BFR Bbva Banco Frances S.A.

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

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

of the Securities Exchange Act of 1934

For the month of November, 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 September  30, 2014 together with Independent Auditors´ Limited Review Report

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		FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2014 TOGETHER WITH INDEPENDENT AUDITORS’ LIMITED REVIEW REPORT.

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

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

-Stated in thousands of pesos-

 

ASSETS:		09-30-2014				12-31-2013
A. CASH AND DUE FROM BANKS:
Cash				2,320,882				2,063,190
Due from banks and correspondents				10,149,801				10,782,106
Argentine Central Bank (BCRA)				9,803,241				10,546,478
Other local				2,458				2,795
Foreign				344,102				232,833
				12,470,683				12,845,296
B. GOVERNMENT AND PRIVATE SECURITIES:
Holdings booked at fair value (Exhibit A)				2,562,936				1,982,038
Holdings booked at amortized cost (Exhibit A)				164				164
Instruments issued by the BCRA (Exhibit A)				7,031,106				1,408,487
Investments in listed private securities (Exhibit A)				384				90
Less: Allowances (Exhibit J)				204				196
				9,594,386				3,390,583
C. LOANS:
To government sector (Exhibits B, C and D)				51,945				40,915
To financial sector (Exhibits B, C and D)				2,267,379				2,879,947
Interfinancial – (Call granted)				60,000				280,000
Other financing to local financial institutions				1,740,850				2,172,548
Interest and listed-price differences accrued and pending collection				466,529				427,399
To non financial private sector and residents abroad (Exhibits B, C and D)				37,850,594				32,740,843
Overdraft				7,311,296				6,552,258
Discounted instruments				6,303,691				5,476,961
Real estate mortgage				1,387,004				1,243,900
Collateral Loans				1,457,802				1,178,092
Consumer				5,977,109				5,998,691
Credit cards				9,383,445				7,429,187
Other				5,562,745				4,446,498
Interest and listed-price differences accrued and pending collection				598,675				547,469
Less: Interest documented together with main obligation				131,173				132,213
Less: Allowances (Exhibit J)				839,712				680,651
				39,330,206				34,981,054
D. OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (BCRA)				452,910				624,368
Amounts receivable for spot and forward sales to be settled				3,805,054				260,046
Instruments to be received for spot and forward purchases to be settled				1,965,684				72,567
Unlisted corporate bonds (Exhibits B, C and D)				40,397				9,713
Non-deliverable forward transactions balances to be settled				89,430				8,266
Other receivables not covered by debtor classification regulations				1,454				4,135
Other receivables covered by debtor classification regulations (Exhibits B, C and D)				222,009				172,342
Less: Allowances (Exhibit J)				1,575				1,209
				6,575,363				1,150,228
E. RECEIVABLES FROM FINANCIAL LEASES:
Receivables from financial leases (Exhibits B, C and D)				1,909,868				1,699,070
Interest accrued pending collection (Exhibits B, C and D)				25,807				20,692
Less:  Allowances (Exhibit J)				25,318				21,186
				1,910,357				1,698,576
F. INVESTMENTS IN OTHER COMPANIES:
In financial institutions (Exhibit E)				469,216				316,688
Other (Note 5.a.) (Exhibit E)				148,471				143,411
				617,687				460,099
G. OTHER RECEIVABLES:
Other (Note 5.b.)				1,481,591				1,276,095
Other interest accrued and pending collection				658				3,478
Less:  Allowances (Exhibit J)				309,677				277,334
				1,172,572				1,002,239
H. PREMISES AND EQUIPMENT (Exhibit F):				806,963				704,406
I. OTHER ASSETS (Exhibit F):				1,029,575				646,702
J. INTANGIBLE ASSETS (Exhibit G):
Organization and development expenses				142,959				120,637
				142,959				120,637
K. SUSPENSE ITEMS:				7,720				5,291
TOTAL ASSETS:				73,658,471				57,005,111

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(Contd.)

 

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

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

-Stated in thousands of pesos-

 

LIABILITIES:		09-30-2014				12-31-2013
L. DEPOSITS (Exhibits H and I):
Government sector				3,835,304				2,780,304
Financial sector				32,224				45,961
Non financial private sector and residents abroad				45,775,669				40,948,509
Checking accounts				13,151,814				9,958,520
Savings deposits				12,633,809				11,903,124
Time deposits				18,689,581				17,914,786
Investments accounts				677				4,027
Other				984,806				916,985
Interest and listed-price differences accrued payable				314,982				251,067
				49,643,197				43,774,774
M. OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (Exhibit I)				78,275				93,746
Other				78,275				93,746
Banks and International Institutions (Exhibit I)				492,815				106,178
Unsubordinated corporate bonds (Exhibit I)				1,425,003				621,357
Amounts payable for spot and forward purchases to be settled				1,966,265				63,298
Instruments to be delivered for spot and forward sales to be settled (Exhibit O)				3,830,247				273,672
Non-deliverable forward transactions balances to be settled				322				46,755
Other (Note 5.c.) (Exhibit I)				3,600,819				2,525,646
Interest and listed-price differences accrued payable (Exhibit I)				63,926				24,319
				11,457,672				3,754,971
N. OTHER LIABILITIES:
Other (Note 5.d.)				2,313,821				1,666,844
				2,313,821				1,666,844
O. ALLOWANCES (Exhibit J):				692,819				622,704
P. SUSPENSE ITEMS:				33,443				29,638
TOTAL LIABILITIES:				64,140,952				49,848,931
STOCKHOLDERS’ EQUITY: (as per the related statements of changes in stockholders’ equity)				9,517,519				7,156,180
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY:				73,658,471				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-

 

		09-30-2014				12-31-2013
DEBIT ACCOUNTS
Contingent
–      Guaranties received				11,171,341				9,731,412
–      Contra contingent debit accounts				1,483,744				1,290,370
				12,655,085				11,021,782
Control
–      Receivables classified as irrecoverable				556,818				421,809
–      Other (Note 5.e.)				131,402,961				153,376,373
–      Contra control debit accounts				1,150,978				1,523,153
				133,110,757				155,321,335
Derivatives (Exhibit O)
–      “Notional” amount of non-deliverable forward transactions				4,387,582				5,414,377
–      Interest rate swap				1,170,205				1,520,738
–      Contra derivatives debit accounts				3,952,992				1,871,743
				9,510,779				8,806,858
For trustee activities
–      Funds in trust				6,605				6,582
				6,605				6,582
TOTAL				155,283,226				175,156,557
CREDIT ACCOUNTS
Contingent
–      Credit lines granted (unused portion) covered by debtor classification regulations (Exhibits B, C and D)				514,182				453,478
–      Guaranties provided to the BCRA				198,013				191,303
–      Other guaranties given covered by debtor classification regulations (Exhibits B, C and D)				325,859				287,575
–      Other guaranties given non covered by debtor classification regulations				198,541				158,783
–      Other covered by debtor classification regulations (Exhibits B, C and D)				247,149				199,231
–      Contra contingent credit accounts				11,171,341				9,731,412
				12,655,085				11,021,782
Control
–      Items to be credited				1,007,989				1,186,195
–      Other				142,989				336,958
–      Contra control credit accounts				131,959,779				153,798,182
				133,110,757				155,321,335
Derivatives (Exhibit O)
–      “Notional” amount of non-deliverable forward transactions				3,952,992				1,871,743
–      Contra derivatives credit accounts				5,557,787				6,935,115
				9,510,779				8,806,858
For trustee activities
–      Contra credit accounts for trustee activities				6,605				6,582
				6,605				6,582
TOTAL				155,283,226				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 NINE MONTH PERIODS

ENDED SEPTEMBER 30, 2014 AND 2013

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

- Stated in thousands of pesos -

 

		09-30-2014				09-30-2013
A. FINANCIAL INCOME
Interest on cash and due from banks				--,--				54
Interest on loans to the financial sector				480,939				359,988
Interest on overdraft				1,541,460				882,203
Interest on discounted instruments				900,901				537,418
Interest on real estate mortgage				170,660				115,432
Interest on collateral loans				223,473				164,802
Interest on credit card loans				1,369,713				674,299
Interest on other loans				2,001,550				1,556,380
Interest on other receivables from financial transactions				3,795				29,425
Interest on financial leases				228,470				159,149
Income from secured loans - Decree 1387/01				12,727				6,553
Net income from government and private securities				1,153,756				316,692
Indexation by benchmark stabilization coefficient (CER)				252,211				100,130
Gold and foreign currency exchange difference				755,865				270,055
Other				541,955				261,566
				9,637,475				5,434,146
B. FINANCIAL EXPENSE
Interest on savings deposits				14,104				10,536
Interest on time deposits				3,172,480				1,605,065
Interest on interfinancial financing (call borrowed)				6,408				3,479
Interest on other financing from financial institutions				5				--,--
Interest on other liabilities from financial transactions				231,899				39,182
Other interest				6,296				4,877
Indexation by CER				142				79
Contribution to the deposit guarantee fund				58,824				45,731
Other				582,141				334,168
				4,072,299				2,043,117
GROSS INTERMEDIATION MARGIN – GAIN				5,565,176				3,391,029
C. ALLOWANCES FOR LOAN LOSSES				413,511				297,284
D. SERVICE CHARGE INCOME
Related to lending transactions				1,146,126				798,811
Related to liability transactions				1,087,394				827,347
Other commissions				111,388				72,676
Other (Note 5.f.)				666,711				543,709
				3,011,619				2,242,543
E. SERVICE CHARGE EXPENSE
Commissions				571,384				417,679
Other (Note 5.g.)				304,980				216,872
				876,364				634,551

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(Contd.)

 

STATEMENTS OF INCOME FOR THE NINE MONTH PERIODS

ENDED SEPTEMBER 30, 2014 AND 2013

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

- Stated in thousands of pesos -

 

 

		09-30-2014				09-30-2013
F. ADMINISTRATIVE EXPENSES
Payroll expenses				2,381,270				1,617,331
Fees to Bank Directors and Supervisory Committee				3,723				2,825
Other professional fees				39,433				33,560
Advertising and publicity				162,956				134,913
Taxes				346,683				240,221
Fixed assets depreciation				97,517				72,801
Organizational expenses amortization				42,881				35,795
Other operating expenses				562,036				407,498
Other				442,285				311,267
				4,078,784				2,856,211
NET GAIN FROM FINANCIAL TRANSACTIONS				3,208,136				1,845,526
G. OTHER INCOME
Income from long-term investments				282,432				125,555
Punitive interests				18,554				9,852
Loans recovered and reversals of allowances				98,159				68,653
Other (Note 5.h.)				157,031				245,179
				556,176				449,239
H. OTHER EXPENSE
Punitive interests and charges paid to BCRA				15				19
Charge for uncollectibility of other receivables and other allowances				157,909				280,605
Amortization of difference arising from judicial resolutions Depreciation and losses from miscellaneous assets				11,139 249				20,970 229
Other (Note 5.i)				59,861				43,329
				229,173				345,152
NET GAIN BEFORE INCOME TAX				3,535,139				1,949,613
I. INCOME TAX (Note 4.1)				1,145,000				789,300
NET INCOME FOR THE PERIOD				2,390,139				1,160,313

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 NINE MONTH PERIODS ENDED SEPTEMBER 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				--,--				--,--				--,--				--,--					--,--					2,390,139					2,390,139				1,160,313
		4.		Balance at the end of the period				536,878				182,511				312,979				1,900,721					4,194,291					2,390,139					9,517,519				6,292,249

 

(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

NINE MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013

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

-Stated in thousands of pesos-

 

		09-30-2014										09-30-2013
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					13,300,398				(1)						8,490,691				(1)
Net decrease in cash and cash equivalents					(303,793)										(630,297)
REASONS FOR CHANGES IN CASH AND CASH EQUIVALENTS
Operating activities
Net collections/ (payments) from:
- Government and private securities					(4,617,128)										(1,375,889)
- Loans					3,354,941										268,727
to financial sector					289,378										(92,782)
to non-financial public sector					(414)										(40,059)
to non-financial private sector and residents abroad					3,065,977										401,568
- Other receivables from financial transactions					15,461										7,445
- Receivables from financial leases					(211,781)										(422,416)
- Deposits					2,067,495										3,373,581
to financial sector					(13,737)										(1,861)
to non-financial public sector					1,060,741										280,454
to non-financial private sector and residents abroad					1,020,491										3,094,988
- Other liabilities from financial transactions					1,046,984										310,192
Financing from financial or interfinancial sector (call borrowed)					--,--										14,600
Others (except liabilities included in Financing Activities)					1,046,984										295,592
Collections related to service charge income					3,012,943										2,238,425
Payments related to service charge expense					(873,191)										(633,542)
Administrative expenses paid					(3,896,898)										(2,701,034)
Organizational and development expenses paid					(28,129)										(34,562)
Net collections from punitive interest					18,539										9,833
Differences from judicial resolutions paid					(11,139)										(20,970)
Collections of dividends from other companies					54,716										33,654
Other collections related to other income and expenses					187,723										261,325
Net cash flows provided by operating activities					120,536										1,314,769
Investment activities
Net payments from premises and equipment					(147,199)										(78,068)
Net collections from other assets					(463,331)										(493,901)
Other payments from investment activities					(147,696)										(322,321)
Net cash flows used in investment activities					(758,226)										(894,290)
Financing activities
Net collections / (payments) from:
- Unsubordinated corporate bonds					803,646										(84,093)
- Argentine Central Bank					(15,336)										31,841
Other					(15,336)										31,841
- Banks and international agencies					386,637										(262,770)
- Financing received from local financial institutions					--,--										(400)
Cash dividends					28,800										--,--
Other payments related to financing activities					(812,250)										(735,408)
Net cash flows provided by / (used in) financing activities					333,897										(1,050,830)
Financial results and results from holdings of cash and cash equivalents (including interest)					--,--										54
Net decrease in cash and cash equivalents					(303,793)										(630,297)

 

(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 SEPTEMBER 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 SEPTEMBER 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 248-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 75.93% of the corporate stock as of September 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:

 

 

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:

 

-

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. The proceeding to register the Bank as a Settlement and Clearing Agent – Comprehensive started on December 17, 2013 and was completed on September 19, 2014 when the Bank was registered under Number 42.

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 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).

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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 September 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 September 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 September 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 September 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 September 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 September 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 September 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 September 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 September 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 September 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 September 30, 2014 and the end of the previous fiscal year.

 

j)

Receivables from financial leases:

As of September 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:

 

•

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.

 

•

Banelco S.A.: was valued by applying the equity method at the end of the previous fiscal year.

 

-

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 September 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 1,430,122 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 September 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.

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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.

 

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 September 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 September 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 September 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.

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t)

Earning per share:

As of September 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:

 

 

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 245,400 and 231,100 as of September 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 September 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 9,144 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 September 30, 2014 and 2013 would have been 47,677 (income) and 7,797 (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 September 30, 2014 and 2013, the Bank recorded 1,145,000 and 789,300, 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 September 30, 2014 and the end of the previous fiscal year, the Bank has booked 632,099 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 September 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 245,400 and 231,100, respectively. Such amounts are made up as follows:

 

		09-30-2014				12-31-2013
Deferred tax assets			466,000				412,100
Deferred tax liabilities			(220,600)				(181,000)
Net deferred assets			245,400				231,100
Allowance			(245,400)				(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 September 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:

 

		09-30-2014					12-31-2013
a)     INVESTMENTS IN OTHER COMPANIES
In controlled companies-supplementary activities				97,629					95,199
In other non-controlled companies-unlisted				39,053					29,302
In non-controlled companies-supplementary activities				11,789					18,910
Total				148,471					143,411
b)     OTHER RECEIVABLES
Guarantee deposits				341,184					309,390
Prepayments				330,054					309,864
Miscellaneous receivables				327,467					207,941
Tax prepayments (1)				268,578					252,455
Loans to personnel				185,421					189,700
Advances to personnel				27,873					6,238
Other				1,014					507
Total				1,481,591					1,276,095

 

(1)

As of September 30, 2014 and the end of the previous fiscal year, it includes the deferred tax asset for 245,400 and 231,100, respectively (see note 4.1.).

c)     OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS
Accounts payable for consumption				1,837,926										1,193,215
Other withholdings and collections at source				595,027										457,110
Collections and other operations for the account of third parties				509,957										342,912
Money orders payable				468,080										327,967
Social security payment orders pending settlement				80,942										6,484
Loans received from Fondo Tecnológico Argentina (FONTAR) and Banco de Inversión y Comercio Exterior (BICE)				38,241										46,882
Pending Banelco debit transactions				34,728										120,570
Funds raised from third parties				16,725										17,255
Accrued commissions payable				8,781										5,608
Loans received from Interamerican Development Bank (IDB)				5,522										3,229
Other				4,890										4,414
Total				3,600,819										2,525,646

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		09-30-2014					12-31-2013
d)     OTHER LIABILITIES
Accrued taxes				848,251					608,584
Miscellaneous payables				702,586					494,208
Accrued salaries and payroll taxes				435,756					394,268
Amounts collected in advance				325,837					169,278
Other				1,391					506
Total				2,313,821					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				68,303,382					121,633,179
Items in safekeeping				56,701,761					26,281,408
Checks not yet credited				3,996,067					3,347,400
Collections items				840,229					686,371
Checks drawn on the Bank pending clearing				696,567					602,976
Cash in custody on behalf of the BCRA				297,943					52,144
Other				567,012					772,895
Total				131,402,961					153,376,373

		09-30-2014					09-30-2013
f)     SERVICE CHARGE INCOME
Commissions for hiring of insurances				375,479					246,003
Rental of safe-deposit boxes				107,209					82,271
Commissions on debit and credit cards				36,709					31,389
Commissions for loans and guaranties				28,654					97,807
Commissions for transportations of values				20,066					15,262
Commissions for escrow				15,077					14,608
Commissions for capital market transactions				9,086					10,746
Commissions for salary payment				6,914					6,944
Commissions for trust management				1,459					922
Other				66,058					37,757
Total				666,711					543,709
g)     SERVICE CHARGE EXPENSE
Turn-over tax				210,148					162,188
Insurance paid on lease transactions				83,158					40,387
Other				11,674					14,297
Total				304,980					216,872

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		09-30-2014					09-30-2013
h)     OTHER INCOME
Income from the Credit Card Guarantee Fund				44,481					13,894
Related parties expenses recovery				39,265					17,037
Interest on loans to personnel				23,246					21,184
Deferred income tax (1)				14,300					164,500
Other				35,739					28,564
Total				157,031					245,179

(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
Donations				11,039					9,366
Turn-over tax				7,774					5,794
Insurance losses				7,681					8,894
Private health insurance for former employees				7,279					5,965
Other				26,088					13,310
Total				59,861					43,329

 

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 September 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 198,000 in peso-denominated Discount Bonds 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 9,669 in Guaranteed Bonds maturing in 2020 as of September 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 188,810 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 794,911 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 September 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			109,354				21,976				104,471				53,269				33,986				26,740
BBVA Francés Valores S.A			87				--,--				1,359				4,583				11,289				10,661
Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings)			1				1				666				24,513				24,138				49,339
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			546				243				11,427				23,765				33,607				42,548
BBVA Consolidar Seguros S.A.			36,195				18,314				24,719				23,972				16,946				--,--
PSA Finance Argentina Cía. Financiera S.A.			1,100,654				1,054,573				4,043				8,760				224,003				373,879
Rombo Cía. Financiera S.A.			748,349				1,063,677				3,401				9,733				382,752				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. Pursuant to BCRA’s Communication “A” 5641 and to be in force as from November 2014, the amount of the guarantee will be pesos three hundred and fifty thousand.

 

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 September 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.

Besides, the Bank in its capacity as Trustee in the Corp Banca Trust recorded the selected assets on account of the redemption in kind of participation certificates for 4,177 as of September 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 150,888 and 99,373 as of September 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

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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.

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.

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.

On August 26, 2014, the Bank approved the issuance of Class 12 and 13 of its Corporate Bonds under the Program for a joint principal amount of up to $500.000.000. The subscription period started on October 31, 2014. The date of issuance shall be November 13, 2014.

As of September 30, 2014 and the end of the previous fiscal year, the outstanding principal and accrued interest amounts to 1,482,801 (in connection with Class 4, 6, 7, 8, 9, 10 and 11 of the Corporate Bonds) and 644,164 (in connection with Class 4, 6 and 7 of the Corporate Bonds), respectively.

 

12.

DERIVATIVE FINANCIAL INSTRUMENTS

 

I.

Transactions as of September 30, 2014:

 

a)

Interest rate swaps for 1,127,103 (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 5,000 (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.

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These transactions have been valued in accordance with the criteria described in note 2.3.n.1.) recognizing the amount of 4,304 as loss for the period.

The estimated fair value of said instruments amounts to 16,534 (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 1,132,103.

 

b)

Interest rate swap for 38,102 (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 38,102.

 

c)

Non-deliverable forward purchase and sale transactions in foreign currency payable in Pesos, maturing within a period not exceeding 1 year, for 4,387,582 and 3,952,992, 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 474,233 as income for the period.

 

d)

Forward sales of BCRA Bills under repurchase agreements for 1,760,610 and of Government securities for 134,502, 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 25,415 as income for the period.

 

e)

The Bank does not carry any pending balances associated to reverse repos in force at September 30, 2014. However, the transactions conducted at September 30, 2014 have yielded a 5,733 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.

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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.

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:

According to CNV’s General Resolution No. 622/13, the minimum Stockholders’ Equity required to operate as “Settlement and Clearing Agent – Comprehensive” 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 September 30, 2014, and the end of the previous fiscal year, the Bank’s Stockholders’ Equity exceeds the minimum amount imposed by CNV.

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13.2 Investment Funds custodian

As of September 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”, “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 4,602,160 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		09-30-2014										12-31-2013
FBA Renta Pesos									2,216,748										1,460,275
FBA Ahorro Pesos									2,568,062										541,736
FBA Calificado									331,870										126,513
FBA Horizonte									71,280										47,322
FBA Acciones Latinoamericanas									78,059										41,623
FBA Bonos Argentina									20,155										5,096
FBA Acciones Argentinas									992										468
FBA Bonos Globales									182										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									5,287,348										2,386,511

(*) On August 30, 2013, BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión decided to start the process of liquidation of FBA Renta Dólares, FBA Ahorro Dólares, FBA Renta Fija, FBA Renta Premium and 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.

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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 September 30, 2014 and the end of the previous fiscal year:

 

		09-30-14				12-31-13
COMPUTABLE COMPLIANCE IN PESOS
Special Guarantee Accounts			231,884				224,634
BCRA Checking Account			5,201,006				5,357,009
Special social security accounts			74,080				--,--
Franchises			--,--				81,944
TOTAL			5,506,970				5,663,587
COMPUTABLE COMPLIANCE IN US DOLLARS (Stated in thousands of pesos)
Special Guarantee Accounts			34,298				26,411
BCRA Checking Account			4,470,749				5,147,476
TOTAL			4,505,047				5,173,887
COMPUTABLE COMPLIANCE IN EUROS (Stated in thousands of pesos)
BCRA Checking Account			56,590				40,957
TOTAL			56,590				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:

 

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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.

 

17.

THE BANK’S DOCUMENTATION AND RECORDS – CNV RESOLUTION No. 629/14

CNV issued its General Resolution No. 629 on August 14, 2014 to introduce changes in its own rules governing the maintenance and safekeeping of corporate books, accounting records and business documentation. In this respect, it is reported that the Bank has sent the documentation that supports its operations for the periods still open to audit for safekeeping to Administradora de Archivos S.A. (AdeA), domiciled at Ruta 36 Km. 31.5 of Florencio Varela, Province of Buenos Aires.

In addition, it is put on record that a detail of the documentation delivered for safekeeping, as well as the documentation referred to in Article 5, Sub-article a.3), Section I of Chapter V of Title II of the CNV rules is available at the Bank’s registered office (Technical Rules 2013 as modified).

 

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 SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

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

- Stated in thousands of pesos -

 

 

				Holding
								Book balance								Book balance								Position
		ID		Market				as of								as of								without								Final
		Caja de		value or
Description		Valores		present value				09-30-2014								12-31-2013								options								position
GOVERNMENT SECURITIES
Government securities at fair value
Local
In pesos
Secured Bonds due 2020		2423											1,146,234																1,146,234								1,146,234
Peso-denominated Discount governed by Argentine Law maturing in 2033		45696											451,091																451,091								451,091
Federal Government Bonds in Pesos Badlar + 200 bp due 2017		5460											388,400																388,400								388,400
Federal Government Bonds in Pesos Badlar + 200 bp due 2017		5459											189,684																189,684								189,684
Federal Government Bonds in Pesos Badlar + 300 bp due 2015		5441											91,048																--,--								--,--
Other													52,622																31,938								31,938
Subtotal in pesos													2,319,079								1,110,448								2,207,347								2,207,347
In foreign currency
Argentine Bond of Saving towards economic development		5456											193,147																193,147								193,147
Federal Government Bonds in US Dollars 7% due 2015		5433											27,940																--,--								--,--
Other													22,770																--,--								--,--
Subtotal in foreign currency													243,857								871,590								193,147								193,147
Subtotal Government securities at fair value													2,562,936								1,982,038								2,400,494								2,400,494
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 SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

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

- Stated in thousands of pesos -

 

				Holding
						Book balance								Book balance								Position
		ID		Market		as of								as of								without								Final
		Caja de		value or
Description		Valores		present value		09-30-2014								12-31-2013								options								position
Instruments issued by the BCRA
BCRA Bills
At fair value
Argentine Central Bank Internal Bills due 10-15-14		46274									333,644																333,644								333,644
Argentine Central Bank Internal Bills due 10-29-14		46575									52,385																52,385								52,385
Argentine Central Bank Internal Bills due 10-22-14		46602									38,646																42,589								42,589
Argentine Central Bank Internal Bills due 10-01-14		46270									21,085																21,085								21,085
Other											18,373																18,373								18,373
Subtotal at fair value											464,133								495								468,076								468,076
Repurchase transactions
Argentine Central Bank Internal Bills due 01-28-15		46291									975,547																--,--								--,--
Argentine Central Bank Internal Bills due 09-16-15		46615									700,378																--,--								--,--
Argentine Central Bank Internal Bills due 12-24-14		46574									84,685																--,--								--,--
Subtotal repurchase transactions											1,760,610								39,882								--,--								--,--
At amortized cost
Argentine Central Bank Internal Bills due 07-01-15		46603									456,365																456,365								456,365
Argentine Central Bank Internal Bills due 02-18-15		46578									430,691																430,691								430,691
Argentine Central Bank Internal Bills due 04-22-15		46591									390,528																390,528								390,528
Argentine Central Bank Internal Bills due 06-03-15		46596									372,244																372,244								372,244
Argentine Central Bank Internal Bills due 01-28-15		46291									329,476																329,547								329,547
Argentine Central Bank Internal Bills due 12-17-14		46282									323,745																314,282								314,282
Argentine Central Bank Internal Bills due 02-04-15		46296									309,065																309,065								309,065
Argentine Central Bank Internal Bills due 05-27-15		46595									297,518																297,518								297,518
Argentine Central Bank Internal Bills due 03-04-15		46590									288,615																288,615								288,615
Argentine Central Bank Internal Bills due 05-20-15		46594									277,160																277,160								277,160
Argentine Central Bank Internal Bills due 03-25-15		46587									265,749																265,749								265,749
Argentine Central Bank Internal Bills due 11-19-14		46573									236,597																236,597								236,597
Argentine Central Bank Internal Bills due 07-08-15		46605									206,404																206,404								206,404
Argentine Central Bank Internal Bills due 06-10-15		46597									168,359																168,359								168,359
Argentine Central Bank Internal Bills due 01-07-15		46284									134,200																134,200								134,200
Argentine Central Bank Internal Bills due 07-15-15		46604									106,867																106,867								106,867
Argentine Central Bank Internal Bills due 01-14-15		46572									52,232																52,232								52,232
Argentine Central Bank Internal Bills due 11-26-14		46541									26,936																26,936								26,936
Argentine Central Bank Internal Bills due 12-24-14		46574									24,528																988								988
Argentine Central Bank Internal Bills due 01-21-15		46287									23,873																23,873								23,873
Argentine Central Bank Internal Bills due 02-11-15		46577									--,--																199,493								199,493
Other											33,328																24,916								24,916
Subtotal at amortized cost											4,754,480								1,232,715								4,912,629								4,912,629
BCRA Notes
Repurchase transactions
Subtotal repurchase transactions											--,--								135,395								--,--								--,--
At amortized cost
Argentine Central Bank Notes – In Pesos – Variable Badlar coupon due 11-05-14		46592									51,883																51,883								51,883
Subtotal at amortized cost											51,883								--,--								51,883								51,883
Subtotal instruments issued by the BCRA											7,031,106								1,408,487								5,432,588								5,432,588
TOTAL GOVERNMENT SECURITIES											9,594,206								3,390,689								7,833,246								7,833,246

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EXHIBIT A

(Contd.)  

 

DETAIL OF GOVERNMENT AND PRIVATE SECURITIES

AS OF SEPTEMBER 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  09-30-2014								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									268																268								268
Subtotal in pesos											268								--,--								268								268
From abroad
In foreign currency
Silicon Graphics Inc.		6003									76																76								76
Other											40																40								40
Subtotal in foreign currency											116								90								116								116
Subtotal Equity instruments											384								90								384								384
TOTAL INVESTMENTS IN LISTED PRIVATE SECURITIES											384								90								384								384
TOTAL GOVERNMENT AND PRIVATE SECURITIES											9,594,590								3,390,779								7,833,630								7,833,630

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EXHIBIT B

CLASSIFICATION OF FINANCING FACILITIES BY CATEGORIES

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

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

-Stated in thousands of pesos-

 

		09-30-2014					12-31-2013
COMMERCIAL PORTFOLIO
Normal performance				24,045,407					21,239,671
Preferred collaterals and counter guaranties “A”				934,280					779,621
Preferred collaterals and counter guaranties “B”				798,028					577,055
Without senior security or counter guaranties				22,313,099					19,882,995
With special follow-up				4,232					19,473
Under observation				4,232					15,428
Preferred collaterals and counter guaranties “B”				1,872					--,--
Without senior security or counter guaranties				2,360					15,428
Negotiations for recovery or re-financing agreements underway				--,--					4,045
Preferred collaterals and counter guaranties “B”				--,--					786
Without senior security or counter guaranties				--,--					3,259
Non-performing				15,361					2,717
Preferred collaterals and counter guaranties “B”				829					--,--
Without senior security or counter guaranties				14,532					2,717
With high risk of uncollectibility				3,544					27,632
Preferred collaterals and counter guaranties “B”				--,--					338
Without senior security or counter guaranties				3,544					27,294
Uncollectible				28,586					10,035
Preferred collaterals and counter guaranties “B”				4,088					--,--
Without senior security or counter guaranties				24,498					10,035
Total				24,097,130					21,299,528

 

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EXHIBIT B

(Contd.)   

 

CLASSIFICATION OF FINANCING FACILITIES BY CATEGORIES

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

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

-Stated in thousands of pesos-

 

		09-30-2014					12-31-2013
CONSUMER AND HOUSING PORTFOLIO
Normal performance				18,849,410					16,814,083
Preferred collaterals and counter guaranties “A”				18,835					20,369
Preferred collaterals and counter guaranties “B”				1,638,067					1,524,188
Without senior security or counter guaranties				17,192,508					15,269,526
Low risk				201,287					178,283
Preferred collaterals and counter guaranties “B”				21,436					23,784
Without senior security or counter guaranties				179,851					154,499
Medium risk				179,109					128,909
Preferred collaterals and counter guaranties “B”				7,184					9,231
Without senior security or counter guaranties				171,925					119,678
High risk				107,563					68,101
Preferred collaterals and counter guaranties “B”				18,924					15,004
Without senior security or counter guaranties				88,639					53,097
Uncollectible				20,584					14,802
Preferred collaterals and counter guaranties “B”				7,269					6,403
Without senior security or counter guaranties				13,315					8,399
Uncollectible, classified as such under regulatory requirements				106					100
Without senior security or counter guaranties				106					100
Total				19,358,059					17,204,278
General Total (1)				43,455,189					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 SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

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

- Stated in thousands of pesos -

 

		09-30-2014										12-31-2013
Number of clients		Outstanding    balance					% of total      portfolio					Outstanding    balance					% of total      portfolio
10 largest clients				4,602,030					10.59%					4,236,449					11.00%
50 next largest clients				6,962,438					16.02%					5,680,349					14.75%
100 following clients				4,377,795					10.07%					3,998,701					10.39%
Remaining clients				27,512,926					63.32%					24,588,307					63.86%
Total (1)				43,455,189					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 SEPTEMBER 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					1 month					3 months					6 months					12 months					24 months					More than 24  months					Total
Government sector				--,--					467					--,--					--,--					--,--					--,--					51,478					51,945
Financial sector				--,--					653,488					168,956					339,534					682,917					432,040					18,500					2,295,435
Non financial private sector and residents abroad				140,596					17,761,806					4,670,255					4,719,423					3,789,206					4,674,330					5,352,193					41,107,809
TOTAL				140,596					18,415,761					4,839,211					5,058,957					4,472,123					5,106,370					5,422,171					43,455,189			(1)

 

(1)	See (1) in Exhibit B.

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EXHIBIT E

DETAIL OF INVESTMENTS IN OTHER COMPANIES

AS OF SEPTEMBER 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				09-30-2014				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				23,640				17,960			Stockholder		09-30-2014			6,390				24,372				5,855
30663323926		Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings)		Common			1$			1			35,425,947				5,611				8,272			Pensions fund manager		09-30-2014			65,739				10,413				2,670
30707847367		PSA Finance Arg. Cía Financiera S.A.		Common			1,000$			1			26,089				241,090				164,652			Financial institution		09-30-2014			52,178				482,180				152,876
30548590163		BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión		Common			1$			1			230,398				68,378				68,967			Investment Fund Manager		09-30-2014			243				118,197				45,601
33707124909		Rombo Cía. Financiera S.A.		Common			1,000$			1			24,000				225,996				150,396			Financial Institution		09-30-2014			60,000				564,991				189,001
				Subtotal controlled													564,715				410,247
		Non controlled
		Local
30598910045		Visa Argentina S.A.		Common			1$			1			1,571,996				6,428				6,428			Services to companies		05-31-2014			15,000				356,378				295,046
30690783521		Interbanking S.A.		Common			1$			1			149,556				5,111				3,571			Services		12-31-2013			1,346				161,375				129,239
30604796357		Banelco S.A.															--,--				8,654			Information services
		Other															250				257
		Foreign
30710156561		Banco Lat. de Comercio Exterior S.A.		Common B			43$			1			20,221				2,130				1,640			Banking institution		12-31-2013			1,824,910				5,592,131				552,420
				Subtotal noncontrolled													13,919				20,550
				Total in financial institutions, supplementary and authorized													578,634				430,797
		IN OTHER COMPANIES
		Non controlled
		Local
30500064230		BBVA Consolidar Seguros S.A.		Common			1$			1			1,301,847				38,947				29,220			Insurance		09-30-2014			10,651				318,714				15,616
		Foreign
		Other															106				82
				Subtotal non controlled													39,053				29,302
				Total in other companies													39,053				29,302
				Total investments in other companies													617,687				460,099

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EXHIBIT F

MOVEMENT OF PREMISES AND EQUIPMENT AND OTHER ASSETS

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 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  09-30-2014					Net book value at  12-31-2013
																						Years of  useful life					Amount
PREMISES AND EQUIPMENT
Real Estate				370,879					8,132					42,070					33,810					50					18,541					368,730					370,879
Furniture and Facilities				208,917					114,983					1,239					8					10					25,734					299,397					208,917
Machinery and Equipment				119,477					30,742					35,535					--,--					3 & 5					52,060					133,694					119,477
Automobiles				5,133					1,205					--,--					14					5					1,182					5,142					5,133
Total				704,406					155,062					78,844					33,832										97,517					806,963					704,406
OTHER ASSETS
Construction in progress				80,662					98,001					(43,324)					29,523					--,--					--,--					105,816					80,662
Advances to suppliers of goods				486,010					407,981					--,--					51,278					--,--					--,--					842,713					486,010
Works of Art				992					--,--					--,--					--,--					--,--					--,--					992					992
Leased assets				2,294					--,--					--,--					--,--					50					35					2,259					2,294
Property taken as security for loans				2,423					617					--,--					468					50					71					2,501					2,423
Stationery and office supplies				7,844					25,271					--,--					13,994					--,--					--,--					19,121					7,844
Other				66,477					25,359					(35,520)					--,--					50					143					56,173					66,477
Total				646,702					557,229					(78,844)					95,263										249					1,029,575					646,702

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EXHIBIT G

MOVEMENT OF INTANGIBLE ASSETS

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 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					Amortization for the     period
												Years of useful life					Amount					Net book value   at 09-30-2014					Net book value  at 12-31-2013
Organization and development expenses (1)				120,637					65,203					1 & 5					42,881					142,959					120,637
Organization and development non-deductible expenses				--,--					11,139					--,--					11,139					--,--					--,--
Total				120,637					76,342										54,020					142,959					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 SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

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

- Stated in thousands of pesos -

 

		09-30-2014										12-31-2013
Number of clients		Outstanding    balance					% of total      portfolio					Outstanding      balance					% of total      portfolio
10 largest clients				6,562,805					13.22%					4,549,211					10.39%
50 next largest clients				4,826,916					9.72%					5,081,876					11.61%
100 following clients				2,937,406					5.92%					3,051,769					6.97%
Remaining clients				35,316,070					71.14%					31,091,918					71.03%
TOTAL				49,643,197					100.00%					43,774,774					100.00%

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		- 39 -

 

EXHIBIT I

BREAKDOWN OF MATURITY TERMS OF DEPOSITS AND

OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS

AS OF SEPTEMBER 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				44,909,698					4,035,975					590,106					106,611					807					--,--					49,643,197
Other liabilities from financial transactions
Argentine Central Bank				4,210					3,942					6,067					12,154					25,454					26,448					78,275
Banks and International Institutions				274,724					222,995					--,--					--,--					--,--					--,--					497,719
Unsubordinated corporate bonds				30,206					27,592					250,000					380,237					233,750					561,016					1,482,801
Other				3,559,555					2,481					4,370					7,592					14,517					13,528					3,602,043
Total				3,868,695					257,010					260,437					399,983					273,721					600,992					5,660,838
TOTAL				48,778,393					4,292,985					850,543					506,594					274,528					600,992					55,304,035

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EXHIBIT J

MOVEMENT OF ALLOWANCES

FOR NINE MONTH PERIOD ENDED SEPTEMBER 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				09-30-2014						12-31-2013
DEDUCTED FROM ASSETS
Government securities
–      For impairment value				196					8				(4)						--,--					--,--					204						196
Loans
–      Allowance for doubtful loans				680,651					417,700				(1)						--,--					258,639					839,712						680,651
Other receivables from financial transactions
–      Allowance for doubtful receivables and impairment				1,209					366				(1)						--,--					--,--					1,575						1,209
Receivables from financial leases
–      Allowance for doubtful receivables and impairment				21,186					9,303				(1)						--,--					5,171					25,318						21,186
Other receivables
–      Allowance for doubtful receivables (2)				277,334					35,110										2,604					163					309,677						277,334
Total				980,576					462,487										2,604					263,973					1,176,486						980,576
LIABILITIES-ALLOWANCES
–      Contingents commitments (1)				539					34										--,--					--,--					573						539
–      Other contingencies				622,165					125,152				(3)						5,138					49,933					692,246						622,165
Total				622,704					125,186										5,138					49,933					692,819						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			4,551
–		Other receivables from financial transaction			4
–		Other receivables			3,170

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EXHIBIT K

CAPITAL STRUCTURE AS OF SEPTEMBER 30, 2014

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

- Stated in thousands of pesos -

 

 

SHARES								CAPITAL STOCK
Class		Quantity				Votes per share		Issued								Pending issuance or								Paid in
								Outstanding				In portfolio				distribution
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

SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

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

-Stated in thousands of pesos-

 

Accounts				09-30-2014																										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				5,362,225				236,133				5,106,243				3,995				706				397				14,751				5,912,615
Government and private securities				252,432				--,--				252,392				--,--				--,--				--,--				40				871,680
Loans				2,819,889				--,--				2,819,889				--,--				--,--				--,--				--,--				1,134,400
Other receivables from financial transactions				389,693				12				389,681				--,--				--,--				--,--				--,--				100,620
Receivables from financial leases				--,--				--,--				--,--				--,--				--,--				--,--				--,--				61
Investments in other companies				2,236				106				2,130				--,--				--,--				--,--				--,--				1,722
Other receivables				141,915				13,415				128,500				--,--				--,--				--,--				--,--				135,361
Suspense items				450				--,--				450				--,--				--,--				--,--				--,--				562
TOTAL				8,968,840				249,666				8,699,285				3,995				706				397				14,791				8,157,021
LIABILITIES
Deposits				5,105,827				81,247				5,024,580				--,--				--,--				--,--				--,--				4,720,888
Other liabilities from financial transactions				1,966,393				120,794				1,840,845				2,031				99				136				2,488				816,105
Other liabilities				149,104				6,456				142,648				--,--				--,--				--,--				--,--				118,440
Suspense items				1,042				--,--				1,042				--,--				--,--				--,--				--,--				571
TOTAL				7,222,366				208,497				7,009,115				2,031				99				136				2,488				5,656,004
MEMORANDUM ACCOUNTS
Debit accounts (except contra debit accounts)
Contingent				2,606,836				139,661				2,467,175				--,--				--,--				--,--				--,--				1,873,226
Control				39,684,033				243,119				39,438,663				--,--				--,--				954				1,297				95,729,619
TOTAL				42,290,869				382,780				41,905,838				--,--				--,--				954				1,297				97,602,845
Credit accounts (except contra credit accounts)
Contingent				508,918				82,995				421,873				--,--				--,--				4,050				--,--				620,570
Control				42,001				747				41,254				--,--				--,--				--,--				--,--				268,945
TOTAL				550,919				83,742				463,127				--,--				--,--				4,050				--,--				889,515

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		- 43 -

 

EXHIBIT N

ASSISTANCE TO RELATED CLIENTS AND AFFILIATES

AS OF SEPTEMBER 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												09-30-2014				12-31-2013
1.     Loans			1,935,657				--,--				--,--				--,--				--,--				--,--				--,--				--,--				1,935,657				2,109,132
-   Overdraft			6,883				--,--				--,--				--,--				--,--				--,--				--,--				--,--				6,883				151
Without senior security or counter guaranty			6,883				--,--				--,--				--,--				--,--				--,--				--,--				--,--				6,883				151
-   Discounted Instruments			2,602				--,--				--,--				--,--				--,--				--,--				--,--				--,--				2,602				--,--
Without senior security or counter guaranty			2,602				--,--				--,--				--,--				--,--				--,--				--,--				--,--				2,602				--,--
-   Real Estate Mortgage and Collateral Loans			2,413				--,--				--,--				--,--				--,--				--,--				--,--				--,--				2,413				2,488
Other collaterals and counter guaranty “B”			2,413				--,--				--,--				--,--				--,--				--,--				--,--				--,--				2,413				2,488
-   Consumer			4,287				--,--				--,--				--,--				--,--				--,--				--,--				--,--				4,287				3,504
Without senior security or counter guaranty			4,287				--,--				--,--				--,--				--,--				--,--				--,--				--,--				4,287				3,504
-   Credit Cards			4,062				--,--				--,--				--,--				--,--				--,--				--,--				--,--				4,062				3,906
Without senior security or counter guaranty			4,062				--,--				--,--				--,--				--,--				--,--				--,--				--,--				4,062				3,906
-   Other			1,915,410				--,--				--,--				--,--				--,--				--,--				--,--				--,--				1,915,410				2,099,083
Without senior security or counter guaranty			1,915,410				--,--				--,--				--,--				--,--				--,--				--,--				--,--				1,915,410				2,099,083
2.     Other receivables from financial transactions			38,543				--,--				--,--				--,--				--,--				--,--				--,--				--,--				38,543				37,835
3.     Receivables from financial leases and other			372				--,--				--,--				--,--				--,--				--,--				--,--				--,--				372				171
4.     Contingent commitments			60,996				--,--				--,--				--,--				--,--				--,--				--,--				--,--				60,996				109,297
5.     Investments in other companies and private securities			571,401				--,--				--,--				--,--				--,--				--,--				--,--				--,--				571,401				442,054
Total			2,606,969				--,--				--,--				--,--				--,--				--,--				--,--				--,--				2,606,969				2,698,489
Total Allowances			19,397				--,--				--,--				--,--				--,--				--,--				--,--				--,--				19,397				20,878

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

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		- 44 -

 

EXHIBIT O

 

FINANCIAL DERIVATIVES INSTRUMENTS

AS OF SEPTEMBER 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		21		11		46			1,132,103
Swaps		Interest rate hedge		-		Upon expiration of differences		Residentes in Argentina – Non - financial sector		122		60		6			38,102
Futures		Financial transactions – own account		Foreign currency		Upon expiration of differences		MAE		4		3		1			7,454,354
Futures		Financial transactions – own account		Foreign currency		Upon expiration of differences		ROFEX		2		2		1			886,220
Repo transactions		Financial transactions – own account		Federal Government Bonds		Upon expiration of differences		Residents in Argentina – Financial sector		1		1		1			134,502
Repo transactions		Financial transactions – own account		Other		Upon expiration of differences		Residents in Argentina – Financial sector		1		1		1			1,760,610
TOTAL																	11,405,891

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		- 45 -

 

CONSOLIDATED BALANCE SHEETS AS OF

SEPTEMBER 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-

 

ASSETS:		09-30-2014						12-31-2013
A. CASH AND DUE FROM BANKS:
Cash					2,320,900						2,063,205
Due from banks and correspondents					10,218,539						10,818,576
Argentine Central Bank (BCRA)					9,863,256						10,576,744
Other local					2,522						2,846
Foreign					352,761						238,986
					12,539,439						12,881,781
B. GOVERNMENT AND PRIVATE SECURITIES (Note 7.a):
Holdings booked at fair value					2,563,512						1,982,431
Holdings booked at amortized cost					164						164
Instruments issued by the BCRA					7,031,106						1,408,487
Investments in listed private securities					64,504						69,049
Less: Allowances					204						196
					9,659,082						3,459,935
C. LOANS:
To government sector (Exhibit 1)					51,945						40,915
To financial sector (Exhibit 1)					1,169,624						1,871,093
Interfinancial – (Call granted)					60,000						313,500
Other financing to local financial institutions					892,622						1,328,346
Interest and listed-price differences accrued and pending collection					217,002						229,247
To non financial private sector and residents abroad (Exhibit 1)					40,219,570						35,278,648
Overdraft					7,311,296						6,552,258
Discounted instruments					6,303,691						5,476,961
Real estate mortgage					1,387,004						1,243,900
Collateral Loans					3,641,853						3,479,820
Consumer					5,977,116						5,998,744
Credit cards					9,383,445						7,429,187
Other					5,708,632						4,647,736
Interest and listed-price differences accrued and pending collection					637,706						582,255
Less: Interest documented together with main obligation					131,173						132,213
Less: Allowances					876,623						722,462
					40,564,516						36,468,194
D. OTHER RECEIVABLES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank (BCRA)					452,910						624,368
Amounts receivable for spot and forward sales to be settled					3,805,054						260,046
Instruments to be received for spot and forward purchases to be settled					1,965,684						72,567
Unlisted corporate bonds (Exhibit 1)					40,397						3,401
Non-deliverable forward transactions balances to be settled					88,648						6,744
Other receivables not covered by debtor classification regulations					1,454						4,135
Other receivables covered by debtor classification regulations (Exhibit 1)					284,482						202,274
Less: Allowances					5,589						5,044
					6,633,040						1,168,491
E. RECEIVABLES FROM FINANCIAL LEASES:
Receivables from financial leases (Exhibit 1)					1,995,083						1,778,235
Interest accrued pending collection (Exhibit 1)					27,371						22,040
Less: Allowances					26,573						22,497
					1,995,881						1,777,778
F. INVESTMENTS IN OTHER COMPANIES:
In financial institutions					228,126						152,036
Other (Note 7.b)					61,320						58,621
					289,446						210,657
G. OTHER RECEIVABLES:
Other (Note 7.c)					1,583,501						1,359,404
Other interest accrued and pending collection					658						3,478
Less: Allowances					345,511						297,585
					1,238,648						1,065,297
H. PREMISES AND EQUIPMENT:					812,537						704,995
I. OTHER ASSETS:					1,063,345						659,997
J. INTANGIBLE ASSETS:
Organization and development expenses					143,124						120,755
					143,124						120,755
K. SUSPENSE ITEMS:					7,764						5,294
L. OTHER SUBSIDIARIES’ ASSETS (Note 7.d):					450						450
TOTAL ASSETS:					74,947,272						58,523,624

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		- 46 -

 

(Contd.)

 

CONSOLIDATED BALANCE SHEETS AS OF

SEPTEMBER 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-

LIABILITIES:		09-30-2014						12-31-2013
M. DEPOSITS:
Government sector					3,835,304						2,780,304
Financial sector					32,224						45,961
Non financial private sector and residents abroad					45,869,065						40,933,200
Checking accounts					13,146,444						9,947,241
Savings deposits					12,624,616						11,902,472
Time deposits					18,791,556						17,910,820
Investments accounts					677						4,027
Other					984,806						916,985
Interest and listed-price differences accrued payable					320,966						251,655
					49,736,593						43,759,465
N. OTHER LIABILITIES FROM FINANCIAL TRANSACTIONS:
Argentine Central Bank					78,275						93,746
Other					78,275						93,746
Banks and International Institutions					492,815						106,178
Unsubordinated corporate bonds					1,761,479						1,190,761
Amounts payable for spot and forward purchases to be settled					1,966,265						63,298
Instruments to be delivered for spot and forward sales to be settled					3,830,247						273,672
Financing received from Argentine financial institutions					261,811						426,238
Interfinancial (call borrowed)					102,800						--,--
Other financings from local financial institutions					158,967						426,238
Interest accrued payable					44						--,--
Non-deliverable forward transactions balances to be settled					573						47,245
Other (Note 7.e)					3,743,360						2,648,545
Interest and listed–price differences accrued payable					99,056						93,577
					12,233,881						4,943,260
O. OTHER LIABILITIES:
Fees payable					149						189
Other (Note 7.f)					2,422,591						1,752,778
					2,422,740						1,752,967
P. ALLOWANCES:					755,887						709,343
Q. SUSPENSE ITEMS:					33,513						29,677
R. OTHER SUBSIDIARIES’ LIABILITIES (Note 7.g):					337						337
TOTAL LIABILITIES:					65,182,951						51,195,049
S. MINORITY INTEREST IN SUBSIDIARIES (Note 4):					246,802						172,395
STOCKHOLDERS’ EQUITY:					9,517,519						7,156,180
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY:					74,947,272						58,523,624

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		- 47 -

 

MEMORANDUM ACCOUNTS

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

- Stated in thousands of pesos -

 

		09-30-2014						12-31-2013
DEBIT ACCOUNTS
Contingent
–         Guaranties received					13,456,632						12,125,408
–         Contra contingent debit accounts					1,483,744						1,290,370
					14,940,376						13,415,778
Control
–         Receivables classified as irrecoverable					572,490						432,256
–         Other (Note 7.h)					131,640,900						153,384,808
–         Contra control debit accounts					1,217,774						1,544,001
					133,431,164						155,361,065
Derivatives
–         “Notional” amount of non-deliverable forward transactions					4,387,582						5,414,377
–         Interest rate swap					1,058,986						1,367,098
–         Contra debit derivatives accounts					3,952,992						1,871,743
					9,399,560						8,653,218
For trustee activities
–         Funds in trust					6,605						6,582
					6,605						6,582
TOTAL					157,777,705						177,436,643
CREDIT ACCOUNTS
Contingent
–         Credit lines granted (unused portion) covered by debtor classification regulations (Exhibit 1)					514,182						453,478
–         Guaranties provided to the BCRA					198,013						191,303
–         Other guaranties given covered by debtor classification regulations (Exhibit 1)					325,859						287,575
–         Other guaranties given non covered by debtor classification regulations					198,541						158,783
–         Other covered by debtor classification regulations (Exhibit 1)					247,149						199,231
–         Contra contingent credit accounts					13,456,632						12,125,408
					14,940,376						13,415,778
Control
–         Items to be credited					1,007,989						1,186,195
–         Other					209,785						357,806
–         Contra control credit accounts					132,213,390						153,817,064
					133,431,164						155,361,065
Derivatives
–         “Notional” amount of non-deliverable forward transactions					3,952,992						1,871,743
–         Contra credit derivatives accounts					5,446,568						6,781,475
					9,399,560						8,653,218
For trustee activities
–         Contra credit accounts for trustee activities					6,605						6,582
					6,605						6,582
TOTAL					157,777,705						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 NINE MONTH PERIODS ENDED SEPTEMBER 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 -

		09-30-2014						09-30-2013
A. FINANCIAL INCOME
Interest on cash and due from banks					--,--						54
Interest on loans to the financial sector					274,681						225,629
Interest on overdraft					1,541,444						882,149
Interest on discounted instruments					900,901						537,418
Interest on real estate mortgage					170,660						115,432
Interest on collateral loans					589,638						426,140
Interest on credit card loans					1,369,713						674,299
Interest on other loans					2,023,070						1,577,757
Interest from other receivables from financial transactions					3,795						29,425
Interest on financial leases					245,513						168,837
Income from secured loans - Decree 1387/01					12,727						6,553
Net income from government and private securities					1,167,292						322,483
Indexation by CER					252,211						100,130
Gold and foreign currency exchange difference					760,205						273,949
Other					592,452						255,875
					9,904,302						5,596,130
B. FINANCIAL EXPENSE
Interest on savings deposits					14,104						10,536
Interest on time deposits					3,178,676						1,606,592
Interest on interfinancial financing (call borrowed)					14,537						4,898
Interest on other financing from financial institutions					59,950						69,865
Interest on other liabilities from financial transactions					326,978						106,801
Other interest					6,296						4,877
Indexation by CER					142						79
Contribution to the deposit guaranty fund					58,885						45,783
Other					606,080						355,862
					4,265,648						2,205,293
GROSS INTERMEDIATION MARGIN – GAIN					5,638,654						3,390,837
C. ALLOWANCES FOR LOAN LOSSES					422,340						311,521
D. SERVICE CHARGE INCOME
Related to lending transactions					1,450,471						1,039,483
Related to liability transactions					1,087,394						827,347
Other commissions					136,975						89,015
Other (Note 7.i)					666,704						543,704
					3,341,544						2,499,549
E. SERVICE CHARGE EXPENSE
Commissions					580,084						433,450
Other (Note 7.j)					330,887						235,029
					910,971						668,479

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(Contd.)

 

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 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 -

 

		09-30-2014						09-30-2013
F. ADMINISTRATIVE EXPENSES
Payroll expenses					2,404,697						1,643,760
Fees to Bank Directors and Supervisory Committee					3,911						2,968
Other professional fees					48,342						44,581
Advertising and publicity					164,639						136,252
Taxes					353,862						244,763
Fixed assets depreciation		.			97,620						72,887
Organizational expenses amortization					42,911						35,822
Other operating expenses					563,958						409,448
Other					448,917						314,229
					4,128,857						2,904,710
NET GAIN FROM FINANCIAL TRANSACTIONS					3,518,030						2,005,676
RESULTS OF MINORITY INTEREST IN SUBSIDIARIES					(74,407)						(38,343)
G. OTHER INCOME
Income from long-term investments					159,724						79,791
Punitive interests					20,389						11,017
Loans recovered and reversals of allowances					103,261						71,535
Other (Note 7.k)					145,883						237,465
					429,257						399,808
H. OTHER EXPENSE
Punitive interests and charges paid to BCRA					15						19
Charge for uncollectibility of other receivables and other allowances					159,441						290,668
Amortization of difference arising from judicial resolutions					11,139						20,970
Depreciation and losses from miscellaneous assets					549						229
Other (Note 7.l)					61,968						46,653
					233,112						358,539
NET GAIN BEFORE INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME					3,639,768						2,008,602
I. INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME					1,249,629						848,289
NET INCOME FOR THE PERIOD					2,390,139						1,160,313

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 NINE MONTH PERIODS ENDED SEPTEMBER 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-

		09-30-2014								09-30-2013
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					13,314,787			(1)					8,404,135				(1)
Net decrease in cash and cash equivalents					(288,833)								(644,315)
REASONS FOR CHANGES IN CASH AND CASH EQUIVALENTS
Operating activities
Net collections/ (payments) from:
- Government and private securities					(4,601,567)								(1,331,632)
- Loans					3,837,553								(176,923)
to financial sector					312,224								(84,645)
to non-financial public sector					(414)								(40,059)
to non-financial private sector and residents abroad					3,525,743								(52,519)
- Other receivables from financial transactions					6,002								7,045
- Receivables from financial leases					(218,103)								(446,007)
- Deposits					2,043,846								3,331,510
to financial sector					(13,737)								(1,861)
to non-financial public sector					1,060,741								280,454
to non-financial private sector and residents abroad					996,842								3,052,917
- Other liabilities from financial transactions					1,169,187								376,975
Financing from financial or interfinancial sector (call borrowed)					102,800								23,600
Others (except liabilities included in Financing Activities)					1,066,387								353,375
Collections related to service charge income					3,312,913								2,485,776
Payments related to service charge expense					(907,798)								(667,470)
Administrative expenses paid					(3,946,909)								(2,748,569)
Organizational and development expenses paid					(28,129)								(34,562)
Net collections from punitive interest					18,539								9,833
Differences from judicial resolutions paid					(11,139)								(20,970)
Collections of dividends from other companies					54,716								33,654
Other collections related to other income and expenses					336,027								331,243
Net cash flows provided by operating activities					1,065,138								1,149,903
Investment activities
Net payments from premises and equipment					(152,287)								(78,227)
Net payments from other assets					(484,106)								(497,466)
Other payments from investment activities					(354,465)								(417,276)
Net cash flows used in investment activities					(990,858)								(992,969)
Financing activities
Net collections / (payments) from:
- Unsubordinated corporate bonds					570,718								156,674
- Argentine Central Bank					(15,336)								31,841
Other					(15,336)								31,841
- Banks and international agencies					386,637								(262,770)
- Financing received from local financial institutions					(267,271)								123,350
Cash dividends					(28,800)								--,--
Other payments from financing activities					(1,009,061)								(850,398)
Net cash flows used in financing activities					(363,113)								(801,303)
Financial results and results from holdings of cash and cash equivalents (including interest)					--,--								54
Net decrease in cash and cash equivalents					(288,833)								(644,315)

(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 SEPTEMBER 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 SEPTEMBER 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 September 30, 2014 and the end of the previous fiscal year, and the statements of income and cash and cash equivalents flow for the nine month periods ended September 30, 2014 and 2013, as per the following detail:

 

–

As of September 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 nine month periods ended September 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 three month periods ended September 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 nine month period ended on September 30, 2014 and 2013.

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

 

		Shares												Interest percentage in
		Type				Quantity								Total Capital								Possible Votes
Companies						09-30-2014				12-31-2013				09-30-2014				12-31-2013				09-30-2014				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

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

 

		Assets								Liabilities								Stockholders’ Equity								Net income/ gain-(loss)
Companies		09-30-2014				12-31-2013				09-30-2014				12-31-2013				09-30-2014				12-31-2013				09-30-2014				09-30-2013
BBVA Francés Valores S.A.			33,814				25,477				9,442				6,960				24,372				18,517				5,855				1,559
Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)			69,273				97,950				58,860				82,600				10,413				15,350				(4,937)				(3,056)
PSA Finance Argentina Cía Financiera S.A.			2,544,780				2,692,580				2,062,600				2,363,276				482,180				329,304				152,876				79,390
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			144,444				80,684				26,247				8,088				118,197				72,596				45,601				6,541

 

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 Argentine 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 8,928 and 11,146 as of September 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.

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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 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:

 

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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 September 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:

 

				09-30-2014				12-31-2013				09-30-2013				12-31-2012
a)		Cash and due from banks			12,538,623				12,880,744				7,768,277				8,613,997
b)		Government securities			546,164				115,876				260,358				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			230,000				607,000				375,500				332,000
CASH AND CASH EQUIVALENTS					13,314,787				13,603,620				8,404,135				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:

 

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(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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EXHIBIT 1

CONSOLIDATED CLASSIFICATION OF FINANCING FACILITIES BY

CATEGORIES AND GUARANTIES RECEIVED

AS OF SEPTEMBER 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-

 

		09-30-2014				12-31-2013
COMMERCIAL PORTFOLIO
Normal performance			23,023,436				20,260,306
Preferred collaterals and counter guaranties “A”			934,280				779,621
Other collaterals and counter guaranties “B”			817,579				595,147
Without senior security or counter guaranties			21,271,577				18,885,538
With special follow-up			5,246				19,473
Under observation			5,246				15,428
Other collaterals and counter guaranties “B”			2,555				--,--
Without senior security or counter guaranties			2,691				15,428
Negotiations for recovery or re-financing agreements underway			--,--				4,045
Preferred collaterals and counter guaranties “B”			--,--				786
Without senior security or counter guaranties			--,--				3,259
Non-performing			15,361				2,717
Preferred collaterals and counter guaranties “B”			829				--,--
Without senior security or counter guaranties			14,532				2,717
With high risk of uncollectibility			3,544				27,632
Other collaterals and counter guaranties “B”			--,--				338
Without senior security or counter guaranties			3,544				27,294
Uncollectible			28,586				10,035
Other collaterals and counter guaranties “B”			4,088				--,--
Without senior security or counter guaranties			24,498				10,035
Total			23,076,173				20,320,163

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EXHIBIT 1

(Contd.)   

 

CONSOLIDATED CLASSIFICATION OF FINANCING FACILITIES BY

CATEGORIES AND GUARANTIES RECEIVED

AS OF SEPTEMBER 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-

 

		09-30-2014				12-31-2013
CONSUMER AND HOUSING PORTFOLIO
Normal performance			21,189,457				19,339,695
Preferred collaterals and counter guaranties “A”			18,835				20,369
Other collaterals and counter guaranties “B”			3,812,872				3,821,776
Without senior security or counter guaranties			17,357,750				15,497,550
Low risk			255,693				222,672
Other collaterals and counter guaranties “B”			71,624				64,575
Without senior security or counter guaranties			184,069				158,097
Medium risk			192,088				140,262
Other collaterals and counter guaranties “B”			18,819				19,317
Without senior security or counter guaranties			173,269				120,945
High risk			126,384				82,219
Other collaterals and counter guaranties “B”			35,305				27,635
Without senior security or counter guaranties			91,079				54,584
Uncollectible			35,761				31,742
Other collaterals and counter guaranties “B”			20,359				21,254
Without senior security or counter guaranties			15,402				10,488
Uncollectible, classified as such under regulatory requirements			106				137
Other collaterals and counter guaranties “B”			--,--				37
Without senior security or counter guaranties			106				100
Total			21,799,489				19,816,727
General Total (1)			44,875,662				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 NINE MONTH PERIOD

ENDED ON SEPTEMBER 30, 2014

(Consolidated amounts – Stated in thousand Pesos)

In accordance with the guidelines laid down by Grupo BBVA, BBVA Francés has added a Digital Banking division to the Transformation Department for the purpose of improving customer experience in all channels. Besides, in the course of this three month period, 3 new branches were opened, thus broadening the network to 278 customer service points, 248 of which are retail branches and 30 are devoted to small and medium enterprises and institutions, together with 7 business units divided by industry 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, 669 ATMs and 723 self-service terminals.

In terms of activity, the Bank’s portfolio of loans to the private sector totaled 41,389,194 as of September 30, 2014, which points to an 20.9% growth rate in the last twelve months of the year, while during the quarter the growth rate was of 6.9%.

Efforts to boost the credit card product continued: the Visa Xeneize and River LANPASS cards were launched, together with a new program of LANPASS retail stores that allows customers to earn kilometers for the stores’ sales credited to their checking accounts. In the past twelve months, the credit card product grew by 57.1% whilst growth in the period was 8.5%. In addition, pledge and consumer loans both grew by 9.4% and 5.6% respectively in the past twelve months, whilst both products rose less in this quarter, reflecting the decrease in the level of activity.

Besides, in the commercial segment, the Bank continues to play a leading role in the agriculture and livestock sector with major brand presence and exclusive products. As concerns credit lines aimed at production activities in accordance with the Central Bank’s rules and regulations and with a primary focus on investment projects, the entity’s management actions in this respect attained the objectives proposed regarding the placement of loan and lease with option to purchase transactions.

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. The portfolio quality ratio (Non-performing loans/Total loans) was 0.90% with a level of coverage (Total loan loss provisions/Non-performing loans) of 226.3% at the end of the period.

As of September 30, 2014, the portfolio of Government securities, net of repurchase agreements, totaled 2,429,010 and represented 3.2% of the Bank’s Total assets. Besides, the instruments issued by the Argentine Central Bank, net of repurchase agreements, totaled 5,270,496 as of that date and since they are short-term, they are used in order to allocate liquidity.

Total clients’ resources totaled 49,736,593, indicative of 25.7% growth in the last twelve months. In the same period, sight deposits grew by 28.7% whilst term deposits grew by 16.8%. Whilst total deposits in the quarter grew by 3.5% with sight balances increasing by 8.7% whilst term deposits dropped slightly, which thus improved the funding mix.

BBVA Francés maintains sufficient levels of liquidity and solvency. As of September 30, 2014, liquid assets (Cash and cash equivalents plus Government and Private securities) represented 44.6% of the Bank’s deposits. Besides, the capital ratio was at 16.2% of risk-weighted assets. The Bank surpassed capital minimum requirements by 4,724,666.

BBVA Francés’ net income was of 2,390,139, as of September 30, 2014.

As of September 30, 2014 the Financial income - net totaled 5,638,654, which points to 66.3% growth compared to the accumulated amount as of September 2013. The reasons for such growth are to be found mainly in the major 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 forward transactions in foreign currency. Meanwhile, during the quarter there was a 21.7% increase resulting from intermediation with the private sector and income from the portfolio of Government securities.

Income from services – net totaled 2,430,573, which points to 32.7% compared to accumulated amount as of September 30, 2013, whilst, compared to the previous quarter, the increase was 9.1%. These increases were mainly driven by 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.

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Administrative expenses, again, recorded a balance of 4,128,857 at the end of September 2014, growing by 42.1% compared to the prior year and 19.0% in the quarter. The increase in personnel expenses registers the salary raises agreed with the working union, , in addition to the charge for severance pays booked in the quarter and caused by the downsizing in structure whilst overhead reflects the impact of an intensified level of activity and the adjustment in general prices.

Outlook

In creating the Digital Banking division, the Bank is firmly poised not only to develop products that are more suitable and fitting to its customers but also to inject dynamism into the conduct of business by implementing increasingly innovative channels of communication.

To attain this objective, BBVA Francés will focus on improving both the processes and the design of products, including not only new digital products but also analogical products (those sold through the networks).

In addition, to supplement the creation of the Digital Banking division, the Bank has also introduced a number of organizational changes, redefining roles and simplifying the organization chart in order to adapt its internal structure to the business needs.

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

(Stated in thousands of pesos)

 

		09-30-2014				09-30-2013				09-30-2012				09-30-2011				09-30-2010
Total Assets			74,947,272				54,978,499				41,584,172				36,467,322				34,121,464
Total Liabilities			65,182,951				48,529,926				36,617,481				33,017,956				30,594,284
Minority Interest in subsidiaries			246,802				156,324				109,689				79,491				232,053
Stockholders´ Equity			9,517,519				6,292,249				4,857,002				3,369,875				3,295,127
Total Liabilities + Minority Interest in subsidiaries + Stockholders´ Equity			74,947,272				54,978,499				41,584,172				36,467,322				34,121,464

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

(Stated in thousands of pesos)

 

 

		09-30-2014				09-30-2013				09-30-2012				09-30-2011				09-30-2010
Financial income			5,638,654				3,390,837				2,687,626				1,488,936				2,135,261
Allowances for loan losses			(422,340)				(311,521)				(156,033)				(92,466)				(115,066)
Income from services			2,430,573				1,831,070				1,329,835				1,035,882				788,548
Administrative expenses			(4,128,857)				(2,904,710)				(2,194,323)				(1,677,861)				(1,504,938)
Net gain from financial transactions			3,518,030				2,005,676				1,667,105				754,491				1,303,805
Miscellaneous income and expenses – net			196,145				41,269				16,446				134,567				(278,643)
Results of minority interest in subsidiaries			(74,407)				(38,343)				(25,951)				(5,842)				(18,873)
Income tax			(1,249,629)				(848,289)				(668,855)				(376,021)				(205,982)
Net income for the period			2,390,139				1,160,313				988,745				507,195				800,307

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

(Stated in thousands of pesos)

 

 

		09-30-2014				09-30-2013				09-30-2012				09-30-2011				09-30-2010
Net cash flow provided by operating activities			1,065,138				1,149,903				1,133,705				5,570,077				1,522,591
Net cash flow used in investment activities			(990,858)				(992,969)				(425,122)				(299,713)				(242,181)
Net cash flow used in financing activities			(363,113)				(801,303)				(578,978)				(3,803,518)				(268,193
Financial results and results from holdings of cash and cash equivalents (including interest)			--,--				54				--,--				2				13
Total cash (used) / provided during the period			(288,833)				(644,315)				129,605				1,466,848				1,012,230

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STATISTICAL DETAILS COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

(year-over-year variations in balances)

 

		09-30-2014/13				09-30-2013/12				09-30-2012/11				09-30-2011/10				09-30-2010/09
Total Loans			20.81%				31.24%				22.61%				40.84%				28.56%
Total Deposits			25.72%				27.34%				9.28%				31.29%				20.12%
Net Income			105.99%				17.35%				94.94%				(36.62%)				75.04%
Stockholders’ Equity			51.26%				29.55%				44.13%				2.27%				25.54%

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RATIOS COMPARED TO THE SAME PERIODS IN PRIOR FISCAL YEARS

 

 

		09-30-2014				09-30-2013				09-30-2012				09-30-2011				09-30-2010
Solvency (1)			14.55%				12.92%				13.22%				10.18%				10.69%
Liquidity (2)			44.63%				34.59%				37.45%				42.53%				63.51%
Tied-up capital (3)			2.69%				2.32%				1.71%				1.83%				1.81%
Indebtedness (4)			6.87				7.74				7.56				9.82				9.36

 

(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 September 30, 2014 and the statement of income, statement of changes in stockholders´ equity and cash and cash equivalents flow for the nine-month period then ended, with their notes 1 to 19 (notes 2 and 4.1 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 September 30, 2014 and the consolidated statement of income and the consolidated cash and cash equivalents flow for the nine-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 nine-month period ended September 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 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 September 30, 2014, on the results of its operations, the changes in its stockholders´ equity and its cash and cash equivalents flow for the nine-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.

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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:

 

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 nine-month period ended September 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 November 7, 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, November 7, 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:		November 18, 2014				By:		/s/ Ignacio Sanz y Arcelus
								Name:		Ignacio Sanz y Arcelus
								Title:		Chief Financial Officer