Report of Foreign Issuer (6-k)

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

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

of the Securities Exchange Act of 1934

For the month of September, 2019

Commission File Number: 001-12568

BBVA FRENCH BANK S.A.

(Translation of registrant’s name into English)

Córdoba 111, 1054

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  ☒             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   ☒

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   ☒

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    ☒

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

 

 

 

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BBVA French Bank S.A.

TABLE OF CONTENTS

 

Item
1.		Financial Statements as of June 30, 2019.

 

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CONDENSED INTERIM FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD ENDED

JUNE 30, 2019

 

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BBVA Banco Francés S.A.

TABLE OF CONTENTS

 

Condensed interim financial statements for the six-month period ended on June 30, 2019, comparatively presented.
Consolidated Condensed Statement of Financial Position			1
Consolidated Condensed Statement of Income			3
Consolidated Condensed Statement of Other Comprehensive Income			5
Consolidated Condensed Statement of Changes in Shareholders’ Equity			6
Consolidated Condensed Statement of Cash Flows			7
Notes			9
Exhibits			48
Independent auditors’ limited review report on consolidated condensed interim financial statements			56
Separate Condensed Statement of Financial Position			58
Separate Condensed Statement of Income			60
Separate Condensed Statement of Other Comprehensive Income			62
Separate Condensed Statement of Changes in Shareholders’ Equity			63
Separate Condensed Statement of Cash Flows			64
Notes			66
Exhibits			82
Independent auditors’ limited review report on separate condensed interim financial statements			94
Supervisory Committee’s Report
Reporting Summary			96

 

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CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		Notes and Exhibits				06.30.19				12.31.18
ASSETS
Cash and deposits in banks			7				90,955,170				99,105,461
Cash							15,856,359				15,570,831
Financial institutions and correspondents							75,098,811				83,534,630
Argentine Central Bank (BCRA)							73,483,563				75,503,977
Other in the country and abroad							1,615,248				8,030,653
Debt securities at fair value through profit or loss			8				6,590,932				7,508,099
Derivatives			9				1,838,020				591,418
Repo transactions			10				5,924,379				12,861,116
Other financial assets			11				5,957,221				9,647,526
Loans and other financing			12				186,615,851				181,422,347
Non-financial government sector							336				207
Argentine Central Bank (BCRA)							64				383
Other financial institutions							7,596,572				9,583,842
Non-financial private sector and residents abroad							179,018,879				171,837,915
Other debt securities			13				69,763,641				23,742,631
Financial assets pledged as collateral			14				6,352,207				4,703,064
Current income tax assets			15 a)				385				385
Investments in equity instruments			16				1,914,766				129,538
Investments in associates			17				2,075,103				1,752,322
Property and equipment			18				11,866,623				9,816,116
Intangible assets			19				590,357				510,912
Deferred income tax assets							526,504				194,036
Other non-financial assets			20				1,860,690				2,135,859
Non-currrent assets held for sale			21				59,776				493,373
TOTAL ASSETS							392,891,625				354,614,203

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CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		Notes and Exhibits				06.30.19				12.31.18
LIABILITIES
Deposits			22 and Exhibit H				285,201,866				259,509,061
Non-financial government sector							3,635,297				1,544,761
Financial sector							296,404				294,122
Non-financial private sector and residents abroad							281,270,165				257,670,178
Liabilities at fair value through profit or loss			23				1,156,152				692,270
Derivatives			9				2,288,638				1,377,259
Repo transactions			10				—				14,321
Other financial liabilities			24				23,067,544				28,189,392
Financing received from the BCRA and other financial institutions			25				3,291,860				5,527,525
Corporate bonds issued			26				4,329,078				2,473,690
Current income tax liabilities			15 b)				4,609,342				3,676,444
Provisions			27 and Exhibit J				7,050,001				3,620,723
Deferred income tax liabilities							65,175				57,725
Other non-financial liabilities			28				13,022,560				10,894,016
TOTAL LIABILITIES							344,082,216				316,032,426
EQUITY
Share capital			30				612,660				612,660
Non-capitalized contributions							6,735,977				6,735,977
Capital adjustments							312,979				312,979
Reserves							28,488,024				17,424,932
Retained earnings							—				3,856,405
Other accumulated comprehensive income							(161,736	)			(4,975	)
Income for the period							12,787,742				9,613,687
Equity attributable to owners of the Parent							48,775,646				38,551,665
Equity attributable to non-controlling interests							33,763				30,112
TOTAL EQUITY							48,809,409				38,581,777
TOTAL LIABILITIES AND EQUITY							392,891,625				354,614,203

Notes and exhibits are an integral part of these financial statements.

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CONSOLIDATED CONDENSED STATEMENT OF INCOME

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		Notes and Exhibits		Accumulated as of 06.30.19				Accumulated as of 06.30.18				Quarter from 04.01.19 to 06.30.19				Quarter from 04.01.18 to 06.30.18
Interest income		31			41,393,775				17,170,889				23,018,132				9,278,025
Interest expense		32			(18,606,406	)			(6,316,007	)			(9,982,014	)			(3,507,170	)
Net interest income					22,787,369				10,854,882				13,036,118				5,770,855
Commission income		33			8,180,721				4,922,559				4,366,538				2,888,018
Commission expenses		34			(4,742,250	)			(2,876,986	)			(2,422,882	)			(1,522,164	)
Net commission income					3,438,471				2,045,573				1,943,656				1,365,854
Net income/(loss) from measurement of financial instruments at fair value through profit or loss		35			4,579,305				(412,679	)			2,115,028				(743,026	)
Net loss from write-down of assets at amortized cost and at		36			(40,563	)			(66,931	)			(36,380	)			(68,298	)
fair value through OCI
Foreign exchange and gold gains		37			2,496,102				2,704,858				1,321,560				2,009,608
Other operating income		38			7,780,728				2,139,860				4,389,805				397,252
Loan loss allowances		Exhibit R			(4,223,063	)			(1,330,442	)			(1,864,924	)			(804,248	)
Net operating income					36,818,349				15,935,121				20,904,863				7,927,997
Personnel benefits		39			(5,954,616	)			(3,887,157	)			(3,242,029	)			(1,929,968	)
Administrative expenses		40			(4,465,529	)			(3,154,824	)			(2,421,106	)			(1,646,632	)
Depreciation and amortization		41			(752,287	)			(406,902	)			(393,926	)			(207,860	)
Other operating expenses		42			(8,612,435	)			(3,582,190	)			(6,074,392	)			(1,428,480	)
Operating income					17,033,482				4,904,048				8,773,410				2,715,057
Income from associates					429,486				345,065				312,483				305,188
Income before income tax					17,462,968				5,249,113				9,085,893				3,020,245
Income tax		15 c)			(4,671,575	)			(1,529,111	)			(2,305,571	)			(866,387	)
Income for the period					12,791,393				3,720,002				6,780,322				2,153,858
Income for the period attributable to:
Owners of the Parent					12,787,742				3,669,218				6,780,123				2,123,920
Non-controlling interests					3,651				50,784				199				29,938

Notes and exhibits are an integral part of these financial statements.

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EARNINGS PER SHARE

AS OF JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Numerator:
Net income attributable to owners of the Parent			12,787,742				3,669,218
Net income attributable to owners of the Parent adjusted to reflect the effect of dilution			12,787,742				3,669,218
Denominator:
Weighted average of outstanding common shares for the period			612,659,638				612,659,638
Weighted average of outstanding common shares for the period adjusted to reflect the effect of dilution			612,659,638				612,659,638
Basic earnings per share (stated in thousands of pesos)			20.8725				5.9890
Diluted earnings per share (stated in thousands of pesos) (1)			20.8725				5.9890

 

(1)	Since BBVA Banco Francés S.A. has not issued financial instruments with a dilutive effect on earnings per share, basic and diluted earnings per share are the same.

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CONSOLIDATED CONDENSED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		Accumulated as of 06.30.19				Accumulated as of 06.30.18				Quarter from 04.01.19 to 06.30.19				Quarter from 04.01.18 to 06.30.18
Income for the period			12,791,393				3,720,002				6,780,322				2,153,858
Other comprehensive income components to be reclassified to income/(loss) for the period:
Profit or losses from financial instruments at fair value through OCI
Income/(loss) for the period on financial instruments at fair value through OCI			(264,016	)			(104,763	)			17,485				(129,704	)
Reclassification adjustment for the period			40,563				66,931				36,380				68,298
Income tax			67,078				8,259				(36,125	)			18,700
			(156,375	)			(29,573	)			17,740				(42,706	)
Other comprehensive income components not to be reclassified to income/(loss) for the period:
Employee benefit plans
Accumulated actuarial profits or losses due to employee benefit plans			—				(5,322	)			—				(5,322	)
Income tax			—				1,600				—				1,600
			—				(3,722	)			—				(3,722	)
Share in Other Comprehensive Income from associates and joint ventures at equity method
Income/(loss) on the share in OCI from associates and joint ventures at equity method			(386	)			102,833				9,519				110,791
			(386	)			102,833				9,519				110,791
Total Other Comprehensive Income for the period			(156,761	)			69,538				27,259				64,363
Total Comprehensive Income			12,634,632				3,789,540				6,807,581				2,218,221
Total comprehensive income:
Attributable to owners of the Parent			12,630,981				3,738,756				6,807,382				2,188,283
Attributable to non-controlling interests			3,651				50,784				199				29,938

Notes and exhibits are an integral part of these financial statements.

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CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX-MONTH INTERIM PERIOD ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		2019																																												2018
		Share capital				Non-capitalized contributions								Other comprehensive income								Retained earnings
Transactions		Outstanding shares				Share premium				Adjustments to equity				Losses on financial instruments at fair value through OCI				Other				Legal reserve				Optional reserve				Unappropriated retained earnings				Total equity attributable to owners of the Parent				Total equity attributable to non- controlling interests				Total				Total
Balance at the beginning of the year			612,660				6,735,977				312,979				(112,612	)			107,637				4,802,904				12,622,028				13,470,092				38,551,665				30,112				38,581,777				26,056,548
Impact of the implementation of the financial reporting framework set forth by the BCRA			—				—				—				—				—				—				—				—				—				—				—				4,344,409
Adjusted balance at the beginning of the year			612,660				6,735,977				312,979				(112,612	)			107,637				4,802,904				12,622,028				13,470,092				38,551,665				30,112				38,581,777				30,400,957
Total Comprehensive income for the period
- Net income for the period			—				—				—				—				—				—				—				12,787,742				12,787,742				3,651				12,791,393				3,720,002
- Other comprehensive income for the period			—				—				—				(156,375	)			(386	)			—				—				—				(156,761	)			—				(156,761	)			69,538
- Distribution of retained earnings approved by the
Shareholders’ Meetings held on April 24, 2019 and April 10, 2018
Legal reserve			—				—				—				—				—				1,922,737				—				(1,922,737	)			—				—				—				—
Cash dividends			—				—				—				—				—				—				—				(2,407,000	)			(2,407,000	)			—				(2,407,000	)			(970,000	)
Statutory special reserve due to application of IFRS			—				—				—				—				—				—				3,856,405				(3,856,405	)			—				—				—				—
Other			—				—				—				—				—				—				5,283,950				(5,283,950	)			—				—				—				—
- Distribution of subsidiary dividends			—				—				—				—				—				—				—				—				—				—				—				(935	)
- Capital increase of subsidiary			—				—				—				—				—				—				—				—				—				—				—				196,000
Balance at fiscal period-end			612,660				6,735,977				312,979				(268,987	)			107,251				6,725,641				21,762,383				12,787,742				48,775,646				33,763				48,809,409				33,415,562

Notes and exhibits are an integral part of these financial statements.

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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Cash flows from operating activities
Income before Income Tax			17,462,968				5,249,113
Adjustments to obtain cash flows from operating activities:			(5,679,834	)			(7,050,127	)
Depreciation and amortization			752,287				406,902
Loan loss allowance			4,223,063				1,330,442
Effect of foreign exchange changes			(6,591,354	)			(12,428,451	)
Income/(loss) from sale of Prisma			(2,695,720	)			—
Other adjustments			(1,368,110	)			3,640,980
Net decreases from operating assets:			(45,588,288	)			(38,900,491	)
Debt securities at fair value through profit or loss			917,167				3,086,551
Derivatives			(1,246,602	)			142,225
Repo transactions			6,936,737				18,273
Loans and other financing			(6,893,948	)			(34,758,768	)
Non-financial government sector			(129	)			140
Other financial institutions			1,987,589				(1,251,178	)
Non-financial private sector and residents abroad			(8,881,408	)			(33,507,730	)
Other debt securities			(46,244,463	)			(2,491,559	)
Financial assets pledged as collateral			(1,649,143	)			(1,905,376	)
Investments in equity instruments			—				6,309
Other assets			2,591,964				(2,998,146	)
Net increases from operating liabilities:			19,702,703				42,401,471
Deposits			25,692,805				37,976,490
Non-financial government sector			2,090,536				(7,220	)
Financial sector			2,282				19,983
Non-financial private sector and residents abroad			23,599,987				37,963,727
Liabilities at fair value through profit or loss			463,882				143,495
Derivatives			911,379				(213,227	)
Repo transactions			(14,321	)			651,341
Other liabilities			(7,351,042	)			3,843,372
Income tax paid			(596,632	)			(541,734	)
Total cash flows (used in)/generated by operating activities			(14,699,083	)			1,158,232

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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Cash flows from investing activities:
Payments:			(870,291	)			(637,905	)
Purchase of property and equipment, intangible assets and other assets			(870,291	)			(636,240	)
Other payments related to investing activities			—				(1,665	)
Collections:			2,552,618				324,851
Sale of investments in equity instruments			1,729,915				—
Other collections related to investing activities			822,703				324,851
Total cash flows generated by / (used in) investing activities			1,682,327				(313,054	)
Cash flows from financing activities
Payments:			(3,258,289	)			(1,297,747	)
Dividends			(2,407,000	)			(970,935	)
Non-subordinated corporate bonds			(570,712	)			(326,812	)
BCRA			(1,116	)			—
Lease payments			(279,461	)			—
Collections:			1,533,400				4,318,808
Non-subordinated corporate bonds			1,533,400				—
Other collections related to financing activities			—				4,316,810
BCRA			—				1,998
Total cash flows (used in) / generated by financing activities			(1,724,889	)			3,021,061
Effect of exchange rate changes on cash and cash equivalents			6,591,354				12,428,451
Total changes in cash flows			(8,150,291	)			16,294,690
Cash and cash equivalents at the beginning of the year (Note 7)			99,105,461				38,235,942
Cash and cash equivalents at fiscal period end (Note 7)			90,955,170				54,530,632

Notes and exhibits are an integral part of these financial statements.

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NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR

THE FISCAL PERIOD ENDED JUNE 30, 2019

(Stated in thousands of pesos)

 

1.	General information

BBVA Banco Francés S.A. (hereinafter, either “BBVA Francés”, the “Entity” or the “Bank”) is a corporation (“sociedad anónima”) incorporated under the laws of Argentina, operating as a universal bank with a network of 252 national branches.

Since December 1996, BBVA Francés is part of the global strategy of Banco Bilbao Vizcaya Argentaria S.A. (BBVA or the “Parent”), which directly and indirectly controls the Entity, by holding 66.55% of the share capital as of June 30, 2019.

On April 24, 2019, the Shareholders’ Meeting approved the Entity’s change of corporate name to “BBVA Argentina S.A.”. However, pursuant to a requirement from the Argentine Central Bank (BCRA) and upon the consent granted by the Shareholders’ Meeting, the Board of Directors, at a meeting held on May 28, 2019, resolved to adopt the name “Banco BBVA Argentina S.A.” On July 25, 2019, the BCRA served notice of the approval of the change of corporate name by way of Resolution No. 166. The registration with the Argentine Superintendence of Corporations (IGJ) is still pending.

These financial statements include the Entity and its controlled or subsidiary companies (collectively referred to, including the Entity, as the “Group”). The Entity’s subsidiaries are listed below:

 

•

BBVA Francés Valores S.A.: corporation incorporated under the laws of Argentina as a comprehensive clearing and settlement agent. On March 8, 2019, the Bank’s Board of Directors submitted to its Shareholders’ Meeting a proposal to carry out a merger of this company in order to attain more efficiency in its administrative processes and thus, provide better service to its customers. In this regard, on April 24, 2019, the Shareholders’ Meeting approved the proposal made by the Bank’s Board of Directors. The Argentine Securities Commission (CNV) has authorized the merger prospectus published in the Buenos Aires Stock Exchange Bulletin on April 16, 2019. As of the date of these financial statements, the statutory opposition period afforded by Section 83, paragraph 3, of the Argentine Companies Law has elapsed, with no objections having been raised. On July 17, 2019, the Final Merger Agreement was filed with the CNV for registration with the IGJ. The merger is deemed effective since October 1, 2019.

 

•

BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión: corporation incorporated under the laws of Argentina as an agent for the management of mutual funds;

 

•

Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (undergoing liquidation proceedings): corporation incorporated under the laws of Argentina undergoing liquidation proceedings. On December 4, 2008, Law No. 26425 was enacted, providing for the elimination and replacement of the capitalization regime that was part of the Integrated Retirement and Pension System, with a single government regime named the Argentine Integrated Retirement and Pensions System (SIPA). Consequently, Consolidar A.F.J.P. S.A. ceased to manage the resources that were part of the individual capitalization accounts of affiliates and beneficiaries of the capitalization regime of the Integrated Retirement and Pension System, which were transferred to the Guarantee Fund for the Sustainability of the Argentine Retirement and Pension Regime as they were already

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invested, and the Argentine Social Security Office (ANSES) is now the sole and exclusive owner of those assets and rights. Likewise, on October 29, 2009, the ANSES issued Resolution No. 290/2009, whereby retirement and pension funds managers interested in reconverting their corporate purpose to manage the funds for voluntary contributions and deposits held by participants in their capitalization accounts had 30 business days to express their intention to that end. On December 28, 2009, based on the foregoing and taking into consideration that it is impossible for Consolidar A.F.J.P. S.A. to comply with the corporate purpose for which it was incorporated, it was resolved, at a Unanimous General and Extraordinary Shareholders’ Meeting to approve the dissolution and subsequent liquidation of that company effective as of December 31, 2009.

 

•

Volkswagen Financial Services Compañía Financiera S.A. (VWFS): A financial company incorporated under the laws of Argentina engaged in pledge loans. On September 25, 2018, BBVA Francés lost control of the company due to the termination of the two-year term committed by the Entity to provide financing to such company if it failed to diversify its sources of funding. According to International Accounting Standard No. 28 (IAS 28), VWFS qualifies as an associate and, as such, it has been deconsolidated effective since the date of loss of control.

Argentine Capital Markets Law No. 26831, enacted on December 28, 2012 and amended by Law No. 27440 dated May 11, 2018, subsequently regulated through General Resolution No. 622/13 and General Resolution No. 731/2018 issued by the CNV, establishes in Section 47 that agents have an obligation to register with the CNV, to act in the market in any of the capacities set forth in such law. On September 9 and 19, 2014, the Entity was registered as an Agent for the Custody of Mutual Funds under No. 4 and as a Comprehensive Clearing and Settlement Agent under No. 42. On August 7, 2014, the subsidiary BBVA Banco Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión was registered as a Mutual Fund Agent under No. 3. On September 19, 2014, the subsidiary BBVA Francés Valores S.A. was registered as a comprehensive Settlement, Clearing and Trading Agent under No. 41.

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

 

2.	Basis for the preparation of the Financial Statements

These condensed financial statements for the six-month period ended June 30, 2019 are prepared pursuant to the reporting framework set forth by the BCRA that requires supervised entities to submit financial statements prepared pursuant to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), subject to temporary exception from applying the impairment model in Section 5.5 “Impairment” of IFRS No. 9 “Financial instruments” and International Accounting Standard No. 29 (IAS No. 29) “Financial reporting in hyperinflationary economies”, which shall be applicable for the fiscal years beginning on or after January 1, 2020 and, taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulatory entity on May 29, 2017 regarding the treatment to be applied to uncertain tax positions as well as, the instructions provided in Memorandum No. 7/2019 issued by the BCRA dated April 29, 2019, which set forth the accounting treatment to be applied to the remaining investment held by the Entity in Prisma Medios de Pago S.A. as of June 30, 2019 (“financial reporting framework set forth by the BCRA”).

The exceptions described are a deviation from IFRS and are detailed below:

 

a)

Regarding the impairment model set forth in Section 5.5 “Impairment” of IFRS 9, on December 5, 2018, the Entity filed with the BCRA the impairment model to be applied within the framework of IFRS No. 9 as from January 1, 2020. The Entity filed quantification with the BCRA on March 29, 2019;

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b)

Regarding IAS No. 29, the existence of an inflationary context significantly affects the Entity’s financial position and profit or loss and, therefore, the impact of inflation shall be taken into consideration in the interpretation of the information the Entity provides in these financial statements on its financial position, financial performance and cash flows;

 

c)

Had the IFRS treatment regarding uncertain tax positions been applied, liabilities would have decreased by 5,447,078 and 2,207,318 as of June 30, 2019 and December 31, 2018. Likewise, the income/(loss) for the six-month period ended June 30, 2019 and 2018 would have increased by 3,239,760 and 1,021,518, respectively (Note 15.c), and

 

d)

As regards the investment held in Prisma Medios de Pago S.A. recorded under “Investments in Equity Instruments” as of June 30, 2019, it should be recognized at fair value determined as of such date pursuant to IFRS No. 9 (Note 16).

As this is an interim period, the Group has opted to present condensed information, pursuant to the guidelines of IAS No. 34 “Interim Financial Information”; therefore, not all the information required for the preparation of complete financial statements under IFRS is included. Therefore, these financial statements should be read jointly with the financial statements as of December 31, 2018. However, explanatory notes of events and transactions that are material for understanding any changes in the financial position as from December 31, 2018 are included.

Furthermore, the BCRA, through Communications “A” 6323 and 6324 set forth guidelines for the preparation and presentation of the financial statements of financial institutions for fiscal years beginning on or after January 1, 2018, including the additional reporting requirements as well as the information to be submitted as Exhibits.

These financial statements have been approved by the Board of Directors of BBVA Banco Francés S.A. as of August 9, 2019.

 

3.	Functional and presentation currency and Unit of account

 

3.1.

Functional and presentation currency

The Group considers the Argentine Peso as the functional and presentation currency. All amounts are stated in thousands of pesos, unless otherwise stated.

 

3.2.

Unit of account

According to IAS No. 29, entities are required to restate financial statements stated in local currency as their functional currency to reflect the changes in the purchasing power of such currency, based on the existence or not of a hyperinflationary economy. IAS No. 29 provides certain qualitative and quantitative guidelines to determine the existence of a hyperinflationary economy. Accordingly, hyperinflation shall be deemed to exist where the last three years’ cumulative inflation approaches or exceeds 100%.

As a result of the increase in inflation that has been experienced in the first months of fiscal year 2018, there has been consensus on that the Argentine economy would qualify as a highly inflationary economy according to the guidelines set forth under IAS No. 29. This consensus implies the need to apply IAS No. 29 in preparing financial statements under IFRS for annual and interim periods ended after July 1, 2018.

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IAS 29 sets forth that the financial statements of an entity with a functional currency of a high inflationary economy shall be restated in terms of the measuring unit current at the end of the reporting period, regardless of whether the financial statements are based on an historical cost or current cost approach. For such purposes, monetary items shall not be restated, non-monetary items shall be restated by applying the variation of a general price index between the date of acquisition or the date of revaluation and the date of the financial statements to be submitted. The components of shareholders’ equity, except accumulated income/(loss) and surplus of appreciation of assets, shall be restated by applying the general price index to the various items between the date of contribution, or between the date of acquisition for any other cause and the date of the financial statements to be submitted. Income and expenses for the period shall be adjusted by applying the general price index between the date those items were acquired and the date of the financial statements to be submitted.

Furthermore, the figures for the preceding fiscal years or periods presented for comparative purposes shall be restated.

As mentioned in Note 2, the application of the guidelines in IAS 29 is exempted and shall be effective for fiscal years beginning on or after January 1, 2020 as set forth by the BCRA through Communication “A” 6651 issued on February 22, 2019, and therefore the Group does not and shall not restate its financial statements until the date referred to above

The financial statements as of June 30, 2019 of the following subsidiaries: BBVA Francés Valores S.A., BBVA Francés Asset Management S.A. and Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (Undergoing liquidation proceedings) were prepared in constant currency in accordance with the provisions of Resolution 107/18 of the Professional Council of Economic Sciences of the City of Buenos Aires (CPCECABA), which state the need to restate in constant currency financial statements for fiscal years ended on or after July 1, 2018, in accordance with JG Resolution issued by the Federation of Professional Councils of Economic Sciences (FACPCE)No. 539/18 dated September 29, 2018. For the purposes of the preparation of the consolidated financial statements in accordance with the financial reporting framework set forth by the BCRA, the Entity has made the necessary adjustments to eliminate the inflation restatement.

The Entity’s Management estimates that the Group shareholders’ equity and income/(loss) may significantly differ if IAS No. 29 is applied.

The existence of such inflationary economic environment affects the Group’s financial position and results of operations. Therefore, the impact of inflation may distort the financial information and should be taken into consideration in understanding the Group’s information reported in these financial statements about its financial position, comprehensive income, changes in shareholders’ equity and cash flows.

 

4.	Accounting estimates and judgments

Significant judgments made by the Board of Directors in the application of accounting policies as well as the premises and estimates on uncertainties as of June 30, 2019 were the same as those described in Note 4.1. and 4.2. to the financial statements as of December 31, 2018.

In addition, the Bank applies the same methodologies for the assessment of fair values and the same criteria for the classification of fair value levels as those described in Note 4.3. to the financial statements as of December 31, 2018.

 

5.	Significant accounting policies

Except as stated in Notes 5.1 and 5.2 below, the Group has consistently applied the accounting policies described in Note 5 to the consolidated financial statements as of December 31, 2018, in all the periods presented in these financial statements.

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5.1.

Assets acquired through leases

On January 13, 2016, the IASB issued IFRS No. 16, replacing IAS No. 17 “Leases” for fiscal periods beginning on or after January 1, 2019. Said standard was adopted by the BCRA through Communication “A” 6560. The new standard introduces a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases. There are recognition exceptions for short term leases and leases where the underlying asset has a low value. The lessee has to recognize a right-of-use asset representing its right to use the leased asset and a lease liability for the obligation of making payments for the lease.

As to the lessor’s recognition, IFRS No. 16 substantially keeps the requirements of IAS No. 17. Therefore, lessors continue classifying leases as operating or financial, and each of them are recognized differently.

The Bank has opted for applying the modified retrospective method consisting in recognizing lease liabilities in the amount equivalent to the current amount of future payments agreed. As a result of this approach, as of such date, the Entity recognizes right-to-use assets and lease liabilities, mainly from leases of offices in its network of branches (Note 29).

 

5.2.

Investments in equity instruments

By virtue of the partial sale of the shareholding in Prisma Medios de Pago S.A. as explained in Note 16, the remaining stake has been measured at fair value through profit or loss on the basis of the valuation reports issued by independent appraisers, net of the valuation adjustment mandated by the BCRA in its Memorandum No. 7/2019. The accounting criteria applied as required above, imply a deviation from IFRS.

 

5.3.

Interim financial information

These financial statements for the six-month period ended June 30, 2019 have been prepared in accordance with IAS No. 34 “Interim financial information” and pursuant to the policies adopted by the Entity in its annual financial statements as of December 31, 2018.

 

5.4.

Comparative information

For comparative purposes, certain reclassifications were made to the information presented for the previous year/period, in order to present them on a consistent basis. The changes of comparative information do not imply changes in any decisions taken on the basis thereof.

 

6.	IFRS issued but not yet effective

Pursuant to Communication “A” 6114 issued by the BCRA, as the new IFRS are approved, or the current IFRSs are modified or repealed and, once such changes are adopted by the FACPCE, the BCRA shall issue a statement of its approval for financial institutions. In general, early adoption of an IFRS shall not be allowed, unless specifically admitted when adopted.

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a)

IFRS No. 9 Financial Instruments - Impairment

Regarding Section 5.5 “Impairment” of IFRS No. 9, Communication “A” 6430 issued by the BCRA established its application as from fiscal periods beginning on or after January 1, 2020. On the subject, the Entity submitted to the BCRA a description of the expected losses calculation model under that standard on December 5, 2018 and made the quantification of its impact and submitted such information to the regulatory entity on March 29, 2019, as required by Communication “A” 6590 issued by the BCRA.

 

b)

IAS No. 29 Financial reporting in hyperinflationary economies

In addition, Communication “A” 6651 issued by the BCRA on February 22, 2019 set forth the application of a the restatement in constant currency set forth by IAS 29 in hyperinflationary economies for fiscal periods beginning on or after January 1, 2020. As stated in Note 2 to these financial statements, the Entity estimates that the effect of adopting this regulation has a significant impact on its statements of financial position, income and other comprehensive income, changes in shareholders’ equity and cash flows as of June 30, 2019.

 

7.	Cash and deposits in banks

Breakdown in the Consolidated Condensed Statement of Financial Position and the balance of cash and cash equivalents computed for the purposes of the preparation of the Consolidated Condensed Statement of Cash Flows is as follows:

 

		06.30.19				12.31.18
Cash			15,856,359				15,570,831
BCRA - Current account			73,483,563				75,503,977
Balances with other local and foreign institutions			1,615,248				8,030,653
TOTAL			90,955,170				99,105,461

 

8.	Debt securities at fair value through profit or loss

 

		06.30.19				12.31.18
Government securities			523,799				952,798
Private securities - Corporate bonds			100,680				167,913
BCRA Bills			5,966,453				6,387,388
TOTAL			6,590,932				7,508,099

 

9.	Derivatives

In the ordinary course of business, the Group carried out foreign currency forward transactions with daily or upon-maturity settlement of differences, with no delivery of the underlying asset and interest rate swap transactions. These transactions do not qualify as hedging pursuant to IFRS No. 9 - “Financial Instruments”.

The aforementioned instruments are measured at fair value and were recognized in the Consolidated Condensed Statement of Financial Position in the item “Derivative instruments” Changes in fair values were recognized in the Consolidated Condensed Statement of Income in “Net income/(loss) from measurement of financial instruments at fair value through profit or loss”.

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Breakdown is as follows:

Assets

 

		06.30.19				12.31.18
Debit balances linked to foreign currency forwards pending settlement in pesos			1,838,020				591,418
TOTAL			1,838,020				591,418

Liabilities

 

		06.30.19				12.31.18
Credit balances linked to foreign currency forwards pending settlement in pesos			1,852,065				889,731
Credit balances linked to interest rate swaps			436,573				487,528
TOTAL			2,288,638				1,377,259

The notional amounts of the forward transactions and foreign currency forwards, stated in US Dollars (US$) and in Euros as applicable, as well as the base value of interest rate swaps are reported below:

 

		06.30.19				12.31.18
Foreign Currency Forwards
Foreign currency forward purchases - US$			746,097				620,651
Foreign currency forward sales - US$			806,914				760,615
Foreign currency forward sales - Euros			4,322				5,463
Interest rate swaps
Fixed rate for floating rate			2,418,547				3,261,154

 

10.	Repo transactions

Breakdown is as follows:

Reverse repurchase transactions

 

				06.30.19				12.31.18
Amounts receivable for reverse repurchase transactions of government					263,176				154,753
securities and BCRA bills with financial institutions Amounts receivable for reverse repurchase transactions of government securities with non-financial institutions		(1)			5,661,203				12,706,363
TOTAL					5,924,379				12,861,116

 

(1)	For one repo transaction of Argentine Bonds in US Dollars 2024 carried out with Argentina for an original total of US$ 300,000,000 with final maturity on May 7, 2020.

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Repurchase transactions

 

		06.30.19				12.31.18
Amounts payable for repurchase transactions of BCRA bills			—				14,321
TOTAL			—				14,321

 

11.	Other financial assets

Breakdown of other financial assets is as follows:

 

		06.30.19				12.31.18
Measured at amortized cost
Financial debtors from spot transactions pending settlement			2,433,593				6,842,344
Non-financial debtors from spot transactions pending settlement			343,880				91,052
Receivables from sale of ownership interest in Prisma Medios de Pago S.A.			1,369,677				—
Other receivables			2,503,441				1,837,527
Other			238,977				552,220
			6,889,568				9,323,143
Measured at fair value through profit or loss
Mutual funds			575,037				408,704
			575,037				408,704
Allowance for loan losses (Note 16 and Exhibit R)			(1,507,384	)			(84,321	)
TOTAL			5,957,221				9,647,526

 

12.	Loans and other financing

The Group keeps loans and other financing under a business model for the purpose of collecting contractual cash flows. Therefore, it measures loans and other financing at amortized cost. Below is a breakdown of the related balance:

 

		06.30.19				12.31.18
Non-financial government sector			336				207
BCRA			64				383
Other financial institutions			7,648,724				9,669,330
Overdrafts			9,589,505				11,789,313
Discounted instruments			10,315,773				11,310,587
Unsecured instruments			8,410,206				12,739,330
Instruments purchased			54,907				264,434
Mortgage loans			12,041,363				10,104,731
Pledge loans			1,540,809				1,650,222
Consumer loans			24,367,511				23,560,930
Credit Cards			47,825,927				41,869,188
Loans for the prefinancing and financing of exports			51,172,141				45,088,576
Receivables from financial leases			2,065,885				2,377,747
Loans to personnel			1,448,769				1,203,780
Other financing			15,903,054				14,051,828
			192,384,974				185,680,586
Allowance for loan losses (Exhibit R)			(5,769,123	)			(4,258,239	)
TOTAL			186,615,851				181,422,347

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Classification of loans and other financing according to credit performance (determined as per the criteria set forth by the BCRA) and guarantees received are presented in Exhibit B. The information on the concentration of loans and other financing is presented in Exhibit C. The reconciliation of the information included in that Exhibit with the carrying amounts is shown below:

 

		06.30.19				12.31.18
Total Exhibits B and C			193,925,363				187,080,255
Plus:
BCRA			64				383
Loans to personnel			1,448,769				1,203,780
Less:
Allowances for loan losses			(5,769,123	)			(4,258,239	)
Adjustments for effective interest rate			(467,474	)			(767,474	)
Corporate bonds			(148,517	)			(123,275	)
Loan commitments			(2,373,231	)			(1,713,083	)
Total loans and other financing			186,615,851				181,422,347

As of June 30, 2019 and December 31, 2018, the Group holds the following contingent transactions booked in memorandum accounts according to the financial reporting framework set forth by the BCRA:

 

		06.30.19				12.31.18
Overdrafts and receivables agreed not used			395,080				531,590
Guarantees granted			1,117,236				578,092
Liabilities related to foreign trade transactions			377,645				141,321
Secured loans			483,270				462,080
			2,373,231				1,713,083

Risks related to the aforementioned contingent transactions are evaluated and controlled in the framework of the Group’s credit risks policy.

 

13.	Other debt securities

 

13.1

Financial assets measured at amortized cost

 

		06.30.19				12.31.18
Corporate bonds in arrears			136				136
			136				136
Allowance for loan losses - Private securities (Exhibit R)			(136	)			(136	)
TOTAL			—				—

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13.2

Financial assets measured at fair value through other comprehensive income

 

		06.30.19				12.31.18
Government securities			18,595,978				9,815,621
BCRA Liquidity Bills			51,038,995				13,815,040
Private securities - Corporate bonds			129,968				113,148
			69,764,941				23,743,809
Allowance for loan losses - Private securities (Exhibit R)			(1,300	)			(1,178	)
TOTAL			69,763,641				23,742,631

 

14.	Financial assets pledged as collateral

The breakdown of the financial assets pledged as collateral as of June 30, 2019 and December 31, 2018 is included below:

 

						06.30.19				12.31.18
BCRA - Special guarantee accounts			(1	)			2,443,445				1,238,252
Guarantee Trust - BCRA Bills at fair value through OCI			(2	)			498,517				1,061,766
Guarantee Trust - Pesos			(2	)			17,190				14,260
Deposits as collateral			(3	)			3,393,055				2,372,751
For repo transactions - Government securities at fair value			(4	)			—				16,035
TOTAL							6,352,207				4,703,064

 

(1)	Special guarantee current accounts opened at the BCRA for the transactions related to the automated clearing houses and other similar entities.

(2)	Set up as collateral to operate with ROFEX and MAE on foreign currency forward transactions and futures contracts. The trust fund consists of pesos and monetary regulation instruments issued by the BCRA.

(3)	Deposits pledged as collateral for activities related to credit card transactions in the country and abroad, with leases and futures contracts.

(4)	It corresponds to repo transactions.

 

15.	Income Tax:

 

a)

Current income tax assets

 

		06.30.19				12.31.18
Advances			385				385
			385				385

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b)

Current income tax liabilities

 

		06.30.19				12.31.18
Income tax provision (1)			4,931,978				4,429,343
Advances			(318,024	)			(738,645	)
Collections and withholdings			(4,612	)			(14,254	)
			4,609,342				3,676,444

 

(1)	The balance as of June 30, 2019 includes a reduction for 3,239,760 corresponding to the declaratory action in respecto of the application of the tax inflation adjustment, while as of December 31, 2018, such reduction amounted to 1,021,518.

 

c)

Income tax expense

Breakdown of income tax expense:

 

		06.30.19				06.30.18
Current tax			4,931,978				1,677,722
Deferred tax			(260,403	)			(148,611	)
			4,671,575				1,529,111

Pursuant to IAS No. 34, income tax is recognized in interim periods over the best estimate of the weighted average tax rate expected by the Entity for the fiscal year.

The income tax expense is calculated as income before income tax for the interim period times Management’s best estimate of the annual effective tax rate expected to be in force for the full fiscal year, adjusted for the fiscal effect of certain items fully recognized during the period.

In this respect, Law No. 27,430, as subsequently amended by Law No. 27,468, set forth that the inflation adjustment—calculated on the basis of the procedure outlined in the Income Tax Law—should be mandatorily deducted from, or added to, taxable income. However, in light of the differing interpretations of the inflation levels required to trigger the application of this law, and based on the existing legislative precedents, the applicability of the adjustment is uncertain. Accordingly, as of June 30, 2019, the Bank has not recognized the impact of the inflation adjustment for tax purposes on the annual effective tax rate at year-end.

The Group’s effective rate for the six-month period ended June 30, 2019 was 27%, while for the six-month period ended June 30, 2018, it was 29%.

 

•

Income tax– Tax inflation adjustment for fiscal years 2016, 2017 and 2018.

On May 10, 2017, May 10, 2018 and May 13, 2019, and based on related case law, the Entity approved the filing of an action for declaratory judgment of unconstitutionality of Section 39 of Law 24073, Section 4 of Law 25561, Section 5 of Decree No. 214/02 issued by the Argentine Executive and any other regulation whereby the inflation adjustment mechanism provided for under Law 20628, as amended, is considered not applicable due to the confiscatory effect on the specific case, for fiscal years 2016, 2017 and 2018. Consequently, the Entity filed its Income Tax Returns for fiscal years 2016, 2017 and 2018 taking into consideration the effect of those restatement mechanisms.

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The net impact of this measure is an adjustment to the Income Tax assessed for the fiscal year ended December 31, 2016 in the amount of 1,185,800 while during the fiscal year ended December 31, 2017 the Income Tax adjustment amounted to 1,021,518, and during the fiscal year ended December 31, 2018, it amounted to 3,239,760.

Through Memorandum No. 6/2017 dated May 29, 2017, the BCRA, without resolving on the decisions adopted by the authorities of the Entity or the right of the Entity regarding the suit filed, in its capacity as issuer of accounting standards, requested the Entity to record a contingent provision included in “Liabilities” in the amount equivalent to income recorded, as it considers that “a reassessment of the income tax by applying the inflation adjustment is not addressed by the BCRA regulations”.

In response to this Memorandum, the Entity filed the related answer and confirmed its position by providing the documentation supporting the referred recording. Notwithstanding the foregoing, the Entity recorded the requested provision in the “Provisions” account under liabilities and in “Other operating expenses” in the Statement of Income, as specifically pursuant to the accounting standards prescribed by the regulator for this case.

As a result of the assessment made and based on the opinion of its legal and tax advisors, the Entity considers that it is more likely than not for the Entity to obtain a final favorable judgment supporting the idea that this period’s income tax shall be assessed including the tax inflation adjustment, based on the confiscatory nature of the rate that would result from not applying said adjustment in the fiscal years ended December 31, 2018, 2017 and 2016.

Therefore, the recording of the contingent provision required by the BCRA results in a departure from IFRS, as stated in Note 2.

 

•

Income tax – requests for recovery of payments made for fiscal years 2013, 2014 and 2015.

Regarding fiscal years 2013, 2014 and 2015, the Entity assessed income tax without applying the tax inflation adjustment, consequently a higher tax was paid in the amounts of 264,257, 647,945 and 555,002 for those periods.

Based on the grounds stated above, on November 19, 2015, the petition for recovery of the payments made was filed for periods 2013 and 2014, and the related complaint was filed on September 23, 2016 for both periods, given that no answer to the petition above was received.

In turn, on April 4, 2017, a petition for recovery of the payments made for the higher amount of tax paid for fiscal year 2015 was filed. Likewise, on December 29, 2017, the related complaint was filed for this fiscal year.

As of the date of these financial statements, the tax authorities have not issued a resolution regarding the claims filed.

Pursuant to the financial reporting framework set forth by the BCRA, the Entity does not record assets in relation to contingent assets derived from the claims filed.

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16.	Investments in equity instruments

Investments in equity instruments for which the Group has no control, joint control or a significant influence are measured at fair value through profit or loss and at fair value through other comprehensive income. Breakdown is as follows:

 

16.1

Investments in equity instruments through profit or loss

 

		06.30.19				12.31.18
Mercado de Valores de Buenos Aires S.A.			38,372				24,722
BYMA-Bolsas y Mercados Argentinos S.A.			92,750				94,600
Prisma Medios de Pago S.A. (1)			1,765,000				—
TOTAL			1,896,122				119,322

 

(1)

This balance corresponds to the amount of 2,252,139 shares held in Prisma Medios de Pago S.A., representing 5.44% of such company’s capital stock. Said investment was recorded as an asset held for sale as of December 31, 2018 pursuant to the divestiture agreement dated November 2017 and within the framework of IFRS No. 5.

On February 1, 2019, the transfer of 2,344,064 registered, common shares with a nominal value of $ 1 each and one vote per share, owned by the Bank in Prisma Medios de Pago S.A. was made for the benefit AI Zenith (Netherlands) B.V. (company related to Advent International Global Private Equity).

In accordance with the provisions of the Offer for the purchase of those shares by AI Zenith (Netherlands) B.V., and accepted by the Bank, the total estimated price adjusted was USD 78,265,273, out of which, on February 1, 2019, the Bank received USD 46,457,210, and the unpaid balance shall be deferred over the following 5 (five) years and settle as follows; (i) 30% of that amount shall be paid in pesos, adjusted by CER (UVA) at an annual nominal rate of 15% and (ii) 70% in US Dollars at an annual nominal rate of 10 %. Pursuant to the provisions and allowance rules issued by the BCRA, a provision of $1,418,509 was recorded as of June 30, 2019.

As a consequence of this transaction, a profit of 2,695,720 is recognized in “Other operating income” as of June 30, 2019 (Note 38).

 

16.2

Investments in equity instruments through other comprehensive income

 

		06.30.19				12.31.18
Banco Latinoaméricano de Exportaciones S.A.			17,880				9,516
Other			764				700
TOTAL			18,644				10,216

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17.	Investments in Associates

 

		06.30.19				12.31.18
Volkswagen Financial Services Compañía Financiera S.A.			768,343				633,362
PSA Finance Arg. Cía. Financiera S.A.			465,399				434,494
Rombo Cía. Financiera S.A.			562,887				514,779
BBVA Consolidar Seguros S.A.			223,082				135,148
Interbanking S.A.			54,424				33,864
Other			968				675
TOTAL			2,075,103				1,752,322

 

18.	Property and equipment

 

		06.30.19				12.31.18
Real estate			6,771,750				6,820,968
Real estate acquired through leases (See Note 5.1 and 29)			1,789,968				—
Furniture and facilities			1,681,661				1,561,128
Machinery and equipment			1,172,610				951,797
Automobiles			15,202				12,704
Constructions in progress			435,432				469,519
TOTAL			11,866,623				9,816,116

 

19.	Intangible Assets

 

		06.30.19				12.31.18
Licenses - Software			590,357				510,912
TOTAL			590,357				510,912

 

20.	Other non-financial assets

Breakdown is as follows:

 

		06.30.19				12.31.18
Investment properties			65,650				66,368
Tax advances			328,294				388,733
Prepayments			1,090,726				1,160,403
Advances to suppliers of goods			128,445				152,848
Other miscellaneous assets			235,448				327,504
Advances to personnel			1,339				8,155
Assets acquired as security for loans			3,958				2,758
Other			6,830				29,090
TOTAL			1,860,690				2,135,859

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21.	Non-current assets held for sale

On December 19, 2018, the Board of Directors agreed to a plan to sell a group of real property assets located in Argentina. Therefore, these assets, the value of which, as of June 30, 2019 and December 31, 2018 amounts to 59,776, were classified as “Non-current assets held for sale”, after the efforts to sell that group of assets began.

During November 2017, the Board of Directors agreed to a plan to sell its ownership interest in Prisma Medios de Pago S.A., and therefore the accounting balance thereof was presented as “Non-current assets held for sale”, in the amount of 433,597 as of December 31, 2018. The sale of 51% of the Bank’s shareholding in such company was completed on February 1, 2019. As of June 30, 2019, the ownership interest in this company was recorded under “Investments in equity instruments” (Note 16).

 

22.

Deposits

The information on concentration of deposits is disclosed in Exhibit H.

Breakdown is as follows:

 

		06.30.19				12.31.18
Non-financial government sector			3,635,297				1,544,761
Financial sector			296,404				294,122
Non-financial private sector and residents abroad			281,270,165				257,670,178
Checking accounts			30,710,060				28,574,950
Savings accounts			153,260,717				140,956,173
Time deposits			92,508,942				83,804,407
Investment accounts			62				—
Other			4,790,384				4,334,648
TOTAL			285,201,866				259,509,061

 

23.	Liabilities at fair value through profit or loss

 

		06.30.19				12.31.18
Obligations from securities transactions			1,156,152				692,270
TOTAL			1,156,152				692,270

 

24.	Other financial liabilities

 

		06.30.19				12.31.18
Obligations from financing of purchases			10,070,897				13,105,616
Creditors from spot transactions pending settlement			2,968,528				7,031,105
Collections and other transactions on behalf of third parties			3,638,103				3,374,476
Liabilities from leases (Note 29)			2,012,184				—
Interest accrued payable			86,711				89,774
Accrued commissions payable			8,474				5,893
Other			4,282,647				4,582,528
TOTAL			23,067,544				28,189,392

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25.	Financing received from the BCRA and other financial institutions

 

		06.30.19				12.31.18
Foreign financial institutions			3,282,968				5,517,517
BCRA			8,892				10,008
TOTAL			3,291,860				5,527,525

 

26.	Corporate bonds issued

Below is a detail of corporate bonds in force as of June 30, 2019 and December 31, 2018:

 

Detail

Issuance date

Nominal value (in thousands of pesos)

Maturity date

Annual Nominal Rate

Payment of interest

Residual value as of 06.30.19

Residual value as of 12.31.18

Class 20

08/08/2016

292,500

08/08/2019

Badlar Private + 3.23%

Quarterly

289,000

289,000

Class 22

11/18/2016

181,053

11/18/2019

Badlar Private + 3.50%

Quarterly

181,053

181,053

Class 23

12/27/2017

553,125

12/27/2019

TM20 + 3.20%

Quarterly

551,125

551,125

Class 24

12/27/2017

546,500

12/27/2020

Badlar Private + 4.25%

Quarterly

541,500

541,500

Class 25

11/08/2018

784,334

11/08/2020

UVA + 9.50%

Quarterly

1,051,721

856,473

Class 26

02/28/2019

529,400

11/28/2019

Fixed 43%

Upon maturity

453,400

—

Class 27

02/28/2019

1,090,000

08/28/2020

Badlar Private + 6.25%

Quarterly

1,080,000

—

Total principal

4,147,799

2,419,151

Interest accrued

181,279

54,539

Total principal and Interest accrued

4,329,078

2,473,690

Definitions:

TM20 RATE: is the single arithmetic mean of interest rates for time deposits for twenty million pesos or over, and from thirty to thirty five days.

BADLAR RATE: is the interest rate for time deposits over 1 (one) million pesos, for 30 to 35 days.

UVA RATE: is a measurement unit updated on a daily basis as per CER, according to the consumer price index.

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27.	Provisions

 

		06.30.19				12.31.18
For reassessment of income tax due to adjustment for inflation (Note 15.c))			5,447,078				2,207,318
Provisions for termination plans (Exhibit J)			61,228				62,135
Provisions for reorganization (Exhibit J)			70,000				—
For administrative, disciplinary and criminal penalties (Note 55 and Exhibit J)			5,000				5,000
Contingent commitments provisions (Exhibit R)			1,651				1,483
Other contingencies			1,465,044				1,344,787
TOTAL			7,050,001				3,620,723

It includes the estimated amounts to pay highly likely liabilities which, in case of occurrence, would generate a loss for the Entity.

The breakdown and changes of provisions are included in Exhibit J. However, below is a brief description:

 

•

Re-assessment of Income Tax due to the application of the inflation adjustment: it reflects the provision required by the BCRA through Memorandum No. 6/2017 dated May 29, 2017, as it was considered that the reassessment of the income tax by applying the inflation adjustment is not addressed by the current regulations. The Bank has answered the BCRA memorandum and evidenced the validity of the recognition timely made and has requested that it be reviewed. Notwithstanding the foregoing, the provision requested by the BCRA was set up.

 

•

Termination benefit plans: for certain terminated employees, the Bank bears the cost of private health care plans (total or partial) for a certain period after termination. The Bank does not bear any situations requiring medical assistance, but it only makes the related health care plan payments.

 

•

Provisions for reorganization: Consistent with the goal of further aligning the organizational structure with the corporate strategy during the current year, achieving efficiency gains and streamlining the decision-making process across all work teams.

 

•

Administrative, disciplinary and criminal penalties: administrative penalties initiated by the Financial Information Unit, even if there were court or administrative measures to suspend payment and regardless of the status of the proceedings regarding penalties.

 

•

Contingent commitments: it reflects the credit risk arising from the assessment of the degree of compliance of the beneficiaries of unused overdrafts, guarantees, sureties and other contingent commitments for the benefit of third parties on behalf of customers, and of their financial position and the counter guarantees supporting those transactions.

 

•

Other: it reflects the estimated amounts to pay tax claims, labor-related and commercial claims and miscellaneous complaints.

In the opinion of the Entity’s Board of Directors and its legal advisors, there are no other significant effects other than those stated in these financial statements, the amounts and repayment terms of which have been recorded based on the actual value of those estimates, considering the probable date of their final resolution.

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28.	Other non-financial liabilities

Breakdown is as follows:

 

		06.30.19				12.31.18
Short-term personnel benefits			2,760,977				2,538,893
Long-term personnel benefits			198,610				180,757
Other collections and withholdings			2,314,017				2,015,263
Social security payable			350,375				68,967
Advances collected			2,161,718				1,653,586
Miscellaneous creditors			4,006,902				3,440,930
For contract liabilities			224,065				189,140
Other taxes payables			1,000,903				777,085
Other			4,993				29,395
TOTAL			13,022,560				10,894,016

 

29.

Leases

Lessee

Below is a detail of the amounts of assets acquired through leases and liabilities from leases in force as of June 30, 2019:

Assets acquired through leases

 

Account		Initial value as of 01.01.2019				Increases				Decreases				Amortization																Residual value as of 06.30.2019
														Accumulated as of 01.01.2019				Decreases				For the period				Accumulated at period end
Leases			1,846,051				141,494				—				—				—				197,577				197,577				1,789,968

Liabilities from leases

Future minimum payments for lease agreements are as follows:

 

		In foreign currency				In local currency				06.30.19
Up to one year			199,241				11,714				210,955
From 1 to 5 years			1,287,082				160,122				1,447,204
More than 5 years			350,037				3,988				354,025
											2,012,184

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Interest and exchange rate difference recognized in profit or loss

 

Other operating expenses			(119,096	)
Interest on liabilities from lease (Note 42)
Exchange rate difference			(180,792	)
Exchange rate difference for financial lease (loss)
Other Expenses
Leases (Notes 5.1 and 40)			(331,126	)

 

30.	Share Capital

Breakdown is as follows:

 

Shares

Share capital

Class

Quantity

Nominal value per share

Votes per share

Shares outstanding

Pending issuance or distribution

Paid-in (1)

Common

612,659,638

1

1

612,615

45

612,660

 

(1)	Registered with the Public Registry of Commerce.

BBVA Banco Francés S.A. is a corporation (sociedad anónima) incorporated under the laws of Argentina. The shareholders limit their liability to the shares subscribed and paid in, pursuant to the Argentine Companies Law (Law No. 19550). Therefore, and pursuant to Law No. 25738, it is reported that neither foreign capital majority shareholders nor local or foreign shareholders shall be liable in excess of the above mentioned capital contribution for obligations arising from transactions carried out by the financial institution.

The Shareholders’ Meeting held on June 13, 2017 approved the increase in share capital up to $ 145,000,000 (nominal value) by issuing 145,000,000 new registered, common shares with a nominal value of $ 1 each, one vote per share. The Board of Directors is granted the necessary authority to implement that capital increase and determine the issuance conditions.

On July 18, 2017, the issuance of 66,000,000 registered, common shares was approved, with a nominal value of $ 1 each, and a subscription price of USD 5.28 per share and USD 15.85 per each American Depositary Share (ADS), at the spot exchange rate published by the BCRA as of that date ($ 17.0267) for the purposes of paying the shares in pesos. On July 24, 2017, the shares subscribed were paid in.

Pursuant to the terms of the Shares Subscription Agreement, on July 26, 2017, International Underwriters opted to acquire 9,781,788 new shares (equivalent to 3,260,596 ADS) at the same issue price. On July 31, 2017, those shares were paid in, using the spot exchange rate stated.

The Entity applied the funds obtained from the global offer and the exercise of preemptive subscription rights to continue with its growth strategy in the Argentine financial system.

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31.	Interest income

 

		06.30.19				06.30.18
Interest from government securities			13,231,346				2,140,027
Interest from credit card loans			8,128,354				3,309,894
Interest from instruments			4,044,280				1,956,153
Interest from consumer loans			3,586,387				2,888,635
Acquisition Value Unit (UVA) clause adjustment			3,817,799				794,629
Interest from overdrafts			3,061,406				2,095,420
Interest from other loans			1,312,350				1,375,999
Interest from loans to the financial sector			1,280,222				597,948
Interest from loans for the prefinancing and financing of exports			1,265,244				494,495
Premium from reverse repurchase agreements			647,290				228,621
Interest from mortgage loans			542,680				312,517
Interest from financial leases			237,693				254,186
Interest from pledge loans			191,599				654,527
Stabilization Coefficient (CER) clause adjustment			42,494				51,121
Interest from private securities			4,312				16,716
Other financial income			319				1
TOTAL			41,393,775				17,170,889

 

32.	Interest expenses

 

		06.30.19				06.30.18
Time deposits			14,922,547				4,512,931
Checking accounts deposits			1,464,364				706,198
Other liabilities from financial transactions			1,426,605				489,942
Acquisition Value Unit (UVA) clause adjustments			725,982				415,030
Interfinancial loans received			19,664				85,112
Savings accounts deposits			31,720				37,714
Premium for reverse repurchase agreements			1,229				68,756
Other			14,295				324
TOTAL			18,606,406				6,316,007

 

33.	Commission income

 

		06.30.19				06.30.18
Linked to liabilities			4,247,411				2,645,986
From credit cards			2,689,760				1,313,284
Linked to loans			376,809				372,768
From insurance			438,355				337,290
From foreign trade and foreign currency transactions			385,788				186,609
Linked to securities			41,971				64,812
From guarantees granted			627				1,810
TOTAL			8,180,721				4,922,559

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34.	Commission expenses

 

		06.30.19				06.30.18
From credit and debit cards			2,031,274				1,234,807
Latam Pass Commissions			1,577,370				964,773
From promotions			44,443				133,158
From payment of salaries			332,944				107,105
From digital sale services			267,592				170,444
From foreign trade transactions			70,422				60,462
Linked to transactions with securities			1,110				732
Other commission expenses			417,095				205,505
TOTAL			4,742,250				2,876,986

 

35.	Net income / (loss) from financial instruments carried at fair value through profit or loss

 

		06.30.19				06.30.18
Income from private securities			2,387,573				28,553
Income from government securities			1,627,372				435,982
Income from foreign currency forward transactions			864,056				(463,165	)
Income from corporate bonds			34,548				17,627
Interest rate swaps			(334,244	)			(431,676	)
TOTAL			4,579,305				(412,679	)

 

36.	Net (loss) from writing-down assets carried at amortized cost and at fair value through OCI

 

		06.30.19				06.30.18
Loss from sale of government securities			(40,208	)			(66,931	)
Loss from sale of private securities			(355	)			—
TOTAL			(40,563	)			(66,931	)

 

37.	Foreign exchange and gold gains

 

		06.30.19				06.30.18
Conversion of foreign currency assets and liabilities into pesos			(492,846	)			1,208,444
Income from purchase-sale of foreign currency			2,988,948				1,496,414
TOTAL			2,496,102				2,704,858

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38.	Other operating income

 

		06.30.19				06.30.18
Rental of safe deposit boxes			265,673				211,111
Adjustments and interest on miscellaneous receivables			457,304				157,276
Punitive interest			68,758				30,386
Loans recovered			197,680				140,175
Allowances reversed			53,136				72,369
Income from sale of non-current assets held for sale (Note 16)			2,695,720				—
Income tax - Tax inflation adjustment - Fiscal years 2017 and 2018 (Note 15.c)			3,239,760				1,021,518
Debit and credit card commissions			297,273				133,076
Other operating income			505,424				373,949
TOTAL			7,780,728				2,139,860

 

39.	Personnel benefits

 

		06.30.19				06.30.18
Salaries			3,637,576				2,375,471
Social security charges			1,025,333				688,185
Personnel compensation and bonuses			169,144				221,687
Personnel services			111,288				85,438
Other short-term personnel benefits			994,328				497,830
Termination personnel benefits			—				1,822
Other long-term personnel benefits			16,947				16,724
TOTAL			5,954,616				3,887,157

 

40.	Administrative expenses

 

		06.30.19				06.30.18
Travel expenses			55,766				41,708
Administrative expenses			376,820				237,875
Security services			173,060				143,637
Fees to Bank Directors and Supervisory Committee			6,744				6,196
Other fees			240,302				130,220
Insurance			51,553				32,598
Rent (Note 29)			331,126				316,553
Stationery and supplies			22,134				18,541
Electricity and communications			243,502				132,523
Advertising			231,410				236,895
Taxes			1,195,294				730,116
Maintenance costs			535,103				334,410
Armored transportation services			493,940				400,573
Other administrative expenses			508,775				392,979
TOTAL			4,465,529				3,154,824

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41.	Depreciation and amortization

 

		06.30.19				06.30.18
Depreciation of property and equipment			509,270				344,273
Amortization of intangible assets			44,396				61,334
Depreciation of assets acquired through financial leases (Note 29)			197,577				—
Depreciation of other assets			1,044				1,295
TOTAL			752,287				406,902

 

42.	Other operating expenses

 

		06.30.19				06.30.18
Turnover tax			2,813,277				1,682,501
Inicial loss of loans below market rate			764,103				248
Other allowances (Exhibit J)			3,783,813				1,284,462
Restructuring expenses (Exhibit J)			188,268				—
Contribution to the Deposit Guarantee Fund (Note 49)			232,357				137,656
Interest on liabilities from financial lease (Note 29)			119,096				—
Claims			81,437				75,466
Other operating expenses			630,084				401,857
TOTAL			8,612,435				3,582,190

 

43.	Fair values of financial instruments

 

a)	Assets and liabilities measured at fair value

The fair value hierarchy of assets and liabilities measured at fair value as of June 30, 2019 is detailed below:

 

		Accounting balance				Total fair value				Level 1 Fair value				Level 2 Fair value				Level 3 Fair value
Financial assets
Debt securities at fair value through profit or loss			6,590,932				6,590,932				107,779				6,483,153				—
Derivative instruments			1,838,020				1,838,020				—				1,838,020				—
Other financial assets			575,037				575,037				575,037				—				—
Other debt securities			69,763,641				69,763,641				841,499				68,922,142				—
Financial assets pledged as collateral			498,517				498,517				159,182				339,335				—
Investments in equity instruments			1,914,766				1,914,766				149,002				764				1,765,000
Financial liabiltiies
Liabilities at fair value through profit or loss			1,156,152				1,156,152				1,156,152				—				—
Derivative instruments			2,288,638				2,288,638				—				2,288,638				—

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The fair value hierarchy of assets and liabilities measured at fair value as of December 31, 2018 is detailed below:

 

		Accounting balance				Total fair value				Level 1 Fair value				Level 2 Fair value
Financial assets
Debt securities at fair value through profit or loss			7,508,099				7,508,099				54,011				7,454,088
Derivative instruments			591,418				591,418				—				591,418
Other financial assets			408,704				408,704				408,704				—
Other debt securities			23,742,495				23,742,495				100,166				23,642,329
Financial assets pledged as collateral			1,077,801				1,077,801				—				1,077,801
Investments in equity instruments			129,538				129,538				119,322				10,216
Financial liabilities
Liabilities at fair value through profit or loss			692,270				692,270				162,696				529,574
Derivative instruments			1,377,259				1,377,259				—				1,377,259

The fair value of a financial asset or liability is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date.

The most objective and usual reference of the fair value of a financial asset or liability is the price that would be paid in an orderly, transparent and deep market, that is to say its quoted or market price.

If it is not possible to obtain a market price, a fair value is determined using best market practice quoting techniques, such as cash flows discount based on a yields curve for the same class and type of instrument, or if there is no market curve with the same characteristics of the bond, the technical value is calculated considering the latest market price plus interest accrued until the valuation date (whichever is more representative for the species).

In line with the accounting standard, a three-level classification of financial instruments is established. This classification is mainly made based on the observability of the necessary inputs to calculate that fair value, defining the following levels:

 

•

Level 1: Financial instruments valued with quoted prices in an active market. Active market means a market that allows the observation of representative prices with sufficient frequency and daily volume

 

•

Level 2: Financial instruments that do not have an active market, but that may be valued through market observable data.

 

•

Level 3: Valuation using models where variables not obtained from observable market information are used.

Financial assets at fair value mainly consist of BCRA Liquidity Bills and Argentine Treasury Bills (Letes), together with a minor share in Argentine Government Bonds and Corporate Bonds. Likewise, financial derivatives are classified at fair value, which includes foreign currency forward transactions and interest rate swaps with settlement at maturity.

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b)	Transfers between hierarchy levels

 

b.1)	Transfers from Level 1 to Level 2

The following instruments measured at fair value were transferred from Level 1 to Level 2 of the fair value hierarchy:

 

		06.30.19				12.31.18
Argentine Bond in Pesos due 2038			—				1,615

The transfer is due to the fact that the bond was not listed on the market the number of days necessary to be considered Level 1.

 

b.2)	Transfers from Level 2 to Level 1

The following instruments measured at fair value were transferred from Level 2 to Level 1 of the fair value hierarchy:

 

		06.30.19				12.31.18
Capitalizable Treasury Bills in Pesos due 04-30-20			44,370				—
Treasury Bills in US dollars due 07-26-19			104				—

Transfers are due to the fact that both bonds quoted more than 90% during the last 30 days, allowing to consider them as liquid bonds and giving them the level 1 designation.

 

b.3)	Valuation techniques for Levels 2 and 3

The determination of fair value prices set forth by the bank for fixed income consists of considering reference market prices for active markets MAE (“Mercado Abierto Electrónico”) and BYMA (“Bolsas y Mercados Argentinos”). If there are no quoted prices for the last 10 business days, a theoretical valuation is made.

The valuation allocated to financial assets that were not listed on the last 10 business days is determined by considering the latest quoted market price, plus interest accrued until the valuation date or technical value, whichever more representative.

The theoretical valuation carried out for swaps and non-delivery forwards consists in discounting the future flows of the investment applying the interest rate as per the proper spot rates curve.

The estimate of future cash flows for swaps is made considering the spot rates in pesos and the BADLAR rate curve as input. In the case of non-delivery forwards, future cash flows are estimated considering the fair values of Rofex futures for local agreements and ICAP futures prices for offshore agreements as inputs.

For Level 2 Calculations, input data observable in the market is required: the last quoted market price (MAE or BYMA), the terms and conditions of the bond issue as detailed in the respective offering memorandum or, in the particular case of BADLAR-adjustable bonds, according to the terms published in the BCRA’s website, the spot discount curve.

The fair value of the equity interest held in Prisma—classified as Level 3—was calculated on the basis of independent appraisers’ valuations, who relied on a future discounted cash flow method embracing a combined income and market approach, net of the valuation adjustment required by the BCRA in Memorandum No. 7/2019 (Note 5.2).

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b.4)	Reconciliation of opening and ending balances of Level 3 assets and liabilities at fair value

The following table shows a reconciliation between opening balances and final balances of Level 3 fair values:

 

		06.30.19
Balance at the beginning of the fiscal year			—
Investments in equity instruments – Prisma Medios de Pago S.A.			1,765,000
Balance at fiscal period-end			1,765,000

 

c)	Fair value of Assets and Liabilities not measured at fair value

Below is a description of methodologies and assumptions used to assess the fair value of the main financial instruments not measured at fair value, when the instrument does not have a quoted price in a known market.

 

•

Assets and liabilities with fair value similar to their accounting balance

For financial assets and financial liabilities maturing in less than one year, it is considered that the accounting balance is similar to fair value. This assumption also applies for deposits, because a significant portion thereof (more than 99% considering contractual terms and conditions) have a residual maturity of less than one year.

 

•

Fixed rate financial instruments

The fair value of financial assets was assessed by discounting future cash flows from market rates at each measurement date for financial instruments with similar characteristics.

 

•

Variable rate financial instruments

For financial assets and financial liabilities accruing a variable rate, it is considered that the accounting balance is similar to the fair value.

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The fair value hierarchy of assets and liabilities not measured at fair value as of June 30, 2019 is detailed below:

 

		Accounting balance				Total fair value				Level 1 Fair value				Level 2 Fair value
Financial assets
Cash and deposits in banks			90,955,170				(1	)			—				—
Repo transactions			5,924,379				(1	)			—				—
Other financial assets			5,382,184				(1	)			—				—
Loans and other financing							(1	)
Non-financial government sector			336				(1	)			—				—
Argentine Central Bank (BCRA)			64				(1	)			—				—
Other financial institutions			7,596,572				6,737,650				—				6,737,650
Non-financial private sector and residents abroad			179,018,879				178,389,490				—				178,389,490
Financial assets pledged as collateral			5,853,690				(1	)			—				—
Financial liabilities
Deposits			285,201,866				283,332,474				—				283,332,474
Other financial liabilities			23,067,544				(1	)			—				—
Financing received from the Argentine Central Bank (BCRA) and			3,291,860								—
other financial institutions							(1	)							—
Corporate bonds issued			4,329,078				4,239,290				—				4,239,290

 

(1)	Fair value is not reported as it is deemed similar to its book value.

The fair value hierarchy of assets and liabilities not measured at fair value as of December 31, 2018 is detailed below:

 

		Accounting balance				Total fair value				Level 1 Fair value				Level 2 Fair value
Financial assets
Cash and deposits in banks			99,105,461				(1	)			—				—
Repo transactions			12,861,116				(1	)			—				—
Other financial assets			9,238,822				(1	)			—				—
Loans and other financing
Non-financial government sector			207				(1	)			—				—
Argentine Central Bank (BCRA)			383				(1	)			—				—
Other financial institutions			9,583,842				9,492,614								9,492,614
Non-financial private sector and residents abroad			171,837,915				167,308,597				—				167,308,597
Other debt securities			136				(1	)			—				—
Financial assets pledged as collateral			3,625,263				(1	)			—				—
Financial liabilities
Deposits			259,509,061				256,910,027				—				256,910,027
Repo transactions			14,321				(1	)			—				—
Other financial liabilities			28,189,392				(1	)			—				—
Financing received from the Argentine Central Bank (BCRA) and other financial institutions			5,527,525				(1	)			—				—
Corporate bonds issued			2,473,690				2,412,051				—				2,412,051

 

(1)	Fair value is not reported as it is deemed similar to its book value.

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44.	Segment reporting

Basis for segmentation

As of June 30, 2019 and December 31, 2018, the Group determined that it has only one reporting segment related to banking activities.

Below is relevant information on loans and deposits by line of business as of June 30, 2019 and December 31, 2018:

 

BBVA Banco Francés S.A. (bank) (1)		Total as of 06.30.19				Total as of 12.31.18
Loans and other financing			186,615,851				181,422,347
Corporate banking			51,506,274				52,196,585
Small and medimum companies			48,963,924				52,384,419
Retail			86,145,653				76,841,343
Other assets			206,275,774				173,191,856
TOTAL ASSETS			392,891,625				354,614,203
Deposits			285,201,866				259,509,061
Corporate banking			18,613,254				29,668,066
Small and medium companies			58,401,028				49,240,049
Retail			208,187,584				180,600,946
Other liabilities			58,880,350				56,523,365
TOTAL LIABILITIES			344,082,216				316,032,426

 

(1)

It includes BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, BBVA Francés Valores S.A. and Consolidar A.F.J.P. (undergoing liquidation proceedings).

 

45.	Subsidiaries

Below is the information on the Bank’s subsidiaries:

 

Name		Registered Office (country)				Ownership interest as of
						06.30.19				12.31.18
BBVA Francés Valores S.A.			Argentina				96.9953	%			96.9953	%
Consolidar A.F.J.P. S.A. (undergoing liquidation proceedings)			Argentina				53.8892	%			53.8892	%
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión (1)			Argentina				95.0000	%			95.0000	%

 

(1)	The Entity owns a direct 95% interest in the company’s share capital and an indirect 4.8498% interest through BBVA Francés Valores S.A.

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46.	Related parties

 

a)

Parent

The Bank’s parent is Banco Bilbao Vizcaya Argentaria.

 

b)

Key Management personnel

Pursuant to IAS 24, key management personnel are those having the authority and responsibility for planning, managing and controlling the Group’s activities, whether directly or indirectly.

Based on that definition, the Group considers the members of the Board of Directors as key personnel.

 

b.1)

Remuneration of key management personnel

The key personnel of the Board of Directors received the following compensations:

 

		06.30.19				06.30.18
Fees			6,259				5,721
Total			6,259				5,721

 

b.2)

Profit or loss for transactions and balances with key management personnel

 

		Balances as of								Profit or loss
		06.30.19				12.31.18				06.30.19				06.30.18
Loans
Credit cards			2,161				2,907				296				—
Overdrafts			4				19				—				—
Mortgage loans			1,288				1,316				115				120
Deposits
Checking account			8				8				—				—
Savings account			21,407				30,306				47				—
Time deposits			3,445				—				—				—

Loans are granted on an arm’s length basis. As of June 30, 2019 and December 31, 2018, balances of loans granted are classified under normal performance according to the debtor classification rules issued by the BCRA.

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b.3)

Profit or loss and balances with related parties (except key Management personnel)

 

		Balances as of								Profit or loss
Parent		06.30.19				12.31.18				06.30.19				06.30.18
Cash and deposits in bank			558,946				259,503				—				—
Derivative instruments (Assets)			670,097				23,177				—				—
Other financial assets			—				310,034				—				—
Liabilities at fair value through profit or loss			—				315,396				—				—
Other non-financial liabilities			110,216				51,296				97,809				35,762
Derivative instruments (Liabilities)			1,642,439				51,198				1,345,548				16,281
Off-balance sheet balances
Securities in custody			65,194,465				56,994,610				—				—
Derivative instruments			33,482,195				5,172,413				—				—
Sureties granted			554,408				593,593				1,527				321
Guarantees received			316,337				717,641				—				—

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		Balances as of								Profit or loss
Associates		06.30.19				12.31.18				06.30.19				06.30.18
Cash and deposits in banks			32				70				—				—
Loans and other financing			4,147,015				5,723,637				1,109,518				403,281
Debt securities at fair value through profit or loss			10,223				50,398				34,522				17,573
Other financial assets			—				161,622				—				—
Deposits			136,141				149,338				6,590				1,595
Liabilities at fair value through profit or loss			—				223,833				—				—
Other financial liabilities			—				37,390				—				—
Other non-financial liabilities			587				—				1,794				2,859
Financing received			—				—				3,974				2,546
Derivative instruments (Liabilities)			369,913				381,998				277,490				321,507
Corporate bonds issued			126,691				115,263				23,365				13,520
Other operating income			—				—				15,432				5,649
Off-balance sheet balances
Interest rate swaps			1,901,879				2,364,460				—				—
Securities in custody			514,227				506,076				310				183
Guarantees received			2,873				284				—				—
Sureties granted			25,070				23,864				181				79

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		Balances as of								Profit or loss
Subsidiaries		06.30.19				12.31.18				06.30.19				06.30.18
Loans and other financing			3,892				2,809				1,364				529,228
Other financial assets			440				379				125				1,145
Deposits			285,344				254,431				57,753				22
Financing received			—				—				—				570
Other operating income			—				—				2,377				2,625
Administrative expenses			—				—				—				756
Off-balance sheet balances
Securities in custody			578,830				432,968				—				—
Sureties granted			281				281				—				—

Transactions have been agreed upon on an arm’s length basis. As of June 30, 2019 and December 31, 2018, balances of loans granted are classified under normal performance according to the debtor classification rules issued by the BCRA.

 

47.	Restrictions to the payment of dividends

Pursuant to the provisions in the regulation in force issued by the BCRA, financial institutions shall apply an annual 20% of the year’s profits to increase legal reserves.

Furthermore, pursuant to the requirements in General Resolution No. 622 issued by the CNV, the Shareholders’ Meeting considering the financial statements with e accumulated gains shall specifically provide for the allocation thereof.

Specifically, the mechanism to be followed by financial institutions to assess distributable balances is defined by the BCRA through the regulations in force on the “Distribution of earnings”, provided that there are no records of financial assistance from that entity due to illiquidity or shortfalls as regards minimum capital requirements or minimum cash requirements, and other sort of penalties imposed by specific regulators, which are deemed to be material, and/or where no corrective measures had been implemented, among other conditions.

It is worth noting that, on September 20, 2017, the BCRA issued Communication “A” 6327, which provides that financial institutions shall not distribute earnings generated by first application of International Financial Reporting Standards (IFRS), and shall create a special reserve which may only be reversed for capitalization or to absorb potential losses of the item “Unappropriated retained earnings”.

In addition, the Group shall maintain a minimum capital after the proposed distribution of earnings.

On April 24, 2019, the Ordinary and Extraordinary Shareholders’ Meeting was held, whereby the following distribution of profits was approved:

 

•

To Legal Reserve: 1,922,737

 

•

To Distribution of cash dividends: 2,407,000

 

•

To special statutory reserve due to application of IFRS: 3,856,405

 

•

To Optional Reserve for future distribution of profits: 5.283,950.

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48.	Restricted assets

As of June 30, 2019 and December 31, 2018, the Entity has the following restricted assets:

 

a)

The Entity applied Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 79,588, Treasury Bills in US dollars maturing on August 16, 2019 in the amount of 49,665 and Treasury Bills in US dollars maturing on December 4, 2019 in the amount of 24,422 as of June 30, 2019, Argentine Treasury Bonds adjusted by CER in pesos maturing in 2021 in the amount of 79,285 and Treasury Bonds in US dollars maturing on May 10, 2019 in the amount of 56,145 as of December 31, 2018, as security for loans agreed under the Global Credit Program for micro, small and medium enterprises granted by the Inter-American Development Bank (IDB).

 

b)

Also, the Entity has accounts, deposits, repo transactions and trusts applied as guarantee for activities related to credit card transactions, with automated clearing houses, transactions settled at maturity, foreign currency futures, court proceedings and leases in the amount of 6,352,207 and 4,703,064 as of June 30, 2019 and December 31, 2018, respectively.

 

c)

BBVA Francés Valores S.A. has shares in Mercado de Valores de Buenos Aires S.A. (MERVAL) in the amounts of 38,372 and 24,722, and BYMA, in the amounts of 92,750 and 94,600 as of June 30, 2019 and December 31, 2018, respectively. Those shares are pledged for the benefit of “Crédito and Caución Compañía de Seguros S.A.” under the surety bond signed by the issuer to secure noncompliance with the company’s obligations.

 

49.	Deposits guarantee regime

The Entity is included in the Deposits Guarantee Fund Insurance System of Law No. 24485, Regulatory Decrees No. 540/95, No. 1292/96, No. 1127/98 and No. 30/18 and Communication “A” 5943 issued by the BCRA

That law provided for the incorporation of the company “Seguros de Depósitos Sociedad Anónima” (SEDESA) for the purpose of managing the Deposits Guarantee Fund (DGF), the shareholders of which, pursuant to the changes introduced by Decree No. 1292/96, will be the BCRA with at least one share and the trustees of the trust with financial institutions in the proportion determined by the BCRA for each, based on their contributions to the DGF.

In August 1995, that company was incorporated, and the Entity has a 10.038% share of the corporate stock.

The Deposits Guarantee Insurance System, which is limited, mandatory and for valuable consideration, has been created for the purpose of covering bank deposit risks in addition to the deposits privileges and protection system set forth by the Financial Institutions Law.

The guarantee covers the refund of the principal paid plus interest accrued up to the date of revocation of the authorization to operate or until the date of suspension of the entity by application of Section 49 of the Articles of Organization of the BCRA, if this measure had been adopted previously, without exceeding the amount of four hundred and fifty thousand pesos. For transactions in the name of two or more people, the guarantee shall be distributed on a pro-rata basis among them. In no case shall the total guarantee per person exceed the aforementioned amount, regardless of the number of accounts and/or deposits.

In addition, it is set forth that financial institutions shall make a monthly contribution to the DGF an amount equivalent to 0.015% of the monthly average of daily balances of the items listed in the related regulations.

As of June 30, 2019 and 2018, the contributions to the Fund have been recorded in the item “Other operating expenses—Contributions to the deposits guarantee fund” in the amounts of 232,357 and 137,656, respectively.

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On February 28, 2019, the Argentine Central Bank issued Communication “A” 6654 setting forth an increase in the guarantee from pesos four hundred and fifty thousand to pesos one million, effective March 1, 2019.

 

50.	Minimum cash and minimum capital requirements

50.1 Minimum cash requirements

The BCRA establishes different prudential regulations to be observed by financial institutions, mainly regarding solvency levels, liquidity and credit assistance levels.

Minimum cash regulations set forth an obligation to keep liquid assets in relation to deposits and other obligations recorded for each period. The items included for the purpose of meeting that requirement are detailed below:

 

Accounts		06.30.19				12.31.18
Balances at the BCRA
Argentine Central Bank (BCRA) – current account - not restricted			72,910,424				82,119,608
Argentine Central Bank (BCRA) – special guarantee accounts – restricted (Note 14)			2,443,445				1,238,252
Argentine Central Bank (BCRA) –social security special accounts - restricted			281,285				—
			75,635,154				83,357,860
Argentine Treasury Bonds in pesos at fixed rate due November 2020			7,310,239				6,936,000
Liquidity Bills – BCRA			57,005,448				20,202,428
TOTAL			139,950,841				110,496,288

 

50.2	Minimum capital requirements

The regulatory breakdown of minimum capitals is as follows at the above mentioned date:

 

Minimum capital requirements		06.30.19				06.30.18
Credit risk			18,398,338				16,092,833
Operational risk			4,817,242				2,966,117
Market risk			174,965				154,790
Paid-in			44,237,568				33,150,138
Surplus			20,847,023				13,936,398

 

51.	Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and cash contra-account

According to CNV’s General Resolution No. 622/13, as amended by CNV’s General Resolution No. 731, the minimum Shareholders’ Equity required to operate as “Settlement and Clearing Agent - Comprehensive” and “Mutual Funds Custodian Agent” amounts to 29,000 and the minimum cash contra-account required by those rules amounts to 14,750. This amount includes Argentine Treasury Bonds adjusted by CER due 2021 deposited with the account opened at Caja de Valores S.A., named “Depositor 1647 Brokerage Account 5446483 BBVA Banco Francés minimum cash contra-account”. As of June 30, 2019 and December 31, 2018, the Bank’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

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Likewise, the subsidiary BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, as Mutual Funds Management Agent, met the CNV minimum cash contra-account requirements with 282,641 shares of FBA Ahorro Pesos Fondo Común de Inversión, in the amount of 5,302, through custody account No. 493-0005459481 at BBVA Banco Francés S.A. The minimum shareholders’ equity required to act as Mutual Funds Management Agent of the Company amounts to 2,600. As of June 30, 2019 and December 31, 2018, the company’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV. In addition, pursuant to the requirements in General Resolution No. 792 issued by the CNV on April 30, 2019, and effective as of the end of fiscal year ended December 31, 2019, mutual fund management companies’ minimum shareholders’ equity will be comprised by 150,000 UVAs plus 20,000 UVAs, per each additional mutual fund under management.

The subsidiary BBVA Francés Valores S.A., as a Comprehensive Settlement and Clearing Agent met CNV minimum cash contra-account requirements with 9,000,000 shares of FBA Renta Fija Plus in the amount of 14,632, through custody account No. 601-493-0005448549 at BBVA Banco Francés S.A. The minimum shareholders’ equity required to act as a Comprehensive Settlement and Clearing Agent amounts to 18,000, while the minimum cash contra-account amounts to 9,000. As of June 30, 2019 and December 31, 2018, the company’s Shareholders’ Equity exceeds the minimum amount imposed by the CNV.

 

52.	Compliance with the provisions of the Argentine Securities Commission – documentation

The CNV issued General Resolution No. 629 on August 14, 2014 to introduce changes to 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 keeps the documentation that supports its operations for the periods still open to audit for safekeeping in Administradora de Archivos S.A. (AdeA), domiciled at Ruta 36 Km, 31,5 of Florencio Varela, Province of Buenos Aires.

In addition, it is informed that a detail of the documentation delivered for safekeeping, as well as the documentation referred to in Art. 5. a.3), Section I of Chapter V of Title II of the CNV rules is available at the Bank’s registered office (2013 consolidated text and amendments).

 

53.	Trust activities

On January 5, 2001, the Board of Directors of BCRA issued Resolution No. 19/2001, 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 Settler and the Bank as Trustee in relation to the exclusion of assets as provided in the above-mentioned resolution. As of June 30, 2019 and December 31, 2018, the assets of Diagonal Trust amount to 2,427, considering its recoverable value.

In addition, the Entity in its capacity as Trustee in the Corp Banca Trust recorded the selected assets on account of the redemption in kind of participation certificates in the amount of 4,177 as of June 30, 2019 and December 31, 2018.

In addition, the Entity acts as a Trustee in 12 non-financial trusts, in no case as 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 trust assets and the proceeds therefrom. The non-financial trusts concerned were set up to manage assets and/or secure the receivables of several creditors

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(beneficiaries) and the trustee was entrusted the management, care, preservation and custody of the corpus assets until (i) noncompliance with the obligations by the debtor (settler) vis-a-vis the creditors (beneficiaries) are verified, when such assets will be sold and the proceeds therefrom will be distributed (net of expenses) among all beneficiaries, the remainder (if any) shall be delivered to the settler, or (ii) all contract terms and conditions are complied with, in which case all the trust assets will be returned to the settler or to whom it may be indicated. The trust assets totaled 245,151 and 229,112 as of June 30, 2019 and December 31, 2018, respectively, and consist of cash, creditors’ rights, real estate and shares.

 

54.	Mutual funds

As of June 30, 2019 and December 31, 2018, the Entity holds in custody, as Custodian Agent of Mutual Funds managed by BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, time deposit certificates, shares, corporate bonds, government securities, mutual funds, deferred payment checks, BCRA instruments, Buenos Aires City Government Bills, ADRS, Buenos Aires Province Government Bills and repos in the amounts of 26,060,981 and 17,026,024, which are part of the mutual fund portfolio and are recorded in debit balance memorandum accounts “Control – Other”.

The Mutual Fund assets are as follows:

 

		ASSETS AS OF
MUTUAL FUNDS		06.30.19				12.31.18
FBA Renta Pesos			27,139,461				15,883,270
FBA Ahorro Pesos			9,863,188				6,302,409
FBA Renta Fija Dólar			5,700,111				3,747,771
FBA Bonos Argentina			4,839,243				4,011,931
FBA Renta Fija Dólar Plus			1,363,190				1,582,891
FBA Bonos Latam			942,763				36,718
FBA Horizonte			857,915				1,309,573
FBA Calificado			473,442				381,258
FBA Acciones Latinoamericanas			450,519				363,493
FBA Acciones Argentinas			381,028				371,680
FBA Bonos Globales			283,765				34,199
FBA Renta Fija Plus			206,243				219,981
FBA Retorno Total II			117,293				65,690
FBA Horizonte Plus			115,672				94,620
FBA Brasil I			95,291				1,059
FBA Renta Mixta			91,761				83,995
FBA Retorno Total I			47,040				57,549
FBA Renta Pesos Plus			19,444				15,974
FBA Renta Pública I			1,288				1,060
FBA Renta Fija Local			1,287				1,060
FBA Renta Pública II			425				377
TOTAL			52,990,369				34,566,558

The subsidiary BBVA Francés Asset Management S.A. acts as a mutual funds manager, authorized by the CNV, which registered that company as a mutual funds management agent under No. 3 under Provision 2002 issued by the CNV on August 7, 2014.

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55.	Penalties and administrative proceedings instituted by the BCRA

According to the requirements of Communication “A” 5689, as amended, issued by the BCRA, below is a detail of the administrative and/or disciplinary penalties as well as the judgements issued by courts of original jurisdiction in criminal matters, enforced or brought by the BCRA of which the Entity has been notified:

Administrative proceedings commenced by the BCRA

 

•

“Banco Francés S.A. over breach of Law 19359”. Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on February 22, 2008 and identified under No. 3511, File No. 100194/05, on grounds of a breach of the Criminal Foreign Exchange Regime as a result of the purchase and sale of US Dollars through the BCRA in excess of the authorized amounts. These totaled 44 transactions involving the Bank’s branches 099, 342, 999 and 320. The individuals/entities subject to these proceedings were BBVA Banco Francés S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) two Territory Managers, (ii) four Branch Managers, (iii) four Heads of Back-Office Management and (iv) twelve cashiers. On August 21, 2014, the court acquitted the individuals/entities above from all charges. The General Attorney’s Office filed an appeal and Room A of the Appellate Court with jurisdiction over Criminal and Economic Matters confirmed the Bank’s and the involved officers’ acquittal from all charges. The General Attorney’s Office filed an Extraordinary Appeal, which was granted and, as of the date of these financial statements, is being heard by the Supreme Court of Justice.

 

•

“Banco Francés S.A. over breach of Law 19359”. Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on December 1, 2010 and identified under No. 4539, File No. 18398/05 where charges focus on fake foreign exchange transactions, through false statements upon processing thereof, carried out by personnel from five branches in Mar del Plata, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, paragraph 6. The individuals/entities subject to these proceedings were BBVA Banco Francés S.A., the five regular members of the Board of Directors and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) the Retail Bank Manager, (ii) the Territory Manager, (iii) the Area Manager, (iv) a commercial aide to the Area Manager, (v) five Branch Managers, (vi) four Heads of Back-Office Management, (vii) five Main Cashiers and (viii) one cashier. To date, the case is being heard by Federal Court No. 3, Criminal Division of the City of Mar del Plata, under File No. 16377/2016. On June 21, 2017, the court sought to obtain further evidence on its own initiative ordering that a court letter should be sent to the BCRA for it to ascertain if the rules governing the charges brought in the Case File No. 18398/05 Proceedings No. 4539 have been subject to any change. The BCRA answered the request from the Court, stating that noncompliance with the provisions of Communication “A” 3471 would not currently be subject to any change that may imply a lesser offense. Moreover, the Entity is awaiting an answer from the Court regarding the transfer of the requested court files. On July 5, 2018, the Entity was notified of the hearing under Section No. 41 of the Criminal Code, which was held on August 7, 2018.

 

•

“BBVA Banco Francés S.A. over breach of Law 19359”. Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on December 1, 2010 and identified under No. 4524, File No. 3406/06 where charges focus on fake foreign exchange transactions, conducted in the name of a deceased, carried out by personnel of the Branch 240 - Mendoza -, which would entail a failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, Paragraph 6. The individuals/entities subject to these proceedings were BBVA Banco Francés S.A., five regular members of the Board of Directors and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) the Retail Bank Manager, (ii) the Territory Manager, (iii) the Area Manager, (iv) the Branch Manager, (v) the Back Office Branch Management Head and (vi) the Main Cashier. The trial period came to a close. The case is being heard by the Federal Court No. 1, Criminal department of

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the City of Mendoza, File No. 23461/2015. The Federal Court of Mendoza requested by electronic mail to the Federal Courts of Comodoro Rivadavia and Mar del Plata, to certify the cases that are said to be related in terms of object, individuals/entities involved and offense. The Federal Courts of Comodoro Rivadavia answered the letter partially while the Federal Courts of Mar del Plata has not provided any answer at the date of issuance of these financial statements.

 

•

“BBVA Banco Francés S.A. over breach of Law 19359”. Administrative Proceedings for Foreign Exchange Offense initiated by the BCRA notified on July 26, 2013 and identified under No. 5406, File No. 100443/12 where charges focus on fake foreign exchange transactions through false statements upon processing thereof carried out incurred by personnel in Branch 087 - Salta -, which would entail failure to comply with the client identification requirements imposed by foreign exchange rules and regulations through Communication “A” 3471, Paragraph 6. The individuals/entities subject to these proceedings were BBVA Banco Francés S.A. and the following Bank officers who served in the capacities described below at the date when the breaches were committed: (i) the Branch Manager (ii) the Back Office Management Head, (iii) the Main Cashier and (iv) two cashiers. The trial period came to a close and the BCRA must send the file to Salta’s Federal Court.

 

•

“BBVA Banco Francés S.A. over breach of Law 19359”. Administrative Proceedings for foreign exchange offense initiated by the BCRA, notified on December 23, 2015 and identified under No. 6684, File No. 100068/13. The proceedings were brought for allegedly having completed operations under Code 631 “Professional and technical business services” for ROCA ARGENTINA S.A. against the applicable exchange regulations (Communications “A” 3471, “A” 3826 and “A” 5264), involving the incomplete verification of the services provided. The individuals/entities subject to these proceedings were BBVA Banco Francés S.A. and two of the Entity’s officers holding the positions described below: (i) the Foreign Trade Manager and (ii) an officer of the Area. The BCRA has decided that the trial period has come to an end. The case is being heard by Federal Court No. 2, in Lomas de Zamora, Province of Buenos Aires, Criminal Division, under File No. 39130/2017. On October 26, 2017, the Entity filed a request for retroactive application of the most favorable criminal law, as through Communication “A” 5264, whereby the restriction on foreign trade transactions was removed, the payment of services abroad was reinstated

The Entity and its legal advisors estimate that a reasonable interpretation of the applicable regulations in force was made and do not expect an adverse financial impact from these cases.

 

56.	Subsequent events

On July 22, 2019, the Bank completed the process to assess the final sale price for Prisma Medios de Pago S.A.’s shares, representing 51% of its capital stock and votes.

The final price for the shares transferred by the Bank amounts to USD 76,947,895.33. The shortage between the final price and the estimated price at closing was discounted from the outstanding balance; therefore, the Bank made no reimbursement of the proceeds it had received. All other payment terms have remained unaltered, under the agreed-upon conditions (Note 16.1).

Except as stated in the paragraphs above, no other events or transactions have occurred between the period-end date and the date of issuance of these financial statements that may materially affect the Entity’s financial position or results as of June 30, 2019.

 

57.	Accounting principles – Explanation added for translation into English

These financial statements are the English translation of those originally issued in Spanish.

These financial statements are presented on the basis of the accounting standards established by the financial reporting framework set forth by BCRA. Certain accounting practices applied by the Bank that conform to the standards of the BCRA may not conform to the generally accepted accounting principles in other countries.

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The differences between the financial reporting framework set forth by BCRA and IFRS are detailed in Note 2 to the consolidated financial statements. Accordingly, these financial statements are not intended to present financial position, results of operations and cash flows in accordance with generally accepted accounting principles other than the financial reporting framework set forth by the BCRA.

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EXHIBIT B

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO FINANCIAL PERFORMANCE

AND GUARANTEES RECEIVED CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

Account		06.30.19				12.31.18
COMMERCIAL PORTFOLIO
Normal performance			94,577,679				99,848,486
Preferred collaterals and counter-guarantees “A”			648,398				782,100
Preferred collaterals and counter-guarantees “B”			756,493				1,068,873
No preferred collaterals or counter-guarantees			93,172,788				97,997,513
With special follow-up			440,303				174,767
Under observation			440,303				174,767
Preferred collaterals and counter-guarantees “B”			161,679				3,522
No preferred collaterals or counter-guarantees			278,624				171,245
Troubled			529,253				1,529,081
Preferred collaterals and counter-guarantees “B”							3,315
No preferred collaterals or counter-guarantees			529,253				1,525,766
With high risk of insolvency			1,877,828				294,627
Preferred collaterals and counter-guarantees “B”			10,662				9,437
No preferred collaterals or counter-guarantees			1,867,166				285,190
Uncollectible			174,272				23,658
No preferred collaterals or counter-guarantees			174,272				23,658
TOTAL			97,599,335				101,870,619

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EXHIBIT B

(Continued)

CLASSIFICATION OF LOANS AND OTHER FINANCING ACCORDING TO FINANCIAL PERFORMANCE

AND GUARANTEES RECEIVED CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

Account		06.30.19				12.31.18
CONSUMER AND HOUSING PORTFOLIO
Normal performance			91,919,066				82,079,990
Preferred collaterals and counter-guarantees “A”			46,402				52,624
Preferred collaterals and counter-guarantees “B”			12,343,151				9,573,987
No preferred collaterals or counter-guarantees			79,529,513				72,453,379
Low risk			1,822,879				1,363,176
Preferred collaterals and counter-guarantees “A”			—				769
Preferred collaterals and counter-guarantees “B”			87,426				61,746
No preferred collaterals or counter-guarantees			1,735,453				1,300,661
Medium risk			1,525,035				1,112,362
Preferred collaterals and counter-guarantees “A”			537				—
Preferred collaterals and counter-guarantees “B”			29,311				8,703
No preferred collaterals or counter-guarantees			1,495,187				1,103,659
High risk			987,123				585,308
Preferred collaterals and counter-guarantees “B”			27,073				22,179
No preferred collaterals or counter-guarantees			960,050				563,129
Uncollectible			71,925				68,800
Preferred collaterals and counter-guarantees “A”			15				15
Preferred collaterals and counter-guarantees “B”			11,156				7,764
No preferred collaterals or counter-guarantees			60,754				61,021
TOTAL			96,326,028				85,209,636
TOTAL GENERAL			193,925,363				187,080,255

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EXHIBIT C

CONCENTRATION OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19								12.31.18
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			25,132,718				12.96	%			23,237,722				12.42	%
50 following largest customers			32,201,254				16.60	%			31,726,036				16.96	%
100 following largest customers			17,151,022				8.84	%			18,088,037				9.67	%
All other customers			119,440,369				61.60	%			114,028,460				60.95	%
TOTAL			193,925,363				100.00	%			187,080,255				100.00	%

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EXHIBIT D

BREAKDOWN BY TERM OF LOANS AND OTHER FINANCING

CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019

(stated in thousands of pesos) (1)

 

						Terms remaining to maturity
ITEM		Portfolio due				1 month				3 months				6 months				12 months				24 months				More than 24 months				TOTAL
Non-financial government sector			—				336				—				—				—				—				—				336
Argentine Central Bank (BCRA)			—				64				—				—				—				—				—				64
Financial sector			—				2,286,182				693,548				1,173,915				1,370,806				2,060,389				918,160				8,503,000
Non-financial private sector and residents abroad			1,571,465				73,814,001				33,159,699				17,964,587				14,949,175				21,915,117				39,855,052				203,229,096
TOTAL			1,571,465				76,100,583				33,853,247				19,138,502				16,319,981				23,975,506				40,773,212				211,732,496

 

(1)	These balances are total contractual cash flows and, therefore , include principal, accrued and to be accrued interest and charges.

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EXHIBIT H

DEPOSITS CONCENTRATION

CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19								12.31.18
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			10,474,052				3.67	%			15,293,060				5.89	%
50 following largest customers			14,865,237				5.21	%			15,553,822				5.99	%
100 following largest customers			10,045,130				3.52	%			10,544,960				4.06	%
Rest of customers			249,817,447				87.60	%			218,117,219				84.06	%
TOTAL			285,201,866				100.00	%			259,509,061				100.00	%

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EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES BY REMAINING TERMS

CONSOLIDATED WITH SUBSIDIARIES

AS OF JUNE 30, 2019

(stated in thousands of pesos) (1)

 

		Terms remaining to maturity
ITEMS		1 month				3 months				6 months				12 months				24 months				More than 24 months				TOTAL
Deposits			257,644,001				23,856,916				6,028,739				4,605,395				56,058				311				292,191,420
Non-financial government sector			3,634,689				13,955				—				—				—				—				3,648,644
Financial sector			296,404				—				—				—				—				—				296,404
Non-financial private sector and residents abroad			253,712,908				23,842,961				6,028,739				4,605,395				56,058				311				288,246,372
Liabilities at fair value through profit or loss			1,156,152				—				—				—				—				—				1,156,152
Derivative instruments			2,288,638				—				—				—				—				—				2,288,638
Other financial liabilities			21,784,493				280,618				378,275				677,453				521,696				29,362				23,671,897
Financing received from the BCRA and other financial institutions			847,886				1,042,397				250,438				1,165,484				—				—				3,306,205
Corporate bonds issued			193,162				599,832				1,406,448				480,806				3,018,475				—				5,698,723
TOTAL			283,914,332				25,779,763				8,063,900				6,929,138				3,596,229				29,673				328,313,035

 

(1)	These balances are total contractual cash flows and, therefore, include principal, accrued and to be accrued interest and charges.

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EXHIBIT J

PROVISIONS

CONSOLIDATED WITH SUBSIDIARIES

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2019 AND

FISCAL YEAR ENDED DECEMBER 31, 2018

(stated in thousands of pesos)

 

										Decreases
Accounts		Balances at the beginning the year				Increases				Reversals				Uses				Balances as of 06.30.19				Balances as of 12.31.18
INCLUDED IN LIABILITIES
- Provisions for contingent commitments			1,483				168	(1)			—				—				1,651				1,483
- For administrative, disciplinary and criminal penalties			5,000				—	(4)			—				—				5,000				5,000
- Provisions for reorganization			—				188,268	(5)			—				118,268				70,000				—
- Provisions for termination plans			62,135				—	(2)			907				—				61,228				62,135
- Other			3,552,105				3,783,645	(3)			4,488				419,140				6,912,122				3,552,105
TOTAL PROVISIONS			3,620,723				3,972,081				5,395				537,408				7,050,001				3,620,723

 

(1)	Set up in compliance with the provisions of Communication “A” 2950 and supplementary regulations of the BCRA.

(2)	Set up to cover contingencies referred to private healthcare plans.

(3)	Set up to cover for potential contingencies not considered in other accounts (civil, commercial, labor and other lawsuits), and as required by Memorandum 6/2017 issued by the BCRA.

(4)	Set up to cover administrative, disciplinary and criminal penalties.

(5)	See Note 27.

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EXHIBIT R

ADJUSTMENT TO IMPAIRMENT LOSS - ALLOWANCES FOR LOAN LOSSES

CONSOLIDATED WITH SUBSIDIARIES

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2019 AND

FISCAL YEAR ENDED DECEMBER 31, 2018

(stated in thousands of pesos)

 

										Decreases
Accounts		Balances at the beginning of the year				Increases				Reversals				Uses				Balances as of 06.30.19				Balances as of 12.31.18
Other financial assets			84,321				1,423,247	(1)(3)			—				184				1,507,384				84,321
Loans and other financing			4,258,239				2,996,670	(1)(3)			42,902				1,442,884				5,769,123				4,258,239
Other financial institutions			85,488				9,548				42,884				—				52,152				85,488
Non-financial private sector and residents abroad			4,172,751				2,987,122				18				1,442,884				5,716,971				4,172,751
Overdrafts			110,147				35,172				—				59,287				86,032				110,147
Instruments			1,164,674				597,355				—				10,771				1,751,258				1,164,674
Mortgage loans			99,518				31,080				—				128				130,470				99,518
Pledge loans			44,250				7,689				—				6,272				45,667				44,250
Consumer loans			808,085				701,881				—				406,489				1,103,477				808,085
Credit card loans			1,359,528				1,138,690				—				652,934				1,845,284				1,359,528
Financial leases			47,227				20,371				—				11,759				55,839				47,227
Other			539,322				454,884				18				295,244				698,944				539,322
Private securities			1,314				168	(2)(3)			—				46				1,436				1,314
Contingent commitments			1,483				168	(4)			—				—				1,651				1,483
TOTAL ALLOWANCES			4,345,357				4,420,253				42,902				1,443,114				7,279,594				4,345,357

 

(1)	Set up in compliance with the provisions of Communication “A” 2950 and supplementary regulations issued by the BCRA taking into consideration the disclosures made in Note 11 - Other financial assets and Note 12 - Loans and other financing to the consolidated financial statements.

(2)	Set up in compliance with the provisions of Communication “A” 4084 issued by the BCRA.

(3)	Includes total exchange rate difference of:

 

- Other financial assets			79,127
- Loans and other financing			117,755
- Private securities			140

 

(4)	Set up in compliance with credit risk a rising from unused overdraft balances in current account granted, guarantees, sureties and other contingent commitments.

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		KPMG Bouchard 710 - 1st Floor - C1106ABL Buenos Aires, Argentina		[phone]   www.kpmg.com.ar
		- 56 -

 

INDEPENDENT AUDITORS’ LIMITED REVIEW REPORT ON CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

To the President and Directors of

BBVA Banco Francés S.A.

Registered office: Av. Córdoba 111

City of Buenos Aires

Taxpayer identification number [C.U.I.T.] 30 -50000319 -3

Report on the financial statements

We have reviewed the accompanying condensed interim consolidated financial statements of BBVA Banco Francés S.A. (the “Entity”) and its subsidiaries, which include the condensed consolidated statement of financial position as of June 30, 2019, the condensed consolidated statements of income, other comprehensive income, changes in shareholders’ equity and cash flows for the six-month period then ended, exhibits and selected explanatory notes.

The balances and other information as of December 31, 2018 and for the six-month period ended June 30, 2018 are an integral part of the aforementioned financial statements and, therefore, shall be considered in the light of these financial statements.

Board of Directors’ and Management responsibility for the financial statements

The Entity’s Board of Directors and Management are responsible for the preparation and presentation of the accompanying condensed consolidated financial statements in accordance with the accounting standards established by the Argentine Central Bank (“BCRA”), which, as indicated in Note 2 to the accompanying financial statements, are based on the International Financial Reporting Standards (“IFRS”), and, particularly, on International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as approved by the International Accounting Standards Board (“IASB”), and adopted by the Argentine Federation of Professional Councils of Economic Sciences (“FACPCE”), except for section 5.5 “Impairment” of IFRS 9 “Financial Instruments” and IAS 29 “Financial Reporting in Hyperinflationary Economies”. Furthermore, the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions and Memorandum No. 7/2019, issued by the regulator on April 29, 2019 regarding the valuation of the investment held by the Entity in Prisma Medios de Pago S.A., were also considered. The Board of Directors and Management are also responsible for such internal control as they determine is necessary to enable the preparation of the interim consolidated financial statements that are free from material misstatement whether due to error or irregularities.

Scope of our review

Our responsibility is to issue a conclusion on these condensed interim consolidated financial statements based on our review. We conducted our review in accordance with the standards set forth by Technical Resolution No. 37 of the FACPCE and the “Minimum Standards applicable to External Audits” set forth by the BCRA for the review of interim financial statements. In accordance with such standards, a review is limited primarily to the performance of analytical and other review procedures applied to financial data included in the interim financial statements and inquiries of personnel responsible for the preparation thereof. A review is substantially less in scope than an audit conducted in accordance with auditing standards in force, and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the accompanying condensed interim consolidated financial statements.

© 2019 KPMG, a partnership established under Argentine law and a member firm of the KPMG network of independent firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements of BBVA Banco Francés S.A. have not been prepared, in all material respects, in accordance with the BCRA accounting framework described in Note 2 to the accompanying financial statements.

Emphasis of matter

Without modifying our conclusion, we draw users’ attention to the following information disclosed in the accompanying condensed consolidated financial statements:

 

a)

As explained in Note 2. a) to the accompanying financial statements, they have been prepared by the Entity’s Board of Directors and Management in accordance with the BCRA accounting framework, which differs from IFRS as to the application of section 5.5 “Impairment” of IFRS 9 “Financial Instruments”, which was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions.

 

b)

As explained in Notes 2. b) and 3, as provided for by BCRA Communication “A” 6651, the Entity has not applied IAS 29 “Financial Reporting in Hyperinflationary Economies” to the preparation of the accompanying financial statements. The existence of an inflationary context affects the Entity’s financial position and results of operations and, therefore, the inflation impact may distort the financial information, which should be considered in the interpretation of the information provided by the Entity in these consolidated financial statements in respect of its financial position, comprehensive income and cash flows. Management estimates that both the Entity’s equity and income may differ significantly, should IAS 29 be applied.

 

c)	As explained in Note 2. c), the accompanying financial statements have been prepared taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions.

 

d)

As explained in Note 2. d) to the accompanying financial statements, by virtue of the partial sale of the ownership interest in Prisma Medios de Pago S.A., the remaining ownership interest were reclassified to “Investments in equity instruments” and stated at its fair value with changes recognized through profit or loss, based on a valuation report of the company prepared by an external professional. In addition, the valuation adjustment established by Memorandum No. 7/1019, issued on April 29, 2019 by BCRA, was deducted from such remaining ownership interest.

The aforementioned situations do not modify the conclusion stated in the Conclusion paragraph, but it should be considered by those users that apply IFRS to the interpretation of the accompanying financial statements.

City of Buenos Aires, August 9, 2019.

KPMG

María Gabriela Saavedra

Partner

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SEPARATE CONDENSED STATEMENT OF FINANCIAL POSITION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		Notes and Exhibits		06.30.19				12.31.18
ASSETS
Cash and deposits in banks		4			90,952,293				99,102,416
Cash					15,856,354				15,570,362
Financial institutions and correspondents					75,095,939				83,532,054
Argentine Central Bank (BCRA)					73,483,563				75,503,977
Other in the country and abroad					1,612,376				8,028,077
Debt securities at fair value through profit or loss		5 and Exhibit A			6,588,270				7,505,826
Derivatives		6			1,838,020				591,418
Repo transactions		7			5,924,379				12,861,116
Other financial assets		8			5,376,329				9,233,052
Loans and other financing		9			186,585,926				181,398,818
Non-financial government sector					336				207
Argentine Central Bank (BCRA)					64				383
Other Financial Institutions					7,596,572				9,583,794
Non-financial private sector and residents abroad					178,988,954				171,814,434
Other debt securities		10			69,763,641				23,742,631
Financial assets pledged as collateral		11			6,352,207				4,703,064
Investments in equity instruments		13 and Exhibit A			1,783,644				10,216
Investments in subsidiaries and associates		14			2,904,252				2,371,153
Property and equipment		15			11,866,623				9,816,116
Intangible assets		16			590,357				510,912
Deferred income tax assets					526,504				194,036
Other non-financial assets		17			1,859,827				2,133,285
Non-current assets held for sale		18			59,776				493,373
TOTAL ASSETS					392,972,048				354,667,432

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SEPARATE CONDENSED STATEMENT OF FINANCIAL POSITION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		Notes and Exhibits				06.30.19				12.31.18
LIABILITIES
Deposits			19 and Exhibit H				285,481,770				259,763,289
Non-financial government sector							3,635,297				1,544,761
Financial sector							296,404				294,122
Non-financial private sector and residents abroad							281,550,069				257,924,406
Liabilities at fair value through profit or loss			20				1,156,152				692,270
Derivative instruments			6				2,288,638				1,377,259
Repo transactions			7				—				14,321
Other financial liabilities			21				23,067,544				28,189,392
Financing received from the BCRA and other financial institutions			22				3,291,860				5,527,525
Corporate bonds issued			23				4,329,078				2,473,690
Current income tax liabilities			12 a)				4,559,812				3,609,985
Provisions			Exhibit J				7,035,279				3,603,314
Other non-financial liabilities			24				12,986,269				10,864,722
TOTAL LIABILITIES							344,196,402				316,115,767
EQUITY
Share capital			26				612,660				612,660
Non-capitalized contributions							6,735,977				6,735,977
Capital adjustments							312,979				312,979
Reserves							28,488,024				17,424,932
Retained earnings							—				3,856,405
Other accumulated comprehensive income							(161,736	)			(4,975	)
Informe for the period							12,787,742				9,613,687
TOTAL EQUITY							48,775,646				38,551,665
TOTAL LIABILITIES AND EQUITY							392,972,048				354,667,432

Notes and exhibits are an integral part of these financial statements.

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SEPARATE CONDENSED STATEMENT OF INCOME

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		Notes and Exhibits		Accumulated as of 06.30.19				Accumulated as of 06.30.18				Quarter from 04.01.19 to 06.30.19				Quarter from 04.01.18 to 06.30.18
Interest income		27			41,393,775				16,754,574				23,018,132				9,051,426
Interest expenses		28			(18,662,564	)			(6,256,722	)			(10,013,575	)			(3,457,733	)
Net interest income					22,731,211				10,497,852				13,004,557				5,593,693
Commission income		29			7,987,975				4,697,381				4,270,906				2,776,190
Commission expenses		30			(4,742,043	)			(2,867,601	)			(2,422,767	)			(1,516,764	)
Net commission income					3,245,932				1,829,780				1,848,139				1,259,426
Net income/(loss) from financial instruments at fair value through profit or loss		31			4,460,600				(445,638	)			2,035,667				(754,815	)
Net loss from write-down of assets at amortized cost and at fair value through OCI		32			(40,563	)			(66,931	)			(36,380	)			(68,298	)
Foreign exchange and gold gains		33			2,494,635				2,698,018				1,321,674				2,003,389
Other operating income		34			7,763,930				2,147,359				4,375,575				398,914
Loan loss allowances		Exhibit R			(4,221,985	)			(1,313,580	)			(1,865,107	)			(791,654	)
Net operating income					36,433,760				15,346,860				20,684,125				7,640,655
Personnel benefits		35			(5,929,742	)			(3,824,931	)			(3,226,766	)			(1,895,684	)
Administrative expenses		36			(4,441,408	)			(3,105,694	)			(2,405,630	)			(1,618,832	)
Depreciation and amortization		37			(752,287	)			(404,243	)			(393,926	)			(206,885	)
Other operating expenses		38			(8,581,774	)			(3,393,018	)			(6,052,808	)			(1,281,304	)
Operating income					16,728,549				4,618,974				8,604,995				2,637,950
Income from associates and joint ventures					639,804				486,103				429,409				328,458
Income before income tax					17,368,353				5,105,077				9,034,404				2,966,408
Income tax		12 b)			(4,580,611	)			(1,435,859	)			(2,254,281	)			(842,488	)
Income for the period					12,787,742				3,669,218				6,780,123				2,123,920

Notes and exhibits are an integral part of these financial statements.

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EARNINGS PER SHARE

AS OF JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Numerator:
Net income attributable to owners of the Parent			12,787,742				3,669,218
Net income attributable to owners of the Parent adjusted to reflect the effect of dilution			12,787,742				3,669,218
Denominator:
Weighted average of outstanding common shares for the period			612,659,638				612,659,638
Weighted average of outstanding common shares for the period adjusted to reflect the effect of dilution			612,659,638				612,659,638
Basic earnings per share (stated in thousands of pesos)			20.8725				5.9890
Diluted earnings per share (stated in thousands of pesos) (1)			20.8725				5.9890

 

(1)	Since BBVA Banco Francés S.A. has not issued financial instruments with a dilutive effect on earnings per share, basic and diluted earnings per share are the same.

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SEPARATE CONDENSED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		Accumulated as of 06.30.19				Accumulated as of 06.30.18				Quarter from 04.01.19 to 06.30.19				Quarter from 04.01.18 to 06.30.18
Income for the period			12,787,742				3,669,218				6,780,123				2,123,920
Other comprehensive income components to be reclassified to income/(loss) for the period:
Profits or losses from financial instruments at fair value through OCI
(Loss) for the period on financial instruments at fair value through OCI			(264,016	)			(104,763	)			17,485				(129,704	)
Reclassification adjustment for the period			40,563				66,931				36,380				68,298
Income tax			67,078				8,259				(36,125	)			18,700
			(156,375	)			(29,573	)			17,740				(42,706	)
Other comprehensive income components not to be reclassified to income/(loss) for the period:
Personnel benefit plans
Actuarial profits or losses accumulated due to personnel benefit plans			—				(5,322	)			—				(5,322	)
Income tax			—				1,600				—				1,600
			—				(3,722	)			—				(3,722	)
Share in Other Comprehensive Income from associates and joint venture at equity method:
(Loss)/Income for the period on the share in OCI from associates and joint ventures at equity method			(386	)			102,833				9,519				110,791
			(386	)			102,833				9,519				110,791
Total Other Comprehensive Income for the period			(156,761	)			69,538				27,259				64,363
Total Comprehensive Income			12,630,981				3,738,756				6,807,382				2,188,283

Notes and exhibits are an integral part of these financial statements.

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SEPARATE CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

		2019																																				2018
		Share capital				Non-capitalized contributions								Other comprehensive income								Retained earnings
Transactions		Outstanding shares				Share premium				Adjustments to equity				Losses on financial instruments at fair value through OCI				Other				Legal reserve				Other				Unappropriated retained earnings				Total				Total
Balances at the beginning of the year			612,660				6,735,977				312,979				(112,612	)			107,637				4,802,904				12,622,028				13,470,092				38,551,665				26,056,548
Impact of the implementation of the financial reporting framework set forth by the BCRA			—				—				—				—				—				—				—				—				—				4,036,385
Adjusted balance at the beginning of the year			612,660				6,735,977				312,979				(112,612	)			107,637				4,802,904				12,622,028				13,470,092				38,551,665				30,092,933
Total comprehensive income for the year
- Net income for the year			—				—				—				—				—				—				—				12,787,742				12,787,742				3,669,218
- Other Comprehensive Income/(Loss) for the year			—				—				—				(156,375	)			(386	)			—				—				—				(156,761	)			69,538
- Allocation of unappropriated retained earnings as per Shareholders’
Meeting held on April 24, 2019 and April 10, 2018
Legal reserve			—				—				—				—				—				1,922,737				—				(1,922,737	)			—				—
Cash dividends			—				—				—				—				—				—				—				(2,407,000	)			(2,407,000	)			(970,000	)
Special statutory reserve due to application of IFRS			—				—				—				—				—				—				3,856,405				(3,856,405	)			—				—
Other			—				—				—				—				—				—				5,283,950				(5,283,950	)			—				—
Balances at fiscal period end			612,660				6,735,977				312,979				(268,987	)			107,251				6,725,641				21,762,383				12,787,742				48,775,646				32,861,689

Notes and exhibits are an integral part of these financial statements.

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SEPARATE CONDENSED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Cash flows from operating activities
Income before income tax			17,368,353				5,105,077
Adjustments to obtain flows from operating activities:			(5,885,832	)			(6,949,915	)
Depreciation and amortization			752,287				404,243
Loan loss allowances			4,221,985				1,313,580
Effect of exchange rate changes on cash and cash equivalents			(6,590,306	)			(12,308,718	)
(Loss) from sale of Prisma			(2,695,720	)			—
Other adjustments			(1,574,078	)			3,640,980
Net decreases from operating assets:			(45,410,732	)			(37,272,393	)
Debt securities at fair value through profit or loss			917,556				3,066,802
Derivative instruments			(1,246,602	)			142,225
Repo transactions			6,936,737				18,273
Loans and other financing			(6,887,552	)			(32,994,309	)
Non-financial government sector			(129	)			140
Other financial institutions			1,987,541				(996,076	)
Non-financial private sector and residents abroad			(8,874,964	)			(31,998,373	)
Other debt securities			(46,244,463	)			(2,538,901	)
Financial assets pledged as collateral			(1,649,143	)			(1,905,110	)
Investments in equity instruments			—				(982	)
Other assets			2,762,735				(3,060,391	)
Net increases from operating liabilities:			19,738,735				41,911,379
Deposits			25,718,481				38,033,376
Non-financial government sector			2,090,536				(7,220	)
Financial sector			2,282				67,502
Non-financial private sector and residents abroad			23,625,663				37,973,094
Liabilities at fair value through profit or loss			463,882				143,495
Derivative instruments			911,379				(213,227	)
Repo transactions			(14,321	)			651,341
Other liabilities			(7,340,686	)			3,296,394
Income tax paid			(508,391	)			(445,868	)
Total cash flows (used in)/generated by operating activities			(14,697,867	)			2,348,280

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SEPARATE CONDENSED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH INTERIM PERIODS ENDED JUNE 30, 2019 AND 2018

(stated in thousands of pesos)

 

Accounts		06.30.19				06.30.18
Cash flows from investing activities
Payments:			(870,291	)			(959,224	)
Purchase of property and equipment, intangible assets and other assets			(870,291	)			(753,559	)
Purchase of debt or equity instruments issued by other institutions			—				(205,665	)
Collections:			2,552,618				554,119
Sale of investments in equity instruments			1,729,915				554,119
Other collections related to investing activities			822,703				—
Total cash flows generated by / (used in) investing activities			1,682,327				(405,105	)
Cash flows from financing activities
Payments:			(3,258,289	)			(2,283,268	)
Dividends			(2,407,000	)			(970,000	)
Non-subordinated corporate bonds			(570,712	)			(326,812	)
Argentine Central Bank			(1,116	)			—
Local financial institutions			—				(986,456	)
Lease payments			(279,461	)			—
Collections:			1,533,400				4,122,808
Non-subordinated corporate bonds			1,533,400				4,120,810
Argentine Central Bank			—				1,998
Total cash flows (used in) / generated by financing activities			(1,724,889	)			1,839,540
Effect of exchange rate changes on cash and cash equivalents			6,590,306				12,428,451
Total changes in cash flows			(8,150,123	)			16,211,166
Cash and cash equivalents at the beginning of the year (Note 4)			99,102,416				38,179,507
Cash and cash equivalents at fiscal period end (Note 4)			90,952,293				54,390,673

Notes and exhibits are an integral part of these financial statements.

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NOTES TO THE SEPARATE CONDENSED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Stated in thousands of pesos)

 

1.	Basis for the preparation of the separate financial statements

As mentioned in Note 2 to the consolidated condensed interim financial statements, BBVA Banco Francés S.A. (the “Bank”) presents consolidated financial statements in accordance with the financial reporting framework set forth by the Argentine Central Bank (BCRA).

These financial statements of the Bank are supplementary to the consolidated condensed interim financial statements mentioned above, and are intended for the purposes of complying with legal and regulatory requirements.

 

2.	Criteria for the preparation of the financial statements

These condensed interim financial statements for the six-month period ended June 30, 2019 are prepared pursuant to the reporting framework set forth by the BCRA that requires supervised entities to submit financial statements prepared pursuant to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), subject to temporary exception from applying the impairment model in Section 5.5 “Impairment” of IFRS No. 9 “Financial instruments” and International Accounting Standard No. 29 (IAS No. 29) “Financial reporting in hyperinflationary economies”, which shall be applicable for the fiscal years beginning on or after January 1, 2020 and, taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulatory entity on May 29, 2017 regarding the treatment to be applied to uncertain tax positions as well as, the instructions provided in Memorandum No. 7/2019 issued by the BCRA dated April 29, 2019, which set forth the accounting treatment to be applied to the remaining investment held by the Entity in Prisma Medios de Pago S.A. as of June 30, 2019 (“financial reporting framework set forth by the BCRA”).

As stated in Note 2 to the consolidated condensed interim financial statements, the above mentioned circumstances result in a departure from the IFRS which has a significant impact and may distort the information provided in these separate financial statements.

As this is an interim period, the Bank has opted to present condensed information. Likewise, these separate financial statements contain the additional information and exhibits required by the BCRA through Communication “A” 6324.

To avoid duplication of information already provided, we refer to the consolidated financial statements regarding:

 

•

Functional and presentation currency and unit of account (Note 3 to the consolidated condensed interim financial statements)

 

•

Accounting judgment and estimates (Note 4 to the consolidated condensed interim financial statements)

 

•

Significant accounting policies (Note 5 to the consolidated condensed interim financial statements), except for the measurement of ownership interests in subsidiaries.

 

•

IFRS issued but not yet effective (Note 6 to the consolidated condensed interim financial statements)

 

•

Provisions (Note 27 to the consolidated condensed interim financial statements)

 

•

Fair values of financial instruments (Note 43 to the consolidated condensed interim financial statements)

 

•

Segment reporting (Note 44 to the consolidated condensed interim financial statements)

 

•

Subsidiaries (Note 45 to the consolidated condensed interim financial statements)

 

•

Deposits guarantee regime (Note 49 to the consolidated condensed interim financial statements)

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•

Compliance with the provisions of the Argentine Securities Commission – minimum shareholders’ equity and liquid assets (Note 51 to the consolidated condensed interim financial statements)

 

•

Trust activities (Note 53 to the consolidated condensed interim financial statements)

 

•

Mutual funds (Note 54 to the consolidated condensed interim financial statements)

 

•

Penalties and administrative proceedings initiated by the BCRA (Note 55 to the consolidated condensed interim financial statements)

 

•

Subsequent events (Note 56 to the consolidated condensed interim financial statements)

 

3.	Significant accounting policies

The Bank has consistently applied the accounting policies described in Note 5 to the consolidated financial statements as of December 31, 2018, in all the periods presented in these financial statements.

Investments in subsidiaries

Subsidiaries are all the entities controlled by the Bank. The Bank owns a controlling interest in an entity when it is exposed to, or has rights over, the variable returns from its interest in the company, and has the power to affect the changes in such yields. The Bank reevaluates if its control is maintained when there are changes in any of the conditions mentioned.

Interests in Subsidiaries are measured using the equity method. They are initially recognized at cost, which includes transaction costs. After initial recognition, the financial statements include the Bank’s share in profit or loss and OCI of investments accounted for using the equity method, until the date when the significant influence or joint control cease.

The interim financial statements as of June 30, 2019 of the subsidiaries BBVA Francés Valores S.A, BBVA Francés Asset Management S.A. and Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. (under liquidation proceedings) were adjusted considering the financial reporting framework set forth by the BCRA in order to present financial information on an homogeneous basis.

Interim financial information

These financial statements for the six-month period ended June 30, 2019 have been prepared in accordance with IAS No. 34 “Interim financial information” and pursuant to the policies adopted by the Entity in its annual financial statements as of December 31, 2018.

 

4.	Cash and deposits in banks

 

		06.30.19				12.31.18
Cash			15,856,354				15,570,362
BCRA - Current account			73,483,563				75,503,977
Balances with other local and foreign institutions			1,612,376				8,028,077
TOTAL			90,952,293				99,102,416

 

5.	Debt securities at fair value through profit or loss

 

		06.30.19				12.31.18
Government securities			521,137				950,525
Private securities - Corporate bonds			100,680				167,913
BCRA Bills			5,966,453				6,387,388
TOTAL			6,588,270				7,505,826

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6.	Derivatives

In the ordinary course of business, the Bank carried out foreign currency forward transactions with daily or upon-maturity settlement of differences, with no delivery of the underlying asset and interest rate swap transactions. These transactions do not qualify as hedging pursuant to IFRS No. 9 - “Financial Instruments”.

The aforementioned instruments are measured at fair value and were recognized in the Statement of financial position in the item “Derivative instruments” and changes in fair values were recognized in the Statement of Income in the item “Net income from measurement of financial instruments at fair value through profit or loss”.

Breakdown is as follows:

Assets

 

		06.30.19				12.31.18
Debit balances linked to foreign currency forwards pending settlement in pesos			1,838,020				591,418
TOTAL			1,838,020				591,418

Liabilities

 

		06.30.19				12.31.18
Credit balances linked to foreign currency forwards pending settlement in pesos			1,852,065				889,731
Credit balances linked to interest rate swaps			436,573				487,528
TOTAL			2,288,638				1,377,259

The notional amounts of the forward transactions and foreign currency forwards, stated in US Dollars (US$) and euros, as applicable, as well as the base value of interest rate swaps are reported below.

 

		06.30.19				12.31.18
Foreign Currency Forwards
Foreign currency forward purchases - US$			746,097				620,651
Foreign currency forward sales - US$			806,914				760,615
Foreign currency forward sales - Euros			4,322				5,463
Interest rate swaps
Fixed rate for floating rate			2,418,547				3,261,154

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7.	Repo transactions

Breakdown is as follows:

Reverse repurchase transactions

 

				06.30.19				12.31.18
Amounts receivable for reverse repurchase transactions of government securities and BCRA bills with financial institutions					263,176				154,753
Amounts receivable for reverse repurchase transactions of government securities with non-financial institutions		(1)			5,661,203				12,706,363
TOTAL					5,924,379				12,861,116

 

(1)	For one repo transaction of Argentine Bonds in US Dollars 2024 carried out with Argentina for an original total of US$ 300,000,000 with final maturity on May 7, 2020.

Repurchase transactions

 

		06.30.19				12.31.18
Amounts payable for repurchase transactions of BCRA bills			—				14,321
TOTAL			—				14,321

 

8.	Other financial assets

Breakdown of other financial assets is as follows:

 

		06.30.19				12.31.18
Measured at amortized cost
Financial debtors from spot transactions pending settlement			2,433,593				6,842,344
Non-financial debtors from spot transactions pending settlement			343,880				91,052
Receivables from sale of ownership interest in Prisma Medios de Pago S.A.			1,369,677				—
Other receivables			2,481,369				1,816,476
Other			238,977				552,220
			6,867,496				9,302,092
Allowance for loan losses (Exhibit R)			(1,491,167	)			(69,040	)
TOTAL			5,376,329				9,233,052

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9.	Loans and other financing

The Bank keeps loans and other financing under a business model with the purpose of collecting contractual cash flows. Therefore, it measures loans and other financing at amortized cost. Below is a breakdown of the related balance:

 

		06.30.19				12.31.18
Non-financial government sector			336				207
BCRA			64				383
Other financial institutions			7,648,724				9,669,282
Overdrafts			9,589,505				11,789,313
Discounted instruments			10,315,773				11,310,587
Unsecured instruments			8,410,206				12,739,330
Instruments purchased			54,907				264,434
Mortgage loans			12,041,363				10,104,731
Pledge loans			1,540,809				1,650,222
Consumer loans			24,367,511				23,560,930
Credit Cards			47,825,927				41,869,188
Loans for the prefinancing and financing of exports			51,172,141				45,088,576
Receivables from financial leases			2,065,885				2,377,747
Loans to personnel			1,448,769				1,203,780
Other financing			15,873,129				14,028,347
			192,355,049				185,657,057
Allowance for loan losses (Exhibit R)			(5,769,123	)			(4,258,239	)
TOTAL			186,585,926				181,398,818

A breakdown of loans and other financing according to credit quality standing pursuant to the standards applicable issued by the BCRA are detailed in Exhibit B, while the information on the concentration of loans and other financing is presented in Exhibit C to these separate financial statements. The reconciliation of the information included in those Exhibits with the accounting balances is included below.

 

		06.30.19				12.31.18
Total Exhibits B and C			193,895,438				187,056,726
Plus:
BCRA			64				383
Loans to personnel			1,448,769				1,203,780
Less:
Allowances for loan losses			(5,769,123	)			(4,258,239	)
Adjustments for effective interest rate			(467,474	)			(767,474	)
Corporate bonds			(148,517	)			(123,275	)
Loan commitments			(2,373,231	)			(1,713,083	)
Total loans and other financing			186,585,926				181,398,818

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10.	Other debt securities

 

a)

Financial assets measured at amortized cost

 

		06.30.19				12.31.18
Corporate bonds in arrears			136				136
			136				136
Allowance for loan losses - Private securities (Exhibit R)			(136	)			(136	)
TOTAL			—				—

 

b)

Financial assets measured at fair value through OCI

 

		06.30.19				12.31.18
Government securities			18,595,978				9,815,621
BCRA Liquidity Bills			51,038,995				13,815,040
Private securities - Corporate bonds			129,968				113,148
			69,764,941				23,743,809
Allowance for loan losses - Private securities (Exhibit R)			(1,300	)			(1,178	)
TOTAL			69,763,641				23,742,631

 

11.	Financial assets pledged as collateral

As of June 30, 2019 and December 31, 2018, the Entity delivered the financial assets listed below as collateral:

 

						06.30.19				12.31.18
BCRA - Special guarantee accounts			(1	)			2,443,445				1,238,252
Guarantee Trust - Government securities and BCRA Bills at fair value through OCI			(2	)			498,517				1,061,766
Guarantee Trust - Pesos			(2	)			17,190				14,260
Deposits as collateral			(3	)			3,393,055				2,372,751
For repo transactions - Government securities at fair value			(4	)			—				16,035
TOTAL							6,352,207				4,703,064

 

(1)

Special guarantee current accounts opened at the BCRA for the transactions related to the automated clearing houses and other similar entities.

 

(2)

Set up as collateral to operate with ROFEX and MAE on foreign currency forward transactions and futures contracts. The trust fund consists of pesos and monetary regulation instruments issued by the BCRA.

 

(3)

Deposits pledged as collateral for activities related to credit card transactions in the country and abroad, leases and futures contracts.

 

(4)

It corresponds to repo transactions.

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12.	Income tax

a) Current income tax liabilities

Breakdown is as follows:

 

		06.30.19				12.31.18
Advances			(285,940	)			(667,440	)
Collections and withholdings			(249	)			(575	)
Income tax provision			4,846,001				4,278,000
			4,559,812				3,609,985

b) Income tax expense

Breakdown of income tax expense:

 

		06.30.19				06.30.18
Current tax			4,846,001				1,556,000
Deferred tax			(265,390	)			(120,141	)
			4,580,611				1,435,859

Pursuant to IAS No. 34, in interim periods income tax is recognized over the best estimate of the weighted average tax rate expected by the Entity for the fiscal year.

The Bank’s effective rate for the six-month period ended June 30, 2019 was 26%, while for the six-month period ended June 30, 2018, it was 28%.

 

13.	Investments in equity instruments

Investments in equity instruments over which the Bank has no control, joint control or a significant influence are measured at fair value through profit or loss and at fair value through OCI. Breakdown is as follows:

13.1 Investments in equity instruments through profit or loss

 

		06.30.19				12.31.18
Prisma Medios de Pago S.A. (Note 16 to the consolidated financial statements)			1,765,000				—
TOTAL			1,765,000				—

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13.2 Investments in equity instruments through other comprehensive income

 

		06.30.19				12.31.18
Banco Latinoaméricano de Exportaciones S.A.			17,880				9,516
Other			764				700
TOTAL			18,644				10,216

 

14.	Investments in subsidiaries and associates

The Bank has investments in the following entities over which it has a control or significant influence which are measured by applying the equity method:

 

		06.30.19				12.31.18
PSA Finance Arg. Cía. Financiera S.A.			465,399				434,494
Rombo Cía. Financiera S.A.			562,887				514,779
Volkswagen Financial Services Compañía Financiera S.A.			768,343				633,362
Consolidar A.F.J.P. S.A. (under liquidation proceedings)			31,564				28,454
BBVA Francés Valores S.A.			186,843				164,294
BBVA Francés Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión			611,710				426,759
Interbanking S.A.			54,424				33,863
BBVA Consolidar Seguros S.A.			223,082				135,148
TOTAL			2,904,252				2,371,153

 

15.	Property and equipment

 

		06.30.19				12.31.18
Real estate			6,771,750				6,820,968
Real estate acquired through financial leases (Note 25)			1,789,968				—
Constructions in progress			435,432				469,519
Furniture and facilities			1,681,661				1,561,128
Machinery and equipment			1,172,610				951,797
Automobiles			15,202				12,704
TOTAL			11,866,623				9,816,116

Detailed information on assets and liabilities for leases as well as interest and foreign exchange differences recognized in profit or loss are stated in Note 18 to the consolidated condensed interim financial statements.

 

16.	Intangible assets

 

		06.30.19				12.31.18
Licenses - Software			590,357				510,912
TOTAL			590,357				510,912

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17.	Other non-financial assets

Breakdown is as follows:

 

		06.30.19				12.31.18
Investment properties			65,650				66,368
Tax advances			328,267				388,264
Prepayments			1,090,718				1,159,780
Advances to suppliers of goods			128,445				152,848
Other miscellaneous assets			235,448				327,504
Advances to personnel			1,339				8,155
Assets acquired as security for loans			3,958				2,758
Other			6,002				27,608
TOTAL			1,859,827				2,133,285

 

18.	Non-current assets held for sale

On December 19, 2018, the Board of Directors agreed to a plan to sell a group of real property assets located in Argentina. Therefore, these assets, the value of which, as of June 30, 2019 and December 31, 2018 amounts to 59,776, were classified as “Non-current assets held for sale”, after the efforts to sell that group of assets began.

During November 2017, the Board of Directors agreed to a plan to sell its ownership interest in Prisma Medios de Pago S.A., and therefore the accounting balance of that ownership interest was presented as “Non-current assets held for sale”, in the amount of 433,597 as of December 31, 2018. The sale of 51% of the Bank’s shareholding in that Company was completed on February 1, 2019. As of June 30, 2019, the ownership interest in this company is accounted for under “Investments in equity instruments” (Note 13).

 

19.

Deposits

The information on concentration of deposits is disclosed in Exhibit H.

Breakdown is as follows:

 

		06.30.19				12.31.18
Non-financial government sector			3,635,297				1,544,761
Financial sector			296,404				294,122
Non-financial private sector and residents abroad			281,550,069				257,924,406
Checking accounts			30,718,916				28,583,294
Savings accounts			153,260,717				140,956,173
Time deposits			92,779,990				84,050,291
Investment accounts			62				—
Other			4,790,384				4,334,648
TOTAL			285,481,770				259,763,289

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20.	Liabilities at fair value through profit or loss

 

		06.30.19				12.31.18
Obligations from securities transactions			1,156,152				692,270
TOTAL			1,156,152				692,270

 

21.	Other financial liabilities

 

		06.30.19				12.31.18
Creditors from spot transactions pending settlements			2,968,528				7,031,105
Obligations from financing of purchases			10,070,897				13,105,616
Liabilities from leases (Note 25)			2,012,184				—
Accrued commissions payable			8,474				5,893
Collections and other transactions on behalf of third parties			3,638,103				3,374,476
Interest accrued payable			86,711				89,774
Other			4,282,647				4,582,528
TOTAL			23,067,544				28,189,392

 

22.	Financing received from the BCRA and other financial institutions

The financing received from the BCRA and other financial institutions is measured at amortized cost and the breakdown is as follows:

 

		06.30.19				12.31.18
Foreign financial institutions			3,282,968				5,517,517
BCRA			8,892				10,008
			3,291,860				5,527,525

 

23.	Corporate bonds issued

The detail of corporate bonds in force as of June 30, 2019 and December 31, 2018, is included in Note 26 to the consolidated condensed interim financial statements.

 

24.	Other non-financial liabilities

 

		06.30.19				12.31.18
Short-term personnel benefits			2,748,912				2,525,378
Long-term personnel benefits			198,207				180,354
Other collections and withholdings			2,313,282				2,014,695
Social security payable			350,375				68,967
Advances collected			2,161,718				1,653,586
Miscellaneous creditors			3,987,211				3,427,678
For contract liabilities			224,065				189,140
Other taxes payables			997,607				775,669
Other			4,892				29,255
TOTAL			12,986,269				10,864,722

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25.

Leases

See note 29 to the Consolidated Condensed Interim Financial Statements.

 

26.	Share capital

The information on the corporate stock is disclosed in Note 30 to the Consolidated Condensed Interim Financial Statements.

 

27.	Interest income

 

		06.30.19				06.30.18
Interest from government securities			13,231,346				2,140,027
Interest from credit card loans			8,128,354				3,309,894
Interest from instruments			4,044,280				1,956,153
Acquisition Value Unit (UVA) clause adjustment			3,772,217				782,429
Interest from consumer loans			3,586,387				2,888,635
Interest from overdrafts			3,061,406				2,095,420
Interest from loans to the financial sector			1,325,804				1,077,526
Interest from other loans			1,312,350				897,989
Interest from loans for the prefinancing and financing of exports			1,265,244				494,495
Premium from reverse repurchase agreements			647,290				228,621
Interest from mortgage loans			542,680				312,517
Interest from financial leases			237,693				253,779
Interest from pledge loans			191,599				249,251
Stabilization Coefficient (CER) clause adjustment			42,494				51,121
Interest from private securities			4,312				16,716
Other financial income			319				1
TOTAL			41,393,775				16,754,574

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28.	Interest expenses

 

		06.30.19				06.30.18
Time deposits			14,922,547				4,512,931
Checking accounts deposits			1,464,364				706,198
Other liabilities from financial transactions			1,426,605				489,719
Acquisition Value Unit (UVA) clause adjustments			725,982				415,030
Savings accounts deposits			87,878				37,714
Interfinancial loans received			19,664				26,050
Other			14,295				324
Premium for reverse repurchase agreements			1,229				68,756
TOTAL			18,662,564				6,256,722

 

29.	Commission income

 

		06.30.19				06.30.18
Linked to liabilities			4,247,411				2,645,986
Linked to loans			184,063				147,590
Linked to securities			41,971				64,812
From guarantees granted			627				1,810
From credit cards			2,689,760				1,313,284
From insurance			438,355				337,290
From foreign trade and foreign currency transactions			385,788				186,609
TOTAL			7,987,975				4,697,381

 

30.	Commission expenses

 

		06.30.19				06.30.18
From credit and debit cards			2,031,274				1,234,807
Latam Pass Commissions			1,577,370				964,773
Related to transactions with securities			903				643
From foreign trade transactions			70,422				60,462
From salary payments			332,944				107,105
From promotions			44,443				133,158
From digital sales services			267,592				170,444
Other commission expenses			417,095				196,209
TOTAL			4,742,043				2,867,601

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31.	Net income/(loss) from measurement of financial instruments carried at fair value through profit or loss

 

		06.30.19				06.30.18
Income from foreign currency forward transactions			864,056				(463,165	)
Income from government securities			1,627,273				434,848
Income from corporate bonds			34,548				17,627
Income from private securities			2,268,967				(3,273	)
Interest rate swaps			(334,244	)			(431,675	)
TOTAL			4,460,600				(445,638	)

 

32.	(Loss) from writing down of financial assets at amortized cost and at fair value through OCI

 

		06.30.19				06.30.18
Loss from sale of government securities			(40,208	)			(66,931	)
Loss from sale of private securities			(355	)			—
TOTAL			(40,563	)			(66,931	)

 

33.	Foreign exchange and gold gains

 

		06.30.19				06.30.18
Conversion of foreign currency assets and liabilities into pesos			(494,313	)			1,201,604
Income from purchase-sale of foreign currency			2,988,948				1,496,414
TOTAL			2,494,635				2,698,018

 

34.	Other operating income

 

		06.30.19				06.30.18
Rental of safe deposit boxes			265,673				211,111
Adjustments and interest on miscellaneous receivables			457,304				157,276
Punitive interest			68,758				29,457
Loans recovered			197,680				140,175
Allowances reversed			43,663				63,560
Income from sale of non-current assets held for sale			2,695,720				—
Income tax - Tax inflation adjustment - Fiscal years 2017 and 2018 (Note 15.c) to the condensed consolidated interim financial statements			3,239,760				1,021,518
Debit and credit card commissions			297,273				133,076
Other operating income			498,099				391,186
TOTAL			7,763,930				2,147,359

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35.	Personnel benefits

 

		06.30.19				06.30.18
Salaries			3,621,998				2,326,353
Social security charges			1,021,606				681,067
Personnel compensation and bonuses			163,847				218,202
Personnel services			111,016				83,360
Other short-term personnel benefits			994,328				497,403
Termination personnel benefits			—				1,822
Other long-term personnel benefits			16,947				16,724
TOTAL			5,929,742				3,824,931

 

36.	Administrative expenses

 

		06.30.19				06.30.18
Travel expenses			55,497				39,324
Administrative expenses			376,260				212,483
Security services			173,060				143,637
Fees to Bank Directors and Supervisory Committee			6,525				5,811
Other fees			227,058				132,881
Insurance			51,553				32,149
Rent (Note 25)			331,126				315,107
Stationery and supplies			22,117				18,404
Electricity and communications			243,404				132,099
Advertising			231,410				235,339
Taxes			1,193,266				716,685
Maintenance costs			531,574				332,223
Armored transportation services			493,940				400,573
Other administrative expenses			504,618				388,979
TOTAL			4,441,408				3,105,694

 

37.	Depreciation and amortization

 

		06.30.19				06.30.18
Depreciation of property and equipment			509,270				341,955
Amortization of intangible assets			44,396				60,993
Depreciation of assets acquired through financial leases (Note 25)			197,577				—
Depreciation of other assets			1,044				1,295
TOTAL			752,287				404,243

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38.	Other operating expenses

 

		06.30.19				06.30.18
Contribution to the Deposit Guarantee Fund			232,357				137,656
Turnover tax			2,799,000				1,602,500
Other allowances (Exhibit J)			3,782,773				1,283,072
Restructuring expenses (Exhibit J)			188,268				—
Claims			81,437				75,466
Interest on liabilities from financial lease (Note 25)			119,096				—
Initial recognition of loans			764,103				248
Other operating expenses			614,740				294,076
TOTAL			8,581,774				3,393,018

 

39.	Related parties

See Note 46 to the Consolidated Condensed Interim Financial Statements.

 

40.	Restrictions to the payment of dividends

See Note 47 to the consolidated financial statements regarding the restrictions to the payment of dividends.

 

41.	Restricted assets

We refer to Note 48 to the consolidated financial statements regarding the Entity’s restricted assets.

 

42.	Minimum cash and minimum capital requirements

42.1 Minimum cash requirements

The BCRA establishes different prudential regulations to be observed by financial institutions, mainly regarding solvency levels, liquidity and credit assistance levels, among others.

Minimum cash regulations set forth an obligation to keep liquid assets in relation to deposits and other obligations recorded for each period. The items included for the purpose of meeting that requirement are detailed below:

 

Accounts		06.30.19				12.31.18
Balances at the BCRA
Argentine Central Bank (BCRA) – current account not restricted			72,910,424				82,119,608
Argentine Central Bank (BCRA) – special guarantee accounts - restricted (Note 11)			2,443,445				1,238,252
Argentine Central Bank (BCRA) – social security special accounts - restricted			281,285				—
			75,635,154				83,357,860
Treasury Bonds in pesos at fixed rate due November 2020			7,310,239				6,936,000
Liquidity Bills – BCRA			57,005,448				20,202,428
TOTAL			139,950,841				110,496,288

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42.2 Minimum capital requirements

The regulatory breakdown of minimum capital requirements is as follows at the mentioned date:

 

Minimum capital requirement		06.30.19				06.30.18
Credit risk			17,309,067				15,096,489
Operational risk			4,577,918				2,791,194
Market risk			173,869				153,495
Paid-in			41,647,600				29,910,261
Surplus			19,586,746				11,869,083

 

43.	Accounting principles – Explanation added for translation into English

These financial statements are the English translation of those originally issued in Spanish.

These financial statements are presented on the basis of the accounting standards established by the financial reporting framework set forth by BCRA. Certain accounting practices applied by the Bank that conform to the standards of the BCRA may not conform to the generally accepted accounting principles in other countries.

The differences between the financial reporting framework set forth by BCRA and IFRS are detailed in Note 2 to the consolidated financial statements. Accordingly, these financial statements are not intended to present financial position, results of operations and cash flows in accordance with generally accepted accounting principles other than the financial reporting framework set forth by the BCRA.

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EXHIBIT A

BREAKDOWN OF GOVERNMENT AND PRIVATE SECURITIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

						HOLDING																POSITION
Account		Identification				value Fair				Fair value level				Book value 06.30.2019				Book value 12.31.2018				Position with no options				Options				Final position
DEBT SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Local:
Government Securities - In pesos
Capitalizable Treasury Bills in pesos. Maturity 09-13-19			5337				199,660				2				199,660				—				199,660				—				199,660
Capitalizable Treasury Bills in pesos. Maturity 10-31-19			5269				126,850				2				126,850				5,254				126,850				—				126,850
Province of Río Negro Debt Security. Floating rate. Maturity 2021			42016				51,228				2				51,228				53,584				51,228				—				51,228
Capitalizable Treasury Bills in pesos. Maturity 04-30-20			5271				44,370				1				44,370				48,825				44,370				—				44,370
Argentine Treasury Bond in pesos. Monetary policy rate. Maturity 2020			5327				34,515				1				34,515				23,156				34,515				—				34,515
Capitalizable Treasury Bills in pesos. Maturity 07-19-19			5297				27,080				1				27,080				—				27,080				—				27,080
Capitalizable Treasury Bills in pesos. Maturity 08-30-19			5335				20,890				2				20,890				—				20,890				—				20,890
Capitalizable Treasury Bills in pesos. Maturity 06-28-19			5281				—								—				306,053				—				—				—
Capitalizable Treasury Bills in pesos. Maturity 02-22-19			5273				—								—				229,419				—				—				—
CER-adjusted Treasury Bills. Maturity 02-22-19			5274				—								—				185,182				—				—				—
Other							8,965								8,965				94,357				8,965				—				8,965
Subtotal Government Securities - In pesos							513,558								513,558				945,830				513,558				—				513,558
Government Securities - In foreign currency
Treasury Bills in USD. Maturity 11-29-19			5296				6,956				1				6,956				—				6,956				—				6,956
Treasury Bills in USD. Maturity 08-16-19			5282				288				1				288				—				288				—				288
Treasury Bills in USD. Maturity 10-11-19			5291				231				2				231				—				231				—				231
Treasury Bills in USD. Maturity 07-26-19			5258				104				1				104				30				104				—				104
Treasury Bills in USD. Maturity 02-22-19			5251				—								—				4,156				—				—				—
Treasury Bills in USD. Maturity 02-08-19			5250				—								—				467				—				—				—
Treasury Bills in USD. Maturity 03-29-19			5263				—								—				42				—				—				—
Subtotal Government Securities - In foreign currency							7,579								7,579				4,695				7,579				—				7,579
BCRA Bills
BCRA Liquidity Bills in pesos. Maturity 07-01-19			13428				3,980,035				2				3,980,035				—				3,980,035				—				3,980,035
BCRA Liquidity Bills in pesos. Maturity 07-02-19			13429				1,986,418				2				1,986,418				—				1,986,418				—				1,986,418
BCRA Liquidity Bills in pesos. Maturity 01-07-19			13311				—								—				6,387,388				—				—				—
Subtotal BCRA Bills							5,966,453								5,966,453				6,387,388				5,966,453				—				5,966,453
Private Securities
Corporate Bond FCA Financiera Series I UVA Maturity 11-05-20			53823				69,328				2				69,328				56,748				69,328				—				69,328
Corporate Bond Banco de la Provincia de Bs. As. Class IV			32890				21,130				2				21,130				18,033				21,130				—				21,130
Corporate Bond Rombo Cía Financiera S.A. Class 42			53238				5,242				2				5,242				5,296				5,242				—				5,242
Corporate Bond Rombo Cía Financiera S.A. Class 40			52940				4,980				2				4,980				4,963				4,980				—				4,980
Corporate Bond Banco Santander Rio S.A. Class XXIII			53448				—								—				51,080				—				—				—
Corporate Bond YPF S.A. Class XVII			38562				—								—				18,707				—				—				—
Corporate Bond YPF S.A. Class XXXV			39792				—								—				10,922				—				—				—
Corporate Bond Rombo Cía Financiera S.A. Class 36			52186				—								—				2,164				—				—				—
Subtotal Private Securities							100,680								100,680				167,913				100,680				—				100,680
TOTAL DEBT SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS							6,588,270								6,588,270				7,505,826				6,588,270				—				6,588,270

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EXHIBIT A

(Continued)

BREAKDOWN OF GOVERNMENT AND PRIVATE SECURITIES

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

						HOLDING																POSITION
Account		Identification				Fair value				Fair value level				Book balance 06.30.2019				Book value 12.31.2018				Position with no options				Options				Final position
OTHER DEBT SECURITIES
MEASURED AT FAIR VALUE THROUGH OCI
Local:
Government Securities - In pesos
Argentine Treasury Bond in pesos. Fixed rate. Maturity November 2020			5330				7,310,239				2				7,310,239				6,936,000				7,310,239				—				7,310,239
CER-adjusted Argentine Bond in pesos. Maturity 2021			5315				100,549				1				100,549				100,166				100,549				—				100,549
Capitalizable Treasury Bills in pesos. Maturity 04-12-19			5280				—								—				407,800				—				—				—
Capitalizable Treasury Bills in pesos. Maturity 06-28-19			5281				—								—				204,500				—				—				—
Subtotal Government Securities - In pesos							7,410,788								7,410,788				7,648,466				7,410,788				—				7,410,788
Government Securities - In foreign currency
US dollar-linked Treasury Bills. Maturity 12-04-19			5333				9,474,164				2				9,474,164				—				9,474,164				—				9,474,164
Treasury Bills in USD. Maturity 07-19-19			5298				970,075				2				970,075				—				970,075				—				970,075
Treasury Bills in USD. Maturity 08-30-19			5283				492,628				1				492,628				—				492,628				—				492,628
Treasury Bills in USD. Maturity 08-16-19			5282				248,323				1				248,323				—				248,323				—				248,323
Treasury Bills in USD. Maturity 04-26-19			5255				—								—				809,347				—				—				—
Treasury Bills in USD. Maturity 05-10-19			5272				—								—				704,886				—				—				—
Treasury Bills in USD. Maturity 03-15-19			5261				—								—				470,762				—				—				—
Treasury Bills in USD. Maturity 02-08-19			5250				—								—				182,160				—				—				—
Subtotal Government Securities - In foreign currency							11,185,190								11,185,190				2,167,155				11,185,190				—				11,185,190
BCRA Bills
BCRA Liquidity Bills in pesos. Maturity 07-05-19			13432				22,233,502				2				22,233,502				—				22,233,502				—				22,233,502
BCRA Liquidity Bills in pesos. Maturity 07-02-19			13429				12,911,717				2				12,911,717				—				12,911,717				—				12,911,717
BCRA Liquidity Bills in pesos. Maturity 07-01-19			13428				7,960,071				2				7,960,071				—				7,960,071				—				7,960,071
BCRA Liquidity Bills in pesos. Maturity 07-03-19			13430				7,933,705				2				7,933,705				—				7,933,705				—				7,933,705
BCRA Liquidity Bills in pesos. Maturity 01-04-19			13310				—								—				9,870,740				—				—				—
BCRA Liquidity Bills in pesos. Maturity 01-08-19			13312				—								—				3,944,300				—				—				—
Subtotal BCRA Bills							51,038,995								51,038,995				13,815,040				51,038,995				—				51,038,995
Private Securities - In foreign currency
Corporate Bond John Deere Credit Cia. Financiera S.A. Class XII			51620				86,781				2				86,781				113,148				86,781				—				86,781
Corporate Bond John Deere Credit Cia. Financiera S.A. Class XVIII			54266				43,187				2				43,187				—				43,187				—				43,187
Subtotal Private Securities							129,968								129,968				113,148				129,968				—				129,968
Subtotal Measured at Fair Value through OCI							69,764,941								69,764,941				23,743,809				69,764,941				—				69,764,941
MEASURED AT AMORTIZED COST
Private Securities - In pesos
Corporate Bond EXO. S.A.							136				2				136				136				136				—				136
TOTAL OTHER DEBT SECURITIES							69,765,077								69,765,077				23,743,945				69,765,077				—				69,765,077
EQUITY INSTRUMENTS
Local:
Private Securities - In pesos
Prisma Medios de Pago S.A.							1,765,000				3				1,765,000				—				1,765,000				—				1,765,000
Other							231				2				231				225				231				—				231
Foreign:
Private Securities - In foreign currency
Other							18,413				2				18,413				9,991				18,413				—				18,413
TOTAL EQUITY INSTRUMENTS							1,783,644								1,783,644				10,216				1,783,644				—				1,783,644

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EXHIBIT B

CLASSIFICATION OF LOANS AND OTHER FINANCING

ACCORDING TO FINANCIAL PERFORMANCE AND GUARANTEES RECEIVED

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19				12.31.18
COMMERCIAL PORTFOLIO
Normal performance			94,547,754				99,824,957
Preferred collaterals and counter-guarantees “A”			648,398				782,100
Preferred collaterals and counter-guarantees “B”			756,493				1,068,873
No preferred collaterals or counter-guarantees			93,142,863				97,973,984
With special follow-up			440,303				174,767
Under observation			440,303				174,767
Preferred collaterals and counter-guarantees “B”			161,679				3,522
No preferred collaterals or counter-guarantees			278,624				171,245
Troubled			529,253				1,529,081
Preferred collaterals and counter-guarantees “B”			—				3,315
No preferred collaterals or counter-guarantees			529,253				1,525,766
With high risk of insolvency			1,877,828				294,627
Preferred collaterals and counter-guarantees “B”			10,662				9,437
No preferred collaterals or counter-guarantees			1,867,166				285,190
Uncollectible			174,272				23,658
No preferred collaterals or counter-guarantees			174,272				23,658
TOTAL			97,569,410				101,847,090

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EXHIBIT B

(Continued)

CLASSIFICATION OF LOANS AND OTHER FINANCING

ACCORDING TO FINANCIAL PERFORMANCE AND GUARANTEES RECEIVED

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19				12.31.18
CONSUMER AND HOUSING PORTFOLIO
Normal performance			91,919,066				82,079,990
Preferred collaterals and counter-guarantees “A”			46,402				52,624
Preferred collaterals and counter-guarantees “B”			12,343,151				9,573,987
No preferred collaterals or counter-guarantees			79,529,513				72,453,379
Low risk			1,822,879				1,363,176
Preferred collaterals and counter-guarantees “A”			—				769
Preferred collaterals and counter-guarantees “B”			87,426				61,746
No preferred collaterals or counter-guarantees			1,735,453				1,300,661
Medium risk			1,525,035				1,112,362
Preferred collaterals and counter-guarantees “A”			537				—
Preferred collaterals and counter-guarantees “B”			29,311				8,703
No preferred collaterals or counter-guarantees			1,495,187				1,103,659
High risk			987,123				585,308
Preferred collaterals and counter-guarantees “B”			27,073				22,179
No preferred collaterals or counter-guarantees			960,050				563,129
Uncollectible			71,925				68,800
Preferred collaterals and counter-guarantees “A”			15				15
Preferred collaterals and counter-guarantees “B”			11,156				7,764
No preferred collaterals or counter-guarantees			60,754				61,021
TOTAL			96,326,028				85,209,636
TOTAL GENERAL			193,895,438				187,056,726

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EXHIBIT C

CONCENTRATION OF LOANS AND OTHER FINANCING

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19								12.31.18
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			25,132,718				12.96	%			23,237,722				12.42	%
50 following largest customers			32,201,254				16.61	%			31,726,036				16.96	%
100 following largest customers			17,151,022				8.85	%			18,088,037				9.67	%
All other customers			119,410,444				61.58	%			114,004,931				60.95	%
TOTAL			193,895,438				100.00	%			187,056,726				100.00	%

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EXHIBIT D

BREAKDOWN BY TERM OF LOANS AND OTHER FINANCING

AS OF JUNE 30, 2019

(stated in thousands of pesos) (1)

 

						Terms remaining to maturity
ITEM		Portfolio due				1 month				3 months				6 months				12 months				24 months				More than 24 months				TOTAL
Non-financial government sector			—				336				—				—				—				—				—				336
Argentine Central Bank (BCRA)			—				64				—				—				—				—				—				64
Financial sector			—				2,286,182				693,548				1,173,915				1,370,806				2,060,389				918,160				8,503,000
Non-financial private sector and residents abroad			1,571,465				73,784,076				33,159,699				17,964,587				14,949,175				21,915,117				39,855,052				203,199,171
TOTAL			1,571,465				76,070,658				33,853,247				19,138,502				16,319,981				23,975,506				40,773,212				211,702,571

 

(1)	These balances are total contractual cash flows and, therefore, include principal, accrued and to be accrued interest and charges.

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EXHIBIT H

DEPOSITS CONCENTRATION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		06.30.19								12.31.18
Number of customers		Debt balance				% over total portfolio				Debt balance				% over total portfolio
10 largest customers			10,474,052				3.67	%			15,293,060				5.89	%
50 following largest customers			15,141,352				5.30	%			15,553,822				5.99	%
100 following largest customers			10,045,130				3.52	%			10,544,960				4.06	%
Rest of customers			249,821,236				87.51	%			218,371,447				84.06	%
TOTAL			285,481,770				100.00	%			259,763,289				100.00	%

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EXHIBIT I

BREAKDOWN OF FINANCIAL LIABILITIES BY REMAINING TERMS

AS OF JUNE 30, 2019

(stated in thousands of pesos) (1)

 

		Terms remaining to maturity
ITEMS		1 month				3 months				6 months				12 months				24 months				More than 24 months				TOTAL
Deposits			257,923,905				23,856,916				6,028,739				4,605,395				56,058				311				292,471,324
Non-financial government sector			3,634,689				13,955				—				—				—				—				3,648,644
Financial sector			296,404				—				—				—				—				—				296,404
Non-financial private sector and residents abroad			253,992,812				23,842,961				6,028,739				4,605,395				56,058				311				288,526,276
Liabilities at fair value through profit or loss			1,156,152				—				—				—				—				—				1,156,152
Derivative instruments			2,288,638				—				—				—				—				—				2,288,638
Other financial liabilities			21,784,493				280,618				378,275				677,453				521,696				29,362				23,671,897
Financing received from the BCRA and other financial institutions			847,886				1,042,397				250,438				1,165,484				—				—				3,306,205
Corporate bonds issued			193,162				599,832				1,406,448				480,806				3,018,475				—				5,698,723
TOTAL			284,194,236				25,779,763				8,063,900				6,929,138				3,596,229				29,673				328,592,939

 

(1)	These balances are total contractual cash flows and, therefore, include principal, accrued and to be accrued interest and charges.

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EXHIBIT J

PROVISIONS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2019 AND

THE FISCAL YEAR ENDED DECEMBER 31, 2018

(stated in thousands of pesos)

 

										Decreases
Accounts		Balances at the beginning of the year				Increases				Reversals				Uses				Balances as of 06.30.19				Balances as of 12.31.18
INCLUDED IN LIABILITIES
- Provisions for contingent commitments			1,483				168	(1)			—				—				1,651				1,483
- For administrative, disciplinary and criminal penalties			5,000				—	(4)			—				—				5,000				5,000
- Provisions for reorganization			—				188,268	(5)			—				118,268				70,000				—
- Provisions for termination plans			62,135				—	(2)			907				—				61,228				62,135
- Other			3,534,696				3,782,605	(3)			761				419,140				6,897,400				3,534,696
TOTAL PROVISIONS			3,603,314				3,971,041				1,668				537,408				7,035,279				3,603,314

 

(1)	Set up in compliance with the provisions of Communication “A” 2950 and supplementary regulations of the BCRA.

(2)	Set up to cover contingences referred to private healthcare plans.

(3)	Set up to cover for potential contingencies not considered in other accounts (civil, commercial, labor and other lawsuits), and as required by Memorandum 6/2017 issued by the BCRA.

(4)	Set up to cover administrative, disciplinary and criminal penalties.

(5)	See Note 27 to the condensed consolidated interim financial statements.

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EXHIBIT L

BALANCES IN FOREIGN CURRENCY

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(stated in thousands of pesos)

 

		TOTAL AS OF				AS OF 06.30.19 (per currency)																TOTAL AS OF
ACCOUNTS		06.30.19				Dollar				Euros				Real				Other				12.31.18
ASSETS
Cash and deposits in banks			62,354,503				59,043,665				3,223,647				28,201				58,990				52,484,375
Debt securities at fair value through profit or loss			7,579				7,579				—				—				—				4,695
Repo transactions			5,661,203				5,661,203				—				—				—				12,706,363
Other financial assets			371,228				367,499				3,729				—				—				649,072
Loans and other financing			67,232,136				67,034,501				197,635				—				—				60,635,907
Non-financial government sector			14				14				—				—				—				—
Argentine Central Bank (BCRA)			64				64				—				—				—				—
Other financial institutions			558,093				558,093								—				—				248,932
Non-financial private sector and residents abroad			66,673,965				66,476,330				197,635				—				—				60,386,975
Other debt securities			11,313,858				11,313,858				—				—				—				2,279,172
Financial assets pledged as collateral			3,140,076				3,140,076				—				—				—				2,303,947
Investments in equity instruments			18,413				18,413				—				—				—				9,991
TOTAL ASSETS			150,098,996				146,586,794				3,425,011				28,201				58,990				131,073,522
LIABILITIES
Deposits			135,991,383				133,386,931				2,604,452				—				—				114,494,962
Non-financial government sector			2,722,923				2,718,817				4,106				—				—				390,264
Financial sector			92,291				91,939				352				—				—				99,865
Non-financial private sector and residents abroad			133,176,169				130,576,175				2,599,994				—				—				114,004,833
Liabilities at fair value through profit or loss			166,156				166,156				—				—				—				34,797
Other financial liabilities			9,045,983				8,699,365				326,365				—				20,253				5,316,849
Financing received from the BCRA and other financial institutions			3,282,968				3,093,795				189,173				—				—				5,400,682
Other non-financial liabilities			1,014,917				1,012,938				1,979				—				—				946,530
TOTAL LIABILITIES			149,501,407				146,359,185				3,121,969				—				20,253				126,193,820

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EXHIBIT O

DERIVATIVES

AS OF JUNE 30, 2019

(stated in thousands of pesos)

 

Type of Contract		Purpose of the transactions		Underlying asset		Type of settlement		Scope of negotiation or counterparty		Weighted average term originally agreed				Residual weighted average term				Weighted average term for settlement of differences				Amount
SWAPS		Financial transactions own account		—		Upon maturity of differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			30				9				51				2,418,547
REPO TRANSACTIONS		Financial transactions own account		Argentine Government Securities		Upon maturity of differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			1				1				3				293,572
REPO TRANSACTIONS		Financial transactions own account		Argentine Government Securities		Upon maturity of differences		RESIDENTS IN THE COUNTRY NON-FINANCIAL SECTOR			6				4				184				20,188,166
FUTURES		Financial transactions own account		Foreign Currency		Daily differences		ROFEX			4				3				1				22,827,407
FUTURES		Financial transactions own account		Foreign Currency		Daily differences		RESIDENTS IN THE COUNTRY FINANCIAL SECTOR			1				1				1				223,310
FUTURES		Financial transactions own account		Foreign Currency		Upon maturity of differences		RESIDENTS ABROAD FINANCIAL SECTOR			3				2				83				33,482,194
FUTURES		Financial transactions own account		Foreign Currency		Upon maturity of differences		RESIDENTS IN THE COUNTRY NON-FINANCIAL SECTOR			6				4				187				17,267,676

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EXHIBIT R

ADJUSTMENT TO IMPAIRMENT LOSS - ALLOWANCES FOR LOAN LOSSES

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2019 AND

FISCAL YEAR ENDED DECEMBER 31, 2018

(stated in thousands of pesos)

 

										Decreases
Accounts		Balances at the beginning of the year				Increases				Reversals				Uses				Balances as of 06.30.19				Balances as of 12.31.18
Other financial assets			69,040				1,422,169	(1)(3)			—				42				1,491,167				69,040
Loans and other financing			4,258,239				2,996,670	(1)(3)			42,902				1,442,884				5,769,123				4,258,239
Other financial institutions			85,488				9,548				42,884				—				52,152				85,488
Non-financial private sector and residents abroad			4,172,751				2,987,122				18				1,442,884				5,716,971				4,172,751
Overdrafts			110,147				35,172				—				59,287				86,032				110,147
Instruments			1,164,674				597,355				—				10,771				1,751,258				1,164,674
Mortgage loans			99,518				31,080				—				128				130,470				99,518
Pledge loans			44,250				7,689				—				6,272				45,667				44,250
Consumer loans			808,085				701,881				—				406,489				1,103,477				808,085
Credit card loans			1,359,528				1,138,690				—				652,934				1,845,284				1,359,528
Financial leases			47,227				20,371				—				11,759				55,839				47,227
Other			539,322				454,884				18				295,244				698,944				539,322
Private securities			1,314				168	(2)(3)			—				46				1,436				1,314
Contingent commitments			1,483				168	(4)			—				—				1,651				1,483
TOTAL ALLOWANCES			4,330,076				4,419,175				42,902				1,442,972				7,263,377				4,330,076

 

(1)	Set up in compliance with the provisions of Communication “A” 2950 and supplementary regulations issued by the BCRA taking into consideration the disclosures made in Note 8 - Other financial assets and Note 9 - Loans and other financing to the consolidated financial statements.

(2)	Set up in compliance with the provisions of Communication “A” 4084 issued by the BCRA.

(3)	Includes total exchange rate difference of:

 

- Other financial assets			79,127
- Loans and other financing			117,755
- Private securities			140

 

(4)	Set up in compliance with credit risk a rising from unused overdraft balances in current account granted, guarantees, sureties and other contingent commitments.

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		KPMG Bouchard 710 - 1st Floor - C1106ABL Buenos Aires, Argentina		[phone]   www.kpmg.com.ar
		- 94 -

 

INDEPENDENT AUDITORS’ LIMITED REVIEW REPORT ON CONDENSED INTERIM SEPARATE FINANCIAL STATEMENTS

To the President and Directors of

BBVA Banco Francés S.A.

Registered office: Av. Córdoba 111

City of Buenos Aires

Taxpayer identification number [C.U.I.T.] 30 -50000319 -3

Report on the financial statements

We have reviewed the accompanying condensed interim separate financial statements of BBVA Banco Francés S.A. (the “Entity”), which include the statement of financial position as of June 30, 2019, the statements of income, other comprehensive income, changes in shareholders’ equity and cash flows for the six-month period then ended, exhibits and selected explanatory notes.

The balances and other information as of December 31, 2018 and for the six-month period ended June 30, 2018 are an integral part of the aforementioned financial statements and, therefore, shall be considered in the light of these financial statements.

Board of Directors’ and Management responsibility for the financial statements

The Entity’s Board of Directors and Management are responsible for the preparation and presentation of the accompanying separate financial statements in accordance with the accounting standards established by the Argentine Central Bank (“BCRA”), which, as indicated in Note 2 to the accompanying financial statements, are based on the International Financial Reporting Standards (“IFRS”), and, particularly, on International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as approved by the International Accounting Standards Board (“IASB”), and adopted by the Argentine Federation of Professional Councils of Economic Sciences (“FACPCE”), except for section 5.5 “Impairment” of IFRS 9 “Financial Instruments” and IAS 29 “Financial Reporting in Hyperinflationary Economies”. Furthermore, the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions, and Memorandum No. 7/2019, issued by the regulator on April 29, 2019 regarding the valuation of the investment held by the Entity in Prisma Medios de Pago S.A., were also considered. The Board of Directors and Management are also responsible for such internal control as they determine is necessary to enable the preparation of the interim separate financial statements that are free from material misstatement whether due to error or irregularities.

Scope of our review

Our responsibility is to issue a conclusion on these condensed interim separate financial statements based on our review. We conducted our review in accordance with the standards set forth by Technical Resolution No. 37 of the FACPCE and the “Minimum Standards applicable to External Audits” set forth by the BCRA for the review of interim financial statements. In accordance with such standards, a review is limited primarily to the performance of analytical and other review procedures applied to financial data included in the interim financial statements and inquiries of personnel responsible for the preparation thereof. A review is substantially less in scope than an audit conducted in accordance with auditing standards in force, and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the accompanying condensed interim separate financial statements.

© 2019 KPMG, a partnership established under Argentine law and a member firm of the KPMG network of independent firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim separate financial statements of BBVA Banco Francés S.A. have not been prepared, in all material respects, in accordance with the BCRA accounting framework described in Note 2 to the accompanying financial statements.

Emphasis of matter

Without modifying our conclusion, we draw users’ attention to the following information disclosed in the accompanying financial statements:

 

e)

As explained in Note 2 to the accompanying financial statements, they have been prepared by the Entity’s Board of Directors and Management in accordance with the BCRA accounting framework, which differs from IFRS as to the application of section 5.5 “Impairment” of IFRS 9 “Financial Instruments”, which was temporarily excluded by the BCRA from the accounting framework applicable to financial institutions.

 

f)

As explained in Note 2, as provided for by BCRA Communication “A” 6651, the Entity has not applied IAS 29 “Financial Reporting in Hyperinflationary Economies” to the preparation of the accompanying financial statements. The existence of an inflationary context affects the Entity’s financial position and results of operations and, therefore, the inflation impact may distort the financial information, which should be considered in the interpretation of the information provided by the Entity in these financial statements in respect of its financial position, comprehensive income and cash flows. Management estimates that both the Entity’s equity and income may differ significantly, should IAS 29 be applied.

 

g)	As explained in Note 2, the accompanying financial statements have been prepared taking into consideration the standards prescribed through Memorandum No. 6/2017 issued by the regulator on May 29, 2017 regarding the accounting treatment to be applied to uncertain tax positions.

 

h)

As explained in Note 2 to the accompanying financial statements, by virtue of the partial sale of the ownership interest in Prisma Medios de Pago S.A., the remaining ownership interest was reclassified to “Investments in equity instruments” and stated at its fair value with changes recognized through profit or loss, based on a valuation report of the company prepared by an external professional. In addition, the valuation adjustment established by Memorandum No. 7/1019, issued on April 29, 2019 by BCRA, was deducted from such remaining ownership interest.

The aforementioned situations do not modify the conclusion stated in the Conclusion paragraph, but it should be considered by those users that apply IFRS to the interpretation of the accompanying financial statements.

City of Buenos Aires, August 9, 2019.

María Gabriela Saavedra

Partner

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REPORTING SUMMARY FOR

THE FISCAL PERIOD ENDED

JUNE 30, 2019

(Consolidated, stated in thousands of pesos)

On December 12, 2016, the BCRA decided to apply International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2018 subject to the temporary exception of Section 5.5 - “Impairment”, in IFRS No. 9 and the International Accounting Standard (IAS) No. 29 “Reporting on hyperinflationary economies”, and considering, in turn, the accounting standards set forth by the referred entity through Memorandum No. 6/2017 regarding the criterion to be applied in recognizing uncertain tax positions. Besides, in the particular case of International Accounting Standard (IAS) No. 29, the Argentine Central Bank has temporarily excluded its application until January 1, 2020. Additionally, the regulations set forth by the BCRA through Memorandum No. 7/2019 dated April 29, 2019, as regards the accounting treatment to be applied to the remaining investment held in Prisma Medios de Pago S.A. (“Financial reporting framework set forth by the BCRA”) has been considered. As a consequence of the application of those standards, BBVA Francés presents its financial statements prepared pursuant to the new financial reporting framework set forth by the BCRA as of June 30, 2019 and December 31, 2018.

As of June 30, 2019, assets amounted to 392,891,625, liabilities amounted to 344,082,216 and shareholders’ equity amounted to 48,809,409.

On September 25, 2018, BBVA Francés ceased to have control of Volkswagen Financial Services Compañía Financiera S.A. (VWFS) due to the termination of the two-year term committed by the Bank to provide financing to the company if it failed to diversify its sources of funding.

The Entity offers its products and services through a wide multi-channel distribution network with presence in all the provinces in Argentina and the City of Buenos Aires, with more than 2.5 million active customers as of June 30, 2019. That network includes 252 branches providing services for the retail segment and also to small and medium enterprises and organizations. Corporate Banking is divided by industry sector: Consumers, Heavy Industries and Energy, providing customized services for large companies. To supplement the distribution network, the Entity has 14 in-company banks, one point of sales, two points of Customer service booths, 855 ATMs and 843 self-service terminals.

Also, it has a telephone banking service, a modern, safe and functional Internet banking platform, a mobile banking app and a total of 6,223 employees as of June 30, 2019.

The loans portfolio net of allowance for loan losses totaled 186,615,851 pesos as of June 30, 2019, reflecting an increase by 15.11% as compared to the previous year, which allowed the Bank to maintain the market share in 8.51% at the end of the fiscal period.

The growth of the loans portfolio was backed by the growth of the mortgage loans portfolio, which recorded an increase by 63.73% as compared to June 2018, while the credit cards business continued to strengthen, increasing the consumer market share. Pledge loans have dropped during the period mainly due to the effect generated by the deconsolidation of VWFS.

In terms of portfolio quality, the Entity has managed to maintain very good ratios. The irregular portfolio ratio (Financings with irregular performance/total financing) was 2.77%, with a coverage level (total allowances/irregular performance) of 111.69% as of June 30, 2019.

The total exposure for securities totaled 82,278,952 pesos at year end, including repos both with the BCRA and Argentina.

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Information not covered by the Review Report.

In terms of liabilities, customers’ resources totaled 285,201,866, with a 47.88% increase over the last twelve months.

The market share of deposits to the private sector reached 7.35% as of June 30, 2019.

Breakdown of changes in the main income/loss items:

BBVA Francés recorded an accumulated profit 12,791,393 as of June 30, 2019, representing a return on average liabilities of 4.4% and a return on average assets of 3.9%.

Net financial income totaled 22,787,369, with a 109.93% growth as compared to June 2018, mainly driven by the growth of the activity and better spreads.

Net income from services totaled 3,438,471, accounting for a 68.09% increase compared to June 2018. This increase is mainly due to higher income from the rise in prices, commissions charged on credit and debit cards, and foreign trade and exchange transactions.

On February 1, 2019, within the Divestiture Commitment assumed by Prisma Medios de Pago S.A. and its shareholders to Argentina’s Federal Commission for the Defense of Competition, the amount of 2,344,064 registered, common shares with a nominal value of $ 1 each and one vote per share held by the Bank in Prisma Medios de Pago S.A. was transferred to AI Zenith (Netherlands) B.V. (a company related to Advent International Global Private Equity), accounting for 51% of the Bank’s shareholding in said company.

The total estimated price adjusted at period-end is USD 78.3 million. Out of this amount, the Bank has received USD 46.5 million, and the unpaid balance of USD 31.8 million shall be deferred over the following 5 (five) years and settled as follow. Thirty per cent (30%) shall be paid in Pesos, adjusted by applying the CER (UVA) at an annual nominal rate of 15% and 70% in US Dollars at an annual nominal rate of 10%.

By virtue of the partial sale of the shareholding in Prisma Medios de Pago S.A. the remaining stake has been measured at fair value through profit and loss on the basis of the valuation reports issued by independent appraisers and taking into account the resolution of the BCRA in that regard.

Administrative expenses and personnel benefits totaled 10,420,145, a 47.97% growth in relation to those recorded for June 2018. The increase in personnel expenses is mainly a consequence of salary increases agreed with the union. The remaining expenses grow due to the increased volume of activity, the general increase in prices, currency depreciation and increase in utility rates.

Outlook

2019 will be a year of large challenges for Argentina and the financial system.

In this context, BBVA in Argentina has strengthened its strategy based on transformation and growth for the purpose of leading a more efficient financial system and with a tendency towards consolidation and offering a better experience to customers through a change in banking.

Along this line, the growth plan will be focused both on obtaining new customers and strengthening the relationship with customers already in the portfolio, for the purpose of increasing cross-selling, improving the quality of service and enhancing efficiency levels as well as the development and training of teams.

Information not covered by the Review Report.

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CONSOLIDATED BALANCE SHEET STRUCTURE

COMPARATIVE WITH THE SAME PERIODS FOR PREVIOUS YEARS

(stated in thousands of pesos)

 

		06.30.19 (1)				06.30.18 (1)				06.30.17 (1)
Total Assets			392,891,625				268,228,122				167,870,447
Total Liabilities			344,082,216				234,812,560				147,054,953
Parent’s Shareholders’ Equity			48,775,646				32,861,689				20,528,602
Non-controlling interest			33,763				553,873				286,892
Total Liabilities + Non-controlling interest + Shareholder’s Equity			392,891,625				268,228,122				167,870,447

 

		06.30.16 (2)				06.30.15 (2)
Total Assets			131,589,234				87,571,100
Total Liabilities			116,326,817				75,772,809
Minority Interest			317,712				268,259
Shareholders’ Equity			14,944,705				11,530,032
Total Liabilities + Minority Interest + Shareholder’s Equity			131,589,234				87,571,100

 

(1)

Pursuant to the measurement and presentation criteria established by the financial reporting framework set forth by the BCRA, which does not include the temporary application exception of IFRS No. 9 (Impairment) and IAS 29, apart from considering Memorandum No. 6/2017 of the BCRA and the provisions of Memorandum No. 7/2019.

(2)	Pursuant to the valuation and disclosure criteria set forth by the BCRA at each date.

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CONSOLIDATED STATEMENT OF INCOME STRUCTURE

COMPARATIVE WITH THE SAME PERIODS FOR PREVIOUS YEARS

(stated in thousands of pesos)

 

		06.30.19 (1)				06.30.18 (1)				06.30.17 (1)
Net interest income			22,787,369				10,854,882				6,857,392
Net commission income			3,438,471				2,045,573				1,173,344
Net income from measurement of financial instruments at fair value through profit or loss			4,579,305				(412,679	)			866,148
Net income / (loss) from write-down of assets at amortized cost and at fair value			(40,563	)			(66,931	)			6,688
Foreign exchange and gold gains			2,496,102				2,704,858				738,049
Other operating income			7,780,728				2,139,860				2,468,659
Loan loss provision			(4,223,063	)			(1,330,442	)			(798,771	)
Net operating income			36,818,349				15,935,121				11,311,509
Personnel benefits			(5,954,616	)			(3,887,157	)			(3,193,314	)
Administrative expenses			(4,465,529	)			(3,154,824	)			(2,506,045	)
Asset depreciation and impairment			(752,287	)			(406,902	)			(302,522	)
Other operating expenses			(8,612,435	)			(3,582,190	)			(3,241,213	)
Operating income			17,033,482				4,904,048				2,068,415
Income from associates and joint ventures			429,486				345,065				247,424
Income before income tax			17,462,968				5,249,113				2,315,839
Income tax from continuing operations			(4,671,575	)			(1,529,111	)			(760,727	)
Net income from continuing operations			12,791,393				3,720,002				1,555,112
Net income for the period			12,791,393				3,720,002				1,555,112

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		06.30.16 (2)				06.30.15 (2)
Financial income			6,331,460				4,258,960
Loan loss provision			(497,480	)			(324,275	)
Income from services			1,945,476				1,761,058
Administrative expenses			(4,321,708	)			(3,057,397	)
Net income			3,457,748				2,638,346
Miscellaneous profits and losses - net			179,502				(28,289	)
Loss from minority interest			(71,796	)			(66,193	)
Income tax			(1,437,112	)			(945,708	)
Profit for the period			2,128,342				1,598,156

 

(1)

Pursuant to the measurement and presentation criteria established by the financial reporting framework set forth by the BCRA, which does not include the temporary application exception of IFRS No. 9 (Impairment) and IAS 29, apart from considering Memorandum No. 6/2017 of the BCRA and the provisions of Memorandum No. 7/2019.

(2)	Pursuant to the valuation and disclosure criteria set forth by the BCRA at each date.

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CONSOLIDATED CASH FLOW STRUCTURE COMPARATIVE WITH

THE SAME PERIODS FOR PREVIOUS YEARS

(stated in thousands of pesos)

 

		06.30.19 (1)				06.30.18 (1)				06.30.17 (1)
Net cash (used in) / generated by operating activities			(14,699,083	)			1,158,232				(9,655,296	)
Net cash generated by / (used in) investing activities			1,682,327				(313,054	)			(984,669	)
Net cash (used in) / generated by financing activities			(1,724,889	)			3,021,061				(1,609,906	)
Effect of exchange rate changes			6,591,354				12,428,451				1,281,073
Total cash (used) / generated during the period			(8,150,291	)			16,294,690				(10,968,798	)

 

		06.30.16 (2)				06.30.15 (2)
Net cash generated by operating activities			1,894,250				3,047,981
Net cash used in investing activities			(781,366	)			(699,705	)
Net cash used in financing activities			(2,596,451	)			(1,480,663	)
Total cash (used) / generated during the period			(1,483,567	)			867,613

 

(1)

Pursuant to the measurement and presentation criteria established by the financial reporting framework set forth by the BCRA, which does not include the temporary application exception of IFRS No. 9 (Impairment) and IAS 29, apart from considering Memorandum No. 6/2017 of the BCRA and the provisions of Memorandum No. 7/2019.

(2)	Pursuant to the valuation and disclosure criteria set forth by the BCRA at each date.

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STATISTICAL DATA COMPARATIVE WITH

THE SAME PERIODS OF PREVIOUS YEARS

(Variation of balances during the same period of the previous year)

 

		06.30.19 / 18 (1)				06.30.18 / 17 (1)
Total loans			15.11	%			82.56	%
Total deposits			47.88	%			53.59	%
Income			243.85	%			139.21	%
Shareholders’ equity			46.07	%			60.53	%

 

		06.30.17 / 16 (2)				06.30.16 / 15 (2)				06.30.15 / 14 (2)
Total loans			35.78	%			40.06	%			24.00	%
Total deposits			35.38	%			54.67	%			24.90	%
Income / (loss)			(37.85	%)			33.17	%			(9.26	%)
Shareholders’ equity			12.89	%			29.62	%			29.72	%

 

(1)

Pursuant to the measurement and presentation criteria established by the financial reporting framework set forth by the BCRA, which does not include the temporary application exception of IFRS No. 9 (Impairment) and IAS 29, apart from considering Memorandum No. 6/2017 of the BCRA and the provisions of Memorandum No. 7/2019.

(2)	Pursuant to the valuation and disclosure criteria set forth by the BCRA at each date.

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COMPARATIVE RATIOS

WITH THE SAME PERIODS FOR PREVIOUS YEARS

 

		06.30.19 (1)				06.30.18 (1)				06.30.17 (1)
Solvency (a)			14.19	%			14.23	%			14.15	%
Liquidity (b)			58.66	%			39.31	%			47.11	%
Tied-up capital (c)			25.52	%			28.97	%			44.40	%
Indebtedness (d)			7.05				7.03				7.06

 

(a)	Total Shareholders’ Equity/Liabilities.

(b)	Sum of cash and deposits in banks, debt securities at fair value through profit or loss and other debt securities/deposits.

(c)	Sum of intangible assets and property, plant and equipment/Shareholders’ Equity.

(d)	Total Liabilities/Shareholders’ Equity.

 

		06.30.16 (2)				06.30.15 (2)				06.30.14 (2)
Solvency (a)			12.81	%			15.16	%			14.94	%
Liquidity (b)			51.54	%			46.42	%			45.20	%
Tied-up capital (c)			2.48	%			2.90	%			2.64	%
Indebtedness (d)			7.81				6.60				6.69

 

(a)	Total Shareholders’ Equity/Liabilities (including minority interest).

(b)	Sum of cash and due from banks and government and private securities/deposits.

(c)	Sum of premises and equipment, miscellaneous assets and intangible assets/Assets.

(d)	Total Liabilities (including minority interest)/Shareholders’ Equity.

 

(1)

Pursuant to the measurement and presentation criteria established by the financial reporting framework set forth by the BCRA, which does not include the temporary application exception of IFRS No. 9 (Impairment) and IAS 29, apart from considering Memorandum No. 6/2017 of the BCRA and the provisions of Memorandum No. 7/2019.

(2)

Pursuant to the valuation and disclosure criteria set forth by the BCRA at each date.

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Additional Information required by the Argentine Securities Commission (CNV)’s General Resolution No. 622/13, Chapter III, Title IV, Section 12

 

1.	General matters concerning the Entity’s business

 

a)

Significant specific legal regimes that entail the contingent termination or reinstatement of the benefits set forth by such regimes’ provisions.

None.

 

b)

Significant changes in the Entity’s activities or other similar circumstances taking place during the periods covered by the financial statements which affect the financial statements’ comparability with those presented in previous periods or capable of affecting comparability with the financial statements to be presented in future periods.

The Shareholders’ Meeting held on June 13, 2017 adopted a decision to increase capital stock through the issuance of new registered, common shares. Refer to Note 30. Share Capital of the Consolidated Financial Statements of BBVA Banco Francés S.A.

On January 18, 2018, the Entity made a capital contribution in proportion to its ownership interest in Volkswagen Financial Services Compañía Financiera S.A. in the amount of 204,000 thousand pesos, equivalent to 204,000,000 non-endorsable, registered, common shares, with a value of $1 and one vote per share.

On September 25, 2018, the Entity made a capital contribution in proportion to its ownership interest in Consolidar Administradora de Fondos de Jubilaciones y Pensiones S.A. in the aggregate amount of 26,945 thousand pesos, equivalent to 26,944,600 non-endorsable, registered common shares, with a value of $1 and one vote per share.

On March 8, 2019, the Bank’s Board of Directors submitted to its Shareholders’ Meeting a proposal to merge BBVA Francés Valores S.A. in order to attain more efficiency in its administrative processes and thus, provide better service to its customers. In this regard, the Bank’s Board of Directors approved the merger consolidated balance sheet and authorized the filing of the merger prospectus with the CNV in order to apply for the authorization of the transaction by such entity.

 

2.	Classification of the balances receivable (financing) and payable (deposits and liabilities) according to their maturity dates.

See “Exhibit D - Breakdown by Term of Loans and Other Financing”, and “Exhibit I - Breakdown of Financial Liabilities by Remaining Terms” of BBVA Banco Francés S.A.’s Consolidated Financial Statements.

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3.	Classification of the balances receivable (financing) and payable (deposits and liabilities), to know the holding financial effects:

 

Item		Local currency												Foreign currency
In thousands of Pesos		With interest rate clause				With CER adjustment clause				Without interest rate clause				With Interest rate clause				Without interest rate clause
Financing facilities (net of allowances)
Loans and other financing			98,673,259				20,612,557				99,766				67,230,269				—
TOTAL			98,673,259				20,612,557				99,766				67,230,269				—
Item		Local currency												Foreign currency
In thousands of Pesos		With Interest rate clause				With CER adjustment clause				Without Interest rate clause				With interest rate clause				Without interest rate clause
Deposits and corporate bonds
Deposits			80,627,652				3,535,813				33,999,608				139,190,732				27,848,061
Other liabilities (1)			5,935,545				—				31,392,707				3,199,349				8,822,444
TOTAL			86,563,197				3,535,813				65,392,315				142,390,081				36,670,505

 

(1)	Includes the following items: Derivative instruments, Repo Transactions, Other financial liabilities, Loans received from the BCRA and other financial institutions, Corporate bonds issued, Other non-financial liabilities and Current and deferred income tax liabilities.

 

4.	Breakdown of the percentage of ownership interests in other companies’ capital stock and total votes and debt and/or credit balances per company.

Refer to Note 45. Subsidiaries and Note 46. Related Parties of the Consolidated Condensed Interim Financial Statements of BBVA Banco Francés S.A.

 

5.	Receivables from sales or loans to directors.

Refer to Note 46. Related Parties of the Consolidated Condensed Interim Financial Statements of BBVA Banco Francés S.A.

 

6.	Physical count of inventories. Term and scope of physical count of inventories.

Not applicable.

 

7.	Ownership interests in other companies in excess of the amount allowed under Section 31 of Law No. 19550 and corrective measures plan.

None.    

 

8.	Recoverable Values: Criteria followed to determine significant “recoverable values” of inventories, property, plant and equipment and other assets, used as limits for their respective accounting valuations.

To determine the “recoverable values”, the net realization value for the status and condition of property, plant and equipment is considered.

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9.	Insurance covering tangible assets.

 

Assets insured in thousands of Pesos		Risk		Insured Amount				Book value
Monies, checks and other valuables		Fraud, robbery, safety boxes and valuables in transit			5,279,125				15,856,359
Buildings, machines, electronic equipment used in IT, furniture, fixtures, signage, telephones and works of art		Fire, vandalism and earthquake - Transportation of goods			22,156,109				12,217,245
Motor vehicles		All kinds of risk and third-party insurance			37,265				15,202

 

10.	Positive and negative contingencies

 

a)

Elements considered to calculate allowances whose balances exceed, individually or jointly, two percent (2%) of the equity.

 

-

Refer to Note 15. Income Tax of the Consolidated Condensed Interim Financial Statements of BBVA Banco Francés S.A.

 

b)

Contingent situations as of the date of the financial statements that are unlikely to occur and with equity effects not accounted for, stating if the lack of accounting is based on the probability of occurrence or difficulties for the quantification of its effects.

None.

11.	Irrevocable advances for future subscriptions. Status of the process aimed at capitalization.

None.

 

12.	Preferred shares cumulative dividends unpaid.

None.

 

13.	Conditions, circumstances or terms for the elimination of restrictions on the distribution of retained earnings.

Refer to Note 47 Restrictions on the payment of dividends of the Consolidated Condensed Interim Financial Statements of BBVA Banco Francés S.A.

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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: September 23, 2019				By:		/s/ Ernesto R. Gallardo Jimenez
						Name:		Ernesto R. Gallardo Jimenez
						Title:		Chief Financial Officer