Banco Espirito Santo 3Q2005 Consolidated Results (Unaudited)

HIGHLIGHTS

-- Net income for the first nine months of 2005 (IFRS) reached euro 208.0 million, up by 19.9% year-on-year (PABS - Portuguese plan of accounts for the banking sector), corresponding to a ROE of 13.2%. Banking income increased 6.6%, despite an adverse economic background and strong competitive pressure.

-- Net interest income, fuelled by business growth, reached euro 534.8 million, up by 4.1%.

-- Commissioning posted a significant recovery in the quarter, reaching euro 394.2 million in the nine months. Excluding the deferral effect resulting from the introduction of IFRS, accumulated fees and commissions grew by 1.8%.

-- Operating costs dropped by 7.2%, influenced by a reduction of pension costs and depreciation. Productivity and efficiency (cost to income) continue to reflect a consistent improvement trend.

-- The unrealised capital gains increased from euro 143.2 million in June to euro 359.2 million in September, backed by an appreciation on the main equity exposures in the available for sale portfolio.

-- Sharp increase in the customer base: the Group acquired 50,000 net new clients in the first nine months of the year. Customer loans, including securitised credit, rose by 12.7% and total customer funds were up by 6.0%, underpinned by off-balance sheet business (+15.3%).

-- Coverage of overdue loans over 90 days rose to 189.9% (Sep 04: 165.9%), the outcome of a prudent stance vis-a-vis the provisioning policy. The ratio of overdue loans over 90 days fell to 1.45% (Sep 04: 1.67%).

-- Approval, during the third quarter, of a project of merger by integration of Banco Internacional de Credito (BIC) into Banco Espirito Santo (BES), which will contribute to improve the Group's efficiency and profitability.

INDEX

1. Foreword on the new regulatory framework

2. Economic overview

3. Results

3.1 Net interest income

3.2 Fees and commissions

3.3 Capital markets results and other

3.4 Operating costs

4. Activity summary

5. Asset quality, provisioning and solvency

6. Productivity and efficiency

7. Profitability

8. Bank of Portugal reference indicators

9. Direct banking and other

10. Merger by incorporation of BIC into BES

1. Foreword on the new regulatory framework

Regulation no. 1606/2002 of 19.Jul.02 of the European Council andParliament determines that companies having securities admitted totrading on a regulated market of any Member State should prepare theirconsolidated accounts for each financial year starting on or after 1January 2005 in accordance with the International Financial ReportingStandards (IFRS), also known as International Accounting Standards(IAS). After this regulation was transposed into Portuguese nationallegislation, the Bank of Portugal, through Notice no. 1/2005,established the standards and reporting model for the entities subjectto its supervision.

Bearing in mind that BES is subject to these provisions, itsconsolidated financial information relative to financial 2005,including interim financial information, was prepared based on theapplication of the IFRS.

On the other hand, and also deriving from the change in accountingregulations, the financial statements of BES Group for financial 2005(prepared in accordance with the IFRS/IAS) are not directly comparablewith the financial statements disclosed in the course of 2004, whichhad been prepared based on the regulations of the Portuguese Plan ofAccounts for the Banking System (PABS), as set out in the Bank ofPortugal's instructions no. 4/96 and 71/96.

Hence, for purposes of comparability of the financial statements,and in line with the recommendations of the Committee of EuropeanSecurities Regulators (CESR) and the Portuguese Securities MarketCommission (CMVM), BES Group has restated its financial statements forfinancial year 2004 based on application of the IAS/IFRS with theexceptions, as permitted by IFRS 1, of comparable information thatwould arise from application of IAS 32 and IAS 39.

2. Economic overview

In the third quarter of 2005, the world economy was marked by anew hike in the price of oil, with the Brent barrel price leaping by14% over the previous quarter. In the year to September 2005, theprice per barrel surged by 55.5%, to USD 62.6.

Despite the negative impact of hurricane Katrina, economicactivity in the US is thought to have maintained a growth rate ofaround 3.5%, the year-on-year inflation rate rising to 4.7% inSeptember. This prompted the Federal Reserve to raise the fed fundstarget rate by 50 basis points, to 3.75%.

Between January and September, the performance of the main USstock market indices was quite subdued (although a recovery trendbecame more noticeable in the third quarter): the Nasdaq and Dow Jonesdropped by 1.1% and 2%, respectively, and the S&P 500 rose by 1.4%.

In the Euro area, economic activity is thought to have picked upsomewhat in the third quarter, with GDP growth rising from 0.3% tobetween 0.4% and 0.5% on the positive performance of external demand,an improvement in the financial health of companies, and thepersistence of historically favourable financing conditions - theEuropean Central Bank kept the main refi rate at 2%, the yield on10-year public debt securities remained at extremely low levels(3.15%) and the euro fell by 0.53% against the Dollar (-11.26% sinceJanuary), to EUR/USD 1.203. In this context, the main European stockmarket indices recorded appreciable gains since the beginning of theyear: CAC40 +20.38%, Dax +18.52% and IBEX35 +19.09%.

In Portugal, the available third quarter indicators confirm thesluggish trend of economic activity, consistent with a year-on-yearincrease in GDP of 0.4% in the first nine months of the year. The hikein energy prices pushed up inflation, the year-on-year inflation raterising above the average rate in the Euro area, to 2.8%. The PSI-20followed the European upward trend, going up by 6.43% since thebeginning of the year.

3. Results

The activity developed by BES Group in the first nine months ofthe year resulted into a net income of euro 208.0 million, whichcompares with euro 173.5 million in the same period last year, underthe accounting regulations in force at the time (PABS), and euro 77.3million under IFRS(1). As referred in the previous quarters, the 2004year-end results, restated under IFRS, were negatively influenced bydisability retirement costs that occurred during that year (euro 60million).

The table below shows the income statement for the year toSeptember 2005 along with the 2004 comparative data:
Income Statement
euro million
---------------------------------------------------------------------
September
-------------------------
2004 2004 2005 D%
PABS IFRS IFRS IFRS
---------------------------------------------------------------------
Net Interest Income 517.5 513.7 534.8 4.1
+ Fees and Commissions 400.7 400.7 394.2 -1.6
= Banking Income ex-Markets 918.2 914.4 929.0 1.6
+ Capital Markets and Other 137.1 109.8 162.8 48.2
= Banking Income 1 055.3 1 024.2 1 091.8 6.6
- Operating Costs 558.5 656.1 608.9 -7.2
= Gross Results 496.8 368.1 482.9 31.2
- Net Provisions 258.9 234.9 232.8 -0.9
Credit 204.0 204.0 187.3 -8.2
Securities 5.8 5.8 27.1 ---
Other 49.1 25.1 18.4 -26.7
= Income before Taxes and
Minorities 237.9 133.2 250.1 87.7
- Income Tax 33.3 36.0 37.0 2.8
= Income before Minorities 204.6 97.2 213.1 119.2
- Minority Interests 31.1 19.9 5.1 -74.4
= Net Income 173.5 77.3 208.0 169.1
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(1)Under IFRS 1, IAS 32 and 39 do not apply retroactively.

3.1 Net Interest Income

Accumulated net interest income for the first nine months of 2005reached euro 534.8 million, which corresponds to a year-on-yearincrease of 4.1%. Such increase represents a reversal in the previousquarters' trend, deriving essentially from business growth,particularly on the side of credit, which was up by 12.7% (includingsecuritised loans).

Notwithstanding the good progress made in the third quarter, netinterest income continues to suffer from several external constraints,namely competition's pressure and the low level of euro interestrates. Nevertheless, a slight recovery in Euribor 3M had a positiveimpact on the funds' contribution to net interest income.

3.2 Fees and Commissions

The performance of fees and commissions in the course of 2005 hasbeen conditioned by the volatile nature of investment bankingactivities, which are very sensitive to the economic environment andcorporate expectations, and the adverse effects of fierce competition.Results from traditional banking services were the worst affected.Cross selling results continued to make good progress, fuelled by thecommercial dynamics of the various sales networks and on intra-companysynergies, bearing out the Group's long standing strategic focus.Bancassurance deserves a special note, in particular the goodperformance of retirement/education savings plans (+34%) and otherlife insurance products (+17%).
Fees and Commissions

euro million
----------------------------------------------------------------------
September
------------------
2004 2005
IFRS IFRS D %
----------------------------------------------------------------------
Fees and Commissions based on applicable
rules 400.7 394.2 -1.6
Deferral effect (13.5) - -
----------------------------------------------------------------------
Comparable Fees and Commissions 387.2 394.2 1.8
----------------------------------------------------------------------

Excluding the effect of deferral of fees and commissions relatedto credit origination, resulting from the difference between the IFRSand the former rules (PABS), accumulated commissions as of September2005 rose 1.8%.

3.3 Capital markets results and other

Capital markets and other results reached euro 162.8 million.These results were based on diversification of market risk, whilelately trading on emerging markets securities was reinforced, with aspecial focus on Latin American countries, where both interest rateand exchange rate performance was favourable, thus compensating theflattening yield curves of European and US markets, as well as thenegative performance of the equity domestic market.

During the third quarter, the Group realised capital losses inPortugal Telecom, whose impact on the income statement (a loss of euro70.9 million) was offset by the sale of 1.3% of the ordinary shares ofBanco Bradesco to the pension fund and by the sale of preferenceshares of Bradespar in the international market.

None of the transactions related to PT and Bradesco affects eitherthe partnerships or the strategic nature of these investments for BESGroup.

3.4 Operating costs

Operating costs reached euro 608.9 million, corresponding to ayear-on-year decline of 7.2%. The cost reduction has been underpinnedby lower investments, translating into a 21.2% drop in amortisationand depreciation, as well as by lower pension costs.
Operating Costs
euro million
---------------------------------------------------------------------
September
---------------------
2004 2004 2005 D %
PABS IFRS IFRS IFRS
---------------------------------------------------------------------

Staff Costs, o.w. 245.0 356.8 310.1 -13.1
Salaries 225.0 258.7 265.7 2.7
Pensions 20.0 98.1 44.4 -54.7
Admin Costs 215.2 223.3 238.9 7.0
Depreciation and Amortisation 98.3 76.0 59.9 -21.2

---------------------------------------------------------------------

Operating costs 558.5 656.1 608.9 -7.2

Staff costs went up by 2.7%, driven by the annual salary increasesand promotions. These costs already include the accrual of employeebonuses, which will be subject to adjustments in the last quarter ofthe year.

General administrative costs pursued the slowing down trendachieved in the previous periods, registering a 7.0% increase thatcompares with the 14.0% and 12.1% rises reported respectively in thefirst quarter and in the first half of the year. Excluding the cost ofpromoting the "T-Card", an initiative intended to promote theAssurfinance project, this increase would have been even lower.

The drop in depreciation and amortisation reflects thestreamlining of investments in premises and IT developments.

4. Activity

BES Group's activity continued to focus on the following keycommercial factors:

-- differentiation through quality;

-- focus on higher value Clients and products;

-- stepping up the effort to attract new Clients;

-- specific value proposition for the Clients of Tranquilidade.

The Group maintained a strong commercial activity, with totalassets rising by 14.5% and customer loans by 12.7%. Customer fundsshow a more modest performance (+6.0%) due to a particularly fiercecompetitive environment. However, off-balance sheet funds grew 15.3%year-on-year. This performance is strongly influenced by theacquisition of 50,000 net new Clients this year, significantly higherthan in 2004.
Main business variables
euro million
---------------------------------------------------------------------
September
---------------------
2004 2004 2005 D %
PABS IFRS IFRS IFRS
---------------------------------------------------------------------
Total Assets (1) 62 499 60 204 68 958 14.5
---------------------------------------------------------------------

Assets 45 160 43 198 49 033 13.5

Gross Loans (including
securitised) 30 345 30 477 34 335 12.7
- Mortgage 10 930 10 930 12 062 10.4
- Other Loans to Individuals 1 549 1 549 1 713 10.6
- Corporate 17 866 17 998 20 560 14.2

Loans to Individuals / Gross
Loans (%) (2) 37.5 37.3 35.0 -2.3p.p.

Customer Funds
+ Deposits (3) 21 256 21 309 20 830 -2.2
Debt Securities placed with
+ Clients 5 733 4 055 4 815 18.7
= On-Balance Sheet Customer Funds 26 989 25 364 25 645 1.1
+ Off-Balance Sheet Funds 13 215 13 215 15 241 15.3
= Total Customer Funds 40 204 38 579 40 886 6.0

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Transformation Ratio(%)(2) 102 110 120 10p.p.
---------------------------------------------------------------------

(1) Net Assets + Asset Management + Other off-balance sheet
liabilities + Securitised credit

(2) Assuming on-balance sheet credit

(3) Includes: Customer deposits and Certificates of Deposits

Credit displayed balanced growth, with mortgage loans rising by10.4%, corporate loans by 14.2% and other loans to individuals up by10.6%.

As for corporate lending, BES has been reinforcing its position asbank of reference and a protagonist in Programmes for InvestmentIncentives. Within the scope of agreements between banks and thePortuguese Institute of Tourism, BES is financing 58% of the projects,which represents 82% of total amount. BES also participates in PRORESTIII (Portuguese public co-investment programme for restaurantqualification, modernization and equipment), where BES supports 20% ofthe projects both in terms of number of projects and in terms of totalamount. BES also takes part in PRIME-SIME (Portuguese Public IncentiveSystems for Economic Development), where 21% of approved projects and31% of incentives allocated were implemented through BES Group.

Loans to Customers euro million
---------------------------------------------------------------------
Sep 04 Sep 04
PABS IFRS
--------------------------------------------------------
excluding including excluding including
securitisation securitisation securitisation securitisation
---------------------------------------------------------------------

---------------------------------------------------------------------
Loans to
Customers 28 220 30 345 28 685 30 477
Mortgage 9 160 10 930 9 160 10 930
Other Loans to
Individuals 1 415 1 549 1 527 1 549
Corporate 17 645 17 866 17 998 17 998

euro million
----------------------------------------------------------------------
Sep 05
IFRS D% IFRS
--------------------------------------------------------
excluding including excluding including
securitisation securitisation securitisation securitisation
---------------------------------------------------------------------
Loans to
Customers 31 642 34 335 10.3 12.7
Mortgage 9 369 12 062 2.3 10.4
Other Loans to
Individuals 1 713 1 713 12.2 10.6
Corporate 20 560 20 560 14.2 14.2

In September, the Group performed a securitisation transaction onmortgage loans, amounting to euro 1,200 million. This transaction hadno impact on the credit portfolio because the Group consolidated thesecuritisation SPV, since the equity piece was kept.

The Assurfinance Program continues to deliver positive results, inline with the objectives: more than 18,000 new Clients were acquiredand over 22,000 T-Cards were placed. The program already contributesto over 17% of the Group's mortgage credit production (12% inSeptember 2004).

In September 2005, the banking income of BES Investimento reachedeuro 81.3 million and net income totalled euro 30.8 million,representing an increase of 5.9% year-on-year. BES Investimentoestablished a partnership with Concordia Group, which will result intothe incorporation of a company named Concordia Espirito SantoInvestment (CESI) to provide advisory services in Project Finance, M&Aand other areas of Corporate Finance in the Polish market. Thiscompany will be held 51% by Concordia and 49% by BES Investimento.

BES Investimento applied for the authorisations of incorporationof Espirito Santo Investment, a brokerage company that operates inSpain.

Assets under management of Espirito Santo Activos Financeiros(ESAF) reached euro 15.2 billion, representing a 15.3% year-on-yeargrowth, backed by a strong performance of domestic mutual funds,discretionary management and the launch of the second closed-end realestate fund in August 2005 (Espirito Santo Reconversao Urbana) with aninitial capital of euro 30 million. ESAF posted a net income of euro14.1 million in the first nine months of 2005 (+22%).

Besleasing e Factoring posted an increase in leasing production of27.4% and in factoring production of 24.9%, which allowed to maintainthe second position in the Portuguese market in both products, with amarket share of 18% and 21%, respectively. The company posted a netincome close to euro 9 million, corresponding to a year-on-yearincrease of 31.5%.

In the international arena, the performance of BES Angola shouldbe highlighted, which has striven to build ever stronger relationswith corporate, institutional and affluent clients. Having followed apre-established strategy, the bank has shown consistent growth,continuously improving its efficiency ratios, while also raising itsmarket share. Customer funds increased 100% year-on-year up toSeptember 2005, the cost to income ratio stood at 26.9% and net incomeclimbed by 174%, to euro 19.7 million

5. ASSET QUALITY, PROVISIONING AND SOLVENCY

The provision charge totalled euro 187.3 million, despite a dropof euro 48.7 million in overdue loans, showing a traditionally prudentstance in credit provisioning. Hence the provision coverage of overdueloans over 90 days rose to 189.9% (Sep 04: 165.9%), while thecorresponding overdue loans ratio significantly dropped from 1.67% inSeptember 2004 to 1.45% in September 2005.
Asset Quality
---------------------------------------------------------------------
Change IFRS
Sep 04 Sep 04 Sep 05 -------------------
PABS IFRS IFRS absolute relative(%)
---------------------------------------------------------------------
Loans to Customers(gross)
(eur mn) 28 220 28 685 31 642 2 957 10.3
Overdue Loans (eur mn) 569.9 575.3 526.6 -48.7 -8.5
Overdue Loans greater
than 90 days (eur mn) 477.7 477.7 457.3 -20.4 -4.3
Overdue and Doubtful
Loans
(B.Portugal)(a)(eur mn) 560.0 560.0 607.5 47.5 8.5
Provisions for
Credit (eur mn) 792.4 792.4 868.5 76.1 9.6

---------------------------------------------------------------------

Overdue Loans / Loans to
Customers (gross) % 2.02 2.01 1.66 -0.35 p.p.
Overdue Loans greater
than 90 days / Loans to
Customers (gross) % 1.69 1.67 1.45 -0.22 p.p.
Overdue and doubtful
loans / Loans to
Customers (gross)(a) % 1.98 1.95 1.92 -0.03 p.p.

Coverage of Overdue
Loans % 139.0 137.7 164.9 27.2 p.p.
Coverage of Overdue Loans
greater than 90 days % 165.9 165.9 189.9 24.0 p.p.
Coverage of Overdue and
doubtful loans % 141.5 141.5 143.0 1.5 p.p.
----------------------------------------------------------------------
(a) According to Circular Letter no. 99/03/2003 of Bank of Portugal

The highest equity exposures in the available for sale portfoliocontinued to post an appreciation, with overall potential gainsamounting to euro 359.2 million at the end of the period.
Available for sale portfolio
euro million
---------------------------------------------------------
Fair Value Reserve
----------------------------------
31 Mar 05 30 Jun 05 30 Sep 05
---------------------------------------------------------
Portugal Telecom -23.1 -63.5 1.5
PT Multimedia 10.0 0.7 14.5
Banco Bradesco 58.1 185.5 294.2
Bradespar 32.9 16.9 40.9
B. Marocaine Com. Ext. 1.4 3.6 8.1
Jeronimo Martins 1.8 1.8 -
---------------------------------------------------------
81.1 145.0 359.2
---------------------------------------------------------

Value fluctuations in these investments are reflected into fairvalue reserves of equity. For solvency ratio purposes, only 45% ofpotential gains are eligible for Tier II.

The Group's solvency ratio remains at comfortable levels comparedwith the minimum requirements of the Bank of Portugal.
Solvency
(Bank of Portugal)
euro million
---------------------------------------------------------
Sep 05*
---------------------------------------------------------
Risk Weighted Assets 37 458
Regulatory Capital 4 448
Tier I 2 372
Tier II 2 136
Deductions ( 60)
Preference Shares 600
---------------------------------------------------------
Core Tier I 4.73%
Tier I 6.33%
Total 11.87%
---------------------------------------------------------
* estimate

Standard & Poor's, in its annual ratings review, has maintained"A-" for the medium and long term debt and "A-2" for the short term,with stable outlook. The rating agency's decision was based on theGroup's strong competitive position in retail, its adequateprofitability based on operating efficiency as well as a more balancedfunding structure and asset quality. FitchRatings maintained the A+notch for long term debt and F1 for short term debt, with stableoutlook. Moody's ratings for BES are A1 for long term debt and P1 forshort term, with a stable outlook.

6. PRODUCTIVITY AND EFFICIENCY

Productivity and efficiency ratios continued to make goodprogress: operating costs per unit of average net assets undermanagement dropped from 2.12% to 1.79% while total assets per employeegrew by 14.9%.

The cost to income also improved, reaching 55.8% (56.0% in 1H05)in the period, or 65.5% excluding capital markets results (67.0% in1H05).
Productivity and Efficiency Indicators
--------------------------------------------------------------------
Sep 04 Sep 04 Sep 05 Chg
PABS IFRS IFRS IFRS
--------------------------------------------------------------------

Cost to Income 52.5% 64.1% 55.8% -8.3 p.p.
Cost to Income ex-Markets 60.8% 71.8% 65.5% -6.3 p.p.

Operating Costs / Average Net
Assets 1.71% 2.12% 1.79% -0.33 p.p.
Total Assets* per
Employee (eur '000) 8 501 8 189 9 408 14.9%
--------------------------------------------------------------------

* Net Assets + Asset Management + Other Off-Balance Sheet items +
Securitised Credit

7. PROFITABILITY

Based on the annualised results, Return on equity (ROE) stood at13.2% and Return on Assets (ROA) at 0.61%.
Profitability
(%)
--------------------------------------------------------------------
2004 up to
---------- Sep 05
PCSB IFRS IFRS
--------------------------------------------------------------------
Return on Equity 13.9 6.4 13.2

Return on Assets 0.63 0.37 0.61

8. BANK OF PORTUGAL REFERENCE INDICATORS

According to Bank of Portugal instruction no. 16/2004, financialinstitutions should disclose reference indicators (calculated underthe methodology set forth in this regulation), when releasinginformation concerning Solvency, Credit Quality, Profitability andEfficiency.

The table below lists these indicators for both September 2005 and2004.
Bank of Portugal Indicators (%)
---------------------------------------------------------------------
Sep 04 Sep 04 Sep 05
PABS IFRS IFRS
---------------------------------------------------------------------
Solvency
---------------------------------------------------------------------
Regulatory Capital /
Risk Weighted Assets 10.29 10.29 11.87
Tier I Capital /
Risk Weighted Assets 6.37 6.37 6.33

Asset Quality
----------------------------------------------------------------------
Overdue & Doubtful Loans (a)/
Gross Loans 1.98 1.95 1.92
Overdue & Doubtful Loans
Net of Provisions(b)/Net Loans(b) -0.85 -0.83 -0.85

Profitability
---------------------------------------------------------------------
Income before Taxes and Minorities/
Average Equity (c) 11.79 6.78 12.58
Banking Income (d)/
Average Net Assets 3.23 3.32 3.22
Income before Taxes and Minorities/
Average Net Assets 0.73 0.43 0.74

Efficiency
---------------------------------------------------------------------
General Admin Costs (d)+ Depreciation/
Banking Income (d) 52.5 64.1 55.8
Staff Costs / Banking Income (d) 23.2 34.8 28.4
=====================================================================

(a) Calculated according to BoP Circular Letter no. 99/03/2003
(b) Credit net of provisions for overdue loans and for doubtful loans
(c) Includes Average Minorities
(d) Calculated according to BoP Instruction no 16/2004

9. DIRECT BANKING AND OTHER

Direct Banking

The number of users of Internet Banking for individual customers -BESnet - reached 742,000 in September, corresponding to a year-on-yearincrease of 6.4%. The number of logins continued to grow at asustained pace, rising by 15% on September 2004.

The number of transactions performed through BESnet has increasedby 23.3% versus September 2004, and by 42.5% in the third quarter.This sharp increase in transactions pushed up the ratio of low valuetransactions performed off-branch, which reached 41.1% (35.7% in thesame period in 2004).

During this period the "electronic statement" facility was madeavailable on line. This allows BESnet users to view their last 12account statements in PDF format, cancelling the receipt of accountstatements in paper format. So far, 13,000 clients have subscribed tothis new facility.

At the beginning of October another facility was made availablethrough BESnet that allows clients to view, print and record a copy ofthe cheques drawn or deposited in their account. Close to 10,000clients have already used this new service, viewing a total of 33,000cheques in the first three weeks after it was made available.

The monthly average number of visitors to BES website reached 2.4million between January and September, corresponding to a 22.6%increase compared to the same period last year.

The number of companies using the Internet banking service forcorporate customers - BESnet Negocios - reached 41,000, a year-on-yearincrease of 14.9%. Logins were up by 23.5% and transactions by 40.2%proving the growing importance of this channel as a transactionalsupport to the companies' activity.

Electronic Banking

Pmelink.pt, the largest domestic B2B portal, promoted under ajoint venture between BES, CGD and PT, registered more than 57,000on-line purchasers up to September 2005, corresponding to an increaseof 40% over September 2004. Turnover of the portal reached euro 10.1million, a year-on-year increase of 45%.

Banco BEST continued to reinforce its asset management productoffer by selling mutual funds from highly recognised investmentmanagement firms. New investor support facilities were introduced inequities trading, contributing to raise the Bank's market share ofinternet transactions from 6.3% in the 3rd quarter of 2004 to 8.6% inthe reporting quarter. The Client base reached 40,000 in September2005, up by 23% year-on-year. Assets under management totalled euro503 million, corresponding to an increase of 42% versus September2004.

Other aspects

BES Group was the first Portuguese financial institution to adoptthe Equator Principles. The Equator Principles are a set of guidelinesvoluntarily followed by financial institutions to manage social andenvironmental issues arising from project finance operations with acapital cost of US$50 million or more (roughly euro 40 million). Byadopting the Equator Principles, BES Group undertakes to subject theapproval of credit operations to compliance with these principles andto make public the number of projects financed, and theircategorisation by social and environmental risk criteria.

10. MERGER BY INCORPORATION OF BIC INTO BES

On September 19th, BES's Board of Directors approved a proposalfor the merger by incorporation of Banco Internacional de Credito, SAinto Banco Espirito Santo, SA, which should be concluded by the end of2005.

This operation is part of the Group's strategy for creatingshareholder value, which assumes that a single commercial and branchnetwork will induce business growth - by broadening the scope of theoffer of products and services and the capacity to attract clients,raising quality standards and building up brand value - and strengthenthe Group's competitiveness, through increased efficiency andprofitability.

Besides positioning the Group as the holder of the third largestbranch network at national level, promoting the Espirito Santo brandvalue, and broadening the bonded client base, this operation, willalso afford integration synergies of euro 24 to 28 million per year,which roughly corresponds to 8% of the Group's operating results. Thecosts attributed to the integration process will be charged to arestructuring provision (IAS 37) to be charged in the last quarter of2005.

At the time of its integration into BES, it is important torecognise the crucial contribution given by BIC over the years to theGroup's positioning and development, particularly after the market'sliberalisation. The creation of BIC in 1986 actually represents anhistorical landmark as it coincided with the return of the EspiritoBanco Group to financial activities in Portugal.

THE BOARD OF DIRECTORS

BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2005
---------------------------------------------------------------------
Sep 04 Sep 04 Sep 05
PCSB IFRS IFRS
(eur '000) (eur '000) (eur '000)
---------------------------------------------------------------------
---------------------------------------------------------------------
NET ASSETS
Cash and deposits at Central
Banks 613 586 614 055 672 949
Loans and advances to credit
institutions 770 396 770 456 471 903
Financial Assets held for trading 2 161 046 2 161 046 3 606 152
Other financial assets at fair
value through the P&L - - 2 047 969
Financial Assets available for
sale 5 524 139 4 445 507 3 167 460
Other loans and advances to
credit institutions 4 764 999 4 797 260 5 389 479
Loans and advances to customers 27 781 430 27 892 675 30 773 298
(Provisions) (438 356) (792 318) (868 541)
Financial Assets held to maturity 502 584 502 584 597 810
Financial Assets with repurchase
agreements - - -
Fair value of Hedging
derivatives 176 704 176 704 59 268
Non current assets held for sale - - -
Property and equipment - - -
Other tangible assets 339 177 329 802 350 774
Intangible assets 141 832 86 270 73 893
Investments in associated
companies 46 617 54 783 58 123
Current tax assets 5 224 5 224 20 601
Deferred tax assets - 94 158 209 793
Other assets 2 332 297 1 267 445 1 533 317

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TOTAL ASSETS 45 160 031 43 197 969 49 032 789
---------------------------------------------------------------------

---------------------------------------------------------------------
LIABILITIES
Amounts owed to central banks 126 748 126 748 387 231
Financial liabilities held for
trading 587 918 587 918 1 622 362
Other financial liabilities at
fair value through the P&L - - -
Amounts owed to other credit
institutions 6 368 783 6 386 453 7 884 803
Amounts owned to customers 19 435 871 19 489 334 18 157 059
Debt securities 13 118 338 11 440 116 14 590 537
Financial liabilities associated
to transfered assets - - -
Fair value of hedging derivatives 151 664 151 664 88 928
Non current liabilities held for
sale - - -
Provisions 558 111 75 149 112 111
Current tax liabilities 8 624 8 624 23 032
Deferred tax liabilities - 24 526 169 784
Capital instruments - - -
Other subordinated liabilities 1 533 504 1 572 690 2 080 827
Other liabilities 452 539 797 765 972 725

---------------------------------------------------------------------
TOTAL LIABILITIES 42 342 100 40 660 987 46 089 399
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 1 500 000 1 500 000 2 100 000
Share premium 300 000 300 000 300 000
Other capital instruments - - -
Revaluation reserves - - 313 992
Other reserves and retained
earnings 197 230 104 642 63 304
(Treasury stock) - ( 100 174) ( 89 039)
Net income for the year 173 530 77 269 208 018
(Anticipated dividends) - - ( 33 480)
Minority interests 647 171 655 245 80 595

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TOTAL SHAREHOLDERS' EQUITY 2 817 931 2 536 982 2 943 390
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TOTAL LIABILITIES + SHAREHOLDERS'
EQUITY 45 160 031 43 197 969 49 032 789
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BANCO ESPIRITO SANTO, S.A.
CONSOLIDATED INCOME STATEMENT AS AT 30 SEPTEMBER 2005
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Sep 04 Sep 04 Sep 05
PCSB IFRS IFRS
(eur '000) (eur '000) (eur '000)
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Interest Income 1 615 150 1 608 769 1 470 789
Interest expense 1 097 669 1 095 103 935 989
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Net interest income 517 481 513 666 534 800
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Dividends on securities 16 215 16 215 31 350
Commissions and other similar income 327 015 327 015 353 319
Commissions and other similar
expenses 33 091 33 091 48 365
Gains and losses in financial assets
at fair value 9 683 9 683 ( 70 778)
Gains and losses in financial assets
available for sale 111 915 46 398 113 839
Gains and losses in foreign exchange
revaluation 6 989 6 989 80 100
Gains and losses in the sale of
other assets 56 906 56 906 33 773
Other net income from banking
activity 38 648 76 822 58 898
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Banking Income 1 051 761 1 020 603 1 086 936
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Staff expenses 244 988 356 779 310 093
Other administrative expenses 215 209 223 304 238 871
Depreciation 98 303 75 980 59 929
Provisions net of reversals 33 184 9 184 22 149
Loan impairment net of reversals and
recoveries 203 946 203 946 187 275
Other financial assets' impairment
net of reversals and recoveries 18 121 18 121 24 622
Other assets' impairment net of
reversals and recoveries 3 622 3 622 ( 1 234)
Equity in earnings of associated
companies 3 571 3 571 4 860
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Income before taxes 237 959 133 238 250 091
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Taxes
Current 33 286 33 286 57 570
Deferred - 2 751 ( 20 595)
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Income after taxes 204 673 97 201 213 116
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Minority interests 31 143 19 932 5 098
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Net income 173 530 77 269 208 018
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This news release may include certain statements relating to theBanco Espirito Santo Group that are neither reported financial resultsnor other historical information. These statements may includetargets, forecasts, projections, descriptions of anticipated costsavings, statements regarding the possible development or possibleassumed future results of operations and any statement preceded by,followed by or including words like "believes", "expects", "aims","intends", "may" or similar expressions.

By their nature, forward-looking statements are inherentlypredictive, speculative and involve risk and uncertainty. There are anumber of factors that could cause actual results and developments todiffer materially from those expressed or implied by forward-lookingstatements. These factors include, but are not limited to, changes ineconomic conditions in individual countries in which the BES Groupconducts its business and internationally, fiscal or other policiesadopted by various governments and regulatory authorities of Portugaland other jurisdictions, levels of competition from other banks andfinancial services companies as well as future exchange and interestrates.

Banco Espirito Santo does not undertake to release publicly anyrevision to the forward-looking information included in this newsrelease to reflect events, circumstances or unanticipated eventsoccurring after the date hereof.