BFR Bbva Banco Frances S.A.

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August, 2014

Commission File Number: 001-12568

 

 

BBVA FRENCH BANK S.A.

(Translation of registrant’s name into English)

 

 

Reconquista 199, 1006

Buenos Aires, Argentina

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ¨            No   x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ¨            No   x

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes  ¨            No   x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 

 

 

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BBVA French Bank S.A.

TABLE OF CONTENTS

 

Item
1.		Financial Statements as of June 30, 2014 together with Independent Auditors´ Limited Review Report

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FINANCIAL STATEMENTS AS OF

JUNE 30, 2014 TOGETHER WITH

INDEPENDENT AUDITORS’ LIMITED

REVIEW REPORT.

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BALANCE SHEETS AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

-Stated in thousands of pesos-

 

ASSETS:		06-30-2014				12-31-2013
A. CASH AND DUE FROM BANKS:
Cash			1,978,530				2,063,190
Due from banks and correspondents			9,453,339				10,782,106
Argentine Central Bank (BCRA)			9,255,818				10,546,478
Other local			1,656				2,795
Foreign			195,865				232,833
			11,431,869				12,845,296
B. GOVERNMENT AND PRIVATE SECURITIES:
Holdings booked at fair value (Exhibit A)			2,349,646				1,982,038
Holdings booked at amortized cost (Exhibit A)			164				164
Instruments issued by the BCRA (Exhibit A)			7,732,288				1,408,487
Investments in listed private securities (Exhibit A)			298				90
Less: Allowances (Exhibit J)			204				196
			10,082,192				3,390,583
C. LOANS:
To government sector (Exhibits B, C and D)			49,024				40,915
To financial sector (Exhibits B, C and D)			2,429,249				2,879,947
Interfinancial – (Call granted)			15,000				280,000
Other financing to local financial institutions			1,939,585				2,172,548
Interest and listed-price differences accrued and pending collection			474,664				427,399
To non financial private sector and residents abroad (Exhibits B, C and D)			34,972,230				32,740,843
Overdraft			6,894,271				6,552,258
Discounted instruments			5,558,444				5,476,961
Real estate mortgage			1,311,435				1,243,900
Collateral Loans			1,240,593				1,178,092
Consumer			5,974,919				5,998,691
Credit cards			8,651,287				7,429,187
Other			4,864,619				4,446,498
Interest and listed-price differences accrued and pending collection			602,353				547,469
Less: Interest documented together with main obligation			125,691				132,213
Less: Allowances (Exhibit J)			787,274				680,651
			36,663,229				34,981,054
D. OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (BCRA)			405,613				624,368
Amounts receivable for spot and forward sales to be settled			2,315,030				260,046
Instruments to be received for spot and forward purchases to be settled			382,062				72,567
Unlisted corporate bonds (Exhibits B, C and D)			39,860				9,713
Non-deliverable forward transactions balances to be settled			82,518				8,266
Other receivables not covered by debtor classification regulations			8,315				4,135
Other receivables covered by debtor classification regulations (Exhibits B, C and D)			237,936				172,342
Less: Allowances (Exhibit J)			1,899				1,209
			3,469,435				1,150,228
E. RECEIVABLES FROM FINANCIAL LEASES:
Receivables from financial leases (Exhibits B, C and D)			1,867,502				1,699,070
Interest accrued pending collection (Exhibits B, C and D)			21,914				20,692
Less: Allowances (Exhibit J)			27,380				21,186
			1,862,036				1,698,576
F. INVESTMENTS IN OTHER COMPANIES:
In financial institutions (Exhibit E)			401,195				316,688
Other (Note 5.a.) (Exhibit E)			187,626				143,411
			588,821				460,099
G. OTHER RECEIVABLES:
Other (Note 5.b.)			1,400,989				1,276,095
Other interest accrued and pending collection			652				3,478
Less: Allowances (Exhibit J)			299,484				277,334
			1,102,157				1,002,239
H. PREMISES AND EQUIPMENT (Exhibit F):			765,153				704,406
I. OTHER ASSETS (Exhibit F):			899,723				646,702
J. INTANGIBLE ASSETS (Exhibit G):
Organization and development expenses			131,537				120,637
			131,537				120,637
K. SUSPENSE ITEMS:			5,429				5,291
TOTAL ASSETS:			67,001,581				57,005,111

 

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(Contd.)

 

BALANCE SHEETS AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

-Stated in thousands of pesos-

 

LIABILITIES:		06-30-2014				12-31-2013
L. DEPOSITS (Exhibits H and I):
Government sector			3,897,609				2,780,304
Financial sector			27,250				45,961
Non financial private sector and residents abroad			44,063,535				40,948,509
Checking accounts			11,137,007				9,958,520
Savings deposits			12,576,595				11,903,124
Time deposits			19,053,653				17,914,786
Investments accounts			1,176				4,027
Other			964,190				916,985
Interest and listed-price differences accrued payable			330,914				251,067
			47,988,394				43,774,774
M. OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (Exhibit I)			83,893				93,746
Other			83,893				93,746
Banks and International Institutions (Exhibit I)			421,324				106,178
Unsubordinated corporate bonds (Exhibit I)			1,025,353				621,357
Amounts payable for spot and forward purchases to be settled			269,551				63,298
Instruments to be delivered for spot and forward sales to be settled (Exhibit O)			2,449,931				273,672
Financing received from Argentine financial institutions (Exhibit I)			15				—,—
Other financing from local financial institutions			15				—,—
Non-deliverable forward transactions balances to be settled			3,302				46,755
Other (Note 5.c.) (Exhibit I)			3,055,132				2,525,646
Interest and listed-price differences accrued payable (Exhibit I)			44,994				24,319
			7,353,495				3,754,971
N. OTHER LIABILITIES:
Dividends payable			28,800				—,—
Other (Note 5.d.)			2,034,283				1,666,844
			2,063,083				1,666,844
O. ALLOWANCES (Exhibit J):			674,787				622,704
P. SUSPENSE ITEMS:			33,273				29,638
TOTAL LIABILITIES:			58,113,032				49,848,931
STOCKHOLDERS’ EQUITY: (as per the related statements of changes in stockholders’ equity)			8,888,549				7,156,180
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY:			67,001,581				57,005,111

 

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MEMORANDUM ACCOUNTS

(Translation of financial statements originally issued in Spanish – See note 19)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
DEBIT ACCOUNTS
Contingent
- Guaranties received			10,126,622				9,731,412
- Contra contingent debit accounts			1,283,924				1,290,370
			11,410,546				11,021,782
Control
- Receivables classified as irrecoverable			489,190				421,809
- Other (Note 5.e.)			112,503,941				153,376,373
- Contra control debit accounts			1,426,575				1,523,153
			114,419,706				155,321,335
Derivatives (Exhibit O)
- “Notional” amount of non-deliverable forward transactions			3,679,322				5,414,377
- Interest rate swap			1,297,303				1,520,738
- Contra derivatives debit accounts			3,251,987				1,871,743
			8,228,612				8,806,858
For trustee activities
- Funds in trust			6,605				6,582
			6,605				6,582
TOTAL			134,065,469				175,156,557
CREDIT ACCOUNTS
Contingent
- Credit lines granted (unused portion) covered by debtor classification regulations (Exhibits B, C and D)			435,581				453,478
- Guaranties provided to the BCRA			185,233				191,303
- Other guaranties given covered by debtor classification regulations (Exhibits B, C and D)			293,591				287,575
- Other guaranties given non covered by debtor classification regulations			207,328				158,783
- Other covered by debtor classification regulations (Exhibits B, C and D)			162,191				199,231
- Contra contingent credit accounts			10,126,622				9,731,412
			11,410,546				11,021,782
Control
- Items to be credited			1,323,851				1,186,195
- Other			102,724				336,958
- Contra control credit accounts			112,993,131				153,798,182
			114,419,706				155,321,335
Derivatives (Exhibit O)
- “Notional” amount of non-deliverable forward transactions			3,251,987				1,871,743
- Contra derivatives credit accounts			4,976,625				6,935,115
			8,228,612				8,806,858
For trustee activities
- Contra credit accounts for trustee activities			6,605				6,582
			6,605				6,582
TOTAL			134,065,469				175,156,557

The accompanying notes 1 through 19 and exhibits A through L, N and O and the consolidated financial statements with its notes and exhibits are an integral part of these statements.

 

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STATEMENTS OF INCOME FOR THE SIX MONTH PERIODS

ENDED JUNE 30, 2014 AND 2013

(Translation of financial statements originally issued in Spanish – See note 19)

- Stated in thousands of pesos -

 

		06-30-2014				06-30-2013
A. FINANCIAL INCOME
Interest on cash and due from banks			—,—				54
Interest on loans to the financial sector			325,049				229,918
Interest on overdraft			993,728				543,050
Interest on discounted instruments			589,557				334,284
Interest on real estate mortgage			109,602				72,946
Interest on collateral loans			144,115				103,954
Interest on credit card loans			879,363				431,473
Interest on other loans			1,301,054				981,329
Interest on other receivables from financial transactions			3,770				18,932
Interest on financial leases			148,912				100,268
Income from secured loans - Decree 1387/01			8,988				2,632
Net income from government and private securities			726,780				145,447
Indexation by benchmark stabilization coefficient (CER)			193,151				66,936
Gold and foreign currency exchange difference			646,876				136,451
Other			503,148				137,426
			6,574,093				3,305,100
B. FINANCIAL EXPENSE
Interest on savings deposits			9,243				6,599
Interest on time deposits			2,141,736				969,028
Interest on interfinancial financing (call borrowed)			5,195				1,499
Interest on other liabilities from financial transactions			139,983				26,088
Other interest			4,304				2,978
Indexation by CER			119				56
Contribution to the deposit guarantee fund			38,520				29,908
Other			407,283				206,960
			2,746,383				1,243,116
GROSS INTERMEDIATION MARGIN – GAIN			3,827,710				2,061,984
C. ALLOWANCES FOR LOAN LOSSES			263,400				197,489
D. SERVICE CHARGE INCOME
Related to lending transactions			718,019				488,850
Related to liability transactions			693,170				528,740
Other commissions			69,226				46,316
Other (Note 5.f.)			432,486				357,194
			1,912,901				1,421,100
E. SERVICE CHARGE EXPENSE
Commissions			365,967				272,481
Other (Note 5.g.)			193,431				134,767
			559,398				407,248

 

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(Contd.)

STATEMENTS OF INCOME FOR THE SIX MONTH PERIODS

ENDED JUNE 30, 2014 AND 2013

(Translation of financial statements originally issued in Spanish – See note 19)

- Stated in thousands of pesos -

 

		06-30-2014				06-30-2013
F. ADMINISTRATIVE EXPENSES
Payroll expenses			1,416,024				1,058,693
Fees to Bank Directors and Supervisory Committee			2,606				1,674
Other professional fees			27,390				20,554
Advertising and publicity			101,810				82,819
Taxes			222,652				143,174
Fixed assets depreciation			62,406				46,857
Organizational expenses amortization			27,524				23,244
Other operating expenses			359,976				252,700
Other			287,763				199,239
			2,508,151				1,828,954
NET GAIN FROM FINANCIAL TRANSACTIONS			2,409,662				1,049,393
G. OTHER INCOME
Income from long-term investments			159,385				71,972
Punitive interests			10,525				5,789
Loans recovered and reversals of allowances			64,906				40,863
Other (Note 5.h.)			109,758				213,876
			344,574				332,500
H. OTHER EXPENSE
Punitive interests and charges paid to BCRA			12				25
Charge for uncollectibility of other receivables and other allowances			109,641				227,156
Amortization of difference arising from judicial resolutions Depreciation and losses from miscellaneous assets			7,641 169				16,850 153
Other (Note 5.i)			40,804				26,594
			158,267				270,778
NET GAIN BEFORE INCOME TAX			2,595,969				1,111,115
I. INCOME TAX (Note 4.1)			834,800				511,500
NET INCOME FOR THE PERIOD			1,761,169				599,615

The accompanying notes 1 through 19 and exhibits A through L, N and O and the consolidated financial statements with its notes and exhibits are an integral part of these statements.

 

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STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(Translation of financial statements originally issued in Spanish – See note 19)

- Stated in thousands of pesos -

 

2014																														2013
						Non capitalized contributions								Retained earnings
Movements		Capital Stock				Issuance premiums				Adjustments to stockholders’ equity (1)				Legal				Other				Unappropriated earnings				Total				Total
1. Balance at beginning of fiscal year			536,878				182,511				312,979				1,495,872				2,603,696				2,024,244				7,156,180				5,131,936
2. Stockholders’ Meeting held on April 10, 2014
- Dividends paid in cash			—,—				—,—				—,—				—,—				—,—				(28,800	)(2)			(28,800	)			—,—
- Legal reserve			—,—				—,—				—,—				404,849				—,—				(404,849	)			—,—				—,—
- Voluntary reserve for future distributions of income			—,—				—,—				—,—				—,—				1,590,595				(1,590,595	)			—,—				—,—
3. Net income for the period			—,—				—,—				—,—				—,—				—,—				1,761,169				1,761,169				599,615
4. Balance at the end of the period			536,878				182,511				312,979				1,900,721				4,194,291				1,761,169				8,888,549				5,731,551

 

(1)	Adjustments to stockholders’ equity refer to Adjustment to Capital Stock.

(2)	Approved by the B.C.R.A. through its Resolution No 312/26/14 dated June 16, 2014 and paid during the month of July 2014.

The accompanying notes 1 through 19 and exhibits A through L, N and O and the consolidated financial statements with its notes and exhibits are an integral part of these statements.

 

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STATEMENTS OF CASH AND CASH EQUIVALENTS FLOW FOR THE

SIX MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(Translation of financial statements originally issued in Spanish – See note 19)

-Stated in thousands of pesos-

 

		06-30-2014				06-30-2013
CHANGES IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the fiscal year			13,604,191	(1)			9,120,988	(1)
Cash and cash equivalents at the end of the period			12,177,562	(1)			8,718,445	(1)
Net decrease in cash and cash equivalents			(1,426,629	)			(402,543	)
REASONS FOR CHANGES IN CASH AND CASH EQUIVALENTS
Operating activities
Net collections/ (payments) from:
- Government and private securities			(5,794,412	)			(229,754	)
- Loans			3,714,328				408,779
to financial sector			314,323				108,326
to non-financial public sector			(477	)			(36,736	)
to non-financial private sector and residents abroad			3,400,482				337,189
- Other receivables from financial transactions			72,502				(18,645	)
- Receivables from financial leases			(163,460	)			(235,584	)
- Deposits			1,627,801				1,510,478
to financial sector			(18,711	)			17,775
to non-financial public sector			1,118,815				(809,981	)
to non-financial private sector and residents abroad			527,697				2,302,684
- Other liabilities from financial transactions			502,696				42,865
Financing from financial or interfinancial sector (call borrowed)			15				30,000
Others (except liabilities included in Financing Activities)			502,681				12,865
Collections related to service charge income			1,889,441				1,415,251
Payments related to service charge expense			(558,013	)			(402,369	)
Administrative expenses paid			(2,467,638	)			(1,785,346	)
Organizational and development expenses paid			(10,642	)			(15,704	)
Net collections from punitive interest			10,513				5,764
Differences from judicial resolutions paid			(7,641	)			(16,850	)
Collections of dividends from other companies			20,070				11,467
Other collections related to other income and expenses			130,445				221,522
Net cash flows (used in) / provided by operating activities			(1,034,010	)			911,874
Investment activities
Net payments from premises and equipment			(82,875	)			(41,190	)
Net collections from other assets			(315,264	)			(45,950	)
Other payments from investment activities			(116,471	)			(281,367	)
Net cash flows used in investment activities			(514,610	)			(368,507	)
Financing activities
Net collections / (payments) from:
- Unsubordinated corporate bonds			403,996				(185,193	)
- Argentine Central Bank			(9,759	)			12,652
Other			(9,759	)			12,652
- Banks and international agencies			315,146				(155,066	)
- Financing received from local financial institutions			—,—				(425	)
Other payments related to financing activities			(587,392	)			(617,932	)
Net cash flows provided by / (used in) financing activities			121,991				(945,964	)
Financial results and results from holdings of cash and cash equivalents (including interest)			—,—				54
Net decrease in cash and cash equivalents			(1,426,629	)			(402,543	)

 

(1)	See note 16 “Statements of cash and cash equivalents flow”.

The accompanying notes 1 through 19 and exhibits A through L, N and O and the consolidated financial statements with its notes and exhibits are an integral part of these statements.

 

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NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2014, PRESENTED IN

COMPARATIVE FORM WITH THE BALANCE SHEET AS OF DECEMBER 31, 2013, AND THE

STATEMENTS OF INCOME, CHANGES IN STOCKHOLDERS’ EQUITY AND CASH AND CASH

EQUIVALENTS FLOW AS OF JUNE 30, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

(Stated in thousands of pesos)

 

1.	CORPORATE SITUATION AND BANK’S ACTIVITIES

 

1.1

Corporate situation

BBVA Banco Francés S.A. (hereinafter indistinctly referred to as either “BBVA Francés” or the “Bank”) has its headquarter in Buenos Aires, Argentina, and operates a 245-branch network.

As from December, 1996, BBVA Francés is part of Banco Bilbao Vizcaya Argentaria S.A.‘s (BBVA) global strategy, which controls the Bank, direct and indirectly, with 75.89% of the corporate stock as of June 30, 2014.

Part of the Bank’s corporate stock is publicly traded and has been registered with the Buenos Aires Stock Exchange, New York Stock Exchange and Madrid Stock Exchange.

 

1.2

Capital stock

Changes in the Bank’s capital stock during the last five fiscal years are as follows:

 

Date of
Stockholders’ Meeting deciding on the issuance		Registration with the Public Registry of Commerce (RPC)		Form of placement		Amount				Total
Capital Stock as of December 31, 2009:											536,361
03-30-2011		09-14-2011		(1)			517				536,878
03-26-2012				(2)			50,410
03-26-2012				(2)			(50,410)				536,878	(3)

(1) Due to the merger of Consolidar Comercializadora S.A. into BBVA Francés.

(2) Due to the merger of Inversora Otar S.A. into BBVA Francés.

(3) The amount of Capital Stock is fully paid in and authorized for public offering by National Securities Commission (CNV).

 

1.3

Inversora Otar S.A. merged by absorption into BBVA Francés

As of the end of the fiscal year ended December 31, 2011, Inversora Otar S.A. (Otar) held in its name 50,410,182 book-entry, ordinary shares, with a par value of $1 each and right to 1 vote each in the capital stock of BBVA Francés.

On February 9, 2012, BBVA Francés and Otar entered into a “Preliminary Merger Agreement” whereby BBVA Francés incorporates Otar on the basis of these companies’ financial statements as of December 31, 2011 and Otar goes through a dissolution without liquidation process.

 

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On March 26, 2012, the Ordinary and Extraordinary General Shareholders’ Meetings of BBVA Francés and Otar approved the above mentioned preliminary merger agreement, the consolidated financial statements for merging purposes as of December 31, 2011 and the shares’ exchange ratio.

The Shareholders’ Meeting of BBVA Francés above mentioned, approved the increase in capital stock of BBVA Francés by issuing 50,410,182 book-entry, ordinary shares with a par value of $ 1 each and 1 vote per share, that would be listed for public offering at the Buenos Aires Stock Exchange in order to be delivered to the shareholders of Otar. These shares would be issued as soon as the merger is registered with the Public Registry of Commerce.

In addition, immediately after the above-mentioned capital increase, BBVA Francés would redeem the 50,410,182 book-entry, ordinary shares, with a par value of $1 each and right to 1 vote each that it owns subject to the previous capital stock reduction stemming from the merger.

The parties have agreed to set April 1, 2012 as the effective date for the merger as that was the date when all the assets and liabilities of the merged company were transferred, for 390,971 and 5,668, respectively.

On July 18, 2013, the Argentine Central Bank (BCRA) resolved not to make any observations against the merger by absorption of Otar by BBVA Francés through its Resolution No. 473. On August 8, 2013, the CNV approved the merger by absorption in accordance with Section 82 of the Argentine Companies Law pursuant to its Resolution No. 17,155. On March 27, 2014, the merger was registered with the Supervisory Board of Companies (IGJ) under No. 5,302 of Book 68 of Stock Corporations. Finally, 50,410,182 book-entry, ordinary shares with par value $ 1 each and 1 vote per share of BBVA Francés were redeemed and 50,410,182 book-entry, ordinary shares with par value $ 1 each and 1 vote per share of BBVA Francés were simultaneously issued and delivered in exchange to Otar’s former shareholders, according to the following detail:

 

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BBVA América S.L.: 47,867,795 shares.

-

Corporación General Financiera S.A.: 2,520,509 shares.

-

Sucesión Romero Gregorio: 21,878 shares.

The merger by absorption of Otar by BBVA Francés was thus completed, with BBVA Francés becoming the surviving company to all intents and purposes.

 

1.4

Registration with CNV as Settlement and Clearing Agent - Comprehensive

The new Capital Markets Law No. 26,831, enacted on December 28, 2012 and then regulated by CNV’s General Resolution No. 622/13 on September 5, 2013 sets forth, in its Section 47 that agents are under a duty to register with the CNV for interacting with the market in any of the modalities established in CNV’s General Resolution No. 622/13. On December 17, 2013, the Bank filed the application for registration as a “Settlement and Clearing Agent – Comprehensive”. This category comprises all the agents involved in settling and clearing trades executed for their own accounts and for third parties accounts and who also choose to offer trade clearing and settlement services to other registered Broker-Dealers.

 

1.5

Responsibility of stockholders

BBVA Francés is a corporation established under the laws of the Argentine Republic, and the responsibility of its stockholders is limited to the value of the paid - in shares, in accordance with Law No. 19,550. As a result, in compliance with Law No. 25,738, it is hereby informed that neither the foreign capital majority stockholders nor the local or foreign stockholders will respond, in excess of the mentioned paid-in stockholding, for the liabilities arising out of the transactions performed by the financial institution.

 

2.	SIGNIFICANT ACCOUNTING POLICIES

 

2.1

Restatement of the financial statements in equivalent purchasing power

The financial statements have been taken from the Bank’s books of account in conformity with the standards of the BCRA.

These financial statements recognize the effects of the changes in the purchasing power of the currency through February 28, 2003, following the restatement method established by Argentine Federation of

 

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Professional Council in Economic Sciences (FACPCE) Technical Pronouncement No. 6 (modified by Technical Pronouncement No. 19), using adjustment rates derived from the Internal Wholesale Price Index published by the National Institute of Statistics and Census (INDEC).

By Communication “A” 3921 of the BCRA and General Resolution No. 441/03 of the CNV, in compliance with Decree 664/03 of the Federal Executive, application of the restatement method on financial statements in equivalent purchasing power has been suspended as from March 1, 2003.

 

2.2

Comparative information

In accordance with BCRA Communication “A” 4667 and amendments, the Balance Sheet and the Exhibits that so specify include the comparative information as of December 31, 2013, while the Statements of Income, Changes in Stockholders’ Equity and Cash and cash equivalents flow show comparative information as of June 30, 2013.

 

2.3

Valuation methods

The main valuation methods used in the preparation of the financial statements have been as follows:

 

a)

Foreign currency assets and liabilities:

As of June 30, 2014 and the end of the previous fiscal year, such amounts were translated into pesos at the benchmark exchange rate of the BCRA as of the closing date of transactions on the last business day of the period or fiscal year. The exchange differences were charged to income (loss) for the period or fiscal year.

 

b)

Government and private securities:

 

•

Holdings booked at fair value and instruments issued by the BCRA at fair value: they were valued based on current listed prices or the prevailing present value for each security as of June 30, 2014 and the end of the previous fiscal year. Differences in listed prices were credited/charged to income for the period or fiscal year.

 

•

Holdings booked at amortized cost and instruments issued by the BCRA at amortized cost: as of June 30, 2014 and the end of the previous fiscal year, these were valued using the amount of initial recognition, rose on the basis of the interest accrued as per the internal rate of return.

 

•

Investments in listed private securities, equity and debt instruments: they were valued based on current listed prices as of June 30, 2014 and the end of the previous fiscal year. Differences in listed prices were charged to income for the period or fiscal year.

 

c)

Loans to Government Sector:

Federal Government secured loans – Decree No. 1387/2001:

As of June 30, 2014 and the end of the previous fiscal year, the secured loans were valued at the highest amount resulting from a comparison between the present value as estimated by BCRA and the book value in accordance with the provisions under BCRA’s Communication “A” 5180. In addition, the amount required to take their book values to their fair realizable values is recorded in a balancing account.

 

d)

Interest accrual:

Interest has been accrued according to a compound interest formula in the periods in which it was generated, except interest on transactions in foreign currency, those whose maturity does not exceed 92 days, and adjustable assets and liabilities which were recognized on a linear basis.

 

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e)

Benchmark stabilization coefficient (CER):

As of June 30, 2014 and the end of the previous fiscal year, receivables and payables have been adjusted to the CER as follows:

 

-

Federal government secured loans have been adjusted under Resolution No. 50/2002 of the Ministry of Economy, which resolved that the CER business 10 (ten) days prior to the maturity date of the related service will be considered for yield and repayments of the loans.

 

-

Federal Government Secured Bonds due in 2020: have been adjusted under Resolution No. 539/2002 of the Ministry of Economy, which resolved that the CER business 5 (five) days prior to the maturity date of the related service will be considered for yield and repayment of the bonds.

 

-

Deposits and other assets and liabilities: have been adjusted considering the CER prevailing as of June 30, 2014 and the end of the previous fiscal year.

 

f)

Allowance for loan losses and contingent commitments:

For loans, other receivables from financial transactions, receivables from financial leases, receivables from sale of property assets and contingent commitments: the allowances have been calculated based on the Bank’s estimated loan loss risk in light of debtor compliance and the collaterals supporting the respective transactions, as provided by Communication “A” 2950 and supplemented of the BCRA.

 

g)

Instruments to be received and to be delivered for spot and forward transactions pending settlement:

 

-

In foreign currency: they were valued according to the benchmark exchange rate of the BCRA for each currency determined on the last business day of the end of the period or fiscal year.

 

-

Securities: with Holdings of government and private securities and Instruments issued by BCRA at fair value and at amortized cost: as of June 30, 2014 and the end of the previous fiscal year, they were valued according to the method described in 2.3.b).

 

h)

Amounts receivable and payable for spot and forward transactions pending settlement:

They were valued based on the prices agreed upon for each transaction, plus related premiums accrued as of June 30, 2014 and the end of the previous fiscal year.

 

i)

Unlisted Corporate Bonds:

They were valued at acquisition cost plus income accrued but not collected as of June 30, 2014 and the end of the previous fiscal year.

 

j)

Receivables from financial leases:

As of June 30, 2014 and the end of the previous fiscal year, they were valued at the present value of the sum of the periodical instalments and the unguaranteed residual value, calculated as per the conditions agreed upon in the respective leases, applying the implicit interest rate thereto.

 

k)

Investments in other companies:

 

-

Investments in controlled financial institutions, supplementary activities and authorized were valued based on the following methods:

 

•

BBVA Francés Valores S.A., Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings), PSA Finance Argentina Compañía Financiera S.A., BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión and Rombo Cía. Financiera S.A.: were valued by applying the equity method at the end of the period or fiscal year.

 

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Although the Entity has a 40% interest ownership in the capital stock and votes of Rombo Cía. Financiera S.A., operational and financial decisions at Rombo Cía. Financiera S.A. are taken together with this company’s majority shareholder on a joint control basis.

 

-

Investments in non controlled financial institutions, supplementary activities and authorized were valued according to the following methods:

 

•

Banelco S.A., Visa Argentina S.A. and Interbanking S.A.: were valued by applying the equity method at the end of the period or fiscal year.

 

•

Bladex S.A.: was valued at acquisition cost in foreign currency plus the nominal value of stock dividends received, converted into pesos based on the method described in 2.3.a).

 

•

Other: valued at acquisition cost, without exceeding their recoverable value.

 

-

Other non controlled affiliates were valued based on the following methods:

 

•

BBVA Consolidar Seguros S.A.: was valued by applying the equity method at the end of the period or fiscal year.

 

•

Other: were valued at acquisition cost, without exceeding their recoverable value.

 

l)

Premises and equipment and Other assets:

They have been valued at acquisition cost plus increases from prior-year appraisal revaluations, restated as explained in note 2.1, less related accumulated depreciation calculated in proportion to the months of estimated useful life of items concerned (see Exhibit F).

 

m)

Intangible assets:

They have been valued at acquisition cost less related accumulated amortization calculated in proportion to the months of estimated useful life of the items concerned (see useful life assigned in Exhibit G).

This caption included the differences arising from compliance with court-ordered measures arising from cases challenging the current rules and regulations applicable to deposits with the financial system in the framework of the provisions of Law No. 25,561, Decree No. 214/02 and supplementary provisions. The assets mentioned (calculated on the basis of the nominal difference between the exchange rate freely determined in the market and applied to the value of the deposit recorded in the books at that date) was amortized within the 60 monthly instalments starting in April 2003 in accordance with Communication “A” 3916 of the BCRA.

As of June 30, 2014 and the end of the previous fiscal year these assets have been fully amortized, with the total accumulated amortization as of those dates amounting to 1,426,624 and 1,418,983, respectively.

The Bank, however, notifies that such amortization was solely calculated to comply with the regulations of the BCRA and that by no means does it imply a waiver to possible compensation or recovery of the exchange difference resulting from compliance with court orders corresponding to petitions for protection of civil rights or other court action derived from the mandatory conversion of bank deposits into pesos.

Pursuant to the decisions handed down by Argentina’s Supreme Court of Justice (“Massa, Juan Agustín v. Argentine Executive Branch – Executive Order 1570/ et al over action for the protection of constitutional rights (amparo) Law No. 16,986” and “Kujarchuk v. Argentine Executive Branch”), a calculation method was established for the payment of bank deposits that was different from the one that had been instituted by the Argentine Executive Branch.

As of June 30, 2014 and the end of the previous fiscal year, the Bank has estimated this contingency and it has recorded allowances for the total amount.

The Bank expects that the Argentine State remedies the significant damage resulting from compliance with court-ordered measures on petitions for protection of civil rights and actions for relief, particularly due to the impact of differences in compensation or recovery as per the rulings in the above-mentioned actions and according to the law in relation to the “pesification” of the underlying deposits. In this regard, the Bank has informed of such financial damages to the relevant authorities, with reservation of rights.

 

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n)

Derivative transactions (see note 12):

 

•

Interest rate swaps and Forward transactions:

 

1.

Interest rate swaps are recorded at the value resulting from the application of rates differences to residual notional amounts at the end of the period or fiscal year.

 

2.

Forward transactions receivable/payable in pesos without delivery of the underlying asset are recorded for the amount receivable or payable, as appropriate, arising from the difference between the agreed exchange rate and the exchange rate at the end of the period or fiscal year as applied to stated notional amounts.

 

•

Repo and Reverse Repo transactions

As of June 30, 2014 and the end of the previous fiscal year, the repos whose underlying assets are not subject to the volatilities published by BCRA were valued as per the cost of each transaction and the repos whose underlying assets are subject to volatility were recorded at their quoted value. Accrued premiums were charged to income (loss) for the period or fiscal year.

 

o)

Employee termination pay:

The Bank expenses employee termination pay as disbursed.

 

p)

Other liabilities:

They include the debit balances non arising out of transactions relating to the supply and demand of financial resources, plus the adjustments and interest payable accrued as of June 30, 2014 and the end of the previous fiscal year.

 

q)

Allowance for other contingencies:

It includes the estimated amounts to meet contingencies of probable occurrence that, if occurred, would give rise to a loss for the Bank.

 

r)

Stockholders’ equity accounts:

They are restated as explained in note 2.1, except for the “Capital Stock” and “Non capitalized contributions” accounts which have been kept at cost. The adjustment resulting from the restatement is included in the “Adjustment to Stockholders´ Equity – Adjustment to Capital Stock” account.

 

s)

Statement of Income Accounts:

 

-

As of June 30, 2014 and 2013, accounts accruing monetary transactions [(financial income (expense), service charge income (expense), provision for loan losses, administrative expenses, etc.)] were computed on the basis of their monthly accrual at historical rates.

 

-

Accounts reflecting the effect on income resulting from the sale, write-off, or use of non-monetary assets were computed based on the value of such assets, as mentioned in note 2.1.

 

-

Income from investments in subsidiaries was computed based on such companies’ income adjusted as explained in note 2.1.

 

t)

Earning per share:

As of June 30, 2014 and 2013, the Bank calculated the earning per share on the basis of 536,877,850 ordinary shares of $1 par value each. The net income for each period on those dates is as follows:

 

		06-30-2014				06-30-2013
Net income for the period			1,761,169				599,615
Earning per share for the period – (stated in pesos)			3.28				1.11

 

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u)

Use of accounting estimates:

The preparation of the financial statements in accordance with the standards set forth by the BCRA require the Bank to use assumptions and estimates that affect certain assets such as allowances for doubtful loan and certain liabilities such as provisions for other contingencies as well as the reported amounts of income/loss during the periods. Actual income/loss may differ from such estimates.

 

3.	DIFFERENCES BETWEEN BCRA ACCOUNTING STANDARDS AND ARGENTINE PROFESSIONAL ACCOUNTING STANDARDS

The Bank has prepared these financial statements by applying the regulations of the BCRA, which do not contemplate some of the valuation criteria established by the Argentine professional accounting standards.

The main differences between the regulations of the BCRA and the Argentine professional accounting standards are detailed below:

 

a)

Tax effects

As already indicated hereinbelow, in note 4.1., the Bank has received various communications from the BCRA pursuant to which that BCRA indicates that the capitalization of items arising from the application of the deferred tax method is not allowed. In accordance with Argentine professional accounting standards, a deferred tax asset should be recognized to the extent the reversal of temporary differences generates a future decrease in the tax effectively determined. As a result, the allowances set up by the Bank in this respect, for 233,700 and 231,100 as of June 30, 2014 and the end of the previous fiscal year, respectively, should be reversed.

 

b)

Derivative financial instruments

As explained in notes 2.3.n) and 12, as of June 30, 2014 and the end of the previous fiscal year, the Bank recorded the effects of interest rate swap agreements as established by the BCRA. Should the Bank had applied the Argentine professional accounting standards, the stockholders’ equity would have increased in 1,222 and decreased in 38,533, respectively. By contrast, the effect of the application of the professional accounting standards on the income statement for the periods ended June 30, 2014 and 2013 would have been 39,755 (income) and 2,842 (income), respectively.

 

4.	TAX MATTERS

 

4.1.

Income tax

The Bank determined the charge for income tax by applying the statutory 35% rate to taxable income estimated for fiscal year considering the effect of temporary differences between valuation of assets and liabilities for accounting purposes and their taxable bases. The Bank considered as temporary differences those that have a definitive reversal date in subsequent years.

As of June 30, 2014 and 2013, the Bank recorded 834,800 and 511,500, respectively, in the Income tax caption as the estimate of the income tax charge payable to the tax authorities for these fiscal years.

As of June 30, 2014 and the end of the previous fiscal year, the Bank has booked 578,297 and 435,831, respectively, in the caption Other liabilities – Other – Accrued Taxes as a result of having netted the income tax withholdings and other withholdings applied to the Bank until such dates.

 

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Besides, on June 19, 2003, the Bank received a note from the BCRA indicating that the capitalization of items arising from the application of the deferred tax method is not allowed.

On June 26, 2003, the Bank, based on the opinion of its legal counsel, responded the above mentioned note, indicating that in their opinion the rules of the BCRA do not prohibit the application of the deferred tax method generated by the recognition of temporary differences between the accounting and tax result. Subsequently, Resolution 118/03 of the Superintendent of Financial and Exchange Institutions received on October 7, 2003 confirmed the terms of the note dated June 19, 2003. Consequently, as from that date the Bank set up an allowance for the net balance between the deferred tax assets and liabilities.

As of June 30, 2014 and the end of the previous fiscal year, the Bank recorded under Other Receivables (in the line Tax Prepayments) a taxable deferred asset amounting 233,700 and 231,100, respectively. Such amounts are made up as follows:

 

		06-30-2014				12-31-2013
Deferred tax assets			453,900				412,100
Deferred tax liabilities			(220,200	)			(181,000	)
Net deferred assets			233,700				231,100
Allowance			(233,700	)			(231,100	)

 

4.2.

Tax on minimum presumed income

Tax on minimum presumed income (TOMPI) was established by Law No. 25,063 in the year ended December 31, 1998, for a ten-year term. On December 19, 2008 Law No. 26,426 established a one-year extension in TOMPI until December 30, 2009. In turn, Law No. 26,545, published in the Official Gazette on December 2, 2009 extended TOMPI for an additional ten-year period. This tax is supplementary to income tax: while the latter is levied on the taxable income for the year, TOMPI is a minimum levy determined by applying the current 1% rate on the potential income of certain productive assets. Therefore, the Bank’s tax obligation for each year will coincide with the highest of these taxes. The above Law provides that institutions governed by Financial Institutions Law must consider as a tax base 20% of their taxable assets, after deducting non-computable ones. However, if TOMPI exceeds income tax in a given year, the excess thereof may be computed as a payment on account of any income tax in excess of TOMPI that may occur in any of the following ten years.

In every year that net operating losses are offset, the tax benefit (the benefit of the effective rate on the net operating loss used) will be realized to the extent that income tax (net of the offsetting) equals or exceeds tax on minimum presumed income, but will be reduced by any excess of the latter over former.

On February 11, 2005, the Argentine Central Bank issued Communication “A” 4295 whereby it enabled, under certain rules, the accounting record of credits on Tax on Minimum Presumed Income.

As of June 30, 2014 and 2013, the Income tax assessed was higher than the TOMPI. Therefore, a provision was raised for Income tax.

 

4.3.

Other tax issues

 

a)

On October 24, 2007, the Bank was notified by the Tax Bureau of the City of Buenos Aires of the commencement of a sua sponte tax assessment on a certain basis and partial in nature of the taxable income as regards turnover tax for the fiscal years 2002 and 2003. On November 14, 2007, the Bank filed its defenses to the notice mentioned.

Then, on October 6, 2008, the Bank was given notice of Resolution No. 3631-DGR 2008 containing the sua sponte tax assessment for the fiscal years 2002 and 2003. On October 28, 2008, the Bank filed an appeal for review against this resolution, which was rejected on November 7, 2008.

In response to said rejection, on November 28, 2008 an appeal was filed with a higher administrative authority by the Ministry of Economy of the Government of the City of Buenos Aires, which was also dismissed on April 24, 2009.

 

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On April 28, 2009, the Court of Appeals with Federal Jurisdiction over Contentious Administrative Matters, Panel 3 handed down a judgment favourable to a petition filed by the Bank for the judge to suspend the effect of the decision made by administrative authorities until the appeal is decided. The judgment thus ordered that “….subject to a sworn promise to comply … a) the Tax Bureau of the City of Buenos Aires must suspend the sua sponte assessment that has objected to the treatment afforded by BBVA Francés to the bonds received from the National Government in the terms of Decree No. 905-02 and the related foreign exchange gains/losses in all matters related to taxation for turnover tax purposes for the fiscal period 2002; b) therefore, the Tax Bureau of the City of Buenos Aires must abstain from demanding that the Bank should pay any amount due that may have arisen from the items above detailed”.

Also in this respect, on May 13, 2009, an action for a declaratory judgment was commenced by the Bank against the Tax Bureau of the City of Buenos Aires, currently being heard by the court with original Federal Jurisdiction over Contentious Administrative Matters No. 1, to procure a judgment ascertaining that a) the bonds received by the Bank from the National Government as compensation for the asymmetric conversion into pesos of assets and liabilities imposed by the Executive Order No. 905/2002 may not be levied with Turnover Tax in the Autonomous City of Buenos Aires; b) the foreign exchange gains/losses are a direct effect of the modification of the monetary system and therefore should not be levied with Turnover Tax in the Autonomous City of Buenos Aires.

On December 29, 2010, the Judge presiding over the court with original Federal Jurisdiction over Contentious Administrative Matters No. 1 handed down a new precautionary measure ordering the Tax Bureau of the City of Buenos Aires to refrain from demanding that BBVA Francés should pay any debt originating in the tax treatment that should be afforded to the bonds received from the National Government as compensation for the asymmetric re-denomination into Pesos under Executive Order No. 905/02 and the foreign exchange gains/losses for purposes of Turnover Tax for the fiscal period 2002 in issue until a final judgment has been rendered on the proceedings whereby the action for a declaratory judgment is still pending.

The Bank as well as its legal and tax advisors estimate that the Bank has made a reasonable interpretation of currently applicable rules and regulations concerning the fiscal periods objected to by the Tax Bureau of the City of Buenos Aires and do not expect an adverse financial impact in these respects.

As regards the balance of the amount claimed, the Entity adhered to a scheme of payment in instalments that was cancelled on October 4, 2010.

 

b)

On December 23, 2011, the Tax Bureau of the City of Buenos Aires (AGIP) passed its Resolution No. 3088-DGR-2011 and notified the Bank of the commencement of a sua sponte tax assessment thereunder alleging presumptive differences owed to the Tax Bureau in the payment of turnover tax for the fiscal years 2004 through 2010. On January 27, 2012, BBVA Francés filed its defense with the Tax Bureau.

Afterwards, on December 28, 2012, the Bank was notified of Resolution No. 3253-DRG-2012 whereby the Tax Bureau of the City of Buenos Aires proceeded with a sua sponte assessment based on facts concerning the taxable basis for purposes of turnover tax for the fiscal years 2004 through 2010.

On February 4, 2013, the Bank filed an appeal for reconsideration against Resolution No. 3253-DRG-2012 moving for the annulment of the tax adjustments contained in the sua sponte tax assessment and for an immediate order to archive the case file.

The Bank as well as its legal and tax advisors estimate that the Bank has made a reasonable interpretation of currently applicable rules and regulations concerning the fiscal periods objected to by the Tax Bureau of the City of Buenos Aires and do not expect an adverse financial impact in these respects.

 

c)

On December 20, 2013, the Bank was notified of the Summary Tax Assessment Decision No. 4705 handed down by the Tax Bureau of the Province of Buenos Aires, whereby this tax bureau made a sua sponte determination of taxable income associated to turnover tax for the fiscal periods 01/2008 to 12/2008.

Against this Decision, the Bank filed on January 14, 2014 an appeal for the tax bureau to reverse its own decision and requested that the tax adjustments inserted in the sua sponte tax assessment be rendered ineffectual and that in due time these proceedings be archived.

 

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The Bank as well as its legal and tax advisors estimate that the Bank has made a reasonable interpretation of currently applicable rules and regulations concerning the fiscal periods objected to by the Tax Bureau of the Province of Buenos Aires and do not expect an adverse financial impact in these respects.

 

5.	BREAKDOWN OF MAIN ITEMS AND ACCOUNTS

The breakdown of the items included under Other accounts which exceed 20% of the total amount of each item is as follows:

 

		06-30-2014				12-31-2013
a) INVESTMENTS IN OTHER COMPANIES
In controlled companies -supplementary activities			131,011				95,199
In other non-controlled companies- unlisted			37,140				29,302
In non-controlled companies-supplementary activities			19,475				18,910
Total			187,626				143,411
b) OTHER RECEIVABLES
Prepayments			326,659				309,864
Guarantee deposits			326,146				309,390
Miscellaneous receivables			294,182				207,941
Tax prepayments (1)			249,266				252,455
Loans to personnel			189,292				189,700
Other			15,444				6,745
Total			1,400,989				1,276,095

 

(1)

As of June 30, 2014 and the end of the previous fiscal year, it includes the deferred tax asset for 233,700 and 231,100, respectively (see note 4.1.).

 

c) OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS
Accounts payable for consumption			1,506,801				1,193,215
Other withholdings and collections at source			551,602				457,110
Collections and other operations for the account of third parties			417,138				342,912
Money orders payable			321,174				327,967
Pending Banelco debit transactions			111,736				120,570
Social security payment orders pending settlement			76,945				6,484
Loans received from Fondo Tecnológico Argentina (FONTAR) and Banco de Inversión y Comercio Exterior (BICE)			42,843				46,882
Loans received from Interamerican Development Bank (IDB)			6,267				3,229
Other			20,626				27,277
Total			3,055,132				2,525,646

 

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		06-30-2014				12-31-2013
d) OTHER LIABILITIES
Accrued taxes			781,860				608,584
Miscellaneous payables			687,282				494,208
Accrued salaries and payroll taxes			344,851				394,268
Amounts collected in advance			219,544				169,278
Other			746				506
Total			2,034,283				1,666,844

 

e) MEMORANDUM ACCOUNTS – DEBIT – CONTROL
Securities representative of investments in custody safekeeping on behalf of the Guarantee Fund for the Sustainability of the Pay-as-you-go System managed by the Argentine Republic			66,654,932				121,633,179
Items in safekeeping			39,561,982				26,281,408
Checks not yet credited			3,793,686				3,347,400
Collections items			932,467				686,371
Checks drawn on the Bank pending clearing			783,299				602,976
Cash in custody on behalf of the BCRA			156,148				52,144
Other			621,427				772,895
Total			112,503,941				153,376,373

 

		06-30-2014				06-30-2013
f) SERVICE CHARGE INCOME
Commissions for hiring of insurances			244,692				154,648
Rental of safe-deposit boxes			69,118				53,439
Commissions for loans and guaranties			23,221				70,535
Commissions on debit and credit cards			23,000				18,763
Commissions for transportations of values			12,740				10,301
Commissions for escrow			10,404				10,376
Commissions for capital market transactions			6,561				9,237
Commissions for salary payment			4,681				4,541
Commissions for trust management			888				490
Other			37,181				24,864
Total			432,486				357,194

 

g) SERVICE CHARGE EXPENSE
Turn-over tax			134,491				101,487
Insurance paid on lease transactions			52,534				23,871
Other			6,406				9,409
Total			193,431				134,767

 

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		06-30-2014				06-30-2013
h) OTHER INCOME
Income from the Credit Card Guarantee Fund			32,352				6,711
Related parties expenses recovery			26,507				11,900
Interest on loans to personnel			15,483				13,938
Deferred income tax (1)			2,600				154,900
Other			32,816				26,427
Total			109,758				213,876

 

(1)

Offset with a charge for the same amount in “Charge for uncollectibility of other receivables and other allowances” account, under Other expense item.

 

i) OTHER EXPENSE
Turn-over tax			6,681				3,623
Donations			6,138				4,531
Insurance losses			5,255				6,360
Private health insurance for former employees			4,853				3,976
Other			17,877				8,104
Total			40,804				26,594

 

6.	FINANCIAL INFORMATION UNIT: ENFORCEMENT ACTION PROCEEDINGS

In March 2010, the Bank was notified of the commencement of two enforcement action proceedings instituted by the Financial Information Unit (UIF) against BBVA Francés and its Regulatory Compliance Officer arising from two wire transfers received by two customers in their respective sight accounts on November 22, 2007 and respectively amounting to 39,393 and 9,174.

It has been the UIF’s understanding that the profile of the customers, as defined, and the supporting documentation submitted by the Bank do not coincide with the possibility of receiving such wire transfers.

In due time, the Bank filed its defenses, offered evidence and petitioned for an acquittal. In addition, the Bank called for the enforcement in this case of the same guarantees available in court proceedings, argued that the statute of limitations applicable to punishable offenses had run out and further claimed that Law No. 25,246 is unconstitutional when it comes to the scale of penalties imposed.

As regards the Regulatory Compliance Officer, the Bank focused on the nature of the penalties that could be imposed on him and petitioned for the enforcement of the general principles of the law in his respect as these prescribe that this officer should not be deemed liable on grounds of occupying the position of regulatory compliance officer at the Bank.

In September and October 2010, the Bank was served with the resolutions adopted by the UIF whereby BBVA Francés and the Regulatory Compliance Officer were each ordered to pay a fine for an amount equivalent to one time the transactions objected.

On the basis of its legal advisors’ opinion, on October 28 and November 25, 2010, the Bank lodged with the Court of Appeals with Federal Jurisdiction over Contentious Administrative Matters a direct appeal against the UIF’s Resolutions in connection with the wire transfers for 9,174 and 39,393, respectively, in accordance with the provisions under Section 25 of Law No. 25,246.

The Bank and its legal advisors have concluded that the analysis of the transactions involved has been made in compliance with applicable legal regulations and that no Suspicious Transaction Report (“ROS”, for its Spanish acronym) has proven necessary. For such reason, the Bank does not expect any adverse financial impacts in this respect.

 

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7.	RESTRICTIONS ON ASSETS

As of June 30, 2014 and the end of the previous fiscal year, there are Bank’s assets, which are restricted as follows:

 

a)

The Government and Private Securities account includes 185,220 in peso-denominated variable rate Argentine Central Bank Notes and 191,290 in bonds issued by the Argentine Government in US Dollars maturing in 2017, respectively, allocated to the guarantee required to act as custodian of investment securities related to Guarantee Fund for the Sustainability of the Pay-as-you-go System managed by the Argentine Republic.

 

b)

The Bank appropriated 13,457 in Guaranteed Bonds maturing in 2020 as of June 30, 2014 and 7,754 in peso-denominated fixed rate Argentine Central Bank Bills and 4,053 in Secured Bonds due 2020 as of December 31, 2013, to secure loans arranged under the Credit Global Program to micro, small and medium businesses given by the Interamerican Development Bank (IDB).

 

c)

The Bank appropriated 193,809 and 146,915, respectively, in Guaranteed Bonds maturing in 2020, to secure loans granted by the so-called “Bicentennial Fund”.

 

d)

The Bank has also appropriated accounts, deposits and trusts for 732,511 and 763,876, respectively, as security for activities related to credit card operations, automated clearing houses, non-deliverable forwards and lawsuits.

 

8.	TRANSACTIONS WITH SUBSIDIARIES AND PARENT COMPANIES (ART. 33 OF LAW No. 19,550)

The balances as of June 30, 2014 and the end of the previous fiscal year, for transactions performed with subsidiaries and parents companies are as follows:

 

		Balance Sheet																Memorandum Accounts (1)
		Assets								Liabilities
Company		2014				2013				2014				2013				2014				2013
BBVA			58,439				21,976				98,430				53,269				36,865				26,740
BBVA Francés Valores S.A			58				—				892				4,583				12,474				10,661
Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings)			3				1				208				24,513				35,149				49,339
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			411				243				9,023				23,765				107,708				42,548
BBVA Consolidar Seguros S.A.			34,021				18,314				2,937				23,972				6,510				—
PSA Finance Argentina Cía. Financiera S.A.			1,088,426				1,054,573				2,486				8,760				285,333				373,879
Rombo Cía. Financiera S.A.			802,803				1,063,677				8,564				9,733				425,373				524,802

 

(1)	Includes Items in safekeeping, Credit lines granted (unused portion) covered by debtor classification regulations, Guaranties given covered by debtor classification regulations and Derivatives.

 

9.	BANK DEPOSITS GUARANTEE INSURANCE SYSTEM

The Bank is included in the Deposit Guarantee System established by Law 24,485, Regulatory Decrees No. 540/95, No. 1,292/96 and 1,127/98 and Communication “A” 5170 and BCRA’s amendments.

Such law provided for the creation of the Company Seguros de Depósitos Sociedad Anónima (SEDESA) for purposes of managing the Deposit Guarantee Fund (DGF), whose shareholders, in accordance with the changes introduced by Decree No. 1,292/96, shall be the BCRA with one share as a minimum and the trustees of the trust created by the financial institutions in the proportion to be determined for each by the BCRA according to their contributions to the DGF.

 

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That Company was incorporated in August 1995 and the Bank has a 9.5232% interest in its capital stock.

The Deposit Guarantee System, which is limited, compulsory and onerous, has been created for purposes of covering the bank deposit risks subsidiarily and complementarily to the deposit protection and privilege system established by the Financial Institutions Law.

The guarantee shall cover the repayment of principal disbursed plus interest accrued through the date of revoking of the authorization to operate or through the date of suspension of the institution through application of section 49 of the BCRA’s Charter provided that the latter had been adopted earlier than the former without exceeding the amount of pesos a hundred and twenty thousand. Regarding operations in the name of two or more people, the guarantee shall be prorated between the holders. In no event shall the total guarantee per person exceed the above-mentioned amount, whatever the number of accounts and/or deposits.

 

10.	TRUST ACTIVITIES

 

10.1.

Financial Trusts

On January 5, 2001, the BCRA’s Board of Directors issued Resolution No. 19/01, providing for the exclusion of Mercobank S.A.’s senior liabilities under the terms of section 35 bis of the Financial Institutions Law, the authorization to transfer the excluded assets to the Bank as trustee of the Diagonal Trust, and the authorization to transfer the excluded liabilities to beneficiary banks. Also, on the mentioned date, the agreement to set up the Diagonal Trust was subscribed by Mercobank S.A. as settle and the Bank as trustee in relation to the exclusion of assets as provided in the resolution above-mentioned. As of June 30, 2014 and the end of the previous fiscal year, the assets of Diagonal Trust amount to 2,428 and 2,405, respectively, considering its recoverable value.

The Bank recorded the selected assets on account of the redemptions in kind of the Fideicomiso Corp Banca participation certificates for 4,177 as of June 30, 2014 and the end of the previous fiscal year.

Such amounts are recorded in memorandum debit accounts “For trustee activities – Funds in trust”.

 

10.2.

Non Financial Trusts

The Bank acts as trustee in 14 non-financial trusts, and in no case being personally liable for the liabilities assumed in the performance of the contract obligations; such liabilities will be settled with and up to the full amount of the corpus assets and the proceeds therefrom. The non financial trusts concerned were set up to secure the receivables of several creditors (beneficiaries) and the trustee was entrusted the management, care, preservation and custody of the corpus assets until (i) the requirements to show the noncompliance with the obligations by the debtor (settler) vis-à-vis the creditors (beneficiaries) are met, moment at which such assets will be sold and the proceeds therefrom will be distributed (net of expenses) among all beneficiaries, the remainder (if any) being delivered to the settler, or (ii) all contract terms and conditions are complied with, in which case all the corpus assets will be returned to the settler or to whom it may indicate. The trust assets represent about 100,603 and 99,373 as of June 30, 2014 and the end of the previous fiscal year, respectively, consist of cash, creditors’ rights, real estate and shares.

 

11.	CORPORATE BONDS

On July 15, 2003, an Extraordinary Stockholders’ Meeting approved the setting up of a Program for the issuance and re-issuance of ordinary non-convertible Corporate Bonds with ordinary guarantee, or such guarantees as may be decided by the Bank, and unsecured Subordinated Corporate Bonds, convertible or not into shares. During the life of the Program, which was 5 (five) years, it was possible to issue and re-issue any number of series and/or classes of Corporate Bonds as long as at all times the maximum amount in circulation after adding together all series and/or classes outstanding under the Program pending redemption does not exceed at any time US$ 300,000,000 (or the equivalent thereof in other currencies). The Program was approved by CNV Resolution No. 14,967 dated November 29, 2004.

The Global Program was amended according to the resolutions adopted by the Ordinary and Extraordinary Stockholders’ Meeting held on April 26, 2007; extended for 5 (five) years by resolution adopted by the Ordinary and Extraordinary Stockholders’ Meetings held on March 28, 2008 and on April 9, 2013 (approved by the CNV by Resolutions No. 16,010 and No. 17,127 dated November 6, 2008 and July 11, 2013, respectively); and the maximum amount of the issuance was successively increased from US$ 300,000,000 to US$ 500,000,000 and from US$ 500,000,000 to US$ 750,000,000 by resolution adopted by the Ordinary and Extraordinary Stockholders’ Meetings held on March 30, 2011 and March 26, 2012, respectively.

 

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On December 11, 2012, the Bank approved the issuance of Class 4 of its Corporate Bonds under the Program for a principal amount of up to $ 200,000,000. On May 9, 2013 the Bank decided to increase the maximum amount of the issuance up to $ 300,000,000. On July 31, 2013, the Bank issued its Corporate Bonds, which were fully subscribed and paid in for 250,000 for a term of 18 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 3.69% per annum, with quarterly interest payments. As provided for in the Corporate Bonds Law and the BCRA regulations, the proceeds obtained from the issuance of the above-mentioned Class were applied to the reimbursement of time deposits.

On August 8, 2013, the Bank approved the issuance of Class 6 and 7 of its Corporate Bonds under the Program for a joint principal amount of up to $ 500,000,000. On November 8, 2013, the Bank issued Class 6 and 7 of its Corporate Bonds, which were fully subscribed and paid in for 121,357 for a term of 18 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 3.25% per annum, with quarterly interest payments and for 250,000 for a term of 36 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 4.24% per annum, with quarterly interest payments, respectively. As provided for in the Corporate Bonds Law and the BCRA regulations, the proceeds obtained from the issuance of the above-mentioned Classes were applied to the reimbursement of time deposits.

On November 26, 2013, the Bank approved the issuance of Class 8 and 9 of its Corporate Bonds under the Program for a joint principal amount of up to $ 500,000,000. On February 11, 2014, the Bank issued Class 8 and 9 of its Corporate Bonds, which were fully subscribed and paid in for 258,880 for a term of 18 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 3.8% per annum, with quarterly interest payments and for 145,116 for a term of 36 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 4.7% per annum, with quarterly interest payments, respectively. As provided for in the Corporate Bonds Law and the BCRA regulations, the proceeds obtained from the issuance of the above-mentioned Classes were applied to the reimbursement of time deposits.

As of June 30, 2014 and the end of the previous fiscal year, the outstanding principal and accrued interest amounts to 1,067,156 (in connection with Class 4, 6, 7, 8 and 9 of the Corporate Bonds) and 644,164 (in connection with Class 4, 6 and 7 of the Corporate Bonds), respectively.

On April 30, 2014, the Bank approved the issuance of Class 10 and 11 of its Corporate Bonds under the Program for a joint principal amount of up to $ 500,000,000. On July 18, 2014, the Bank issued Class 10 and 11 of its Corporate Bonds, which were fully subscribed and paid in for 233,750 for a term of 18 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 2.5% per annum, with quarterly interest payments and for 165,900 for a term of 36 months, to be fully amortized at maturity and subject to a variable interest rate equivalent to the private Badlar rate plus a spread of a nominal 3.75% per annum, with quarterly interest payments, respectively. As provided for in the Corporate Bonds Law and the BCRA regulations, the proceeds obtained from the issuance of the above-mentioned Classes were applied to the reimbursement of time deposits.

 

12.	DERIVATIVE FINANCIAL INSTRUMENTS

 

I.

Transactions as of June 30, 2014:

 

a)

Interest rate swaps for 1,247,643 (Fixed Rate versus Badlar), maturing within a period not exceeding 2 years for which the Bank pays a variable amount in accordance with changes in the Badlar, Encuesta rate, and receives a fixed amount based on stated notional amounts; and interest rate swaps for 10,000 (Badlar versus Fixed Rate), maturing within a period not exceeding 1 year for which the Bank pays a fixed amount and receives a variable amount in accordance with changes in the Badlar rate.

These transactions have been valued in accordance with the criteria described in note 2.3.n.1.) recognizing the amount of 12,616 as loss for the period.

 

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The estimated fair value of said instruments amounts to 611 (Asset). For fair value estimation purposes, the variable and fixed as yet not matured future flows are discounted, with the swap value being the difference between the current value of the future flows receivable and the current value of the future flows payable.

As of the end of the period, the above transactions were recorded under “Memorandum Accounts - Debit Accounts – Derivatives – Interest rate swap” for 1,257,643.

 

b)

Interest rate swap for 39,660 (Fixed Rate versus Badlar), with final maturity in September 2019, for which the Bank pays a variable amount in accordance with changes in the Badlar, Encuesta rate, and receives a fixed amount based on stated notional amounts.

Said transaction was consummated as hedge for potential volatility in the cash flows arising from certain financing deals attributable to changes in the designated benchmark interest rates and it has proven to be effective hedge for the risk mentioned.

The aim pursued by risk management consists in reducing exposure to changes in cash flows arising from financing deals. Thanks to the hedge established, changes in the cash flows arising from the underlying instrument caused by changes in the benchmark interest rate would decrease as a result of having been offset with the changes in the cash flows arising from the hedge instrument.

As of the end of the fiscal year the above transaction was recorded under “Memorandum Accounts - Debit Accounts –Derivatives – Interest rate swap” for 39,660.

 

c)

Non-deliverable forward purchase and sale transactions in foreign currency payable in Pesos, maturing within a period not exceeding 1 year, for 3,679,322 and 3,251,987, which are recorded under “Memorandum Accounts - Debit Accounts - Derivatives – “Notional” amount of non-deliverable forward transactions”, and “Memorandum Accounts - Credit Accounts - Derivatives – “Notional” amount of non-deliverable forward transactions”, respectively.

These transactions have been valued in accordance with the criteria described in note 2.3.n.2.), recognizing the amount of 461,615 as income for the period.

 

d)

Forward sales of BCRA Bills under repurchase agreements for 1,953,447 and of Government securities for 92,827, which are recorded under “Other liabilities from financial transactions – Instruments to be delivered for spot and forward sales to be settled”.

These transactions have been valued in accordance with the description in note 2.3.g) recognizing the amount of 17,668 as income for the period.

 

e)

The Bank does not carry any pending balances associated to reverse repos in force at June 30, 2014. However, the transactions conducted at June 30, 2014 have yielded a 4,839 loss at the end of the period.

 

II.

Transactions as of December 31, 2013:

 

a)

Interest rate swaps for 1,412,963 (Fixed Rate versus Badlar), maturing within a period not exceeding 2 years for which the Bank pays a variable amount in accordance with changes in the Badlar, Encuesta rate, and receives a fixed amount based on stated notional amounts; and interest rate swaps for 65,000 (Badlar versus Fixed Rate), maturing within a period not exceeding 1 year for which the Bank pays a fixed amount and receives a variable amount in accordance with changes in the Badlar rate.

These transactions have been valued in accordance with the criteria described in note 2.3.n.1.) recognizing the amount of 22,019 as income for the fiscal year.

The estimated fair value of said instruments amounts to 35,388 (Liability). For fair value estimation purposes, the variable and fixed as yet not matured future flows are discounted, with the swap value being the difference between the current value of the future flows receivable and the current value of the future flows payable.

 

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As of the end of the fiscal year, the above transactions were recorded under “Memorandum Accounts - Debit Accounts – Derivatives – Interest rate swap” for 1,477,963.

 

b)

Interest rate swap for 42,775 (Fixed Rate versus Badlar), with final maturity in September 2019, for which the Bank pays a variable amount in accordance with changes in the Badlar, Encuesta rate, and receives a fixed amount based on stated notional amounts.

Said transaction was consummated as hedge for potential volatility in the cash flows arising from certain financing deals attributable to changes in the designated benchmark interest rates and it has proven to be effective hedge for the risk mentioned.

The aim pursued by risk management consists in reducing exposure to changes in cash flows arising from financing deals. Thanks to the hedge established, changes in the cash flows arising from the underlying instrument caused by changes in the benchmark interest rate would decrease as a result of having been offset with the changes in the cash flows arising from the hedge instrument.

As of the end of the fiscal year the above transaction was recorded under “Memorandum Accounts - Debit Accounts –Derivatives – Interest rate swap” for 42,775.

 

c)

Non-deliverable forward purchase and sale transactions in foreign currency payable in Pesos, maturing within a period not exceeding 1 year, for 5,414,377 and 1,871,743, which are recorded under “Memorandum Accounts - Debit Accounts - Derivatives – “Notional” amount of non-deliverable forward transactions”, and “Memorandum Accounts - Credit Accounts - Derivatives – “Notional” amount of non-deliverable forward transactions”, respectively.

These transactions have been valued in accordance with the mechanism described in note 2.3.n.2.), recognizing the amount of 465,650 as income for the fiscal year.

 

d)

Forward sales of BCRA Bills and Notes under repurchase agreements for 175,277 and of Government securities for 5,103, which are recorded under “Other liabilities from financial transactions – Instruments to be delivered for spot and forward sales to be settled”.

These transactions have been valued in accordance with the description in note 2.3.g) recognizing the amount of 45,601 as income for the fiscal year.

 

e)

The Bank does not carry any pending balances associated to reverse repos in force at December 31, 2013. However, the transactions conducted at December 31, 2013 have yielded a 2,133 loss at the end of the fiscal year.

 

13.	COMPLIANCE WITH CNV REQUIREMENTS

 

13.1

Minimum Stockholders’ Equity and Minimum of liquid assets:

Given the operations the Bank carries out at present and in compliance with the provisions set forth by CNV’s General Resolution No. 622/13, the Entity is applying for registration with CNV as “Settlement and Clearing Agent – Comprehensive”.

According to CNV’s General Resolution No. 622/13, the minimum Stockholders’ Equity required to operate in the above-mentioned category would amount to 15,000 and the minimum of liquid assets required by those rules would be 7,500, this amount is carried in the account identified in the Bank’s records with the number 111.015.003 [named “Argentine Central Bank – Checking Account (Balancing entry – CNV)”]. As of June 30, 2014, and the end of the previous fiscal year, the Bank’s Stockholders’ Equity exceeds the minimum amount imposed by CNV.

13.2 Investment Funds custodian

As of June 30, 2014 and the end of the previous fiscal year, in its capacity of Investment Funds custodian of “FBA Renta Pesos”, “FBA Ahorro Pesos”, “FBA Calificado”, “FBA Horizonte”, “FBA Acciones Latinoamericanas”, “FBA Bonos Argentina”, “FBA Acciones Argentinas”, “FBA Bonos Globales”, “FBA Bonos Latinoamericanos”, “FBA Renta Dólares”, “FBA Renta”, “FBA Total”, “FBA Acciones Globales”,

 

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“FBA Internacional”, “FBA Ahorro Dólares”, “FBA Renta Fija”, “FBA Renta Premium” and “FBA Renta Corto Plazo” administrated by BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, the Bank holds certificates of deposits, deferred payment checks, shares, corporate bonds, government securities, indexes, securities issued by the BCRA, Cedears, ADRS and shares in mutual funds in safekeeping in the amount of 2,835,659 and 1,499,521, respectively, all of which making up the Fund’s portfolio and booked in “Memorandum Accounts - Debit Accounts - Control - Other”.

The Investment Funds´ equities are as follows:

 

		EQUITIES AS OF
INVESTMENT FUND		06-30-2014				12-31-2013
FBA Renta Pesos			1,875,652				1,460,275
FBA Ahorro Pesos			1,255,448				541,736
FBA Calificado			183,426				126,513
FBA Horizonte			63,392				47,322
FBA Acciones Latinoamericanas			48,401				41,623
FBA Bonos Argentina			15,578				5,096
FBA Acciones Argentinas			707				468
FBA Bonos Globales			142				117
FBA Bonos Latinoamericanos (*)			—,—				26,211
FBA Renta Dólares (*)			—,—				5,971
FBA Renta (*)			—,—				20,537
FBA Total (*)			—,—				20,817
FBA Acciones Globales (*)			—,—				47,620
FBA Internacional (*)			—,—				4,558
FBA Ahorro Dólares (*)			—,—				14,092
FBA Renta Fija (*)			—,—				14,373
FBA Renta Premium (*)			—,—				8,866
FBA Renta Corto Plazo (*)			—,—				316
Total			3,442,746				2,386,511

(*) On August 31, 2013, BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión (“the Managing Company”) decided to start the process of liquidation of FBA Renta Dólares, FBA Ahorro Dólares, FBA Renta Fija, FBA Renta Premium y FBA Renta Corto Plazo, on September 2, 2013 of FBA Acciones Globales and FBA Renta, and on January 27, 2014 of FBA Internacional, FBA Total and FBA Bonos Latinoamericanos. As of the date of issuance of these financial statements, the Asset Manager had paid off all the amounts due to the holders of shares in these funds, except to the holders of shares in FBA Acciones Globales, to whom partial payments have been made (with the remaining funds having been deposited in a special account at BBVA Francés).

 

14.	EARNINGS DISTRIBUTIONS

The Bank has in place an earnings distribution policy in line with the Bank’s vocation for sustained stockholder value, that at the same time allows the Bank’s financial condition to perform favourably so as to strive for business growth and the maintenance of consistently high liquidity and solvency standards in compliance with currently applicable rules and regulations.

In accordance with Communication “A” 5273 of “Distribution of Income” of the BCRA, issued on January 27, 2012, for purposes of calculating the earnings subject to distribution, off-balance sheet deductions must be performed from the sum of the balances recorded in the account Unappropriated retained earnings and in the Voluntary reserve for future distributions of income as set forth in point 2.1 of such Communication. In addition, the authorization of the Superintendent of Financial and Exchange Institutions shall be required in order to verify that the procedure established in said resolution for earnings distribution has been properly applied.

 

15.	ACCOUNTS IDENTIFYING COMPLIANCE WITH MINIMUM CASH

The following are the items computed for Compliance with Minimum Cash Requirements according to the regulations of the BCRA, with their corresponding balances as of June 30, 2014 and the end of the previous fiscal year:

 

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		06-30-14				12-31-13
COMPUTABLE COMPLIANCE IN PESOS
Special Guarantee Accounts			224,634				224,634
BCRA Checking Account			3,899,894				5,357,009
Special social security accounts			67,917				—,—
Franchises			—,—				81,944
TOTAL			4,192,445				5,663,587
COMPUTABLE COMPLIANCE IN US DOLLARS (Stated in thousands of pesos)
Special Guarantee Accounts			32,954				26,411
BCRA Checking Account			5,227,795				5,147,476
TOTAL			5,260,749				5,173,887
COMPUTABLE COMPLIANCE IN EUROS (Stated in thousands of pesos)
BCRA Checking Account			59,195				40,957
TOTAL			59,195				40,957

 

16.	STATEMENTS OF CASH AND CASH EQUIVALENTS FLOW

The Statements of Cash and cash equivalents flow explain the changes in cash and cash equivalents. For such purpose, a detail is supplied of the items that the Bank considers to be cash and cash equivalents:

 

		06-30-14				12-31-13				06-30-13				12-31-12
a) Cash and due from banks			11,430,853				12,844,259				8,066,398				8,594,068
b) Government securities			259,229				88,812				72,312				100,301
c) Loans to financial sector, call granted maturity date less than three months as from the end of the period or fiscal year			487,480				671,120				579,735				426,619
CASH AND CASH EQUIVALENTS			12,177,562				13,604,191				8,718,445				9,120,988

Items b) and c) are considered to be cash equivalents because they are held in order to meet short-term commitments, they are easily convertible in known cash amounts, they are subject to negligible changes in value and their maturity is less than three months as from each period or fiscal year date.

 

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17.	SUBSEQUENT EVENTS

The Bank sold to BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, in arm’s length conditions, a property located at Reconquista 281 in the City of Buenos Aries. On July 31, 2014 proceeded to the signing of the deed of this asset.

 

18.	PUBLICATION OF THE FINANCIAL STATEMENTS

As provided by Communication “A” 760, the previous intervention of the BCRA is not required for the publication of these financial statements.

 

19.	ACCOUNTING PRINCIPLES – EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

These financial statements are presented on the basis of the accounting standards of the BCRA and, except for the effect of the matters mentioned in note 3 to the stand – alone financial statements and note 2 to the consolidated financial statements, in accordance with the Argentine professional accounting standards. Certain accounting practices applied by the Bank that conform with the standards of the BCRA and with the Argentine professional accounting standards may not conform with the generally accepted accounting principles in other countries.

The effects of the differences, if any, between Argentine professional accounting standards and the generally accepted accounting principles in the countries in which the financial statements are to be used have not been quantified. Accordingly, they are not intended to present financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the countries of the users of the financial statements, other than Argentina.

 

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EXHIBIT A

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

						Holding
Description		ID Caja de Valores				Market value or present value				Book balance as of 06-30-2014				Book balance as of 12-31-2013				Position without options				Final position
GOVERNMENT SECURITIES
Government securities at fair value
Local
In pesos
Secured Bonds due 2020			2423								1,176,582								1,176,582				1,176,582
Peso-denominated Discount governed by Argentine Law maturing in 2033			45696								482,987								482,987				482,987
Federal Government Bonds in Pesos Badlar + 200 bp due 2017			5459								367,766								367,284				367,284
Federal Government Bonds in Pesos Badlar + 300 bp due 2015			5441								92,661								316				316
Other											27,816								27,816				27,816
Subtotal in pesos											2,147,812				1,110,448				2,054,985				2,054,985
In foreign currency
Argentine Bond of Saving towards economic development			5456								132,615								132,615				132,615
Par Securities denominated in US Dollars and governed by Argentine Law			45699								50,400								50,400				50,400
Federal Government Bonds in US Dollars 7% due 2015			5433								18,819								18,819				18,819
Subtotal in foreign currency											201,834				871,590				201,834				201,834
Subtotal Government securities at fair value											2,349,646				1,982,038				2,256,819				2,256,819
Government securities at amortized cost
Local
In pesos
Other							164				164								164				164
Subtotal in pesos											164				164				164				164
Subtotal Government securities at amortized cost											164				164				164				164

 

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EXHIBIT A

(Contd.)

 

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

						Holding
Description		ID Caja de Valores				Market value or present value		Book balance as of 06-30-2014				Book balance as of 12-31-2013				Position without options				Final position
Instruments issued by the BCRA
BCRA Bills
At fair value
Argentine Central Bank Internal Bills due 07-16-14			46582						66,445								56,446				56,446
Other									6,035								24,125				24,125
Subtotal at fair value									72,480				495				80,571				80,571
Repurchase transactions
Argentine Central Bank Internal Bills due 10-01-14			46270						1,897,450								—,—				—,—
Argentine Central Bank Internal Bills due 09-10-14			46523						42,705								—,—				—,—
Other									13,292								—,—				—,—
Subtotal repurchase transactions									1,953,447				39,882				—,—				—,—
At amortized cost
Argentine Central Bank Internal Bills due 10-15-14			46274						646,354								646,354				646,354
Argentine Central Bank Internal Bills due 11-19-14			46573						550,603								550,603				550,603
Argentine Central Bank Internal Bills due 08-13-14			46260						540,123								530,662				530,662
Argentine Central Bank Internal Bills due 01-28-15			46291						431,564								431,564				431,564
Argentine Central Bank Internal Bills due 06-03-15			46596						397,259								397,259				397,259
Argentine Central Bank Internal Bills due 04-22-15			46591						366,229								366,229				366,229
Argentine Central Bank Internal Bills due 03-04-15			46590						335,833								335,833				335,833
Argentine Central Bank Internal Bills due 07-23-14			46255						322,854								314,868				314,868
Argentine Central Bank Internal Bills due 12-03-14			46542						311,995								311,995				311,995
Argentine Central Bank Internal Bills due 05-27-15			46595						279,408								279,408				279,408
Argentine Central Bank Internal Bills due 03-25-15			46587						249,340								249,340				249,340
Argentine Central Bank Internal Bills due 09-17-14			46267						227,961								227,961				227,961
Argentine Central Bank Internal Bills due 12-17-14			46282						164,937								164,937				164,937
Argentine Central Bank Internal Bills due 06-10-15			46597						158,099								158,099				158,099
Argentine Central Bank Internal Bills due 02-04-15			46296						127,853								127,853				127,853
Argentine Central Bank Internal Bills due 09-03-14			46581						114,438								114,438				114,438
Argentine Central Bank Internal Bills due 08-27-14			46265						95,970								95,970				95,970
Argentine Central Bank Internal Bills due 08-06-14			46533						36,279								28,473				28,473
Other									71,048								88,794				88,794
Subtotal at amortized cost									5,428,147				1,232,715				5,420,640				5,420,640
BCRA Notes
At fair value
Argentine Central Bank Notes – In Pesos – Variable Badlar coupon due 08-20-14			46203						226,895								226,895				226,895
Argentine Central Bank Notes – In Pesos – Variable Badlar coupon due 07-23-14			46584						21,030								21,030				21,030
Subtotal at fair value									247,925				—,—				247,925				247,925
Repurchase transactions
Subtotal repurchase transactions									—,—				135,395				—,—				—,—
At amortized cost
Argentine Central Bank Notes – In Pesos – Variable Badlar coupon due 09-24-14			46585						30,289								30,289				30,289
Subtotal at amortized cost									30,289				—,—				30,289				30,289
Subtotal instruments issued by the BCRA									7,732,288				1,408,487				5,779,425				5,779,425
TOTAL GOVERNMENT SECURITIES									10,082,098				3,390,689				8,036,408				8,036,408

 

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EXHIBIT A

(Contd.)

 

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

						Holding
Description		ID Caja de Valores				Market value		Book balance as of 06-30-2014				Book balance as of 12-31-2013				Position without options				Final position
INVESTMENTS IN LISTED PRIVATE SECURITIES
Other debt instruments
Other Equity instruments
Local
In pesos
Tenaris S.A.			40115						185								185				185
Subtotal in pesos									185				—,—				185				185
From abroad
In foreign currency
Silicon Graphics Inc.			6003						73								73				73
Other									40								40				40
Subtotal in foreign currency									113				90				113				113
Subtotal Equity instruments									298				90				298				298
TOTAL INVESTMENTS IN LISTED PRIVATE SECURITIES									298				90				298				298
TOTAL GOVERNMENT AND PRIVATE SECURITIES									10,082,396				3,390,779				8,036,706				8,036,706

 

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EXHIBIT B

CLASSIFICATION OF FINANCING FACILITIES BY CATEGORIES

AND GUARANTIES RECEIVED AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
COMMERCIAL PORTFOLIO
Normal performance			21,947,116				21,239,671
Preferred collaterals and counter guaranties “A”			834,197				779,621
Preferred collaterals and counter guaranties “B”			768,160				577,055
Without senior security or counter guaranties			20,344,759				19,882,995
With special follow-up			1,860				19,473
Under observation			—,—				15,428
Without senior security or counter guaranties			—,—				15,428
Negotiations for recovery or re-financing agreements underway			1,860				4,045
Preferred collaterals and counter guaranties “B”			—,—				786
Without senior security or counter guaranties			1,860				3,259
Non-performing			18,682				2,717
Preferred collaterals and counter guaranties “B”			862				—,—
Without senior security or counter guaranties			17,820				2,717
With high risk of uncollectibility			25,012				27,632
Preferred collaterals and counter guaranties “B”			338				338
Without senior security or counter guaranties			24,674				27,294
Uncollectible			—,—				10,035
Without senior security or counter guaranties			—,—				10,035
Total			21,992,670				21,299,528

 

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EXHIBIT B

(Contd.)

 

CLASSIFICATION OF FINANCING FACILITIES BY CATEGORIES

AND GUARANTIES RECEIVED AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
CONSUMER AND HOUSING PORTFOLIO
Normal performance			17,988,021				16,814,083
Preferred collaterals and counter guaranties “A”			16,840				20,369
Preferred collaterals and counter guaranties “B”			1,505,067				1,524,188
Without senior security or counter guaranties			16,466,114				15,269,526
Low risk			227,548				178,283
Preferred collaterals and counter guaranties “B”			26,665				23,784
Without senior security or counter guaranties			200,883				154,499
Medium risk			185,874				128,909
Preferred collaterals and counter guaranties “B”			5,948				9,231
Without senior security or counter guaranties			179,926				119,678
High risk			95,730				68,101
Preferred collaterals and counter guaranties “B”			20,340				15,004
Without senior security or counter guaranties			75,390				53,097
Uncollectible			19,119				14,802
Preferred collaterals and counter guaranties “B”			6,172				6,403
Without senior security or counter guaranties			12,947				8,399
Uncollectible, classified as such under regulatory requirements			116				100
Without senior security or counter guaranties			116				100
Total			18,516,408				17,204,278
General Total (1)			40,509,078				38,503,806

 

(1)

Items included: Loans (before allowances); Other receivables from financial transactions: Unlisted corporate bonds and Other receivables covered by debtor classification regulations; Receivables from financial leases (before allowances); Memorandum accounts - Credit - Contingent: Credit lines granted (unused portion) covered by debtor classification regulations, Other guaranties given covered by debtor classification regulations and Other covered by debtor classification regulations.

 

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EXHIBIT C

FINANCING FACILITIES CONCENTRATION

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

		06-30-2014								12-31-2013
Number of clients		Outstanding balance				% of total portfolio				Outstanding balance				% of total portfolio
10 largest clients			4,885,363				12.06	%			4,236,449				11.00	%
50 next largest clients			6,062,871				14.97	%			5,680,349				14.75	%
100 following clients			3,888,905				9.60	%			3,998,701				10.39	%
Remaining clients			25,671,939				63.37	%			24,588,307				63.86	%
Total (1)			40,509,078				100.00	%			38,503,806				100.00	%

 

(1)	See (1) in Exhibit B.

 

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EXHIBIT D

BREAKDOWN BY FINANCING TERMS AS OF JUNE 30, 2014

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

						Term remaining to maturity
Description		Past-due portfolio				1month				3 months				6 months				12 months				24 months				More than 24 months				Total
Government sector			—,—				530				—,—				—,—				—,—				—,—				48,494				49,024
Financial sector			—,—				598,582				380,631				251,669				602,365				587,264				38,500				2,459,011
Non financial private sector and residents abroad			125,416				15,087,710				5,506,684				4,479,826				3,260,064				4,271,154				5,270,189				38,001,043
TOTAL			125,416				15,686,822				5,887,315				4,731,495				3,862,429				4,858,418				5,357,183				40,509,078	(1)

 

(1)	See (1) in Exhibit B.

 

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EXHIBIT E

DETAIL OF INVESTMENTS IN OTHER COMPANIES

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish – See note 19)

- Stated in thousands of pesos -

 

																										Information about the issuer
Concept				Shares														Amount										Data from last published financial statements
Identification		Description		Class		Unit face value				Votes per share				Number				06-30-2014				12-31-2013				Main business		Period / Fiscal year end				Capital stock				Stockholders’ equity				Income/ (Loss) for the period / fiscal year
		FINANCIAL INSTITUTIONS, SUPPLEMENTARY AND AUTHORIZED
		Controlled
		Local																																			thousands of pesos
33642192049		BBVA Francés Valores S.A.		Common			500	$			1				12,396				21,746				17,960			Stockholder			06-30-2014				6,390				22,420				3,903
30663323926		Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings)		Common			1	$			1				35,425,947				4,172				8,272			Pensions fund manager			06-30-2014				65,739				7,742				(6,553	)
30707847367		PSA Finance Arg. Cía Financiera S.A.		Common			1,000	$			1				26,089				201,464				164,652			Financial institution			06-30-2014				52,178				402,927				95,663
30548590163		BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión		Common			1	$			1				230,398				105,093				68,967			Investment Fund Manager			06-30-2014				243				110,624				38,028
33707124909		Rombo Cía. Financiera S.A.		Common			1,000	$			1				24,000				197,684				150,396			Financial Institution			06-30-2014				60,000				494,210				118,220
				Subtotal controlled															530,159				410,247
		Non controlled
		Local
30598910045		Visa Argentina S.A.		Common			1	$			1				1,571,996				6,428				6,428			Services to companies			05-31-2013				15,000				265,120				203,787
30604796357		Banelco S.A.		Common			1	$			1				2,574,907				7,686				8,654			Information services			12-31-2013				23,599				102,351				39,720
30690783521		Interbanking S.A.		Common			1	$			1				149,556				5,111				3,571			Services			12-31-2013				1,346				161,375				129,239
		Other																	250				257
		Foreign
30710156561		Banco Lat. de Comercio Exterior S.A.		Common B			43	$			1				20,221				2,047				1,640			Banking institution			12-31-2013				1,824,910				5,592,131				552,420
				Subtotal noncontrolled															21,522				20,550
				Total in financial institutions, supplementary and authorized															551,681				430,797
		IN OTHER COMPANIES
		Non controlled
		Local
30500064230		BBVA Consolidar Seguros S.A.		Common			1	$			1				1,301,847				37,038				29,220			Insurance			06-30-2014				10,651				303,097				108,502
		Foreign
		Other																	102				82
				Subtotal non controlled															37,140				29,302
				Total in other companies															37,140				29,302
				Total investments in other companies															588,821				460,099

 

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EXHIBIT F

MOVEMENT OF PREMISES AND EQUIPMENT AND OTHER ASSETS

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2014

AND THE FISCAL YEAR ENDED DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

Description		Net book value at beginning of fiscal year				Additions				Transfers				Decreases				Depreciation for the period								Net book value at 06-30-2014				Net book value at 12-31-2013
																		Years of useful life				Amount
PREMISES AND EQUIPMENT
Real Estate			370,879				2,287				27,686				—,—				50				12,288				388,564				370,879
Furniture and Facilities			208,917				66,131				534				—,—				10				15,996				259,586				208,917
Machinery and Equipment			119,477				11,514				14,020				—,—				3 & 5				33,368				111,643				119,477
Automobiles			5,133				995				—,—				14				5				754				5,360				5,133
Total			704,406				80,927				42,240				14								62,406				765,153				704,406
OTHER ASSETS
Construction in progress			80,662				45,738				(28,235	)			22,308				—,—				—,—				75,857				80,662
Advances to suppliers of goods			486,010				272,046				—,—				23,985				—,—				—,—				734,071				486,010
Works of Art			992				—,—				—,—				—,—				—,—				—,—				992				992
Leased assets			2,294				—,—				—,—				—,—				50				23				2,271				2,294
Property taken as security for loans			2,423				460				—,—				39				50				49				2,795				2,423
Stationery and office supplies			7,844				16,654				—,—				10,012				—,—				—,—				14,486				7,844
Other			66,477				16,876				(14,005	)			—,—				50				97				69,251				66,477
Total			646,702				351,774				(42,240	)			56,344								169				899,723				646,702

 

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EXHIBIT G

MOVEMENT OF INTANGIBLE ASSETS

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2014

AND THE FISCAL YEAR ENDED DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

		Net book value at beginning of fiscal year								Amortization for the period
Description						Additions				Years of useful life				Amount				Net book value at 06-30-2014				Net book value at 12-31-2013
Organization and development expenses (1)			120,637				38,424				1 & 5				27,524				131,537				120,637
Organization and development non-deductible expenses			—,—				7,641				—,—				7,641				—,—				—,—
Total			120,637				46,065								35,165				131,537				120,637

 

(1)	This caption mainly includes costs from information technology projects and leasehold improvements.

 

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EXHIBIT H

CONCENTRATION OF DEPOSITS

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

		06-30-2014								12-31-2013
Number of clients		Outstanding balance				% of total portfolio				Outstanding balance				% of total portfolio
10 largest clients			5,621,934				11.72	%			4,549,211				10.39	%
50 next largest clients			4,614,618				9.62	%			5,081,876				11.61	%
100 following clients			3,011,195				6.27	%			3,051,769				6.97	%
Remaining clients			34,740,647				72.39	%			31,091,918				71.03	%
TOTAL			47,988,394				100.00	%			43,774,774				100.00	%

 

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EXHIBIT I

 

BREAKDOWN OF MATURITY TERMS OF DEPOSITS AND

OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS

AS OF JUNE 30, 2014

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

		Terms remaining to maturity
Description		1 month				3 months				6 months				12 months				24 months				More than 24 months				Total
Deposits			42,762,696				4,255,987				747,212				221,178				1,321				—,—				47,988,394
Other liabilities from financial transactions
Argentine Central Bank			83,893				—,—				—,—				—,—				—,—				—,—				83,893
Banks and International Institutions			—,—				136,853				286,232				—,—				—,—				—,—				423,085
Unsubordinated corporate bonds			10,882				30,921				—,—				371,357				258,880				395,116				1,067,156
Financing received from Argentine financial institutions			15				—,—				—,—				—,—				—,—				—,—				15
Other			3,049,992				499				712				1,540				2,170				1,649				3,056,562
Total			3,144,782				168,273				286,944				372,897				261,050				396,765				4,630,711
TOTAL			45,907,478				4,424,260				1,034,156				594,075				262,371				396,765				52,619,105

 

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EXHIBIT J

 

MOVEMENT OF ALLOWANCES

FOR SIX MONTH PERIOD ENDED JUNE 30, 2014 AND

THE FISCAL YEAR ENDED DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

														Decreases								Book value
Description		Book value at beginning of fiscal year				Increases (5)								Reversals				Applications				06-30-2014				12-31-2013
DEDUCTED FROM ASSETS
Government securities
– For impairment value			196				8				(4	)			—,—				—,—				204				196
Loans
– Allowance for doubtful loans			680,651				266,092				(1	)			—,—				159,469				787,274				680,651
Other receivables from financial transactions
– Allowance for doubtful receivables and impairment			1,209				690				(1	)			—,—				—,—				1,899				1,209
Receivables from financial leases
– Allowance for doubtful receivables and impairment			21,186				7,498				(1	)			—,—				1,304				27,380				21,186
Other receivables
– Allowance for doubtful receivables (2)			277,334				22,360								49				161				299,484				277,334
Total			980,576				296,648								49				160,934				1,116,241				980,576
LIABILITIES-ALLOWANCES
– Contingents commitments (1)			539				26								—,—				—,—				565				539
– Other contingencies			622,165				91,398				(3	)			3,508				35,833				674,222				622,165
Total			622,704				91,424								3,508				35,833				674,787				622,704

 

(1)	Recorded in compliance with the provisions of Communication “A” 3918, as supplemented, of the BCRA, taking into account note 2.3.f).

(2)	Includes mainly the potential loan loss risk arising from the amounts booked as Miscellaneous receivables relating to the petitions for the protection of constitutional rights (Amparos) paid and the deferred tax asset (See note 4.1).

(3)	Recorded to cover possible contingencies that were not considered in other accounts (court orders corresponding to petitions for protection of civil rights, labor, commercial and other lawsuits). (See note 2.3.q).

(4)	Recorded in compliance with the provisions of Communication “A” 4084 of the BCRA.

(5)	Includes exchange differences generated as allowances in foreign currency, booked in the “Financial income - Gold and foreign currency exchange difference” account, as follow:

 

– Government Securities			8
– Loans			3,382
– Other receivables			3,121

 

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EXHIBIT K

 

CAPITAL STRUCTURE AS OF JUNE 30, 2014

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

SHARES								CAPITAL STOCK
						Votes per share		Issued								Pending issuance or distribution
Class		Quantity						Outstanding				In portfolio								Paid in
Common			536,877,850			1			536,833				—,—				45	(1)			536,878	(2)

 

(1)	Shares issued and available to stockholders but not as yet withdrawn.

 

(2)	Fully registered with the Public Registry of Commerce (See note 1.2.).

 

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EXHIBIT L

 

FOREIGN CURRENCY BALANCES AS OF

JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

-Stated in thousands of pesos-

 

Accounts		06-30-2014																												12-31-2013
						Total of the period (per type of currency)
		Total of the period				Euro				US Dollars				Pounds Sterling				Swiss Franc				Yen				Other				Total of the fiscal year
ASSETS
Cash and due from banks			5,943,138				191,325				5,733,328				738				1,312				188				16,247				5,912,615
Government and private securities			234,390				—,—				234,350				—,—				—,—				—,—				40				871,680
Loans			2,275,424				—,—				2,275,424				—,—				—,—				—,—				—,—				1,134,400
Other receivables from financial transactions			370,134				111,558				257,772				—,—				—,—				804				—,—				100,620
Receivables from financial leases			—,—				—,—				—,—				—,—				—,—				—,—				—,—				61
Investments in other companies			2,149				—,—				2,149				—,—				—,—				—,—				—,—				1,722
Other receivables			139,847				14,024				125,823				—,—				—,—				—,—				—,—				135,361
Suspense items			101				1				100				—,—				—,—				—,—				—,—				562
TOTAL			8,965,183				316,908				8,628,946				738				1,312				992				16,287				8,157,021
LIABILITIES
Deposits			5,701,288				82,762				5,618,526				—,—				—,—				—,—				—,—				4,720,888
Other liabilities from financial transactions			1,443,222				211,010				1,230,645				582				138				276				571				816,105
Other liabilities			151,444				6,006				145,438				—,—				—,—				—,—				—,—				118,440
Suspense items			1,857				8				1,849				—,—				—,—				—,—				—,—				571
TOTAL			7,297,811				299,786				6,996,458				582				138				276				571				5,656,004
MEMORANDUM ACCOUNTS
Debit accounts (except contra debit accounts)
Contingent			2,374,975				167,895				2,207,080				—,—				—,—				—,—				—,—				1,873,226
Control			33,235,553				108,454				33,125,204				—,—				—,—				1,064				831				95,729,619
TOTAL			35,610,528				276,349				35,332,284				—,—				—,—				1,064				831				97,602,845
Credit accounts (except contra credit accounts)
Contingent			398,692				56,018				342,674				—,—				—,—				—,—				—,—				620,570
Control			41,423				1,505				39,918				—,—				—,—				—,—				—,—				268,945
TOTAL			440,115				57,523				382,592				—,—				—,—				—,—				—,—				889,515

 

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EXHIBIT N

 

ASSISTANCE TO RELATED CLIENTS AND AFFILIATES

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

		Status
Concept		Normal				With special follow-up / Low risk				With problems / Medium risk								With high risk of uncollectibility / High risk								Uncollectible				Classified uncollectible as such under regulatory requirements				Total (1)
										Not yet matured				Past-due				Not yet matured				Past-due												06-30-2014				12-31-2013
1. Loans			1,957,220				—,—				—,—				—,—				—,—				—,—				—,—				—,—				1,957,220				2,109,132
- Overdraft			441				—,—				—,—				—,—				—,—				—,—				—,—				—,—				441				151
Without senior security or counter guaranty			441				—,—				—,—				—,—				—,—				—,—				—,—				—,—				441				151
- Real Estate Mortgage and Collateral Loans			2,432				—,—				—,—				—,—				—,—				—,—				—,—				—,—				2,432				2,488
Other collaterals and counter guaranty “B”			2,432				—,—				—,—				—,—				—,—				—,—				—,—				—,—				2,432				2,488
- Consumer			3,232				—,—				—,—				—,—				—,—				—,—				—,—				—,—				3,232				3,504
Without senior security or counter guaranty			3,232				—,—				—,—				—,—				—,—				—,—				—,—				—,—				3,232				3,504
- Credit Cards			4,191				—,—				—,—				—,—				—,—				—,—				—,—				—,—				4,191				3,906
Without senior security or counter guaranty			4,191				—,—				—,—				—,—				—,—				—,—				—,—				—,—				4,191				3,906
- Other			1,946,924				—,—				—,—				—,—				—,—				—,—				—,—				—,—				1,946,924				2,099,083
Without senior security or counter guaranty			1,946,924				—,—				—,—				—,—				—,—				—,—				—,—				—,—				1,946,924				2,099,083
2. Other receivables from financial transactions			44,503				—,—				—,—				—,—				—,—				—,—				—,—				—,—				44,503				37,835
3. Receivables from financial leases and other			409				—,—				—,—				—,—				—,—				—,—				—,—				—,—				409				171
4. Contingent commitments			71,984				—,—				—,—				—,—				—,—				—,—				—,—				—,—				71,984				109,297
5. Investments in other companies and private securities			555,651				—,—				—,—				—,—				—,—				—,—				—,—				—,—				555,651				442,054
Total			2,629,767				—,—				—,—				—,—				—,—				—,—				—,—				—,—				2,629,767				2,698,489
Total Allowances			19,729				—,—				—,—				—,—				—,—				—,—				—,—				—,—				19,729				20,878

 

(1)	Maximum amount granted to related clients during June 2014 and December 2013, respectively, according to BCRA rules.

 

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EXHIBIT O

FINANCIAL DERIVATIVES INSTRUMENTS

AS OF JUNE 30, 2014

(Translation of financial statements originally issued in Spanish - See note 19)

- Stated in thousands of pesos -

 

Type of contract		Purpose of transactions		Underlying asset		Type of Settlement		Traded at / Counterparty		Weighted average term as originally agreed (months)		Weighted average residual term (months)		Weighted average term for difference settlements (days)		Amount
Swaps		Financial transactions – own account		—		Upon expiration of differences		Residents in Argentina – Financial sector		20		10		44			1,257,643
Swaps		Interest rate hedge		—		Upon expiration of differences		Residentes in Argentina – Non - financial sector		122		64		6			39,660
Futures		Financial transactions – own account		Foreign currency		Upon expiration of differences		MAE		3		2		1			6,364,589
Futures		Financial transactions – own account		Foreign currency		Upon expiration of differences		ROFEX		4		1		1			566,720
Repo transactions		Financial transactions – own account		Federal Government Bonds		Upon expiration of differences		Residents in Argentina – Financial sector		1		1		1			92,827
Repo transactions		Financial transactions – own account		Other		Upon expiration of differences		Residents in Argentina – Financial sector		1		1		1			1,953,447
TOTAL																	10,274,886

 

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CONSOLIDATED BALANCE SHEETS AS OF

JUNE 30, 2014 AND DECEMBER 31, 2013

(Art. 33 of Law No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
ASSETS:
A. CASH AND DUE FROM BANKS:
Cash			1,978,548				2,063,205
Due from banks and correspondents			9,509,393				10,818,576
Argentine Central Bank (BCRA)			9,304,704				10,576,744
Other local			1,750				2,846
Foreign			202,939				238,986
			11,487,941				12,881,781
B. GOVERNMENT AND PRIVATE SECURITIES (Note 7.a):
Holdings booked at fair value			2,350,179				1,982,431
Holdings booked at amortized cost			164				164
Instruments issued by the BCRA			7,732,288				1,408,487
Investments in listed private securities			149,105				69,049
Less: Allowances			204				196
			10,231,532				3,459,935
C. LOANS:
To government sector (Exhibit 1)			49,024				40,915
To financial sector (Exhibit 1)			1,362,665				1,871,093
Interfinancial – (Call granted)			15,000				313,500
Other financing to local financial institutions			1,099,563				1,328,346
Interest and listed-price differences accrued and pending collection			248,102				229,247
To non financial private sector and residents abroad (Exhibit 1)			37,370,901				35,278,648
Overdraft			6,894,270				6,552,258
Discounted instruments			5,558,444				5,476,961
Real estate mortgage			1,311,435				1,243,900
Collateral Loans			3,456,216				3,479,820
Consumer			5,974,939				5,998,744
Credit cards			8,651,287				7,429,187
Other			5,008,854				4,647,736
Interest and listed-price differences accrued and pending collection			641,147				582,255
Less: Interest documented together with main obligation			125,691				132,213
Less: Allowances			823,477				722,462
			37,959,113				36,468,194
D. OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (BCRA)			405,613				624,368
Amounts receivable for spot and forward sales to be settled			2,315,631				260,046
Instruments to be received for spot and forward purchases to be settled			382,062				72,567
Unlisted corporate bonds (Exhibit 1)			36,207				3,401
Non-deliverable forward transactions balances to be settled			83,368				6,744
Other receivables not covered by debtor classification regulations			8,315				4,135
Other receivables covered by debtor classification regulations (Exhibit 1)			281,187				202,274
Less: Allowances			5,435				5,044
			3,506,948				1,168,491
E. RECEIVABLES FROM FINANCIAL LEASES:
Receivables from financial leases (Exhibit 1)			1,954,052				1,778,235
Interest accrued pending collection (Exhibit 1)			23,557				22,040
Less: Allowances			28,785				22,497
			1,948,824				1,777,778
F. INVESTMENTS IN OTHER COMPANIES:
In financial institutions			199,731				152,036
Other (Note 7.b)			67,081				58,621
			266,812				210,657
G. OTHER RECEIVABLES:
Other (Note 7.c)			1,488,730				1,359,404
Other interest accrued and pending collection			652				3,478
Less: Allowances			331,902				297,585
			1,157,480				1,065,297
H. PREMISES AND EQUIPMENT:			765,757				704,995
I. OTHER ASSETS:			904,115				659,997
J. INTANGIBLE ASSETS:
Organization and development expenses			131,637				120,755
			131,637				120,755
K. SUSPENSE ITEMS:			5,444				5,294
L. OTHER SUBSIDIARIES’ ASSETS (Note 7.d):			450				450
TOTAL ASSETS:			68,366,053				58,523,624

 

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(Contd.)

 

CONSOLIDATED BALANCE SHEETS AS OF

JUNE 30, 2014 AND DECEMBER 31, 2013

(Art. 33 of Law No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
LIABILITIES:
M. DEPOSITS:
Government sector			3,897,609				2,780,304
Financial sector			27,250				45,961
Non financial private sector and residents abroad			44,124,784				40,933,200
Checking accounts			11,135,333				9,947,241
Savings deposits			12,567,670				11,902,472
Time deposits			19,123,237				17,910,820
Investments accounts			1,176				4,027
Other			964,190				916,985
Interest and listed-price differences accrued payable			333,178				251,655
			48,049,643				43,759,465
N. OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank			83,893				93,746
Other			83,893				93,746
Banks and International Institutions			421,324				106,178
Unsubordinated corporate bonds			1,461,649				1,190,761
Amounts payable for spot and forward purchases to be settled			269,551				63,298
Instruments to be delivered for spot and forward sales to be settled			2,450,532				273,672
Financing received from Argentine financial institutions			297,631				426,238
Interfinancial (call borrowed)			55,015				—,—
Other financings from local financial institutions			242,595				426,238
Interest accrued payable			21				—,—
Non-deliverable forward transactions balances to be settled			2,368				47,245
Other (Note 7.e)			3,175,480				2,648,545
Interest and listed–price differences accrued payable			106,945				93,577
			8,269,373				4,943,260
O. OTHER LIABILITIES:
Dividends payable			39,820				—,—
Fees payable			838				189
Other (Note 7.f)			2,131,520				1,752,778
			2,172,178				1,752,967
P. ALLOWANCES:			746,697				709,343
Q. SUSPENSE ITEMS:			33,403				29,677
R. OTHER SUBSIDIARIES’ LIABILITIES (Note 7.g):			337				337
TOTAL LIABILITIES:			59,271,631				51,195,049
S. MINORITY INTEREST IN SUBSIDIARIES (Note 4):			205,873				172,395
STOCKHOLDERS’ EQUITY:			8,888,549				7,156,180
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY:			68,366,053				58,523,624

 

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MEMORANDUM ACCOUNTS

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

- Stated in thousands of pesos -

 

		06-30-2014				12-31-2013
DEBIT ACCOUNTS
Contingent
- Guaranties received			12,444,875				12,125,408
- Contra contingent debit accounts			1,283,924				1,290,370
			13,728,799				13,415,778
Control
- Receivables classified as irrecoverable			506,234				432,256
- Other (Note 7.h)			112,511,864				153,384,808
- Contra control debit accounts			1,438,747				1,544,001
			114,456,845				155,361,065
Derivatives
- “Notional” amount of non-deliverable forward transactions			3,679,322				5,414,377
- Interest rate swap			1,182,088				1,367,098
- Contra debit derivatives accounts			3,251,987				1,871,743
			8,113,397				8,653,218
For trustee activities
- Funds in trust			6,605				6,582
			6,605				6,582
TOTAL			136,305,646				177,436,643
CREDIT ACCOUNTS
Contingent
- Credit lines granted (unused portion) covered by debtor classification regulations (Exhibit 1)			435,581				453,478
- Guaranties provided to the BCRA			185,233				191,303
- Other guaranties given covered by debtor classification regulations (Exhibit 1)			293,591				287,575
- Other guaranties given non covered by debtor classification regulations			207,328				158,783
- Other covered by debtor classification regulations (Exhibit 1)			162,191				199,231
- Contra contingent credit accounts			12,444,875				12,125,408
			13,728,799				13,415,778
Control
- Items to be credited			1,323,851				1,186,195
- Other			114,896				357,806
- Contra control credit accounts			113,018,098				153,817,064
			114,456,845				155,361,065
Derivatives
- “Notional” amount of non-deliverable forward transactions			3,251,987				1,871,743
- Contra credit derivatives accounts			4,861,410				6,781,475
			8,113,397				8,653,218
For trustee activities
- Contra credit accounts for trustee activities			6,605				6,582
			6,605				6,582
TOTAL			136,305,646				177,436,643

The accompanying notes 1 through to 7 to the consolidated financial statements with subsidiaries and the Exhibit 1 are an integral part of these statements, which in turn are part of the stand-alone Financial Statements of BBVA Banco Francés S.A. and are to be read in conjunction therewith.

 

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CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(Art. 33 of Law No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

- Stated in thousands of pesos -

 

		06-30-2014				06-30-2013
A. FINANCIAL INCOME
Interest on cash and due from banks			—,—				54
Interest on loans to the financial sector			191,373				143,631
Interest on overdraft			993,712				543,010
Interest on discounted instruments			589,557				334,284
Interest on real estate mortgage			109,602				72,946
Interest on collateral loans			385,949				270,607
Interest on credit card loans			879,363				431,473
Interest on other loans			1,317,025				994,552
Interest from other receivables from financial transactions			3,770				18,932
Interest on financial leases			160,020				106,289
Income from secured loans - Decree 1387/01			8,988				2,632
Net income from government and private securities			735,273				149,085
Indexation by CER			193,151				66,936
Gold and foreign currency exchange difference			650,461				138,769
Other			553,194				134,209
			6,771,438				3,407,409
B. FINANCIAL EXPENSE
Interest on savings deposits			9,243				6,599
Interest on time deposits			2,141,823				970,316
Interest on interfinancial financing (call borrowed)			11,108				1,499
Interest on other financing from financial institutions			46,865				42,990
Interest on other liabilities from financial transactions			210,733				65,328
Other interest			4,304				2,978
Indexation by CER			119				56
Contribution to the deposit guaranty fund			38,556				29,940
Other			421,296				220,865
			2,884,047				1,340,571
GROSS INTERMEDIATION MARGIN – GAIN			3,887,391				2,066,838
C. ALLOWANCES FOR LOAN LOSSES			270,473				208,633
D. SERVICE CHARGE INCOME
Related to lending transactions			918,314				636,550
Related to liability transactions			693,170				528,740
Other commissions			83,479				57,334
Other (Note 7.i)			432,482				357,191
			2,127,445				1,579,815
E. SERVICE CHARGE EXPENSE
Commissions			373,497				281,309
Other (Note 7.j)			211,297				146,064
			584,794				427,373

 

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(Contd.)

 

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(Art. 33 of Law No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

- Stated in thousands of pesos -

 

		06-30-2014				06-30-2013
F. ADMINISTRATIVE EXPENSES
Payroll expenses			1,436,151				1,076,116
Fees to Bank Directors and Supervisory Committee			2,705				1,767
Other professional fees			33,701				28,017
Advertising and publicity			102,931				83,726
Taxes			227,116				146,464
Fixed assets depreciation			62,459				46,914
Organizational expenses amortization			27,542				23,262
Other operating expenses			361,772				253,902
Other			293,701				201,709
			2,548,078				1,861,877
NET GAIN FROM FINANCIAL TRANSACTIONS			2,611,491				1,148,770
RESULTS OF MINORITY INTEREST IN SUBSIDIARIES			(44,498	)			(25,116	)
G. OTHER INCOME
Income from long-term investments			75,798				40,556
Punitive interests			11,656				6,534
Loans recovered and reversals of allowances			68,504				42,670
Other (Note 7.k)			103,529				209,278
			259,487				299,038
H. OTHER EXPENSE
Punitive interests and charges paid to BCRA			12				25
Charge for uncollectibility of other receivables and other allowances			110,825				228,774
Amortization of difference arising from judicial resolutions			7,641				16,850
Depreciation and losses from miscellaneous assets			169				153
Other (Note 7.l)			42,345				28,837
			160,992				274,639
NET GAIN BEFORE INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME			2,665,488				1,148,053
I. INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME			904,319				548,438
NET INCOME FOR THE PERIOD			1,761,169				599,615

The accompanying notes 1 through 7 to the consolidated financial statements with subsidiaries and the Exhibit 1 are an integral part of these statements, which in turn are part of the stand-alone Financial Statements of BBVA Banco Francés S.A. and are to be read in conjunction therewith.

 

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CONSOLIDATED STATEMENTS OF CASH AND CASH EQUIVALENTS FLOW

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(ART. 33 OF LAW No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

		06-30-2014				06-30-2013
CHANGES IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the fiscal year			13,603,620	(1)			9,048,450	(1)
Cash and cash equivalents at the end of the period			12,189,554	(1)			8,648,049	(1)
Net decrease in cash and cash equivalents			(1,414,066	)			(400,401	)
REASONS FOR CHANGES IN CASH AND CASH EQUIVALENTS
Operating activities
Net collections/ (payments) from:
- Government and private securities			(5,857,571	)			(203,368	)
- Loans			4,072,003				82,879
to financial sector			328,283				131,442
to non-financial public sector			(477	)			(36,736	)
to non-financial private sector and residents abroad			3,744,197				(11,827	)
- Other receivables from financial transactions			63,896				(19,259	)
- Receivables from financial leases			(171,046	)			(250,237	)
- Deposits			1,630,159				1,452,099
to financial sector			(18,711	)			17,775
to non-financial public sector			1,118,815				(809,981	)
to non-financial private sector and residents abroad			530,055				2,244,305
- Other liabilities from financial transactions			553,721				61,529
Financing from financial or interfinancial sector (call borrowed)			55,015				10,000
Others (except liabilities included in Financing Activities)			498,706				51,529
Collections related to service charge income			2,093,942				1,575,512
Payments related to service charge expense			(583,409	)			(422,494	)
Administrative expenses paid			(2,503,072	)			(1,817,979	)
Organizational and development expenses paid			(10,642	)			(15,704	)
Net collections from punitive interest			10,513				5,764
Differences from judicial resolutions paid			(7,641	)			(16,850	)
Collections of dividends from other companies			20,070				11,467
Other collections related to other income and expenses			199,604				255,982
Net cash flows (used in) / provided by operating activities			(489,473	)			699,341
Investment activities
Net payments from premises and equipment			(82,943	)			(41,341	)
Net payments from other assets			(306,361	)			(45,772	)
Other payments from investment activities			(195,566	)			(332,650	)
Net cash flows used in investment activities			(584,870	)			(419,763	)
Financing activities
Net collections / (payments) from:
- Unsubordinated corporate bonds			270,888				(16,860	)
- Argentine Central Bank			(9,759	)			12,652
Other			(9,759	)			12,652
- Banks and international agencies			315,146				(155,066	)
- Financing received from local financial institutions			(183,643	)			170,455
Other payments from financing activities			(732,355	)			(691,214	)
Net cash flows used in financing activities			(339,723	)			(680,033	)
Financial results and results from holdings of cash and cash equivalents (including interest)			—,—				54
Net decrease in cash and cash equivalents			(1,414,066	)			(400,401	)

 

(1)	See note 6 “Statement of cash and cash equivalents flow”.

The accompanying notes 1 through to 7 to the consolidated financial statements with subsidiaries and the Exhibit 1 are an integral part of these statements, which in turn are part of the stand-alone Financial Statements of BBVA Banco Francés S.A. and are to be read in conjunction therewith.

 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

WITH SUBSIDIARIES AS OF JUNE 30, 2014, PRESENTED IN COMPARATIVE FORM WITH

THE BALANCE SHEET AS OF DECEMBER 31, 2013, AND THE STATEMENTS OF INCOME

AND CASH AND CASH EQUIVALENTS FLOW AS OF JUNE 30, 2013

(Art. 33 of Law No. 19,550)

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

1.	SIGNIFICANT ACCOUNTING POLICIES AND SUBSIDIARIES

General rule

In accordance with the procedures set forth in BCRA’s regulations and Technical Pronouncement No. 21 of the Argentine Federation of Professional Councils in Economic Sciences, BBVA Banco Francés S.A. (hereinafter indistinctly referred to as either “BBVA Francés” or the “Bank”) has consolidated - line by line – its balance sheets as of June 30, 2014 and the end of the previous fiscal year, and the statements of income and cash and cash equivalents flow for the six month periods ended June 30, 2014 and 2013, as per the following detail:

 

–

As of June 30, 2014:

 

a)

With the financial statements of BBVA Francés Valores S.A., PSA Finance Argentina Cía. Financiera S.A. and BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión for the six month periods ended June 30, 2014 and 2013.

 

b)

With the financial statements of Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings) for the fiscal years ended June 30, 2014 and 2013.

 

–

As of December 31, 2013:

 

c)

With the financial statements of BBVA Francés Valores S.A., PSA Finance Argentina Cía. Financiera S.A. and BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión for the fiscal year ended December 31, 2013.

 

d)

With the financial statements of Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings) for the six month period ended December 31, 2013.

The results and cash and cash equivalents flow of Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings) have been adjusted for purposes of comparison of the fiscal years of companies consolidating on the basis of a six month period ended on June 30, 2014 and 2013.

Interests in subsidiaries as of June 30, 2014 and the end of the previous fiscal year are listed below:

 

		Shares												Interest percentage in
		Type				Quantity								Total Capital								Possible Votes
Companies						06-30-2014				12-31-2013				06-30-2014				12-31-2013				06-30-2014				12-31-2013
BBVA Francés Valores S.A.			Common				12,396				12,396				96.9953				96.9953				96.9953				96.9953
Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)			Common				35,425,947				35,425,947				53.8892				53.8892				53.8892				53.8892
PSA Finance Argentina Cía Financiera S.A.			Common				26,089				26,089				50.0000				50.0000				50.0000				50.0000
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			Common				230,398				230,398				95.0000				95.0000				95.0000				95.0000

Total assets, liabilities and stockholders’ equity in accordance with the criteria defined in note 2 below, as of June 30, 2014 and the end of the previous fiscal year and net income balances for the six month periods ended June 30, 2014 and 2013, are listed below:

 

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		Assets								Liabilities								Stockholders’ Equity								Net income/ gain-(loss)
Companies		06-30-2014				12-31-2013				06-30-2014				12-31-2013				06-30-2014				12-31-2013				06-30-2014				06-30-2013
BBVA Francés Valores S.A.			29,952				25,477				7,532				6,960				22,420				18,517				3,903				1,011
Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)			83,214				97,950				75,472				82,600				7,742				15,350				(7,608	)			(2,354	)
PSA Finance Argentina Cía Financiera S.A.			2,553,560				2,692,580				2,150,633				2,363,276				402,927				329,304				95,663				52,324
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			134,893				80,684				24,269				8,088				110,624				72,596				38,028				5,844

 

2.	VALUATION METHODS

The financial statements of the subsidiaries have been prepared based on similar methods to those applied by the Bank for preparing its own financial statements, in connection with assets and liabilities valuation, income measurement and restatement procedure as explained in note 2 to the stand-alone financial statements of the Bank. The following are the main differences with the professional accounting standards:

Arising from the application of the accounting standards laid down by BCRA and the Argentine professional accounting standards:

 

•

The commissions paid by PSA Finance Argentina Cía. Financiera S.A. to dealers for granting financing to companies and to the public in general in connection with purchases and sales of automobiles, which in accordance with the rules established by the BCRA are charged to the Income Statement, should be accrued throughout the duration of the loans generated by said dealers in accordance with Argentine professional accounting standards. Had this criterion been applied, shareholders’ equity would have been increased by 9,121 and 11,146 as of June 30, 2014 and the end of the previous fiscal year, respectively.

 

•

The Bank has not made disclosures required by Argentine professional accounting standards on discontinued operations or discontinuation in relation to the process of liquidating its subsidiary Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)

 

3.	REFORM OF THE INTEGRATED RETIREMENT AND PENSION SYSTEM

Law No. 26,425- Dissolution and liquidation of Consolidar A.F.J.P. S.A.:

Law No. 26,425, which came into force on December 4, 2008, mandated that the capitalization system that used to be an integral part of the Integrated Retirement and Pension System was to be suppressed and replaced by a single pay-as-you-go system that is now known as the Argentine Integrated Social Security System (SIPA). As a consequence, Consolidar A.F.J.P. S.A. ceased to manage the funds held in the individual capitalization accounts opened by the members and beneficiaries of the Integrated Retirement and Pension System. Said funds were transferred to the Fund to Guarantee the Sustainability of the State-run Social Security System exactly as they had been invested and it is now the Argentine Social Security Authority (ANSES) the only and sole holder of said assets and funds.

Besides, on October 29, 2009, ANSES issued its Resolution No. 290/2009 whereby it granted a term of 30 working days to the pension fund managers that could be interested in re-converting their corporate purpose in order to manage the funds held as voluntary term deposits and as agreed-upon deposits in capitalization accounts for them to express their decision to do so.

Given the above situation and the inability of Consolidar A.F.J.P. S.A. to attain the corporate purpose and conduct the business for which it had been formed, on December 28, 2009, its Extraordinary General Unanimous Shareholders’ Meeting adopted the resolution to dissolve and subsequently liquidate Consolidar A.F.J.P. S.A. effective as of December 31, 2009 on the understanding that such will be the best alternative to safeguard the interests of both the creditors and the shareholders of the Company. In addition, as set forth in

 

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the Argentine Companies Law, the Shareholders’ Meeting decided to appoint Accountant Mr. Gabriel Orden and Mr. Rubén Lamandia to act as liquidators of Consolidar A.F.J.P. S.A. As of December 31, 2009 these gentlemen have been designated as the Company’s legal representatives. As of the date of issuance of these financial statements, they are moving forward with all the actions necessary to proceed with the liquidation of Consolidar A.F.J.P. S.A.

On January 28, 2010, the dissolution of Consolidar A.F.J.P. S.A. as well as the list of designated liquidators were registered with the Supervisory Board of Companies (IGJ)

In addition, the Extraordinary General Shareholders’ Meeting of Consolidar A.F.J.P. S.A. approved a voluntary reduction in capital stock for 75,000 on October 19, 2009. In turn, the IGJ conferred its approval to the capital reduction mentioned on January 11, 2010. In this respect, on January 19, 2010 the shareholders were transferred their capital contributions in conformity with the above-mentioned reduction.

BBVA Francés, in its capacity as shareholder requested that Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) should file a note with the Argentine Ministry of Economy and Public Finance and with the Argentine Social Security Authority to commence discussions within the framework of Law No. 26,425 in order to identify one or more resolution alternatives in connection with the consequences resulting from the events caused by the enactment of that Law. This note was filed by Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) on June 11, 2010.

On December 7, 2010, Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) filed an action for damages against the National State and the Ministry of Labor, Employment and Social Security with the court of original Federal Jurisdiction over Contentious Administrative Matters No. 4, Clerk of Court’s Office No. 7, case file No. 40,437/2010. The complaint was ratified by BBVA Francés in its capacity as majority shareholder in that Company. On July 15, 2011, Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings) and BBVA Francés filed with the same court an enhanced complaint for determining the amounts claimed as damages. On March 9, 2012, the Court ordered the service of process on the National State. On November 23, 2012, the Court handed down a resolution demanding the production of evidence within a term of forty days. On May 13, 2013, the Court hearing in the case ordered that evidence be produced. The Company is providing depositions, documentary evidence and expert witnesses’ reports. On May 28, 2013, the Company accompanied the statements and the testimony of witnesses, as the case is currently at the evidence production stage.

 

4.	MINORITY INTEREST IN SUBSIDIARIES

The breakdown of balances in the “Minority interest in subsidiaries” account is as follows:

 

		06-30-2014				12-31-2013
Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings)			3,570				7,078
BBVA Francés Valores S.A.			674				557
PSA Finance Argentina Cía Financiera S.A.			201,463				164,652
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			166				108
Total			205,873				172,395

 

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5.	RESTRICTIONS ON ASSETS

 

a)

BBVA Francés Valores S.A. holds two shares of Mercado de Valores de Buenos Aires S.A, booked in the amount of 10,300 as of June 30, 2014 and the end of the previous fiscal year. These shares have been pledged in favor of “CHUBB Argentina de Seguros S.A.” in security of the contract this insurance company executed with Mercado de Valores de Buenos Aires S.A. to cover the latter’s guaranteeing any noncompliance of the company with their obligations.

 

b)

See note 7 to the stand-alone financial statements of the Bank.

 

6.	STATEMENT OF CASH AND CASH EQUIVALENTS FLOW

The Statements of Cash and cash equivalents flow explains the changes in cash and cash equivalents. For such purpose, a detail is supplied of the items that the Bank considers to be cash and cash equivalents:

 

		06-30-2014				12-31-2013				06-30-2013				12-31-2012
a) Cash and due from banks			11,486,925				12,880,744				8,091,833				8,613,997
b) Goverment securities			294,629				115,876				74,716				102,453
c) Loans to financial sectors, call granted maturity date less than three months as from the end of the period or fiscal year			408,000				607,000				481,500				332,000
CASH AND CASH EQUIVALENTS			12,189,554				13,603,620				8,648,049				9,048,450

Items b) and c) are considered to be cash equivalents because they are held in order to meet short-term commitments, they are easily convertible in known cash amounts, they are subject to negligible changes in value and their maturity is less than three months as from the end of each period or fiscal year date.

 

7.	BREAKDOWN OF MAIN ITEMS

The detail of the main items included in financial statements is as follows:

 

		06-30-2014				12-31-2013
a) GOVERNMENT AND PRIVATE SECURITIES
* Holdings booked at fair value
Secured Bonds due in 2020			1,176,582				891,894
Peso-denominated Discount governed by Argentine Law maturing in 2033			482,987				80,980
Federal Government Bonds in Pesos Badlar + 200 bp due 2017			367,766				—,—
Argentine Bond of Saving towards economic development			132,615				121,110
Federal Government Bonds in Pesos Badlar + 300 bp due 2015			92,661				5,103
Par Securities denominated in US Dollars and governed by Argentine Law			50,400				42,300
Consolidation Bonds – sixth series			27,816				31,040
Federal Government Bonds in US Dollars 7% due 2015			18,819				—,—
Secured Bonds due in 2018			—,—				89,114
Federal Government Bonds in US Dollars 7% 2017			—,—				708,180
Federal Government Bonds in Pesos Badlar + 275 bp due 2014			—,—				12,317
Other			533				393
Total			2,350,179				1,982,431

 

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		06-30-2014				12-31-2013
* Holdings booked at amortized cost
Other			164				164
Total			164				164
* Instruments issued by the BCRA
BCRA Bills (LEBAC)			7,454,074				1,273,092
BCRA Notes (NOBAC)			278,214				135,395
Total			7,732,288				1,408,487
* Investments in listed private securities
FBA Ahorro Pesos Investment Fund			135,159				64,525
FBA Bonos Argentina Investment Fund			9,505				—,—
FBA Acciones Globales Investment Fund			—,—				3,849
Other			4,441				675
Total			149,105				69,049
- Allowances			(204	)			(196	)
Total			10,231,532				3,459,935
b) INVESTMENTS IN OTHER COMPANIES – Other
In other companies - unlisted			37,038				29,302
In companies-supplementary activities			30,043				29,319
Total			67,081				58,621

 

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		06-30-2014				12-31-2013
c) OTHER RECEIVABLES – Other
Miscellaneous receivables			372,205				284,581
Prepayments			326,728				309,925
Guarantee deposits			326,146				309,390
Tax prepayments			259,003				258,899
Loans to personnel			189,292				189,700
Other			15,356				6,909
Total			1,488,730				1,359,404
d) OTHER SUBSIDIARIES’ ASSETS
Other related to pension fund management business			450				450
Total			450				450
e) OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS - Other
Accounts payable for consumption			1,506,801				1,193,215
Other withholdings and collections at source			551,686				457,246
Collections and other operations for the account of third parties			417,138				342,912
Money orders payable			321,174				327,967
Pending Banelco debit transactions			111,736				120,570
Fees collected in advance			105,734				105,860
Social security payment orders pending settlement			76,945				6,484
Loans received from Fondo Tecnológico Argentina (FONTAR) and Banco de Inversión y Comercio Exterior (BICE)			42,843				46,882
Loans received from Interamerican Development Bank (IDB)			6,267				3,229
Other			35,156				44,180
Total			3,175,480				2,648,545
f) OTHER LIABILITIES – Other
Accrued taxes			854,775				674,707
Miscellaneous payables			702,635				509,472
Accrued salaries and payroll taxes			353,018				398,013
Amounts collected in advance			219,544				169,278
Other			1,548				1,308
Total			2,131,520				1,752,778
g) OTHER SUBSIDIARIES’ LIABILITIES
Other related pension fund management business			337				337
Total			337				337

 

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		06-30-2014				12-31-2013
h) MEMORANDUM ACCOUNTS – DEBIT – CONTROL – Other
Securities representative of investment in custody safekeeping on behalf of the Guarantee Fund for the Sustainability of the Pay-as-you-go System managed by the Argentine Republic			66,654,932				121,633,179
Items in safekeeping			39,569,905				26,289,843
Checks not yet credited			3,793,686				3,347,400
Collections items			932,467				686,371
Checks drawn on the Bank pending clearing			783,299				602,976
Cash in custody on behalf of the BCRA			156,148				52,144
Other			621,427				772,895
Total			112,511,864				153,384,808
		06-30-2014				06-30-2013
i) SERVICE CHARGE INCOME - Other
Commissions for hiring of insurances			244,692				154,648
Rental of safe-deposit boxes			69,114				53,436
Commissions for loans and guaranties			23,221				70,535
Commissions on debit and credit cards			23,000				18,763
Commissions for transportations of values			12,740				10,301
Commissions for escrow			10,404				10,376
Commissions for capital market transactions			6,561				9,237
Commissions for salary payment			4,681				4,541
Commissions for trust management			888				490
Other			37,181				24,864
Total			432,482				357,191
j) SERVICE CHARGE EXPENSE - Other
Turn-over tax			152,308				112,735
Insurance paid on lease transactions			52,534				23,871
Other			6,455				9,458
Total			211,297				146,064
k) OTHER INCOME – Other
Income from the Credit Card Guarantee Fund			32,352				6,711
Interest on loans to personnel			15,483				13,938
Related parties expenses recovery			14,524				11,900
Deferred income tax (1)			2,600				154,900
Other			38,570				21,829
Total			103,529				209,278

(1) Offset by a charge for the same amount in the line Charge for uncollectibility of other receivables and other allowances under the caption Other expense item.

 

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		06-30-2014				06-30-2013
l) OTHER EXPENSE – Other
Turn-over tax			6,681				3,623
Donations			6,138				4,531
Insurance losses			5,255				6,360
Private health insurance for former employees			4,853				3,976
Other			19,418				10,347
Total			42,345				28,837

 

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EXHIBIT 1

 

CONSOLIDATED CLASSIFICATION OF FINANCING FACILITIES BY

CATEGORIES AND GUARANTIES RECEIVED

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 19 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
COMMERCIAL PORTFOLIO
Normal performance			20,931,475				20,260,306
Preferred collaterals and counter guaranties “A”			834,197				779,621
Other collaterals and counter guaranties “B”			820,358				595,147
Without senior security or counter guaranties			19,276,920				18,885,538
With special follow-up			1,860				19,473
Under observation			—,—				15,428
Without senior security or counter guaranties			—,—				15,428
Negotiations for recovery or re-financing agreements underway			1,860				4,045
Preferred collaterals and counter guaranties “B”			—,—				786
Without senior security or counter guaranties			1,860				3,259
Non-performing			18,682				2,717
Preferred collaterals and counter guaranties “B”			862				—,—
Without senior security or counter guaranties			17,820				2,717
With high risk of uncollectibility			25,012				27,632
Other collaterals and counter guaranties “B”			338				338
Without senior security or counter guaranties			24,674				27,294
Uncollectible			—,—				10,035
Without senior security or counter guaranties			—,—				10,035
Total			20,977,029				20,320,163

 

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EXHIBIT 1

(Contd.)

 

CONSOLIDATED CLASSIFICATION OF FINANCING FACILITIES BY

CATEGORIES AND GUARANTIES RECEIVED

AS OF JUNE 30, 2014 AND DECEMBER 31, 2013

(Translation of financial statements originally issued in Spanish - See note 18 to the stand-alone Financial Statements)

-Stated in thousands of pesos-

 

		06-30-2014				12-31-2013
CONSUMER AND HOUSING PORTFOLIO
Normal performance			20,351,873				19,339,695
Preferred collaterals and counter guaranties “A”			16,840				20,369
Other collaterals and counter guaranties “B”			3,703,790				3,821,776
Without senior security or counter guaranties			16,631,243				15,497,550
Low risk			290,124				222,672
Other collaterals and counter guaranties “B”			84,450				64,575
Without senior security or counter guaranties			205,674				158,097
Medium risk			205,257				140,262
Other collaterals and counter guaranties “B”			23,364				19,317
Without senior security or counter guaranties			181,893				120,945
High risk			112,644				82,219
Other collaterals and counter guaranties “B”			35,186				27,635
Without senior security or counter guaranties			77,458				54,584
Uncollectible			31,907				31,742
Other collaterals and counter guaranties “B”			17,119				21,254
Without senior security or counter guaranties			14,788				10,488
Uncollectible, classified as such under regulatory requirements			122				137
Other collaterals and counter guaranties “B”			6				37
Without senior security or counter guaranties			116				100
Total			20,991,927				19,816,727
General Total (1)			41,968,956				40,136,890

(1) Items included: Loans (before allowances); Other receivables from financial transactions: Unlisted corporate bonds and Other receivables covered by debtor classification regulations; Receivables from financial leases (before allowances); Memorandum accounts – Credit – Contingent: Credit lines granted (unused portion) covered by debtor classification regulations, Other guaranties given covered by debtor classification regulations and Other covered by debtor classification regulations.

 

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INFORMATIVE SUMMARY OF ACTIVITY FOR THE SIX MONTH PERIOD

ENDED ON JUNE 30, 2014

(Consolidated amounts – Stated in thousand Pesos)

BBVA Francés develops a universal banking strategy and has a strong presence in different market segments: corporate, small and medium enterprises and retail. Thanks to the commercial actions implemented and the strength of the Bank’s corporate culture, the Bank stands out in the market and maintains a leading position.

Within the present-day context, the Bank has outstanding liquidity and solvency levels, the best portfolio quality ratio in the system, good performance and a solid relationship with the Bank’s clients.

BBVA Francés is made up by a broad, countrywide network of branches that includes 275 customer service points, 245 of which are retail branches, 30 offices devoted to small and medium enterprises and institutions and 7 business units divided by industry and grouped by purchase behavior that provide personalized service to corporate customers. Besides, the Bank’s distribution network is further supplemented by 13 in-store banks, 2 points of sales, 659 ATMs and 731 self-service terminals.

In terms of activity, the Bank’s portfolio of loans to the private sector totaled 37,910,089 as of June 30, 2014, which points to an 20.3% growth rate in the last twelve months of the year and 3.4% in the quarter.

In the first half of 2014, credit growth exhibited a system-wide slowdown. This notwithstanding, BBVA Francés has continued with different commercial actions strongly focused on supplying customers with the best benefits.

In the retail segment, the Bank continued to drive forward the credit card product offering the most highly valued discounts and promotions, which resulted in 58.4% growth in the past year and 8.1% in the quarter. As to pledge and consumer loans, they grew by 14.1% and 11% in the past twelve months and they showed a slight negative variation in the quarter.

Besides, in the commercial segment, the Bank continued to prioritize the needs of Institutional and Agro clients, offering them different financing tools available to the segment.

As to portfolio quality, the Bank has been able to maintain the best indicators in the Argentine financial system within an environment that has shown signs of deterioration. As of June 30, 2014, the portfolio quality ratio (Non-performing loans/Total loans) was 0.94% with a level of coverage (Total loan loss provisions/Non-performing loans) of 217.9%.

The portfolio of Government securities, net of repurchase agreements, totaled 2,257,352 and represented 3.3% of the Bank’s Total assets as of June 30, 2014. Besides, the instruments issued by the Argentine Central Bank, net of repurchase agreements, totaled 5,778,841 as of that date: since they are short-term, they are used in order to allocate liquidity.

Total clients’ resources totaled 48,049,643, indicative of 30.3% growth in the last twelve months. In the same period, term deposits grew by 31.9% whilst sight deposits grew by 17.8%. Whilst total deposits in the quarter grew by 7.1% with sight balances increasing by 10.7% whilst term deposits dropped slightly, which thus improved the funding mix.

On July 18, 2014, the Entity issued Classes 10 and 11 of its Corporate Bonds, which were fully subscribed and paid in for an amount of 233,750 for an 18-month term and for 165,900 for a 36-month term, respectively.

Corporate bonds were also issued by PSA Finance during the year, and there were some that fell due as well. As of June 30, 2014 the principal balance (plus accrued interest) amounts to 461,320. The proceeds from all of the series were used to grant loans for the acquisition of cars.

BBVA Francés maintains sufficient levels of liquidity and solvency. As of June 30, 2014, liquid assets (Cash and cash equivalents plus Government and Private securities) represented 45.2% of the Bank’s deposits. Besides, the capital ratio was at 15.8% of risk-weighted assets. The Bank surpassed capital minimum requirements by 4,360,047.

BBVA Francés’ net income was of 1,761,169, as of June 30, 2014

As of June 30, 2014 the Financial income - net totaled 3,887,391, which points to 88.1% growth compared to the same period of 2013. The reasons for such growth are to be found in the increase in intermediation with the private sector and the increase in prices and also in the major increase in the line Foreign exchange gains and other, which includes

 

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forward transactions in foreign currency. In turn, the quarterly comparison shows a decrease of 41.3% due to the appreciation of the foreign exchange rate occurred in January 2014 and the losses incurred in the Government securities portfolio during the second quarter of 2014.

Income from services – net totaled 1,542,651, which points to 33.9% compared to accumulated amount as of June 30, 2013, whilst, compared to the previous quarter, the increase was 11.7%. These increases were mainly driven by higher credit card consumptions and increases in activities recorded in deposit accounts, as well as in the commissions provided by PSA Finance. Whilst expenses from services reflect an increase in the fees paid associated to promotions with debit and credit cards.

Administrative expenses, again, recorded a balance of 2,548,078 at the end of June 2014, growing by 36.9% compared to the prior year and 8.8% in the quarter. The increase in personnel expenses registers the salary raises agreed with the working union, whilst overhead expenses accompany the level of activity and the adjustment in general prices observed during the period.

Outlook

BBVA Francés will continue to work focused on 3 main areas: transactionality, quality and development of digital banking.

The transactional plan is central to the Bank’s business strategy and seeks to position BBVA Francés as its customers preferred bank and as the bank through which customers handle all of their collections and payments and to build loyalty in the relationship. This plan involves all of the Bank’s areas, be them retail, enterprises, and Corporate & Investment Banking and consolidates the motto of applying a customer-centric vision. This spans three dimensions: comprehensiveness, profitability and loyalty. Such change of focus is in response to the needs arising from the specific conditions of the current market and prioritizes a cultural change in how the liabilities which generate a major contribution to spreads and recurring commissions are managed. The plan comprises actions undertaken together by the three banking segments in which each one has its own challenges to increase transactionality, for instance:

 

•

Retail Banking developed multi-segment strategies with a proposal that draws a distinction and is in line with the customer’s profile.

 

•

Enterprise Banking has a two-fold focus: on one hand, it aspires to increase the sale of transactional products and on the other hand it seeks to develop the payroll plan. As to the Agro segment, commercial actions include campaigns, participation in fairs and auctions and new alliances. At Institutions, the offering of products has been segmented and campaigns are deployed at professional associations.

 

•

Corporate & Investment Banking will drive forward an improvement in the offering of products for collections, payments and electronic banking for companies.

This plan is one of the strategic focuses for the year and it lays down a superior value proposition supported by service quality as the differential aspect.

As concerns Quality, the Bank will continue to work on the continuous improvement project associated to how the customer experiences the Bank and the objectives are to achieve differentiation in the quality of the service offered and to raise the level of customer referrals. The goal for 2014 is to maintain the best customer satisfaction indicator and succeed in leading the market. The Plan to Improve Customer Experience works on 4 pillars: a better understanding of customers, an improvement in the processes that have a high impact on quality perception, furtherance of a customer service culture and definition of both a governance model and a quality measurement methodology.

Within a context of constant technological changes, customers are increasingly connected and look for a stronger relationship with the Bank through multiple contact alternatives. Warranting special mention amongst these alternatives are e-mails, social media, web-pages and mobile apps. It is for this reason that the development of digital banking is a priority to BBVA Group. To encourage the use of Francés Net, the Bank modified the steps to take for subscribing to the electronic account statement that allows customers to adhere to their whole range of current and future products. This is not a mere operational change. It also has to do with how the Entity sees its customers: in a comprehensive and unified manner. Besides, the process has started to re-design the Web page as well as Francés Net: they will soon be displaying a refreshed image and will focus on user experience and new features that will render it more user friendly and agile for all customers.

Early this year, the Bank launched its “Mobile banking” application. It is a new app for smartphones that allows users to operate easily, fast and safely from any smart telephone. This new technological development at the Entity provides users with the following functions: Queries: overall position, products (accounts, credit cards, term deposits, escrow accounts, loans), movements (accounts and cards); Transfers; Password Management and ATM and Branch locator.

 

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CONSOLIDATED BALANCE SHEET STRUCTURE COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

(Stated in thousands of pesos)

 

		06-30-2014				06-30-2013				06-30-2012				06-30-2011				06-30-2010
Total Assets			68,366,053				49,308,628				39,592,599				33,042,764				28,350,630
Total Liabilities			59,271,631				43,433,980				35,053,001				29,720,241				25,342,083
Minority Interest in subsidiaries			205,873				143,097				99,970				75,253				226,991
Stockholders’ Equity			8,888,549				5,731,551				4,439,628				3,247,270				2,781,556
Total Liabilities + Minority Interest in subsidiaries + Stockholders’ Equity			68,366,053				49,308,628				39,592,599				33,042,764				28,350,630

 

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CONSOLIDATED STATEMENT OF INCOME STRUCTURE COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

(Stated in thousands of pesos)

 

		06-30-2014				06-30-2013				06-30-2012				06-30-2011				06-30-2010
Financial income			3,887,391				2,066,838				1,701,900				1,031,793				1,161,546
Allowances for loan losses			(270,473	)			(208,633	)			(77,315	)			(32,955	)			(69,719	)
Income from services			1,542,651				1,152,442				855,160				646,987				512,734
Administrative expenses			(2,548,078	)			(1,861,877	)			(1,419,060	)			(1,095,678	)			(931,761	)
Net gain from financial transactions			2,611,491				1,148,770				1,060,685				550,147				672,800
Miscellaneous income and expenses – net			98,495				24,399				(7,877	)			124,992				(215,094	)
Results of minority interest in subsidiaries			(44,498	)			(25,116	)			(16,230	)			(1,606	)			(13,810	)
Income tax			(904,319	)			(548,438	)			(465,207	)			(281,047	)			(80,849	)
Net income for the period			1,761,169				599,615				571,371				392,486				363,047

 

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CONSOLIDATED CASH FLOWS STRUCTURE COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

(Stated in thousands of pesos)

 

		06-30-2014				06-30-2013				06-30-2012				06-30-2011				06-30-2010
Net cash flow (used in) / provided by operating activities			(489,473	)			699,341				633,174				5,378,421				2,059,021
Net cash flow used in investment activities			(584,870	)			(419,763	)			(359,235	)			(191,841	)			(143,835	)
Net cash flow used in financing activities			(339,723	)			(680,033	)			(276,489	)			(4,106,283	)			(604,171	)
Financial results and results from holdings of cash and cash equivalents (including interest)			—,—				54				—,—				1				9
Total cash (used) / provided during the period			(1,414,066	)			(400,401	)			(2,550	)			1,080,298				1,311,024

 

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STATISTICAL DETAILS COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

(year-over-year variations in balances)

 

		06-30-2014/13				06-30-2013/12				06-30-2012/11				06-30-2011/10				06-30-2010/09
Total Loans			20.41	%			32.68	%			28.45	%			40.64	%			12.02	%
Total Deposits			30.30	%			22.72	%			15.28	%			29.72	%			7.59	%
Net Income			193.72	%			4.94	%			45.58	%			8.11	%			145.77	%
Stockholders’ Equity			55.08	%			29.10	%			36.72	%			16.74	%			23.87	%

 

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RATIOS COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

 

		06-30-2014				06-30-2013				06-30-2012				06-30-2011				06-30-2010
Solvency (1)			14.94	%			13.15	%			12.63	%			10.90	%			10.88	%
Liquidity (2)			45.20	%			33.95	%			40.48	%			45.25	%			63.84	%
Tied-up capital (3)			2.64	%			1.64	%			1.74	%			1.97	%			2.17	%
Indebtedness (4)			6.69				7.60				7.92				9.18				9.19

 

(1)	Total Shareholders’ equity/Liabilities (including minority interests in subsidiaries)

(2)	Sum of Cash and cash equivalents and Government and Private securities/Deposits

(3)	Sum of Premises and equipment, other assets and Intangible assets/Assets

(4)	Total Liabilities (including minority interests in subsidiaries)/Shareholders’ equity

 

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INDEPENDENT AUDITORS’ LIMITED REVIEW REPORT

To the President and the Board of Directors of

BBVA BANCO FRANCÉS S.A.

Reconquista 199

City of Buenos Aires

 

1.	Identification of the financial statements subject to our review

We have reviewed:

 

a)

the accompanying interim financial statements of BBVA BANCO FRANCÉS S.A. (“BBVA Francés” or the “Bank”), which comprise the balance sheet as of June 30, 2014 and the statement of income, statement of changes in stockholders´ equity and cash and cash equivalents flow for the six-month period then ended, with their notes 1 to 19 (notes 2 and 4 describe a summary of significant accounting policies), and supplemental Exhibits “A” through “L”, “N” and “O”; and

 

b)

the accompanying consolidated financial statements of BBVA Francés and its subsidiaries (listed in note 1 to the consolidated financial statements), which comprise the consolidated balance sheet as of June 30, 2014 and the consolidated statement of income and the consolidated cash and cash equivalents flow for the six-month period then ended, with their notes 1 to 7 (note 2 describe a summary of significant accounting policies) and the supplemental Exhibit 1.

The interim financial statements and certain related supplemental information detailed in paragraphs a) and b) above, are presented for comparative purposes with the financial statements (both stand-alone and the consolidated financial statements) and supplemental information for the year ended December 31, 2013 and for the six-month period ended June 30, 2013.

The Bank is responsible for the preparation and fair presentation of such financial statements in conformity with applicable accounting standards. It is also responsible for the existence of internal control considered necessary to enable the presentation of financial statements free from material misstatement, whether due to errors or omissions or to irregularities. Our responsibility is to issue a limited review report on such interim financial statements, based on our limited review performed in accordance with the scope described in caption 2 of this report.

 

2.	Scope of our review

Our review was conducted in accordance with standards set forth by Technical Pronouncement N° 7 of the Argentine Federation of Professional Councils in Economic Sciences and the “Minimum Standards applicable for External Audits” established by the Argentine Central Bank (B.C.R.A.) for the limited reviews of interim financial statements. These standards determine a scope which is substantially less than the application of all auditing procedures necessary to be able to issue an audit opinion on financial statements taken as a whole. Accordingly, we do not express an opinion on the financial position of the Bank as of June 30, 2014, on the results of its operations, the changes in its stockholders´ equity and its cash and cash equivalents flow for the six-month period then ended.

 

3.	Explanatory paragraph

The interim stand-alone and consolidated financial statements referred to in paragraphs a) and b) of caption 1 of this report have been prepared by the Bank in accordance with the accounting standards established by the B.C.R.A., which differ from the Argentine professional accounting standards concerning the matters indicated in note 3 to the stand-alone financial statements and in note 2 to the consolidated financial statements.

 

4.	Limited review report

Based on our limited review procedures performed with the scope indicated in caption 2 of this report, we are in position to report that:

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a)

the interim financial statements of BBVA Francés both individually and consolidated with its subsidiaries companies mentioned in paragraphs a) and b) of caption 1 of this report, give consideration to all the significant facts and circumstances of which we are aware of, and

 

b)

we have no observations to present on the referred financial statements, other than those indicated under caption 3.

Our Independent Auditors´ Report on the financial statements for the year ended December 31, 2013, whose figures are presented for comparative proposes and relate to those included in the financial statements corresponding to such fiscal year, was issued on February 19, 2014 and was qualified due to certain departures from Argentine professional accounting standards, described in note 3 to the stand-alone financial statements and in note 2 to the consolidated financial statements.

Our Independent Auditors´ Limited Review Report on the interim financial statements for the six-month period ended June 30, 2013, whose figures are presented for comparative proposes and relate to those included in the financial statements corresponding to such interim period, was issued on August 8, 2013, including an observation referred to certain departures from Argentine professional accounting standards, described in note 3 to the stand-alone financial statements and in note 2 to the consolidated financial statements.

 

5.	English translation of statutory financial statements

This report and the financial statements referred to in caption 1 have been translated into English for the convenience of English-speaking readers. As further explained in note 19 to the accompanying stand-alone financial statements, the financial statements (both the stand-alone and the consolidated financial statements) are the English translation of those originally prepared by the Bank in Spanish and presented in accordance with the accounting standards of B.C.R.A. and except for the matters described in caption 3, with the Argentine professional accounting standards. The effects of the differences between the accounting standards of B.C.R.A. and the Argentine professional accounting standards, and the accounting principles generally accepted in the countries in which the financial statements are to be used have not been quantified. Accordingly, the accompanying financial statements are not intended to present the financial position, results of operations, stockholders’ equity or cash and cash equivalents flow in accordance with accounting principles generally accepted in the countries of users of the financial statements, other than Argentina.

City of Buenos Aires, August 8, 2014.

MARCELO BASTANTE

Partner

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		BBVA French Bank S.A.
Date: August 19, 2014		By:		/s/ Ignacio Sanz y Arcelus
				Name:		Ignacio Sanz y Arcelus
				Title:		Chief Financial Officer