Espirito Santo Financial Group S.A. Announces the 2004 Half Year Results for Its Subsidiary Banco Espirito Santo -Unaudited-

Business Wire, July 27, 2004

LUXEMBOURG & PORTUGAL -- Espirito Santo Financial Group S.A. (Luxembourg and Euronext Lisbon: ESF) announces the 2004 half year results for its subsidiary Banco Espirito Santo ("BES").

HIGHLIGHTS

--Net income for the first semester of 2004 reached euro 131.8 million, an increase of 14.3% (19.8% on a comparable basis), corresponding to annualized Return on Equity (ROE) of 13.4%.

--Considerable growth of fees and commissions (28.4%), the outcome of the Group's positioning as financial services provider, as well as the reinforcement of service quality. Strong performance of corporate and investment banking (including project finance), bancassurance and asset management.

--Net interest income flat compared to previous year (down by 0.5% on a like-for-like basis), notwithstanding the strong competitive environment and low level of interest rates.

--Operating costs under control, rising by 4.3%, or 1.6% in real terms.

--Prudent provisioning policy (charge of euro 179.5 million), due to the persistence of risks inherent to the current economic cycle.

--Strong increase of customer funds (10.1%), notably in deposits ( 8.2%), with a positive impact on the transformation ratio, which improved from 108% to 102%. Credit increased 8.6%, including securitized loans.

--Comfortable solvency levels: Solvency ratio remains well above the levels recommended by supervision authorities; coverage of overdue loans over 90 days reached 156.1% (149.8% in June 2003). Fund for General Banking Risks increased from euro 126 million in December 2003 to euro 151 million in June 2004.

1. ECONOMIC ENVIRONMENT

The first half of 2004 was characterized by a trend of gradual recovery in economic activity. Nevertheless, the world economy still faced a few setbacks, including a rise in the oil price to around USD 40 per barrel that contributed to inflation expectations in the main economic areas.

In the United States the labor market created 1.2 million jobs and core inflation rose from 1.1% to 1.9%, leading the Federal Reserve to raise the target fed funds rate by 25 basis points to 1.25%. The Gross Domestic Product should have grown around 4% (annualized). Global economic recovery was also backed by the good performance of Asian economies, China rising by 9.6% year on year in the second quarter. Strong expansion in Chinese investment in the first half of the year put pressure on world commodities demand, impacting price evolution in the main economies.

In the Euro area, Gross Domestic Product rose 0.6% in the first quarter of 2004, backed by an increase of external demand and corporate investment, and is expected to reach a 0.5% growth in the second quarter. Inflation increased from 1.9% in January to 2.4% in June. Nevertheless, the European Central Bank kept the refi rate unchanged at 2%.

Despite the negative impact of the rising trend in oil prices, which was particularly sharp in May, the main stock market indices showed a positive performance. The Nasdaq rose by 2.22% while the Dow Jones fell by 0.18% and the S&P 500 increased 2.60%. In the Euro Area, the Paris CAC 40 rose 4.92% and the Madrid IBEX 35 4.41%, while the Frankfurt DAX was up by 2.64%.

In Portugal, Gross Domestic Product increased in the first quarter 0.6% in real terms. Private Consumption and Gross Fixed-Capital formation were up in the quarter by 0.5% and 2% respectively. The labor market stabilized during the first half of the year, while economic agents' confidence levels showed a gradual recovery. Prices continued to decelerate, with the year on year inflation rate decreasing from 3.1% to 2.7%. Regarding the equity market, the PSI 20 rose by 9.48%.

2. PRIOR NOTE TO THE ANALYSIS OF THE ACTIVITY AND RESULTS

As announced in due time, Banco Espirito Santo sold to Banque Sofinco its stake in Credibom - Sociedade Financeira para Aquisicoes a Credito S.A.. As a result of this disposal, this entity was excluded from the consolidation scope of BES Group financial statements for 2004, although it was still included in the consolidated income statement for the first half of 2003. Therefore the results presented are not directly comparable.

Hence, whenever justified by circumstances, BES Group financial data will also be presented proforma.

3. RESULTS AND PROFITABILITY

Consolidated net income reached euro 131.8 million, a year-on-year increase of 14.3%, or 19.8% on a comparable basis. Annualized return on equity (ROE) reached 13.4%, a significant performance considering the highly competitive environment and the current low level of interest rates.

INCOME STATEMENT

                                                          euro million
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                                                June         Chg %
                                                              proforma
                                        ---------------------
                                         2003   2003(a) 2004
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  Net Interest Income                   376.4    353.9  352.1    -0.5
  Fees and Commissions                  215.7    214.9  275.9    28.4
= Commercial Banking Income             592.1    568.8  628.0    10.4
  Capital Markets Results               104.5    104.5   96.9    -7.3
= Banking Income                        696.6    673.3  724.9     7.7
- Operating Costs                       356.2    348.9  363.7     4.3
  Extraordinary Results and Other        40.2     39.8   -3.9
= Gross Results                         380.6    364.2  357.3    -1.9
- Net Provisions                        215.3    207.0  179.5   -13.3
      Credit                            126.7    118.4  131.8    11.3
      Securities                        -10.7    -10.7    6.0
      Other                              99.3     99.3   41.7   -58.0
= Income Before Taxes and Minorities    165.3    157.2  177.8    13.1
- Income Tax                             33.3     31.1   24.5   -21.2
- Minority Interests                     16.7     16.1   21.5    33.2
= Net Income                            115.3    110.0  131.8    19.8
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(a) Proforma excluding Credibom contribution