present date, insusceptible to determine or quantify:

i. Legal action brought by Partran, SGPS, S.A., Massa Insolvente by Espírito Santo Financial Group, S.A. and Massa
Insolvente by Espírito Santo Financial (Portugal), S.A. against NOVO BANCO and Calm Eagle Holdings, S.A.R.L.

294

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDthrough which it is intended the declaration of nullity of the pledge constituted on the shares of Companhia de
Seguros Tranquilidade, S.A. and, alternatively, the annulment of the pledge or the declaration of its ineffectiveness;

ii. Lawsuit filed by NOVO BANCO to challenge the resolution in favor of the insolvent estate of the acts of incorpora-
tion and subsequent execution of the pledge on the shares of Companhia de Seguros Tranquilidade, SA, declared
by the insolvency administrator of Partran, SGPS, SA, considering that there are no grounds for the resolution of the
aforementioned acts, as well as for the return of the amounts received as a price (Euro 25 million corresponding
to the initial price and the respective positive adjustments) for the sale of the shares of Companhia de Seguros
Tranquilidade , SA. NOVO BANCO has judicially challenged the resolution act, running the process attached to the
insolvency process of Partran, SGPS, SA;

iii. Lawsuits brought after the execution of the contract for the purchase and sale of NOVO BANCO's share capital,
signed between the Resolution Fund and Lone Star on 31 March 2017, related to the conditions of the sale, namely
the lawsuit administrative action brought by Banco Comercial Português, SA against the Resolution Fund, of which
NOVO BANCO is not a party and, under which, according to the public disclosure of privileged information made by
BCP on the CMVM website on September 1, 2017, the legal assessment of the contingent capitalization obligation
assumed by the Resolution Fund within the scope of the CCA is requested;

iv. NOVO BANCO was notified of an order from the Central Court of Criminal Investigation that determines the
provision of a bond by NB in the amount of approximately Euro 51 million due to an alleged breach of a bank
seizure order, having used the respective means of reaction to oppose the application of the aforementioned asset
guarantee measure due to the absence of a legal basis.

Resolution Fund

The Resolution Fund is a public legal person with administrative and financial autonomy, created by Decree-Law no.
31-A / 2012, of 10 February, which is governed by the RGICSF and its regulations and whose mission is provide financial
support to the resolution measures applied by Banco de Portugal, as the national resolution authority, and to perform
all other functions conferred by law in the scope of the execution of such measures.

The Bank, like most financial institutions operating in Portugal, is one of the institutions participating in the Resolution
Fund, making contributions that result from the application of a rate defined annually by Banco de Portugal based
essentially on the amount of its liabilities. As at 31 December 2020, the Group's periodic contribution amounted to Euro
12,743 thousand (31 December 2019: Euro 12,196 thousand).

Within the scope of its responsibility as a supervisory and resolution authority, Banco de Portugal, on 3 August 2014,
decided to apply a resolution measure to BES, pursuant to paragraph 5 of article 145-G of the General Regime of
Institutions Credit and Financial Companies (RGICSF), which consisted of transferring most of its activity to NOVO
BANCO, created especially for this purpose, with the capitalization being ensured by the Resolution Fund.

For the realization of NOVO BANCO's share capital, the Resolution Fund made available Euro 4,900 million, of which
Euro 365 million corresponded to its own financial resources. A loan from a banking syndicate was also granted to the
Resolution Fund, in the amount of Euro 635 million, with the participation of each credit institution being weighted
according to several factors, including the respective size. The remaining amount (Euro 3,900 million) originated from
a loan granted by the Portuguese State.

In December 2015, the national authorities decided to sell most of the assets and liabilities associated with the activity
of Banif - Banco Internacional do Funchal, SA (BANIF) to Banco Santander Totta, SA (Santander Totta), for Euro 150
million, also within the framework of the application of a resolution measure. In the context of this resolution measure,
Banif's assets identified as problematic were transferred to an asset management vehicle, created for this purpose -
Oitante, S.A.. This operation involved public support estimated at Euro 2,255 million, which aimed at covering future
contingencies, financed at Euro 489 million by the Resolution Fund and Euro 1,766 million directly by the Portuguese
State.

295

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe situation of serious financial imbalance in which BES was in 2014 and BANIF in 2015, which justified the application
of resolution measures, created uncertainties related to the risk of litigation involving the Resolution Fund, which is
significant , as well as with the risk of an eventual insufficiency of resources to ensure the fulfillment of the liabilities, in
particular the short-term repayment of the borrowings.

It was in this context that, in the second half of 2016, the Portuguese Government reached an agreement with the
European Commission to change the financing conditions granted by the Portuguese State and by the banks partici-
pating in the Resolution Fund, in order to preserve financial stability. through the promotion of conditions that provide
predictability and stability to the contributory effort for the Resolution Fund. To this end, an amendment to the financ-
ing contracts to the Resolution Fund was formalized, which introduced a set of changes on the repayment plans, the
remuneration rates and other terms and conditions associated with these loans in order to adjust them. the Resolution
Fund's ability to fully meet its obligations based on its regular revenues, that is, without the need to be charged, to the
banks participating in the Resolution Fund, special contributions or any other type of extraordinary contribution.

According to the statement of the Resolution Fund of 21 March 2017, issued following an earlier statement of September
28, 2016 and the statement of the Ministry of Finance issued on the same date, the revision of the conditions of
financing granted by the State Portuguese and participating banks aimed to ensure the sustainability and financial
balance of the Resolution Fund, based on a stable, predictable and affordable charge for the banking sector. Based
on this review, the Resolution Fund assumed that the full payment of its liabilities is ensured, as well as the respective
remuneration, without the need for recourse to special contributions or any other type of extraordinary contributions
by the banking sector.

On March 31, 2017 , Banco de Portugal announced that it had selected the Lone Star Fund for the purchase of NOVO
BANCO, which was completed on October 18, 2017, through the injection, by the new shareholder, of Euro 750 million,
which was followed by a new a capital contribution of Euro 250 million, made on 21 December 2017. The Lone Star
Fund now holds 75% of NOVO BANCO's share capital and the Resolution Fund the remaining 25%. Additionally, the
approved conditions include:

• A contingent capitalization mechanism, under which the Resolution Fund may be called upon to make payments in
the event of certain cumulative conditions materializing, related to: (i) the performance of a restricted set of assets
of NOVO BANCO and (ii ) the evolution of the Bank's capitalization levels. Any payments to be made under this
contingent mechanism are subject to an absolute ceiling of EUR 3,890 million;

• An indemnity mechanism to NOVO BANCO, if certain conditions are met, it will be sentenced to pay any liability,
by a final judicial decision that does not recognize or is contrary to the resolution measure applied by Banco de
Portugal, or to the perimeter NOVO BANCO's assets and liabilities.

Notwithstanding the possibility provided for in the applicable legislation for the collection of special contributions, in
view of the renegotiation of the conditions for loans granted to the Resolution Fund by the Portuguese State and a
banking union, and to public notices issued by the Resolution Fund and the Office of the Minister of Finance. Finances
that state that this possibility will not be used, these financial statements reflect the expectation of the Executive
Board of Directors that the Bank will not be required to make special contributions or any other type of extraordinary
contributions to finance the resolution measures applied to BES and BANIF , as well as the contingent capitalization
mechanism and the indemnity mechanism referred to in the preceding paragraphs.

Any changes regarding this matter and the application of these mechanisms may have relevant implications for the
Group's financial statements.

296

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDand (ii ) the evolution of the Bank's capitalization levels. Any payments to be made under this contingent mechanism are

subject to an absolute ceiling of EUR 3 890 million;



An indemnity mechanism to NOVO BANCO, if certain conditions are met, it will be sentenced to pay any liability, by a final

judicial decision that does not recognize or is contrary to the resolution measure applied by Banco de Portugal, or to the
perimeter NOVO BANCO's assets and liabilities.

Notwithstanding the possibility provided for in the applicable legislation for the collection of special contributions, in view of the
renegotiation of the conditions for loans granted to the Resolution Fund by the Portuguese State and a banking union, and to public
notices issued by the Resolution Fund and the Office of the Minister of Finance. Finances that state that this possibility will not be
used, these financial statements reflect the expectation of the Executive Board of Directors that the Bank will not be required to make
special contributions or any other type of extraordinary contributions to finance the resolution measures applied to BES and BANIF ,
as well as the contingent capitalization mechanism and the indemnity mechanism referred to in the preceding paragraphs.

Any changes regarding this matter and the application of these mechanisms may have relevant implications for the Group's financial
statements.

NOTE 37 – Assets under management (disintermediation)

NOTE 37 – ASSETS UNDER MANAGEMENT (DISINTERMEDIATION)
In accordance with the legislation in force, the managing companies together with the depositary Bank are jointly
liable to the participants of the funds for the non-fulfilment of obligations assumed under the terms of the law and the
In accordance with the legislation in force, the managing companies together with the depositary Bank are jointly liable to the
regulations of the funds managed.
participants of the funds for the non-fulfilment of obligations assumed under the terms of the law and the regulations of the funds
managed.
As at 31 December 2020 and 2019, the value of the assets under management by the Group companies are analyzed
As at 31 December 2020 and 31 December 2019, the value of the assets under management by the Group companies are analyzed
as follows:
as follows:

Investment funds
Real estate investment funds
Pension funds
Discretionary management

(in thousands of Euros)

31.12.2020

31.12.2019

1 128 238
74 654
2 463 098
710 054

1 344 949
90 184
2 386 809
1 103 025

4 376 044

4 924 967

The amounts included in these captions are measured at fair value, determined at the balance sheet date.

NOTE 38 – Related parties transactions

NOTE 38 – RELATED PARTIES TRANSACTIONS

The group of entities considered to be related parties by NOVO BANCO in accordance with the IAS 24 definitions, are (i) key
The group of entities considered to be related parties by NOVO BANCO in accordance with the IAS 24 definitions, are
management personnel (members of the Executive Board of Directors and members of the General Supervisory Board of NOVO
(i) key management personnel (members of the Executive Board of Directors and members of the General Supervisory
BANCO); (ii) people or entities with a family, legal or business relationship with key management personnel; (iii) people or entities
Board of NOVO BANCO); (ii) people or entities with a family, legal or business relationship with key management
with a family, legal or business relationship with shareholders; (iv) shareholders holding direct or indirect stakes equal to or exceeding
2% of the share capital or voting rights of NOVO BANCO; (v) subsidiaries consolidated for accounting purposes under the full
personnel; (iii) people or entities with a family, legal or business relationship with shareholders; (iv) shareholders holding
consolidation method; (vi) associated companies, that is, companies over which NOVO BANCO Group has significantly influence on
direct or indirect stakes equal to or exceeding 2% of the share capital or voting rights of NOVO BANCO; (v) subsidiaries
the company’s financial and operational polices, despite not having control; and (vii) entities under joint control of NOVO BANCO
consolidated for accounting purposes under the full consolidation method; (vi) associated companies, that is, compa-
(joint ventures).
nies over which NOVO BANCO Group has significantly influence on the company’s financial and operational polices,
During 2020, the following transactions with Related Parties (credit and other types) were carried out:
despite not having control; and (vii) entities under joint control of NOVO BANCO (joint ventures).

During 2020, the following transactions with Related Parties (credit and other types) were carried out:

31 December 2020

Notes to the Consolidated Financial Statements

297

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1) Credit Operations

Entities / Individuals

ACH Brito S.A.

Category

Associate

AGA - Alcool e Géneros Alimentares S.A.

Diretor / Manager / Family

APB - Associação Portuguesa Bancos
AVIZMED Unipessoal Lda
Cristalmax - Indústria Vidros S.A.
EDENRED - Portugal S.A.

Diretor / Manager / Family
Diretor / Manager / Family
Associate
Associate

Enkroot - Gestão e Tratamento de Águas S.A.

Associate

Operation

Amount (Euro)

Limite de Crédito - NB Express Bill
Limites de Cartões de Crédito
Financiamento Médio/Longo Prazo
Limite de Crédito - NB Express Bill
Conta Empréstimo Conta-Corrente
Financiamento Médio/Longo Prazo
Limite de Crédito - NB Express Bill
Limites Débitos Diretos
Crédito Documentário de Importação
Garantia Bancária - Instalação Sistema
Garantia Bancária - Adiantamento

Descoberto Autorizado
Financiamento Médio/Longo Prazo
Limites para Garantias Bancárias
Factoring

75 000
10 000
400 000
650 000
1 100 000
500 000
100 000
410 000
17 901
66 210
66 210

500 000
500 000
500 000
650 000

Entidades GNB
(BEST, NB dos Açores, NBSE, NB Lux e NB Finance)

Subsidiary

Limites Interbancários (Operações de Sala
Mercados)
Limites Comerciais

1 420 990 000

EPEDAL Indústria de Componentes Metálicos S.A.

Associate

Limites de Cartões de Crédito

10 000

GERMEN - Moagens Cereais SA
GNB Companhia de Seguros S.A.
Greendraive - Gestão e Exporação de
Campos de Golf e Complexos Turísticos S.A.

Grupo Esegur
(Esegur - Soluções de Segurança S.A.)

Grupo Multipessoal
(Multipessoal - Recursos Humanos SGPS S.A.)

Diretor / Manager / Family
Associate

Subsidiary

Associate

Jorge Cabrañes Azcona

Director / Manager / Family

Locarent- Coompanhia Portuguesa Aluguer Viaturas S.A.

Associate

Logi C Logística Integrada S.A.

M N Ramos Ferreira Engenharia S.A.

Associate

Nacional Conta – Contabilidade, Consultadoria e Administração, Lda.

Director / Manager / Family

Nexxpro - Fábrica de Capacetes S.A.

Novo Banco Servicios Corporativos SL

Righthour S.A.
TRADISA Logicauto S.L.
TRADISA Operador Turístico S.A.
Unicre - Cartão Internacional de Crédito S.A.

Associate

Subsidiary

Subsidiary
Director / Manager / Family
Director / Manager / Family
Associate

Limite de Crédito - NB Express Bill
Self- Confirming
Limites Débitos Diretos
Financiamento Médio/Longo Prazo
Suprimentos

Limites de Cartões de Crédito

Leasing

Limites para Garantias Bancárias

Limites de Cartões de Crédito

Limite de Crédito - NB Express Bill

Linha Grupada Garantias

Financiamento Médio/Longo Prazo

Descoberto Autorizado

Factoring

Crédito Individual

Limites de Cartões de Crédito
Conta Empréstimo Conta-Corrente
Operações Sala Mercado (RCE)
Limites Débitos Diretos
Plafond de crédito - Leasing
Plafond de crédito - Leasing
Programa de Papel Comercial
Limites de Cartões de Crédito
Conta Empréstimo Conta-Corrente
Limites de Cartões de Crédito
Limite de Crédito - NB Express Bill
Limite de Crédito - NB Express Bill Exclusive
Financiamento Médio/Longo Prazo

Limites de Cartões de Crédito
Conta Empréstimo Conta-Corrente
Financiamento Médio/Longo Prazo

Desconto de Livrança - Apoio Tesouraria
Factoring
Financiamento Médio/Longo Prazo
Suprimentos
Conta Empréstimo Conta-Corrente
Emissão de Distrate
Financiamento Médio/Longo Prazo
Conta Empréstimo Conta-Corrente
Financiamento Médio/Longo Prazo

1 250 000
5 000 000
80 600 000
125 000
700 000

200 000

1 000 000

112 500

500 000

1 750 000

3 000 000

6 500 000

9 200 000

35 000

10 000
2 500 000
3 000 000
4 000 000
32 150 000
45 000 000
50 000 000
10 000
200 000
3 750
100 000
200 000
250 000

1 000
100 000
200 000

200 000
750 000
1 000 000
4 750 000
25 000 000
181 237
300 000
400 000
10 000 000

2) Services rendered and other signed contracts

298

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED2) Services rendered and other signed contracts

Entities / Individuals
BEST - Banco Electrónico de Serviço Total S.A.
EDENRED - Portugal S.A.
ENKROOT - Gestão e Tratamento de Águas S.A.
Entities / Individuals
BEST - Banco Electrónico de Serviço Total S.A.
EDENRED - Portugal S.A.
GNB Companhia de Seguros S.A.
ENKROOT - Gestão e Tratamento de Águas S.A.

GNB-GP
GNB Companhia de Seguros S.A.
Gestão de Patrimónios S.A.

GNB REAL ESTATE – Soc. Gestora de Organismo de
Investimento Coletivo S.A.
GNB-GP
Gestão de Patrimónios S.A.
LINEAS - Concessões de Transportes SGPS S.A.
GNB REAL ESTATE – Soc. Gestora de Organismo de
Investimento Coletivo S.A.
NANI Holdings SGPS SA / LSF NANI Investments Sarl

LINEAS - Concessões de Transportes SGPS S.A.

NANI Holdings SGPS SA / HUDSON Advisors Portugal
NANI Holdings SGPS SA / LSF NANI Investments Sarl
Unipessoal Lda

Novo Banco Pensiones EGFP S.A.
NANI Holdings SGPS SA / HUDSON Advisors Portugal
Unipessoal Lda

Category
Subsidiary
Associate
Associate
Category
Subsidiary
Associate
Associate
Associate

Subsidiary
Associate

Subsidiary

Associate

Subsidiary
Shareholder

Associate

Shareholder
Acionista

Subsidiary

Acionista

Novo Banco Pensiones EGFP S.A.

Subsidiary

•

Operation
Intra Group Service Delivery Agreement
Amendment to the Distribution Agreement
Exemption from filing requirements for debtors Factoring
Operation
4th Amendment to the Contract
Intra Group Service Delivery Agreement
New Product: Personal Accidents
Amendment to the Distribution Agreement
5th Amendment to the Contract
New Product: Health Insurance
Exemption from filing requirements for debtors Factoring
4th Amendment to the Contract
New Product: Personal Accidents
Amendment to the Discretionary Management Agreement
5th Amendment to the Contract
New Product: Health Insurance
Harmonization of the calculation base of the Management Fee of 4 Funds under
Company Management

•
•
• Internal Campaigns: Business Protection Insurance
• Management Committee Review 2 Funds [FUNGEPI and FUNGEPI II]

• Internal Campaigns: Business Protection Insurance
•

Amendment to the Discretionary Management Agreement

•

Consent to sell 50% of the concessionaire: Rodovias do Tietê S.A.
Harmonization of the calculation base of the Management Fee of 4 Funds under
Company Management
Amendment and Consolidation of the Group's Financial Reporting and Shared
• Management Committee Review 2 Funds [FUNGEPI and FUNGEPI II]
Information Agreement (Amendment and Restatement Agreement to the
Intragroup Financial Reporting and Information Sharing Agreement)
Consent to sell 50% of the concessionaire: Rodovias do Tietê S.A.
3rd Amendment to the Contract for the Provision of Services and the Contract
for the Provision of Real Estate Services
Amendment and Consolidation of the Group's Financial Reporting and Shared
Change to the Services Agreement and to the Real Estate Services Agreement -
Information Agreement (Amendment and Restatement Agreement to the
3rd Amendment
Intragroup Financial Reporting and Information Sharing Agreement)
3rd Amendment to the Contract for the Provision of Services and the Contract
Amendment to the Asset Management Contract
for the Provision of Real Estate Services
Change to the Services Agreement and to the Real Estate Services Agreement -
3rd Amendment
Amendment to the Asset Management Contract

The Group Balance Sheet balances with related parties as at 31 December 2020 and 2019, as well as the respective
The Group Balance Sheet balances with related parties as at 31 December 2020 and 2019, as well as the respective profit and
profit and losses, can be summarised as follows:
losses, can be summarised as follows:

Shareholders

NANI HOLDINGS
FUNDO DE RESOLUÇÃO

Associated companies

LINEAS
LOCARENT
GNB SEGUROS*
ESEGUR
UNICRE
MULTIPESSOAL
BANCO DELLE TRE VENEZIE
EDENRED
ENKROTT
PNBC

Other

HUDSON ADVISORS PORTUGAL
NACIONAL CONTA LDA
INFRAMOURA
ESMALGLASS

MARINA VILAMOURA

Other

*sold in 2020

Assets

Liabilities

31.12.2020
Guarantees

Income

Expenses

Assets

Liabilities

(in thousands of Euros)

31.12.2019
Guarantees

Income

Expenses

-
598 312

64 933
115 832
-
2 955
22 597
2 030
-
2
-
-
806 661

-
295
114
-

-
409

153
-

6 505
633
-
1 650
49
31
94
81 821
-
-
90 936

-
52
16
107

1
176

-
-

332
-

-
12 743

-
1 037 013

153
-

-
-

332
-

-
12 196

-
-
-
915
-
273
-
62
-
-
1 250

-
-
-

2
-

2 871
1 081
-
-
289
31

1 967
15
-
6 586

-
-
-

-
-

-
3 806
-
-
-
-

276
16 862

4 685
-
-

-
-

97 656
122 802
-
4 157
28 360
3 520
-
4
1 332
-
1 294 844

-
117
-

-
-

4 685

117

29 556
376
14 390
1 510
2 500
35
11
57 300
1
-
105 832

-
8
-

-
-

-
-
-
69
-
273
-
-
53
-
395

-
-
-

-
-

2 609
1 176
2
-
180
22
-
-
22
-
4 343

-
-
-

-
-

-
4 215
1
-
-
-
-
22
-
1 477
17 911

3 912
-
-

-
-

3 912

The amount of assets receivable from the Resolution Fund corresponds to the amount of the triggering of the Contingent Capital
Agreement regarding the financial years 2020 and 2019. The amount indicated in 2019 was adjusted to Euro 1,035,016 thousand
during the financial year 2020, having been paid in full by the Resolution Fund.
The amount of assets receivable from the Resolution Fund corresponds to the amount of the triggering of the
In June 2018 a contract was entered into between NANI HOLDINGS, SGPS, S.A., LSF NANI INVESTMENTS S.à.r.l. and NOVO
Contingent Capital Agreement regarding the financial years 2020 and 2019. The amount indicated in 2019 was
BANCO, to provide support services for the preparation of consolidated information and regulatory reports.
adjusted to Euro 1,035,016 thousand during the financial year 2020, having been paid in full by the Resolution Fund.

The assets on the balance sheet related to associated companies included in the table above refer mainly to loans and advances,
In June 2018 a contract was entered into between NANI HOLDINGS, SGPS, S.A., LSF NANI INVESTMENTS S.à.r.l. and
and shareholder loans granted, or debt securities acquired in the scope of the Group’s activity. The liabilities relate mainly to Bank
deposits taken
NOVO BANCO, to provide support services for the preparation of consolidated information and regulatory reports.

The guarantees related to associated companies included in the table above refer essentially to guarantees provided.
The assets on the balance sheet related to associated companies included in the table above refer mainly to loans and
advances, and shareholder loans granted, or debt securities acquired in the scope of the Group’s activity. The liabilities
Related party transactions were carried out at arm's length, under similar terms and conditions, when compared with others carried
relate mainly to Bank deposits taken
out with unrelated parties, and when these conditions were not verified, those exceptions were substantiated in accordance with the
Bank’s Related Party Transactions Policy.

299

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe guarantees related to associated companies included in the table above refer essentially to guarantees provided.

Related party transactions were carried out at arm's length, under similar terms and conditions, when compared with
others carried out with unrelated parties, and when these conditions were not verified, those exceptions were substan-
tiated in accordance with the Bank’s Related Party Transactions Policy.

All the loans granted to related parties are included in the impairment model, being subject to the determination of
impairment in the same manner as the commercial loans and advances granted by the Group in the scope of its activity.
All assets placed with related parties earn interest between 0% and 8,00% (the rates correspond to the rates applied
according to the original currency of the asset).
parties earn interest between 0% and 8,00% (the rates correspond to the rates applied according to the original currency of the
asset).
The costs with remunerations and other benefits granted to Key Management Personnel of NOVO BANCO in 2020 and
The costs with remunerations and other benefits granted to Key Management Personnel of NOVO BANCO in 2020 and 2019, are as
2019, are as follows:
follows:

(in thousands of Euros)

Executive
Board of
Directors

31.12.2020
General and
Supervisory
Board

Executive
Board of
Directors

31.12.2019
General and
Supervisory
Board

parties earn interest between 0% and 8,00% (the rates correspond to the rates applied according to the original currency of the
asset).

Short-term employment benefits

993
The costs with remunerations and other benefits granted to Key Management Personnel of NOVO BANCO in 2020 and 2019, are as
follows:

Post-employment benefits

3 792

2 676

3 669

2 812

980

Other long-term benefits

33
2 712

8
1 001

41
3 713

43
2 858

21
1 001

64
3 859

Total

(in thousands of Euros)

Total

980

993

2 812

3 669

2 676

8
1 001

33
2 712

Other long-term benefits

Post-employment benefits

Short-term employment benefits

Executive
Board of
Directors

31.12.2019
General and
Supervisory
Board

31.12.2020
General and
Additionally, in 2020, costs of Euro 320 thousand were recorded as a sign-on bonus resulting from the admission of a new Executive
Supervisory
Director, and compensations for the termination of the mandate of three Executive Directors were recorded, in the amount of Euro
Board
206 thousand. In 2020, variable remuneration to the Board of Directors amounted to Euro 1,860 thousand, which respects to the
remuneration that does not constitute acquired rights of the respective members until after the end of the restructuring period
Additionally, in 2020, costs of Euro 320 thousand were recorded as a sign-on bonus resulting from the admission of
(currently, 31 December 2021), and its payment is subject to approval and verification of certain conditions (31 December 2019: Euro
a new Executive Director, and compensations for the termination of the mandate of three Executive Directors were
1,997 thousand).
recorded, in the amount of Euro 206 thousand. In 2020, variable remuneration to the Board of Directors amounted to
As at 31 December 2020, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:
Euro 1,860 thousand, which respects to the remuneration that does not constitute acquired rights of the respective
(i) to members of the Executive Board of Directors and their immediate relatives was Euro 388 thousand; and (ii) members of the
members until after the end of the restructuring period (currently, 31 December 2021), and its payment is subject to
General and Supervisory Board and their immediate relatives did not had credit granted.
Additionally, in 2020, costs of Euro 320 thousand were recorded as a sign-on bonus resulting from the admission of a new Executive
approval and verification of certain conditions (31 December 2019: Euro 1,997 thousand).
Director, and compensations for the termination of the mandate of three Executive Directors were recorded, in the amount of Euro
As at 31 December 2019, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:
206 thousand. In 2020, variable remuneration to the Board of Directors amounted to Euro 1,860 thousand, which respects to the
(i) to members of the Executive Board of Directors and their immediate relatives was Euro 447 thousand; and (ii) members of the
As at 31 December 2020, the amount of credit granted to members of Key Management Personnel of NOVO BANCO
remuneration that does not constitute acquired rights of the respective members until after the end of the restructuring period
General and Supervisory Board and their immediate relatives did not had credit granted.
was as follows: (i) to members of the Executive Board of Directors and their immediate relatives was Euro 388 thou-
(currently, 31 December 2021), and its payment is subject to approval and verification of certain conditions (31 December 2019: Euro
sand; and (ii) members of the General and Supervisory Board and their immediate relatives did not had credit granted.
1,997 thousand).
NOTE 39 – SECURITISATION OF ASSETS
As at 31 December 2020, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:
As at 31 December 2019, the amount of credit granted to members of Key Management Personnel of NOVO BANCO
As at 31 December 2020 e 2019, the outstanding securitization transactions made by the Group were as follows
(i) to members of the Executive Board of Directors and their immediate relatives was Euro 388 thousand; and (ii) members of the
was as follows: (i) to members of the Executive Board of Directors and their immediate relatives was Euro 447 thou-
General and Supervisory Board and their immediate relatives did not had credit granted.
sand; and (ii) members of the General and Supervisory Board and their immediate relatives did not had credit granted.
As at 31 December 2019, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:
(i) to members of the Executive Board of Directors and their immediate relatives was Euro 447 thousand; and (ii) members of the
General and Supervisory Board and their immediate relatives did not had credit granted.
Lusitano Mortgages No.4 plc

312 836 Mortgage loans (general scheme)

64
3 859

41
3 713

43
2 858

21
1 001

Asset securitized

Original amount

Current amount

September 2005

(in thousands of Euros)

1 200 000

31.12.2020

31.12.2019

Start date

3 792

280 051

Issue

NOTE 39 – Securitisation Of Assets

Lusitano Mortgages No.5 plc

September 2006

1 400 000

417 854

463 413 Mortgage loans (general scheme)

Lusitano Mortgages No.6 plc
NOTE 39 – SECURITISATION OF ASSETS
As at 31 December 2020 e 2019, the outstanding securitization transactions made by the Group were as follows
Lusitano Mortgages No.7 plc
1 900 000
As at 31 December 2020 e 2019, the outstanding securitization transactions made by the Group were as follows
630 385
Lusitano SME No.3

1 090 124 Mortgage loans (general scheme)

434 463 Mortgage loans (general scheme)

88 937 Loans to small and medium-sized enterprises

September 2008

November 2016

1 100 000

1 003 303

July 2007

396 083

(in thousands of Euros)

Current amount

Issue

Start date

Original amount

The loans and advances to customers covered by the securitization operation Lusitano SME No. 3 was not derecognized from the
balance sheet since the Group substantially retained all the risks and rewards of ownership associated with the securitised assets.
During the year of 2020, the Lusitano SME securitization operation No. 3 was settled. The remaining securitisation operations were
Lusitano Mortgages No.4 plc
derecognized as the Group substantially transferred all the risks and rewards of ownership.
Lusitano Mortgages No.5 plc
In accordance with the consolidation rules established in IFRS 10, Lusitano Mortgages No. 6 plc and Lusitano Mortgages No. 7 plc
Lusitano Mortgages No.6 plc
are consolidated using the full consolidation method as from the date of their incorporation (see Note 1). The following are the main
Lusitano Mortgages No.7 plc
impacts of the consolidation of these entities on the Group's accounts:
Lusitano SME No.3

1 090 124 Mortgage loans (general scheme)

463 413 Mortgage loans (general scheme)

312 836 Mortgage loans (general scheme)

434 463 Mortgage loans (general scheme)

88 937 Loans to small and medium-sized enterprises

September 2005

September 2006

September 2008

November 2016

1 400 000

1 200 000

1 900 000

1 100 000

31.12.2020

31.12.2019

1 003 303

630 385

July 2007

280 051

417 854

396 083

Asset securitized

31.12.2020

31.12.2019

1 390 316

1 608 684

122 769

146 364

(in thousands of Euros)

Liabilities represented by securities
In accordance with the consolidation rules established in IFRS 10, Lusitano Mortgages No. 6 plc and Lusitano Mortgages No. 7 plc
are consolidated using the full consolidation method as from the date of their incorporation (see Note 1). The following are the main
(a) See Note 31
impacts of the consolidation of these entities on the Group's accounts:

39 377

45 855

31 December 2020

Notes to the Consolidated Financial Statements

(in thousands of Euros)

Cash, cash balances with central banks and other demand deposits

Loans to Customers (net of impairment)

Liabilities represented by securities

(a) See Note 31

31.12.2020

31.12.2019

122 769

1 390 316

39 377

146 364

1 608 684

45 855

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDparties earn interest between 0% and 8,00% (the rates correspond to the rates applied according to the original currency of the

The costs with remunerations and other benefits granted to Key Management Personnel of NOVO BANCO in 2020 and 2019, are as

asset).

follows:

Short-term employment benefits

Post-employment benefits

Other long-term benefits

Executive

Board of

Directors

31.12.2020

General and

Supervisory

Board

Total

Executive

Board of

Directors

31.12.2019

General and

Supervisory

Board

(in thousands of Euros)

2 676

2 712

993

1 001

3 669

3 713

2 812

2 858

980

1 001

3 792

3 859

Additionally, in 2020, costs of Euro 320 thousand were recorded as a sign-on bonus resulting from the admission of a new Executive

Director, and compensations for the termination of the mandate of three Executive Directors were recorded, in the amount of Euro

206 thousand. In 2020, variable remuneration to the Board of Directors amounted to Euro 1,860 thousand, which respects to the

remuneration that does not constitute acquired rights of the respective members until after the end of the restructuring period

(currently, 31 December 2021), and its payment is subject to approval and verification of certain conditions (31 December 2019: Euro

1,997 thousand).

As at 31 December 2020, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:

(i) to members of the Executive Board of Directors and their immediate relatives was Euro 388 thousand; and (ii) members of the

General and Supervisory Board and their immediate relatives did not had credit granted.

As at 31 December 2019, the amount of credit granted to members of Key Management Personnel of NOVO BANCO was as follows:

(i) to members of the Executive Board of Directors and their immediate relatives was Euro 447 thousand; and (ii) members of the

General and Supervisory Board and their immediate relatives did not had credit granted.

NOTE 39 – SECURITISATION OF ASSETS

As at 31 December 2020 e 2019, the outstanding securitization transactions made by the Group were as follows

Issue

Start date

Original amount

Current amount

31.12.2020

31.12.2019

(in thousands of Euros)

Asset securitized

Lusitano Mortgages No.4 plc

September 2005

1 200 000

Lusitano Mortgages No.5 plc

September 2006

1 400 000

Lusitano Mortgages No.6 plc

July 2007

1 100 000

280 051

417 854

396 083

312 836 Mortgage loans (general scheme)

463 413 Mortgage loans (general scheme)

434 463 Mortgage loans (general scheme)

Lusitano Mortgages No.7 plc

September 2008

1 900 000

1 003 303

1 090 124 Mortgage loans (general scheme)

November 2016

Lusitano SME No.3
The loans and advances to customers covered by the securitization operation Lusitano SME No. 3 was not
derecognized from the balance sheet since the Group substantially retained all the risks and rewards of ownership
The loans and advances to customers covered by the securitization operation Lusitano SME No. 3 was not derecognized from the
associated with the securitised assets. During the year of 2020, the Lusitano SME securitization operation No. 3 was
balance sheet since the Group substantially retained all the risks and rewards of ownership associated with the securitised assets.
settled. The remaining securitisation operations were derecognized as the Group substantially transferred all the risks
During the year of 2020, the Lusitano SME securitization operation No. 3 was settled. The remaining securitisation operations were
derecognized as the Group substantially transferred all the risks and rewards of ownership.
and rewards of ownership.

88 937 Loans to small and medium-sized enterprises

630 385

In accordance with the consolidation rules established in IFRS 10, Lusitano Mortgages No. 6 plc and Lusitano Mortgages No. 7 plc
In accordance with the consolidation rules established in IFRS 10, Lusitano Mortgages No. 6 plc and Lusitano Mortgages
are consolidated using the full consolidation method as from the date of their incorporation (see Note 1). The following are the main
No. 7 plc are consolidated using the full consolidation method as from the date of their incorporation (see Note 1). The
impacts of the consolidation of these entities on the Group's accounts:
following are the main impacts of the consolidation of these entities on the Group's accounts:

Cash, cash balances with central banks and other demand deposits

Loans to Customers (net of impairment)

Liabilities represented by securities

(a)

(a) See Note 31

(in thousands of Euros)

31.12.2020

31.12.2019

122 769

1 390 316

39 377

146 364

1 608 684

45 855

31 December 2020

Notes to the Consolidated Financial Statements

89
Additionally, Lusitano Mortgages No. 4 plc and Lusitano Mortgages No. 5 plc are not consolidated since they do not
meet the rules defined in IFRS 10, namely because the interest retained by the Group is residual.
Additionally, Lusitano Mortgages No. 4 plc and Lusitano Mortgages No. 5 plc are not consolidated since they do not meet the rules
defined in IFRS 10, namely because the interest retained by the Group is residual.
The main characteristics of these operations, as at 31 December 2020 and 31 December 2019, may be analyzed as
follows:
The main characteristics of these operations, as at 31 December 2020 and 31 December 2019, may be analyzed as follows:

31.12.2020

(in thousands of Euros)

Issue

Bonds issued

Initial nominal
value

Current
nominal value

Interest held by
Group (Nominal
value)

Interest held by
Group (Book
value)

Maturity date

Initial rating of the bonds

Current rating of the bonds

Fitch

Moody's

S&P

DBRS

Fitch

Moody's

S&P

DBRS

Lusitano Mortgages No.4 plc

Lusitano Mortgages No.5 plc

Lusitano Mortgages No.6 plc

Lusitano Mortgages No.7 plc

Class A
Class B
Class C
Class D
Class E

Class A
Class B
Class C
Class D
Class E
Class F

Class A
Class B
Class C
Class D

1 134 000
22 800
19 200
24 000
10 200

1 323 000
26 600
22 400
28 000
11 900

943 250
65 450
41 800
17 600
31 900
22 000

1 425 000
294 500
180 500
57 000

214 891
14 224
11 978
14 973
5 100

311 465
25 494
21 469
26 836
11 900

235 906
65 450
41 800
17 600
31 900
22 000

528 003
294 500
180 500
57 000

-
-
-
-
-

188 337
63 950
41 800
17 600
31 900
22 000

528 003
294 500
180 500
57 000

-
-
-
-
-

December 2048 AAA
December 2048 AA
December 2048 A+
December 2048 BBB+
December 2048 NA

December 2059 AAA
December 2059 AA
December 2059 A
December 2059 BBB+
December 2059 N/A

180 754
52 775
32 562
11 906
8 458
-

488 778
265 146
116 051
-

March 2060 AAA
March 2060 AA
March 2060 A
March 2060 BBB
March 2060 BB
-
March 2060

October 2064
October 2064
October 2064
October 2064

-
-
-
-

Aaa
Aa2
A1
Baa1
-

Aaa
Aa2
A1
Baa2
-

Aaa
Aa3
A3
Baa3
-
-

-
-
-
-

AAA
AA
A+
BBB-
NA

AAA
AA
A
BBB
N/A

AAA
AA
A
BBB
BB
-

AAA
BBB-
-
-

-
-
-
-
-

-
-
-
-
-
-

BB
BB
BB
CCC
-

BB
BB
B
CC
-

A
BBB-
B
CCC
CC
-

AAA
-
-
-

-
-
-
-

Aa3
Baa1
Ba3
Caa3
-

A1
Baa3
B3
Ca
-

Aa3
Baa1
Ba3
Caa3
-
-

-
-
-
-

AA
BB+
B+
B-
-

AA
A
BBB
B
-

A-
A-
BBB+
CCC
D
-

AA
BBB
-
-

-
-
-
-
-

-
-
-
-
-
-

AAA
-
-
-

31.12.2019

(in thousands of Euros)

Issue

Bonds issued

Initial nominal
value

Current
nominal value

Interest held by
Group (Nominal
value)

Interest held by
Group (Book
value)

Maturity date

Initial rating of the bonds

Current rating of the bonds

Fitch

Moody's

S&P

DBRS

Fitch

Moody's

S&P

DBRS

Lusitano Mortgages No.4 plc

Lusitano Mortgages No.5 plc

Lusitano Mortgages No.6 plc

Lusitano Mortgages No.7 plc

Lusitano SME No.3

301

Class A
Class B
Class C
Class D
Class E

Class A
Class B
Class C
Class D
Class E
Class F

Class A
Class B
Class C
Class D

Classe A
Classe B
Classe C
Classe D
Classe E
Classe S

1 134 000
22 800
19 200
24 000
10 200

1 323 000
26 600
22 400
28 000
11 900

943 250
65 450
41 800
17 600
31 900
22 000

1 425 000
294 500
180 500
57 000

385 600
62 700
62 700
116 000
9 500
88 771

241 493
15 985
13 461
16 827
5 100

355 021
25 494
21 469
26 836
11 900

264 905
65 450
41 800
17 600
31 900
22 000

616 503
294 500
180 500
57 000

-
-
-
103 316
3 135
5 214

-
-
-
-
-

220 548
63 950
41 800
17 600
31 900
22 000

616 503
294 500
180 500
57 000

-
-
-
103 316
3 135
5 214

-
-
-
-
-

December 2048 AAA
December 2048 AA
December 2048 A+
December 2048 BBB+
December 2048 NA

December 2059 AAA
December 2059 AA
December 2059 A
December 2059 BBB+
December 2059 N/A

210 489
57 981
32 227
11 906
9 371
-

563 186
264 601
154 463
-

-
-
-
100 534
2 776
3 218

March 2060 AAA
March 2060 AA
March 2060 A
March 2060 BBB
March 2060 BB
-
March 2060

October 2064
October 2064
October 2064
October 2064

December 2037
December 2037
December 2037
December 2037
December 2037
December 2037

-
-
-
-

-
-
-
-
-
-

Aaa
Aa2
A1
Baa1
-

Aaa
Aa2
A1
Baa2
-

Aaa
Aa3
A3
Baa3
-
-

-
-
-
-

A3
Baa3
B1
-
-
-

AAA
AA
A+
BBB-
NA

AAA
AA
A
BBB
N/A

AAA
AA
A
BBB
BB
-

AAA
BBB-
-
-

-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-

AAA
-
-
-

AA
BBB
B
-
-
-

BB
BB
BB
CCC
-

AAA
AA
A
BBB+
-

A
BBB-
B
CCC
CC
-

-
-
-
-

-
-
-
-
-
-

Aa3
Baa1
Ba3
Caa3
-

Aaa
Aa2
A1
Baa2
-

Aa3
Baa1
Ba3
Caa3
-
-

-
-
-
-

WR
WR
A3
-
-
-

AA
BBB-
BB-
B-
-

AAA
AA
A
BBB
-

A-
A-
BBB+
CCC
D
-

AA
BBB
-
-

-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-

AAA
-
-
-

-
-
AAA
-
-
-

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESAdditionally, Lusitano Mortgages No. 4 plc and Lusitano Mortgages No. 5 plc are not consolidated since they do not meet the rules

defined in IFRS 10, namely because the interest retained by the Group is residual.

The main characteristics of these operations, as at 31 December 2020 and 31 December 2019, may be analyzed as follows:

31.12.2020

(in thousands of Euros)

Issue

Bonds issued

Initial nominal

Current

value

nominal value

Interest held by

Group (Nominal

Group (Book

Maturity date

value)

Initial rating of the bonds

Current rating of the bonds

Fitch

Moody's

S&P

DBRS

Fitch

Moody's

S&P

DBRS

Lusitano Mortgages No.4 plc

Lusitano Mortgages No.5 plc

Lusitano Mortgages No.6 plc

Lusitano Mortgages No.7 plc

Class A

Class B

Class C

Class D

Class E

Class A

Class B

Class C

Class D

Class E

Class A
Class B
Class C
Class D
Class E
Class F

Class A
Class B
Class C
Class D

1 134 000

22 800

19 200

24 000

10 200

1 323 000

26 600

22 400

28 000

11 900

943 250
65 450
41 800
17 600
31 900
22 000

1 425 000
294 500
180 500
57 000

214 891

14 224

11 978

14 973

5 100

311 465

25 494

21 469

26 836

11 900

235 906
65 450
41 800
17 600
31 900
22 000

528 003
294 500
180 500
57 000

188 337
63 950
41 800
17 600
31 900
22 000

528 003
294 500
180 500
57 000

December 2048 AAA

December 2048 AA

December 2048 A+

December 2048 BBB+

December 2048 NA

December 2059 AAA

December 2059 AA

December 2059 A

December 2059 BBB+

December 2059 N/A

180 754
52 775
32 562
11 906
8 458
-

488 778
265 146
116 051
-

March 2060 AAA
March 2060 AA
March 2060 A
March 2060 BBB
March 2060 BB
-
March 2060

October 2064
October 2064
October 2064
October 2064

-
-
-
-

Aaa

Aa2

Baa1

Aaa

Aa2

Baa2

Aaa
Aa3
A3
Baa3
-
-

-
-
-
-

AAA

A+

BBB-

AAA

BBB

N/A

AAA
AA
A
BBB
BB
-

AAA
BBB-
-
-

-
-
-
-
-
-

CCC

A
BBB-
B
CCC
CC
-

AAA
-
-
-

-
-
-
-

Aa3

Baa1

Ba3

Caa3

Baa3

Aa3
Baa1
Ba3
Caa3
-
-

-
-
-
-

BB+

B+

B-

BBB

A-
A-
BBB+
CCC
D
-

AA
BBB
-
-

-
-
-
-
-
-

AAA
-
-
-

Issue

Bonds issued

Initial nominal
value

Current
nominal value

Interest held by
Group (Nominal
value)

Interest held by
Group (Book
value)

Maturity date

Initial rating of the bonds

Current rating of the bonds

Fitch

Moody's

S&P

DBRS

Fitch

Moody's

S&P

DBRS

31.12.2019

(in thousands of Euros)

Lusitano Mortgages No.4 plc

Lusitano Mortgages No.5 plc

Lusitano Mortgages No.6 plc

Lusitano Mortgages No.7 plc

Lusitano SME No.3

Class A
Class B
Class C
Class D
Class E

Class A
Class B
Class C
Class D
Class E
Class F

Class A
Class B
Class C
Class D

Classe A
Classe B
Classe C
Classe D
Classe E
Classe S

1 134 000
22 800
19 200
24 000
10 200

1 323 000
26 600
22 400
28 000
11 900

943 250
65 450
41 800
17 600
31 900
22 000

1 425 000
294 500
180 500
57 000

385 600
62 700
62 700
116 000
9 500
88 771

241 493
15 985
13 461
16 827
5 100

355 021
25 494
21 469
26 836
11 900

264 905
65 450
41 800
17 600
31 900
22 000

616 503
294 500
180 500
57 000

-
-
-
103 316
3 135
5 214

-
-
-
-
-

220 548
63 950
41 800
17 600
31 900
22 000

616 503
294 500
180 500
57 000

-
-
-
103 316
3 135
5 214

-
-
-
-
-

December 2048 AAA
December 2048 AA
December 2048 A+
December 2048 BBB+
December 2048 NA

December 2059 AAA
December 2059 AA
December 2059 A
December 2059 BBB+
December 2059 N/A

210 489
57 981
32 227
11 906
9 371
-

563 186
264 601
154 463
-

-
-
-
100 534
2 776
3 218

March 2060 AAA
March 2060 AA
March 2060 A
March 2060 BBB
March 2060 BB
-
March 2060

October 2064
October 2064
October 2064
October 2064

December 2037
December 2037
December 2037
December 2037
December 2037
December 2037

-
-
-
-

-
-
-
-
-
-

Aaa
Aa2
A1
Baa1
-

Aaa
Aa2
A1
Baa2
-

Aaa
Aa3
A3
Baa3
-
-

-
-
-
-

A3
Baa3
B1
-
-
-

AAA
AA
A+
BBB-
NA

AAA
AA
A
BBB
N/A

AAA
AA
A
BBB
BB
-

AAA
BBB-
-
-

-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-

AAA
-
-
-

AA
BBB
B
-
-
-

BB
BB
BB
CCC
-

AAA
AA
A
BBB+
-

A
BBB-
B
CCC
CC
-

-
-
-
-

-
-
-
-
-
-

Aa3
Baa1
Ba3
Caa3
-

Aaa
Aa2
A1
Baa2
-

Aa3
Baa1
Ba3
Caa3
-
-

-
-
-
-

WR
WR
A3
-
-
-

AA
BBB-
BB-
B-
-

AAA
AA
A
BBB
-

A-
A-
BBB+
CCC
D
-

AA
BBB
-
-

-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-
-

AAA
-
-
-

-
-
AAA
-
-
-

NOTE 40 – Fair value of financial assets and liabilities

The governance model of the valuation of the Bank's financial instruments is defined in internal regulations, which
establish the policies and procedures to be followed in the identification and valuation of financial instruments, the
control procedures and the definition of the responsibilities of the parties involved in this process.

The fair value of listed financial assets is determined based on the closing price (bid-price), the price of the last
transaction made or the value of the last known price (bid). In the absence of quotation, the Group estimates fair
value using (i) valuation methodologies, such as the use of prices for recent transactions, similar and carried out under
market conditions, discounted cash flow techniques and customized option valuation models. in order to reflect the
particularities and circumstances of the instrument and (ii) valuation assumptions based on market information.

31 December 2020

For the assets included in the level 3 of fair value hierarchy, whose quotation is provided by a third party using parameters
not observable in the market, the Group proceeds, when applicable, to a detailed analysis of the historical and liquidity
performance of these assets, which may imply an additional adjustment to its fair value, as well as a result of additional
internal or external valuations.

Notes to the Consolidated Financial Statements

In accordance with the methodology for valuing assets and liabilities at fair value, they are classified in the corresponding
hierarchy of fair value defined in IFRS 13 - Fair Value. The following is a brief description of the type of assets and
liabilities included in each level of the hierarchy and the corresponding form of valuation:

Quoted market prices (level 1)

This category includes financial instruments with market prices quoted on official markets and those with dealer price
quotations provided by entities that usually disclose transaction prices for these instruments traded on active markets.

The priority in terms of which price is used is given to those observed on official markets; where there is more than one
official market the choice falls on the main market on which those instruments are traded.

The Group considers market prices those disclosed by independent entities, assuming that these act for their own eco-
nomic benefit and that such prices are representative of the active market, using, whenever possible, prices supplied
by more than one entity (for a specific asset and/or liability). For the process of re-evaluating financial instruments, the
Bank analyses the various prices in order to select the one it considers most representative for the instrument under
analysis. Additionally, when they exist, prices relating to recent transactions with similar financial instruments are used
as inputs, being subsequently compared to those supplied by said entities to better justify the option taken by the Bank

302

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDin favour of a specific price.

This category includes, amongst others, the following financial instruments:

i. Derivatives traded on an organized market;

ii. Shares quoted on a stock exchange;

iii. Open investment funds quoted on a stock exchange;

iv. Closed investment funds whose subjacent assets are solely financial instruments listed on a stock exchange;

v. Bonds with observable market quotes;

vi. Financial instruments with market offers even if these are not available at the normal information sources (e.g.

securities traded based on recovery rate).

Valuation models based on observable market parameters / prices (level 2)

In this category, the financial instruments are valued using internal valuation techniques, namely discounted cash flow
models and option pricing models which imply the use of estimates and require judgments that vary in accordance
with the complexity of the financial instruments. Notwithstanding, the Bank uses as inputs in its models, observable
market data such as interest rate curves, credit spreads, volatility and market indexes. This category also includes
instruments with dealer price quotations but which markets have a lower liquidity. Additionally, the Bank also uses as
observable market variables, those that result from transactions with similar instruments and that are observed with a
certain regularity on the market.

This category includes, amongst others, the following financial instruments:

i. Bonds without observable market valuations valued using observable market inputs;

ii. Derivatives (OTC) over-the-counter valued using observable market inputs; and

iii. Unlisted shares valued using internal models using observable market inputs.

Valuation models based on unobservable market parameters (level 3)

This level uses models relying on internal valuation techniques or quotations provided by third parties, but which
imply the use of non-observable market information. The bases and assumptions for the calculation of fair value are in
accordance with IFRS 13.

This category includes, amongst others, the following financial instruments:

i. Debt securities valued using non-observable market inputs;

ii. Unquoted shares;

iii. Closed real estate funds;

iv. Hedge funds;

v. Private equities;

vi. Restructuring funds; and

vii. Over the counter (OTC) derivatives with prices provided by third parties

The valuation models used by type of instrument are as follows:

Money market operations and loans and advances to customers: fair value is determined by the discounted cash flows
method, with future cash flow being discounted considering the currency yield curve plus the credit risk of the entity
contractually liquidating that flow.

303

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESCommercial paper: its fair value is determined by discounting future cash flows considering the currency yield curve
plus the credit risk of the issuer determined in the issuance program.

Debt instruments (bonds) with liquidity: the selective independent valuation methodology is used based on obser-
vations available on Bloomberg, designated as 'Best Price', where all the valuations available are requested, but only
previously validated sources considered as input, with the model excluding prices due to seniority and outlier prices.
In the specific case of the Portuguese sovereign debt, and due to the market making activity and the materiality of the
Bank's positions, the CBBT source valuations are always considered (the CBBT is a composite of valuations prepared by
Bloomberg, which considers the average of executable prices with high liquidity).

Debt instruments (bonds) with reduced liquidity: the models considered for the valuation of low liquidity bonds with-
out observable market valuations are determined taking into account the information available on the issuer and the
instrument, with the following models being considered: (i) discounted cash flows - cash flows are discounted con-
sidering the interest rate risk, credit risk of the issuer and any other risks subjacent to the instrument; or (ii) valuations
made available by external counterparties, when it is impossible to determine the fair value of the instrument, with the
selection always falling on reliable sources with reputed credibility in the market and impartiality in the valuation of the
instruments being analyzed.

Convertible bonds: the cash flows are discounted considering the interest rate risk, the issuer's credit risk and any other
risks that may be associated with the instrument, increased by the net present value (NPV) of the convertibility options
embedded in the instrument.

Shares and quoted funds: for quoted market products, the quotation on the respective stock exchange is considered.

Unquoted Shares: the valuation is carried out using external valuations made of the companies in which the shareholding
is held. In the event the request for an external valuation is not justified due to the immateriality of this position in the
balance sheet, the position is revalued considering the book value of the entity.

Unquoted funds: the valuation considered is that provided by the fund's management company. In the event there
are calls for capital after the reference date of the last available valuation, the valuation is recalculated considering the
capital calls subsequent to the reference date at the amount at which these were made, until a new valuation is made
available by the management company, already considering the capital calls realised. It should be noted that, although
it accepts the valuations provided by the management companies, when applicable in accordance with the funds'
regulations, the Bank requests the legal certification of accounts issued by independent auditors in order to obtain
additional assurance about the information provided by the management company.

In the specific case of the Restructuring Funds (“Assessed Assets”), their assessment was carried out by an independent
external international entity (“Appraiser”), which engaged renowned real estate appraisal companies to determine the
fair value of real estate assets, which represent a significant part of the funds' portfolio.

The fair vale estimation Assessed Assets requires a multi-step approach, taking into account the following (i) The fair
value of the assets invested by each fund (the “Underlying Assets”); (ii) The nature of the participation of the respective
Fund in each of the Underlying Assets; (iii) The other assets and liabilities on the Fund's balance; (iv) The nature of Novo
Banco's investment in each of the funds; and (v) Consideration of any applicable discounts or premiums. The fair value
of the Underlying Assets was estimated using three valuation approaches (market, income and cost) depending, among
other things, on the specific nature of each asset, its state of development, the information available and the date of
the initial investment. The other assets and liabilities in the fund's balances would normally be valued using the cost
approach, with potential adjustments based on the market, and the consideration of discounts and premiums, normally
assessed using market data and benchmarks.

304

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDReal Estate Assets, the main assumptions of value were sales prices, construction costs, timeline (both to development
and sale) and Discount Rates. Each of the assumptions described above considered in the valuation of real estate
assets was determined from asset to asset (total of 149 major assets subdivided into a total of more than 1,000 assets),
depending on the status of the asset, the asset's historical performance, location and market competitors.

Derivative instruments: if these are traded on organised markets, the valuations are observable in the market, otherwise
these are valued using standard models and relying on observable variables in the market, namely:

• Foreign currency options: are valued through the front office system, which considers models such as Garman-

Kohlhagen, Binomial, Black & Scholes, Levy or Vanna-Volga;

•

Interest rate swaps and foreign currency swaps: the valuation of these instruments is done through the front office
system, where the fixed leg cash flows of the instrument are discounted based on the yield curve of the respective
currency, and the cash flows of the variable leg are projected considering the forward curve and discounted, also
considering discount factors and forward rates based on the yield curve of the respective currency;

• Credit Default Swaps (CDS): both legs of the CDS are composed of cash flows contingent on the credit risk of the

underlying asset and are therefore valued using market credit spreads;

• Futures and Options: the Bank trades these products on an organised market, but also has the possibility to trade
them on the OTC market. For futures and options traded on an organised market, the valuations are observable in
the market, with the valuation being received daily through the broker selected for these products. For futures and
options traded on the OTC market, and depending on the type of product and the underlying asset type, discrete
time (binominal) or continuous time (Black & Scholes) models may be used.

Investment properties: its fair value is determined based on periodic evaluations carried out by independent entities
specialized in this type of service, however, given the subjectivity of some assumptions used in the assessments, the
Group carries out internal analysis on the assumptions used, which may imply additional adjustments to fair value,
supported by additional internal or external valuations (see accounting policy in Note 2.23). The market value of
properties for which a promissory purchase and sale agreement has been entered into corresponds to the value of
that contract.

Validation of the valuation of financial instruments is performed by an independent area, which validates the models
used and the prices attributed. More specifically, this area is responsible for independent price verification for mark-to-
market valuations, for mark-to-model valuations, validates the models used and changes to them wherever they exist.
For prices supplied by external entities, the validation performed consists in confirming the use of the correct prices.

The fair value of financial assets and liabilities and non-financial assets (investment properties) measured at fair value
of the Group is as follows:

305

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES



Derivative instruments: if these are traded on organised markets, the valuations are observable in the market, otherwise these are

valued using standard models and relying on observable variables in the market, namely:

Foreign currency options: are valued through the front office system, which considers models such as Garman-Kohlhagen,

Binomial, Black & Scholes, Levy or Vanna-Volga;

Interest rate swaps and foreign currency swaps: the valuation of these instruments is done through the front office system,

where the fixed leg cash flows of the instrument are discounted based on the yield curve of the respective currency, and the

cash flows of the variable leg are projected considering the forward curve and discounted, also considering discount factors

and forward rates based on the yield curve of the respective currency;

Credit Default Swaps (CDS): both legs of the CDS are composed of cash flows contingent on the credit risk of the underlying

asset and are therefore valued using market credit spreads;

Futures and Options: the Bank trades these products on an organised market, but also has the possibility to trade them on

the OTC market. For futures and options traded on an organised market, the valuations are observable in the market, with

the valuation being received daily through the broker selected for these products. For futures and options traded on the OTC

market, and depending on the type of product and the underlying asset type, discrete time (binominal) or continuous time

(Black & Scholes) models may be used.

Investment properties: its fair value is determined based on periodic evaluations carried out by independent entities specialized in

this type of service, however, given the subjectivity of some assumptions used in the assessments, the Group carries out internal

analysis on the assumptions used, which may imply additional adjustments to fair value, supported by additional internal or external
valuations (see accounting policy in Note 2.23). The market value of properties for which a promissory purchase and sale agreement
has been entered into corresponds to the value of that contract.

Validation of the valuation of financial instruments is performed by an independent area, which validates the models used and the
prices attributed. More specifically, this area is responsible for independent price verification for mark-to-market valuations, for mark-
to-model valuations, validates the models used and changes to them wherever they exist. For prices supplied by external entities,
the validation performed consists in confirming the use of the correct prices.

The fair value of financial assets and liabilities and non-financial assets (investment properties) measured at fair value of the Group
is as follows:

31 December 2020

Financial assets held for trading

Securities held for trading

Bonds issued by public entities

Derivatives held for trading

Exchange rate contracts
Interest rate contracts
Others

Financial assets mandatorily at fair value through profit or loss

Bonds issued by other entities
Shares
Other variable income securities

Financial assets at fair value through other comprehensive income

Bonds issued by public entities
Bonds issued by other entities
Shares
Other variable income securities

Derivatives - Hedge Accounting

Interest rate contracts

Investment properties

(in thousands of Euros)

Quoted market
prices

At Fair Value

Valuation models
based on
observable market
parameters

Valuation models
based on
unobservable
market
parameters

(Level 1)

(Level 2)

(Level 3)

Total Fair Value

267 016
267 016
267 016
-
-
-
-
214 882
82 203
132 525
154
7 854 337
6 490 076
1 352 759
11 502
-
-
-
-

388 257
-
-
388 257
57 205
319 662
11 390
36 849
50
-
36 799
10 028
-
-
10 028
-
12 972
12 972
-

-
-
-
-
-
-
-
709 231
77 931
273 579
357 721
43 222
-
-
43 222
-
-
-
592 605

655 273
267 016
267 016
388 257
57 205
319 662
11 390
960 962
160 184
406 104
394 674
7 907 587
6 490 076
1 352 759
64 752
-
12 972
12 972
592 605

Assets at fair value

8 336 235

448 106

1 345 058

10 129 399

Financial liabilities held for trading
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Credit default contracts
Other

Derivatives - Hedge Accounting
Interest rate contracts

Liabilities at fair value

-
-
-
-
-
-
-
-

552 633
552 633
45 493
501 585
16
5 539
72 543
72 543

625 176

2 158
2 158
-
2 158
-
-
-
-

2 158

554 791
554 791
45 493
503 743
16
5 539
72 543
72 543

627 334

31 December 2020

Notes to the Consolidated Financial Statements

306

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED31 December 2019

Financial assets held for trading

Securities held for trading

Bonds issued by public entities

Derivatives held for trading

31 December 2019

Exchange rate contracts
Interest rate contracts
Financial assets held for trading
Credit default contracts
Other
Bonds issued by public entities

Securities held for trading

Economic hedging derivatives
Derivatives held for trading
Interest rate contracts
Exchange rate contracts
Interest rate contracts
Credit default contracts
Bonds issued by other entities
Other
Shares
Economic hedging derivatives
Other variable income securities
Interest rate contracts

Bonds issued by public entities
Bonds issued by other entities
Bonds issued by other entities
Shares
Shares
Other variable income securities
Other variable income securities

Investment properties

Interest rate contracts
Bonds issued by public entities
Bonds issued by other entities
Shares
Other variable income securities

Assets at fair value

Financial assets mandatorily at fair value through profit or loss

Financial assets at fair value through other comprehensive income

Financial assets mandatorily at fair value through profit or loss

Derivatives - Hedge Accounting
Financial assets at fair value through other comprehensive income

Investment properties

Derivatives - Hedge Accounting
Financial liabilities held for trading
Interest rate contracts
Derivatives held for trading
Exchange rate contracts
Interest rate contracts
Credit default contracts
Other

Assets at fair value

Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Derivatives held for trading
Debt securities issued
Exchange rate contracts
Derivatives - Hedge Accounting
Interest rate contracts
Interest rate contracts
Credit default contracts
Other

Liabilities at fair value
Financial liabilities at fair value through profit or loss

Debt securities issued

At Fair Value

Valuation models
based on
observable market
parameters

(Level 2)

At Fair Value
(Level 2)
Valuation models
based on
419 600
observable market
-
parameters
-
419 600
34 540
352 748
419 600
1
-
32 311
-
-
419 600
-
34 540
48
352 748
1
48
32 311
-
-
-
-
28 976
-
48
-
48
28 976
-
-
-
7 452
28 976
7 452
-
-
-
28 976
456 076
-
7 452
542 988
7 452
542 988
-
33 953
499 852
456 076
42
9 141
542 988
-
542 988
-
33 953
58 855
499 852
58 855
42
601 843
9 141
-
-
58 855
58 855

Quoted market
prices

(Level 1)

Quoted market
254 848
prices
254 848
254 848
-
-
-
254 848
-
254 848
-
254 848
-
-
-
-
172 030
-
-
57 535
-
114 296
-
199
-
8 783 741
7 108 022
172 030
1 661 538
57 535
14 181
114 296
-
199
-
8 783 741
-
7 108 022
-
1 661 538
14 181
9 210 619
-
-
-
-
-
-
-
-
9 210 619
-
-
-
102 012
-
102 012
-
-
-
-
-
102 012
-
102 012
102 012
-
-

(in thousands of Euros)

Total Fair Value

(in thousands of Euros)

Valuation models
based on
unobservable
market
parameters
(Level 3)
Valuation models
based on
unobservable
market
parameters
(Level 3)

74 284
-
-
191
-
191
74 284
-
-
-
-
74 093
191
74 093
-
1 142 664
191
-
7
-
489 555
74 093
653 102
74 093
37 179
-
1 142 664
-
7
37 177
489 555
2
653 102
-
37 179
-
-
700 744
-
37 177
1 954 871
2
-
1 837
-
1 837
700 744

1 837
1 954 871

1 837
-
1 837
-
-
1 837
-

1 837
-
-
-
-

Total Fair Value
748 732
254 848
254 848
419 791
34 540
352 939
748 732
1
254 848
32 311
254 848
74 093
419 791
74 093
34 540
1 314 742
352 939
1
57 590
32 311
603 851
74 093
653 301
74 093
8 849 896
7 108 022
1 314 742
1 661 538
57 590
80 334
603 851
2
653 301
7 452
8 849 896
7 452
7 108 022
700 744
1 661 538
80 334
11 621 566
2
7 452
544 825
7 452
544 825
700 744
33 953
501 689
11 621 566
42
9 141
544 825
102 012
544 825
102 012
33 953
58 855
501 689
58 855
42
705 692
9 141
102 012
102 012
58 855
58 855

The changes occurred in financial assets and liabilities valued based on non-observable market information (level 3 of the fair value
hierarchy) during the financial years of 2020 and 2019, may be analyzed as follows:

Derivatives - Hedge Accounting
Interest rate contracts

Liabilities at fair value

102 012

601 843

1 837

The changes occurred in financial assets and liabilities valued based on non-observable market information (level 3 of
The changes occurred in financial assets and liabilities valued based on non-observable market information (level 3 of the fair value
the fair value hierarchy) during the financial years of 2020 and 2019, may be analyzed as follows:
Financial assets at
Financial assets held for trading Financial assets
Financial
hierarchy) during the financial years of 2020 and 2019, may be analyzed as follows:
fair value through
mandatorily at fair
assets at fair
other
value through
value through
Economic
comprehensive
profit or loss
profit or loss
hedging
income
derivatives
31.12.2020
37 179

Derivatives held for
trading

Financial liabilities
held for trading

Balance as at 31 December 2019

Derivatives
held for trading

Investment
properties

(in thousands of Euros)

Total liabilities

Total assets

31.12.2020

1 142 664

1 954 871

700 744

74 093

1 837

191

705 692
(in thousands of Euros)

Balance as at 31 December 2019

Balance as at 31 December 2020

Acquisitions
Attainment of maturity
Liquidation
Transfers in
Transfers out
Sales
Acquisitions
Changes in value
Attainment of maturity
Other movements
Liquidation
Transfers in
Transfers out
Sales
Changes in value
Other movements

Economic
hedging
derivatives

Financial assets held for trading Financial assets
8 479
mandatorily at fair
( 41 302)
value through
( 1 583)
profit or loss
-
( 27 541)
1 142 664
-
8 479
( 371 486)
( 41 302)
-
( 1 583)
709 231
-
( 27 541)
-
( 371 486)
-

-
-
-
Derivatives
-
held for trading
-
191
-
-
( 191)
-
-
-
-
-
-
-
( 191)
-

-
-
( 80 489)
-
-
74 093
-
-
6 396
-
-
( 80 489)
-
-
-
-
6 396
-

Financial
-
assets at fair
-
value through
-
profit or loss
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Financial assets at
5 125
fair value through
-
other
( 22 913)
comprehensive
16 326
income
( 2 685)
37 179
-
5 125
10 190
-
-
( 22 913)
43 222
16 326
( 2 685)
-
10 190
-

11 966
Investment
-
properties
-
-
-
700 744
( 67 581)
11 966
( 101 828)
-
49 304
-
592 605
-
-
( 67 581)
( 101 828)
49 304

25 570
( 41 302)
Total assets
( 104 985)
16 326
( 30 226)
1 954 871
( 67 581)
25 570
( 456 919)
( 41 302)
49 304
( 104 985)
1 345 058
16 326
( 30 226)
( 67 581)
( 456 919)
49 304

1 837
Financial liabilities
-
held for trading
-
-
Derivatives held for
-
trading
-
1 837
-
-
321
-
-
-
2 158
-
-
-
321
-

-
-
Total liabilities
-
-
-
1 837
-
-
321
-
-
-
2 158
-
-
-
321
-

Balance as at 31 December 2020

709 231

43 222

592 605

1 345 058

2 158

31 December 2020

Notes to the Consolidated Financial Statements

307

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Financial assets held for trading Financial assets
mandatorily at fair
value through
profit or loss

Derivatives
held for trading

Economic
hedging
derivatives

31.12.2019

Financial
assets at fair
value through
profit or loss

Financial assets at
fair value through
other
comprehensive
income

Investment
properties

Total assets

(in thousands of Euros)

Financial liabilities
held for trading

Derivatives held for
trading

Total liabilities

Balance as at 31 December 2018

396

70 177

1 487 630

45 713

1 098 071

2 701 987

(in thousands of Euros)

2 724

Financial
assets at fair
value through
profit or loss

31.12.2019

14 309
100
-
-
Financial assets at
fair value through
( 14 692)
-
other
-
-
comprehensive
-
( 16)
income
-
-
( 84)
( 8 151)
-
-
-

45 713

Investment
properties

-
-
-
9 455
-
( 197 058)
( 216 119)
6 395

Total assets

101 237
( 44 412)
( 108 744)
9 455
( 16)
( 197 058)
( 513 973)
6 395

Financial liabilities
held for trading

Derivatives held for
trading

-
-
( 347)
Total liabilities
-
-
-
( 540)
-

-
-
( 347)
-
-
-
( 540)
-

2 724

1 098 071

2 701 987

Balance as at 31 December 2018

Acquisitions
Attainment of maturity
Liquidation
Transfers in
Transfers out
Sales
Changes in value
Other movements
Acquisitions
Attainment of maturity
Liquidation
Transfers in
Transfers out
Sales
Changes in value
Other movements

Economic
hedging
derivatives

86 828
( 44 412)
Financial assets held for trading Financial assets
( 93 656)
mandatorily at fair
-
value through
-
profit or loss
-
( 293 726)
1 487 630
-
86 828
( 44 412)
1 142 664
( 93 656)
-
-
-
( 293 726)
-

( 396)
-
Derivatives
-
held for trading
-
191
396
-
-
191
( 396)
-
-
-
191
-

-
-
-
-
-
-
3 916
70 177
-
-
-
74 093
-
-
-
-
3 916
-

Balance as at 31 December 2019

-
-
1 837
( 347)
-
Potential gains and losses on financial instruments and investment property classified at level 3 of the fair value hierarchy are recorded
-
in profit or loss or revaluation reserves in accordance with the respective asset accounting policy. The amounts calculated at 31
-
( 540)
December 2020 and 2019 were as follows:
-
(in thousands of Euros)
Potential gains and losses on financial instruments and investment property classified at level 3 of the fair value
Balance as at 31 December 2019
hierarchy are recorded in profit or loss or revaluation reserves in accordance with the respective asset accounting
Potential gains and losses on financial instruments and investment property classified at level 3 of the fair value hierarchy are recorded
policy. The amounts calculated at 31 December 2020 and 2019 were as follows:
in profit or loss or revaluation reserves in accordance with the respective asset accounting policy. The amounts calculated at 31
December 2020 and 2019 were as follows:
Derivatives held for trading

101 237
( 44 412)
1 954 871
( 108 744)
9 455
( 16)
( 197 058)
( 513 973)
6 395

-
-
-
9 455
-
( 197 058)
( 216 119)
6 395

14 309
-
( 14 692)
-
-
-
( 8 151)
-

-
-
1 837
( 347)
-
-
-
( 540)
-

Recognised in
the income
statement

100
-
-
-
( 16)
-
( 84)
-

Recognised in
reserves

-
31.12.2020

31.12.2019

1 142 664

1 954 871

23 605

700 744

37 179

74 093

682

1 837

Total

191

Economic hedging derivatives

( 68 722)

Financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive income

Investment properties

Derivatives held for trading

Economic hedging derivatives

-
10 905
Recognised in
-
reserves

31.12.2020

( 359 642)
-

Recognised in
the income
statement

( 104 310)

10 905
-

( 509 390)
23 605

( 68 722)

( 359 642)
10 905

Total

( 104 310)

( 498 485)
23 605

( 68 722)

-
11

Recognised in
reserves

31.12.2019

( 287 694)
-

Recognised in
the income
statement

( 216 119)

11
-

( 496 927)
682

6 204

( 287 694)
11

Total

( 216 119)

( 496 916)
682

6 204

Financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive income
The following table presents, for financial assets included in level 3 of the fair value hierarchy, the main valuation methods used and
Investment properties
the impact of changing the main variables used in their valuation, when applicable:

( 359 642)
10 905

( 287 694)
-

( 287 694)
11

( 359 642)
-

-
10 905

-
11

( 104 310)

( 216 119)

( 509 390)

( 498 485)

( 496 916)

( 496 927)

10 905

(in millions of Euros)
The following table presents, for financial assets included in level 3 of the fair value hierarchy, the main valuation methods used and
The following table presents, for financial assets included in level 3 of the fair value hierarchy, the main valuation
the impact of changing the main variables used in their valuation, when applicable:
methods used and the impact of changing the main variables used in their valuation, when applicable:
Financial assets mandatorily at fair value through
profit or loss

Carrying book
value

Assets classified under level 3

Unfavorable scenario

Favorable scenario

Variable analysed

Valuation Model

31.12.2020

Change

Impact

( 22.2)

709.2

12.2

682
(in thousands of Euros)
6 204

6 204

Obligations of other issuers
Shares

Assets classified under level 3
Assets classified under level 3

Other variable income securities

Financial assets mandatorily at fair value through
Financial assets mandatorily at fair value through
profit or loss
profit or loss
Financial assets at fair value through other
comprehensive income

Obligations of other issuers
Obligations of other issuers
Shares
Shares
Shares

Discounted cash flow model
Valuing adjusted management company

Specific Impairment
(b)

31.12.2020
31.12.2020

77.9
273.6

-50%

( 22.2)
-

+50%
(in millions of Euros)
(in millions of Euros)

12.2
-

Valuation Model
Valuation Model
Valuing adjusted management company
Valuation of the management company

Variable analysed
Variable analysed
(b)
(c)

Discounted cash flow model
Discounted cash flow model
Valuing adjusted management company
Valuing adjusted management company

Specific Impairment
Specific Impairment
(b)
(b)

Carrying book
Carrying book
value
value

357.7
225.3
1 123.5
709.2
709,2

Unfavorable scenario
Unfavorable scenario
Impact
Change
Impact
Change

-
-
-
( 22.2)
( 22,2)

Favorable scenario
Favorable scenario
Impact
Change
Impact
Change

-
-
-
12.2
12,2

-50%
-50%

+50%
+50%

Total

Other variable income securities
Other variable income securities

Discounted cash flow model
Other
Valuing adjusted management company
Valuing adjusted management company
Valuation of the management company
Valuation of the management company
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
Financial assets at fair value through other
Financial assets at fair value through other
(b) For the sensitivity analysis carried out on the valuation of the Restructuring Funds, taking into account the valuation methodologies applied and considering that real estate assets represent more than 95% of the underlying assets of the Funds, a variation of
comprehensive income
comprehensive income
+ 10% was considered and -10% in the fair value of the main real estate assets of each Fund, which leads to an impact of + 6.15% and -5.8% in the fair value of the restructuring funds.

Renewable energy Rates
(a)
(b)
(b)
(c)
(c)

( 2.9)
( 2,9)

43.2
43,2

0.1
0,1

Shares
Shares

Discounted cash flow model
Discounted cash flow model
Other
Other

Renewable energy Rates
Renewable energy Rates
(a)
(a)

43.2

77.9
77,9
273.6
273,6

43.2
16.2
357.7
357,7
27.0
225.3
225,3
752.5
1 123.5
132,5

43.2
43,2
16.2
16,2
27.0
27,0

( 22.2)
( 2.9)
( 22,2)
-
-
( 2.9)
( 2.9)
-
-
-
-
-
( 25.1)
-
-

( 2.9)
( 2,9)
( 2.9)
( 2,9)
-
-

12.2
0.1
12,2
-
-
0.1
0.1
-
-
-
-
-
12.3
-
-

0.1
0,1
0.1
0,1
-
-

Total
Total

752.5
752,5

( 25.1)
( 25,1)

12.3
12,3

(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(b) For the sensitivity analysis carried out on the valuation of the Restructuring Funds, taking into account the valuation methodologies applied and considering that real estate assets represent more than 95% of the underlying assets of the Funds, a variation of
(b) For the sensitivity analysis carried out on the valuation of the Restructuring Funds, taking into account the valuation methodologies applied and considering that real estate assets represent more than 95% of the underlying assets of the Funds, a variation of +
+ 10% was considered and -10% in the fair value of the main real estate assets of each Fund, which leads to an impact of + 6.15% and -5.8% in the fair value of the restructuring funds.
10% was considered and -10% in the fair value of the main real estate assets of each Fund, which leads to an impact of + 6.15% and -5.8% in the fair value of the restructuring funds.
(c) In the specific case of participation units valued in accordance with quotations provided by the respective management company, it is not reasonable to carry out an analysis of the impact of changes of the variables subjacent to the determination of the
(c) In the specific case of participation units valued in accordance with quotations provided by the respective management company, it is not reasonable to carry out an analysis of the impact of changes of the variables subjacent to the determination of the quotation
quotation by the entity
by the entity

31 December 2020

Notes to the Consolidated Financial Statements

308

31 December 2020

Notes to the Consolidated Financial Statements

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

NOVO BANCO

(in millions of Euros)

Change

Favorable scenario
NOVO BANCO
Impact
-
-
-

(in millions of Euros)

-
-
-

Assets classified under level 3

Valuation Model

Variable analysed

31.12.2019

Carrying book
value

Unfavorable scenario

Change

Impact

Other

(a)
(b)

74,3
0,2
74,1

Financial assets held for trading
Derivatives held for trading
Economic hedging derivatives

Financial assets mandatorily at fair value through
profit or loss
Shares

Assets classified under level 3

Financial assets held for trading
Derivatives held for trading
Economic hedging derivatives

Other variable income securities

Financial assets mandatorily at fair value through
profit or loss
Shares

Financial assets at fair value through other
comprehensive income

Total

Valuation Model

Discounted cash flow model
Other
Valuation of the management company

Other

Other
Valuation of the management company

Variable analysed

Specific Impairment
(a)
Net assets value (c)

(a)
(b)

Discounted cash flow model
Other
Valuation of the management company

Other

Specific Impairment
(a)
Net assets value (c)

(a)

31.12.2019

1 142,7

( 34,1)

40,6

Carrying book
value

Unfavorable scenario

Change

-50%

Impact

Favorable scenario

Change

+50%

Impact

489,6
74,7
2,8
74,3
412,1
0,2
653,1
74,1
27,7
625,4

1 142,7

37,2

489,6
74,7
2,8
1 254,1
412,1
653,1
27,7
625,4

( 29,3)
( 29,3)
-
-
-
-
( 4,8)
-
-
( 4,8)

( 34,1)

( 29,3)
( 29,3)
-
-
( 4,8)
-
( 4,8)

( 34,1)

-50%

+50%

31,0
31,0
-
-
9,6
-
9,6

-
-
-

40,6

31,0
31,0
-
40,6
-
9,6
-
9,6

Other variable income securities

(a) No sensitivity analysis was carried out for these categories as these include securities of an individually immaterial value.
(b) In the specific case of derivatives valued according to information provided by external entities, it is not reasonable to carry out an analysis of the impact of changes of the variables subjacent to the determination of the quotation by the entity
(c) In the specific case of participation units valued in accordance with quotations provided by the respective management company, it is not reasonable to carry out an analysis of the impact of changes of the variables subjacent to the determination of the
quotation by the entity

Other
Valuation of the management company

+50%

-50%

Financial assets at fair value through other
comprehensive income

37,2

The main parameters used, at 30 December 2020 and 2019, in the valuation models were as follows:

Other

37,2

(a)

Total

1 254,1

( 34,1)

40,6

Interest rate curves
The main parameters used, at 30 December 2020 and 2019, in the valuation models were as follows:
The short-term rates presented reflect benchmark interest rates for the money market, whilst those presented for the long-term
represent the interest rate swap quotations for the respective periods:

The main parameters used, at 30 December 2020 and 2019, in the valuation models were as follows:

Interest rate curves

(%)

31.12.2020

31.12.2019

USD

EUR

GBP

31.12.2020

Interest rate curves
The short-term rates presented reflect benchmark interest rates for the money market, whilst those presented for the long-term
represent the interest rate swap quotations for the respective periods:

The short-term rates presented reflect benchmark interest rates for the money market, whilst those presented for the
long-term represent the interest rate swap quotations for the respective periods:
-0,4560
-0,4380
-0,3830
-0,3240
-0,3174
-0,3161
-0,2380
-0,1205
0,0160
0,2110
0,4670
0,5990
0,6370
0,6310

-0,5780
-0,5540
-0,5450
-0,5260
-0,5125
-0,4990
-0,5080
-0,4575
-0,3845
-0,2650
-0,0720
0,0090
0,0090
-0,0250

0,1000
0,0900
0,0900
0,1450
0,1950
-0,0125
0,0913
0,1926
0,2799
0,3966
0,5200
0,5730
0,5805
0,5741

0,0776
0,1439
0,2384
0,2576
0,2995
0,3419
0,2370
0,4275
0,6478
0,9170
1,1835
1,3033
1,3680
1,3998

0,7500
(%)
0,7650
0,8650
0,9000
0,9450
0,7419
0,8243
0,8844
0,9406
1,0172
1,0968
1,1206
1,1130
1,1082

1,6000
1,7900
1,9200
1,9300
1,9100
1,7490
1,6556
1,6990
1,7630
1,8470
1,9650
2,0160
2,0350
2,0420

31.12.2019

GBP

EUR

USD

-0,5780
-0,5540
-0,5450
-0,5260
-0,5125
-0,4990
-0,5080
-0,4575
-0,3845
-0,2650
-0,0720
0,0090
0,0090
-0,0250

0,0776
0,1439
0,2384
0,2576
0,2995
0,3419
0,2370
0,4275
0,6478
0,9170
1,1835
1,3033
1,3680
1,3998

0,1000
0,0900
0,0900
0,1450
0,1950
-0,0125
0,0913
0,1926
0,2799
0,3966
0,5200
0,5730
0,5805
0,5741

-0,4560
-0,4380
-0,3830
-0,3240
-0,3174
-0,3161
-0,2380
-0,1205
0,0160
0,2110
0,4670
0,5990
0,6370
0,6310

1,6000
1,7900
1,9200
1,9300
1,9100
1,7490
1,6556
1,6990
1,7630
1,8470
1,9650
2,0160
2,0350
2,0420

0,7500
0,7650
0,8650
0,9000
0,9450
0,7419
0,8243
0,8844
0,9406
1,0172
1,0968
1,1206
1,1130
1,1082

Credit Spreads
The credit spreads used by the Group in the valuation of credit derivatives are those disclosed on a daily basis by Markit, representing
observations pertaining to around 85 renowned international financial entities. The evolution of the main indexes, understood as
being representative of the credit spread behaviour in the market during the year, is presented as follows:

Overnight
1 month
3 months
6 months
9 months
Overnight
1 year
1 month
3 years
3 months
5 years
6 months
7 years
9 months
10 years
1 year
15 years
3 years
20 years
5 years
25 years
7 years
30 years
10 years
15 years
20 years
25 years
30 years

Credit Spreads

The credit spreads used by the Group in the valuation of credit derivatives are those disclosed on a daily basis by Markit,
representing observations pertaining to around 85 renowned international financial entities. The evolution of the main
indexes, understood as being representative of the credit spread behaviour in the market during the year, is presented
as follows:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 256-

309

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 256-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Index

Series

1 year

3 years

5 years

7 years

NOVO BANCO

(basis points)
NOVO BANCO

10 years
(basis points)

Index

1 year

Series

7 years

3 years

5 years

Index
31 December 2020
CDX USD Main
31 December 2020
iTraxx Eur Main
CDX USD Main
iTraxx Eur Senior Financial
iTraxx Eur Main
31 December 2019
iTraxx Eur Senior Financial
31 December 2020
CDX USD Main
31 December 2019
CDX USD Main
iTraxx Eur Main
CDX USD Main
iTraxx Eur Main
iTraxx Eur Senior Financial
iTraxx Eur Main
iTraxx Eur Senior Financial
iTraxx Eur Senior Financial
31 December 2019
CDX USD Main
Interest rate volatility
Interest rate volatility
iTraxx Eur Main
The values presented below represent the implicit volatilities (at the money) used for the valuation of interest rate options:
iTraxx Eur Senior Financial
Interest rate volatility
The values presented below represent the implicit volatilities (at the money) used for the valuation of interest rate options:

9,09
-
-
The values presented below represent the implicit volatilities (at the money) used for the valuation of interest rate
options:

10 years
NOVO BANCO
90,52
86,37
(basis points)
90,52
89,30
10 years
86,37
89,30
90,08
90,52
85,26
90,08
86,37
83,45
85,26
89,30
83,45

30,35
27,66
30,35
0,00
3 years
27,66
0,00
23,31
30,35
23,32
23,31
27,66
-
23,32
0,00
-

49,98
47,95
49,98
59,06
5 years
47,95
59,06
45,30
49,98
44,22
45,30
47,95
51,59
44,22
59,06
51,59

70,70
66,24
70,70
0,00
7 years
66,24
0,00
67,47
70,70
64,99
67,47
66,24
-
64,99
0,00
-

18,95
0,00
18,95
0,00
1 year
0,00
0,00
9,09
18,95
-
9,09
0,00
-
-
0,00
-

35
34
35
34
Series
34
34
33
32
33
32
32
32

90,08
85,26
83,45

45,30
44,22
51,59

67,47
64,99
-

23,31
23,32
-

33
32
32

35
34
34

(%)

31.12.2020

31.12.2019

Interest rate volatility
The values presented below represent the implicit volatilities (at the money) used for the valuation of interest rate options:

1 year

EUR

15,39
EUR
21,33
15,39
28,38
21,33
34,60
28,38
41,18
34,60
46,54
41,18

EUR

15,39

21,33

46,54

28,38

USD
31.12.2020
118,44
USD
91,12
118,44
84,06
31.12.2020
91,12
65,41
84,06
62,77
65,41
-
62,77
91,12
-
84,06

118,44

USD

GBP

-
GBP
-
-
-
-
-
GBP
-
-
-
-
-

EUR

12,71
EUR
22,74
12,71
33,51
22,74
40,12
EUR
33,51
46,46
40,12
51,03
46,46

12,71

22,74

51,03

33,51

USD
31.12.2019
18,87
USD
39,23
18,87
36,57
39,23
39,25
USD
36,57
34,71
39,25
-
34,71

18,87

39,23

31.12.2019

36,57

(%)

GBP

(%)

48,83
GBP
57,73
48,83
64,04
57,73
67,79
GBP
64,04
70,87
67,79
48,83
-
70,87
57,73
-
64,04

3 years
1 year
5 years
3 years
7 years
5 years
10 years
7 years
15 years
10 years

1 year

3 years

15 years

5 years

10 years

15 years

7 years

34,60

46,54

41,18

70,87

46,46

51,03

39,25

65,41

34,71

40,12

62,77

67,79

1 year

1,2271

1 month

EUR/USD

EUR/GBP

9 months

3 months

6 months

31.12.2019

31.12.2020

Volatility (% )

Foreign exchange rate

1,1234
31.12.2019
0,8508
1,1234
1,0854
0,8508
9,8638
31.12.2019
1,0854
4,2568
9,8638
69,9563
4,2568
4,0197
69,9563
5,9501
4,0197

Foreign exchange rates and volatility
Foreign exchange rates and volatility
Presented below, are the foreign exchange rates (European Central Bank) at the balance sheet date and the implicit
Presented below, are the foreign exchange rates (European Central Bank) at the balance sheet date and the implicit volatilities (at
volatilities (at the money) for the main currencies used in the derivatives’ valuation:
the money) for the main currencies used in the derivatives’ valuation:
1,2271
31.12.2020
0,8990
1,2271
1,0802
0,8990
10,4703
31.12.2020
1,0802
4,5597
10,4703
91,4671
4,5597
5,1940
91,4671
7,4265
5,1940

EUR/USD
Foreign exchange rate
EUR/GBP
EUR/USD
EUR/CHF
EUR/GBP
EUR/NOK
EUR/CHF
EUR/PLN
EUR/NOK
EUR/RUB
EUR/PLN
USD/BRL a)
EUR/RUB
USD/TRY b)
USD/BRL a)
a) Calculated based on EUR / USD and EUR / BRL exchange rates.
USD/TRY b)
EUR/PLN
b) Calculated based on EUR / USD and EUR / TRY exchange rates.
a) Calculated based on EUR / USD and EUR / BRL exchange rates.
Regarding foreign exchange rates, the Group uses in its valuation models the spot rate observed in the market at the moment of the
b) Calculated based on EUR / USD and EUR / TRY exchange rates.
valuation.
Regarding foreign exchange rates, the Group uses in its valuation models the spot rate observed in the market at the moment of the
Equity indexes
valuation.
The table below presents the evolution of the main market equity indexes and their respective volatilities, used in the valuation of
equity derivatives:
Equity indexes
Regarding foreign exchange rates, the Group uses in its valuation models the spot rate observed in the market at the moment of the
The table below presents the evolution of the main market equity indexes and their respective volatilities, used in the valuation of
valuation.
equity derivatives:

Volatility (% )
6,45
6 months
7,24
6,45
4,85
7,24
8,78
4,85
6,38
8,78
8,71
6,38
7,24
18,30
8,71
4,85
17,83
18,30
8,78

a) Calculated based on EUR / USD and EUR / BRL exchange rates.
b) Calculated based on EUR / USD and EUR / TRY exchange rates.

6,59
3 months
7,63
6,59
4,68
7,63
8,91
3 months
4,68
6,98
8,91
8,07
6,98
7,63
19,24
8,07
4,68
18,18
19,24
8,91

6,43
9 months
7,10
6,43
5,00
7,10
8,63
9 months
5,00
6,05
8,63
6,43
9,29
6,05
7,10
17,93
9,29
5,00
17,80
17,93
8,63

6,81
1 month
7,96
6,81
4,41
7,96
8,99
1 month
4,41
7,85
8,99
7,51
7,85
20,76
7,51
18,31
20,76

6,37
1 year
6,98
6,37
5,16
6,98
8,48
1 year
5,16
5,75
8,48
6,37
9,58
5,75
6,98
17,56
9,58
5,16
17,75
17,56
8,48

EUR/RUB
USD/BRL a)
USD/TRY b)

Volatility (% )

6 months

EUR/NOK

EUR/CHF

69,9563

10,4703

91,4671

18,18
6,98

7,4265

5,9501

0,8508

9,8638

4,2568

1,1234

1,0854

4,0197

5,9501

4,5597

1,0802

7,4265

0,8990

5,1940

17,83
6,38

17,80
6,05

17,75
5,75

18,31

17,83

17,56

17,75

17,93

17,80

20,76

18,18

18,30

19,24

8,99

6,59

4,41

6,81

7,85

7,96

6,45

8,07

7,51

8,71

9,58

9,29

Equity indexes
The table below presents the evolution of the main market equity indexes and their respective volatilities, used in the valuation of
equity derivatives:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 257-

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

310

- 257-

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 257-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Regarding foreign exchange rates, the Group uses in its valuation models the spot rate observed in the market at the
moment of the valuation.

Equity indexes

The table below presents the evolution of the main market equity indexes and their respective volatilities, used in the
valuation of equity derivatives:

NOVO BANCO

31.12.2020
31.12.2020

Quotation
Quotation
31.12.2019
31.12.2019

% Change
% Change

3 553
3 553
4 898
4 898
8 074
8 074
6 461
6 461
13 719
13 719
3 756
3 756
119 017
119 017

3 745
3 745
5 214
5 214
9 549
9 549
7 542
7 542
13 249
13 249
3 231
3 231
115 645
115 645

5,42%
5.42%
6,45%
6.45%
18,28%
18.28%
16,75%
16.75%
-3,42%
-3.42%
-13,99%
-13.99%
-2,83%
-2.83%

Historical volatility

1 month
1 month
13,27
13.27
17,03
17.03
18,26
18.26
14,68
14.68
14,97
14.97
9,45
9.45
16,43
16.43

3 months

3 months
21,62

21.62

20,33

20.33

24,88

24.88

19,00

19.00

22,50

22.50

18,74

18.74

22,72

22.72

Implied Volatility

Implied
Volatility

-
20,72

20.72

20,88

20.88

17,34

17.34

25,72

25.72

DJ Euro Stoxx 50

PSI 20

PSI 20
IBEX 35

IBEX 35
FTSE 100

FTSE 100

DAX

DAX
S&P 500

S&P 500
BOVESPA

BOVESPA

The fair value of financial assets and liabilities recorded in the balance sheet at amortised cost is analyzed as follows, having been
The fair value of financial assets and liabilities recorded in the balance sheet at amortised cost is analyzed as follows, having been
estimated based on the main methodologies and assumptions described below:
The fair value of financial assets and liabilities recorded in the balance sheet at amortised cost is analyzed as follows,
estimated based on the main methodologies and assumptions described below:
having been estimated based on the main methodologies and assumptions described below:

31 December 2020

Cash, cash balances at central bank and other demand deposits
Cash, cash balances at central bank and other demand deposits
Financial assets at amortised cost
Financial assets at amortised cost
Debt securities
Debt securities
Loans and advances to banks
Loans and advances to banks
Loans and advances to customers
Loans and advances to customers

Fair Value

(in thousands of Euros)

Assets / liabilities
Assets / liabilities
recorded at
recorded at
amortised cost
amortised cost

Quoted market
Quoted market
prices
prices

Valuation models
Valuation models
based on observable
based on observable
market parameters
market parameters

Valuation models
Valuation models
based on
based on
unobservable
unobservable
market parameters
market parameters

Total fair value

(Level 1)
(Level 1)

(Level 2)

(Level 3)

2 695 459
2 695 459

2 229 947
2 229 947
113 795
113 795
23 554 304
23 554 304

2 695 459

846 176
846 176
-
-
-
-

378 588
113 795
-

1 203 883
-
23 784 698

2 428 647
2 428 647
113 795
113 795
23 784 698
23 784 698

Financial assets

28 593 505
28 593 505

846 176
846 176

3 187 842

24 988 581

29 022 599

Financial liabilities measured at amortised cost

Financial liabilities measured at amortised cost
Deposits from banks
Deposits from banks
Due to customers
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred assets
Debt securities issued, subordinated debt and liabilities associated to transferred assets
Other financial liabilities
Other financial liabilities

Financial liabilities

10 102 896
10 102 896
26 322 060
26 322 060
1 017 928
1 017 928
365 883
365 883

37 808 767
37 808 767

-
-
-
-
1 146 753
1 146 753

1 146 753
1 146 753

10 143 505
10 143 505
-
-
1 800
1 800
-
-

10 145 305

-
-
26 322 060
26 322 060
82 898
82 898
365 883
365 883

10 143 505
26 322 060
1 231 451
365 883

26 770 841

38 062 899

Fair Value

(in thousands of Euros)

Assets / liabilities
Assets / liabilities
recorded at
recorded at
amortised cost
amortised cost

Quoted market
Quoted market
prices
prices

Valuation models
Valuation models
based on observable
based on observable
market parameters
market parameters

Valuation models
Valuation models
based on
based on
unobservable
unobservable
market parameters
market parameters

Total fair value

(Level 1)
(Level 1)

(Level 2)

(Level 3)

31 December 2019

Cash, cash balances at central bank and other demand deposits
Cash, cash balances at central bank and other demand deposits
Financial assets at amortised cost
Financial assets at amortised cost

Debt securities
Loans and advances to banks
Loans and advances to customers

Debt securities
Loans and advances to banks
Loans and advances to customers
Financial assets

Financial assets

Financial liabilities measured at amortised cost

Deposits from banks
Deposits from banks
Due to customers
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred
Debt securities issued, subordinated debt and liabilities associated to transferred
assets
assets
Other financial liabilities
Other financial liabilities
Financial liabilities

Financial liabilities

1 854 081
1 854 081

1 622 545
1 622 545
369 228
369 228
25 149 687
25 149 687
28 995 541
28 995 541

9 849 623
9 849 623
28 400 127
28 400 127
1 065 211
1 065 211
358 688
358 688
39 673 649
39 673 649

-
-

84 535
84 535
-
-
-
-
84 535
84 535

-
-
-
-
1 365 636
1 365 636

1 365 636
1 365 636

1 854 081

636 336
369 228
-

2 859 645

9 875 850
-

9 875 850

1 046 352
-
25 478 179

26 524 531

-
28 400 127

-
28 400 127
89 087

89 087

358 688

28 847 902

1 854 081

1 767 223
369 228
25 478 179

29 468 711

9 875 850
28 400 127

1 454 723

358 688

40 089 388

Cash and deposits with Central Banks, Deposits with banks and Loans and advances to credit institutions and Deposits from Central
Cash and deposits with Central Banks, Deposits with banks and Loans and advances to credit institutions and Deposits from Central
Banks.
Banks.
Considering the short-term nature of these financial instruments, their carrying book value is a reasonable estimate of their fair value.
311
Considering the short-term nature of these financial instruments, their carrying book value is a reasonable estimate of their fair value.

Securities at amortised cost
Securities at amortised cost
The fair value of securities recorded at fair value is estimated according to the methodologies used for the valuation of securities
The fair value of securities recorded at fair value is estimated according to the methodologies used for the valuation of securities
recorded at fair value, as described at the beginning of the current Note.

recorded at fair value, as described at the beginning of the current Note.

Loans and advances to customers

31 December 2020

Notes to the Consolidated Financial Statements

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 258-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Cash and deposits with Central Banks, Deposits with banks and Loans and advances to credit institutions and Deposits
from Central Banks.
Considering the short-term nature of these financial instruments, their carrying book value is a reasonable estimate of
their fair value.

Securities at amortised cost
The fair value of securities recorded at fair value is estimated according to the methodologies used for the valuation of
securities recorded at fair value, as described at the beginning of the current Note.

Loans and advances to customers
The fair value of loans and advances to customers is estimated based on the discounted expected future cash flows
of principal and interest, assuming that the instalments are paid on the dates contractually defined. The expected
future cash flows from portfolios of loans with similar credit risk characteristics, such as residential mortgage loans, are
estimated collectively on a portfolio basis. The discount rates used by the Group are the current interest rates used for
loans with similar characteristics.

Deposits from credit institutions
The fair value of deposits from Central Banks and Deposits from credit institutions is estimated based on the discounted
expected future cash flows of principal and interest.

Due to customers
The fair value of these financial instruments is estimated based on the discounted expected future cash flows of principal
and interest. The discount rate used by the Group is that which reflects the current interest rates applicable to deposits
with similar characteristics at the balance sheet date. Given that the interest rates applicable to these instruments are
renewed for periods under one year, there are no material relevant differences in their fair value.

Debt securities issued and Subordinated debt
The fair value of these instruments is based on quoted market prices, when available. When not available, the Group
estimates their fair value by discounting their expected future cash flows of principal and interest.

Other financial liabilities
These liabilities are short-term and therefore the book value is a reasonable estimate of their fair value.

NOTE 41 – Assets transfers

As part of the restructuring process of the Portuguese real estate sector, several initiatives were launched to create
financial, operational and management conditions to the sector. Accordingly, the Government, in close liaison with the
business and the financial sector, including BES, encouraged the creation of companies and specialised funds which,
through concentration, aggregation, mergers and integrated management, could achieve the required synergies to
recover the companies. Pursuing the goals established, companies (parent companies) were incorporated, in which the
Originating Bank had minority interests and which, in turn, now hold almost all the share capital of certain subsidiaries
(subsidiaries of those parent companies) to acquire certain real estate Bank loans.

Several assignments operations of financial assets (namely loans and advances to customers) were made to the latter
entities (subsidiaries of the parent companies). These entities are responsible for managing the assets received as
collateral and, after the assignment of the loans and advances to customers, for implementing a plan to increase their
value. Almost all the financial assets assigned under these operations were derecognized from the balance sheet of
the Group, since a substantial portion of the risks and rewards associated with these, as well as the respective control,
were transferred to those third parties.

312

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThese acquiring entities have a specific management structure, fully autonomous from the assignor Banks, appointed
on the date of their incorporation and have the following main responsibilities:

• define the entity’s purpose;

• to administer and manage, exclusively and independently, the assets acquired, to define the objectives and invest-

ment policy as well as the management and affairs of the entity.

The acquiring entities are predominantly financed through the issuance of senior equity instruments, fully subscribed
by the parent companies. The amount of capital represented by senior securities equals the fair value of the underlying
asset, determined through a negotiation process based on valuations made by both parties. These securities are re-
munerated at an interest rate that reflects the risk of the company holding the assets. Additionally, the funding can be
supplemented through Bank underwriting of junior capital instruments in an amount equal to the difference between
the carrying book value of the assets transferred and the fair value subjacent to the senior securities’ valuation. These
junior capital instruments, when subscribed by the Group, will give rise to a contingent positive amount, if the value
of the assets assigned exceeds the value of the senior securities plus their remuneration, and are normally limited to a
maximum of 25% of the aggregate amount of the senior and junior securities issued.

Given that these junior securities reflect a differential assessment (gap) of the fair value of the assets assigned, based on
a valuation performed by independent entities and a negotiation process between the parties, they are fully provided
for in the Group's balance sheet.

Therefore, following the asset assignment operations, the Group subscribed:

• equity instruments, representing the capital of parent companies in which the cash flow that will enable the company
to be recovered come from a wide range of assets provided by the various Banks. These securities are recognized
in the assets portfolio mandatorily at fair value through profit or loss being valued to market, with valuation released
regularly by the mentioned companies whose accounts are audited at the end of each year;

•

junior instruments issued by the loan acquiring companies, which are fully provided for to reflect the best estimate
of the impairment of the financial assets transferred

The instruments subscribed by NOVO BANCO Group represent clear minority positions in the share capital of the
parent companies and of its subsidiaries.

In this context, holding no control but being exposed to some of the risks and rewards of ownership, the NOVO BANCO
Group, in accordance with IFRS 9 3.2.7, performed an analysis of its exposure to the variability of the risks and rewards
of the transferred assets before and after the operation, having concluded that it has not substantially retained all the
risks and rewards of ownership. Additionally, and considering that it has no control either, it proceeded, in accordance
with IFRS 9 3.2.6c (i) with the derecognition of the assets transferred and (ii) the recognition of the assets received in
return, as shown in the following table:

313

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESUp to 31 December 2012

Fundo Recuperação Turismo, FCR

FLIT SICAV

Discovery Portugal Real Estate Fund

Fundo Vallis Construction Sector

Fundo Recuperação, FCR

Up to 31 December 2013

Fundo Vallis Construction Sector

FLIT SICAV

Discovery Portugal Real Estate Fund

Fundo Recuperação Turismo, FCR

Fundo Recuperação, FCR

Fundo Reestruturação Empresarial

Up to 31 December 2014

Discovery Portugal Real Estate Fund

Fundo Vallis Construction Sector

Fundo Recuperação, FCR

Fundo Reestruturação Empresarial

Fundo Aquarius

FLIT SICAV

Up to 31 December 2015

Fundo Aquarius

Fundo Recuperação, FCR

Discovery Portugal Real Estate Fund

Up to 31 December 2016

Fundo Aquarius

Fundo Vallis Construction Sector

Up to 31 December 2017

Fundo Aquarius

FLIT SICAV

Up to 31 December 2018

Fundo Aquarius

FLIT SICAV

Fundo Vallis Construction Sector

Up to 31 December 2019

Fundo Aquarius

Amounts at transfer date

(in thousands of Euros)

Amounts of the assets transferred

Securities subscribed

Net assets
transferred

Transfer amount

Result of the
transfer

Shares
(Senior
securities)

Junior
securities

Total

Impairment

Carrying book
value

282 121

252 866

96 196

66 272

145 564

18 552

80 769

51 809

11 066

52 983

67 836

282 121

254 547

93 208

66 272

149 883

18 552

80 135

45 387

11 066

52 963

67 836

73 802

74 240

5 389

108 517

24 883

1 471

5 348

710

14 156

555

3 261

839

5 389

108 481

24 753

1 471

5 774

602

14 156

470

3 298

644

1 682

(2 988)

4 319

( 634)

(6 422)

( 20)

438

( 36)

( 130)

427

( 108)

( 86)

( 194)

256 892

235 318

96 733

81 002

148 787

1 606

85 360

51 955

726

99 403

58 238

1 289

14 565

4 078

104 339

1 500

30 406

4 855

600

14 453

624

644

3 348

( 1)

2 323

1 821

( 503)

1 821

34 906

23 247

21 992

36 182

2 874

314

291 798

( 34 906)

258 565

( 23 247)

96 733

102 994

184 970

4 480

85 360

51 955

726

99 403

58 238

1 603

14 565

4 078

104 339

1 500

30 406

4 855

600

14 453

624

644

3 348

( 1)

1 821

(21 992)

(23 000)

(2 874)

( 314)

256 892

235 318

96 733

81 002

161 970

1 606

85 360

51 955

726

99 403

58 238

1 289

14 565

4 078

104 339

1 500

30 406

4 855

600

14 453

624

644

3 348

( 1)

1 821

1 367 289

1 363 070

(4 219)

1 432 468

119 516

1 418 058

( 106 333)

1 311 724

As at 31 December 2020, the Group's total exposure to securities associated with the assignment operations amounted
to Euro 498.8 thousand (31 December 2019: Euro 839.9 million). With the adoption of IFRS 9, these securities were
transferred from the fair value portfolio through other comprehensive income to the mandatorily measured at fair value
through profit or loss, therefore, the balance sheet value presented below already corresponds to the respective fair
value, not requiring register an impairment. The detail is as follows:

Securities

31.12.2020

Shareholder loans or
supplementary capital

Participation
units subscribed
(no.)

Book value

Gross
amount

Impairment

Net
amount

Fundo Recuperação Turismo, FCR

260 683

86 316

34 824

( 34 824)

FLIT SICAV

281 191

157 084

14 900

( 14 900)

Discovery Portugal Real Estate Fund

258 440

116 479

Fundo Vallis Construction Sector

Fundo Recuperação, FCR

Fundo Reestruturação Empresarial

Fundo Aquarius

206 805

117 051

160 586

44 873

22 436

71 631

1 284 756

498 819

49 724

( 49 724)

(in thousands of Euros)

Securities

31.12.2019

Shareholder loans or
supplementary capital

Participation units
subscribed (no.)

Book value

Gross
amount

Impairment

Net
amount

259 646

180 646

34 824

( 34 824)

279 515

197 744

14 900

( 14 900)

256 847

213 217

206 805

74 296

117 051

48 148

159 274

125 875

1 279 138

839 926

49 724

( 49 724)

Unrealised
Subscribed
Capital

14 807

15 309

7 193

19 063

8 237

22 800

87 409

Unrealised
Subscribed
Capital

13 769

13 826

5 232

18 543

6 113

19 519

77 002

The Group also maintains an indirect exposure to the financial assets assigned, within the scope of a minority interest in the pool of
all assets assigned by other financial institutions, through the shares of the subscribed parent companies. However, there was an
operation with the company FLITPTREL VIII in which, due to the fact that the acquiring company substantially holds assets assigned
by the Group and considering the holding of junior securities, the variability test resulted in a substantial exposure to all risks and
benefits. In this circumstance, the operation, in the initial amount of Euro 60 million, remained recognized in the balance sheet under
the heading of loans to customers.

NOTE 42 – RISK MANAGEMENT

314

NOVO BANCO, S.A., (www.novobanco.pt) “institutional” area in the website presents the information directed to investors which
complements the available information presented in this document, namely, NOVO BANCO, S.A., Market Discipline Report 2020
which addresses the public disclosure obligations as defined in Part VIII of the Regulation n.º 575/2013 of the European Parliament

and the Council at 26 of July, 2013 (CRR) and EBA guidelines transposed to the Portuguese legislation through the Instruction n.º

5/2018 the Bank of Portugal.

In the case where the information of the present annual report supports the information in the Market Discipline report it is identified

through references to this report as systematized in the Annex VI of the Market Discipline Report. Additionally, by the nature of the

information presented in the Market Discipline report, it complements the information related with some risks management, namely,

those related with the policies and procedures adopted and the quantitative information related with risk exposures.

The Group is exposed to the following risks arising from the use of financial instruments:

 Credit risk;

 Market risk;



Liquidity risk;

 Operational risk.

Credit Risk

Credit risk results from the possibility of financial losses arising from the default of the client or counterparty in relation to the

contractual obligations established with the Group within the scope of its credit activity. Credit risk is essentially present in traditional

banking products - loans, guarantees and other contingent liabilities and derivatives. In credit default swaps (CDS), the net exposure

between protection seller and buyer positions on each entity underlying the transactions, constitutes credit risk for NOVO BANCO

Group. CDS are recorded at their fair value in accordance with the accounting policy described in Note 2.4.

A permanent management of the credit portfolios is carried out, which favors interaction between the various teams involved in risk

management throughout the successive stages of the life of the credit process. This approach is complemented by the introduction

of continuous improvements both in terms of methodologies and tools for risk assessment and control, as well as in terms of

procedures and decision circuits.

The monitoring of the Group's credit risk profile, namely the evolution of credit exposures and monitoring of credit losses, is carried

out regularly by the Risk Committee. The compliance with approved credit limits and the correct functioning of the mechanisms

associated with the approval of credit lines within the scope of the current activity of the commercial areas are also subject to regular

analysis.

NOVO BANCO Group’s maximum credit risk exposure is analyzed as follows:

31 December 2020

Notes to the Consolidated Financial Statements

101

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

The Group also maintains an indirect exposure to the financial assets assigned, within the scope of a minority interest
in the pool of all assets assigned by other financial institutions, through the shares of the subscribed parent companies.
However, there was an operation with the company FLITPTREL VIII in which, due to the fact that the acquiring compa-
ny substantially holds assets assigned by the Group and considering the holding of junior securities, the variability test
resulted in a substantial exposure to all risks and benefits. In this circumstance, the operation, in the initial amount of
Euro 60 million, remained recognized in the balance sheet under the heading of loans to customers.

NOTE 42 – Risk management

NOVO BANCO, S.A., (www.novobanco.pt) “institutional” area in the website presents the information directed to inves-
tors which complements the available information presented in this document, namely, NOVO BANCO, S.A., Market
Discipline Report 2020 which addresses the public disclosure obligations as defined in Part VIII of the Regulation n.º
575/2013 of the European Parliament and the Council at 26 of July, 2013 (CRR) and EBA guidelines transposed to the
Portuguese legislation through the Instruction n.º 5/2018 the Bank of Portugal.

In the case where the information of the present annual report supports the information in the Market Discipline
report it is identified through references to this report as systematized in the Annex VI of the Market Discipline Report.
Additionally, by the nature of the information presented in the Market Discipline report, it complements the information
related with some risks management, namely, those related with the policies and procedures adopted and the quanti-
tative information related with risk exposures.

The Group is exposed to the following risks arising from the use of financial instruments:

• Credit risk;

• Market risk;

• Liquidity risk;

• Operational risk.

Credit Risk
Credit risk results from the possibility of financial losses arising from the default of the client or counterparty in relation
to the contractual obligations established with the Group within the scope of its credit activity. Credit risk is essentially
present in traditional banking products - loans, guarantees and other contingent liabilities and derivatives. In credit
default swaps (CDS), the net exposure between protection seller and buyer positions on each entity underlying the
transactions, constitutes credit risk for NOVO BANCO Group. CDS are recorded at their fair value in accordance with
the accounting policy described in Note 2.4.

A permanent management of the credit portfolios is carried out, which favors interaction between the various teams
involved in risk management throughout the successive stages of the life of the credit process. This approach is
complemented by the introduction of continuous improvements both in terms of methodologies and tools for risk
assessment and control, as well as in terms of procedures and decision circuits.

The monitoring of the Group's credit risk profile, namely the evolution of credit exposures and monitoring of credit
losses, is carried out regularly by the Risk Committee. The compliance with approved credit limits and the correct
functioning of the mechanisms associated with the approval of credit lines within the scope of the current activity of
the commercial areas are also subject to regular analysis.

NOVO BANCO Group’s maximum credit risk exposure is analyzed as follows:

315

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNOVO BANCO

The Group also maintains an indirect exposure to the financial assets assigned, within the scope of a minority interest in the pool of

all assets assigned by other financial institutions, through the shares of the subscribed parent companies. However, there was an

operation with the company FLITPTREL VIII in which, due to the fact that the acquiring company substantially holds assets assigned

by the Group and considering the holding of junior securities, the variability test resulted in a substantial exposure to all risks and

benefits. In this circumstance, the operation, in the initial amount of Euro 60 million, remained recognized in the balance sheet under

the heading of loans to customers.

NOTE 42 – RISK MANAGEMENT

NOVO BANCO, S.A., (www.novobanco.pt) “institutional” area in the website presents the information directed to investors which

complements the available information presented in this document, namely, NOVO BANCO, S.A., Market Discipline Report 2020

which addresses the public disclosure obligations as defined in Part VIII of the Regulation n.º 575/2013 of the European Parliament

and the Council at 26 of July, 2013 (CRR) and EBA guidelines transposed to the Portuguese legislation through the Instruction n.º

5/2018 the Bank of Portugal.

In the case where the information of the present annual report supports the information in the Market Discipline report it is identified

through references to this report as systematized in the Annex VI of the Market Discipline Report. Additionally, by the nature of the

information presented in the Market Discipline report, it complements the information related with some risks management, namely,

those related with the policies and procedures adopted and the quantitative information related with risk exposures.

The Group is exposed to the following risks arising from the use of financial instruments:

• Credit risk;

• Market risk;

• Liquidity risk;

• Operational risk.

Credit Risk

Credit risk results from the possibility of financial losses arising from the default of the client or counterparty in relation to the

contractual obligations established with the Group within the scope of its credit activity. Credit risk is essentially present in traditional

banking products - loans, guarantees and other contingent liabilities and derivatives. In credit default swaps (CDS), the net exposure

between protection seller and buyer positions on each entity underlying the transactions, constitutes credit risk for NOVO BANCO

Group. CDS are recorded at their fair value in accordance with the accounting policy described in Note 2.4.

A permanent management of the credit portfolios is carried out, which favors interaction between the various teams involved in risk

management throughout the successive stages of the life of the credit process. This approach is complemented by the introduction
of continuous improvements both in terms of methodologies and tools for risk assessment and control, as well as in terms of
procedures and decision circuits.

The monitoring of the Group's credit risk profile, namely the evolution of credit exposures and monitoring of credit losses, is carried
out regularly by the Risk Committee. The compliance with approved credit limits and the correct functioning of the mechanisms
associated with the approval of credit lines within the scope of the current activity of the commercial areas are also subject to regular
analysis.

NOVO BANCO Group’s maximum credit risk exposure is analyzed as follows:

Deposits with and loans and advances to banks
Derivatives for trading and fair value option derivatives
Securities held for trading
Securities at fair value through profit/loss - mandatory
Securities at fair value through other comprehensive income
Securities at amortised cost
Loans and advances to customers
Derivatives - hedge accounting
Other assets
Guarantees and standby letters provided
Documentary credits
Irrevocable commitments
Credit risk associated with the credit derivatives' reference entities

(in thousands of Euros)

31.12.2020

31.12.2019

367 252
388 257
267 016
160 184
7 839 145
2 231 076
23 617 034
12 972
758 252
2 734 027
410 292
7 011 112
4 798

635 181
493 884
254 848
57 590
8 764 004
1 622 545
25 202 227
7 452
802 530
2 899 851
516 162
7 253 656
2 883

45 801 417

48 512 813

- 261-

The Group calculates impairment, on a collective or individual basis in accordance with the accounting policy as
described in Note 2.5. In the cases where the value of the collateral, net of haircuts (taking into account the type of
collateral), equals or exceeds the exposure, the individual impairment may be nil. Hence, NOVO BANCO Group does
not have any overdue financial assets for which it has not performed a review regarding their recoverability and the
subsequent impairment recognition, when necessary.

The exercise of build the base and alternative macroeconomic scenarios for the Portuguese economy is based on a
combination of econometric forecasts, information on forecasts from other external institutions and application of
subjective expert judgment.

In the first component, GDP growth is estimated through estimates for the growth of expenditure components,
obtaining GDP through the formula GDP = Consumption + Investment + Exports - Imports. The econometric
specifications chosen are those that, after testing different alternatives, generate the best result.

The econometric estimates thus obtained are then weighted with forecasts from external institutions, according to the
principle that the combination of different projections tends to be more accurate than just a forecast (the risk of errors
and bias associated with specific methods and variables is minimized).

The forecasts for prices (consume and real estate) and unemployment follow a similar methodology: own forecasts
based on an estimated model, weighted with forecasts from external institutions, if available. In a base scenario, the
projections for interest rates start from market expectations (provided by Bloomberg), with possible adjustments in
accordance with the principles defined above, if considered appropriate (weighting by expert judgment and forecasts
from external institutions). The alternative scenarios are based on the historical observation of deviations from the trend
in GDP behavior (cost and contraction cycles), the reference of EBA recommendations for extreme adverse scenarios,
the stylized facts of economic cycles, with respect to the components of expenditure, prices, unemployment, etc. and
estimates.

Thus, when revising / updating the scenarios, the respective probabilities of execution are also reviewed. Once the
scenarios are updated, the values of the risk parameters are updated for later consideration in the scope of the
Impairment calculation. The final impairment calculated will thus result from the sum of the impairment value of each
scenario, weighted by the respective probability of execution.

Currently, 3 scenarios are considered for the calculation of impairment on a collective basis: base case , downside case
and an upside case.

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

The base case scenario envisages a trend recovery in the form of a “swoosh”. After the abrupt decline in activity in the
1st and 2nd quarters of 2020, there was an initially rapid recovery with the first reopen, followed by a recovery that
tended to be more gradual. The recovery in this scenario leaves economic activity at a lower level than pre-Covid for a
relatively prolonged period, until 2022. Thus, it is assumed some loss of productive potential in the economy.

This scenario assumes negative impacts of a second and third waves of Covid-19 in the 4th quarter of 2020 and
between the 1st and 2nd quarters of 2021, in line with pandemic projection scenarios. These waves restrict economic
activity, but in a progressively less pronounced way than in the first wave. Even so, relatively moderate quarterly GDP
declines are admitted in the 4th quarter of 2020 and in the 2nd quarter of 2021. This scenario assumes the gradual
distribution of anti-Covid-19 vaccines throughout 2021 and in 2022, allowing for a more visible normalization of eco-
nomic activity as of the 3rd quarter of 2021.

The base case scenario, to which a 60% probability is attributed, points to an annual drop in GDP of around 8.3%
in 2020, followed by an annual growth of around 5.2% in 2021, which benefits from a favourable base effect. The
following years assume a gradual evolution towards trend / potential growth, with annual growth of 3.4% in 2022
and 2% in 2023. For the construction of the scenario, the information available on the initial economic impacts of the
Covid-19 crisis was used. In the base case scenario, the increase in unemployment is strongly mitigated by measures
to protect income and employment, which are assumed to be prolonged until 2021. House prices prevent a fall, due
to stabilization measures, such as default and credit guarantees. The gradual withdrawal of these measures, however,
causes a sharp deceleration in these prices in 2021. The base case scenario is marked by disinflationary pressures and
the maintenance of strong monetary incentives.

The downside case scenario, with a probability of 30%, predicts more severe impacts on the economy of a second and
third wave of Covid-19, which force intermittent lockdowns, leading to stronger QoQ contractions in GDP in the 4th
quarter of 2020 and in the 2nd quarter of 2021. The recovery of activity takes place more slowly than in the base case
scenario, which translates into more persistent negative economic effects and a severe loss of productive capacity.
Activity is still significantly below pre-Covid levels in 2023, which translates into a significant rise in unemployment
and a more depressed evolution of prices. GDP declines 9.6% in 2020 and grows 0.9% in 2021, which is explained, in
this case, by a favorable base effect. GDP grows 2.8% in 2022, still benefiting from a favorable base effect, assuming a
trend towards tendencial / potential growth in 2023. The normalization of activity with the introduction of vaccines is
assumed in a more time-consuming and gradual way.

The updside case scenario, with a 10% probability, foresees a “V” shaped recovery. The second wave of the pandemic
has a less pronounced and shorter impact on economic activity and the absence of any third wave is assumed. This
allows for a normalization of activity and a faster recovery of growth. Above all, this allows the recovery of pre-Covid
activity levels as early as 2021, which translates into a more benign trend in unemployment. Without a significant
or persistent loss of capacity, prices have grown more noticeably. In this scenario, a rise in market interest rates is
assumed, albeit at historically low levels.

Four macroeconomic models are used for the segments of Corporate (excluding Real Estate), Real Estate Companies,
Mortgage Loans and Other Loans to Individuals.

The Corporate segment (excluding Real Estate) is particularly sensitive to the rate of GDP growth and the unemployment
rate. In all scenarios, there is a drop in GDP, followed by a recovery in the following years, reaching in 2021 the levels
verified before the pandemic, with the exception of the downside case scenario, in which the pre-pandemic levels
are not reached in the horizon of 3 years. Unemployment registers a significant increase in the year 2020, followed
by a recovery that is not enough to reach the levels of unemployment before the pandemic, with the exception of the
upside case scenario that in the year 2022 is slightly lower than that registered before the pandemic.

The Real Estate Companies segment is particularly sensitive to changes in real estate prices and to the GDP growth
rate. It is the segment most affected in the time horizon in question.

The price of real estate registered a significant fall in the year 2020 in all scenarios, followed by a more or less rapid
recovery, depending on the scenario in question.

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe Mortgage Loans segment is mainly affected by the reduction in GDP and the fall in real estate prices, across all
scenarios in the year 2020.

The Other Loans to Individuals segment is substantially affected by the increase in Unemployment and the reduction in
GDP, verified in 2020 in any of the scenarios.

Collective analysis adjustments to the automatic result of the model

After processing the automatic impairment calculation and validating the consistency of the results obtained, all
situations that may need an adjustment to the calculated impairment value are assessed. These adjustments are
reflected, whenever possible, directly in the exposures.

When this is not possible, the calculated impairment value is recorded without being allocated to specific exposures
and, for that purpose, the stage and the type of credit to which it refers are associated. Having the prerogative to ensure
that all impairment is allocated to specific exposures, these impairment amounts initially constituted in the unallocated
form will, once conditions exist, be fully distributed over the exposures in which their allocation is determined.

In terms of the governance model, both adjustments to specific exposures and impairment amounts constituted in the
unallocated form must be validated and supported by an approval by a competent body, which, as a rule, will be the
Extended Impairment Committee.

Individual impairment analysis process

The Individual Credit Analysis comprises a staging analysis and an individual impairment quantification analysis. The
staging analysis is performed for debtors previously classified as stage 1 and stage 2, with the purpose of evaluating the
adequacy of the assigned stage with additional information obtained on an individual basis. The individual impairment
quantification analysis aims to determine the most appropriate impairment rate for each credit customer, regardless of
the amount resulting from the Collective Impairment Model. Clients that have been subject to Individual Analysis, but
for which an objective impairment loss was not considered, are again included in the Collective Impairment Model.
The Individual Analysis of the selected clients is carried out based on the information provided by the Commercial
Structures regarding the client / Group's framework, historical and forecast cash flows (when available) and existing
collateral.

The scheme below is illustrative of the individual credit analysis to be carried out for the purpose of concluding on the
classification in terms of staging of debtors.

Individual Analysis

Yes

The debt holder is classiﬁed in
stage 1 or stage 2?

Quantiﬁcation of individual
impairment (stage 3)

Credit analysis to quantify impairment on an individual
basis using one of the following methodologies (or
combination of both. (i) going concern and (ii) gone
concern

Staging Analysis

Individual analysis of credit classified in stage 1 and stage 2 withthe purpose
of assessing the adequacy of the stage from the model taking into account
qualitative information available, the results os the analysis of staging
questionnaires and specific information on the debtor’s ability to generate
enough cash flow to service debt service.

Are the expected future cash ﬂows for the debtor
materially impacted and insufficient to cover the
debt service?

Yes

Collective Impairment

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDSelection Criteria

Individual Analysis (staging analysis and, when applicable, quantification of individual impairment) should be carried out
for the borrowers who::

• Register Stage 3 exposure equal to or greater than € 1,000,000;

• Register Stage 2 exposure equal to or greater than € 5,000,000;

• Register Stage 2 exposure equal to or greater than 1,000,000 € and have no rating assigned;

• Register Stage 1 exposure equal to or greater than 5,000,000 € and have no rating assigned;

• Register Stage 1 exposure equal or greater than € 25,000,000 (individually significant exposure);

• Fit into the Financial Holding risk segment and register exposure equal to or greater than € 5,000,000;

• Fit into the Real Estate risk segment and register exposure equal to or greater than € 5,000,000;

• Are identified by the Committee itself based on another criteria that justify (e.g.; sector of activity);

•

In the past, specific impairment has been attributed to them;

•

In the face of any new element that may have an impact on the calculation of impairment, be proposed for analysis
by one of the stakeholders of the Impairment Committee or by another Body.

The identification of the target customers for Individual Analysis will be updated monthly, in order to contemplate
any changes that may occur throughout the year. The Committee analysis of the customers identified in the previous
paragraph will be carried out in the month in which:

• The client registers, for the first time, one of the selection criteria for Individual Impairment Analysis, mentioned in

the previous paragraph;

• Expiry of the Analysis expiration date;

•

Its analysis is requested by one of the participants of the Impairment Committee or by another Body.

The Individual Impairment Analysis can be carried out for individual customers, but should whenever possible consider
the Economic Group view of the selected customers.

Decision Chain

The Board of Directors is the highest body for determining the amount of impairment to be attributed to each client.
Due to its determination, the execution of this function is delegated to the structures mentioned below: the commer-
cial area and, above all, the Rating Department and the Impairment Committee.

The individual Impairment Analysis decision chain is made up of three progressive levels of competence:

The approval of the final values of Impairment is carried out by the EBD in the approval of accounts.

Scope and Stakeholder Impairment Committee

The Impairment Committee has permanent members:

• DRT - Rating Department;

• DRG - Global Risk Department;

• DC - Credit Department;

• DCCF - Accounting, Consolidation and Taxation Department;

• DRCE - Corporate Credit Recovery Department;

• DRCR - Retail Credit Recovery Department;

• DAI - Internal Audit Department.

319

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESAlso participating are the Commercial Units, clients' managers, who will be assessed at these meetings, and other
specialized Entities or Departments whose presence is necessary for a better assessment of the impairment to be
constituted. The Commercial Units vote exclusively in the cases related to the customers they accompany. The invited
Entities or Departments do not have the right to vote.

Decisions resulting from the intervention of the Impairment Committee are taken by majority, with the DRT having the
veto power. They are considered binding, unless otherwise determined by the Executive Board of Directors. Extended
Imparment Committee, meets with the presence of the Directors responsible for the areas involved. Proposals are
deemed to have been approved by obtaining the agreement of all Directors present.

Rules of Operation

The Individual Analysis of the selected clients is carried out based on the information provided by the Commercial Units
regarding the client / Group's framework, historical and forecast cash flows (when available) and existing collateral. For
the analysis of the impairment quantification on an individual basis, a scenario is established that is expected to recover
credit: through the continuity of the client's business or through the execution of the collateral. If this analysis results
in no impairment being necessary, the impairment will be determined by collective analysis, that is, by the collective
impairment model (except for cases with objective evidence of loss / Default, in which the final rate will have to be
defined).

The Individual Impairment quantification analysis determines, for each period, the best recovery scenario, aligning the
commercial strategies defined for the client, with the different recovery possibilities. When, due to lack of information,
it is not possible to identify or update the recovery scenario, the previous rate is maintained, and a new date is set for
the client's review.

Main events that took place in 2020

The most relevant events in 2020 and with an impact on credit risk management policies and procedures consisted of:

1. implementation of the new definition of Default;

2. incorporation into the collective impairment model of the impact of the pandemic;

3. definition and development of specific risk mitigation initiatives emerging from the current context.

1) Implementation of the new definition of Default;

The internal and regulatory framework for the definition of Default is described in default, it was implemented in
internal regulations and is implemented in accordance to Article 178 of EU Regulation No. 575/2013, CRR.

The concept of Default was first determined by the criteria defined in section 2.1. of Part 4 of Annex IV of Notice
5/2007 and the additional clarifications agreed with Bank of Portugal at the meeting held on 17/03/2008 on this topic.
In this sense, a default situation was considered, with respect to a given borrower or contract, when one or more of
the following events occurred: a) the borrower has a delay of more than 90 days , with respect to any significant credit
obligation to the banking group; or b) the bank considers that there is a reduced probability that the borrower will fully
comply with its obligations to the bank, without resorting to specific mitigation actions, such as the activation of any
guarantees held.

Since then, the definition of Default has undergone adaptations in accordance with the new regulatory requirements
provided for by the CRR and also by subsequent guidelines issued by EBA and provided for in this regulation. In 2016,
with the publication of the final guidelines on the application of the definition of default under the terms of article 178
of the CRR (EBA / GL / 2016/07 and EBA / RTS / 2016/06), EBA established the objective of harmonizing the application
the definition of Default in all entities covered by the SSM, leading to consistency and comparability in the calculation
of capital requirements, both in the Standard (SA) and IRB approaches. These issued guidelines introduce changes in
the entire perimeter of the definition in force in GNB until 2020, namely in the frequency of the process, the criteria of
days in arrears, materiality of the default and also in the indicators of reduced probability of payment.

320

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThis new definition of Default (nDoD) is in effect in GNB through a daily process created specifically for this purpose
since 31 May 2020. In addition to the daily process, an effort has been made to recover historical information since
2009 (from a monthly perspective), in order to apply these rules for marking and deselecting Default, on which the
ongoing process of reviewing the risk parameters is based. The output of the recovery process of the historical default
markings served as input to the daily rules engine, in order to reduce the gap between the default dates.

The close relationship between the definition of Default and other regulatory definitions, such as Non Performing
Loans (NPL) and / or Non Performing Exposures (NPE), Credit Impaired Stage 3 and even Credit Forborne, led to the
determination of an alignment of the concepts. In practical terms, the criteria for marking and deselecting Default will
be as demanding as the applicability, not only of its specific regulatory requirements, but also of the requirements of
these other regulatory definitions.

The definition of Default in effect since May 2020 considers a set of concepts that were not evaluated by the previous
definition, namely the concepts of debtor and joint materiality in the default trigger. However and in general lines, in
view of the guidelines EBA / GL / 2016/07 and the alignment with other regulatory definitions, the definition of Default
is based on the following pillars, determined on a daily basis, summarized in the following figure:

• Days in Default;

• Unlikely to pay deterministic situations;

• Pulling effect;

• Probation period;

• Default exit condition;

Whether by measuring the specific triggers of Default, or by the Stage 3 determination indicators, the result will be the
determination of Default and Stage 3 in a consistent manner, starting with the default setting.

The Default setting for a given credit position is carried out automatically in cases where at least one of the specific
triggers for that purpose is positive, encompassing, described in a non-exhaustive manner, the following situations:

• Existence of credit amounts in default with more than 90 calendar days above the materiality threshold; this thresh-
old is checked daily and consists of an absolute and a relative component; material non-compliance is considered
to exist when it cumulatively exceeds the absolute and relative thresholds; the amounts of overdue credit and
exposure considered are determined at the level of the credit position typology (i.e. at the level of the credit facility
or at the level of the debtor);

• Application of insolvency measures and / or other special protection measures;

• Sale of credit portfolios with material economic losses;

• Recognition of credit losses;

• Application of restructuring measures due to the existence of indicators of financial difficulties.

This definition of Default incorporates competing procedures (automatic and manual), for the evaluation and determi-
nation of the objective improvement of the quality of a debtor. This assessment will be automatic, during any probation
period, through the application of a criteria that automatically cancels and resets those probative periods (restart of
probation period). The probation period is a period of time during which the default marking of the contract, the client
or the debtor remains active, even when the situation that originated the marking is regularized. Depending on the
trigger and disregarding restarts, the minimum probation periods can range from 3 to 12 months. Only after the full and
uninterrupted counting of the probation period can the trigger to which the period is applied be deselected. Although
this automatic criteria guarantees an extensive evaluation of all exposures and debtors, the improvement in the quality
of the debtor will be supplemented in all processes of deactivating manual triggers (when active) and in the process of
assigning credit ratings (when applicable).

321

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESclassification as Default. The determination of specific impairment through individual analysis includes the evaluation
of the following indicators of possible occurrences of unlikely-to-pay (UTP):

a. A borrower's sources of recurring income are no longer available to meet the payment of installments;

b. There are justified concerns about a borrower's future ability to generate stable and sufficient cash flows;

c. The institution has executed collateral, including a guarantee;

d. The level of indebtedness of the debtor has increased significantly or there are reasons to believe that it will increase

in the near future;

e. Absence of an active market for the debtor's financial instruments;

f. When there is a default of a company wholly owned by a single person, who has provided the institution with a

personal guarantee for all the obligations of a company;

g. Fraud;

h. Postponement or extension of loans beyond the economic life duration;

i. Borrower's license is withdrawn;

j. The debtor used the contractual possibility to unilaterally change the payment plan established.

This process also considers the customer's assessment and exposures at the level of the interconnected client group,
when applicable, namely if some of the relevant exposures or players in that group are in a default situation.

2) Incorporation into the collective impairment model of the COVID impact

Given the general guidelines received from the supervisory entities throughout 2020 for the measurement and
incorporation of impacts resulting from the Covid-19 pandemic and given the level of uncertainty surrounding the
extent of this impact, Novo Banco adopted until the end of the third quarter of 2020 a strategy for the constitution of
impairments through the accounting of an additional amount to the original result of the model in force.

In any case, this additional amount accounted for - and updated - for the 3rd quarter financial statements, was deter-
mined through simulations of alternative conditions on the model in force. While it is true that an additional amount
of impairments was booked not allocated to specific portfolios or exposures, this amount was determined using the
rules of the model in force, but with alternative conditions. In other words, this additional amount of impairment was
calculated based on parallel simulations where, for the purposes of these simulations only, the risk and / or stage levels
of some portfolios were generally deteriorated, in order to reflect the expected impact resulting from the pandemic.

During the 4th quarter and for the purposes of December 2020 financial statements, this additional amount of im-
pairment was reversed since the impacts resulting from the COVID pandemic started to be directly reflected in the
impairment result of the collective model in force.

So after:

i. definition and updating of the macroeconomic scenarios underlying the calculation of collective impairment in line

with different expectations of the extent of the pandemic's impact;

ii. update of the IFRS 9 risk parameters - probability of default (PD) and severity (LGD) - in line with the new definition

of default, either through the starting points or through the incorporation of forward looking information;

iii. cross-sectional review of corporate ratings, particularly in sectors identified as severely affected and / or affected

by the COVID pandemic;

the result of the collective impairment calculation started to directly reflect the expected impact of this pandemic,
with no need for additional adjustments or, consequently, for the accounting of additional amounts of impairment, not
allocated to specific exposures.

322

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDConsequently, the estimated credit risk deterioration resulting from the pandemic is thus directly reflected in the
exposures / portfolios where there was a downgrade of the associated rating and / or a worsening of the applicable risk
parameters (forward looking effect).

3) Definition and development of specific risk mitigation initiatives emerging from the current context

The Covid-19 pandemic event significantly impacted the normal development of economic activity, both due to
limitations in exercise and the pattern of consumption and investment, as well as significant restrictions on the way of
operating for almost all sectors and agents of the economy as a result of movement restrictions, the growing demands
for social distance, as well as the gradual deterioration of the confidence indices of individuals and companies.

This context changed the debtors' risk profile and their perspective of future evolution, which is why the Bank has
timely adopted a series of articulated initiatives to ensure an adequate management of credit risk:

• Quarterly review of risk appetite rules - as of March, and on a quarterly basis, the risk appetite rules applicable to
the different customer segments for the following quarter began to be evaluated, discussed and decided by the
Executive Board of Directors. This review has led to different policy adaptations, initially focusing the Bank's credit
activity on its customer base and placing greater restrictions on the risk to be assumed by new customers, and at
the same time created levels of risk appetite differentiation based on the impacts of the pandemic:

i. In individual customers, the historical level of probability of default (PD's) observed and the expected level of PD's
in the face of a macroeconomic deterioration suggested an adjustment in the cut-off points for the admission
credit scoring and consumer credit for both new and existing customers;

ii. For customers in the corporate segments, in view of the different impacts of the pandemic restrictions on eco-
nomic activity, the Bank decided to group the sectors of activity into three risk appetite clusters. The first called
“Covid sectors” is composed of the activities directly most affected by the pandemic and mobility restrictions
and for this it defined a very limited risk appetite, recommending to operate only with well-known clients, in very
low risk operations and with special care in the knowledge of the destination of the funds in new clients. The
second cluster “Macro affected sectors” is composed of the sectors of economic activity that are impacted by a
macroeconomic deterioration due to changes in consumption and investment patterns, having defined a limited
risk appetite for the worst rating levels at which it is recommended to operate with low risk profile exposures. The
third cluster “Other sectors” is composed of companies from other sectors of activities not materially impacted
by the Covid-19 pandemic, or that are assessed as more resilient to this impact.

These risk appetite rules continue to be monitored and reviewed on a permanent basis, in order to ensure that at all
times the Bank maintains updated policies that are appropriate to the context and risk profile of each client.

• Monitoring of the credit contracting profile under the new risk appetite rules - to ensure sufficient knowledge about
new production within or outside risk appetite, weekly and monthly management information was created for
periodic sharing with the different bodies Bank's management;

• Periodic monitoring of rating review activity and rating migration flows - to allow timely knowledge and identifica-
tion of rating upgrade or downgrade movements in each segment of corporate, new weekly and monthly manage-
ment information was created with matrices of rating pre- and post-Covid migration for sharing with management
bodies, which allow for the identification of individual cases that have been reassessed by the Rating Department,
as well as changes justified by changes in the sector “Industry Anchors”;

• Review of portfolio limits: the use of this internal risk appetite measurement and monitoring instrument has been
intensified, which has been widely used by the Bank in recent years, as well as its metrics have been updated in
the new post-Covid context. The definition of annual objectives and the monthly monitoring of the most relevant
business lines allow the definition of mandates in the company segments for the worst rating levels, for the weight
of exposures without an assigned rating, and for default exposures. In the case of private portfolios, these metrics
are not defined based on the portfolio, but on the new contract, and are divided between the worst rating levels,
the highest debt repayment ratios and the highest LTV bands. In the new context of revised risk appetite rules, this
monitoring process has proven to be up-to-date and useful and continues to be shared periodically with the Bank's
management bodies;

323

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES• Delegation of credit powers: concurrently with the quarterly review of risk appetite, adjustments were included
in the form of delegation of credit powers with the dual objective of limiting the admission of risk in off-appetite
segments and simultaneously maintaining agility in the process of admission to ensure good support to the econ-
omy with borrowers in the best segments and in the best guaranteed exposures (e.g. Covid credit lines with SGM
guarantee);

• Covid credit lines with SGM guarantee - in view of Novo Banco's natural market share and the strong commitment of
the government and the banking sector to support the economy, guaranteeing the lack of interruption in access to
credit by small and medium-sized companies, were created specific credit lines with SGM guarantee with coverage
between 80% to 90%. This type of credit facility has grown continuously throughout the year, reaching a total port-
folio volume of approximately € 1,000 m. This growing materiality justified the preparation of a set of management
information that allowed the Bank's different management bodies to monitor which risk was approved, the volume
of new production contracted, and to know the profile of corporate clients in which these lines were granted;

• Operationalization and monitoring of legal and private initiative moratorium regimes: After an initial phase in which
the priority was to create an operational context of great agility in the way the Bank confirmed the borrowers' eligi-
bility and ensured the registration of the moratorium conditions in each contract covered, the dimension reached
of the portfolios of corporate and individuals that remained under this regime has justified the immediate creation
of management information that characterizes the evolution of this component of the portfolio and allowed to
deepen the knowledge about its profile, which has been permanently monitored by the Bank's management bodies.

In addition to this global monitoring of the portfolio, in the following months Novo Banco undertook different initiatives
in order to monitor the profile of customers who adhered to these regimes, and their standard of compliance and
solvency, in order to identify in advance those who have not capacity to cpmply with future debt service after the end
of the moratorium period, they may need other forms of support or restructuring, preventing their entry into default,
notably:

i. Creation of a company evaluation questionnaire - initially having only historical economic and financial elements
and in view of the need to reassess the companies’ rating based on updated information that reflected the impact
of the pandemic, Novo Banco created a questionnaire for evaluating companies with a significant set of questions
that will allow them to collect information on the impact that the pandemic has had to date on these debtors, on
the level of impact estimated by them in the full year 2020, as well as an estimate of impact on the activity in 2021.
From its launch, the information in this questionnaire is now integrated into the recurring credit risk admission and
follow-up process, so that all new decisions and policies marked are already informed with these data. Additionally,
using the results obtained with this questionnaire, and after relying on the responses collected, Novo Banco has
information that allows it to individualize the impacts of the pandemic at the level of each debtor, and simulate the
effects on a change in the rating level and on an eventual migration of the Stage in which it is integrated;

ii. Indicators of financial deterioration of individuals - for individual customers, in addition to the current procedures
for the prevention of default (PARI) and the management of default (PERSI), Novo Banco explored new sources of
behavioral and transactional information for its customers, that allow it to identify internal or external signs of finan-
cial degradation. This set of enriched information will allow its customer base to be segmented by different levels
of propensity to enter into default, and to implement a screening action and different support strategies adapted
to the situation of each customer, preventing early entry in delinquency in view of the end date of the moratorium.

With priority for debtors under moratorium regime, for whom the Bank failed to observe data of compliance of debt
service, but in which it is crucial to avoid the “cliff effect” that could originate with the end of the moratoriums through
an identification and offering support in advance to those who are in financial difficulties, a wide range of variables from
the behavioural scoring models, the Default model, the PARI regime, transactional data and different sources of internal
and external information were analyzed. The exercise carried out based on analytical support and a multidisciplinary
expert judgment, allowed to choose the variables understood as the most predictive for the situation of financial
difficulty and to define the materiality triggers that will better identify those debtors.

The choice of these indicators will allow the Bank to segment its portfolio of individuals into homogeneous groups of
customers with a similar probability of future entry into default, in order to prioritize its performance: with immediate
priority for the group of debtors who already exhibit financial difficulties, with a secondary priority for those who have

324

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDa high propensity to default, and with low priority for those who do not register warning signs or have indicators of
resilience.

In order to reinforce the set of operational measures now initiated to deal with the impacts of the pandemic on
credit risk management, by the end of 2020 and in the course of 2021, Novo Banco will continue to develop different
initiatives to ensure correct identification and early offer of support to debtors who may be experiencing difficulties at
the end of the moratorium period.

Internal rating models for Corporates, Institutions and stocks portfolios

Regarding the rating models for corporate portfolios, different approaches are adopted depending on the size and
sector of activity of the clients. Specific models are also used, adapted to loan operations of project finance, acquisition
finance, object finance, commodity finance and real estate development finance.

Below is a summary table on the types of risk models adopted in the internal assignment of credit ratings:

Segmentation criteria

Model Type

Description

Expert
Judgement

Sector, Size, Product
• Large entreprises
• Finantial institutions
• Municipalities
• Institutional
• Local and regional
administrations
• Realestate
(Investment/Promotion)
• Acquisition Finance
• Project Finance
• Object Finance
• Commodity Finance

Template

Ratings atributed by teams
of analyst, using speciﬁc
models by sector (templates)
and ﬁnancial and qualitative
information.

Medium entreprises

Semi-automatic

Small entreprises

Start-Up’s and individual
entrepreneurs

Statistical

Automatic

Rating model based in
ﬁnancial, qualitative and
behavioral information,
validated by analysts.

Rating model based in
ﬁnancial, qualitative and
behavioral information.

Rating model based in
qualitative and behavioral
information.

The Bank's Rating Department has a Rating Model for the following segments: Start-ups; Individual Entrepreneurs
(ENIs); Small business; Medium-sized companies; Big companies; Real Estate and Real Estate Income; Holding Large
Company; Financial Institution; Municipalities and Institutional; Sovereign; Project Finance; Object, Commodity and
Acquisition Finance; Financial Holding.

The segments for which rating models are not available are:

•

Insurance and Pension Funds;

• Churches, political parties and non-profit associations with a turnover of less than Euro 500 thousand.

325

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESRegarding the credit portfolios of Large Companies, Financial Institutions, Institutional, Local and Regional Adminis-
trations and Specialized Loans - namely Project Finance, Object Finance, Commodity Finance and Acquisition Finance
- the credit ratings are assigned by the Bank's Rating representation. This structure is made up of 7 multisectoral teams
that comprise a team leader and several specialized technical analysts. The attribution of internal risk ratings by this
team to these risk segments, classified as low default portfolios, is based on the use of “expert-based” rating models
(templates) that are based on qualitative and quantitative variables, strongly correlated with the sector or sectors of
activity in which the clients under analysis operate. With the exception of assigning a rating to specialized loans, the
methodology used by the Rating representation is also governed by a risk analysis at the level of the maximum con-
solidation perimeter and by the identification of the status of each company in the respective economic group. The
internal credit ratings are validated daily in a Rating Committee composed of members of the Rating Department's
Management and the various specialized teams.

For the medium-sized companies segment, statistical rating models are used, which combine financial data with
qualitative and behavioral information. However, the publication of credit ratings requires the execution of a previous
validation process that is carried out by a technical team of risk analysts, who also take into account behavioral vari-
ables. In addition to rating, these teams also monitor the customers’ loan portfolio of the Bank through the preparation
of risk analysis reports, as provided for in internal regulations, in accordance with the current responsibilities / customer
rating binomial, which may include specific recommendations on the credit relationship with a given customer, as well
as technical advice on investment support operations, restructuring, or other operations subject to credit risk.

For the business segment, statistical scoring models are also used which have, in addition to financial and qualitative
information, the behavioral variables of the companies and the partner(s) in the calculation of credit ratings.

There are also implemented scoring models specifically aimed at quantifying the risk of start-ups (companies
established less than 2 years ago) and individual entrepreneurs (ENI). These customers together with the small
companies, depending on the exposure value, are included in the regulatory retail portfolios.

Finally, for companies in the real estate sector (companies dedicated to the activity of real estate promotion and
investment, especially small and medium-sized companies), taking into account their specificities, the respective
ratings are assigned by a specialized central team, based on use of specific models that combine the use of quantitative
and technical variables (real estate appraisals carried out by specialized offices), as well as qualitative and behavioral
variables.

With regard to exposures equated to shares held by the Bank, directly or indirectly through the holding of investment
funds, as well as shareholders loans and supplementary capital contributions, all included in the risk class of shares for
the purposes of calculating credit risk weighted assets, they are classified in the various risk segments according to the
characteristics of their issuers or borrowers, following the segmentation criteria presented above. These segmentation
criteria determine the type of rating model to be applied to the issuers of the shares (or borrowers of the shareholders
loans / supplementary capital contributions) and, therefore, to them.

Relationships between internal and external ratings

The assignment of an internal rating to entities with an external rating is made through the Markets Template available
in the Rating Calculation application. The Markets Template gathers the external ratings that were assigned to a specific
entity by the rating agencies Standard & Poor’s (S&P), Moody’s and Fitch.

Specifically, the functionality of providing external ratings from S&P - XpressFeed feeds the application of External
Ratings on a daily basis, which allows the external ratings published by these agencies for a given entity to be filled in
the Markets Template. The external ratings assigned by Moody’s and Fitch are not obtained automatically, having to be
entered manually in the Markets Template, after consulting the websites www.moodys.com and www.fitchratings.com.

The internal rating results, in the majority of situations, from the S&P equivalent external rating and, in exceptional
situations, from the S&P equivalent external rating plus an internal adjustment, which must always be accompanied by
justifying comments prepared by the analyst.

326

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDIt should be noted that the S&P equivalent external rating is obtained by making a correspondence between the
available external ratings and the rating scale of the referred financial rating agencies. The internal ratings produced
by the Markets Template and which have had adjustments must be mandatorily approved and validated by the Rating
Committee

The table below shows the correspondence between the external ratings S&P, Moody's and Fitch and the equivalent
external rating S&P:

S&P

AAA

AA+

AA-

A+

A-

BBB+

BBB

BBB-

BB+

BB-

B+

B-

CCC+

CCC

CCC-

Moody's

Aaa

Aa1

Aa2

Aa3

Baa1

Baa2

Baa3

Ba1

Ba2

Ba3

Caa1

Caa2

Caa3

Equivalent external
rating S&P

AAA

AA+

AA-

A+

A-

BBB+

BBB

BBB-

BB+

BB-

B+

B-

CCC+

CCC

Lower than CCC

Fitch

AAA

AA+

AA-

A+

A-

BBB+

BBB

BBB-

BB+

BB-

B+

B-

CCC+

CCC

CCC-

RD/D

Internal scoring models for Individual portfolios

With regard to scoring models for individual portfolios, NB has origination / concession and behavioral scoring models
(applied to operations older than 6 months).

These models are automatic, based on statistical models developed with internal information, considering socio-de-
mographic information, loan characteristics, behavioral information and automatic penalties (if there are warning
signs). In the case of behavioral models, information on the remaining loans of the contract holders is also considered.

NB is authorized by Bank of Portugal to use internal models in the calculation of regulatory capital requirements for
the main portfolios of individuals: Mortgage Loans and Individual Loans. In addition, it has origination and behavioral
scorings for the Credit Card, Overdraft and Loan Accounts products, which it uses for the purposes of designing and
monitoring credit quality, however, not being IRB portfolios.

327

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The table below displays the assets impaired, or overdue by not impaired:

Neither overdue
nor impaired

Overdue but not
impaired

Impaired

Total exposure

Impairment

Net exposure

31.12.2020

(in thousands of Euros)

Deposits with and loans and advances to banks
Securities held for trading

Bonds issued by government and other public entities

Securities at fair value through profit/loss - mandatory

Bonds issued by other entities

Securities at fair value through other comprehensive income

Bonds issued by government and other public entities
Bonds issued by other entities

Securities at amortised cost

Bonds issued by government and other public entities
Bonds issued by other entities

Loans and advances to customers

303 252
267 016
267 016
160 184
160 184
7 820 072
6 490 076
1 329 996
2 312 708
421 249
1 891 459
23 026 101

-
-
-
-
-
-
-
-
-
-
-
7 276

314 138
-
-
-
-
22 770
-
22 770
119 605
-
119 605
2 183 432

617 390
267 016
267 016
160 184
160 184
7 842 842
6 490 076
1 352 766
2 432 313
421 249
2 011 064
25 216 809

( 250 138)
-
-
-
-
( 3 697)
( 3 132)
( 565)
( 201 237)
( 579)
( 200 658)
(1 599 775)

367 252
267 016
267 016
160 184
160 184
7 839 145
6 486 944
1 352 201
2 231 076
420 670
1 810 406
23 617 034

31.12.2019

(in thousands of Euros)

Neither overdue
nor impaired

Overdue but not
impaired

Impaired

Total exposure

Impairment

Net exposure

Deposits with and loans and advances to banks
Securities held for trading

Bonds issued by government and other public entities

Securities at fair value through profit/loss - mandatory

Bonds issued by other entities

Securities at fair value through other comprehensive income

Bonds issued by government and other public entities
Bonds issued by other entities

Securities at amortised cost

Bonds issued by government and other public entities
Bonds issued by other entities

Loans and advances to customers

330 768
254 848
254 848

57 590
57 590
8 724 040
7 108 022
1 616 018
1 676 844
459 260
1 217 584
24 080 163

-
-
-

-
-
-
-
-
-
-
-
15 645

381 501
-
-

-
-
45 520
-
45 520
104 475
-
104 475
2 958 914

712 269
254 848
254 848

57 590
57 590
8 769 560
7 108 022
1 661 538
1 781 319
459 260
1 322 059
27 054 722

( 77 088)
-
-

-
-
( 5 556)
( 4 527)
( 1 029)
( 158 774)
( 704)
( 158 070)
(1 852 495)

635 181
254 848
254 848

57 590
57 590
8 764 004
7 103 495
1 660 509
1 622 545
458 556
1 163 989
25 202 227

Impaired exposures correspond to (i) exposures with objective evidence of loss (“Exposure in default”, according to the
internal definition of default - which corresponds to Stage 3); and (ii) exposures classified as having specific impairment
after individual impairment assessment.

The exposures classified as not having impairment relate to (i) all exposures that do not show signs of significant
deterioration in credit risk - exposures classified in Stage 1; (ii) exposures that, showing signs of significant deterioration
in credit risk, have no objective evidence of loss or specific impairment after an individual assessment of impairment.

The following table presents the assets that are impaired or overdue but not impaired, split by their respective maturity
or ageing (when overdue):

NOVO BANCO

Overdue

Up to 3 months
3 months to 1 year
1 to 3 years
3 to 5 years
More than 5 years

Due

Up to 3 months
3 months to 1 year
1 to 3 years
3 to 5 years
More than 5 years

328

Overdue

Up to 3 months

3 months to 1 year

1 to 3 years

3 to 5 years

More than 5 years

Up to 3 months

3 months to 1 year

1 to 3 years

3 to 5 years

More than 5 years

Due

31.12.2020

(in thousands of Euros)

Securities Portfolio - debt
instruments

Deposits with and loans and
advances to banks

Loans and advances to customers

Overdue but not
impaired

Impaired

Overdue but not
impaired

Impaired

Overdue but not
impaired

Impaired

-
-
-
-
-
-

-
-
-
-
-
-
-
-

-
15 126
10 330
34 444
82 475
142 375

-
-
-
-
-
-

142 375

-
-
-
-
-
-

-
-
-
-
-
-
-
-

34 726
-
-
-
-
34 726

-
-
-
-
279 412
279 412

314 138

5 194
1 133
357
290
302
7 276

-
-
-
-
-
-

7 276

15 240
57 544
93 105
233 020
219 616
618 525

37 599
308 017
273 779
149 134
796 378
1 564 907

2 183 432

31.12.2019

(in thousands of Euros)

Securities Portfolio - debt
instruments

Deposits with and loans and
advances to banks

Loans and advances to customers

Overdue but not
impaired

Impaired

Overdue but not
impaired

Impaired

Overdue but not
impaired

Impaired

6 770

56 070

87 155

149 995

381 501

13 090

643

1 015

742

155

15 645

21 488

68 364

315 286

351 725

337 681

1 094 544

117 606

333 782

488 369

163 804

760 809

1 864 370

2 958 914

The following table shows the assets impaired or overdue but not impaired, broken down by the respective impairment Stage:

Deposits with and loans and advances to banks

Securities at fair value through other comprehensive income

Securities at amortised cost

Loans and advances to customers

31.12.2020

(in thousands of Euros)

31.12.2019

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

314 138

381 501

22 770

119 605

45 520

104 475

1 679

5 597

2 183 432

2 190 708

944

14 701

2 958 914

2 974 559

1 679

319 735

2 325 807

2 647 221

944

396 202

3 108 909

3 506 055

Regarding assets that are neither past due nor impaired, the distribution by rating level is presented below. For the debt

instruments, the rating assigned by the Rating Agencies is taken into account, for the credit to clients and cash and deposits with

credit institutions, the internal rating and scoring models are used, that assign a risk rating, which is periodically reviewed. For the

purposes of presenting the information, the ratings have been aggregated into five major risk groups, with the last group including

the unrated exposures.

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 272-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Overdue

Up to 3 months

3 months to 1 year

1 to 3 years

3 to 5 years

More than 5 years

Overdue
Due

Up to 3 months
Up to 3 months
3 months to 1 year
3 months to 1 year
1 to 3 years
1 to 3 years
3 to 5 years
3 to 5 years
More than 5 years
More than 5 years

Due

Up to 3 months
3 months to 1 year
1 to 3 years
3 to 5 years
More than 5 years

Securities Portfolio - debt

Deposits with and loans and

instruments

advances to banks

Overdue but not

impaired

Impaired

Overdue but not

impaired

Impaired

31.12.2020

Securities Portfolio - debt

instruments

Overdue but not

impaired

Impaired

34 444

Overdue but not

impaired

Impaired

31.12.2020

Deposits with and loans and

34 726

advances to banks

5 194

15 240

Loans and advances to customers

57 544

1 133

Overdue but not

impaired

357

290

302

93 105

Impaired

233 020

219 616

15 126

10 330

82 475

142 375
-
-
15 126
-
10 330
-
34 444
-
82 475
-
142 375
-
-
142 375
-
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

34 726
34 726
-
-
-
-
-
-
-
-
279 412
34 726
279 412
-
314 138
-
-
-
279 412
279 412

NOVO BANCO

(in thousands of Euros)

Loans and advances to customers

NOVO BANCO

Overdue but not

impaired

Impaired

(in thousands of Euros)

7 276
5 194
-
1 133
-
357
-
290
-
302
-
7 276
-
-
7 276
-
-
-
-
-

618 525
15 240
37 599
57 544
308 017
93 105
273 779
233 020
149 134
219 616
796 378
618 525
1 564 907
37 599
2 183 432
308 017
273 779
149 134
(in thousands of Euros)
796 378
1 564 907

2 183 432
Loans and advances to customers

7 276

Overdue but not
impaired

Impaired
(in thousands of Euros)

Securities Portfolio - debt
instruments

142 375

Deposits with and loans and
advances to banks

314 138

31.12.2019

Overdue

31.12.2019

Overdue but not
impaired

Impaired

Overdue but not
impaired

Impaired

Due

Impaired

Overdue
Due

Securities Portfolio - debt
instruments

Deposits with and loans and
advances to banks

Up to 3 months
3 months to 1 year
1 to 3 years
3 to 5 years
More than 5 years

Up to 3 months
Up to 3 months
3 months to 1 year
3 months to 1 year
1 to 3 years
1 to 3 years
3 to 5 years
3 to 5 years
More than 5 years
More than 5 years

-
6 770
56 070
87 155
-
149 995
-
-
6 770
-
56 070
-
87 155
-
-
-
149 995
-
-
149 995
-
-
-
The following table shows the assets impaired or overdue but not impaired, broken down by the respective impairment Stage:
-
-

21 488
Loans and advances to customers
68 364
315 286
351 725
337 681
1 094 544
21 488
117 606
68 364
333 782
315 286
488 369
351 725
163 804
337 681
760 809
1 094 544
1 864 370
117 606
2 958 914
333 782
488 369
163 804
760 809
1 864 370
(in thousands of Euros)

-
-
-
Overdue but not
-
impaired
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
381 501
-
381 501
-
381 501
-
-
-
381 501
381 501

13 090
643
1 015
Overdue but not
742
impaired
155
15 645
13 090
-
643
-
1 015
-
742
-
155
-
15 645
-
-
15 645
-
-
-
-
-
31.12.2019
15 645

The following table shows the assets impaired or overdue but not impaired, broken down by the respective impairment
Stage:
314 138
Deposits with and loans and advances to banks
-
The following table shows the assets impaired or overdue but not impaired, broken down by the respective impairment Stage:
Securities at fair value through other comprehensive income
Securities at amortised cost
Loans and advances to customers

Up to 3 months
3 months to 1 year
1 to 3 years
3 to 5 years
More than 5 years

381 501
-

314 138
22 770

381 501
45 520

2 958 914
Total

381 501
Stage 1

-
14 701

-
22 770

-
45 520

-
5 597

-
1 679

-
944

31.12.2020

31.12.2019

149 995

Stage 2

Stage 3

Stage 2

Stage 3

Stage 1

Total

-
-

Stage 1

1 679

Stage 2
319 735

Stage 1

944

Stage 2
396 202

119 605
2 183 432
Stage 3
2 325 807

119 605
2 190 708
Total
2 647 221

104 475
2 958 914
Stage 3
3 108 909

104 475
(in thousands of Euros)
2 974 559
Total
3 506 055

Deposits with and loans and advances to banks

314 138
-
-
45 520
Securities at fair value through other comprehensive income
104 475
-
Securities at amortised cost
Regarding assets that are neither past due nor impaired, the distribution by rating level is presented below. For the debt
2 958 914
5 597
Loans and advances to customers
instruments, the rating assigned by the Rating Agencies is taken into account, for the credit to clients and cash and deposits with
credit institutions, the internal rating and scoring models are used, that assign a risk rating, which is periodically reviewed. For the
purposes of presenting the information, the ratings have been aggregated into five major risk groups, with the last group including
the unrated exposures.

-
22 770
119 605
2 183 432

314 138
22 770
119 605
2 190 708

381 501
-
-
14 701

381 501
45 520
104 475
2 974 559

-
-
-
1 679

-
-
-
944

2 325 807

2 647 221

3 108 909

3 506 055

319 735

396 202

1 679

944

Regarding assets that are neither past due nor impaired, the distribution by rating level is presented below. For the debt
instruments, the rating assigned by the Rating Agencies is taken into account, for the credit to clients and cash and deposits with
Regarding assets that are neither past due nor impaired, the distribution by rating level is presented below. For the
credit institutions, the internal rating and scoring models are used, that assign a risk rating, which is periodically reviewed. For the
debt instruments, the rating assigned by the Rating Agencies is taken into account, for the credit to clients and cash
purposes of presenting the information, the ratings have been aggregated into five major risk groups, with the last group including
and deposits with credit institutions, the internal rating and scoring models are used, that assign a risk rating, which is
the unrated exposures.
periodically reviewed. For the purposes of presenting the information, the ratings have been aggregated into five major
risk groups, with the last group including the unrated exposures.

NOVO BANCO

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

31.12.2020

Prime +High
grade

Upper Medium
Grade

Lower Medium
grade

Non Investment
Grade
Speculative +
Highly
speculative

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

Deposits with and loans and advances to banks
Securities held for trading

Bonds issued by government and other public entities

Securities at fair value through profit/loss - mandatory

Bonds issued by other entities

Securities at fair value through other comprehensive income

Bonds issued by government and other public entities
Bonds issued by other entities

Títulos ao custo amortizado

Bonds issued by government and other public entities
Bonds issued by other entities

Loans and advances to customers

1 096
-
-
-
-
1 415 572
966 035
449 537
-
-
-
3 734 056

139 859
-
-
32 670
32 670
2 335 007
2 322 904
12 103
51 608
-
51 608
8 854 914

48 121
267 016
267 016
-
-
3 330 418
2 946 842
383 576
140 510
-
140 510
2 469 068

38 073
-
-
-
-
-
-
-
37 958
-
37 958
6 855 355

- 272-
(in thousands of Euros)

Others

Total

- 272-

76 103
-
-
127 514
127 514
739 075
254 295
484 780
2 082 632
421 249
1 661 383
1 112 709

303 252
267 016
267 016
160 184
160 184
7 820 072
6 490 076
1 329 996
2 312 708
421 249
1 891 459
23 026 101

Deposits with and loans and advances to banks
Securities held for trading

329

Bonds issued by government and other public entities
Bonds issued by other entities

Securities at fair value through profit/loss

Bonds issued by other entities

Securities at fair value through profit/loss - mandatory

Bonds issued by other entities

Securities at fair value through other comprehensive income

Bonds issued by government and other public entities

Bonds issued by other entities

Títulos ao custo amortizado

Bonds issued by other entities

Loans and advances to customers

Bonds issued by government and other public entities

31.12.2019

(in thousands of Euros)

Non Investment
Grade
Speculative +
Highly
speculative

41 607
-
-
-
-
-

35 479

7 493 726

Prime +High
grade

Upper Medium
Grade

Lower Medium
grade

45
-
-
-
-
-

1 615 203

1 169 578

445 625

13 411
249 778
249 778
-
-
-

3 935 197

3 537 275

397 922

101 711

2 657 812

5 004
5 070
5 070
-
-
-

47 340

2 407 116

2 400 889

6 227

31.12.2020

3 031 066

9 323 234

Others

Total

270 701
-
-
-
-
-

10 250

766 524

280

766 244

1 539 654

459 260

1 080 394

1 574 325

330 768
254 848
254 848
-
-
-

57 590

8 724 040

7 108 022

1 616 018

1 676 844

459 260

1 217 584

24 080 163

(in thousands of Euros)

As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment constituted,

by segment, is presented as follows:

Segment

Performing or with a

delay < 30 days

With a delay > 30 days

Total

Days of delay

Total

<= 90 days

> 90 days

Exposure

Impairment

Exposure

Impairment Exposure Impairment

Exposure

Impairment

Exposure Impairment Exposure Impairment Exposure Impairment

Perfoming

Non-Perfoming

Total Credit

Corporate

Mortgage loans

Consumer and other loans

1 116 057

9 723 675

17 526

21 113

7 200

65 067

12 129

12 109 249

328 589

645

12 116 449

329 234

940 235

471 147

816 374

544 639 1 756 609

1 015 786

13 873 058

1 345 020

1 706

2 391

9 788 742

1 128 186

19 232

23 504

110 577

17 312

111 134

29 301

221 711

46 613

10 010 453

65 845

147 730

122 182

57 382

43 224

205 112

165 406

1 333 298

188 910

Total

22 948 981

367 228

84 396

4 742

23 033 377

371 970

1 198 542

610 641

984 890

617 164

2 183 432

1 227 805

25 216 809

1 599 775

Segment

Performing or with a

delay < 30 days

With a delay > 30 days

Total

Days of delay

Total

<= 90 days

> 90 days

Exposure

Impairment

Exposure

Impairment Exposure Impairment

Exposure

Impairment

Exposure Impairment Exposure Impairment Exposure Impairment

Perfoming

Non-Perfoming

Total Credit

Corporate

Mortgage loans

12 583 643

154 399

3 154

12 643 435

157 553

1 089 904

504 311 1 498 692

983 700 2 588 596

1 488 011

15 232 031

1 645 564

10 034 807

615

10 074 292

17 264

70 000

19 745

119 983

29 985

189 983

49 730

10 264 275

66 994

Consumer and other loans

1 280 872

389

1 288 089

3 490

149 700

54 426

120 627

82 021

270 327

136 447

1 558 416

139 937

16 649

3 101

59 792

39 485

7 217

Total

23 899 322

174 149

106 494

4 158

24 005 816

178 307

1 309 604

578 482

1 739 302

1 095 706

3 048 906

1 674 188

27 054 722

1 852 495

31.12.2019

(in thousands of Euros)

As at 31 December 2020 and 2019, the analysis of the Loans and advances to customers’ portfolio, by segment and by year of

reference was as follows:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 273-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Deposits with and loans and advances to banks
Securities held for trading

Bonds issued by government and other public entities

Securities at fair value through profit/loss - mandatory

Bonds issued by other entities

Securities at fair value through other comprehensive income

Bonds issued by government and other public entities
Bonds issued by other entities

Títulos ao custo amortizado

Bonds issued by government and other public entities
Bonds issued by other entities

Loans and advances to customers

1 096
-
-
-
-
1 415 572
966 035
449 537
-
-
-
3 734 056

139 859
-
-
32 670
32 670
2 335 007
2 322 904
12 103
51 608
-
51 608
8 854 914

Prime +High
grade

Upper Medium
Grade

Prime +High

Upper Medium

Lower Medium

grade

Grade

grade

Speculative +

Others

Total

31.12.2020

Non Investment

Grade

Highly

speculative

48 121
267 016
267 016
-
-
3 330 418
2 946 842
383 576
140 510
-
140 510
2 469 068

31.12.2019

38 073
-
-
-
-
-
-
-
37 958
-
37 958
6 855 355

Lower Medium
grade

31.12.2019

Non Investment
Grade
Speculative +
Highly
Non Investment
speculative
Grade
Speculative +
Highly
speculative

41 607
-
-

NOVO BANCO

(in thousands of Euros)

76 103
-
-
127 514
127 514
739 075
254 295
484 780
2 082 632
421 249
1 661 383
1 112 709

303 252
267 016
267 016
160 184
160 184
7 820 072
6 490 076
1 329 996
2 312 708
421 249
1 891 459
23 026 101
(in thousands of Euros)

Others

(in thousands of Euros)

Total

Others

270 701
-
-

Total

330 768
254 848
254 848

Deposits with and loans and advances to banks
Securities held for trading

Bonds issued by government and other public entities

Prime +High
grade

45
-
-

Upper Medium
5 004
Grade
5 070
5 070

Lower Medium
13 411
grade
249 778
249 778

Securities at fair value through profit/loss - mandatory

Loans and advances to customers
Securities at fair value through other comprehensive income

Securities at fair value through profit/loss
Títulos ao custo amortizado

Bonds issued by government and other public entities
Bonds issued by government and other public entities
Bonds issued by other entities
Bonds issued by other entities

Bonds issued by other entities
Bonds issued by government and other public entities
Bonds issued by other entities
Bonds issued by other entities

Securities at fair value through profit/loss - mandatory
Deposits with and loans and advances to banks
Bonds issued by other entities
Securities held for trading
Securities at fair value through other comprehensive income

57 590
330 768
57 590
254 848
8 724 040
254 848
7 108 022
-
1 616 018
-
1 676 844
-
459 260
57 590
1 217 584
57 590
24 080 163
8 724 040
7 108 022
1 616 018
1 676 844
459 260
1 217 584
24 080 163
Loans and advances to customers
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment
constituted, by segment, is presented as follows:
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment constituted,
by segment, is presented as follows:

10 250
270 701
10 250
-
766 524
-
280
-
766 244
-
1 539 654
-
459 260
10 250
1 080 394
10 250
1 574 325
766 524
280
766 244
1 539 654
459 260
1 080 394
1 574 325

-
13 411
-
249 778
3 935 197
249 778
3 537 275
-
397 922
-
101 711
-
-
-
101 711
-
2 657 812
3 935 197
3 537 275
397 922
101 711
-
101 711
2 657 812

47 340
5 004
47 340
5 070
2 407 116
5 070
2 400 889
-
6 227
-
-
-
-
47 340
-
47 340
9 323 234
2 407 116
2 400 889
6 227
-
-
-
9 323 234

-
45
-
-
1 615 203
-
1 169 578
-
445 625
-
-
-
-
-
-
-
3 031 066
1 615 203
1 169 578
445 625
-
-
-
3 031 066

-
41 607
-
-
-
-
-
-
-
-
35 479
-
-
-
35 479
-
7 493 726
-
-
-
35 479
-
35 479
7 493 726

Bonds issued by government and other public entities
Bonds issued by other entities

Títulos ao custo amortizado

Segment

Performing or with a
delay < 30 days

With a delay > 30 days

Total

Days of delay

<= 90 days

> 90 days

Total

Exposure

Impairment

Exposure

Impairment Exposure Impairment

Exposure

Impairment

Exposure Impairment Exposure Impairment Exposure Impairment

Perfoming

Non-Perfoming

Total Credit

31.12.2020

(in thousands of Euros)

Corporate

Mortgage loans

Consumer and other loans

1 116 057

12 109 249

328 589

9 723 675

17 526

21 113

7 200

65 067

12 129

645

12 116 449

329 234

940 235

471 147

816 374

544 639 1 756 609

1 015 786

13 873 058

1 345 020

1 706

2 391

9 788 742

1 128 186

19 232

23 504

110 577

17 312

111 134

29 301

221 711

46 613

10 010 453

65 845

147 730

122 182

57 382

43 224

205 112

165 406

1 333 298

188 910

Total

22 948 981

367 228

84 396

4 742

23 033 377

371 970

1 198 542

610 641

984 890

617 164

2 183 432

1 227 805

25 216 809

1 599 775

Segment

Performing or with a
delay < 30 days

With a delay > 30 days

Total

Days of delay

<= 90 days

> 90 days

Total

Exposure

Impairment

Exposure

Impairment Exposure Impairment

Exposure

Impairment

Exposure Impairment Exposure Impairment Exposure Impairment

Perfoming

Non-Perfoming

Total Credit

31.12.2019

(in thousands of Euros)

Corporate

Mortgage loans

Consumer and other loans

1 280 872

12 583 643

154 399

10 034 807

16 649

3 101

59 792

39 485

7 217

3 154

12 643 435

157 553

1 089 904

504 311 1 498 692

983 700 2 588 596

1 488 011

15 232 031

1 645 564

615

10 074 292

17 264

70 000

19 745

119 983

29 985

189 983

49 730

10 264 275

66 994

389

1 288 089

3 490

149 700

54 426

120 627

82 021

270 327

136 447

1 558 416

139 937

Total

23 899 322

174 149

106 494

4 158

24 005 816

178 307

1 309 604

578 482

1 739 302

1 095 706

3 048 906

1 674 188

27 054 722

1 852 495

As at 31 December 2020 and 2019, the analysis of the Loans and advances to customers’ portfolio, by segment and by year of
reference was as follows:
As at 31 December 2020 and 2019, the analysis of the Loans and advances to customers’ portfolio, by segment and by
year of reference was as follows:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 273-

330

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

NOVO BANCO

(in thousands of Euros)

Year of
production

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Corporate

Mortgage loans

Consumer and other loans

Total

2004 and prior

4 508

253 737

12 541

70 884

1 525 145

15 028

732 974

54 539

16 638

808 366

1 833 421

44 207

31.12.2020

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

801

66 294

6 277

8 760

363 661

3 964

10 920

7 453

388

20 481

437 408

10 629

1 047

228 528

52 349

14 695

672 558

5 747

18 044

9 413

1 029

33 786

910 499

59 125

1 311

308 621

46 549

21 786

1 003 716

9 050

25 665

12 887

1 567

48 762

1 325 224

57 166

1 275

507 028

30 559

14 578

709 233

5 732

20 567

10 778

775

36 420

1 227 039

37 066

991

282 231

41 733

9 533

492 528

4 356

12 380

19 179

8 274

22 904

793 938

54 363

1 224

303 769

76 409

8 908

508 778

4 276

19 274

29 123

1 381

29 406

841 670

82 066

1 208

214 814

48 687

4 847

226 201

2 214

22 191

20 942

1 145

28 246

461 957

52 046

1 500

379 756

133 774

2 626

96 782

1 418

28 413

18 224

1 873

32 539

494 762

137 065

2 065

506 226

116 278

3 041

149 827

1 520

25 794

27 293

8 798

30 900

683 346

126 596

2 141

456 374

193 612

1 933

107 869

3 442

730 681

146 759

2 977

185 390

743

787

25 229

23 155

1 101

29 303

587 398

195 456

30 078

124 058

82 465

36 497

1 040 129

230 011

4 910

806 562

62 679

6 108

424 352

1 627

49 529

92 372

22 336

60 547

1 323 286

86 642

7 939

1 124 252

66 057

9 475

762 490

3 039

56 275

129 533

10 083

73 689

2 016 275

79 179

8 993

1 914 976

117 147

10 800

1 006 802

2 716

67 185

198 768

10 025

86 978

3 120 546

129 888

10 488

2 771 828

137 204

10 672

1 035 025

2 358

74 966

304 366

13 832

96 126

4 111 219

153 394

17 700

3 017 381

56 406

7 339

740 096

1 270

48 711

251 215

7 200

73 750

4 008 692

64 876

Total

71 543

13 873 058

1 345 020

208 962

10 010 453

65 845

1 268 195

1 333 298

188 910

1 548 700

25 216 809

1 599 775

31.12.2019

(in thousands of Euros)

Year of
production

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Number of
operations

Amount

Impairment

Corporate

Mortgage loans

Consumer and other loans

Total

2004 and prior

6 216

353 552

57 502

77 022

1 791 552

37 053

786 731

92 963

20 101

869 969

2 238 067

114 656

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

1 296

112 000

11 771

9 502

412 770

2 494

15 980

12 119

332

26 778

536 889

14 597

1 623

288 533

36 673

15 487

746 767

3 452

20 584

18 010

1 032

37 694

1 053 310

41 157

2 035

426 192

42 231

22 824

1 100 894

5 434

29 054

23 832

1 459

53 913

1 550 918

49 124

1 792

672 225

27 953

15 330

780 754

3 328

23 428

23 398

968

40 550

1 476 377

32 249

1 409

369 324

42 067

10 095

542 438

2 266

14 421

28 184

4 717

25 925

939 946

49 050

1 885

409 205

84 735

9 630

565 222

2 866

25 617

40 828

1 842

37 132

1 015 255

89 443

1 641

349 494

54 693

5 198

254 617

1 277

25 716

26 981

1 188

32 555

631 092

57 158

2 068

645 741

301 778

2 883

113 753

3 006

718 017

194 251

3 319

172 221

3 734

669 259

199 342

2 162

130 315

5 238

970 889

136 138

3 257

213 195

7 248

1 159 554

101 604

6 607

474 544

770

882

418

603

955

34 406

31 603

3 681

39 357

791 097

306 229

30 278

48 750

13 377

36 603

938 988

208 510

30 312

37 954

2 056

36 208

837 528

201 816

38 060

142 049

37 492

46 555

1 326 133

174 233

60 776

140 138

30 690

74 631

1 774 236

133 249

10 328

1 748 742

159 893

10 163

840 918

2 788

68 816

202 931

11 014

89 307

2 792 591

173 695

11 048

2 622 431

99 052

11 420

1 078 898

1 191

79 907

272 589

5 617

102 375

3 973 918

105 860

21 838

3 716 873

95 881

10 529

1 045 417

1 217

77 853

416 087

4 371

110 220

5 178 377

101 469

Total

82 405

15 232 031

1 645 564

215 428

10 264 275

66 994

1 361 939

1 558 416

139 937

1 659 772

27 054 722

1 852 495

The figures presented include, in addition to all new operations of the reference year, renewals, interventions and
restructurings of operations originated in previous years, including the period prior to the setting up of NOVO BANCO.
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment assessed
individually and collectively, by segment, is presented as follows:
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment
assessed individually and collectively, by segment, is presented as follows:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 274-

331

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Corporate

Mortgage loans

Consumer and other loans

Total
Corporate

Individual Assessment (1)
Exposure
Impairment

1 667 521

951 926

4 551

220

Individual Assessment (1)
Exposure
Impairment

155 734

136 305

1 827 806
1 667 521

1 088 451
951 926

31.12.2020
Collective Assessment (2)
Exposure
Impairment

12 205 537

393 094

65 625

31.12.2020
10 005 902
Collective Assessment (2)
1 177 564
Impairment
Exposure
23 389 003
12 205 537

511 324
393 094

52 605

NOVO BANCO

(in thousands of Euros)

NOVO BANCO
Total

Exposure

Impairment

13 873 058

(in thousands of Euros)
1 345 020

10 010 453

65 845

Total

1 333 298

Exposure
25 216 809
13 873 058

188 910

Impairment

1 599 775
1 345 020

10 005 902
220
Mortgage loans
(1) Loans and advances for which the final impairment was determined and approved by the Impairment Committee
(2) Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
1 177 564
Consumer and other loans

136 305

155 734

4 551

65 625

10 010 453

65 845

52 605

1 333 298

188 910

Total

1 827 806

1 088 451

23 389 003

511 324

25 216 809

1 599 775
(in thousands of Euros)

(1) Loans and advances for which the final impairment was determined and approved by the Impairment Committee
Individual Assessment (1)
(2) Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
Exposure
Impairment

31.12.2019
Collective Assessment (2)
Exposure
Impairment

Corporate

Mortgage loans

Consumer and other loans

Total
Corporate

2 358 394

1 391 397

12 873 637

254 167

11 065

2 395

Individual Assessment (1)
Exposure
Impairment

200 414

115 384

2 569 873
2 358 394

1 509 176
1 391 397

64 599

31.12.2019
10 253 210
Collective Assessment (2)
1 358 002
Exposure
Impairment
24 484 849
12 873 637

343 319
254 167

24 553

Total

Exposure

Impairment

15 232 031

(in thousands of Euros)
1 645 564

10 264 275

66 994

Total

1 558 416

Exposure
27 054 722
15 232 031

139 937

Impairment

1 852 495
1 645 564

10 253 210
2 395
Mortgage loans
(1) Loans and advances for which the final impairment was determined and approved by the Impairment Committee
(2) Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
1 358 002
Consumer and other loans

115 384

200 414

11 065

64 599

10 264 275

66 994

24 553

1 558 416

139 937

1 509 176

2 569 873

1 852 495
Total
In the case of credits analyzed by the Impairment Committee for which the impairment determined automatically by the Impairment
Model has not been changed, they are included and presented in the "Collective assessment".
(1) Loans and advances for which the final impairment was determined and approved by the Impairment Committee
(2) Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
In the case of credits analyzed by the Impairment Committee for which the impairment determined automatically by
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment assessed
the Impairment Model has not been changed, they are included and presented in the "Collective assessment".
In the case of credits analyzed by the Impairment Committee for which the impairment determined automatically by the Impairment
individually and collectively, by geography, is presented as follows:
Model has not been changed, they are included and presented in the "Collective assessment".
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment
assessed individually and collectively, by geography, is presented as follows:
As at 31 December 2020 and 2019, the analysis of the gross loans and advances to customers’ exposure and impairment assessed
Individual Assessment*
individually and collectively, by geography, is presented as follows:

Collective Assessment**

(in thousands of Euros)

27 054 722

24 484 849

31.12.2020

343 319

Total

Exposure

Impairment

Exposure

Impairment

Exposure

Portugal
Spain
United Kingdom
France
Switzerland
Portugal
Luxembourg
Spain
Other
United Kingdom
France
Total
Switzerland

Exposure

Impairment

1 621 724
29 762
Individual Assessment*
-
-
-
1 621 724
-
29 762
176 320
-
-
1 827 806
-

938 644
17 762
-
-
-
938 644
-
17 762
132 045
-
-
1 088 451
-

31.12.2020

Collective Assessment**

Exposure

21 294 043
410 771
272 723
256 544
231 385
21 294 043
167 956
410 771
755 581
272 723
256 544
23 389 003
231 385

Impairment

471 246
13 019
6 682
3 351
1 573
471 246
20
13 019
13 415
6 682
3 351
509 306
1 573

Impairment
(in thousands of Euros)

Total

Exposure

22 915 767
440 533
272 723
256 544
231 385
22 915 767
167 956
440 533
931 901
272 723
256 544
25 216 809
231 385

Impairment

1 409 890
30 781
6 682
3 351
1 573
1 409 890
20
30 781
145 460
6 682
3 351
1 597 757
1 573

167 956
Luxembourg
* Loans and advances which the final impairment was determined and approved by the Impairment Committee
** Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
755 581
Other

-
176 320

-
132 045

20
13 415

167 956
931 901

Total

1 827 806

1 088 451

23 389 003

31.12.2019

509 306

25 216 809

20
145 460
(in thousands of Euros)
1 597 757

* Loans and advances which the final impairment was determined and approved by the Impairment Committee

Individual Assessment*

Collective Assessment**

Total

** Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model

Exposure

Impairment

Exposure

Impairment

Exposure

Impairment
(in thousands of Euros)

Portugal
Luxembourg
United Kingdom
Spain
Cayman Island
Portugal
Ireland
Luxembourg
Other
United Kingdom
Spain
Total
Cayman Island

Exposure

Impairment

2 210 925
-
Individual Assessment*
481
105 236
-
2 210 925
-
-
253 231
481
105 236
2 569 873
-

1 291 749
-
116
49 141
-
1 291 749
-
-
168 170
116
49 141
1 509 176
-

31.12.2019

Collective Assessment**

Exposure

21 196 952
109 318
219 905
1 838 788
298
21 196 952
17 759
109 318
1 101 829
219 905
1 838 788
24 484 849
298

Impairment

304 530
310
1 401
28 332
6
304 530
31
310
8 709
1 401
28 332
343 319
6

Total

Exposure

23 407 877
109 318
220 386
1 944 024
298
23 407 877
17 759
109 318
1 355 060
220 386
1 944 024
27 054 722
298

Impairment

1 596 279
310
1 517
77 473
6
1 596 279
31
310
176 879
1 517
77 473
1 852 495
6

Ireland
* Loans and advances which the final impairment was determined and approved by the Impairment Committee
** Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
Other

-
168 170

-
253 231

17 759
1 101 829

31
8 709

17 759
1 355 060

31
176 879

Total

2 569 873

1 509 176

24 484 849

343 319

27 054 722

1 852 495

* Loans and advances which the final impairment was determined and approved by the Impairment Committee

** Loans and advances for which the final impairment was determined according to the calculation rules of the collective impairment model
2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

332

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 275-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

NOVO BANCO
In order to mitigate credit risk, credit operations have associated guarantees, namely mortgages or pledges. The fair
value of these guarantees is determined at the date of granting the credit and is periodically reassessed. Below is the
In order to mitigate credit risk, credit operations have associated guarantees, namely mortgages or pledges. The fair value of these
gross value of the credits and the respective fair value of the collateral, limited to the value of the associated credit:
guarantees is determined at the date of granting the credit and is periodically reassessed. Below is the gross value of the credits and
the respective fair value of the collateral, limited to the value of the associated credit:

Individuals - Mortgage
Mortgages
Pledges
Not collateralized

Individuals - Other
Mortgages
Pledges
Not collateralized

Corporate
Mortgages
Pledges
Not collateralized

Total

31.12.2020

(in thousands of Euros)

31.12.2019

Amount of loans

Fair value of
collateral

Amount of loans

Fair value of
collateral

9 801 563
113 702
95 188
10 010 453

219 239
267 102
846 957
1 333 298

3 622 160
2 210 683
8 040 215
13 873 058

9 786 018
113 198
-
9 899 216

216 301
148 584
-
364 885

3 130 712
836 026
-
3 966 738

10 083 366
82 044
98 865
10 264 275

268 964
342 268
947 184
1 558 416

2 915 576
5 017 404
7 299 051
15 232 031

10 065 713
81 368
-
10 147 081

263 156
210 696
-
473 852

2 572 755
2 585 665
-
5 158 420

25 216 809

14 230 839

27 054 722

15 779 353

The difference between the value of the credit and the fair value of the collateral represents the total credit exposure that exceeds
the value of the collateral, this value not being impacted by collaterals with a fair value higher than the credit to which they are
associated.
The difference between the value of the credit and the fair value of the collateral represents the total credit exposure
The details of the collateral – mortgages is presented as follows:
that exceeds the value of the collateral, this value not being impacted by collaterals with a fair value higher than the
credit to which they are associated.

(in thousands of Euros)

31.12.2020

The details of the collateral – mortgages is presented as follows:

Collateral intervals a)

Individuals - Mortgage
loans

Individuals - Other loans

Corporate loans

Total

>= 5,0€mn and <10,0€mn
a) The allocation by intervals was based on the total amount of collateral per credit agreement

>= 10,0€mn and <20,0€mn

>= 20,0€mn and <50,0€mn

>=50€mn

Collateral intervals a)

-
Individuals - Mortgage
203 265
9 786 018
loans

a) The allocation by intervals was based on the total amount of collateral per credit agreement

Number

Amount

<0,5M€

>= 0,5M€ and <1,0M€

>= 1,0M€ and <5,0M€

>= 5,0M€ and <10,0M€

Collateral intervals a)

>= 10,0M€ and <20,0M€

>= 20,0M€ and <50,0M€
<0,5€mn
>=50M€
>= 0,5€mn and <1,0€mn

>= 1,0€mn and <5,0€mn

<0,5M€

>= 0,5M€ and <1,0M€

>= 1,0M€ and <5,0M€

>= 5,0M€ and <10,0M€

Collateral intervals a)

>= 10,0M€ and <20,0M€

>= 20,0M€ and <50,0M€
<0,5€mn
>=50M€
>= 0,5€mn and <1,0€mn

Number

Amount

Number

Amount

Number

Amount

Number

Amount

202 981

9 593 284

5 107

200 866

9 748

248

146 377

8 552

31.12.2020

2 202

505 417

264 144

217 836

10 299 567
(in thousands of Euros)
419 073

2 476

46 357
Individuals - Mortgage
loans
-
-

6 883
Individuals - Other loans
-

7 537
Corporate loans
5 979

401 084

839 109

7 576

5 979

Total

892 349

401 084

Number

Amount

Number

Amount

Number

4 014

Amount

477 539

Number

4 014

Amount

477 539

-
202 981
-
248
203 265
36

-
9 593 284
-
146 377
9 786 018
46 357

-
5 107
-
26
5 136
3

-
200 866
-
8 552
216 301
6 883

170
9 748
1 566
2 202
31 216
7 537

5 979

4 014

170

31.12.2019

1 566

471 926
505 417
171 493
264 144
3 130 712
839 109

401 084

477 539

471 926

171 493

170
217 836
1 566
2 476
239 617
7 576

471 926
10 299 567
171 493
419 073
13 133 031
892 349

5 979

401 084

4 014

477 539
(in thousands of Euros)
170
471 926

1 566

171 493

Individuals - Other loans
216 301

5 136

Corporate loans

31 216

3 130 712

239 617

Total

13 133 031

Number

Amount

Number

Amount

Number

Amount

210 236

9 878 305

5 398

228 186

8 605

235

138 719

16 666

31.12.2019

2 132

408 838

242 563

224 239

10 515 329
(in thousands of Euros)
397 948

2 412

48 689
Individuals - Mortgage
loans
-
-

18 304
Individuals - Other loans
-

6 416
Corporate loans
692

705 489

323 224

6 480

692

Total

772 482

323 224

Number

Amount

Number

Amount

Number

3 267

Amount

303 545

Number

3 267

Amount

303 545

-
210 236
-
235
210 517
46

-
9 878 305
-
138 719
10 065 713
48 689

-
5 398
-
45
5 461
18

-
228 186
-
16 666
263 156
18 304

222
8 605
1
2 132
21 335
6 416

692

3 267

518 961
408 838
70 135
242 563
2 572 755
705 489

323 224

303 545

222
224 239
1
2 412
237 313
6 480

692

3 267

518 961
10 515 329
70 135
397 948
12 901 624
772 482

323 224

303 545

>= 1,0€mn and <5,0€mn
a) The allocation by intervals was based on the total amount of collateral per credit agreement
>= 5,0€mn and <10,0€mn

>= 10,0€mn and <20,0€mn

>= 20,0€mn and <50,0€mn
518 961
The values of collateral - mortgages, presented above, represent the maximum coverage value of the covered assets, that is, that
>=50€mn
70 135
compete up to the gross value of the individual credits covered.

518 961

70 135

222

210 517

10 065 713

5 461

263 156

21 335

2 572 755

237 313

12 901 624

a) The allocation by intervals was based on the total amount of collateral per credit agreement

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 276-

333

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The values of collateral - mortgages, presented above, represent the maximum coverage value of the covered assets,
that is, that compete up to the gross value of the individual credits covered.

In assessing the risk of an operation or set of operations, the elements of credit risk mitigation associated with them are
taken into account, in accordance with internal rules and procedures.

The relevant collaterals are essentially the following:

NOVO BANCO

• Real estate, where the value considered is the correspondent to the last available valuation;
In assessing the risk of an operation or set of operations, the elements of credit risk mitigation associated with them are taken into
• Financial pledges, where the value considered corresponds to the quotation on the last day of the month, in the
account, in accordance with internal rules and procedures.

case of being a listed security, or the value of the pledge, in the case of being cash.

The relevant collaterals are essentially the following:
The acceptance of collateral as a guarantee for credit operations refers to the need to define and implement risk miti-
• Real estate, where the value considered is the correspondent to the last available valuation;
Financial pledges, where the value considered corresponds to the quotation on the last day of the month, in the case of being a
•
gation techniques to which these collaterals are exposed. Thus, and as an approach to this matter, the Group stipulated
listed security, or the value of the pledge, in the case of being cash.
a set of procedures applicable to collateral (namely financial and real estate), which cover, among others, the volatility
of the collateral value, its liquidity and also an indication as to the recovery rates associated with each type of collateral.
The acceptance of collateral as a guarantee for credit operations refers to the need to define and implement risk mitigation techniques
to which these collaterals are exposed. Thus, and as an approach to this matter, the Group stipulated a set of procedures applicable
The internal rules on credit powers thus have a specific chapter on this point, "Acceptance of collateral - techniques for
to collateral (namely financial and real estate), which cover, among others, the volatility of the collateral value, its liquidity and also
an indication as to the recovery rates associated with each type of collateral.
mitigating the risks to which collateral is exposed, namely liquidity and volatility risks".

The internal rules on credit powers thus have a specific chapter on this point, "Acceptance of collateral - techniques for mitigating the
The revaluation process for real estate is performed by independent valuation experts registered in CMVM, following
risks to which collateral is exposed, namely liquidity and volatility risks".
the methodologies as described in Note 2.11.
The revaluation process for real estate is performed by independent valuation experts registered in CMVM, following the
The analysis of risk exposure by sector of activity, as at 31 December 2020 and 2019, is presented as follows:
methodologies as described in Note 2.11.

The analysis of risk exposure by sector of activity, as at 31 December 2020 and 2019, is presented as follows:

Loans and advances to
customers

Gross
amount

Impairment

Financial
assets held
for trading

Derivatives
for trading
and fair
value option
derivates

Financial
assets at
fair value
through
profit or
loss

31.12.2020

Financial assets at
fair value through
profit or loss -
mandatory

Derivatives -
hedge
accounting

333 150
Agriculture, Forestry and Fishery
74 587
Mining
535 893
Food, Beverages and Tobacco
358 937
Textiles and Clothing
72 598
Leather and Shoes
116 943
Wood and Cork
204 175
Paper and Printing Industry
9 867
Refining of Petroleum
323 798
Chemicals and Rubber
126 754
Non-metallic Minerals
361 426
Metallurgical Industries and Metallic Products
Production of Machinery, Equipment and Electrical Devices
141 484
118 960
Production of Transport Material
141 682
Other Transforming Industries
337 076
Electricity, Gas and Water
1 401 976
Construction and Public Works
1 388 289
Wholesale and Retail Trade
980 980
Tourism
874 941
Transport and Communication
470 353
Financial Activities
1 776 935
Real Estate Activities
2 322 854
Services Provided to Companies
591 860
Public Administration and Services
688 940
Other activities of collective services
10 010 453
Mortgage Loans
1 333 298
Consumers Loans
118 600
Others

( 11 213)
( 18 626)
( 16 677)
( 15 812)
( 3 184)
( 3 946)
( 19 003)
( 14)
( 5 175)
( 7 884)
( 12 497)
( 9 161)
( 2 999)
( 11 021)
( 19 073)
( 166 456)
( 61 648)
( 80 486)
( 53 234)
( 61 084)
( 221 118)
( 305 367)
( 26 300)
( 143 175)
( 65 845)
( 188 910)
( 69 867)

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
267 016
-
-
-
-

690
-
10 113
255
-
236
27
-
1 576
-
281
349
78
-
22 809
97 763
3 741
362
67 527
163 798
8 147
9 034
-
1 471
-
-
-

TOTAL

25 216 809

( 1 599 775)

267 016

388 257

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

(in thousands of Euros)

Financial assets at fair
value through other
comprehensive income

Financial assets at
amortised cost

Guarantees and
endorsements provided

Gross
amount

29 227
-
-
-
-
-
-
-
19 597
16 483
16 533
42 692
-
-
33 978
-
41 174
182
99 577
749 263
867
102 139
6 490 358
99 878
-
-
165 639

Impairment

Gross
amount

Impairment

Gross
amount

Impairment

( 13)
-
-
-
-
-
-
-
( 13)
( 14)
( 10)
( 26)
-
-
( 25)
-
( 27)
-
( 63)
( 249)
-
( 53)
( 3 125)
( 58)
-
-
( 14)

19 196
18 380
73 076
1 197
-
12 512
31 483
40 135
131 643
3 441
1 498
45 059
15 039
4 987
138 950
199 316
45 435
-
11 639
369 587
100 777
705 450
421 249
42 264
-
-
-

( 26)
( 4)
( 2 277)
-
-
( 49)
( 48)
( 20)
( 67)
( 4)
( 21)
( 22)
( 8)
( 35)
( 418)
( 60 786)
( 51)
-
( 16)
( 938)
( 26 181)
( 109 627)
( 579)
( 60)
-
-
-

12 411
8 013
50 449
9 336
2 074
6 546
3 542
1 804
18 684
18 496
42 633
64 780
12 297
18 390
101 060
888 736
202 637
62 419
376 637
133 476
214 027
386 795
24 295
142 419
35
6 584
17 615

( 6 004)
( 193)
( 295)
( 2 608)
( 107)
( 46)
( 32)
-
( 122)
( 269)
( 384)
( 979)
( 638)
( 2 359)
( 194)
( 39 174)
( 2 177)
( 7 129)
( 1 794)
( 749)
( 21 151)
( 4 264)
( 191)
( 824)
-
-
( 480)

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
882 971
-
75 613
-
2 378
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12 972
-
-
-
-
-
-
-

960 962

12 972

7 907 587

( 3 690)

2 432 313

( 201 237)

2 826 190

( 92 163)

Loans and advances to
customers

Gross
amount

Impairment

Financial
assets held
for trading

Derivatives
for trading
and fair
value option
derivates

Financial
assets at
fair value
through
profit or
loss

31.12.2019

Financial assets at
fair value through
profit or loss -
mandatory

Derivatives -
hedge
accounting

374 469
Agriculture, Forestry and Fishery
84 012
Mining
510 044
Food, Beverages and Tobacco
306 688
Textiles and Clothing
57 665
Leather and Shoes
91 620
Wood and Cork
201 151
Paper and Printing Industry
9 337
Refining of Petroleum
327 606
Chemicals and Rubber
127 028
Non-metallic Minerals
Metallurgical Industries and Metallic Products
406 350
131 352
Production of Machinery, Equipment and Electrical Devices
98 639
Production of Transport Material
144 628
Other Transforming Industries
434 743
Electricity, Gas and Water
1 411 666
Construction and Public Works
1 383 933
Wholesale and Retail Trade
911 311
Tourism
1 079 857
Transport and Communication
555 298
Financial Activities
2 105 462
Real Estate Activities
2 890 012
Services Provided to Companies
663 576
Public Administration and Services
807 890
Other activities of collective services
10 264 275
Mortgage Loans
1 558 416
Consumers Loans
117 694
Others

334

( 17 182)
( 12 676)
( 19 984)
( 13 773)
( 4 321)
( 3 405)
( 34 597)
( 56)
( 7 888)
( 16 282)
( 10 453)
( 7 118)
( 2 952)
( 8 094)
( 22 595)
( 236 081)
( 84 799)
( 37 090)
( 72 770)
( 66 979)
( 214 942)
( 411 570)
( 26 294)
( 274 143)
( 66 994)
( 139 937)
( 39 520)

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
254 848
-
-
-
-

511
-
10 863
199
51
178
-
-
958
-
750
788
87
1
31 996
94 989
1 435
520
105 644
217 480
7 898
15 910
1 391
2 235
-
-
-

TOTAL

27 054 722

( 1 852 495)

254 848

493 884

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 237 207
2 751
62 506
-
12 278
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7 452
-
-
-
-
-
-
-

(in thousands of Euros)

Financial assets at fair
value through other
comprehensive income

Financial assets at
amortised cost

Guarantees and
endorsements provided

Gross
amount

31 712
109
-
9 988
-
-
-
-
19 305
16 664
21 142
20 643
-
-
54 410
-
40 450
144
134 815
698 324
35 355
322 734
7 108 366
172 519
-
-
163 216

Impairment

Gross
amount

Impairment

Gross
amount

Impairment

( 15)
-
-
( 9)
-
-
-
-
( 16)
( 16)
( 18)
( 12)
-
-
( 42)
-
( 29)
-
( 89)
( 220)
( 19)
( 77)
( 4 527)
( 447)
-
-
( 20)

5 968
-
22 640
3 596
1 999
996
2 498
-
2 985
3 648
6 706
492
-
4 987
195 061
183 129
13 834
-
10 227
79 083
117 986
656 224
459 260
10 000
-
-
-

( 15)
-
( 2 218)
( 3)
( 1)
( 2)
( 5)
-
( 6)
( 3)
( 17)
( 1)
-
( 17)
( 1 002)
( 34 604)
( 9)
-
( 11)
( 371)
( 18 163)
( 101 424)
( 704)
( 198)
-
-
-

12 979
8 217
56 171
9 964
1 660
6 347
4 344
5 210
25 461
17 138
40 531
60 648
10 413
26 382
79 249
897 348
246 231
70 407
387 299
145 391
234 056
464 381
25 100
130 767
33
12 490
15 568

( 517)
( 115)
( 413)
( 4 545)
( 107)
( 32)
( 30)
-
( 176)
( 370)
( 326)
( 1 127)
( 106)
( 767)
( 69)
( 43 165)
( 3 961)
( 6 347)
( 9 108)
( 871)
( 15 604)
( 4 218)
( 279)
( 1 109)
-
( 345)
( 227)

1 314 742

7 452

8 849 896

( 5 556)

1 781 319

( 158 774)

2 993 785

( 93 934)

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 277-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

NOVO BANCO

In assessing the risk of an operation or set of operations, the elements of credit risk mitigation associated with them are taken into

account, in accordance with internal rules and procedures.

The relevant collaterals are essentially the following:

• Real estate, where the value considered is the correspondent to the last available valuation;

•

Financial pledges, where the value considered corresponds to the quotation on the last day of the month, in the case of being a

listed security, or the value of the pledge, in the case of being cash.

The acceptance of collateral as a guarantee for credit operations refers to the need to define and implement risk mitigation techniques

to which these collaterals are exposed. Thus, and as an approach to this matter, the Group stipulated a set of procedures applicable

to collateral (namely financial and real estate), which cover, among others, the volatility of the collateral value, its liquidity and also

an indication as to the recovery rates associated with each type of collateral.

The internal rules on credit powers thus have a specific chapter on this point, "Acceptance of collateral - techniques for mitigating the

risks to which collateral is exposed, namely liquidity and volatility risks".

The revaluation process for real estate is performed by independent valuation experts registered in CMVM, following the

methodologies as described in Note 2.11.

The analysis of risk exposure by sector of activity, as at 31 December 2020 and 2019, is presented as follows:

Loans and advances to

customers

Impairment

Derivatives

Financial

for trading

assets held

and fair

for trading

value option

derivates

assets at

Financial assets at

fair value

fair value through

through

profit or

loss

profit or loss -

mandatory

Derivatives -

hedge

accounting

31.12.2020

Metallurgical Industries and Metallic Products

Production of Machinery, Equipment and Electrical Devices

141 484

Agriculture, Forestry and Fishery

Mining

Food, Beverages and Tobacco

Textiles and Clothing

Leather and Shoes

Wood and Cork

Paper and Printing Industry

Refining of Petroleum

Chemicals and Rubber

Non-metallic Minerals

Production of Transport Material

Other Transforming Industries
Electricity, Gas and Water
Construction and Public Works
Wholesale and Retail Trade
Tourism
Transport and Communication
Financial Activities
Real Estate Activities
Services Provided to Companies
Public Administration and Services
Other activities of collective services
Mortgage Loans
Consumers Loans
Others

Gross

amount

333 150

74 587

535 893

358 937

72 598

116 943

204 175

9 867

323 798

126 754

361 426

118 960

141 682
337 076
1 401 976
1 388 289
980 980
874 941
470 353
1 776 935
2 322 854
591 860
688 940
10 010 453
1 333 298
118 600

( 11 213)

( 18 626)

( 16 677)

( 15 812)

( 3 184)

( 3 946)

( 19 003)

( 14)

( 5 175)

( 7 884)

( 12 497)

( 9 161)

( 2 999)

( 11 021)
( 19 073)
( 166 456)
( 61 648)
( 80 486)
( 53 234)
( 61 084)
( 221 118)
( 305 367)
( 26 300)
( 143 175)
( 65 845)
( 188 910)
( 69 867)

-
-
-
-
-
-
-
-
-
267 016
-
-
-
-

690

10 113

255

236

1 576

281

349

-
22 809
97 763
3 741
362
67 527
163 798
8 147
9 034
-
1 471
-
-
-

TOTAL

25 216 809

( 1 599 775)

267 016

388 257

-
-
-
-
-
-
-
-
-
-
-
-
-
-

(in thousands of Euros)

Impairment

Financial assets at fair

value through other

comprehensive income

Gross

amount

29 227

( 13)

-
-
-
-
-
-
12 972
-
-
-
-
-
-
-

19 597

16 483

16 533

42 692

-
33 978
-
41 174
182
99 577
749 263
867
102 139
6 490 358
99 878
-
-
165 639

( 13)

( 14)

( 10)

( 26)

-
( 25)
-
( 27)
-
( 63)
( 249)
-
( 53)
( 3 125)
( 58)
-
-
( 14)

Financial assets at

amortised cost

Guarantees and

endorsements provided

Gross

amount

19 196

18 380

73 076

1 197

12 512

31 483

40 135

131 643

3 441

1 498

45 059

15 039

4 987
138 950
199 316
45 435
-
11 639
369 587
100 777
705 450
421 249
42 264
-
-
-

( 26)

( 4)

( 2 277)

( 49)

( 48)

( 20)

( 67)

( 4)

( 21)

( 22)

( 8)

( 35)
( 418)
( 60 786)
( 51)
-
( 16)
( 938)
( 26 181)
( 109 627)
( 579)
( 60)
-
-
-

Gross

amount

12 411

8 013

50 449

9 336

2 074

6 546

3 542

1 804

18 684

18 496

42 633

64 780

12 297

18 390
101 060
888 736
202 637
62 419
376 637
133 476
214 027
386 795
24 295
142 419
35
6 584
17 615

( 6 004)

( 193)

( 295)

( 2 608)

( 107)

( 46)

( 32)

( 122)

( 269)

( 384)

( 979)

( 638)

( 2 359)
( 194)
( 39 174)
( 2 177)
( 7 129)
( 1 794)
( 749)
( 21 151)
( 4 264)
( 191)
( 824)
-
-
( 480)

-
-
-
-
-
-
882 971
-
75 613
-
2 378
-
-
-

960 962

12 972

7 907 587

( 3 690)

2 432 313

( 201 237)

2 826 190

( 92 163)

Loans and advances to
customers

Gross
amount

Impairment

Financial
assets held
for trading

Derivatives
for trading
and fair
value option
derivates

Financial
assets at
fair value
through
profit or
loss

31.12.2019

Financial assets at
fair value through
profit or loss -
mandatory

Derivatives -
hedge
accounting

374 469
Agriculture, Forestry and Fishery
84 012
Mining
510 044
Food, Beverages and Tobacco
306 688
Textiles and Clothing
57 665
Leather and Shoes
91 620
Wood and Cork
201 151
Paper and Printing Industry
9 337
Refining of Petroleum
327 606
Chemicals and Rubber
127 028
Non-metallic Minerals
406 350
Metallurgical Industries and Metallic Products
Production of Machinery, Equipment and Electrical Devices
131 352
98 639
Production of Transport Material
144 628
Other Transforming Industries
434 743
Electricity, Gas and Water
1 411 666
Construction and Public Works
1 383 933
Wholesale and Retail Trade
911 311
Tourism
1 079 857
Transport and Communication
555 298
Financial Activities
2 105 462
Real Estate Activities
2 890 012
Services Provided to Companies
663 576
Public Administration and Services
807 890
Other activities of collective services
10 264 275
Mortgage Loans
1 558 416
Consumers Loans
117 694
Others

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
254 848
-
-
-
-

511
-
10 863
199
51
178
-
-
958
-
750
788
87
1
31 996
94 989
1 435
520
105 644
217 480
7 898
15 910
1 391
2 235
-
-
-

TOTAL

27 054 722

( 1 852 495)

254 848

493 884

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 237 207
2 751
62 506
-
12 278
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7 452
-
-
-
-
-
-
-

(in thousands of Euros)

Financial assets at fair
value through other
comprehensive income

Financial assets at
amortised cost

Guarantees and
endorsements provided

Gross
amount

31 712
109
-
9 988
-
-
-
-
19 305
16 664
21 142
20 643
-
-
54 410
-
40 450
144
134 815
698 324
35 355
322 734
7 108 366
172 519
-
-
163 216

Impairment

Gross
amount

Impairment

Gross
amount

Impairment

( 15)
-
-
( 9)
-
-
-
-
( 16)
( 16)
( 18)
( 12)
-
-
( 42)
-
( 29)
-
( 89)
( 220)
( 19)
( 77)
( 4 527)
( 447)
-
-
( 20)

5 968
-
22 640
3 596
1 999
996
2 498
-
2 985
3 648
6 706
492
-
4 987
195 061
183 129
13 834
-
10 227
79 083
117 986
656 224
459 260
10 000
-
-
-

( 15)
-
( 2 218)
( 3)
( 1)
( 2)
( 5)
-
( 6)
( 3)
( 17)
( 1)
-
( 17)
( 1 002)
( 34 604)
( 9)
-
( 11)
( 371)
( 18 163)
( 101 424)
( 704)
( 198)
-
-
-

12 979
8 217
56 171
9 964
1 660
6 347
4 344
5 210
25 461
17 138
40 531
60 648
10 413
26 382
79 249
897 348
246 231
70 407
387 299
145 391
234 056
464 381
25 100
130 767
33
12 490
15 568

( 517)
( 115)
( 413)
( 4 545)
( 107)
( 32)
( 30)
-
( 176)
( 370)
( 326)
( 1 127)
( 106)
( 767)
( 69)
( 43 165)
( 3 961)
( 6 347)
( 9 108)
( 871)
( 15 604)
( 4 218)
( 279)
( 1 109)
-
( 345)
( 227)

1 314 742

7 452

8 849 896

( 5 556)

1 781 319

( 158 774)

2 993 785

( 93 934)

- 277-

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
The Group proceeds to the identification and register of restructured credit contracts due to the client's financial
difficulties whenever there are changes to the terms and conditions of a contract in which the client has defaulted, that
is, it is foreseeable that it will default, with a financial obligation. It is considered that there is a change to the terms and
conditions of the contract when (i) there are contractual changes to the benefit of the customer, such as extending the
NOVO BANCO
term, introducing grace periods, reducing the rate or partial debt forgiveness; (ii) there is a contracting of a new credit
operation to settle the existing debt (total or partial); or (iii) the new terms of the contract are more favorable than those
The Group proceeds to the identification and register of restructured credit contracts due to the client's financial difficulties whenever
applied to other customers with the same risk profile.
there are changes to the terms and conditions of a contract in which the client has defaulted, that is, it is foreseeable that it will default,
with a financial obligation. It is considered that there is a change to the terms and conditions of the contract when (i) there are
The cancellation of a restructured credit due to the client's financial difficulties can only occur after a minimum period
contractual changes to the benefit of the customer, such as extending the term, introducing grace periods, reducing the rate or partial
debt forgiveness; (ii) there is a contracting of a new credit operation to settle the existing debt (total or partial); or (iii) the new terms
of two years from the date of the restructuring, provided that the following conditions are cumulatively fulfilled: (i)
of the contract are more favorable than those applied to other customers with the same risk profile.
regular payment of capital and interest; (ii) the customer has no capital or interest due; and (iii) there were no debt
restructuring mechanisms by the client in that period.
The cancellation of a restructured credit due to the client's financial difficulties can only occur after a minimum period of two years
from the date of the restructuring, provided that the following conditions are cumulatively fulfilled: (i) regular payment of capital and
interest; (ii) the customer has no capital or interest due; and (iii) there were no debt restructuring mechanisms by the client in that
The amounts of the restructured loans due to financial difficulties of the customer as at 31 December 2020 and 2019,
period.
are as follows

The amounts of the restructured loans due to financial difficulties of the customer as at 31 December 2020 and 2019, are as follows:
(in thousands of Euros)

Corporate

Mortgage loans
Consumer and other loans

Total

31.12.2020

31.12.2019

1 782 137

154 216
147 775

2 388 446

135 361
205 795

2 084 128

2 729 602

The details of the restructuring measures applied to loans restructured up to 31 December 2020 and 2019 are the following:

Solution

Performing

31.12.2020

Non Performing

(in thousands of Euros)

Total

Principal or interest forgiveness

Assets received in partial settlement of loan

Capitalization of interest

New loan in total or partial payment of existing loan

Extension of repayment period

Introduction of grace period of principal or interest

Decrease in the interest rates

Changes of the lease payment plan

Changes in the interest paymen

Other

335

Total

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

1 483

57 740

1 104

12 994

90 212

2 063

514 009

339

101

122

33 881

13 859

9 698

3 921

159

1 002

10 130

81 700

1 504

466

787

1 409

47 127

1 304

150

177 807

107 513

193

235 547

111 434

181

575

921

111

656

2 078

1 924

3 182

2 083

123 462

74 085

225

136 456

75 087

231 373

145 655

2 058

321 585

155 785

590 946

382 265

2 984

1 104 955

463 965

60 421

65 171

39 634

2 769

9 823

28 147

23 549

21 771

2 380

1 159

450

131

194

94 302

79 030

49 332

2 789

2 065

56 950

29 651

24 015

22 558

2 381

2 463

5 629

780 644

100 974

2 720

1 303 484

788 448

8 349

2 084 128

889 422

Solution

Performing

No.

Transaction

No.

Transaction

Total

No.

Transaction

Exposure

Impairment

Exposure

Impairment

Exposure

Impairment

31.12.2019

Non Performing

(in thousands of Euros)

New loan in total or partial payment of existing loan

1 637

141 909

Principal or interest forgiveness

Assets received in partial settlement of loan

Capitalization of interest

Extension of repayment period

Introduction of grace period of principal or interest

Decrease in the interest rates

Changes of the lease payment plan

Changes in the interest paymen

Other

Total

50 181

5 330

207

239 255

135 618

245

289 436

140 948

974

585

124

144

49 312

61 338

57 293

16 547

3 142

454

6 240

1 413

1 706

862

213

824

909

219

2 270

97 382

1 564

1 214

3 344

2 481

3 488

2 484

153 804

76 982

239

203 116

77 436

420 775

292 376

2 461

562 684

298 616

174 544

99 258

36 674

13 954

59 578

88 264

33 641

10 548

12 548

20 696

804

178

100

235 882

156 551

53 221

17 096

3 484

156 960

89 677

35 347

11 410

12 608

22 260

415 161

26 675

636 007

375 184

1 883

1 051 168

401 859

5 724

892 409

44 307

3 718

1 837 193

1 048 338

9 442

2 729 602

1 092 645

The movement of restructured loans throughout the years 2020 and 2019 was as follows:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 278-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

The Group proceeds to the identification and register of restructured credit contracts due to the client's financial difficulties whenever

there are changes to the terms and conditions of a contract in which the client has defaulted, that is, it is foreseeable that it will default,

with a financial obligation. It is considered that there is a change to the terms and conditions of the contract when (i) there are

contractual changes to the benefit of the customer, such as extending the term, introducing grace periods, reducing the rate or partial

debt forgiveness; (ii) there is a contracting of a new credit operation to settle the existing debt (total or partial); or (iii) the new terms

of the contract are more favorable than those applied to other customers with the same risk profile.

The cancellation of a restructured credit due to the client's financial difficulties can only occur after a minimum period of two years

from the date of the restructuring, provided that the following conditions are cumulatively fulfilled: (i) regular payment of capital and

interest; (ii) the customer has no capital or interest due; and (iii) there were no debt restructuring mechanisms by the client in that

period.

The amounts of the restructured loans due to financial difficulties of the customer as at 31 December 2020 and 2019, are as follows:
(in thousands of Euros)

Corporate

Mortgage loans
Consumer and other loans

31.12.2020

31.12.2019

1 782 137

154 216
147 775

2 388 446

135 361
205 795

Total
The details of the restructuring measures applied to loans restructured up to 31 December 2020 and 2019 are the
The details of the restructuring measures applied to loans restructured up to 31 December 2020 and 2019 are the following:
following:

2 729 602

2 084 128

Solution

Performing

31.12.2020

Non Performing

(in thousands of Euros)

Total

Principal or interest forgiveness

Assets received in partial settlement of loan

Capitalization of interest

New loan in total or partial payment of existing loan

Extension of repayment period

Introduction of grace period of principal or interest

Decrease in the interest rates

Changes of the lease payment plan

Changes in the interest paymen

Other

Total

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

1 483

57 740

1 104

12 994

90 212

2 063

514 009

339

101

122

33 881

13 859

9 698

3 921

159

1 002

10 130

81 700

1 504

466

787

1 409

47 127

1 304

150

177 807

107 513

193

235 547

111 434

181

575

921

111

656

2 078

1 924

3 182

2 083

123 462

74 085

225

136 456

75 087

231 373

145 655

2 058

321 585

155 785

590 946

382 265

2 984

1 104 955

463 965

60 421

65 171

39 634

2 769

9 823

28 147

23 549

21 771

2 380

1 159

450

131

194

94 302

79 030

49 332

2 789

2 065

56 950

29 651

24 015

22 558

2 381

2 463

5 629

780 644

100 974

2 720

1 303 484

788 448

8 349

2 084 128

889 422

Solution

Performing

31.12.2019

Non Performing

(in thousands of Euros)

Total

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

No.
Transaction

Exposure

Impairment

Principal or interest forgiveness

Assets received in partial settlement of loan

Capitalization of interest

144

49 312

New loan in total or partial payment of existing loan

1 637

141 909

454

6 240

50 181

5 330

207

239 255

135 618

245

289 436

140 948

974

585

124

415 161

26 675

61 338

57 293

16 547

3 142

1 413

1 706

862

2 270

97 382

1 564

1 214

213

824

909

219

3 344

2 481

3 488

2 484

153 804

76 982

239

203 116

77 436

420 775

292 376

2 461

562 684

298 616

636 007

375 184

1 883

1 051 168

401 859

174 544

99 258

36 674

13 954

59 578

88 264

33 641

10 548

12 548

20 696

804

178

100

235 882

156 551

53 221

17 096

3 484

156 960

89 677

35 347

11 410

12 608

22 260

5 724

892 409

44 307

3 718

1 837 193

1 048 338

9 442

2 729 602

1 092 645

Extension of repayment period

Introduction of grace period of principal or interest

Decrease in the interest rates

Changes of the lease payment plan

Changes in the interest paymen

Other

Total

The movement of restructured loans throughout the years 2020 and 2019 was as follows:

NOVO BANCO

Opening balance

Restructured credits in the period

Credits reclassified to "normal"
Credits written off
2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
Others

Total

(in thousands of Euros)

31.12.2020

31.12.2019

2 729 602

402 874

( 101 157)

( 300 821)

( 646 370)

4 832 774

609 428

( 229 312)

- 278-

(1 055 863)

(1 427 425)

2 084 128

2 729 602

Market risk
Market Risk represents the potential loss resulting from an adverse change in the value of a financial instrument due to fluctuations
Market risk
in interest rates, foreign exchange rates, equity prices, commodity prices, volatility and credit spread.

Market Risk represents the potential loss resulting from an adverse change in the value of a financial instrument due
Market risk management is integrated with the balance sheet management through the CALCO (Capital Asset and Liability
Committee) structure, being this risk monitored by the Risk Committee.
to fluctuations in interest rates, foreign exchange rates, equity prices, commodity prices, volatility and credit spread.

The main measurement of market risk is the assessment of potential losses under adverse market conditions, for which the Value at
Market risk management is integrated with the balance sheet management through the CALCO (Capital Asset and
Risk (VaR) methodology is used. NOVO BANCO Group’s VaR model uses the Monte Carlo simulation, based on a confidence level
Liability Committee) structure, being this risk monitored by the Risk Committee.
of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on an observation period of one year.
As a complement to VaR, stress testing scenarios have been developed, which allow for the evaluation of the impact of losses
The main measurement of market risk is the assessment of potential losses under adverse market conditions, for which
potentially higher than those considered by the VaR measurement.
(in thousands of Euros)
the Value at Risk (VaR) methodology is used. NOVO BANCO Group’s VaR model uses the Monte Carlo simulation, based
on a confidence level of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on
an observation period of one year. As a complement to VaR, stress testing scenarios have been developed, which allow
6 215
70 332
for the evaluation of the impact of losses potentially higher than those considered by the VaR measurement.
378
523
12 960
( 14 596)

December Annual average Maximum Minimum December Annual average Maximum Minimum

1 204
11 231
784
180
3 821
( 3 742)

915
14 433
183
37
2 652
( 2 411)

2 187
35 495
192
139
5 051
( 5 289)

3 876
42 292
295
314
1 771
( 4 393)

2 223
29 127
333
470
3 547
( 5 512)

757
14 433
80
37
1 640
( 1 138)

2 412
50 203
207
78
3 401
( 4 383)

31.12.2020

31.12.2019

Exchange risk
Interest rate risk
Shares and commodities
Volatility
Credit spread
Diversification effect
336
Total

15 809

37 775

75 812

15 809

44 155

30 188

51 918

13 478

NOVO BANCO Group has a VaR of Euro 15,809 thousand (31 December 2019: Euro 44,155 thousand) in respect of its trading
positions. The increase is mainly explained by the increase in the position in derivatives to hedge interest rate risk in the banking

portfolio.

by re-pricing intervals.

In accordance with the recommendations of European Banking Authority presented in the document EBA/GL/2018/02, NOVO

BANCO Group calculates the exposure to its balance sheet interest rate risk based on the prescribed shocks, classifying all notional

amounts of assets, liabilities and off-balance sheet captions which are sensitive to interest rate and are not part of the trading portfolio,

Loans to and deposits with banks

Loans and advances to customers

Securities

Other assets

Deposits from banks

Due to customers

Debt securities issued

Other liabilities

Off-Balance sheet

Structural GAP

Accumulated GAP

Balance sheet GAP (Assets - Liabilities)

Eligible

amounts

2 761 847

25 513 997

9 618 019

1 254 599

10 078 636

28 556 210

2 579 547

238 502

(2 304 432)

17 178

(2 287 254)

Total

(in thousands of Euros)

6 months to

1 year

1 to 5 years

More than 5

years

12 088

3 159 080

702 515

39 456

6 930 509

4 045 230

2 651 443

3 169 748

3 873 683

11 015 195

5 821 191

Not sensitive

Up to 3

months

2 706 153

9 063 624

1 365 092

656 287

13 791 156

5 328 425

15 019 258

38 502

114 981

31.12.2020

3 to 6

months

4 150

3 709 340

335 434

598 312

4 647 236

3 959 431

2 729 378

875

25 600

350 779

4 455 507

1 784

48 199

214 911

6 312 032

225 089

40 035

2 538 386

49 721

6 576 664

4 438 532

(1 807 383)

2 631 150

(3 114 655)

2 803 511

3 017 680

(2 190 279)

827 401

(2 287 254)

20 501 166

6 715 284

4 856 269

(6 710 010)

2 587 591

(4 122 419)

(2 068 048)

1 548 714

( 519 334)

(4 641 753)

( 982 586)

( 121 465)

(1 104 051)

(5 745 805)

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 279-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

2 729 602

402 874

( 101 157)

( 300 821)

4 832 774

609 428

NOVO BANCO

( 229 312)

(1 055 863)

( 646 370)

(in thousands of Euros)

(1 427 425)

31.12.2020

31.12.2019

2 084 128

2 729 602

402 874

( 101 157)

2 729 602

4 832 774

609 428

( 229 312)

Opening balance

Restructured credits in the period

Credits reclassified to "normal"

Credits written off

Others

Total

Opening balance

Restructured credits in the period

Credits reclassified to "normal"

Market risk

Credits written off

Market Risk represents the potential loss resulting from an adverse change in the value of a financial instrument due to fluctuations
Others
in interest rates, foreign exchange rates, equity prices, commodity prices, volatility and credit spread.
(1 427 425)

( 646 370)

(1 055 863)

( 300 821)

2 729 602
Total
Market risk management is integrated with the balance sheet management through the CALCO (Capital Asset and Liability
Committee) structure, being this risk monitored by the Risk Committee.

2 084 128

Market risk
The main measurement of market risk is the assessment of potential losses under adverse market conditions, for which the Value at
Market Risk represents the potential loss resulting from an adverse change in the value of a financial instrument due to fluctuations
Risk (VaR) methodology is used. NOVO BANCO Group’s VaR model uses the Monte Carlo simulation, based on a confidence level
in interest rates, foreign exchange rates, equity prices, commodity prices, volatility and credit spread.
of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on an observation period of one year.
As a complement to VaR, stress testing scenarios have been developed, which allow for the evaluation of the impact of losses
Market risk management is integrated with the balance sheet management through the CALCO (Capital Asset and Liability
potentially higher than those considered by the VaR measurement.
Committee) structure, being this risk monitored by the Risk Committee.

(in thousands of Euros)

31.12.2020

31.12.2019

December Annual average Maximum Minimum December Annual average Maximum Minimum

The main measurement of market risk is the assessment of potential losses under adverse market conditions, for which the Value at
Risk (VaR) methodology is used. NOVO BANCO Group’s VaR model uses the Monte Carlo simulation, based on a confidence level
6 215
of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on an observation period of one year.
70 332
As a complement to VaR, stress testing scenarios have been developed, which allow for the evaluation of the impact of losses
378
potentially higher than those considered by the VaR measurement.
523
12 960
( 14 596)

Exchange risk
Interest rate risk
Shares and commodities
Volatility
Credit spread
Diversification effect

915
14 433
183
37
2 652
( 2 411)

2 187
35 495
192
139
5 051
( 5 289)

1 204
11 231
784
180
3 821
( 3 742)

757
14 433
80
37
1 640
( 1 138)

3 876
42 292
295
314
1 771
( 4 393)

2 223
29 127
333
470
3 547
( 5 512)

2 412
50 203
207
78
3 401
( 4 383)

(in thousands of Euros)

31.12.2020

31.12.2019

Total

December Annual average Maximum Minimum December Annual average Maximum Minimum
13 478

15 809

37 775

75 812

15 809

44 155

30 188

51 918

Total

757
14 433
80
37
1 640
( 1 138)

3 876
42 292
295
314
1 771
( 4 393)

915
14 433
183
37
2 652
( 2 411)

2 187
35 495
192
139
5 051
( 5 289)

Exchange risk
6 215
70 332
Interest rate risk
NOVO BANCO Group has a VaR of Euro 15,809 thousand (31 December 2019: Euro 44,155 thousand) in respect of its trading
378
Shares and commodities
positions. The increase is mainly explained by the increase in the position in derivatives to hedge interest rate risk in the banking
Volatility
523
portfolio.
Credit spread
12 960
NOVO BANCO Group has a VaR of Euro 15,809 thousand (31 December 2019: Euro 44,155 thousand) in respect of its
( 14 596)
Diversification effect
In accordance with the recommendations of European Banking Authority presented in the document EBA/GL/2018/02, NOVO
trading positions. The decrease is mainly explained by the lower position in derivatives to hedge interest rate risk in the
75 812
BANCO Group calculates the exposure to its balance sheet interest rate risk based on the prescribed shocks, classifying all notional
banking portfolio.
amounts of assets, liabilities and off-balance sheet captions which are sensitive to interest rate and are not part of the trading portfolio,
NOVO BANCO Group has a VaR of Euro 15,809 thousand (31 December 2019: Euro 44,155 thousand) in respect of its trading
by re-pricing intervals.
positions. The increase is mainly explained by the increase in the position in derivatives to hedge interest rate risk in the banking
In accordance with the recommendations of European Banking Authority presented in the document EBA/GL/2018/02,
portfolio.
NOVO BANCO Group calculates the exposure to its balance sheet interest rate risk based on the prescribed shocks,
classifying all notional amounts of assets, liabilities and off-balance sheet captions which are sensitive to interest rate
In accordance with the recommendations of European Banking Authority presented in the document EBA/GL/2018/02, NOVO
BANCO Group calculates the exposure to its balance sheet interest rate risk based on the prescribed shocks, classifying all notional
-
and are not part of the trading portfolio, by re-pricing intervals.
amounts of assets, liabilities and off-balance sheet captions which are sensitive to interest rate and are not part of the trading portfolio,
-
-
by re-pricing intervals.
-

Loans to and deposits with banks
Loans and advances to customers
Securities
Other assets

1 204
11 231
784
180
3 821
( 3 742)

2 223
29 127
333
470
3 547
( 5 512)

2 412
50 203
207
78
3 401
( 4 383)

2 761 847
25 513 997
9 618 019
1 254 599

31.12.2020
3 to 6
months

6 months to
1 year

More than 5
years

Eligible
amounts

Up to 3
months

(in thousands of Euros)

Not sensitive

1 to 5 years

15 809

13 478

44 155

37 775

15 809

30 188

51 918

12 088
3 159 080
702 515
-
3 873 683

39 456
6 930 509
4 045 230
-
11 015 195

-
2 651 443
3 169 748
-
(in thousands of Euros)
5 821 191

2 706 153
9 063 624
1 365 092
656 287
13 791 156

Total

Deposits from banks
Due to customers
Loans to and deposits with banks
Debt securities issued
Loans and advances to customers
Other liabilities
Securities
Other assets
Balance sheet GAP (Assets - Liabilities)
Off-Balance sheet
Structural GAP
Deposits from banks
Accumulated GAP
Due to customers
Debt securities issued
Other liabilities

Balance sheet GAP (Assets - Liabilities)
Off-Balance sheet
Structural GAP
Accumulated GAP

Not sensitive
-
-
-
-
-
-
-
-

-
-
-
-

Eligible
10 078 636
amounts
28 556 210
2 761 847
2 579 547
25 513 997
238 502
9 618 019
1 254 599
(2 304 432)
17 178
(2 287 254)
10 078 636
28 556 210
2 579 547
238 502

(2 304 432)
17 178
(2 287 254)

Up to 3
5 328 425
months
15 019 258
2 706 153
38 502
9 063 624
114 981
20 501 166
1 365 092
656 287
(6 710 010)
13 791 156
2 587 591
(4 122 419)
5 328 425
(4 122 419)
15 019 258
38 502
114 981
20 501 166

(6 710 010)
2 587 591
(4 122 419)
(4 122 419)

4 150
3 709 340
335 434
598 312
4 647 236

31.12.2020
3 to 6
3 959 431
months
2 729 378
4 150
875
3 709 340
25 600
6 715 284
335 434
598 312
(2 068 048)
4 647 236
1 548 714
( 519 334)
3 959 431
(4 641 753)
2 729 378
875
25 600
6 715 284

(2 068 048)
1 548 714
( 519 334)
(4 641 753)

6 months to
350 779
1 year
4 455 507
12 088
1 784
3 159 080
48 199
4 856 269
702 515
-
( 982 586)
3 873 683
( 121 465)
(1 104 051)
350 779
(5 745 805)
4 455 507
1 784
48 199
4 856 269

( 982 586)
( 121 465)
(1 104 051)
(5 745 805)

1 to 5 years
214 911
6 312 032
39 456
-
6 930 509
49 721
6 576 664
4 045 230
-
4 438 532
11 015 195
(1 807 383)
2 631 150
214 911
(3 114 655)
6 312 032
-
49 721
6 576 664

4 438 532
(1 807 383)
2 631 150
(3 114 655)

More than 5
225 089
years
40 035
-
2 538 386
2 651 443
1
2 803 511
3 169 748
-
3 017 680
5 821 191
(2 190 279)
827 401
225 089
(2 287 254)
40 035
2 538 386
1
2 803 511

3 017 680
(2 190 279)
827 401
(2 287 254)

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

Not sensitive

Up to 3
months

31.12.2019
3 to 6
months

Loans to and deposits with banks
Loans and advances to customers
Securities

Eligible
amounts

2 208 463
25 332 075
12 334 723

230 656
-
2 774 971

1 637 131
14 844 924
1 110 175

28 348
4 883 296
832 147

5 968
2 689 944
197 390

306 360
1 759 049
3 697 178

-
1 154 862
3 722 862

NOVO BANCO

(in thousands of Euros)
- 279-
More than 5
years

1 to 5 years

6 months to
1 year

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 279-

Total

17 592 230

5 743 791

2 893 302

5 762 587

4 877 724

Deposits from banks
Due to customers
Debt securities issued

Balance sheet GAP (Assets - Liabilities)
Off-Balance sheet
Structural GAP
Accumulated GAP

Total

9 846 463
28 076 547
1 068 385

(2 121 761)
871
(2 120 890)

-
-
-

4 160 092
13 976 901
150 554

3 517 272
3 022 732
-

85 141
4 990 307
-

2 083 958
5 987 582
2 233

-
99 025
915 597

18 287 547

6 540 004

5 075 448

8 073 773

1 014 622

( 695 317)
2 097 110
1 401 792
1 401 792

( 796 213)
2 561 159
1 764 945
3 166 738

(2 182 146)
( 18 473)
(2 200 619)
966 118

(2 311 187)
(1 780 690)
(4 091 877)
(3 125 758)

3 863 103
(2 858 234)
1 004 869
(2 120 890)

Sensitivity analyzes are carried out for the interest rate risk of the banking portfolio based on the current difference in the interest rate
Sensitivity analyzes are carried out for the interest rate risk of the banking portfolio based on the current difference
mismatch discounted at current rates and the discounted value of the same cash flows, through scenarios of displacement of the
in the interest rate mismatch discounted at current rates and the discounted value of the same cash flows, through
parallel yield curves ( displacements of +/- 200 bp) and non-parallel (short rate shock up / down, steepener / flattener shocks),
according to the outliers tests defined by the EBA.
scenarios of displacement of the parallel yield curves ( displacements of +/- 200 bp) and non-parallel (short rate shock
up / down, steepener / flattener shocks), according to the outliers tests defined by the EBA.

(in thousands of Euros)

31.12.2020

As at 31 December
Exercise average
337
Exercise maximum
Exercise minimum

As at 31 December

Exercise average

Exercise maximum

Exercise minimum

Parallel
increase of
200 pb

Parallel
decrease of
200 pb

Short Rate
Shock Up

Short Rate
Shock Down

Steepener
shock

Flattener
shock

( 71 576)
109 070
216 808
( 71 576)

52 191
( 13 786)
52 191
( 57 778)

( 87 671)
109 047
235 284
( 87 671)

49 728
( 16 353)
49 728
( 85 746)

13 859
( 83 437)
13 859
( 180 041)

8 430
106 919
182 690
8 430

31.12.2019

(in thousands of Euros)

Parallel

increase of

decrease of

200 pb

Short Rate

Steepener

Flattener

Shock Up

Shock Down

shock

( 44 487)

( 85 848)

10 744

( 163 540)

29 403

54 406

87 692

29 403

76 935

95 216

147 247

( 42 071)

( 103 194)

( 16 798)

69 224

( 317 456)

( 176 020)

( 238 745)

( 176 020)

( 301 807)

102 796

123 974

155 873

102 796

As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which

led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their positions

in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD

SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original

objective of risk management or discontinuation of hedging relationships will occur, the Group did not record significant impacts on

retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships were

subject to the same change (hedged and hedged items).

The following table presents the average interest rates for the Group’s major financial asset and liability categories, as at 31 December

2020 and 2019, as well as the respective average balances and interest for the exercise:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 280-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

(in thousands of Euros)

Loans to and deposits with banks

Loans and advances to customers

Securities

Deposits from banks

Due to customers

Debt securities issued

Balance sheet GAP (Assets - Liabilities)
Off-Balance sheet
Structural GAP
Accumulated GAP

Eligible

amounts

2 208 463

25 332 075

12 334 723

9 846 463

28 076 547

1 068 385

(2 121 761)
871
(2 120 890)

Total

Not sensitive

Up to 3

months

6 months to

1 year

1 to 5 years

More than 5

years

31.12.2019

3 to 6

months

230 656

1 637 131

14 844 924

2 774 971

1 110 175

28 348

4 883 296

832 147

5 968

2 689 944

197 390

306 360

1 759 049

3 697 178

1 154 862

3 722 862

17 592 230

5 743 791

2 893 302

5 762 587

4 877 724

4 160 092

13 976 901

150 554

3 517 272

3 022 732

85 141

4 990 307

2 083 958

5 987 582

2 233

99 025

915 597

18 287 547

6 540 004

5 075 448

8 073 773

1 014 622

( 695 317)
2 097 110
1 401 792
1 401 792

( 796 213)
2 561 159
1 764 945
3 166 738

(2 182 146)
( 18 473)
(2 200 619)
966 118

(2 311 187)
(1 780 690)
(4 091 877)
(3 125 758)

3 863 103
(2 858 234)
1 004 869
(2 120 890)

Sensitivity analyzes are carried out for the interest rate risk of the banking portfolio based on the current difference in the interest rate
mismatch discounted at current rates and the discounted value of the same cash flows, through scenarios of displacement of the
parallel yield curves ( displacements of +/- 200 bp) and non-parallel (short rate shock up / down, steepener / flattener shocks),
according to the outliers tests defined by the EBA.

As at 31 December
Exercise average
Exercise maximum
Exercise minimum

31.12.2020

(in thousands of Euros)

Parallel
increase of
200 pb

Parallel
decrease of
200 pb

Short Rate
Shock Up

Short Rate
Shock Down

Steepener
shock

Flattener
shock

( 71 576)
109 070
216 808
( 71 576)

52 191
( 13 786)
52 191
( 57 778)

( 87 671)
109 047
235 284
( 87 671)

49 728
( 16 353)
49 728
( 85 746)

13 859
( 83 437)
13 859
( 180 041)

8 430
106 919
182 690
8 430

31.12.2019

(in thousands of Euros)

Parallel
increase of
200 pb

Parallel
decrease of
200 pb

Short Rate
Shock Up

Short Rate
Shock Down

Steepener
shock

Flattener
shock

( 44 487)
( 85 848)
10 744
( 163 540)

29 403
54 406
87 692
29 403

76 935
95 216
147 247
69 224

( 42 071)
( 103 194)
( 16 798)
( 317 456)

( 176 020)
( 238 745)
( 176 020)
( 301 807)

102 796
123 974
155 873
102 796

The following table presents the average interest rates for the Group’s major financial asset and liability categories, as
at 31 December 2020 and 2019, as well as the respective average balances and interest for the exercise: NOVO BANCO

Monetary assets
Loans and advances to customers
Securities and other

Average
balance of the
period

2 993 238
24 939 140
10 664 515

31.12.2020

31.12.2019

Interest of the
exercise

Average
interest rate

Average
balance of the
period

Interest of the
exercise

Average
interest rate

(in thousands of Euros)

16 361
534 229
136 602

0,54%
2,11%
1,26%

1 441 545
28 557 937
10 344 022

19 357
592 057
124 997

Financial assets and differentials

38 596 893

687 192

1,76%

40 343 504

736 411

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
Monetary Liabilities
Due to customers
Differential liabilities

9 913 212
25 787 192
1 815 289

( 23 410)
71 688
10 128

8 931 365
27 949 264
2 383 273

-0,23%
0,27%
0,00%

16 817
97 286
8 573

Financial liabilities and differentials

38 596 893

132 058

Net interest income

555 134

0,34%

1,42%

40 343 504

195 798

540 613

1,32%
2,04%
1,19%

1,80%

- 280-

0,19%
0,34%
0,00%

0,48%

1,32%

Regarding foreign exchange risk, the breakdown of assets and liabilities, by currency, as at 31 December 2020 and 2019, is analyzed
as follows:
Regarding foreign exchange risk, the breakdown of assets and liabilities, by currency, as at 31 December 2020 and
(in thousands of Euros)
2019, is analyzed as follows:

31.12.2020

31.12.2019

Spot

Forward

Other
elements

Net exposure

Spot

Forward

Other
elements

Net exposure

USD UNITED STATES DOLLAR

( 754 078)

780 879

26 900

( 965 967)

1 007 651

( 16 381)

GBP GREAT BRITISH POUND

( 66 761)

69 964

( 2 067)

PLN POLISH ZLOTY

28 281

( 29 125)

73 444

( 72 362)

2 127

( 133)

( 8 540)

10 903

19 612

( 19 334)

46 751

( 46 086)

( 621)

( 35)

5 053

( 3 081)

( 197)

8 781

( 81)

( 1 545)

9 573

4 447

3 518

( 230)

( 4 615)

2 984

373

1 766

( 9 979)

2 067

BRL BRAZILIAN REAL

MOP MACAO PATACA

JPY JAPANESE YEN

CHF SWISS FRANC

SEK SWEDISH KRONE

NOK NORWEGIAN KRONE

338

CAD CANADIAN DOLLAR

ZAR SOUTH AFRICAN RAND

AUD AUSTRALIAN DOLLAR

VEB VENEZUELAN BOLIVAR

MAD MOROCCAN DIRHAN

MXN MEXICAN PESO

AOA ANGOLAN KWANZA

CVE CAPE VERDEAN ESCUDO

HKD HONG-KONG DOLLAR

CZK CZECH KORUNA

DZD ALGERIAN DINAR

Note: assets / (liabilities)

follows:

1 136

1 082

2 127

1 934

2 363

278

665

2 897

( 265)

438

( 844)

( 97)

176

8 781

( 81)

221

( 406)

4 447

( 60)

3 298

3 076

6 878

103 672

( 52 218)

4 414

( 152)

311

( 8 133)

12 981

( 208)

47 140

( 47 019)

48 672

( 47 344)

976

( 20 391)

44 657

550

3 349

36 794

( 2 748)

( 318)

13 053

( 65)

( 2)

9 218

7 338

9 211

266

( 491)

10 753

( 5 988)

2 708

608

960

946

3 023

25 303

13 252

51 454

4 414

159

4 640

121

2 304

24 266

14 102

30 806

( 40)

290

13 053

( 65)

( 2)

10 178

7 338

10 157

3 289

CNY YUAN REN-MIN-BI 9 427

( 9 487)

OTHER

( 16 072)

( 11 306)

( 27 378)

( 643 647)

667 863

24 315

( 710 800)

934 614

( 8 735)

215 079

Exposure to sovereign debt of “peripheral” Eurozone countries

As at 31 December 2020 and 2019, the Group’s exposure to sovereign debt of “peripheral” Eurozone countries, is presented as

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 281-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

31.12.2020

31.12.2019

Interest of the

Average

exercise

interest rate

Average

balance of the

period

Interest of the

Average

exercise

interest rate

NOVO BANCO

(in thousands of Euros)

Average

balance of the

period

2 993 238

24 939 140

10 664 515

Monetary assets

Loans and advances to customers

Securities and other

16 361

534 229

136 602

0,54%

2,11%

1,26%

1 441 545

28 557 937

10 344 022

19 357

592 057

124 997

Financial assets and differentials

38 596 893

687 192

1,76%

40 343 504

736 411

Monetary Liabilities

Due to customers
Differential liabilities

9 913 212

25 787 192
1 815 289

( 23 410)

71 688
10 128

Financial liabilities and differentials

38 596 893

132 058

Net interest income

555 134

-0,23%

0,27%
0,00%

0,34%

1,42%

8 931 365

27 949 264
2 383 273

16 817

97 286
8 573

40 343 504

195 798

540 613

1,32%

2,04%

1,19%

1,80%

0,19%

0,34%
0,00%

0,48%

1,32%

Regarding foreign exchange risk, the breakdown of assets and liabilities, by currency, as at 31 December 2020 and 2019, is analyzed
as follows:

31.12.2020

Spot

Forward

Other
elements

Net exposure

Spot

Forward

Other
elements

Net exposure

(in thousands of Euros)

31.12.2019

USD UNITED STATES DOLLAR

( 754 078)

780 879

26 900

( 965 967)

1 007 651

( 16 381)

GBP GREAT BRITISH POUND

( 66 761)

69 964

( 2 067)

BRL BRAZILIAN REAL

MOP MACAO PATACA

JPY JAPANESE YEN

CHF SWISS FRANC

73 444

( 72 362)

2 127

( 133)

( 8 540)

10 903

SEK SWEDISH KRONE

19 612

( 19 334)

NOK NORWEGIAN KRONE

46 751

( 46 086)

CAD CANADIAN DOLLAR

ZAR SOUTH AFRICAN RAND

AUD AUSTRALIAN DOLLAR

VEB VENEZUELAN BOLIVAR

( 621)

( 35)

5 053

3 518

( 230)

( 4 615)

PLN POLISH ZLOTY

28 281

( 29 125)

MAD MOROCCAN DIRHAN

MXN MEXICAN PESO

AOA ANGOLAN KWANZA

CVE CAPE VERDEAN ESCUDO

HKD HONG-KONG DOLLAR

CZK CZECH KORUNA

DZD ALGERIAN DINAR

( 3 081)

( 197)

8 781

( 81)

( 1 545)

9 573

4 447

2 984

373

1 766

( 9 979)

CNY YUAN REN-MIN-BI 9 427

( 9 487)

OTHER

( 16 072)

( 11 306)

2 067

1 136

1 082

2 127

1 934

2 363

278

665

2 897

( 265)

438

( 844)

( 97)

176

8 781

( 81)

221

( 406)

4 447

( 60)

( 27 378)

3 298

3 076

6 878

103 672

( 52 218)

4 414

( 152)

311

( 8 133)

12 981

( 208)

47 140

( 47 019)

48 672

( 47 344)

976

( 20 391)

44 657

550

3 349

36 794

( 2 748)

( 318)

13 053

( 65)

( 2)

9 218

7 338

9 211

266

( 491)

10 753

( 5 988)

2 708

608

960

946

3 023

25 303

13 252

51 454

4 414

159

4 640

121

2 304

24 266

14 102

30 806

( 40)

290

13 053

( 65)

( 2)

10 178

7 338

10 157

3 289

( 643 647)

667 863

24 315

( 710 800)

934 614

( 8 735)

215 079

Note: assets / (liabilities)

Exposure to sovereign debt of “peripheral” Eurozone countries
As at 31 December 2020 and 2019, the Group’s exposure to sovereign debt of “peripheral” Eurozone countries, is presented as
follows:
Exposure to sovereign debt of “peripheral” Eurozone countries

As at 31 December 2020 and 2019, the Group’s exposure to sovereign debt of “peripheral” Eurozone countries, is
presented as follows:

NOVO BANCO

31.12.2020

(in thousands of Euros)

Loans and
advances to
customers

Securities held
for trading

Derivative
instruments (1)

Securities at fair
value through other
comprehensive
income

Securities at
amortised cost

Total

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
Portugal
Spain
Ireland
Italy

267 016
-
-
-

591 859
-
-
-

( 16)
-
-
-

2 780 473
2 039 075
237 844
134 238

420 670
-
-
-

- 281-

4 060 002
2 039 075
237 844
134 238

(1) Net values: receivable / (payable)

591 859

267 016

( 16)

5 191 630

420 670

6 471 159

Loans and
advances to
customers

Securities held
for trading

Derivative
instruments (1)

627 469
35 924
-

249 778
5 070
-

663 393

254 848

( 41)
-
-

( 41)

Portugal
Spain
Ireland

Italy

(1) Net values: receivable / (payable)

31.12.2019

Securities at fair
value through other
comprehensive
income

(in thousands of Euros)

Securities at
amortised cost

Total

3 362 756
2 181 282
227 581

118 828

458 556
-
-

4 698 518
2 222 276
227 581

118 828

5 890 447

458 556

7 267 203

Except for Loans and advances to customers, all the exposures presented above, except those relating to loans and advances to
customers, are recorded in the Group’s balance sheet at fair value, based on market quotations or, in the case derivatives, based on
valuation techniques using observable market parameters / prices.

339

The details of the exposure regarding the securities is as follows:

31.12.2020

Nominal

Amount

Market

quotation

Accrued

Carrying book

interest

value

Impairment

Fair value

reserves

(in thousands of Euros)

Securities at fair value through other comprehensive income

Portugal

Maturity up to 1 year

Maturity exceeding 1 year

Spain

Ireland

Italy

Maturity up to 1 year

Maturity exceeding 1 year

Maturidade até 1 ano

Maturity exceeding 1 year

Securities at amortised cost

Portugal

Spain

Securities held for trading

Portugal

Maturity exceeding 1 year

2 420 973

227 455

2 193 518

2 753 428

27 045

231 102

1 760

2 522 326

25 285

2 780 473

232 862

2 547 611

1 894 750

2 012 871

26 204

2 039 075

380 000

382 512

1 060

383 572

1 514 750

1 630 359

25 144

1 655 503

193 600

236 205

129 821

133 655

80 000

49 821

81 801

51 854

1 639

583

393

190

237 844

134 238

82 194

52 044

4 639 144

5 136 159

55 471

5 191 630

213 500

264 033

2 983

267 016

213 500

264 033

2 983

267 016

419 438

478 998

1 811

420 670

419 438

478 998

1 811

420 670

579

129 520

798

128 722

75 509

1 480

74 029

39 340

4 177

1 616

2 561

248 546

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 282-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

(in thousands of Euros)

Loans and

advances to

customers

Securities held

Derivative

value through other

Securities at

for trading

instruments (1)

comprehensive

amortised cost

Total

31.12.2020

Securities at fair

591 859

267 016

( 16)

420 670

income

2 780 473

2 039 075

237 844

134 238

4 060 002

2 039 075

237 844

134 238

591 859

267 016

( 16)

5 191 630

420 670

6 471 159

Loans and
advances to
customers

Securities held
for trading

Derivative
instruments (1)

31.12.2019

Securities at fair
value through other
comprehensive
income

(in thousands of Euros)

Securities at
amortised cost

Total

627 469
35 924
-

249 778
5 070
-

( 41)
-
-

3 362 756
2 181 282
227 581

118 828

458 556
-
-

4 698 518
2 222 276
227 581

118 828

(1) Net values: receivable / (payable)

Portugal

Spain

Ireland

Italy

Portugal
Spain
Ireland

Italy

663 393

254 848

( 41)

5 890 447

458 556

7 267 203

Except for Loans and advances to customers, all the exposures presented above, except those relating to loans and
(1) Net values: receivable / (payable)
advances to customers, are recorded in the Group’s balance sheet at fair value, based on market quotations or, in the
Except for Loans and advances to customers, all the exposures presented above, except those relating to loans and advances to
case derivatives, based on valuation techniques using observable market parameters / prices.
customers, are recorded in the Group’s balance sheet at fair value, based on market quotations or, in the case derivatives, based on
valuation techniques using observable market parameters / prices.
The details of the exposure regarding the securities is as follows:

The details of the exposure regarding the securities is as follows:

Securities at fair value through other comprehensive income

Portugal

Maturity up to 1 year
Maturity exceeding 1 year

Spain

Maturity up to 1 year

Maturity exceeding 1 year

Ireland

Maturity exceeding 1 year

Italy

Maturidade até 1 ano

Maturity exceeding 1 year

Securities at amortised cost

Portugal
Spain

Securities held for trading

Portugal

Maturity exceeding 1 year

Securities at fair value through other comprehensive income

31.12.2020

Nominal
Amount

Market
quotation

Accrued
interest

Carrying book
value

Impairment

Fair value
reserves

(in thousands of Euros)

2 420 973

227 455
2 193 518

2 753 428

27 045

231 102
2 522 326

1 760
25 285

2 780 473

232 862
2 547 611

1 894 750

2 012 871

26 204

2 039 075

380 000

382 512

1 060

383 572

1 514 750

1 630 359

25 144

1 655 503

193 600

236 205

129 821

133 655

80 000

49 821

81 801

51 854

1 639

583

393

190

237 844

134 238

82 194

52 044

4 639 144

5 136 159

55 471

5 191 630

213 500
-

213 500

264 033
-

264 033

2 983
-

2 983

267 016
-

267 016

-
-

419 438

478 998

1 811

420 670

419 438

478 998

1 811

420 670

579

129 520

798
128 722

75 509

1 480

74 029

39 340

4 177

1 616

2 561

248 546

-
-

31.12.2019

Nominal
Amount

Market
quotation

Accrued
interest

Carrying book
value

Impairment

Fair value
reserves

NOVO BANCO

(in thousands of Euros)

Portugal

2 831 709

3 325 924

36 832

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

Maturity up to 1 year

377

369

3 362 756

387

Maturity exceeding 1 year

Spain

Maturity exceeding 1 year

Ireland

Maturity exceeding 1 year

Italy

Maturity exceeding 1 year

Securities at amortised cost

Portugal
Spain

Securities held for trading

Portugal

Maturity exceeding 1 year

2 831 340

3 325 547

36 822

3 362 369

2 007 130

2 154 408

26 874

2 181 282

200 000

115 606

225 855

118 261

1 726

567

227 581

118 828

5 154 445

5 824 448

65 999

5 890 447

202 280
5 000

207 280

245 105
5 065

250 170

4 673
5

4 678

249 778
5 070

254 848

457 230

526 916

2 030

458 556

457 230

526 916

2 030

458 556

704

-
-

161 516

- 282-

161 515

74 753

22 419

2 816

261 504

-
-

Liquidity risk
Liquidity risk is the current or future risk that arises from an institution's inability to meet its liabilities as they mature, without incurring
substantial losses.

Liquidity risk can be divided into two types:

•

•
340

Liquidity of assets (market liquidity risk) - consists in the impossibility of selling a certain type of asset due to the lack of
liquidity in the market, which translates into the widening of the bid / offer spread or the application of a haircut to the market
value;
Financing (funding liquidity risk) - consists of the impossibility of financing the assets in the market and / or refinancing the
debt that is maturing, in the terms and in the desired currency. This impossibility can be reflected through a strong increase
in the cost of financing or the requirement for collateral to obtain funds. The difficulty of (re) financing can lead to the sale of
assets, even if incurring significant losses. The risk of (re) financing must be minimized through an adequate diversification
of funding sources and maturity terms.

Banks are subject to liquidity risk due to their maturity transformation business (long-term lenders and short-term depositors), so

prudent liquidity risk management is therefore crucial.

As at 31 December 2020, the value of the asset portfolio eligible as collateral for rediscounting operations with the ECB, after haircuts,

amounted to Euro 16.7 billion (31 December 2019: Euro 15.3 billion). This amount includes all the exposure to Portuguese sovereign

debt, in the total amount of approximately Euro 2.5 billion.

During 2020, gross financing from the ECB increased by Euro 910 million to a total of Euro 7.0 billion.

The liquidity of NOVO BANCO Group is managed in a centralized manner, in the Headquarters, for the prudential consolidation

perimeter, and the analysis and decision making made based on the mismatch reports, which allow, not only to identify negative

mismatches but also to make a dynamic hedging of those mismatches. As at 31 December 2020 and 2019, the calculation of the

liquid contractual deficit and the counterbalancing capacity was performed following the ITS (Implementing Technical Standards)

rules:

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 283-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Liquidity risk

Liquidity risk is the current or future risk that arises from an institution's inability to meet its liabilities as they mature,
without incurring substantial losses.

Liquidity risk can be divided into two types:

• Liquidity of assets (market liquidity risk) - consists in the impossibility of selling a certain type of asset due to the lack
of liquidity in the market, which translates into the widening of the bid / offer spread or the application of a haircut
to the market value;

• Financing (funding liquidity risk) - consists of the impossibility of financing the assets in the market and / or
refinancing the debt that is maturing, in the terms and in the desired currency. This impossibility can be reflected
through a strong increase in the cost of financing or the requirement for collateral to obtain funds. The difficulty
of (re) financing can lead to the sale of assets, even if incurring significant losses. The risk of (re) financing must be
minimized through an adequate diversification of funding sources and maturity terms.

Banks are subject to liquidity risk due to their maturity transformation business (long-term lenders and short-term
depositors), so prudent liquidity risk management is therefore crucial.

As at 31 December 2020, the value of the asset portfolio eligible as collateral for rediscounting operations with the
ECB, after haircuts, amounted to Euro 16.7 billion (31 December 2019: Euro 15.3 billion). This amount includes all the
exposure to Portuguese sovereign debt, in the total amount of approximately Euro 2.5 billion.

During 2020, gross financing from the ECB increased by Euro 910 million to a total of Euro 7.0 billion.

The liquidity of NOVO BANCO Group is managed in a centralized manner, in the Headquarters, for the prudential
consolidation perimeter, and the analysis and decision making made based on the mismatch reports, which allow, not
only to identify negative mismatches but also to make a dynamic hedging of those mismatches. As at 31 December
2020 and 2019, the calculation of the liquid contractual deficit and the counterbalancing capacity was performed
NOVO BANCO
following the ITS (Implementing Technical Standards) rules:

Total

Up to 7 days

7 days to 1
month

1 to 3 months 3 to 6 months

6 months to 1
year

More than 1
year

31.12.2020

(in thousands of Euros)

OUTPUT

Liabilities from emited transferable securities (if they're not treated as retail
deposits)

153 890

153 881

Liabilities from guaranteed lending operations and operations associated to
financial markets

Behavioral output from deposits

Exchange swaps and derivatives

Other output

Total Output

INPUT

9 161 995

68 874

106 104

53 504

150 000

264 458

8 519 055

30 328 564

625 681

550 075

302 562

110 144

116 570

144 781

147 268

283 894

140 000

174 392

423 579

29 164 193

32 623

11 515

34 865

19 374

398 560

40 820 205

481 580

367 455

624 666

368 530

722 911

38 255 063

Secured lending operations and operations associated to financial markets

203 306

60 917

142 389

Behavioral inputs from loans and advances

Exchange swaps and derivatives

Own portfolio securities maturing and other entries

Total Input

Net contractual deficit

28 076 498

897 437

12 128 378

75 788

103 389

103 580

58 182

145 071

155 916

166 741

287 285

376 999

236 943

472 123

27 066 721

48 500

71 166

242 026

835 242

898 046

9 758 595

41 305 619

343 674

359 169

831 025

1 120 685

1 441 335

37 209 731

485 417

( 137 906)

( 8 286)

206 360

752 156

718 425

(1 045 332)

Accumulated net contractual deficit

( 137 906)

( 146 192)

60 168

812 324

1 530 749

485 417

CAPACITY TO READJUSTMENT

Cash

Deployable reserves from the central bank

Stock Inicial

até 7 dias

149 205

2 030 915

(2 030 915)

de 7 dias até 1
mês

de 1 a 3
meses

de 3 a 6 meses de 6m a 1 ano

superior a 1
ano

Negotiable and non-negotiable assets eligible for the central bank

8 033 197

67 249

106 994

( 123 762)

( 91 281)

( 587 185)

(7 262 493)

Authorized facilities and not utilized received

Net variation of capacity to adjustment

( 29 275)

( 55 212)

( 199 759)

( 350 461)

( 288 680)

923 388

(1 992 941)

51 782

( 323 521)

( 441 742)

( 875 865)

(6 339 105)

Accumulated capacity to readjustment

10 213 317

8 220 376

8 272 158

7 948 637

7 506 895

6 631 030

291 925

31.12.2019

(in thousands of Euros)

Total

Up to 7 days

7 days to 1
month

1 to 3 months 3 to 6 months

6 months to 1
year

More than 1
year

317 370

2 247

4 593

8 572 412

182 428

1 064 096

1 334 720

3 210 000

310 530

2 781 168

30 163 144

389 848

9 073

145 906

52 238

271 957

401 015

584 667

409 894

473 958

572 820

28 308 655

46 635

11 515

43 769

31 937

398 379

40 047 487

583 596

1 266 833

2 007 692

3 742 108

616 589

31 830 669

26 664 085

870 310

11 843 305

65 307

8 500

70 687

24 399

48 381

73 279

39 856

404 527

58 074

79 972

123 646

26 352 803

62 781

266 149

43 601

1 254 462

203 771

10 197 505

39 377 700

144 494

146 059

487 984

1 392 508

390 198

36 816 457

( 669 786)

( 439 103)

(1 120 773)

(1 519 709)

(2 349 600)

( 226 391)

4 985 790

341
OUTPUT

Liabilities from emited transferable securities (if they're not treated as retail
deposits)

Liabilities from guaranteed lending operations and operations associated to

financial markets

Behavioral output from deposits

Exchange swaps and derivatives

Other output

Total Output

INPUT

Behavioral inputs from loans and advances

Exchange swaps and derivatives

Own portfolio securities maturing and other entries

Total Input

Net contractual deficit

Cash

Deployable reserves from the central bank

Authorized facilities and not utilized received

Net variation of capacity to adjustment

Accumulated capacity to readjustment

Secured lending operations and operations associated to financial markets

Accumulated net contractual deficit

( 439 103)

(1 559 876)

(3 079 585)

(5 429 185)

(5 655 576)

( 669 786)

CAPACITY TO READJUSTMENT

Stock Inicial Up to 7 days

1 to 3 months

3 to 6 months

7 days to 1

month

6 months to 1

More than 1

year

Negotiable and non-negotiable assets eligible for the central bank

7 749 500

1 117 471

78 479

( 22 239)

( 201 402)

(8 781 071)

179 219

1 141 351

(1 141 351)

182 063

( 39 646)

( 79 970)

( 227 545)

1 655 230

( 167 165)

(1 140 903)

( 998 934)

1 037 501

( 149 066)

1 632 991

( 368 567)

(9 921 974)

9 070 070

8 071 136

9 108 637

8 959 571

10 592 562

10 223 995

302 021

As at 31 December 2020, there was an accumulated 1-year net contractual surplus of Euro 1,700 million, having shifted at the end

of 2019 to an accumulated 1-year net contractual deficit of Euro 5,656 million. This improvement is due to that, at the end of 2019,

there was a Euro 6,410 million takeover to the ECB in less than 1 year. The 1-year counterbalancing capacity at the end of 2020 was

Euro 6,631 million, Euro 3,593 million less than the figure recorded at the end of 2019 (Euro 10,224 million).

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 284-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Liabilities from emited transferable securities (if they're not treated as retail

Liabilities from guaranteed lending operations and operations associated to

9 161 995

68 874

106 104

53 504

150 000

264 458

8 519 055

NOVO BANCO

(in thousands of Euros)

153 881

Total

Up to 7 days

1 to 3 months 3 to 6 months

7 days to 1

month

6 months to 1

More than 1

year

31.12.2020

153 890

30 328 564

625 681

550 075

302 562

110 144

116 570

144 781

147 268

283 894

140 000

174 392

423 579

29 164 193

32 623

11 515

34 865

19 374

398 560

40 820 205

481 580

367 455

624 666

368 530

722 911

38 255 063

financial markets

Behavioral output from deposits

Exchange swaps and derivatives

OUTPUT

deposits)

Other output

Total Output

INPUT

Secured lending operations and operations associated to financial markets

203 306

60 917

142 389

Behavioral inputs from loans and advances

Exchange swaps and derivatives

Own portfolio securities maturing and other entries

Total Input

Net contractual deficit

28 076 498

897 437

12 128 378

75 788

103 389

103 580

58 182

145 071

155 916

166 741

287 285

376 999

236 943

472 123

27 066 721

48 500

71 166

242 026

835 242

898 046

9 758 595

41 305 619

343 674

359 169

831 025

1 120 685

1 441 335

37 209 731

485 417

( 137 906)

( 8 286)

206 360

752 156

718 425

(1 045 332)

Accumulated net contractual deficit

( 137 906)

( 146 192)

60 168

812 324

1 530 749

485 417

CAPACITY TO READJUSTMENT

Cash

Deployable reserves from the central bank

Stock Inicial

até 7 dias

149 205

2 030 915

(2 030 915)

de 7 dias até 1
mês

de 1 a 3
meses

de 3 a 6 meses de 6m a 1 ano

superior a 1
ano

Negotiable and non-negotiable assets eligible for the central bank

8 033 197

67 249

106 994

( 123 762)

( 91 281)

( 587 185)

(7 262 493)

Authorized facilities and not utilized received

Net variation of capacity to adjustment

( 29 275)

( 55 212)

( 199 759)

( 350 461)

( 288 680)

923 388

(1 992 941)

51 782

( 323 521)

( 441 742)

( 875 865)

(6 339 105)

Accumulated capacity to readjustment

10 213 317

8 220 376

8 272 158

7 948 637

7 506 895

6 631 030

291 925

OUTPUT

Liabilities from emited transferable securities (if they're not treated as retail
deposits)

Liabilities from guaranteed lending operations and operations associated to
financial markets

Behavioral output from deposits

Exchange swaps and derivatives

Other output

Total Output

INPUT

31.12.2019

(in thousands of Euros)

Total

Up to 7 days

7 days to 1
month

1 to 3 months 3 to 6 months

6 months to 1
year

More than 1
year

317 370

2 247

4 593

8 572 412

182 428

1 064 096

1 334 720

3 210 000

310 530

2 781 168

30 163 144

389 848

584 667

409 894

9 073

145 906

52 238

271 957

401 015

473 958

572 820

28 308 655

46 635

11 515

43 769

31 937

398 379

40 047 487

583 596

1 266 833

2 007 692

3 742 108

616 589

31 830 669

Secured lending operations and operations associated to financial markets

Behavioral inputs from loans and advances

Exchange swaps and derivatives

Own portfolio securities maturing and other entries

Total Input

Net contractual deficit

26 664 085

870 310

11 843 305

65 307

8 500

70 687

24 399

48 381

73 279

39 856

404 527

58 074

79 972

123 646

26 352 803

62 781

266 149

43 601

1 254 462

203 771

10 197 505

39 377 700

144 494

146 059

487 984

1 392 508

390 198

36 816 457

( 669 786)

( 439 103)

(1 120 773)

(1 519 709)

(2 349 600)

( 226 391)

4 985 790

Accumulated net contractual deficit

( 439 103)

(1 559 876)

(3 079 585)

(5 429 185)

(5 655 576)

( 669 786)

CAPACITY TO READJUSTMENT

Cash

Deployable reserves from the central bank

Stock Inicial Up to 7 days

179 219

1 141 351

(1 141 351)

7 days to 1
month

1 to 3 months

3 to 6 months

6 months to 1
year

More than 1
year

Negotiable and non-negotiable assets eligible for the central bank

7 749 500

Authorized facilities and not utilized received

Net variation of capacity to adjustment

Accumulated capacity to readjustment

182 063

( 39 646)

1 117 471

78 479

( 22 239)

( 201 402)

(8 781 071)

( 79 970)

( 227 545)

1 655 230

( 167 165)

(1 140 903)

( 998 934)

1 037 501

( 149 066)

1 632 991

( 368 567)

(9 921 974)

9 070 070

8 071 136

9 108 637

8 959 571

10 592 562

10 223 995

302 021

As at 31 December 2020, there was an accumulated 1-year net contractual surplus of Euro 1,700 million, having shifted at the end
of 2019 to an accumulated 1-year net contractual deficit of Euro 5,656 million. This improvement is due to that, at the end of 2019,
there was a Euro 6,410 million takeover to the ECB in less than 1 year. The 1-year counterbalancing capacity at the end of 2020 was
As at 31 December 2020, there was an accumulated 1-year net contractual surplus of Euro 1,700 million, having
Euro 6,631 million, Euro 3,593 million less than the figure recorded at the end of 2019 (Euro 10,224 million).
shifted at the end of 2019 to an accumulated 1-year net contractual deficit of Euro 5,656 million. This improvement
is due to that, at the end of 2019, there was a Euro 6,410 million takeover to the ECB in less than 1 year. The 1-year
counterbalancing capacity at the end of 2020 was Euro 6,631 million, Euro 3,593 million less than the figure recorded
2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
at the end of 2019 (Euro 10,224 million).

- 284-

In addition, and given the importance of liquidity risk management, the regulatory legislation includes a liquidity
coverage ratio (Liquidity Coverage Ratio - LCR) and a stable financing ratio (Net Stable Funding Ratio - NSFR). The
LCR aims to promote banks' resilience to short-term liquidity risk, ensuring that they hold high-quality liquid assets,
sufficient to survive a severe stress scenario, for a period of 30 days, while the NSFR aims to ensure that Banks maintain
stable financing for their assets and off-balance sheet operations, for a period of one year.

In accordance with current regulatory legislation, the Group is obliged to comply with a minimum limit of 100% in the
LCR. The Group continues to follow regulatory changes in order to comply with all obligations, namely the implemen-
tation of the NSFR and the respective limit.

The information on encumbered and unencumbered assets, as defined by Instruction no. 28/2014 of Bank of Portugal
(note that this information is prepared from a prudential perspective, where the consolidation perimeter differs from
that used in the financial statements presented) is shown in the table below:

342

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Assets

Assets of the institution

Equity instruments

Debt securities

Other assets

Assets of the institution

Equity instruments

Debt securities

Other assets

Collateral received

Collateral received
Equity instruments

Debt securities

Other collateral received

Own debt securities issued other than own covered bonds
or ABS

31.12.2020

(in thousands of Euros)

Carrying book value
of encumbered
assets

Fair value of
encumbered assets

Carrying book value
of unencumbered
assets

Fair value of
unencumbered
assets

12 868 205

1 999 618

10 868 587

n/a

1 999 618

n/a

31 849 466

1 866 679

8 500 364

21 482 423

n/a

1 866 679

8 500 364

n/a

31.12.2019

(in thousands of Euros)

Carrying book value
of encumbered
assets

Fair value of
encumbered assets

Carrying book value
of unencumbered
assets

Fair value of
unencumbered
assets

13 323 907

2 375 384

10 948 523

n/a

2 375 384

n/a

31.12.2020

32 236 016

2 434 131

8 329 159

21 472 726

n/a

2 434 131

8 329 159

n/a

(in thousands of Euros)

31.12.2019

Fair value of
encumbered
collateral received or
of own debt
securities issued

Fair value of
collateral received or
of own debt
securities issued and
encumberable

Fair value of
encumbered
collateral received or
of own debt
securities issued

Fair value of
collateral received or
of own debt
securities issued and
encumberable

-
-

31.12.2020

(in thousands of Euros)

31.12.2019

Encumbered assets, encumbered collateral received and
associated liabilities

Associated liabilities,
contingent liabilities
and securities loaned

Assets, collateral
received and own
debt securities issued
other than
encumbered own
covered bonds or
ABS

Associated liabilities,
contingent liabilities
and securities loaned

Assets, collateral
received and own
debt securities issued
other than
encumbered own
covered bonds or
ABS

Carrying book value of the selected financial liabilities

9 250 342

12 868 205

8 715 669

13 323 906

The encumbered assets are represented essentially by credits and securities used in financing operations with the ECB,
in repo operations, in mortgage bond issues and in securitizations. There are also assets given in collateral to hedge the
Bank's counterparty risk in derivative transactions.

Operational risk

Operational risk generally translates into the probability of the occurrence of events with negative impacts, in the results
or in the capital, resulting from the inadequacy or deficiency of procedures and information systems, the behavior of
people or motivated by external events, including legal risks. Thus, operational risk is understood as the calculation of
the following risks: operational, information systems, compliance and reputation.

For the management of operational risk, a system was developed and implemented to ensure the uniformity, sys-
tematization and recurrence of the activities for the identification, monitoring, control and mitigation of this risk. This
system is supported by an organizational structure, integrated in the Global Risk Department exclusively dedicated to
this task, as well as by Operational Risk Management Representatives designated by each of the departments, branches
and subsidiaries considered relevant, which are responsible for complying with the procedures. and the day-to-day
management of this Risk in its areas of competence.

343

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESCapital Management and Solvency Ratio

The main objective of the Group’s capital management is to ensure compliance with the Group’s strategic objectives
in terms of capital adequacy, respecting and enforcing the requirements for calculating risk-weighted assets and own
funds and ensuring compliance with the levels of solvency and leverage defined by the supervisory entities, in particular
by the European Central Bank (ECB) – the entity directly responsible for the supervision of the Bank - and by the Bank
of Portugal, and internally stipulated risk appetite for capital metrics.

The definition of the strategy for capital adequacy management rests with the Executive Board of Directors and is
integrated in the global definition of the Group objectives.

The capital ratios of the Group are calculated based on the rules defined in Directive 2013/36/EU and Regulation (EU)
no. 575/2013 (CRR) that define the criteria for the access to the credit institution and investment company activity and
determine the prudential requirements to be observed by those same entities, in particular to the calculation of the
ratios mentioned above.

The Group is authorized to apply the Internal Ratings-Based Approach (IRB) for the calculation of risk weighted assets
by credit risk. In particular, the IRB method is applied to the exposure classes of institutions, corporate and retail of
NOVO BANCO Group. The equity’ risk classes, the positions taken in the form of securitization, the positions taken in
the form of participation units in investment funds, and the elements that are not credit obligations are always handled
by the IRB method regardless of the Bank entities in which the respective exposures are recorded. The standard method
is used in the determination of risk weighted assets by market and operational risks.

The regulatory capital components considered in the determination of solvency ratios are divided into own funds of
level 1 (common equity Tier I or CET I), additional own funds of level 1 (additional Tier I) which combined with the CET
I constitute the own funds of level I (Tier I), and own funds of level 2 (or Tier II) which added to the Tier I represent the
total own funds.

The total own funds of NOVO BANCO Group are composed by elements of CET I and Tier II

Additional information on the evolution and composition of NOVO BANCO Group's capital ratios can be found in the
Group's Market Discipline Document (point 3. Capital Adequacy).

The summary of own funds, risk weighted assets and capital ratios capital of NOVO BANCO Group as at 31 December
2020 and 2019 are presented in the following table:

344

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDRealised ordinary share capital, issue premiums and own shares
Reserves and Retained earnings
Net income for the year attributable to shareholders of the Bank
Non-controlling interests (minorities)

A - Equity (prudential perspective)

Non-controlling interests (minorities)
Adjustments of additional valuation
Transitional period to IFRS9
Goodwill and other intangibles
Insufficiency of provisions given the expected losses
Deferred tax assets and shareholdings in financial companies
Realised ordinary share capital, issue premiums and own shares
Outros
Reserves and Retained earnings
B - Regulatory adjustments to equity
Net income for the year attributable to shareholders of the Bank
C - Own principal funds level 1 - CET I (A+B)
Non-controlling interests (minorities)
Other eligible instruments for additional Tier 1
A - Equity (prudential perspective)
D - Additional own funds Level 1 - Additional Tier 1
Non-controlling interests (minorities)
E - Level 1 own funds - Tier I (C+D)
Adjustments of additional valuation
Transitional period to IFRS9
Subordinated liabilities elegible for Tier II
Goodwill and other intangibles
Other elements elegible for Tier II
Insufficiency of provisions given the expected losses
Regulatory adjustments for Tier II
Deferred tax assets and shareholdings in financial companies
Outros

F - Level 2 own funds - Tier II

G - Eligible own funds (E+F)
B - Regulatory adjustments to equity
C - Own principal funds level 1 - CET I (A+B)

Credit risk
Market risk
Other eligible instruments for additional Tier 1
Operational risk
D - Additional own funds Level 1 - Additional Tier 1
H - Risk Weighted Assets
E - Level 1 own funds - Tier I (C+D)
Solvability ratio

Subordinated liabilities elegible for Tier II
Other elements elegible for Tier II
Regulatory adjustments for Tier II

CET I ratio
Tier I ratio
Solvability ratio
F - Level 2 own funds - Tier II
Leverage ratio(2)
G - Eligible own funds (E+F)

(in million Euros)

31.12.2020 (1)

31.12.2019

5 900
( 1 447)
( 1 329)
17
3 141
( 10)
( 11)
356
( 57)
31.12.2020 (1)
( 59)
( 51)
5 900
( 280)
( 1 447)
( 113)
( 1 329)
3 029
17
1
3 141
1
3 030
( 10)
3 030
( 11)
356
399
( 57)
113
( 59)
-
( 51)
512
( 280)
3 542
( 113)
23 848
3 029
1 279
1
1 592
1
3 030
26 718
3 030
399
11,3%
113
11,3%
-
13,3%
512

(C/H)
(E/H)
(G/H)

NOVO BANCO

(in million Euros)

31.12.2019

5 900
( 869)
( 1 058)
18
3 992
( 11)
( 13)
225
( 34)
( 85)
( 9)
5 900
( 68)
( 869)
4
( 1 058)
3 996
18
1
3 992
1
( 11)
3 998
( 13)
225
398
( 34)
124
( 85)
( 45)
( 9)
478
( 68)
4 475
4
26 243
3 996
1 857
1
1 479
1
29 579
3 998
398
13,5%
124
13,5%
( 45)
15,1%
478

6,5%
3 542

8,4%
4 475

(1) Preliminary. The accounts contain an aggregate provision of 166 million euros in relation to the discontinuation of Spanish operations. As there is a potential for dispute between
the parties and therefore potential barrier to immediate access of this amount, the Bank, as a matter of prudence, has deducted this amount from regulatory capital calculation.

Credit risk
Market risk
Operational risk
H - Risk Weighted Assets
(2) The leverage ratio results from spliting Tier 1 for the exposure measure in accordance to the terms of the CRR
Solvability ratio

26 243
1 857
1 479
29 579

23 848
1 279
1 592
26 718

CET I ratio
Tier I ratio
Solvability ratio

(C/H)
(E/H)
(G/H)

11,3%
11,3%
13,3%

13,5%
13,5%
15,1%

NOTA 43 – RELEVANT TRANSACTIONS OCCURRED IN THE FINANCIAL YEARS OF 2020 AND 2019

6,5%

Financial year 2020
Leverage ratio(2)

NOTE 43 – Relevant transaction occurred in the financial
years of 2020 and 2019

(1) Preliminary. The accounts contain an aggregate provision of 166 million euros in relation to the discontinuation of Spanish operations. As there is a potential for dispute between
Sale of a portfolio of non-performing loans (called Project Carter)
the parties and therefore potential barrier to immediate access of this amount, the Bank, as a matter of prudence, has deducted this amount from regulatory capital calculation.
On 23 December 2020, NOVO BANCO entered into a purchase and sale agreement for a portfolio of non-performing loans (non-
performing loans) and related assets (together, the Carter Project), with a net book value of Euro 37.0 million (gross amount of Euro
(2) The leverage ratio results from spliting Tier 1 for the exposure measure in accordance to the terms of the CRR
82.8 million), to a company owned by affiliated companies and advised by AGG Capital Management Limited and Christofferson,
Financial year 2020
Robb & Company, LLC. The impact of this operation on the net income for the year 2020 was reflected in a gain of Euro 2.9 million.
NOTA 43 – RELEVANT TRANSACTIONS OCCURRED IN THE FINANCIAL YEARS OF 2020 AND 2019
Sale of a portfolio of non-performing loans (called Project Carter)
(in thousands of Euros)
On 23 December 2020, NOVO BANCO entered into a purchase and sale agreement for a portfolio of non-performing
Impact on Income Statement
Financial year 2020
loans (non-performing loans) and related assets (together, the Carter Project), with a net book value of Euro 37.0
3 337
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
Sale of a portfolio of non-performing loans (called Project Carter)
million (gross amount of Euro 82.8 million), to a company owned by affiliated companies and advised by AGG Capital
-405
Impairment net of reversals of financial assets not designated at fair value through profit or loss
On 23 December 2020, NOVO BANCO entered into a purchase and sale agreement for a portfolio of non-performing loans (non-
Management Limited and Christofferson, Robb & Company, LLC. The impact of this operation on the net income for
performing loans) and related assets (together, the Carter Project), with a net book value of Euro 37.0 million (gross amount of Euro
2 932
Impact on Net Income
82.8 million), to a company owned by affiliated companies and advised by AGG Capital Management Limited and Christofferson,
the year 2020 was reflected in a gain of Euro 2.9 million.
Robb & Company, LLC. The impact of this operation on the net income for the year 2020 was reflected in a gain of Euro 2.9 million.

31.12.2020

8,4%

2019 Exercise

Impact on Income Statement
Sale of Non-Performing Loans portfolio (Project Nata II)

(in thousands of Euros)

31.12.2020

Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
3 337
In the last quarter of 2019, NOVO BANCO and Fundo Arrábida signed a promissory purchase and sale Agreement with Burlington
-405
Impairment net of reversals of financial assets not designated at fair value through profit or loss
Loan Management DAC, a company affiliated and advised by Davidson Kempner European Partners, Llp, for the sale of a portfolio
Impact on Net Income
2 932
of overdue loans and exposures related (NATA II Project). The impact of this operation on the balance sheet resulted in a reduction
of net assets of Euro -83.5 million.

2019 Exercise

Sale of Non-Performing Loans portfolio (Project Nata II)

31 December 2020

Notes to the Consolidated Financial Statements

127

In the last quarter of 2019, NOVO BANCO and Fundo Arrábida signed a promissory purchase and sale Agreement with Burlington
Loan Management DAC, a company affiliated and advised by Davidson Kempner European Partners, Llp, for the sale of a portfolio
of overdue loans and exposures related (NATA II Project). The impact of this operation on the balance sheet resulted in a reduction
of net assets of Euro -83.5 million.

345

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 287-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

2019 Exercise

Sale of Non-Performing Loans portfolio (Project Nata II)
In the last quarter of 2019, NOVO BANCO and Fundo Arrábida signed a promissory purchase and sale Agreement with
Burlington Loan Management DAC, a company affiliated and advised by Davidson Kempner European Partners, Llp,
for the sale of a portfolio of overdue loans and exposures related (NATA II Project). The impact of this operation on the
balance sheet resulted in a reduction of net assets of Euro -84.0 million.

Impact on Income Statement

NOVO BANCO
(in thousands of Euros)
31.12.2019

NOVO BANCO

31.12.2019

Net interest income

69
(in thousands of Euros)
-3 734
Other operational income
Impact on Income Statement
1 720
1 964
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
-82 374
Impairment net of reversals of financial assets not designated at fair value through profit or loss
(in thousands of Euros)
69
Net interest income
611
Provisions or reversal of provisions
Impact on Income Statement
-3 734
Other operational income
-83 950
1 964
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
-83 464
Impact on Net Income
69
Net interest income
-82 374
Impairment net of reversals of financial assets not designated at fair value through profit or loss
-3 734
Other operational income
611
Provisions or reversal of provisions
1 964
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
Impact on Net Income
-83 464
Sale of a portfolio of real estate assets (called Project Sertorius)
-82 374
Impairment net of reversals of financial assets not designated at fair value through profit or loss
611
Provisions or reversal of provisions
In August 2019, the Group signed a promissory purchase and sale agreement with entities indirectly held by funds managed by
Sale of a portfolio of real estate assets (called Project Sertorius)
Cerberus Capital Management, LP, a New York-based company, for the sale of a portfolio of real estate assets called Project
-83 464
Impact on Net Income
In August 2019, the Group signed a promissory purchase and sale agreement with entities indirectly held by funds
Sale of a portfolio of real estate assets (called Project Sertorius)
Sertorius. The impact of this operation on the balance sheet resulted in a reduction of net assets of Euro -229,2 million.
managed by Cerberus Capital Management, LP, a New York-based company, for the sale of a portfolio of real estate
In August 2019, the Group signed a promissory purchase and sale agreement with entities indirectly held by funds managed by
Cerberus Capital Management, LP, a New York-based company, for the sale of a portfolio of real estate assets called Project
assets called Project Sertorius. The impact of this operation on the balance sheet resulted in a reduction of net assets
Sale of a portfolio of real estate assets (called Project Sertorius)
(in thousands of Euros)
Sertorius. The impact of this operation on the balance sheet resulted in a reduction of net assets of Euro -229,2 million.
of Euro -229,2 million.
Impact on Income Statement
In August 2019, the Group signed a promissory purchase and sale agreement with entities indirectly held by funds managed by
Cerberus Capital Management, LP, a New York-based company, for the sale of a portfolio of real estate assets called Project
-34 961
Other operational income
Sertorius. The impact of this operation on the balance sheet resulted in a reduction of net assets of Euro -229,2 million.
(in thousands of Euros)
-165 703
Impairment on othe assets net of reversals
Impact on Income Statement
Non-controlling interests
Other operational income
Impact on Net Income
Impact on Income Statement
Impairment on othe assets net of reversals

-1 875
-34 961
(in thousands of Euros)
-198 789
31.12.2019
-165 703

31.12.2019

Non-controlling interests
Other operational income

-1 875
-34 961

-165 703
Impairment on othe assets net of reversals
Impact on Net Income
-198 789
Sale of a portfolio of non-performing loans and real estate assets (referred to as Project Albatros):
In August 2019, the Group, through its Spanish Branch and Novo Banco Servicios Corporativos, S.L entered into a purchase and
Non-controlling interests
-1 875
sale agreement with Waterfall Asset Management LLC, an asset management company based in New York, for the sale of a portfolio
-198 789
Impact on Net Income
of real estate assets and non-performing loans, designated Project Albatros. The impact of this operation on the income
Sale of a portfolio of non-performing loans and real estate assets (referred to as Project Albatros):
statementresulted in a reduction of net assets of Euro -33.9 million.
In August 2019, the Group, through its Spanish Branch and Novo Banco Servicios Corporativos, S.L entered into a purchase and
Sale of a portfolio of non-performing loans and real estate assets (referred to as Project Albatros)
sale agreement with Waterfall Asset Management LLC, an asset management company based in New York, for the sale of a portfolio
Sale of a portfolio of non-performing loans and real estate assets (referred to as Project Albatros):
of real estate assets and non-performing loans, designated Project Albatros. The impact of this operation on the income
In August 2019, the Group, through its Spanish Branch and Novo Banco Servicios Corporativos, S.L entered into a
(in thousands of Euros)
statementresulted in a reduction of net assets of Euro -33.9 million.
In August 2019, the Group, through its Spanish Branch and Novo Banco Servicios Corporativos, S.L entered into a purchase and
purchase and sale agreement with Waterfall Asset Management LLC, an asset management company based in New
Impact on Income Statement
sale agreement with Waterfall Asset Management LLC, an asset management company based in New York, for the sale of a portfolio
York, for the sale of a portfolio of real estate assets and non-performing loans, designated Project Albatros. The impact
of real estate assets and non-performing loans, designated Project Albatros. The impact of this operation on the income
-7 443
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
statementresulted in a reduction of net assets of Euro -33.9 million.
(in thousands of Euros)
of this operation on the income statementresulted in a reduction of net assets of Euro -33.9 million.
-53 544
Impairment net of reversals of financial assets not designated at fair value through profit or loss
Impact on Income Statement
Impairment on other assets net of reversals
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
Provisions or reversal of provisions
Impairment net of reversals of financial assets not designated at fair value through profit or loss
Impact on Income Statement
Impact on Net Income
Impairment on other assets net of reversals
Results from the sale of financial assets and liabilities not designated at fair value through profit or loss
Provisions or reversal of provisions
Impairment net of reversals of financial assets not designated at fair value through profit or loss

-7 543
-7 443
(in thousands of Euros)
35 200
-53 544

-33 330
-7 543
-7 443
35 200
-53 544

31.12.2019

Impairment on other assets net of reversals
-7 543
Impact on Net Income
-33 330
Sale of GNB Vida
Following the contract for the purchase and sale of the entire share capital of GNB Vida, entered into with Bankers Insurance Holdings,
35 200
Provisions or reversal of provisions
SA, a company of the Global Bankers Insurance Group, LLC, on September 12, 2018, the Group proceeded to derecognise this
-33 330
Impact on Net Income
investment in September 2019, after obtaining the necessary regulatory authorizations. The impact of this operation on the income
Sale of GNB Vida
statement resulted in a reduction of net income of Euro -4.1 million.
Following the contract for the purchase and sale of the entire share capital of GNB Vida, entered into with Bankers Insurance Holdings,
SA, a company of the Global Bankers Insurance Group, LLC, on September 12, 2018, the Group proceeded to derecognise this
(in thousands of Euros)
investment in September 2019, after obtaining the necessary regulatory authorizations. The impact of this operation on the income
Sale of GNB Vida
Impact on Income Statement
statement resulted in a reduction of net income of Euro -4.1 million.
Following the contract for the purchase and sale of the entire share capital of GNB Vida, entered into with Bankers Insurance Holdings,
SA, a company of the Global Bankers Insurance Group, LLC, on September 12, 2018, the Group proceeded to derecognise this
-4 082
Impairment on other assets net of reversals
investment in September 2019, after obtaining the necessary regulatory authorizations. The impact of this operation on the income
(in thousands of Euros)
statement resulted in a reduction of net income of Euro -4.1 million.
-4 082
Impact on Net Income
Impact on Income Statement

31.12.2019

Impairment on other assets net of reversals

Impact on Income Statement
Impact on Net Income

Impairment on other assets net of reversals

346

Impact on Net Income
NOTE 44 – NON-CURRENT ASSETS HELD FOR SALE - DISCONTINUED OPERATIONS

NOTE 44 – NON-CURRENT ASSETS HELD FOR SALE - DISCONTINUED OPERATIONS

31 December 2020

Notes to the Consolidated Financial Statements

NOTE 44 – NON-CURRENT ASSETS HELD FOR SALE - DISCONTINUED OPERATIONS

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

-4 082
(in thousands of Euros)

31.12.2019

-4 082

128

- 288-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

Impact on Income Statement

Net interest income

Other operational income

Provisions or reversal of provisions

Impact on Net Income

Results from the sale of financial assets and liabilities not designated at fair value through profit or loss

Impairment net of reversals of financial assets not designated at fair value through profit or loss

Sale of a portfolio of real estate assets (called Project Sertorius)

In August 2019, the Group signed a promissory purchase and sale agreement with entities indirectly held by funds managed by

Cerberus Capital Management, LP, a New York-based company, for the sale of a portfolio of real estate assets called Project

Sertorius. The impact of this operation on the balance sheet resulted in a reduction of net assets of Euro -229,2 million.

Impact on Income Statement

Other operational income

Impairment on othe assets net of reversals

Non-controlling interests

Impact on Net Income

Sale of a portfolio of non-performing loans and real estate assets (referred to as Project Albatros):

In August 2019, the Group, through its Spanish Branch and Novo Banco Servicios Corporativos, S.L entered into a purchase and

sale agreement with Waterfall Asset Management LLC, an asset management company based in New York, for the sale of a portfolio

of real estate assets and non-performing loans, designated Project Albatros. The impact of this operation on the income

statementresulted in a reduction of net assets of Euro -33.9 million.

NOVO BANCO

(in thousands of Euros)

31.12.2019

-3 734

1 964

-82 374

611

-83 464

(in thousands of Euros)

31.12.2019

-34 961

-165 703

-1 875

-198 789

(in thousands of Euros)

31.12.2019

-7 443

-53 544

-7 543

35 200

-33 330

Impact on Income Statement

Results from the sale of financial assets and liabilities not designated at fair value through profit or loss

Impairment net of reversals of financial assets not designated at fair value through profit or loss

Impairment on other assets net of reversals

Provisions or reversal of provisions

Impact on Net Income

Sale of GNB Vida
Following the contract for the purchase and sale of the entire share capital of GNB Vida, entered into with Bankers
Sale of GNB Vida
Insurance Holdings, SA, a company of the Global Bankers Insurance Group, LLC, on September 12, 2018, the Group
Following the contract for the purchase and sale of the entire share capital of GNB Vida, entered into with Bankers Insurance Holdings,
proceeded to derecognise this investment in September 2019, after obtaining the necessary regulatory authorizations.
SA, a company of the Global Bankers Insurance Group, LLC, on September 12, 2018, the Group proceeded to derecognise this
investment in September 2019, after obtaining the necessary regulatory authorizations. The impact of this operation on the income
The impact of this operation on the income statement resulted in a reduction of net income of Euro -4.1 million.
statement resulted in a reduction of net income of Euro -4.1 million.

Impact on Income Statement

Impairment on other assets net of reversals

Impact on Net Income

(in thousands of Euros)

31.12.2019

-4 082

NOTE 44 – NON-CURRENT ASSETS HELD FOR SALE - DISCONTINUED OPERATIONS

NOTE 44 – Non-current assets held for sale
- Discontinued operations

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES
The financial statements as at 31 December 2020 and 2019 of the discontinued units, mentioned in Note 30 and when
The financial statements as at 31 December 2020 and 2019 of the discontinued units, mentioned in Note 30 and when applicable,
are as follows:
applicable, are as follows:

- 288-

NOVO BANCO

BALANCE SHEET AS AT 31 DECEMBER 2020 AND 2019

NOVO BANCO
Sucursal de
Espanha

NB Servicios

NOVO
Vanguarda

Greendraive

31.12.2020

31.12.2019

(in thousands of Euros)

31 190
44 203
2 813
34 348
1 828 912
282 617
1 546 295
101
2 021
183
5 877
5 877
2 390
39 078
7 711
31 367
52 051
1 469

2 044 636

46 773
1 969 627
35 044
1 934 583
2 241
41 554
3 203
3 203
21 019

2 084 417

-
-
842
-
-
( 40 623)

( 39 781)

2 044 636

23
-
-
-
-
-
-
-
-
-
-
-
-
3 673
27
3 646
7 085
4 162

14 943

-
18 470
18 470
-
-
-
-
-
562

19 032

1 057
-
-
-
( 4 665)
( 481)

( 4 089)

14 943

162
-
-
-
-
-
-
-
-
-
-
-
-
48
23
25
-
-

210

-
-
-
-
-
-
-
-
27

500
-
-
-
( 286)
( 31)

183

210

68
-
-
-
-
-
-
-
-
-
343
343
-
-
-
-
934
-

1 345

-
-
-
-
-
-
-
-
3 549

3 549

60
4 530
-
( 5 906)
-
( 888)

( 2 204)

1 345

114
-
-
-
-
-
-
-
-
-
309
309
-
-
-
-
453
-

876

-
-
-
-
-
-
-
-
1 726

1 726

60
4 190
-
( 4 424)
-
( 676)

( 850)

876

Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets

Tangible fixed assets

Intangible assets
Tax assets

Current Tax Assets
Deferred Tax Assets

Other assets
Non-current assets and disposal groups classified as held for sale

TOTAL ASSETS

LIABILITIES
Financial liabilities held for trading
Financial liabilities measured at amortised cost

Deposits from banks
Due to customers

Derivatives – Hedge accounting
Provisions
Tax liabilities

Deferred Tax Liabilities

Other liabilities

TOTAL LIABILITIES

EQUITY
Capital
Other equity
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

347

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 289-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO

(in thousands of Euros)

Interest Income
Interest Expenses

Net Interest Income

Dividend income
Fee and comission income
Fee and comission expenses
Gains or losses on financial assets and liabilities held for trading
Gains or losses on financial assets mandatorily at fair value through profit or loss
Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses

Operating Income

Administrative expenses

Staff expenses
Other administrative expenses

Depreciation
Provisions or reversal of provisions

Commitments and guarantees given
Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss
Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax
Deferred tax

Profit or loss after tax from continuing operations

NOVO BANCO
Sucursal de
Espanha

NB Servicios

NOVO
Vanguarda

Greendraive

31.12.2020

31.12.2019

33 028
( 2 403)

30 625

13
13 304
( 3 495)
439
( 7)
107
36
275
4 939
( 2 458)

43 778

( 30 428)
( 15 778)
( 14 650)
( 2 748)
1 749
( 113)
1 862
( 43 240)
( 31)
( 5 310)

-
( 265)

( 265)

-
23
( 399)
-
-
-
-
( 2 118)
2 162
( 29)

( 626)

( 15)
-
( 15)
-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-
-
393
( 13)

380

( 403)
( 99)
( 304)
-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-
-
1 694
( 115)

1 579

( 2 467)
( 489)
( 1 978)
-
-
-
-
-
-
-

-
( 65)

( 65)

-
-
-
-
-
-
-
-
3 524
( 289)

3 170

( 3 741)
( 1 732)
( 2 009)
( 96)
-
-
-
-
-
-

( 36 230)

( 641)

( 23)

( 888)

( 667)

-
-

-
160

( 8)
-

-
-

( 9)
-

( 36 230)

( 481)

( 31)

( 888)

( 676)

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 290-

348

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATED

CASH FLOW STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO

(in thousands of Euros)

NOVO BANCO
Sucursal de
Espanha

NB Servicios

NOVO
Vanguarda

Greendraive

31.12.2020

31.12.2019

31 555
( 2 802)
13 304
( 3 645)
381
( 30 428)

8 365

( 1 579)
1 244
76 348
151 228
( 74 880)
( 56 816)
52 594
( 109 410)
( 44 687)

2 407

( 3 559)

( 1 152)

( 31)
( 1 010)
769

( 272)

-
-

( 1 424)

32 614
31 190

( 1 424)

-
31 190

31 190

-
( 265)
23
( 399)
-
( 15)

( 656)

-
-
23
23
-
( 1 685)
( 1 685)
-
4 003

-
-
-

-
-

-
23

-
-

-
-
-
-
-
-

-
-
4
4
-
-
-
-
( 4)

-
-
-

-
-

158
162

-
-

-
( 65)
1 694
-
-
( 2 467)

( 838)

-
-
-
-
-
-
-
-
192

( 646)

-
( 12)
-

( 12)

612
-

612

( 46)

114
68

( 46)

5
63

-
( 53)
4 082
-
-
( 4 559)

( 530)

-
-
-
-
-
-
-
-
5

( 525)

( 117)

( 642)

-
( 23)
-

( 23)

2 990
( 2 233)

757

22
114

16
98

114

Cash flows from operating activities
Interest received
Interest paid
Fees and commissions received
Fees and commissions paid
Recoveries on loans previously written off
Cash payments to employees and suppliers

Changes in operating assets and liabilities:

Financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Loans and advances to banks
Loans and advances to customers
Financial liabilities at amortised cost

Deposits from banks
Due to customers

Other operating assets and liabilities

Net cash from operating activities before corporate income tax

Corporate income taxes paid

Net cash from operating activities

Cash flows from investing activities
Sale of investments in subsidiaries and associated companies
Acquisition of tangible fixed assets
Sale of intangible assets

Net cash from investing activities

Cash flows from financing activities
Issuance of subordinated liabilities
Interest on other equity instruments

Net cash from financing activities

Net changes in cash and cash equivalents

Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period

Cash and cash equivalents include:
Cash
Deposits with banks

Total

NOTE 45 – NPL DISCLOSURES

NOTE 45 – NPL Disclosures

Following the recommendations of the European Banking Authority explained in document EBA/GL/2018/10, credit institutions with
an NPL (Non Performing Exposures) ratio greater than 5% must publish a set of information regarding NPE, restructured loans and
foreclosed assets, according to a standard format, which we present below (we emphasize that this information is prepared from a
prudential perspective, whose consolidation perimeter differs from the consolidation perimeter of the financial statements presented):
Following the recommendations of the European Banking Authority explained in document EBA/GL/2018/10, credit
institutions with an NPL (Non Performing Exposures) ratio greater than 5% must publish a set of information regarding
Credit quality of forborne exposure
NPE, restructured loans and foreclosed assets, according to a standard format, which we present below (we emphasize
that this information is prepared from a prudential perspective, whose consolidation perimeter differs from the
consolidation perimeter of the financial statements presented):

2020 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS AND FINAL NOTES

- 291-

349

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Credit quality of forborne exposure

Gross carrying amount/nominal amount of exposures with
forbearance measures

Loans and advances

Central banks

General governments

Credit institutions

Loans and advances

Other financial corporations
Central banks
Non-financial corporations
General governments
Households
Credit institutions

Debt securities

Other financial corporations

Loan commitments given

Non-financial corporations

Total

Households

Debt securities

Gross carrying amount/nominal amount of exposures with
forbearance measures

Non-performing forborne

Performing
forborne

Of which
defaulted
Non-performing forborne

Of which subject
to impairment

1 318 902

Of which
defaulted

0
Of which subject
50
to impairment

0
1 318 902
137 193
0
1 016 644
50
165 014
0
0
137 193
1 132
1 016 644
1 320 034
165 014

780 644

Performing
forborne

5 996

0
780 644
4 968
0
632 703
5 996
136 977
0
0
4 968
9 659
632 703
790 303
136 977

-100 974

On performing
forborne
exposures

-566

0
-100 974
-16
0
-98 230
-566
-2 162
0
0
-16
0
-98 230
-100 974
-2 162

Accumulated impairment,
accumulated negative changes
in fair value due to credit risk
and provisions

Accumulated impairment,
On non-
accumulated negative changes
On performing
performing
in fair value due to credit risk
forborne
forborne
and provisions
exposures
exposures

-792 682

On non-
performing
forborne
exposures

-39

(in thousands of Euros)

Collateral received and financial
guarantees received on forborne
exposures

(in thousands of Euros)
Of which collateral
and financial
Collateral received and financial
guarantees received
guarantees received on forborne
on nonperforming
exposures
exposures with
forbearance
Of which collateral
measures
and financial
guarantees received
on nonperforming
exposures with
forbearance
measures

823 943

4 797

396 148

0
-792 682
-52 509
0
-609 893
-39
-130 240
0
0
-52 509
0
-609 893
-792 682
-130 240

0
823 943
79 795
0
588 013
4 797
151 338
0
0
79 795
0
588 013
823 943
151 338

0
396 148
76 337
0
295 905
0
23 906
0
0
76 337
0
295 905
396 148
23 906

396 148

(in thousands of Euros)

9 659
Loan commitments given
Credit quality of performing and non-performing exposures by past due days
790 303
Total
Credit quality of performing and non-performing exposures by past due days

Gross carrying amount/nominal amount

1 320 034

-100 974

-792 682

1 132

823 943

Credit quality of performing and non-performing exposures by past due days

Performing exposures

Non-performing exposures

Not past due or
past due < =30
days

Past due > 30
days <=90 days

Performing exposures

Unlikely to pay
that are not past
due or are past
due <=90 days

Past due >
180 days
Gross carrying amount/nominal amount
<=1 year

Past due >
90 days
<=180 days

Past due > 1
year <= 2
years

Past due > 2
years >=5
years

Past due > 5
years >=7
years

Non-performing exposures

(in thousands of Euros)

Past due > 7
years

Of which
defaulted

Cash in Central Banks

Loans and advances

Central banks

General governments

Credit institutions

Cash in Central Banks

Other financial corporations

Loans and advances

Non-financial corporations
Central banks

Of which SMEs

General governments
Households
Credit institutions

Debt securities

Other financial corporations
Central banks
Non-financial corporations
General governments
Of which SMEs
Credit institutions
Households
Other financial corporations

Debt securities

Non-financial corporations
Central banks

Off-balance-sheet exposures

General governments
Central banks
Credit institutions
General governments
Other financial corporations
Credit institutions
Non-financial corporations
Other financial corporations
Off-balance-sheet exposures
Non-financial corporations
Central banks
Households
General governments

Total

Credit institutions

Other financial corporations

Non-financial corporations

Households

Total

2 541 160

22 928 020

Not past due or
past due < =30
days

404 476

Past due > 30
days <=90 days

84 396

2 512 984

62 612

199 673

Past due >
90 days
<=180 days

Past due >
180 days
<=1 year

133 418
Past due > 1
0
year <= 2
years

334 744
Past due > 2
0
years >=5
years

414

183 612
Past due > 5
0
years >=7
years

1 528 094

Unlikely to pay
that are not past
due or are past
due <=90 days

112

314 138

0
81 348
1 528 094
874 190
0
629 960
112
258 306
314 138
77 931
81 348
0
874 190
0

629 960

0
258 306
0
77 931
77 931
0

0
185
62 612
48 401
0
12 833
0
14 026
0
15 126
185
0
48 401
0

12 833

0
14 026
0
15 126
15 126
0

77 931

15 126

0
52
199 673
145 730
0
37 807
1
53 889
0
0
52
0
145 730
0

37 807

0
53 889
0
0
0
0

0
57
133 418
101 687
0
97 484
0
31 674
0
4 830
57
0
101 687
0

97 484

0
31 674
1 940
4 830
2 890
0

1 940

2 890

0
55 415
334 744
245 948
0
86 961
414
32 967
0
39 944
55 415
0
245 948
0

86 961

0
32 967
20 830
39 944
19 114
0

20 830

19 114

0
1 230
183 612
166 765
0
135 730
0
15 618
0
82 475
1 230
0
166 765
0

135 730

0
15 618
0
82 475
82 475
0

82 475

70 831
Past due > 7
0
years

0
10 568
70 831
39 921
0
35 727
0
20 342
0
0
10 568
0
39 921
0

35 727

0
20 342
0
0
0
0

44 943

2 541 160
277 563
22 928 020
11 417 261
0
6 556 781
404 476
10 783 776
44 943
10 217 594
277 563
0
11 417 261
6 914 457

6 556 781

701 735
10 783 776
458 726
10 217 594
2 142 676
0

6 914 457

701 735

458 726

2 142 676

2 541 160

23 012 416

404 477

44 943

2 541 160
277 651
23 012 416
11 424 372
0
6 561 785
404 477
10 860 972
44 943
10 217 594
277 651
0
11 424 372
6 914 457

6 561 785

701 735
10 860 972
458 726
10 217 594
2 142 676
0
9 871 398
6 914 457
0
701 735
34 983
458 726
555 283
2 142 676
59 495
9 871 398
8 208 623
0
1 013 015
34 983
45 642 568
555 283

59 495

8 208 623

1 013 015

0
89
84 396
7 111
0
5 005
0
77 196
0
0
89
0
7 111
0

5 005

0
77 196
0
0
0
0

527

314 138

0
148 854
2 512 984
1 622 643
0
1 036 502
527
426 823
314 138
220 306
148 854
0
1 622 643
0

1 036 502

0
426 823
22 770
220 306
197 536
0
386 019
0
0
0
17
22 770
8 520
197 536
7 625
386 019
367 140
0
2 718
17
3 119 309
8 520

7 625

367 140

2 718

35 686 774

84 396

1 606 025

77 738

199 673

138 248

374 688

266 087

70 831

2 512 984

Of which
defaulted

527

314 138

0
148 854
2 512 984
1 622 643
0
1 036 502
527
426 823
314 138
220 306
148 854
0
1 622 643
0

1 036 502

0
426 823
22 770
220 306
197 536
0
386 019
0
0
0
17
22 770
8 520
197 536
7 625
386 019
367 140
0
2 718
17
3 119 309
8 520

7 625

367 140

2 718

45 642 568

35 686 774

84 396

3 119 309

1 606 025

77 738

199 673

138 248

374 688

266 087

70 831

3 119 309

31 December 2020

350

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

132

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDPerforming and non-performing exposures and related provisions
Performing and non-performing exposures and related provisions

Gross carrying amount/nominal amount

Accumulated impairment, accumulated negative changes in fair value due to credit risk
and provisions

(in thousands of Euros)

Collateral and financial
guarantees received

Performing and non-performing exposures and related provisions

Performing exposures

Non-performing exposures

Performing exposures – accumulated
impairment and provisions

Cash in Central Banks

2 541 160

Performing exposures

Non-performing exposures

Gross carrying amount/nominal amount

Of which
stage 1

Of which
stage 2

Of which
stage 3

Loans and advances

23 012 416

18 981 637

4 030 779

2 512 984

Of which
stage 1

380 427

Of which
stage 2

24 050

527

Of which
stage 2

2 512 984

Of which
stage 3

527

Das quais,
Stage 1

Das quais,
Stage 2

Performing exposures – accumulated
impairment and provisions

-62 817

-310 004

-372 821

Das quais,
Stage 1

-556

Das quais,
Stage 2

-713

Non-performing exposures – accumulated
impairment, accumulated negative changes
in fair value due to credit risk and
provisions

Das quais,
Stage 2
Non-performing exposures – accumulated
0
impairment, accumulated negative changes
in fair value due to credit risk and
provisions

Das quais,
Stage 3

-1 491 696

-451

Das quais,
Stage 2

Accumulated impairment, accumulated negative changes in fair value due to credit risk
and provisions

Central banks

General governments

Credit institutions
Cash in Central Banks

Other financial corporations

Loans and advances

Non-financial corporations
Central banks

Of which SMEs
General governments
Households
Credit institutions

Debt securities

Other financial corporations
Central banks
Non-financial corporations
General governments
Of which SMEs

Credit institutions
Households
Other financial corporations

Debt securities

Non-financial corporations
Central banks

Off-balance-sheet exposures

Total

Credit institutions

404 477

44 943
2 541 160
277 651
23 012 416
11 424 372
0
6 561 785
404 477
10 860 972
44 943
10 217 594
277 651
0
11 424 372
6 914 457
6 561 785
701 735
10 860 972
458 726
10 217 594
2 142 676
0
9 871 398
6 914 457
0
701 735
34 983
458 726
555 283
2 142 676
59 495
9 871 398
8 208 623
0
1 013 015
34 983
45 642 568
555 283

44 848
2 541 160
257 036
18 981 637
8 460 936
0
4 866 462
380 427
9 838 390
44 848
9 906 693
257 036
0
8 460 936
6 914 457
4 866 462
701 735
9 838 390
455 681
9 906 693
1 834 820
0
8 484 827
6 914 457
0
701 735
25 499
455 681
544 506
1 834 820
55 233
8 484 827
6 867 362
0
992 227
25 499
39 914 317
544 506

95
0
20 615
4 030 779
2 963 437
0
1 695 323
24 050
1 022 582
95
310 901
20 615
0
2 963 437
0
1 695 323
0
1 022 582
3 045
310 901
307 856
0
1 386 571
0
0
0
9 483
3 045
10 776
307 856
4 263
1 386 571
1 341 261
0
20 788
9 483
5 728 251
10 776

314 138
0
148 854
2 512 984
1 622 643
0
1 036 502
527
426 823
314 138
220 306
148 854
0
1 622 643
0
1 036 502
0
426 823
22 770
220 306
197 536
0
386 019
0
0
0
17
22 770
8 520
197 536
7 625
386 019
367 140
0
2 718
17
3 119 309
8 520

0
0
0
0
0
0
0
0
0
0
77 931
0
0
0
0
0
0
0
0
77 931
77 931
0
0
0
0
0
0
0
0
77 931
0
0
0
0
0
0
77 931
0

314 138
0
148 854
2 512 984
1 622 643
0
1 036 502
527
426 823
314 138
142 375
148 854
0
1 622 643
0
1 036 502
0
426 823
22 770
142 375
119 605
0
386 019
0
0
0
17
22 770
8 520
119 605
7 625
386 019
367 140
0
2 718
17
3 041 378
8 520

7 625

367 140

2 718

-1 269

-851
0
-2 730
-372 821
-325 235
0
-144 330
-1 269
-42 735
-851
-95 274
-2 730
0
-325 235
-3 711
-144 330
-217
-42 735
-970
-95 274
-90 376
0
35 061
-3 711
0
-217
22
-970
74
-90 376
104
35 061
31 475
0
3 385
22
-433 035
74

104

31 475

3 385

-851
0
-1 256
-62 817
-47 926
0
-32 044
-556
-12 227
-851
-7 622
-1 256
0
-47 926
-3 711
-32 044
-217
-12 227
-486
-7 622
-3 208
0
6 983
-3 711
0
-217
22
-486
18
-3 208
30
6 983
3 651
0
3 263
22
-63 456
18

3 651

3 263

0
0
-1 474
-310 004
-277 309
0
-112 286
-713
-30 508
0
-87 652
-1 474
0
-277 309
0
-112 286
0
-30 508
-484
-87 652
-87 168
0
28 078
0
0
0
0
-484
56
-87 168
75
28 078
27 825
0
122
0
-369 579
56

-249 287
0
-58 976
-1 491 696
-970 963
0
-552 324
-451
-212 020
-249 287
-109 660
-58 976
0
-970 963
0
-552 324
0
-212 020
0
-109 660
-109 660
0
66 929
0
0
0
0
0
4
-109 660
701
66 929
66 000
0
224
0
-1 534 426
4

701

27 825

66 000

122

224

Other financial corporations

59 495

55 233

4 263

7 625

Non-financial corporations

Quality of non-productive exhibitions by geography

8 208 623

6 867 362

1 341 261

367 140

Households

1 013 015

992 227

20 788

2 718

Total

45 642 568

39 914 317

5 728 251

3 119 309

77 931

3 041 378

-433 035

-63 456

-369 579

-1 534 426

Quality of non-productive exhibitions by geography
Quality of non-productive exhibitions by geography

Gross carrying amount/nominal amount

Of which non-performing

Gross carrying amount/nominal amount

Of which
defaulted

38 504 460

2 733 290
Of which non-performing

2 733 290

30 121 182

2 194 332

8 383 278

10 257 417

38 504 460
8 363 278
30 121 182
1 894 139
8 383 278
48 761 877
10 257 417

538 958

386 019

2 733 290
376 616
2 194 332
9 403
538 958
3 119 309
386 019

8 363 278

376 616

9 403

538 958

Of which
defaulted

386 019

2 733 290
376 616
2 194 332
9 403
538 958
3 119 309
386 019

376 616

9 403

Of which subject
to impairment

38 077 260
Of which subject
29 766 568
to impairment

8 310 693

38 077 260

29 766 568

8 310 693
38 077 260

Accumulated
impairment

-2 069 451

-1 626 811

-442 640

-2 069 451

-1 626 811

-442 640
-2 069 451

3 119 309

38 077 260

-2 069 451

On-balance-sheet exposures

Portugal

Other countries

Off-balance-sheet exposures

On-balance-sheet exposures

Portugal
Portugal
Other countries
Other countries

Total
Off-balance-sheet exposures

Portugal

Other countries

1 894 139
Credit quality of loans and advances by industry
48 761 877
Total

Credit quality of loans and advances by industry

Accumulated
partial write-
off

Accumulated
0
partial write-
-565 334
off

0
0
-164 902
-565 334
-398 988
0
-45 866
0
-1 444
0
0
-164 902
0
-398 988
0
-45 866
0
-1 444
0
0
0
0

-565 334

(in thousands of Euros)

On
performing
exposures

On non-
performing
Collateral and financial
exposures
guarantees received

13 315 570

On
performing
exposures

694 808

On non-
performing
exposures

37 681

0
0
151 379
13 315 570
3 127 336
0
2 302 265
37 681
9 999 174
0
0
151 379
0
3 127 336
0
2 302 265
0
9 999 174
0
0
0
0
162 625
0
0
0
4 617
0
1 543
0
9 096
162 625
135 436
0
11 933
4 617
13 478 195
1 543

9 096

135 436

11 933

0
0
78 731
694 808
430 658
0
311 587
56
185 363
0
0
78 731
0
430 658
0
311 587
0
185 363
0
0
0
0
14 837
0
0
0
0
0
59
0
0
14 837
14 598
0
179
0
709 645
59

14 598

179

Das quais,
Stage 3

-451

701

66 000

224

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-1 534 426

-565 334

13 478 195

709 645

(in thousands of Euros)

Provisions on off-
balance-sheet
commitments and
financial guarantees
given

Accumulated negative
changes in fair value
due to credit risk on
(in thousands of Euros)
non-performing
exposures

Accumulated negative
changes in fair value
0
due to credit risk on
0
non-performing
exposures

101 990

100 159

1 831

101 990
101 990

100 159

1 831

101 990

0
0

31 December 2020

Notes to the Consolidated Financial Statements

351

31 December 2020

Notes to the Consolidated Financial Statements

133

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESCredit quality of loans and advances by industry

Agriculture, forestry and fishing

Mining and quarrying

Manufacturing

Electricity, gas, steam and air conditioning supply

Water supply
Agriculture, forestry and fishing
Construction
Mining and quarrying
Wholesale and retail trade
Manufacturing
Transport and storage
Electricity, gas, steam and air conditioning supply
Accommodation and food service activities
Water supply
Information and communication
Construction
Financial and insurance activities
Wholesale and retail trade
Real estate activities
Transport and storage
Professional, scientific and technical activities
Accommodation and food service activities
Administrative and support service activities
Information and communication
Public administration and defence, compulsory social security
Financial and insurance activities
Education
Real estate activities
Human health services and social work activities
Professional, scientific and technical activities
Arts, entertainment and recreation
Administrative and support service activities
Other services
Public administration and defence, compulsory social security
Total
Education

Human health services and social work activities
Collateral valuation – loans and advances
Arts, entertainment and recreation

Other services

348 666

81 033

2 571 297

301 457

139 268
348 666
1 516 554
81 033
1 469 940
2 571 297
870 282
301 457
1 029 150
139 268
179 409
1 516 554
710 795
1 469 940
1 615 048
870 282
1 070 828
1 029 150
299 120
179 409
8 696
710 795
42 703
1 615 048
233 448
1 070 828
236 077
299 120
323 245
8 696
13 047 015
42 703

233 448

236 077

323 245

Total

Collateral valuation – loans and advances

Gross carrying amount

Of which non-performing

Of which
defaulted

Of which loans
and advances
subject to
impairment

Accumulated
impairment

Gross carrying amount

15 403

348 666

-13 340

Of which non-performing

37 337

145 241

32 445

14 775
15 403
254 782
37 337
90 961
145 241
55 586
32 445
139 423
14 775
23 388
254 782
123 193
90 961
276 429
55 586
151 477
139 423
14 535
23 388
0
123 193
3 196
276 429
43 441
151 477
93 037
14 535
107 993
0
1 622 643
3 196

43 441

93 037

145 241

Of which
defaulted

32 445

43 441

93 037

81 033

Of which loans
and advances
subject to
impairment

2 571 297

301 457

-22 965

Accumulated
impairment

-117 088

-19 577

-11 240
-13 340
-201 471
-22 965
-73 478
-117 088
-62 924
-19 577
-97 281
-11 240
-19 347
-201 471
-140 273
-73 478
-187 998
-62 924
-114 977
-97 281
-15 512
-19 347
-28
-140 273
-1 619
-187 998
-23 558
-114 977
-63 604
-15 512
-109 916
-28
-1 296 198
-1 619

-23 558

-63 604

-109 916

233 448

236 077

323 245

(in thousands of Euros)

Accumulated negative
changes in fair value
due to credit risk on
non-performing
exposures

(in thousands of Euros)

0
Accumulated negative
changes in fair value
0
due to credit risk on
non-performing
exposures

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
(in thousands of Euros)
0

Performing

13 047 015

1 622 643

13 047 015
Non-performing

-1 296 198

107 993

107 993
Loans and advances

Collateral valuation – loans and advances

Of which past
due > 30 days
<=90 days

Gross carrying amount

Of which secured

Of which secured with immovable property

25 525 400

23 012 416

Performing

16 573 754

15 026 393

14 059 236

12 891 519

84 396

69 853

68 521

Of which instruments with LTV higher than 60% and lower or equal to 80%

5 009 815

4 836 251

Of which instruments with LTV higher than 80% and lower or equal to 100%

1 500 075

1 284 058

Of which instruments with LTV higher than 100%

Accumulated impairment for secured assets
Gross carrying amount

Collateral

Of which secured

Of which value capped at the value of exposure
Of which secured with immovable property

1 267 336

750 074

-996 410
25 525 400

-215 228
23 012 416

16 573 754

15 026 393

13 973 102
14 059 236

13 281 584
12 891 519

Of which immovable property
Of which instruments with LTV higher than 60% and lower or equal to 80%

12 972 629
5 009 815

12 374 924
4 836 251

Of which value above the cap

Of which instruments with LTV higher than 80% and lower or equal to 100%

21 628 284
1 500 075

19 539 311
1 284 058

Of which immovable property
Of which instruments with LTV higher than 100%

Financial guarantees received
Accumulated impairment for secured assets

Accumulated partial write-off
Collateral

Of which value capped at the value of exposure

Of which immovable property

Of which value above the cap

Of which immovable property

Financial guarantees received

Accumulated partial write-off

15 754 125
1 267 336

15 043 727
750 074

37 276
-996 410

-565 334

33 986
-215 228

-26

13 973 102

13 281 584

12 972 629

12 374 924

21 628 284

19 539 311

15 754 125

15 043 727

37 276

-565 334

33 986

-26

Of which past
due > 30 days
<=90 days

-2 112
84 396

69 853

67 610
68 521

66 397

62 882

60 361

23
-2 112

-26

67 610

66 397

62 882

60 361

-26

2 512 984

1 547 361

1 167 717

173 563

216 018

517 262

-781 182
2 512 984

1 547 361

691 518
1 167 717

597 706
173 563

2 088 973
216 018

710 398
517 262

3 290
-781 182

-565 308

691 518

597 706

2 088 973

710 398

3 290

-565 308

Unlikely to pay
that are not past
due or are past
due <= 90 days

1 528 094

891 541

651 717
Unlikely to pay
that are not past
86 003
due or are past
145 801
due <= 90 days

Past due > 90 days

Of which past
due >90 days
<= 180 days

Loans and advances

Of which: past
due > 180
days <= 1 year

Of which: past
due > 1 years
<= 2 years

Of which: past
due > 2 years
<= 5 years

Of which: past
due > 5 years
<=7 years

Of which: past
(in thousands of Euros)
due > 7 years

984 890

655 819

516 000

87 561

70 217

62 612

54 555

199 673
Non-performing
138 209

133 418

100 843

27 833

84 910

Past due > 90 days

96 925

334 744

173 197

152 248

183 612

142 724

111 633

70 831

46 290

42 451

Of which past
due >90 days
<= 180 days

Of which: past
due > 180
days <= 1 year

Of which: past
due > 1 years
<= 2 years

Of which: past
due > 2 years
<= 5 years

Of which: past
due > 5 years
<=7 years

Of which: past
due > 7 years

283 808

233 454

-434 166
1 528 094

-347 016
984 890

-32 256
62 612

891 541

395 212
651 717

358 226
86 003

748 300
145 801

368 584
283 808

2 366
-434 166

-358

395 212

358 226

748 300

368 584

2 366

-358

655 819

296 305
516 000

239 479
87 561

54 555

22 192
27 833

17 031

1 340 673
70 217

1 340 673

341 813
233 454

924
-347 016

-564 950

296 305

239 479

341 813

107
-32 256

22 192

17 031

1 340 673

341 813

924

-564 950

107

-49 743
199 673

138 209

80 731
84 910

52 320

-56 000
133 418

100 843

43 569
96 925

41 178

255
-49 743

549
-56 000

-1 068

80 731

52 320

255

-1 068

-9 604

43 569

41 178

549

-93 777
334 744

173 197

76 670
152 248

68 332

11
-93 777

-468 800

76 670

68 332

-86 570
183 612

142 724

55 777
111 633

43 523

0
-86 570

-79 756

55 777

43 523

-28 670
70 831

46 290

17 364
42 451

17 094

1
-28 670

-5 721

17 364

17 094

-9 604

-468 800

-79 756

-5 721

31 December 2020

352

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

134

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDChanges in the stock of non-performing loans and advances

Changes in the stock of non-performing loans and advances

Changes in the stock of non-performing loans and advances
Initial stock of non-performing loans and advances

Inflows to non-performing portfolios

Outflows from non-performing portfolios
Changes in the stock of non-performing loans and advances

Outflow to performing portfolio

Initial stock of non-performing loans and advances
Outflow due to loan repayment, partial or total

Inflows to non-performing portfolios

Outflow due to collateral liquidation

Inflows to non-performing portfolios

Outflows from non-performing portfolios
Outflow due to taking possession of collateral
Initial stock of non-performing loans and advances
Outflow to performing portfolio
Outflow due to sale of instruments
Outflow due to loan repayment, partial or total
Outflow due to risk transfer
Outflows from non-performing portfolios
Outflow due to collateral liquidation
Outflow due to write-off
Outflow to performing portfolio
Outflow due to taking possession of collateral
Outflow due to other situations
Outflow due to loan repayment, partial or total
Outflow due to sale of instruments
Outflow due to reclassification as held for sale
Outflow due to collateral liquidation
Outflow due to risk transfer
Final stock of non-performing loans and advances
Outflow due to taking possession of collateral
Outflow due to write-off
Outflow due to sale of instruments
Outflow due to other situations
Outflow due to risk transfer
Outflow due to reclassification as held for sale
Outflow due to write-off

Collateral obtained by taking possession and execution processes

Final stock of non-performing loans and advances
Collateral obtained by taking possession and execution processes

Outflow due to other situations

Outflow due to reclassification as held for sale

Collateral obtained by taking possession and execution processes
Final stock of non-performing loans and advances
Property, plant and equipment (PP&E)

Other than PP&E
Collateral obtained by taking possession and execution processes

Residential immovable property

Commercial Immovable property
Property, plant and equipment (PP&E)

Movable property (auto, shipping, etc.)

Other than PP&E

Equity and debt instruments
Residential immovable property
Property, plant and equipment (PP&E)
Other
Commercial Immovable property

Other than PP&E
Total

(in thousands of Euros)

Gross carrying
amount

3 445 821
(in thousands of Euros)
528 442

-1 461 279

Gross carrying
amount

Gross carrying
amount
-157 051
(in thousands of Euros)
3 445 821
-195 764
528 442
0
-1 461 279
-23 070
3 445 821
-157 051
-376 963
528 442
-195 764
0
-1 461 279
0
-504 225
-157 051
-23 070
-204 206
-195 764
-376 963
0
0
0
2 512 984
-23 070
-504 225
-376 963
-204 206
0
(in thousands of Euros)
0
-504 225
2 512 984
-204 206

Collateral obtained by taking possession

Value at initial recognition

Accumulated negative
changes

Collateral obtained by taking possession

589 907

2 512 984
0
(in thousands of Euros)
-277 322

141 144
Accumulated negative
Value at initial recognition
changes
349 959
Collateral obtained by taking possession
0
3 488
589 907
67 922
141 144
0
27 394
349 959
589 907
589 907

-38 478
(in thousands of Euros)
-216 309
0
-2 285
-277 322
-9 229
-38 478
0
-11 022
-216 309
-277 322
-277 322

Accumulated negative
changes

Value at initial recognition

Movable property (auto, shipping, etc.)
Residential immovable property

Equity and debt instruments
Commercial Immovable property

Other
Movable property (auto, shipping, etc.)

Collateral obtained by taking possession and execution processes – vintage breakdown
Total

Equity and debt instruments

Other

Total collateral obtained by taking possession

3 488
141 144

67 922
349 959

27 394
3 488

589 907
67 922

27 394

Total
Collateral obtained by taking possession and execution processes – vintage breakdown

Foreclosed <=2 years

Foreclosed > 2 years <=5 years

Accumulated
negative
changes

Value at initial
recognition

Accumulated
negative
changes

Value at initial
recognition

Accumulated
negative
changes

Value at initial
recognition

Foreclosed > 5 years
589 907

Value at initial
recognition

Accumulated
negative
changes

-2 285
-38 478

-9 229
-216 309

-11 022
-2 285

-277 322
-9 229
(in thousands of Euros)

-11 022
Of which non-current assets held-
-277 322
for-sale
Accumulated
negative
changes

Value at initial
recognition

Collateral obtained by taking possession classified as PP&E

Collateral obtained by taking possession and execution processes – vintage breakdown
Collateral obtained by taking possession and execution processes – vintage breakdown

Collateral obtained by taking possession other than that classified as PP&E

Total collateral obtained by taking possession

-277 322

-135 674

589 907

117 878

221 000

251 029

-42 001

-99 647

(in thousands of Euros)

Residential immovable property

Commercial immovable property

141 144

Value at initial
recognition

349 959

-38 478
Accumulated
negative
changes

-216 309

25 195

Value at initial
recognition

48 333

-4 844
Accumulated
negative
changes

-20 039

47 660

Value at initial
recognition

137 098

-12 345
Accumulated
negative
changes

-86 598

Total collateral obtained by taking possession

68 290

Value at initial
recognition

164 528

-21 289
Accumulated
negative
changes

-109 672

Foreclosed <=2 years

Foreclosed > 2 years <=5 years

Foreclosed > 5 years

Collateral obtained by taking possession classified as PP&E
Movable property (auto, shipping, etc.)

Collateral obtained by taking possession other than that classified as PP&E
Equity and debt instruments

Other
Residential immovable property
Collateral obtained by taking possession classified as PP&E

0
3 488

Value at initial
recognition

589 907
67 922

0
-2 285
Accumulated
negative
changes

-277 322
-9 229

27 394
141 144
0

-11 022
-38 478
0

Foreclosed <=2 years
1 061

-175
Accumulated
negative
changes

-42 001
-5 922

Foreclosed > 2 years <=5 years

Value at initial
recognition

221 000
36 243

0
Accumulated
negative
changes

-99 647
-704

Value at initial
recognition

117 878
15 896

Foreclosed > 5 years
2 427

Value at initial
recognition

251 029
15 783

-2 110
Accumulated
negative
changes

-135 674
-2 603

27 394
25 195

-11 022
-4 844

0
47 660

0
-12 345

68 290

-21 289

Total
Commercial immovable property
Collateral obtained by taking possession other than that classified as PP&E

589 907
349 959
589 907

-277 322
-216 309
-277 322

117 878
48 333
117 878

-42 001
-20 039
-42 001

221 000
137 098
221 000

-99 647
-86 598
-99 647

164 528

251 029
251 029

-109 672

-135 674
-135 674

Movable property (auto, shipping, etc.)
Residential immovable property

3 488
141 144

-2 285
-38 478

1 061
25 195

-175
-4 844

0
47 660

0
-12 345

2 427

68 290

-2 110

-21 289

Equity and debt instruments
Commercial immovable property

NOTE 46 – DISCLOSURES ABOUT EXPOSURES RESULTING FROM MEASURES RELATED TO THE PANDEMIC COVID-19

-9 229
-216 309

36 243
137 098

-704
-86 598

67 922
349 959

-5 922
-20 039

15 896
48 333

-109 672

164 528

15 783

-2 603

Other
Movable property (auto, shipping, etc.)

27 394
3 488

-11 022
-2 285

27 394
1 061

-11 022
-175

0
0

2 427

-2 110

Total
Equity and debt instruments

Following the recommendations of the European Banking Authority and according with Instruction no. 19/2020 on the reporting and
disclosure of information on exposures subject to measures applied in response to the Covid-19 crisis as per EBA (EBA/GL/2020/07),
we present below the following details referring to default and loans granted under the new public guarantee plans, which are fully
applicable to the consolidation perimeters of Nani Holdings, SGPS; SA and LSF Nani Investments S.à.r.l:
NOTE 46 – DISCLOSURES ABOUT EXPOSURES RESULTING FROM MEASURES RELATED TO THE PANDEMIC COVID-19

-277 322
-9 229

-135 674
-2 603

589 907
67 922

117 878
15 896

221 000
36 243

251 029
15 783

-42 001
-5 922

-99 647
-704

Other

-277 322

-135 674

589 907

117 878

221 000

251 029

-11 022

-42 001

-99 647

27 394

Total

Following the recommendations of the European Banking Authority and according with Instruction no. 19/2020 on the reporting and
NOTE 46 – DISCLOSURES ABOUT EXPOSURES RESULTING FROM MEASURES RELATED TO THE PANDEMIC COVID-19
disclosure of information on exposures subject to measures applied in response to the Covid-19 crisis as per EBA (EBA/GL/2020/07),
Information on loans and advances subject to legislative and non-legislative moratorias
we present below the following details referring to default and loans granted under the new public guarantee plans, which are fully
Following the recommendations of the European Banking Authority and according with Instruction no. 19/2020 on the reporting and
applicable to the consolidation perimeters of Nani Holdings, SGPS; SA and LSF Nani Investments S.à.r.l:
disclosure of information on exposures subject to measures applied in response to the Covid-19 crisis as per EBA (EBA/GL/2020/07),
we present below the following details referring to default and loans granted under the new public guarantee plans, which are fully
applicable to the consolidation perimeters of Nani Holdings, SGPS; SA and LSF Nani Investments S.à.r.l:

Notes to the Consolidated Financial Statements

31 December 2020

135

353

Information on loans and advances subject to legislative and non-legislative moratorias

Notes to the Consolidated Financial Statements

31 December 2020

Notes to the Consolidated Financial Statements

135

0
Of which non-current assets held-
for-sale
0
0
(in thousands of Euros)
Accumulated
negative
changes

0
Of which non-current assets held-
for-sale
0

Value at initial
recognition

0
Accumulated
negative
changes

Value at initial
recognition

0
0

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES of which: small and medium-sized enterprises
Loans and advances that have been offered a moratorium
of which: secured by commercial real estate
Loans and advances subject to a moratorium (applied)

NOTE 46 – Disclosures about exposures resulting from
measures related to the pandemic covid-19

Following the recommendations of the European Banking Authority and according with Instruction no. 19/2020 on the
reporting and disclosure of information on exposures subject to measures applied in response to the Covid-19 crisis
as per EBA (EBA/GL/2020/07), we present below the following details referring to default and loans granted under the
new public guarantee plans, which are fully applicable to the consolidation perimeters of Nani Holdings, SGPS; SA and
LSF Nani Investments S.à.r.l:

Information on loans and advances subject to legislative and non-legislative moratorias

Gross carrying amount

Accumulated impairment, accumulated negative changes in fair value resulting from credit risk

Productive

Non-productive

(in thousands of Euros)

Gross
carrying
amount

Of which:
exposures
subject to
restructuring
measures

Of which:
instruments with a
significant increase in
credit risk since initial
recognition but
without credit
impairment (Stage 2)
Gross carrying amount

Of which:
exposures
subject to
restructuring
measures

Of which:
Reduced
probability of
payment that
are not past
due or past due
for <= 90 days

Of which:
exposures
subject to
restructurin
g measures

Of which:
instruments with
a significant
increase in
credit risk since
initial
recognition but
without credit
impairment

Of which:
exposures
subject to
restructuring
measures

Of which:
Reduced
probability of
payment that
are not past due
or past due for
<= 90 days

Of which:
Reduced
probability of
payment that
has not been
due or has been
due for a long
time <= 90 dias

(in thousands of Euros)

Entries to
non-
productive
exhibitions

Gross
carrying
amount

Accumulated impairment, accumulated negative changes in fair value resulting from credit risk

Loans and advances subject to a
moratorium

6 878 599

6 138 006

546 662
Productive

2 056 137

740 594

412 022
Non-productive

659 514

-523 884

-205 061

-80 393

-189 404

-318 823

Non-productive

-183 211

-286 987

201 360

of which: private

2 251 137

2 144 377

72 183

401 600

106 760

13 804

-32 906

-16 435

-14 775

-16 471

of which: secured by
residential properties
of which: non-financial
corporations

of which: small and medium-
sized enterprises
of which: secured by
commercial real estate

Loans and advances subject to a
moratorium

2 035 738

1 943 797

4 618 006

3 984 223

3 009 464

2 544 369

1 625 319
6 878 599

1 283 209
6 138 006

of which: private

2 251 137

2 144 377

68 278

Of which:
exposures
subject to
restructuring
measures

474 342

Productive
210 132

174 122
546 662

Of which:
exposures
subject to
72 183
restructuring
measures
68 278

Of which:
instruments with a
324 786
significant increase in
Gross carrying amount
credit risk since initial
1 653 722
recognition but
without credit
958 483
impairment (Stage 2)

Of which:
625 756
instruments with a
2 056 137
significant increase in
credit risk since initial
401 600
recognition but
without credit
324 786
impairment (Stage 2)
1 653 722

91 941

633 783

465 096

342 111
740 594

106 760

11 989

Of which:
exposures
subject to
restructuring
measures
Non-productive

398 168

322 099

209 712
412 022

Of which:
exposures
subject to
13 804
restructuring
measures
11 989

82 142

Of which:
Reduced
71 973
probability of
payment that
are not past
due or past due
447 804
for <= 90 days

577 322

Of which:
301 198
Reduced
659 514
probability of
payment that
82 142
are not past
due or past due
71 973
for <= 90 days
577 322

Accumulated impairment, accumulated negative changes in fair value resulting from credit risk

-16 634

-490 853

-280 222

-244 170
-523 884

-32 906

Of which:
-6 153
exposures
subject to
-188 540
restructurin
g measures
-84 641

-63 398
Of which:
-205 061
exposures
subject to
-16 435
restructurin
g measures
-6 153

-490 853

-188 540

-636

Of which:
-1 021
instruments with
a significant
increase in
credit risk since
-79 370
initial
recognition but
-20 122
without credit
Of which:
impairment
instruments with
-18 290
a significant
-80 393
increase in
credit risk since
-1 021
initial
recognition but
-636
without credit
impairment
-79 370
Gross carrying amount

-80 393
-20 122

-5 433

-174 590

Of which:
-10 480
exposures
subject to
-302 313
restructuring
measures

-74 092

Non-productive
-195 581

-58 397
-189 404

-14 775

-180 772
Of which:
-318 823
exposures
subject to
-16 471
restructuring
measures
-10 480

-2 403

Of which:
Reduced
-1 638
probability of
payment that
-180 769
are not past due
or past due for
-139 716
<= 90 days

Of which:
-99 810
Reduced
-183 211
probability of
payment that
-2 403
are not past due
or past due for
-1 638
<= 90 days

79 732

-12 192

121 628

120 364

Entries to
non-
Gross
productive
carrying
exhibitions
amount

Of which:
Reduced
(in thousands of Euros)
-8 106
71 740
probability of
payment that
-274 756
has not been
due or has been
-187 309
due for a long
time <= 90 dias
Of which:
-160 189
Reduced
-286 987
probability of
payment that
-12 192
has not been
due or has been
71 740
-8 106
due for a long
(in thousands of Euros)
time <= 90 dias
121 628
-274 756

50 464
Entries to
201 360
non-
productive
79 732
exhibitions

-174 590

-189 404
-74 092

-302 313

-318 823
-195 581

-180 769

-183 211
-139 716

-286 987
-187 309

201 360
120 364

4 618 006

3 984 223

6 878 599
3 009 464

6 138 006
2 544 369

474 342

546 662
210 132

2 056 137
958 483

633 783

740 594
465 096

398 168

412 022
322 099

659 514
447 804

-523 884
-280 222

-205 061
-84 641

Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual term of the moratoria

2 035 738

1 943 797

-16 634

91 941

-5 433

2 251 137
1 625 319

Breakdown of loans and advances subject to legislative and non-legislative moratoria by
residual term of the moratoria
Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual term of the moratoria
Loans and advances that have been offered a moratorium

82 142
Of which:
301 198
legislative
71 973
moratoriums

-1 638
> 9 months
-180 769
<= 12 months

-16 435
-63 398
Of which:
-6 153
expired
-188 540

-2 403
-16 471
Residual deadline for default
-99 810
-180 772

-10 480
> 6 months
-302 313
<= 9 months

> 3 months
<= 6 months

Number of
debtors

<= 3 months

6 878 599
322 099

2 144 377
1 283 209

-32 906
-244 170

-12 192
-160 189

13 804
209 712

72 183
174 122

401 600
625 756

106 760
342 111

-1 021
-18 290

-14 775
-58 397

39 437

> 1 year

4 618 006

2 035 738

3 009 464

1 943 797

3 984 223

1 653 722

2 544 369

-174 590

-490 853

-280 222

-195 581

-139 716

-274 756

447 804

398 168

577 322

324 786

474 342

633 783

210 132

958 483

465 096

-79 370

-16 634

-84 641

-20 122

-74 092

11 989

68 278

91 941

-5 433

-8 106

-636

79 732
50 464

71 740

121 628

Loans and advances subject to a moratorium (applied)

1 625 319

1 283 209

174 122

625 756

39 437

342 111

6 878 599
209 712

2 251 137

301 198

6 123 365

-244 170

1 500 379

0
-63 398

592 124
-18 290

591 434

Gross carrying amount

161 249

-58 397

-180 772

6 125 226

-99 810

157 463

1 502 241

of which: secured by residential properties
Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual term of the moratoria
of which: non-financial corporations

2 035 738

1 461 827

4 618 006

4 613 530

573 911

Residual deadline for default

0
Of which:
0
expired

-187 309

120 364
(in thousands of Euros)
0
50 464

0
-160 189

of which: secured by
residential properties
of which: non-financial
corporations
Loans and advances subject to a
of which: small and medium-
moratorium
sized enterprises
of which: secured by
commercial real estate
of which: secured by
residential properties
of which: non-financial
corporations

of which: private

of which: small and medium-
sized enterprises
of which: secured by
commercial real estate
of which: households

Number of
debtors

39 437
Number of
39 437
debtors

Of which:
legislative
moratoriums

3 004 991

1 625 319
6 123 365

Of which:
legislative
moratoriums

1 500 379

3 009 464
6 878 599
1 625 319
6 878 599

2 251 137

0
0
Of which:
0
expired

690
<= 3 months
687

3 786
> 3 months
<= 6 months
3 786

Gross carrying amount
0
592 124

0
161 249

> 6 months
<= 9 months

3 004 991

> 9 months
<= 12 months
0

0
(in thousands of Euros)
> 1 year
0

Residual deadline for default

1 625 319
6 125 226

0
0

of which: households

> 1 year
0
of which: secured by residential properties
Information on new loans and advances granted under new public guarantee systems introduced in response to the COVID-
Loans and advances that have been offered a moratorium
of which: non-financial corporations
0
19 crisis
Loans and advances subject to a moratorium (applied)
of which: small and medium-sized enterprises

6 123 365
3 004 991

6 878 599
3 009 464

6 125 226
3 004 991

6 878 599
4 618 006

1 461 827

4 613 530

2 035 738

1 461 827

592 124
687

161 249
3 786

39 437

3 786

690

0
0

591 434
<= 3 months
573 911

157 463
> 3 months
<= 6 months
0

1 502 241

> 6 months
<= 9 months

> 9 months
<= 12 months
0

of which: households
of which: secured by commercial real estate

2 251 137
1 625 319

1 500 379
1 625 319

0
0

591 434
0

4 618 006

1 461 827

2 035 738

of which: non-financial corporations

Gross carrying amount

of which: secured by residential properties

0
Gross carrying
0
amount
0
0
of which: small and medium-sized enterprises
Information on new loans and advances granted under new public guarantee systems introduced in response to the COVID-
Entries
0
0
of which: secured by commercial real estate
19 crisis
to non-productive
(in thousands of Euros)
Information on new loans and advances granted under new public guarantee systems
exhibitions
introduced in response to the COVID-19 crisis
Information on new loans and advances granted under new public guarantee systems introduced in response to the COVID-
14
New loans and advances subject to public guarantee systems
19 crisis
0
of which: households
(in thousands of Euros)
0
Entries
to non-productive
Gross carrying
14
exhibitions
amount

Maximum amount of
823 162
guarantee that can be
considered

Gross carrying amount
0

Public guarantees
received

of which: secured by residential properties

Gross carrying
amount

of which: non-financial corporations

of which:
restructured

Gross carrying amount

997 673

995 776

3 004 991

4 613 530

1 625 319

3 009 464

3 004 991

1 625 319

573 911

901

690

687

Public guarantees
Maximum amount of
821 614
received
guarantee that can be
considered

157 463
0

1 502 241
1 625 319
Maximum amount of
1 461 827
guarantee that can be
4 613 530
3 786
considered
3 786

0
0
0
0
(in thousands of Euros)
0
0
0
0

of which: small and medium-sized enterprises
New loans and advances subject to public guarantee systems
of which: secured by commercial real estate
of which: households

835 055
997 673
0
0

901

823 162

of which:
restructured

Public guarantees
received

14
14
0
Entries
0
to non-productive
0
exhibitions

821 614
823 162

14
14

of which: secured by residential properties
NOTE 47 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS
901
of which: non-financial corporations
901
New loans and advances subject to public guarantee systems

995 776
997 673

0
0

14
0

835 055

995 776

821 614

354

835 055
0

of which: small and medium-sized enterprises
of which: households
IFRS 17 – Insurance contracts
of which: secured by commercial real estate
of which: secured by residential properties
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts
901
of which: non-financial corporations
covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance
NOTE 47 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS
of which: small and medium-sized enterprises
Contracts.
of which: secured by commercial real estate
IFRS 17 – Insurance contracts
IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of
NOTE 47 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS
entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts
scope exceptions will apply.
covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance
IFRS 17 – Insurance contracts
Contracts.
The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts
insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies,
IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of
covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance
IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.
entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few
Contracts.
scope exceptions will apply.
The core of IFRS 17 is the general model, supplemented by:
IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of


A specific adaptation for contracts with direct participation features (the variable fee approach)

The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for

entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few

A simplified approach (the premium allocation approach) mainly for short-duration contracts

insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies,



scope exceptions will apply.

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.

The main features of the new accounting model for insurance contracts are as follows:

The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for

The core of IFRS 17 is the general model, supplemented by:



insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies,

A specific adaptation for contracts with direct participation features (the variable fee approach)

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.

Notes to the Consolidated Financial Statements

A simplified approach (the premium allocation approach) mainly for short-duration contracts

31 December 2020

136



The core of IFRS 17 is the general model, supplemented by:

The main features of the new accounting model for insurance contracts are as follows:

A specific adaptation for contracts with direct participation features (the variable fee approach)

A simplified approach (the premium allocation approach) mainly for short-duration contracts

31 December 2020

Notes to the Consolidated Financial Statements

The main features of the new accounting model for insurance contracts are as follows:

31 December 2020

Notes to the Consolidated Financial Statements

136

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOTE 47 – Recently issued accounting standards and
interpretations

IFRS 17 – Insurance contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance
contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS
4 Insurance Contracts.

IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless
of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary
participation features. A few scope exceptions will apply.

The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and con-
sistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local
accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting
aspects.

The core of IFRS 17 is the general model, supplemented by:

• A specific adaptation for contracts with direct participation features (the variable fee approach)

• A simplified approach (the premium allocation approach) mainly for short-duration contracts

The main features of the new accounting model for insurance contracts are as follows:

• The measurement of the present value of future cash flows, incorporating an explicit risk adjustment, remeasured

every reporting period (the fulfilment cash flows)

• A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the fulfilment cash flows of a
group of contracts, representing the unearned profit of the insurance contracts to be recognized in profit or loss
over the service period (i.e., coverage period)

• Certain changes in the expected present value of future cash flows are adjusted against the CSM and thereby

recognized in profit or loss over the remaining contractual service period

• The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income,

determined by an accounting policy choice

• The presentation of insurance revenue and insurance service expenses in the statement of comprehensive income

based on the concept of services provided during the period

• Amounts that are paid to a policyholder in all circumstances, regardless of whether an insured event happens
(non-distinct investment components) are not presented in the income statement, but are recognized directly on
the balance sheet

•

Insurance services results (earned revenue less incurred claims) are presented separately from the insurance finance
income or expense

• Extensive disclosures to provide information on the recognized amounts from insurance contracts and the nature

and extent of risks arising from these contracts

Both the modified retrospective approach and the fair value approach provide transitional reliefs for determining
the grouping of contracts. If an entity cannot obtain reasonable and supportable information necessary to apply the
modified retrospective approach, it is required to apply the fair value approach.

In June 2020, the IASB issued amendments to IFRS 17. These amendments follow from the Exposure Draft (ED) on
proposed Amendments to IFRS 17 Insurance Contracts.

355

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESAs a result of its re-deliberations, the IASB has made changes to the following main areas of IFRS 17:

• Deferral of the effective date of IFRS 17 and IFRS 9 for qualifying insurance entities by two years to annual reporting

periods beginning on or after 1 January 2023)

• Scope of the standard

• Expected recovery of insurance acquisition cash flows from insurance contract renewals

• CSM relating to investment activities

• Applicability of the risk mitigation option for contracts with direct participation features

• Reinsurance contracts held - expected recovery of losses on underlying onerous contracts

• Simplified presentation of insurance contracts in the statement of financial position

• Additional transition reliefs

In addition to the above changes, the amendments also include several other minor and editorial changes to IFRS 17.

No material impacts are expected on the Group's financial statements.

Definition of business activity - Amendments to IFRS 3

The IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine
whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a
business, remove the assessment of whether market participants are capable of replacing any missing elements, add
guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of
outputs, and introduce an optional fair value concentration test.

Minimum requirements to be a business

The amendments clarify that to be considered a business, an integrated set of activities and assets must include, at a
minimum, an input and a substantive process that together significantly contribute to the ability to create output. They
also clarify that a business can exist without including all of the inputs and processes needed to create outputs. That is,
the inputs and processes applied to those inputs must have ‘the ability to contribute to the creation of outputs’ rather
than ‘the ability to create outputs’.

Market participants’ ability to replace missing elements

Prior to the amendments, IFRS 3 stated that a business need not include all of the inputs or processes that the seller
used in operating that business, ’if market participants are capable of acquiring the business and continuing to produce
outputs, for example, by integrating the business with their own inputs and processes’. The reference to such integra-
tion is now deleted from IFRS 3 and the assessment must be based on what has been acquired in its current state and
condition.

Assessing whether an acquired process is substantive

The amendments specify that if a set of activities and assets does not have outputs at the acquisition date, an acquired
process must be considered substantive only if: (a) it is critical to the ability to developor convert acquired inputs into
outputs; and (b) the inputs acquired include both an organised workforce with the necessary skills, knowledge, or
experience to perform that process, and other inputs that the organised workforce could develop or convert into
outputs. In contrast, if a set of activities and assets has outputs at that date, an acquired process must be considered
substantive if: (a) it is critical to the ability to continue producing outputs and the acquired inputs include an organised
workforce with the necessary skills, knowledge, or experience to perform that process; or (b) it significantly contributes
to the ability to continue producing outputs and either is considered unique or scarce, or cannot be replaced without
significant cost, effort or delay in the ability to continue producing outputs.

356

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNarrowed definition of outputs

The amendments narrowed the definition of outputs to focus on goods or services provided to customers, investment
income (such as dividends or interest) or other income from ordinary activities. The definition of a business in Appendix
A of IFRS 3 was amended accordingly.

Optional concentration test

The amendments introduced an optional fair value concentration test to permit a simplified assessment of whether an
acquired set of activities and assets is not a business. Entities may elect to apply the concentration test on a transac-
tion-by-transaction basis. The test is met if substantially all of the fair value of the gross assets acquired is concentrated
in a single identifiable asset or group of similar identifiable assets. If the test is met, the set of activities and assets is
determined not to be a business and no further assessment is needed. If the test is not met, or if an entity elects not to
apply the test, a detailed assessment must be performed applying the normal requirements in IFRS 3.

The amendments must be applied to transactions that are either business combinations or asset acquisitions for which
the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January
2020. Consequently, entities do not have to revisit such transactions that occurred in prior periods. Earlier application
is permitted and must be disclosed.

The amendments could also be relevant in other areas of IFRS (e.g., they may be relevant where a parent loses control
of a subsidiary and has early adopted Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (Amendments to IFRS 10 and IAS 28)).

No material impacts are expected on the Group's financial statements.

Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7

In September 2019, the IASB issued amendments to IFRS 9, IAS 39 Financial Instruments: Recognition and Measure-
ment and IFRS 7 Financial Instruments: Disclosures, which concludes phase one of its work to respond to the effects
of Interbank Offered Rates (IBOR) reform on financial reporting.

The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncer-
tainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate
(an RFR).

The amendments to IFRS 9
The amendments include a number of reliefs, which apply to all hedging relationships that are directly affected by the
interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the
timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument.

Application of the reliefs is mandatory. The first three reliefs provide for:

• The assessment of whether a forecast transaction (or component thereof) is highly probable

• Assessing when to reclassify the amount in the cash flow hedge reserve to profit and loss

• The assessment of the economic relationship between the hedged item and the hedging instrument

For each of these reliefs, it is assumed that the benchmark on which the hedged cash flows are based (whether or not
contractually specified) and/or, for relief three, the benchmark on which the cash flows of the hedging instrument are
based, are not altered as a result of IBOR reform.

A fourth relief provides that, for a benchmark component of interest rate risk that is affected by IBOR reform, the
requirement that the risk component is separately identifiable need be met only at the inception of the hedging rela-
tionship.

357

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESWhere hedging instruments and hedged items may be added to or removed from an open portfolio in a continuous
hedging strategy, the separately identifiable requirement need only be met when hedged items are initially designated
within the hedging relationship.

To the extent that a hedging instrument is altered so that its cash flows are based on an RFR, but the hedged item is still
based on IBOR (or vice versa), there is no relief from measuring and recording any ineffectiveness that arises due to
differences in their changes in fair value.

The reliefs continue indefinitely in the absence of any of the events described in the amendments. When an entity
designates a group of items as the hedged item, the requirements for when the reliefs cease are applied separately to
each individual item within the designated group of items.

The amendments also introduce specific disclosure requirements for hedging relationships to which the reliefs are
applied.

The amendments to IAS 39
The corresponding amendments are consistent with those for IFRS 9, but with the following differences:

• For the prospective assessment of hedge effectiveness, it is assumed that the benchmark on which the hedged
cash flows are based (whether or not it is contractually specified) and/or the benchmark on which the cash flows

• of the hedging instrument are based, are not altered as

• result of IBOR reform.

• For the retrospective assessment of hedge effectiveness, to allow the hedge to pass the assessment even if the
actual results of the hedge are temporarily outside the 80%-125% range, during the period of uncertainty arising
from IBOR reform.

• For a hedge of a benchmark portion (rather than a risk component under IFRS 9) of interest rate risk that is affected
by IBOR reform, the requirement that the portion is separately identifiable need be met only at the inception of the
hedge.

Transition
The amendments must be applied retrospectively. However, any hedge relationships that have previously been de-
designated cannot be reinstated upon application, nor can any hedge relationships be designated with the benefit of
hindsight. Early application is permitted and must be disclosed.

No material impacts are expected on the Group's financial statements.

Reform of interest rate reference indices - Phase 2 - changes to IFRS 9, IAS 39 and IFRS 7

On 27 August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16. With publication of the phase two amendments, the IASB has completed its work in response to
IBOR reform.

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered
rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).

Practical expedient for changes in the basis for determining the contractual cash flows as a result of IBOR reform
The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate
of interest. Inherent in allowing the use of this practical expedient is the requirement that the transition from an IBOR
benchmark rate to an RFR takes place on an economically equivalent basis with no value transfer having occurred. Any
other changes made at the same time, such as a change in the credit spread or maturity date, are assessed. If they are

358

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDsubstantial, the instrument is derecognized. If they are not substantial, the updated effective interest rate (EIR) is used
to recalculate the carrying amount of the financial instrument, with any modification gain or loss recognized in profit
or loss.
The practical expedient is required for entities applying IFRS 4 that are using the exemption from IFRS 9 (and, therefore,
apply IAS 39) and for IFRS 16 Leases, to lease modifications required by IBOR reform.

Relief from discontinuing hedging relationships
The amendments permit changes required by IBOR reform to be made to hedge designations and hedge documen-
tation without the hedging relationship being discontinued. Permitted changes include redefining the hedged risk to
reference an RFR and redefining the description of the hedging instruments and/or the hedged items to reflect the
RFR. Entities are allowed until the endof the reporting period, during which a modification required by IBOR reform is
made, to complete the changes.

Any gains or losses that could arise on transition are dealt with through the normal requirements of IFRS 9 and IAS 39
to measure and recognise hedge ineffectiveness.

Amounts accumulated in the cash flow hedge reserve are deemed to be based on the RFR. The cash flow hedge
reserve is released to profit or loss in the same period or periods in which the hedged cash flows based on the RFR
affect profit or loss. For the IAS 39 assessment of retrospective hedge effectiveness, on transition to an RFR, entities
may elect on a hedge-by-hedge basis, to reset the cumulative fair value changes to zero. This relief applies when the
exception to the retrospective assessment ends.

The amendments provide relief for items within a designated group of items (such as those forming part of a macro
cash flow hedging strategy) that are amended for modifications directly required by IBOR reform. The reliefs allow the
hedging strategy to remain and not be discontinued. As items within the hedged group transition at different times
from IBORs to RFRs, they will be transferred to sub-groups of instruments that reference RFRs as the hedged risk. As
instruments transition to RFRs, a hedging relationship may need to be modified more than once. The phase two reliefs
apply each time a hedging relationship is modified as a direct result of IBOR reform. The phase two reliefs cease to
apply once all changes have been made to financial instruments and hedging relationships, as required by IBOR reform.

Separately identifiable risk components
The amendments provide temporary relief to entities from having to meet the separately identifiable requirement when
an RFR instrument is designated as a hedge of a risk component. The relief allows entities upon designation of the
hedge, to assume that the separately identifiable requirement is met, provided the entity reasonably expects the RFR
risk component to become separately identifiable within the next 24 months.

Changes are mandatory for annual periods beginning on or after 1 January 2021, with earlier application permitted.
Hedging relationships must be re-established if the hedging relationship was discontinued only due to changes
required by the IBOR reform and would not have been discontinued if the changes in phase two had been applied at
that time. Although the application is retrospective, an entity is not required to restate previous periods.

Definition of Material - Amendments to IAS 1 and IAS 8

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 to align the
definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states
that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions
that the primary users of general purpose financial statements make on the basis of those financial statements, which
provide financial information about a specific reporting entity.’

The amendments clarify that materiality will depend on the nature or magnitude of information, or both. An entity will
need to assess whether the information, either individually or in combination with other information, is material in the
context of the financial statements.

359

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESObscuring information
The amendments explain that information is obscured if it is communicated in a way that would have a similar effect as
omitting or misstating the information. Material information may, for instance, be obscured if information regarding a
material item, transaction or other event is scattered throughout the financial statements or disclosed using a language
that is vague or unclear. Material information can also be obscured if dissimilar items, transactions or other events are
inappropriately aggregated, or conversely, if similar items are inappropriately disaggregated.

New threshold
The amendments replaced the threshold ‘could influence’, which suggests that any potential influence of users must
be considered, with ‘could reasonably be expected to influence’ in the definition of ‘material’. In the amended defini-
tion, therefore, it is clarified that the materiality assessment will need to take into account only reasonably expected
influence on economic decisions of primary users.

Primary users of the financial statements
The current definition refers to ‘users’ but does not specify their characteristics, which can be interpreted to imply
that an entity is required to consider all possible users of the financial statements when deciding what information to
disclose. Consequently, the IASB decided to refer to primary users in the new definition to help respond to concerns
that the term ‘users’ may be interpreted too widely.

This amendment is effective for annual reporting periods beginning on or after 1 January 2020. The amendments must
be applied prospectively. Early application is permitted and must be disclosed.

No material impacts are expected on the Group's financial statements.

Covid-19-Related Rent Concessions - Amendments to IFRS 16

In May 2020, the IASB amended IFRS 16 to provide relief to lessees from applying the IFRS 16 guidance on lease
modifications to rent concessions arising as a direct consequence of the covid-19 pandemic. The amendment does
not apply to lessors.

As a practical expedient, a lessee may elect not to assess whether a covid-19 related rent concession from a lessor is
a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the
covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not
a lease modification.

The practical expedient applies only to rent concessions occurring as a direct consequence of the covid-19 pandemic
and only if specific conditions are met.

A lessee will apply the amendment for annual reporting periods beginning on or after 1 June 2020. Earlier application
is permitted, including in financial statements not yet authorized for issue at 28 May 2020.

No material impacts are expected on the Group's financial statements.

Reference to the Conceptual Framework - Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework.
The amendments are intended to replace a reference to a previous version of the IASB’s Conceptual Framework (the
1989 Framework) with a reference to the current version issued in March 2018 (the Conceptual Framework) without
significantly changing its requirements.

The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains
or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 Provisions, Contingent
Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately.

360

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDThe exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual
Framework, to determine whether a present obligation exists at the acquisition date.

At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for
recognition at the acquisition date.

These amendments are effective for annual reporting periods beginning on or after 1 January 2022 and must be applied
prospectively.

No material impacts are expected on the Group's financial statements.

Property, Plant and Equipment: Proceeds before intended use - Amendments to IAS 16

The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E),
any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it
to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from
selling such items, and the costs of producing those items, in profit or loss.

These amendments are effective for annual reporting periods beginning on or after 1 January 2022 and must be applied
prospectively.

No material impacts are expected on the Group's financial statements.

Onerous contracts: costs of fulfilling the contract - Amendments to IAS 37

In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to specify
which costs an entity needs to include when assessing whether a contract is onerous or loss-making.

The amendments apply a ‘directly related cost approach’.

The costs that relate directly to a contract to provide goods or services include both incremental costs (e.g., the
costs of direct labour and materials) and an allocation of costs directly related to contract activities (e.g., deprecia-
tion of equipment used to fulfil the contract as well as costs of contract management and supervision). General and
administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the
counterparty under the contract.

These amendments are effective for annual reporting periods beginning on or after 1 January 2022 and must be applied
prospectively to contracts for which an entity has not yet fulfilled all of its obligations at the beginning of the annual
reporting period in which it first applies the amendments (the date of initial application).

No material impacts are expected on the Group's financial statements.

The amendments clarify that a gain or loss is fully recognized when a transfer to an associate or joint venture involves
a business activity as defined in IFRS 3. Any gain or loss resulting from the sale or contribution of assets that do not
constitute a company, is only recognized to the extent of the interests of unrelated investors in the associate or joint
venture.

Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor to
its associate or joint ventures

The amendments address the conflict between IFRS 10 Consolidated Financial Statements and IAS 28 Investments
in Associates and Joint Ventures in dealing with the loss of control of a subsidiary that is sold or contributed to an
associate or joint venture.

The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a
business as defined in IFRS 3. Any gain or loss resulting from the sale or contribution of assets that does not constitute
a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

361

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESNo material impacts are expected on the Group's financial statements.

The Conceptual Framework for Financial Reporting

The IASB issued the Conceptual Framework in March 2018. It establishes a comprehensive set of concepts for financial
reporting, standards, guidance for preparers in the development of consistent accounting policies and assistance to
others in their efforts to understand and interpret the standards.

The Conceptual Framework includes some new concepts, provides updated definitions and criteria for recognizing
assets and liabilities and clarifies some important concepts. It is organized into eight chapters, as follows:

• Chapter 1 – The objective of financial reporting

• Chapter 2 – Qualitative characteristics of useful financial

•

information

• Chapter 3 – Financial statements and the reporting entity

• Chapter 4 – The elements of financial statements

• Chapter 5 – Recognition and derecognition

• Chapter 6 – Measurement

• Chapter 7 – Presentation and disclosure

• Chapter 8 – Concepts of capital and capital maintenance

The amended conceptual framework for the financial reporting is not a standard and none of its concepts prevails on
the concepts set out in other standards or requirements of any standard. It is applicable to entities that develop their
accounting principles based on the conceptual framework applicable to annual reporting periods beginning on or after
1 January 2020.

No material impacts are expected on the Group's financial statements.

Classification of Liabilities as current and non-current - Amendments to IAS 1

In January 2020, the Board issued amendments to paragraphs 69 to 76 of IAS 1 Presentation of Financial Statements to
specify the requirements for classifying liabilities as current or non-current.

The amendments clarify:

• What is meant by a right to defer settlement

• That a right to defer must exist at the end of the reporting period

• That classification is unaffected by the likelihood that an entity will exercise its deferral right

• That only if an embedded derivative in a convertible liability is itself an equity instrument, would the terms of a

liability not impact its classification

Right to defer settlement
The Board decided that if an entity’s right to defer settlement of a liability is subject to the entity complying with
specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it
complies with those conditions at that date.

Existence at the end of the reporting period
The amendments also clarify that the requirement for the right to exist at the end of the reporting period applies
regardless of whether the lender tests for compliance at that date or at a later date.

362

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDManagement expectations
IAS 1.75A has been added to clarify that the ‘classification of a liability is unaffected by the likelihood that the entity
will exercise its right to defer settlement of the liability for at least twelve months after the reporting period’. That is,
management’s intention to settle in the short run does not impact the classification. This applies even if settlement has
occurred when the financial statements are authorised for issuance.

Meaning of the term ‘settlement’
The Board added two new paragraphs (paragraphs 76A and 76B) to IAS 1 to clarify what is meant by ‘settlement’ of a
liability. The Board concluded that it was important to link the settlement of the liability with the outflow of resources
of the entity.

Settlement by way of an entity’s own equity instruments is considered settlement for the purpose of classification of
liabilities as current or non-current, with one exception.

In cases where a conversion option is classified as a liability or part of a liability, the transfer of equity instruments would
constitute settlement of the liability for the purpose of classifying it as current or non-current. Only if the conversion
option itself is classified as an equity instrument would settlement by way of own equity instruments be disregarded
when determining whether the liability is current or non-current.

Unchanged from the current standard, a rollover of a borrowing is considered the extension of an existing liability and
is therefore not considered to represent ‘settlement’.

This amendment is effective for annual reporting periods beginning on or after 1 January 2023.

Improvement to IFRS - 2018-2020 cycle (issued in May 2020)

IFRS 1 - First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter
The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation
differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. This amendment
is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.

An entity applies the amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application
is permitted.

IFRS 9 - Financial Instruments - Fees in the ’10 per cent’ test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original financial liability. These fees include only those
paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender
on the other’s behalf. There is no similar amendment proposed for IAS 39.

An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the
annual reporting period in which the entity first applies the amendment.

An entity applies the amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application
is permitted.

IFRS 16 - Leases
The amendment removes the illustration of payments from the lessor relating to leasehold improvements in Illustrative
Example 13 accompanying IFRS 16. This removes potential confusion regarding the treatment of lease incentives when
applying IFRS 16.

IAS 41 - Agriculture
The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude cash flows for taxation when
measuring the fair value of assets within the scope of IAS 41.

363

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESAn entity applies the amendment to fair value measurements on or after the beginning of the first annual reporting
period beginning on or after 1 January 2022. Earlier application is permitted.

NOTE 48 - Subsequent events

On March 5, 2021, NOVO BANCO reported that, after completing a competitive sale process, it entered into with
BURLINGTON LOAN MANAGEMENT DAC, a company affiliated and advised by DAVIDSON KEMPNER EUROPEAN
PARTNERS, LLP, a promissory Purchase and Sale Agreement of a portfolio of non-performing loans (NPL) and related
assets (together, Project Wilkinson) with a gross balance sheet value of Euro 216.3 million, still subject to usual
perimeter adjustments in operations of this nature . The sale value of the portfolio amounts to Euro 67.5 million, and
the completion of the operation, under the terms agreed, should have a marginally positive direct impact on capital
and in the 2021 income statement.

364

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES CONSOLIDATEDNOVO BANCO, S.A. Separate income
statement for the years ended 31
NOVO BANCO, S.A.
December 2020 and 2019

INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

NOVO BANCO

Interest Income
Interest Expenses

Net Interest Income

Dividend income
Fees and commissions income
Fee and commissions expenses

Gains or losses on derecognition of financial assets and liabilities not measured at fair value through profit or
loss

Gains or losses on financial assets and liabilities held for trading

Gains or losses on financial assets mandatorily at fair value through profit or loss

Gains or losses from hedge accounting
Exchange differences
Gains or losses on derecognition of non-financial assets
Other operating income
Other operating expenses

Operating Income

Administrative expenses

Staff expenses
Other administrative expenses

Contributions to resolution funds and deposit guarantee
Depreciation
Provisions or reversal of provisions

Commitments and guarantees given
Other provisions

Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss

Impairment or reversal of impairment of investment in subsidiaries, joint ventures and associates

Impairment or reversal of impairment on non-financial assets

Profit or loss before tax from continuing operations

Tax expense or income related to profit or loss from continuing operations

Current tax
Deferred tax

Profit or loss after tax from continuing operations

Profit or loss before tax from discontinued operations

Profit or loss for the period

Basic earnings per share (in euros)
Diluted earnings per share (in euros)

Basic earnings per share of continuing activities (in Euros)
Diluted earnings per share of continuing activities (in Euros)

Notes

31.12.2020

31.12.2019*

(in thousands of Euros)

4
4

5
6
6

10
11
12
13
13

14
16
17
24, 25
30

27, 28

18
18

760 111
( 192 112)

732 291
( 214 722)

567 999

517 569

16 928
279 878
( 41 438)

86 183

( 91 208)

( 521 059)

( 12 053)
( 2 000)
2 272
87 599
( 89 879)

17 270
318 119
( 44 286)

59 376

( 61 168)

( 372 654)

( 2 445)
38 486
14 507
56 534
( 74 783)

283 222

466 525

( 367 635)
( 223 604)
( 144 031)
( 34 766)
( 35 033)
( 187 839)
( 21 595)
( 166 244)
( 750 975)

( 41 285)

( 215 397)

( 376 360)
( 223 363)
( 152 997)
( 34 448)
( 33 358)
( 121 954)
56 287
( 178 241)
( 544 187)

( 36 036)

( 284 893)

(1 349 708)

( 964 711)

4 216
13 400
( 9 184)

( 38 726)
( 2 541)
( 36 185)

(1 345 492)

(1 003 437)

( 28 754)

( 84 147)

(1 374 246)

(1 087 584)

(0,14)
(0,14)

(0,11)
(0,11)

(0,10)
(0,10)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The accompanying explanatory notes are an integral part of these separate financial statements

365

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 305-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO, S.A. Separate statement
of comprehensive income for the years
ended 31 December 2020 and 2019

Net profit / (loss) for the period

Other comprehensive income/(loss)

Notes

31.12.2020

(in thousands of Euros)
31.12.2019

( 1 374 246)

( 1 087 584)

Items that will not be reclassified to results

Actuarial gains / (losses) on defined benefit plans
Fair value changes of equity instruments measured at fair value through

other comprehensive income

Fair value changes of financial liabilities at fair value through profit or loss that is

attributable to changes in their credit risk

Items that may be reclassified to results

Financial assets at fair value through other comprehensive income

( 125 636)
( 122 199)

( 14 320)

10 883

8 410
8 410

( 104 596)
( 106 026)

4 301

( 2 871)

223 579
223 579

Total other comprehensive income/(loss) for the period

(1 491 472)

( 968 601)

a) See Statement of Changes in Equity

The accompanying explanatory notes are an integral part of these separate financial statements

366

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATENOVO BANCO, S.A. Separate balance
sheet as at 31 December 2020 and 2019

NOVO BANCO

NOVO BANCO, S.A.

BALANCE SHEET
AS AT 31 DECEMBER 2020 AND 2019

(in thousands of Euros)

Notes

31.12.2020

31.12.2019

ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost

Debt securities
Loans and advances to Banks

(of which, Repurchase Agreement)

Loans and advances to customers

Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedge of interest rate risk
Investments in subsidiaries, joint ventures and associates
Tangible assets

Tangible fixed assets

Intangible assets
Tax assets

Current Tax Assets
Deferred Tax Assets

Other assets
Non-current assets and disposal groups classified as held for sale

TOTAL ASSETS

LIABILITIES
Financial liabilities held for trading
Financial liabilities measured at amortised cost

Deposits from banks

(of which, Repurchase Agreement)

Due to customers
Debt securities issued, Subordinated debt and liabilities associated to transferred assets
Other financial liabilities

Derivatives – Hedge accounting
Provisions
Tax liabilities

Current Tax liabilities

Other liabilities
Liabilities included in disposal groups classified as held for sale

TOTAL LIABILITIES

EQUITY
Capital
Accumulated other comprehensive income
Retained earnings
Other reserves
Profit or loss attributable to Shareholders of the parent

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

19
20
21
21
21

22
22
23

24
25
26

27
28

20
29

22
30
26

31
28

32
33
33
33

2 524 868
655 327
2 445 605
7 813 584
24 804 483
2 873 753
245 472
-
21 685 258

13 606
60 976
189 924
188 968
188 968
48 331
771 854
-
771 854
2 956 010
1 568 912

1 674 826
748 836
3 044 724
8 758 131
26 042 243
2 392 843
495 252
8
23 154 148

7 992
49 884
231 425
194 753
194 753
26 043
892 713
680
892 033
3 333 586
21 273

44 042 448

45 026 429

554 343
37 895 984
10 778 468
1 625 724
25 778 507
974 996
364 013
72 543
438 572
5 536
5 536
314 611
2 007 770

544 400
39 924 564
10 542 549
2 168 488
27 980 577
1 044 445
356 993
58 854
371 744
9 239
9 239
471 626
-

41 289 359

41 380 427

5 900 000
( 749 259)
(7 202 828)
6 179 422
(1 374 246)

5 900 000
( 632 033)
(6 115 245)
5 580 864
(1 087 584)

2 753 089

3 646 002

44 042 448

45 026 429

The accompanying explanatory notes are an integral part of these separate financial statements
The accompanying explanatory notes are an integral part of these separate financial statements

367

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 307-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO, S.A. Separate statement
of changes in equity for the years
ended 31 December 2020 and 2019

NOVO BANCO, S.A.

NOVO BANCO

STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2020 AND 2019

Notes

Share
Capital

Other
Comprehen
sive Income

Retained
earnings

Other
reserves

(in thousands of Euros)

Net
profit/(loss)
for the period
attributable to
shareholders
of the Bank

Total

Balance as at 31 December 2018

5 900 000

( 751 016)

( 4 682 368)

4 565 538

( 1 432 875)

3 599 279

Other Increase / (Decrease) in Equity

Appropriation to retained earnings of net profit / (loss) of the previous period*
Reserve of Contingent Capital Agreement
Fusion reserve BES GMBH
Fusion reserve BESIL
Fusion reserve ES Plc
Other movements

Total comprehensive income for the period

Changes in fair value, net of tax
Remeasurement of defined benefit plans, net of tax
Credit risk changes of financial liabilites at fair value, net of tax
Reserves of impairment of securities at fair value through OCI
Reserves of sales of securities at fair value through OCI
Net income of the period

-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
118 983
228 454
( 106 026)
( 2 871)
4 301
( 4 875)
-

( 1 432 877)
( 1 432 875)
-
-
-
-
( 2)
-
-
-
-
-
-
-

1 015 326
-
1 037 013
( 195 267)
173 679
( 97)
( 2)
-
-
-
-
-
-
-

1 432 875
1 432 875
-
-
-
-
-
( 1 087 584)
-
-
-
-
-
( 1 087 584)

1 015 324
-
1 037 013
( 195 267)
173 679
( 97)
( 4)
( 968 601)
228 454
( 106 026)
( 2 871)
4 301
( 4 875)
( 1 087 584)

Balance as at 31 December 2019

5 900 000

( 632 033)

( 6 115 245)

5 580 864

( 1 087 584)

3 646 002

Other Increase / (Decrease) in Equity

Appropriation to retained earnings of net profit / (loss) of the previous period
Reserve of Contingent Capital Agreement
Other movements

Total comprehensive income for the period

33
15
33
33
33

-
-
-
-
-
-
-
-
-
-
-

( 1 087 583)
( 1 087 584)
-
1
-
-
-
-
-
-
-

598 558
-
596 315
2 243
-
-
-
-
-
-
-

1 087 584
1 087 584
-
-
( 1 374 244)
-
-
-
-
-
( 1 374 246)

598 559
-
596 315
2 244
( 1 491 472)
12 284
( 122 199)
10 883
( 1 838)
( 16 356)
( 1 374 246)

( 117 226)
12 284
( 122 199)
10 883
( 1 838)
( 16 356)
-

Balance as at 31 December 2020

5 900 000

( 749 259)

( 7 202 828)

6 179 422

( 1 374 246)

2 753 089

The accompanying explanatory notes are an integral part of these separate financial statements

368

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 308-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOVO BANCO, S.A. Separate cash flow
statement for the years ended on 31
December 2020 and 2019

NOVO BANCO, S.A.

NOVO BANCO

INTERIM CASH FLOW STATEMENT
FOR THE SIX MONTH PERIODS ENDED ON 30 JUNE 2020 AND 2019

Cash flows from operatins activities
Interest received
Interest paid
Fees and commissions received
Fees and commissions paid
Recoveries on loans previously written off
Contributions to the pension fund
Cash contributions to resolution funds and deposit guarantee schemes
Cash payments to employees and suppliers

Changes in operating assets and liabilities:

Securities
Loans and advances to banks
Loans and advances to customers
Financial liabilities at amortised cost

Deposits from banks
Due to customers

Derivatives - Hedge accounting
Other operating assets and liabilities

Net cash from operating activities before corporate income tax

Corporate income taxes paid

Net cash from operating activities

Cash flows from investing activities
Dividends received
Acquisition of tangible fixed assets
Sale of tangible fixed assets
Acquisition of intangible assets
Sale of intangible assets

Net cash from investing activities

Cash flows from financing activities
Contingent Capital Agreement
Reimbursement of bonds and other debt securities

Net cash from financing activities

Net changes in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Net changes in cash and cash equivalents

Cash and cash equivalents at the end of the period

Cash and cash equivalents include:
Cash
Deposits with Central Banks
(of which, Restricted balances)
Deposits with banks

Total

(in thousands of Euros)

31.12.2020

31.12.2019

741 134
( 239 631)
279 878
( 41 438)
29 596
( 266 833)
( 34 766)
( 358 667)

109 273

915 128
( 507 149)
191
804 356
500 648
( 511 297)
59 217
952 728
(2 837 350)
( 671 335)
(2 166 015)
( 3 017)
907 336

751 730
( 222 520)
333 902
( 48 049)
30 230
-
( 34 448)
( 399 539)

411 306

( 297 651)
( 839 719)
164 896
( 907 485)
(1 172 699)
( 29 161)
63 182
(1 206 720)
1 263 360
1 716 126
( 452 766)
( 1 880)
1 132 133

( 110 584)

( 247 739)

( 18 356)

( 30 308)

( 128 940)

( 278 047)

16 928
( 43 398)
2 790
( 26 508)
-

17 313
( 17 130)
16 387
( 26 137)
-

( 50 188)

( 9 567)

1 035 016
( 589)

1 149 295
467

1 034 427

1 149 762

855 299

862 148

1 406 347

855 299

544 199

862 148

2 261 646

1 406 347

142 325
2 292 797
( 263 222)
89 746

174 156
1 408 908
( 268 479)
91 762

2 261 646

1 406 347

The accompanying explanatory notes are an integral part of these separate financial statements

The accompanying explanatory notes are an integral part of these interim condensed separate financial statements

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 309-

369

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Notes to the Separate Financial
Statements as at 31 December 2020

(Amounts expressed in thousands of Euro, except when otherwise indicated)

NOTA 1 –Activity

NOVO BANCO, S.A. is the main entity of the financial Group NOVO BANCO focused on the banking activity, having
been incorporated on the 3rd of August 2014 per deliberation of the Board of Directors of Bank of Portugal (the
Central Bank of Portugal) dated 3rd of August 2014 (8 p.m.), under No. 5 of article 145-G of the General Law on Credit
Institutions and Financial Companies (“Regime Geral das Instituições de Crédito e Sociedades Financeiras” (RGICSF))¹,
approved by Decree-Law No. 298/92, of 31 December, following the resolution measure applied by Bank of Portugal
to Banco Espírito Santo, S.A. (BES), under the terms of paragraphs 1 and 3-c) of article 145-C of the RGICSF, from which
resulted the transfer of certain assets, liabilities and off-balance sheet elements as well as assets under management
of BES from BES to NOVO BANCO (NOVO BANCO or the Bank).

As a result of the resolution measure applied, Fundo de Resolução (“Resolution Fund”) became the sole owner of the
share capital of NOVO BANCO, in the amount of Euro 4,900 million, with the status of a transition bank, with a limited
duration, due to the commitment assumed by the Portuguese State with the European Commission to sell its shares
within two years from the date of its incorporation, extendable for one year.

On 31 March 2017, the Resolution Fund signed the sale agreement of NOVO BANCO. On 18 October the sale process
was concluded, following the acquisition of the majority (75%) of its share capital by Nani Holdings, SGPS, SA, a com-
pany belonging to the North-American Group Lone Star, through two share capital increases in the amount of Euro
750 million and Euro 250 million, in October and December, respectively. Thus, as at 30 June 2020 and 31 December
2019, the share capital of NOVO BANCO amounted to Euro 5,900 million, represented by 9,799,999,997 nominative
shares, with no nominal value.

Within the sale process, a Contingent Capital Agreement was created with the sale process, which in case its capital
ratios decrease below the regulatory requirements defined for NOVO BANCO, and cumulatively, losses are recorded in
a delimited portfolio of assets, the Resolution Fund makes a payment corresponding to the lower of the losses recorded
and the amount needed to restore the capital ratios at the relevant level, up to a maximum of Euro 3,890 million.

Since 18 October 2017 the financial statements of NOVO BANCO are consolidated by Nani Holdings SGPS, S.A., with
registered office at Avenida D. João II, no. 46, 4A, Lisbon. LSF Nani Investments S.à.r.l., headquartered in Luxembourg,
is the parent company of the Group.

NOVO BANCO, S.A. has its registered office in Lisbon, at Avenida da Liberdade, No. 195.

As at 31 December 2020, NOVO BANCO has a retail network comprising 340 branches in Portugal and abroad (31
December 2019: 368 branches), branches in Spain and Luxembourg and 4 representative offices in Switzerland (31
December 2019: 4 representative offices).

During 2019, the subsidiaries BES GMBH, BESIL and ESPLC were merged into NOVO BANCO. The branches in London
and the Cayman Islands were also closed.

370

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATENOTE 2 – Main accounting policies

2.1. Basis of presentation

In accordance with Regulation (EC) No. 1606/2002 of 19 July 2002 of the European Council and the Parliament
and Notices 5/2015 of the Bank of Portugal, the consolidated financial statements from NOVO BANCO, S.A. (NOVO
BANCO) were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the
European Union effective as of 1 January 2020.

The separate financial statements of NOVO BANCO are presented as at 31 December 2020. The accounting policies
used by the Bank in their preparation are consistent with those used in the preparation of the financial statements as
at 31 December 2019. except in what concerns with the new standards issued. These changes are presented below.

The accounting standards and interpretations recently issued, but which have not yet entered into force and which the
Bank has not yet applied in the preparation of its financial statements can also be analyzed in Note 41.

The separate financial statements are expressed in thousands of Euros, rounded to the are expressed in thousands of
Euro, rounded to the nearest thousand. They have been prepared under the assumption of continuity of operations
from the accounting records and following the historical cost convention, except for the assets and liabilities
accounted for at fair value, namely derivative financial instruments, financial assets and liabilities at fair value through
profit or loss, financial assets at fair value through other comprehensive income, investment properties and hedged
assets and liabilities, in respect of their hedged component.

Changes in accounting policies

The preparation of the financial statements in accordance with IFRS requires the Bank to make judgments and estimates
and use assumptions that affect the application of accounting policies and the amounts of income, costs, assets and
liabilities. Changes in such assumptions or differences in relation to reality may have an impact on current estimates
and judgments. The areas that involve a higher level of judgment or complexity or where significant assumptions and
estimates are used in the preparation of the financial statements are analyzed in Note 3.

The separate financial statements and the Management Report of 31 December 2020 were approved at the Executive
Board of Directors’ meeting held on 24 March 2021 and will be submitted to the General Assembly of Shareholders,
which has the power to justifiably decide to change them. However, it is Executive Board of Directors conviction that
these separate financial statements will be approved without changes.

2.2. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction.

371

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESrelated to equity instruments classified as financial assets at fair value through other comprehensive income, which are
recorded in equity reserves.

Foreign exchange differences relating to cash flow hedges and the hedging of the net investment in foreign operational
units, when they exist, are recognized in other comprehensive income.

2.3. Derivative financial instruments and hedge accounting

Classification

The Bank classifies its derivatives portfolio into (i) hedging derivatives and (ii) trading derivatives, which include, in
addition to the trading book, other derivatives contracted for the purpose of hedging certain assets and liabilities
designated at fair value through profit or loss but not classified as hedging (fair value option).

Recognition and measurement

Derivative financial instruments are initially recognized at their fair value on the date the derivative contract is entered
into (trade date). Subsequent to initial recognition, the fair value of derivative financial instruments is premeasured on
a regular basis and the resulting gains or losses on remeasurement are recognized directly in the income statement,
except for derivatives designated as hedging instruments. The recognition of the resulting gains or losses arising on the
derivatives designated as hedging instruments depends on the nature of the risk being hedged and the hedge model
used.

Derivatives traded on organized markets, namely futures and some options contracts, are recorded as trading derivatives
and their fair value changes are recorded against the income statement. The margin accounts are included under other
assets and other liabilities (see Notes 27 and 31) and comprise the minimum collateral mandatory for open positions.

Hedge accounting

Classification criteria

Derivative financial instruments used for hedging purposes may be classified in the accounts as hedging instruments
provided the following criteria are cumulatively met:

i. Hedging instruments and hedged items are eligible for the hedge relationship;

ii. At the inception of the hedge, the hedge relationship is identified and documented, including identification of the

hedged item and hedging instrument and evaluation of the effectiveness of the hedge;

iii. There is an economic relationship between the hedged item and the hedging instrument;

iv. The effect of credit risk does not dominate the changes in value that result from this economic relationship;

v. The effectiveness of the hedge can be reliably measured, both at the inception of the hedge and on an ongoing

basis.

For the cases in which the Bank uses macro hedging, accounting is performed in accordance with IAS 39 (using the
policy choice permitted under IFRS 9), with the Bank carrying out prospective tests on the hedge relationship start date,
when applicable, and retrospective tests in order to confirm, on each balance sheet date, the effectiveness of hedging
relationships, demonstrating that changes in the fair value of the hedging instrument are covered by changes in the fair
value of the hedged item in the portion attributed to the hedged risk. Any ineffectiveness found is recognized in the
income statement when it occurs in gains or losses of hedge accounting.

372

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEThe use of derivatives is framed in the Bank's risk management strategy and objectives.

Fair value hedge

If the hedge no longer meets the effectiveness requirement, but the objective of risk management stays the same, the
Bank may adjust the hedging operation in order to meet the eligibility (rebalancing) criteria.

If the hedge no longer meets the criteria for hedge accounting (if the hedging instrument expires, is sold, terminated
or exercised, without having been replaced in accordance with the entity's documented risk management objective),
the derivative financial instrument is transferred to the trading portfolio and hedge accounting is discontinued
prospectively. The cumulative adjustment to the carrying book value of a hedged asset or liability corresponding to
a fixed income instrument is amortised via the income statement over the period to its maturity, using the effective
interest rate method.

Cash Flow Hedge

When a derivative financial instrument is designated as a hedge against the variability of highly probable future cash
flows, the effective portion of the changes in the fair value of the hedging derivative is recognized in reserves, being
recycled to the income statement in the periods in which the hedged item affects the income statement. The ineffective
portion is recognized in the income statement.

As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of reference interest
rates, which led to the transition from EONIA (Euro OverNight Index Average) to € STR (Euro Short Term Rate ), in
the course of 2020, the Bank changed the discount curve of its positions in derivative financial instruments cleared
in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD SOFR. In accordance with the
implementation principle of the aforementioned regulation, that no substantial changes to the original objective of
risk management or discontinuation of hedging relationships will occur, the Bank did not record any relevant impacts
on retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging
relationships (hedged and hedged items) were subject to the same change.

Embedded derivatives

If a hybrid contract includes a host contract that is a financial asset under IFRS 9, the Bank classifies the entire contract
in accordance with the policy outlined in Note 2.4.

a. the economic characteristics and risks of the embedded derivative are not closely related to the economic charac-

teristics and risks of the host contract;

b. a separate financial instrument with the same terms as the embedded derivative satisfies the definition of a derivative;

and

c. the hybrid contract is not measured at fair value and changes in fair value are recognized in profit or loss (a derivative

that is embedded in a financial liability at fair value through profit or loss is not separated).

373

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThese embedded derivatives are measured at fair value with the changes in fair value being recognized in the income
statement.

2.4. Other financial assets: Placements with credit institutions, customer loans
and securities

The Bank initially classifies all of its financial assets based on the business model for managing the assets and the asset’s
contractual terms. This classification determines how the asset is measured after its initial recognition:

• Mandatorily measured at fair value through profit or loss: all cases not within the scope of SPPI;

• Measured at fair value through profit or loss: other financial instruments not included in the business models
described above. If these assets were acquired with the objective of being traded in the short term, they are classified
as held for trading.

Initial recognition and measurement and derecognition

These financial assets are initially recognized at fair value plus transaction costs, except for financial assets at fair value
through profit or loss, where transaction costs are directly recognized in the income statement.

Deposits and loans and advances to banks and loans and advances to customers are recorded on the date the amount
of the transaction is advanced to the counterparty. Acquisitions and disposals of securities are recognized on the trade
date, that is, on the date on which the Bank undertakes to acquire or dispose of the asset.

Financial assets at amortised cost or accounted at fair value through other comprehensive income

In accordance with IFRS 9 - Financial Instruments, for a financial asset to be classified and measured at amortised cost
or at fair value through other comprehensive income, it is necessary that:

ii. The financial asset is held within a business model with the objective to hold financial assets to maturity to collect
contractual cash flows (financial assets at amortised cost) or to collect the contractual cash flows until maturity
and selling the financial asset (financial assets at fair value through other comprehensive income). The assessment
of the business models of the financial asset is fundamental for its classification. The Bank determines the business
models by financial asset groups according to how they are managed to achieve a particular business objective. The
Bank's business models determine whether cash flows will be generated by obtaining only contractual cash flows,
from selling the financial assets or both. At initial recognition of a financial asset, the Bank determines whether it is

374

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEpart of an existing business model or if it reflects a new business model. The Bank reassesses its business models
in each reporting period in order to determine whether there have been changes in business models since the last
reporting period.

The above requirements do not apply to lease receivables, which meet the criteria defined in IFRS 16 – Leases.

Financial assets that are subsequently measured at amortised cost or at fair value through other comprehensive income
are subject to impairment assessment.

Financial assets at fair value through other comprehensive income are initially recorded at fair value and subsequently
measured at fair value with changes in the fair value recognized in reserves (other comprehensive income) until
derecognition, when cumulative potential gains and losses recognized in reserves are reclassified to the caption Gains
and losses on financial assets and liabilities designated at fair value through profit or loss. In the specific case of equity
instruments, the cumulative gains/ (losses) previously recognized in equity is not reclassified to profit or losses being
reclassified between equity accounts. However, dividends received from these equity instruments are recognized in
profit or loss.

At initial recognition, financial assets at amortised cost are recorded at acquisition cost, and subsequently measured at
amortised cost based on the effective interest rate. Interest calculated at the effective interest rate are recognized in
profit or loss.

Financial assets at fair value through profit or loss

Financial assets recorded at fair value through profit or loss present the following characteristics:

• contractual cash flows are not SPPI (mandatorily measured at fair value through profit or loss); and/or

•

it is held within a business model which objective is neither to obtain only contractual cash flows or to obtain
contractual cash flows and sale; or,

•

it is designated at fair value through profit or loss as a result of applying the fair value option.

These assets are measured at fair value and the respective revaluation gains or losses are recognized in the income
statement.

Reclassifications

If the Bank changes a business model, the financial assets included in that model are reclassified and the classification
and measurement requirements for the new category are applied prospectively as from that date.

Impairment

The Bank records impairment allowance for expected credit losses ("ECLs") for the following debt instruments:

• Loans and advances to customers;

• Financial and performance guarantees;

•

Import documentary credits;

• Confirmed export documentary credits;

• Undrawn loan commitments;

• Money market exposures;

• Securities portfolio.

Debt instruments at amortised cost or at fair value through other comprehensive income are in the scope of the
impairment calculation.

Impairment losses identified are recognized in the income statement and are subsequently reversed through the in-
come statement if, in a subsequent period, the amount of impairment losses decreases.

375

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESStaging

The impairment calculation approach distinguishes between the 12 months’ expected credit losses - Stage 1 - and
the lifetime expected credit losses. To determine expected lifetime losses, the approach considers the projection of
contractual cash flows - Stage 2 - or the present value of the expected recoveries - Stage 3. Thus, the model of
impairment calculation by Stage is summarized as follows:

• expected credit loss resulting from a potential loss event occurring within the next 12 months after the calculation

date (Stage 1); or

• expected credit loss, resulting from all potential loss events expected over the lifetime, applied to the projection of

contractual cash flows (Stage 2); or

• expected credit loss resulting from the difference between the amount outstanding and the present value of the

cash flows estimated to be recovered from the exposure1 (Stage 3).

Therefore, for the determination of impairment, the classification by Stage for all exposures according to their level of
credit risk, as summarized in the figure below, is made beforehand:

Stage 1

Stage 2

Stage 3

Signiﬁcant increase
in credit risk?

Objective evidence
of impairment?

Stage 3

The process of assigning Stage to an exposure starts by checking if the Stage 3 criteria applies. If the exposure is
classified as Default - according to the current internal definition1 - this exposure is classified as Stage 3.

Thus, the classification of exposures in Stage 3 is based on the occurrence of a default event, with objective evidence of
loss occurring at the time from which a significant change occurs in the creditor-debtor relationship, being the creditor
exposed to a monetary loss.

Considering the measure of specific triggers of Default or the Stage 3 determination indicators, the result will be the
determination of Default and Stage 3 accordingly, taking as a starting point the default setting.

Stage 2

Exposures are classified as Stage 2 whenever there is a significant increase in credit risk, since initial recognition. If there
is no objective evidence of loss associated with the exposure, criteria are analyzed to determine whether exposure has
significantly increased its credit risk.

The significant increase in credit risk is assessed through qualitative and quantitative evidence. Once it is verified that
- at least - one of these triggers is active, the exposure is classified in Stage 2.

The table below describes the criteria and respective applicable thresholds:

376

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATECriteria for Stage 2
classiﬁcation1

Low default
portfolios
(Risk Solutions
Templates)

Rated on the
reporting and
origination date

Not rated on the
origination

Note rated on the
reporting date3

Exposure

Quantitative Triggers
• PD relative and absolute
change since origination

Qualitative Triggers

• PD Lifetime Forward Looking (LT FL)

captured on origination and comparison
(absolute and relative) - SICR2
• Relative Threshold of +200%
• Absolute Threshold of +1.5%

• Worse Rating / Worse Scoring

• Credit in litigation/written off on CRC; or
• Check use inhibition; or
• Forborne due to ﬁnancial difficulties; or

Backstop Triggers

• Past due for more than 30 days, above materiality

• > €100 overdue, for loans to individuals
• > €500 overdue, for corporate loans

As explained in the IFRS 9 regulation, the assessment of a significant increase in credit risk involves - also - comparing
the current level of risk of an exposure against the level of risk existing in origination.

The Bank assigns an internal credit risk grade to the exposure / borrower, depending on its quality and associated
with the probability of default. In assessing whether the exposure credit risk has increased significantly since initial
recognition, the Bank compares, at the reporting date, the lifetime probability of default with the probability of default
at origination of the exposure. Depending on whether the observed variation falls above a defined threshold - relative
and / or absolute - the exposure is classified in Stage 2.

In addition to this event, the Bank considers other events, that if verified imply the classification in Stage 2 - e.g.:
material default for more than 30 days, risk events in the financial system, internal credit risk grade above a certain
threshold, among others.

Stage 1

The classification of exposures in Stage 1 depends on:

i. absence of active events that qualify for Stage 3 and Stage 2, which were mentioned and described above; or

ii. the framing of these exposures under the low-credit risk exemption. These exposures, if not in Stage 3, are auto-

matically classified in Stage 1.

The outlined vision is based not only on the requirement in IFRS 9, but also on the approach defined for capital
calculation, where for these exposures a 0% risk weight is considered. Thus, entities that are not classified as default
and fully comply with the conditions mentioned above are classified as low credit risk, being assigned stage 1. Each
month the list of entities in these conditions is reviewed, whose majority is composed of Portuguese public debt, public
debt in the Euro zone, American public debt and / or equivalent.

377

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESSegmentation

For purposes of the collective assessment of impairment, loans are grouped on the basis of similar credit risk
characteristics, taking in consideration the Bank’s credit risk management process. For each of these homogeneous
risk groups, risk factors are estimated and then applied for impairment assessment purposes.

For the purpose of determining collective impairment, operations are allocated to risk sub-segments in accordance
with the following definitions in the table below:

1st Segmentation

2nd Segmentation

3rd Segmentation

4th Segmentation

Client Type

Corporate

Risk Segment

Large Companies
Real Estate
Medium Companies
Small Companies
Start-ups
Financial Institutions
Sovereign

Rating Notation

Individuals

Product Type

Mortgage
Consumer Loans
Credit Cards
Other Individuals

Scoring Notation

Collaterals - LTV

Typically, Corporate segments consider
the value of collateral for segmentation
purposes

The mortgage segment considers the
value of the ﬁnanced asset for the
purposes of segmentation

Scenarios

As required by IFRS 9, the Banks’s impairment assessment reflects different expectations of macroeconomic
developments, i.e., it incorporates multiple scenarios. In order to incorporate the effects of future macroeconomic
behavior on loss estimates, forward looking macroeconomic estimates are included in some of the risk parameters
used to calculate impairment. In fact, different possible scenarios giving rise to the same number of impairment results
are considered.

In this context, the process of defining macroeconomic scenarios consider the following principles:

• Representative scenarios that capture the existing non-linearities (e.g. a base scenario, an optimistic and a pessimistic

scenario);

• The base scenario should be consistent with the inputs used in other exercises in the Bank (e.g., Planning). This is
ensured since the option used for the purpose of calculating impairment was precisely the same methodology that
the Bank uses in internal and / or regulatory planning exercises;

• Alternative scenarios to the base scenario should not originate extreme scenarios;

• The correlation between the projected variables should be realistic with the economic reality (e.g. if GDP is increasing

it is expected that unemployment is decreasing).

Write-offs

Write-off is defined as the derecognition of a financial asset from the Group’s balance sheet, which should only occur
when cumulatively:

378

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEii. All the recovery efforts, considered appropriate, have been developed (and the relevant evidence gathered) and

additional efforts to recover the asset will not be considered economically viable.

iv. A final agreement has been obtained as part of a restructuring process and the remaining debt can no longer be

recovered.

Subsequent payments received after the write-off must be recognized as subsequent write-off recoveries at other
operating income.

Derecognition

Financial assets are derecognized from the balance sheet when (i) the Bank contractual rights relating to the respective
cash flows have expired, (ii) the Bank has substantially transferred all the risks and benefits associated with its owner-
ship, or (iii) despite the Bank having withholding part, but not substantially all of the risks and benefits associated with
its ownership, control over the assets has been transferred. When an operation measured at fair value through other
comprehensive income is derecognized, the accumulated gain or loss previously recognized in other comprehensive
income is reclassified to results. In the specific case of equity instruments, the accumulated gain or loss previously
recognized in other equity is not reclassified to profit or loss, being transferred between equity items.

2.5. Assets sold with repurchase agreements, securities
loaned and short sales

Securities ceded under loan agreements are not derecognized in the balance sheet, being classified and measured in
accordance with the accounting policy described in Note 2.4. Securities received under borrowing agreements are not
recognized in the balance sheet.

Short sales correspond to securities sold that are not included in the Bank’s assets. They are recorded as financial
liabilities held for trade, at the fair value of the assets to be returned in the scope of the repurchase agreement. Gains
and losses resulting from the change in their respective fair value are recognized directly in the income statement in
Gains or Losses from financial assets and liabilities held for trading.

379

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES2.6. Financial liabilities

Non-derivatives financial liabilities include deposits from banks and customers, loans, debt securities, subordinated
debt and short sales.

The Bank designates, at inception, certain financial liabilities at fair value through profit or loss when:

•

It eliminates or significantly reduces, a measurement or recognition inconsistency (accounting mismatch) that
would otherwise occur;

• The financial liability it’s part of a portfolio of financial assets or financial liabilities or both, managed and evaluated

on a fair value basis, according with the Bank’s risk management or investment strategy; or

• These financial liabilities contain embedded derivatives and IFRS 9 allows designate the entire hybrid contract at fair

value through profit and loss.

Reclassifications between categories of liabilities are not allowed.

The structured products issued by the Bank – except for the structured products for which the embedded derivatives
were separated, recorded separately and revalued at fair value - are classified under the fair value through profit or loss
category because they always meet one of the above-mentioned conditions.

The fair value of listed financial liabilities is their current market bid prices. In the absence of a quoted price, the Bank
establishes the fair value by using valuation techniques based on market information, including the Group issuer’s own
credit risk.

Profits or losses arising from the revaluation of liabilities at fair value are recorded in the income statement. However,
the change in fair value attributable to changes in credit risk is recognized in other comprehensive income. At the time
of derecognition of the liability, the amount recorded in other comprehensive income attributable to changes in credit
risk is not transferred to the income statement.

The Bank accounts material changes in the terms of an existing liability or part of it as an extinction of the original
financial liability and recognizes of a new liability. The terms are assumed to be substantially different if the present
value of the cash flows under the new terms, including any fees paid net of commissions received, and discounted
using the original effective interest rate is at least 10% different from the discounted present value of the remaining
cash flows from the original financial liability. The difference between the carrying amount of the original liability and
the value of the new liability is recognized in the income statement.

If the Bank repurchases debt securities issued, these are derecognized from the balance sheet and the difference
between the carrying book value of the liability and its acquisition cost is recognized in the income statement cost is
recognized in the income statement.

2.7. Financial and performance guarantees

Financial guarantees

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder

380

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEfor a loss due to non-compliance with the contractual terms of a debt instrument, namely the payment of principal
and/or interest.

Financial guarantees are initially recognized in the financial statements at fair value. Financial guarantees are subse-
quently measured at the higher of (i) the fair value recognized on initial recognition and (ii) the amount of any financial
obligation arising as result of the guarantee contracts, measured at the balance sheet date. Any change in the amount
of the liability relating to guarantees is taken to the income statement.

Financial guarantee contracts issued by the Bank normally have a stated maturity date and a periodic fee, usually paid
in advance, which varies in function of the counterpart risk, the amount and the time period of the contract. Conse-
quently, the fair value of the financial guarantee contracts issued by the Bank, at the inception date, is approximately
equal to the initial fee received, considering that the conditions agreed to are market conditions. Hence, the amount
recognized at the contract date is equal to the amount of the commission initially received, which is recognized in the
income statement over the period to which it relates. Subsequent periodic fees are recognized in the income statement
in the period to which they relate.

Performance guarantees

Performance guarantees are contracts that result in the compensation of a party if the other does not comply with its
contractual obligation. Performance guarantees are initially recognized at their fair value, which is normally evidenced
by the amount of the commissions received during the contract period. When there is a breach of contract, the Bank
has the right to reverse the guarantee, recognizing the amounts in Loans and advances to customers after transferring
the compensation for the losses to the collateral taker.

2.8. Equity instruments

Distributions to holders of an equity instrument are deducted directly from equity as dividends, when declared.

2.9. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the
asset and settle the liability simultaneously. The legally enforceable right may not be contingent on future events
and must be enforceable in the course of the normal activity of the NOVO BANCO, as well as in the event of default,
bankruptcy or insolvency of the Bank or the counterparty.

2.10. Foreclosed properties and non-current assets held for sale

Non-current assets or disposal groups (groups of assets to be disposed of together and the related liabilities that
include at least one non-current asset) are classified as held for sale when their carrying values will be recovered mainly
through a sale transaction (including those acquired exclusively with a view to their subsequent disposal), the assets
or disposal groups are in condition for immediate sale and the sale is highly probable (within the period of one year).

381

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESImmediately before the initial classification as held for sale, the measurement of the non-current assets (or of all the
assets and liabilities in a disposal group) is brought up to date in accordance with the applicable IFRS. Subsequently,
these assets or disposal groups are remeasured at the lower of their carrying value and fair value less costs to sell.

In the scope of its loan granting activity, the Bank incurs in the risk of the borrower failing to repay all the amounts due.
In case of loans and advances with mortgage collateral, the Bank executes these and receives real estate properties
resulting from foreclosure. Due to the provisions of the “Regime Geral das Instituições de Crédito e Sociedades Finan-
ceiras” (RGICSF), banks are prevented, unless authorized by Bank of Portugal, from acquiring real estate property that
is not essential to their installation and daily operations and the pursuit of their object (no. 1 of article 112 of RGICSF),
being able to acquire, however, real estate property in exchange for loans granted by same. This real estate property
must be sold within 2 years, period which may, based on reasonable grounds, be extended by Bank of Portugal, on the
conditions to be determined by this Authority (article 114 of RGICSF).

Although the Bank’s objective is to immediately dispose of all real estate property acquired as payment in kind for loans,
during financial year 2016 the Bank changed the classification of this real estate properties from Non-current assets
held for sale to Other assets, due to the permanence of same in the portfolio exceeding 12 months. However, the
accounting method has not changed, these being initially recognized at the lower of their fair value less costs to sell
and the carrying amount of the subjacent loans. Subsequently, these real estate properties are measured at the lower of
its initial carrying amount and the corresponding fair value less costs to sell and it is not depreciated. Unrealized losses
on these assets, so determined, are recorded in the income statement.

The valuation of these real estate properties is performed in accordance with one of the following methodologies,
applied in accordance with the specific situation of the asset:

i. Market Method

ii. Income Method

Under this method, the real estate property is valued based on the capitalization of its net income, discounted to
the present using the discounted cash-flow method.

iii. Cost Method

Additionally, since these are assets whose level in fair value hierarchy of IFRS 13 mostly corresponds to level 3, given the
subjectivity of some assumptions used in the valuations and the fact that there are external indications with alternative
values, the Bank proceeds to analysis on the assumptions used, which may imply additional adjustments to their fair
value supported by additional internal or external valuations.

2.11. Tangible fixed assets

The Bank’s tangible fixed assets are measured at cost less accumulated depreciation and impairment losses. The cost
includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs with tangible fixed assets are only recognized when it is probable that future economic benefits
associated with them will flow to the Bank. All repair and maintenance costs are charged to the income statement
during the period in which they are incurred, on the accrual basis.

382

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATELand is not depreciated. The depreciation of tangible fixed assets is calculated using the straight-line method, at the
following depreciation rates that reflect their estimated useful lives:

external valuations.

2.11. Tangible fixed assets

Own use properties
Leased building improvements
Computer equipment
Furniture and material
Indoor facilities
Safety equipment
Machines and tools
Transport material
Other equipment

The Bank’s tangible fixed assets are measured at cost less accumulated depreciation and impairment losses. The cost includes
expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs with tangible fixed assets are only recognized when it is probable that future economic benefits associated with
them will flow to the Bank. All repair and maintenance costs are charged to the income statement during the period in which they are
incurred, on the accrual basis.

Land is not depreciated. The depreciation of tangible fixed assets is calculated using the straight-line method, at the following
depreciation rates that reflect their estimated useful lives:

Number of years

35 a 50
10
4 a 8
4 a 10
5 a 10
4 a 10
4 a 10
4
5

The useful lives and residual values of the tangible fixed assets are reviewed at each reporting date.

When there is an indication that an asset may be impaired, IAS 36 requires its recoverable amount to be estimated and
an impairment loss recognized when the book value of the asset exceeds its recoverable amount. Impairment losses
are recognized in the income statement, being reversed in subsequent periods, when the reasons that led to their
initial recognition cease to exist. For this purpose, the new depreciated amount shall not exceed that which would be
recorded had the impairment losses not been imputed to the asset but considering the normal depreciation the asset
would have been subject to.

The recoverable amount is determined as the lower of its net selling price and its value in use, which is based on the
net present value of the estimated future cash flows arising from the continued use and ultimate disposal of the asset
at the end of its useful life.

On the date of the derecognition of a tangible fixed asset, the gain or loss determined as the difference between the net
selling price and the net carrying book value is recognized under the caption Other operating income and expenses.

2.12. Intangible assets

The costs incurred with the acquisition, production and development of software are capitalized, as are additional costs
incurred by the Bank to implement said software. These costs are amortised on a straight-line basis over their expected
useful lives, which usually range between 3 and 6 years.

All remaining costs associated with information technology services are recognized as an expense as incurred.

2.13. Leases

IFRS 16 – Leases

A. Lease Definition

Determining whether an Agreement Contains a Lease. The Bank assesses whether a contract is or contains a lease
based on the lease definition. In accordance with IFRS 16, a contract is or contains a lease if it has the right to control
the use of an identified asset for a certain period of time, in exchange for retribution.

383

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe Bank has adopted some practical expedients provided for in the standard in applying IFRS 16:

• Applies the exception, mentioned above, of non-recognition of assets under right of use and liabilities for short-

term leases (i.e. with a lease term of 12 months or less);

• Apply the exception, mentioned above, of non-recognition of assets under use and liabilities for low value leases

(i.e. new value less than Euro 5 thousand);

• For leases in which the entity is a lessee, it was decided not to separate the non-lease components and account for

the lease and non-lease components as a single lease component.

The option of not applying this standard to leases of intangible assets was also used.

B. As Lessee

In accordance with IFRS 16, the Bank recognizes leased assets and lease liabilities for some asset classes, i.e., these
leases are on the entity's balance sheet.

Lease contracts are recorded at the inception date, both under assets and liabilities, at the cost of the asset leased,
which is equal to the present value of the outstanding lease instalments. Instalments comprise (i) an interest charge,
which is recognized in the income statement and (ii) the repayment of principal, which is deducted from liabilities.
Financial charges are recognized as costs over the lease period, in order to produce a constant periodic rate of interest
on the remaining balance of the liability for each period.

The Bank leases various assets, including real estate, vehicles and IT equipment.

As previously mentioned, the Bank has opted not to recognize assets under right of use and liabilities for short-term
leases, with a lease term of 12 months or less, and low value asset leases (e.g. IT equipment) with a new value of less
than Euro 5 thousand. The Bank recognizes the lease payments associated with these leases as expenses on a straight-
line basis over the lease term in income statement as “Other administrative expenses – rents and rentals”.

The Bank presents assets under right of use that do not fit the definition of investment property as "tangible fixed
assets", in the same line as the underlying assets of the same nature that they own. Right-of-use assets that fall under
the definition of investment property are presented as investment property.

The Bank presents the lease liabilities under "Other liabilities" in the statement of financial position.

Significant judgment in determining contract lease term
The Bank has applied judgment to determine the lease term of certain agreements, in which it acts as lessee, and
which include renewal and termination options. The Bank determines the lease term as the non-cancellable lease
term, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if reasonably certain not to be exercised. This assessment
will have an impact on the lease term, which will significantly affect the amount of the lease liabilities and recognized
right-of-use assets.

The Bank has the option, namely in real estate lease agreements, to lease assets for additional periods from 1 month to
20 years. The Bank applies judgment in assessing whether it is reasonably right to exercise the renewal option. That is,
it considers all the relevant factors that create an economic incentive for renewal.

Measurement and remeasurement of assets under right of use and lease liabilities
Lease payments are discounted at the lessee's incremental financing interest rate, which incorporates the risk-free
interest rate curve plus the Bank’s risk spread, applied over the weighted average term of each lease.

384

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEAn asset under right of use, initially measured at cost, must take into account the present value of the future cash flows
of the lease liability, being subsequently subject to depreciation / amortization according to the lease term of each
contract and to tests of impairment.

C. As lessor

In accordance with IFRS 16, lessors will continue to classify leases as financial or operational.

Operating leases
All lease transactions that do not fall under the definition of finance lease are classified as operating leases. Payments
made by the Bank under operating lease agreements, from the perspective of the lessee, are recorded in costs in the
periods to which they relate.

2.14. Employee benefits

Pensions

Pursuant to the signature of the Collective Labour Agreement (“Acordo Coletivo de Trabalho” (ACT)) for the banking
sector and its subsequent amendments resulting from the 3 tripartite agreements described in Note 15, pension funds
and other mechanisms were set up to cover liabilities assumed with pensions on retirement, disability, survival and
health-care benefits.

The liabilities’ coverage is assured, for most of the Bank companies, by pension funds managed by GNB - Sociedade
Gestora de Fundos de Pensões, SA, subsidiary of the NOVO BANCO Group.

The pension plans of the Bank are defined benefit plans, as they establish the criteria to determine the pension benefit
to be received by employees during retirement, usually dependent on one or more factors such as age, years of service
and salary level.

The Bank determines the net interest income / expense for the period incurred with the pension plan by multiplying the
plan’s net assets / liabilities (liabilities net of the fair value of the fund’s assets) by the discount rate used to measure the
retirement pension liabilities referred to above. On that basis, the net interest income / expense was determined based
on the interest cost on the retirement pension liabilities net of the expected return on the funds’ assets, both calculated
using the discount rate applied in the determination of the retirement pension liabilities.

385

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe Bank recognizes as a cost in the income statement a net total amount that includes (i) current service costs, (ii) net
interest income / expense with the pension fund, (iii) the effect of early retirement, (iv) past service costs, and (v) the
effect of settlements or curtailments occurring during the period. The net interest income / expense with the pension
plan is recognized as interest income or interest expense, depending on its nature. Early retirement costs correspond
to increases in liabilities due to employees retiring before turning 65 (normal retirement age foreseen in the ACT)
and which forms the basis of the actuarial calculation of pension fund liabilities. Whenever the possibility of the early
retirement provided for in the pension fund regulation is invoked, the responsibilities of same must be incremented by
the value of the actuarial calculation of the liabilities corresponding to the period between the early retirement and the
employee turning 65.

The Bank makes payments to the funds in order to assure their solvency, the minimum levels set by Bank of Portugal
being: (i) the liability with pensioners must be totally funded at the end of each period, and (ii) the liability relating to
past service costs for active employees must be funded at a minimum level of 95%.

The Bank assesses the recoverability of any excess in a fund regarding he retirement pension liabilities, based on the
expectation of reductions in future contributions.

Health-care benefits

The Bank provides to its banking employees health-care benefits through a specific Social-Medical Assistance Service.
This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union.

Arising from the signature of the new Collective Labour Agreement (ACT) on 5 July 2016, published in Labour Bulletin
(Boletim do Trabalho) no. 29, of 8 August 2016, the Bank’s contributions to SAMS as from 1 February 2017, correspond
to a fixed amount (as per Annex VI of the new ACT) for each employee, 14 times a year, recorded on a monthly basis in
personnel costs, while the component to be paid by the employee is discounted monthly in the processing of salary,
against the caption Amounts payable (SAMS).

The calculation and recognition of the Bank’s liability with post-retirement health-care benefits is similar to the calcu-
lation and recognition of the pension liability described above. These benefits are covered by the Pension Fund, which
presently covers all liabilities with pensions and health-care benefits.

Career bonus

The ACT provides for the payment by the Group of a career bonus, due at the time immediately prior to the employee's
retirement if he retires at the Group's service, corresponding to 1.5 of his salary at the time of payment.

The career bonus is accounted for by the Bank in accordance with IAS 19, as a long-term employee benefit. The
amount of the Bank's liabilities with this career bonus is likewise periodically estimated based on the Projected Unit
Credit Method. The actuarial assumptions used are based on expectations of future salary increases and mortality
tables. The discount rate used in this calculation is determined applying the same methodology described above for
retirement pensions. In each period, the increase in the liability for long-term service bonuses, including actuarial gains
and losses and past service costs, was charged to the income statement, in Personnel Expenses.

Employees’ variable remuneration and other obligations

The Bank recognizes under costs the short-term benefits paid to employees who were at its services in the respective
accounting period.

• Profit-sharing and bonus plans

The Bank recognizes the cost expected with profit-sharing pay-outs and bonuses when it has a present, legal or
constructive, obligation to make such payments as a result of past events and can make a reliable estimate of the
obligation.

386

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE• Obligations with holidays, holiday subsidy and Christmas subsidy

2.15. Corporate Income tax

NOVO BANCO and its subsidiaries are subject to the tax regime consigned in the Código do Imposto sobre o Rendi-
mento das Pessoas Coletivas (IRC Code).

The total amount of corporate income tax comprises current tax and deferred tax.

Current Taxes

Current tax is calculated based on taxable income for the period, which differs from accounting income due to adjust-
ments resulting from expenses or income not relevant for tax purposes or which will only be considered in subsequent
years.

Deferred taxes

Deferred tax is calculated on timing differences arising between the carrying book values of assets and liabilities for
financial reporting purposes and their respective tax base, and is calculated using the tax rates enacted or substantively
enacted at the balance sheet date in each jurisdiction and that are expected to apply when the timing differences are
reversed.

Deferred tax liabilities are recognized for all taxable timing differences except for: i) goodwill non-deductible for tax
purposes; ii) differences arising on the initial recognition of assets and liabilities that neither affect the accounting
nor taxable profit; iii) that do not result from a business combination, and iv) differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future and the Bank does not control
the timing of the reversal of the timing differences. Deferred tax assets are recognized to the extent that it is probable
that future taxable profits will be available against which the deductible timing differences can be offset. Deferred tax
liabilities are always accounted for, regardless of the performance of Bank.

Taxable income or tax loss reported by the Bank may be corrected by the Portuguese Tax Authorities within a period of
four years, except when any deduction was made or a tax credit was used, in which case this period corresponds to the
period during which this right may be exercised (5 or 12 years in the case of tax losses, depending on the financial year).
The Executive Board of Directors considers that any corrections, resulting mainly from differences in interpretation of
tax legislation, will not have a material effect on the financial statements.

The Bank, as established in IAS 12, paragraph 74, offsets deferred tax assets and liabilities whenever (i) it has the legally
enforceable right to offset current tax assets and current tax liabilities; and (ii) they relate to corporate income taxes
levied by the same Taxation Authority, on the same tax entity or different taxable entities that intent to settle current tax

387

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESliabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period
in which the deferred tax liabilities or assets are expected to be settled or recovered.

2.16. Provisions and Contingent liabilities

Provisions are recognized when: (i) the Bank has a current legal or constructive obligation, (ii) it is probable that its
settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.

Provisions related to legal cases opposing the Bank to third parties, are constituted according to internal risk assess-
ments made by Management, with the support and advice of its legal advisors, both internal and external.

Restructuring provisions are recognized when the Bank has approved a formal, detailed restructuring plan and such
restructuring has either commenced or has been publicly announced.

A provision for onerous contracts is recognized when the benefits expected to be derived by the Bank from a contract
are lower than the unavoidable costs of meeting its obligation under the contract. This provision is measured at the
present value of the lower of the estimated cost of terminating the contract and the estimated net costs of continuing
the contract.

If a future outflow of funds is not likely, this situation reflects a contingent liability. Contingent liabilities are always
disclosed, except when the likelihood of their occurrence is remote.

2.17. Recognition of interest income and expense

When calculating the effective interest rate, the Bank estimates the cash flows considering all the contractual terms of
the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation
includes all the commissions that are an integral part of the effective interest rate, transaction costs and all other related
premiums or discounts.

388

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEFor derivative financial instruments, the interest component in the change in fair value of derivative financial instru-
ments classified as fair value hedge and fair value option is recognized under interest income or interest expense. For
other derivatives, the interest component inherent in the fair value change will not be separated and will be classified
under the income statement of assets and liabilities at fair value through profit or loss (see Note 2.3).

2.18. Recognition of fees and commissions income

Fees and commissions income are recognized as revenue from customer contracts to the extent that performance
obligations are met:

• Fees and commissions that are earned on the execution of a significant act, such as loan syndication fees, are

recognized as income when the significant act has been completed;

• Fees and commissions earned over the period during which the services are provided are recognized as income in

the financial year in which the services are provided;

• Fees and commissions that are an integral part of the effective interest rate of a financial instrument are recognized

as income using the effective interest rate method, as described in note 2.17.

2.19. Recognition of dividend income

Dividend income is recognized when the right to receive the dividend payment is established.

2.20. Report by Segment

In accordance with the paragraph 4 of IFRS 8 – Operational Segments, the Bank is waived to present the report by
segment on an individual basis, since the separated financial statements are presented together with the consolidated
financial statements.

2.21. Earnings per share

2.22. Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with a maturity of less than
three months from the date of acquisition / contracting and whose risk of change in value is immaterial, including cash,
deposits with Central Banks and deposits with other credit institutions. Cash and cash equivalents exclude restricted
balances with Central Banks.

2.23. Provision of insurance or reinsurance mediation services

NOVO BANCO is an entity authorized by the Instituto de Seguros de Portugal for the practice of insurance mediation

389

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESactivity in the category of Mediator of Linked Insurance, in accordance with Article 8, a), i), of Decree-Law no. 144/2006,
of July 31, developing the activity of insurance intermediation through sale of life and non-life insurance contracts. As
remuneration for the rendered services of insurance mediation, the Bank receives commissions that are defined in
agreements / protocols established between the Bank and the Insurers.

The commissions received by the services of insurance mediation cover the following modalities:

• commissions that include a fixed and variable component. The fixed component is calculated by applying a
predetermined rate on the value of the subscriptions made through the Bank and the variable component is
calculated monthly according to pre-established criteria, with the total annual commission equal to the sum of
the commissions calculated monthly;

• other variable commissions, which are calculated and paid annually by insurer in the beginning of the following

year.

The commissions received by the insurance mediation services are recognized in accordance with the principle of
accruals accrual, so that commissions paid at a different time than the period to which they relate are registered as an
amount receivable under Other Assets.

NOTE 3 – Main accounting estimates and judgements
used in preparing the financial statements

Considering that the current accounting framework requires applying judgements and calculating estimates involving
some degree of subjectivity, the use of different parameters or judgements based on different evidence may result in
different estimates. The main accounting estimates and judgments used in applying the accounting principles by the
Bank are discussed in this Note in order to improve the understanding of how their application affects the reported
results of the Bank and its disclosure.

The Bank does not have projects or intentions for actions that could question the continuity of the operations.

The COVID-19 pandemic, despite the government and regulatory response measures adopted, resulted in an additional
high level of uncertainty about the Portuguese and European economy and in particular banking activity, with an
impact on the judgments and estimates used in the financial statements. However, the internal control policies and
standards adopted by the Bank allow us to consider that these judgments and estimates were made independently and
appropriately as of 31 December 2020.

The relevant judgments made by Management in the application of the Bank's accounting policies and the main sources
of uncertainty in the estimates were the same as those described in the last report of the Financial Statements.

3.1. Impairment of financial assets at amortised cost and at fair value through
other comprehensive income

The critical judgements with greater impact on the recognized impairment values for the financial assets at amortised
cost and at fair value through other comprehensive income are the following:

• Assessment of the business model: the measurement and classification of financial assets depends on the results
of SPPI test and on the business model setting. The Bank determines its business model based on how it manages
the financial assets and its business objectives. The Bank monitors if the business model classification is appropriate
based on the analysis on the anticipated derecognition of the assets at amortised cost or at fair value through other
comprehensive income, assessing if it is necessary to prospectively apply any changes;

390

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEthe purpose of determining the respective impairment is made based on the judgement that, in accordance to the
Bank management, constitutes a significant increase on credit risk;

• Definition of groups of financial assets with similar credit risk characteristics: when the expected credit losses are
measured through collective model, the financial instruments are aggregated based on the same risk characteris-
tics. The Bank monitors the credit risk characteristics in order to assure the correct reclassification of the assets, in
cases of changes on the credit risk characteristics;

• Models and assumptions: the Bank uses several models and assumptions on the measurement of the expected
credit losses. The judgement is applied on the identification of the more appropriate model for each type of asset
as well as in the determination of the assumptions used in these models, including the assumptions related with
the main credit risk drivers. In addition, in compliance with the IFRS 9 regulation that clarifies the need for the
impairment result to consider multiple scenarios, a methodology for incorporating different scenarios into the risk
parameters was implemented. Thus, the calculation of collective impairment considers several scenarios with a
specific weighting, based on the internal methodology defined about scenarios - definition of multiple perspectives
of macroeconomic evolution, with probability of relevant occurrence.

3.2. Fair value of derivative financial instruments and other financial assets and
liabilities at fair value

Fair value is based on listed market prices when available; otherwise fair value is determined based on similar recent
arm’s length transaction prices or using valuation methodologies, based on the net present value of estimated future
cash flows taking into consideration market conditions, the time value, the yield curve and volatility factors, in accor-
dance with IFRS 13 - Fair Value Measurement. The Bank uses several models and assumption in measuring the fair value
of financial assets. Judgement is applied on the identification of the more appropriate model for each type of asset as
well as in the determination of the assumptions used in these models, including the assumptions related with the main
credit risk drivers.

Consequently, the use of a different methodology or different assumptions or judgements in applying a particular
model could have produced different financial results, summarized in Note 37.

3.3. Corporate income taxes

The Bank is subject to corporate income tax in numerous jurisdictions. Certain interpretations and estimates are re-
quired in determining the overall corporate income tax amount. Different interpretations and estimates could result in
a different level of income tax, current and deferred, being recognized in the period and evidenced in Note 26.

The Tax Authorities are entitled to review the determination of the taxable income of the Bank during a period of four
years or twelve years, when there are tax loss carry forwards. Hence, it is possible that some additional taxes may be
assessed, mainly as a result of differences in interpretation of tax law. However, it is the conviction of the Executive
Board of Directors of the Bank, that there will be no significant corrections to the corporate income taxes recorded in
the financial statements.

391

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES3.4. Pensions and other employee benefits

The determination of the retirement pension liabilities presented in Note 15 requires the use of assumptions and esti-
mates, including the use of actuarial tables, assumptions regarding the growth of pensions, salaries and discounts rates
(which are determined based on the market rates associated with high quality corporate bond, denominated in the
same currency in which the benefits will be paid and with a maturity similar to the expiry date of the plan's obligations).
These assumptions are based on the expectations of the NOVO BANCO for the period during which the liabilities will
be settled as well as other factors that may impact the costs and liabilities of the pension plan.

Changes in these assumptions could materially affect the amounts determined.

3.5. Provisions and Contingent liabilities

The Bank recognises provisions intended to cover for losses arising from commercial offers approved by the Executive
Board of Directors of the Bank, when these are not opposed by Bank of Portugal. The amount of the provisions reflects
NOVO BANCO’s best estimate as each reporting date. The subjectivity inherent to the determination of the probability
and amount of the internal resources required for the payment of the obligations may lead to significant adjustments (i)
due to variations in the assumptions used (ii) for the future recognition of provisions previously disclosed as contingent
liabilities; and/or (iii) for the future write-off of provisions, when they start to classify as contingent liabilities only. The
provisions are detailed in Note 30.

3.6. Assets received from credit recovery and Non-current assets held for sale
and Non-current assets and disposal groups classified as held for sale

Assets received from credit recovery and Non-current assets held for sale are measured at the lower of the net book
value and the fair value less costs to sell.

The fair value of these assets is determined based on valuations carried out by independent entities specializing in this
type of service, using the market, income or cost methods defined in Note 2.10. The valuation reports are analyzed
internally, namely comparing the sales values with the revalued values of the properties in order to maintain the
valuation parameters and processes aligned with the market evolution.

The use of alternative methodologies and different assumptions could result in a different level of fair value with an
impact on the respective balance sheet amount recognized.

NOTE 4 – NET INTEREST INCOME

The breakdown of this caption as at 31 December 2020 and 2019 is as follows:

392

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE 7 377

1 438

732 291

Total

35 807
91 660

33 216

34 166
543 824
13 083
24 462
6 790
155 190
214 722
7 377
517 569
1 438

732 291

25 793
From assets /
liabilities at
-
fair value
-
through profit
or loss

-
-
8 969
-
-
18 939
8 969
6 854
16 824
-

25 793

Interest Expenses

Interest on debt securities issued
Interest on amounts due to customers

Interest Income

Interest on deposits from Central Banks and
other banks
Interest on subordinated liabilities
Interest from loans and advances
Interest on derivatives held for risk
Interest from deposits with and loans and
management purposes
advances to banks
Other interest and similar expenses
Interest from securities
Interest from derivatives held for risk
management purposes
Other interest and similar income

NOTE 4 – NET INTEREST INCOME

The breakdown of this caption as at 31 December 2020 and 2019 is as follows:

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019*

Calculated by the effective interest
method

Other

Calculated by the effective interest
method

Other

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expens
es from
negative
interest rates

From assets /
liabilities at
fair value
through profit
or loss

Total

From assets / liabilities
at fair value through
other comprehensive
income and assets at
amortised cost

Income/expens
es from
negative
interest rates

NOVO BANCO

Total

From assets /
liabilities at
fair value
through profit
or loss

59 236
The breakdown of this caption as at 31 December 2020 and 2019 is as follows:
168 763

141 054

19 835

27 709

39 401

521 389

Interest Income

NOTE 4 – NET INTEREST INCOME

Interest from loans and advances
Interest from deposits with and loans and
advances to banks
Interest from securities
Interest from derivatives held for risk
management purposes
Other interest and similar income

543 824

21 344

136 251

3 118

543 824

24 462

18 939

(in thousands of Euros)

155 190

31.12.2020
1 669

8 545

10 214

31.12.2019*
523

6 854

Other

509

Other

Calculated by the effective interest
509
method
682 787
From assets / liabilities
at fair value through
34 206
other comprehensive
69 990
income and assets at
amortised cost

Income/expens
es from
-
negative
-
interest rates
2 750

26 620

41 070

36 254
From assets /
liabilities at
-
fair value
-
through profit
or loss

760 111

Total

34 206
69 990

29 370

Calculated by the effective interest
1 438
method
702 857
From assets / liabilities
at fair value through
35 807
other comprehensive
91 660
income and assets at
amortised cost

Income/expens
es from
-
negative
-
interest rates
1 864

31 352

3 641

34 165
521 389
-
19 835
7 463
141 054
172 444
-
510 343
509

-
-
5 771
39 401
331
-
8 852
1 669
32 218
-

-
-
10 816
-
-
27 709
10 816
8 545
25 438
-

34 165
521 389
16 587
59 236
7 794
168 763
192 112
10 214
567 999
509

682 787

41 070

36 254

760 111

34 166
543 824
-
21 344
6 643
136 251
199 628
-
503 229
1 438

702 857

-
-
4 114
3 118
147
-
6 125
523
( 2 484)
-

3 641

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Interest Expenses

-
-

2 750

5 771

26 620

31 352

29 370

34 165

34 206
69 990

35 807
91 660

34 206
69 990

Interest on debt securities issued
Interest on amounts due to customers

Interest on deposits from Central Banks and
other banks
Interest on subordinated liabilities
Interest on derivatives held for risk
management purposes
Other interest and similar expenses

Interest on amounts due to customers and deposits from Central banks and other banks include, as at 31 December 2020,
respectively, the amounts of Euro -16 thousand and Euro 822 thousand related to repurchase agreement operations (31 December
2019: Euro -2 thousand of interest from deposits with and loans and advances to banks, Euro 16 thousand in customer resources
Interest on amounts due to customers and deposits from Central banks and other banks include, as at 31 December
and Euro 2,166 thousand in interest on deposits from Central Banks and other banks).
2020, respectively, the amounts of Euro -16 thousand and Euro 822 thousand related to repurchase agreement
As of 31 December 2020, interest from loans and advances to customers includes Euro 35,385 thousand related to finance lease
10 816
operations (31 December 2019: Euro -2 thousand of interest from deposits with and loans and advances to banks,
operations (31 December 2019: Euro 40,035 thousand).
Euro 16 thousand in customer resources and Euro 2,166 thousand in interest on deposits from Central Banks and other
10 816
Interest income and expense items related to derivative interest include, interest from hedging derivatives and from derivatives used
25 438
banks).
to manage the economic risk of certain financial assets and liabilities designated at fair value through profit or loss, as per the
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
accounting policies described in Notes 2.3 e 2.6.
As of 31 December 2020, interest from loans and advances to customers includes Euro 35,385 thousand related to
Interest on amounts due to customers and deposits from Central banks and other banks include, as at 31 December 2020,
respectively, the amounts of Euro -16 thousand and Euro 822 thousand related to repurchase agreement operations (31 December
finance lease operations (31 December 2019: Euro 40,035 thousand).
The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to these liabilities.
2019: Euro -2 thousand of interest from deposits with and loans and advances to banks, Euro 16 thousand in customer resources
and Euro 2,166 thousand in interest on deposits from Central Banks and other banks).
Interest income and expense items related to derivative interest include, interest from hedging derivatives and from
NOTE 5 – DIVIDEND REVENUE
derivatives used to manage the economic risk of certain financial assets and liabilities designated at fair value through
As of 31 December 2020, interest from loans and advances to customers includes Euro 35,385 thousand related to finance lease
operations (31 December 2019: Euro 40,035 thousand).
profit or loss, as per the accounting policies described in Notes 2.3 e 2.6.
The breakdown of this caption is as follows:

35 807
91 660

517 569

214 722

510 343

172 444

567 999

503 229

192 112

199 628

16 587

16 824

34 166

33 216

13 083

34 165

32 218

( 2 484)

6 790

8 852

8 969

6 643

1 864

7 794

6 125

7 463

4 114

147

331

-
-

(in thousands of Euros)
Interest income and expense items related to derivative interest include, interest from hedging derivatives and from derivatives used
The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to
31.12.2019*
to manage the economic risk of certain financial assets and liabilities designated at fair value through profit or loss, as per the
these liabilities.
accounting policies described in Notes 2.3 e 2.6.

31.12.2020

Financial assets mandatorily at fair value through profit or loss

The measures adopted to reduce the cost of customer deposits justify the decrease in the interest expense related to these liabilities.

1 765
5 324
-

3 365
3 656
137

Shares
Participation units
Others

NOTE 5 – Dividend income

NOTE 5 – DIVIDEND REVENUE

Financial assets at fair value through other comprehensive income

The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

Financial assets in investments in associates and subsidiaries

7 750

2 089

31.12.2020

16 928

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

1 734

8 378

(in thousands of Euros)
31.12.2019*

17 270

Financial assets mandatorily at fair value through profit or loss

In 2020, dividend income of Euro 16,928 thousand was recorded (31 December 2019: Euro 17,270 thousand), which are broken
Shares
down as follows:
Participation units
• Euro 7,089 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss, which include
Others
dividends received from the Fundo Solução Arrendamento in the amount of Euro 3,141 thousand, from the Fundo Arrendamento
Mais in the amount of Euro 1,593 thousands and from Euronext NV in the amount of Euro 1, 391 thousand (31 December 2019:
Shares
Euro 7,158 thousand, which include dividends received from Euronext in the amount of Euro 1,348 thousand, from Fundo
Soluções Arrendamento in the amount of Euro 1,767 thousand and from Sealion Ltd of Euro 989 thousand); and

Financial assets at fair value through other comprehensive income

1 765
5 324
-

3 365
3 656
137

Financial assets in investments in associates and subsidiaries

2 089

8 378

7 750

1 734

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 327-

In 2020, dividend income of Euro 16,928 thousand was recorded (31 December 2019: Euro 17,270 thousand), which are broken
down as follows:
• Euro 7,089 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss, which include
dividends received from the Fundo Solução Arrendamento in the amount of Euro 3,141 thousand, from the Fundo Arrendamento
Mais in the amount of Euro 1,593 thousands and from Euronext NV in the amount of Euro 1, 391 thousand (31 December 2019:
Euro 7,158 thousand, which include dividends received from Euronext in the amount of Euro 1,348 thousand, from Fundo
Soluções Arrendamento in the amount of Euro 1,767 thousand and from Sealion Ltd of Euro 989 thousand); and

393

16 928

17 270

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 327-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

In 2020, dividend income of Euro 16,928 thousand was recorded (31 December 2019: Euro 17,270 thousand), which
are broken down as follows:

• Euro 7,089 thousand in financial assets that are mandatorily accounted for at fair value through profit or loss, which
include dividends received from the Fundo Solução Arrendamento in the amount of Euro 3,141 thousand, from the
Fundo Arrendamento Mais in the amount of Euro 1,593 thousands and from Euronext NV in the amount of Euro
1,391 thousand (31 December 2019: Euro 7,158 thousand, which include dividends received from Euronext in the
amount of Euro 1,348 thousand, from Fundo Soluções Arrendamento in the amount of Euro 1,767 thousand and
from Sealion Ltd of Euro 989 thousand); and

• Euro 7,750 thousand in financial assets accounted for at fair value through other comprehensive income, which
include dividends received from FLITPTREL X in the amount of Euro 6,000 thousand, from SIBS SGPS in the amount
of Euro 887 thousand and from ESA Energia in the Euro 657 thousand (31 December 2019: Euro 1,734 thousand,
NOVO BANCO
which includes dividends received and from SIBS SGPS in the Euro 887 thousand); and

• Euro 2,089 thousand financial assets in investments in associates and subsidiaries, which include dividends received
• Euro 7, 750 thousand in financial assets accounted for at fair value through other comprehensive income, which include dividends
received from FLITPTREL X in the amount of Euro 6,000 thousand, from SIBS SGPS in the amount of Euro 887 thousand and
from Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583 thousand and from
from ESA Energia in the Euro 657 thousand (31 December 2019: Euro 1,734 thousand, which includes dividends received and
ESEGUR in the amount of Euro 548 thousand (31 December 2019: Euro 8,378 thousand, which include dividends
from SIBS SGPS in the Euro 887 thousand); and
received from Unicre in the amount of Euro 4,165 thousand, from GNB Seguros in the amount of Euro 1,500
• Euro 2,089 thousand financial assets in investments in associates and subsidiaries, which include dividends received from
Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583 thousand and from ESEGUR in the
thousand and from NB Açores in the amount of Euro 1,083 thousand).
amount of Euro 548 thousand (31 December 2019: Euro 8,378 thousand, which include dividends received from Unicre in the
amount of Euro 4,165 thousand, from GNB Seguros in the amount of Euro 1,500 thousand and from NB Açores in the amount
of Euro 1,083 thousand).

NOTE 6 – Fees and commissions income and expenses

NOTE 6 – FEES AND COMMISSIONS INCOME AND EXPENSES
The breakdown of this caption is as follows:

The breakdown of this caption is as follows:

Fees and commissions income

Fees and commissions expenses

With banking services rendered by third parties
With guarantees received
With transaction of securities
Other fee and commission income

(in thousands of Euros)

31.12.2020

31.12.2019*

198 376
34 762
3 718
8 062
32 254
2 706

279 878

31 497
1 755
2 259
5 927

41 438

215 926
42 783
4 780
7 792
36 379
10 459

318 119

35 267
1 900
2 052
5 067

44 286

238 440

273 833

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 7 – GAINS OR LOSSES ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS

The breakdown of this caption is as follows:

NOTE 7 – Gains or losses on derecognition of financial
assets and liabilities not measured at fair value through
profit or loss

From financial assets at fair value through other comprehensive income

31.12.2019*

31.12.2020

Losses

Gains

Total

(in thousands of Euros)

Securities

Bonds and other fixed income securities

The breakdown of this caption is as follows:

Issued by government and public entities
Issued by other entities

From financial assets and liabilities at amortised cost

Securities

Bonds and other fixed income securities

Issued by other entities

Loans

93 160
1 010

6 529
7 482

86 631
( 6 472)

65 735
2 442

2 021
443

63 714
1 999

94 170

14 011

80 159

68 177

2 464

65 713

6 281

154

6 127

2 050

8 336

8 439

( 103)

23 610

31 997

( 8 387)

14 617

8 593

6 024

25 660

31 997

( 6 337)

394
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

108 787

22 604

86 183

93 837

34 461

59 376

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 328-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

• Euro 7, 750 thousand in financial assets accounted for at fair value through other comprehensive income, which include dividends

received from FLITPTREL X in the amount of Euro 6,000 thousand, from SIBS SGPS in the amount of Euro 887 thousand and

from ESA Energia in the Euro 657 thousand (31 December 2019: Euro 1,734 thousand, which includes dividends received and

from SIBS SGPS in the Euro 887 thousand); and

• Euro 2,089 thousand financial assets in investments in associates and subsidiaries, which include dividends received from

Locarent in the amount of Euro 958 thousand, from Edenred in the amount of Euro 583 thousand and from ESEGUR in the

amount of Euro 548 thousand (31 December 2019: Euro 8,378 thousand, which include dividends received from Unicre in the

amount of Euro 4,165 thousand, from GNB Seguros in the amount of Euro 1,500 thousand and from NB Açores in the amount

of Euro 1,083 thousand).

NOVO BANCO

NOTE 6 – FEES AND COMMISSIONS INCOME AND EXPENSES

The breakdown of this caption is as follows:

Fees and commissions income

From banking services

From guarantees provided

From transaction of securities

From commitments to third parties

From transactions carried out on behalf of third parties - cross-selling

Other fee and commission income

Fees and commissions expenses

With banking services rendered by third parties

With guarantees received

With transaction of securities

Other fee and commission income

(in thousands of Euros)

31.12.2020

31.12.2019*

198 376

34 762

3 718

8 062

32 254

2 706

279 878

31 497

1 755

2 259

5 927

41 438

215 926

42 783

4 780

7 792

36 379

10 459

318 119

35 267

1 900

2 052

5 067

44 286

238 440

273 833

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 7 – GAINS OR LOSSES ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS

The breakdown of this caption is as follows:

From financial assets at fair value through other comprehensive income

Securities

Bonds and other fixed income securities

Issued by government and public entities
Issued by other entities

From financial assets and liabilities at amortised cost

Securities

Bonds and other fixed income securities

Issued by other entities

Loans

31.12.2020

31.12.2019*

Gains

Losses

Total

Gains

Losses

Total

(in thousands of Euros)

93 160
1 010

6 529
7 482

86 631
( 6 472)

65 735
2 442

2 021
443

63 714
1 999

94 170

14 011

80 159

68 177

2 464

65 713

6 281

154

6 127

2 050

8 336

8 439

( 103)

23 610

31 997

( 8 387)

14 617

8 593

6 024

25 660

31 997

( 6 337)

108 787

22 604

86 183

93 837

34 461

59 376

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 8 - Gains or losses on financial assets and liabilities
NOVO BANCO
held for trading

The breakdown of this caption is as follows:
NOTE 8 - GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

The breakdown of this caption is as follows:

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

31.12.2020

Gains

Losses

(in thousands of Euros)

31.12.2019*

Total

Gains

Losses

- 328-
Total

Securities

Bonds and other fixed income securities

Issued by government and public entities
Issued by other entities

Financial Derivatives

Foreign exchange rate contracts
Interest rate contracts
Equity / Index contracts
Credit default contracts
Other

13 710
5

13 121
-

589
5

26 480
-

10 963
-

15 517
-

68 245
602 631
82 551
42
488

52 681
711 014
81 243
44
777

15 564
( 108 383)
1 308
( 2)
( 289)

24 576
729 666
93 119
78 241
1 702

26 351
803 868
92 296
78 622
2 852

( 1 775)
( 74 202)
823
( 381)
( 1 150)

767 672

858 880

( 91 208)

953 784

1 014 952

( 61 168)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

In accordance with the accounting policies followed by the Bank, financial instruments are measured, at their initial recognition, at
their fair value. The transaction value of the instrument is assumed to correspond to the best estimate of its fair value on the date of
its initial recognition. However, in certain circumstances, the initial fair value of a financial instrument, determined on the basis of
valuation techniques, may differ from the transaction value, especially by the existence of an intermediary margin, resulting in a day
In accordance with the accounting policies followed by the Bank, financial instruments are measured, at their initial
one profit.
recognition, at their fair value. The transaction value of the instrument is assumed to correspond to the best estimate
of its fair value on the date of its initial recognition. However, in certain circumstances, the initial fair value of a financial
The Bank recognizes in profit or loss the gains arising from the day one profit generated primarily by the intermediation of derivative
and foreign exchange financial products, since the fair value of these instruments, on the date of their initial recognition and
instrument, determined on the basis of valuation techniques, may differ from the transaction value, especially by the
subsequently, is determined only by the Bank based on observable market variables and reflects the Bank's access to the wholesale
existence of an intermediary margin, resulting in a day one profit.
market.

The Bank recognizes in profit or loss the gains arising from the day one profit generated primarily by the intermediation
As at 31 December 2020, gains recognized in the income statement arising from intermediation fees, which are essentially related to
foreign exchange transactions, amounted to approximately Euro 5,100 thousand (31 December 2019: Euro 3,114 thousand).
of derivative and foreign exchange financial products, since the fair value of these instruments, on the date of their
initial recognition and subsequently, is determined only by the Bank based on observable market variables and reflects
the Bank's access to the wholesale market.
NOTE 9 - GAINS OR LOSSES ON FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFITS OR LOSS

The breakdown of this caption is as follows:
As at 31 December 2020, gains recognized in the income statement arising from intermediation fees, which are essen-
(in thousands of Euros)
tially related to foreign exchange transactions, amounted to approximately Euro 5,100 thousand (31 December 2019:
Euro 3,114 thousand).

31.12.2019*

31.12.2020

Gaines

Losses

Total

Gaines

Losses

Total

Gains or losses in financial assets mandatority
at fair value through profit or loss

Securities
Títulos

Bonds and other fixed income securities

Issued by other entities

Other variable income securities
395

17 920

90 440

( 72 520)

8 337

10 625

( 2 288)

23 229

141 374 ( 118 145)

34 575

90 862

( 56 287)

1 709

332 103 ( 330 394)

17 482 331 561 ( 314 079)

42 858

563 917 ( 521 059)

60 394 433 048 ( 372 654)

42 858

563 917 ( 521 059)

60 394 433 048 ( 372 654)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

As at 31 December 2020, gains or losses on financial assets mandatorily at fair value through profit or loss – securities - shares and

other variable income securities, include a loss of Euro 300.2 million, resulting from the completion of an independent valuation to the

restructuring funds. These funds are “level 3” assets in accordance with the fair value hierarchy of IFRS 13 (quotes provided by third

parties whose parameters used are not observable in the market). NOVO BANCO requested an independent assessment from an

international consulting firm in conjunction with real estate consulting firms. This work resulted in a market value of Euro 498.8 million

for the total investment held in these assets (see Note 21), which led to the recording of the said loss of Euro 300.2 million in 2020

(see Note 37).

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 329-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOTE 9 - Gains or losses on financial assets mandatorily at
fair value through profit or loss

The breakdown of this caption is as follows:

Gains or losses in financial assets mandatorily
at fair value through profit or loss

Securities
Títulos

Bonds and other fixed income securities

Issued by other entities

Other variable income securities

31.12.2020

(in thousands of Euros)

31.12.2019*

Gaines

Losses

Total

Gaines

Losses

Total

17 920

90 440

( 72 520)

8 337

10 625

( 2 288)

23 229

141 374 ( 118 145)

34 575

90 862

( 56 287)

1 709

332 103 ( 330 394)

17 482 331 561 ( 314 079)

42 858

563 917 ( 521 059)

60 394 433 048 ( 372 654)

42 858

563 917 ( 521 059)

60 394 433 048 ( 372 654)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

As at 31 December 2020, gains or losses on financial assets mandatorily at fair value through profit or loss – securities
- shares and other variable income securities, include a loss of Euro 300.2 million, resulting from the completion of
an independent valuation to the restructuring funds. These funds are “level 3” assets in accordance with the fair value
hierarchy of IFRS 13 (quotes provided by third parties whose parameters used are not observable in the market). NOVO
BANCO requested an independent assessment from an international consulting firm in conjunction with real estate
consulting firms. This work resulted in a market value of Euro 498.8 million for the total investment held in these assets
(see Note 21), which led to the recording of the said loss of Euro 300.2 million in 2020 (see Note 37).

NOVO BANCO

NOTE 10 – Gains or losses from hedge accounting

NOVO BANCO

NOTE 10 – GAINS OR LOSSES FROM HEDGE ACCOUNTING
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:
NOTE 10 – GAINS OR LOSSES FROM HEDGE ACCOUNTING

The breakdown of this caption is as follows:

Fair value changes of hedging instruments
Instrumentos financeiros derivados

Interest rate contracts

Fair value changes of hedging instruments
Instrumentos financeiros derivados
Instrumentos financeiros derivados
Fair value changes of hedging item attributable to hedged risk

Interest rate contracts

31.12.2020

31.12.2019*

(in thousands of Euros)

Gains

Losses

Total

Gains

Losses

(in thousands of Euros)

Total

31.12.2020

31.12.2019*

75 803
Gains

97 972

Losses

( 22 169)
Total

49 993
Gains

66 301

Losses

( 16 308)
Total

43 804
75 803
119 607

33 688
97 972
131 660

10 116
( 22 169)
( 12 053)

34 904
49 993
84 897

21 041
66 301
87 342

13 863
( 16 308)
( 2 445)

Fair value changes of hedging item attributable to hedged risk
Instrumentos financeiros derivados
Compensations for hedging operations interruptions (see Note 13)

43 804
438

33 688
-

10 116
438

34 904
461

21 041
-

13 863
461

Amount net of compensations

119 607
120 045

131 660
131 660

( 12 053)
( 11 615)

84 897
85 358

87 342
87 342

( 2 445)
( 1 984)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Compensations for hedging operations interruptions (see Note 13)

438

461

Amount net of compensations

120 045

131 660

( 11 615)

85 358

87 342

( 1 984)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
NOTE 11 – EXCHANGE DIFFERENCES

NOTE 11 – Exchange differences
The breakdown of this caption is as follows:
NOTE 11 – EXCHANGE DIFFERENCES

The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

31.12.2020

31.12.2019*

(in thousands of Euros)

Foreign exchange revaluation

1 282 775
Gains
1 282 775

31.12.2020
1 284 775
Losses
1 284 775

( 2 000)

Total

( 2 000)

1 052 463
Gains
1 052 463

31.12.2019*
1 013 977
Losses
1 013 977

38 486
Total
38 486

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Foreign exchange revaluation

1 284 775

1 282 775

( 2 000)

1 052 463

1 013 977

38 486

Gains

Losses

Total

Gains

Losses

(in thousands of Euros)

Total

This caption includes the results of foreign exchange revaluation of monetary assets and liabilities registered in foreign currency in
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
accordance with the accounting policy described in Note 2.2.

1 282 775

1 284 775

( 2 000)

1 052 463

1 013 977

38 486

This caption includes the results of foreign exchange revaluation of monetary assets and liabilities registered in foreign currency in
accordance with the accounting policy described in Note 2.2.
NOTE 12 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS

396

The breakdown of this caption is as follows:
NOTE 12 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS

The breakdown of this caption is as follows:

Real Estate

Equipment

Other

Real Estate

Equipment

(in thousands of Euros)

31.12.2020

31.12.2019*

1 167

(in thousands of Euros)

12 954

31.12.2020

( 520)

31.12.2019*

( 479)

1 625

1 167

2 272

( 520)

2 272

2 033

12 954

14 507

( 479)

2 033

14 507

(in thousands of Euros)

31.12.2020

31.12.2019*

(in thousands of Euros)

31.12.2020

29 596

31.12.2019*

29 589

264

57 739

29 596

87 599

264

57 739

( 5 175)

87 599

( 32 193)

( 1 580)

( 5 175)

( 2 321)

( 32 193)

( 48 610)

( 1 580)

( 89 879)

( 2 321)

( 2 280)

( 48 610)

( 89 879)

( 2 280)

1 299

25 646

29 589

56 534

1 299

25 646

( 7 757)

56 534

( 26 647)

( 1 409)

( 7 757)

( 2 456)

( 26 647)

( 36 514)

( 1 409)

( 74 783)

( 2 456)

( 18 249)

( 36 514)

( 74 783)

( 18 249)

- 330-

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Other

1 625

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 13 – OTHER OPERATING INCOME AND EXPENSES

The breakdown of this caption is as follows:

NOTE 13 – OTHER OPERATING INCOME AND EXPENSES

The breakdown of this caption is as follows:

Other operating income

Gains / (losses) on recoveries of loans

Non-recurring advisory services

Other operating income

Other income

Gains / (losses) on recoveries of loans

Non-recurring advisory services

Other operating expenses

Other income

Direct and indirect taxes

Contribution to the Banking Sector (see Note 26)

Other operating expenses

Membership subscriptions and donations

Direct and indirect taxes

Charges with Supervisory entities

Contribution to the Banking Sector (see Note 26)

Other expenses

Membership subscriptions and donations

Charges with Supervisory entities

Other operating income / (expenses)

Other expenses

Other operating income / (expenses)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOTE 10 – GAINS OR LOSSES FROM HEDGE ACCOUNTING

The breakdown of this caption is as follows:

NOTE 10 – GAINS OR LOSSES FROM HEDGE ACCOUNTING

The breakdown of this caption is as follows:

Instrumentos financeiros derivados

Fair value changes of hedging instruments

Interest rate contracts

Instrumentos financeiros derivados

Fair value changes of hedging item attributable to hedged risk

Instrumentos financeiros derivados

Fair value changes of hedging instruments

Interest rate contracts

Compensations for hedging operations interruptions (see Note 13)

Fair value changes of hedging item attributable to hedged risk
Instrumentos financeiros derivados
Amount net of compensations

119 607

75 803

438

131 660

97 972

( 12 053)

( 22 169)

438

43 804
120 045

33 688
131 660

10 116
( 11 615)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

119 607

131 660

( 12 053)

NOVO BANCO

(in thousands of Euros)

84 897

49 993

461

34 904
85 358

87 342

66 301

21 041
87 342

( 2 445)

( 16 308)

461

13 863
( 1 984)

84 897

87 342

( 2 445)

31.12.2020

31.12.2019*

Gains

Losses

Total

Gains

Losses

Total

75 803

31.12.2020

97 972

( 22 169)

49 993

31.12.2019*

66 301

( 16 308)

Gains

43 804

Losses

33 688

Total

10 116

Gains

34 904

Losses

21 041

Total

13 863

Compensations for hedging operations interruptions (see Note 13)

438

461

Amount net of compensations

NOTE 11 – EXCHANGE DIFFERENCES
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

120 045

131 660

( 11 615)

The breakdown of this caption is as follows:

NOTE 11 – EXCHANGE DIFFERENCES

85 358

87 342

( 1 984)

(in thousands of Euros)

The breakdown of this caption is as follows:
This caption includes the results of foreign exchange revaluation of monetary assets and liabilities registered in foreign
Losses
currency in accordance with the accounting policy described in Note 2.2.

(in thousands of Euros)

Losses

Gains

Total

31.12.2020

31.12.2019*

Foreign exchange revaluation

1 282 775

1 282 775
Gains

1 284 775
31.12.2020
1 284 775
Losses

( 2 000)

1 052 463

( 2 000)

Total

1 052 463
Gains

1 013 977
31.12.2019*
1 013 977
Losses

38 486

38 486
Total

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Foreign exchange revaluation

This caption includes the results of foreign exchange revaluation of monetary assets and liabilities registered in foreign currency in
accordance with the accounting policy described in Note 2.2.
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 12 – Gains or losses on derecognition of
non-financial assets

This caption includes the results of foreign exchange revaluation of monetary assets and liabilities registered in foreign currency in
NOTE 12 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS
accordance with the accounting policy described in Note 2.2.
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

1 282 775

1 284 775

1 052 463

1 013 977

38 486

( 2 000)

1 282 775

1 284 775

( 2 000)

1 052 463

1 013 977

38 486

NOTE 12 – GAINS OR LOSSES ON DERECOGNITION OF NON-FINANCIAL ASSETS

31.12.2020

31.12.2019*

(in thousands of Euros)

The breakdown of this caption is as follows:
Real Estate
Equipment
Other

1 167
( 520)
1 625

31.12.2020

(in thousands of Euros)

12 954
( 479)
2 033

31.12.2019*

Real Estate
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
Equipment
Other

2 272
1 167
( 520)
1 625

NOTE 13 – OTHER OPERATING INCOME AND EXPENSES
* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

2 272

14 507
12 954
( 479)
2 033

14 507

NOTE 13 – Other operating income and expenses

The breakdown of this caption is as follows:

NOTE 13 – OTHER OPERATING INCOME AND EXPENSES
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:
Other operating income

Gains / (losses) on recoveries of loans
Non-recurring advisory services
Other income

Other operating income

Gains / (losses) on recoveries of loans
Other operating expenses
Non-recurring advisory services
Direct and indirect taxes
Other income
Contribution to the Banking Sector (see Note 26)
Membership subscriptions and donations
Other operating expenses
Charges with Supervisory entities
Direct and indirect taxes
Other expenses
Contribution to the Banking Sector (see Note 26)
Membership subscriptions and donations
Charges with Supervisory entities
Other expenses

Other operating income / (expenses)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

(in thousands of Euros)

31.12.2020

31.12.2019*

(in thousands of Euros)

31.12.2020

31.12.2019*

29 596
264
57 739
87 599
29 596
264
( 5 175)
57 739
( 32 193)
87 599
( 1 580)
( 2 321)
( 5 175)
( 48 610)
( 32 193)
( 89 879)
( 1 580)
( 2 280)
( 2 321)
( 48 610)
( 89 879)

29 589
1 299
25 646
56 534
29 589
1 299
( 7 757)
25 646
( 26 647)
56 534
( 1 409)
( 2 456)
( 7 757)
( 36 514)
( 26 647)
( 74 783)
( 1 409)
( 18 249)
( 2 456)
( 36 514)
( 74 783)

Other operating income / (expenses)

( 2 280)

( 18 249)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 330-

- 330-
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
As of 31 December 2020, the amount received relating to compensation for interruption of hedging operations,
NOVO BANCO
included in other income, amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 10).

As of 31 December 2020, the amount received relating to compensation for interruption of hedging operations, included in other
income, amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 10).

NOTE 14 – Staff expenses

NOTE 14 – STAFF EXPENSES
The breakdown of these captions is as follows:

The breakdown of these captions is as follows:

Wages and salaries

Remuneration
Long-term service / Career bonuses (see Note 15)

Mandatory social charges
Costs with post-employment benefits (see Note 15)
Other costs

(in thousands of Euros)

31.12.2020

31.12.2019*

167 702
166 758
944
51 170
432
4 300

223 604

167 601
166 752
849
52 161
-
3 601

223 363

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The provisions and costs related to the restructuring process are presented in Note 30.

397

As at 31 December 2020 and 2019, the number of employees of the Bank, considering the staff and the contracted term, presents
the following breakdown by professional category:

31.12.2020

31.12.2019

384

485

2 036

1 351

4 256

400

541

2 169

1 318

4 428

Directive functions

Management functions

Specific functions

Administrative and other functions

NOTE 15 – EMPLOYEE BENEFITS

Pension and health-care benefits

In compliance with the Collective Labour Agreement (ACT) for the banking sector established with the unions, the Bank undertook

the commitment to grant its employees, or their families, pensions on retirement, disability and survival. These payments consist of a

percentage that increases in accordance with the years of service, applied to each year’s negotiated salary table for the active

workforce.

Banking employees also receive health-care benefits through a specific Social-Medical Assistance Service (SAMS) managed by the

Union. As a result of the signing of the new Collective Labor Agreement (ACT) on July 5, 2016, with publication in Labor Bulletin No.

29 of August 8, 2016, the contributions to SAMS, under the responsibility of the Group, as of February 1, 2017 started to correspond

to a fixed amount (according to Annex VI of the new ACT) for each employee, 14 times in a year. The calculation and recording of

the Group's obligations with health benefits attributable to workers at retirement age are carried out in a similar way to pension

liabilities. These benefits are covered by the Pension Fund, which integrates all liabilities with pensions and health benefits.

For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions consecrated

under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension fund, managed by GNB –

Sociedade Gestora de Fundos de Pensões, S.A..

Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the General Social Security

Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all banking employees who were beneficiaries of

“CAFEB – Caixa de Abono de Família dos Empregados Bancários” were integrated in the General Social Security Regime as from

1 January 2011.

Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.

Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the 2nd tripartite

agreement continue to be calculated in accordance with the provisions of the ACT and other conventions; however, banking

employees are entitled to receive a pension under the General Regime that considers the number of years of contributions under that

regime. The Banks are responsible for the difference between the pension determined in accordance with the provisions of the ACT

and that which the banking employees are entitled to receive from the General Social Security Regime.

The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de Abono de

Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change, pension entitlements

of active employees are to be covered on the terms defined under the General Social Security Regime, for the length of their

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 331-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

As of 31 December 2020, the amount received relating to compensation for interruption of hedging operations, included in other

income, amounts to Euro 438 thousand (31 December 2019: Euro 461 thousand) (see Note 10).

NOTE 14 – STAFF EXPENSES

The breakdown of these captions is as follows:

Wages and salaries

Remuneration
Long-term service / Career bonuses (see Note 15)

Mandatory social charges
Costs with post-employment benefits (see Note 15)
Other costs

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019*

167 702
166 758
944
51 170
432
4 300

223 604

167 601
166 752
849
52 161
-
3 601

223 363

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
The provisions and costs related to the restructuring process are presented in Note 30.
The provisions and costs related to the restructuring process are presented in Note 30.
As at 31 December 2020 and 2019, the number of employees of the Bank, considering the staff and the contracted
As at 31 December 2020 and 2019, the number of employees of the Bank, considering the staff and the contracted term, presents
term, presents the following breakdown by professional category:
the following breakdown by professional category:

Directive functions
Management functions
Specific functions
Administrative and other functions

31.12.2020

31.12.2019

384
485
2 036
1 351

4 256

400
541
2 169
1 318

4 428

NOTE 15 – EMPLOYEE BENEFITS

NOTE 15 – Employee benefits

Pension and health-care benefits

In compliance with the Collective Labour Agreement (ACT) for the banking sector established with the unions, the Bank undertook
Pension and health-care benefits
the commitment to grant its employees, or their families, pensions on retirement, disability and survival. These payments consist of a
percentage that increases in accordance with the years of service, applied to each year’s negotiated salary table for the active
In compliance with the Collective Labour Agreement (ACT) for the banking sector established with the unions, the Bank
workforce.
undertook the commitment to grant its employees, or their families, pensions on retirement, disability and survival.
These payments consist of a percentage that increases in accordance with the years of service, applied to each year’s
Banking employees also receive health-care benefits through a specific Social-Medical Assistance Service (SAMS) managed by the
Union. As a result of the signing of the new Collective Labor Agreement (ACT) on July 5, 2016, with publication in Labor Bulletin No.
negotiated salary table for the active workforce.
29 of August 8, 2016, the contributions to SAMS, under the responsibility of the Group, as of February 1, 2017 started to correspond
to a fixed amount (according to Annex VI of the new ACT) for each employee, 14 times in a year. The calculation and recording of
Banking employees also receive health-care benefits through a specific Social-Medical Assistance Service (SAMS)
the Group's obligations with health benefits attributable to workers at retirement age are carried out in a similar way to pension
managed by the Union. As a result of the signing of the new Collective Labor Agreement (ACT) on July 5, 2016, with
liabilities. These benefits are covered by the Pension Fund, which integrates all liabilities with pensions and health benefits.
publication in Labor Bulletin No. 29 of August 8, 2016, the contributions to SAMS, under the responsibility of the
For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions consecrated
Group, as of February 1, 2017 started to correspond to a fixed amount (according to Annex VI of the new ACT) for each
under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension fund, managed by GNB –
employee, 14 times in a year. The calculation and recording of the Group's obligations with health benefits attributable
Sociedade Gestora de Fundos de Pensões, S.A..
to workers at retirement age are carried out in a similar way to pension liabilities. These benefits are covered by the
Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the General Social Security
Pension Fund, which integrates all liabilities with pensions and health benefits.
Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all banking employees who were beneficiaries of
“CAFEB – Caixa de Abono de Família dos Empregados Bancários” were integrated in the General Social Security Regime as from
For employees hired until 31 December 2008, the retirement pension and the disability, survival and death pensions
1 January 2011.
consecrated under the ACT, as well as the liabilities for health-care benefits (SAMS), are covered by a closed pension
Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.
fund, managed by GNB – Sociedade Gestora de Fundos de Pensões, S.A..

Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the 2nd tripartite
Protection of employees in the event of maternity, paternity and adoption, as well as old age, is covered by the
agreement continue to be calculated in accordance with the provisions of the ACT and other conventions; however, banking
General Social Security Regime, given that with the publication of Decree-Law No. 1-A/2011, of 3 January, all
employees are entitled to receive a pension under the General Regime that considers the number of years of contributions under that
regime. The Banks are responsible for the difference between the pension determined in accordance with the provisions of the ACT
banking employees who were beneficiaries of “CAFEB – Caixa de Abono de Família dos Empregados Bancários”
and that which the banking employees are entitled to receive from the General Social Security Regime.
were integrated in the General Social Security Regime as from 1 January 2011.
The contribution rate is 26.6%, 23.6% paid by the employer and 3% paid by the employees on the behalf of Caixa de Abono de
Employees hired after 31 December 2008 are covered by the Portuguese General Social Security Regime.
Família dos Empregados Bancários (CAFEB), abolished by said Decree-law. In consequence of this change, pension entitlements
of active employees are to be covered on the terms defined under the General Social Security Regime, for the length of their
Retirement pensions of banking employees integrated in the General Social Security Regime within the scope of the
2nd tripartite agreement continue to be calculated in accordance with the provisions of the ACT and other conven-
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 331-
tions; however, banking employees are entitled to receive a pension under the General Regime that considers the
number of years of contributions under that regime. The Banks are responsible for the difference between the pension
determined in accordance with the provisions of the ACT and that which the banking employees are entitled to receive
from the General Social Security Regime.

398

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

foreseen in the “Instrumento de Regulação Coletiva de Trabalho” (IRCT) applicable to banking employees, including
the eventualities of death, disability and survival. The liabilities relating to the updating of pension amounts, pension
benefits other than those to be borne by Social Security, health-care contributions to SAMS, death allowances and
deferred survivor’s pensions will remain under the banks’ responsibility, with the corresponding funding being met
through the respective pension funds.

The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to
NOVO BANCO
the satisfaction responsibilities for those pensions, be transferred to the State.

According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering
employment between 1 January 2011 and their retirement date. The differential required to make up the pension guaranteed under
the ACT is paid by the Banks.
the resolution by the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained
in the deliberation of the Board of Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES
At the end of financial year 2011 and pursuant to the 3rd tripartite agreement, it was decided to transfer, definitively and irreversibly,
responsibilities not transferred to NOVO BANCO relate to the retirement and survival pensions and complementary
to the General Social Security Regime all the banks’ liabilities with pensions in payment to retirees and pensioners that were in that
condition as at 31 December 2011 at constant values (0% discount rate) for the component foreseen in the “Instrumento de Regulação
retirement and survival pensions of the Directors of BES who had been members of its Executive Committee, as defined
Coletiva de Trabalho” (IRCT) applicable to banking employees, including the eventualities of death, disability and survival. The
in BES’s Articles of Association and BES’s General Assembly Regulations to which the Articles of Association refer, not
liabilities relating to the updating of pension amounts, pension benefits other than those to be borne by Social Security, health-care
having, therefore, been transferred to NOVO BANCO, without prejudice to the transfer of the responsibilities relating
contributions to SAMS, death allowances and deferred survivor’s pensions will remain under the banks’ responsibility, with the
corresponding funding being met through the respective pension funds.
exclusively to the employment contracts with BES.

The agreement further established that the financial institutions’ pension fund assets relating to the part allocated to the satisfaction
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to
responsibilities for those pensions, be transferred to the State.
NOVO BANCO. Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive
According to the deliberation of the Board of Directors of Bank of Portugal of 3 August 2014 (8 p.m.), considering the resolution by
Committee Plan were split, with a part (described above) remaining in BES, with the other part being transferred to
the same Board of Directors of 11 August 2014 (5 p.m.), and the additional clarifications contained in the deliberation of the Board of
NOVO BANCO, together with the Pension Fund’s liabilities relating to the Base Plan and the Complementary Plan.
Directors of Bank of Portugal, of 11 February 2015, it was clarified that the BES responsibilities not transferred to NOVO BANCO
relate to the retirement and survival pensions and complementary retirement and survival pensions of the Directors of BES who had
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES,
been members of its Executive Committee, as defined in BES’s Articles of Association and BES’s General Assembly Regulations to
following the decision of Bank of Portugal of 11 February 2015, from those that were transferred to NOVO BANCO, the
which the Articles of Association refer, not having, therefore, been transferred to NOVO BANCO, without prejudice to the transfer of
the responsibilities relating exclusively to the employment contracts with BES.
assets existing on 3 August 2014 were split in proportion to the liabilities calculated on the same date, allocated to each
of the groups of former participants and beneficiaries allocated to each of the entities. The split performed on these
Given the aforementioned, liabilities arising exclusively from the employment contracts with BES were transferred to NOVO BANCO.
terms will result, on 3 August 2014, in a level of funding of the Complementary Plan of the Executive Commission that
Considering the foregoing, only the pension fund liabilities arising from the Complementary Executive Committee Plan were split, with
a part (described above) remaining in BES, with the other part being transferred to NOVO BANCO, together with the Pension Fund’s
is equal for each of the associates of the Fund (NOVO BANCO and BES).
liabilities relating to the Base Plan and the Complementary Plan.

On 16 June 2020, the Insurance and Pension Funds Supervisory Authority (“ASF”) approved the extinction of the portion
To quantify the amounts relating to the split of the Pension Fund assets allocated to the liabilities that remained in BES, following the
that finances the Plan of the previous Executive Committee and, simultaneously, the amendment of the Constitutive
decision of Bank of Portugal of 11 February 2015, from those that were transferred to NOVO BANCO, the assets existing on 3 August
2014 were split in proportion to the liabilities calculated on the same date, allocated to each of the groups of former participants and
Contract of the Novo Mercado Pension Fund Bank. This approval led to the creation of three aspects of the Executive
beneficiaries allocated to each of the entities. The split performed on these terms will result, on 3 August 2014, in a level of funding
Committee's Pension Plan: (i) Executive Committee - BES, (ii) Executive Committee - NOVO BANCO and (iii) Undivided
of the Complementary Plan of the Executive Commission that is equal for each of the associates of the Fund (NOVO BANCO and
Party. The assets of the undivided party are not allocated to any liability of NOVO BANCO or BES until the final decision
BES).
of the court (limit of article 402), so NOVO BANCO transferred the amount of 19.2 million euros of net liabilities of the
On 16 June 2020, the Insurance and Pension Funds Supervisory Authority (“ASF”) approved the extinction of the portion that finances
amount of the fund's assets relating to the undivided portion for Provisions.
the Plan of the previous Executive Committee and, simultaneously, the amendment of the Constitutive Contract of the Novo Mercado
Pension Fund Bank. This approval led to the creation of three aspects of the Executive Committee's Pension Plan: (i) Executive
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary
Committee - BES, (ii) Executive Committee - NOVO BANCO and (iii) Undivided Party. The assets of the undivided party are not
plan became a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19,
allocated to any liability of NOVO BANCO or BES until the final decision of the court (limit of article 402), so NOVO BANCO transferred
the amount of 19.2 million euros of net liabilities of the amount of the fund's assets relating to the undivided portion for Provisions.
this plan´s responsibilities and assets are net of the amounts presented for the defined benefit plans. On 31 December
2020, the amount of Euro 535 thousand was recorded in Personnel Costs related to the defined contribution plan (31
On 1 June 2016, an amendment was made to Fundo de Pensões NB´s constitutive contract, where the complementary plan became
December 2019: Euro 492 thousand).
a defined contribution instead of a defined benefit plan. Considering this, and in accordance with IAS 19, this plan´s responsibilities
and assets are net of the amounts presented for the defined benefit plans. On 31 December 2020, the amount of Euro 535 thousand
was recorded in Personnel Costs related to the defined contribution plan (31 December 2019: Euro 492 thousand).
The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as
follows:

The key actuarial assumptions used to calculate retirement pension and health-care liabilities are identical and are as follows:

Actuarial Assumptions

Projected rate of return on plan assets
Discount rate
Pension increase rate
Salary increase rate

Mortality table men
Mortality table women

31.12.2020

31.12.2019

Assumptions

Actual

Assumptions

Actual

1,00%
1,00%
0,25%
0,50%

2,41%
-
1,34%
3,07%

1,35%
1,35%
0,25%
0,50%

6,82%
-
0,49%
1,20%

TV 88/90
TV 88/90-2 years

Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as at 31 December
2020 and 31 December 2019 was based on: (i) the evolution of the main indices for high quality corporate bonds and (ii) the duration
of the liabilities.

399

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 332-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Disability decreases are not considered in the calculation of the liabilities. The determination of the discount rate as at
31 December 2020 and 2019 was based on: (i) the evolution of the main indices for high quality corporate bonds and
(ii) the duration of the liabilities.

NOVO BANCO

Pension plan participants are detailed as follows:
Pension plan participants are detailed as follows:

Pension plan participants are detailed as follows:

Employees
Pensioners and survivors

TOTAL

31.12.2020

NOVO BANCO
31.12.2019

4 318

6 870

4 399

6 761

31.12.2020

11 188

31.12.2019

11 160

Employees
Pensioners and survivors

NOVO BANCO
4 399
The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:
6 761
(in thousands of euros)
11 160
The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 2019 is as follows:
Pension plan participants are detailed as follows:
31.12.2019

11 188
31.12.2020

TOTAL

6 870

4 318

11 160

705 596

( 24 692)

1 659 246

1 867 977

31.12.2019

31.12.2020

(1 892 669)

(1 811 526)

(1 345 899)
( 546 770)

(1 892 669)
4 318
(1 345 899)
6 870
( 546 770)
11 188

Assets / (liabilities) recognized in the balance sheet
The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:
(1 811 526)
Total liabilities
(in thousands of euros)
Employees
4 399
(1 275 193)
Pensioners
31.12.2019
Pensioners and survivors
6 761
Employees
( 536 333)
Assets / (liabilities) recognized in the balance sheet
TOTAL
Coverage
Fair value of plan assets
Total liabilities
(1 275 193)
Pensioners
Net assets / (liabilities) in the balance sheet (see Note 31)
( 152 280)
The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:
( 536 333)
Employees
Accumulated actuarial deviations recognized in other comprehensive income
583 396
(in thousands of euros)
Coverage
Fair value of plan assets
According to the policy defined in Note 2.14 - Employee Benefits, the Bank calculates liabilities for pensions and actuarial gains and
Assets / (liabilities) recognized in the balance sheet
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
Net assets / (liabilities) in the balance sheet (see Note 31)
respective pension liabilities.
Total liabilities
Accumulated actuarial deviations recognized in other comprehensive income
Pensioners
As at 31 December 2019, the net balance sheet value includes 30,4 million euros related to NOVO BANCO’s share of the deficit of
According to the policy defined in Note 2.14 - Employee Benefits, the Bank calculates liabilities for pensions and actuarial gains and
Employees
the complementary plan CE. With respect to the base plan and complementary net liabilities on 31 December 2019, the Bank made
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
Coverage
the necessary contribution in early 2020.
respective pension liabilities.
Fair value of plan assets
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
As at 31 December 2019, the net balance sheet value includes 30,4 million euros related to NOVO BANCO’s share of the deficit of
Net assets / (liabilities) in the balance sheet (see Note 31)
According to the policy defined in Note 2.14 - Employee Benefits, the Bank calculates liabilities for pensions and
mortality table results in the following changes in the current value of liabilities determined for past services:
the complementary plan CE. With respect to the base plan and complementary net liabilities on 31 December 2019, the Bank made
actuarial gains and losses half-yearly and evaluates at each balance sheet date and for each plan separately, the
583 396
Accumulated actuarial deviations recognized in other comprehensive income
(in thousands of Euros)
the necessary contribution in early 2020.
recoverability of the excess of the respective pension liabilities.
According to the policy defined in Note 2.14 - Employee Benefits, the Bank calculates liabilities for pensions and actuarial gains and
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the
As at 31 December 2019, the net balance sheet value includes 30,4 million euros related to NOVO BANCO’s share of the
of -0.25% in the
mortality table results in the following changes in the current value of liabilities determined for past services:
respective pension liabilities.
rate used
(in thousands of Euros)
deficit of the complementary plan CE. With respect to the base plan and complementary net liabilities on 31 December
Discount rate
72 833
2019, the Bank made the necessary contribution in early 2020.
As at 31 December 2019, the net balance sheet value includes 30,4 million euros related to NOVO BANCO’s share of the deficit of
the complementary plan CE. With respect to the base plan and complementary net liabilities on 31 December 2019, the Bank made
Salary increase rate
( 18 679)
the necessary contribution in early 2020.
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one
( 49 940)
Pension increase rate
year in the mortality table results in the following changes in the current value of liabilities determined for past services:
As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the
Discount rate
72 833
mortality table results in the following changes in the current value of liabilities determined for past services:
Salary increase rate
Mortality table

Change in the amount of liabilities due to the change:

(1 811 526)
583 396
(1 275 193)
( 536 333)

(1 892 669)
705 596
(1 345 899)
( 546 770)

of +0.25% in the
rate used

of -0.25% in the
rate used

Assumptions

27 028
( 63 877)

Assumptions

31.12.2019

31.12.2020

26 348
( 69 944)

31.12.2019

31.12.2020

of +1 year

31.12.2020

31.12.2019

( 152 280)

1 659 246

1 867 977

of -1 year

( 24 692)

705 596

( 52 114)

( 72 395)

( 16 750)

( 68 028)

( 16 750)

( 72 395)

56 848

53 868

70 931

64 542

77 186

26 348

27 028

77 186

Pension increase rate

Assumptions

56 848

Change in the amount of liabilities due to the change:

( 52 114)

53 868

( 18 679)
(in thousands of Euros)
( 49 940)

of -1 year
The evolution of the actuarial gains and losses in the balance sheet can be analysed as follows:
of -0.25% in the
70 931
Mortality table
rate used

of +1 year
of +0.25% in the
( 69 944)
rate used

31.12.2020

of +1 year
of +0.25% in the
( 63 877)
rate used

31.12.2019

of -1 year
of -0.25% in the
64 542
(in thousands of Euros)
rate used

Discount rate

( 72 395)

77 186

31.12.2020
( 68 028)

31.12.2019

72 833

26 348

56 848

of +1 year

( 16 750)
Salary increase rate
The evolution of the actuarial gains and losses in the balance sheet can be analysed as follows:
Retirement pension liabilities at beginning of exercise
( 52 114)
Pension increase rate
Current service cost
Interest cost
Plan participants' contribution
Mortality table
Retirement pension liabilities at beginning of exercise
Contributions from other entities
Actuarial (gains) / losses in the period:
Current service cost
- Changes in financial assumptions
Interest cost
The evolution of the actuarial gains and losses in the balance sheet can be analysed as follows:
- Experience adjustments (gains) / losses
Plan participants' contribution
Pensions paid by the fund / transfers and once-off bonuses
Contributions from other entities
Amount of the responsabilities transferred to defined contribution plans
Actuarial (gains) / losses in the period:
Early retirement
- Changes in financial assumptions
- Experience adjustments (gains) / losses
Foreign exchange differences and other
Retirement pension liabilities at beginning of exercise
400
Pensions paid by the fund / transfers and once-off bonuses
Current service cost
Retirement pension liabilities at end of exercise
Amount of the responsabilities transferred to defined contribution plans
Interest cost
Early retirement
Plan participants' contribution
Foreign exchange differences and other
Contributions from other entities

of -1 year

( 69 944)

70 931

27 028
1 811 526
53 868

432
23 425
2 577
232

( 63 877)
1 811 526

31.12.2020
of +1 year

31.12.2020

432
99 466
23 425
49 383
2 577
( 72 200)
232
( 54 679)
31 592
99 466
49 383
915
1 811 526
( 72 200)
432
1 892 669
( 54 679)
23 425
31 592
2 577
915
232

1 641 964

31.12.2019
of -1 year

( 18 679)
1 641 964
( 49 940)
(in thousands of Euros)
-
31 121
2 605
64 542
281
-
122 794
31 121
63 084
2 605
(in thousands of Euros)
( 68 896)
281
-
15 670
2 903

31.12.2019

122 794
63 084
1 641 964
( 68 896)
-
1 811 526
-
31 121
15 670
2 605
2 903
281

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Actuarial (gains) / losses in the period:

Retirement pension liabilities at end of exercise

Pensions paid by the fund / transfers and once-off bonuses

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Amount of the responsabilities transferred to defined contribution plans

- Changes in financial assumptions

- Experience adjustments (gains) / losses

Early retirement

Foreign exchange differences and other

1 892 669

99 466

49 383

( 72 200)

( 54 679)

31 592

915

- 333-

1 811 526

122 794

63 084

( 68 896)

- 333-

15 670

2 903

Retirement pension liabilities at end of exercise

1 892 669

1 811 526

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 333-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

Pension plan participants are detailed as follows:

Employees

Pensioners and survivors

TOTAL

Assets / (liabilities) recognized in the balance sheet

Total liabilities

Pensioners

Employees

Coverage

Fair value of plan assets

Net assets / (liabilities) in the balance sheet (see Note 31)

Accumulated actuarial deviations recognized in other comprehensive income

NOVO BANCO

31.12.2020

31.12.2019

4 318

6 870

4 399

6 761

11 188

11 160

(in thousands of euros)

31.12.2020

31.12.2019

(1 892 669)

(1 345 899)

( 546 770)

(1 811 526)

(1 275 193)

( 536 333)

1 867 977

1 659 246

( 24 692)

705 596

( 152 280)

583 396

The application of IAS 19 in terms of liabilities and coverage levels as at 31 December 2020 and 31 December 2019 is as follows:

According to the policy defined in Note 2.14 - Employee Benefits, the Bank calculates liabilities for pensions and actuarial gains and

losses half-yearly and evaluates at each balance sheet date and for each plan separately, the recoverability of the excess of the

respective pension liabilities.

As at 31 December 2019, the net balance sheet value includes 30,4 million euros related to NOVO BANCO’s share of the deficit of

the complementary plan CE. With respect to the base plan and complementary net liabilities on 31 December 2019, the Bank made

the necessary contribution in early 2020.

As at 31 December 2020 and 2019, the sensitivity analysis to a 0.25% change in the assumptions rate used and one year in the

mortality table results in the following changes in the current value of liabilities determined for past services:

Assumptions

Discount rate

Salary increase rate

Pension increase rate

Change in the amount of liabilities due to the change:

31.12.2020

31.12.2019

of +0.25% in the
rate used

of -0.25% in the
rate used

of +0.25% in the
rate used

of -0.25% in the
rate used

(in thousands of Euros)

( 72 395)

26 348

56 848

77 186

( 16 750)

( 52 114)

( 68 028)

27 028

53 868

72 833

( 18 679)

( 49 940)

of +1 year

of -1 year

of +1 year

of -1 year

Mortality table

( 69 944)

70 931

( 63 877)

64 542

The evolution of the actuarial gains and losses in the balance sheet can be analysed as follows:
The evolution of the actuarial gains and losses in the balance sheet can be analysed as follows:

Retirement pension liabilities at beginning of exercise

Current service cost
Interest cost
Plan participants' contribution
Contributions from other entities
Actuarial (gains) / losses in the period:
- Changes in financial assumptions
- Experience adjustments (gains) / losses
Pensions paid by the fund / transfers and once-off bonuses
Amount of the responsabilities transferred to defined contribution plans
Early retirement
Foreign exchange differences and other

(in thousands of Euros)

31.12.2020

31.12.2019

1 811 526

1 641 964

432
23 425
2 577
232

99 466
49 383
( 72 200)
( 54 679)
31 592
915

-
31 121
2 605
281

122 794
63 084
( 68 896)
-
15 670
2 903

Retirement pension liabilities at end of exercise

1 892 669

1 811 526

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
The evolution of the value of the pension funds can be analyzed as follows:

The evolution of the value of the pension funds can be analyzed as follows:

Fair value of fund assets at beginning of exercise

31.12.2020

1 659 246

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

46 131
1 659 246
19 482
26 649
46 131
266 834
19 482
2 577
26 649
1 659 246
( 72 200)
266 834
46 131
( 35 523)
2 577
19 482
912
( 72 200)
26 649
( 35 523)
1 867 977
266 834
912
2 577
1 867 977
( 72 200)
( 35 523)
912
31.12.2019
Unquoted
31.12.2019
Unquoted

1 867 977

NOVO BANCO
- 333-

NOVO BANCO

(in thousands of Euros)

31.12.2019
NOVO BANCO
(in thousands of Euros)
1 615 249
31.12.2019

107 384
1 615 249
27 496
79 888
107 384
-
27 496
2 605
79 888
1 615 249
( 68 896)
-
107 384
-
2 605
27 496
2 904
( 68 896)
79 888
-
1 659 246
-
2 904
2 605
1 659 246
( 68 896)
-
2 904

(in thousands of Euros)

1 659 246
Total

(in thousands of Euros)

59 309

-
59 309
52 836
-
7 733
52 836
1
7 733
59 309
107 166
1
-
60 832
107 166
52 836
287 877
60 832
7 733

222 237
Total
1 000 530
222 237
254 763
1 000 530
13 717
Total
254 763
1
13 717
222 237
107 166
1
1 000 530
60 832
107 166
254 763
1 659 246
60 832
13 717

1
287 877
107 166
(in thousands of Euros)
60 832

1
1 659 246
107 166

60 832

- Share of the net interest on the assets
- Return on assets excluding net interest

Net return from the fund
Fair value of fund assets at beginning of exercise
The evolution of the value of the pension funds can be analyzed as follows:
Net return from the fund
Group contributions
Plan participants’ contributions
Fair value of fund assets at beginning of exercise
Pensions paid by the fund / transfers and once-off bonuses
Group contributions
Net return from the fund
Transfer to Undivided Party
Plan participants’ contributions
- Share of the net interest on the assets
Foreign exchange differences and other
Pensions paid by the fund / transfers and once-off bonuses
- Return on assets excluding net interest
Transfer to Undivided Party
Fund balance at the end of the year
Group contributions
Foreign exchange differences and other
Plan participants’ contributions
Fund balance at the end of the year
Pensions paid by the fund / transfers and once-off bonuses
The assets of the pension funds can be analyzed as follows:
Transfer to Undivided Party
The assets of the pension funds can be analyzed as follows:
Foreign exchange differences and other
The assets of the pension funds can be analyzed as follows:
Fund balance at the end of the year

Equity instruments

39 034

The assets of the pension funds can be analyzed as follows:

Debt instruments
Equity instruments
Investment funds
Debt instruments
Structured debt
Investment funds
Derivatives
Structured debt
Equity instruments
Real estate properties
Derivatives
Debt instruments
Cash and cash equivalents
Real estate properties
Investment funds
Total
Cash and cash equivalents
Structured debt

Derivatives
Total
Real estate properties

Quoted

1 093 577
39 034
306 217
1 093 577
-
306 217
-
-
39 034
-
-
1 093 577
-
-
306 217
1 438 828
-
-

-
1 438 828
-

31.12.2020
Unquoted
31.12.2020
Unquoted

31.12.2020
Unquoted

-
-
66 761
-
-
66 761
-
-
-
115 855
-
-
246 533
115 855
66 761
429 149
246 533
-

-
429 149
115 855

Total

Quoted

39 034

Total
1 093 577
39 034
372 978
1 093 577
-
Total
372 978
-
-
39 034
115 855
-
1 093 577
246 533
115 855
372 978
1 867 977
246 533
-

-
1 867 977
115 855

Quoted

162 928

1 000 530
162 928
201 927
1 000 530
5 984
201 927
-
5 984
162 928
-
-
1 000 530
-
-
201 927
1 371 369
-
5 984

-
1 371 369
-

Quoted

31.12.2019
Unquoted

The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as follows:

Cash and cash equivalents

246 533

The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as follows:

Total
Real estate properties

287 877
(in thousands of Euros)
The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as
follows:
Total
The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as follows:
Real estate properties

75 851
75 851

63 630
63 630

31.12.2020

31.12.2019

1 659 246

1 438 828

1 867 977

1 371 369

429 149

75 851

63 630

The evolution of the actuarial gains in the balance sheet can be analysed as follows:

Total

Real estate properties

The evolution of the actuarial gains in the balance sheet can be analysed as follows:
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period

Total

Actuarial (gains) / losses in the period:
- Changes in assumptions
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
The evolution of the actuarial gains in the balance sheet can be analysed as follows:
- Financial assumptions
Actuarial (gains) / losses in the period:
- Plan assets return (excluding net interest)
401
- Changes in assumptions
Other
- Financial assumptions

- Plan assets return (excluding net interest)
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Other
Actuarial (gains) / losses in the period:
- Changes in assumptions

Accumulated actuarial losses recognized in other comprehensive income at the end of the period

- Financial assumptions

63 630

31.12.2020

(in thousands of Euros)

75 851

31.12.2019

(in thousands of Euros)

31.12.2020

63 630

31.12.2019
75 851

583 396

63 630

31.12.2020

(in thousands of Euros)

477 370
75 851
31.12.2019

31.12.2020

583 396
99 466
22 734
(in thousands of Euros)
-
99 466
22 734
705 596
583 396
-

477 370
122 794
( 16 804)
36
122 794
( 16 804)
583 396
477 370
36

31.12.2019

The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:

- Plan assets return (excluding net interest)

The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:

31.12.2020

31.12.2019

Accumulated actuarial losses recognized in other comprehensive income at the end of the period

583 396

705 596

The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:

Other

Current service cost

Net interest

Current service cost

Cost with post-employment benefits

Net interest

Cost with post-employment benefits

Current service cost

Net interest

Cost with post-employment benefits

705 596

99 466

22 734

583 396

122 794

( 16 804)

(in thousand of Euros)

31.12.2020

31.12.2019

(in thousand of Euros)

3 625

31.12.2020

4 375

31.12.2019

3 625

432

3 943

432

4 375

3 943

432

3 943

4 375

3 625

- 334-

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

107 166

60 832
(in thousands of Euros)
287 877

1 659 246

60 832

31.12.2019

63 630

75 851

31.12.2020

31.12.2019

63 630

31.12.2020

(in thousands of Euros)

75 851
31.12.2019
75 851
477 370

(in thousands of Euros)

31.12.2020

31.12.2019

99 466
22 734
-
583 396
705 596

99 466
22 734
-

122 794
( 16 804)
36
477 370
583 396

122 794
( 16 804)
36

NOVO BANCO

(in thousands of Euros)

NOVO BANCO

31.12.2019

1 615 249

107 384

(in thousands of Euros)

27 496

31.12.2019

79 888

1 615 249

2 605

107 384

( 68 896)

27 496

79 888

2 904

1 659 246

2 605

( 68 896)

2 904

31.12.2020

1 659 246

46 131

19 482

31.12.2020

26 649

266 834

1 659 246

2 577

46 131

( 72 200)

19 482

( 35 523)

26 649

912

266 834

1 867 977

2 577

( 72 200)

( 35 523)

912

The evolution of the value of the pension funds can be analyzed as follows:

Fair value of fund assets at beginning of exercise

Net return from the fund

The evolution of the value of the pension funds can be analyzed as follows:

- Share of the net interest on the assets

- Return on assets excluding net interest

Group contributions

Fair value of fund assets at beginning of exercise

Plan participants’ contributions

Net return from the fund

Pensions paid by the fund / transfers and once-off bonuses

Transfer to Undivided Party

- Share of the net interest on the assets

Foreign exchange differences and other

- Return on assets excluding net interest

Group contributions

Fund balance at the end of the year

Plan participants’ contributions

Pensions paid by the fund / transfers and once-off bonuses

Transfer to Undivided Party

The assets of the pension funds can be analyzed as follows:

Foreign exchange differences and other

Fund balance at the end of the year

Equity instruments

The assets of the pension funds can be analyzed as follows:

Debt instruments

Investment funds

Structured debt

Derivatives

Equity instruments

Real estate properties

Debt instruments

Cash and cash equivalents
Investment funds

Total
Structured debt

Derivatives

31.12.2020

Unquoted

Quoted

39 034

1 093 577

1 867 977

31.12.2019

(in thousands of Euros)

1 659 246

Total

Quoted

Unquoted

Total

162 928

1 000 530

59 309

222 237

(in thousands of Euros)

1 000 530

306 217

31.12.2020

66 761

201 927

31.12.2019

52 836

254 763

Quoted

Unquoted

Total

Quoted

5 984

Unquoted

7 733

Total

13 717

115 855

246 533
66 761

429 149
-

39 034

1 093 577

372 978

39 034

115 855

1 093 577

246 533
372 978

1 867 977
-

39 034

1 093 577

-
306 217

1 438 828
-

162 928

1 000 530

-
201 927

1 371 369
5 984

59 309

222 237

107 166

1 000 530

60 832
52 836

60 832
254 763

287 877
7 733

1 659 246
13 717

The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as follows:

115 855

246 533

115 855

246 533

1 438 828

429 149

1 867 977

1 371 369

31.12.2020

Real estate properties

Cash and cash equivalents

Total

Real estate properties

The assets of the pension funds used by the Bank or representative of securities issued by the Bank are detailed as follows:
The evolution of the actuarial gains in the balance sheet can be analysed as follows:

63 630

Total

(in thousands of Euros)

75 851

The evolution of the actuarial gains in the balance sheet can be analysed as follows:

Real estate properties

Total

Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period

63 630

583 396

Actuarial (gains) / losses in the period:
The evolution of the actuarial gains in the balance sheet can be analysed as follows:
- Changes in assumptions
- Financial assumptions

- Plan assets return (excluding net interest)
Other
Accumulated actuarial losses recognized in other comprehensive income at the beginning of the period
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
Actuarial (gains) / losses in the period:
- Changes in assumptions
- Financial assumptions

- Plan assets return (excluding net interest)
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
Other
(in thousand of Euros)
Accumulated actuarial losses recognized in other comprehensive income at the end of the period
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed
as follows:
Current service cost
Net interest
The costs of retirement pensions and health benefits for the years ended 31 December 2020 and 2019 can be analyzed as follows:
(in thousand of Euros)

432
3 943

-
3 625

31.12.2020

31.12.2019

583 396

705 596

Cost with post-employment benefits

4 375

3 625

Current service cost
Net interest

Cost with post-employment benefits

31.12.2020

31.12.2019

432
3 943

4 375

-
3 625

3 625

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
The evolution of net assets/ (liabilities) on balance sheet may be analyzed as follows:

The evolution of net assets/ (liabilities) on balance sheet may be analyzed as follows:

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
At the beginning of the exercise

Cost for period
Actuarial gains / (losses) recognized in other comprehensive income
The evolution of net assets/ (liabilities) on balance sheet may be analyzed as follows:
Contributions made in the period
Undivided transfer and reduction of responsabilities
Other

31.12.2020

( 152 280)

( 4 375)
( 122 200)
266 834
19 156
( 31 827)

31.12.2020

NOVO BANCO
- 334-

(in thousands of Euros)

31.12.2019
- 334-
NOVO BANCO
( 26 715)

( 3 625)
( 106 026)
-
-
( 15 914)

31.12.2019

(in thousands of Euros)

At the end of the exercise
At the beginning of the exercise

( 24 692)
( 152 280)

( 152 280)
( 26 715)

Cost for period
In 2020, the value of early retirements was Euro 31.6 million (31 December 2019: Euro 15.7 million), which fall within the bank's
Actuarial gains / (losses) recognized in other comprehensive income
restructuring process and, as such, they were recognized against the use of the provision for restructuring (see Note 30). These
Contributions made in the period
amounts are considered in Others in the previous table.
Undivided transfer and reduction of responsabilities
In 2020, the value of early retirements was Euro 31.6 million (31 December 2019: Euro 15.7 million), which fall within the
Other
The summary of the last five years of the funds' liabilities and balance, as well as experience gains and losses, is analyzed as follows:
bank's restructuring process and, as such, they were recognized against the use of the provision for restructuring (see
At the end of the exercise
(in thousands of Euros)
Note 30). These amounts are considered in Others in the previous table.
In 2020, the value of early retirements was Euro 31.6 million (31 December 2019: Euro 15.7 million), which fall within the bank's
Retirement pension liabilities
restructuring process and, as such, they were recognized against the use of the provision for restructuring (see Note 30). These
The summary of the last five years of the funds' liabilities and balance, as well as experience gains and losses, is analyzed
amounts are considered in Others in the previous table.
Funds balance
as follows:
(Under) / overfunding of liabilities
The summary of the last five years of the funds' liabilities and balance, as well as experience gains and losses, is analyzed as follows:
(in thousands of Euros)

( 4 375)
( 122 200)
266 834
19 156
( 31 827)

( 3 625)
( 106 026)
-
-
( 15 914)

( 152 280)

( 24 692)

(1 542 016)

(1 892 669)

(1 629 305)

(1 811 526)

(1 641 964)

1 614 543

1 867 977

1 659 246

1 523 694

1 615 249

( 152 280)

( 18 322)

( 24 692)

( 26 715)

( 14 762)

31.12.2017

31.12.2019

31.12.2018

31.12.2020

31.12.2016

(Gains) / losses on experience adjustments in retirement pension liabilities

(Gains) / losses on experience adjustments in plan assets
Retirement pension liabilities

49 383

31.12.2020

( 26 649)
(1 892 669)

63 084

31.12.2019

( 79 888)
(1 811 526)

18 400

31.12.2018

52 175
(1 641 964)

14 859

31.12.2017

( 91 005)
(1 629 305)

11 667

31.12.2016

42 118
(1 542 016)

Funds balance

1 867 977

1 659 246

1 615 249

1 614 543

1 523 694

The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
(Under) / overfunding of liabilities
following table shows the temporal detail of the estimated benefits to be paid:
(Gains) / losses on experience adjustments in retirement pension liabilities

( 152 280)

( 18 322)

( 24 692)

( 14 762)

( 26 715)

49 383

14 859

63 084

18 400

(Gains) / losses on experience adjustments in plan assets

( 26 649)

( 79 888)

Up to 1
year

From 1 to
2 years

52 175

From 2 to 5
years

( 91 005)

11 667
(in thousands of Euros)
More than 5
42 118
years

Estimated amount of benefits payable
The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
following table shows the temporal detail of the estimated benefits to be paid:
Career bonuses
(in thousands of Euros)
As at 31 December 2020, the liabilities assumed by the Bank amounted to Euro 7,465 thousand, corresponding to the liabilities for
More than 5
past services subjacent to the career bonuses, as described in Note 2.14 – Employee benefits (31 December 2019: Euro 6,981
years
thousand) (see Note 31).
Estimated amount of benefits payable
As at 31 December 2020, the costs recognized with career bonuses were Euro 944 thousand (31 December 2019: Euro 849

From 2 to 5
years

From 1 to
2 years

Up to 1
year

1 856 158

219 739

73 018

73 253

73 018

73 253

402

thousand) (see Note 14).

Career bonuses

thousand) (see Note 31).

thousand) (see Note 14).

As at 31 December 2020, the liabilities assumed by the Bank amounted to Euro 7,465 thousand, corresponding to the liabilities for

past services subjacent to the career bonuses, as described in Note 2.14 – Employee benefits (31 December 2019: Euro 6,981

As at 31 December 2020, the costs recognized with career bonuses were Euro 944 thousand (31 December 2019: Euro 849

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 335-

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 335-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The evolution of net assets/ (liabilities) on balance sheet may be analyzed as follows:

At the beginning of the exercise

Cost for period

Actuarial gains / (losses) recognized in other comprehensive income

Contributions made in the period

Undivided transfer and reduction of responsabilities

Other

At the end of the exercise

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

( 152 280)

( 4 375)

( 122 200)

266 834

19 156

( 31 827)

( 26 715)

( 3 625)

( 106 026)

( 15 914)

( 24 692)

( 152 280)

In 2020, the value of early retirements was Euro 31.6 million (31 December 2019: Euro 15.7 million), which fall within the bank's

restructuring process and, as such, they were recognized against the use of the provision for restructuring (see Note 30). These

amounts are considered in Others in the previous table.

The summary of the last five years of the funds' liabilities and balance, as well as experience gains and losses, is analyzed as follows:

Retirement pension liabilities

Funds balance

31.12.2020

31.12.2019

31.12.2018

31.12.2017

31.12.2016

(in thousands of Euros)

(1 892 669)

(1 811 526)

(1 641 964)

(1 629 305)

(1 542 016)

1 867 977

1 659 246

1 615 249

1 614 543

1 523 694

(Under) / overfunding of liabilities

( 24 692)

( 152 280)

( 26 715)

( 14 762)

( 18 322)

(Gains) / losses on experience adjustments in retirement pension liabilities

49 383

63 084

(Gains) / losses on experience adjustments in plan assets

( 26 649)

( 79 888)

18 400

52 175

14 859

( 91 005)

11 667

42 118

The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16
years). The following table shows the temporal detail of the estimated benefits to be paid:
The average duration of defined benefit plan liabilities is approximately 16 years (31 December 2019: approximately 16 years). The
following table shows the temporal detail of the estimated benefits to be paid:

Up to 1
year

From 1 to
2 years

From 2 to 5
years

(in thousands of Euros)
More than 5
years

Estimated amount of benefits payable

73 018

73 253

219 739

1 856 158

Career bonuses
As at 31 December 2020, the liabilities assumed by the Bank amounted to Euro 7,465 thousand, corresponding to the liabilities for
past services subjacent to the career bonuses, as described in Note 2.14 – Employee benefits (31 December 2019: Euro 6,981
Career bonuses
thousand) (see Note 31).

As at 31 December 2020, the liabilities assumed by the Bank amounted to Euro 7,465 thousand, corresponding to
As at 31 December 2020, the costs recognized with career bonuses were Euro 944 thousand (31 December 2019: Euro 849
the liabilities for past services subjacent to the career bonuses, as described in Note 2.14 – Employee benefits (31
thousand) (see Note 14).
December 2019: Euro 6,981 thousand) (see Note 31).

As at 31 December 2020, the costs recognized with career bonuses were Euro 944 thousand (31 December 2019: Euro
849 thousand) (see Note 14).

NOTE 16 – Other administrative expenses

NOTE 16 – OTHER ADMINISTRATIVE EXPENSES
The breakdown of this caption is as follows:
The breakdown of this caption is as follows:

NOTE 16 – OTHER ADMINISTRATIVE EXPENSES

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019*

The breakdown of this caption is as follows:

Rentals
Advertising
Communication
Maintenance and repairs expenses
Travelling and representation
Rentals
Transportation of valuables
Advertising
Insurance
Communication
IT services
Maintenance and repairs expenses
Independent work
Travelling and representation
Temporary work
Transportation of valuables
Electronic payment systems
Insurance
Legal costs
IT services
Consultancy and audit fees
Independent work
Water, energy and fuel
Temporary work
Consumables
Electronic payment systems
Other costs
Legal costs
Consultancy and audit fees
Water, energy and fuel
Consumables
Other costs

(in thousands of Euros)

31.12.2020

31.12.2019*

2 246
5 799
9 360
8 523
1 210
2 246
4 354
5 799
3 020
9 360
43 196
8 523
2 080
1 210
1 287
4 354
10 593
3 020
4 699
43 196
23 589
2 080
3 053
1 287
1 404
10 593
19 618
4 699
144 031
23 589
3 053
1 404
19 618

144 031

2 986
7 380
9 212
8 750
2 754
2 986
4 063
7 380
2 517
9 212
43 499
8 750
3 015
2 754
1 477
4 063
9 773
- 335-
2 517
6 874
43 499
23 625
3 015
3 543
1 477
1 468
9 773
22 061
6 874
152 997
23 625
3 543
1 468
22 061

152 997

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The Other costs item includes, among others, training costs and costs with services provided by the Complementary Groupings of
Companies (CGC) in which NOVO BANCO participates.

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020
The Other costs item includes, among others, training costs and costs with services provided by the Complementary
The rental and rental caption includes, on 31 December 2020, an amount of Euro 196 thousand related to short-term operating lease
Groupings of Companies (CGC) in which NOVO BANCO participates.
contracts, as described in note 2.13.
The Other costs item includes, among others, training costs and costs with services provided by the Complementary Groupings of
Companies (CGC) in which NOVO BANCO participates.
The fees invoiced during financial years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
The rental and rental caption includes, on 31 December 2020, an amount of Euro 196 thousand related to short-term
Portuguese Companies Code (Código das Sociedades Comerciais), have the following breakdown:
operating lease contracts, as described in note 2.13.
The rental and rental caption includes, on 31 December 2020, an amount of Euro 196 thousand related to short-term operating lease
contracts, as described in note 2.13.
The fees invoiced during financial years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in
The fees invoiced during financial years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
article 508-F of the Portuguese Companies Code (Código das Sociedades Comerciais), have the following breakdown:
Portuguese Companies Code (Código das Sociedades Comerciais), have the following breakdown:

(in thousands of Euros)
31.12.2019

31.12.2020

Statutory audit of annual accounts
Other reliability assurance services
Other services

2 176
327
411

1 471
947
-

Valor total dos serviços faturados

Statutory audit of annual accounts
Other reliability assurance services
Other services

NOTE 17 – CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

Valor total dos serviços faturados

This caption on 31 December 2020 and 2019 is analyzed as follows:

2 914

31.12.2020

(in thousands of Euros)
31.12.2019

2 418

2 176
327
411

2 914

1 471
947
-

2 418

NOTE 17 – CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES

Contribution to the Fundo Único de Resolução
403
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

This caption on 31 December 2020 and 2019 is analyzed as follows:

31.12.2020

22 201
12 528
37

(In thousands of Euros)

31.12.2019*

22 412
11 996
40

(In thousands of Euros)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

Contribution to the Fundo Único de Resolução

Contribution to the Fundo de Resolução Nacional

Contribution to the Fundo de Garantia de Depósitos

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

22 201

12 528

34 766

22 412

11 996

34 448

31.12.2020

34 766

31.12.2019*

34 448

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 336-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOTE 16 – OTHER ADMINISTRATIVE EXPENSES

The breakdown of this caption is as follows:

Rentals

Advertising

Communication

Maintenance and repairs expenses

Travelling and representation

Transportation of valuables

Insurance

IT services

Independent work

Temporary work

Electronic payment systems

Legal costs

Consultancy and audit fees

Water, energy and fuel

Consumables

Other costs

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019*

2 246

5 799

9 360

8 523

1 210

4 354

3 020

43 196

2 080

1 287

10 593

4 699

23 589

3 053

1 404

19 618

2 986

7 380

9 212

8 750

2 754

4 063

2 517

43 499

3 015

1 477

9 773

6 874

23 625

3 543

1 468

22 061

144 031

152 997

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The Other costs item includes, among others, training costs and costs with services provided by the Complementary Groupings of

Companies (CGC) in which NOVO BANCO participates.

The rental and rental caption includes, on 31 December 2020, an amount of Euro 196 thousand related to short-term operating lease
contracts, as described in note 2.13.

The fees invoiced during financial years 2020 and 2019 by the Statutory Audit Firm, according to that laid down in article 508-F of the
Portuguese Companies Code (Código das Sociedades Comerciais), have the following breakdown:

31.12.2020

(in thousands of Euros)
31.12.2019

Statutory audit of annual accounts
Other reliability assurance services
Other services

NOTE 17 – Contributions to resolution funds and deposit
guarantee

Valor total dos serviços faturados

2 914

2 418

2 176
327
411

1 471
947
-

NOTE 17 – CONTRIBUTIONS TO RESOLUTION FUNDS AND DEPOSIT GUARANTEE SCHEMES
This caption on 31 December 2020 and 2019 is analyzed as follows:

This caption on 31 December 2020 and 2019 is analyzed as follows:

Contribution to the Fundo Único de Resolução
Contribution to the Fundo de Resolução Nacional
Contribution to the Fundo de Garantia de Depósitos

(In thousands of Euros)

31.12.2020

31.12.2019*

22 201
12 528
37

34 766

22 412
11 996
40

34 448

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

NOTE 18 – Earnings per share
NOTE 18 – EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the
The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted average
weighted average number of ordinary shares in circulation during the financial year / period.
number of ordinary shares in circulation during the financial year / period.

NOVO BANCO

Net profit / (loss) attributable to shareholder of the Bank

Weighted average number of common shares outstanding (thousands)

Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

(In thousands of Euros)

31.12.2020

31.12.2019*

(1 374 246)

(1 087 584)

9 800 000

(0,14)

(0,11)

- 336-
(0,10)

Diluted earnings per share
The diluted earnings per share are calculated considering the net profit attributable to the shareholders of the Bank and the weighted
average number of ordinary shares in circulation, adjusted for the effects of all potential dilutive ordinary shares.
Diluted earnings per share
The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.
The diluted earnings per share are calculated considering the net profit attributable to the shareholders of the Bank and
the weighted average number of ordinary shares in circulation, adjusted for the effects of all potential dilutive ordinary
shares.
NOTE 19 – CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS

As at 31 December 2020 and 2019, this caption is analysed as follows:
The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.

(in thousands of Euros)

31.12.2020

31.12.2019

Cash

Demand Deposits in central banks

NOTE 19 – Cash, cash balances at central banks and
other demand deposits

Bank of Portugal
Other Central Banks

2 289 339
3 458

142 325

174 156

1 387 250
21 658

As at 31 December 2020 and 2019, this caption is analysed as follows:

Deposits in other credit institutions in the country

Repayable on demand
Uncollected checks

Deposits with banks abroad
Repayable on demand

2 292 797

1 408 908

13 250
50 994

64 244

25 502

11 850
50 915

62 765

28 997

2 524 868

1 674 826

404

Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the average amount
of the deposits with Bank of Portugal over said period. The balance of the account with Bank of Portugal as at 31 December 2020

was included in the observation period running from 16 December 2020 to 26 January 2021.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 337-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOVO BANCO

(In thousands of Euros)

31.12.2020

31.12.2019*

(1 374 246)

(1 087 584)

9 800 000

(0,14)

(0,11)

(0,10)

NOTE 18 – EARNINGS PER SHARE

Basic earnings per share

The basic earnings per share are calculated dividing the net profit attributable to the shareholders of the Bank by the weighted average

number of ordinary shares in circulation during the financial year / period.

Net profit / (loss) attributable to shareholder of the Bank

Weighted average number of common shares outstanding (thousands)

Basic earnings per share attributable to shareholders of NOVO BANCO (in Euros)

Basic earnings per share from continuing activities attributable to shareholders of NOVO BANCO (in Euros)

* Pro-forma considering the transfer of the Spanish Branch to discontinued operations, which occurred in the third quarter of 2020

The diluted earnings per share do not differ from the basic earnings per share, since there are no dilutive effects.

NOTE 19 – CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS

As at 31 December 2020 and 2019, this caption is analysed as follows:

Cash

Demand Deposits in central banks

Bank of Portugal
Other Central Banks

Deposits in other credit institutions in the country

Repayable on demand
Uncollected checks

Deposits with banks abroad
Repayable on demand

(in thousands of Euros)

31.12.2020

31.12.2019

142 325

174 156

2 289 339
3 458

1 387 250
21 658

2 292 797

1 408 908

13 250
50 994

64 244

25 502

11 850
50 915

62 765

28 997

2 524 868

1 674 826

The caption Demand Deposits with Bank of Portugal includes mandatory deposits to comply with the minimum legal cash reserve
requirements in an amount of Euro 251.8 million (31 December 2019: Euro 237,8 million). According to the European Central Bank
Regulation (EU) No. 1358/2011, of 14 December 2011, minimum cash requirements of demand deposits with Bank of Portugal are
interest-bearing and correspond to 1% of the deposits and debt certificates maturing in less than 2 years, after excluding from these
The caption Demand Deposits with Bank of Portugal includes mandatory deposits to comply with the minimum legal
the deposits of institutions subject to the European System of Central Banks minimum reserve requirements. As at 31 December
cash reserve requirements in an amount of Euro 251.8 million (31 December 2019: Euro 237,8 million). According to the
2020 and 2019, the average interest rate on these deposits was null.
European Central Bank Regulation (EU) No. 1358/2011, of 14 December 2011, minimum cash requirements of demand
Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the average amount
deposits with Bank of Portugal are interest-bearing and correspond to 1% of the deposits and debt certificates maturing
of the deposits with Bank of Portugal over said period. The balance of the account with Bank of Portugal as at 31 December 2020
in less than 2 years, after excluding from these the deposits of institutions subject to the European System of Central
was included in the observation period running from 16 December 2020 to 26 January 2021.
Banks minimum reserve requirements. As at 31 December 2020 and 2019, the average interest rate on these deposits
was null.

Compliance with minimum cash requirements, for a given observation period, is monitored taking into account the
average amount of the deposits with Bank of Portugal over said period. The balance of the account with Bank of
Portugal as at 31 December 2020 was included in the observation period running from 16 December 2020 to 26
January 2021.

NOVO BANCO

NOTE 20 – Financial assets and liabilities held for trading

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
NOTE 20 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

- 337-

As at 31 December 2020 and 2019, this caption is analysed as follows:
As at 31 December 2020 and 2019, this caption is analysed as follows:

Financial assets held for trading

Securities

Securities held for trading

Bonds and other fixed income securities

Issued by government and public entities

Derivatives

Derivatives held for trading with positive fair value
Fair value option derivatives with positive fair value

Financial liabilities held for trading

Derivatives

Derivatives held for trading with negative fair value

Securities held for trading

(in thousands of Euros)

31.12.2020

31.12.2019

267 016
267 016

388 311
-
388 311

655 327

254 848
254 848

419 895
74 093
493 988

748 836

554 343

544 400

In accordance with the accounting policy described in Note 2.4, securities held for trading are those acquired to be traded in the short-
term regardless of their maturity.

As at 31 December 2020 and 2019, the analysis of the securities held for trading, by maturity, is as follows

405

From one to five years
More than five years

(in thousands of Euros)

31.12.2020

31.12.2019

3 734
263 282

267 016

117 227
137 621

254 848

A breakdown of the securities held for trading, by fair value hierarchy, is presented in Note 37.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 338-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOTE 20 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

As at 31 December 2020 and 2019, this caption is analysed as follows:

Financial assets held for trading

Securities

Securities held for trading

Bonds and other fixed income securities

Issued by government and public entities

Derivatives

Derivatives held for trading with positive fair value
Fair value option derivatives with positive fair value

Financial liabilities held for trading

Derivatives

Derivatives held for trading with negative fair value

Securities held for trading

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

267 016

388 311
-
388 311

655 327

254 848

419 895
74 093
493 988

748 836

554 343

544 400

In accordance with the accounting policy described in Note 2.4, securities held for trading are those acquired to be
Securities held for trading
traded in the short-term regardless of their maturity.
In accordance with the accounting policy described in Note 2.4, securities held for trading are those acquired to be traded in the short-
term regardless of their maturity.
As at 31 December 2020 and 2019, the analysis of the securities held for trading, by maturity, is as follows

As at 31 December 2020 and 2019, the analysis of the securities held for trading, by maturity, is as follows

From one to five years
More than five years

(in thousands of Euros)

31.12.2020

31.12.2019

3 734
263 282

267 016

117 227
137 621

254 848

A breakdown of the securities held for trading, by fair value hierarchy, is presented in Note 37.

NOVO BANCO

Derivatives
Derivatives

As at 31 December 2020 and 2019, this caption is analysed as follows:
As at 31 December 2020 and 2019, this caption is analysed as follows:

31.12.2020

(in thousands of Euros)

31.12.2019

Notional

Fair value

Asset

Liabilities

Notional

Fair value

Asset

Liabilities

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

578 826
562 420

1 010 248
1 010 906

21 390
21 390

168 095
167 870

6 758 221
6 759 223

-
-

89 767
165 221

30 467
30 467

662 425
684 421

2 399
2 399

23 668

7 893

1 499

5 488

21 363

10 743

10 706

702 690
704 147

1 060 009
1 065 566

22 951
22 947

219 866
192 493

5 307

5 574

1 230

540

21 875

21 870

6 240

5 836

57 273

45 450

34 652

33 820

318 578

499 616

1 084

3 961

7 391 231
7 392 292

400 000
-

93 846
91 073

349 152

499 562

2 821

1 177
- 338-

966

893

319 662

503 577

352 939

501 632

2 337

2 204

9 039

11 376

3 096

5 300

152 294
152 294

710 616
742 699

2 883
2 883

3 988

3 739

28 315

32 303

5 167

8 906

388 311

554 343

419 895

544 400

Trading derivatives

Exchange rate contracts

Forward
- acquisition
- sales
Currency Swaps
- acquisition
- sales
Currency Interest Rate Swaps
- acquisition
- sales
Currency Options
- acquisition
- sales

Interest rate contracts
Interest Rate Swaps
- acquisition
- sales
Swaption - Interest Rate Options
- acquisition
- sales
Interest Rate Caps & Floors
- acquisition
- sales

Stock / index contracts
Equity / Index Swaps
- acquisition
- sales
Equity / Index Options
- acquisition
- sales

Default risk contracts
Credit Default Swaps
- acquisition
- sales

Economic hedge derivatives

Interest rate contracts
Interest Rate Swaps
- acquisition
- sales

-
-

171 371
171 371

74 093

a) Derivatives traded on organized markets, the market value of which is settled daily against the margin account (see Note 31)

406

calculation of the CVA on an individual basis is based on the determination of the exposure using stochastic methods (Expected

Positive Exposure) which translates into the calculation of the expected fair value exposure that each derivative is likely to assume

over its remaining life. Subsequently, are applied to the exposure determined, an expected loss and a recovery rate.

In 2020, the Bank recognized a loss of Euro 289 thousand related to the CVA of derivative instruments (31 December 2019: loss of

Euro 1,403 thousand).

The Bank chooses not to register the Debt Valuation Adjustment (DVA), that represents the market value of Bank own credit risk of

a specific negative exposure to a counterparty, reflecting a prudent perspective of application of this regulation. It should be noted

that the exposure potentially subject to DVA is controlled on a monthly basis and has assumed immaterial values.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 339-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The Bank calculates the Credit Valuation Adjustment (CVA) for derivative instruments in accordance with the following
methodology: (i) Portfolio basis – the calculation of the CVA corresponds to the application, to the aggregate exposure
of each counterpart, of an expected loss and a recovery rate, considering the average duration period estimated for
each exposure; (ii) Individual basis – the calculation of the CVA on an individual basis is based on the determination
of the exposure using stochastic methods (Expected Positive Exposure) which translates into the calculation of the
expected fair value exposure that each derivative is likely to assume over its remaining life. Subsequently, are applied to
the exposure determined, an expected loss and a recovery rate.

In 2020, the Bank recognized a loss of Euro 289 thousand related to the CVA of derivative instruments (31 December
2019: loss of Euro 1,403 thousand).

The Bank chooses not to register the Debt Valuation Adjustment (DVA), that represents the market value of Bank own
credit risk of a specific negative exposure to a counterparty, reflecting a prudent perspective of application of this
regulation. It should be noted that the exposure potentially subject to DVA is controlled on a monthly basis and has
NOVO BANCO
assumed immaterial values.

As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:
As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:

Derivatives held for negotiation

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

Fair value option derivatives

More than 5 years

31.12.2020

Notional

Assets

Liabilities

Fair Value (net)

(in thousands of Euros)

31.12.2019

Notional

Assets

Liabilities

Fair Value (net)

1 596 056
821 366
2 329 447
4 574 969
9 321 838

1 596 370
805 003
2 347 986
4 654 958
9 404 317

32
8 725
( 23 383)
( 151 406)
( 166 032)

2 094 166
1 053 257
2 110 078
5 498 885
10 756 386

1 923 639
843 825
2 097 178
5 501 752
10 366 394

( 647)
16 408
1 526
( 141 792)
( 124 505)

-
-

171 371
171 371

74 093
74 093

Credit Support Annex (CSA)
NOVO BANCO has several contracts negotiated with counterparties with which it trades derivatives on the Over-the-counter market.
The CSAs take the form of collateral agreements established between two parties negotiating over-the-counter derivatives with each
Credit Support Annex (CSA)
other, with the main objective of providing protection against credit risk, defining for that purpose rules regarding collateral. Derivative
transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have minimum risk margin that may
NOVO BANCO has several contracts negotiated with counterparties with which it trades derivatives on the Over-the-
change according to the ratings of the parties.
counter market. The CSAs take the form of collateral agreements established between two parties negotiating over-
the-counter derivatives with each other, with the main objective of providing protection against credit risk, defining for
NOTE 21 – FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS, DESIGNATED AT FAIR
that purpose rules regarding collateral. Derivative transactions are regulated by the International Swaps and Derivatives
VALUE THROUGH PROFIT OR LOSS, AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME AND AT AMORTISED
Association (ISDA) and have minimum risk margin that may change according to the ratings of the parties.
COST

As at 31 December 2020 and 2019, this caption is analysed as follows:

NOTE 21 – Financial assets mandatorily at fair value
through profit or loss, designated at fair value through
profit or loss, at fair value through other comprehensive
income and at amortised cost

Fair value through
other comprehensive
income

Mandatorily at fair value
through profit and loss

Loans and advances to customers

Loans and advances to banks

Fair value
changes *

Amortised cost

31.12.2020

21 685 258

Securities

2 445 605

2 873 753

7 813 584

245 472

59 847

1 129

Total

21 745 105

13 134 071

245 472

2 445 605

7 813 584

24 804 483

60 976

35 124 648

(in thousands of Euros)

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 22)
As at 31 December 2020 and 2019, this caption is analysed as follows:

407

Securities

Loans and advances to banks

Loans and advances to customers

Mandatorily at fair value
through profit and loss

Fair value through
other comprehensive
income

Amortised cost

Fair value
changes *

Total

31.12.2019

(in thousands of Euros)

3 044 724

8 758 131

2 392 843

495 252

23 154 148

49 884

14 195 698

495 252

23 204 032

3 044 724

8 758 131

26 042 243

49 884

37 894 982

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 22)

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 340-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

As at 31 December 2020 and 2019, the analysis of the derivatives held for trading by maturity period is as follows:

Derivatives held for negotiation

Up to 3 months

From 3 months to 1 year

From 1 to 5 years

More than 5 years

Fair value option derivatives

More than 5 years

31.12.2020

Notional

31.12.2019

Notional

Assets

Liabilities

Assets

Liabilities

Fair Value (net)

(in thousands of Euros)

1 596 056

821 366

2 329 447

4 574 969

9 321 838

1 596 370

805 003

2 347 986

4 654 958

9 404 317

8 725

( 23 383)

( 151 406)

( 166 032)

2 094 166

1 053 257

2 110 078

5 498 885

1 923 639

843 825

2 097 178

5 501 752

10 756 386

10 366 394

( 647)

16 408

1 526

( 141 792)

( 124 505)

171 371

74 093

Credit Support Annex (CSA)

NOVO BANCO has several contracts negotiated with counterparties with which it trades derivatives on the Over-the-counter market.

The CSAs take the form of collateral agreements established between two parties negotiating over-the-counter derivatives with each

other, with the main objective of providing protection against credit risk, defining for that purpose rules regarding collateral. Derivative
transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have minimum risk margin that may
change according to the ratings of the parties.

NOTE 21 – FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS, DESIGNATED AT FAIR
VALUE THROUGH PROFIT OR LOSS, AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME AND AT AMORTISED
COST

As at 31 December 2020 and 2019, this caption is analysed as follows:

Securities

Loans and advances to banks

Loans and advances to customers

Mandatorily at fair value
through profit and loss

Fair value through
other comprehensive
income

Amortised cost

Fair value
changes *

Total

31.12.2020

(in thousands of Euros)

2 445 605

7 813 584

2 873 753

245 472

21 685 258

1 129

59 847

13 134 071

245 472

21 745 105

2 445 605

7 813 584

24 804 483

60 976

35 124 648

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 22)

Securities

Loans and advances to banks

Loans and advances to customers

Mandatorily at fair value
through profit and loss

Fair value through
other comprehensive
income

Amortised cost

Fair value
changes *

Total

31.12.2019

(in thousands of Euros)

3 044 724

8 758 131

2 392 843

495 252

23 154 148

49 884

14 195 698

495 252

23 204 032

3 044 724

8 758 131

26 042 243

49 884

37 894 982

* Fair value changes of the elements covered by the interest rate hedge portfolio (see Note 22)

Securities
Securities
As at 31 December 2020 and 2019, the detail of securities portfolio is as follows:
As at 31 December 2020 and 2019, the detail of securities portfolio is as follows:

Securities mandatorily at fair value through profit or loss

Bonds and other fixed income securities

From other issuers

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Other securities with variable income

Securities at fair value through other comprehensive income

Bonds and other fixed income securities

From public issuers
From other issuers

Other variable income securities

Securities at amortised cost

Bonds and other fixed income securities

From public issuers
From other issuers

Impairment

Value adjustments for hedging operations for interest rate risk *

* See note 22

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

647 082

403 752

1 394 771

2 445 605

6 406 465
1 352 759

54 360

694 667

601 613

- 340-

1 748 444

3 044 724

7 027 343
1 661 538

69 248

7 813 584

8 758 131

415 192
2 661 021

( 202 460)

2 873 753

1 129

459 260
2 093 737

( 160 154)

2 392 843

13 134 071

14 195 698

The securities mandatorily accounted at fair value through profit or loss include the participation units held by the Bank in Restructuring
Funds, which are accounted for in accordance with the accounting policy described in Note 2.4, based on the net book value disclosed
by the Management Companies, which may be adjusted according to information, analyzes or independent evaluations deemed
The securities mandatorily accounted at fair value through profit or loss include the participation units held by the Bank
necessary to determine its fair value, in response to guidelines from the European Central Bank.
in Restructuring Funds, which are accounted for in accordance with the accounting policy described in Note 2.4, based
At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds are “level 3”
on the net book value disclosed by the Management Companies, which may be adjusted according to information,
assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose parameters used are not
analyzes or independent evaluations deemed necessary to determine its fair value, in response to guidelines from the
observable in the market), and NOVO BANCO requested an independent evaluation from an international consulting company in
articulation with real estate consultancy companies. This work resulted in a market value of 498.8 million euros for the total investment
European Central Bank.
held in these assets, which led to the recording of a loss of 300.2 million euros in the financial year 2020 recorded in the item gains
or losses on financial assets mandatorily accounted for at fair value through profit or loss (see Note 9). This assessment included the
establishment of assumptions for the valuation of assets included in the funds, a discount at the level of the fund based on parameters
equivalent to quoted funds and an appreciation of the potential evolution of the fund.

408

As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as follows:

Bonds and other fixed income securities

From public issuers

Residents

Non residents

From other issuers

Residents

Non residents

Residents

Non residents

Other securities with variable income

Residents

Cost (1)

Fair value reserve

Positive

Negative

Balance sheet
value

Impairment
reserves

(in thousands of Euros)

6 050 592

2 571 260

3 479 332

1 286 344

29 605

1 256 739

407 319

331 888

75 431

356 115

125 602

230 513

68 749

107

68 642

12 548

11 330

1 218

( 242)

( 2 334)

( 365 507)

( 296 014)

( 69 493)

( 2)

6 406 465

2 696 862

3 709 603

1 352 759

27 378

1 325 381

54 360

47 204

7 156

( 3 095)

( 1 405)

( 1 690)

( 565)

( 3)

( 562)

Balance as at 31 December 2020

7 744 257

437 412

( 368 085)

7 813 584

( 3 660)

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 341-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

Securities

As at 31 December 2020 and 2019, the detail of securities portfolio is as follows:

Securities mandatorily at fair value through profit or loss

Bonds and other fixed income securities

From other issuers

Other securities with variable income

Securities at fair value through other comprehensive income

Bonds and other fixed income securities

From public issuers

From other issuers

Other variable income securities

Securities at amortised cost

Bonds and other fixed income securities

From public issuers
From other issuers

Impairment

Value adjustments for hedging operations for interest rate risk *

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

647 082

403 752

1 394 771

2 445 605

6 406 465

1 352 759

54 360

694 667

601 613

1 748 444

3 044 724

7 027 343

1 661 538

69 248

7 813 584

8 758 131

415 192
2 661 021

( 202 460)

2 873 753

1 129

459 260
2 093 737

( 160 154)

2 392 843

13 134 071

14 195 698

* See note 22

At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds
are “level 3” assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose
The securities mandatorily accounted at fair value through profit or loss include the participation units held by the Bank in Restructuring
parameters used are not observable in the market), and NOVO BANCO requested an independent evaluation from an
Funds, which are accounted for in accordance with the accounting policy described in Note 2.4, based on the net book value disclosed
by the Management Companies, which may be adjusted according to information, analyzes or independent evaluations deemed
international consulting company in articulation with real estate consultancy companies. This work resulted in a market
necessary to determine its fair value, in response to guidelines from the European Central Bank.
value of 498.8 million euros for the total investment held in these assets, which led to the recording of a loss of 300.2
million euros in the financial year 2020 recorded in the item gains or losses on financial assets mandatorily accounted
At the end of 2020, NOVO BANCO completed the independent assessment of the restructuring funds. These funds are “level 3”
assets in accordance with the fair value hierarchy of IFRS 13 (quotations provided by third parties whose parameters used are not
for at fair value through profit or loss (see Note 9). This assessment included the establishment of assumptions for the
observable in the market), and NOVO BANCO requested an independent evaluation from an international consulting company in
valuation of assets included in the funds, a discount at the level of the fund based on parameters equivalent to quoted
articulation with real estate consultancy companies. This work resulted in a market value of 498.8 million euros for the total investment
held in these assets, which led to the recording of a loss of 300.2 million euros in the financial year 2020 recorded in the item gains
funds and an appreciation of the potential evolution of the fund.
or losses on financial assets mandatorily accounted for at fair value through profit or loss (see Note 9). This assessment included the
establishment of assumptions for the valuation of assets included in the funds, a discount at the level of the fund based on parameters
As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as
equivalent to quoted funds and an appreciation of the potential evolution of the fund.
follows:
As at 31 December 2020 and 2019, the detail of the fair value securities through other comprehensive income is as follows:

Bonds and other fixed income securities

From public issuers

Residents
Non residents
From other issuers

Residents
Non residents

Other securities with variable income

Residents

Cost (1)

Fair value reserve

Positive

Negative

Balance sheet
value

Impairment
reserves

(in thousands of Euros)

6 050 592
2 571 260
3 479 332
1 286 344
29 605
1 256 739

407 319
331 888
75 431

2
2

356 115
125 602
230 513
68 749
107
68 642

12 548
11 330
1 218

-
-

( 242)
-
( 242)
( 2 334)
( 2 334)
-

( 365 507)
( 296 014)
( 69 493)

( 2)
( 2)

6 406 465
2 696 862
3 709 603
1 352 759
27 378
1 325 381

54 360
47 204
7 156

-
-

( 3 095)
( 1 405)
( 1 690)
( 565)
( 3)
( 562)

-
-
-

-
-

Balance as at 31 December 2020

7 744 257

437 412

( 368 085)

7 813 584

( 3 660)

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Cost (1)

Fair value reserve

Positive

Negative

NOVO BANCO

(in thousands of Euros)

Balance
sheet value

Impairment
- 341-
reserves

Bonds and other fixed income securities

From public issuers

Residents
Non residents
From other issuers

Residents
Non residents

Other securities with variable income

Residents
Non residents

6 705 039
3 125 170
3 579 869
1 575 607
33 212
1 542 395

424 304
348 161
76 143

2
2
-

322 996
157 397
165 599
87 363
20 711
66 652

19 795
18 614
1 181

2
-
2

( 692)
( 490)
( 202)
( 1 432)
-
( 1 432)

( 374 851)
( 311 371)
( 63 480)

( 2)
( 2)
-

7 027 343
3 282 077
3 745 266
1 661 538
53 923
1 607 615

69 248
55 404
13 844

2
-
2

( 4 476)
( 2 107)
( 2 369)
( 1 029)
( 8)
( 1 021)

-
-
-

Balance as at 31 December 2019

8 704 952

430 156

( 376 977)

8 758 131

( 5 505)

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

The changes in the impairment reserves in fair value securities through other comprehensive income are presented as follows:

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2019

409
Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2020

Balance as at 31 December 2018

Increases due to changes in credit risk

Decreases due to changes in credit risk

Utilization during the period

Other movements

Balance as at 31 December 2019

Increases due to changes in credit risk

Decreases due to changes in credit risk

Utilization during the period

Other movements

Balance as at 31 December 2020

Impairment movement of securities at fair value
through other comprehensive income

Stage 1

Stage 2

Stage 3

Total

(in thousands of Euros)

1 182

6 188
( 1 725)
( 137)
( 3)

5 505

3 480
( 5 022)
( 232)
( 64)

3 667

-
( 18)
-
( 4)

38
-
( 44)
6

-
-
-
-

1 204

6 188
( 1 743)
( 137)
( 7)

5 505

3 518
( 5 022)
( 276)
( 58)

3 667

Impairment movement of securities at amortised cost

Stage 1

Stage 2

Stage 3

Total

(in thousands of Euros)

3 970

57 283

131 072

192 325

14 394

636 822

( 14 664)

( 640 167)

( 1)

11 256

716 961

( 10 094)

( 682 995)

( 36)

296

( 2)

( 318)

6 615

( 7 247)

( 28 019)

10 533

( 3 294)

( 1)

657 831

( 662 078)

( 28 020)

738 750

( 696 383)

( 38)

( 23)

3 758

53 974

102 422

160 154

5 180

87 620

109 660

202 460

During the financial year of 2020, the Bank sold Euro 1 295.0 million of financial instruments classified at fair value through other

comprehensive income (31 December 2019: Euro 3 730.0 million), with a gain of Euro 80.2 million (31 December 2019: gain of Euro

65.7 million), recorded in the income statement, from the sale of debt instruments and a loss of Euro 16.4 million that were transferred

from revaluation reserves to sales reserves (31 December 2019: loss of Euro 4.9 million).

Changes in impairment losses on amortised cost securities are as follows:

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 342-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Residents
Non residents

Bonds and other fixed income securities

From public issuers

Residents

Non residents
From other issuers

Residents
Non residents

Shares
Bonds and other fixed income securities

Other securities with variable income

From public issuers

Residents
Non residents
Residents
Non residents
From other issuers

Residents
Residents
Non residents
Non residents

Cost (1)

Fair value reserve

Positive

Negative

322 996

157 397

( 692)

( 490)

NOVO BANCO

(in thousands of Euros)

Balance

Impairment

sheet value

reserves

NOVO BANCO

(in thousands of Euros)

7 027 343

3 282 077

3 745 266
1 661 538
Balance
53 923
sheet value
1 607 615

( 4 476)

( 2 107)

( 2 369)
( 1 029)
Impairment
( 8)
reserves
( 1 021)

165 599
Fair value reserve
87 363
20 711
66 652

( 202)
( 1 432)
-
( 1 432)

Negative

Positive

19 795
18 614
322 996
1 181
157 397
165 599
2
87 363
-
20 711
2
66 652

( 374 851)
( 311 371)
( 692)
( 63 480)
( 490)
( 202)
( 2)
( 1 432)
( 2)
-
-
( 1 432)

69 248
55 404
7 027 343
13 844
3 282 077
3 745 266
2
1 661 538
-
53 923
2
1 607 615

-
-
( 4 476)
-
( 2 107)
( 2 369)
-
( 1 029)
-
( 8)
-
( 1 021)

6 705 039

3 125 170

3 579 869
1 575 607
Cost (1)
33 212
1 542 395

424 304
348 161
6 705 039
76 143
3 125 170
3 579 869
2
1 575 607
2
33 212
-
1 542 395

( 5 505)
Balance as at 31 December 2019
-
Shares
The changes in the impairment reserves in fair value securities through other comprehensive income are presented as
(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.
-
follows:
-
The changes in the impairment reserves in fair value securities through other comprehensive income are presented as follows:
Other securities with variable income

8 758 131
69 248
55 404
13 844

8 704 952
424 304
348 161
76 143

( 376 977)
( 374 851)
( 311 371)
( 63 480)

430 156
19 795
18 614
1 181

Residents
Non residents

2
2
-

2
-
2

2
-
2
Impairment movement of securities at fair value
through other comprehensive income
8 758 131

-
(in thousands of Euros)
-
-

( 2)
( 2)
-

( 376 977)

430 156

( 5 505)

Total

Balance as at 31 December 2019

8 704 952

(1) Aquisition cost referring to shares and other equity instruments and amortized cost for debt securities.

Stage 1

Stage 2

Stage 3

Balance as at 31 December 2018
The changes in the impairment reserves in fair value securities through other comprehensive income are presented as follows:

1 182

1 204

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2019
Balance as at 31 December 2018

Increases due to changes in credit risk
Increases due to changes in credit risk
Decreases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Utilization during the period
Other movements
Other movements

Balance as at 31 December 2020
Balance as at 31 December 2019

6 188
( 1 725)
( 137)
( 3)

-
( 18)
-
( 4)

Impairment movement of securities at fair value
through other comprehensive income

6 188
(in thousands of Euros)
( 1 743)
( 137)
( 7)

-
-
-
-

Total

Stage 1

Stage 2

Stage 3

5 505
1 182
3 480
6 188
( 5 022)
( 1 725)
( 232)
( 137)
( 64)
( 3)
3 667
5 505

-
22
38
-
-
( 18)
( 44)
-
6
( 4)
-
-

-
-
-
-
-
-
-
-
-
-
-
-

5 505
1 204
3 518
6 188
( 5 022)
( 1 743)
( 276)
( 137)
( 58)
( 7)
3 667
5 505

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

During the financial year of 2020, the Bank sold Euro 1 295.0 million of financial instruments classified at fair value through other
3 518
comprehensive income (31 December 2019: Euro 3 730.0 million), with a gain of Euro 80.2 million (31 December 2019: gain of Euro
( 5 022)
65.7 million), recorded in the income statement, from the sale of debt instruments and a loss of Euro 16.4 million that were transferred
( 276)
During the financial year of 2020, the Bank sold Euro 1 295.0 million of financial instruments classified at fair value
from revaluation reserves to sales reserves (31 December 2019: loss of Euro 4.9 million).
( 58)
through other comprehensive income (31 December 2019: Euro 3 730.0 million), with a gain of Euro 80.2 million (31
3 667
Balance as at 31 December 2020
Changes in impairment losses on amortised cost securities are as follows:
December 2019: gain of Euro 65.7 million), recorded in the income statement, from the sale of debt instruments and
During the financial year of 2020, the Bank sold Euro 1 295.0 million of financial instruments classified at fair value through other
a loss of Euro 16.4 million that were transferred from revaluation reserves to sales reserves (31 December 2019: loss of
comprehensive income (31 December 2019: Euro 3 730.0 million), with a gain of Euro 80.2 million (31 December 2019: gain of Euro
Euro 4.9 million).
65.7 million), recorded in the income statement, from the sale of debt instruments and a loss of Euro 16.4 million that were transferred
from revaluation reserves to sales reserves (31 December 2019: loss of Euro 4.9 million).
Changes in impairment losses on amortised cost securities are as follows:
Balance as at 31 December 2018
Changes in impairment losses on amortised cost securities are as follows:

Impairment movement of securities at amortised cost

3 480
( 5 022)
( 232)
( 64)

38
-
( 44)
6

(in thousands of Euros)

131 072

192 325

57 283

Stage 1

Stage 2

Stage 3

3 667

3 970

-
-
-
-

Total

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

Balance as at 31 December 2019
Balance as at 31 December 2018

Balance as at 31 December 2020
Balance as at 31 December 2019

3 758
3 970
11 256
14 394
( 10 094)
( 14 664)
( 36)
-
296
58
5 180
3 758

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilization during the period
Other movements

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
Balance as at 31 December 2020

5 180

14 394
( 14 664)
-
58

Stage 1

636 822
( 640 167)
( 1)
37

Stage 2

6 615
( 7 247)
( 28 019)
1

657 831
( 662 078)
(in thousands of Euros)
( 28 020)
96

Stage 3

Total

Impairment movement of securities at amortised cost

53 974
57 283
716 961
636 822
( 682 995)
( 640 167)
( 2)
( 1)
( 318)
37
87 620
53 974

716 961
( 682 995)
( 2)
( 318)

102 422
131 072
10 533
6 615
( 3 294)
( 7 247)
-
( 28 019)
( 1)
1
109 660
102 422

10 533
( 3 294)
-
( 1)

87 620

109 660

160 154
192 325
738 750
657 831
( 696 383)
( 662 078)
( 38)
( 28 020)
( 23)
96
202 460
160 154

738 750
( 696 383)
( 38)
( 23)
- 342-
202 460

11 256
( 10 094)
( 36)
296

In accordance with the accounting policy mentioned on Note 2.4, the Bank regularly evaluate if there is any objective
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 342-
evidence of impairment in its securities portfolio at a fair value through other comprehensive income based on the
judgement criteria mentioned on Note 3.1.

Impairments for securities reinforced during the 2020 financial year include Euro 29.0 million, reflecting the update of
information in IFRS 9 models, anticipating losses related to the Covid-19 pandemic.

As at 31 December 2020 and 2019, the securities portfolio, by residual maturity period, is as follows:

410

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

31.12.2020

31.12.2019

75 553
32 670
39 966
498 893
1 798 523
75 553
2 445 605
32 670
39 966
216 825
498 893
760 409
1 798 523
3 904 755
2 445 605
2 877 235
54 360
216 825
7 813 584
760 409
3 904 755
754 292
2 877 235
113 105
54 360
267 980
7 813 584
1 940 836
3 076 213
754 292
13 335 402
113 105
267 980
1 940 836
3 076 213

-
(in thousands of Euros)
7
57 535
637 126
2 350 056
-
3 044 724
7
57 535
164 095
637 126
179 917
2 350 056
4 311 899
3 044 724
4 032 970
69 250
164 095
8 758 131
179 917
4 311 899
927 397
4 032 970
131 372
69 250
48 500
8 758 131
1 445 728
2 552 997
927 397
14 355 852
131 372
48 500
1 445 728
2 552 997

13 335 402

14 355 852

(in thousands of Euros)

31.12.2020

31.12.2019

4 075
136 440
30 429
4

8 902
135 411
(in thousands of Euros)
34 013
3

31.12.2019

31.12.2020

In accordance with the accounting policy mentioned on Note 2.4, the Bank regularly evaluate if there is any objective evidence of
NOVO BANCO
impairment in its securities portfolio at a fair value through other comprehensive income based on the judgement criteria mentioned
on Note 3.1.

NOVO BANCO

Impairments for securities reinforced during the 2020 financial year include Euro 29.0 million, reflecting the update of information in
In accordance with the accounting policy mentioned on Note 2.4, the Bank regularly evaluate if there is any objective evidence of
IFRS 9 models, anticipating losses related to the Covid-19 pandemic.
impairment in its securities portfolio at a fair value through other comprehensive income based on the judgement criteria mentioned
on Note 3.1.
As at 31 December 2020 and 2019, the securities portfolio, by residual maturity period, is as follows:
(in thousands of Euros)
Impairments for securities reinforced during the 2020 financial year include Euro 29.0 million, reflecting the update of information in
IFRS 9 models, anticipating losses related to the Covid-19 pandemic.

31.12.2019

31.12.2020

Securities mandatorily at fair value through profit or loss

As at 31 December 2020 and 2019, the securities portfolio, by residual maturity period, is as follows:

Securities mandatorily at fair value through profit or loss

Securities mandatority at fair value through other comprehensive income

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Undetermined (Overdue Loans)
Up to 3 months
From 3 months to 1 year
From 1 to 5 years
Up to 3 months
More than 5 years
From 3 months to 1 year
Undetermined (Overdue Loans)
From 1 to 5 years
More than 5 years
Undetermined (Overdue Loans)
Up to 3 months
From 3 months to 1 year
From 1 to 5 years
Up to 3 months
More than 5 years
From 3 months to 1 year
Undetermined (Overdue Loans)
From 1 to 5 years
More than 5 years

Securities at amortized cost (*)

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

(*) Gross Value before impairment

The detail of the securities portfolio by fair value hierarchy is presented in Note 37.

(*) Gross Value before impairment

The portfolio securities pledged by the Bank are analysed in Note 34.
The detail of the securities portfolio by fair value hierarchy is presented in Note 37.

The detail of the securities portfolio by fair value hierarchy is presented in Note 37.
Loans and advances to Banks
The portfolio securities pledged by the Bank are analysed in Note 34.
The portfolio securities pledged by the Bank are analysed in Note 34.
As at 31 December 2020 and 2019, the detail of Loans and advances to banks is as follows:

Loans and advances to Banks
Loans and advances to Banks
As at 31 December 2020 and 2019, the detail of Loans and advances to banks is as follows:
As at 31 December 2020 and 2019, the detail of Loans and advances to banks is as follows:

Loans and advances to banks in Portugal

Very short-term placements
Deposits
Loans
Other loans and advances

Loans and advances to banks in Portugal

Loans and advances to banks abroad

Very short-term placements
Deposits
Loans
Deposits
Other loans and advances
Loans
Operations with reverse repurchase agreements
Other loans and advances

Loans and advances to banks abroad

Deposits
Loans
Operations with reverse repurchase agreements
Other loans and advances

Outstanding applications

Impairment losses

Outstanding applications

Loans and advances to banks are all recorded in the amortised cost portfolio.

Impairment losses

Loans and advances to banks are all recorded in the amortised cost portfolio.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

411

170 948
4 075
136 440
30 429
10 532
4
-
-
170 948
279 419

289 951
10 532
-
34 726
-
279 419
495 625

289 951
( 250 153)

34 726
245 472

495 625

178 329
8 902
135 411
34 013
10 851
3
1 645
8
178 329
381 553

394 057
10 851
1 645
-
8
381 553
572 386

394 057
( 77 134)

-
495 252

572 386

( 250 153)

( 77 134)

245 472

495 252

- 343-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Loans and advances to banks are all recorded in the amortised cost portfolio.

NOVO BANCO

As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:
As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:

NOVO BANCO

As at 31 December 2020 and 2019, the analysis of loans and advances to banks, by residual maturity is as follows:

31.12.2020

31.12.2019

(in thousands of Euros)

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Up to 3 months
Undetermined (Overdue Loans)
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Undetermined (Overdue Loans)

(in thousands of Euros)

31.12.2020

31.12.2019

51 484
100 259
303 188
5 968
51 484
34 726
100 259
495 625
303 188
5 968
34 726

49 834
109 277
407 175
6 100
49 834
-
109 277
572 386
407 175
6 100
-

Changes in impairment losses on loans and advances to banks are presented as follows:

495 625

572 386

(in thousands of Euros)

Changes in impairment losses on loans and advances to banks are presented as follows:

Loans and advances to banks

Changes in impairment losses on loans and advances to banks are presented as follows:

Stage 1

Stage 2

Stage 3

Total

Balance as at 31 December 2018

Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilizations
Other movements
Increases due to changes in credit risk
Decreases due to changes in credit risk
Utilizations
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2019

177

Stage 1

416
( 224)
-
177
( 2)
416
367
( 224)
-
556
( 2)
( 477)
( 1)
367

Stage 2

Stage 3

75 143

424
Loans and advances to banks
-
-
-
424
2
-
426
-
-
317 540
2
( 128 520)
60 260
426

2 837
( 3 038)
( 22)
75 143
1 421
2 837
76 341
( 3 038)
( 22)
2 462
1 421
( 1 965)
( 76 836)
76 341

Balance as at 31 December 2020

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

445
556
( 477)
( 1)

2
2 462
( 1 965)
( 76 836)

249 706
317 540
( 128 520)
60 260

The reinforcement of impairment for investments in credit institutions verified in 2020 results from the deterioration of the credit risk
of international exposures analyzed on an individual basis, whose situation of partial default at the end of 2020 (meanwhile regularized
Balance as at 31 December 2020
during the month of January 2021), between other signs of impairment, led to the transfer of it to stage 3 and to the constitution of
additional impairments of Euro 189.6 million, with the total impairment recorded on 31 December 2020 for this exposure being Euro
The reinforcement of impairment for investments in credit institutions verified in 2020 results from the deterioration of the credit risk
249.3 million.
of international exposures analyzed on an individual basis, whose situation of partial default at the end of 2020 (meanwhile regularized
during the month of January 2021), between other signs of impairment, led to the transfer of it to stage 3 and to the constitution of
additional impairments of Euro 189.6 million, with the total impairment recorded on 31 December 2020 for this exposure being Euro
The reinforcement of impairment for investments in credit institutions verified in 2020 results from the deterioration
249.3 million.
of the credit risk of international exposures analyzed on an individual basis, whose situation of partial default at the
end of 2020 (meanwhile regularized during the month of January 2021), between other signs of impairment, led
to the transfer of it to stage 3 and to the constitution of additional impairments of Euro 189.6 million, with the total
impairment recorded on 31 December 2020 for this exposure being Euro 249.3 million.

250 153

249 706

445

(in thousands of Euros)
75 744

Total

3 253
( 3 262)
( 22)
75 744
1 421
3 253
77 134
( 3 262)
( 22)
320 558
1 421
( 130 962)
( 16 577)
77 134

250 153
320 558
( 130 962)
( 16 577)

Loans and advances to customers

As at 31 December 2020 and 2019, the detail of loans and advances to customers is presented as follows:

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

412

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 344-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

Loans and advances to customers

As at 31 December 2020 and 2019, the detail of loans and advances to customers is presented as follows:

NOVO BANCO

Domestic loans and advances

Corporate

Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances

Individuals

Residential Mortgage loans
Consumer credit and other loans

Foreign loans and advances

Corporate

Current account loans
Loans
Discounted bills
Factoring
Overdrafts
Financial leases
Other loans and advances

Individuals

Residential Mortgage loans
Consumer credit and other loans

Overdue loans and advances and interests

Under 90 days
Over 90 days

Impairment losses

Fair value adjustaments of interest rate hedges *

Corporate
Loans
Individuals

Residential Mortgage loans

* See note 22

(in thousands of Euros)

31.12.2020

31.12.2019

1 109 729
8 876 278
80 430
575 682
7 105
1 421 765
20 974

7 368 861
1 007 365

1 362 889
8 345 875
119 241
709 747
3 042
1 523 226
29 477

7 370 060
1 042 745

20 468 189

20 506 302

851 791
146 986
4
51 483
8 321
-
1

949 211
180 022

2 187 819

687 878
1 068 038
21 206
138 292
39 158
37 422
1

1 084 606
315 483

3 392 084

13 457
602 796

24 025
1 073 220

616 253

1 097 245

23 272 261

24 995 631

(1 587 003)

(1 841 483)

21 685 258

23 154 148

6 774

14 390

53 073

59 847

35 494

49 884

21 745 105

23 204 032

During the year of 2020, a sale of a portfolio of non-performing loans (called “Carter”) was carried out, and the impact of this operation
on the balance sheet resulted in a reduction of net credit to customers of Euro 34.1 million (Euro 79.1 million in gross value and Euro
45 million in impairment) and the impact on results translated into a gain of Euro 2.3 million (see Note 40).

During the year of 2020, a sale of a portfolio of non-performing loans (called “Carter”) was carried out, and the impact
During the year of 2019, a sale of a portfolio of non-performing loans (called “NATA II”) was carried out, and the impact of this
of this operation on the balance sheet resulted in a reduction of net credit to customers of Euro 34.1 million (Euro 79.1
operation on the balance sheet resulted in a reduction in net loans and advances to customers of Euro 128.1 million (Euro 1,189.3
million in gross value and Euro 1 061.1 million in impairment), and the impact in the income statement was a loss of Euro 79 million
million in gross value and Euro 45 million in impairment) and the impact on results translated into a gain of Euro 2.3
(see Note 40).
million (see Note 40).

Loans to customers are all recorded in the amortised cost portfolio.
During the year of 2019, a sale of a portfolio of non-performing loans (called “NATA II”) was carried out, and the impact
As at 31 December 2020, the caption Loans and advances to customers include Euro 6,104.8 million of mortgage loans related to
of this operation on the balance sheet resulted in a reduction in net loans and advances to customers of Euro 128.1
the issuance of covered bonds (31 December 2019: Euro 6 076.8 million) (see Note 29).
million (Euro 1,189.3 million in gross value and Euro 1,061.1 million in impairment), and the impact in the income
statement was a loss of Euro -79.0 million (see Note 40).
As at 31 December 2020, the amount of interest and commissions recorded in the balance sheet relating to credit operations amounts
to Euro 24,765 thousand (31 December 2019: Euro 25,139 thousand).
Loans to customers are all recorded in the amortised cost portfolio.

As at 31 December 2020, the caption Loans and advances to customers include Euro 6,104.8 million of mortgage loans
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 345-
related to the issuance of covered bonds (31 December 2019: Euro 6,076.8 million) (see Note 29).

As at 31 December 2020, the amount of interest and commissions recorded in the balance sheet relating to credit
operations amounts to Euro 24,765 thousand (31 December 2019: Euro 25,139 thousand).

413

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

As at 31 December 2020 and 2019, the analysis of loans and advances to customers, by residual maturity period, is as
follows:
As at 31 December 2020 and 2019, the analysis of loans and advances to customers, by residual maturity period, is as follows:

NOVO BANCO
(in thousands of Euros)

31.12.2020

31.12.2019

NOVO BANCO

Stage 3

Stage 2

Stage 1

31.12.2020

394 119

NOVO BANCO

31.12.2019
(in thousands of Euros)

971 494
1 243 984
5 112 417
15 387 960
616 253

Changes in credit impairment losses are presented as follows:

Changes in credit impairment losses are presented as follows:
Balance as at 31 December 2018

1 766 827
1 424 761
5 084 654
(in thousands of Euros)
15 672 028
1 097 245

971 494
23 332 108
1 243 984
5 112 417
15 387 960
616 253
971 494
23 332 108
1 243 984
5 112 417
15 387 960
616 253

Changes in credit impairment losses are presented as follows:
Balance as at 31 December 2018

As at 31 December 2020 and 2019, the analysis of loans and advances to customers, by residual maturity period, is as follows:

31.12.2019
As at 31 December 2020 and 2019, the analysis of loans and advances to customers, by residual maturity period, is as follows:

Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Unlimited duration (Overdue Loans)
Up to 3 months
1 766 827
25 045 515
From 3 months to 1 year
1 424 761
From 1 to 5 years
5 084 654
(in thousands of Euros)
More than 5 years
15 672 028
Unlimited duration (Overdue Loans)
1 097 245
Up to 3 months
1 766 827
Impairment movements of loans and advances to customers
25 045 515
From 3 months to 1 year
1 424 761
Total
From 1 to 5 years
5 084 654
More than 5 years
15 672 028
4 071 843
Unlimited duration (Overdue Loans)
1 097 245
(in thousands of Euros)
( 1 056 533)
Financial assets derecognised
Impairment movements of loans and advances to customers
25 045 515
Increases due to changes in credit risk
1 471 513
Total
Decreases due to changes in credit risk
( 840 658)
Utilization during the period
( 1 720 923)
4 071 843
(in thousands of Euros)
( 83 759)
Other movements
Financial assets derecognised
( 1 056 533)
Balance as at 31 December 2019
1 841 483
Increases due to changes in credit risk
1 471 513
Total
Decreases due to changes in credit risk
( 840 658)
( 294 007)
Financial assets derecognised
Utilization during the period
( 1 720 923)
4 071 843
Balance as at 31 December 2018
Increases due to changes in credit risk
791 619
Other movements
( 83 759)
Decreases due to changes in credit risk
( 271 103)
( 1 056 533)
Financial assets derecognised
( 439 021)
Utilization during the period
Balance as at 31 December 2019
1 841 483
1 471 513
Increases due to changes in credit risk
( 41 968)
Other movements
( 840 658)
Decreases due to changes in credit risk
Financial assets derecognised
( 294 007)
( 1 720 923)
Utilization during the period
1 587 003
Balance as at 31 December 2020
Increases due to changes in credit risk
791 619
( 83 759)
Other movements
( 271 103)
Decreases due to changes in credit risk
(a) It includes 58 046 thousand euros of impairment of credits of the Spanish Branch transferred to discontinued operations (22 427 thousand euros in stage 1 and 35 619 thousand euros in stage 3).
( 439 021)
Utilization during the period
1 841 483
( 41 968)
Other movements
During the year of 2020, the credit risk impairments were additionally reinforced by Euro 218.8 million, with the updated information
Financial assets derecognised
( 294 007)
1 587 003
Balance as at 31 December 2020
in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.
791 619
Increases due to changes in credit risk
( 271 103)
Decreases due to changes in credit risk
(a) It includes 58 046 thousand euros of impairment of credits of the Spanish Branch transferred to discontinued operations (22 427 thousand euros in stage 1 and 35 619 thousand euros in stage 3).
( 439 021)
Utilization during the period
( 41 968)
Other movements
(in thousands of Euros)
During the year of 2020, the credit risk impairments were additionally reinforced by Euro 218.8 million, with the updated information
1 587 003
Balance as at 31 December 2020
in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.

( 1 055 717)
700 362
Stage 3
( 126 020)
( 1 720 474)
3 571 646
281 649
( 1 055 717)
1 651 446
700 362
Stage 3
( 126 020)
( 294 005)
( 1 720 474)
3 571 646
417 014
281 649
( 59 624)
( 1 055 717)
( 438 892)
1 651 446
700 362
( 55 507)
( 126 020)
( 294 005)
( 1 720 474)
1 220 432
417 014
281 649
( 59 624)
( 438 892)
1 651 446
( 55 507)
( 294 005)
1 220 432
417 014
( 59 624)
( 438 892)
( 55 507)

( 13)
105 897
( 30 025)
( 403)
106 078
( 44 562)
( 13)
136 972
105 897
Stage 2
( 30 025)
-
( 403)
106 078
336 436
( 44 562)
( 97 277)
( 13)
( 113)
136 972
105 897
( 69 574)
( 30 025)
-
( 403)
306 444
336 436
( 44 562)
( 97 277)
( 113)
136 972
( 69 574)
-
306 444
336 436
( 97 277)
( 113)
( 69 574)

( 803)
665 254
Stage 1
( 684 613)
( 46)
394 119
( 320 846)
( 803)
53 065
665 254
Stage 1
( 684 613)
( 2)
( 46)
394 119
38 169
( 320 846)
( 114 202)
( 803)
( 16)
53 065
665 254
83 113
( 684 613)
( 2)
( 46)
60 127
38 169
( 320 846)
( 114 202)
( 16)
53 065
83 113
( 2)
60 127
38 169
( 114 202)
( 16)
83 113

Credit distribution by type of rate is as follows:

Impairment movements of loans and advances to customers

Balance as at 31 December 2019

31.12.2019

31.12.2020

3 571 646

1 220 432

23 332 108

106 078

306 444

60 127

Stage 2

(a) It includes 58 046 thousand euros of impairment of credits of the Spanish Branch transferred to discontinued operations (22 427 thousand euros in stage 1 and 35 619 thousand euros in stage 3).
During the year of 2020, the credit risk impairments were additionally reinforced by Euro 218.8 million, with the updated
Fixed rate
3 583 037
Credit distribution by type of rate is as follows:
Variable rate
21 462 478
information in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.
(in thousands of Euros)
During the year of 2020, the credit risk impairments were additionally reinforced by Euro 218.8 million, with the updated information
in the IFRS 9 models, anticipating the losses related to the Covid-19 pandemic.
Credit distribution by type of rate is as follows:
Credit distribution by type of rate is as follows:

3 883 609
19 448 499

23 332 108

25 045 515

31.12.2019

31.12.2020

Fixed rate
Variable rate

3 883 609
19 448 499

3 583 037
21 462 478

(in thousands of Euros)

Fixed rate
Variable rate

31.12.2020

23 332 108

31.12.2019

25 045 515

3 883 609
19 448 499

3 583 037
21 462 478

23 332 108

25 045 515

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

414

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 346-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

An analysis of finance lease loans, by residual maturity period, is presented as follows:

Gross investment in finance leases receivable

An analysis of finance lease loans, by residual maturity period, is presented as follows:

Up to 1 year
1 to 5 years
More than 5 years

Gross investment in finance leases receivable
Unrealized finance income in finance leases
Up to 1 year
Up to 1 year
1 to 5 years
1 to 5 years
More than 5 years
More than 5 years

An analysis of finance lease loans, by residual maturity period, is presented as follows:

NOVO BANCO

31.12.2020

(in thousands of Euros)
NOVO BANCO

31.12.2019

270 188
761 487
571 105

31.12.2020

1 602 780

293 189
827 824
663 672
(in thousands of Euros)
1 784 685
31.12.2019
NOVO BANCO

270 188
44 830
761 487
67 455
571 105
32 654
1 602 780
144 939

31.12.2020

293 189
35 558
827 824
91 219
663 672
57 541
(in thousands of Euros)
1 784 685
184 318

31.12.2019

Unrealized finance income in finance leases
Capital falling due
Gross investment in finance leases receivable
Up to 1 year
Up to 1 year
Up to 1 year
1 to 5 years
1 to 5 years
1 to 5 years
More than 5 years
More than 5 years
More than 5 years

Capital falling due
Unrealized finance income in finance leases

Impairment
Up to 1 year
Up to 1 year
1 to 5 years
1 to 5 years
More than 5 years
More than 5 years

44 830
225 358
270 188
67 455
694 032
761 487
32 654
538 451
571 105
144 939
1 457 841
1 602 780
( 220 447)
225 358
44 830
1 237 394
694 032
67 455
538 451
32 654
1 457 841
144 939
( 220 447)

35 558
257 631
293 189
91 219
736 605
827 824
57 541
605 996
663 672
184 318
1 600 232
1 784 685
( 202 575)
257 631
35 558
1 397 657
736 605
91 219
605 996
57 541
1 600 232
184 318
( 202 575)

NOTE 22 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS
Impairment
Capital falling due
At 31 December 2020 and 2019, the fair value of the hedging derivatives is analysed as follows:
Up to 1 year
1 to 5 years
More than 5 years

NOTE 22 – Derivatives – hedge accounting and fair value
changes of the hedged items

225 358
1 237 394
694 032
538 451

257 631
1 397 657
736 605
605 996
31.12.2019
1 600 232

(in thousands of Euros)

1 457 841

31.12.2020

NOTE 22 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS
At 31 December 2020 and 2019, the fair value of the hedging derivatives is analysed as follows:
At 31 December 2020 and 2019, the fair value of the hedging derivatives is analysed as follows:

Hedging derivatives
Impairment
Assets
Liabilities

( 220 447)

1 237 394

13 606
( 72 543)
( 58 937)

( 202 575)
7 992
( 58 854)
1 397 657
(in thousands of Euros)
( 50 862)

Fair value component of the assets and liabilities hedged for interest rate risk
NOTE 22 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS
Hedging derivatives
Financial assets
Assets
Liabilities

At 31 December 2020 and 2019, the fair value of the hedging derivatives is analysed as follows:

Securities (see Note 21)
Loans and advances to customers (see Note 21)

13 606
1 129
( 72 543)
59 847
( 58 937)
60 976

7 992
-
( 58 854)
49 884
( 50 862)
49 884
(in thousands of Euros)

31.12.2020

31.12.2019

31.12.2020

31.12.2019

1 129
13 606
59 847
( 72 543)
60 976
( 58 937)

-
7 992
49 884
( 58 854)
49 884
( 50 862)

Fair value component of the assets and liabilities hedged for interest rate risk
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
Financial assets
Hedging derivatives
recognized in the income statement in the caption Gains and losses from hedge accounting.

Securities (see Note 21)
Loans and advances to customers (see Note 21)

Assets
Liabilities

Financial assets

The Bank calculates the Credit Valuation Adjustment (CVA) for derivatives according to the methodology described in Note 20 –
Financial assets and liabilities held for trading.
Fair value component of the assets and liabilities hedged for interest rate risk
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
As at 31 December 2020 and 2019, fair value hedging operations may be analysed as follows:
recognized in the income statement in the caption Gains and losses from hedge accounting.

Securities (see Note 21)
Loans and advances to customers (see Note 21)

-
49 884
31.12.2020
The Bank calculates the Credit Valuation Adjustment (CVA) for derivatives according to the methodology described in Note 20 –
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives
49 884
Change in fair
Financial assets and liabilities held for trading.
value
are recognized in the income statement in the caption Gains and losses from hedge accounting.
Fair value of
component of
Hedged risk
derivatives (1)
item hedged
Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are
As at 31 December 2020 and 2019, fair value hedging operations may be analysed as follows:
in period (2)
The Bank calculates the Credit Valuation Adjustment (CVA) for derivatives according to the methodology described in
recognized in the income statement in the caption Gains and losses from hedge accounting.
(in thousands of Euros)
Note 20 – Financial assets and liabilities held for trading.
31.12.2020
Interest rate and
The Bank calculates the Credit Valuation Adjustment (CVA) for derivatives according to the methodology described in Note 20 –
exchange rate
Change in
Interest rate
Financial assets and liabilities held for trading.
fair value of
Hedged risk
As at 31 December 2020 and 2019, fair value hedging operations may be analysed as follows:
derivative in
period

1 129
59 847
60 976
Fair value
component of
item hedged(2)

Change in
fair value of
derivative in
period

Interest Rate Swap/CIRS
Interest Rate Swap

Fair value
component of
item hedged(2)

Fair value of
derivatives (1)

Loans and advances to customers

Securities at amortized cost

3 347 176
378 000

( 59 602)
665

(in thousands of Euros)

11 189
1 130

59 847
1 129

( 8 981)
801

Hedged item

3 725 176

Derivative

( 58 937)

Notional

12 319

60 976

( 8 180)

As at 31 December 2020 and 2019, fair value hedging operations may be analysed as follows:

Change in fair
value
component of
item hedged
in period (2)

(1) Includes accrued interest
(2) Attributable to the hedged risk

Interest Rate Swap/CIRS
Interest Rate Swap

Derivative

(1) Includes accrued interest
Derivative
(2) Attributable to the hedged risk

Loans and advances to customers

Securities at amortized cost

Hedged item

Interest Rate Swap/CIRS
Interest Rate Swap/CIRS
Interest Rate Swap

Loans and advances to customers
Loans and advances to customers
Securities at amortized cost

Interest rate and
31.12.2020
exchange rate
Interest rate
31.12.2019
Hedged risk

3 347 176
378 000

Notional
3 725 176

Hedged risk

Notional

( 59 602)
665
Fair value of
( 58 937)
derivatives (1)
Fair value of
derivatives (1)

( 8 981)
801

( 8 180)

Change in
fair value of
Change in
derivative in
fair value of
period
derivative in
period

59 847
1 129

Fair value
component of
60 976
Fair value
item hedged(2)
component of
item hedged(2)

Interest rate and
exchange rate
Interest and exchange
31.12.2019
rates
Interest rate

3 347 176
3 312 380
378 000

3 312 380
3 725 176

( 59 602)
( 50 862)
665

( 8 981)
( 16 124)
801

59 847
49 884
1 129

( 50 862)
( 58 937)
Fair value of
derivatives (1)

( 16 124)
( 8 180)

Change in
fair value of
derivative in
period

49 884
60 976

Fair value
component of
item hedged(2)

(in thousands of Euros)

11 189
1 130

(in thousands of Euros)
Change in fair
value
Change in fair
component of
12 319
value
item hedged
component of
in period (2)
item hedged
in period (2)
(in thousands of Euros)

11 189
18 311
1 130

18 311
12 319

Change in fair
value
component of
item hedged
in period (2)

49 884

(in thousands of Euros)
18 311
- 347-
18 311

Change in fair
value
component of
item hedged
in period (2)

(1) Includes accrued interest
(1) Includes accrued interest
(2) Attributable to the hedged risk
(2) Attributable to the hedged risk

Derivative

Hedged item

Hedged risk

Notional

Interest Rate Swap/CIRS
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Loans and advances to customers

3 312 380

Interest and exchange
rates
31.12.2019

( 50 862)

( 16 124)

415
(1) Includes accrued interest
(2) Attributable to the hedged risk

Derivative

Hedged item

Hedged risk

Notional

Fair value of
derivatives (1)

3 312 380

( 50 862)

( 16 124)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(2)

Interest Rate Swap/CIRS

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Loans and advances to customers

3 312 380

rates

( 50 862)

( 16 124)

Interest and exchange

3 312 380

( 50 862)

( 16 124)

49 884

- 347-

18 311

(1) Includes accrued interest

(2) Attributable to the hedged risk

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 347-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

An analysis of finance lease loans, by residual maturity period, is presented as follows:

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

270 188

761 487

571 105

1 602 780

44 830

67 455

32 654

144 939

225 358

694 032

538 451

1 457 841

( 220 447)

1 237 394

293 189

827 824

663 672

1 784 685

35 558

91 219

57 541

184 318

257 631

736 605

605 996

1 600 232

( 202 575)

1 397 657

(in thousands of Euros)

31.12.2020

31.12.2019

13 606

( 72 543)

( 58 937)

7 992

( 58 854)

( 50 862)

1 129

59 847

60 976

49 884

Gross investment in finance leases receivable

Unrealized finance income in finance leases

Up to 1 year

1 to 5 years

More than 5 years

Up to 1 year

1 to 5 years

More than 5 years

Capital falling due

Up to 1 year

1 to 5 years

More than 5 years

Impairment

Hedging derivatives

Assets

Liabilities

NOTE 22 – DERIVATIVES – HEDGE ACCOUNTING AND FAIR VALUE CHANGES OF THE HEDGED ITEMS

At 31 December 2020 and 2019, the fair value of the hedging derivatives is analysed as follows:

Fair value component of the assets and liabilities hedged for interest rate risk

Financial assets

Securities (see Note 21)

Loans and advances to customers (see Note 21)

Changes in the fair value of the hedged assets and liabilities mentioned above and of the respective hedging derivatives are

recognized in the income statement in the caption Gains and losses from hedge accounting.

The Bank calculates the Credit Valuation Adjustment (CVA) for derivatives according to the methodology described in Note 20 –

Financial assets and liabilities held for trading.

As at 31 December 2020 and 2019, fair value hedging operations may be analysed as follows:

31.12.2020

Derivative

Hedged item

Hedged risk

Notional

Fair value of
derivatives (1)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(2)

(in thousands of Euros)

Change in fair
value
component of
item hedged
in period (2)

Interest Rate Swap/CIRS
Interest Rate Swap

Loans and advances to customers

Securities at amortized cost

Interest rate and
exchange rate
Interest rate

3 347 176
378 000

( 59 602)
665

( 8 981)
801

59 847
1 129

3 725 176

( 58 937)

( 8 180)

60 976

11 189
1 130

12 319

(1) Includes accrued interest
(2) Attributable to the hedged risk

Derivative

Hedged item

Hedged risk

Notional

31.12.2019

Fair value of
derivatives (1)

Change in
fair value of
derivative in
period

Fair value
component of
item hedged(2)

(in thousands of Euros)

Change in fair
value
component of
item hedged
in period (2)

Interest Rate Swap/CIRS

Loans and advances to customers

Interest and exchange
rates

3 312 380

( 50 862)

( 16 124)

3 312 380

( 50 862)

( 16 124)

49 884

18 311

(1) Includes accrued interest
(2) Attributable to the hedged risk

- 347-
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
NOVO BANCO
As at 31 December 2020, the ineffective portion of the fair value hedging operations resulted in a gain of Euro
4.1 million that was recognized in the income statement (31 December 2019: cost of Euro 2.2 million). The Bank
periodically evaluates the effectiveness of the hedges.

As at 31 December 2020, the ineffective portion of the fair value hedging operations resulted in a gain of Euro 4.1 million that was
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference
recognized in the income statement (31 December 2019: cost of Euro 2.2 million). The Bank periodically evaluates the effectiveness
interest rates, which led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change
of the hedges.
NOVO BANCO
the discount curve of their positions in derivative financial instruments cleared in central counterparty (CCP) from
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which
EUR OIS to EUR € STR and from USD OIS to USD SOFR. In accordance with the principle of implementation of the
ions
led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their posit
aforementioned regulation, that no substantial changes to the original objective of risk management or discontinuation
in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD
As at 31 December 2020, the ineffective portion of the fair value hedging operations resulted in a gain of Euro 4.1 million that was
SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original
of hedging relationships will occur, the Bank did not record any relevant impacts on retrospective and prospective
recognized in the income statement (31 December 2019: cost of Euro 2.2 million). The Bank periodically evaluates the effectiveness
objective of risk management or discontinuation of hedging relationships will occur, the Bank did not record any relevant impacts on
of the hedges.
effectiveness, taking into account that all assets and liabilities involved in hedging relationships (hedged and hedged
retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships
items) were subject to the same change.
(hedged and hedged items) were subject to the same change.
As part of the application of Commission Regulation (EU) 2021/25, of 13 January 2021 - Reform of the reference interest rates, which
ions
led to the transition from EONIA to € STR, in the course of 2020, the Group proceeded to change the discount curve of their posit
As at 31 December 2020 and 2019, the analysis of derivatives held for risk management and hedging purposes, by
in derivative financial instruments cleared in central counterparty (CCP) from EUR OIS to EUR € STR and from USD OIS to USD
As at 31 December 2020 and 2019, the analysis of derivatives held for risk management and hedging purposes, by maturity, may be
SOFR. In accordance with the principle of implementation of the aforementioned regulation, that no substantial changes to the original
maturity, may be analyzed as follows:
analyzed as follows:
objective of risk management or discontinuation of hedging relationships will occur, the Bank did not record any relevant impacts on
retrospective and prospective effectiveness, taking into account that all assets and liabilities involved in hedging relationships
(hedged and hedged items) were subject to the same change.

(in thousands of Euros)

31.12.2020

31.12.2019

Notional

Buy

Sell

Fair value (net)

Notional

Buy

Sell

Fair value (net)

As at 31 December 2020 and 2019, the analysis of derivatives held for risk management and hedging purposes, by maturity, may be
3 months to 1 year
173 866
analyzed as follows:
1 to 5 years
811 060
More than 5 years
877 662
31.12.2020
1 862 588

-
781 374
874 816

173 866
811 060
877 662

-
( 13 873)
( 36 989)

( 862)
( 8 163)
( 49 912)

(in thousands of Euros)

31.12.2019

1 862 588

1 656 190

( 58 937)

( 50 862)

Notional

Buy

Sell

Fair value (net)

Notional

Buy

Sell

3 months to 1 year
1 to 5 years
More than 5 years

NOTE 23 – INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

173 866
811 060
877 662

( 862)
( 8 163)
( 49 912)

-
781 374
874 816

-
( 13 873)
( 36 989)

31.12.2019

31.12.2020

( 50 862)

( 58 937)

1 656 190

1 862 588

Nº of
shares

(in thousands of Euros)

Cost of
participation

Nominal
value
(euros)

Direct
participation
in capital

57,53%
100,00%
100,00%
100,00%
100,00%
Direct
98,97%
participation
99,99%
in capital
50,00%

Investments in subsidiaries, joint ventures and associate companies are presented as follows:

NOTE 23 – Investments in subsidiaries, joint ventures
and associates

Direct
participation
Nº of
in capital
shares
NOTE 23 – INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
Investments in subsidiaries, joint ventures and associate companies are presented as follows:
NB AÇORES
2 144 404
2 144 404
NB FINANCE
100 000
100 000
Investments in subsidiaries, joint ventures and associate companies are presented as follows:
BEST
62 999 700
62 999 700
ES TECH VENTURES
71 500 000
71 500 000
GNB GA
2 350 000
2 350 000
942 306
942 306
GNB CONCESSÕES
Nº of
Nº of
E.S. REPRESENTAÇÕES
49 995
49 995
shares
shares
525 000
525 000
LOCARENT
NOVO BANCO SERVICIOS
-
2 676 665
2 144 404
2 144 404
NB AÇORES
500 000
-
NOVO VANGUARDA
100 000
100 000
NB FINANCE
13 300 000
13 300 000
NB ÁFRICA
62 999 700
62 999 700
BEST
350 029
350 029
UNICRE
71 500 000
71 500 000
ES TECH VENTURES
122 499
122 499
IJAR LEASING ALGERIE
2 350 000
2 350 000
GNB GA
101 477 601
101 477 601
EDENRED PORTUGAL
942 306
942 306
GNB CONCESSÕES
5 280 000
-
HERDADE DO PINHEIRINHO I
49 995
49 995
E.S. REPRESENTAÇÕES
17 200 000
-
HERDADE DO PINHEIRINHO II
525 000
525 000
LOCARENT
2 676 665
-
NOVO BANCO SERVICIOS
500 000
-
NOVO VANGUARDA
Impairment
13 300 000
13 300 000
NB ÁFRICA
350 029
350 029
UNICRE
122 499
122 499
IJAR LEASING ALGERIE
101 477 601
101 477 601
EDENRED PORTUGAL
During the year of 2020, the subsidiaries Herdade do Pinheirinho I and Herdade do Pinheirinho II were sold. Novo Banco Servicios
5 280 000
-
HERDADE DO PINHEIRINHO I
e Novo Vanguarda were transferred to non-current assets and disposal groups classified as held for sale (see Note 28).
17 200 000
-
HERDADE DO PINHEIRINHO II

10 308
5,00
1 700
1,00
1,00
100 418
(in thousands of Euros)
71 500
1,00
86 722
5,00
20 602
5,00
Cost of
12
0,22
participation
2 967
5,00
1 057
0,40
10 308
5,00
500
1,00
1 700
1,00
66 500
5,00
100 418
1,00
11 497
5,00
71 500
1,00
12 362
74,94
86 722
5,00
4 984
0,01
20 602
5,00
5 280
1,00
12
0,22
1,00
17 200
2 967
5,00
413 609
0,40
1 057
1,00
500
( 182 184)
5,00
66 500
231 425
11 497
5,00
12 362
74,94
4 984
0,01
5 280
1,00
17 200
1,00

10 308
1 700
100 418
71 500
86 722
20 602
Cost of
8
participation
2 967
-
10 308
-
1 700
66 500
100 418
11 497
71 500
12 361
86 722
4 984
20 602
-
8
-
2 967
389 567
-
-
( 199 643)
66 500
189 924
11 497
12 361
4 984
-
-

57,53%
100,00%
100,00%
100,00%
100,00%
Direct
98,97%
participation
99,99%
in capital
50,00%
100,00%
57,53%
100,00%
100,00%
100,00%
100,00%
17,50%
100,00%
35,00%
100,00%
50,00%
98,97%
100,00%
99,99%
100,00%
50,00%
100,00%
100,00%
100,00%
17,50%
35,00%
50,00%
100,00%
100,00%

57,53%
100,00%
100,00%
100,00%
17,50%
100,00%
18,85%
100,00%
50,00%
98,97%
99,99%
50,00%

5,00
1,00
5,00
1,00
5,00
1,00
61,94
5,00
0,01
5,00
0,16
5,00

5,00
1,00
1,00
1,00
5,00
5,00
0,16
5,00

100,00%
17,50%
18,85%
50,00%

5,00
5,00
61,94
0,01

Nominal
value
(euros)

Cost of
participation

31.12.2020

31.12.2019

During 2019, ES PLC and BES GMBH were merged into NOVO BANCO. The associated companies GNB Seguros, ESEGUR and
Impairment
Multipessoal were transferred to Non-current assets held for sale because they are in active sale processes (see Note 28).

( 182 184)

( 199 643)

189 924

231 425

389 567

413 609

During the year of 2020, the subsidiaries Herdade do Pinheirinho I and Herdade do Pinheirinho II were sold. Novo Banco Servicios
e Novo Vanguarda were transferred to non-current assets and disposal groups classified as held for sale (see Note 28).

416

During 2019, ES PLC and BES GMBH were merged into NOVO BANCO. The associated companies GNB Seguros, ESEGUR and
Multipessoal were transferred to Non-current assets held for sale because they are in active sale processes (see Note 28).

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 348-

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 348-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

During the year of 2020, the subsidiaries Herdade do Pinheirinho I and Herdade do Pinheirinho II were sold. Novo
Banco Servicios e Novo Vanguarda were transferred to non-current assets and disposal groups classified as held for
sale (see Note 28).

During 2019, ES PLC and BES GMBH were merged into NOVO BANCO. The associated companies GNB Seguros,
ESEGUR and Multipessoal were transferred to Non-current assets held for sale because they are in active sale processes
(see Note 28).

NOVO BANCO
The changes in impairment losses for investments in subsidiaries, joint ventures and associates are presented as follows:
NOVO BANCO

The changes in impairment losses for investments in subsidiaries, joint ventures and associates are presented as follows:

(in thousands of Euros)

The changes in impairment losses for investments in subsidiaries, joint ventures and associates are presented as follows:

31.12.2020

31.12.2019

Balance at the beginning of the exercise

Charges
Utilizations
Reversals
Charges
Foreign exchange differences
Utilizations
Reversals
Foreign exchange differences

Balance at the end of the exercise

Balance at the end of the exercise
NOTE 24 – TANGIBLE FIXED ASSETS

This caption as at 31 December 2020 and 2019 is analyzed as follows:
NOTE 24 – TANGIBLE FIXED ASSETS

NOTE 24 – Tangible fixed assets

This caption as at 31 December 2020 and 2019 is analyzed as follows:
This caption as at 31 December 2020 and 2019 is analyzed as follows:

Real estate properties

Equipment

Real estate properties

For own use
Improvements in leasehold properties
Assets under right-of-use
For own use
Improvements in leasehold properties
Assets under right-of-use
Computer equipment
Fixtures
Equipment
Furniture
Computer equipment
Security equipment
Fixtures
Office equipment
Furniture
Transport equipment
Security equipment
Assets under right-of-use
Office equipment
Other
Transport equipment
Assets under right-of-use
Other

Work in progress

Improvements in leasehold properties
Real estate properties
Others
Improvements in leasehold properties
Real estate properties
Others

Accumulated impairment
Accumulated depreciation

417

182 184

(in thousands of Euros)
146 281

31.12.2020

48 388
( 22 480)
182 184
( 7 103)
48 388
( 1 346)
( 22 480)
199 643
( 7 103)
( 1 346)

31.12.2019

36 040
( 38)
146 281
-
36 040
( 99)
( 38)
182 184
-
( 99)

199 643

182 184

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

220 386
132 844
69 375
220 386
422 605
132 844
69 375
101 230
422 605
54 828
48 803
101 230
23 697
54 828
7 488
48 803
562
23 697
8 889
7 488
160
562
245 657
8 889
160

-
245 657
1
1 417
-
1 418
1
1 417
669 680
1 418
( 13 385)
( 467 327)
669 680

188 968
( 13 385)
( 467 327)

31.12.2019
202 485
136 307
77 574
202 485
416 366
136 307
77 574
105 322
416 366
56 208
67 528
105 322
24 284
56 208
7 739
67 528
586
24 284
5 076
7 739
167
586
266 910
5 076
167

22
266 910
65
-
22
87
65
-
683 363
87
( 10 609)
( 478 001)
683 363

194 753
( 10 609)
( 478 001)

188 968

194 753

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 349-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The changes in this caption were as follows:
The changes in this caption were as follows:

Acquisition cost
Balance at 31 December 2018

Acquisitions
Disposals / write-offs
Transfers (a)
IFRS 16 transition impact
Exchange variation and other movements

Balance at 31 December 2019

Acquisitions
Disposals / write-offs
Transfers (b)
Foreign exchange differences and other (c)

Balance at 31 December 2020

Depreciation
Balance at 31 December 2018

Depreciation
Disposals / write-offs
Transfers (a)
Foreign exchange differences and other

Balance at 31 December 2019

Depreciation
Disposals / write-offs
Transfers (b)
Foreign exchange differences and other ( d)

Balance at 31 December 2020

Impairment
Balance at 31 December 2018

Balance at 31 December 2019

Perdas por imparidade

Balance at 31 December 2020

NOVO BANCO

Real estate
properties

Equipment

Work in
progress

Total

(in thousands of Euros)

339 664
6 076
( 20 089)
438
90 280
( 3)

416 366
27 192
( 10 195)
( 1 665)
( 9 093)

273 008
10 704
( 21 511)
950
3 755
4

266 910
14 759
( 9 509)
( 153)
( 26 350)

422 605

245 657

222 994
24 434
( 5 927)
( 210)
91

241 382
20 968
( 8 387)
( 903)
( 316)

245 227
11 076
( 20 176)
( 74)
566

236 619
11 465
( 9 108)
( 143)
( 24 250)

252 744

214 583

10 609

10 609
2 776

13 385

-
-

1 889
350
-
( 2 152)
-
-

87
1 446
-
( 115)
-

1 418

-
-
-
-
-

-
-

614 561
17 130
( 41 600)
( 764)
94 035
1

683 363
43 398
( 19 704)
( 1 934)
( 35 443)

669 680

468 221
35 510
( 26 103)
( 284)
657

478 001
32 433
( 17 495)
( 1 046)
( 24 566)

467 327

10 609

10 609
2 776

13 385

Net book value at 31 December 2020

156 476

31 074

1 418

188 968

Net book value at 31 December 2019

164 375

30 291

194 753

(a) Includes 764 thousand euros of fixed assets (property and equipment) and 284 thousands of euros of accumulated depreciation related to discontinued branches that w ere transferred at net value
to the appropriate balance sheet items.

Includes 1,951 thousand euros of fixed assets (property and equipment) and 1,064 thousands of euros of accumulated depreciation related to discontinued branches that w ere transferred at net

(b)
value to the appropriate balance sheet items

(c) Includes 9,005 and 27,118 thousand euros of property and equipment from the Spanish Branch transferred to discontinued activities during the year 2020

(d) It includes 2,034 and 24,274 thousand euros of depreciation related to the properties and equipment of the Spanish Branch transferred to discontinued activities during the year 2020.

NOTE 25 – Intangible assets

NOTE 25 – INTANGIBLE ASSETS
This caption as at 31 December 2020 and 2019 is analyzed as follows:
This caption as at 31 December 2020 and 2019 is analyzed as follows:

Internally developed

Software - Automatic data processing system

Acquired from third parties

Software - Automatic data processing system

Work in progress

Accumulated amortization

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

65 373

65 270

346 389

364 062

411 762

429 332

21 420

17 446

433 182

446 778

( 384 851)

( 420 735)

48 331

26 043

The caption Intangible assets developed internally includes costs incurred by the Bank units specialized in the development and
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 350-
implementation of software applications that will generate economic benefits in the future (see Note 2.12).

The changes in this caption were as follows:

418

Automatic data processing
system

Work in progress

Total

(in thousands of Euros)

Acquisition cost

Balance as at 31 December 2018

Acquisitions

Acquired from third parties

Disposals / write-offs

Transfers

Foreign exchange differences and other

Balance as at 31 December 2018

Acquisitions

Acquired from third parties

Disposals / write-offs

Transfers

Foreign exchange differences and other (a)

Balance as at 31 December 2020

Amortizations

Balance as at 31 December 2018

Amortization for the period

Disposals / write-offs

Balance as at 31 December 2019

Amortization for the period

Disposals / write-offs

Transfers

Balance as at 31 December 2020

Net balance at 31 December 2020

Net balance at 31 December 2019

Foreign exchange differences and other (b)

NOTE 26 – INCOME TAXES

429 187

3 137

( 7 460)

4 467

429 332

2 373

( 20)

20 161

( 40 084)

411 762

427 024

1 171

( 7 460)

420 735

2 600

( 20)

( 38 464)

384 851

26 911

8 597

2 618

23 000

( 8 172)

17 446

24 134

( 20 161)

21 420

17 446

431 805

26 137

( 7 460)

( 3 705)

446 778

26 507

( 20)

( 40 083)

433 182

427 024

1 171

( 7 460)

420 735

2 600

( 20)

( 38 464)

384 851

48 331

26 043

(a) It includes 40 083 thousand Euros of investment projects assigned to the Spanish Branch transferred to discontinued operations during the year 2020.

(b) It includes 38 463 thousand euros of investment projects related to the Spanish Branch that were transferred to discontinued operations during the year 2020.

NOVO BANCO is subject to taxation in accordance with the Corporate Income Tax (IRC) Code. As a result, deferred taxes are

recorded depending on the temporary differences between accounting and tax income relevant for IRC purposes, whenever such

temporary differences are to be reverted in the future.

The income taxes correspond to the value of taxable income (if applicable) of the period, using the overall Corporate Income Tax rate

in force at the balance sheet date (21%) and autonomous taxation.

Corporate income taxes (current or deferred) are recognized in the income statement for the year, except when the underlying

transactions or items to which they are related have been reflected under other equity captions (e.g. revaluation of financial assets at

fair value through other comprehensive income). In these situations, the corresponding tax is also charged to equity, not affecting the

net profit / (loss) for the year.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The caption Intangible assets developed internally includes costs incurred by the Bank units specialized in the develop-
ment and implementation of software applications that will generate economic benefits in the future (see Note 2.12).

The changes in this caption were as follows:

Automatic data processing
system

Work in progress

Total

(in thousands of Euros)

Acquisition cost
Balance as at 31 December 2018

Acquisitions

Acquired from third parties

Disposals / write-offs
Transfers
Foreign exchange differences and other

Balance as at 31 December 2018

Acquisitions

Acquired from third parties

Disposals / write-offs
Transfers
Foreign exchange differences and other (a)

Balance as at 31 December 2020

Amortizations
Balance as at 31 December 2018

Amortization for the period
Disposals / write-offs

Balance as at 31 December 2019

Amortization for the period
Disposals / write-offs
Foreign exchange differences and other (b)

Balance as at 31 December 2020

Net balance at 31 December 2020

Net balance at 31 December 2019

429 187

3 137
( 7 460)
4 467
1

429 332

2 373
( 20)
20 161
( 40 084)

411 762

427 024
1 171
( 7 460)

420 735
2 600
( 20)
( 38 464)

384 851

26 911

8 597

2 618

23 000
-
( 8 172)
-

17 446

24 134
-
( 20 161)
1

21 420

-
-
-

-
-
-
-

21 420

17 446

431 805

26 137
( 7 460)
( 3 705)
1

446 778

26 507
( 20)
-
( 40 083)

433 182

427 024
1 171
( 7 460)

420 735
2 600
( 20)
( 38 464)

384 851

48 331

26 043

(a) It includes 40 083 thousand Euros of investment projects assigned to the Spanish Branch transferred to discontinued operations during the year 2020.

(b) It includes 38 463 thousand euros of investment projects related to the Spanish Branch that were transferred to discontinued operations during the year 2020.

NOTE 26 – Income taxes

NOVO BANCO is subject to taxation in accordance with the Corporate Income Tax (IRC) Code. As a result, deferred
taxes are recorded depending on the temporary differences between accounting and tax income relevant for IRC
purposes, whenever such temporary differences are to be reverted in the future.

The income taxes correspond to the value of taxable income (if applicable) of the period, using the overall Corporate
Income Tax rate in force at the balance sheet date (21%) and autonomous taxation.

Corporate income taxes (current or deferred) are recognized in the income statement for the year, except when
the underlying transactions or items to which they are related have been reflected under other equity captions (e.g.
revaluation of financial assets at fair value through other comprehensive income). In these situations, the corresponding
tax is also charged to equity, not affecting the net profit / (loss) for the year.

Deferred taxes are calculated based on the anticipated tax rates to be effective at the date of reversal of temporary
differences, which correspond to rates approved or substantially approved at the balance sheet date.

419

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

of each tax period of the adaptation regime.

NOVO BANCO
Thus, on 31 December 2020, the Bank continued to apply Regulatory Decree nº 13/2018, of December 28, which aims
to extend, for tax purposes, the tax framework resulting from Notice Noº 3/95 of Bank of Portugal.
Deferred taxes are calculated based on the anticipated tax rates to be effective at the date of reversal of temporary differences, which
The IRC payment declarations are subject to inspection and possible adjustment by the Tax Authorities for a period of
correspond to rates approved or substantially approved at the balance sheet date.
four years or during the period in which it is possible to deduct tax losses or tax credits (up to a maximum of twelve
Thus, at 31 December 2020 the deferred tax related to temporary differences was determined based on an aggregate rate of 31%,
years, depending on the year of determination). Thus, possible additional tax assessments may take place due essen-
resulting from the sum of the general IRC rate (21%), the Municipal Surcharge of 1.5% and an average rate of State Surcharge of
tially to different interpretations of tax legislation. However, Management believes that, in the context of the separate
8.5%.
financial statements, there will be no additional charges of significant value.
On 4th September 2019, Law No. 98/2019 was published, which amended the IRC Code on the tax treatment of credit institutions'
impairments, creating rules applicable to impairment losses recorded in the tax periods beginning before 1st January 2019, not yet
In 31 December 2020 and 2019, NOVO BANCO recorded deferred tax assets associated with impairments not
accepted for tax purposes. This Law established a transition period for the aforementioned tax regime, which allows taxpayers in the
accepted for tax purposes for credit operations, which have already been written off, considering the expectation that
five tax periods beginning on or after January 1, 2019, to continue to apply the tax regime in force before publication of this law,
except if they perform the exercise of opt in until the end of October of each tax period of the adaptation regime.
these will contribute to a taxable profit in the periods taxation in which the conditions required for tax deductibility
are met.
Thus, on 31 December 2020, the Bank continued to apply Regulatory Decree nº 13/2018, of December 28, which aims to extend, for
tax purposes, the tax framework resulting from Notice Noº 3/95 of Bank of Portugal.
Pursuant to Law No. 55-A/2010, of 31 December, a Bank Levy was established, which is levied on the average annual
The IRC payment declarations are subject to inspection and possible adjustment by the Tax Authorities for a period of four years or
liabilities recorded on the balance sheet net of own funds and of deposits covered by the guarantee of the Deposit
during the period in which it is possible to deduct tax losses or tax credits (up to a maximum of twelve years, depending on the year
Guarantee Fund and on the notional amount of derivative financial instruments. The Bank Levy is not eligible as a tax
of determination). Thus, possible additional tax assessments may take place due essentially to different interpretations of tax
cost, and the respective regime has been extended. As at 31 December 2020, NOVO BANCO recognized Banking
legislation. However, Management believes that, in the context of the separate financial statements, there will be no additional charges
Levy charges as a cost in the amount of Euro 26,981 thousand (31 December 2019: Euro 26,647 thousand). The cost
of significant value.
In 31 December 2020 and 2019, NOVO BANCO recorded deferred tax assets associated with impairments not accepted for tax
recognized as at 31 December 2020 has been calculated and paid based on the maximum rate of 0.110% levied on the
purposes for credit operations, which have already been written off, considering the expectation that these will contribute to a taxable
average annual liabilities recorded on the balance sheet, net of own funds and deposits covered by the guarantee of the
profit in the periods taxation in which the conditions required for tax deductibility are met.
Deposit Guarantee Fund, approved by Law No. 7-A/2016, of 30 March and by Ordinance No. 165-A/2016, of 14 June.
Pursuant to Law No. 55-A/2010, of 31 December, a Bank Levy was established, which is levied on the average annual liabilities
recorded on the balance sheet net of own funds and of deposits covered by the guarantee of the Deposit Guarantee Fund and on the
In 2020, following one of the measures foreseen in the Economic and Social Stabilization Program (PEES) and following
notional amount of derivative financial instruments. The Bank Levy is not eligible as a tax cost, and the respective regime has been
art. 18 of Law No. 27 -A / 2020, of 24 July, the Solidarity Additional on the Banking Sector was created, which, similarly
extended. As at 31 December 2020, NOVO BANCO recognized Banking Levy charges as a cost in the amount of Euro 26,981
to what happens with the Contribution on the Banking Sector, is levied on the average annual liability calculated in
thousand (31 December 2019: Euro 26,647 thousand). The cost recognized as at 31 December 2020 has been calculated and paid
based on the maximum rate of 0.110% levied on the average annual liabilities recorded on the balance sheet, net of own funds and
Balance sheet deducted from own funds and deposits covered by the Deposit Guarantee Fund guarantee and on the
deposits covered by the guarantee of the Deposit Guarantee Fund, approved by Law No. 7-A/2016, of 30 March and by Ordinance
notional value of derivative financial instruments. Its settlement is carried out until the end of June of the year following
No. 165-A/2016, of 14 June.
the year to which the surcharge relates. A transitional regime was established for the financial year 2020 and 2021, the
In 2020, following one of the measures foreseen in the Economic and Social Stabilization Program (PEES) and following art. 18 of
settlement of which was carried out in accordance with the following rules:
Law No. 27 -A / 2020, of 24 July, the Solidarity Additional on the Banking Sector was created, which, similarly to what happens with
the Contribution on the Banking Sector, is levied on the average annual liability calculated in Balance sheet deducted from own funds
• The reserve base is calculated by reference to the half-yearly average of the final balances of each month, which
and deposits covered by the Deposit Guarantee Fund guarantee and on the notional value of derivative financial instruments. Its
correspond in the accounts for the first half of 2020, in the case of the solidarity surcharge due in 2020, and in the
settlement is carried out until the end of June of the year following the year to which the surcharge relates. A transitional regime was
established for the financial year 2020 and 2021, the settlement of which was carried out in accordance with the following rules:
accounts for the second half of 2020 , in the case of the solidarity surcharge due in 2021, published in compliance
with the obligation established in Banco de Portugal Notice No. 1/2019;
The reserve base is calculated by reference to the half-yearly average of the final balances of each month, which correspond in
the accounts for the first half of 2020, in the case of the solidarity surcharge due in 2020, and in the accounts for the second half
• Settlement is carried out by the taxable person through the declaration to be sent until 15 December 2020 and
of 2020 , in the case of the solidarity surcharge due in 2021, published in compliance with the obligation established in Banco de
2021, respectively, with payment due on the same dates.
Portugal Notice No. 1/2019;

•

The Solidarity Additional on the Banking Sector is not eligible as a tax cost.
• Settlement is carried out by the taxable person through the declaration to be sent until 15 December 2020 and 2021, respectively,

with payment due on the same dates.

As at 31 December 2020, the Bank recognized as an expense in relation to the Solidarity Additional on the Banking
The Solidarity Additional on the Banking Sector is not eligible as a tax cost.
Sector the amount of Euro 5,212 thousand. The recognized expense was calculated and paid based on the maximum
rate of 0.02% which is levied on the average annual liability calculated on the balance sheet less the own funds and
As at 31 December 2020, the Bank recognized as an expense in relation to the Solidarity Additional on the Banking Sector the amount
of Euro 5,212 thousand. The recognized expense was calculated and paid based on the maximum rate of 0.02% which is levied on
deposits covered by the Deposit Guarantee Fund guarantee.
the average annual liability calculated on the balance sheet less the own funds and deposits covered by the Deposit Guarantee Fund
guarantee.
The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 2019 may be
analyzed as follows:
The deferred tax assets and liabilities recognized in the balance sheet as at 31 December 2020 and 2019 may be analyzed as follows:

Current tax

Corporate tax recoverable
Other
Deferred tax

(in thousands of Euros)

31.12.2020

31.12.2019

Ativo

Passivo

Ativo

Passivo

5 536

5 462

680

771 854

892 033

9 239

5 278

3 961

771 854

5 536

892 713

9 239

The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:

420

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 352-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The deferred tax assets and liabilities recognized in the balance sheet in this period are as follows:

NOVO BANCO

(in thousands of Euros)

Assets

Liabilities

31.12.2020

31.12.2019

31.12.2020

31.12.2019

Net

31.12.2020

NOVO BANCO
31.12.2019

Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Provisions
Pensions
Debt securities issued
Other
Financial instruments
Impairment losses on loans and advances to customers
Deferred tax asset / (liability)
Other tangible assets
Provisions
Asset / liability set-off for deferred tax purposes
Pensions
Net Deferred tax asset / (liability)
Debt securities issued
Other

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

Assets

64 012
788 341
-
38 975
31 185
-
-
64 012
788 341
922 513
-
38 975
( 150 659)
31 185
Assets
771 854
-
-

55 247
903 759
-
48 375
26 938
-
745
55 247
903 759
1 035 064
-
48 375
( 143 031)
26 938
892 033
-
745

(136 845)
-
( 8 203)
-
-
(5 611)
-

(136 845)
-
( 150 659)
( 8 203)
-
150 659
-
-
(5 611)
-

Liabilities

( 134 654)
-
( 8 377)
-
-
-
-
( 134 654)
-
( 143 031)
( 8 377)
-
143 031
-
-
-
-

Net

(in thousands of Euros)

( 72 833)
788 341
( 8 203)
38 975
31 185
31.12.2019
( 5 611)
NOVO BANCO
-
( 72 833)
788 341
771 854
( 8 203)
38 975
-
31 185
771 854
( 5 611)
-

( 79 407)
903 759
( 8 377)
48 375
26 938
-
745
( 79 407)
903 759
892 033
( 8 377)
48 375
-
26 938
892 033
-
745

(in thousands of Euros)

31.12.2019

Net

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

922 513
64 012
788 341
( 150 659)
-
38 975
771 854
31 185
-
-

Deferred tax asset / (liability)
The changes occurred in the deferred tax captions are as follows:
Financial instruments
Impairment losses on loans and advances to customers
Asset / liability set-off for deferred tax purposes
Other tangible assets
Provisions
Net Deferred tax asset / (liability)
The changes occurred in the deferred tax captions are as follows:
Pensions
Debt securities issued
Other
The changes occurred in the deferred tax captions are as follows:
Deferred tax asset / (liability)

892 033
( 79 407)
903 759
-
( 8 377)
48 375
892 033
26 938
-
1 179 272
745
( 36 185)
892 033
( 105 153)
( 145 899)
-
( 2)
892 033
1 179 272
892 033
( 36 185)
( 105 153)
( 145 899)
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:
( 2)

Balance at the beginning of the exercise
Recognised in Results for the exercise
Recognised in Fair value reserves
Conversion of Deferred taxes into Tax credits
Asset / liability set-off for deferred tax purposes
Foreign exchange differences and other
Balance at the beginning of the exercise
Balance at the end of the exercise (Assets / (Liabilities))
Recognised in Results for the exercise
Recognised in Fair value reserves
Conversion of Deferred taxes into Tax credits
Foreign exchange differences and other

( 143 031)
( 134 654)
-
143 031
( 8 377)
-
31.12.2020
-
-
-
892 033
-
( 9 184)
( 2 814)
( 107 705)
( 476)
892 033
771 854
( 9 184)
( 2 814)
( 107 705)
( 476)

771 854
( 72 833)
788 341
-
( 8 203)
38 975
31.12.2019
771 854
31 185
( 5 611)
-

The changes occurred in the deferred tax captions are as follows:

1 035 064
55 247
903 759
( 143 031)
-
48 375
892 033
26 938
-
745

( 150 659)
(136 845)
-
150 659
( 8 203)
-
-
-
(5 611)
-

Net Deferred tax asset / (liability)

31.12.2019
-

31.12.2020
143 031

1 035 064

( 143 031)

( 150 659)

( 143 031)

( 150 659)

922 513

771 854

892 033

771 854

150 659

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

31.12.2019

Recognised in
reserves

Recognised in
the income
statement

Balance at the end of the exercise (Assets / (Liabilities))

Balance at the end of the exercise (Assets / (Liabilities))
Balance at the beginning of the exercise
Recognised in Results for the exercise
Recognised in Fair value reserves
Conversion of Deferred taxes into Tax credits
Foreign exchange differences and other

892 033
1 179 272
( 36 185)
Recognised in
( 105 153)
reserves
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:
( 145 899)
(in thousands of Euros)
( 2)
105 153
Financial instruments
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the
-
Impairment losses on loans and advances to customers
892 033
following origins:
Other tangible assets
-
Recognised in
reserves
Provisions
-
Pensions
-
The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:
Financial instruments
105 153
Other
-
Impairment losses on loans and advances to customers
-
Tax losses carried forward
-
Other tangible assets
-
Deferred taxes
105 153
Recognised in
Provisions
-
reserves
Pensions
-
Current taxes
-
Other
-
105 153
Total tax recognised (income) / (expense)
105 153
Financial instruments
Tax losses carried forward
-
-
Impairment losses on loans and advances to customers
105 153
Deferred taxes
-
Other tangible assets
The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:
-
Provisions
Current taxes
-
(in thousands of Euros)
-
Pensions
105 153
Total tax recognised (income) / (expense)
-
Other
Valor
-
Tax losses carried forward
(1 048 858)
Income before tax
Tax rate of NOVO BANCO
The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:
105 153
Deferred taxes
Tax rate of NOVO BANCO
21,0
(in thousands of Euros)
( 220 260)
Income tax calculated based on the tax rate of NOVO BANCO
-
Current taxes

771 854
892 033
Recognised in
( 9 184)
the income
( 2 814)
statement
( 107 705)
( 476)
1 751
( 136 523)
771 854
Recognised in
( 175)
the income
33 208
statement
885
1 751
( 991)
( 136 523)
138 030
( 175)
Recognised in
36 185
33 208
the income
885
2 541
statement
( 991)
38 726
1 751
138 030
( 136 523)
36 185
( 175)
33 208
2 541
885
38 726
( 991)
138 030

( 11 363)
13 324
Recognised in
( 174)
the income
9 401
statement
( 2 004)
( 11 363)
-
13 324
-
( 174)
Recognised in
9 184
9 401
the income
( 2 004)
( 13 400)
statement
-
( 4 216)
( 11 363)
-
13 324
9 184
( 174)
9 401
( 13 400)
( 2 004)
( 4 216)
-
-

5 057
-
-
Recognised in
reserves
-
( 2 243)
5 057
-
-
-
-
2 814
Recognised in
-
reserves
( 2 243)
-
-
2 814
5 057
-
-
2 814
-
-
-
( 2 243)
2 814
-
%
-

(in thousands of Euros)

(1 378 462)

31.12.2019

31.12.2020

31.12.2019

31.12.2020

( 289 477)

( 13 400)

2 814
21,0

36 185

2 541

9 184

Valor

31.12.2020

31.12.2019

Valor

( 4 216)

38 726

Valor
( 1 759)
Tax-exempt dividends
0,2
105 153
Total tax recognised (income) / (expense)
Impairment on investments in subsidiaries or associated companies not subject to Participation Exemption
22 788
(2,2)
Income before tax
(1 048 858)
Tax rate of NOVO BANCO
Branch Tax and Tax Withheld Abroad
3 391
(0,3)
Tax rate of NOVO BANCO
21,0
The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:
(3,7)
Rate differential in the generation / reversal of temporary differences
38 344
Income tax calculated based on the tax rate of NOVO BANCO
( 220 260)
(in thousands of Euros)
Annulment of tax losses carried forward
138 030
(13,2)
( 225 299)
Impairments and provisions for credit
21,5
31.12.2019
0,2
Tax-exempt dividends
( 1 759)
Impairments and fair value adjustments of securities
922
(0,1)
Valor
Impairment on investments in subsidiaries or associated companies not subject to Participation Exemption
22 788
(2,2)
Provisions for other risks and charges and contingencies
( 6 264)
0,6
Branch Tax and Tax Withheld Abroad
3 391
(0,3)
(1 048 858)
Income before tax
Tax rate of NOVO BANCO
(24,2)
Deferred tax asset not recognized on tax loss for the year
254 300
Rate differential in the generation / reversal of temporary differences
38 344
(3,7)
21,0
Tax rate of NOVO BANCO
-
Pension Fund
-
Annulment of tax losses carried forward
138 030
(13,2)
( 220 260)
Income tax calculated based on the tax rate of NOVO BANCO
Extraordinary Contribution and Additional Solidarity over the Banking Sector
5 689
(0,5)
Impairments and provisions for credit
( 225 299)
21,5
28 844
(2,8)
Others
Impairments and fair value adjustments of securities
922
(0,1)
( 1 759)
0,2
Tax-exempt dividends
Provisions for other risks and charges and contingencies
( 6 264)
0,6
38 726
(3,7)
22 788
(2,2)
Impairment on investments in subsidiaries or associated companies not subject to Participation Exemption
254 300
(24,2)
Deferred tax asset not recognized on tax loss for the year
3 391
(0,3)
Branch Tax and Tax Withheld Abroad
-
-
Pension Fund
38 344
(3,7)
Rate differential in the generation / reversal of temporary differences
5 689
(0,5)
Extraordinary Contribution and Additional Solidarity over the Banking Sector
138 030
(13,2)
Annulment of tax losses carried forward
28 844
(2,8)
Others
( 225 299)
21,5
Impairments and provisions for credit
922
(0,1)
Impairments and fair value adjustments of securities
(3,7)
38 726
Total tax recognized
421
( 6 264)
0,6
Provisions for other risks and charges and contingencies
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 353-
254 300
(24,2)
Deferred tax asset not recognized on tax loss for the year
-
-
Pension Fund
5 689
(0,5)
Extraordinary Contribution and Additional Solidarity over the Banking Sector
28 844
(2,8)
Others

%
0,0
2 814
(2,9)
(0,2)
21,0
3,4
-
(10,7)
31.12.2020
0,0
(7,6)
%
(2,9)
(1,6)
(0,2)
(1,2)
3,4
21,0
0,0
-
(0,5)
(10,7)
0,5
(7,6)
0,0
(1,6)
0,3
(2,9)
(1,2)
(0,2)
0,0
3,4
(0,5)
-
0,5
(10,7)
(7,6)
0,3
(1,6)
(1,2)
0,0
(0,5)
0,5

( 482)
40 166
(1 378 462)
2 902
( 46 706)
( 289 477)
-
147 255
( 482)
104 665
40 166
21 988
2 902
(1 378 462)
15 913
( 46 706)
( 324)
-
( 289 477)
6 760
147 255
( 6 876)
104 665
( 482)
21 988
( 4 216)
40 166
15 913
2 902
( 324)
( 46 706)
6 760
-
( 6 876)
147 255
104 665
( 4 216)
21 988
15 913
( 324)
6 760
( 6 876)

Total tax recognized

Valor

Total tax recognized

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

0,3

( 4 216)

(3,7)

38 726

- 353-

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 353-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

(in thousands of Euros)

Impairment losses on loans and advances to customers

Financial instruments

Other tangible assets

Provisions

Pensions

Other

Debt securities issued

Assets

Liabilities

Net

31.12.2020

31.12.2019

31.12.2020

31.12.2019

31.12.2020

31.12.2019

(136 845)

( 134 654)

( 8 203)

( 8 377)

64 012

788 341

38 975

31 185

55 247

903 759

48 375

26 938

745

( 79 407)

903 759

( 8 377)

48 375

26 938

745

( 72 833)

788 341

( 8 203)

38 975

31 185

( 5 611)

(5 611)

Deferred tax asset / (liability)

922 513

1 035 064

( 150 659)

( 143 031)

771 854

892 033

Asset / liability set-off for deferred tax purposes

( 150 659)

( 143 031)

150 659

143 031

Net Deferred tax asset / (liability)

771 854

892 033

771 854

892 033

The changes occurred in the deferred tax captions are as follows:

Balance at the beginning of the exercise

Recognised in Results for the exercise

Recognised in Fair value reserves

Conversion of Deferred taxes into Tax credits

Foreign exchange differences and other

Balance at the end of the exercise (Assets / (Liabilities))

(in thousands of Euros)

31.12.2020

31.12.2019

892 033

( 9 184)

( 2 814)

( 107 705)

( 476)

771 854

1 179 272

( 36 185)

( 105 153)

( 145 899)

( 2)

892 033

The current and deferred taxes recognized in the income statement and in reserves, in 2020 and 2019, had the following origins:

Financial instruments
Impairment losses on loans and advances to customers
Other tangible assets
Provisions
Pensions
Other
Tax losses carried forward

Deferred taxes

31.12.2020

31.12.2019

Recognised in

the income

statement

Recognised in

reserves

Recognised in

the income

statement

Recognised in

reserves

(in thousands of Euros)

( 11 363)
13 324
( 174)
9 401
( 2 004)
-
-

9 184

5 057
-
-
-
( 2 243)
-
-

2 814

1 751
( 136 523)
( 175)
33 208
885
( 991)
138 030

105 153
-
-
-
-
-
-

36 185

105 153

Current taxes
The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be
Total tax recognised (income) / (expense)
analyzed as follows:

105 153

( 13 400)

38 726

( 4 216)

2 541

2 814

The reconciliation of the corporate income tax rate, for the portion recognized in the income statement, may be analyzed as follows:

Income before tax
Tax rate of NOVO BANCO
Tax rate of NOVO BANCO
Income tax calculated based on the tax rate of NOVO BANCO

Tax-exempt dividends
Impairment on investments in subsidiaries or associated companies not subject to Participation Exemption
Branch Tax and Tax Withheld Abroad
Rate differential in the generation / reversal of temporary differences
Annulment of tax losses carried forward
Impairments and provisions for credit
Impairments and fair value adjustments of securities
Provisions for other risks and charges and contingencies
Deferred tax asset not recognized on tax loss for the year
Pension Fund
Extraordinary Contribution and Additional Solidarity over the Banking Sector
Others

Total tax recognized

31.12.2020

31.12.2019

Valor

(in thousands of Euros)

21,0

0,0
(2,9)
(0,2)
3,4
-
(10,7)
(7,6)
(1,6)
(1,2)
0,0
(0,5)
0,5

0,3

(1 378 462)

(1 048 858)

( 289 477)

( 220 260)

21,0

( 482)
40 166
2 902
( 46 706)
-
147 255
104 665
21 988
15 913
( 324)
6 760
( 6 876)

( 4 216)

0,2
(2,2)
(0,3)
(3,7)
(13,2)
21,5
(0,1)
0,6
(24,2)
-
(0,5)
(2,8)

(3,7)

( 1 759)
22 788
3 391
38 344
138 030
( 225 299)
922
( 6 264)
254 300
-
5 689
28 844

38 726

Deferred tax assets are recognized to the extent it is probable that taxable profits will be available allowing for the
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 353-
utilization of the deductible temporary differences. The Bank has evaluated the recoverability of the deferred tax assets
considering its expectations of future taxable profits until 2028. The recoverable deferred tax assets covered by the
Special Regime applicable to Deferred Tax Assets is not dependent on the generation of future taxable income.

Following the analyses of recoverability of deferred tax assets, the Bank on 31 December 2019 delisted deferred taxes
related to tax losses amounting to Euro 251,000 thousand. As of 31 December 2020, NOVO BANCO has not registered
deferred tax assets associated with tax losses.

In the evaluation of the expectation of future taxable income generation in Portugal for the purposes of the above
recovery exercise, the following assumptions were also considered:

•

In addition to the detailed estimates up to 2023, it is assumed, thereafter an increase in pre-tax results at a rate of
2.64% from 2023;

• Financial results moderate growth (average of 4%), with the expected cost of debt issuing to meet MREL
requirements offset by the development of new lines of activity and the resumption of economic activity, which
is strongly affected by the current pandemic situation. The growth in economic activity should also provide a
return to commission levels to values similar to previous years;

• Operating costs reduction, based on specific cost reduction plans and the implementation of a new distribution
model, reflecting the favourable effect of the decrease in the number of employees and branches and, generally,
the simplification and increase in the efficiency of processes; and

• Credit impairment charges in line with the evolution of the Bank's activity and supported by macroeconomic pro-
jections, bearing in mind, in particular, the significant effort made in the last few years in the provisioning of the loan
portfolio and the progressive convergence towards gradually normalized risk costs.

The evolution of the business plan used for this exercise is strongly conditioned by the evolution of the Covid-19
pandemic situation, whose evolution is difficult to predict.

422

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

Depending on the analysis mentioned above, the amount of deferred taxes not recognized for tax losses, per year of
expiry, is as follows:

reflecting the favourable effect of the decrease in the number of employees and branches and, generally, the simplification
and increase in the efficiency of processes; and
Credit impairment charges in line with the evolution of the Bank's activity and supported by macroeconomic projections,
bearing in mind, in particular, the significant effort made in the last few years in the provisioning of the loan portfolio a
468 903
progressive convergence towards gradually normalized risk costs.
1 124 790
1 593 693

2024-2026
2028 and following

482 974
1 124 790
1 607 764

(in thousands of Euros)

2019

2020

The evolution of the business plan used for this exercise is strongly conditioned by the evolution of the Covid
whose evolution is difficult to predict.

In addition, during the financial year 2020, the Bank became aware of the position of the tax authority with regard to
adjustments resulting from the application of fair value to units in real estate investment funds and venture capital.
These adjustments resulting from the application of the fair value model to units of real estate investment funds and
venture capital funds do not contribute to the formation of the taxable profit of the tax period in which they are
recognized in the accounting, having only tax relevance at the moment of the respective realization, namely in the
onerous transfer of the units of participation or liquidation of the funds. The Bank is investigating the impacts related to
temporary differences resulting from this understanding.

Special Regime applicable to Deferred Tax Assets

During 2014, NOVO BANCO adhered to the Special Regime applicable to deferred tax assets, after a favourable decision
of the Shareholders General Meeting.

The changes to the mentioned above regime, introduced by Law No. 23/2016, of 19 August, limited the temporal appli-
cation of the above mentioned negative expenses and equity variations, accounted for in the tax periods beginning on
or after 1 January 2016, as well as the associated deferred taxes. Thus, the deferred taxes covered by this special regime
correspond only to expenses and negative equity variations calculated up to 31 December 2015.

To convert to a tax credit (other than by liquidation or insolvency), a special reserve should be created for the amount
of the respective tax credit increased by 10%. The exercise of conversion rights results in the capital increase of the
taxable person by incorporation of the special reserve and issuance of new common shares. This special reserve may
not be distributed.

NOVO BANCO
Deferred tax assets recorded by NOVO BANCO and considered eligible the special regime at 31 December 2020 and
2019, are as follows:
Deferred tax assets recorded by NOVO BANCO and considered eligible the special regime at 31 December 2020 and 2019, are as
follows:

Credit impairment

(in thousands of Euros)

31.12.2020

31.12.2019

400 414

516 072

2019

2018

2017

2016

2015

(in thousands of Euros)

Tax credit

110 922

161 974

127 575

99 474

153 555

423

NOTE 27 – OTHER ASSETS

As at 31 December 2020 and 2019, the caption Other assets is analyzed as follows:

Collateral deposits placed

Derivative products

Collateral CLEARNET and VISA

Collateral deposits relating to reinsurance operations

Other collateral deposits

Recoverable government subsidies on mortgage loans

Precious metals, numismatics, medal collection and other liquid assets

Stock exchange transactions pending settlement

Other assets

Public sector

Contingent Capital Agreement

Other debtors

Income receivable

Deferred costs

Real estate properties a)

Equipment a)

Impairment losses

Real estate properties a)

Equipment a)

Other

Other debtors - Shareholder loans, supplementary capital contributions

(in thousands of Euros)

31.12.2020

31.12.2019

806 215

655 952

33 092

117 127

6 527

683 882

598 312

553 668

61 212

51 569

9 677

500 917

3 488

60 917

54 689

3 391 073

( 267 438)

( 2 285)

( 109 538)

( 55 802)

( 435 063)

2 956 010

807 810

631 994

33 175

141 697

944

4 441

437 249

1 037 013

730 419

31 061

55 317

9 510

562 532

3 130

135 150

3 813 632

( 267 656)

( 2 404)

( 111 051)

( 98 935)

( 480 046)

3 333 586

a) Real estate properties and equipment received in settlement of loans and discontinued

The caption Other debtors includes, amongst others:

• Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of loans and

advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned), and

• Euro 67.0 million receivable in relation to the sale operation of non-performing loans (Project NATA II) (31 December 2019: Euro

126.5 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 40);

• Euro 21.8 million receivable in relation to the sale operation of real estate assets in 2019 (denominated “Sertorius Project”) (31

December 2019: Euro 21.0 million); and

• Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the Spanish Branch

in 2019 (denominated “Albatros Project”) (31 December 2019: Euro 37.7 million); and

•

Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project Carter”).

As at 31 December 2020, the caption Deferred costs includes the amount of Euro 40,800 thousand (31 December 2019: Euro 43,372

thousand) related to the difference between the nominal amount of the loans and advances granted to Bank employees under the

Collective Labour Agreement (ACT) for the banking sector and their respective fair value at grant date, calculated in accordance with

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 355-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Deferred tax assets recorded by NOVO BANCO and considered eligible the special regime at 31 December 2020 and 2019, are as
follows:

Credit impairment

(in thousands of Euros)

31.12.2020

400 414

31.12.2019
NOVO BANCO

516 072

NOVO BANCO

Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets
Deferred tax assets recorded by NOVO BANCO and considered eligible the special regime at 31 December 2020 and 2019, are as
converted or estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are
follows:
as follows:
Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets converted or
estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are as follows:

(in thousands of Euros)

31.12.2019

31.12.2020

Credit impairment

2019

2018

2017

400 414
2016
400 414

(in thousands of Euros)

516 072

2015

516 072

Tax credit

110 922

161 974

127 575

99 474

153 555

As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution of the special
Following the determination of a negative net income for the years between 2015 and 2019, the deferred tax assets converted or
reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and Customs Authority, within the
estimated to be converted by reference to the deferred tax assets eligible at the balance sheet date are as follows:
scope of the review procedures for the assessment of the taxable income for the relevant tax periods.
As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution
of the special reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and
NOTE 27 – OTHER ASSETS
Customs Authority, within the scope of the review procedures for the assessment of the taxable income for the relevant
As at 31 December 2020 and 2019, the caption Other assets is analyzed as follows:
tax periods.
As a result of Law No. 61/2014, the amount of deferred tax assets to be converted into a tax credit and the constitution of the special
reserve shall be subject to certification by a statutory auditor, as well as to confirmation by the Tax and Customs Authority, within the
(in thousands of Euros)
scope of the review procedures for the assessment of the taxable income for the relevant tax periods.

(in thousands of Euros)

Tax credit

153 555

127 575

161 974

110 922

99 474

2016

2018

2015

2017

2019

NOTE 27 – Other assets

Collateral deposits placed
Derivative products
NOTE 27 – OTHER ASSETS
Collateral CLEARNET and VISA
Collateral deposits relating to reinsurance operations
Other collateral deposits

As at 31 December 2020 and 2019, the caption Other assets is analyzed as follows:
As at 31 December 2020 and 2019, the caption Other assets is analyzed as follows:

Recoverable government subsidies on mortgage loans
Public sector
Contingent Capital Agreement
Collateral deposits placed
Other debtors
Derivative products
Income receivable
Collateral CLEARNET and VISA
Deferred costs
Collateral deposits relating to reinsurance operations
Precious metals, numismatics, medal collection and other liquid assets
Other collateral deposits
Real estate properties a)
Recoverable government subsidies on mortgage loans
Equipment a)
Public sector
Stock exchange transactions pending settlement
Contingent Capital Agreement
Other assets
Other debtors
Income receivable
Deferred costs
Impairment losses
Real estate properties a)
Precious metals, numismatics, medal collection and other liquid assets
Equipment a)
Real estate properties a)
Other debtors - Shareholder loans, supplementary capital contributions
Equipment a)
Other
Stock exchange transactions pending settlement
Other assets

a) Real estate properties and equipment received in settlement of loans and discontinued
Impairment losses

31.12.2020

31.12.2019

31.12.2020

31.12.2019

806 215
655 952
33 092
117 127
45
6 527
683 882
598 312
806 215
553 668
655 952
61 212
33 092
51 569
117 127
9 677
45
500 917
6 527
3 488
683 882
60 917
598 312
54 689
553 668
3 391 073
61 212
51 569
9 677
( 267 438)
( 2 285)
500 917
( 109 538)
3 488
( 55 802)
60 917
( 435 063)
54 689
2 956 010
3 391 073

807 810
631 994
33 175
141 697
944
4 441
(in thousands of Euros)
437 249
1 037 013
807 810
730 419
631 994
31 061
33 175
55 317
141 697
9 510
944
562 532
4 441
3 130
437 249
-
1 037 013
135 150
730 419
3 813 632
31 061
55 317
9 510
( 267 656)
( 2 404)
562 532
( 111 051)
3 130
( 98 935)
-
( 480 046)
135 150
3 333 586
3 813 632

( 267 656)
( 2 404)
( 111 051)
( 98 935)
( 480 046)

( 267 438)
( 2 285)
( 109 538)
( 55 802)
( 435 063)

The caption Other debtors includes, amongst others:
• Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of loans and

Real estate properties a)
Equipment a)
Other debtors - Shareholder loans, supplementary capital contributions
Other
advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned), and

• Euro 67.0 million receivable in relation to the sale operation of non-performing loans (Project NATA II) (31 December 2019: Euro

126.5 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 40);

2 956 010

3 333 586

• Euro 21.8 million receivable in relation to the sale operation of real estate assets in 2019 (denominated “Sertorius Project”) (31
a) Real estate properties and equipment received in settlement of loans and discontinued

December 2019: Euro 21.0 million); and

126.5 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 40);

• Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the Spanish Branch
The caption Other debtors includes, amongst others:
in 2019 (denominated “Albatros Project”) (31 December 2019: Euro 37.7 million); and
• Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of loans and
•
Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project Carter”).
advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned), and
The caption Other debtors includes, amongst others:
• Euro 67.0 million receivable in relation to the sale operation of non-performing loans (Project NATA II) (31 December 2019: Euro
As at 31 December 2020, the caption Deferred costs includes the amount of Euro 40,800 thousand (31 December 2019: Euro 43,372
thousand) related to the difference between the nominal amount of the loans and advances granted to Bank employees under the
• Euro 21.8 million receivable in relation to the sale operation of real estate assets in 2019 (denominated “Sertorius Project”) (31
• Euro 111.6 million of shareholder loans and supplementary capital contributions resulting from the assignment of
Collective Labour Agreement (ACT) for the banking sector and their respective fair value at grant date, calculated in accordance with
December 2019: Euro 21.0 million); and
loans and advances which are entirely provisioned (31 December 2019: Euro 111.6 million, entirely provisioned),
• Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the Spanish Branch
in 2019 (denominated “Albatros Project”) (31 December 2019: Euro 37.7 million); and
• Euro 67.0 million receivable in relation to the sale operation of non-performing loans (Project NATA II) (31 December
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 355-
Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project Carter”).
•
2019: Euro 126.5 million relating to NATA I and Euro 110.8 million relating to NATA II) (see Note 40);

As at 31 December 2020, the caption Deferred costs includes the amount of Euro 40,800 thousand (31 December 2019: Euro 43,372
Euro 21.8 million receivable in relation to the sale operation of real estate assets in 2019 (denominated “Sertorius
•
thousand) related to the difference between the nominal amount of the loans and advances granted to Bank employees under the
Project”) (31 December 2019: Euro 21.0 million);
Collective Labour Agreement (ACT) for the banking sector and their respective fair value at grant date, calculated in accordance with

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 355-

424

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

• Euro 37.9 million receivable in relation to the sale operation of real estate assets and non-performing loans in the

Spanish Branch in 2019 (denominated “Albatros Project”) (31 December 2019: Euro 37.7 million); and

• Euro 27.4 million receivable in relation to the sale operation of non-performing loans in 2020 (denominated “Project

Carter”).

As at 31 December 2020, the caption Deferred costs includes the amount of Euro 40,800 thousand (31 December
2019: Euro 43,372 thousand) related to the difference between the nominal amount of the loans and advances granted
to Bank employees under the Collective Labour Agreement (ACT) for the banking sector and their respective fair value
at grant date, calculated in accordance with IFRS 9. This amount is charged to the income statement under staff costs
over the lower of the remaining period to the maturity of the loan granted and the estimated remaining years of service
life of the employee.

The captions of Real estate properties and Equipment relate to foreclosed assets through the recovery of loans and
advances and to discontinued facilities, for which the Bank has the objective of immediate sale.

NOVO BANCO
The Bank implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, continu-
ing its efforts to meet the sales program established, of which we highlight the following (i) the existence of a web site
IFRS 9. This amount is charged to the income statement under staff costs over the lower of the remaining period to the maturity of
specifically aimed at the sale of real estate properties; (ii) the development and participation in real estate events both in
the loan granted and the estimated remaining years of service life of the employee.
Portugal and abroad; (iii) the establishment of protocols with several real estate agents; and (iv) the regular sponsorship
The captions of Real estate properties and Equipment relate to foreclosed assets through the recovery of loans and advances and to
of auctions. Despite its intention to sell these assets, the Bank regularly requests the Bank of Portugal’s authorization,
discontinued facilities, for which the Bank has the objective of immediate sale.
under article 114 of RGICSF, to extend the period the Bank has to hold foreclosed assets.

The Bank implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, continuing its efforts
The caption Collateral deposits placed includes, amongst others, deposits made by the Bank as collateral in order to
to meet the sales program established, of which we highlight the following (i) the existence of a web site specifically aimed at the sale
of real estate properties; (ii) the development and participation in real estate events both in Portugal and abroad; (iii) the establishment
celebrate certain derivative contracts on organized markets (margin accounts) and on over the counter markets (Credit
of protocols with several real estate agents; and (iv) the regular sponsorship of auctions. Despite its intention to sell these assets, the
Support Annex – CSA).
Bank regularly requests the Bank of Portugal’s authorization, under article 114 of RGICSF, to extend the period the Bank has to hold
foreclosed assets.
Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and
The caption Collateral deposits placed includes, amongst others, deposits made by the Bank as collateral in order to celebrate certain
pending settlement, in accordance with the accounting policy described in Note 2.4.
derivative contracts on organized markets (margin accounts) and on over the counter markets (Credit Support Annex – CSA).
In the financial year of 2020, NOVO BANCO recorded impacts related to the sale of a portfolio of real estate assets
Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and pending settlement,
(Project Anibal). In the financial year of 2019, the Bank recorded impacts related to the sale of a portfolio of real estate
in accordance with the accounting policy described in Note 2.4.
assets (Project Sertorius) and to a sale of a portfolio of non-performing loans and real estate assets (Project Albatros).
In the financial year of 2020, NOVO BANCO recorded impacts related to the sale of a portfolio of real estate assets (Project Anibal).
The details of these operations can be found in Note 40.
In the financial year of 2019, the Bank recorded impacts related to the sale of a portfolio of real estate assets (Project Sertorius) and
to a sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The details of these operations can be found
During the financial year of 2020, a net impairment amount of Euro 41.3 million was booked (31 December 2019: Euro
in Note 40.
198.2 million). Given the uncertainty related to this estimate, the Bank will continue to monitor this area as the impact
During the financial year of 2020, a net impairment amount of Euro 41.3 million was booked (31 December 2019: Euro 198.2 million).
of the Covid-19 pandemic on the Portuguese economy becomes clearer.
Given the uncertainty related to this estimate, the Bank will continue to monitor this area as the impact of the Covid-19 pandemic on
the Portuguese economy becomes clearer.
The changes occurred in impairment losses are presented as follows:

The changes occurred in impairment losses are presented as follows:

Balance at the beginning of the exercise

Allocation for the exercise
Utilisation during the exercise
Write-back for the exercise
Foreign exchange differences and other

Balance at the end of the exercise

The changes occurred in the real estate properties were as follows:

Balance at the beginning of the exercise

Additions
Sales
Other movements

Balance at the end of the exercise

(in thousands of Euros)

31.12.2020

31.12.2019

480 046

53 588
( 64 754)
( 11 427)
( 22 390)

435 063

553 947

263 227
( 318 985)
( 20 578)
2 435

480 046

(in thousands of Euros)

31.12.2020

31.12.2019

562 532

25 971
( 69 901)
( 17 685)

500 917

974 179

85 678
( 497 263)
( 62)

562 532

As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:

425

Land

Urban

Rural

Buildings constructed

Commercial

Residential

Others

31.12.2020

(in thousands of Euros)

Number of
properties

Gross value

Impairment

Net book value

Fair value of
assets (a)

257

192

449

813

1 408

32 033

189 977

222 010

145 717

133 048

11 451

142 038

153 489

71 766

35 853

20 582

47 939

68 521

73 951

97 195

21 613

48 860

70 473

75 800

107 511

2 221

278 765

107 619

171 146

183 311

142

6 330

( 6 188)

2 670

500 917

267 438

233 479

247 596

(a) Determined in accordance with accounting policy mentioned in Note 2.11

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 356-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

IFRS 9. This amount is charged to the income statement under staff costs over the lower of the remaining period to the maturity of

the loan granted and the estimated remaining years of service life of the employee.

The captions of Real estate properties and Equipment relate to foreclosed assets through the recovery of loans and advances and to

IFRS 9. This amount is charged to the income statement under staff costs over the lower of the remaining period to the maturity of

discontinued facilities, for which the Bank has the objective of immediate sale.

the loan granted and the estimated remaining years of service life of the employee.

The Bank implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, continuing its efforts

The captions of Real estate properties and Equipment relate to foreclosed assets through the recovery of loans and advances and to

to meet the sales program established, of which we highlight the following (i) the existence of a web site specifically aimed at the sale

discontinued facilities, for which the Bank has the objective of immediate sale.

of real estate properties; (ii) the development and participation in real estate events both in Portugal and abroad; (iii) the establishment

of protocols with several real estate agents; and (iv) the regular sponsorship of auctions. Despite its intention to sell these assets, the

The Bank implemented a plan aimed at the immediate sale of all real estate property recorded in Other assets, continuing its efforts

Bank regularly requests the Bank of Portugal’s authorization, under article 114 of RGICSF, to extend the period the Bank has to hold

to meet the sales program established, of which we highlight the following (i) the existence of a web site specifically aimed at the sale

of real estate properties; (ii) the development and participation in real estate events both in Portugal and abroad; (iii) the establishment

foreclosed assets.

of protocols with several real estate agents; and (iv) the regular sponsorship of auctions. Despite its intention to sell these assets, the

The caption Collateral deposits placed includes, amongst others, deposits made by the Bank as collateral in order to celebrate certain

Bank regularly requests the Bank of Portugal’s authorization, under article 114 of RGICSF, to extend the period the Bank has to hold

derivative contracts on organized markets (margin accounts) and on over the counter markets (Credit Support Annex – CSA).

foreclosed assets.

Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and pending settlement,

The caption Collateral deposits placed includes, amongst others, deposits made by the Bank as collateral in order to celebrate certain

in accordance with the accounting policy described in Note 2.4.

derivative contracts on organized markets (margin accounts) and on over the counter markets (Credit Support Annex – CSA).

In the financial year of 2020, NOVO BANCO recorded impacts related to the sale of a portfolio of real estate assets (Project Anibal).

Stock exchange transactions pending settlement refer to transactions of securities, recorded at the trade date and pending settlement,

In the financial year of 2019, the Bank recorded impacts related to the sale of a portfolio of real estate assets (Project Sertorius) and

in accordance with the accounting policy described in Note 2.4.

to a sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The details of these operations can be found

in Note 40.

In the financial year of 2020, NOVO BANCO recorded impacts related to the sale of a portfolio of real estate assets (Project Anibal).

In the financial year of 2019, the Bank recorded impacts related to the sale of a portfolio of real estate assets (Project Sertorius) and

During the financial year of 2020, a net impairment amount of Euro 41.3 million was booked (31 December 2019: Euro 198.2 million).

to a sale of a portfolio of non-performing loans and real estate assets (Project Albatros). The details of these operations can be found

Given the uncertainty related to this estimate, the Bank will continue to monitor this area as the impact of the Covid-19 pandemic on

in Note 40.

the Portuguese economy becomes clearer.

During the financial year of 2020, a net impairment amount of Euro 41.3 million was booked (31 December 2019: Euro 198.2 million).
The changes occurred in impairment losses are presented as follows:
Given the uncertainty related to this estimate, the Bank will continue to monitor this area as the impact of the Covid-19 pandemic on
the Portuguese economy becomes clearer.

(in thousands of Euros)

31.12.2020

31.12.2019

The changes occurred in impairment losses are presented as follows:

Balance at the beginning of the exercise

Allocation for the exercise
Utilisation during the exercise
Write-back for the exercise
Balance at the beginning of the exercise
Foreign exchange differences and other
Allocation for the exercise
Utilisation during the exercise
Write-back for the exercise
Foreign exchange differences and other

Balance at the end of the exercise

The changes occurred in the real estate properties were as follows:
The changes occurred in the real estate properties were as follows:

480 046

31.12.2020

53 588
( 64 754)
( 11 427)
480 046
( 22 390)
53 588
435 063
( 64 754)
( 11 427)
( 22 390)

(in thousands of Euros)

31.12.2019

553 947

263 227
( 318 985)
( 20 578)
553 947
2 435
263 227
480 046
( 318 985)
( 20 578)
2 435

Balance at the end of the exercise

435 063

(in thousands of Euros)

480 046

31.12.2020

31.12.2019

The changes occurred in the real estate properties were as follows:

Balance at the beginning of the exercise

Additions
Sales
Other movements

Balance at the beginning of the exercise

562 532

31.12.2020

25 971
( 69 901)
( 17 685)
562 532

974 179

(in thousands of Euros)
85 678
( 497 263)
( 62)
974 179

31.12.2019

Balance at the end of the exercise

Additions
Sales
Other movements

500 917
25 971
( 69 901)
( 17 685)

562 532
85 678
( 497 263)
( 62)

As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:

Balance at the end of the exercise

562 532
(in thousands of Euros)
As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:
As at 31 December 2020 and 2019, the detail of the real estate properties included in Other assets, by type, is as follows:
Number of
properties

Fair value of
assets (a)
(in thousands of Euros)

Net book value

Gross value

Impairment

31.12.2020

500 917

Land

Urban
Rural

Land
Buildings constructed

Urban
Commercial
Rural
Residential
Others

Buildings constructed

Others

Commercial
Residential
Others

(a) Determined in accordance with accounting policy mentioned in Note 2.11

Others

31.12.2020

Number of
properties

257
192
449

Gross value

32 033
189 977
222 010

Impairment

11 451
142 038
153 489

20 582
Net book value
47 939
68 521

Fair value of
assets (a)

21 613
48 860
70 473

257
813
192
1 408
449
-
2 221
813
-
1 408
-
2 670
2 221

32 033
145 717
189 977
133 048
222 010
-
278 765
145 717
142
133 048
-
500 917
278 765

142

11 451
71 766
142 038
35 853
153 489
-
107 619
71 766
6 330
35 853
-
267 438
107 619

6 330

20 582
73 951
47 939
97 195
68 521
-
171 146
73 951
( 6 188)
97 195
-
233 479
171 146

( 6 188)

267 438

233 479

21 613
75 800
48 860
107 511
70 473
-
183 311
75 800
( 6 188)
107 511
-
247 596
183 311

( 6 188)

NOVO BANCO
- 356-

247 596

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
(a) Determined in accordance with accounting policy mentioned in Note 2.11

500 917

2 670

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 356-

Land

Urban
Rural

Buildings under construction

Commercial
Residential
Other

Buildings constructed

Commercial
Residential
Other

Others

31.12.2019

(in thousands of Euros)

Number of
properties

Gross value

Impairment

Net book value

Fair value of
assets (a)

315
225
540

2
2
1
5

335
2 081
227
2 643

52 309
190 678
242 987

36
271
1 577
1 884

58 269
169 596
83 289
311 154

6 507

24 496
127 859
152 355

4
187
752
943

23 215
47 733
36 109
107 057

7 301

27 813
62 819
90 632

32
84
825
941

35 054
121 863
47 180
204 097

( 794)

94 931
63 771
158 702

59
646
825
1 530

44 622
144 225
50 769
239 616

( 794)

3 193

562 532

267 656

294 876

399 054

(a) Determined in accordance with accounting policy mentioned in Note 2.11

The detail of the real estate properties included in Other assets, by ageing, is as follows:

Land

Urban
Rural

Buildings constructed
426

Commercial
Residential
Other

Others

Edifícios em desenvolvimento

Land

Urban

Rural

Comerciais

Habitação

Outros

Commercial

Residential

Other

Others

Buildings constructed

31.12.2020

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5
years

Total net book
value

76
139
215

10 934
7 273
-
18 207

( 6 188)

2 110
2 730
4 840

19 978
15 558
-
35 536

10 565
15 370
25 935

23 163
26 024
-
49 187

7 831
29 700
37 531

19 876
48 340
-
68 216

20 582
47 939
68 521

73 951
97 195
-
171 146

( 6 188)

12 234

40 376

75 122

105 747

233 479

31.12.2019

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5

Total net book

years

value

2 225

7 698

9 923

1 836

7 587

8 887

18 310

( 794)

3 272

13 459

16 731

5 484

31 735

10 332

47 551

11 890

1 977

13 867

825

854

9 659

31 132

10 364

51 155

10 426

39 685

50 111

18 075

51 409

17 597

87 081

27 813

62 819

90 632

825

941

35 054

121 863

47 180

204 097

( 794)

27 507

64 282

65 876

137 211

294 876

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 357-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOVO BANCO

Number of

properties

Gross value

Impairment

Net book value

31.12.2019

(in thousands of Euros)

Fair value of

assets (a)

315

225

540

335
2 081
227
2 643

52 309

190 678

242 987

271

1 577

1 884

58 269
169 596
83 289
311 154

6 507

24 496

127 859

152 355

187

752

943

23 215
47 733
36 109
107 057

7 301

27 813

62 819

90 632

825

941

35 054
121 863
47 180
204 097

( 794)

94 931

63 771

158 702

646

825

1 530

44 622
144 225
50 769
239 616

( 794)

3 193

562 532

267 656

294 876

399 054

Buildings under construction

Land

Urban

Rural

Commercial

Residential

Other

Buildings constructed

Commercial
Residential
Other

Others

(a) Determined in accordance with accounting policy mentioned in Note 2.11

The detail of the real estate properties included in Other assets, by ageing, is as follows:
The detail of the real estate properties included in Other assets, by ageing, is as follows:

Land

Urban
Rural

Buildings constructed

Commercial
Residential
Other

Others

Land

Urban
Rural

Edifícios em desenvolvimento

Comerciais
Habitação
Outros

Buildings constructed

Commercial
Residential
Other

Others

31.12.2020

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5
years

Total net book
value

76
139
215

10 934
7 273
-
18 207

( 6 188)

2 110
2 730
4 840

19 978
15 558
-
35 536

10 565
15 370
25 935

23 163
26 024
-
49 187

7 831
29 700
37 531

19 876
48 340
-
68 216

20 582
47 939
68 521

73 951
97 195
-
171 146

( 6 188)

12 234

40 376

75 122

105 747

233 479

31.12.2019

(in thousands of Euros)

Up to 1 year

1 to 2.5 years 2.5 to 5 years

More than 5
years

Total net book
value

2 225
7 698
9 923

-
68
-
68

1 836
7 587
8 887
18 310

( 794)

3 272
13 459
16 731

-
-
-
-

5 484
31 735
10 332
47 551

11 890
1 977
13 867

29
-
825
854

9 659
31 132
10 364
51 155

10 426
39 685
50 111

3
16
-
19

18 075
51 409
17 597
87 081

27 813
62 819
90 632

32
84
825
941

35 054
121 863
47 180
204 097

( 794)

27 507

64 282

65 876

137 211

294 876

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 357-

NOTE 28 –Non-current assets and disposal groups for
sale classified as held for sale and liabilities included in
disposal groups classified as held for sale

This caption as at 31 December 2020 and 2019 is analyzed as follows:

427

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO
As at 31 December 2020, the amount related to discontinued facilities included in the caption Real estate properties amounts to Euro
35,535 thousand (31 December 2019: Euro 16,569 thousand), having the Bank recorded impairment losses for these assets in the
total amount of Euro 28,661 thousand (31 December 2018: Euro 8,079 thousand).

NOVO BANCO

Ativo

Passivo

31.12.2020

Assets of discontinued operations

This caption as at 31 December 2020 and 2019 is analyzed as follows:

NOVO BANCO
NOTE 28 –NON-CURRENT ASSETS AND DISPOSAL GROUPS FOR SALE CLASSIFIED AS HELD FOR SALE AND LIABILITIES
As at 31 December 2020, the amount related to discontinued facilities included in the caption Real estate properties amounts to Euro
INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
35,535 thousand (31 December 2019: Euro 16,569 thousand), having the Bank recorded impairment losses for these assets in the
total amount of Euro 28,661 thousand (31 December 2018: Euro 8,079 thousand).
This caption as at 31 December 2020 and 2019 is analyzed as follows:
As at 31 December 2020, the amount related to discontinued facilities included in the caption Real estate properties amounts to Euro
NOTE 28 –NON-CURRENT ASSETS AND DISPOSAL GROUPS FOR SALE CLASSIFIED AS HELD FOR SALE AND LIABILITIES
(in thousands of Euros)
35,535 thousand (31 December 2019: Euro 16,569 thousand), having the Bank recorded impairment losses for these assets in the
31.12.2019
INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
total amount of Euro 28,661 thousand (31 December 2018: Euro 8,079 thousand).
This caption as at 31 December 2020 and 2019 is analyzed as follows:
NOTE 28 –NON-CURRENT ASSETS AND DISPOSAL GROUPS FOR SALE CLASSIFIED AS HELD FOR SALE AND LIABILITIES
(in thousands of Euros)
INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
31.12.2019

Banco Well Link (previous NB Ásia)
Banco Delle Tre Venezie
ESEGUR
GNB - Companhia de Seguros, S.A.
Novo Banco Suc. en España, S.A.
Banco Well Link (previous NB Ásia)
Others
Banco Delle Tre Venezie
ESEGUR
Impairment losses
GNB - Companhia de Seguros, S.A.
Assets of discontinued operations
Banco Delle Tre Venezie
Novo Banco Suc. en España, S.A.
Banco Well Link (previous NB Ásia)
ESEGUR
Others
Banco Delle Tre Venezie
Novo Banco Suc. en España, S.A.
ESEGUR
Others
Impairment losses
GNB - Companhia de Seguros, S.A.
Banco Delle Tre Venezie
Novo Banco Suc. en España, S.A.
Others
ESEGUR
Novo Banco Suc. en España, S.A.
Others

4 121
8 926
9 634
3 749
-
4 121
3 619
8 926
30 049
9 634
Ativo
3 749
( 6 626)
-
4 121
-
3 619
8 926
-
30 049
9 634
( 2 150)
3 749
( 8 776)
( 6 626)
-
21 273
3 619
-
30 049
-
( 2 150)
( 8 776)
( 6 626)
Banco Delle Tre Venezie
21 273
-
ESEGUR
Other non-current assets held for sale include shareholdings and respective shareholder loans, which were reclassified
Novo Banco Suc. en España, S.A.
-
As at 31 December 2019 and 2018, the results from discontinued operations is as follows:
( 2 150)
Others
to this caption under IFRS 5.
Other non-current assets held for sale include shareholdings and respective shareholder loans, which were reclassified to this caption
(in thousands of Euros)
( 8 776)
under IFRS 5.
As at 31 December 2020 and 2019, the results from discontinued operations is as follows:
As at 31 December 2019 and 2018, the results from discontinued operations is as follows:
Other non-current assets held for sale include shareholdings and respective shareholder loans, which were reclassified to this caption
(in thousands of Euros)
Transfers
under IFRS 5.
Sales
Other movements

Other non-current assets held for sale include shareholdings and respective shareholder loans, which were reclassified to this caption
under IFRS 5.

1 883
8 926
9 634
-
1 725 555
1 883
2 150
8 926
1 748 148
9 634
Ativo
-
( 6 626)
1 725 555
1 883
( 4 460)
2 150
8 926
( 166 000)
1 748 148
9 634
( 2 150)
-
( 179 236)
( 6 626)
1 725 555
1 568 912
2 150
( 4 460)
1 748 148
( 166 000)
( 2 150)
( 179 236)
( 6 626)
1 568 912
( 4 460)
( 166 000)
( 2 150)
( 179 236)

-
-
-
-
2 007 770
-
-
-
2 007 770
-
-
-
2 007 770
-
-
-
-
-
2 007 770
-
-
-
-
-
2 007 770
2 007 770
-
-
2 007 770
-
-
-
-
2 007 770
-
-
-
-

Balance at the beginning of the exercise

(in thousands of Euros)
31.12.2019

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
634 881

31.12.2020
2 007 770

Impairment losses

31.12.2019

31.12.2020

31.12.2019

31.12.2020

1 568 912

30 049

Passivo

21 273

Ativo

As at 31 December 2019 and 2018, the results from discontinued operations is as follows:

Balance at the beginning of the exercise
Balance at the end of the exercise

31.12.2020

31.12.2019

(in thousands of Euros)

( 283 684)
( 5 987)
-
30 049
( 259 622)
( 283 684)
( 5 987)
-
30 049
(in thousands of Euros)
( 259 622)
31.12.2020
( 283 684)
( 5 987)
-
11 869
(in thousands of Euros)
( 40 623)

15 532
( 620 472)
108
634 881
30 049
15 532
( 620 472)
108
634 881
30 049
15 532
( 620 472)
108
-
( 84 147)
30 049
( 84 147)

( 259 622)
31.12.2020

31.12.2019*

( 28 754)

11 869
( 40 623)

(in thousands of Euros)

-
( 84 147)

11 869
( 40 623)

-
( 84 147)

Transfers
Sales
Other movements

The results of operations discontinued as of 31 December 2020 and 2019 is as follows:

Balance at the beginning of the exercise
Balance at the end of the exercise

Results from discontinued operations
The results of operations discontinued as of 31 December 2020 and 2019 is as follows:

GNB - Companhia de Seguros, S.A.
Novo Banco Suc. en España, S.A.

Balance at the end of the exercise

The results of operations discontinued as of 31 December 2020 and 2019 is as follows:
Results from discontinued operations
The results of operations discontinued as of 31 December 2020 and 2019 is as follows:
* Values restated to reflect the reclassification of the Spanish Branch for discontinued operation, which occurred in the third quarter of 2020

GNB - Companhia de Seguros, S.A.
Novo Banco Suc. en España, S.A.

During the 2020 fiscal year, GNB – Companhia de Seguros, S.A. was sold and in 2019 the Bank completed the sale process of Gama
Life (GNB Vida) (see Note 40). In 2020 the Spanish branch was also transferred to the non-current assets and disposal groups
Results from discontinued operations
classified as held for sale.
* Values restated to reflect the reclassification of the Spanish Branch for discontinued operation, which occurred in the third quarter of 2020

31.12.2019*

31.12.2020

( 28 754)

( 84 147)

GNB - Companhia de Seguros, S.A.
Novo Banco Suc. en España, S.A.

( 84 147)

( 28 754)

Gama Life (previous GNB Vida)
During the 2020 fiscal year, GNB – Companhia de Seguros, S.A. was sold and in 2019 the Bank completed the sale process of Gama
As a result of the commitments assumed between the Portuguese State and the European Competition Commission and
Life (GNB Vida) (see Note 40). In 2020 the Spanish branch was also transferred to the non-current assets and disposal groups
communicated to the Group at the end of 2017, after the completion of the Bank's sale process, the NOVO BANCO began in 2017
classified as held for sale.
* Values restated to reflect the reclassification of the Spanish Branch for discontinued operation, which occurred in the third quarter of 2020
an organized process of selling a 100% stake. of the share capital of Gama Life (previous GNB Vida). In this sense, this company
During the 2020 fiscal year, GNB – Companhia de Seguros, S.A. was sold and in 2019 the Bank completed the sale process of Gama
started to be considered as a discontinued operation on 31 December 2017. On 12 September 2018, a company belonging to the
Gama Life (previous GNB Vida)
Life (GNB Vida) (see Note 40). In 2020 the Spanish branch was also transferred to the non-current assets and disposal groups
Global Bankers Insurance Group, LLC, was entered into with Bankers Insurance Holdings, S.A., a purchase and sale agreement for
As a result of the commitments assumed between the Portuguese State and the European Competition Commission and
classified as held for sale.
the entire share capital of Gama Life (previous GNB Vida). The derecognition of this participation occurred in September 2019, after
communicated to the Group at the end of 2017, after the completion of the Bank's sale process, the NOVO BANCO began in 2017
During the 2020 fiscal year, GNB – Companhia de Seguros, S.A. was sold and in 2019 the Bank completed the sale
obtaining the necessary regulatory authorizations (see Note 40).
an organized process of selling a 100% stake. of the share capital of Gama Life (previous GNB Vida). In this sense, this company
process of Gama Life (GNB Vida) (see Note 40). In 2020 the Spanish branch was also transferred to the non-current
Gama Life (previous GNB Vida)
started to be considered as a discontinued operation on 31 December 2017. On 12 September 2018, a company belonging to the
As a result of the commitments assumed between the Portuguese State and the European Competition Commission and
Global Bankers Insurance Group, LLC, was entered into with Bankers Insurance Holdings, S.A., a purchase and sale agreement for
assets and disposal groups classified as held for sale.
GNB Seguros
communicated to the Group at the end of 2017, after the completion of the Bank's sale process, the NOVO BANCO began in 2017
the entire share capital of Gama Life (previous GNB Vida). The derecognition of this participation occurred in September 2019, after
an organized process of selling a 100% stake. of the share capital of Gama Life (previous GNB Vida). In this sense, this company
Also due to the commitments assumed between the Portuguese State and the European Competition Commission, during financial
obtaining the necessary regulatory authorizations (see Note 40).
started to be considered as a discontinued operation on 31 December 2017. On 12 September 2018, a company belonging to the
year 2020 NOVO BANCO concluded the process of divesting its stake in GNB Insurance (25%), having recorded a gain of 11.9
Gama Life (previous GNB Vida)
Global Bankers Insurance Group, LLC, was entered into with Bankers Insurance Holdings, S.A., a purchase and sale agreement for
million euros.
GNB Seguros
the entire share capital of Gama Life (previous GNB Vida). The derecognition of this participation occurred in September 2019, after
As a result of the commitments assumed between the Portuguese State and the European Competition Commission
obtaining the necessary regulatory authorizations (see Note 40).
Also due to the commitments assumed between the Portuguese State and the European Competition Commission, during financial
and communicated to the Group at the end of 2017, after the completion of the Bank's sale process, the NOVO BANCO
year 2020 NOVO BANCO concluded the process of divesting its stake in GNB Insurance (25%), having recorded a gain of 11.9
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 358-
million euros.
began in 2017 an organized process of selling a 100% stake. of the share capital of Gama Life (previous GNB Vida). In
GNB Seguros
this sense, this company started to be considered as a discontinued operation on 31 December 2017. On 12 September
Also due to the commitments assumed between the Portuguese State and the European Competition Commission, during financial
2018, a company belonging to the Global Bankers Insurance Group, LLC, was entered into with Bankers Insurance
year 2020 NOVO BANCO concluded the process of divesting its stake in GNB Insurance (25%), having recorded a gain of 11.9
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 358-
million euros.
Holdings, S.A., a purchase and sale agreement for the entire share capital of Gama Life (previous GNB Vida). The
derecognition of this participation occurred in September 2019, after obtaining the necessary regulatory authorizations
(see Note 40).
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 358-

428

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

GNB Seguros

Also due to the commitments assumed between the Portuguese State and the European Competition Commission,
during financial year 2020 NOVO BANCO concluded the process of divesting its stake in GNB Insurance (25%), having
recorded a gain of 11.9 million euros.

Spanish Branch

NOVO BANCO

Following the accounting policy followed by the NOVO BANCO, and in accordance with IFRS5 - Non-current assets
NOVO BANCO
held for sale and discontinued operations, during the year 2020 the Bank proceeded to transfer its activity in Spain
Spanish Branch
to the heading of Non-current assets and divestiture groups classified as held for sale, as their value is expected
Following the accounting policy followed by the NOVO BANCO, and in accordance with IFRS5 5 - Non-current assets held for sale
to be recovered through a sale transaction and it is highly probable, with the respective assets in immediate sale
and discontinued operations, during the year 2020 the Bank proceeded to transfer its activity in Spain to the heading of Non-current
conditions. The determination of fair value less costs to sell, which took into account the amounts received from
assets and divestiture groups classified as held for sale, as their value is expected to be recovered through a sale transaction and it
Spanish Branch
is highly probable, with the respective assets in immediate sale conditions. The determination of fair value less costs to sell, which
potential interested in partial sales of this activity, the cost of selling a selected loan portfolio, and the cost of
took into account the amounts received from potential interested in partial sales of this activity, the cost of selling a selected loan
Following the accounting policy followed by the NOVO BANCO, and in accordance with IFRS5 5 - Non-current assets held for sale
discontinuing the remaining residual activity, resulted in a need to establish an impairment of 166.0 million euros.
portfolio, and the cost of discontinuing the remaining residual activity, resulted in a need to establish an impairment of 166.0 million
and discontinued operations, during the year 2020 the Bank proceeded to transfer its activity in Spain to the heading of Non-current
euros.
assets and divestiture groups classified as held for sale, as their value is expected to be recovered through a sale transaction and it
The impairment movement for non-current Assets for disposal classified as held for sale is as follow:
is highly probable, with the respective assets in immediate sale conditions. The determination of fair value less costs to sell, which
The impairment movement for non-current Assets for disposal classified as held for sale is as follow:
took into account the amounts received from potential interested in partial sales of this activity, the cost of selling a selected loan
portfolio, and the cost of discontinuing the remaining residual activity, resulted in a need to establish an impairment of 166.0 million
(in thousands of Euros)
euros.

31.12.2020

31.12.2019

The impairment movement for non-current Assets for disposal classified as held for sale is as follow:

Balance at the beginning of the exercise

8 776

Allocation / (reversals) for the exercise
Utilizations
Exchange differences and other

Balance at the beginning of the exercise

Balance at the end of the exercise

Allocation / (reversals) for the exercise
Utilizations
Exchange differences and other

Balance at the end of the exercise

a) As of 31 December 2017 it refers to the impairment of the participation in GNB Vida transferred from investments in associates and subsidiaries

NOTE 29 – FINANCIAL LIABILITIES MEASURED AT AMORTISED COST

This caption as at 31 December 2020 and 2019 is analyzed as follows:

NOTE 29 – Financial liabilities measured at amortised cost

a) As of 31 December 2017 it refers to the impairment of the participation in GNB Vida transferred from investments in associates and subsidiaries

NOTE 29 – FINANCIAL LIABILITIES MEASURED AT AMORTISED COST

(in tousands of Euros)

This caption as at 31 December 2020 and 2019 is analyzed as follows:
This caption as at 31 December 2020 and 2019 is analyzed as follows:
Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred assets
Other financial liabilities

Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred assets
Deposits from Banks
Other financial liabilities

The balance of Deposits from banks is composed, as to its nature, as follows:

Deposits from Banks

The balance of Deposits from banks is composed, as to its nature, as follows:

Deposits from Central Banks

From the European System of Central Banks

Deposits
Other funds

Deposits from Central Banks

From the European System of Central Banks

Deposits from credit institutions

Domestic

Deposits
Other funds
Deposits
Other funds

Deposits from credit institutions

Foreign
Domestic

Deposits
Deposits
Loans
Other funds
Operations with repurchase agreements
Other resources

Foreign

Deposits
Loans
Operations with repurchase agreements
Other resources

(in thousands of Euros)

448 373

31.12.2020

170 460
-
-
8 776

170 460
179 236
-
-

31.12.2019

55 775
( 497 472)
2 100
448 373

55 775
8 776
( 497 472)
2 100

179 236

8 776

31.12.2020

31.12.2019

10 778 468
25 778 507
974 996
364 013

10 542 549
27 980 577
(in tousands of Euros)
1 044 445
356 993

31.12.2019

31.12.2020

10 778 468
37 895 984
25 778 507
974 996
364 013

10 542 549
39 924 564
27 980 577
1 044 445
356 993

37 895 984

39 924 564

(in thousands of Euros)

31.12.2020

31.12.2019

(in thousands of Euros)

31.12.2020

29 030
7 004 000
7 033 030

31.12.2019

36 176
6 087 000
6 123 176

29 030
7 004 000
889 876
7 033 030
4 792
894 668

624 873
889 876
596 534
4 792
1 625 724
894 668
3 639
2 850 770
624 873
596 534
3 745 438
1 625 724
3 639
10 778 468
2 850 770

36 176
6 087 000
681 478
6 123 176
12 674
694 152

914 414
681 478
634 557
12 674
2 168 488
694 152
7 762
3 725 221
914 414
634 557
4 419 373
2 168 488
7 762
10 542 549
3 725 221

429

As at 31 December 2020, the caption Other funds from the European System of Central Banks includes Euro 7,004 million covered
4 419 373
by Bank financial assets pledged as collateral, as part of the third series of longer-term refinancing operations of the European
10 542 549
Central Bank (TLTRO III). The bonus introduced by the ECB in the interest rate of these transactions, in accordance with the
provisions of IAS 20, is being deducted from financing costs on a linear basis for accounting purposes, taking into account the Bank's

10 778 468

3 745 438

expectation of complying with the eligibility requirements set by the ECB.

As at 31 December 2020, the caption Other funds from the European System of Central Banks includes Euro 7,004 million covered

by Bank financial assets pledged as collateral, as part of the third series of longer-term refinancing operations of the European

Central Bank (TLTRO III). The bonus introduced by the ECB in the interest rate of these transactions, in accordance with the

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

provisions of IAS 20, is being deducted from financing costs on a linear basis for accounting purposes, taking into account the Bank's

- 359-

expectation of complying with the eligibility requirements set by the ECB.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 359-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

Spanish Branch

Following the accounting policy followed by the NOVO BANCO, and in accordance with IFRS5 5 - Non-current assets held for sale

and discontinued operations, during the year 2020 the Bank proceeded to transfer its activity in Spain to the heading of Non-current

assets and divestiture groups classified as held for sale, as their value is expected to be recovered through a sale transaction and it

is highly probable, with the respective assets in immediate sale conditions. The determination of fair value less costs to sell, which

took into account the amounts received from potential interested in partial sales of this activity, the cost of selling a selected loan

portfolio, and the cost of discontinuing the remaining residual activity, resulted in a need to establish an impairment of 166.0 million

euros.

The impairment movement for non-current Assets for disposal classified as held for sale is as follow:

Balance at the beginning of the exercise

Allocation / (reversals) for the exercise

Utilizations

Exchange differences and other

Balance at the end of the exercise

a) As of 31 December 2017 it refers to the impairment of the participation in GNB Vida transferred from investments in associates and subsidiaries

NOTE 29 – FINANCIAL LIABILITIES MEASURED AT AMORTISED COST

This caption as at 31 December 2020 and 2019 is analyzed as follows:

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

8 776

170 460

179 236

448 373

55 775

( 497 472)

2 100

8 776

Deposits from banks
Due to customers
Debt securities issued, subordinated debt and liabilities associated to transferred assets
Other financial liabilities

Deposits from Banks
Deposits from Banks
The balance of Deposits from banks is composed, as to its nature, as follows:
The balance of Deposits from banks is composed, as to its nature, as follows:

Deposits from Central Banks

From the European System of Central Banks

Deposits
Other funds

Deposits from credit institutions

Domestic

Deposits
Other funds

Foreign

Deposits
Loans
Operations with repurchase agreements
Other resources

(in tousands of Euros)

31.12.2020

31.12.2019

10 778 468
25 778 507
974 996
364 013

10 542 549
27 980 577
1 044 445
356 993

37 895 984

39 924 564

(in thousands of Euros)

31.12.2020

31.12.2019

29 030
7 004 000
7 033 030

36 176
6 087 000
6 123 176

889 876
4 792
894 668

624 873
596 534
1 625 724
3 639
2 850 770

681 478
12 674
694 152

914 414
634 557
2 168 488
7 762
3 725 221

3 745 438

4 419 373

10 778 468

10 542 549

As at 31 December 2020, the caption Other funds from the European System of Central Banks includes Euro 7,004 million covered
by Bank financial assets pledged as collateral, as part of the third series of longer-term refinancing operations of the European
Central Bank (TLTRO III). The bonus introduced by the ECB in the interest rate of these transactions, in accordance with the
provisions of IAS 20, is being deducted from financing costs on a linear basis for accounting purposes, taking into account the Bank's
As at 31 December 2020, the caption Other funds from the European System of Central Banks includes Euro 7,004
expectation of complying with the eligibility requirements set by the ECB.
million covered by Bank financial assets pledged as collateral, as part of the third series of longer-term refinancing
operations of the European Central Bank (TLTRO III). The bonus introduced by the ECB in the interest rate of these
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 359-
transactions, in accordance with the provisions of IAS 20, is being deducted from financing costs on a linear basis for
accounting purposes, taking into account the Bank's expectation of complying with the eligibility requirements set by
NOVO BANCO
the ECB.

The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing
agreement (repos), recorded in accordance with the accounting policy mentioned in Note 2.5.
The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement
(repos), recorded in accordance with the accounting policy mentioned in Note 2.5.
As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:
As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:

Deposits from Central Banks

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

Deposits from Banks
Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

The analysis of Repurchase agreements operations, by residual maturity, is as follows:

The balance of Deposits due to costumers is composed, as follows:

Foreign

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

430

Due to customers

Repayable on demand

Demand deposits

Time deposits

Other

Savings accounts

Retirement saving accounts

Other

Other funds

Other

(in thousands of Euros)

31.12.2020

31.12.2019

29 030
-
7 004 000
7 033 030

1 420 031
666 868
1 087 233
571 306
3 745 438

1 286 176
3 210 000
1 627 000
6 123 176

2 421 436
361 732
1 091 606
544 599
4 419 373

10 778 468

10 542 549

(milhares de euros)

31.12.2020

31.12.2019

225 507
350 014
1 050 203

1 306 243
199 972
662 273

1 625 724

2 168 488

(in thousands of Euros)

31.12.2020

31.12.2019

11 475 826

11 877 766

9 187 317

241

9 187 558

232 741

4 673 474

4 906 215

208 908

11 228 519

253

11 228 772

243 507

4 439 813

4 683 320

190 719

25 778 507

27 980 577

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 360-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement

NOVO BANCO

(repos), recorded in accordance with the accounting policy mentioned in Note 2.5.

As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:

The balance of the caption Repurchase agreements operations corresponds to the sale of securities with purchasing agreement

(in thousands of Euros)

(repos), recorded in accordance with the accounting policy mentioned in Note 2.5.

31.12.2020

31.12.2019

As at 31 December 2020 and 2019, the analysis of Deposits from banks, by maturity, is as follows:

Deposits from Central Banks

Up to 3 months

From 3 months to 1 year

From 1 to 5 years

Deposits from Central Banks

Up to 3 months
Deposits from Banks
From 3 months to 1 year
Up to 3 months
From 1 to 5 years
From 3 months to 1 year
From 1 to 5 years
Deposits from Banks
More than 5 years
Up to 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years

The analysis of Repurchase agreements operations, by residual maturity, is as follows:

Foreign

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

Foreign

Up to 3 months
From 3 months to 1 year
From 1 to 5 years

Due to customers

The balance of Deposits due to costumers is composed, as follows:
Due to customers
Due to customers
The balance of Deposits due to costumers is composed, as follows:
The balance of Deposits due to costumers is composed, as follows:

Repayable on demand

Demand deposits

Time deposits
Repayable on demand
Time deposits
Demand deposits
Other

Time deposits
Savings accounts
Time deposits
Retirement saving accounts
Other
Other

Savings accounts
Other funds
Retirement saving accounts
Other
Other

Other funds
Other

NOVO BANCO

29 030

(in thousands of Euros)

1 286 176

31.12.2020

3 210 000

31.12.2019

7 004 000
7 033 030
29 030
-
1 420 031
7 004 000
666 868
7 033 030
1 087 233
571 306
3 745 438
1 420 031
666 868
10 778 468
1 087 233
571 306
3 745 438

1 627 000
6 123 176
1 286 176
3 210 000
2 421 436
1 627 000
361 732
6 123 176
1 091 606
544 599
4 419 373
2 421 436
361 732
10 542 549
1 091 606
544 599
4 419 373

10 778 468

10 542 549
(milhares de euros)

31.12.2020

31.12.2019

31.12.2020

225 507
350 014
1 050 203

31.12.2019

(milhares de euros)
1 306 243
199 972
662 273

1 625 724
225 507
350 014
1 050 203

2 168 488
1 306 243
199 972
662 273

1 625 724

2 168 488

(in thousands of Euros)

31.12.2020

31.12.2019

11 475 826

(in thousands of Euros)

11 877 766

31.12.2020

31.12.2019

9 187 317
11 475 826
241
9 187 558

9 187 317
232 741
241
4 673 474
9 187 558
4 906 215

232 741
208 908
4 673 474
208 908
4 906 215
25 778 507

208 908
208 908

11 228 519
11 877 766
253
11 228 772

11 228 519
243 507
253
4 439 813
11 228 772
4 683 320

243 507
190 719
4 439 813
190 719
4 683 320
27 980 577

190 719
190 719

25 778 507

27 980 577

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Repayable on demand

11 475 826

11 877 766

- 360-

Term deposits

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

Up to 3 months
3 months to 1 year
1 to 5 years
More than 5 years

7 124 178
5 561 554
1 576 564
40 385

7 204 511
5 866 566
2 572 125
459 609

- 360-

14 302 681

16 102 811

25 778 507

27 980 577

Debt Securities issued, subordinated debt and financial liabilities associated to transferred assets

This caption breaks down as follows:

Debt securities issued

Euro Medium Term Notes (EMTN)

Subordinated debt

Bonds

Financial liabilities associated to transferred assets

Asset lending operations

431

(in thousands of Euros)

31.12.2020

31.12.2019

515 311

495 989

415 234

415 069

44 451

133 387

974 996

1 044 445

Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro
10,000 million, the Bank issued covered bonds which amount to Euro 5,500 million (31 December 2019: Euro 5,500 million), being
these covered bonds totally repurchased by the Bank. The main characteristics of the outstanding issues as at 31 December 2020

and 2019 are as follows:

Designation

Issue date

Maturity date

Interest Rate

Market

Nominal value

(in thousands

of Euros)

Carrying book

value (in

thousands of

Euros)

NB 2015 SR.1

NB 2015 SR.2

NB 2015 SR.3

NB 2015 SR.4

NB 2015 SR.5

NB 2019 SR.6

NB 2019 SR.7

NB 2015 SR.1

NB 2015 SR.2

NB 2015 SR.3

NB 2015 SR.4

NB 2015 SR.5

NB 2019 SR.6

NB 2019 SR.7

1 000 000

700 000

500 000

750 000

550 000

5 500 000

1 000 000

700 000

500 000

750 000

550 000

5 500 000

Nominal value

(in thousands

of Euros)

Carrying book

value (in

thousands of

Euros)

31.12.2020

31.12.2019

Interest

payment

Quarterly

Interest

payment

Quarterly

07/10/2015

22/12/2016

10/12/2019

07/10/2021

07/10/2024

07/10/2020

07/10/2022

22/12/2023

10/06/2023

10/12/2024

Euribor 3 Months + 0,25%

07/10/2015

22/12/2016

10/12/2019

07/10/2021

07/10/2024

07/10/2020

07/10/2022

22/12/2023

10/06/2023

10/12/2024

Euribor 3 Months + 0,25%

Designation

Issue date

Maturity date

Interest Rate

Market

(in thousands of Euros)

Rating

Moody's

DBRS

XDUB

(in thousands of Euros)

Rating

Moody's

DBRS

These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in NOVO BANCO

Bank’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities have a special creditor

privilege. The conditions of the covered debt securities issues are framed in Decree-Law No. 59/2006, and in Notices No. 5, 6, 7 and

8/2006 and Instruction No. 13/2006 of Bank of Portugal.

As at 31 December 2020, the assets that collateralize these covered debt securities amount to Euro 6,104.8 million (31 December

2019: Euro 6,076.8 million) (see Note 21).

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 361-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:

NOVO BANCO

31.12.2020

(in thousands of Euros)

NOVO BANCO
31.12.2019

Repayable on demand

11 475 826
As at 31 December 2020 and 2019, the caption Due to customers, by residual maturity periods, is as follows:

11 877 766

31.12.2020

7 124 178
5 561 554
1 576 564
11 475 826
40 385

31.12.2019

(in thousands of Euros)
7 204 511
5 866 566
2 572 125
11 877 766
459 609

Term deposits

Up to 3 months
3 months to 1 year
1 to 5 years
Repayable on demand
More than 5 years

Term deposits

14 302 681
7 124 178
25 778 507
5 561 554
1 576 564
40 385

16 102 811
7 204 511
27 980 577
5 866 566
2 572 125
459 609

Up to 3 months
3 months to 1 year
1 to 5 years
More than 5 years

This caption breaks down as follows:

14 302 681

16 102 811

25 778 507

(in thousands of Euros)

27 980 577

31.12.2020

31.12.2019

Debt Securities issued, subordinated debt and financial liabilities associated to transferred assets

Debt securities issued

Euro Medium Term Notes (EMTN)
This caption breaks down as follows:

Subordinated debt

Bonds

Financial liabilities associated to transferred assets
Debt securities issued

Asset lending operations
Euro Medium Term Notes (EMTN)

Subordinated debt

515 311

495 989

(in thousands of Euros)

415 234

31.12.2020

415 069

31.12.2019

44 451
515 311
974 996

133 387
495 989
1 044 445

Bonds

Financial liabilities associated to transferred assets

415 069
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro
10,000 million, the Bank issued covered bonds which amount to Euro 5,500 million (31 December 2019: Euro 5,500 million), being
133 387
Asset lending operations
these covered bonds totally repurchased by the Bank. The main characteristics of the outstanding issues as at 31 December 2020
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum
and 2019 are as follows:
1 044 445
(in thousands of Euros)
amount of Euro 10,000 million, the Bank issued covered bonds which amount to Euro 5,500 million (31 December
31.12.2020
2019: Euro 5,500 million), being these covered bonds totally repurchased by the Bank. The main characteristics of the
Under the Covered Bonds Program (“Programa de Emissão de Obrigações Hipotecárias”), which has a maximum amount of Euro
10,000 million, the Bank issued covered bonds which amount to Euro 5,500 million (31 December 2019: Euro 5,500 million), being
outstanding issues as at 31 December 2020 and 2019 are as follows:
Interest
these covered bonds totally repurchased by the Bank. The main characteristics of the outstanding issues as at 31 December 2020
payment
and 2019 are as follows:

Carrying book
value (in
thousands of
Euros)

Nominal value
(in thousands
of Euros)

974 996

415 234

Maturity date

Interest Rate

Designation

44 451

Issue date

Moody's

Market

Rating

DBRS

NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
Designation
NB 2019 SR.6
NB 2019 SR.7
NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
NB 2019 SR.6
NB 2019 SR.7

Designation

1 000 000
1 000 000
1 000 000
700 000
Nominal value
500 000
(in thousands
750 000
of Euros)
550 000
1 000 000
5 500 000
1 000 000
1 000 000
700 000
500 000
750 000
Nominal value
550 000
(in thousands
of Euros)

5 500 000

-
-
-
Carrying book
-
value (in
-
thousands of
-
Euros)
-
-
-
-
-
-
-
Carrying book
-
value (in
-
thousands of
-
Euros)

07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
Issue date
10/12/2019
10/12/2019
07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
10/12/2019
10/12/2019
Issue date

NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
Designation
NB 2019 SR.6
NB 2019 SR.7
NB 2015 SR.1
NB 2015 SR.2
NB 2015 SR.3
NB 2015 SR.4
NB 2015 SR.5
NB 2019 SR.6
NB 2019 SR.7

1 000 000
1 000 000
1 000 000
Nominal value
700 000
500 000
(in thousands
750 000
of Euros)
550 000
1 000 000
5 500 000
1 000 000
1 000 000
700 000
500 000
750 000
550 000

-
-
-
Carrying book
-
value (in
-
thousands of
-
Euros)
-
-
-
-
-
-
-
-
-

07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
Issue date
10/12/2019
10/12/2019
07/10/2015
07/10/2015
07/10/2015
07/10/2015
22/12/2016
10/12/2019
10/12/2019

31.12.2020

31.12.2019

07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
Maturity date
10/06/2023
10/12/2024
07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
10/06/2023
10/12/2024
Maturity date

07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
Maturity date
10/06/2023
10/12/2024
07/10/2021
07/10/2024
07/10/2020
07/10/2022
22/12/2023
10/06/2023
10/12/2024

Quarterly
Quarterly
Quarterly
Quarterly
Interest
Quarterly
payment
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Interest
Quarterly
payment

Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Interest Rate
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Euribor 3 Months + 0,25%
Interest Rate

XDUB
XDUB
XDUB
XDUB
XDUB
Market
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
Market

Quarterly
Quarterly
Quarterly
Quarterly
Interest
Quarterly
payment
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly

XDUB
XDUB
XDUB
XDUB
XDUB
Market
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB
XDUB

(in thousands of Euros)

Rating

A2
A2
A2
A2
A2
A2
Moody's
A2
A2
A2
A2
A2
A2
A2
A2

A
A
A
A
A
A
DBRS
A
A
A
A
A
A
A
A

Moody's

DBRS

(in thousands of Euros)

These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in NOVO BANCO
Bank’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities have a special creditor
privilege. The conditions of the covered debt securities issues are framed in Decree-Law No. 59/2006, and in Notices No. 5, 6, 7 and
8/2006 and Instruction No. 13/2006 of Bank of Portugal.

5 500 000

As at 31 December 2020, the assets that collateralize these covered debt securities amount to Euro 6,104.8 million (31 December
These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated in NOVO BANCO
2019: Euro 6,076.8 million) (see Note 21).
Bank’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities have a special creditor
privilege. The conditions of the covered debt securities issues are framed in Decree-Law No. 59/2006, and in Notices No. 5, 6, 7 and
8/2006 and Instruction No. 13/2006 of Bank of Portugal.

These covered bonds are guaranteed by a cover asset pool, comprising mortgage and other assets, segregated
As at 31 December 2020, the assets that collateralize these covered debt securities amount to Euro 6,104.8 million (31 December
in Bank’s accounts as autonomous patrimony and over which the holders of the relevant covered debt securities
2019: Euro 6,076.8 million) (see Note 21).
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 361-
have a special creditor privilege. The conditions of the covered debt securities issues are framed in Decree-Law No.
59/2006, and in Notices No. 5, 6, 7 and 8/2006 and Instruction No. 13/2006 of Bank of Portugal.

As at 31 December 2020, the assets that collateralize these covered debt securities amount to Euro 6,104.8 million (31
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 361-
December 2019: Euro 6,076.8 million) (see Note 21).

432

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOVO BANCO
The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities
associated to transferred assets was as follows:
The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities associated
to transferred assets was as follows:

Balance as at

31.12.2019

Issues

Redemptions
b)

Net
purchases

(in thousands of Euros)
NOVO BANCO
Balance as at
31.12.2020

Other
movements a)

Debt securities issued

Euro Medium Term Notes (EMTN)

The changes in the financial years of 2020 and 2019 in Debt securities issued, subordinated debt and financial liabilities associated
to transferred assets was as follows:

515 311

495 989

19 892

( 570)

Subordinated debt

Bonds

Financial liabilities associated to transferred assets
Debt securities issued

Asset lending operations
Euro Medium Term Notes (EMTN)

415 069
Balance as at

31.12.2019

Issues

133 387
495 989
1 044 445

-
-
-

-
Redemptions
b)

Net
purchases

165

(in thousands of Euros)
415 234
Balance as at
31.12.2020

Other
movements a)

( 88 251)
-
( 88 251)

-
( 570)
( 570)

( 685)
19 892
19 372

44 451
515 311
974 996

Subordinated debt

a) The other movements include accrued interest on the balance sheet, corrections for hedging operations, corrections of fair value and exchange rate variations.
b) During the year of 2020, the Lusitano SME issue no. 3, on balance in 2019, was fully repaid (Classes D, E and S).
415 069
Bonds

Financial liabilities associated to transferred assets

Asset lending operations

Balance as at
133 387

31.12.2018

1 044 445

Issues

Redemptions
( 88 251)
b)
( 88 251)

Net
purchases

( 570)

Debt securities issued

a) The other movements include accrued interest on the balance sheet, corrections for hedging operations, corrections of fair value and exchange rate variations.
Euro Medium Term Notes (EMTN)
507 236
b) During the year of 2020, the Lusitano SME issue no. 3, on balance in 2019, was fully repaid (Classes D, E and S).
-
Covered bonds c)
507 236

-
1 300 000
1 300 000

-
-
-

-
(1 300 000)
(1 300 000)

165

415 234

(in thousands of Euros)
Balance as at
44 451
31.12.2019

Other
( 685)
movements a)
19 372

974 996

( 11 247)
-
( 11 247)

495 989
-
495 989
(in thousands of Euros)
Balance as at
31.12.2019

415 069

Other
movements a)
166

Subordinated debt

Bonds

Debt securities issued
Financial liabilities associated to transferred assets

Euro Medium Term Notes (EMTN)
Asset lending operations
Covered bonds c)

Balance as at

31.12.2018

414 903

Issues

Redemptions
b)

Net
purchases

507 236
242 438
-
507 236
1 164 577

-
-
1 300 000
1 300 000
1 300 000

-
( 107 660)
-
-
( 107 660)

-
-
(1 300 000)
(1 300 000)
(1 300 000)

( 11 247)
( 1 391)
-
( 11 247)
( 11 081)

495 989
133 387
-
495 989
1 044 445

Subordinated debt

a) Other movements include accrued interest on the balance sheet, corrections for hedging operations, corrections of fair value and exchange rate variations.
b) During 2019, all Classes B and C issued by Lusitano SME No. 3 issued 12.6 thousand euros of Class D were repaid in advance.
Bonds
c) During the financial year of 2019, two mortgage bonds were issued in the amount of 750 million euros and 550 million euros.

414 903

166

415 069

Financial liabilities associated to transferred assets

As at 31 December 2020 and 2019, the analysis of Debt securities issued and subordinated debt, by maturity, is as follows:

Asset lending operations

242 438

( 107 660)

1 164 577

1 300 000

( 107 660)

(1 300 000)

( 1 391)

133 387
(in thousands of Euros)
1 044 445

( 11 081)

31.12.2019

31.12.2020

As at 31 December 2020 and 2019, the analysis of Debt securities issued and subordinated debt, by maturity, is as
follows:

c) During the financial year of 2019, two mortgage bonds were issued in the amount of 750 million euros and 550 million euros.

Debt securities issued
More than 5 years

515 311
515 311

495 989
495 989

As at 31 December 2020 and 2019, the analysis of Debt securities issued and subordinated debt, by maturity, is as follows:

Subordinated debt

1 to 5 years
Debt securities issued
More than 5 years

Financial liabilities associated to transferred assets

Subordinated debt

More than 5 years
Undertimined maturity
1 to 5 years

Financial liabilities associated to transferred assets

More than 5 years
Undertimined maturity

(in thousands of Euros)

31.12.2020

415 234
415 234
515 311
515 311
-
44 451
44 451
415 234
415 234
974 996

31.12.2019

415 069
415 069
495 989
495 989
88 937
44 450
133 387
415 069
415 069
1 044 445

-
44 451
44 451

88 937
44 450
133 387

974 996

1 044 445

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

433

- 362-

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 362-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The main characteristics of these liabilities, as at 31 December 2020 and 2019, are as follows:
The main characteristics of these liabilities, as at 31 December 2020 and 2019, are as follows:

31.12.2020

(in thousands of Euros)

NOVO BANCO

Entity

ISIN

Description

Moeda

Maturity

Interest rate

Market

Data de
emissão

Unit price
(€)

Carrying
Book value

The main characteristics of these liabilities, as at 31 December 2020 and 2019, are as follows:
Euro Medium Term Notes

(in thousands of Euros)

Entity

NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
Euro Medium Term Notes
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NOVO BANCO
NB (Luxembourg Branch)
NB (Luxembourg Branch)
NB (Luxembourg Branch)
a) Date of the next call option
NB (Luxembourg Branch)
NB (Luxembourg Branch)

Subordinated debt

ISIN

XS0869315241
XS0877741479
XS0888530911
XS0897950878
XS0972653132
XS1031115014
XS1034421419
XS1038896426
XS0869315241
XS1042343308
XS0877741479
XS1053939978
XS0888530911
XS1055501974
XS0897950878
XS1058257905
XS0972653132
XS1031115014
XS1034421419
PTNOBFOM0017
XS1038896426
XS1042343308
XS1053939978
XS1055501974
XS1058257905

BES Luxembourg 3.5% 02/01/43
BES Luxembourg 3.5% 23/01/43
BES Luxembourg 3.5% 19/02/2043
BES Luxembourg 3.5% 18/03/2043
Description
BES Luxembourg ZC
Banco Esp San Lux ZC 12/02/49
Banco Esp San Lux ZC 19/02/49
Banco Esp San Lux ZC 27/02/51
BES Luxembourg 3.5% 02/01/43
BES Luxembourg ZC 06/03/2051
BES Luxembourg 3.5% 23/01/43
BES Luxembourg ZC 03/04/48
BES Luxembourg 3.5% 19/02/2043
BES Luxembourg ZC 09/04/52
BES Luxembourg 3.5% 18/03/2043
BES Luxembourg ZC 16/04/46
BES Luxembourg ZC
Banco Esp San Lux ZC 12/02/49
Banco Esp San Lux ZC 19/02/49
NB 06/07/2028
Banco Esp San Lux ZC 27/02/51
BES Luxembourg ZC 06/03/2051
BES Luxembourg ZC 03/04/48
BES Luxembourg ZC 09/04/52
BES Luxembourg ZC 16/04/46

Subordinated debt

NOVO BANCO

PTNOBFOM0017

NB 06/07/2028

Entity

ISIN

Description

a) Date of the next call option

Euro Medium Term Notes

Entity

Subordinated debt

ISIN

EUR
EUR
EUR
EUR
Moeda
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

EUR

Moeda

EUR
EUR
EUR
EUR
Moeda
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR

2013
2013
2013
Data de
2013
emissão
2013
2014
2014
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
2018
2014
2014
2014
2014
2014

2018

Data de
emissão

2013
2013
2013
Data de
2013
emissão
2013
2014
2014
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
2018
2014
2014
2014
2014
2014

1,00
1,00
1,00
Unit price
1,00
(€)
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
100,00
1,00
1,00
1,00
1,00
1,00

Carrying
Book value

42 287
31.12.2020
97 153
63 183
46 521
36 398
45 717
40 220
34 848
42 287
15 212
97 153
43 649
63 183
38 646
46 521
11 477
36 398
45 717
40 220
415 234
34 848
930 545
15 212
43 649
38 646
11 477

2043
2043
2043
2043
Maturity
2048
2049
2049
2051
2043
2051
2043
2048
2043
2052
2043
2046
2048
2049
2049
2023 a)
2051
2051
2048
2052
2046

Fixed rate 3,5%
Fixed rate 3,5%
Fixed rate 3,5%
Fixed rate 3,5%
Interest rate
Zero cuppon
Zero cuppon
Zero cuppon
Zero cuppon
Fixed rate 3,5%
Zero cuppon
Fixed rate 3,5%
Zero cuppon
Fixed rate 3,5%
Zero cuppon
Fixed rate 3,5%
Zero cuppon
Zero cuppon
Zero cuppon
Zero cuppon
8,50%
Zero cuppon
Zero cuppon
Zero cuppon
Zero cuppon
Zero cuppon

100,00

31.12.2019

415 234

Unit price
(€)

930 545

Carrying
Book value

2023 a)

8,50%

XDUB

Maturity

Interest rate

Market

(in thousands of Euros)

1,00
1,00
1,00
Unit price
1,00
(€)
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
1,00
100,00
1,00
1,00
1,00
1,00
1,00

31.12.2019

Carrying
Book value

41 798
96 270
62 461
46 011
34 344
42 861
37 674
32 615
41 798
14 236
96 270
40 699
62 461
36 317
46 011
10 703
34 344
42 861
37 674
415 069
32 615
911 058
14 236
40 699
36 317
10 703

2043
2043
2043
2043
Maturity
2048
2049
2049
2051
2043
2051
2043
2048
2043
2052
2043
2046
2048
2049
2049
2023 a)
2051
2051
2048
2052
2046

XLUX
XLUX
XLUX
XLUX
Market
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XLUX
XDUB
XLUX
XLUX
XLUX
XLUX
XLUX

NOVO BANCO

The Bank did not present any capital or interest defaults regarding debt issued during the first half of 2020 and 2019.
Subordinated debt
8,50%

EUR
The securitization operations not derecognized above, implied the registration of financial liabilities associated with transferred assets,
The Bank did not present any capital or interest defaults regarding debt issued during the first half of 2020 and 2019.
which are detailed as follows:
a) Date of the next call option
(in thousands Euros)

PTNOBFOM0017

NB 06/07/2028

415 069

911 058

2023 a)

100,00

XDUB

2018

The securitization operations not derecognized above, implied the registration of financial liabilities associated with
The Bank did not present any capital or interest defaults regarding debt issued during the first half of 2020 and 2019.
transferred assets, which are detailed as follows:
The securitization operations not derecognized above, implied the registration of financial liabilities associated with transferred assets,
which are detailed as follows:

Lusitano SME No. 3
FLITPTREL (1)

-
44 451

88 937
44 450

31.12.2020

31.12.2019

(1) asset transfer operation, with the Bank in the securities portfolio vehicle equity instruments

Lusitano SME No. 3
FLITPTREL (1)

(1) asset transfer operation, with the Bank in the securities portfolio vehicle equity instruments

44 451

31.12.2020

-
44 451

44 451

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

434

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

(in thousands Euros)

133 387

31.12.2019

88 937
44 450

133 387

- 363-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

NOTE 30 – Provisions
NOTE 30 – PROVISIONS

As at 31 December 2020 and 2019, the caption Provisions presents the following changes:
As at 31 December 2020 and 2019, the caption Provisions presents the following changes:
NOTE 30 – PROVISIONS

As at 31 December 2020 and 2019, the caption Provisions presents the following changes:
Restructuring
NOTE 30 – PROVISIONS
provision

Commercial
Offers

Provision for
guarantees and
commitments

As at 31 December 2020 and 2019, the caption Provisions presents the following changes:
Balance as at 31 December 2018
9 781
Restructuring
provision

Commercial
Offers

72 877

Allocation / (write-backs) for the period
Utilization during the period
Foreign exchange differences and other

Balance as at 31 December 2018

Balance as at 31 December 2019

Balance as at 31 December 2018

Balance as at 31 December 2019

Allocation / (write-backs) for the period
Utilization during the period
Allocation / (write-backs) for the period
Foreign exchange differences and other
Utilization during the period
Foreign exchange differences and other (a)
Allocation / (write-backs) for the period
Utilization during the period
Allocation / (write-backs) for the period
Foreign exchange differences and other
Utilization during the period
Foreign exchange differences and other (a)

Balance as at 31 December 2020

Allocation / (write-backs) for the period

Balance as at 31 December 2020

Utilization during the period
Foreign exchange differences and other (a)

47 291
( 33 052)
Restructuring
24
9 781
provision

24 044
47 291
( 33 052)
123 915
9 781
24
( 42 188)
( 8 798)
47 291
24 044
( 33 052)
96 973
123 915
24
( 42 188)
24 044
( 8 798)

123 915
96 973
( 42 188)
( 8 798)

Provision for
189 369
guarantees and
( 60 467)
commitments
-
Provision for
( 31 799)
189 369
guarantees and
97 103
commitments
( 60 467)
-
21 595
189 369
( 31 799)
( 2 188)
( 15 026)
( 60 467)
97 103
-
101 484
21 595
( 31 799)
( 2 188)
97 103
( 15 026)

21 595
101 484
( 2 188)
( 15 026)

Commercial
Offers

( 1 366)
( 29 937)
( 240)
72 877

41 334
( 1 366)
( 29 937)
( 629)
72 877
( 240)
( 29 506)
-
( 1 366)
41 334
( 29 937)
11 199
( 629)
( 240)
( 29 506)
41 334
-

( 629)
11 199
( 29 506)
-

Programme of
antecipated
repayment of
liabilities
Programme of
38 865
antecipated
repayment of
( 1 172)
liabilities
( 37 694)
Programme of
antecipated
1
38 865
repayment of
-
( 1 172)
liabilities
( 37 694)
-
38 865
1
-
-
( 1 172)
-
( 37 694)
-
-
1
-
-
-

-
-
-
-

Balance as at 31 December 2019
( a ) Includes 8,798 tho usand euro s o f restructuring pro visio ns and 14,420 tho usand euro s o f pro visio ns fo r guarantees pro vided by the Spanish B ranch transferred to disco ntinued o peratio ns.

NOVO BANCO

(in thousands of Euros)

Other
provisions

Total

(in thousands of Euros)

112 991

Other
provisions

423 883

Total

101 844
(in thousands of Euros)
( 122 250)
( 31 733)
423 883

Total

371 744
101 844
( 122 250)
187 839
423 883
( 31 733)
( 88 451)
( 32 560)
101 844
371 744
( 122 250)
438 572
187 839
( 31 733)
( 88 451)
371 744
( 32 560)

187 839
438 572
( 88 451)
( 32 560)

117 558
( 21 567)
281
112 991

209 263
117 558
( 21 567)
42 958
112 991
281
( 14 569)
( 8 736)
117 558
209 263
( 21 567)
228 916
42 958
281
( 14 569)
209 263
( 8 736)

42 958
228 916
( 14 569)
( 8 736)

The changes in the caption Provisions for guarantees, are detailed as follows:
( a ) Includes 8,798 tho usand euro s o f restructuring pro visio ns and 14,420 tho usand euro s o f pro visio ns fo r guarantees pro vided by the Spanish B ranch transferred to disco ntinued o peratio ns.

11 199
Balance as at 31 December 2020
The changes in the caption Provisions for guarantees, are detailed as follows:
Stage 1

101 484

96 973

Stage 2

26 789

228 916

438 572
(in thousands of Euros)

Stage 3

Total

143 498

187 075
(in thousands of Euros)

Stage 3

Stage 2

Stage 1

6 724
( 7 701)
16 788
( 1 750)

307
( 2 191)
26 789
( 21 330)

Balance as at 31 December 2018

Balance as at 31 December 2019

Balance as at 31 December 2018

The changes in the caption Provisions for guarantees, are detailed as follows:

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

44 990
Total
( 106 242)
187 075
(in thousands of Euros)
( 31 800)
Total
Increases due to changes in credit risk
44 990
94 023
Decreases due to changes in credit risk
( 106 242)
44 572
Increases due to changes in credit risk
187 075
Other movements
( 31 800)
( 29 479)
Decreases due to changes in credit risk
44 990
Increases due to changes in credit risk
94 023
( 2 188)
Uses
( 106 242)
Decreases due to changes in credit risk
Other moviments (a)
( 15 023)
Increases due to changes in credit risk
44 572
( 31 800)
Other movements
Decreases due to changes in credit risk
( 29 479)
91 905
Balance as at 31 December 2020
94 023
Balance as at 31 December 2019
( 2 188)
Uses
(a) Includes 14,420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations (2,360 thousand euros on stage 1 and 12,060
44 572
Increases due to changes in credit risk
Other moviments (a)
( 15 023)
thousand euros on stage 3).
Decreases due to changes in credit risk
( 29 479)
91 905
( 2 188)
Uses
(a) Includes 14,420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations (2,360 thousand euros on stage 1 and 12,060
Other moviments (a)
( 15 023)
The changes in the caption Provisions for commitments are detailed as follows:
thousand euros on stage 3).

6 724
14 061
( 7 701)
20 441
16 788
( 1 750)
( 12 790)
6 724
14 061
-
( 7 701)
2 293
20 441
( 1 750)
( 12 790)
24 005
14 061
-
20 441
2 293
( 12 790)
24 005
-
2 293

37 959
76 387
( 96 350)
23 301
143 498
( 8 720)
( 15 991)
37 959
76 387
( 2 188)
( 96 350)
( 14 923)
23 301
( 8 720)
( 15 991)
66 586
76 387
( 2 188)
23 301
( 14 923)
( 15 991)
66 586
( 2 188)
( 14 923)

307
3 575
( 2 191)
830
26 789
( 21 330)
( 698)
307
3 575
-
( 2 191)
( 2 393)
830
( 21 330)
( 698)
1 314
3 575
-
830
( 2 393)
( 698)
1 314
-
( 2 393)

37 959
( 96 350)
143 498
( 8 720)

Balance as at 31 December 2020

Stage 2

Stage 1

Stage 3

Balance as at 31 December 2020

1 314

24 005

66 586

(in thousands of Euros)
91 905

(a) Includes 14,420 thousand euros of provisions for guarantees provided by the Spanish Branch transferred to discontinued operations (2,360 thousand euros on stage 1 and 12,060
The changes in the caption Provisions for commitments are detailed as follows:
thousand euros on stage 3).
Balance as at 31 December 2018
1 870
The changes in the caption Provisions for commitments are detailed as follows:
504
The changes in the caption Provisions for commitments are detailed as follows:
( 468)
1 870
29

Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

210
1 632
( 215)
( 847)
2 294
-
(in thousands of Euros)
5
1

Balance as at 31 December 2018

918
( 164)
424
( 33)

2 294
(in thousands of Euros)

Stage 2

Stage 3

Stage 1

424

Total

Stage 2

Stage 1

Stage 3

Total

Balance as at 31 December 2018

Balance as at 31 December 2019

Balance as at 31 December 2020

Increases due to changes in credit risk
Decreases due to changes in credit risk
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Increases due to changes in credit risk
Other movements
Decreases due to changes in credit risk
Other movements
Increases due to changes in credit risk
Decreases due to changes in credit risk
Other movements

Balance as at 31 December 2019

Stage 1

Stage 2

Stage 3

504
1 935
( 468)
6 325
1 870
29
( 3 708)
504
1 935
1 071
( 468)
6 325
5 623
29
( 3 708)
1 935
1 071
6 325
5 623
( 3 708)
1 071

918
1 145
( 164)
5 488
424
( 33)
( 1 570)
918
1 145
( 1 107)
( 164)
5 488
3 956
( 33)
( 1 570)
1 145
( 1 107)
5 488
3 956
( 1 570)
( 1 107)

210
-
( 215)
-
-
5
( 33)
210
-
33
( 215)
-
-
5
( 33)
-
33
-
-
( 33)
33

Total

1 632
3 080
( 847)
11 813
2 294
1
( 5 311)
1 632
3 080
( 3)
( 847)
11 813
9 579
1
( 5 311)
3 080
( 3)
11 813
9 579
( 5 311)
( 3)

The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising
Balance as at 31 December 2020
from the Bank's sale and restructuring process.

5 623

During the financial year of 2020, a provision of Euro 127.4 million was set up, and there was also a reversal of the provisions set up
The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising
Balance as at 31 December 2020
in 2016 and 2017 in the amount of Euro 3.4 million. As at 31 December 2020, the amount of restructuring provisions on the balance
from the Bank's sale and restructuring process.
sheet is 97.0 million euros.
During the financial year of 2020, a provision of Euro 127.4 million was set up, and there was also a reversal of the provisions set up
The restructuring provisions were set up within the scope of the commitments assumed before the European Commission arising
Other provisions amounting to Euro 228.9 million (31 December 2019: Euro 209.3 million) are intended to cover certain identified
in 2016 and 2017 in the amount of Euro 3.4 million. As at 31 December 2020, the amount of restructuring provisions on the balance
from the Bank's sale and restructuring process.
contingencies related to the Bank’s activities, the most relevant being:
sheet is 97.0 million euros.
• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Bank maintains provisions of Euro 20.4
During the financial year of 2020, a provision of Euro 127.4 million was set up, and there was also a reversal of the provisions set up
Other provisions amounting to Euro 228.9 million (31 December 2019: Euro 209.3 million) are intended to cover certain identified
in 2016 and 2017 in the amount of Euro 3.4 million. As at 31 December 2020, the amount of restructuring provisions on the balance
contingencies related to the Bank’s activities, the most relevant being:
sheet is 97.0 million euros.
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 364-
• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Bank maintains provisions of Euro 20.4
Other provisions amounting to Euro 228.9 million (31 December 2019: Euro 209.3 million) are intended to cover certain identified
contingencies related to the Bank’s activities, the most relevant being:
• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Bank maintains provisions of Euro 20.4
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

million (31 December 2019: Euro 27.3 million);
435

million (31 December 2019: Euro 27.3 million);

- 364-

3 956

9 579

million (31 December 2019: Euro 27.3 million);

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 364-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

The restructuring provisions were set up within the scope of the commitments assumed before the European
Commission arising from the Bank's sale and restructuring process.

During the financial year of 2020, a provision of Euro 127.4 million was set up, and there was also a reversal of the pro-
visions set up in 2016 and 2017 in the amount of Euro 3.4 million. As at 31 December 2020, the amount of restructuring
provisions on the balance sheet is 97.0 million euros.

Other provisions amounting to Euro 228.9 million (31 December 2019: Euro 209.3 million) are intended to cover certain
identified contingencies related to the Bank’s activities, the most relevant being:

• Contingencies associated with ongoing tax processes. To cover for these contingencies, the Bank maintains
provisions of Euro 20.4 million (31 December 2019: Euro 27.3 million);

• Contingencies associated with legal proceedings in the amount of Euro 6.6 million (31 December 2019: Euro 5.8
million);

• Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5
million);

NOVO BANCO
• Contingencies relating to the undivided part of the Executive Board's Pension Plan, in the amount of Euro 19.2
million, transferred from the net liability items of the value of the assets of the pension fund (see Note 15);

• The remaining amount, of Euro 141.6 million (31 December 2019: Euro 140.7 million), is intended to cover for losses
• Contingencies associated with legal proceedings in the amount of Euro 6.6 million (31 December 2019: Euro 5.8 million);
NOVO BANCO
• Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);
in connection to the Bank’s normal activities, such as fraud, theft and robbery, and ongoing legal lawsuits, among
• Contingencies relating to the undivided part of the Executive Board's Pension Plan, in the amount of Euro 19.2 million, transferred
others.

from the net liability items of the value of the assets of the pension fund (see Note 15);

to the Bank’s normal activities, such as fraud, theft and robbery, and ongoing legal lawsuits, among others.

• The remaining amount, of Euro 141.6 million (31 December 2019: Euro 140.7 million), is intended to cover for losses in connection
• Contingencies associated with legal proceedings in the amount of Euro 6.6 million (31 December 2019: Euro 5.8 million);
NOTE 31 – Other liabilities
• Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);
• Contingencies relating to the undivided part of the Executive Board's Pension Plan, in the amount of Euro 19.2 million, transferred
NOTE 31 – OTHER LIABILITIES
from the net liability items of the value of the assets of the pension fund (see Note 15);
As at 31 December 2020 and 2019, the caption Other liabilities is analyzed as follows:
• The remaining amount, of Euro 141.6 million (31 December 2019: Euro 140.7 million), is intended to cover for losses in connection
As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

to the Bank’s normal activities, such as fraud, theft and robbery, and ongoing legal lawsuits, among others.

NOTE 31 – OTHER LIABILITIES

(in thousands of Euros)

31.12.2020

31.12.2019

As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

32 532
31 047
65 586
88 315
62 119
70 197
7 465
6 981
24 692
152 280
67 642
76 989
32 532
31 047
955
983
65 586
88 315
-
6 577
62 119
70 197
53 620
38 257
7 465
6 981
24 692
152 280
314 611
471 626
67 642
76 989
983
955
As at 31 December 2020, the caption Creditors for supply of goods includes Euro 47,973 thousand related to creditors of assets for
6 577
-
right of use (31 December 2019: Euro 59,565 thousand), whose maturity dates are present the following detail:
38 257
53 620

Public sector
Creditors for supply of goods
Other creditors
Career bonuses (see Note 15)
Retirement pensions and health-care benefits (see Note 15)
Other accrued expenses
Public sector
Deferred income
Creditors for supply of goods
Foreign exchange transactions pending settlement
Other creditors
Other transactions pending settlement
Career bonuses (see Note 15)
Retirement pensions and health-care benefits (see Note 15)
Other accrued expenses
Deferred income
Foreign exchange transactions pending settlement
Other transactions pending settlement

31.12.2020

31.12.2019

(in thousands of Euros)

As at 31 December 2020, the caption Creditors for supply of goods includes Euro 47,973 thousand related to creditors
471 626
of assets for right of use (31 December 2019: Euro 59,565 thousand), whose maturity dates are present the following
detail:
As at 31 December 2020, the caption Creditors for supply of goods includes Euro 47,973 thousand related to creditors of assets for
right of use (31 December 2019: Euro 59,565 thousand), whose maturity dates are present the following detail:

31.12.2020

314 611

(in thousands of Euros)

Up to 3 months
From 3 months to one year
From one to five years
More than five years

78
438
(in thousands of Euros)
26 118
21 339

31.12.2020

Up to 3 months
From 3 months to one year
From one to five years
NOTE 32 – SHARE CAPITAL
More than five years

47 973
78
438
26 118
21 339

Ordinary shares
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro 750 million
and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020 and 31 December 2019,
the share capital of the Bank amounts to Euro 5 900 000 000, represented by 9,799,999,997 registered shares, with no nominal
NOTE 32 – SHARE CAPITAL
value, fully subscribed and realised by the following shareholders:

47 973

436

% Share Capital

31.12.2019

31.12.2020

the share capital of the Bank amounts to Euro 5 900 000 000, represented by 9,799,999,997 registered shares, with no nominal

Nani Holdings, SGPS, SA

value, fully subscribed and realised by the following shareholders:

Resolution Fund (1)

75,00%

25,00%

75,00%

25,00%

% Share Capital

100,00%

31.12.2020

31.12.2019

(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.

Nani Holdings, SGPS, SA

Resolution Fund (1)

As mentioned in Note 26, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by

Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax

purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances

100,00%

to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted

(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.

into tax credits when the taxable entity reports an annual net loss.

75,00%

25,00%

75,00%

25,00%

As mentioned in Note 26, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by

The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of said net

Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax

loss to total equity at the individual company level.

purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances

to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted

into tax credits when the taxable entity reports an annual net loss.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of said net

- 365-

loss to total equity at the individual company level.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 365-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

• Contingencies associated with legal proceedings in the amount of Euro 6.6 million (31 December 2019: Euro 5.8 million);

• Contingencies associated with sales processes in the amount of Euro 41.1 million (31 December 2019: Euro 35.5 million);

• Contingencies relating to the undivided part of the Executive Board's Pension Plan, in the amount of Euro 19.2 million, transferred

from the net liability items of the value of the assets of the pension fund (see Note 15);

• The remaining amount, of Euro 141.6 million (31 December 2019: Euro 140.7 million), is intended to cover for losses in connection

to the Bank’s normal activities, such as fraud, theft and robbery, and ongoing legal lawsuits, among others.

NOTE 31 – OTHER LIABILITIES

As at 31 December 2020 and 31 December 2019, the caption Other liabilities is analyzed as follows:

Public sector

Creditors for supply of goods

Other creditors

Career bonuses (see Note 15)

Other accrued expenses

Deferred income

Foreign exchange transactions pending settlement

Other transactions pending settlement

Retirement pensions and health-care benefits (see Note 15)

NOVO BANCO

(in thousands of Euros)

31.12.2020

31.12.2019

32 532

65 586

62 119

7 465

24 692

67 642

955

53 620

31 047

88 315

70 197

6 981

152 280

76 989

983

6 577

38 257

314 611

471 626

As at 31 December 2020, the caption Creditors for supply of goods includes Euro 47,973 thousand related to creditors of assets for
right of use (31 December 2019: Euro 59,565 thousand), whose maturity dates are present the following detail:

Up to 3 months
From 3 months to one year
From one to five years
More than five years

NOTE 32 – Share capital

(in thousands of Euros)

31.12.2020

78
438
26 118
21 339

47 973

Ordinary shares
NOTE 32 – SHARE CAPITAL
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro
Ordinary shares
750 million and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020
In 2017 and following the acquisition of 75% of NOVO BANCO by Lone Star, two capital increases in the amounts of Euro 750 million
and 31 December 2019, the share capital of the Bank amounts to Euro 5 900 000 000, represented by 9,799,999,997
and Euro 250 million, in October and December, respectively, were realised. Thus, as at 31 December 2020 and 31 December 2019,
the share capital of the Bank amounts to Euro 5 900 000 000, represented by 9,799,999,997 registered shares, with no nominal
registered shares, with no nominal value, fully subscribed and realised by the following shareholders:
value, fully subscribed and realised by the following shareholders:

Nani Holdings, SGPS, SA
Resolution Fund (1)

% Share Capital

31.12.2020

31.12.2019

75,00%

25,00%

75,00%

25,00%

100,00%

(1) In view of the commitments assumed by the Portuguese Republic before the European Commisson, the Resolution Fund is inhibited from exercising its voting rights.

As mentioned in Note 26, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA) approved by
Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction, for corporate income tax
As mentioned in Note 26, NOVO BANCO adhered to the Special Regime applicable to Deferred Tax Assets (DTA)
purposes, of costs and negative equity changes recorded up to 31 December 2015 for impairment losses on loans and advances
to customers and with employee post-employment or long-term benefits. Said regime foresees that those assets can be converted
approved by Law No. 61/2014, of 26 August. Said regime applies to deferred tax assets related to the non-deduction,
into tax credits when the taxable entity reports an annual net loss.
for corporate income tax purposes, of costs and negative equity changes recorded up to 31 December 2015 for im-
pairment losses on loans and advances to customers and with employee post-employment or long-term benefits. Said
The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount of said net
loss to total equity at the individual company level.
regime foresees that those assets can be converted into tax credits when the taxable entity reports an annual net loss.

The conversion of the eligible deferred tax assets into tax credits was made according to the proportion of the amount
of said net loss to total equity at the individual company level.
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

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A special reserve was established with an amount identical to the tax credit approved, increased by 10%. This special reserve was
It is estimated that the conversion rights to be issued and allocated to the State following the net loss of years 2015 and
established using the originating reserve and is to be incorporated in the share capital.
2019 will confer a shareholding of up to approximately 12.82% of the share capital of NOVO BANCO, which will dilute
the Resolution Fund, according to the sale contract.
The conversion rights are securities that grant the State the right to demand of NOVO BANCO the respective share capital increase,
through the incorporation of the amount of the special reserve and the consequent issue and delivery of ordinary shares at no cost.

NOTE 33 – Accumulated other comprehensive income,
retained earnings, other reserves

NOTE 33 – ACCUMULATED OTHER COMPREHENSIVE INCOME, RETAINED EARNINGS, OTHER RESERVES

As at 31 December 2020 and 2019, the accumulated other comprehensive income, retained earnings and other
As at 31 December 2020 and 2019, the accumulated other comprehensive income, retained earnings and other reserves present the
following detail:
reserves present the following detail:

Other accumulated comprehensive income

Retained earnings

Other reserves

Originating reserve

Special reserve

Other reserves and Retained earnings

(in thousands of Euros)

31.12.2020

31.12.2019

( 749 259)

( 632 033)

( 7 202 828)

( 6 115 245)

6 179 422

1 976 173

728 561

5 580 864

2 098 187

606 547

3 474 688

2 876 130

( 1 772 665)

( 1 166 414)

Other accumulated comprehensive income

437

The movements in Other accumulated comprehensive income were as follows:

Other accumulated comprehensive income

(in thousands of Euros)

Impairment

Credit risk

reserves

Sales

reserves

Fair value

reserves

Actuarial

deviations (net of

taxes)

Total

Balance as at 31 December 2018

1 204

1 202

( 3 557)

( 272 495)

( 477 370)

( 751 016)

Balance as at 31 December 2019

5 505

( 1 669)

( 8 432)

( 44 041)

( 583 396)

( 632 033)

Actuarial deviations

Fair value changes, net of taxes

Changes in credit risk of financial liabilities at fair value, net

of taxes

comprehensive income

Impairment reserves of securities at fair value through other

Reserves of sales of securities at fair value through other

Actuarial deviations

Fair value changes, net of taxes

Changes in credit risk of financial liabilities at fair value, net

Impairment reserves of securities at fair value through other

Reserves of sales of securities at fair value through other

of taxes

comprehensive income

( 2 871)

4 301

10 883

( 1 838)

( 4 875)

( 16 356)

( 106 026)

228 454

( 122 199)

12 284

( 106 026)

228 454

( 2 871)

4 301

( 4 875)

( 122 199)

12 284

10 883

( 1 838)

( 16 356)

( 749 259)

Balance as at 31 December 2020

3 667

9 214

( 24 788)

( 31 757)

( 705 595)

Fair value reserve

taxes.

The fair value reserves represent the amount of the unrealised gains and losses arising from the securities portfolio classified as at

a fair value through other comprehensive income, net of impairment losses. The amount of this reserve is shown net of deferred

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 366-

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

A special reserve was established with an amount identical to the tax credit approved, increased by 10%. This special reserve was

established using the originating reserve and is to be incorporated in the share capital.

The conversion rights are securities that grant the State the right to demand of NOVO BANCO the respective share capital increase,

through the incorporation of the amount of the special reserve and the consequent issue and delivery of ordinary shares at no cost.

It is estimated that the conversion rights to be issued and allocated to the State following the net loss of years 2015 and 2019 will

confer a shareholding of up to approximately 12.82% of the share capital of NOVO BANCO, which will dilute the Resolution Fund,

according to the sale contract.

NOTE 33 – ACCUMULATED OTHER COMPREHENSIVE INCOME, RETAINED EARNINGS, OTHER RESERVES

As at 31 December 2020 and 2019, the accumulated other comprehensive income, retained earnings and other reserves present the

following detail:

Other accumulated comprehensive income

Retained earnings

Other reserves

Originating reserve

Special reserve

Other reserves and Retained earnings

Other accumulated comprehensive income
Other accumulated comprehensive income
The movements in Other accumulated comprehensive income were as follows:

The movements in Other accumulated comprehensive income were as follows:

(in thousands of Euros)

31.12.2020

31.12.2019

( 749 259)

( 632 033)

( 7 202 828)

( 6 115 245)

6 179 422

1 976 173

728 561

5 580 864

2 098 187

606 547

3 474 688

2 876 130

( 1 772 665)

( 1 166 414)

Other accumulated comprehensive income

(in thousands of Euros)

Impairment
reserves

Credit risk
reserves

Sales
reserves

Fair value
reserves

Actuarial
deviations (net of
taxes)

Total

Balance as at 31 December 2018

1 204

1 202

( 3 557)

( 272 495)

( 477 370)

( 751 016)

Actuarial deviations

Fair value changes, net of taxes
Changes in credit risk of financial liabilities at fair value, net
of taxes
Impairment reserves of securities at fair value through other
comprehensive income
Reserves of sales of securities at fair value through other
comprehensive income

4 301

( 2 871)

( 4 875)

( 106 026)

228 454

( 106 026)

228 454

( 2 871)

4 301

( 4 875)

Balance as at 31 December 2019

5 505

( 1 669)

( 8 432)

( 44 041)

( 583 396)

( 632 033)

Actuarial deviations

( 1 838)

10 883

( 16 356)

( 122 199)

12 284

Balance as at 31 December 2020

3 667

9 214

( 24 788)

( 31 757)

( 705 595)

( 122 199)

12 284

10 883

( 1 838)

( 16 356)

( 749 259)

NOVO BANCO
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as
follows:
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

- 366-
(in thousands of Euros)

31.12.2020

Fair value reserves

31.12.2019

Fair value reserves

Financial assets at
fair value through
other comprehensive
income

Deferred tax
reserves

Total fair
value reserves

Financial assets at
fair value through
other
comprehensive

Deferred tax
reserves

Total fair
value reserves

Opening balance

Changes in fair value

Foreign exchange differences
Sales in the exercise

Deferred taxes

53 179

( 97 220)

( 44 041)

( 280 428)

7 933

( 272 495)

87 060

( 4 372)
( 66 540)

-
-

( 5 057)

87 060

( 4 372)
( 66 540)

( 5 057)

408 804

( 6 678)
( 68 519)

-
-

408 804

( 6 678)
( 68 519)

( 105 153)

Balance at the end of the exercise

69 327

( 102 277)

( 32 950)

53 179

( 97 220)

( 44 041)

The fair value reserves are analyzed as follows:

Amortised cost of financial assets at fair value through other comprehensive income

Market value of financial assets at fair value through other comprehensive income

Unrealised gains / (losses) recognized in fair value reserve

Fair value reserves for discontinuing activities

Deferred Taxes

Fair value reserve attributable to shareholders of the Bank

31.12.2020

31.12.2019

(in thousands of Euros)

7 744 257

7 813 584

69 327

1 193

( 102 277)

( 31 757)

8 704 952

8 758 131

53 179

( 97 220)

( 44 041)

438

Originating reserve
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the

independent auditor nominated by Bank of Portugal.

Special reserve

As mentioned in Note 26, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime

applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax

assets into tax credits and the simultaneous establishment of a special reserve.

Following the clearance of a negative net result in the years 2015-2019, with reference to deferred tax assets eligible at the date of

closures of those financial years, the application of that special regime applicable to deferred tax assets, NOVO BANCO recorded a

special reserve, in the same amount of the tax credit calculated, increased by 10% , which has the following decomposition:

2016 (net loss of 2015)

2017 (net loss of 2016)

2018 (net loss of 2017)

2019 (net loss of 2018)

2020 (net loss of 2019)

(in thousands of Euros)

31.12.2020

31.12.2019

168 911

109 421

150 044

178 171

122 014

728 561

168 911

109 421

150 044

178 171

606 547

Other reserves and retained earnings

Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,

if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution

Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the

defined threshold, of up to a maximum of Euro 3 890 million (see Note 34 – Contingent liabilities and commitments). The capital

corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion. As at 31

December 2020 these assets had a net value of Euro 2.0 billion, mainly as a result of losses recorded as well as payments and

recoveries (31 December 2019: net value of Euro 3.1 billion).

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:

31.12.2020

Fair value reserves

(in thousands of Euros)

31.12.2019

Fair value reserves

NOVO BANCO

Deferred tax
reserves
The changes occurred in the fair value reserves, net of deferred taxes and impairment losses may be analyzed as follows:

Total fair
value reserves

Deferred tax
reserves

Total fair
value reserves

Financial assets at
fair value through
other
comprehensive

Opening balance

Changes in fair value

Foreign exchange differences
Sales in the exercise

Deferred taxes

Balance at the end of the exercise

( 97 220)

( 44 041)

( 280 428)

7 933

( 272 495)

(in thousands of Euros)

( 4 372)
( 66 540)
Financial assets at
-
fair value through
other comprehensive
69 327
income

31.12.2020

-
Fair value reserves
-

87 060

( 4 372)
( 66 540)

( 5 057)
Deferred tax
reserves

( 102 277)

( 5 057)

Total fair
value reserves
( 32 950)

( 6 678)
( 68 519)
Financial assets at
-
fair value through
other
comprehensive

53 179

408 804

31.12.2019

-
Fair value reserves
-

408 804

( 6 678)
( 68 519)

( 105 153)
Deferred tax
reserves

( 97 220)

( 105 153)

Total fair
value reserves
( 44 041)

Financial assets at
fair value through
other comprehensive
income

53 179

87 060

( 97 220)

( 44 041)

( 280 428)

7 933

( 272 495)

The fair value reserves are analyzed as follows:
53 179
Opening balance
The fair value reserves are analyzed as follows:
Changes in fair value
Foreign exchange differences
Sales in the exercise

( 4 372)
( 66 540)

87 060

-
-

Deferred taxes
Amortised cost of financial assets at fair value through other comprehensive income
Balance at the end of the exercise
Market value of financial assets at fair value through other comprehensive income

69 327

( 102 277)

( 5 057)

Unrealised gains / (losses) recognized in fair value reserve

Fair value reserves for discontinuing activities
The fair value reserves are analyzed as follows:
Deferred Taxes

Fair value reserve attributable to shareholders of the Bank

87 060

( 4 372)
( 66 540)

( 5 057)

( 32 950)

408 804

( 6 678)
31.12.2020
( 68 519)

408 804

-
(in thousands of Euros)
-
-

( 6 678)
( 68 519)

31.12.2019

-
7 744 257

( 105 153)

53 179

7 813 584

( 97 220)

69 327

1 193

( 105 153)
8 704 952
( 44 041)
8 758 131

53 179

( 102 277)

(in thousands of Euros)

( 97 220)

31.12.2020

( 31 757)

31.12.2019

( 44 041)

Amortised cost of financial assets at fair value through other comprehensive income

7 744 257

8 704 952

1 193

69 327

53 179

( 102 277)

7 813 584

8 758 131

Market value of financial assets at fair value through other comprehensive income
Originating reserve
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
Unrealised gains / (losses) recognized in fair value reserve
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
Originating reserve
Fair value reserves for discontinuing activities
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the
Deferred Taxes
independent auditor nominated by Bank of Portugal.
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO
Fair value reserve attributable to shareholders of the Bank
BANCO, on the terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve
Special reserve
includes the effects of Bank of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions
As mentioned in Note 26, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime
Originating reserve
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax
reached through the audit conducted by the independent auditor nominated by Bank of Portugal.
The originating reserve results from the difference between the assets and liabilities transferred from BES to NOVO BANCO, on the
assets into tax credits and the simultaneous establishment of a special reserve.
terms defined in the resolution measure applied by Bank of Portugal to BES. The amount of the reserve includes the effects of Bank
Special reserve
of Portugal’s Resolution Measure (“Medida de Resolução”) and those of the conclusions reached through the audit conducted by the
Following the clearance of a negative net result in the years 2015-2019, with reference to deferred tax assets eligible at the date of
independent auditor nominated by Bank of Portugal.
As mentioned in Note 26, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special
closures of those financial years, the application of that special regime applicable to deferred tax assets, NOVO BANCO recorded a
Regime applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of
special reserve, in the same amount of the tax credit calculated, increased by 10% , which has the following decomposition:
Special reserve
eligible deferred tax assets into tax credits and the simultaneous establishment of a special reserve.
As mentioned in Note 26, the special reserve was created as a result of the adhesion of NOVO BANCO to the Special Regime
applicable to Deferred Tax Assets approved by Law No. 61/2014, of 26 August, which implied the conversion of eligible deferred tax
assets into tax credits and the simultaneous establishment of a special reserve.
Following the clearance of a negative net result in the years 2015-2019, with reference to deferred tax assets eligible
at the date of closures of those financial years, the application of that special regime applicable to deferred tax assets,
Following the clearance of a negative net result in the years 2015-2019, with reference to deferred tax assets eligible at the date of
NOVO BANCO recorded a special reserve, in the same amount of the tax credit calculated, increased by 10%, which
closures of those financial years, the application of that special regime applicable to deferred tax assets, NOVO BANCO recorded a
has the following decomposition:
special reserve, in the same amount of the tax credit calculated, increased by 10% , which has the following decomposition:

(in thousands of Euros)

31.12.2020

31.12.2019

( 44 041)

( 97 220)

( 31 757)

2016 (net loss of 2015)
2017 (net loss of 2016)
2018 (net loss of 2017)
2019 (net loss of 2018)
2020 (net loss of 2019)

(in thousands of Euros)

31.12.2020

31.12.2019

168 911
109 421
150 044
178 171
122 014

728 561
168 911
109 421
150 044
178 171
122 014

168 911
109 421
150 044
178 171
-

606 547
168 911
109 421
150 044
178 171
-

728 561

Other reserves and retained earnings
Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,
if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution
Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the
defined threshold, of up to a maximum of Euro 3 890 million (see Note 34 – Contingent liabilities and commitments). The capital
corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion. As at 31
December 2020 these assets had a net value of Euro 2.0 billion, mainly as a result of losses recorded as well as payments and
recoveries (31 December 2019: net value of Euro 3.1 billion).
Other reserves and retained earnings
Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created. In this context,
Other reserves and retained earnings
if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited asset portfolio, the Resolution
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 367-
Fund makes a payment corresponding to the lower of the losses recorded and the amount necessary to restore the ratios to the
Following the conditions agreed in the NOVO BANCO’S sale process, a Contingent Capital Agreement was created.
defined threshold, of up to a maximum of Euro 3 890 million (see Note 34 – Contingent liabilities and commitments). The capital
In this context, if the capital ratios fall below a certain threshold and, cumulatively, losses are recorded in a delimited
corresponds to a previously defined asset perimeter, with an initial net book value (June 2016) of around Euro 7.9 billion. As at 31
December 2020 these assets had a net value of Euro 2.0 billion, mainly as a result of losses recorded as well as payments and
asset portfolio, the Resolution Fund makes a payment corresponding to the lower of the losses recorded and the
recoveries (31 December 2019: net value of Euro 3.1 billion).
amount necessary to restore the ratios to the defined threshold, of up to a maximum of Euro 3,890 million (see Note
34 – Contingent liabilities and commitments). The capital corresponds to a previously defined asset perimeter, with an
initial net book value (June 2016) of around Euro 7.9 billion. As at 31 December 2020 these assets had a net value of
2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES
- 367-
Euro 2.0 billion, mainly as a result of losses recorded as well as payments and recoveries (31 December 2019: net value
of Euro 3.1 billion).

606 547

As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining
the payment by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand
were meet and the payments occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the

439

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

NOVO BANCO

caption Reserves registered the responsibility of the Resolution Fund amounting to Euro 598,312 thousand relating to
As a result of the losses recorded by NOVO BANCO on 31 December 2019, 2018 and 2017, the conditions determining the payment
the Contingent Capital Agreement. The amount is accounted for under Other reserves and it results at each Balance
by Resolution Fund of Euro 1,035,016 thousand, Euro 1,149,295 thousand and Euro 791,695 thousand were meet and the payments
Sheet date of the incurred losses and of the regulatory ratios in force at the moment of its determination.
occurred in May 2020, 2019 and 2018, respectively. In the financial year of 2020, the caption Reserves registered the responsibility
of the Resolution Fund amounting to Euro 598,312 thousand relating to the Contingent Capital Agreement. The amount is accounted
for under Other reserves and it results at each Balance Sheet date of the incurred losses and of the regulatory ratios in force at the
moment of its determination.

NOTE 34 – Contingent liabilities and commitments

NOTE 34 – CONTINGENT LIABILITIES AND COMMITMENTS
In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 31 December
2020 and 2019 are the following:
In addition to the derivative financial instruments, the balances relating to off-balance accounts as at 31 December 2020 and 31
December 2019 are the following:

Contingent liabilities
Guarantees and standby letters
Financial assets pledged as collateral
Open documentary credits

Commitments
Revocable commitments
Irrevocable commitments

(in thousands of Euros)

31.12.2020

31.12.2019

2 815 920
14 194 624
410 292

17 420 836

6 419 991
629 454

7 049 445

3 148 216
11 930 201
516 162

15 594 579

6 897 501
409 215

7 306 716

Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the Bank.

Guarantees and standby letters provided are banking operations that do not imply any mobilization of funds for the
As at 31 December 2020, the caption financial assets pledged as collateral includes:
Bank.
• The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity facility, in the

amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);

• Securities pledged as collateral to the Portuguese Securities and Exchange Commission (“Comissão do Mercado de Valores
As at 31 December 2020, the caption financial assets pledged as collateral includes:
Mobiliários” (CMVM)) in the scope of the Investors Indemnity System (“Sistema de Indemnização aos Investidores”), in the amount
of Euro 8.1 million (31 December 2019: Euro 8.1 million);

• The market value of financial assets pledged as collateral to the European Central Bank in the scope of a liquidity
• Securities pledged as collateral to the Deposits’ Guarantee Fund (“Fundo de Garantia de Depósitos”), in the amount of Euro 69.5

facility, in the amount of Euro 13.1 billion (31 December 2019: Euro 11.5 billion);
million (31 December 2019: Euro 71.8 million);

• Securities pledged as collateral to the European Investment Bank, in the amount of Euro 769.7 million (31 December 2019: Euro
• Securities pledged as collateral to the Portuguese Securities and Exchange Commission (“Comissão do Mercado
98.6 million);
de Valores Mobiliários” (CMVM)) in the scope of the Investors Indemnity System (“Sistema de Indemnização aos
• Securities delivered as collateral in connection with derivatives trading with a central counterparty in the amount of Euro 107.0
million (31 December 2019: Euro 113.0 million).
Investidores”), in the amount of Euro 8.1 million (31 December 2019: Euro 8.1 million);

The above mentioned financial assets pledged as collateral are recorded in the various asset categories of the Group’s balance sheet
• Securities pledged as collateral to the Deposits’ Guarantee Fund (“Fundo de Garantia de Depósitos”), in the amount
and may be executed in the event the Group does not fulfil its obligations under the terms and conditions of the contracts celebrated.
The increase in the value of securities pledged as collateral to the European Investment Bank is related to the reinforcement of the
collateral due to changes in the minimum required amounts.
• Securities pledged as collateral to the European Investment Bank, in the amount of Euro 769.7 million (31 December

of Euro 69.5 million (31 December 2019: Euro 71.8 million);

2019: Euro 98.6 million);

Documentary credits are irrevocable commitments made by the Bank, on behalf of its customers, to pay or order to pay a certain
amount to a supplier of goods or services, within a determined period, upon the presentation of documentation of the expedition of
• Securities delivered as collateral in connection with derivatives trading with a central counterparty in the amount of
the goods or rendering of the services. The condition of “irrevocable” derives from the fact that they may not be cancelled neither
changed without the agreement of all involved parties.

Euro 107.0 million (31 December 2019: Euro 113.0 million).

Revocable and irrevocable commitments represent contractual agreements to extend credit to customers of the Bank (e.g. undrawn
The above mentioned financial assets pledged as collateral are recorded in the various asset categories of the Group’s
credit lines), which are, generally, contracted for fixed periods of time or with other expiration conditions and, usually, require the
balance sheet and may be executed in the event the Group does not fulfil its obligations under the terms and conditions
payment of a fee. Almost all credit commitments in force require that customers continue meeting certain conditions that were verified
of the contracts celebrated. The increase in the value of securities pledged as collateral to the European Investment
at the time the credit was contracted.
Bank is related to the reinforcement of the collateral due to changes in the minimum required amounts.
Despite the characteristics of these contingent liabilities and commitments, these operations require a previous rigorous risk
assessment of the solvency of the customer and of its business, similarly to any other commercial operation. When necessary, the
Documentary credits are irrevocable commitments made by the Bank, on behalf of its customers, to pay or order
Bank requires the collateralisation of these transactions. Since it is expected that the majority of these operations will mature without
to pay a certain amount to a supplier of goods or services, within a determined period, upon the presentation of
any funds having been drawn, these amounts do not necessarily represent future cash out-flows.
documentation of the expedition of the goods or rendering of the services. The condition of “irrevocable” derives from
the fact that they may not be cancelled neither changed without the agreement of all involved parties.

Revocable and irrevocable commitments represent contractual agreements to extend credit to customers of the Bank
(e.g. undrawn credit lines), which are, generally, contracted for fixed periods of time or with other expiration conditions
and, usually, require the payment of a fee. Almost all credit commitments in force require that customers continue
meeting certain conditions that were verified at the time the credit was contracted.

2020 ANNUAL REPORT | SEPARATE FINANCIAL STATEMENTS AND FINAL NOTES

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATE

Despite the characteristics of these contingent liabilities and commitments, these operations require a previous
rigorous risk assessment of the solvency of the customer and of its business, similarly to any other commercial
operation. When necessary, the Bank requires the collateralisation of these transactions. Since it is expected that the
majority of these operations will mature without any funds having been drawn, these amounts do not necessarily
represent future cash out-flows.

NOVO BANCO

Additionally, liabilities recorded in off-balance sheet items related to banking services provided are as follows:

Deposit and custody of securities and other items
Amounts received for subsequent collection
Securitized loans under management (servicing)
Other responsibilities related with banking services

(in thousands of Euros)

31.12.2020

31.12.2019

35 774 785
233 938
2 118 806
1 838 050

36 782 430
283 674
3 660 539
871 399

39 965 579

41 598 042

Under the resolution measure applied to BES by deliberation of Bank of Portugal of 3 August 2014, (point 1., paragraph b),
subparagraph (vii) of Appendix 2), as altered by the deliberation of Bank of Portugal of 11 August 2014, the “Excluded Liabilities”
from the transfer to NOVO BANCO include “any obligations, guarantees, liabilities or contingencies assumed in the trading, financial
Under the resolution measure applied to BES by deliberation of Bank of Portugal of 3 August 2014, (point 1., paragraph
intermediation and distribution of debt instruments issued by entities integrating Espírito Santo Group (…)”.
b), subparagraph (vii) of Appendix 2), as altered by the deliberation of Bank of Portugal of 11 August 2014, the “Excluded
Under the terms of the point and paragraph referred to above and sub point (v), the excluded liabilities also include “any liabilities or
Liabilities” from the transfer to NOVO BANCO include “any obligations, guarantees, liabilities or contingencies assumed
contingencies, namely those resulting from fraud or the violation of regulatory, penal or administrative offense provisions or
in the trading, financial intermediation and distribution of debt instruments issued by entities integrating Espírito Santo
regulations”.
Group (…)”.
On 29 December 2015, Bank of Portugal adopted a new deliberation for the “Clarification and retransmission of liabilities and
contingencies defined as excluded liabilities in subparagraphs (v) through (vii) of paragraph (b) of No. 1 of Appendix 2 of the
Under the terms of the point and paragraph referred to above and sub point (v), the excluded liabilities also include
Deliberation of Bank of Portugal of 3 August 2014 (8 p.m.), with the wording given it by the Deliberation of Bank of Portugal of 11
“any liabilities or contingencies, namely those resulting from fraud or the violation of regulatory, penal or administrative
August 2014 (5 p.m.)”. Through this deliberation, Bank of Portugal:
offense provisions or regulations”.

(i) Clarified the treatment as excluded liabilities of the contingent and unknown liabilities of BES (including litigation liabilities
related to pending litigation and liabilities or contingencies arising from fraud or violation of rules or regulatory, criminal or
On 29 December 2015, Bank of Portugal adopted a new deliberation for the “Clarification and retransmission of liabilities
administrative offence decisions), regardless of their nature (tax, labour, civil or other) and whether or not these are recorded
and contingencies defined as excluded liabilities in subparagraphs (v) through (vii) of paragraph (b) of No. 1 of Appendix
in the accounts of BES, in accordance with subparagraph (v) of paragraph (b) of No. 1 of Appendix 2 of the Deliberation of
3 August; and
2 of the Deliberation of Bank of Portugal of 3 August 2014 (8 p.m.), with the wording given it by the Deliberation of Bank
of Portugal of 11 August 2014 (5 p.m.)”. Through this deliberation, Bank of Portugal:

(ii) Clarified that the following liabilities had not been transferred from BES to NOVO BANCO:

a. All the liabilities relating to Preference Shares issued by vehicle companies established by BES and sold by BES;
b. All liabilities, damages and expenses related to real estate assets that were transferred to NOVO BANCO;
i. Clarified the treatment as excluded liabilities of the contingent and unknown liabilities of BES (including litigation
c. All indemnities related to breach of contracts (purchase and sale of real estate assets and others) signed and
liabilities related to pending litigation and liabilities or contingencies arising from fraud or violation of rules or
d. All indemnities related to life insurance contracts, in which the insurer was BES - Companhia de Seguros de Vida,
regulatory, criminal or administrative offence decisions), regardless of their nature (tax, labour, civil or other) and
whether or not these are recorded in the accounts of BES, in accordance with subparagraph (v) of paragraph (b) of
e. All liabilities and indemnities related to the alleged annulment of certain clauses in loan agreements in which BES
No. 1 of Appendix 2 of the Deliberation of 3 August; and

celebrated before 8 p.m. on 3 August 2014;

was the lender;

S.A.;

f. All the indemnities and liabilities arising from the cancellation of operations carried out by BES whilst financial and

ii. Clarified that the following liabilities had not been transferred from BES to NOVO BANCO:

g. Any liability that is the object of any of the processes described in Appendix I of said deliberation.

investment service provider; and

(iii) To the extent that, despite the clarifications made above, it is found that there has been an effective transfer of any liabilities
a. All the liabilities relating to Preference Shares issued by vehicle companies established by BES and sold by BES;
from BES to NOVO BANCO which, in terms of any of those paragraphs and the Deliberation of 3 August, should have
remained in BES’s legal sphere, said liabilities will be retransmitted from NOVO BANCO to BES, with effect as at 8 p.m. of
3 August 2014.

b. All liabilities, damages and expenses related to real estate assets that were transferred to NOVO BANCO;

celebrated before 8 p.m. on 3 August 2014;

c. All indemnities related to breach of contracts (purchase and sale of real estate assets and others) signed and
In the preparation of its consolidated financial statements as at 31 December 2020 (as well as in the previous financial statements),
NOVO BANCO incorporated the decisions resulting from the referred resolution measure regarding the transfer of the assets,
liabilities, off-balance sheet items and assets under management of BES, as well as from the deliberation of 29 December 2015 of
d. All indemnities related to life insurance contracts, in which the insurer was BES - Companhia de Seguros de Vida,
Bank of Portugal, in particular, with regards to the clarification of the non-transmission to NOVO BANCO of contingent and unknown
liabilities as well as the clarifications relating to the liabilities listed in paragraph (ii) above, herein also including the lawsuits listed in
S.A.;
said deliberation.

was the lender;

e. All liabilities and indemnities related to the alleged annulment of certain clauses in loan agreements in which BES
In addition, also by the deliberation of Bank of Portugal of 29 December 2015, it was decided that it is the responsibility of Resolution
Fund to neutralize, at the Bank level, the effects of decisions that are legally binding, beyond the control of NOVO BANCO and to
which it did not contribute and that, simultaneously, translate into the materialization of liabilities and contingencies which, according
f. All the indemnities and liabilities arising from the cancellation of operations carried out by BES whilst financial
to the perimeter of the transfer to NOVO BANCO as defined by Bank of Portugal, should remain in BES’s scope or give rise to the
setting of indemnities in the scope of the implementation of court sentences annulling decisions adopted by Bank of Portugal.

and investment service provider; and

g. Any liability that is the object of any of the processes described in Appendix I of said deliberation.

Considering that the establishment of the Bank results from the application of a resolution measure to BES, which had a significant
impact on the net worth of third parties, and notwithstanding the deliberations of Bank of Portugal of 29 December 2015, there are
still relevant litigation risks, albeit mitigated, namely regarding the various disputes relating to the loan made by Oak Finance to BES
and regarding the senior bond issues retransmitted to BES, as well as the risk of the non-recognition and/or non-implementation of
the various decisions of Bank of Portugal by Portuguese or foreign courts (as it is the case of the courts in Spain) in disputes related
to the perimeter of the assets, liabilities, off-balance sheet items and assets under management transferred to NOVO BANCO. These
disputes include the two lawsuits of late January 2016, with the Supreme Court of Justice of Venezuela, Banco de Desarrollo
Económico y Social de Venezuela and the Fondo de Desarrollo Nacional against BES and NOVO BANCO, relating to the sale of
debt instruments issued by entities belonging to the Espírito Santo Group, in the amount of 37 million dollars and 335 million dollars,
respectively, and which requests the reimbursement of the amount invested, plus interest, compensation for the value of inflation and

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NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES

iii. To the extent that, despite the clarifications made above, it is found that there has been an effective transfer of any
liabilities from BES to NOVO BANCO which, in terms of any of those paragraphs and the Deliberation of 3 August,
should have remained in BES’s legal sphere, said liabilities will be retransmitted from NOVO BANCO to BES, with
effect as at 8 p.m. of 3 August 2014.

In the preparation of its consolidated financial statements as at 31 December 2020 (as well as in the previous financial
statements), NOVO BANCO incorporated the decisions resulting from the referred resolution measure regarding the
transfer of the assets, liabilities, off-balance sheet items and assets under management of BES, as well as from the
deliberation of 29 December 2015 of Bank of Portugal, in particular, with regards to the clarification of the non-trans-
mission to NOVO BANCO of contingent and unknown liabilities as well as the clarifications relating to the liabilities
listed in paragraph (ii) above, herein also including the lawsuits listed in said deliberation.

In addition, also by the deliberation of Bank of Portugal of 29 December 2015, it was decided that it is the responsibility
of Resolution Fund to neutralize, at the Bank level, the effects of decisions that are legally binding, beyond the control
of NOVO BANCO and to which it did not contribute and that, simultaneously, translate into the materialization of
liabilities and contingencies which, according to the perimeter of the transfer to NOVO BANCO as defined by Bank of
Portugal, should remain in BES’s scope or give rise to the setting of indemnities in the scope of the implementation of
court sentences annulling decisions adopted by Bank of Portugal.

Considering that the establishment of the Bank results from the application of a resolution measure to BES, which had
a significant impact on the net worth of third parties, and notwithstanding the deliberations of Bank of Portugal of 29
December 2015, there are still relevant litigation risks, albeit mitigated, namely regarding the various disputes relating
to the loan made by Oak Finance to BES and regarding the senior bond issues retransmitted to BES, as well as the
risk of the non-recognition and/or non-implementation of the various decisions of Bank of Portugal by Portuguese
or foreign courts (as it is the case of the courts in Spain) in disputes related to the perimeter of the assets, liabilities,
off-balance sheet items and assets under management transferred to NOVO BANCO. These disputes include the two
lawsuits of late January 2016, with the Supreme Court of Justice of Venezuela, Banco de Desarrollo Económico y
Social de Venezuela and the Fondo de Desarrollo Nacional against BES and NOVO BANCO, relating to the sale of debt
instruments issued by entities belonging to the Espírito Santo Group, in the amount of 37 million dollars and 335 million
dollars, respectively, and which requests the reimbursement of the amount invested, plus interest, compensation for
the value of inflation and costs (in a total estimated amount by the claimants of 96 and 871 million dollars, respectively).
In accordance with resolution measure, these responsibilities were not transferred to NOVO BANCO and the main
actions and precautionary seizure procedures are still pending before the Supreme Court of Venezuela.

In the preparation of the individual and consolidated financial statements of the Bank as at 31 December 2020, the
Executive Board of Directors reflected the Resolution Deliberation and related decisions made by Bank of Portugal, in
particular the decisions of 29 December 2015. In this context, the present financial statements, namely in what regards
the provisions for contingencies arising from lawsuits, reflect the exact perimeter of the assets, liabilities, off-balance
sheet elements and assets under management and liabilities transferred from BES to NOVO BANCO, as determined
by Bank of Portugal and taking as reference the current legal bases and the information available at the present date.

As part of the sale of NOVO BANCO, completed on 18 October 2017, the respective contractual documents include
specific provisions that produce effects equivalent to the aforementioned resolution of the Board of Directors of the
Bank of Portugal, dated 29 December 2015, concerning the neutralisation, at the level of NOVO BANCO, of the effects
of unfavourable decisions that are legally binding, although it is now contractual in nature, thus maintaining the con-
tingent liabilities of the Resolution Fund.

Relevant lawsuits

For the purpose of determining the contingent liabilities, and without prejudice to the information contained in these
notes to the accounts, namely regarding the conformity of the policy for the constitution of provisions with the reso-
lution measure and subsequent decisions of Bank of Portugal (and the criteria for the allocation of responsibilities and
contingencies arising therefrom), it is also necessary to identify the following disputes whose effects or impacts on the
financial statements of NOVO BANCO are, on this date, not susceptible of determination or quantification:

442

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEi. Lawsuit brought by Partran, SGPS, S.A., Massa Insolvente da Espírito Santo Financial Group, S.A. and Massa Insol-
vente da Espírito Santo Financial (Portugal), S.A. against NOVO BANCO and Calm Eagle Holdings, S.A.R.L. through
which it is intended that the pledge of the shares of Companhia de Seguros Tranquilidade, S.A. be declared invalid
and, secondarily, that said pledge be annulled or declared ineffective;

ii. Lawsuit brought by NOVO BANCO, challenging the resolution decided in favour of the insolvent estate in respect
of the acts of the constitution and subsequent execution of the pledge on the shares of the company Companhia
de Seguros Tranquilidade, S.A., declared by the insolvency administrator of Partran, SGPS, S.A., due to considering
that there are no grounds for the resolution of these acts, as well as demanding the reimbursement of the amount
received by way of price (Euro 25 million, subject to possible positive adjustment) on the sale of the shares of
Companhia de Seguros Tranquilidade, S.A.. NOVO BANCO challenged judicially the resolution act, with this process
running its course attached to the insolvency proceedings of Partran, SGPS, S.A.;

iii. Following the conclusion of the sale agreement of NOVO BANCO's share capital, signed between the Resolution
Fund and Lone Star on 31 March 2017, certain legal suits have been lodged, related to the conditions of the sale,
namely the administrative action brought by Banco Comercial Português, SA (BCP) against the Resolution Fund, of
which NOVO BANCO is not a party, and according to the public disclosure of inside information made by BCP on
the website of the CMVM on 1 September 2017, it requested the legal assessment of the contingent capitalization
obligation assumed by the Resolution Fund within the CCA;

iv. NOVO BANCO was notified of an order by the Central Court of Criminal Investigation (“TCIC”) that determines the
provision of a guarantee by the NB in the approximate amount of EUR 51 million due to an alleged failure to comply
with an arrest order bank accounts, having used the respective means of reaction to oppose the application of the
aforementioned asset guarantee measure due to the absence of a legal basis..

Resolution Fund

Resolution Fund is a public legal entity with administrative and financial autonomy, created by Decree-Law No. 31-
A/2012, of 10 February, which is governed by the RGICSF and by its internal regulation, having as its mission to provide
financial support for the resolution measures implemented by Bank of Portugal, whilst national resolution authority,
and to carry out all the other functions conferred by law in the scope of the execution of such measures.

The Bank, as with the generality of the financial institutions operating in Portugal, is one of the institutions participating
in Resolution Fund, making contributions that result from the application of a rate defined annually by Bank of Portugal,
based, essentially, on the amount of its liabilities. As at 31 December 2020 the periodic contribution made by the Bank
amounted to Euro 12,528 thousand (31 December 2019: Euro 11,996 thousand).

As part of its responsibility as the supervisory and resolution authority, Bank of Portugal decided to apply, on 3 August
2014, a resolution measure to BES, under No. 5 of article 145-G of the RGICSF, which consisted on the transfer of most
of its activity to NOVO BANCO, created specifically for this purpose and the capital was assured by the Resolution Fund.

To realise the share capital of NOVO BANCO, Resolution Fund made available Euro 4,900 million, of which Euro 365
million corresponded to own funds. A loan was also granted by a banking syndicate to Resolution Fund, amounting
to Euro 635 million, with the participation of each credit institution being weighted by various factors, including their
respective size. The remaining amount (Euro 3,900 million) had its origin in a reimbursable loan granted by the Portu-
guese State.

In December 2015, national authorities decided to sell most of the assets and liabilities associated with the activity
of Banif - Banco Internacional do Funchal, SA (BANIF) to Banco Santander Totta, S.A. (Santander Totta), for Euro 150
million, also in the scope of the application of a resolution measure. This operation involved an estimated Euro 2,255
million of public funding, aimed at covering future contingencies, financed in Euro 489 million by Resolution Fund
and Euro 1,766 million directly by the Portuguese State. In the context of this resolution measure, the assets of Banif
identified as problematic were transferred to an asset management vehicle, created for the purpose – Oitante, S.A.. This
operation involved public support estimated at Euro 2,255 million, which aimed to cover future contingencies, financed
at Euro 489 million by the Resolution Fund and Euro 1,766 million directly by the Portuguese State.

443

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTESThe serious financial imbalance of BES in 2014 and BANIF in 2015, which justified the application of resolution mea-
sures, created uncertainties related to the risk of litigation involving Resolution Fund, which is significant, as well as to
the risk of an insufficiency of funds to ensure its compliance with its responsibilities, namely the short-term repayment
of the loans contracted.

It was in this context that, in the second half of 2016, the Portuguese Government reached an agreement with the
European Commission to change the terms of the financing granted by the Portuguese State and by the banks
participating in Resolution Fund in order to preserve its financial stability, through the promotion of conditions that
endow predictability and stability of the contributory efforts to Resolution Fund. To this end, an addendum to the
financing agreements with Resolution Fund was formalised, which introduced a number of changes to the repayment
schedule, remuneration rates and other terms and conditions associated with said loans such that these are adjusted to
Resolution Fund’s ability to fully meet its obligations based on its regular revenues, that is, without the need to charge
the banks participating in Resolution Fund for special contributions or any other extraordinary contribution.

As announced by the Resolution Fund in 21 March 2017, issued following an earlier statement of 28 September 2016
and the statement of the Ministry of Finance issued on the same date the review of the conditions of the funding
granted by the Portuguese State and the participating banks aimed to ensure the sustainability and the financial balance
of the Resolution Fund, with the basis of a stable, predictable and affordable charge to the banking sector. Based
on this review, the assumed Resolution Fund is assured the full payment of their responsibilities, and the respective
remuneration, without need for recourse to special contributions or any other type of contributions extraordinary by
the banking industry.

Also on 31 March 2017, Bank of Portugal announced that it had selected Lone Star Funds for the acquisition of NOVO
BANCO, which was completed on 18 October 2017, through the injection, by the new shareholder, of Euro 750 million,
followed by another capital injection of Euro 250 million, made on 21 December 2017. Lone Star Funds came to hold
75% of the share capital of NOVO BANCO and Resolution Fund the remaining 25%. In addition, the approved conditions
include:

• A Contingent Capital Agreement, under which the Resolution Fund, whilst shareholder, may be called upon to make
payments in the event of certain cumulative conditions related to: i) the performance of a restricted set of assets of
NOVO BANCO and ii) the evolution of the Bank’s capitalization levels. The possible payments needed, in the agreed
terms of this Contingent Capital Agreement are of an absolute maximum of Euro 3,890 million;

• A Compensation Mechanism to NOVO BANCO if in the event that some conditions are met, and it is convicted to
make payments of any responsibilities, due to a final court judicial decision not recognising or that is opposed to the
resolution measure applied by Bank of Portugal, or to NOVO BANCO’s perimeter of assets and liabilities.

Notwithstanding the possibility under the applicable legislation for the collection of special contributions, in light of the
renegotiation of the conditions of the loans granted to Resolution Fund by the Portuguese State and by a syndicate of
banks, and of the public press releases made by the Resolution Fund and the Office of the Finance Minister stating that
this possibility is not to be used, the present financial statements reflect the expectation of the Board of Directors that
the Bank will not be required to make special contributions or any other type of extraordinary contributions to finance
the resolution measures applied to BES and BANIF, as well as the Contingent Capital Agreement and the Compensation
Mechanism referred to in the previous paragraphs.

Any changes in this regard and the application of these mechanisms may have relevant implications in the Bank’s
financial statements.

NOTE 35 – Related parties transactions

The group of entities considered to be related parties by NOVO BANCO in accordance with the IAS 24 definitions, are
(i) key management personnel (members of the Executive Board of Directors and members of the General Supervisory
Board of NOVO BANCO); (ii) people or entities with a family, legal or business relationship with key management
personnel; (iii) people or entities with a family, legal or business relationship with shareholders; (iv) shareholders holding

444

NOVO BANCO FINANCIAL STATEMENTS AND FINAL NOTES1.0 MESSAGE 2.0 ANNUAL REPORT 3.0 SUSTAINABILITY REPORT 4.0 FINANCIAL STATEMENTS AND FINAL NOTES SEPARATEdirect or indirect stakes equal to or exceeding 2% of the share capital or voting rights of NOVO BANCO; (v) subsidiaries
consolidated for accounting purposes under the full consolidation method; (vi) associated companies, that is, compa-
nies over which NOVO BANCO has significantly influence on the company’s financial and operational polices, despite
not having control; and (vii) entities under joint control of NOVO BANCO (joint ventures).

During 2020, the following transactions with Related Parties (credit and other types) were carried out:

NOVO BANCO

1) Credit Operations

Entities / Individuals

ACH Brito S.A.