Annual and Transition Report (foreign Private Issuer) (20-f)

 

As filed with the Securities and Exchange Commission on May 10, 2019  

 

 

SECURITIES AND EXCHANGE COMMISSION  

WASHINGTON, D.C. 20549

 

 

 

FORM 20-F

 

☐

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

 

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 001-12568

 

 

 

BBVA BANCO FRANCÉS S.A.  

(Exact name of Registrant as specified in its charter)

 

BBVA FRENCH BANK  

(Translation of Registrant’s name into English)

 

Republic of Argentina  

(Jurisdiction of incorporation or organization)

 

 

 

Av. Córdoba 111, C1054AAA  

Ciudad Autónoma de Buenos Aires, Argentina  

(Address of principal executive offices)

 

 

 

Eduardo González Correas – 011-54-11-4348-0000 (ext. 14483) – [e-mail] – Av. Córdoba 111 31° (C1054AAA)  

Ciudad Autónoma de Buenos Aires, Republic of Argentina  

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing the right to receive three ordinary shares, par value Ps.1.00 per share	New York Stock Exchange
Ordinary shares, par value Ps.1.00 per share	New York Stock Exchange*

 

*   The ordinary shares are not listed for trading, but are listed only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock
as of the close of the period covered by the annual report:

 

Title of class	Number of shares outstanding
Ordinary Shares, par value Ps.1.00 per share	612,659,638

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act . ☒Yes  ☐ No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes   ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports ), a nd (2) has been subject to such filing requirements for the past 90 day s: ☒Yes  ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐Yes  ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☒   Accelerated filer ☐   Non-accelerated filer ☐   Emerging growth company ☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing :

   

U.S. GAAP ☐

International Financial Reporting Standards as issued by the International Accounting Standards Board ☒

Other ☐

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. 

☐ Item 17    ☐ Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes   ☒ No

 

 

 

Table of Contents  

 

  

TABLE OF CONTENTS

 

		Page
FORWARD-LOOKING STATEMENTS		1
PRESENTATION OF FINANCIAL INFORMATION		1
CERTAIN TERMS AND CONVENTIONS		2
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.	KEY INFORMATION	3
ITEM 4.	INFORMATION ON THE COMPANY	24
ITEM 4A.	UNRESOLVED STAFF COMMENTS	98
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	98
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	128
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	142
ITEM 8.	FINANCIAL INFORMATION	145
ITEM 9.	THE OFFER AND LISTING	146
ITEM 10.	ADDITIONAL INFORMATION	149
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	161
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	170
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	172
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	172
ITEM 15.	CONTROLS AND PROCEDURES	172
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	178
ITEM 16B.	CODE OF ETHICS	178
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	179
ITEM 16D.	EXEMPTIONS FROM LISTING REQUIREMENTS FOR AUDIT COMMITTEES	179
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY ONE ISSUER AND AFFILIATED PERSONS	179
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	179
ITEM 16G.	CORPORATE GOVERNANCE	179
PART III
ITEM 17.	FINANCIAL STATEMENTS	183
ITEM 18.	FINANCIAL STATEMENTS	183
ITEM 19.	EXHIBITS	183

 

 

Table of Contents  

 

FORWARD-LOOKING STATEMENTS

 

This Form 20-F contains words, such as “believe”, “expect”, “estimate”, “intend”, “plan”, “may” and “anticipate” and similar expressions that identify forward-looking statements, which reflect our views about future events and financial performance. Actual results could differ materially as a result of factors beyond our control, including but not limited to:

 

§

changes in general economic, business or political or other conditions in the Republic of Argentina (“Argentina” or “the Republic”) or changes in general economic or business conditions in Latin America;

 

§

changes in exchange rates or capital markets in general that may affect policies towards or lending to Argentina or Argentine companies;

 

§

increased costs and decreased income related to macroeconomic variables such as exchange rates and the Consumer Price Index in Argentina (“CPI”);

 

§

unanticipated increases in financing and other costs or the inability to obtain additional debt, equity or wholesale financing on attractive terms or at all; and

 

§

the factors discussed under “Item 3. Key Information—D. Risk Factors” .

 

Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. BBVA Banco Francés S.A. (“BBVA Francés” or the “Bank”) undertakes no obligation to update or revise these forward-looking statements or to publicly release the results of any revisions to these forward-looking statements. The accompanying information in this annual report, including, without limitation, the information under “Item 4. Information on the Company” , “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk” identifies important factors that could cause material differences between any forward-looking statements and actual results.

 

PRESENTATION OF FINANCIAL INFORMATION

 

General

 

The Bank’s audited consolidated financial statements as of and for the years ended December 31, 2018 and 2017 (the “Consolidated Financial Statements”) are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”). These are the first financial statements prepared by the Bank under IFRS-IASB, and therefore the opening statement of financial position was prepared as of January 1, 2017, the date of our transition to IFRS, as required by IFRS 1—“First Time Adoption of International Financial Reporting Standards”. The comparative figures at and for the year ended December 31, 2017 reflect adjustments and reclassifications made as a result of our adoption of IFRS-IASB. Previously, our consolidated financial statements were prepared in accordance with the accounting rules (“BCRA-GAAP”) established by Argentine Central Bank (the “Central Bank” or “BCRA”), which differ in some respects from IFRS-IASB.

 

 All 2018 and 2017 data included in this report have been prepared in accordance with IFRS-IASB for the sole purpose of filing this annual report on Form 20-F with the Securities and Exchange Commission (“SEC”).

 

The statutory consolidated annual financial statements for the fiscal year ended December 31, 2018 that the Bank prepared to comply with the requirements of the Central Bank are the Bank’s first annual financial statements prepared pursuant to the reporting framework established by the Central Bank requiring supervised entities to submit financial statements prepared pursuant to IFRS-IASB, with temporary exceptions from the application of (i) the impairment model in Section 5.5 Impairment of IFRS 9 Financial Instruments and (ii) IAS 29 Financial Reporting in Hyperinflationary Economies, both of which are applicable under the Central Bank’s rules for the fiscal years beginning on or after January 1, 2020, and in accordance with the standards prescribed by Memorandum No. 6/2017 Financial Reporting Framework Established by the BCRA issued on May 29, 2017 regarding the treatment to be applied to uncertain tax positions. We refer in this annual report on Form 20-F to IFRS-IASB as adjusted by the regulations of the BCRA as “IFRS-BCRA”. Beginning with the fiscal year commencing January 1, 2020, we expect to prepare our financial statements for purposes of both our annual reports on Form 20-F and the Central Bank under IFRS-IASB.

 

For 2018, the Consolidated Financial Statements include entities in which the Bank holds control, directly or indirectly. See “Item 4. Information on the Company – C. Organizational Structure” for an organizational chart depicting BBVA Francés and its subsidiaries.

 

In this annual report, references to “$”, “US$”, “U.S. dollars” and “dollars” are to United States dollars and references to “Ps.” or “pesos” are to Argentine pesos. Percentages and certain dollar and peso amounts have been rounded for ease of presentation. Unless otherwise stated, all market share and other industry information has been derived from information published by the Central Bank.

 

1  

Table of Contents  

 

Unless otherwise indicated, financial information contained in this annual report reflects the consolidation of the following subsidiaries at the year end and for the fiscal years indicated below.

 

	As of December 31,
Entity	2018	2017
Volkswagen Financial Services Compañía Financiera S.A.		X
Consolidar AFJP S.A. (undergoing liquidation proceedings)	X	X
BBVA Francés Valores S.A.	X	X
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión	X	X

 

On September 25, 2018, BBVA Francés lost control of Volkswagen Financial Services Compañía Financiera S.A. (“VWFS”) due to the termination of the two-year commitment by the Bank to provide financing to VWFS if it were unable to diversify its sources of funding. According to IAS 28 Investments in Associates and Joint Ventures, VWFS qualifies as a joint venture and, as such, it has been deconsolidated effective since the date of loss of control.

 

Since the Bank has adopted IFRS-IASB with respect to its consolidated financial statements as of and for the year ended December 31, 2018, we have applied the accommodation granted by General Instruction G to Form 20-F (First-Time Application of International Financial Reporting Standards), and as a result financial information prior to 2017 has generally been omitted from this annual report on Form 20-F. Please see our annual report on Form 20-F for the year ended December 31, 2017 for BCRA-GAAP and certain other financial information of the Bank prior to 2017.

 

IAS 29 Financial Reporting in Hyperinflationary Economies requires that an entity whose functional currency is the currency of a hyperinflationary economy must state its assets, liabilities, income and expenses in terms of the measuring unit current at the end of the reporting period (December 31, 2018). The Bank has applied IAS 29 as follows:

 

-

Restated the Consolidated Statement of Financial Position as of January 1, 2017, which is the earliest financial information presented.

 

-

Restated the Consolidated Statement of Financial Position as of December 31, 2017.

 

-

Restated the Consolidated Statement of Profit or Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Shareholders’ Equity and Consolidated Statements of Cash Flow for the year ended December 31, 2017, including the calculation and separate disclosure of the gain or loss on the net monetary position.

 

-

Adjusted the Consolidated Statement of Financial Position as of December 31, 2018.

 

-

Adjusted the Consolidated Statement of Profit or Loss, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Shareholders’ Equity and Consolidated Statements of Cash Flow for the year ended December 31, 2018, including the calculation and separate disclosure of the gain or loss on the net monetary position.

 

For further information regarding the methodology and criteria applied as well as the impact of the application of IAS 29 in the Bank´s accounting, see Note 3.2 to the Consolidated Financial Statements.

 

See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for information regarding the evolution of rates of exchange since 2012.

 

All figures and percentages of variations in this annual report on Form 20-F, unless otherwise stated, are presented in real terms based on the measuring unit current at December 31, 2018.

 

CERTAIN TERMS AND CONVENTIONS

 

The terms below are used as follows throughout this report:

 

§

“BBVA Francés”, the “Bank” or the “Company” and terms such as “we”, “us” and “our” mean BBVA Banco Francés S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

 

§

“BBVA” or the “BBVA Group” means Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

 

§

“Consolidated Financial Statements” means our audited consolidated financial statements as of and for the years ended December 31, 2018 and 2017 and consolidated statement of financial position as of January 1, 2017, prepared in accordance with IFRS-IASB and included in this Form 20-F.

 

2  

Table of Contents  

 

- PART I -

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A.

Selected Financial Data

 

The historical financial information set forth below as of and for the years ended December 31, 2018 and 2017 has been selected from, and should be read together with, the Consolidated Financial Statements included herein.

 

For information concerning the preparation and presentation of the Consolidated Financial Statements, see “Presentation of Financial Information” . See also “ D. Risk Factors—Risks Relating to Argentina ”, and “ D. Risk Factors—Risks Relating to the Argentine Financial System and to BBVA Francés ” below.

 

			For the year ended December 31,
			2018		2017
			(in thousands of pesos) (1)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Amounts in accordance with IFRS-IASB
Interest and other income			56,472,561		35,714,188
Interest expenses			(24,738,228)		(11,959,325)
NET INTEREST INCOME			31,734,333		23,754,863
Fee and commission income			12,574,698		10,772,307
Fee and commission expense			(5,501,505)		(4,882,374)
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net			115,843		4,361,298
Gains (losses) on derecognition of financial assets not measured at fair value through profit or loss			(136,740)		11,983
Exchange differences, net			6,489,026		3,377,178
Other operating income			2,106,977		1,943,178
Other operating expenses			(7,984,040)		(7,346,168)
NET INTEREST INCOME AND OTHER OPERATING INCOME			39,398,592		31,992,265
Administration costs			(19,538,918)		(19,631,612)
Personnel benefits			(10,887,691)		(11,221,860)
Administrative expenses			(8,651,227)		(8,409,752)
Depreciation and amortization			(1,922,260)		(1,429,362)
Impairment of financial assets			(3,834,036)		(2,527,822)
Loss on net monetary position			(11,654,234)		(6,159,779)
NET OPERATING INCOME			2,449,144		2,243,690
Share of profit of equity accounted investees			317,523		338,313
PROFIT BEFORE TAX			2,766,667		2,582,003
Income tax expense			(4,336,370)		(722,492)
(LOSS) PROFIT FOR THE YEAR			(1,569,703)		1,859,511
Attributable to owners of the Bank			(1,489,732)		1,903,820
Attributable to non-controlling interest			(79,971)		(44,309)
(Loss) Profit for the year attributable to owners of the Bank per ordinary share (2)(3)			(2.43)		3.34
(Loss) Profit for the year attributable to owners of the Bank per ADS (2)(3)(5)			(7.29)		10.02
Declared dividends per ordinary share (2)(3)(4)			3.92877		2.29327
Declared dividends per ADS (2)(3)(4)(5)			11.78631		6.87981
Net operating income per ordinary share (2)(3)			4.00		3.94
Net operating income per ADS (2)(3)(5)			12.00		11.82
Average ordinary shares outstanding (000s) (3)			612,660		569,910

 

3  

Table of Contents  

 

			For the Fiscal Year Ended December 31,
			2018		2017
			(in thousands of pesos) (1)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Amounts in accordance with IFRS
Cash, cash balances at central bank and other demand deposits			99,105,461		56,453,684
Financial assets at fair value through profit or loss			8,627,543		9,494,547
Financial assets at amortized cost			203,541,121		201,776,086
Financial assets at fair value through Other Comprehensive Income (“OCI”)			24,563,962		25,220,479
Tangible assets			17,061,205		17,770,756
Other assets			8,643,157		8,067,540
TOTAL ASSETS			361,542,449		318,783,092
Financial liabilities at fair value through profit or loss			2,069,529		339,253
Financial liabilities at amortized cost			293,240,299		249,393,674
Other liabilities			20,690,480		19,533,510
TOTAL LIABILITIES			316,000,308		269,266,437
Share capital			612,660		612,660
Share premium			12,593,197		12,593,197
Inflation adjustment to share capital			8,580,581		8,580,581
Reserves			30,374,629		26,456,104
Retained earnings			(6,679,416)		761,204
Other comprehensive income			30,378		58,125
Equity attributable to owners of the Bank			45,512,029		49,061,871
Non-controlling interests			30,112		454,784
TOTAL EQUITY			45,542,141		49,516,655
SELECTED RATIOS
Profitability and Performance
Return on average total assets (6)			(0.44)%		0.63%
Return on average total equity (7)			(3.15)%		4.37%
Capital
Total equity as a percentage of total assets			12.60%		15.53%
Total liabilities as a multiple of total equity			6.94x		5.44x
Credit Quality
Allowances for loan losses as a percentage of Financial assets at amortized cost			2.01%		1.37%
Non-performing loans as a percentage of gross loans (8)			1.80%		0.65%
Allowances for loan losses as a percentage of non-performing loans (8)			120.94%		207.19%