BFR Bbva Banco Frances S.A.

Economic Environment

The Monthly Estimator of Economic Activity (known by its acronym in Spanish as EMAE) registered a fall of 0.2% in May 2014 compared to May 2013, but increased 0.5% (seasonally adjusted) compared to April 2014. As a result, the EMAE grew 0.1% in April-May compared to the first quarter of 2014.

In the industrial sector, the Monthly Industrial Estimator fell 0.5% in April-May compared to the first quarter of 2014, while it decreased 4.5% in comparison with the same two-month period of 2013. In the construction sector, the Synthetic Index of Construction Activity increased 2.6% in April-May 2014, in comparison to the first quarter of the year, but decreased 3.6% with respect to the same two-month period of 2013.

Inflation, measured since January by the new official National and Urban Consumer Price Index (which is use to calculate the CER adjustment for some sovereign bonds) increased by 4.6% in the second quarter of 2014. The new index is national in scope (compared to the previously used indicator which covered the Greater Buenos Aires area) and uses the year 2013 as a base year (2013=100). Given this change, no historical data exists and it is not possible to make a comparative analysis with the previous rates.

The national public sector fiscal balance showed a primary surplus of AR$ 3.7 billion during April-May 2014 compared to a surplus of AR$ 3.1 billion in the same period of 2013, an increase of 20.4 %. Primary public sector spending increased 42.2% and public sector revenues had a smaller increase, of 41.6 % during the same period.

Tax revenues increased by 35.9% due to a significant increase in export duties (73.7% q/q) and Income tax (37.5% q/q). Tax revenues were reinforced by the increase in results from the BCRA and transfers from the National Social Security Administration (ANSES) to the National Treasury.

Interest payments increased by 34.3% during April and May and the total deficit reached AR$ 5.4 billion,

an increase of 45.9% compared to the same period in 2013. Increased expending in current expenditures, public firms deficit and transfers to the private sector (by 64.1%) were primarily responsible for the increase in primary spending in the period.

In the external sector, the accumulated trade surplus reached USD 3.6 billion during the second quarter of 2014, 2.3% lower than that recorded in the same period of 2013. The performance of the trade balance is the result of total exports in the period of 2014 of USD 20.9 billion (-10.9%) and total imports of USD 17.3 billion (-12.5%).

In the FX market, the exchange rate (BCRA reference rate) closed at AR$ 8.13 per U.S. dollar on June 30, 2014, increasing 1.5% compared to the AR$ 8.01 rate registered on March 31, 2014 and 56.4% from the same period of the previous year.

In the second quarter of 2014, the stock of international reserves of the BCRA increased by USD 2.3 billion to USD 29.3 billion as of June 30, 2014. During the quarter, the Central Bank purchased USD 4.1 billion in the FX market, an increase over the USD 0.4 billion purchased during previous quarter.

The Badlar interest rate for private banks increased 17 b.p. in the second quarter of 2014, averaging 24.7% compared to a 24.5% average in the first quarter of 2014.

Private sector loans in pesos increased 2.6% compared to the first quarter of 2014, while private sector loans in dollars grew by 12.2%.

Total deposits in pesos in the financial system increased by 5.4% during the same period, private sector deposits in pesos increased by 21.1% and 5.6% in dollars.

The Bank

BBVA Francés continued to work focused on three main areas: transactional banking, quality and development of digital banking.

The transactional plan is crucial to the Bank’s business strategy. Its goal is to place BBVA Francés as the leading bank for its clients, managing all their collections and payments and cementing customer’s loyalty. The plan involves all banking segments: retail, middle-market and corporate & investment banking division and consolidates the customer-centric vision motto.

In March 2014, the BBVA Group announced the development of a Digital Banking division, an area that has the dual mission of accelerating the transformation of the Group and promoting the development of new digital businesses.

Following the Group’s guidelines and understanding the digital transformation of its business, BBVA Francés began the process of redesigning its website and Frances Net, focusing on the clients’ experiences and new features that will make it much more user-friendly.

The construction of the BBVA Tower in Buenos Aires continuous, reaching almost 30%. The new BBVA Francés headquarters will be located at the building under construction by Consultatio Real State and within the framework of the plan designed by BBVA Francés for unification of its core areas.

During the second quarter of 2014 BBVA Francés continued to develop a series of commercial projects:

In the retail segment, during the first week of June the Bank organized the “Fashion Week” and offered its clients up to 15% discounts in more than 60 leading clothing brands all over the country. Moreover, those clients using the BBVA Lanpass program obtained a 5% additional discount.

Continuing its strategic alliance with LAN, BBVA Francés offered the chance of redeem LANPASS KMs for up to 40% discount on tickets to fly to various destinations in Argentina and up to 30% off the purchase of tickets.

It is also important to highlight that BBVA Francés continues with its expansion plan. A new VIP Space was opened at branch 202 in the City of Córdoba, and three new branches were opened during July: one in Chascomús, Buenos Aires, another one in Las Heras, Santa Cruz, and the last one in Colón, Entre Ríos.

Within this framework, the Bank has also been developing a plan to improve the image and premises of its branches with 94 buildings under renovation all over the country including the update of ATSs. As a result, the Bank plans to have 300 ATSs, self-service equipment with intelligent deposit and extended hours (7am-10pm), installed by the end of the year with the goal of providing customers with the highest quality service and excellence.

In the commercial segment and understanding the needs of its clients, during May 2014, BBVA Francés gave a series of courses to 120 managers and PyME officers on the use of a new tool called “PyME and Businesses” that allows traceability in the loan application managing process as well as improving efficiency and productivity in a segment that is of special interest to the Bank.

During May 2014 BBVA Francés was also part of the issuance of YPF S.A.’s Class XXXI-XXXII-XXXIII notes as one of the main arrangers and placement agents. Class XXXI notes were issued for an amount of AR$ 200 million to retail investors and the Classes XXXII and XXXIII were issued for an amount of AR$ 1,000 million to institutional investors.

The “BBVA Francés 2014 Social Compromise Plan”, with an initial investment of more than AR$ 15.9 million allocated to several areas to benefit society, establishes three lines of work: the “BBVA Scholarships for Inclusion program (“Becas de Integración BBVA Francés”) and its related programs (“Artists for Education”, “Sportsmen for Education”, “Mayors for Education” and “Analysis and Investigation”), the Environment Preservation Program and the Program encouraging entrepreneurs in the agricultural sector.

Under the Artists for Education program, in June 2014, the Bank sponsored the Teatro Colón Ballet’s performance of Don Quixote in the province of San Luis. Thus, the 2014 National Tour Company of the Ballet of the Teatro Colón has had great success and acclaim in the cities of Rosario, Córdoba, Mendoza, San Luis and Santa Fe for the third year in a row. Also, under the auspices of the same BBVA Frances sponsorship program, the Teatro Colón Children’s Choir performed at the “Iguazú in Concert” festival.

BBVA Francés together with the Boca Juniors soccer team awarded 60 scholarships under the “BBVA Francés Scholarships for Inclusion” program to children from the city of Buenos Aires and its surroundings in an event that took place at the branch “Catedral” branch in Buenos Aires.

Lastly, BBVA Frances in partnership with Cáritas, opened a new Scholarship Center at San Miguel de Tucumán. The center has been opened thanks to Cáritas initiative to allocate part of its raised funds to one of our programs.

Presentation of Financial Information

As of June 30, 2014 BBVA Francés’ total net income reached AR$ 399.1 million. Such result includes a loss of AR$ 95.4 million due to variations in public bond portfolio valuations.

In recurring terms, net income for the period was AR$ 488.9 million.

The following “pro forma” table presents the non-recurring earnings.

In order to standardize the comparison with previous quarters, the analysis of the variations is made in terms of recurring results.

During the second quarter of 2014, BBVA Francés reached recurring net income of AR$ 488.9 million, registering an increase of 17.6% compared to the same quarter of 2013, whereas compared to the first quarter of 2014; it registered a significant decrease mainly due to the appreciation of the exchange rate that took place on January 2014.

Net financial income grew 39.2% compared to the quarter ended June 30, 2013, whereas it declined compared to the previous quarter. The drop in the results for foreign exchange difference and the futures position plus the loss generated by the public bond portfolio offset the gain registered by the intermediation with the private sector.

Provisions for loan losses increased both compared to the second quarter of 2013 and to the previous quarter, mainly due to the deterioration of the portfolio.

Net income from services increased 33.9% and 11.7% compared to the quarters ended June 30, 2013 and March 31, 2014, respectively. Administrative expenses increased 40.6% and 8.8%, respectively, during the same periods.

On the other hand, the higher proportional income tax rate is a consequence of the tax revaluation of the Bogar 20 portfolio that took place during the quarter ended June 30, 2014.

Net Financial Income

Net financial income arising from the intermediation with the private sector grew 12.6% compared to the second quarter of 2013 and 10.6% compared to the previous quarter.

Income from securities and short-term investments includes non-recurring income originated by variations in the valuation of public securities. Such results totaled a loss of AR$ 95.4 million during the quarter ended June 30, 2014 and of AR$ 139.8 million in the same quarter of 2013, whereas it recorded a gain of AR$ 192.1 million during the

previous quarter. In addition, it is important to mention that the line item “CER Adjustment” also registered a significant increase as result of the new CPI index applied since January 2014.

Furthermore, during the first quarter of 2014, the line item “Foreign exchange difference and others” reflected the effect of the appreciation of the foreign exchange that took place during January 2014.

Income from Public and Private Securities

The Bank has the discretion to mark-to-market its total public bonds portfolio; because of that, such income includes the unrealized losses/gains from variations in the valuations of the portfolio.

As was previously mentioned, it is important to note that during the first quarter of 2014 a new CPI index was released registering an increase in the CER Adjustment.

Net Income from Services

Net income form services increased by 33.9% for the quarter ended June 30, 2014, compared to the same quarter of 2013 and by 11.7% compared to the previous quarter.

In the annual comparison, growth was due mainly to higher consumption with credit cards, fees associated with insurance and fees generated by an increase in the stock of deposit accounts. Such growth was partially offset by an increase in service charge expenses related to promotions associated with the LANPASS kilometers program.

In the quarterly comparison, income from services increased 8.4% due to higher fees generated by credit and debit cards purchases and insurance sales. Service charge expenses did not register variation during the period.

Administrative Expenses

Administrative expenses increased by 40.6% compared to the second quarter of 2013 and 8.8% compared to the previous quarter of 2014.

Personnel expenses, during both periods, mainly reflected the impact of the wage increase and a higher number of employees.

General expenses increased 46.3% compared to the second quarter of 2013 as a consequence of a higher volume of activity, as well as the increase in prices and the effect of the devaluation over agreements denominated in dollar terms, mainly related to advertisement and technology.

Compared to the previous quarter, growth was 7.5%, during the second quarter of 2014. Commercial actions with the alliances (LAN, Francés Go), that

were re-designed at the beginning of the year were implemented during the second quarter. These expenses were partially offset by lower expenses in fees due to lower activity in consulting and legal costs (seasonally). Similarly, electricity and communications in lower consumptions were also recorded.

As of June 30, 2014, the Bank and its subsidiaries had 5,338 employees, an increase of 161 employees in the last twelve months. In addition the Bank has an extensive branch office network of 275 offices, including 245 consumer branch offices and 30 branch offices specializing in middle-market segment companies and institutions. Corporate banking included 7 business units grouped by industry. Complementing its distribution network, the Bank has 13 in-company branches and 2 point of sale outlets, 659 ATM’s and 731 quick deposit boxes (“QDBs”).

Other Income / Expenses

Other income/expenses totaled a loss of AR$ 21.1 million during the second quarter of 2014. During the quarter higher charges were accounted mainly due to the impact of the salary increases on the stock of vacation days and for a higher number of accrued days.

Income from Equity Investments

Income from equity investments sets forth net income from related companies that are not consolidated. During the second quarter of 2014, a gain of AR$ 42.5 million was recorded, mainly due to the stake held by BBVA Francés in Rombo Compañía

Financiera and the annual revaluation for the stake in Internbanking, registered during the quarter.

Total Public Sector Exposure

Exposure to the public sector’s National treasury increased compared to the same quarter of 2013 and to the previous quarter, mainly due to the purchase of new bonds.

The Bank’s portfolio of BCRA bills and notes showed a significant increase both, during the period under analysis and in the last twelve months, reflecting the liquidity management policy implemented by the Bank.

As of June 30, 2014, public sector National treasury assets represented 3.6% of the Bank’s total assets. Total exposure to BCRA’s bills and notes net of holdings linked to reverse repo transactions, represented 8.5% of the Bank’s total assets.

Total exposure to the public sector includes public debt of the National treasury through public securities, guaranteed loans and trustees (canceled on January 2014), as well as the BCRA’s bills and notes.

Loan Portfolio

In terms of activity, as of June 30, 2014 the private sector loan portfolio totaled AR$ 37.9 billion, registering increases of 20.3% compared to the second quarter of 2013 and of 3.4% to the previous quarter.

In the last twelve months, loans to finance consumption grew 30.4% mainly driven by higher volume in credit cards, car loans and personal loans, whereas loans to small and medium size companies increased by 24.2% due to increased placements in commercial loans, checks and leasing. The corporate segment portfolio grew 4.6% during the same quarter.

It is noteworthy that during the first six months of 2014, the Bank has placed approximately AR$ 1.9 billion in credit lines for productive investment, complying with the BCRA regulations, accumulating a total amount of AR$ 5.4 billion since the second quarter of 2012.

In the quarterly comparison, both, commercial loans as well as consumer loans registered a slight increase of 4.5% and 2.6%, respectively.

Asset Quality

As of June 30, 2014, the asset quality ratio (non-performing loans/total loans) was 0.97%, while the coverage ratio (provisions/non-performing loans) reached 218.19%.

Compared to the second quarter of 2013, growth was due to higher non performing loans as well as an increase in the performing portfolio. While compared with the previous quarter, growth primarily reflects the deterioration in the portfolio.

The following table shows the evolution of provisions for loan losses, including charges relating to

transactions recorded under “Other receivables” from financial intermediation.

Deposits

Total deposits reached AR$ 48.1 billion as of June 30, 2014, increasing 30.2% in the last twelve months and 7.0% during the quarter.

During the year, both, term deposits as well as sight accounts registered increases of approximately 30%.

It is important to note that in the last twelve months total peso-denominated deposits grew 25.9% increasing term deposits by 29.5% and sight accounts by 23.0%.

Compared to the previous quarter, total deposits grew 7.0%, driven by sight accounts, increasing 16.4% while term deposits registered a decrease of

3.4%, resulting in an improvement in the mix of funds. Sight accounts represented 56% of total deposits at the end of June 2014.

Deposits denominated in foreign currency grew 74.5% and 17.2%, compared to the last twelve months and to the previous quarter, respectively. By the end of June 30, 2014 deposits denominated in foreign currency reached AR$ 5.7 billion (equivalent to US$ 0.7 billion), representing 11.9% of the Bank’s total deposits.

Other Funding Sources

Other funding sources totaled AR$ 2.3 billion as of June 30, 2014, increasing significantly compared to the second quarter of 2013, while remaining at a similar level to the previous quarter.

In the last twelve months, both the Bank and PSA Finance issued non-subordinated negotiable obligations (bonds). Some series of bonds matured

during the period. Dollar funding increased as well, mainly funding lines aimed at financing exports.

Of the total outstanding senior bonds, AR$ 461.3 million correspond to those issued by PSA Finance and the remaining AR$ 1.1 billion to those issued by BBVA Francés.

Capitalization

By the end of the second quarter of 2014, the Bank’s total shareholders’ equity totaled AR$ 8.9 billion, while the excess over the BCRA minimum capital requirements was AR$ 4.4 billion or 91.2%.

As of June 30, 2014, the capital ratio reached 15.8% of assets adjusted to risk.

It is important to mention that beginning with the second quarter of 2014, the calculation of the ratio was modified, considering total risk-weighted assets. Previously, only credit risk-weighted assets were considered in the capital ratio calculation.