shareholder’s annual general meeting 11th june …€™s annual general meeting ... fees and...

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SHAREHOLDER’S ANNUAL GENERAL MEETING

11th June 2012

Jacobo González-Robatto

Chief Financial Officer

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Disclaimer

This presentation has been prepared by Banco Popular Español solely for purposes of

information. It may contain estimates and forecasts with respect to the future development

of the business and to the financial results of the Banco Popular Group, which stem from the

expectations of the Banco Popular Group and which, by their very nature, are exposed to

factors, risks and circumstances that could affect the financial results in such a way that they

might not coincide with such estimates and forecasts. These factors include, but are not

restricted to, (i) changes in interest rates, exchange rates or any other financial variables,

both on the domestic as well as on the international securities markets, (ii) the economic,

political, social or regulatory situation, and (iii) competitive pressures. In the event that such

factors or other similar factors were to cause the financial results to differ from the estimates

and forecasts contained in this presentation, or were to bring about changes in the strategy

of the Banco Popular Group, Banco Popular does not undertake to publicly revise the content

of this presentation.

This presentation contains summarised information and may contain unaudited information.

In no case shall its content constitute an offer, invitation or recommendation to subscribe or

acquire any security whatsoever, nor is it intended to serve as a basis for any contract or

commitment whatsoever.

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1. Financial results evolution

Agenda

2. Banco Pastor integration process

3. Royal Decree RD 02/2012 y 18/2012

4. Conclusions and perspectives for 2012/2013

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2011 was influenced by a strong pressure on margins… across the banking industry

(€, million) 2011 2010 Change Change(%)

Net Interest Income 2.087 2.432 -345 -14,2%

Fees and commissions 686 675 11 1,6%

Trading and other income 224 291 -67 -23,0%

Gross operating income 2.997 3.398 -401 -11,8%

Expenses -1.369 -1.303 -66 5,1%

Pre-provisioning profit 1.627 2.095 -468 -22,3%

Provisions and extraordinaries -1.183 -1.316 133 -10,1%

Net profit 480 590 -110 -18,7%

Gross loans evolution 98.873 98.213 660 0,7%

Retail funds 61.285 60.582 703 1,2%

Note: 2010 figures ajusted to Allianz-Popular Holding transaction

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… However, 1Q12 results already show a strong recovery on margins…

(€, million) 1T12 4T11 1T11 Change Change(%)

Net Interest Income 693 527 516 +177 +34,3%

Fees and commissions 186 170 172 14 8,1%

Trading and other income 56 48 88 -32 -36,3%

Gross operating income 935 746 776 159 +20,5%

Expenses -397 -366 -326 -71 21,8%

Pre-provision profit 539 381 450 +89 19,8%

Provisions and extraordinaries -399 -305 -338 -61 18,1%

Net profit 100 76 186 -86 -46,2%

Gross loans evolution 117.955 98.873 98.364 19.591 19,9%

Retail funds 79.590 61.285 61.866 17.724 28,7%

Note: 1T12 figures include Banco Pastor contribution as of 17th February (1 month and 11 days)

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10,47,4 6,0

3,9 2,6 2,5

31,5

22,4

POP POP

ex-

PAS

Bank

1

Bank

2

Bank

3

Bank

4

Bank

5

Bank

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Quaterly net interest income evolution 1Q12 Net interest income / Average total assets 1Q12

Source: quarterly financial reports SAN Spain, BBVA Spain, Caixabank, Banesto, Sabadell and Bankinter 1Q12

European banks: KBW & Credit Suisse

… a trend that contributes to mantain our leading position in margins and efficiency

1,951,79

1,58 1,49 1,461,29

1,10

Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6

(%) (%)

39% 42%

60%

Spanish Banks European Banks

Efficiency ratio compared to the sector

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This operating performance has been possible thanks to the extraordinary commercial performance of our bank…

5,9%

10,2%11,9%12,5%

13,8%

20,3%

Bank 1 Bank 2 Bank 3 Bank 4 Bank 5

(%)

ICO’s market share March 2012 Loans and Deposits market share evolution

Note: Combined market share Popular + Pastor Other resident sectors

6,0%5,8%

5,4%

6,2% 6,4%

5,9%

dec-09 dec-10 dec-11

Deposits Loans

3.2x natural credit

market share +50bps

+60bps

Source: Santander, Bankia, BBVA, Sabadell and La Caixa. Note: Popular + Pastor “ICO” = public funding to SMEs channeled through banks

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Customers base increase

(*)

• 47,723 new individuals

• 17,672 new SMEs

Retail Deposits up (*)

• 3,2bn New Deposits since Dec-11

* Note: Popular standalone

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38.130

29.086

23.512 23.286 23.129

2008 2009 2010 2011 1Q12

On the balance sheet side, we continue improving the commercial gap (difference between loans and deposits) without reducing credit access to our clients…

39%

174% 149% 136% 135% 125%

Evolution of the gap between loans and deposits and LTD ratio

38.130

19.389

2008 1Q12

Evolution of the commercial gap (standalone Popular)

€-18,700 Mn

(€, million)

(€, million) … due to the exceptional performance of deposit gathered from clients. We keep on reducing wholesale markets dependancy.

Ratio loans/deposits

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Senior debt

1.227 92700

13.281

167

1.473

2012 2013 2014 >2014 2nd line of

liquidity

Potential GGB

capacityEMTN GGB

1.9113.078

3.254

7.757

2012 2013 2014 >2014

(€, Mn)

1,640

3,009

(*)

Popular + Pastor medium and long term maturities and the 2nd line of liquidity

(*) After haircuts

1,277 0 92

Data as of March 2012 including Banco Pastor

Covered Bonds

4.6x covered with 2nd

line of liquidity & GGB

capacity

Covered bonds re-usable on ECB

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… the liquidity of our bank continues in very good position: as we keep a comfortable liquidity buffer (€13,000m) which covers 4.6x our senior maturities…

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…NPLs are still a challenge to manage as a consequence of the crisis, albeit we are in a better position comparing to the sector. The impact is being compensated by an exceptional level of provisions: in 2013 we will have provisioned €20,000m.

NPLs increase is lower than in the system

20.000

200

2007 2013E

0.3%

20%

(Specific provisions, € million, % over RWAs)

€ 20,000 m in provisions

Evolution of provisions

6 , 0 3 %5 , 9 9 %

4 , 8 1% 4 , 9 1% 5 , 0 4 % 5 , 17 %5 , 2 7 %

5 , 4 4 %5 , 5 8 %

5 , 8 5 %

6 , 3 5 %

8 , 16 %

7 , 5 1%

7 . 16 %

6 , 6 9 %

6 , 11%5 , 8 2 %

5 , 4 8 %5 , 3 2 %5 , 2 9 %

5 , 0 4 %

D ec-

0 9

M ar-

10

Jun-

10

Sep-

10

D ec-

10

M ar-

11

Jun-

11

Sep-

11

D ec-

11

M ar-

12

NPL ratio evolution

Popular & Pastor Average Spanish industry* Popular

213 bp.

Like-for-Like

181 bp.

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Evolution of core capital

… Our capital, and despite the high provisioning effort, ranks in a leading position compared to the market and without public support.

We keep our solvency intact

6,47%7,17%

8,57%9,43% 9,80%

9%

9,84%10,04%

2007 2008 2009 2010 2011 1Q2012 Spanish

Banks

European

Banks

55%

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… as we had been already working for months to prepare ourselves for an extremely complex & changing regulatory environment

Main measures

• Succesful margins management, that has allowed us to post the

biggest increase of the net interest margin in 1Q12

• That will allow us to achieve a pre-provisioning profit close to

€4,400m over the next two years

Reinforce our pre-provision

profit

• Issuance of € 1,100m € of new MCN in 1Q12

• Exchange of c. € 700m of MCNs for new MCN computable for EBA

• Exchange of MCNs for shares in 2Q12 for c. €450m

• 10% QoQ reduction of pro-forma risk weighted assets in 1Q12 and

we continue working on plans to further optimize our capital

• Capital increase of €700m announced after Pastor adquisition and

that will be carried out in the next 9 to 12 months

Capital measures

Capital gains • Identifying c.2,000m € of gross capital gains to be executed during

the next months

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First conclusion to be made, is the strong recovery of margins and income levels and an expectional pre-provision profit already achieved in 1Q, which allow us to face a still very challenging 2012

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Key-messages 1Q12

• Credit coverage increased 15 p.p. to 50% and RE coverage increased

10 p.p. to 42%

• We have already absorbed 60% of the new Royal Decree Law

02/2012 in 1Q12

A sound liquidity position

• Efficiency ratio improves to 39%, 36% Popular standalone

• Expect synergies of the Pastor integration to be above the initial

estimates. Pastor will have a strong contribution from year 1

Strong reinforcement in

coverage

• Net interest income+31% QoQ and +34% YoY (+25% Popular

standalone). Total Recurrent Revenues +20%. Pre-Provisioning

Profit up by 20% to €539m

Solid revenues

Efficiency and Pastor

integration

• We have reduced our wholesale funding reliance over the last 3 years

by 50% (from €38 bn to €19 bn Popular standalone). Loan to

deposits ratio of the combined Group improves to 125% with

€13bn+ liquidity buffer.

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Agenda


3. Royal Decree RD 02/2012 y 18/2012


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Banco Pastor adquisition adds a profitable business model since day 1, in addition to a very low execution risk

(1) Net interest margins over total assets. Note: Information as of 1Q2011 except Unicaja, BBK and Caja Vital as of 1Q2011

Average: 1,18%

1.61% 1.59% 1.46%

1.31% 1.31% 1.17% 1.13%

0.94% 0.92% 0.90% 0.82% 0.72%

0.57%

1.05% 1.01%

1.66%

Popular Popular + Pastor

Sabadell Pastor Unicaja BBK Banca Cívica

CaixaBank Ibercaja BMN NCG CAM Bankinter Bankia Unnim Cat Caixa

Corporates & SMEs 68%

Other private individuals 6%

Popular: Total net: €98,200Mn

Mortgage retail 26%

Corporates & SMEs 66%

Other private individuals 4%

Mortgage retail 30%

Pastor: Total net: €21,300Mn

Comparison of Net interest income (1)

Business models

Banco Pastor’s business model is very profitable and similar to Banco Popular, focusing specially on SMEs

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Pastor contibutes with an excellent franchise in its core region with ample room for further improvement

17.0% 19.8%

Credit market share (Pop + Pas) Deposit market share (Pop + Pas)

1,826 clients increase since the adquisition 17% deposit market share in Galicia and

penetration level below franchise capacity

16 1Penetration level calculated as market share per volumens and market share per branches

16.0%

16.6% 17.9%

17.6% 24.8%

16.6% 14.9%

11.4%

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74

133

81

154147

164

2012E 2013E 2014E

Initial Synergies Updated Synergies

Synergies revised up: +12% over initial

estimates

Restructuring costs revised down

Annual Synergies (€Mn)

Synergies and restructuring costs following Pastor acquisition, better than initially planned

Note: Data for Popular & Pastor

NPV of Synergies up

+19% to €947mn from €799mn

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Return on investment above cost of equity (ROI est. 12%-17%)

Popular initially estimated significant synergies to spring from the acquisition, which represent approximately 70% of the value of the transaction

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Agenda


3. Royal Decree RD 02/2012 y 18/2012


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Recent meassures announced by the Spanish Government for the restructuring of the financial system are extremely demanding

1st change: Royal Decree 02/2012: • Increase of the coverage level for foreclosed assets from 30% up to 35%, 50% or

60% depending on the type the asset, and adding a capital buffer between 15% and 20% • Increase of the coverage of real estate loans (NPLs and substandart) and adding

a generic provisions of 7% for the performing credit

2nd change: Royal Decree 18/2012: • Increase of the coverage level for performing real estate loans through a generic

provision (additional to the existing 7%) of 7% for finished buildings, of 22% for buildings under construction and 45% for land and others

• Transfer of the foreclosed assets, at book value to asset managing companies.

• Next regulatory steps: valuation of the credit portfolio by two independent auditors, and stress test and revision of the auditing through external auditing companies

• Calendar for Popular: 2 years to fulfill both Royal Decrees 02/2012 and 18/2012

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Popular will carry out a capital increase already announced in October 2011 for the Pastor acquisition in the next 9-12 months, depending on market conditions.

Main highlights from the New Business Plan incorporating the two new Royal Decrees (RDL 02/2012 and RDL 18/2012) to be submitted to the BoFS envisages as well an aggressive asset divestment and provisions for the non real estate book in Spain as well.

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3

2

4 Popular expects, in spite of the massive provisions, to generate profits in 2012 and 2013, and significantly higher in 2014

Popular will carry out an asset divestment plan

Popular incorporates in its plans provisions above the expected loss figures calculated through its Basel II advanced internal models for non Real Estate corporates and individuals portfolios

In 2012-13 Banco Popular will cover all the provisions requirements of the two new Royal Decrees

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2.4

1Q12 2Q12 2H12 1H13 2H13 Total

4.0

In 2012 y 2013 we will cover the provisions of the two RoyalDecreeLaw’s, both generics and accelerated provisions…

Schedule for P&L and capital

(€, Bn)

7.3

3.3

2012 & 2013

Provisions RDL 02/12 and 18/12

Total provisions RD 02/12 Total provisions RD 18/12

• Pastor integration will allow us to charge provisions against capital (FVA)

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(€, Bn) RD 02/2012 RD 18/2012

Total 4.0 3.3

Note: Out of the €7.3Bn of provisions, €4.1Bn are generic provisions, that if not used at 31.12.13, will be used for other portfolios

Note: prliminary business plan

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53%

32%

Dic-11 2013E

… After fulfilling the two RDL’s, coverage of the total RE exposure will reach 43%

Coverage of RE exposure (credit + foreclosed) (1) Coverage of Foreclosed (1)

(2) NPA: NPL’s + foreclosed+ write-offs

43%

16%

Dic-11 2013E

+27p.p.

Coverage of RE Credit (1) Coverage of RE NPA (2)

35%

11%

Dic-11 2013E

+24p.p.

57%

32%

Dic-11 2013E

+25p.p.

+21p.p.

P.S: These coverage levels exclude any value from collaterals

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(1) Includes RE capital buffer and write-offs



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Capital gains realized 2009-11 Sources of future capital gains 2012-13

Joint venture (credit cards and consumer credit with actual profits c.120m€)

Branch network sales

Sale of Life & Pensions Insurance business in Portugal

Non accelerated asset sales and others

Branch network sale (creation of Targobank)

Allianz Joint Venture in Life, Pensions & AM

Branch network Sale & Lease-back

Non accelerated asset sales and others

Total €1.5 Bn Total c. €2 Bn Est.

We will carry out an asset disposal plan that will lead us to lower capital consumption and significant capital gains

2

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Non RE Coverage including provisions and write-offs in Spain

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• Banco Popular accumulated Expected Loss coverage at 2013 will be at 7.9% of the Non RE portfolio (including write-offs).

Popular (2012+2013)

Total Non RE Exposure (SME’s, Corporates and individuals) as of 31/3/12

€ 79 Bn

Expected loss based on IRB models (1) € 2.2 Bn

S

Non RE Stock of provisions as of 31/03/2012 € 1.2 Bn

Non RE Provision charges in Business Plan 2012-2013 (EL coverage + accelerated)

€ 1.6 Bn

Total Non RE provisions at the end of the period € 2.8 Bn

Expected Loss covered with provisions at 2013e + Accumulated Non RE write-offs in Spain 2007-1Q12 (%)

7.9%

(1) Note: expected loss projection from IRB models to exposures under standard models (ie: Pastor). In case of no models, the most conservative expected loss is applied. Preliminary business plan.

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Popular expects, in spite of the massive provisions, to generate profits in 2012 and 2013, and significantly higher in 2014 as a consequence of the accelerated provisions and its capacity to generate ordinary and extraordinary income

Estimates of P&L 2012-13

(€, Bn) 1Q12 1Q12 x 4 2012E 2013E

Net Interest Income 0.7 2.8 2.8 2.9

Total Income 0.9 3.8 3.8 3.9

Pre Provision Profit 0.5 2.2 2.1 2.3

Provisions RDL 02/12

Against capital: 2.2

Against P&L: 0.2

Against capital: n.a.

Against P&L: 0.8


Against P&L: 1.5

0.0

Provisions RDL 18/12

0,2 0,8


Against P&L: 1.8

0.6

Non RE Provisions in Spain: IRB Models EL coverage

0.5 0.5

Non RE Provisions no in Spain: accelerated above EL

0.0 0.6

Write-offs recoveries and rest of provisions

-0.04 -0.0

Capital Gains 0 - 1.7 0.3

Net Profit 0.1 0.4 0.3 0.6

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Capital: we will comply with new requirements with a reasonable capital excess (keeping the current sovereign buffer)

Estimates of EBA Core Capital

8,70%

9,95% 10,20%10,80%

1Q12 2Q12 4Q12 4Q13

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Note: includes 700m € capital increase already announced in October 2011 for the Pastor deal, to be executed the next 9-12 month depending on market conditions, and schedule of provisions and capital gains. Capital gains included have an impact on CT1 of +75bp.


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Conclusions regarding the Royal Decrees: in Popular business plans as of June 10th, we rule any public capital injection. We incorporate in our current Plan the new regulatory changes, actual and accelerated provisions in its books of RE, Non RE and private individuals

1

3

2

4

Popular expects, in spite of the massive provisions, to generate profits in 2012 and 2013, and significantly higher in 2014 as a consequence of the accelerated provisions and its proven and exceptional capacity to generate ordinary and extraordinary income

Popular will carry out an asset divestment plan that will derive in lower capital consumption and significant capital gains


In 2012-13 Banco Popular will cover all the provisions requirements of the two new Royal Decrees to cover the Real Estate risks, both performing and non performing

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Popular will carry out a capital increase already announced in October 2011 for the Pastor acquisition in the next 9-12 months, depending on market conditions. As of 31st December 2013, we will have a significant capital buffer, without taking into account the extremely likely surplus of generic provisions from RDL 18/2012


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Agenda


3. Royal Decree RD 02/2012 y 18/2012


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We have started the year with a very strong operating performance

Key-messages 1Q12

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• Credit coverage increased 15 p.p. to 50% and RE coverage increased

10 p.p. to 42%

• We have already absorbed 60% of the new Royal Decree Law

02/2012 in 1Q12

A sound liquidity position

• Efficiency ratio improves to 39%, 36% Popular standalone

• Expect synergies of the Pastor integration to be above the initial

estimates. Pastor will have a strong contribution from year 1

Strong reinforcement in

coverage

• Net interest income+31% QoQ and +34% YoY (+25% Popular

standalone). Total Recurrent Revenues +20%. Pre-Provisioning

Profit up by 20% to €539m

Solid revenues

Efficiency and Pastor

integration

• We have reduced our wholesale funding reliance over the last 3 years

by 50% (from €38 bn to €19 bn Popular standalone). Loan to

deposits ratio of the combined Group improves to 125% with

€13bn+ liquidity buffer.

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Outlook 2012/2013

• Provisions booked in NPL’s and RE Assets will allow us to gradually

dispose these assets in a profitable manner

Excellent competitive

position

• Our strong capacity to generate revenues and synergies (PPP est. €2

Bn) plus one-offs would allow us to face all the extraordinary

provisions of the Royal Decree Law and still post profits in 2012 (c.

€300 Mn). Net profit in 2013 should increase significantly thanks to

the accelerated 2012 clean-up

Strong coverage increase

• Macro, Micro and Regulatory environment will still be very

challenging

Complex environment

Strength and recurrence of PPP

€2 Bn

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• Our efficiency in costs and revenues, a good liquidity position and a

high level of capital will allow us to take advantage of all the

opportunities that a restructuring market offers

• In 2012 and 2013 we will achieve provision level through pre-

provisioning profit and extraordinary gains, generating profits in

both exercises. In addition, we will carry out an asset disposal plan

Royal Decree fulfillment in 2

years

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